No Win No Fee: How do they set their costs?

Factual Questions
1

I’m sure we’ve all seen the adverts.
There are law firms that specialize in personal injury claims, and promise:

  1. No win, no fee
  2. If you win, you keep 100% of the compensation (their costs for representing you are worked out separately, and billed to the defendant)

The thing that seems odd to me is that with this setup, there is no downward pressure on costs. A firm could charge $1 billion to represent a trivial claim. How are charges limited? And do all such solicitors set their costs at the maximum that they are allowed to charge?

(I assume that some of these questions will show breathtaking ignorance, but that’s what this board is for ;))

2

I haven’t seen any examples of #2. Most of the [del]ambulance chasers[/del] personal injury attorneys I’ve seen advertise will take a percentage of your award as their fee, which you agree to up front.

3

Ah, I see that “No win no fee” is a British term, according to wiki.

Furthermore, the general principle that the loser of a court case must pay both side’s legal fees (“loser pays”) is a system that is not used within the US (though it is not solely British).

No wonder there was a lack of responses.

So already my ignorance is being fought. But I still don’t get why attorney fees don’t tend towards infinity in situations where there is both “no win no fee” and “loser pays”.

4

I used to work for personal injury attorneys, and the percentage fee the attorneys may take on contingency is set by my state. I believe that is the case in many states.

By your use of the term “solicitor” I take it you aren’t American?

5

IME the usual arrangement for working on contingency is for the lawyer to take 1/3 of the award, zero for a loss.

6

WAG: Because the courts limit how large fees the winning attorneys can demand from the loser.

7

At least in the US, in the relatively few cases where one side pays the court costs of the winner, this is part of the judgement and thus decided (or at least approved) by the court. If the person being forced to pay feels that the attorney fees are too high, they can appeal in roughly the same manner as if they felt the actual award of damages was too high…

8

Presumably the judge or the court has to OK the proposed attorney fees and will balk if it looks like the losing party is being ripped off.

9

Makes sense, and that would be my guess too.

It feels a little odd – you have a for-profit business, which has its prices regulated only by what is considered reasonable by a court.

But I suppose in practice it’s no different from a court having to define what is reasonable compensation in civil cases.

10

The attorneys don’t make a profit on the costs. They have to spend the money. Thus, if Iput $100,000 in costs of my money to help me establish your case, and I lose, I’m out of pocket $100,000. (it happens, believe me) If I win and do get the court to make the other side pay my cost (or more likely, a portion of the costs) I’m only getting back money I spent in the first place. That provides ample incentive to keep the costs as reasonable as possible.

I only get compensated if my client prevails in the case. Thus, I also have serious incentive to avoid “frivilious” lawsuits. In states I practice in, I can set any “reasonable” percentage of the proceeds as my fee, assuming my client agrees, etc. it ranges from 25% to 45%, depending on the difficulty, costs, and other factors.
Also, fyi, Alaska has a “loser pay” fee shifting arrangement. The corporations who usually advocate for such a system have found out they are the ones most often paying.

11

In my recent case, I feel that I was semi-fairly compensated, after fees and costs were deducted.My settlement might have been higher had I been younger and had I been 100% disabled. It took much longer than I thought it would to reach a settlement; other than that, I had no real complaints. Oh, my attorney’s fees were 30% and I ate the document costs. But I knew all that up front.