Rules of thumb for contingent fee arrangements when the company sues

Under a typical contingent fee arrangement, when a law department retains a firm to sue another company the firm receives 33 percent of the recovery if the case settles before trial and 40 percent if the case goes to trial (Corp. Counsel, June 2005 at pg. 69). According to the article, firms are likely to pass on the opportunity to represent the company plaintiff if less than $2 million is at stake (too much risk for too little reward) and companies may lose interest if more than $10 million is at stake (not enough risk and too much reward to the firm).

I like the article’s suggestion of a blended contingent fee arrangement, such as when the company pays a reduced hourly fee in exchange for a reduced contingent fee. The example used $200 an hour (don’t we wish!) and 20 percent of any recovery.

These arrangements have many pitfalls, as the article describes, but they marry the interests of company and outside counsel better than do hourly billing arrangements.