The Logic of the Contingent Fee System in Injury Cases
As is true with many things dealing with trial lawyers, there is a great deal of back and forth about the contingent fee system. This fee system is used mostly in injury claims.
The contingent fee is exactly that i.e., the fee depends on the outcome. If the lawyer does not put money in the client’s pocket then the lawyer does not put any money in her pocket. The lawyer gets no fee for the time spent. The logic of this fee system is that it allows people to pursue their claim even though they do not have the resources to pay their lawyer.
Although this fee system is most often used in injury claims, it applies to any type of claim. It applies to a contract claim. It applies to a constitutional claim or other type of claim. The fee agreement is result-driven. If the lawyer doesn’t produce a good result or at least a result that generates income for the client then the lawyer does not get paid.
The Contingent Fee System Is Not Without Flaws
The flaw in this fee system is that some lawyers use it to extract settlements from persons that in fact may not owe anything. The insurance industry and the so-called “tort reformers” contend the problem is rampant. It is not. Lawyers are the same as any other business person. They’re in business to make money. If a claim does not have merit then the party being sued is going to fight it. There is very little money reward for a lawyer to pursue a claim simply to extract a small settlement. The time spent does not justify the fee expected to be received. Call, or contact us for a free consult.
That doesn’t mean that there have not been some abuses over the years. Clearly there have been. However the abuses go both ways. The insurance industry and parties being sued fight claims. They fight claims they should not fight. What I mean by that is that it’s not unusual for insurers to stonewall claims. They do this see what the plaintiff and the plaintiff’s lawyer are made of. If they have the mettle to pursue the claim to the end then the insurer gets serious about settling.
Caps On Damages
A factor that alters the entire contingent fee system is caps on damages. Caps on damages are set by law. This means that the insurer and/or the party being sued will never pay more than whatever that cap amount is. If the cap is $350,000, or whatever the number is, then that means that the insurer will never offer that amount. That cap amount is their worst outcome in court. The plaintiff’s lawyer then has to fight very hard simply to get something that is under the cap. That is the unreported and insidious aspect of damage caps. Really they’re not caps but rather they are “super caps”. The real cap is much less than the cap set by law. This is because the insurer will never pay the full cap to resolve a case.
Contingent Fee Lawyers As Heroes: You Decide
Some judges and legal pundits have described lawyers who take cases on a contingent fee basis as being the heroes within the legal system. There is some merit to that. That is, a lawyer who takes on tough cases and pursues them for a long time with no money for the attorney’s time may well be a hero.
Tobacco Cases And Others
To some extent that was seen in regards to the tobacco lawsuits years ago. The tobacco suits were driven by a group of plaintiffs’ trial lawyers. They took on the tobacco industry at a time when it was thought to be supreme. Big tobacco had more money than God. They were committed to fighting all claims. They did fight many of the claims. Over time the plaintiff’s lawyers wore them down to the point where they settled. In addition they agreed to warnings and advertising limits in promoting their deadly product.
A more recent example is the lawyers who took on the claims against the Iranian government. These were brought by persons who had been held hostage in Iran. Those claims were thought to be a reach. Not only was Iran a foreign country and therefore immune but also its assets were in Iran. They were not in the U.S. It so happens that there were certain assets that Iran had in the U.S. After nearly 20 years of wrangling these assets were freed up. There were resulting payments to these hostages. The lawyers who took on these cases waited for 20 years for a payday. The payday was a handsome one. It was well-deserved.Call, or contact us for a free consult.
One critique of the contingent fee system that has some merit is that even though lawyers are required to make the client pay for the expenses of suit many lawyers advance those expenses. This means that the plaintiff has a free lawyer as to the lawyer’s time. The client also has someone to bear the expenses. That free ride for the client causes some plaintiffs to be reckless in terms of pursuit of the claim. What some lawyers do in that regard is to make the client pay the expenses.
The expenses of suit are such things as expert witness fees and filing fees. There are also fees for the service of court process and fees for taking of depositions.
Making the client pay these expenses promotes a degree of good sense in the plaintiff. It also makes the plaintiff more sensible in terms of settling the case. Their money is on the line. They have some skin in the game. Most state bars require that the client pay for these costs. That is sometimes handled with a “wink and a nod”. Although the state bar requires such, that requirement is soft-pedaled by many lawyers. The wink and the nod is that the case will produce enough money that any expenses will be paid out of that money. Therefore the client does not have to pay anything out of pocket. The end result is that sometimes the state bar rule is not complied with.Call, or contact us for a free consult.
Variable Contingent Fees
The most common contingent fee that is used by lawyers is a 1/3 fee. There are lawyers who charge more than that. Sometimes the fee is as much as 40% or 45%.
There are also attorneys who use a lesser fee schedule as a come-on. That is, they will charge 20% or 25% if the case settles within a certain time before trial. With any substantial case, if it settles at all, it most often settles within 30 days of trial. As such leading the client to believe that they’re saving some money with this lesser fee is less than honest. The lawyer knows that the case is unlikely to settle sooner than 30 days before trial. Thereafter charging a 1/3 fee or more at that point I think is a tactic that is subject to question. There is nothing wrong with that if in fact that is what a client wants. However the lawyer should inform the client that cases that have any significant value are in fact not likely to settle until they get very close to trial.
As is true with most things, there are pros and cons to the contingent fee system. Overall it is a means to help increase access of worthy plaintiffs to the court system. Without that fee system many worthy plaintiffs would have no chance to pursue their claim for their injuries.For more information on contingent fees see the pages on Wikipedia and see the pages on this site dealing with personal injury.