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Fees vs. Costs

Unfortunately, horror stories abound in which seriously injured plaintiffs who win their cases nonetheless take home less money than their attorneys. In all fairness, while it is true that an attorney or law firm may receive a large share of the settlement/verdict/award, the money does not all go to the attorneys. Costs and expenses often devour the largest chunk of the proceeds. In their minds, plaintiffs are thinking they will receive two-thirds of any settlement or award, based on e.g., a 33.33 percent contingency fee. But in reality, another third of the proceeds may be spent on costs and expenses associated with the case. In the end, the injured plaintiff may go home with one third, and the law firm will keep two-thirds of the proceeds (but earn considerably less once all costs and expenses are reimbursed). This, precisely, is what contributes to the perception that the “lion’s share went to the lawyers.”

Such a scenario is particularly true in personal injury/medical malpractice cases that require copious amounts of medical analyses and expert witness opinions. Trial expert witnesses charges thousands of dollars for reviewing files, rendering opinions (upon which reputations may be staked) and appearing to testify at trial.

But in reality, the attorneys only keep the agreed-upon fee. If they also receive monies for costs and expenses, it is merely to repay them for bills they have paid on behalf of the client. Costs are ultimately the responsibility of clients, even if initially paid by the law firm in order to move the case forward. Costs are itemized separately from the fee charged by attorneys for their legal work.

Costs include charges for all court filings (complaint, motions, discovery, etc.), process serving, investigations, mailing, photocopying, service of subpoenas for appearance of witnesses, as well as for records and document retrieval, court reporters and transcripts of depositions, motions, and other related proceedings, jury fees and mileage, expert witness fees and travel/lodging fees for both witnesses and attorneys.

Most often, costs are deducted from the gross amount of the settlement/verdict/award after the deduction of attorney fees. In other words, the attorney fee will be based on a percentage of the gross amount recovered, not the net amount after costs are deducted. Second in line will come such a deduction for costs and expenses paid or owing on behalf of the client. Finally, the remaining balance will represent the client’s proceeds or share of the money.

Inside Fees vs. Costs