Publication Date

10-1989

Journal

UCLA Law Review

Abstract

According to conventional wisdom virtually all contingent fee percentages exceeding fifty percent are illegal and excessive, but most lower percentages are valid. This Article challenges the conventional wisdom, an amalgam of the unassailability of the standard one-third rate, notions of fairness versus price gouging, lawyer effort versus lawyer' reward, and the right of a lawyer to contract freely for a fee. It advances instead two propositions for determining the legitimacy of contingent fees. The first is that for a contingent fee to be valid, there must be an actual contingency, which means a realistic risk of nonrecovery. Though this proposition is rarely disputed, contingent fees are charged in a substantial number of retainer agreements, though no real contingency exists. The second proposition, heretofore unstated, flows inexorably from the first: Where there is a realistic contingency, the percentage fee set by the lawyer must be proportionate to the risk that the lawyer's actual effort will considerably exceed what is anticipated and that there will be little or no recovery. This corollary proportionality proposition is routinely disregarded by lawyers who charge a standard contingent fee rate for all cases, regardless of factual differences and differing risks. Accordingly, many contingent fees are invalid as a matter of ethics, policy, and law since they are often used in situations where there is either no contingency or, although a contingency exists, the contingent fee far exceeds any legitimate risk premium for the anticipated effort. On the other hand, contingent fees in excess of fifty percent, which are typically precluded by court rule, statute, or custom, should be upheld in cases where the risks of nonrecovery and greater effort than anticipated are high.

Volume

37

Issue

1

First Page

29

Last Page

138

Publisher

UCLA School of Law

Keywords

Contingency Fees, Legal Profession, Communications Law, Evidence, Personal Injury, Torts, Plaintiffs, Legal Practice and Procedure, Contracts

Disciplines

Communications Law | Contracts | Evidence | Law | Legal Profession | Torts

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