Finance Corner:

    A Guide for Plaintiffs' Attorneys

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    Managing Operations & Cash Flow: Blog Post #5

    Predicting When You’ll Receive Contingent Fees: Impossible or Achievable?

    Fee_PaymentYou’ve settled a case and are patiently waiting for your attorneys’ fees to be disbursed. Why does it take so long and how can you envisage when you’ll actually receive payment?

    These are both fair questions asked by many contingent fee attorneys because knowing when you’ll be paid for your services is a key element in effectively managing your cash flow and can be critical to the success of your firm.

    While calculating precisely when you’ll receive fees is practically impossible due to factors outside your control, there are ways you can more reliably predict contingent fee income. Here are just a few.

    1. Know your source of recovery.

    Who is paying the settlement and attorney’s fees? Usually with contingent fee cases you’re dealing with an insurer or someone acting on the insurer’s behalf negotiating and distributing the settlement. Although this is a dependable source of payment, timing of the case’s resolution and payment thereof can vary by company.

    You can help manage the timetable in this context, however, through a demand package. When preparing the demand package keep in mind or research case settlement values for the type of case you’re litigating and your specific venue. A high demand may stimulate discussions, but could also put off an insurer if they find the request unreasonable, so it’s typically better to be optimistic, but realistic, with your offer.

    Further, often making the demand first, rather than waiting for a proposal from the other side, gives you the upper hand in negotiations. It gives you the opportunity to set the expectation of the value to the insurer, which may expedite case resolution.

    Moreover, if you know the insurer it can help speed along the process, as you likely understand their tactics and process and procedures. Stay on top of the process—as many insurers delay for one reason or another. A claims representative is under pressure to resolve their cases as much as you are, since open claims cost the insurer time and money and they are evaluated on their ability to resolve claims effectively.

    1. Have a good case management system in place.

    Having a solid handle on the status of your cases—portfolio-wide—along with someone to manage the settlement process is key. The attorney on the case should actively work to keep cases moving, especially those close to resolution, so that your clients remain content and you can better predict timing.

    In the event a case is delayed, for instance, when court approval is required for the settlement of litigation involving a minor, you can still achieve some control over timing by taking certain actions, including having the order prepared ahead of time and filed as soon as possible.

    1. Take Fee-Sharing into Account

    Fee-sharing arrangements are a common across a wide range of practice areas—from single event cases to mass torts. Many times they can be beneficial partnerships. Maintaining an active role in the process, even if you aren’t the litigating or lead attorney, will help streamline the events during and after a settlement is reached.

    If you are the managing attorney in the agreement, you have first-hand knowledge of the settlement, so payment will be more transparent than if you’re referring counsel. Knowing the attorneys you partner with is important and having a good rapport can help to ensure you’re kept well informed.

    As a precaution, it’s recommended that you make sure each firm that’s party to a co-counsel arrangement is listed on the written retainer agreement. Many firms rely on a handshake to verify their joint legal interest in fees, but having your firm named in the retainer agreement solidifies the arrangement and protects all parties, including the client.

    1. Pay Special Attention to Mass Tort Cases

    Remaining active in your cases protects your interest in knowing when a case is settled and the amount of that settlement. This is especially imperative when taking on mass tort litigation. Communication with those firms you’re co-counseling or partnering with in the case is a must, as often, these complex litigations may take years to resolve. Here are steps you can take to help make the process as transparent as possible:

    • Make sure you know what cases are yours in the totality of the managing firm’s portfolio
    • Ask for and review your case list
    • Ask for updates on the process of intake, review and filing of your cases.
    • Follow the electronic docket for real-time information about the status of the cases.

    Being involved in the process will help you to determine the overall viability of your cases and allow you to better estimate when you’ll receive your fees when the case resolves. Resolution of mass torts takes time and even upon settlement, receipt of fees can take years. Be prepared for this reality and set reasonable expectations.

    For most plaintiffs’ firms, contingent fees are the lifeblood of your practice. Understanding how the process works, and timing of fees due to the issues discussed above, can be a challenge. Take the extra step to manage both sides’ expectations and understand the process in its entirety and you will be well prepared to plan out your fees and how they will impact your overall business operations.

    Categories: Managing Operations & Cash Flow

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