Also from Wil Hylton’s “A Bug In The System” (The New Yorker, February 2, 2015):
When [Bill] Marler’s litigation becomes complicated and protracted, his firm can go months without generating income. Marler routinely lends money to the firm to keep the operation afloat. One morning, his longtime office manager, Peggy Paulson, stepped into his office with a sheepish look. When Marler glanced up, Paulson said quietly, “I could use a check for half a million bucks.” Marler’s jaw dropped with feigned horror. “So could I!” he said with a laugh. Then he promised to write a check. Later, he told me, “That’s partly why I don’t buy a vacation home. I’ve never been in a position that I settled a case because I needed the money.”
As an ex-law office manager, I can confirm this sort of interaction, although I wasn’t ever “sheepish.” I was kind, explanatory but firm: I needed the money to pay the bills.
It happens in law firms, especially smallish ones. When a large case is settled, although the money is first deposited in the firm’s escrow account and then divided among the client(s) and the firm, most of the firm’s earnings are usually dispersed to the partners by the end of the year. In an LLC (limited liability corporation), the firm doesn’t pay income taxes; the partners do.
And the partners give back to the firm when money is needed to pay the bills.
P.S. The first phrase in the above quoted paragraph–when “litigation becomes complicated and protracted”– is sort of unnecessary: most big contingency cases, i.e., civil rights, personal injury, etc., are protracted. They can go on for years. During that time, the law firm is paying all the costs and expenses of the lawsuit and such lawsuits can run up a pile of expenses. Of course, the law firm gets all its costs and expenses reimbursed but not until the case settles.
Which is why Marler and other lawyers like him have to put funds into their firms every once in a while.
And that’s what “contingency” means to a lawyer.