Contingent Fee Arrangements In Business Litigation In New York

Contingent-fee representation for business litigation is a hot topic these days. While corporate counsel and business owners are wise to consider using contingent-fees, it is also important to consider all the factors before making such a significant change.

First of all, there should not be any reduction in quality simply because the fee structure is contingency rather than hourly. Parties should hold their attorneys to the utmost care regardless if they are being paid hourly or not. Once they’ve taken on a case, legal ethics require that all attorneys adhere to the same strict standards of care regardless of how or when they’re being paid. This may be institutionalized wishful thinking, in that it’s human nature for someone to want to work harder on cases that are likely to bring in more money, but with contingent-fee representation, the attorney won’t get paid if he doesn’t win the case, so you’re usually assured his full efforts until the end.

Of course the corollary to that argument also holds; namely, that a contingent-fee attorney may not be willing to spend any time at all on a case if it’s not clear from the start that there’s a decent chance of winning. Also, even where liability is obvious, if the case is not likely to result in a significant award of money – enough to pay the steep costs of litigation, a contingent-fee attorney might not be able to take the case. This is particularly unfortunate where significant injuries have resulted from the defendants’ actions, but the defendants don’t have insurance, or deep enough pockets to distribute the awarded money at the close of the case. These are considerations that both the clients and the attorneys have to address before agreeing to a contingent-fee structure.

Even if clients aren’t spending their own personal money in the litigation of their case, they will still need to invest significant time and effort on the case. Plaintiffs have to be deposed, possibly multiple times, which can require significant preparation. Additionally, spending a lot of time and effort concentrating on what are likely to be unpleasant memories and issues can impose a significant emotional burden on anyone. If firm lacks the talent, education and drive necessary to obtain a winning resolution, clients can find the representation exasperating and probably unsuccessful.

It’s important to find counsel that believes in your case. An attorney that sees potential value in the case will likely be more willing and capable of litigating it aggressively than will one who doesn’t. This may be true for all lawyers but is particularly important in contingent-fee cases, where the attorneys have to foot the bills themselves throughout the length of the litigation.

Thorough Evaluation

Clients should be prepared for a candid and thorough evaluation of their case by counsel regardless of the payment structure. This appraisal should cover the strengths and weaknesses of the case. What is the maximum value the case is likely to be worth? What is the least? Also potential litigation strategies should be discussed, as well as the possibility and even the process of settlement.

Of course a frank and thorough assessment of the relevant laws is important. If an attorney isn’t fully educated in the relevant areas, he must become so. This process may be different for contingency attorneys than for those who work on an hourly fee, in that hourly-fee lawyers can learn as they go, and get paid for it while doing it. Contingency attorneys, on the other hand, have to fully understand the relevant laws before accepting a case, otherwise they risk an obligation of time and effort on a case that will never pay out.

A contingency fee structure is advantageous to the client, in that the client doesn’t have to pay for the attorney’s “education.” A contingent-fee lawyer is less likely to take on frivolous cases than would an hourly-fee lawyer, but, by the same token, they might also be less likely to take “risks” on cases with real injuries but less than certain outcomes.

The Relationship

The attorney/client relationship can be quite different in contingent-fee cases than they are in hourly-fee cases.

Things usually go well when lawyers and clients agree, but big problems can result when they don’t. One of the biggest sources of conflict between an attorney and his client are disputes over settling. Sometimes clients are looking for more than just money; sometimes they’re more interested in making their case in front of a judge and jury, thereby validating their position on an issue that they are emotionally invested in. Or, they may simply disagree with their counsel on how much their injuries are worth. Ethically speaking, the goals of the litigation are entirely up to the client. If there comes a point where a defendant is offering a cash settlement, and the attorney and client don’t agree on it, the contingent-fee attorney must take pains to make sure the client doesn’t feel his true goal in the litigation has been abandoned by a lawyer who is more concerned with his own financial interests. This is not likely to be a problem when the fee structure is hourly.

The contingent-fee option clearly is not suitable in every situation. But it offers real advantageous for clients who cannot afford an hourly fee.