Law Firms That Do Commercial Litigation On Contingency: 6 Key Considerations For businesses facing complex legal disputes, the traditional hourly....
Law Firms That Do Commercial Litigation On Contingency: 6 Key Considerations
For businesses facing complex legal disputes, the traditional hourly billing model for commercial litigation can present a significant financial barrier. This often leads companies to explore alternative fee arrangements, with contingency fees emerging as a potential solution. A contingency fee arrangement means the law firm only gets paid if they successfully recover damages for their client, typically taking a percentage of the settlement or award. While more common in personal injury cases, certain law firms specialize in offering this model for commercial disputes, particularly when substantial damages are at stake.
Understanding how to identify and engage with law firms that offer commercial litigation on contingency requires careful consideration. This approach can align the interests of the client and the legal team, but it also comes with specific criteria and implications. Here are six key points to consider when exploring this funding model for your commercial dispute.
1. Understanding Contingency Fee Arrangements in Commercial Cases
In a contingency fee structure, the law firm's payment is contingent upon the successful resolution of the case, usually through a settlement or a court judgment. If the case is lost, the client generally does not pay attorney fees, though they may still be responsible for case expenses and disbursements. For commercial litigation, this model is typically applied to disputes where a clear monetary claim can be quantified, such as breach of contract, fraud, or intellectual property infringement where lost profits or damages are ascertainable. It differs from the more common personal injury contingency in terms of case complexity, evidence requirements, and the financial sophistication of the parties involved.
2. Types of Commercial Cases Suitable for Contingency
Not all commercial disputes are candidates for a contingency fee arrangement. Law firms usually consider cases with strong merits, clear liability, and a high probability of significant financial recovery. Common examples include substantial breach of contract claims, business fraud cases, intellectual property infringement disputes (e.g., patent or copyright infringement), complex business torts, breach of fiduciary duty actions, and certain antitrust claims. Cases involving minor damages, speculative outcomes, or primarily injunctive relief (stopping an action rather than monetary recovery) are less likely to qualify for contingency representation.
3. The Law Firm's Perspective: Case Evaluation Criteria
When approached for a contingency arrangement, law firms meticulously evaluate several factors. They assess the strength of the evidence, the legal merits of the claim, the potential amount of damages recoverable, and the financial viability of the opposing party to ensure they can pay a judgment. Firms also consider the estimated cost and time investment required for the litigation, weighing it against the potential return. A firm's willingness to take a case on contingency signals their confidence in its merits and their belief in a successful outcome.
4. Benefits and Risks for Businesses
The primary benefit of a contingency fee is the reduction of upfront legal costs, making high-stakes litigation accessible to businesses that might otherwise be unable to afford it. It also aligns the law firm's interests directly with the client's goal of financial recovery, incentivizing efficient and effective legal action. However, there are risks: the law firm will take a percentage of the recovery (often 30-40%), which can be a substantial sum. Additionally, firms may be more inclined to settle cases for a lower amount if it reduces their risk, potentially pressuring clients to accept offers they might otherwise decline. Clients also remain responsible for case-related expenses, regardless of the outcome.
5. What to Look For in a Contingency Commercial Litigation Firm
When selecting a firm, look for extensive experience in your specific area of commercial litigation and a demonstrated track record of success with contingency fee cases. Evaluate the firm's financial stability and resources, as complex commercial litigation can be costly to pursue. Transparency in their fee agreement and a clear understanding of how expenses are handled are crucial. Reputable firms will provide a detailed breakdown of their proposed percentage, how expenses are calculated, and what happens in various scenarios (e.g., settlement versus trial).
6. Due Diligence and Agreement Review
Thorough due diligence is paramount. Interview several firms, request references, and meticulously review any proposed contingency fee agreement. Understand the exact percentage the firm will take, how litigation expenses (such as expert witness fees, court filing fees, discovery costs) are defined and paid, and whether those expenses are deducted before or after the attorney's percentage. Clarify what happens if the case settles quickly or proceeds to a lengthy trial. Ensuring every aspect of the agreement is clear and understood can prevent future disputes and align expectations.
Costs Beyond the Contingency Fee
Even in a "no win, no fee" attorney scenario, clients are typically responsible for litigation costs and expenses. These can include court filing fees, deposition costs, expert witness fees, travel expenses, and e-discovery costs. It is essential to understand whether these expenses are advanced by the firm and repaid from the recovery, or if the client is expected to pay them as they arise, and whether they are repaid regardless of the case outcome.
Summary
Engaging law firms that handle commercial litigation on a contingency basis can be a powerful strategy for businesses seeking justice without prohibitive upfront legal costs. This model requires a strong case, a clear understanding of the benefits and risks, and careful selection of a reputable firm with proven experience. By thoroughly evaluating potential firms and scrutinizing their contingency fee agreements, businesses can navigate complex commercial disputes effectively while managing financial exposure.
