You Signed for a Third. A Third of What, and Who Gets Paid Before You Do?

Two clients can settle identical claims for the same number, sign fee agreements that both say one third, and walk away with amounts that differ by thousands of dollars. The percentage is only the first term in the equation. What matters just as much is the base it applies to, whether that base shifts when a lawsuit is filed, whether case expenses come off before or after the fee is calculated, and which third parties have a legal claim on the money before any of it reaches the client. A careful reader checks all four, in that order, before signing.

Gross or net, and why the order of operations matters

Most Texas contingency agreements state a percentage of the gross recovery, meaning the fee is computed on the full settlement figure before case expenses are subtracted. A minority compute the fee on the net, after expenses. On a hypothetical settlement with meaningful costs behind it, the gross method produces a larger fee than the net method at the identical stated percentage, because the lawyer's share is measured against a bigger number. Neither approach is improper, and the gross method is the more common practice. The point is that a thirty-three percent net agreement and a thirty-three percent gross agreement are not the same contract, and the difference lives in a single preposition.

The flat rate compared with the tiered rate

Some agreements carry one percentage from intake through resolution. Others step up: a lower figure if the claim resolves before suit is filed, a higher one once a petition goes on file, and sometimes a third tier if the case is appealed or reaches the eve of trial. The tiered structure reflects real effort, since filing brings discovery, depositions, expert designations and a court's schedule. The comparison a reader should run is not which number is smaller but where the trigger sits. An agreement that steps up on filing is different from one that steps up on the defendant's answer, and different again from one that steps up when a trial date is set.

Case costs are a separate line, not part of the fee

Expenses are typically advanced by the firm and reimbursed from the settlement in addition to the fee. Records retrieval, filing fees, process servers, court reporters, medical illustration, accident reconstruction and treating physician narrative reports all land here, and expert work in a filed case is usually the largest single item. A pre-suit claim resolved on a demand package may carry costs measured in hundreds of dollars. A case worked up for trial can carry costs in a different order of magnitude entirely. Two questions settle most confusion: whether interest is charged on advanced costs, and what happens to unreimbursed costs if the case produces nothing.

Liens, subrogation and unpaid providers

Even after the fee and costs are accounted for, the client is rarely next in line. Texas allows hospitals to file a statutory lien against a personal injury recovery for emergency and post-accident treatment, perfected by filing in the county real property records, and that lien attaches to the settlement rather than to the client personally. Health insurers frequently assert subrogation or reimbursement rights under their plan documents, and self-funded employer plans governed by federal law tend to carry stronger rights than fully insured ones. Government payers stand on their own footing: the Centers for Medicare and Medicaid Services oversees the Medicare program and its conditional payment recovery process, which has its own timelines and its own paperwork. Providers treating under a letter of protection are paid at disbursement as well.

What the settlement statement should show

The document that reconciles all of this is the disbursement or settlement statement, and it should be legible on a single reading. Gross recovery at the top, the fee with its percentage stated, itemized case costs, then each lien, subrogation interest and provider balance listed by name and amount, with the client's net at the bottom. Reduced figures deserve a note showing both the original demand and the negotiated number, since hospital liens and plan reimbursement claims are frequently compromised, and those reductions are often where the largest real dollars are recovered for the client. Asking for a draft statement before signing a release is ordinary, and a well-run file will already have one.

The arithmetic is not complicated. It is simply performed in an order most people never see until the money is already sitting in a trust account, and the questions that change the outcome are cheapest to ask at the beginning.