Bermuda: Best Value For Money Contingency Fees?

Last Updated: 3 August 2018
Article by Appleby  

Most Read Contributor in Bermuda, September 2018

Wherever one goes in the world, one is sure to hear a conversation about lawyers' fees be it that hourly rates are too high, that timesheets are works of fiction or that the lawyers' share of any award is unpalatable. Lawyers must find a way to structure their fees in such a way as to be acceptable to their clients whilst maintaining the ability of even the most impecunious client to have access to justice.

I am going to talk about lawyers' fees from a plaintiff's perspective and the advent of contingency and conditional fees into a jurisdiction that has traditionally outlawed any kind of champerty. Whilst contingency or conditional fees may be operated on behalf of a defendant, experience tends to find that a defendant will be a corporation or commercial entity who are (un)happy to pay on an hourly rate basis. However, be aware that the corporate defendant will be wanting to see value for money and there has been much discussion in the legal marketplace over this past several years of the introduction of value billing and fixed fee billing arrangements. This may all amount to revisiting the old way in which lawyers delivered their invoices for fees marked "for professional services rendered" and giving no indication of what work had, in fact, been undertaken. Forty years ago, corporate defendants, or any corporate entity involved in litigation, wanted to know precisely what its lawyers had done, how much time had been spent and who had worked on their particular case. The introduction of the timesheets and the detailed invoice passed into modern usage. Nowadays, computerised time recording is a way of life.

More and more corporate entities are looking to "partner" with their lawyers in the assignment. Corporations attempt to create incentives to reward lawyers for achieving the client's goal in the manner that the client wishes. If speed to resolve the case is an important factor, the lawyer may be able to earn a higher fee if he should gain an earlier resolution. Fixed fee budgets are the most attractive to the corporate litigant but may not be as attractive to the lawyer. Much work must be done by the lawyer to establish whether or not the work and, more importantly, the unexpected twists and turns of any litigation can be accommodated for a fixed fee.

Lawyers and their clients should not be rigid with regard to the fixing of an alternative fee arrangement and should be creative, keeping in mind that the important goal of any fee arrangement is to meet the interests of the client and the lawyer. The clients' interests are obviously paramount but the lawyer has to live!

So how does all this compare with the contingency fee arrangement? For an overview of the contingency fee system, one need look no further than the United States. Personal injury and product liability work have generated an enormous pool of fees for lawyers. Typically, a plaintiff litigant will instruct his lawyer to recover damages for whatever injury has been suffered. The lawyer will pay for everything with the case going forward. All expenses or disbursements will be discharged by the lawyer and his agreement with the client will normally provide the lawyer with one-third of the eventual settlement or award. From these sums, the lawyer will have to reimburse himself for the disbursements and expenses that he has laid out and so his net fee recovery is considerably less.

There have been benefits to society and the legal system by virtue of the contingency fee arrangement in the United States. There has also been the ever looming question mark as to whether the conflicts of interest have the dice heavily loaded in the lawyer's favour.

The Pros:

  • Contingency fees provide access to justice for everyone. An injured person need not be intimidated by the might and wealth of a large corporate defendant.
  • By allowing the plaintiff's lawyer, rather than the plaintiff, to assume the risk of financing of litigation, the contingency fee system levels the playing field, placing plaintiffs on a more equal footing with corporate defendants.
  • Businesses have been forced to pay greater attention to safety and quality1;
  • Consumers perceive that they are receiving products which are safer and of a higher quality;
  • Objective measures indicate that injuries and death as a result of accidents in both the workplace and home have declined, saving thousands of lives and millions of injuries;
  • The contingency fee system may actually deter unprofessional behaviour and frivolous filings in certain situations. Lawyers charging on an hourly basis may, with a claim lacking merit, have no incentive to avoid stretching out the claim because – regardless of the outcome – this will provide his fees. Lawyers would have no motivation to bring or pursue a case that has little chance of success. An unsuccessful claim will not bring the lawyer any income.
  • Contingency fee provides an incentive for the lawyers to analyse thoroughly and evaluate the merits of any claim before pursuing it.
  • The contingency fee arrangement can, however, be viewed negatively:
  • It may conflict with the lawyer's duty to the court;
  • A temptation for unprofessional conduct;
  • Would lead to unmeritorious "blackmailing" actions;
  • Lawyers would lack independence from their clients;
  • Affords clients no protection against inter parties costs, expert fees and other disbursements;
  • Would lead to conflict of interest between the lawyer and the client.2

Perhaps one of the drawbacks of the contingency fee arrangement in the United States is the failure of the United States courts to award costs against the losing party. In the majority of other common law jurisdictions, the courts will award costs against the losing party.

Writing in the Law Times, James D. Zirin3 gave examples of what would appear on the face of it to be excessive recoveries to the lawyer under contingency fee arrangements. He cited the Houston trial lawyer who sought $108.9 million in fees and disbursement out of an award of $170 million in respect of a leaky pipe case brought by 37,000 home owners against Shell Oil and others. "The Texas Judge could not find enough words to express his displeasure". Perhaps this contingency agreement pales into insignificance to that of Joseph Jamail, best remembered for collecting $10.7 billion for Pennzoil in its 1987 battle with Texaco.

In some jurisdictions, particularly my own, Bermuda, there is a prohibition against charging contingency fees except in respect of undefended debt collections "or to an extent expressly permitted by the Bar Council". Specifically, the Barristers' Code of Professional Conduct 1981 (Rule 96) prevents a barrister entering into a contingent fee arrangement under which his fees depend upon the results of a case or consist of a pre-arranged share of money recovered on behalf of the client.

This professional conduct rule was not too different from the position in England and Wales until 1990 when a limited form of contingency fee – conditional fee arrangements – were provided for. Now of course, England and Wales have almost entirely embraced the contingency fee arrangement for all actions save criminal and family work. However, the English Court of Appeal in November 19994 ruled that contingent fees agreements were only allowable where permitted by statute or common law. Otherwise an agreement would be unlawful and against public policy.

The contingency fee as we know it exists from the US model but in England and Wales the contingency fee exists in a more restricted form as a conditional fee arrangement.

Typically, the agreement reached with a client will provide for the payment of a "success fee" in the event of achieving pre-determined results of the outcome of litigation. The lawyer will charge his normal fee throughout the litigation and, if successful, will receive his "success fee" representing a percentage of his fee by way of uplift to a maximum of 100%.

In the event that the predetermined results are not met, then the agreement can provide for no fee or the reimbursement of expenses and disbursements.

I am led to believe by figures published in various law journals that the number of conditional fee agreements that have been entered into are equal to or are just about to exceed the number of legal aid certificates which had been issued in a year. England and Wales are withdrawing legal aid for all but criminal proceedings, and the trend to conditional fee arrangements is inevitably towards maintaining the access to justice that would have been available to those who had become eligible for legal aid.

Contingency fee and conditional fee agreements are potentially more lucrative in the area of multi-party actions.

One of the high profile conditional fee, multi-party action cases to be held in England during the last year was the infamous tobacco litigation in which law firm, Leigh Day Leigh, committed to a conditional fee agreement on a no win/no fee basis. Having spent two and a half million pounds of the law firm's money, the lawyers were justifiably glum when a judge hearing a preliminary issue on causation dismissed the litigation. The law firm recovered no fees. As a condition of not pursuing the individual plaintiffs for costs, the defendants also extracted an undertaking from the law firm that they (the law firm) would not pursue the defendants for a period of 10 years in any other litigation.

Therefore, contingency fee and conditional fee arrangements do have their drawbacks and need to be entered into with the lawyers' eyes open. Much greater attention must be paid to the case at an earlier stage to weed out unmeritorious claims and a proper risk analysis prepared which, in turn, will lead to a detailed management and cost analysis of the litigation. Not too many firms could afford to suffer a loss of two and a half million pounds!

An immediate plunge into the contingency fee world is not recommended. As in the model used in England and Wales, a gradual introduction of conditional fee may be appropriate to test the water – even – allowing a contingency fee on undefended debt collection work is a start.

The law firms should have consideration for access to justice and either be prepared to undertake pro bono work in a far greater proportion than they do at present, or look to a conditional fee arrangement and then, if successful, expand the cases in which contingency fees can be adopted.

There will be casualties along the way. There may be a tendency for some lawyers to reduce the amount of the contingency fee or success fee so as to gain work. If in large actions the expenses and disbursements are so high, the lawyer may face bankruptcy. One only has to look to the case of Jan Schlichtmann, the US lawyer fighting for compensation on behalf of Wobon Massachusetts residents against two of the United States biggest corporations – WR Grace and Beatrice Foods - and who was the subject of the book "A Civil Action" by Jonathan Harr which itself was the subject of the film "A Civil Action". Despite winning $8 million by way of a settlement from one of the companies, he lost his home, law firm and family. The contingency fee that he received was barely enough to pay the enormous expenses that the scientific evidence consumed and left only a few hundred thousand for the eight families of plaintiffs that he represented.

Footnotes

1 Consumer Federation of America Report 1987

2 UK White Paper "Legal Services: A Framework for the Future", 1989

3 Senior Partner in Brown & Wood, New York law firm, writing in the Law Times, 18 February 1997

4 Geraghty & Co -v- Awad Awwad [1999] – The Independent, 1st December 1999

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions