Fee-Shifting Statutes and Compensation for Risk

54 Pages Posted: 15 Jun 2020

See all articles by Maureen Carroll

Maureen Carroll

University of Michigan Law School

Date Written: June 3, 2020

Abstract

A law firm that enters into a contingency arrangement provides the client with more than just its attorneys’ labor. It also provides a form of financing, because the firm will be paid (if at all) only after the litigation ends; and insurance, because if the litigation results in a low recovery (or no recovery at all), the firm will absorb the direct and indirect costs of the litigation. Courts and markets routinely pay for these types of risk-bearing services through a range of mechanisms, including state fee-shifting statutes, contingent percentage fees, common-fund awards, alternative fee arrangements, and third-party litigation funding.

This Article mines those risk-compensation mechanisms for lessons about the proper interpretation of federal fee-shifting statutes. Those statutes encourage private plaintiffs to enforce a limited set of laws, including civil rights statutes, by authorizing the court to award a reasonable attorney’s fee to the prevailing party. Although a law firm cannot receive a court ordered fee shift unless its client prevails, current doctrine prohibits compensation for risk in federal fee-shifting awards. This Article argues that this prohibition should be eliminated, and to that end, it evaluates specific methods of including compensation for risk in federal fee-shifting awards.

Keywords: civil procedure, federal courts, access to justice, class actions, litigation finance

Suggested Citation

Carroll, Maureen, Fee-Shifting Statutes and Compensation for Risk (June 3, 2020). Indiana Law Journal, Vol. 95, No. 4, 2020, Available at SSRN: https://ssrn.com/abstract=3617885

Maureen Carroll (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

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