Chapter 12
CASE STUDY 12.4
WHEN TO ACCEPT CONTINGENCY FEES
STATEMENT OF THE PROBLEM
As a professional in private practice, you are considering whether to offer
your services on a contingency basis, an arrangement whereby you would receive
a percentage of the outcome.
Two clients wish to retain you.
Client A wants to retain you to act as an expert witness in a lawsuit against a third party.
The
lawsuit, if successful, should result in a very large settlement.
Client B has shown an interest in retaining you to reduce the energy used by a
manufacturing process.
You believe
that Client B would be more positive if you base your fee on a percentage of
the energy saved.
After an
initial study of the problem, you believe that the energy savings could be
immense.
QUESTIONS
Is it ethical to offer your services on a
contingency basis to either of these clients with the understanding that you
would receive a percentage of the legal settlement (Client A) or a percentage
of the value of the energy savings (Client B)?
CHAT
GPT Solution
The two situations look similar
because both involve a contingency fee, but ethically they are quite
different.
A contingency basis means
your payment depends on the result you achieve.
Explain: What does Client A want?
Client A wants to hire you as an expert witness in a lawsuit.
In
simple words, Client A is suing someone (a third party) and
wants you, as a professional engineer/geoscientist, to give your expert
professional opinion about technical matters in the case.
For
example:
Client
A: “I am suing Company X. I need you to examine the technical evidence and
explain your professional findings to the court.”
If
Client A wins, Client A may receive a very large settlement.
The
proposed contingency arrangement would be:
Client A wins → you receive a percentage of the settlement.
Client A loses → you receive little or nothing under that arrangement.
That's
the problem: you would personally benefit if Client A wins, while an expert
witness is supposed to give an independent and unbiased opinion,
regardless of who wins.
So:
What does Client A want? → Your expert testimony for
the lawsuit.
What does Client A ultimately want? → To win the
lawsuit and receive the settlement.
Explain: What does Client B want?
Client B wants you to help reduce the amount of energy
used by its manufacturing process.
For example, suppose Client B owns a factory that
currently spends $1 million per year on energy.
They want you, as an engineer, to study the factory and
find ways to:
use less electricity, natural gas, or other energy → reduce
energy costs
You propose:
“Instead of paying me a fixed fee, pay me a percentage of
the money I save you.”
For example:
Before your work: Energy cost = $1,000,000/year
After your work: Energy cost = $700,000/year
Savings: $300,000/year
If your agreed fee is 10% of the savings,
you receive:
10% × $300,000 = $30,000
So simply:
Client A wants your independent expert
opinion in a lawsuit.
Client B wants your engineering work to reduce its energy use and
costs.
That's why a percentage-based fee is problematic
for A, but can be acceptable for B.
Chat GPT explanation of the whole scenario: .
You are a self-employed
professional consultant. Two people/companies want to hire you.
Instead of charging a normal fixed
fee, you are thinking about saying:
“My fee will depend on how
successful my work is. If the result is bigger, I get paid more.”
This is called a contingency fee.
Client
A
Client A is suing someone and
wants to hire you as an expert witness.
Client A says, in effect:
“Study the technical issue and give
your expert opinion in court.”
If Client A wins the lawsuit, Client
A could receive a lot of money.
You are considering saying:
“If you win, give me a percentage of
the money you receive.”
For example:
Client A wins $1 million.
Your fee is 10%.
You receive $100,000.
Problem: You are supposed to be an independent
and unbiased expert, but now you personally make more money if Client A
wins.
Therefore:
Client
A → contingency fee is NOT ethical. ❌
Client
B
Client B owns a factory and wants
you to reduce the factory's energy use.
You are considering saying:
“Pay me a percentage of the money I
save you.”
For example:
Your work reduces Client B's annual
energy costs by $200,000.
Your fee is 10%.
You receive $20,000.
Here, both you and Client B want the
same legitimate thing:
More energy savings.
So this type of payment arrangement
can be acceptable.
Therefore:
Client B → contingency fee can be
ethical. ✅
What
does “energy savings could be immense” mean?
Immense = very large.
It means that after looking at the
factory, you think:
“I can probably reduce this
factory's energy use by a very large amount.”
Therefore, Client B could save a lot
of money, and you could also earn a large fee if you're paid a
percentage of those savings.
Very
easy NPPE memory
Client A:
Win lawsuit → I make more money → expert may become biased → ❌
Client B:
Save more energy → client saves more money → I earn more → goals are aligned
→ ✅
The key difference is: an expert witness must be
independent; an energy consultant is hired specifically to create savings.
Given QUESTIONS
Is it ethical to offer your services on a contingency basis to either of these
clients with the understanding that you would receive a percentage of the legal
settlement (Client A) or a percentage of the value of the energy savings
(Client B)?
Answer:
The
answer is different for the two clients:
Client A — NO ❌
It
is not ethical to work as an expert witness and receive a percentage of
the legal settlement.
Why?
An expert witness must give an independent and unbiased professional opinion.
If
your payment depends on Client A winning, you have a personal financial reason
to help Client A win.
For
example:
Client
A wins $1 million →
you receive $100,000.
Client A loses →
you receive nothing.
That
could influence—or appear to influence—your expert opinion.
Therefore:
Expert witness + contingency fee = unethical.
Client B — YES ✅
It
can be ethical to receive a percentage of the value of the energy
savings.
Client
B hires you specifically to reduce energy consumption.
For
example:
You
save Client B $200,000 in energy costs → you receive 10% = $20,000.
The
more legitimate energy you save, the more Client B benefits and the more you
earn.
Your
interests and Client B's interests are therefore working in the same
direction.
Therefore:
Energy-saving consultant + percentage of genuine savings = generally ethical.
Easy memory
Client
A: “If you WIN, I get paid.” → ❌
Client B: “If I SAVE you money, I get paid.” →
✅
The
main reason is independence: an expert witness must remain financially
independent from the outcome of the lawsuit.
AUTHORS' SUGGESTED SOLUTION
These two cases appear to be similar but
are distinctly different.
Client A: An expert witness may express
opinions, whereas a non-expert witness must confine his or her testimony to
known facts. Therefore, a professional testifying as an expert witness must be
absolutely impartial.
If, however, you receive a percentage of
the potential settlement from Client A, you have a conflict of interest and
your testimony would be questionable. Therefore, it is unethical to accept this
case on a contingency basis.
You should bill Client A for your time
and expenses so that your reimbursement is independent of the outcome of the
case.
Client B: The case of Client B is
different, because there is no need for impartiality. In fact, your bias toward
reducing energy consumption could be very beneficial to the client.
Of course, you have a duty under most
Codes of Ethics to charge an adequate
fee. From your study, you evidently believe that this fee will be adequate.
Therefore, the proposal to use a contingency
fee is ethical.
A word of warning, however: You must
measure the energy savings accurately and impartially, and you must not degrade
the client's product or facilities.
Therefore, although a contingency fee is
ethical in this case, it has some risks. The more common billing methods
(described in Chapter 5) are usually simpler.
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