Prakash Yedhula
(Lawyer)
12 August 2007
[align=justify]Hello Sibsanker,
Thanks for the invitation. I have sent you a mail in this regard. But I would like to post this reply about an article regarding the nature of fees prevailing in USA for the benefit of members.
""On rare occasion a lawsuit will be followed by a quick settlement, but most of the time litigation takes many months or even years before a verdict is obtained or a settlement is reached. Meanwhile, the costs of litigation are substantial, and the plaintiff continues to incur personal expenses. How are lawsuits financed?
Funding for Contingent Fee Lawsuits
Contingent fee (or ""contingence fee"") lawsuits are ordinarily funded by the plaintiff's lawyer or law firm. The law firm will ordinarily advance all costs associated with the litigation, including filing fees, service fees, expert witness fees, and other expenses. These costs are recovered from the ultimate verdict or settlement.
A contingent attorney fee, by definition, is paid only if there is a recovery, and is based upon a percentage of the money recovered.
Under typical ethical rules, the costs of litigation are to be ultimately reimbursed by the client, even if there is no recovery. While many law firms ignore the rules requiring clients to repay costs in the event of a loss, you should be clear with your lawyer as to both what is required under the laws and rules of ethics in your state, and also what expenses you would be expected to repay in the event that you don't prevail in your lawsuit.
Funding Hourly Fee Lawsuits[/align]
[align=justify]The funding of litigation which occurs on an hourly fee basis, where the attorney charges by the hour for work performed, is usually the duty of the client. There are some firms which offer financing for attorney fees, but lawsuit loans are more common in contingent fee cases than in hourly fee cases. This is because in a typical case where there is strong liability and a good claim for damages, a law firm will be willing to accept the case on a contingent fee bases. It tends to be the weaker cases, where there is a poor case for liability, little chance of recovering any award of damages, or the plaintiff wants to proceed ""as a matter of principle"" in a money-losing lawsuit, that are handled on an hourly basis. (It is more likely that litigation loans will be available for an appeal following a successful lawsuit, even if the appeal is being handled on an hourly fee basis, as most verdicts are upheld on appeal.)
A plaintiff who might otherwise pay an hourly fee may wish to try to negotiate an alternative arrangement, such as a fixed fee (where the lawsuit is handled for a fixed attorney fee, regardless of how many hours it takes to complete the suit), or a customized fee arrangement which works to the benefit of both parties (e.g., the attorney will work the case on a reduced hourly basis, but will also collect a reduced contingent fee in the event that certain settlement goals are met or the verdict exceeds an agreed-upon value.)
Loans for Personal Expenses[/align]
[align=justify]However the attorney fees and litigation costs are being financed, plaintiffs often have significant personal financial obligations following an injury. A plaintiff who is severely injured may not be able to work, or may have significant medical bills associated with the injury. Sometimes a plaintiff will not want to wait until the conclusion of the litigation to obtain money. A growing number of lawsuit financing companies have emerged, usually offering ""no recourse lawsuit loans to plaintiffs. Typically, a ""no recourse"" loan will be characterized by the finance company as a ""cash advance"", ""venture capital"", or ""investment"", so as to avoid state usury laws (laws prohibiting lenders from charging an excessive interest rate.)
You should consult your lawyer about your circumstances before taking out a pre-settlement lawsuit loan, or choosing a particular litigatin financing company to provide such a loan. There may be alternatives available which will permit you to avoid the high cost of pre-settlement lawsuit funding, and even if you are sure you wish to obtain a lawsuit loan you may benefit from having your attorney negotiate the terms of the loan. Also, your attorney may be asked to sign a contract with the financing company assigning it a lien on your file, and it is best that any call from the lawsuit finance company not come as a surprise.""
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