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Contingency Fees

By Ed Poll
April 26, 2011

Much of the pressure for law firms to utilize alternative billing approaches comes from companies of all sizes that increasingly want to control their legal costs by appealing to the individuality of lawyers. That requires rewarding lawyers for having “skin in the game” ' a personal financial stake in the outcome of a matter through compensation that goes up when the results justify it. The risk for the lawyer is in not meeting the client's cost and business goals; the reward is in meeting them or even doing better than what was required.

Lawyers who bill using contingency fees are the classic example of this type of shared risk arrangement. If the client doesn't receive value, there is no charge; if the client does receive value, the lawyer's fee is based on a previously negotiated percentage. Contingency fees are particularly useful for the lawyer skilled in analyzing cases and accepting those with a high likelihood of success. But there are risks as well, summarized in the line used in some law firms' television advertising: “No fee unless we win.”

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