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Consumer Protection

THE “NO RECOVERY, NO FEE” SYSTEM: IS IT GOOD FOR YOU?

     Generally, attorneys handle personal injury and insurance cases on a contingent fee basis. This means that payments to attorneys are contingent on the final results of the case. Meanwhile, the attorneys advance the costs of litigation.

     Unlike criminal defense cases or divorce cases, the attorney does not send the client a bill every month based on the number of hours worked. Instead, the client pays the attorney a percentage of the settlement or judgment. If there is no recovery, the client pays no fee.

     Corporate interest groups have criticized the contingent fee system, claiming that it encourages frivolous lawsuits. In fact, the exact opposite is true. Because the attorney will be paid nothing if the client recovers nothing, the attorney must turn away frivolous cases, or else the attorney will soon be out of business.

     The true reason why such groups oppose the contingency fee system is that they know that most people cannot afford to pay attorneys on an hourly basis. The fee rates for attorneys can be several hundred dollars per hour. For a typical lawsuit, the client would have to pay thousands of dollars per month in attorney fees. Even for people who could afford to initiate a lawsuit, as the case dragged on and attorney fees snowballed, they would face enormous pressure to settle their case for less than its real value.

     That would be just fine with corporations that make defective products that injure their customers, or insurance companies that treat their insured unfairly, or corporations that discriminate against women or minorities. Most of the people these corporations hurt could not afford to file a lawsuit against them. These corporations could largely avoid taking financial responsibility for the harm they cause.

     The contingent fee system gives those who are not wealthy a chance to exercise their legal rights when they are injured. This access to justice helps to deter bad corporate behavior. The system levels the playing field between consumers and big corporations.

     The contingency system provides the individuals with a ticket to the court house. In this way, the consumer can better protect his or her legal rights.

© Law Offices C. Joe Sayas, Jr.