Business litigation traditionally has been funded by client internal cash flow. An alternative to this traditional funding model is the contingency fee option. Contingency fee options are also known as success-based or results-based fee options. With these options, our clients do not pay us legal fees based on the hours we work. Instead, clients pay us a fee based on a percentage of any financial recovery we obtain through litigation or settlement. It’s simple – if we do not add value by obtaining a recovery, there is no fee for the work performed.
Not every business litigation case is appropriate for a contingent fee arrangement. The contingent-fee cases we typically handle are complex and frequently involve first-rate opposing lawyers with well-heeled clients who are able to vigorously defend serious claims. These cases generally require a significant investment of our time and resources over long periods. So any case we accept must present the prospect of a recovery justifying the dedicated effort it will take to be successful.
Every case we handle is distinct, but there are common characteristics for those business litigation cases we handle on a contingent-fee basis. So what criteria do we consider to determine if a business litigation case is appropriate for a contingent-fee arrangement? The characteristics we typically consider include each of the following:
- A client with the time and commitment necessary to see the dispute to conclusion. We are not afraid to be compensated based on the results we obtain rather than the number of hours we spend representing our clients. We cannot, however, achieve success without the full commitment of our clients. Business litigation can be protracted and before we agree to handle any matter on a contingent-fee basis, we must be assured our clients are able to commit the time and effort necessary to help us achieve a successful result.
- A strong case for liability. This requires an analysis of the facts demonstrating a potential defendant indeed did something wrong and should be ordered to pay damages. The stronger the case is for liability, the more likely it is suitable for a contingent-fee arrangement.
- A significant up-side recovery of damages. This requires an analysis to determine, if liability is established, what monetary recovery is likely. This is key because we develop a litigation budget based on the expected effort for every business litigation case we handle. The likely damages recovery must be sufficient to justify the work and investment we believe will be necessary to achieve a successful outcome.
- A defendant able to pay a judgment or award in the appropriate amount. This requires an analysis of the ability of a defendant to pay. It would be a hollow victory if we were successful in establishing liability and damages only to learn a defendant is unable to pay.