DP9727 Why Plaintiffs' Attorneys Use Contingent and Defense Attorneys Fixed Fee Contracts

Author(s): Winand Emons, Claude Fluet
Publication Date: November 2013
Keyword(s): contingent fees, expert services, fixed fees, litigation
JEL(s): D82, K41
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9727

Victims want to collect damages from injurers. Cases differ with respect to the judgment. Attorneys observe the expected judgment, clients do not. Victims need an attorney to sue; defense attorneys reduce the probability that the plaintiff prevails. Plaintiffs' attorneys offer contingent fees providing incentives to proceed with strong and drop weak cases. By contrast, defense attorneys work for fixed fees under which they accept all cases. Since the defense commits to fight all cases, few victims sue in the first place. We thus explain the fact that in the US virtually all plaintiffs use contingency while defendants tend to rely exclusively on fixed fees.