While contingent and flat fees are nothing new in the legal world, there’s something else that’s taken hold for law firms and clients: payment structures.
“It’s something we have been open to and something we’ve had success with,” said Matthew Miller, a partner at Rupp Baase Pfalzgraf Cunningham LLC. “It’s been growing in recent years.”
Historically, law firms have been known for high hourly rates. They’re also risk-averse, he said.
“They want to get paid, and the way to do that is to charge their hourly rates,” he said.
That model doesn’t fit all sizes of businesses, according to Miller. Smaller companies and even larger ones without large litigation budgets may have “meritorious claims,” he said, but they don’t pursue the claim because of the costs involved in pursuing the matter. Contingent fees in the commercial context offer advantages to businesses.
“It can incentivize smaller businesses to pursue a claim that it may have against a more wealthy or more experienced opponent on the other side,” he said.
The structure also aligns the client and lawyer “perfectly,” he said.
“Assuming there’s a reasonable possibility of winning on liability and getting damages in return, it gives the lawyer skin in the game,” Miller said. “There’s no interest in just churning out hours.”
Contingent fees give the lawyer a financial interest in the outcome of a case. Consequently, the client isn’t constantly being hit with bills.
“All the lawyer really needs from the client then is the dedication to put in the effort – to be able to provide documents and participate in the case,” he said, “and not just close the door and forget about it.”
Under the structure, the risk is taken on by the law firm.
“If we win, we have an appetite for risk here that aligns our interests with the client,” he said. “If we don’t win, we essentially don’t get paid, other than expenses along the way.”
Contingent fees aren’t right for every type of case, he said. There has to be a good chance that the case can be won on liability.
Read More on fee structures.