No business wants litigation. It is time consuming, aggravating and unpredictable. It doesn’t forward your business purpose; to the contrary, it causes heartburn when you wake up. But most importantly, it opens up a black hole into which endless attorney’s fees seem to get sucked in. And sucked in. And sucked in.
Also, no business likes to pay lawyers. Still, most businesses pay an attorney because getting things done right moves the business forward, and doing them wrong can be disastrous. Businesses pay attorneys because the attorney is helping to achieve a business goal. For example, in contract negotiations, lawyers for both sides work together to facilitate the win-win deal both sides desire, and the legal fee is simply a cost of bettering both companies.
Paying your litigator is different. You resent having to sue or being sued and consequently you resent paying your gladiator. The usual win-win use of lawyers to forward business goals is replaced by the goal of defeating the other side.
So, litigation is not for the faint of heart, and it should only be used when business solutions fail. Today you are in conflict, but tomorrow you may need one another again. The future may be long and unpredictable, and it is usually unwise to unnecessarily burn a bridge. Still, here are some examples of when litigation is appropriate after business solutions fail:
- When you don’t want to become the victim of an economic bully. As a rule bullies pick on the weakest victims, and the people who put up a fight get paid quickly and more fully. Bullies pick on the strong only once before learning their lesson.
- When they just aren’t paying. This is a toxic business associate you don’t want in the future. But you need to get paid for what you have provided.
- When you are in an industry where demonstrated strength is not only respected, but required. Personal Injury lawyers know that insurance companies record which lawyers will take a case to trial, and they grudgingly respect our reputation for fighting ferociously for our clients. As a result, they pay us well and cut corners on the other guys.
Let’s assume that you have to engage in litigation; you need to sue or are being sued. The next question is, how do you choose your attorney? This is where aligning the attorney’s interests with yours is crucial. “Alignment” means that you both want (1) a satisfactory solution (2) in a reasonably short amount of time (3) at a reasonable cost. At Cutler Rader we believe that most attorneys are honest and well-meaning. However, in some cases hourly billing, because it rewards the attorney for time rather than results, creates a malalignment between the client’s and attorney’s interests. In these situations, a contingency fee arrangement, where the attorney is paid a percentage of the outcome, may be the best solution.
To be sure, hourly billing has its places. In fact, contingency agreements are illegal and unethical in criminal and matrimonial cases. Defending litigation is usually paid hourly because the client is not seeking a recovery- just trying to defend against having to pay one. Transactional work is another example where flat or hourly fees are best.
But in some situations contingency fees for commercial plaintiffs may be ideal for the client, who may not have the money to pay an hourly attorney. And it may benefit the attorney who, in exchange for taking the risk of not being paid at all, receives a significant fee upon a successful outcome.
A contingency-fee plaintiff litigator also tends to approach cases differently than other attorneys. He always begins a case with the end in mind. His interests are completely aligned with those of the client. He wants to settle the case successfully, but is ready to take the case to a jury if the other side is unwilling to pay what is due. During the initial meeting with a contingency-fee litigator, he is simultaneously considering possible win-win settlements while imagining his cross-examinations and closing arguments.
During the litigation, the contingency-fee litigator is streamlining the case and pushing it toward resolution, whether by settlement or trial. Because he is only paid upon a satisfactory result, he is always fighting to end the case quickly but as favorably as possible. After all, the faster and better he does for the client, the better he does for himself.
Cutler Rader has always worked on a contingency arrangement for our plaintiff clients. We win or lose with our clients. If we win, we get paid a percentage of the collection. If we lose, we don’t get paid but the client has not paid exorbitant attorney’s fees. Simple as that.