Commentary: Gavel to Gavel: Fee Agreements

Article excerpt

When an attorney accepts a large tort case in which the defendant is covered by insurance or is a large self-insured corporate entity, the attorneys for the plaintiff and those for the defendants are generally paid under different types of fee agreements. The plaintiff's attorney traditionally enters into a contingency fee agreement with his client whereby he or she will not receive any fees until and unless the claim is resolved in favor of the client. Often the plaintiff's attorney will have to wait months or years to get paid, essentially working without pay until the case settles or there is a favorable judgment. Tort cases provide the traditional scenario for contingency fee agreements and are the cases most attorneys and most members of the public associate with contingency fees, even though contingency fees are only prohibited in certain domestic relations and criminal matters.

The theory behind contingency fees is that these types of cases cost a lot in resources and attorney time and most members of the general public don't have the financial resources necessary to independently finance these lawsuits. Sometimes they can afford the expenses in the case, but rarely can they afford to pay their attorneys by the hour for all of the time expended. But for the willingness of an attorney to accept the case on a contingency fee agreement, the victim of the tort might go uncompensated. Sometimes these types of cases represent a very large potential attorney fee to the plaintiff's attorney, who therefore has a clear incentive to get the case resolved in his client's favor as expeditiously as possible. Waiting to be paid, however, provides as strong a disincentive to take such a case, because waiting to get paid for a year or more can create a significant financial hardship for a practicing attorney, all with no guarantee of ever being paid.

The defendant's attorney in such a case rarely works on a contingency fee agreement and instead is paid by the hour. In long and contentious cases, the fees paid to the defense attorneys can far exceed the amount the plaintiffs recover or even seek to recover. In such a case, has the defendant really been cost- effectively represented? The defense attorney will quickly point out that settling such cases, large or small, sets a bad precedent and will only encourage frivolous claims from other claimants. Other potential claimants, the theory goes, would see the defendant as an easy mark and the frivolous claims would multiply. …

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