Model wording for hybrid fee agreement between lawyer and plaintiff
The pages above explain how a lawyer and client may agree to a hybrid fee agreement under which the lawyer is paid a low hourly fee as the claim proceeds and is then paid a bonus if there is good recovery on the client’s claim.
The following wording may be appropriate for a hybrid fee agreement (perhaps appropriate when the lawyer's normal rate under an hourly rate fee agreement is $250 / hour):
- It is not certain at the time of signing this agreement what amount if any will be recovered on account of the Client’s Case, or how much legal work will be required to achieve full or partial recovery. To share the risk and benefits of uncertain recovery the Firm and the Client agree to variable fees as set out below and the following defined rates apply to calculation of such fees:
- Minimum Hourly Rate: $150
- Maximum Hourly Rate: $450
- Fees calculated based on the time spent on the Client’s Case and using the Minimum Hourly Rate (the “Minimum Fees”) will be payable to the Firm by the Client as and when accounts are rendered regardless of the amount, if any, ever recovered on account of the Client’s Case.
- If and when full or partial recovery on account of the Client’s Case is made, the Firm may issue further accounts (the “Further Accounts”) claiming further payment in addition to the Minimum Fees, except that the total fees shall be subject to the following limits:
- The total fees charged shall not exceed the fees calculated considering the time spent on the Client’s Case and using the Maximum Hourly Rate for Lawyers (the “Maximum Fees”).
- The total fees charged at any point in time shall not exceed 33% of the amount recovered on the Client’s Case to that point in time.
- The fact that work has been previously billed and paid as Minimum Fees does not preclude the Firm from issuing Further Accounts claiming additional payment for that same work. Indeed, the Firm and the Client specifically anticipate that after full or partial recovery is made on account of the Case the Firm will issue Further Accounts seeking additional payment for work previously billed and paid as Minimum Fees.
The above wording is merely an example and the figures would need to be adjusted for each particular case by taking into account the lawyer’s normal hourly rate, the client’s ability to pay a base hourly rate, and each of the lawyer’s and client’s willingness to accept risk.
If the prospects of recovery are good, the lawyer may be willing to agree to a relatively low base hourly rate, but if the prospects of recovery are poor, or uncertain, the lawyer may require a base rate close to his or her normal hourly rate.
As noted above, the maximum compensation may be limited to a percentage of the amount recovered, to a maximum hourly rate, or to the lesser of those two items. Limiting the maximum compensation to the lesser of the two will to the benefit of the plaintiff, but depending on the risks involved may not be acceptable to the lawyer.
Where the maximum compensation is limited by a maximum hourly rate the client should expect that rate to be higher than the lawyer’s normal hourly rate, particularly where the base hourly rate is substantially below the lawyer’s normally hourly rate i.e. if the lawyer will be accepting the risk of substantially reduced certain payment, then the lawyer will be entitled to relatively higher compensation if the claim is successful. As noted in the contingency fee section above, rates double the lawyer’s normal hourly rate are considered not unreasonable in a pure contingency fee context and a similar factor would likely be appropriate under a hybrid fee arrangement if the lawyer was being paid a base hourly rate substantially below his or her normal hourly rate.
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