A few weeks ago, Blawgletter read an article about the down-side of making a contingent fee deal with a lawyer.
The item said that the arrangement creates a conflict of interest. The lawyer, it said, wants to settle fast because he or she may earn a big fee for doing little work while the client might benefit from "eighteen months of battle in the courts." Plus: come rain or shine, there may "still be substantial costs the client must pay, such as fees for expert witnesses, first-class plane tickets for expert witnesses, luxury hotel rooms for expert witnesses, etc."
The author's alternative? "[Y]ou should consider hiring a lawyer on an hourly rate basis."
[The author says in his online profile that he "has emphasized the representation of financial services clients concerning both their lending and deposit account activities." Ahem.]
Call us doubtful. A lawyer who works on a contingent fee basis, like her colleagues who toil for hourly rates, cannot settle a case without the client's consent. And, unlike the lawyer who earns an hourly fee regardless of the outcome, the contingent fee lawyer has an incentive to maximize the recovery for him and the client. Plus, many contingent fee deals either split out-of-pocket costs between lawyer and client or put the burden solely on the lawyer. Nor can we recall an instance where a client felt unhappy about a case settling early.
The hourly lawyer, on the other hand, has an incentive to drag things out. Has no financial stake in holding expenses down. Suffers no loss if the case craters.
Which arrangement better aligns the interests of client and lawyer? Leaving to one side the question of affordability — since many people cannot pay hourly rates – we'll vote for the contingent fee thing. Lawyer and client win or lose together. And, in the real world, a good firm that will work on a contingent fee basis often will offer to handle a case hourly or on a flat fee.