Why does a plaintiff firm get 1/3? How a plaintiff law firm works.

Someone recently asked why a law firm gets 33% of a settlement in personal injury cases.  It’s a fair question.  First, you have to remember that, unlike divorce, probate, property and criminal lawyers, personal injury lawyers don’t bill by the hour.  We are one of the few professions that doesn’t get automatically get paid for its work. Why?  Because most people could never afford to pay the hourly rate necessary and pay for all of the experts and costs.   If we don’t win, we don’t get paid for hundreds of hours of work, but also lose all the money we spent on the litigation.  The financial risk is the firm’s, not the client’s.   If we lose then we are out $100,000+ in costs on a bigger case.  Experts cost thousands a day and the firm pays those up front.  Lawyers have to earn a living while the case is going as do the paralegals and legal assistants.  There are case filing fees; the firm has to pay rent, computer fees, phone bills, electric bills, internet, and health insurance etc.…everything that makes a business run.  Unlike almost all businesses, we only get paid if we succeed. That’s not the way it is for 99% of the businesses.   I would love to get paid by $300 an hour (that’s what it takes to cover me, the staff, rent, etc.) but most folks don’t have that kind of money, unlike insurance companies who pay their lawyers hourly (more than $300 an hour).  The client risks nothing and owes us nothing if we lose…and we do lose.  Every plaintiff lawyer wins and loses cases.  Last year alone, we lost $114,000.00 on one case, which doesn’t include the 500 hours of work time we put into the case (lawyers, paralegals and legal assistants).  The client owed us nothing for all of our work.  We lost several hundred thousand dollars over the course of the 5 years on that one case.  Also, there are cases where we make very little money relative to the effort.  In one case we won $100,000.  It’s a work comp case so our fees are capped at 20%. Of the 20%, 1/3 of that goes to the referring counsel which means our part is $13,300.00.  We have worked on that case for 7+ years.  When you break down the costs and time for me and the staff, we’ll actually lose money.

In some cases we make a lot of money.  On some cases we lose a lot of money.  Either way, the client gets representation with no personal financial risk at all.  It is the only way that the average person can afford stand up against insurance companies and corporations.   Plaintiff lawyers are intellectual gamblers.  We gamble with our money and our effort and we bet on our skills.  And if we’re wrong, no one pays but us.


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