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3 Advantages of Hiring a Lawyer on Contingency (and 1 Disadvantage)

March 11, 2014

I had a famous relative who used to say: “Never hire a lawyer not on a contingency”.

Is that true? Let’s consider the positives and negatives of a contingency arrangement.

To those who aren’t familiar, a contingency agreement with a lawyer is an arrangement where the lawyer earns a percentage of a client’s recovery, instead of charging the client an hourly rate. This arrangement is ubiquitous in some areas of law, e.g. personal injury and doesn’t lend itself to other areas of laws e.g. criminal law, among other areas. Not to be confused with a straight fixed fee arrangement, a contingency fee can be a percentage or a fixed fee plus a percentage of a recovery.

What are the advantages?

1.       You limit your out of pocket expenses. Since you are only paying if you recover, there is no hourly rate charged by your lawyer. Usually, you’ll still have to pay expenses, like court costs and expert witness fees. If you have limited funds (and don’t we all), this is essential.

2.       You limit your downside. Unfortunately, I’ve encountered many people who have sued, racked up huge legal fees and their recovery/settlement was dwarfed by their legal bill. With a contingency arrangement, this isn’t possible.

3.       Your lawyer has enough confidence in your case that she is willing to “bet” her fee on the outcome. If you lose, she doesn’t get paid. Clearly, she adjudges your case worthwhile to spend her time on it.

What is the disadvantage?

1.       Your lawyer is your partner. Now, that sounds great, but the problem with having a partner is that you give up autonomy and the dynamic changes. You aren’t the absolute boss anymore.

What does this mean?

It means your lawyer is going to decide how to run the case. If you don’t have a contingency arrangement, you decide how to run the case. If you tell your lawyer to ask for mountains of discovery, she’ll happily do it. After all, she’s getting paid for every hour. If she’s on a contingency she’ll decide if your request are worth her time. She’ll weight her time expenditures against her share of the potential recovery.  And, you won’t always agree.

As an aside, there is an interesting legal ethics question here as the lawyer should not act this way, but she will.

To conclude: If you can, do a hire a lawyer on contingency as the advantages are substantial. But, be aware of the way the arrangement will affect the dynamic of the relationship.

Avrum Aaron, COO of Legal Outsourcing Partners, LLC can be reached at avrum@lop-llc.com or 201-379-9230.

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