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    March 31, 2008  
 
 

THE CONTINGENCY GAMBLE


Keep those nominations coming for the "30 Under 30" awards, due by April 5.  No muss or fuss—just a couple sentences about your nominee and why they deserve this august honor:  30under30@bisnow.com. 

 

With taxes on our mind, we came up with our plan for a recent lunch at the Oval Room. Three top managing partners, some good discussion about hot law firm topics, and voila!— the tastiest business expense we could imagine, fit for publication.  

 
 

True credit goes to the people on the left: sponsors Bella Schiro of Jones Lang LaSalle’s law firm group and John Niehoff, head of the popular law firm practice at accounting firm Beers & Cutler, with famed executive chef Tony Conte. On the right, our esteemed panel: LaFonte Nesbitt, Executive Partner of Holland & Knight’s DC, NoVa, and Bethesda offices; Matt Schneider, Managing Director of Garvey Schubert Barer in DC and NY; and Graeme Bush, Chairman of Zuckerman Spaeder.

 
Bisnow:

There’s been another big contingency fee win in the news—are your firms taking more such cases?

   
Graeme: A small but significant part of our business is plaintiffs’ work, and we’re looking at more contingency possibilities: representing states, some class actions, insurance bad faith cases. We’re very selective about it so it’s a grab bag. 
   
Bisnow: Are other firms stepping up contingency work?
   
Graeme: There’s a partner at Sullivan & Cromwell who’s taken on a big contingency case, which would seem to be a change, but I don’t know if it’s a trend. I don’t know how many firms are doing it other than opportunistically—we’re trying to do it on a more systematic basis.
   
LaFonte: We haven’t taken that many, but we do take them. One thing that happens is, if you send in a memo with the word “contingency,” lots of bells and whistles go off. People run in and ask, What are you doing?  You can’t get to the next step in the process without a lot of explanation. 
   
 
Graeme:

Nobody’s allowed to open a contingency case without going through our contingency committee. But it’s a way for middle-market firms, of which there are two at this table, to get a little leverage.  

   
Matt: We’ve done some contingency matters, but we don’t like to dabble too much in areas we don’t have depth in.  I think of contingency work like gambling in Las Vegas: People only talk about their winnings.
   
Graeme: It’s true, you have to be careful—you can really kill yourself on a contingency if you take the wrong case or don’t have the experience. 
   
LaFonte: I think most firms have been doing modified contingency arrangements, which reduce the front end charges to clients but also mean the firm is not funding everything.

 

Don’t be confused: Graeme’s Australian name is pronounced just like the famous cracker.

 
Matt:

Personal injury cases are one thing, but business litigation on contingency is fraught with peril because it’s so easy to get sucked into protracted, hugely expensive proceedings.  And I’ve never yet seen a lawyer accurately estimate the amount of effort a case will entail.

   
Graeme: You’re never going to get it exactly right. The key thing in the evaluation process is to be rigorous about what it’s going to cost. You also need to have the plaintiff lawyer’s mindset. If you put a defense lawyer on a plaintiff’s case you’re sure to overrun your budget.  No question about it. 
   
Bisnow: Are there positives to contingency work beyond the obvious?
   
LaFonte: If you ever want to partner with a client, this is the way to do it because if you deliver you get paid a lot but not so much if the outcome is not favorable. But it’s also a so-called alternative billing model that people are always looking for—a way of getting around purely hourly billing.  So I think you’ll see more of it. At least until an article comes out about a firm that invested $20 million in a contingency case and lost. 
 
 
 
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