A California contingency fee agreement is a written contract between you and your attorney that ties the lawyer’s payment to the outcome of your case: no recovery, no fee. California Business and Professions Code section 6147 sets out exactly what the contract has to say, and if any required term is missing, you can void the agreement and limit the attorney to a reasonable fee for the work actually done. Before you sign, check the document against the required terms below.
What the Agreement Must Contain
Every contingency fee contract in California must be in writing and signed by both you and the attorney, and you must receive a signed copy when you enter the agreement. Beyond that, BPC 6147 requires the contract to include each of the following:
- The specific percentage the attorney will take from any recovery.
- A clear explanation of how litigation costs and disbursements will affect both the attorney’s fee and the amount you take home.
- A disclosure of whether the attorney could charge you separately for work on related matters that fall outside the contingency arrangement.
- A statement that, except in medical malpractice cases, the fee is not set by law and is negotiable between you and the attorney. In medical malpractice cases governed by BPC 6146, the statement must instead say the statutory rates are maximums and you can negotiate a lower percentage.
The negotiability line matters. There is no legally fixed “standard” contingency rate for general personal injury cases in California. The percentage is whatever you and your attorney agree to. If a lawyer presents a rate as fixed or non-negotiable in a case that isn’t medical malpractice, that isn’t accurate.
One boundary worth flagging: BPC 6147 does not govern contingency contracts for workers’ compensation benefits. Those are handled under a separate fee system administered by the Workers’ Compensation Appeals Board.1California Legislative Information. California Business and Professions Code 6147 – Fee Agreements
What Happens If a Required Term Is Missing
If a contingency fee agreement fails to comply with any provision of BPC 6147, the entire contract is voidable at your option. When you void it, the attorney cannot enforce the agreed percentage and may collect only a reasonable fee for services actually performed.1California Legislative Information. California Business and Professions Code 6147 – Fee Agreements
That is real leverage. Compare the document you’re being asked to sign against the list above. If anything is missing, ask for a corrected version before the representation begins. If you later find the contract was defective, you can raise it then.
How the Fee Is Calculated
The attorney’s compensation is a percentage of whatever the case produces, whether through settlement, arbitration award, or trial verdict. In typical California personal injury cases, the fee often runs around one-third of the recovery when the case settles before a lawsuit is filed, and can climb to 40 percent once the case moves into active litigation or reaches trial. These are common market rates, not legal requirements, and they are negotiable.
Many agreements use a sliding scale that raises the percentage at defined milestones. A well-drafted contract identifies each stage and the corresponding rate: one rate for pre-suit resolution, a higher rate after a complaint is filed, a still-higher rate if the case goes to trial. Look for those milestones spelled out in writing.
One provision that quietly moves a lot of money is whether the percentage applies to the gross recovery or the net recovery. Gross means the total before costs are deducted. Net means what remains after litigation expenses come out. On a six-figure recovery with meaningful costs, the difference between the two methods can shift thousands of dollars from your pocket to the attorney’s or vice versa. BPC 6147 requires the agreement to explain how costs affect the fee and your recovery, so the calculation method should be clear on the face of the document.1California Legislative Information. California Business and Professions Code 6147 – Fee Agreements
Costs and Who Bears Them
Litigation costs are separate from the attorney’s fee. Common expenses include court filing fees, deposition transcript charges, expert witness fees, medical record retrieval, and process server fees. Under BPC 6147, the agreement has to explain how these costs will affect your final recovery.1California Legislative Information. California Business and Professions Code 6147 – Fee Agreements
In most contingency arrangements the attorney advances these expenses during the case and takes them back out of the recovery at the end. What happens if there is no recovery depends entirely on the contract. Some agreements make you responsible for advanced costs even if you lose. Others treat advanced costs as the attorney’s risk, so you owe nothing if the case produces nothing. Clarify this before you sign.2American Bar Association. Rule 1.5: Fees
The contract should also say whether you could owe the attorney separate compensation for related matters outside the contingency arrangement, such as a related insurance dispute or lien negotiation that comes up during the case.1California Legislative Information. California Business and Professions Code 6147 – Fee Agreements
Medical Malpractice Fee Caps
Medical malpractice cases against health care providers are subject to statutory fee limits under BPC 6146 that no contingency agreement can exceed. The caps step with the timing of the resolution:
- Pre-filing settlement: the fee cannot exceed 25 percent of the amount recovered, if all parties sign a settlement before a civil complaint or arbitration demand is filed.
- Post-filing resolution: the fee cannot exceed 33 percent of the amount recovered after a complaint or arbitration demand has been filed, whether the case ends in settlement, arbitration, or judgment.
- Trial with court approval: if the case goes to trial or arbitration, the attorney can file a motion asking the court to approve a fee above 33 percent, and the court decides based on whether good cause exists.
Under BPC 6146, “recovered” means the net amount after litigation costs and disbursements are deducted, but medical care costs you incurred and the attorney’s overhead are not deductible in that calculation. These caps apply regardless of who the injured person is, including minors and incapacitated individuals.3California Legislative Information. California Business and Professions Code 6146
Cases Where Contingency Fees Are Not Allowed
California’s Rules of Professional Conduct bar contingency arrangements in two categories. An attorney cannot charge a fee that depends on the outcome of a criminal defense matter. And contingency fees are prohibited in family law cases when the fee turns on securing a divorce, a nullity of marriage, or a particular amount of spousal or child support.4State Bar of California. California Rule of Professional Conduct 1.5 – Fees for Legal Services
The family law prohibition has a carve-out. An attorney may charge a contingency fee to collect past-due child support or spousal support after a judgment has already been entered.4State Bar of California. California Rule of Professional Conduct 1.5 – Fees for Legal Services
Firing the Attorney Before the Case Ends
You have an absolute right to discharge a contingency fee attorney at any time, with or without cause. California courts have recognized this since the California Supreme Court’s 1972 decision in Fracasse v. Brent, and the State Bar has repeatedly reaffirmed it.5State Bar of California. State Bar Standing Committee – Conversion Clauses in Contingency Fee Agreements
A discharged contingency attorney cannot demand the full contract percentage. The attorney is limited to the reasonable value of services actually performed up to termination. Any clause that tries to convert the arrangement into a higher hourly rate the moment you fire the lawyer is ethically suspect and likely unenforceable, because it would discourage clients from switching lawyers.5State Bar of California. State Bar Standing Committee – Conversion Clauses in Contingency Fee Agreements
To protect that reasonable-value claim, a discharged attorney may assert a lien on any future recovery you obtain with a new attorney. That is standard in contingency practice. Your new lawyer will typically negotiate with the former one over the lien amount before distributing funds from any eventual settlement or verdict.
How Your Recovery Is Taxed
Federal tax treatment depends on what the money compensates you for. Damages received on account of personal physical injuries or physical sickness are excluded from gross income under Internal Revenue Code section 104(a)(2). The exclusion covers both economic losses like medical bills and lost wages and non-economic losses like pain and suffering, as long as they stem from a physical injury or physical sickness.6Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness
Several categories fall outside that exclusion:
- Punitive damages are always taxable, even in a physical injury case.
- Emotional distress damages are taxable when the claim is purely emotional with no underlying physical injury, though the portion used to pay for medical treatment of that emotional distress remains excludable.
- Recoveries for defamation, breach of contract, and similar non-physical claims are generally taxable.
In a physical injury case, the exclusion applies to the entire recovery, including the portion paid to your attorney as a contingency fee. You are not taxed on money that went straight from the defendant to your lawyer. In taxable recoveries such as employment discrimination awards, the attorney fee portion may still count as your income for tax purposes even though you never received it. Federal law provides an above-the-line deduction for attorney fees in certain discrimination and whistleblower cases, which prevents you from being taxed on money your attorney kept. The details are worth reviewing with a tax professional before the case resolves.