A contingency fee is a share of the recovery, payable only if there is one. Case costs are usually a separate deduction — and whether they come off before or after the fee changes what you keep.
Fee and costs are two different things
The fee is what the firm charges for its work. Costs are money spent running the case: filing fees, records, depositions and transcripts, expert reports and testimony, investigators, exhibits, mediation. Experts are usually the largest item, and a case turning on causation can consume a great deal before it ever reaches trial.
Most agreements make the client responsible for costs out of the recovery. What varies — and what a client should ask about directly — is what happens to those costs if the case is lost.
The ordering question, with numbers
Take a $100,000 settlement, a one-third fee and $10,000 of costs.
- Fee calculated on the gross, costs deducted after: fee $33,333, then costs $10,000, leaving $56,667.
- Costs deducted first, fee on the net: costs $10,000 leaves $90,000; fee $30,000, leaving $60,000.
Same headline figure, same percentage, a $3,333 difference from one sentence in the agreement. On a larger case with heavy expert costs the gap is far wider. This is worth reading carefully before signing, and it is a fair question to ask.
Sliding scales
Many agreements step the percentage up as the case progresses — a lower rate if it resolves pre-suit, higher once suit is filed, higher again if it is tried or appealed. That reflects genuine risk and effort, but it means the effective rate depends on when the case ends. Some states also impose limits in particular categories, medical malpractice especially, and court approval is commonly required for a minor’s settlement.
What else affects the net
Fees and costs are not the last deduction. Liens and subrogation claims come out too, and tax can apply to parts of a recovery — see taxability. The number worth focusing on during negotiation is the projected net, not the gross.
Related: Claims, Settlements.
General information only, not legal advice. Fee limits and approval requirements vary by state and by claim type. The figures above are arithmetic illustrations, not typical or expected outcomes.