Posted on 05/26/2003 12:07:01 AM PDT by Sonny M
Lawyers in 13 states have begun a coordinated campaign to limit the fees their colleagues collect in some lawsuits. They say it is unethical for plaintiffs' lawyers to routinely pocket one-third or more of the money they win for clients, no matter how long or hard they work on a case.
Ethical rules in many states already require lawyers, whether they are paid by the hour or by a percentage of the recovery, to charge only "reasonable fees."
In theory, this means fees should vary with the difficulty of the case, the expertise of the lawyer, the time required and the result obtained.
But in practice, the lawyers urging the change say, contingency fees are uniformly 33 percent in most places and 40 percent in others. They say that plaintiffs' lawyers charge such fees even when a big settlement is quick, fixed and certain.
The new proposal would limit contingency fees in many cases to 10 percent of the first $100,000 of a settlement, and 5 percent of anything more. Common Good, an advocacy group pushing for the change, has enlisted the help of some lawyers in filing petitions for the change with state supreme courts, bar associations or ethics commissions in Alabama, Arizona, California, Colorado, Maryland, Mississippi, New Jersey, New York, Ohio, Oklahoma, Texas, Utah and Virginia.
With the exception of the petition in Texas, all were filed in the last few weeks. The Colorado petition was filed on Friday.
Legal experts are sharply divided on whether such fees are a problem and whether lowering them makes sense. Plaintiffs' lawyers scoff at the proposal.
"It's a ridiculous idea," said Barry J. Nace, a lawyer in Washington. "If we're going to do this, let's reduce the fees on the other side. Let's put a limit on what think-tank guys can make. Let's put a limit on what law professors can make."
The proposal would require the plaintiff's lawyer to send a letter to the defendant at the start of a case, describing the injury and why the defendant was liable for it. The defendant would not be required to make a settlement offer, and the plaintiff would not have to accept one. But if the defendant did make an offer and the plaintiff accepted it, his lawyer would be entitled to no more than 10 percent of the first $100,000 and 5 percent of anything more.
If plaintiffs' lawyers did not send the letter, their fees would be capped at those levels no matter how long or hard they worked on the case.
"The proposal is really elegantly simple," said Nancy Udell, the general counsel of Common Good, which is dedicated to changing what it calls the lawsuit culture. "The only thing this does is make sure that if there is an offer and if it is early, that 90 percent of the offer goes to the injured person. The only thing this does is encourage early settlements."
She added that the proposal would encourage defendants to make larger early settlement offers. Among the reasons for this, she said, are that defense lawyers tend to be paid by the hour and have incentives to prolong cases, that early settlement offers have until now been considered a sign of weakness and that delay can be a way to wear plaintiffs down.
There appears to be very little price competition in contingency fees, supporters of the proposal said. A study by Jeffrey O'Connell, a law professor at the University of Virginia, found that only 7 of more than 1,400 advertisements by lawyers in the Yellow Pages of the telephone directories in 12 big cities stated the percentage to be charged. It averaged 31 percent.
Lester Brickman, a professor at Cardozo School of Law at Yeshiva University, said the laws of supply and demand did not seem to apply to contingency-fee lawyers. He said that contingency-fee percentages had not dropped even as the number of lawyers had more than doubled in recent years. He estimated that contingency fees amounted to $22 billion a year, often at effective hourly rates of thousands of dollars.
"Legal fees are not competitive because lawyers have colluded to maintain a fixed 33 percent rate regardless of the nature or difficulty of the case," Professor Brickman said.
Herbert M. Kritzer, who teaches political science at the University of Wisconsin in Madison, has also studied the market for legal services based on contingency fees but has come to a different conclusion. They are, he said, quite competitive. He said that the percentages charged varied some; that clients chose lawyers based on other factors, including their sense of the likely total recovery; and that many contingency-fee lawyers had incomes comparable to those of lawyers who charged by the hour.
The proposal itself has been criticized by people who support its aims and by those who say the system needs no revision.
"They're on to something," said Stephen Gillers, who teaches legal ethics at New York University. "They took a pretty good goal and went too far."
He objected to the requirement that plaintiffs describe their claims at the start of the case. "The proposal disadvantages plaintiffs by creating a one-way information flow," Professor Gillers said.
Michael Horowitz, one of the drafters of the proposal and a senior fellow at the Hudson Institute, a conservative research institute, said the objection was a quibble.
"The proposal is designed to screen out clear liability cases, and the notice provision must provide enough information to allow defendants to make sufficient offers," Mr. Horowitz said. "As Gillers correctly points out, it should not give defendants an unfair advantage. If we have struck the balance between those two needs incorrectly, we are willing to make the necessary changes."
Charles M. Silver, a law professor at the University of Texas in Austin who says the current system is the product of "a very vibrant market," said any proposal should focus on defendants and their lawyers.
"The empirical evidence shows that plaintiffs' lawyers are settlement-crazy," Professor Silver said. "It's not on the plaintiff's side that we need to create incentives to settle."
Steven Lubet, who teaches legal ethics at Northwestern University, said that legislatures should regulate contingency fees, not the bodies responsible for ethics rules.
"It's really aimed more at social policy than legal ethics," Professor Lubet said of the proposal. "Rules of this complexity invariably come with unintended consequences, and the legislative process is much more likely to figure them out."
Professor Kritzer said it was telling that few consumers of the services of personal injury lawyers complain.
Then again, few customers are able to draw on an earlier experience to try to negotiate a better deal the second time around. Susan Sheridan said she was an exception.
Ms. Sheridan, 43, a former banking executive who lives in Eagle, Idaho, said she had been devastated twice by the medical system and had been sorely disappointed by the legal system. Her son Cal, 8, was born healthy but suffered brain damage when jaundice went untreated. The litigation that followed was, she said, long, ugly and costly on all sides. It was settled for a confidential amount this year, after seven years of litigation. The Sheridans' lawyer took 40 percent of the settlement.
When her husband Pat's spinal cancer was misdiagnosed in 1999, the Sheridans said they thought they had learned something from the first lawsuit. They consulted lawyers in Phoenix, where he had been treated, asking them to drop their fees and handle the matter through a quick and informal mediation.
All of the lawyers insisted on a standard cut of the settlement.
"It was 40 percent, take it or leave it," said Martin J. Hatlie, who helped the Sheridans search for a lawyer. Mr. Sheridan has since died.
It did not matter to the lawyers how quickly the case might be resolved, Ms. Sheridan said.
"They looked at us like we were speaking a foreign language," she said.
Barn Owl
Don't you mean extortion reform?
Take a moment from this thread, get your phone book, no matter where you live, and look up lawyers. I bet you will see page upon page of ads....full page ads, maybe double full page ads, many with multi colors. You will find far more for lawyers than for any other listing.
There are waaaaaaaaay too many of them, they all are looking to make a living, the rewards if they can hit a big one are great.
It is all to the detriment of our society.
Hey, I'm a real estate agent, and I've always operated in the most ethical and legal (the 2 are definatley different) way.
Any agent worth his wait in salt, should be able to help get an even better value for your house and boost your property value or at least have ideas on how to do it.
Also to note, part of the reason its 6%, is that its split, 3% goes to the listing agent, 3% goes to the selling agent, and if they are working under a broker, then it gets split again according to the aggreement.
To be honest with you, I think thats one of the best ideas I have heard in a long time. You would get fewer starving lawyers who sue like animals, downside is, you'd get alot better lawyers (not sure if thats really good or bad).
I wish they raise the limit or increase the cap on medical schools admissions so we could get more doctors and lower the medical bills. Damn AMA.
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