Law Firms Court Small Businesses Suing Corporate Giants on Contingency Basis

Recent findings, released in May from Washington, D.C.-based The Polling Co. Inc., support the assumption that businesses of all sizes are looking to those they normally face across the aisle in a courtroom – plaintiffs’ attorneys – to represent them in business-to-business litigation.

According to those surveyed which included executive officers in companies of all sizes, 87 percent were interested in non-hourly billing alternatives. Nearly six out of 10 persons surveyed, 59 percent, favored a contingency- based billing process – meaning that the trial attorney and his firm would be paid only if the case were won.

Jeff Cooper, managing Shareholder of East Alton-based law firm Simmons Hanly Conroy, says his firm recently launched a contingency-based practice of representing businesses in litigation against other businesses. Although it requires the law firm to do more extensive research on the front end and be more selective as to which clients it will represent, the non-hourly billing mechanism affords smaller companies the chance to initiate a legitimate claim against a large corporation whose pockets are a lot deeper.

“This was all borne out of the business calls we were receiving at the firm,” said Cooper, whose firm is known to represent victims in asbestos cases. “We would refer businesses needing representation in a lawsuit against another business to other lawyers we knew who handled that. When we started getting calls back from those we referred saying that law firms wanted $300 an hour to take their cases, we decided we needed to introduce an alternative that made it affordable for smaller businesses who have been wronged,” he added.

Pharmacy benefits management litigation, patent litigation and a third area ranging from fraud to breach of contract are examples of the contingency-based expertise Simmons Hanly Conroy offers companies. Pharmacy benefits management cases, he explained, often involve medium to large companies with a large number of employees – employers who contract with a health insurance benefits administration firm. Typically the reason for the litigation, according to Cooper, is when it is alleged by an employer that the outside firm either breaches the contract and/or breaches its fiduciary duty to the employer/client.

“The patent cases are also coming very, very quickly,” Cooper said. “A lot of people who have valid patents are being infringed upon all over the country.”

What Simmons Hanly Conroy is discovering is that even business clients who could afford to pay an hourly fee to litigate against another company are opting for the contingency-based way of paying because these employers feel it’s a better value, Cooper said.

“Many companies are seeing this as a better deal because it’s a results-based model,” he added. “If the client – the company – is successful, we get paid. If they’re not, we don’t. There is no out-of-pocket expense for that client.”

Contingency representation logically poses more risk for the plaintiffs’ firms, said Cooper; that’s likely why there aren’t more law firms around who are taking contingency-based cases that involve business versus business litigation.

“A lot of the larger law firms who tried to do this 10 to 20 years ago were burned on it,” he said. “But our whole business model is based on sharing the risk with our client. We see a number of really worthwhile cases that fit this model. It is relatively expensive, though, for a law firm because it can take three to four months on the front end to do the research and develop the case.”

Patent infringement cases, for example, require a huge amount of due diligence on the front end, according to Cooper. Each of Simmons Hanly Conroy’s 62 attorneys lends expertise to the contingency-based business litigation.

“It is interesting to see the reaction of the companies who are typically the defendants in our (asbestos) lawsuits when we walk into the courtroom and enter on behalf of the defendant this time around. They sort of wonder what’s going on,” he said.

Jack Carey is third vice president of the Illinois State Bar Association and has practiced law in Southwestern Illinois for 25 years. Although contingency- based personal injury cases are his mainstay, Carey says he offers companies a hybrid contact that includes an hourly fee to cover court-related costs plus a contingency model tied to the outcome of the business versus business litigation.

“I think it’s an excellent way of giving a modestly capitalized business access to the courthouse,” said Carey. “If you’re taking on an ExxonMobil and you’re a service station owner, your pockets aren’t deep enough to pursue the litigation on an hourly fee basis.”