How Contingency Fee Arrangements Empower Whistleblowers

[This article first appeared on Cafepharma, written by Joseph Gentile.]

Among the questions any would-be whistleblower should have when searching for an attorney is how that attorney is going to get paid for representing the whistleblower. Fortunately, the answer is simple and sensible.  But it’s worth reviewing.

Many attorneys who represent whistleblowers – including this firm – do so on a contingency basis.  But there are many different ways that attorneys are paid for their work.  These include hourly rates (capped or not), flat fees, milestone payments, or a hybrid model that incorporates two or more different fee structures. Some attorneys have even accepted corporate stock from the clients instead of traditional currency (rather like the modern-day equivalent of chickens).

All attorneys have hourly billing rates – regardless of whether they bill on an hourly basis or not.  A majority of attorneys are happy to be paid an hourly rate based on the length of time a particular project takes.  This is the most recognized method of a fee-for-service relationship and makes sense when the nature or scope of a project is unclear.  Sometimes, such hourly rates are capped. In many instances, the attorney’s work only commences once the client submits a negotiated amount (sometimes called a “retainer”) from which the attorney draws his fee.

Many attorneys, especially if they specialize in discrete transactional matters (such as wills, real estate sales, or traffic ticket representation) will agree to a flat fee. These attorneys can propose a flat rate because their expertise allows them to properly determine how long a project will take and they are prepared to take on the risk that the project might take longer (or enjoy the reward if the project doesn’t). Clients enjoy flat rates because they provide a bit of certainty to an otherwise uncertain engagement.

In contrast to the hourly rate and flat fee structure (and various hybrid versions that incorporate these and other models), there is the contingent fee model.  In a contingency matter, the attorney does not get paid unless there is a recovery.  In other words: no win, no fee.  While some attorneys who use contingent fee models require clients to pay the expenses (such as postage, court costs, expert fees, etc.) most do not.  Most contingency fee lawyers pay those expenses out of their own pocket and are only reimbursed from the recovery.  Again, if there’s no recovery, there’s no reimbursement – the attorney suffers the loss of paying those expenses.

For whistleblowers, hiring an attorney is a critical decision and knowing how they are compensated (and whether that compensation method is in the client’s best interest) is equally critical.  Here are a few reasons why contingency fee structures for whistleblower lawyer’s makes the most sense:

  • Cases are Vetted Thoroughly. As an advocate, lawyers advance their clients’ interests but sometimes do so half-heartedly – motivated not by fairness or legal principles, but by the fact that they are paid by the hour. Contingency fee lawyers only take cases they believe they can win. Why else would they risk the time and money litigating complex cases for years? Such a fee structure is concrete proof that your lawyer believes in you and thinks your claims have merit and enjoy a good chance of success. It’s like the old saying: “put your money where your mouth is.” Contingency lawyers do just that.
  • Interests are Aligned. By hinging a lawyer’s compensation to the outcome of the client’s case, a contingency fee structure ensures that the lawyer and the client have the same interests. It’s like another old saying about having “skin in the game.” When both lawyer and client have a stake in the litigation, their interests are aligned and they’ll work more cooperatively together.
  • Risk Transfer. Since whistleblower cases often take years to litigate (and often involve case expenses in the six-figure range, or more), hiring a contingency lawyer allows clients to move much of the financial risk of taking on such matters to their attorneys.
  • Quality. Companies accused of wrongdoing hire top legal talent to represent them. By using a contingent fee model, whistleblowers can level the playing field and ensure that individuals have equal footing with wealthy defendants.

By sharing the recovery of a whistleblower action with their lawyers, whistleblowers ensure that their attorneys genuinely believe in their claims, are properly motivated to advocate on their behalf, and have the resources and ability to succeed against formidable opposition. In addition, by compensating counsel if (and only if) a case is successful, whistleblowers do not have to bare alone the financial risks of protracted and expensive litigation.