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Contingency fees: freedom from worry

By Diane Karpman

Diane Karpman
Karpman

Let’s face it, the harsh truth is that most clients don’t want to pay our bills. Regardless of what system we use, we get roasted by the media, scholars and, of course, clients. Usually, lawyers either bill per hour or work on a contingency fee. Nevertheless, both systems are constantly subjected to harsh ridicule.

In the billable hour universe, fees are based on the time spent on a matter. This is the dollars times hours regime, which litigator Scott Turow disparaged in “The Billable Hour Must Die,” (abajournal.com/magazine/ the_billable _hour _wont_die/.) He maintains that it is detrimental to the quality of lawyers’ lives, the image of our profession (no time for pro bono when the clock is ticking) and diametrically opposed to the interests of clients. Although this time-based measure has been employed by the profession for about 50 years, it so misaligns with the client’s interests that it can create a perverse incentive for the attorney. It may possibly encourage firms to overstaff cases, coat bills with marginally useful activities and delay the closure of cases. Remember that attorneys sell legal service; therefore, copying and postage cannot become “profit centers” for the firm.

However, it is the contingency lawyers who are truly vilified and sometimes characterized as craven. These are the lawyers who actually invest their own time and money into their client’s causes, assuming the risk of no recovery. Recently, contingency fee lawyers in class actions were labeled as “Contingency-Fee Con-Men.” (Wall Street Journal 9/25/07)

Among the risks they assume is the possibility of being fired on the eve of settlement. They can recover because “[t]o the extent that such discharge occurs on ‘the courthouse steps,’ where the client executes a settlement obtained after much work by the attorney, the factors involved in a determination of reasonableness would certainly justify a finding that the entire fee was the reasonable value of the attorney’s services.” Fracasse v. Brent (1972) 6 Cal. 3d 784, 791.

To recover a legal fee, the lawyer must have personal knowledge of the legal services performed. This may be shocking to the many lawyers super-glued to daily times sheets, but contingency fee lawyers almost uniformly don’t keep time records. There is no legal requirement that an attorney supply contemporaneous time records to support a claim for fees. They can be difficult to recreate with precision, six years after the fact, but that was recently accomplished in Mardirossian v. Ersoff (2007) 153 Cal. App. 4th 257. (Review denied)

Contingency fee lawyers have other luxuries that lawyers wedded to the clock lack. They can research or squander time on an interesting issue, since they can be “unconcerned about the mounting hours because the client will not be billed.” (Id. at 267) That gives them freedom from worrying that their natural intellectual curiosity will be challenged by a grumpy client at some subsequent point, about which time-based practitioners can only sigh and dream.

• Diane Karpman, a legal ethics expert, can be reached at 310/887-3900 or at karpethics@aol.com.

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