Lawyers, to their chagrin, acknowledge that their banking clients have commoditized - turned into a package which can be priced accurately - virtually every area of legal practice, except litigation. Bankers are used to having bond issues and syndicated loans negotiated and documented by lawyers on a fixed-fee basis. But litigation remains largely subject to the "piece of string rule" as in Q: How much will it cost? A: How long is a piece of string?
This is not simply a matter of lawyers' intransigence. Litigation is by definition risky: if the outcome of a dispute were clear-cut, the losing party would capitulate immediately and not incur the costs of fighting it. Since the outcome is not clear-cut, lawyers are unable to price the cost. It depends on how long the dispute takes to be resolved (in or out of court) and the intensity with which it is fought.
Contingency fees, where the party only pays if the lawyer wins the action, are common in the US. But if the lawyer does win, he or she routinely keeps 30% to 40% of the proceeds. "In effect, the lawyers have insured the plaintiffs' downside by writing an expensive premium on their potential upside," say Andrew Freeman and Ron Dembo, the authors of Seeing Tomorrow: Rewriting the Rules of Risk, published this month by Wiley.