The contingency fee agreement is the document that governs the financial relationship between the PI firm and the client for the duration of the case. Most firms use a standard form that covers the basic percentage structure but leaves unaddressed the specific questions that become disputes at settlement: what happens when there are multiple recoveries from different defendants, what expenses are deducted and in what order, how the fee is calculated on a recovery that includes a structured settlement component, and who is responsible for paying unpaid medical bills out of the client's net proceeds. Addressing these questions in the fee agreement before the client signs eliminates the most common sources of fee disputes.
Mandatory Requirements in Most States
Every state with a rules of professional conduct framework requires contingency fee agreements to be in writing and signed by the client. Beyond that baseline, the requirements vary:
- California requires a written contingency fee agreement in personal injury cases, mandates disclosure of the specific percentage and how expenses are handled (Business & Professions Code Section 6147), and requires that the agreement include a statement of the client's right to negotiate the fee percentage. A fee agreement that fails to comply with Section 6147 is voidable at the client's option, meaning the client can void the agreement and require the firm to accept a reasonable fee under quantum meruit rather than the contractual percentage.
- New York requires written contingency fee agreements in personal injury and wrongful death matters and regulates the maximum percentage through the Appellate Division fee schedules for certain case types. The standard New York sliding scale for personal injury (33-1/3% on the first $250,000, 25% on the next $250,000, etc.) applies unless the court approves a higher percentage on good cause shown.
- Florida, Texas, and most other states require written contingency fee agreements and disclosure of the specific percentage, but do not impose sliding scale caps for most PI cases.
Regardless of state-specific requirements, the fee agreement should be drafted and signed before any substantive work begins on the case, not after the client relationship has already been established.
The Expense Deduction Question: Net vs. Gross
One of the most frequently disputed provisions in a PI contingency fee agreement is the order of operations for expenses: is the attorney's fee calculated on the gross recovery before expenses are deducted, or on the net recovery after expenses? The difference is substantial in high-expense cases.
Example: $300,000 recovery with $75,000 in case expenses, 33% fee.
- Fee on gross: 33% x $300,000 = $99,000 fee. Client net: $300,000 - $99,000 - $75,000 = $126,000.
- Fee on net: 33% x ($300,000 - $75,000) = 33% x $225,000 = $74,250 fee. Client net: $300,000 - $74,250 - $75,000 = $150,750.
Most PI firms calculate the fee on the gross recovery before expenses, which is permissible in virtually every state, but the fee agreement must say so explicitly. A fee agreement that says only that the firm receives 33% of the recovery and is silent on expenses is ambiguous and invites a dispute at settlement when the client sees the numbers for the first time. Specify in the agreement whether the percentage applies to the gross recovery or the net recovery, and give the client a concrete example of how the calculation works on a hypothetical recovery amount so there is no ambiguity.
What Counts as a Case Expense
The fee agreement should list the categories of expenses that will be charged to the case and deducted from the recovery. Common expense categories in PI cases include: filing fees and court costs, deposition transcripts and court reporter fees, medical record retrieval fees, expert witness fees, investigation costs, process server fees, and travel expenses for depositions and court appearances. Less obvious items that should be addressed: whether the firm charges for postage and copying at a per-unit rate, whether the firm's overhead costs (staff time, office space) are included in expenses or absorbed by the fee, and whether interest accrues on case advances at a specific rate.
If the firm advances expenses and expects repayment from the recovery, the agreement must say so. If the firm does not advance expenses and expects the client to pay costs as they accrue, that must also be stated clearly. Many fee disputes arise not because the client disputes the fee percentage but because the client was not aware that they had accumulated $50,000 in case expenses that would be deducted from their recovery alongside the attorney's fee.
Settlement Authority and Communication Requirements
The contingency fee agreement should not make settlement decisions. Those decisions belong to the client. However, the agreement should establish the client communication protocol: the firm will provide written status updates at specified intervals, the client will be notified in writing of any settlement offer within a specified time, and settlement cannot be finalized without the client's written consent. These provisions protect the firm in a later fee dispute by demonstrating that the client was fully informed at every step.
California, New York, and most other states have disciplinary rules requiring that the attorney inform the client of all settlement offers and obtain client consent before accepting or rejecting a settlement. A fee agreement provision that mirrors this requirement makes it explicit and reduces the risk of a later claim that the client was not kept informed.
When the Fee Agreement Is Challenged: Quantum Meruit and Fee Arbitration
When a client disputes the fee after settlement, two resolution paths are available: fee arbitration under the state bar's fee dispute program (available in California, New York, and many other states) and litigation on quantum meruit. A client who challenges a fee agreement as unenforceable, because the agreement failed to comply with state law requirements, may be awarded only a quantum meruit recovery to the attorney. In California, quantum meruit for a contingency fee practice is calculated on the basis of the reasonable value of the services provided, which is often less than the contractual percentage on a large recovery.
The surest protection against fee disputes is a fee agreement that is clear, compliant, and delivered with a verbal explanation of its terms before the client signs. Clients who understand the financial structure of their case at the outset rarely dispute the fee at the end. For practice management resources on client communication protocols and engagement letter drafting guidance for PI firms, see the practice operations archive. For how fee allocation works when a PI case settles alongside a workers' compensation case in which both liens and a separate fee agreement apply, the liens and settlement section covers coordinated resolution structures.