A business with a strong commercial claim against a former partner, a contractual counterparty, or a professional services firm walks into a major New York law firm and asks about representation. The firm evaluates the case favorably, drafts a thoughtful retainer letter, and proposes a fee structure built around hourly rates of $1,500 to $2,500 per partner hour and $700 to $1,500 per associate hour. The estimated cost to take the matter through discovery, dispositive motion practice, and trial is somewhere between $800,000 and $4,000,000. The business has the case but does not have the cash. The team at Warner & Scheuerman, which represents commercial plaintiffs on contingency as a regular part of the firm’s litigation practice, sees this scenario every month, and the answer offered to the prospective client is almost always the same. The big firm cannot do the case on contingency. The reasons are not about the merits.
Commercial contingency representation in New York is rare, structurally constrained, and significantly more available than the prevailing hourly-billing assumption would suggest.
The Economics That Most Big Firms Cannot Make Work
Big-firm commercial litigation runs on hourly billing for structural reasons that have nothing to do with the strength of any particular case.
The cost stack at a major Manhattan law firm runs deep. Manhattan office space, partner compensation tied to draws, associate utilization targets, marketing infrastructure, technology spend, and administrative staff all require predictable revenue at every monthly close. A firm that takes a major commercial matter on contingency commits hundreds of thousands of dollars in attorney time without any expectation of cash flow for two to four years. The capital required to carry several such matters simultaneously while continuing to compensate partners on schedule is significant. Most firms do not have it, and the firms that do generally choose not to deploy it that way.
Conflicts compound the structural problem. The largest New York commercial firms primarily represent corporate defendants – banks, insurers, public companies, professional services firms, and the kind of institutional clients whose recurring hourly engagements form the firm’s core revenue. Taking a contingent commercial matter against the type of defendant the firm typically represents introduces conflicts that compromise the firm’s existing book of business. The economic logic strongly favors the existing book.
Compensation structures inside big firms reinforce the pattern. Partners are compensated on origination, billable hours, and collections. A partner who takes a contingent matter that consumes significant time without generating monthly bills is, in the firm’s internal accounting, costing the firm money even before the case is resolved. The institutional incentives push partners away from contingent work and toward billable matters that contribute to current-year compensation.
The result is that the largest, most prestigious firms in New York have effectively withdrawn from contingent commercial litigation as a category. The work has been left to smaller boutiques willing to absorb the risk and accept the structural constraints in exchange for the upside.
Why an AV Preeminent Rating Matters in This Particular Decision
Martindale-Hubbell’s AV Preeminent rating reflects a peer-and-judiciary assessment of a firm’s legal ability and ethical standards. The rating is not self-conferred. It is conferred by the lawyers and judges who have worked with the firm, and it operates as a reasonably reliable signal of the firm’s quality.
Most AV Preeminent firms charge premium hourly rates and decline contingent work. When an AV-rated firm does accept a commercial matter on contingency, the acceptance itself communicates something the firm did not have to say out loud. The firm has independently evaluated the merits and concluded that the case has a meaningful probability of success. The firm has evaluated the defendant and concluded that a successful judgment will be collectible. The firm has assessed the time and capital commitment and concluded that the matter justifies the diversion from hourly alternatives.
For a prospective plaintiff, the difference between a contingent personal injury firm taking a matter and an AV-rated commercial litigation boutique taking the same matter is significant. Personal injury contingency is a high-volume, statistically driven practice in which firms accept substantial portions of intake and rely on settlements to produce average outcomes. AV-rated commercial contingency is selective, with firms evaluating each matter against the alternative billable use of attorney time and accepting only those that justify the trade.
The peer-credentialed selection itself functions as a form of merits evaluation that the prospective plaintiff would otherwise have to pay for separately.
How New York’s Rules of Professional Conduct Frame Commercial Contingency
New York’s Rules of Professional Conduct expressly authorize contingent fee arrangements in civil matters. Rule 1.5(c) governs contingency agreements generally, requiring that the agreement be in writing signed by the client, state the method by which the fee is to be determined including the percentages applicable at settlement, trial, or appeal, identify the litigation expenses to be deducted from any recovery, and clarify whether expenses are deducted before or after the contingent fee is calculated. Upon conclusion of the matter, the lawyer must provide the client with a written statement showing the outcome and, if there is a recovery, the remittance and method of calculation.
Rule 1.5(d) prohibits contingent fees in only two categories: criminal defense and matrimonial matters. Commercial contingency representation is unrestricted by category. Rule 1.8(i) confirms that a lawyer may contract with a client for a reasonable contingent fee in a civil matter, subject to the underlying reasonableness requirement of Rule 1.5(a).
Court rules impose sliding scales on contingent fees in personal injury matters under 22 NYCRR § 603.7(e) (and equivalent rules in the other Appellate Division departments), but these sliding scales do not apply to commercial cases. A commercial contingency arrangement at 33⅓ percent to 40 percent of recovery is the typical market rate, with hybrid structures combining a discounted hourly rate and a reduced percentage frequently used for matters where the firm wants to recover some fees during pendency.
The reasonableness standard under Rule 1.5(a) governs the ultimate question of whether the fee charged is permissible. The factors include the time and labor required, the difficulty and novelty of the issues, the skill required, the customary fee in the locality, the amount involved and the result obtained, the experience and reputation of the lawyer, and the nature of the engagement. Commercial contingency fees that fall within market norms have been routinely upheld.
The Recent Shift: Litigation Finance and Hybrid Arrangements
Third-party litigation finance has changed the contingency landscape significantly over the last decade.
Funders such as Burford Capital, Parabellum Capital, Longford Capital, Validity Finance, and Therium provide non-recourse capital to plaintiffs and law firms in exchange for a percentage of recovery. The total committed capital deployed by litigation funders in the United States has grown into the multi-billion-dollar range. New York courts have generally been receptive to litigation funding arrangements, treating them as legitimate financial products subject to ordinary contractual analysis.
The practical effect is that strong commercial cases that would once have required pure contingency representation now have additional structural options. A plaintiff can engage hourly counsel and have the hourly fees funded by a third party in exchange for a portion of recovery. A firm can take a case on a hybrid basis with funder support reducing the firm’s capital risk. Hybrid fee arrangements that combine discounted hourly billing with a contingent component have become more common, both because funders sometimes prefer them and because they align firm and client incentives without the cash flow strain of pure contingency.
Disclosure of litigation funding arrangements is required in some federal courts and not in others, and remains an evolving area in New York state practice. The substantive permissibility of the arrangements is, in most contexts, settled.
How Warner & Scheuerman Evaluates a Contingency Engagement
The firm’s intake on a potential contingent commercial matter runs through a structured analysis at the front of the engagement.
Liability strength is the first element. The matter has to present a probability of success that justifies the time commitment and capital exposure relative to the firm’s billable alternatives. Marginal cases are declined.
Collectibility is the second. Even a winning judgment is worth nothing against an insolvent or judgment-proof defendant. The firm evaluates the defendant’s insurance coverage, asset base, business operations, and corporate structure to confirm that recovery is realistic. The firm’s parallel judgment-collection practice means this evaluation is done with operational expertise that not every commercial firm brings.
Damages quantification is the third. The matter has to support meaningful recovery on the available legal theories. Cases with strong liability and weak damages do not justify contingent representation regardless of merit.
Timeline is the fourth. Most commercial matters resolve within two to four years. Cases that could realistically run longer require either additional capital structure or modified fee arrangements.
Where the analysis supports proceeding, the firm structures the fee in writing as required under Rule 1.5(c), specifying the percentage at settlement, trial, and appeal, the litigation expenses, and the method of calculation. Hybrid arrangements are available where the structural fit justifies them. Litigation funding arrangements are coordinated where the matter and the client’s preferences support them.
If you have a meaningful commercial claim that you have been told will require seven figures in legal fees to pursue and you do not have the capital to fund hourly representation, the answer in the New York commercial litigation market may be different from what the first three firms told you. Reach out to Warner & Scheuerman to walk through the merits evaluation, the collectibility analysis, the damages framework, and the contingent fee structures available for cases that justify the trade.