NANCY Seminar – Yannick GABUTHY (BETA)

Event details :

Title: Rent-seeking and litigation: Some virtues of reverse contingency fees

Abstract: This paper analyzes the welfare implications of reverse contingency fees – compared to hourly fees – both in terms of litigation effort, plaintiff’s access to court, and justice achievement, in a framework where litigation is modeled as a rent-seeking contest. Under reverse contingency fees, the defendant’s lawyer gets a share of the amount her client saved in litigation, which is the difference between the plaintiff’s claim and the judgement. Our main findings highlight that this – uncommon – fee arrangement may be more desirable than standard hourly fees, depending on the value of the contingent fraction obtained by the defendant’s lawyer. From a public policy perspective, reverse contingency fees should therefore be promoted, provided that this mechanism is regulated by the authorities, as it is the case with standard contingent fees in the US.