Allocating Settlement Authority Under a Contingent-Fee Arrangement

Posted: 16 Apr 2004

See all articles by Albert H. Choi

Albert H. Choi

University of Virginia School of Law

Multiple version iconThere are 2 versions of this paper

Abstract

A contingent fee contract improves a plaintiff's bargaining position against a defendant by providing incentive to the plaintiff's lawyer. Setting the lawyer's share of judgment high will induce more effort from the lawyer while keeping the lawyer's settlement share low will reduce the legal fees and the lawyer's rent. When the plaintiff negotiates against a tough-bargaining defendant, however, legal fee saving accrues mostly to the defendant through a lower settlement offer. To maximize her return from settlement, the plaintiff would want to delegate control to the lawyer and guarantee him a large rent. She would want to delegate especially when the lawyer is more expensive and the size of the claim is small, as in individual tort cases.

Keywords: Litigation, contingent fee, delegation

JEL Classification: K12, K13, K41

Suggested Citation

Choi, Albert H., Allocating Settlement Authority Under a Contingent-Fee Arrangement. Journal of Legal Studies, Vol. 23, No. 2, June 2003. Available at SSRN: https://ssrn.com/abstract=526122

Albert H. Choi (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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