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June 12, 2003

Some UnCommonly Good Advice on Contingency Fees

Filed under: pre-06-2006 — David Giacalone @ 9:57 pm

podiumSN Right now, trial lawyers everywhere are planning strategy (and calling in favors), hoping to prevent the adoption of the early-offer settlement rules recently proposed by Common Good. The proposed rules would increase the victim’s share — by reducing the lawyer’s share — of damages won in a personal injury lawsuit. [As discussed previously in our postings on May 30, 2003 and June 3, 2003 .]

Well, ethicalEsq has the perfect plan to avoid adoption of the Common Good proposal in the 13 states where petitions are pending, or anywhere else. If p/i lawyers, bar associations, disciplinary committees, the courts, and the entire legal profession simply follow these suggestions, there will be no reason to make the changes proposed by Common Good to the existing rules of ethics. Indeed, this blawg will be the first to say just that. It’s easy:

(1) Start to follow and enforce the current rules concerning the proper use of contingency fees. Stop your denial of these obligations, which were clearly spelled out in the American Bar Association’s Formal Ethics Opinion 94-389, based on long-established principles, Rules and Commentary. Opinion 94-389 isn’t available online from the ABA, but I have summarized it quite fairly in a now unavailable column (and more thoroughly in “contingency fees: ethical duties” here at f/k/a):

The Ethics Opinion states that a contingency fee “does not violate ethical standards as long as the fee is appropriate in the circumstances and reasonable in amount, and as long as the client has been fully advised of the availability of alternative fee arrangements.” According to Op. 94-389, a long list of relevant factors needs to be discussed with every client in every case, and “a lawyer who always charges the same percentage of recovery regardless of the particulars of a case should consider whether he is charging a fee that is, in an ethical context, a reasonable one.” In short, the choice to use a contingency fee belongs to the client and any percentage fee charged should reflect how likely the client is to win, how much money is likely to be rewarded and collected, and how much work the lawyer is likely to have to do (that is, the apparent risk taken by the lawyer).

[Note: You are not being savvy, cute or ethical merely responding to Op. 94-389 by saying, as many p/i lawyers have slyly told me, “we have no alternative fee arrangements, so we don’t have to tell the client about them.”]

(2) Because the requirements are almost universally ignored by lawyers and their watchdogs, it’s time to follow this recommendation from Op. 94-389:

“[A]ny lapse from the applicable requirements by some members of the profession suggests that the profession should redouble its efforts to assure that the ethical obligations associated with entering into a contingent fee arrangement are fully understood and observed.”

This means creating CLE seminars, articles and brochures, and imposing some actual attorney discipline. Also, it should mean going to the public to let consumers know their rights, because that knowledge will allow clients to protect themselves and spur fee competition among p/i lawyers. To show good faith and effort, mandatory statements of client rights should be promulgated, to ensure that each prospective client has enough information to make a smart choice in bargaining for a fair contingency fee or another arrangement, such as paying by the hour.

(3) Publically reject the recent changes to Rule 1.5 of the Model Rules of Professional Responsibility that were clearly made to protect lawyers from the ethical and fiduciary obligations required in Op. 94-389. (See My Open Letter to the FTC ) Opt out of the Ethics 2000 conspiracy by specifically asking the ruling body in each local jurisdiction to keep the current version Rule 1.5.

If you don’t take this advice, you’ll prove Common Good’s case and deserve everything you get — or don’t get. However, if the profession immediately take the steps outlined above, Common Good’s complicated, micro-managing proposals will be unnecessary to protect clients from excessive contingency fees. And, that is, or should be, everyone’s goal.

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