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Contingent Fees with Legal Discovery

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  • Florian Baumann
  • Tim Friehe

Abstract

This paper analyzes the principal-agent relationship between a plaintiff and her lawyer when the lawyer chooses the settlement offer and undertakes legal discovery. Our objective was to highlight the implications of discovery for the contingent-fee arrangement that is optimal for the plaintiff. We consider bifurcated contingent fees and show that the consideration of legal discovery attenuates the standard asymmetry between the contingent fee for a settlement and the contingent fee for a judgment. To obtain the maximal joint surplus of the plaintiff–lawyer pair, the arrangement must specify nonlinear contingent fees.

Suggested Citation

  • Florian Baumann & Tim Friehe, 2016. "Contingent Fees with Legal Discovery," American Law and Economics Review, American Law and Economics Association, vol. 18(1), pages 155-175.
    • Handle: RePEc:oup:amlawe:v:18:y:2016:i:1:p:155-175.
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    File URL: http://hdl.handle.net/10.1093/aler/ahv020
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    Cited by:

    1. At Christian & Friehe Tim & Gabuthy Yannick, 2019. "On Lawyer Compensation When Appeals Are Possible," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-11, April.
    2. Friehe, Tim & Gabuthy, Yannick & Lambert, Eve-Angéline, 2020. "Settlement implications of lawyer advertising," International Review of Law and Economics, Elsevier, vol. 61(C).

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