Conclusion regarding contingency fee (no recovery no fee) agreements

Contingency fee agreements offer a social utility in allowing plaintiffs who cannot afford to pay a lawyer by the hour the option of still advancing a claim with the help of a lawyer on a no recovery no fee basis.

 

While on first impression one may think that a lawyer handling a file on a contingency fee basis has an incentive to simply maximize the recovery obtained, that is not necessarily the case and other factors (such as the effort required to advance a claim through trial) may create an incentive to settle cases early, even if at less than their “fair” value. In particular, lawyers may have a financial incentive to avoid proceeding to trial because that will free up time to work on other cases. It is not being said that lawyers will necessarily give in to the financial incentive to turn over many cases as quickly as possible, but it is considered worthwhile for plaintiffs to understand that such incentive might exist.

 

The hourly rates charged by many lawyers may seem high to the general public, and the effective hourly rates charged by the plaintiffs’ lawyers on successful contingency fee files may be even higher. However, clients who chose contingency fee agreements because they cannot afford to pay a lawyer up front by the hour should appreciate the risk that a lawyer takes in agreeing to work with no certainty of ever being paid, and acknowledge that the relatively high payment on successful files is designed in part to offset the losses suffered on unsuccessful files.

 

 

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