The Center for Justice & Democracy recently released a report entitled, Courthouse Cornerstone: Contingency Fees & Their Importance for Everyday Americans. The study provides a helpful overview of these fee arrangements, explaining what they are, how they came about, their purpose, and the way that these agreements are used to ensure open access to the justice system. Many residents do not appreciate the value provided by this structure, and it is worthwhile to emphasize the critical role it plays in holding negligent parties accountable for paying for the consequences of their actions.
What It Is
The civil justice system has a cost. Court fees must be paid to keep the operations of the system running. Attorneys must be paid, as the work is their source of personal income. Litigation itself has a cost, as traveling to depositions, compensating expert witnesses, copying documents, and similar steps all must be handled.
There are two general modes of thought on these costs. Under the “English Rule,” the loser pays for the costs of the winning party. For example, a plaintiff brings a case alleging negligence lead to a brain injury, if they do not win the matter, then the plaintiff actually has to pay the defendant the costs. This acts as a huge disincentive for even the most meritorious of cases to be brought, stifling justice for many.
Fortunately, the “American Rule” is different: every party pays for their own costs (in most cases). But this also comes with a challenge–what if a party is too poor to hire an attorney after they are injured? Without other options, an injury victim may not be able to file a suit, even one with obvious cause, because they cannot afford the costs. That is where contingency fee arrangements come in. Under a contingency fee system, an injury attorney agrees to pay the upfront costs and not collect a fee unless the plaintiff succeeds in receiving a favorable settlement. The costs and fees are then taken from that settlement or award.
How It Helps
Perhaps most obviously, contingencies fees allow all parties access to the civil justice system. No one should be barred from seeking redress because of their economic situation.
On top of that, these fee arrangement align the interests of the attorney and client such that fairness and efficiency are maximized. In other words, the main alternative arrangement is the “billable hour.” Under that system, attorneys simply receive a flat amount for every hour that they work on a case. In that way, the attorney profits more by dragging out a case as long as possible and increasing the hours required to work on it.
Additionally, the billable hour approach makes it less beneficial to weed out cases that are less than meritorious. If the attorney stands to gain regardless of the outcome of the case, then there is little advantage to rejecting matters that might be difficult to prove. Conversely, under contingency fee arrangement, the risk of loss falls on the plaintiff’s attorney. They may put in hundreds of hours and spend thousands of dollars only to lose a case and not have any compensation. With those risks, attorneys are far more likely not to take cases that will be difficult to prove. This is an efficient use of resources, improving the functioning of the civil justice system.
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