Google this. Blawgletter gets as-they-happen Google Alerts by email. You might consider it too. Don’t cost nothin’.
Our Alerts include items that mention "contingent fee" (or its yokely doppelganger, "contingency fee"). Most reference ads for personal injury lawyers, especially ones handling (still!) "mesothelioma" cases.
A claim of sameness. A more interesting one caught our eye yesterday. The item appeared on David Giacalone’s f/k/a blog under the lower-case title obama’s tort reform creds? On the way to finding Barack Obama neither fish nor fowl in tort reform terms, the post notes (with emphasis ours) that f/k/a has "written extensively on the topic of the standard contingency fee (charging virtually every personal injury client the same percentage fee regardless of how risky or easy the case might be), which we believe consistently extracts excessive fees from clients." And it refers the reader to "our four-part essay on the ethics and economics of contingency fees."
The "same percentage fee" and "excessive fees" got our attention. Specifically they provoked, how you say, dubiositousness. While we don’t practice in the p.i. arena, we do recall that in January we saw a study that attributed the uniformity of contingent fee percentages in personal injury matters to some kind of "sorting" process. Cases sort themselves into a rough order of strength: The strongest cases go to the best lawyers, middling ones attract the not-so-greats, and the weakest end up with the pikers. The clients don’t mind paying one-third because a 33.3 percentage assures that each gets the highest quality his or her individual case can attract.
Take a for instance. Say you have a great case — hard damages of $10 million, a solvent defendant, and good liability facts. A hack lawyer would positively salivate at landing you as a client. He might even discount the usual one-third to keep you from going elsewhere. But will you hire him? Or will you go with the best personal injury trial lawyer in the state? You know — the courtroom dynamo who doesn’t need your case because she has so many other terrific ones to work on?
Commercial angle. We must say that we find the "sorting" conclusion appealing. We also expect that, if accurate, it applies with even greater force in the context of commercial — business v. business — litigation.
Why? In the first place, commercial litigants know more. They may not have served as president of the Harvard Law Review, but they do have contacts in the business and legal communities as well as the resources and savvy to evaluate credentials, look at success rates, and judge other signs of competence. So you’d expect businesspeople to do an even better job of finding the best contingent fee lawyer for their cases.
You’d also anticipate that companies and business owners grasp how to turn competition to their advantage. They know to shop their cases to compare offers. They understand that a "standard" contingent fee represents a starting point for negotiation. They or their regular counsel can haggle over terms — not only the contingent percentage but also who pays expenses, whether expenses come out before computing the fee, and under what circumstances the lawyer can withdraw. Fee terms thus vary widely in commercial contingent fee litigation.
Businesses with money also enjoy more options. Law firms that will work on a contingent fee basis usually will offer also to take cases on an hourly basis, for a periodic flat fee, or under an arrangement that blends hourly with contingent. The business client chooses.
Bottom line. We favor contingent fees because they shift downside risk to the lawyer, better aligning the interests of client and lawyer. Clients appreciate them too. The study concluded, in fact, that clients so like the idea of shedding some of the risk of loss that they’ll gladly agree to pay a contingent fee 2.5 times as big as the fees they’d expect to pay to an hourly lawyer. What does that tell you?