Attorneys must go through extensive education, training, and licensing to practice law, and often work grueling hours for their clients. So why do they sometimes accept a claim without billing for their time? In order to make the law more accessible to a broader range of potential clients, many attorneys adopt Alternative Fee Arrangements (AFAs) that create different compensation models than just an hourly rate or retainer. One of the most popular of these AFAs is a contingency fee, a pay-for-performance model in which the attorney is paid with a percentage of the financial outcome of a claim. Every lawyer that is a member of The National List of Attorneys (The NL) premier legal network offers services on a contingency fee.
The American Bar Association explains how in a contingent fee arrangement “the lawyer agrees to accept a fixed percentage (often one-third to 40 percent) of the recovery, which is the amount finally paid to the client.”¹ This means if the lawyer wins the case their fee comes out of the money awarded to the client. And if the claim is lost, neither client nor attorney will get any money awarded, but the attorney will not charge the client for the work done on the claim.
Contingency fees sound like a great deal for clients—and they are—but it’s not the same as free labor. Shifting more risk to the lawyer affects the dynamics of the attorney-client relationship, and places unique responsibilities on the client to help both counsel and themselves. There are five key tips clients can keep in mind to get the best results from working with a lawyer on contingency.
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Place the Right type of claim
Not every legal claim can be worked on contingency—a financial outcome is necessary for attorney fees to be calculated by that outcome. Furthermore many jurisdictions prohibit contingency-fee arrangements for certain types of claims, such as divorce cases and criminal defense. However there are many legal practice areas well-suited for contingency, including bankruptcy, collections, creditors rights, insurance defense, subrogation and transportation / freight matters.
It’s also important to consider the financial amount of the claim. Lower claim amounts face a point of diminishing returns, where a percentage of a small award may not be meaningful enough to justify either the attorney’s work, or to cover the client’s other expenses, such as suit costs, filing fees, and other items charged by the court. An attorney will let you know the minimum claim value that makes financial sense for pursuing it on contingency.
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Don’t Wait Too Long
One of the most common reasons The NL sees for contingency claims failing to result in payment for both client and attorney is the age of the claim. Whether the matter is collecting a past-due account or recovering funds from an adverse party to offset what’s already paid to an insured customer, it typically makes sense to try and resolve the matter yourself before proceeding with litigation. But if you aren’t able to get results on your own quickly, inertia can damage a claim’s chances of financial results by holding on to it and just hoping things will change.
Any number of things can happen while you wait, including the defendant claiming bankruptcy, their assets being used to pay other creditors first, movement that makes it harder to find the defendant, and even the statute of limitations running out while your claim lingers without results. Dun & Bradstreet reports, “After six months, the probability rate [of getting paid] drops to 52.1%, and after one year of delinquency, the chance of collecting payment falls to 22.8%”.² If you approach an attorney to work for you on contingency, their incentive to perform for you will be influenced by any delays that have reduced the likelihood of either of you getting paid.
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Prepare Your Documentation
Once a claim is placed with an attorney they will often issue a letter from their law office to let the defendant know counsel has been retained, and to demand payment. If there is no satisfactory reply, the next step is generally to file suit and obtain a court date. However these steps can be delayed if your attorney does not have all the documentation that supports your claim. Copies of agreements, policies, communications, previous billing and notices, and any other documents pertaining to the matter are all important supporting evidence, so if you only start gathering that information after you engage an attorney, you will be delaying their work and possibly reducing the odds of litigating a successful financial outcome. The better you are prepared, the better a contingency-fee attorney can represent you.
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Make The Reward Worth the Risk
At first glance, the percentage of results a contingency-fee attorney charges for a claim might seem like a lot of money. This can be thrown into especially sharp profile when the percentage is of a high-value claim, or if the defendant offers payment before even going to court. It’s entirely possible for an attorney working on contingency fee to get paid even more than they would have if they were only billing hourly or on a retainer. But that doesn’t happen often, and it’s important not to let possible outliers like that get in the way of monetizing your claim in the first place.
Keep in mind that when you engage a lawyer on contingency, you are asking them to take a risk of not getting paid at all for their work. And with greater risk comes greater reward. For an attorney to work sustainably, they need to take into account the claims that turn out to be uncollectable, or that settle for less than the full amount due. The bulk of these claims are only rarely offset by the unusual claims that pay out full value in the pre-litigation phase.
Clients who insist on trying to negotiate lower contingency-fee rates may find attorneys are simply no longer interested in working on the clients’ claims at all, leaving no other option but to fork over a retainer or agree to be billed hourly as the attorney’s time is racked up working on your behalf.
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Use a Legal Network for Extra Support
While it’s easy enough to use your favorite search engine to look through the multitudes of law firm websites online, or pore through any that have paid to advertise in a Yellow-Pages era “law list” legal directory, clients needing contingency-fee attorneys gain free access to an elevated level of support and service when they work through a premier legal network, like The NL. A boutique network like The NL is a curated, exclusive affiliation of pre-vetted attorneys in multiple jurisdictions and practice areas, all collaborating and pooling resources to provide mutual clients of the whole network with a superior experience.
When clients forward claims through The NL, they receive personalized legal referrals tailored the unique needs of the claim (a commercial collection claim for cryptocurrency in California is very different than a subrogation matter for automotive damages in South Carolina). But it doesn’t stop there. Clients can place claims online at their convenience, track their progress, and work with an experienced NL account executive to have a one-stop shop for help with all their contingency claims across all their attorneys in every jurisdiction. Clients rely on us as a trusted backup point of contact behalf of all our attorney members across the country when they are in court, a different time zone, or otherwise out of office. And for high-volume forwarders who aggregate their litigation portfolios through The NL, we offer claim analytics and business intelligence to provide data-driven insights into optimizing their litigation portfolios. The NL uniquely provides clients with $2M in claim insurance coverage, the only policy in the industry that is not divided with any other legal referral service. Our attorneys value their ongoing relationships with clients enough to provide these extra services through The NL, free of charge to you. No more random clicking and visiting one firm’s website after another hoping you’ve made the right choice.
Do you have other tips for getting the best financial results and free premium services for your contingency-fee legal claims? Join the discussion in The NL Community Forum on LinkedIn and let us know!
About The National List of Attorneys
The NL is the premier B2B legal networking hub where contingency-fee attorneys connect with the business clients who need their help to get paid what they’re fairly due. We use claim performance data to optimize legal referrals, advance the legal industry’s use of technology, and develop tailored client-focused strategies to maximize financial outcomes of legal claims.
Footnotes
¹ American Bar Association (americanbar.org) “Fees and Expenses” 2020
² Dun & Bradstreet (dnb.com) “How to Prioritize Accounts Receivable Collections” 2022
Categories: Attorney Fees, claims insurance, collect overdue receivables, Collection attorney fees, Commercial collections, Debt Collection, NL Insider, old debt, Overdue Receivables
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