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July 16, 2003

A Bar President Writes About Contingency Fees

Filed under: pre-06-2006 — David Giacalone @ 2:27 pm

I‘ve wanted to quote publically from an article by Rutledge R. Liles for a long time, and it just occurred to me that I have a weblog that will let me do just that. Liles was president of the Florida Bar when he wrote the artcle entitled Professionalism and the Contingent Fee: When is Enough Enough?, for The Florda Bar Journal (Jan. 1989, at 5). [Given its vintage, the article is not available online, but can be ordered through the Journal archives on the Bar site, or by email to gbusch -at- .]

After a successful fight against an early tort reform proposal called Amendment 10, Liles wanted to discuss a topic that came up often when he spoke against Amendment 10 — “The contingent fee and perceived abuses.” Here are some excerpts [bold emphases added]:

  • “Judging from the many comments I received during the past several months, the contingent fee, or perhaps more accurately, the size of the percentage of fee that it often generates, causes considerable hostility among the public. They constantly hear and read of lawyers retaining 40 percent or 45 percent of a damage award as a fee which, after adding costs, results in less than half of the award findings its way to the client. This distribution creates the impression of greed.”
  • “Once explained, I seriously doubt that anyone would dispute the philosophy behind the contingent fee. It is the application of the concept on a case-by-case basis that causes the perceived — and sometimes real — problem. And it is in the context of professionalism and of monitoring legitimate criticism that we must reexamine the applied philosophy of the contingent fee.”
  • Drawing upon personal experience, I recall a time when one-third and even less was the ’standard’ fee. Over the years, it began to move upward into the 40 percent range with some lawyers charging even more. . . . What has caused this evolution from a fractional percentage of the recovery to one approaching an equal partnership [with the client]?
  • Experienced trial lawyers will tell you that while there may be cases that ultimately justify a 40 percent contingent fee — complex products liability and medical malpractice — there remain many, many cases that clearly do not.”
  • While it is easy to defend the philosophy of the contingent fee, it is impossible to defend its abuses. We must as professionals address these abuses and the process must start in our own individual practices. The contingent fee should be reasonable under the circumstances of the given case. The contracted fee should be a guide not a mandate.”
  • It has been accurately said, in justification of the contingent fee, that it is the “poor man’s key to the courthouse.” Professionalism, however, demands that we be ever mindful that keys are made of brass — not solid gold.”

Are there any other bar leaders willing to be as honest as Rutledge Liles?

P.S. It is probably no coincidence that Liles’ state, Florida, is the only state in the nation with a Statement of Client’s Rights for Continency Fees. Among other information, clients in Florida must be told that there is no set percentage for a contingency fee and they are free to negotiate the fee level with their lawyer.

tiny check See our version of The Injured Consumers’ Bill of Rights for Contingency Fees, which is based on the requirements set forth in ABA Ethics Op. 94-389 and in the Florida Bar’s fee rules.

Challenge to Public Citizen: Help Fix the Contingency Fee System (get the current rules enforced and clients informed)

Filed under: pre-06-2006 — David Giacalone @ 3:04 am

In a press release issued yesterday evening, Public Citizen announced that it had submitted comments to the Utah Bar, opposing the Common Good proposal that would limit contingency fees when personal injury cases are settled early.  [The proposals were discussed here in postings made on May 30, June 3, and June 12, 2003.] Public Citizen’s 10-page Comments/ Critique (dated July 14th) is available online in pdf. The PC press release is headlined: “Proposal to Undermine Contingency Fee System for Personal Injury Lawyers Should Be Rejected: Changes Would Put Injured Parties at a Disadvantage, National Public Interest Group Tells Utah Bar.” (dated 7/15/03)

Despite several decades admiring much of the work of Ralph Nader and Public Citizen, I find myself once again wondering how this band of “consumer advocates” can so consistently parrot the arguments of the p/i plaintiff’s bar when it comes to the topic of contingency fees.  [Actually, “parrot” isn’t quite the right word, because it implies that Public Citizen does not understand the trial lawyers’ position or its consequences.  Maybe “zealously advocate” is more appropriate, as it captures the frequently over-the-top, one-sided and often misleading nature of PC’s arguments in support of current contingency fee practices.]

Frankly, many of the points made in the PC Critique of Common Good’s proposal have some merit — the proposal is highly regulatory, complicated and experimental.   What I find inexplicable, however, is that this self-proclaimed consumer-rights champion makes no arguments beyond those of the trial lawyers’ bar and makes no recommendations to help eliminate the acknowldeged injustice created by the use of “standard” contingency fees in p/i cases, with the accompanying failure to take the risk factor in each case into account when setting the fee level.  P/i clients have a lot of interests in common with their lawyers, but clearly not all interests are consistent, especially those having to do with splitting the award pie.

In fact, there are only two sentences in the entire 10-page submittal that might depart from the party-line position of the plaintiffs’ trial lawyers.  At the bottom of page 5, the PC Critique asserts: “The stated goal of the proposal is uncontroversial.  It is widely accepted that contingency fees should vary depending on the riskiness and complexity of the individual case; indeed, that is what the ethical rules currently require (even though almost universally honored in the breach).”  [emphases added]

The meaning of Public Citizen’s admission is clear:  Although the percentage rate of a contingency fee is ethically required to relate to the riskiness of each particular case, they “almost universally” do not.  Since p/i lawyers customarily reject the most risky cases and almost always charge the maximum percentage allowed in their jurisdiction for the cases they do take, a large percentage of contingency fees are greater than can be justified by the risk taken by the lawyer of working without adequate compensation.  Put another way, in a significant percentage of p/i cases, plaintiff’s lawyer is paid an excessive amount of the client’s award and the client is cheated out of a portion of his or her fair share.  In those cases, the lawyers receive unreasonably high fees, in violation of their ethical obligations.

Public Citizen offers not one word of outrage or concern about this anti-consumer outcome and unjustified enrichment of the plaintiffs’ lawyers.  The only concern mentioned is that consumers might not be able to attract adequate numbers of lawyers, if the lawyers are not allowed to continue to charge such excessive fees in a significant number of cases. Although it has written frequently on the issue of contingent fee levels, and it is now appearing in front of a body considering the regulation of contingency fees, Public Citizen offers no recommendations for preventing excessive fees, righting the balance of information, or policing the over-reaching p/i bar.  For another example, see the Public Citizen Fact Sheet, Capping Attorneys Fees: A Way To Keep Injured People Out Of Court (6/21/01).

Independent Voice? Why is Public Citizen so reticent, despite it customary outspoken insistence on consumer rights?  On its website, PC trumpets that it “is an independent voice for citizens in the halls of power. We take NO government or corporate money.”   What it does not say, of course, is “we take no trial lawyer money.”  Has PC been co-opted, like the Democratic Party and much of the liberal not-for-profit sector, which are addicted to the funds received from generous trial lawyers and their PACS?  Are unethically high contingency fees an important part of Public Citizen’s own resources for carrying on its mission?

Given the initially one-side approach of Public Citizen in its opposition to the Common Good proposal, ethicalEsq challenges Public Citizen to supplement its statement to the Utah State Bar and any other state considering the Common Good Petition, by outlining and supporting policies that will preserve what is good about the contingency fee system, while helping to avoid the unfair enrichment of lawyers at the expense of their suffering, injured and often twice-victimized clients.

In our Posting dated 6/12/03, called UnCommonly Good Advice on Contingency Fees, we modestly stated that:
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 the denial or flouting 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 column and here:

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).

(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.  It should also 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 for another arrangement, such as paying by the hour.  And,
(3) Publically reject the ABA’s 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. 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. [see the article, The Continuing Assault on the Citadel of Fiduciary Protection: Ethics 2000’s Revision of Model Rule 1.5 (2003 U.Ill.L.Rev. 1181 [Number 5]), by Cardozo Law Professor Lester Brickman, which is discussed in this post, dated Jan. 28, 2004.]

I’ve laid down the gauntlet, Public Citizen.  Let’s see whose side you’re really on.

See our version of The Injured Consumers’ Bill of Rights for Contingency Fees, which is based on the requirements set forth in ABA Ethics Op. 94-389 and in the Florida Bar’s fee rules.  Also, see our 4-part essay on contingency fees (economics and ethics).

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