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Examiner
  • Bob Buckley: Why contingent fees are used

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  • A question often asked is how payment for my services is handled. I always begin by telling the client that I do not charge for the initial conversation so that the client can feel free to spend as much time as necessary with me to discuss the matter without worrying about receiving a bill. I have used this practice for all of my 34 years of practice due to the nature of my practice. If I practiced in a different area of law, such as family law, I would most likely have a different custom. However, since I only handle personal injury and medical malpractice cases, I am quite willing to spend a few minutes on the phone to obtain information to determine if I can be of benefit. There are many occasions when a few minutes on the phone are adequate to address the issue and we part company without any bill being generated.
    When I do undertake to represent an injured party, my fees will be a percentage of the amount recovered. This agreement is called a contingent fee agreement and is recognized by our rules of professional conduct. The rules provide that a lawyer shall not make an agreement for an unreasonable amount for fees or expenses. The factors to be considered in determining reasonableness are time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the service properly. Also considered is the experience, reputation, and ability of the lawyer performing the services, the amount customarily charged in the locality for similar legal services, and the nature and length of the employment relationship.
    A fee may be contingent on the outcome of the matter for which the service is rendered, except in two circumstances: (1) any domestic relations matter in which the payment of an amount is contingent on obtaining a divorce, or upon the amount of maintenance, alimony, support or property settlement; and (2) representation of a defendant in a criminal case.
    Contingent fees have not always been permitted in the United States. Most of our laws have their roots in English law, which prohibited contingent fee agreements because of laws prohibiting champerty. Champerty is an illegal agreement in which a person with no previous interest in a lawsuit finances it with a view to sharing the disputed property if the suit succeeds. Until 1876, there was uncertainty in Missouri as to whether contingent fee agreements were illegal in Missouri, but in a well-written opinion with a complete discussion of the history of champerty, it was declared that such contracts were legal.
    In the Missouri case of Duke v. Harper, Justice Bakewell said that the doctrine of champerty is a “relic of a state of things long since passed away.” Dating back to the Crusades in the Middle Ages, when land-holders were absent from home, dishonest men, who had asserted claims to the land of absent land owners, frequently on the return of the landowner assigned their dishonest claims to some powerful neighbor who used his power and influence to enforce the claim and deprive the rightful landowner of his property.
    Page 2 of 2 - Justice Bakewell stated that the court sees nothing contrary to the welfare of society and administration of justice in upholding a contract between an attorney and a client that the attorney shall be paid of the thing recovered. In fact, he noted that “many a poor man with a just claim would find himself unable to prosecute his rights, could he make no arrangement to pay his advocate out of the proceeds of the suit.”
    I call the contingent fee agreement the great equalizer as it levels the playing field. How else could the normal person make a claim against an insurance company, a large company, or a company or person insured by an insurance company unless the attorney was hired on a contingent fee basis? Who could afford to hire an attorney on an hourly basis and to pay the substantial expenses of litigating a claim if contingent fees were illegal?
    In medical negligence cases, the simple case can involve expert witness fees in excess of $20,000 if the case goes to trial. We are permitted to finance those expenses and to make the client's obligation for such expenses contingent on the outcome of the case, so that the client has no obligation unless and until recovery is made. The large company or insurer would have a huge advantage otherwise and as a practical matter there would be very few, if any, claims.
    The contingent fee has been criticized by some who would seek to abolish it or to regulate it in some harsh manner. For example, some have advocated that we adopt the English Rule which would make the prevailing party pay the other party's attorneys' fees. This would likewise have a chilling effect on any claim. The English Rule would only serve to eliminate claims and create an unlevel playing field.
    Some legislators, obviously under the influence of insurers and large corporations, have introduced attempts to impose restrictions on the contingent fee agreement by interfering with the agreements between lawyers and clients by dictating how the contract is structured. Such legislation is clearly designed to create an unlevel playing field and ultimately reduce the number of claims. For the last 140 years, contingent fees have been regulated by the Missouri Bar and the courts and there are few complaints. Why try to fix something that isn't broken?
    Bob Buckley is an attorney in Independence. Email him at bbuckley@wagblaw.com

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