Serious Representation For Your Legal Disputes

Is the contingency fee approach effective in business disputes?

On Behalf of | Jan 26, 2023 | Business Disputes

Some small businesses may not have the financial wherewithal to pursue a litigation stemming from a major legal dispute. However, they recognize the necessity to take legal action. In such scenarios, retaining an attorney on a contingency basis may be the best option.

Contingency fees are part of an arrangement between an attorney and client in which the attorney agrees to represent a client in exchange for payment solely tied to the results of the case. For example, the attorney may agree to compensation of a certain percentage if the cases reaches a settlement or goes to trial.

A results-oriented philosophy

This is about risk-shifting.  Attorneys who take cases on a contingency basis agree to assume the risk of failure up to the amount of their legal fees.  If an attorney will NOT accept a contingency fee arrangement, you should carefully consider whether he/she adjudges your risk of failure as being unduly high. Naturally, an attorney will only accept such an arrangement if he or she has a high level of confidence of obtaining a successful outcome.

Contingency fees may range from 15 to 50%. In this hypothetical example, an attorney may collect 30% of the recovered amount if a settlement takes place or 35% if the case goes to trial.  Typically, the longer a case takes, the more time and risk the contingency fee attorney takes, the higher the percentage of the recovery they will want.  Where the chances of for a quick, successful outcome are highest, the fee percentage is lowest.

Business dispute scenarios

While contingency fees often are used in personal injury cases, this same approach also is common among business disputes. Contingency fees are appropriate in a number of business cases, including:

  • Breaches of contract: Originating from complex disputes such as business partnerships, and supply and distribution matters. The breach occurs if one party does not live up to its end of the contract.
  • Employment disputes: This may surface if an employee contends that he or she lost out on a commission or if an employee violated a non-compete clause.
  • The misappropriation of trade secrets: Competitors or former employees may be the culprits here.
  • The misuse of your company’s intellectual property: Another company may surreptitiously attempt to do this, damaging your business’s earnings and reputation.
  • Business torts and product liability: Scenarios may include the defrauding of your company, or a firm’s violation of a person’s safety in a product liability case.

Ultimately, contingency fees pose many advantages for plaintiffs.

Contingency fees may prove advantageous

Ask yourself, can we stomach monthly attorney fees?  Also, in an hourly fee structure, the more the attorney works, the more he/she gets paid.  Attorney and client incentives are less perfectly aligned than in a contingency fee structure.  If you think you will win, win quickly, win big enough and can sustain the hourly fees, the hourly structure may be preferable.  However, if you want to reduce risk and make your attorney your business partner in the case, you should consider a contingency fee structure.