Below you will find various examples of alternative legal fee arrangements we have structured and implemented in the past for some of our clients.
TOP
FIXED FEE /
SUCCESS FEE
Mighty Hover
DEFERRED FEE
HYBRID
Mighty Hover
EQUITY
CONVERSION FEE
Mighty Hover
ASSET
ASSIGNMENT
Mighty Hover
A residential developer
Our Client purchased several large tracts of land for residential subdivision and development. The Seller failed to disclose various conditions that prohibited the Property from being subdivided. Our Client sued the Seller for concealment and misrepresentation.
The cost of prosecuting the case on an hourly basis was going to be substantial. The potential range of damages was equally significant and difficult to predict. Our Client was willing to share in the upside recovery, but in the event of a bad outcome, our Client did not want to risk incurring legal fees that might exceed his recovery. Time was of the essence due to an expiring vesting period that would have rendered the Property undevelopable in less than a year.
We were able to leverage the threat of additional damages flowing from the pending loss of the development rights to negotiate and obtain substantial compensation for our Client within the limited time period remaining. Our client thereby received full compensation for its losses within the necessary time frame so that it could then pursue development activities before those rights expired.
We agreed to a fixed fee/success fee hybrid where our Client paid a single lump sum fee at the beginning of our representation. In the event we recovered damages for our Client in excess of a predetermined amount, our firm would then receive a variable success fee based on both (A) the net recovery and (B) the duration of the litigation. We then developed strategies on how to efficiently and effectively position the case for prompt resolution.
A commercial development company
A lender sued our client alleging a default under a $9,200,000.00 commercial loan and seeking the appointment of a Receiver to take control of the Property securing the debt.
The Property securing the loan was appraised at over $24 million based on development entitlements. The loan documents gave the Lender the ability to assume title and control over the Property in the event of a Default. Our Client therefore stood to lose substantial profits if the Lender took over the possession and development of the Property. The Client’s objective was for our firm to assist it in achieving some of those profits by positioning it through the litigation either to retain, redevelop or sell the Property at fair market value.
We helped our Client locate investors to temporarily prop up the liquidity and associated value of the development company, which in turn restored street value to the Property. We were then able to position a sale of the Property for nearly $20,000,000.00, thereby converting a lawsuit against our Client into millions of dollars of profits for our Client. And our office earned a handsome success fee that our Client happily paid out of profits that the Client never expected to see.
After extensive investigation, we structured a reduced hourly fee with a deferred payment and back end success fee. Under this arrangement, our standard hourly rate was discounted by 30% and did not become due or payable by the Client until a triggering “Disposition Event” such as the sale of the Property or the infusion of new capital or investment monies into the entity. This allowed the Client to use its limited cash resources for monthly carrying costs and development activities rather than consuming those funds on monthly legal fees. As an incentive for our agreement to carry all the costs of litigation, the Client agreed to pay us a structured Success Fee based upon any profits we helped the client realize. We therefore bore the risk that if we failed to achieve profits for our Client, our firm would be paid substantially less than our standard rate.
A luxury hotel resort
Our Client owns and operates several 5 star hotels in resort locations throughout North America. Our client launched a program to fractionalize and sell suites within all of its hotels, collecting over $40,000,000.00 in Buyer deposits. Before the redevelopment and build out was complete, the Buyers collectively threatened a class action lawsuit for alleged violations of the Federal Interstate Land Sales Act (ILSA).
The suit was “bet the company” litigation from the Client’s perspective. The Client could not risk the fallout of publicity flowing from any litigation but was too far along in the restructuring of its business model and construction either to refund the deposits or to abandon the fractional program without triggering a default with its institutional and mezzanine lenders. The Client thus sought to incentive us to find a solution outside of the courtroom that would enable it to continue its re-branding and restructuring while retaining the financial deposits from its contracted Buyers.
Working in concert with the hotel’s transactional counsel, we negotiated an outcome by which the hotel expanded its fractional program to permit Buyers to utilize any of the resorts within the hotels’ collection of properties. By increasing both the actual and perceived value of fractional interests, all but three Buyers agreed to withdraw their claims and demands and to proceed with their purchases at the same price and terms stated in their contracts. Our Client not only avoided a costly lawsuit, but also converted the situation into a more favorable business model that resulted in even higher sales volume than projected.
We agreed to a fee structure where our hours could be converted at a multiple to warrants in the hotel company, thereby putting our fee partially at risk to any downturn in the companies’ stock that might result if we were unsuccessful in negotiating a resolution with the Buyers.
An individual homeowner
Our Client contracted to purchase a luxury townhome in Aspen that the Homeowner’s Association intended to build and sell for the purpose of offsetting the costs of a complete redevelopment of the Association. Property values increased substantially during the construction period, leading the Board to rescind the contract with our Client in favor of a more lucrative price with a new third party buyer. The Client lost at trial and hired us to handle the appeal.
The trial court had awarded legal fees to the Association. The Client had therefore incurred liability for over a quarter million in legal fees and did not have the resources to continue litigating. The Client was prepared to absorb the losses and walk away from both the lawsuit and the purchase contract. We had to craft a win-win solution that made sense for both parties.
We prevailed on appeal and overturned the trial court. The fee agreement allowed the client to mount an aggressive appeal that it could not have otherwise afforded. As a result, we helped the Client avoid liability for over a quarter million in legal fees to the Association, with our firm in turn compensated for our success through the net profits we were able to generate by buying and selling the town home for a gain.
The Client was willing to assign the purchase contract to our firm in the event we prevailed on appeal and relieved the Client from the liability for legal fees owed to the Association. In contrast, if we were unsuccessful on appeal, our office would be paid nothing and the Client would be no worse off than he already was.
The choice of a lawyer is an important decision and should not be based solely upon advertisements.
Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.
* COLORADO DOES NOT CERTIFY LAWYERS AS SPECIALISTS IN ANY FIELD