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Contingent Fee Arrangements With Government


It has been done in Mississippi, Florida, and in New Brunswick, Canada. Governmental bodies have finally realized that if they have a cause of action, involving complex litigation, why pay exorbitant hourly fees? Instead, why not hire plaintiff oriented firms who are skilled in working under contingent fee arrangements? Why not let the law firms undertake the risk of the loss of fees and, in some cases, the costs as well?

As Attorney David Lowe points out in a recent blog posting, the only people apparently squawking about this favorable approach to complex litigation for governments is the defense bar. Oh, and President Bush apparently thinks it is a bad idea; since he issued an executive order in May that bans governmental agencies from hiring private lawyers on a contingency fee basis.

Let’s be fair and try to analyze motivations in an objective light.

Plaintiff attorneys agree to take on most cases for a contingent fee agreement. This sort of arrangement guarantees a fee to the attorney only if he or she is successful in winning the case for the client. Often it also includes the costs involved in the litigation; meaning that the attorney forfeits both fees and costs in the event they are unsuccessful on behalf of their client. Plaintiff attorneys have historically worked under contingent fee agreements because nearly all clients could never afford the significant costs and the fees involved in litigating their cases. Injured victims would go without their day in court were it not for the contingent fee agreement. Plaintiffs’ attorneys agree to take on the risk of losing a case (and, thus their fees and costs) because it gives them the opportunity to win for their client and earn a living doing it.

Is their anything wrong with government attorneys litigating these cases, rather than hiring plaintiff attorneys on a contingent fee? Yes, it is a bad business decision for the tax payer. First, most government attorneys do not have the depth of experience in litigating very complex cases that seasoned plainitff attorneys have? Second, why should the public have to pay for the time involved in government attorneys litigating the cases, when their time could be better spent elsewhere? Third, why should the tax payer have to take the risk of losing fees and costs, when someone else is willing to do so for them?

President Bush said he thought government should run more like a business. Successful businesses do not make decisions and pass policy based upon interests other than their stock holders (think tax payer here). So, why issue an order that essentially says: “we want our business (government) to take all the risks in every situation and we do not want to hedge our risk by transferring part or all of it to someone else. Further, we want our stock holders (think taxpayer) to be saddled with all the potential losses that may flow from the risks we undertake.”

Does this impress you as sound business acumen or good business practice?

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