Contingent Fees Are the Key to the Courtroom

The contingent fee system is the "key to the courtroom" for thousands of Americans. It allows people who suffered an injury to bring a suit without having to have the money up front to pay their attorney. Rather than charging for legal services by the hour, an attorney agrees to accept a portion of any recovery in the case, usually one-third. If the plaintiff receives no compensation, the attorney receives nothing. Without such a system, injured people could not have their cases considered in court and would be forced to accept whatever the defendant offered in compensation.

Contingent fees promote efficiency and discourage frivolous lawsuits. Since attorneys bear all the financial risk if there is no recovery or if the recovery does not cover their costs, they act as gatekeepers—not accepting frivolous or unjustified lawsuits. Attorneys also strive for efficiency, since extra costs come from their bottom line, rather than the client's pocket. In contrast, hourly-fee attorneys have an incentive to draw proceedings out, to maximize their hours of billable time.

Contingent fees are comparable to hourly fees. Several recent studies have shown that, for the number of hours worked, median fees on a contingent basis are comparable to the median hourly fees of attorneys in similar cases. There is no outcry over the level of contingent fees by the clients who actually pay them. In every state, courts have the right to reduce fees that are excessive in light of the work performed, and most jurisdictions have streamlined fee-dispute processes as well. There is no need for a rigid, statutory framework.

Caps and artificial limits on contingent fees would limit access to justice. Limits on contingent fees would make it more difficult for attorneys to accept cases with lower damages. An attorney who routinely took cases of a low dollar value would soon go out of business, if the fee was held to only 10%. Contingent fees must be high enough to take into account the risk of losing, of receiving a low settlement, or of having to try the case through to appeal.

Caps on contingent fees are one-sided, to the detriment of injured people. Proposals to limit fees never focus on the hourly fees charged by defense attorneys, some of whom charge hundreds of dollars per hour of work. Why should the Congress take action that will only affect one side in a civil dispute? The agenda of these proposals is clear—to take away the only person standing up for an injured person and demanding accountability.

The world is coming our way—why should we tamper with what works? Great Britain recently adopted a conditional fee system similar to the American contingent fee system. People understand that their lawyers will be more motivated if their fees depend on success. Even corporate lawyers who traditionally work on an hourly fee basis are adopting "results-oriented" fees.