Most False Claims Act lawsuits are undertaken by attorneys on a contingency fee basis. Our firm does so as well. The reason is simple: Most clients could not afford to undertake the lawsuit otherwise. A contingency fee allows the individual to pay the fee out of the proceeds of the recovery.
In traditional business litigation, a law firm charges their clients for work on an hourly basis that is agreed to upfront. A partner might bill at $650 an hour, a senior associate at $375 an hour, a junior associate at $200 an hour, and a paralegal at $150 an hour. In order to ensure that the client pays, a firm might ask for a portion of the anticipated costs and expenses to be put in an escrow account at the beginning as a retainer.
Businesses can afford these rates. Most whistleblowers can’t. So law firms that represent individuals instead charge clients based on a percentage of the recovery. The law firm and the client then have their interests (mostly) aligned – they both want the highest recovery possible. If the lawyers are able to recover for the client, they take a portion of the recovery.
Contingency fees charged by lawyers vary based on the firm and the type of work. However, state ethics rules govern the maximum fee that can be charged to a client. Lawyers must charge fees that are reasonable.
In the False Claims Act, you will also see that there are provisions about the recovery of attorney fees from the Defendant. These provisions are generally referred to in litigation as statutory fee-shifting. If the United States wants to encourage plaintiff’s attorneys to file certain types of cases, it will add a fee-shifting provision to the statute. In the case of the False Claims Act, this means that a losing Defendant will have to pay the attorney fees for the relator (a technical term for the whistleblower).
In the event of a recovery, an attorney may bill their hourly attorney fee to the Defendant and also take the contingency fee from the recovery. This practice has been challenged by both Relators and Defendants seeking to avoid paying the Relator’s counsel.
Nevertheless, it is still the practice used by our firm in whistleblower litigation. False Claims Act lawsuits are expensive. They involve years of work. And they are speculative – there is no guarantee of success. In order to pursue cases, we must be well compensated when we win so that we can fund future whistleblower litigation.