Congress has capped contingency fees in personal injury cases exactly once, and almost nobody the cap applies to knows about it. Under 28 U.S.C. section 2678, an attorney handling a claim against the United States may not charge more than 25 percent of a judgment or of a settlement made after suit is filed, or more than 20 percent of a settlement reached administratively before any lawsuit. An attorney who collects more than that, where there is a recovery, faces a fine of up to $2,000 or up to a year in prison.
The scope is narrow. The cap attaches to Federal Tort Claims Act cases, meaning the defendant is the federal government: a Postal Service vehicle, a Veterans Affairs hospital, a federal employee acting within the scope of employment. Outside that, no federal ceiling exists. The percentage is set by state law and by the retainer you sign.
Which makes the document, rather than the advertising slogan, the thing worth understanding.
What “no win, no fee” covers, and what it does not
The phrase describes the fee. It does not necessarily describe the costs, and the two are separate lines in every contingency agreement.
The fee is the lawyer’s payment for services, expressed as a percentage. Costs are money spent moving the case forward: filing fees, deposition transcripts, expert witness charges, medical record retrieval, investigators, exhibits. The statutory language on the federal cap makes the distinction explicit, and 43 CFR Part 22, which restates section 2678 for one agency, treats fees as capped without folding costs into the same number.
Firms commonly advance those costs and recover them from the settlement. Whether you owe them back if the case is lost is a question the agreement answers in one sentence somewhere, and the answer varies between firms. It is a fair question to ask out loud before signing, and a firm that answers it clearly is telling you something useful about how it operates.
The ordering question that changes the number
Here is where most people stop reading the agreement one paragraph too early. Two firms can quote the same percentage and hand over materially different cheques, because the percentage can be applied before costs are deducted or after.
Round illustrative numbers chosen to show the mechanism, not typical settlements. Take a $90,000 recovery, a one-third fee, and $12,000 in case costs.
| Order of operations | How it runs | What reaches the client |
|---|---|---|
| Fee calculated on the gross, costs deducted after | One third of $90,000 is $30,000. Then $12,000 of costs comes off the remainder. | $48,000 |
| Costs deducted first, fee calculated on the net | $90,000 less $12,000 is $78,000. One third of that is $26,000. | $52,000 |
Same percentage, same costs, same recovery, $4,000 apart. Neither ordering is improper and both appear in ordinary agreements. It is simply a term, and it is negotiable in the way any term is negotiable, which is to say sometimes.
Two related terms sit next to it. Some agreements use a sliding scale, where the percentage steps up if the case is filed, or again if it reaches trial, on the reasoning that the work and the risk both increase. And medical liens, whether from a provider, a health plan or a government programme, are typically paid out of the client’s share after the fee, which is why a settlement figure quoted in conversation is rarely the figure that arrives.
The federal cap, read closely
The two numbers in section 2678 are 20 and 25, and the trigger between them is whether a lawsuit was filed. A claim resolved at the administrative stage, before any court involvement, carries the 20 percent ceiling. Once suit is filed, the ceiling rises to 25 percent whether the case then settles or goes to judgment. Those figures date from a 1966 amendment which raised them from 10 and 20 percent and removed the requirement that an agency or court approve the fee amount.
The fee comes out of the recovery rather than being added on top of it. And the criminal penalty in the second sentence of the statute is unusual: fee disputes are normally a matter for a bar association, not a fine and a possible prison term. Congress evidently thought the risk here justified the difference.
The practical point for a reader is a single question. If the injury involved a federal employee, a federal facility, or a federal vehicle, ask whether the claim falls under the FTCA, because the answer changes the maximum fee by law rather than by negotiation.
Everywhere else, the rules are your state’s
Outside FTCA claims, contingency fees are governed by state rules of professional conduct and, in some states, by statute. The pattern across jurisdictions is consistent even where the detail is not: the agreement generally has to be in writing and signed, it has to state the percentage and how costs are handled, and the client is generally entitled to a written statement at the end showing how the money was divided.
Beyond that, states diverge, and the divergence is real money. Some cap fees in medical malpractice cases specifically, sometimes on a sliding scale that shrinks as the recovery grows. Some require court approval where the client is a minor or lacks capacity. Some regulate the ordering question described above directly. Because this varies and changes, the authoritative answer sits with your state bar association or the court rules for your jurisdiction, and it is a free lookup.
Why the percentage is what it is
A third of a recovery reads as a lot until you look at what the firm is actually pricing. It is closer to an insurance premium than to an hourly bill. The firm funds the work and the costs across a portfolio of cases, some of which recover nothing at all, and the fee on the ones that succeed has to cover the ones that do not. That is why the percentage does not fall when a particular case turns out to be easy: the price was set against the pool, not against your file.
The sliding scale follows the same logic in the other direction. Filing suit commits real money and years of calendar; trial commits more. A percentage that steps up at each stage is the firm repricing as its exposure grows, which is defensible, and it is also the reason to know the steps before rather than after.
The honest counterargument, and it has force, is that the pooled-risk justification is weakest precisely where the case is strongest. A clear-liability claim with an insurer already offering near the policy limit carries little of the risk the percentage is priced for. That is the case worth discussing terms on, and the one where a fee quoted as standard is most worth testing.
Six questions, asked before the pen moves
- Is the fee calculated on the gross recovery or after costs? Ask for the answer in the document, then find the sentence.
- Does the percentage change if suit is filed, or at trial? If it is a sliding scale, get every step and the trigger for each.
- Who pays the costs if the case does not succeed? One sentence, and it should be readable without a second opinion.
- Which lawyer handles the file day to day? The person in the meeting and the person doing the work are frequently different people.
- How are medical liens handled, and who negotiates them down before the final distribution.
- Does this claim involve a federal defendant? If so, section 2678 may cap the fee by statute.
When the arrangement is worth it, and when it is not
Being fair to the model: contingency fees exist because most people injured by someone else cannot fund litigation against an insurer that can. The fee transfers the financing and the downside risk to the firm, which is a genuine service and is priced as one. A serious injury with disputed liability is the case this structure was built for, and going without representation there is generally the more expensive choice.
The weaker case for it is a small, undisputed claim where liability is clear and the insurer has already offered close to the policy limit. Handing over a third of a straightforward recovery buys correspondingly less. Small claims court exists for modest amounts and is designed to work without a lawyer. Many state insurance departments will also take a complaint about an insurer’s claims handling at no cost, which is a different lever from a lawsuit and occasionally the more effective one.
Outcomes in any individual claim depend on facts, jurisdiction and evidence, and nothing above predicts what any particular case may recover. This is general educational material rather than legal advice, and a licensed attorney in your state is the person who can assess a specific situation.
Sources
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Every figure in this article traces to a government record or to a named independent, non-commercial research body. We do not cite insurance marketplaces or affiliate comparison sites for data.
- U.S. Government Publishing Office, United States Code 28 U.S.C. section 2678, Attorney fees; penalty Published 1966-07-18Supports: No attorney may charge fees in excess of 25 per centum of any judgment rendered pursuant to section 1346(b) or any settlement made pursuant to section 2677, or in excess of 20 per centum of any award, compromise or settlement made pursuant to section 2672; an attorney collecting more than allowed, if recovery be had, shall be fined not more than $2,000 or imprisoned not more than one year, or both; Pub. L. 89-506 raised the limits from 10 to 20 percent for administrative settlements and from 20 to 25 percent after suit is filed and removed the requirement of agency or court allowance of the fee amount.
- Office of the Federal Register, eCFR 43 CFR Part 22, Administrative Claims Under the Federal Tort Claims Act Published 2026-08-29Supports: Restates that section 2678 provides no attorney shall charge fees in excess of 25 percent of a judgment or settlement after litigation, or in excess of 20 percent of administrative settlements.
Figures last verified August 29, 2026.