As an injury lawyer in Kalispell, Montana, I can’t emphasize enough how important the common fund doctrine is to accident victims. Whether you’ve been injured in a car accident, boat wreck, or something else, knowing your rights can make a world of difference.
The common fund doctrine allows a litigant or lawyer who recovers a common fund for the benefit of other parties to recover attorney fees from the whole. This is an exception to the general rule on attorneys’ fees in Montana which requires that each party to a civil action pay his or her own attorneys’ fees unless a statute, contract, or general principles of fairness allow otherwise.
There are three elements necessary to establish a common fund: 1) a party (the active beneficiary) must create, reserve, preserve, or increase an identifiable monetary fund or benefit in which all active and non-participating beneficiaries have an interest; 2) the active beneficiary must incur legal fees in establishing the common fund; and 3) the common fund must benefit ascertainable, non-participating beneficiaries.
The idea of the common fund was first established by the U.S. Supreme Court, and later adopted by the Montana Supreme Court in order to prevent unjust enrichment of non-participating claimants at the expense of active litigants and their counsel. As the Montana Supreme Court said, “The doctrine is employed to spread the cost of litigation among all beneficiaries so that the active beneficiary is not forced to bear the burden alone and the stranger beneficiaries do not receive their benefits at no cost to themselves.”
If you’ve been injured because of someone else’s negligence, the common fund doctrine can be a major advantage. Imagine you’re injured, and your insurance company pays part of your medical expenses. Later, you hire an injury lawyer who is able to get payment from the person who hurt you. Because part of the money you receive includes that payment by your insurance company, you have to pay them back for what they’ve already paid. But, under the common fund doctrine part of the attorneys’ fees are paid out of that money, and what you give to the insurance company is reduced. Because most injury lawyers handle cases on a flat fee, this reduces the amount you pay out of your share and ensures a better outcome for you.