Variable percentage fee based on time of settlement

In the discussion above regarding the plaintiff lawyer's incentive to settle cases it was mentioned that there may be a financial incentive for the plaintiff’s lawyer to settle cases rather than proceed with the work intensive process of proceeding through trial. Plaintiffs hiring lawyers on a percentage fee basis are strongly encouraged to review that page.

 

This page provides information regarding the work generally required to advance a personal injury claim through the different phases of litigation and may help plaintiffs better understand the nature and extent of the incentive the plaintiffs’ lawyers may have to settle claims rather than going to trial.

 

Personal injury claims filed in court generally proceed through the following stages:

  1. Pre litigation investigations. This phase may involve:
    1. very little work (e.g. if liability for causing the accident not in dispute, plaintiff having relatively minor injuries that are treated at the direction of the plaintiff’s family doctor); or
    2. substantial work (investigations, including witness interviews, regarding liability for causing the accident if liability is in dispute, dealing with municipal liability, hit and run, worker v. worker issues, etc.).
  2. Pleadings. This involves the filing of court documents by the plaintiff and defendant, and is generally straightforward and involves relatively little work for personal injury claims.
  3. Document production. This involves the parties exchanging relevant documents (accident reports, copies of medical records, etc.). This phase may involve a significant amount of work, especially if there are disputes over the scope of documents to be produced.
  4. Examination for discovery. This involves the lawyers questioning the plaintiff and defendant under oath about the accident and the injuries suffered by the plaintiff.
  5. Preparation of expert evidence. Collection and review of expert evidence can be a substantial amount of work in more complicated cases. This work may also occur earlier in the process.
  6. Trial. This involves presenting the case in court for a judge or jury to decide who was at fault for causing the accident (if liability for causing the accident is in dispute) and the compensation, if any, to be paid to the plaintiff. Trial is normally by far the most work intensive part of the process and the effort required to complete the following tasks is very substantial:
    1. prepare witnesses to give evidence;
    2. prepare the questions to be asked of the opposing parties witnesses on cross examination;
    3. collect and organize the documents to be filed as exhibits;
    4. prepare opening and closing arguments; and
    5. prepare to deal with evidentiary issues that may (or may not) arise during trial.

 

As indicated by the above, the effort required to prosecute most personal injury claims is not constant over the duration of the process. In most cases, the documents filed with the court to start the action (i.e. the pleadings) are standard form documents with only minor variations for each particular case. From that point on increased effort is required. Most files that proceed to litigation will settle shortly before or after examination for discovery. The trial stage typically requires, by far, the most effort, and will often involve more work than all of the other stages combined.

 

Given the pattern of ongoing and increasing effort as the matter proceeds through litigation it is appropriate for the percentage fee received by the lawyer to increase as the matter proceeds through the later stages. For example, the lawyer may take a 20% fee if the claim settles before filing of court papers, 25% if it settles between filing of court papers and examination for discovery, 30% if it settles between discovery and trial, and 33% if it is necessary to take the claim all the way through trial.

 

It seems obvious that the lawyer’s compensation should mirror the effort required to advance the file through the various stages, which means some type of increase in percentage fee as the case proceeds is appropriate. Further, a fee agreement that provides for an increasing percentage fee as the file proceeds through litigation results in better alignment of the interests of the plaintiff and the lawyer, and decreases the financial incentive to the lawyer in having the case settled without proceeding to trial (see discussion in contingency fee section above).

 

 

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