Is a Contingency Fee Fair to the Client?
By Ian Zimmerman, Esq.
As personal injury lawyer with over 30 years of experienced I am often asked – and challenged- to support the very idea of a contingency fee.
“Isn’t it a bit much?” “Aren’t you taking the injured person’s money?” “What happens when you only have to make one phone call and settle the case, should you be entitled to so large a fee?”
These are all good and proper questions and deserve answers. I don’t run from hard questions so here goes.
Sometimes the contingency fee can be unfair and result in a windfall for the lawyer. Yes, sometimes a lawyer can do very little work and yet earn an very large fee. Sometimes it isn’t fair or just.
But, and it’s a very big but, I have rarely seen this happen. Can it happen? Yes. Does it happen? Yes. Does it happen often? Absolutely not. Do I wish it happened more? Well that question I am not going to answer at least here.
Most of the time the contingency fee that a Personal Injury lawyer charges is less than what he could earn hourly. Don’t believe me? Then ask yourself why all the really big firms-I’m talking about 100 lawyers or more- are almost all defense firms? Do you think they know something that the average lone-ranger of a plaintiff’s lawyer doesn’t know? Yes. What is it? It’s how to make money by simply billing around the clock for every moment that the lawyer is even thinking about the case.
The really big fees that lawyers earn- but are hardly ever reported in he news- are those earned by firms that bill the old fashioned way. For everything. Every hour, minute, second. Day after these firms keep the clock ticking along with their fees and yet these firms (almost always DEFENSE firms) are rarely in the news.
Why? Because it happens slowly and its boring and very few people are paying attention. Is it dishonest? No But don’t kid yourself, the hourly based attorneys are the one that are doing extremely well. In good times and bad. Plaintiff attorneys are the other hand, sometimes live from case to case. Most of the time the fees earned by a contingency arrangement are less than those earned if the attorney turned on the meter. Want more proof? Ask any Plaintiff attorney if he or she will take on your case on an hourly basis as opposed to a contingency fee. 95% will jump at the chance. I’ll bet you my fee.
Most plaintiff lawyers earn far less than their defense counterparts. Most plaintiff firm are small firms of less than 10 lawyers. Want proof? Check the most respected directory in the country for lawyers and law firms. Martindale- Hubbell. Many plaintiff personal injury lawyers have less than 3 lawyers!!
Most big law firms don’t like to gamble. Nor do they like to front any of their own money. Plaintiff attorneys have no choice. Their clients are average working people who can’t front the enormous costs that are required to successfully push a case through the system. Most plaintiff attorney can’t afford to take a case to trial. I repeat. Most plaintiff attorneys cannot afford to go to trial! They are forced – by the sheer weight of economic really – to refer the case out to a deeper pocket plaintiff law firm or settle the case. Who pays that price?
Do personal injury lawyer’s take a part of the injured party’s settlement? Of course they do. But the fact is that a good and aggressive attorney more than pays for himself. Any regular attorney can settle a million dollar case for a million dollars but how do you get $1.2 million or $1.4 million or even $2 million for the same case? How do you increase the pie as opposed to merely taking a slice out of it? You can look at all the large 7 and 8 figure advertisements all day long but what do they tell you? Was the “$5 million dollar” case easy or hard to settle? How much time did the attorney put in? What was the first offer? Did the attorney hold out? Did the case settle on the court house steps or did it settle early with little struggle? What are similar cases settled for?
Be careful when you see all those big figure settlements advertised because they don’t necessarily mean what they are intended to mean. They really begin the inquiry not end it. How would an average “Joe” consumer/client know? Sadly there is really no way to really know unless someone you really respect –and is an insider himself/herself- can tell you categorically that your lawyer has a reputation of going all the way and extracting the largest settlement possible. Other than that there is no real way to know even it this world of Google, Yelp and Facebook.
I can say unequivocally that most of time WE INCREASE THE PIE. How do I know? Because I know what comparable cases are settling for by reading such insider magazines called Jury Verdicts Weekly and similar publications and we have a very good idea what the averages are. True, it hard to know exactly what the case is worth “soaking wet” but a good lawyer should have a range and be able to consistently settle cases in the highest atmosphere of that range. So if the case is worth between $150,000 and $200,000 you have a $50 thousand dollar gap and you can be on either side of that gap depending upon who your lawyer is. It’s in those gaps that an attorney really earns his or her fee. That’s as straightforward as I can say it. It’s in the gap.
We hold out, insist on top dollar. Why? How? Because we know the system and how it is set up and when cases are “expected” to settle and for how much and what we can do to frustrate that machinery and those expectations. We almost always get more. Want more evidence? Many of our cases come from disgruntled clients who wondered if their lawyers were fighting hard enough for them. We know what was offered or “on the table” before we got involved in the case and we tell our clients that if we can’t do better we won’t take the fee we would otherwise be entitled to.
There is a world of difference between an attorney who is willing to go to trial – and go through all the rigors and stress and expense of litigation and bruising discovery- and one is who is simply willing to settle easily with the insurance company. A recent case came to us with $300,000 “on the table”. The client was told that if he could get more they would “kiss his ____ in Macy’s Window”. Guess what? We settled the case after 5 days of trial for $940,000.00 or more than three times what was offered before we got into the case. Never mind about the earlier promise and Macy’s window. The client now had more important things to concern himself about.
It’s an attitude and money thing. Your lawyer has to have the right attitude and has to have the economic wherewithal to do battle for a sustained period of time and that attitude and reputation has to be known to the defense firms. Yes, the same firms that bill and bill and bill. They like us. The really like us. We give them lots of work and hours. But their affection goes only so far. They cool quickly when we announce in open court on the date set for trial that we are “Ready for Trial”.
Then they want to talk to us.
So to get back to the question: Is the contingency fee fair to the client. Almost always “Yes”.