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Colorado Business Litigation Risks

When one company sues another in a dispute involving lots of money with an uncertain outcome, what kind of law firm should the company hire? Some Colorado businesses think (unwisely) they always need a traditional business law firm. These traditional law firms bill by the hour, even by the minute! And in a complex case, those hours add up quickly, with no assurance of any recovery.
In a case where the recovery may be millions or may be nothing, there are risks in hiring a law firm that bills by the hour, rather than taking a fee only if he recovers money for the client – a contingency fee lawyer.
Risk #1: Out of pocket attorneys fees. Why should your company be on the hook for huge monthly legal fees in a case you might lose? The answer is simple: You shouldn’t be! Why add to a loss by being out tens of thousands of dollars in hourly fees? When you are paying hourly, your lawyer makes money whether you do or not. In high risk cases, you need a lawyer who will be your “partner” in the litigation. He wants to win as badly as you do, because he gets paid only when your company gets paid.
Risk #2: Conflict of interest. Hourly billing in high risk cases can create potential conflicts of interest. Your company wants the case settled quickly if it can be settled fairly. An hourly lawyer is paid more the longer the case goes on. With a contingency fee, the lawyer and client have the same incentives – maximize recovery, for the least time and costs.
But these aren’t the only risks when you hire a lawyer by the hour to handle your high risk business litigation. I will talk about the other risks in a later blog post.