Every week clients approach me to take their case on a contingency fee basis. I most often decline; let me tell you why.
To begin with, let’s define our terms. A contingency fee is when the lawyer is paid if and only if the plaintiff wins or there is a settlement. If the client doesn’t get any money then the lawyer doesn’t get paid a fee.
How does one determine the amount of a contingency fee? Normally, it is a percentage of the winnings. For instance, someone who wins $1 million dollars in court might pay $300,000.00 to his lawyer in contingency fees.
Why do clients want to hire a lawyer on a contingency basis?
Every person is different. Desperate people without money think that paying a contingency fee is the only way they can get to court. Other clients have money but do not want to take the risk. If they can find a lawyer willing to take the risk for them, they are willing to reward the lawyer with a higher fee.
Why do lawyers accept contingency fees?
Law firms have different business models. Some law firms only take files on a contingency basis. Others only work on a fee per hour basis.
In my office we usually charge an hourly rate for our time. For me to accept a contingency fee, I must be convinced that the case can be won so as to make sure that our firm’s financial reward would exceed our potential earnings had we billed by the hour. Our financial remuneration would need to make up for the risk we would take with our time.
Even when I consider such a step I warn the client that it is likely far less expensive for them to pay me my hourly rates.
What does the Law Society say?
For those interested in the Law Society of Upper Canada regulations regarding contingency fees I refer you to sub rule 2.08(3) and commentary of the lawyers’ Rules of Professional Conduct and the Solicitors Act and the regulations there under.
For the clients who are considering hiring a lawyer on a contingency fee basis I have the following advice:
- Don’t compromise on your choice of a lawyer because of contingency fee. For your own benefit, choose the lawyer who is best qualified to handle your case even if he or she will only accept payment according to their billable hours. Unprepared, unqualified lawyers can lose cases that should be won. Better qualified lawyers are worth the high fees they charge.
- If a good lawyer is prepared to take a contingency fee maybe you should consider paying his hourly rate. It is a risk for a lawyer to take a case on a contingency fee. The lawyer will probably invest a lot of time and money in the case and if there is no settlement or victory at trial it is the lawyer who loses the time he spent on the file. The qualified lawyer who is prepared to take that risk does so because based on his expertise and experience the case likely has a very good chance to succeed. A skilled lawyer takes that risk only because, in his view, the facts of the case and the law suggest to him that it is a worthwhile risk to take. If the lawyer is willing to risk his time/money on your case and you trust his judgment then perhaps you should think twice about hesitating to take that risk because paying an hourly rate will cost less then a contingency fee arrangement.
- Remember – even with a contingency fee there is always a risk. Even though clients who hire lawyers on a contingency fee basis only do so if they win, clients should consider what happens if they lose. If the plaintiff in a case loses the judge will likely make the plaintiff pay the defendant’s costs.
So when will I take on a contingency fee? I ask myself these questions. Is this a solid case that is winnable? If we win will we be able to collect? Is the client a stable reasonable person who really cannot afford to pay his or her legal fees? Does the client fully understand that it will be more expensive for them to take this route? Is this the only way they are able to get access to the justice system? If the answers to all these are questions are yes then I will consider taking the case. Even under these circumstances I always insist that the client thinks twice before I take on a contingency fee because if a case is so promising that it is worth the risk to me it probably means that the client is better off just paying the lawyer for his time.