Contingent Fees with Legal Discovery

• Florian Baumann ^[1] ; Tim Friehe ^[2]
  1. [1] University of Düsseldorf
  2. [2] University of Marburg
• Localización: American law and economics review, ISSN 1465-7252, Vol. 18, Nº. 1, 2016, págs. 155-175
• Idioma: inglés
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• Resumen

  • 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.