Justice or Jackpot? The Hidden Economics of Contingency Fees

From Champerty to Contingency

In olden times, what we now call contingency fees were known as champerty, and they carried a heavy stigma. Under common law doctrines of maintenance and champerty, outsiders were forbidden from interfering in lawsuits. Maintenance meant meddling in another’s case without a legitimate interest, while champerty went further: financing someone else’s lawsuit in exchange for a share of the proceeds.

English courts feared these practices encouraged frivolous litigation and opportunism. As Lord Justice Steyn later put it, maintenance was outside support for litigation “without just cause,” while champerty was its aggravated form—support given in return for spoils of victory. Yet this hard line created its own problem. If litigation was expensive and the poor had no money for lawyers, then barring all such arrangements effectively denied them justice.

Some judges began to question whether helping the poor always amounted to “stirring up strife.” Lord Abinger, writing in 1843, suggested that if a benevolent man paid for an attorney to help an abused pauper obtain redress, it would be hard to call that malicious. Still, courts continued to strike down champertous contracts, wary of exploitation.

America’s Adoption and Resistance

Across the Atlantic, things developed differently. Early America, often short on cash, tolerated contingency-like arrangements out of necessity. Justice Hugh Henry Brackenridge observed in 1813 that poor litigants would sometimes promise lawyers a portion of any recovery, since they lacked money to pay upfront. Yet courts often resisted, citing the same fears of abuse voiced in England.

New York Chancellor James Kent condemned a case where an attorney bought his client’s cause of action cheaply and later profited enormously, calling it a classic example of champerty. South Carolina’s courts allowed a Good Samaritan to fund a neighbor’s lawsuit for justice’s sake but balked when that help came with a contract for half the recovery. For decades, the tension remained unresolved.

By the mid-19th century, however, necessity and politics began to shift the tide. Jacksonian democratic ideals and evangelical moral influences aligned with the practical reality that rights meant little without the means to enforce them. Courts in Tennessee, Pennsylvania, and elsewhere began upholding contingency fee contracts, and judges increasingly described them as not only lawful but essential to securing justice for the poor.

The Rise of Personal Injury Law

By the late 19th and early 20th centuries, contingency fees had become central to American litigation. They gave working-class plaintiffs a way to bring claims against powerful corporations in an era of industrial accidents, railroad injuries, and unsafe workplaces. Critics still warned about “ambulance chasing,” as some lawyers aggressively solicited accident victims, but the broader consensus was that contingency fees democratized access to the courts.

This trend deepened in the 20th century. Contingency fees became the backbone of the personal injury bar, fueling claims that would otherwise never have reached court. At the same time, bar associations struggled to police solicitation and preserve professional dignity.

A decisive moment came in 1977 with Bates v. State Bar of Arizona, when the U.S. Supreme Court struck down bans on lawyer advertising as unconstitutional. The Court reasoned that legal advertising was protected under the First Amendment as commercial speech. Attorneys could now promote their services openly, supposedly increasing access to justice by letting the public know where to turn for help. But this also changed the character of the profession. Billboards, television ads, and eventually social media campaigns turned personal injury practice into a highly visible—and highly commercial—industry. The stereotype of the “ambulance chaser” grew as advertising became inseparable from the business of law.

The Age of Private Equity

Fast forward to today, and the personal injury sector is undergoing yet another transformation—this time driven by private equity, regulatory reform, and technology. Investors see personal injury law as fertile ground, with its high-value settlements, recurring revenue streams, and fragmented marketplace. Their expertise in scaling businesses, optimizing operations, and deploying technology promises to reshape the way PI firms operate.

Alternative business structures in states like Arizona and Utah now allow non-lawyers and corporate entities to own law firms, creating entirely new models of practice. Large plaintiff firms are also consolidating aggressively, acquiring smaller practices to expand their reach. At the same time, operational pressures—from the rising cost of digital marketing to the need for AI-driven case management—are forcing many smaller firms to seek outside funding or merge with larger players. Succession challenges compound the trend, as aging firm owners without exit strategies leave their practices vulnerable to buyouts.

The result is a sector where PI law is increasingly run like an industry, fueled by investor capital, marketing strategies, and technology platforms. What once began as champerty—illegal, disreputable, and banned—has become not only normalized but corporatized.

Are Contingency Fees Fair?

All of this leads to the most practical question for clients: are contingency fees actually fair? On one hand, they give people without money a chance at justice. On the other, they often deliver extraordinary profits to lawyers with relatively little work.

Consider a “slam dunk” case: clear fault, a large insurance policy, and high medical bills. An experienced lawyer can usually tell the likely outcome from just a police report and medical records. If the lawyer hands the matter to a paralegal who spends fifteen hours gathering paperwork, then quickly settles for the full policy limits—say $300,000—the lawyer’s one-third fee might come to $100,000. Subtract $100,000 in medical bills, and the client is left with $100,000, while the lawyer takes the same amount for minimal effort.

By the hour, the lawyer just earned the equivalent of $2,000 an hour or more—far beyond even elite billing rates. Lawyers often justify this by saying contingency practice is risky: they lose money on bad cases, and the big wins balance out the losses. But is that really true? Seasoned PI lawyers can value cases quickly and often know, with a high degree of certainty, how they’ll resolve. For many cases, the risk is minimal, the outcome nearly predetermined, and the client ends up paying for “risk” that never truly existed.

This raises uncomfortable but necessary questions. Do contingency fees still serve their noble purpose of empowering the poor, or have they become another profit engine where clients subsidize a system that lawyers already know how to game? The answer may depend on whether we view PI law as a tool of justice—or simply as a business, now turbocharged by advertising, consolidation, and private equity.

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