Legal Definitions - defense contingent fee

A defense contingent fee, also known as a reverse contingent fee, is a payment arrangement where a lawyer representing a defendant (the party being sued) receives a fee based on the amount of money saved for their client. Unlike a traditional contingent fee where a plaintiff's lawyer earns a percentage of the money won, a defense contingent fee compensates the defense lawyer with a percentage of the difference between the amount the plaintiff initially demanded or was likely to win, and the final amount the defendant actually has to pay. This structure incentivizes the defense attorney to achieve the lowest possible settlement or judgment for their client.

• Example 1: Business Contract Dispute

  A small manufacturing company is sued for $750,000 by a supplier alleging a breach of contract. The company hires a defense attorney who agrees to a defense contingent fee of 15% of the amount saved below the initial $750,000 demand. Through strategic negotiation and legal arguments, the attorney manages to settle the case for $150,000. The amount saved for the company is $750,000 - $150,000 = $600,000. The attorney's fee would then be 15% of $600,000, which is $90,000. This illustrates the term because the lawyer's compensation is directly tied to the financial benefit (the reduction in liability) they secured for their client.

• Example 2: Professional Malpractice Claim

  A medical professional is facing a malpractice lawsuit where the plaintiff is seeking $1.5 million in damages. The professional's defense lawyer takes the case on a reverse contingent fee basis, agreeing to a percentage of the amount by which the final judgment or settlement is reduced from the initial claim. After a thorough defense, the lawyer successfully argues for a dismissal of the most significant claims, leading to a final settlement of only $200,000. The savings for the medical professional are $1.5 million - $200,000 = $1.3 million. The lawyer's fee would be the agreed-upon percentage of this $1.3 million, demonstrating how the fee is contingent on minimizing the client's financial exposure.

• Example 3: Construction Defect Lawsuit

  A homeowner's association is sued by a developer for $1 million over alleged unpaid fees and construction defects. The association's legal counsel agrees to a defense contingent fee, where their payment will be a share of the amount by which they can reduce the developer's claim. After a lengthy arbitration process, the arbitrator rules that the association only owes $250,000. The amount saved for the homeowner's association is $1,000,000 - $250,000 = $750,000. The lawyer's fee would be a pre-determined percentage of this $750,000, showcasing how their compensation is directly linked to the financial relief provided to the defendant.