A Note on Settlements under the Contingent Fee Method of Compensating Lawyers

13 Pages Posted: 30 May 2003  

A. Mitchell Polinsky

Stanford Law School; National Bureau of Economic Research (NBER)

Daniel L. Rubinfeld

University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

Multiple version iconThere are 2 versions of this paper

Date Written: March 2002

Abstract

It is commonly thought that a lawyer working under a contingent fee arrangement has an excessive motive - relative to his client's interest - to settle the case, leading to a lower-than-desirable settlement amount and a high settlement rate. The conventional analysis that generates this conclusion omits an important consideration - that if the case were to go to trial, the lawyer would spend an inadequate amount of time on it. We demonstrate that once this effect is taken into account, the lawyer could have an insufficient motive to settle, the opposite of what is usually believed. Specifically, the lawyer's settlement demand could be too high and the resulting settlement rate too low.

Suggested Citation

Polinsky, A. Mitchell and Rubinfeld, Daniel L., A Note on Settlements under the Contingent Fee Method of Compensating Lawyers (March 2002). Stanford Law and Economics Olin Working Paper No. 224; and UC Berkeley Public Law Research Paper No. 67. Available at SSRN: https://ssrn.com/abstract=286055 or http://dx.doi.org/10.2139/ssrn.286055

A. Mitchell Polinsky (Contact Author)

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Daniel L. Rubinfeld

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NYU Law School ( email )

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