A new court rule governing the calculation of contingency fees in wrongful death and personal injury cases has prompted the New York State Academy of Trial Lawyers to offer a sample retainer agreement designed to shield lawyers from an inadvertent misstep.
The perplexity centers on contingency fees and expenses, and whether the latter is deducted from the former when calculating what goes to the lawyer and what goes to the client. Until 2006, clients had to remain ultimately responsible for expenses, win or lose.
That meant, for example, if there was a $100,000 total recovery and $10,000 in expenses, the costs would be deducted from the settlement or award, and the fee would be calculated on the difference. Thus, a lawyer would get one-third of the $90,000 remaining after expenses ($30,000) and the client would get the remainder ($60,000).
In 2006, the Legislature enacted a measure permitting lawyers to advance costs. Using the same example, the attorney’s contingency fee would be based on one-third of the total $100,000 award, and the client’s recovery would be somewhat less.
In 2014, all four departments of the Appellate Division adopted a mandatory rule on the application of the 2006 amendment. The rule requires attorneys to give clients a choice to base the fee on the gross or the net recovery. It also requires lawyers to provide an example of how either choice would affect the recovery.
John Powers, a partner at Powers & Santola in Albany and former president of the Trial Lawyers, said the group drafted a proposed retainer agreement after studying the rules, the 2006 legislation and consulting with ethics experts.
However, he said, “None of us really know if this is right,” Powers said. “There is no guidance, no court decision. We are looking at what makes sense and what other states have done and what is consistent with the ethical requirements.”