Hiring your lawyer on a contingency basis sounds like a great idea. Instead of forking over tens of thousands of dollars for a retainer and refreshing that retainer month after month after month, you simply sign on the dotted line and pay nothing. Well, nothing up front any way.
Contingency arrangements allow you to hire a lawyer and pay them a percentage of what the lawyer recovers for you, rather than paying on an hourly basis. The big benefit of contingency is no money up front and, in most cases, you only pay if the lawyer achieves the desired result. The downside is the amount paid to the lawyer can be substantially more than what would occur when paying a lawyer on an hourly basis.
In this article, we will discuss the pros and the cons of contingency arrangements. We will also discuss some of the issues that you may not have considered before when it comes to choosing contingency over hourly.
The Risks of hiring a lawyer on contingency
There are risks for both lawyer and client when entering into a contingency fee agreement. These risks can be hard to value at the outset of a case, in particular.
The risk to the law firm depends on the type of contingency fee agreement it enters into. Under most contingency arrangements (including the ones used by Albertson & Davidson, LLP), the firm agrees to do the work and pay for all the costs of the case as it proceeds through the court system. If the firm is not successful in securing a result, then the firm is paid nothing. That could mean hundreds of hours of attorney time and tens of thousands of dollars in out-of-pocket costs lost to the law firm if the case is not successful.
For example, the out-of-pocket costs for things like depositions, document subpoenas, expert witness fees, court filing and service fees, and mediation fees (to name just a few) can equal anywhere from $10,000 to $100,000 or more in a single case. That is a big investment for anyone to make without any guarantees of repayment.
The risk to the client is the opposite. What if the case were to settle quickly and without much effort? Wouldn’t it have been better to hire the law firm on an hourly basis and pay less than the contingency fee would be? The length and difficulty of a case can be a big risk factor for the law firm, but it is also a risk factor for the client.
The reality is this: cases rarely settle quickly or without effort. In fact, the more effort you put into a case the more likely it is to settle. But it still takes time and effort to work a case to the point where the parties are feeling the pressure to settle. If you hire a lawyer that does less work, you are being hurt in two ways: (1) the case will never be ready to settle because the opposing party feels no pressure to settle it, and (2) if/when your case does eventually settle, it will be for a much lower amount.
Even in the best of cases, your case will be much harder and take much longer than you can even imagine. People who have never experienced our court system before are shocked at just how difficult it is to navigate. The court system is not to blame. The rules have been created to ensure a fair and due process of law. But that process, and the procedures created to support that process, takes time, money, and perseverance to pursue.
For example, you serve a bank with a subpoena to obtain financial records. And then the opposing party files a motion to quash your subpoena claiming it is not relevant or the records are protected by the right to privacy. Your lawyer then has to file a response to that motion and maybe file another motion to enforce the subpoena depending on the circumstances. The court sets the hearing date on the motion for 45 to 60 days from now, maybe more. The court then will rule on the motion. Maybe you are denied the documents, maybe you get the documents, or maybe you only get some of the documents.
The court’s decisions must be submitted on a written order for the judge’s signature. That can take a few weeks to get back from the court. You then serve the order on the bank and demand that they produce the documents. But their legal department has issues with the order and ask your lawyer to have it re-issued. Your lawyer argues with the bank, but the bank refuses to budge. Your lawyer then files a motion to compel against the bank. Once the motion is filed, the bank gives in and agrees to produce the documents, but it takes another two weeks to actually obtain the documents from the bank. From the start of this process to the finish it takes three and a half months.
That’s not the way it goes every time, but it is a true example of how something that sounds simple can become complex and get bogged down in the legal process. You should be able to obtain financial records in 20 days and instead it takes 120 days. And if it isn’t the bank, then it is some other issue that crops up and requires a good deal of time and attention to resolve.
These unknown case issues are what make the risk evaluation difficult. Every case will be hard, but just how hard and how time consuming? If you hire a lawyer on an hourly basis, then you take on the risk of this expense and the lawyer is paid regardless of the result. If you hire a lawyer on a contingency basis, then the lawyer takes on the risk of the time and expenses and will only be paid if and when they obtain a result for you. Hourly and contingency are two very different arrangements.
The Costs hiring a lawyer on contingency vs hourly
Every court case comes with out-of-pocket costs that will be incurred. By costs, we are referring to the money that must be paid to fund your case other than the attorney’s fees.
For example, when you file your lawsuit, there is a filing fee the court charges. When you subpoena documents from a bank, you have to pay for copies of the records. You also must pay for the process server to serve the subpoena and for the deposition officer to take custody of the financial records for you. When you take a deposition of a witness, you must pay the 
court reporter for their work in typing and preparing the written transcript. You also must pay witness fees. You may also decide to videotape the deposition; in which case you must pay the videographer for their time. If your case requires an expert witness (and most of them do), then you must pay the expert witness fees. If you go to mediation, you have to pay the mediator’s fee, or at least a portion of it. And then there are all the related costs such as copy fees, service fees, research software fees, and any number of other related costs.
The costs of a typical trust contest lawsuit can range from $10,000 to $100,000 or more per case. Every case is different and requires different services, which result in different costs. But every case will incur some costs no matter what.
When you hire an attorney on contingency, under most fee agreements the law firm will agree to pay for these costs and will not be reimbursed by you unless they obtain a recovery in your case. That is money out of the law firm’s pocket that it would not have to spend if hired on an hourly basis. Again, as with the attorneys’ fees, contingency shifts the risk of paying the costs onto the lawyer or law firm.
The Incentives… and the Freedom
One of the biggest benefits of hiring a lawyer on contingency is that you align your incentives for the case with the lawyer’s incentive. You essentially become partners in this long and expensive endeavor. Incentivizing the lawyers is a great way to build proper motivation to handle the case well, quickly (or as quickly as the process will allow), and try to get as much as possible. Aligned goals are good for you and the lawyer. It puts everyone on the same page when it comes to driving for a good result.
The reason Albertson & Davidson, LLP prefers contingency is it gives us the freedom to do everything on the case that we want to do. You can imagine that when clients are paying on an hourly basis, at some point they may want us to slow down or not take a deposition that we need because they don’t want to pay for it. The costs can increase quickly and significantly when the right work is being done on a case. But with contingency, we can do the work we want and need to do in order to better work the case and build the pressure and leverage to achieve a great result (either at trial or in a settlement).
Contingency gives us the incentives to work hard on your case but also the freedom to work your case the best way we know how.
The end goal
Results matter. Litigating a case just to litigate it or just to show how smart the lawyers are results in destruction to the client(s). The only thing that should matter to you is the result. You want the best result you can achieve under the circumstances.
Of course, every lawsuit also comes with risk. There is always a risk that you may not win your case or that the result may not be as good as you had hoped. Every case has its own pros and cons.
Favorable evidence will be found, but not so favorable evidence will arise also. There is no such thing as a perfect case. And there certainly is never a slam-dunk case. Eventhe best of cases have their issues. Whatever comes in your case, you need a qualified, competent lawyer to help walk you through the landmines that can befall your case.
That gets us back to results. A great result in your case is reaching the end and obtaining as much as you can under the circumstances. With contingency, there is a big incentive for the lawyer to obtain a result. The lawyer is not paid until the money (or whatever you are fighting for) arrives. You want to be sure to hire a lawyer who understands that a final result is what we’re after. There is no better way to align the lawyer’s incentive on a final result than hiring him or her on contingency.
Why hourly is worse
The simple reason we don’t care for hourly cases is freedom of action. We want to take the actions we know must be taken to strengthen your case. But with hourly arrangements, there are times when a client will ask the lawyer to either slow down or stop taking certain actions altogether because the costs are mounting and they simple can’t, or don’t want to, pay for those services. It is a big mistake, but sometimes there are no other choices–especially where a client lacks the money to pay for the services.
Contingency eliminates all of these concerns. Firms like Albertson & Davidson, LLP can have the freedom to do what they need to do, when they need to do it. Of course, you need a firm that (1) wants to take action for you, and (2) has the resources to take those actions. With the right firm, a contingency arrangement can unleash a wealth of talent and action on your case that will result in a great outcome for you.
Why contingency firms without resources are worse
If you are going to take action, then you need talented people to do the work, and they need to have deep pockets. Or at least deep enough pockets to foot the bill. With contingency, the lawyer is agreeing to pay for the costs. You don’t want a firm that refuses to take action because they don’t have the money to pay for those actions. Of course, you also don’t want a firm that racks up unnecessary costs. But you do want a firm that has the resources to take all the actions that are necessary and desired for your case.
For example, if you need to take five depositions of key witnesses and a treating physician, you want a law firm who can pay for those depositions. You also want a law firm that has talented attorneys to do a great job at those depositions. Not all lawyers are created equal. Talent and skill make a big difference in the result you can achieve in your case. As does the resources of the firm to back up their actions.
Albertson & Davidson, LLP has focused on trust and will litigation for over 18 years. We are the leading contingency trust and will litigation firm in the State of California. Our attorneys have successfully handled hundreds and hundreds of trust and will litigation cases and have obtained over $300 million in verdicts and settlements for our clients. We have the talent and we have the resources to handle your case.
