Aligning the Interests of Lawyers and Clients
A. Mitchell Polinsky () and
Daniel L. Rubinfeld
American Law and Economics Review, 2003, vol. 5, issue 1, pages 165-188
The potential conflict of interest between lawyers and clients is well known. If a lawyer is paid for his time regardless of the outcome of the case, the lawyer may wish to bring the case even when it is not in the best interest of the client, may spend more hours working on the case than the client would want, and may reject a settlement when the client would be better off if it were accepted. Alternatively, if the lawyer is compensated according to the conventional contingent fee arrangement--under which he is paid a fraction of any trial award or settlement but bears all of the cost of litigation--the lawyer may have an insufficient incentive to bring the case, may spend too little time working on it if it is brought, and may encourage a settlement when the client would be better off going to trial. In this article we propose a method of compensating lawyers that overcomes the conflict of interest between the lawyer and the client. Our system is a variation of the conventional contingent fee system, but, in contrast to that system, we would have the lawyer bear only a fraction of the cost of litigation--the same fraction that the lawyer obtains of the award or settlement. We demonstrate that when the fraction of the cost that the lawyer bears equals the fraction of the award or settlement that he obtains, he will have an incentive to do exactly what a knowledgeable client would want him to do with respect to accepting the case, spending time on the case, and settling the case. Under our modified contingent fee system, a third party would compensate the lawyer for a certain fraction of his costs, in return for which the lawyer would pay that party an up-front fee. In this way, the client would not bear any costs, even if the case were lost, just as under the conventional contingent fee system. Copyright 2003, Oxford University Press.
References: Add references at CitEc
Citations View citations in EconPapers (24) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:oup:amlawe:v:5:y:2003:i:1:p:165-188
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Law and Economics Review is currently edited by Hon. Richard A. Posner
More articles in American Law and Economics Review from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Series data maintained by Oxford University Press ().