Contingent Fees for Plaintiffs

April 13, 2006

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For a small business owner navigating the court system, there are a number of inherent economic disadvantages when being sued.

Typically, attorneys for plaintiffs will handle personal injury and other cases on a contingent fee basis, where there is a substantial likelihood of both a win and a large award of damages. Usually, the attorney will collect, as a fee, one-third of the amount of monetary damages secured by way of a judgment or a settlement, although some states limit such fees when damages are very large. With a contingent fee arrangement, if the attorney secures a $180,000 settlement, the fee for this one case is $60,000. However, of course, if he is unable to secure a settlement or judgment, he collects no fee at all.

A contingent fee arrangement also means that a plaintiff can bring or threaten an action without spending any financial resources whatsoever. Even the other costs of bringing the action (e.g., sheriff's fees, court fees, and fees for experts) are usually advanced by the attorney.

The availability of a contingent fee arrangement for plaintiffs is considered to be justifiable, from a social point of view, because it allows individuals without financial resources to seek redress for losses.

Of course, in practice, plaintiff's attorneys often will not accept a contingent fee arrangement unless there is both a substantial likelihood of a win and a large monetary settlement or judgment. However, many cases that are worthwhile from a societal viewpoint, or as a matter of principal, do not involve either of these possibilities and, thus, are not accepted by attorneys on a contingent fee basis.

When being sued, you're at a serious economic disadvantage because the plaintiff often has the services of an attorney motivated by the rewards a contingent fee can bring. Unfortunately, you will probably not be able to offer the same economic incentive to your legal team.