Alternative Litigation Billing

[courtn...@gmail.com]

I am interning for a law firm that is looking for alternative
billing methods when the legal fees will be more than the
settlement might be. Any ideas on what others have done in
this situation. We already use alternative billings such as
fixed/flat fees, hybrid billings, and contingency fees. Any
help would be appreciated.

[Mike Jacobs]

You don't say whether your employer represents plaintiffs or
defendants in whatever type of litigation this is. It matters.

For the defense, the amount of legal work required in litigation
is largely in the control of the plaintiffs, not your own clients
-- if your opponent makes a big deal out of an issue you have
little choice but to respond, although there are (imperfect)
fee-shifting mechanisms already in place in the court system if
the plaintiff's claim is frivolous or in bad faith.

If these lawyers represent plaintiffs, contingent fees are common
(in the USA, assuming that's where you are) and would prevent the
fee from being larger than the settlement -- it would be a
percentage of the recovery, thus automatically proportional.

If you are talking about class-action settlements, I'm not sure
how to help you. Plaintiff class action cases are very expensive
and time-consuming to pursue and even if each client (class
member) only gets a small amount, the lawyer puts a huge amount of
work into it and deserves to be compensated for achieving justice
-- the kind of ripoffs that are best dealt with as class actions
used to escape justice altogether because they were too small to
deal with, and if the damages to each victim are big enough, you
don't _need_ a class action. Besides, if you have a million
clients, even if the lawyer makes a million bucks off of a
settlement where each client gets, say, a rebate card worth 10
bucks, paying the lawyer a million dollar fee still only amounts
to a dollar per client. That is less than a typical contingent fee
would be -- and no lawyer is going to pursue "justice" for a $10
win and only charge the client $3 for his efforts.

There are inherent problems with the hourly fee system, mainly
because it does not incentivize efficiency or speed (the more work
the lawyer has to do to get the desired result, the more the
lawyer gets paid). But sometimes, especially in defense of civil
claims, it is still the best way to go. Even very good lawyers
have an impossible task predicting how much work is going to be
required by a litigation matter. Accepting a flat fee for such
work basically hands the reins to the opponents to determine
whether the poor flat-fee lawyers for the defense are going to get
screwed and wind up working for less than they could earn flipping
burgers at McDonald's.

--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal matter.
For confidential professional advice, consult your own lawyer in a
private communication.

Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685

[A Michigan Attorney]

Basically you are asking how to use alternate billing to turn a negative
ROI into a positive one. No such billing method exists. You could lower
the fee, but that's not a billing *method* - at best that's just
re-examining the ROI to correct any inaccurate variables. If the ROI
really *is* negative, the only economical solutions are (1) for the
firm, refuse the case; and (2) for the client, pursue it pro se or
abandon it.

From a client's perspective it is senseless to pay a law firm to pursue
a case where the only benefit is a recovery of property that is worth
less than the fees and expenses. Such a case might be sensible if there
is also an important right to be vindicated (e.g., to set a useful
precedent for the client). From the law firm's perspective it is unwise
to take a case that the firm knows will result in a net loss to the firm
or the client.

Perhaps the purpose of your research project is to emphasize these points.

[Barry Gold]

A Michigan Attorney wrote:
> From a client's perspective it is senseless to pay a law firm to pursue
> a case where the only benefit is a recovery of property that is worth
> less than the fees and expenses. Such a case might be sensible if there
> is also an important right to be vindicated (e.g., to set a useful
> precedent for the client). From the law firm's perspective it is unwise
> to take a case that the firm knows will result in a net loss to the firm
> or the client.

I agree. However, sometimes a creative approach can work wonders.

My mother-in-law's estate included some mineral rights that paid
royalties of about $150/year. The firm that managed the oil extraction
and paid the owners claimed that they could not transfer the account to
my wife's name until she was officially named executor in probate
papers. But my in-laws used a trust, so there was no probate.

My wife called our lawyer (her cousin), and he said, as we expected,
that the cost of writing letters and possibly suing to get the payer to
fix things was more than the NPV of the asset. So using the legal system
would have been a lose.

Instead, my wife wrote the payers a letter. She told them that if they
couldn't see their way to changing the name on the account, she would
transfer her interest to the IRS as a gift. And that she was certain
that _they_ would find a way to convince the payers that they were owed
the money.

She got a letter of apology by return mail, and the whole thing was
straightened out in a week. And yes, if they hadn't cooperated she
_would_ have transferred her mineral rights to the IRS. After all,
what good were they doing her?