Contingent fee
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A contingent fee in the United States or conditional fee in the United Kingdom is any fee for services provided where the fee is only payable if there is a favourable result. In the law, this is the "no win, no fee" system.
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[edit] Fee Structure
A client is not charged attorney fees if he loses the case (however, a client is charged for court costs and expenses, at least in the US.) If the client wins or settles, the fees the attorney can charge varies depending on the country, and even local jurisdictions. In the US, for example, the most an attorney can charge is the contracted contingency fee. The fee is calculated as a share of the eventual damage judgment or settlement won by the client. The percentage allowed is subject to the ethical rules of professional conduct, and in many circumstances, statutory limitations. In the UK, on the other hand, the client is liable for normal fee (based on hourly billing plus a profit element) plus a success (or bonus) fee. The amount of the success is limited to 100 per cent of the normal fees. Most lawyers charge a success fee which is much less than this, between 25 and 50 per cent. In English law fees are subject to compliance with the statutory scheme.
[edit] Advantages
A contingency fee arrangement provides access to the courts for those who cannot afford to pay the attorneys fees and costs of civil litigation. Contingency fees also provide a powerful motivation to the attorney to work diligently on the client's case. In other types of litigation where clients pay the attorney by the hour for their time, it makes little economic difference to the attorney whether the client has a successful outcome to the litigation. Finally, because lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be reduced.
[edit] Disadvantages
Contingency fees do not guarantee civil justice, or even access to the courts. Lawyers sometimes "cherry-pick" only the strongest claims which are most likely to succeed. Not all cases are immediately transparent. Some require extensive investigation before the chances of success can be properly assessed. Such cases might be turned away because even the initial assessment of their strength is costly and risky.
Critics also suggest that the availability of a mechanism to bring lawsuits without any costs risk to the plaintiff encourages frivolous claims, and is part of the growing "compensation culture" that is the source of much adverse comment.
[edit] UK
In English law, conditional fees were introduced by the Courts and Legal Services Act 1990, but the relevant statutory instruments were not made until 1995. Initially, the success fee was not recoverable from the losing party, but on 1 April 2000 section 27 of the Access to Justice Act 1999 amended the Courts and Legal Services Act 1990 to allow recovery of success fees from the losing party. The regulations that accompanied this change in the law (the Conditional Fee Agreements Regulations 2000) were far from clear, and the result was that a great deal of satellite litigation took place. On 1 November 2005 these regulations were revoked, and now it is much easier to enter into conditional fee agreements than was previously the case.
[edit] Canada
In North America, contingent fee agreements are legal in the United States and Alberta. In other Canadian provinces, an attorney may collect a percentage of recovery in case of a victory, but must charge an hourly fee otherwise. Contingent fees are entirely barred in the Province of Ontario. Many countries prohibit contingent fees.
[edit] United States
Most jurisdictions in the United States prohibit working for a contingent fee in family law or criminal cases, as made clear in Rule 1.5(d) of the Model Rules of Professional Conduct of the American Bar Association.[1] In the United States, contingency fees are the standard in personal injury cases and are less common in other types of litigation. Fees range from 25% to 50% of the amount recovered, although 30-40% is the most common. The ABA's Model Rules provide guidelines for when a contingency arrangement is appropriate.[2] Sometimes lawyers and clients agree to a "split-fee" arrangement, where the client pays a reduced retainer or reduced hourly rate and the lawyer receives a reduced percentage of the recovery if successful.
Contingency fees have come under controversy in the United States. Some allege that some class action lawsuits are brought only to generate fees for lawyers without giving any significant economic benefit to the members. The Class Action Fairness Act of 2005 was enacted to address these concerns.
Some tort reform proposals in the United States seek to further regulate contingent fees. For example, Florida passed a law limiting contingent fees in medical malpractice cases.[citations needed] Some object to these laws as an unfair restriction on freedom of contract.
[edit] References
Andrews, Neil H. A. "English Civil Procedure: Three Aspects of the Long Revolution" [3]
