Determining a Reasonable Percentage in Establishing a Contingency Fee: A New Tool to Remedy an Old Problem

Abstract:     
The indiscriminate use of contingency fee contracts providing for a one-third fee paid contingent upon either damages awarded to and received by the plaintiff or settlement amounts paid to the plaintiff is an important issue. This article first describes what is wrong with the one-third model, the response of the legal system to unreasonable contingency fees, and the mixed beliefs on obtaining a reasonable contingency fee percentage. The article then uses mathematics and law to construct a computerized, mathematical model that can be used to calculate a contingency fee tailored to each client’s case. The author uses statistical analysis to estimate the pertinent factors to determine a contingency fee: projected hours, hourly wage, projected costs fronted, risk multiplier, and projected recovery. Before concluding, the article assesses the benefits and drawbacks of this new mathematical model.

Number of Pages in PDF File: 31

Keywords: contingency fee, litigation, fee agreement, damages, settlement, attorneys’ fees, one-third, unreasonable, Early Offer Proposal, New American Rule, professional responsibility, legal ethics

JEL Classification: C13, C40, J31, J33, K10, K4

Accepted Paper Series