Let's look first at the option of hiring an attorney on a contingency basis.
In addition to the amount at stake--$20,000 in this case--you need to know some details about the kind of dispute; and in the context of considering whether to hire an attorney, you especially need to know whether it is the kind of case an attorney would take on a contingency basis.
If you are not already familiar with that term, a contingency basis is when an attorney agrees to handle your case for little to no money upfront in exchange for your agreement to pay the attorney a percentage of what you win in the case, if you win at all. That percentage usually ranges from 20% to 40%. In addition, it is common for contingency arrangements to also include a provision that first pays an attorneys expenses incurred in handling your case, and then deducts the percentage from that leftover balance. This means that should you win your case, and some compensation s a result, you could be responsible to first your attorney's expenses and "success fee."
But to keep this analysis simple, let's assume that you do not have to pay your attorney's fees but that you agree to pay her 33% of what you win, and to pay her nothing if you do not win. So if your potential winnings were $20,000, then you would be "risking" an attorney fee of $6,600, and your attorney would be risking a fee of $0.
Not a bad option, right? If you were able to find an attorney to agree to such an arrangement, then you could keep your $1,000 and align your attorney's interests with your own. Not so fast.
Let's stipulate that the issue is a contract dispute and that, specifically, $15,000 of the $20,000 stakes is the amount you would have to pay over the remainder of the contract if you were not able to terminate it now. This means that, out of the $20,000 at stake, there is only $5,000 of actual cash in play, although the total value of win to you is $20,000: because you would both get your $5,000 back and avoid having to pay the $15,000.
"Normally, people who hire a lawyer on contingency do not have the option of paying the lawyer’s hourly rates because they simply can’t afford them. To seek justice, they must accept a contingency fee arrangement. If you are hiring a lawyer on contingency, keep in mind that the lawyer is first concerned about ensuring the lawyer benefits from the deal. In general, lawyers are far more experienced with contingency fees than clients, so lawyers know better how to calculate contingency fees so the lawyer is not disadvantaged. Experienced attorneys do not take contingency fee cases if it is a bad deal for them. For example, attorneys routinely reject being paid on contingency for small financial cases, complex cases, and time-consuming cases. However, attorneys routinely accept contingency fee cases that have the potential to win a lot of money, are simple, and will not take much time."
Every attorney will find risk in any given case. It's just the way that attorneys view the world, and it's a handy inclination for evaluating a potential contingency case (in fact, attorneys who are bad at this kind calculus are probably bad attorneys). The way that an attorney would look at your case is twofold:
"People are only now starting to pay attention to the fact that lawyers and judges who are bad at math can make mistakes that ruin people's lives." --Arden Rowell, a professor of law and the Richard W. and Marie L. Corman Scholar at Illinois.
If the attorney won your case, and you were excused from a $15,000 debt, then to pay the attorney's 33% contingency fee on that portion of the winnings would require you to pay the attorney almost $5,000 out of your own pocket (which exceeds your budget of $1,000). So the case economics, for the attorney's fee, really center on that $4,000 in cash (expected value), which would only amount to just over $1,300 if the attorney were to win your case.
In contrast, most attorney retainers begin around $1,000 to $2,000, with hourly rates ranging typically from $250 to $350 (or more, depending on experience and expertise). So the chance to win a $1,300 fee, even if it is a good chance, is not compelling to most attorneys: the attorney's alternative fee models--the standard retainer + billable hour model, for example--are far too lucrative to consider taking this case on a contingency basis.
💡 For a little more background beyond just this hypothetical analysis, keep in mind that you tend see contingency fee arrangements mostly in personal injury cases in which your opponent has insurance designed to cover the kind of wrongdoing your suit might allege (i.e. automobile accident cases and medical malpractice cases) and in cases for which there is statutory basis for recovery of both attorney fees and stipulated damage amounts (i.e. debt collection cases invoking laws such as the Fair Debt Collection Practices Act). In other words, you do not tend to see contingency arrangements in contract disputes like the hypothetical one we have described above. Further, most states have laws that actually prohibit contingency fees in certain types of cases, which are understood to be for "public policy reasons."
Conclusion on the contingency fee option: not an option for you. Although contingency fee arrangements can be favorable for the client in certain types of cases--because the contingency fee forces the attorney to share the risk with the client and because it allows you to pursue legal claims you could otherwise not afford to pursue (or at least justify when the stakes are low)--the contingency fee option is not generally available in a contract dispute case, and is specifically not likely in our hypothetical contract dispute case described above, both because of the type of case it is and because the amount at stake ($20,000) is far too low for most attorneys to even consider on a contingency basis. So a general truth seems to be that if the stakes of your case are too low for you to risk paying an attorney regular fees upfront, then the attorney will draw the same conclusion about her risking not getting paid upfront. Thus contingency fees are almost never an option in (what we call) "low-value claim" cases.
Let's look next at the option of hiring an attorney at normal hourly rates.
Because in our hypothetical scenario, you actually have $1,000 to spend, we'll ignore the question of whether you can afford to spend $1,000. Maybe you're a small business owner, and this contract dispute is with your landlord: you want to terminate the contract early, but he wants to charge you the outstanding balance of $15,000 for the remainder of the lease's term, and he is threatening to keep your security deposit in the amount of $5,000. Of course, there might still be questions of whether you can afford to spend more than $1,000, and we will run into that question right now.
As we've already said, hiring an attorney the old-fashioned way--paying a retainer upfront and a set hourly rate throughout the case--can become really expensive really fast. So in the context of our scenario...
Having handled thousands of these cases over the last decade, I can tell you that most people would begin by considering the second question. Why? Because people are more averse to certain loss than potential gain, even when the value of the potential gain outweighs the certain loss; and paying a $1,000 retainer right upfront, and then committing to an hourly rate on top of that of $250 or more...that is what "certain loss" looks like, because it's gone for sure, whether you eventually win your case or not.
It's called the "loss aversion bias."
Luckily, in our hypothetical scenario, I have stipulated a budget, such that you have no more than $1,000 to spend even if you weren't somehow influenced by this loss aversion bias.
So let's move to consideration of the first question, whether an attorney will represent you if you only have $1,000 to spend. This has two parts. The first is to try to estimate how much work it would take for an attorney to resolve your $20,000 contract dispute case, and then apply some hourly fee to determine whether we fall above or below $1,000.
The chart above comes from a study conducted by the National Center for State Courts. Based on a range of hourly rates from $150 to $600 per hour, it found that the median attorney fees in a contract dispute case well exceed $1,000 in the very first stage of the case ("intake"). During the intake stage, your are simply telling the attorney about the case, she is taking notes, and she is beginning to devise a case strategy. It is a preliminary analysis of the facts and evidence, and involves basically no work that gets you any closer to your goal of resolving your issue. Is it necessary? Absolutely. But does it help you? Only if that attorney then proceeds to subsequent stages, which means that you would have to continue paying for more of your attorney's time.
"Drawing upon 925,000 cases disposed of between July 2012 and June 2013 in ten large urban counties, the NCSC researchers identified 228,000 cases that resulted in a non-zero monetary judgment. The median judgment amount was a mere $2,441 — hardly an amount that can support the cost of hiring a lawyer." -- Bill Henderson, Professor of Law and Stephen F. Burns Chair on the Legal Profession at Indiana University Maurer School of Law.
Across all case types this study surveyed, the bare minimum cost of resolving a case was $1,000, but that was not for a contract dispute case, and that was only if the attorney had to spend no more than 4 hours on the case. Yet the median judgment was only $2,441--at best a 2.4 non-risk-adjusted ROI. This is why 76% of the cases surveyed featured at least one party who did not have representation by an attorney. Do you think an attorney could resolve your (admittedly hypothetical) contract dispute issue in less than 4 hours of work?
The second part is less obvious. Some contracts explicitly say that the losing party in a dispute must pay the prevailing party's attorney fees. If your contract dispute arose from a contract with such a provision, then you might be able to find an attorney who would take your case for the $1,000 retainer upfront and a billable hour along the way, but at a full deferral of the billable hour portion until the case is resolved. Then, if you were to win your case, the other party would have to pay your attorney's fees. Why would an attorney do this? If she thought you had a good chance of winning, then such a provision could theoretically serve as a "blank check" for however large he fees become in the course of handling your case. But it still presents the attorney with a risk that you will not win your case and that no such blank check will be there to cover her exorbitant fees.
Note that if your were to lose, you would still have to pay your own attorney's fees, because this is not a contingency arrangement. So both you and your attorney should thoroughly evaluate your ability to afford whatever total fee your attorney would need to charge to handle your case. Likely, that total amount will exceed your $1,000 budget. For example, the chart below is considered by some to be the predominant method for determining a "fair hourly rate" for the attorney fees a the loser would have to pay for a case heard in the Washington-Baltimore area--could you afford to be the loser who pays those rates when your case only involves a $20,000 stake?
But, just for fun, let's suppose that you did find an attorney to take your case under this arrangement, with full deferral of the billable hour portion until the case is resolved, and that in the end you did win your case. Still, it is up to the court to decide whether the attorney fees you would then ask the losing party to pay were "reasonable." It is a somewhat subjective measure, but there is enough case precedent that we can identify some of the key elements for determining what is reasonable, one of which is "the size of the amount in dispute in relation to the fees requested." So this puts downward pressure on the total fees your attorney could rack up in general, and even more downward pressure when the case pertains to a relatively small sum at stake, as in our case. Would a court find that $10,000 of attorney fees were reasonable on a case only worth $20,000 total? Maybe not.
The last caveat with this second part is that once you and your attorney enter into such a deferred-fee arrangement, your options for settling the case prior to a verdict by the court might be fewer, because you might not qualify as the "prevailing party" under a settlement agreement. The only exception would be if you somehow managed to get the court to treat the settlement agreement as an order of the court, and to specify therein either that you are the prevailing party or that the other party must pay your attorney's fees in any case.
💡 Attorney fees are expensive, and the single largest driver of those fees is time: how much time will they spend on your case? Because the "traditional law firm model," one of upfront retainers and billable hours, has never had any incentive to reduce the time it spends handling a case, it hasn't. Indeed, in the chart below, you can see that the cost of legal services has gone up faster than the relative cost of the the other components of the Consumer Price Index.
And what has been the result? Simple economics. As cost (aka price) has risen, spending on legal services has fallen, as people have opted for more DIY and non-lawyer methods for resolving legal disputes. Nowhere is this more apparent than in the segment of the legal market that Veeto plays in: low-value claims. Because when the price of a lawyer rises, the demand for a lawyer goes down (especially when the stakes of your case are lower).
Conclusion on the billable hour option: not an option for you. That $1,000 is not likely to buy you an attorney for your case.
Now let's look at the option of handling the case yourself, DIY.
Since this option depends more on you than any of the other options (obviously!), I will not be long-winded here. Instead, I would point to one truth. The single largest drive of attorney cost will be the single largest drive of DIY cost: time. But obviously, with DIY, the time is yours. So you have to consider two key questions:
OK, let's look at the final option of using a legal service like Veeto.
And I'll just keep this one to bullet points, because if you want to, you can find plenty of info about Veeto just by kicking around this blog. Veeto is a good option if...
Fun game, huh?
For real, though, if you have a real case you would like to run by Veeto, hit the button below.
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