Are personal injury [“p/i”] lawyers virtually in the dark when they enter into contingency fee contracts with their clients — unable to tell which cases are likely to be rather straightforward, resulting in a relatively quick, successful resolution without major expenditure of time or resources, or instead to be complex, and time-consuming with impossible to predict results? Does such lack of information force them to offer each client a “standard fee” (which is often one-third or 40%, and is usually the maximum permitted in their jurisdiction without court permission) rather than trying to tailor the fee offer roughly to the risk presented by each client’s case, as might be expected under professional ethics and fiduciary principles?
Or, on the other hand, can and do p/i lawyers have sufficient knowledge and experience to make intelligent inquiries, choices and distinctions among clients, so as to greatly reduce the risk of working long and hard on a case without receiving adequate compensation? That is, are they able to ask questions and make inquiries so as to have a rough idea of the risk status/continuum of each case before they decide whether to accept it and make a fee offer to the prospective client?
I refuse to believe that my p/i lawyer brethren at the bar go around accepting clients in a clueless fashion, with no choice but to charge each client as if taking his or her case presented the highest acceptable risk to the firm’s financial viability, and with no hunch as to whether they have accepted a sure winner, a fair risk, or a true challenge.
My trust in the competence of p/i lawyers is, however, apparently not shared by members of the plaintiff’s personal injury bar. (For a prior example, see this weblogger’s post.) The latest example of Client Selection Insecurity Syndrome comes from Eric Turkewitz, the NYC lawyer who is the proprietor of the New York Personal Injury Blog. In his Aug. 31st Personal Injury Law Roundup #26, Eric reacted to my recent posting “why do lawyers lie (about contingency fees?,” which discusses whether such fees constitute value billing (Aug. 29, 2007).
Moving to legal fees, Perlumtter & Schuelke wrote In Defense of the Contigent Fee as a form of value billing — as opposed to the billable hour with its inherent conflict of interest between client and attorney. David Giacalone at f/k/a didn’t like that, and attacked Perlmutter — OK, not just Perlmutter but attorneys in general who work on contingency — in a post entitled why do lawyers lie (about contingency fees)? Among Giacalone’s complaints, he asserts that “The client rarely is given essential information (such as the likelihood of success, the probable size of a recovery, and the amount of time and money that is likely to be invested by the lawyer) that would allow him or her to place a value on the lawyer’s participation.” There’s probably a good reason for that, being that the information is often unknown at the time the retainer is signed.
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bar assoc.
Before you start feeling sorry for the poor p/i lawyer, who would have you believe he (or she) heroically jumps in to take your case regardless of the risk to himself (while charging you the maximum just in case), remember a couple of facts:
- p/i lawyers reject about two-thirds of all prospective clients, weeding out the losers and the money-pits, and taking only those cases that look potentially capable of bringing in a good pay day; and
- Tort lawyers “prevail in approximately 90% of the cases they accept and obtain repayment of substantially all litigation expenses they advance, including expenses advanced in the cases where they do not prevail. “Effective Hourly Rates of Contingency-Fee Lawyers: Competing Data and Non-Competitive Fees,” 81 Wash.U.L.Q. 653 (2003), by Lester Brickman, Professor of Law, Benjamin N. Cardozo School of Law of Yeshiva University; and see, e.g., our posts: “Better Data on Contingency Fees Show They’re Too High” (Feb. 23, 2004); “98% Win Rate: Where’s the Risk?” (April 6, 2004); “It’s Not Unusual (to take one-third)” (Sept. 5, 203); “A Bar President Writes About Contingency Fees” (July 16, 2003); and, in general, our Four-part Contingency Fee Essay, which begins here.
- Most p/i/ lawyers are like Eric Turkewitz, who notes at his website that he is “highly selective in deciding which people to represent” — because “The cases we accept are often complex and time consuming. Most often we are up against multi-billion dollar corporations and insurance companies that will do everything possible to slow the legal process.”
Here’s how Professor Brickman describes the result of the current practice of weeding out the riskiest cases and charging a “standard” rate (your firm’s or your community’s preferred percentage) to virtually every accepted client:
“The use of a uniform pricing structure is a “heads-I-win-tails-you-lose” fee-setting practice. If a case is too risky, it is rejected. If it is lucrative, it is accepted, and a standard contingency fee is charged irrespective of whether there is any meaningful litigation risk and even though the cost of production of the service in no way justifies the enormous projected return on investment.”
As my Dad would say, “that’s a pretty nice racket those p/i lawyers have.” Some members of the public or even our profession might actually admire them for figuring out how to turn the contingency fee concept into such a great little pricing gimmick (and understand their reluctance to change their practices). There’s a big problem, however, with the system as practiced by practically all personal injury attorneys: As members of the Bar, lawyers have a professional ethical duty, and an overlapping fiduciary duty, to charge only fair and “reasonable” fees, and to adequately inform their clients on all important issues. See our essay “contingency fees (part 4 of 4): ethical duties” (April 7, 2006).
Given their proven ability to choose winning cases, and their continuing willingness to spend far more money on advertising than firms that work by the hour or for flat fees (see our post “Contingency Fees Inspire Ever More Lawyer Advertising,” and Ted Frank’s “Search Engine Index” March 27, 2006, and “Search Engine Index II,” Sept. 5, 2007), I simply cannot conclude that p/i lawyers are too clueless to differentiate between broad levels of risk when deciding on the contingent fee arrangement they offer a particular client. (Nor do I believe that they fail to give such an assessment to their partners when new clients are being discussed.) As I said in my critique of Prof. Kritzer’s defense of current contingency fee practices:
No sane observer of the legal scene believes [the myth that p/i lawyers take every case that walks into their doors]. Quite the opposite is true: p/i lawyers sort through cases all the time, rejecting the poor prospects (and advertising that they only take “serious” injuries that could bring huge fee jackpots). That’s why I believe that an experienced p/i lawyer can and does make intelligent guesses about the likely outcome of a case, greatly lowering the overall risk in his or her practice. And, that’s why I’ve often suggested that one possible pricing strategy might be a three-tier percentage system based on the lawyer’s perception of the risk: You give the client a good faith evaluation as to whether the case appears to be low, medium or high risk, and offer corresponding percentages (e.g., 13-23-33%). Of course, you also let the client know that a hourly fee could be negotiated — just like in marital or commercial cases, where the client often has no idea what the final outcome or bill will be.
More important, perhaps: There is no excuse for a lawyer failing to know enough to make this kind of knowledgeable risk assessment and to share it with the client before they negotiate and agree upon a fee. If more time is needed to accumulate more information, the lawyer-fiduciary must take that time, rather than unfairly asking each client to pay the highest level of contingent fee. He or she cannot ethically say, in effect, “Sorry, you must sign a fee contract now, before we know enough to make an intelligent decision on the level of the fee that is fair to you.” (see the description of the Canadian case Usipuik v. Jensen, Mitchell & Co, below the fold of this post) As Prof. Brickman has explained in “The Continuing Assault on the Citadel of Fiduciary Protection” (2003 U.Ill.L.Rev. 1181 [Number 5]), lawyers are the archetypical fiduciary, and:
“The principal fiduciary obligations imposed on the lawyer include the duties of confidentiality, loyalty, safeguarding property, giving disinterested advice, and acting fairly towards the client. The duties to act fairly and in a non-self-interested fashion, in particular, relate to the financial relationship between the lawyer and client and require that a lawyer present the client with information regarding the fee arrangement that approximates what the client would obtain if the client consulted a second lawyer for assistance in negotiating the fee arrangement with the primary lawyer. “
Unfortunately, as ethicalEsq wrote in June 2003 at this weblog, when it comes to lawyers who use contingency fee contracts, there appear to be “Fiduciaries everywhere except in the mirror.” Even worse (and shamefully), lawyers have pushed bar counsel and courts to hold that fiduciary duties do not arise until after a retainer agreement is entered into with a prospective client (see Brickman’s The Continuing Assault, at 1197, which is excerpted below the fold). That’s right: Some lawyers are shameless enough to argue that their duty to put the client’s financial interests above their own (that is, to treat the client fairly) — and to give clients enough information to make intelligent decisions — does not exist until after the level of fees has been settled. [update (Sept. 5, 2007): Beldar disagrees with me. See my comment, too.]
If the Bar wants to make sure clients “get everything you deserve,” we must assure that their lawyers take only the amount that they deserve — an amount, if a contingency fee is utilized, that corresponds with the risk estimated and accepted in good faith by the lawyer at the time the fee contract is entered into. No client should be forced to enter into a contingency fee arrangement without enough information to make an intelligent choice about fee levels and options. Therefore, no lawyer has the right to remain clueless: he or she should not proffer a contingency fee contract and stated fee level until a good faith effort has been made to assess the risk that the law firm is being asked to accept by taking the case.
For a fuller discussion of these issues, see our four-part series:
Also, check out ethicalEsq’s Injured Consumers’ Bill of Rights for Contingency Fees, which sets forth the informational requirements set forth in the American Bar Association’s Formal Ethics Opinion 94-389:Contingent Fees. And see the legal reform group HALT’s Injured Consumer’s Legal Bill of Rights (HALT, The Legal Reformer, December 1997; no longer available at the HALT website).
In addition, below the fold, I’ve excerpted some of the relevant parts of Prof. Brickman’s article “The Continuing Assault on the Citadel of Fiduciary Protection” (2003 U.Ill.L.Rev. 1181 [Number 5]). However, reading the entire article (which gives a history of the fiduciary concept as applied to lawyers and details the attempts of the p/i bar to weaken those duties and fiducial rights of clients) is highly recommended.
campfire…
with each fresh log
the old man’s fish grows longer
crescent moon
the ex-con’s
friendly smile
……………………………………………. by ed markowski
afterthought (Sept. 10, 2007): Here’s an excerpt from a prior post on fees and fiduciary duties that is well-worth repeating:
[I]n 1996, the ABA Task Force on Lawyer Business Ethics, issued its Statements of Principles in Billing for Legal Services (excerpted in Business Lawyer, 51 Bus. Law 1303, Aug. 1996), which included these notable introductory remarks:
[T]he Statement of Principles in Billing for Legal Services and the Statement of Principles in Billing For Disbursements and Other Charges are predicated upon an understanding between lawyer and client. To be valid, such an understanding requires, at the least, a fully informed client, whose information usually comes from the lawyer seeking agreement. The form, nature, and extent of the disclosure will depend on the sophistication and knowledge of the client as to legal matters and business dealings with lawyers. Thus, what might constitute acceptable disclosure to an in-house counsel accustomed to negotiating with lawyers over engagement letters and fee arrangements might be unacceptable when dealing with a business executive very knowledgeable about technical aspects of the business, but relatively inexperienced in dealing with lawyers over fee arrangements, the custom in the community with respect thereto, or the availability of alternative fee arrangements.
The courts and lawyer-disciplinary bodies normally do not require separate representation of the client with respect to the billing aspect of the engagement, even if the client is woefully naive. They often look, however, at the fairness of the understanding with skepticism, insisting that the lawyers carry the burden of establishing fairness.
In setting fees, then, the lawyer-fiduciary must act in a manner that puts the client’s interest first — to ensure a result that is fair to both lawyer and client. Making sure the client is fully informed when entering into the fee arrangement is essential, taking into account the sophistication level and experience of the particular client.
Asking what fee might result, if the client had engaged another lawyer solely to negotiate fees, seems to me to be a very useful standard. update: Don’t laugh. Canadian tort lawyers Polten & Hodder have this advice on their contingency fee FAQ page:“Negotiate with your lawyer. It may well be advisable to pay a separate, independent lawyer to negotiate the contingency agreement with the lawyer who is taking your case. Don’t laugh. If a small up front fee saves you $100,000 in fees down the road, it is money well spent.” (for more in this spirit, see our prior post a Canadian role model, Jan. 5, 2005.)
(more…)
A federal district court ruled today that Ohio’s sex offender residency law could not be applied to Lane Mikaloff of Akron, a rapist whose crime occurred two decades before the law was passed in 2003. See Mikaloff v. Walsh, Northern District of Ohio, Hon. James S. Gwin, presiding, Case 5:06-cv-00096-JG (Sept. 4, 2007; decision, 22-pp pdf.; hat tip: The Parson). According to the Cincinnati Enquirer, in “Judge’s sex offender ruling blasted” (Sept. 4, 2007):Selections from Missed Appointment by Gary Hotham:
. . . “We do all of this — and let it cost us more as a country — because it is a little cheaper for us as individuals and employers. And whether we knew it or not, we are deliberately fencing in our own economy.
p.s. Veteran weblogger George Lenard of 
.. 
On a micro- rather than macro-level: If you are wondering about loving a lawyer, check out 
With picture-perfect location and weather, the family and friends of my friends Elizabeth and Barry came together in August 2007, at 
The fine folk at The Heron’s Nest have invited us up for a lovely, lazy Labor Day weekend at their place — with the enticement of a brand new edition of their premiere genuine haiku journal. As usual, f/k/a‘s family of 
Of course, there are dozens of other excellent poets whose work can be found in this and every other edition of The Heron’s Nest. Congratulations to Chad Lee Robinson, Robert Bauer and A. Thiagarajan, whose poems were honored as Editor’s Choices in the September 2007 edition of The Heron’s Nest. 
