Negotiation, Settlement and the Contingent Fee
Robert H. Mnookin
Harvard Law School; Program on Negotiation
DePaul Law Review, Vol. 47, No. 2, 1998.
This commentary offers four observations on the relationship of the settlement process to the contingent fee. Each wa stimulated by Professor Samuel R. Gross's paper, We Could Pass a Law... What Might Happen if Contingent Legal Fees Were Banned, 47 DePaul L. Rev. 321 (1998).
The first concerns the effects of fee arrangements on the settlement process. In most tort litigation today, "single-shot" plaintiffs with contingent fee lawyers face insured defendants whose lawyers are compensated by the hour. To what extent would the balance of bargaining power between plaintiffs and litigation insurance and where fee shifting with losers paying was the rule?
The second observation, also connected to the settlement process, relates to the potential use of Alternative Dispute Resolution ("ADR") in accident cases. In a world where the contingent fee was banned, Professor Gross suggests there is little incentive for defendants to participate in ADR. I explain why, in terms of today's institutional arrangements, there would in fact appear to be powerful incentives for the demand for ADR to increase in the years to come.
The third observation relates to Professor Gross's observation that "it is uncommon for plaintiffs' attorneys to compete by varying the terms of the contingent fee contracts that they offer." If plaintiffs" lawyers "rarely" compete in this way, in a market where there are admittedly large numbers of lawyers, what alternate form does competition take? With respect to the allocation of cases among plaintiffs' lawyers, what are the effects?
The final observation relates to the overall transaction costs of an accident compensation system that largely depends not only on the contingent fee, but also on what Professor Gross correctly characterizes as a "highly complex, privatized, lawyer-dominated system of civil litigation."
Date posted: July 30, 1998