Legal Fee Restrictions, Moral Hazard, and Attorney Rents

Contingent fee caps, screening, and the quality of legal services

“…Were it not for this constraint, the equilibrium contract would entail the attorney "buying" the case from the client, an outcome that could be achieved with a contingent fee of 100% and a negative fixed fee equal to the expected value of the case net of the attorney's cost. However, ABA's Model Rules prohibit this type of contract (Santore & Viard, 2001;Shukaitis, 1987). Fig.…”

“…8 A non-binding cap reduces the set of allowable contracts, but the equilibrium contract remains the same as if there were no cap. 9 Santore and Viard (2001) show that when attorney effort is unobservable the ABA's Model Rules of Professional Conduct, which prohibit negative fixed fees and the purchase of civil suits, can allow attorneys to earn economic profits while harming clients and lowering efficiency.…”

Contingent fees meet the British rule: an exploratory study

“…6 It may be argued that the outright selling of the claim to the lawyer will result in efficient effort incentives, but this is usually prohibited either by professional codes or by the law (see, e.g., Santore and Viard 2001). As a result, we assume that the share β is strictly less than 1.…”

Incentive Contracts with Unobservable Competence Levels

“…In contrast there is a voluminous literature on contingent fee contracts. Analysed phenomena are numerous and the following is just a sampling of the more recent literature: contingent fees versus fixed fees or hourly fees for lawyer services [1,[6][7][8][9]; contingent fees and the trade-offs between out of court settlement versus going to trial [10,11]; the efficiency of the contingent fee system [12][13][14]; and, even the impact of contingent fee rents on the market for lawyers [15].…”