Contingency fee contracts & vesting: necessary clause(s)

In our recent post about maintaining client relationships, we discussed why and how co-counsel could “steal” your client. But there is another way to protect yourself when working for a client on a contingency fee basis.

Put it in the contingency fee contract

Under Georgia law, the lawyer has no right to a fee if the contingency of the contract doesn’t occur. See, e.g., Kirschner & Venker, P.C. v. Taylor & Martino, P.C., 277 Ga. App. 512 (2006). That means, if no money is recovered before the contract is terminated, the lawyer doesn’t have a right to be paid. Now, the contingency fee system is a good thing for clients. It provides access to justice for people without the means to pay for counsel. But in the past, unscrupulous clients tried to abuse the contingency fee system by waiting until an acceptable offer had been made. Then they would terminate the lawyer, settle the case themselves, and refuse to pay the lawyer. Obviously, this is not equitable.

You can better protect yourself and your hard earned fee from this possibility by putting a simple clause in your contingency fee contracts. The clause might look something like this:

Upon termination, Client agrees that if a settlement offer has been made by any opposing party, Client will pay to Lawyer a total fee of (whatever the contingency amount is), plus any expenses advanced prior to termination.

Courts are very likely to enforce such a contract clause against a bad acting client.

Quantum meruit—as much as deserved

Another way to obtain payment is to include a specific clause authorizing the recovery of fees under quantum meruit, or the value of your services up to the point of termination. See, e.g., Nelson & Hill, P.A. v. Wood, 245 Ga. App. 60 (2000). Generally speaking, this means your time working on the case. But other factors such as percent of case completion, and value added to the case, could also apply.

So, how do you recover what is deserved? You need time records. Yes, this means that you’ll need to keep track of your time, just like when working for hourly clients. Yes, it is tedious, and many folks think of it as a hassle. But it’s the best, and only, proof of the actual time you spent on behalf of the client in a case.If you find yourself in a situation where you’re limited to quantum meruit recovery only, you’ll have to be able to show the court contemporaneous time records what you did for the client and when you did it. In contrast, we’ve had defendant lawyers claim to estimate their time based on the thickness of the file, or the number of and length of email messages they sent. You can imagine the cross-examination questions those claims would generate.

We’re happy to discuss making alterations to your contingency fee agreements to comply with Georgia law and protect your interests. Feel free to contact us by phone or e-mail.