There does not appear to be any gross discrepancy between the effective hourly fee earned by plaintiff lawyers under the contingent fee arrangement and the normal hourly fee charged by defense attorneys in medical malpractice cases on the average. The American Bar Association's Special Committee on the Tort Liability System expressed concern about allegations that contingent fees encourage lawsuits. We take it that any litigating lawyer, whatever his or her fee arrangement, wants to win, but it is not at all apparent that the incentives to win are unhealthily greater for lawyers working on contingency fees than for those employed at fixed hourly rates. Even as the contingent fee is being condemned by corporate America, those same corporations as clients are becoming disgruntled with the hourly billing rate which has been the bedrock of their own lawyer-client relationship for decades. Even in a corporate setting, the contingent fee offers the client the opportunity to shift the risk to the law firm.
Law firms are also bad at predicting the likelihood of a bad outcome, especially in litigation.
Relying on a contingent fee, in which the lawyers profit from a good outcome and share in a bad one, shifts that risk, too. Hourly billing provides no such linkage. It is an accounting device. There is no credible economic theory underlying the hourly billing method, and for that reason, we no longer accept it as the sole, or even predominant, method of pricing legal services. It also pushes law firms to a near-obsession with billable hours.