Attorney Fee Arrangements: The U.S. and Western Perspectives

Maurer, Virginia G., Thomas, Robert E., DeBooth, Pamela A. | January 1, 1999

This article develops an analytical framework for viewing the rules on attorney fee arrangements that have been adopted in the United States and in major western European countries. In section II the paper explains the choice of economic agency theory as a starting point for developing this framework. Within the meaning of economic agency, the attorney is a dual agent, with duties to both the client and the judicial system. In section III the paper identifies five interests that form the basis for evaluating fee systems. These interests are derived from applying basic agency theory to the duties of the attorney as an agent of both the client and the judicial system, and extracting the more specific aspects of both types of duties. In sections IV and V the interest analysis is applied to three types of fee arrangements–the fixed fee, the hourly fee, and the contingency fee. We select these types of fee arrangements because they represents key distinct elements, one or more of which seems to be present in any of the fee systems used in the United States or in western Europe. The key distinct element of the fixed fee is that the attorney will be paid the amount agreed upon, without regard to effort or to risk. The key distinct element of the hourly fee is that the attorney will be compensated based on effort, as measured by time spent working, without regard to a fixed amount or to risk. The key distinct element of the contingency fee is that the attorney is compensated for assuming risk, without regard to an agreed upon amount or effort expended. By isolating the way these three distinct types of fee arrangements affect interests that are important in all of the western fees systems, we build a framework for evaluating the many fee arrangements that utilize and combine these key elements, such as the United Kingdom’s new conditional fee system. This framework avoids the dominant tendency of the literature to focus on the flaws of a particular fee system in isolation from its alternatives.