Contingency fees are often a key component in cases that have the potential for a very high payoff for the client that does not have the resources or desire to pay a law firm by the hour.
A contingency fee is the cost of legal representation when payment to an attorney is based upon a percentage of what a client receives in a settlement or judgment. While contingency cases are well-known to the public in the personal injury realm, business contingency cases can also be extremely viable for clients that have a business law issue. In either specialty, when a case comes along that a company does not have the resources to pay thousands, if not millions, of dollars in legal fees, the case is frequently dropped out or not engaged initially out of economic necessity. Contingency fees allow these cases to be pursued.
The trick of expertly handling contingency cases is to combine large-firm expertise with small-firm attention while reducing overhead.
The best business law firms in a given state or region are renowned for successful outcomes achieved in at least one or two, and preferably several, well-chosen contingency cases. Certain prudent firms versed in business contingency cases may carry three or more promising contingency cases at all times. A single such case may consume up to 20 percent of a firm’s available time, but typically generates between 40 and 50 percent of the same firm’s revenues.
The crucial part of any business firm’s contingency strategy is that these cases must be well chosen. The ideal formula is to have a relatively small number of such cases in the game, as a loss in a time-consuming and hard fought contingency case could seriously impair even the most aggressive firm’s bottom line.
Financial thresholds for a contingency-based case can range from tens of thousands to several million. Once an appropriate financial range is established, the case must be thoroughly analyzed and determined to be financially viable with sound prospects for success, assuming that the matter is deemed substantive enough to go to trial.
Legal vehicles such as blended contingency models, in which a fee consists of discounted hourly rates and a significant percent of the recovery, are considered the most useful, although individual negotiation is recommended so that the client is satisfied at the outset.