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June 3, 2003

Got My First Hate Mail (on behalf of trial lawyers, of course)

Filed under: pre-06-2006 — David Giacalone @ 10:40 pm

After just three days as a blawger, I got my first hate mail today. As expected, I was called anti-lawyer and pro-insurance for daring to believe that the blanket use of standard contingency fees is unethical (by a writer who refused to be go on the record).

To my knowledge, no lawyer who charges each p/i client the same standard fee has ever bothered to counter the ethics arguments — they only whine about disguising a “political issue” as a matter of ethics and making them look bad. I’m glad these guys weren’t my moot court partners back in law school.

P.S. The fact that p/i lawyers sometimes work hard on a case and don’t win does not justify a Standard contingency fee. If you never lost, there’d be no risk of nonpayment and no reason for ever taking more than a normal hourly fee would provide (with interest, perhaps).

7 Comments

  1. I am not going to send you any hate mail on this topic. I am just here to tell you that you are using the ethics rules as a pretext for your hidden agenda. What about notions of freedom of contract? Also, care to comment on the following article on this issue: http://polisci.wisc.edu/~kritzer/research/contfee/wulq2002.htm

    Comment by Brian Huddleston — June 4, 2003 @ 8:52 pm

  2. Thank you for your civil tone. It’s hard to respond to someone who declares that I have a hidden agenda and am therefore not acting in good faith. Anyone who knew me would have a good chuckle hearing that I’m part of a (rightwing) social movement seeking tort reform. On the About page of this blawg, I went out of my way to say that I was not part of the tort reform movement, although I knew saying that would lose me some allies in my contingency fee/informed-client campaign.
    My entire legal career has been spent fighting for the “little guy” consumer or victim.  I’m no saint; that’s just my personality, and I’ve have never been a fan of big business, laissez faire, or trickle down theories. If you really want details, I’d be happy to tell you more about my career in a direct email, but I don’t want to spend space blowing my own horn on this blawg.
    Back to the merits: My focus has never been on class action suits or even the giant-payoff suits, it’s on the “regular” client in an individual personal injury case. My wish is not to impoverish plaintiff’s lawyers, it’s to make sure that each client is given enough information from his or her lawyer to make an intelligent decision about a fee arrangement — e.g., whether to negotiate a smaller percentage contingency fee, or a stepped percentage or hybrid, or an hourly fee. If the lawyer makes a good faith attempt to do that, and the client has the opportunity to make a reasoned decision, I hope that lawyer and client both strike it rich, and that the lawyer uses that policy to achieve immense success.
    The simple fact, however, is that most clients never get that opportunity to negotiate and consider options. They are presented with a single option of using the standard fee. Sure, some lawyers negotiate fees, but it’s usually only when the client is savvy enough to demand it. I do not believe that silently offering the average client a Standard Contingency fee as a fait accompli fulfills the lawyer’s fiduciary or professional duties toward the individual client. Nor do I believe that the total lack of price-fee-percentage competition in the reams of p/i yellow pages and media ads is coincidental or unrelated to the aura the p/i bar wants to give to the Standard Fee as the sole option (or to a slightly smaller % fee as a wonderful act of generosity by the lawyer).
    Nothing in the lawyer’s code allows the interest of the individual client to be compromised so that the lawyer can take even riskier cases. It is of course just the opposite — you can’t charge an unreasonbly high fee to Client A in order to subsidize Client B’s risker case. I went to the article you cited to me and read it. My main response is that it addresses arguments sometimes raised by other people, but not the ones that I make. For instance, I have never said that p/i lawyers take every case that walks in the door. Quite the opposite: they sort through cases all the time, rejecting the poor prospects (or advertising that they only take “serious” injuries). That’s why I know that an experienced p/i lawyer can and does make intelligent guesses about the likely outcome of a case, greatly lowering the overall risk. And, that’s why I’ve suggested elsewhere that one possible pricing option would be a three-tier percentage system: 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%). And 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.
    Despite the implication in all those ads, no win/no fee is NOT always a great deal. It depends on the facts, and the lawyer knows the factors to consider far better than the client.

    Comment by David Giacalone — June 4, 2003 @ 11:06 pm

  3. I have been thinking more about the early option issue and I am wondering what your position would be on the following proposal. I would advertise that I take personal injury cases with a 15 percent contingency cut (I am thinking that this might attract clients’ attention). I would then explain to the client that I would take the case contingency, investigate it and send out a demand letter. If the case settled within 4-5 months and client accepted, the 15 percent offer would apply. If no settlement in that time period, the retainer would provide for termination of the relationship. At that point, I would either refer the case out or client would be free to seek an attorney of his or her choosing. I would also reserve the right to recover at least an hourly fee from the clients if they rejected the settlement and after my representation ended, went directly to the opposing counsel and accepted a comparable deal. The benefit of this arrangement to me is little up front costs and client gets the benefit of a larger piece of the pie and we both get a quicker payout. Of course, I would only allow this kind of arrangement is the statute of limitations is sufficiently far off such that client would not be compromised by attempting settlement first. Also, injuries could not be too complicated as I would not want to settle quickly and then discover that client’s injury was far more serious.
    If properly explained up front and memorialized in a retainer, are there any ethical problems with this proposal?

    Comment by Carolyn Elefant — June 5, 2003 @ 1:52 am

  4. You did a good job responding, just not a convincing one. You have yet to provide any facts to support your notions about what most PI attorneys are doing, and what most of the little guys are not doing, at the time of contracting. The article I linked http://polisci.wisc.edu/~kritzer/research/contfee/wulq2002.htm does address this issue. PI attorneys don’t have a silent conspiracy regarding the 1/3 contingency fee. Where is your research about how often clients fee shop and how often attorneys negotiate fees? The rule requires the fee to be reasonable, and any fee less than 50% is per se reasonable. The rule simply does not require the attorney to invite potential clients to negotiate fees with him. Brian

    p.s. Ed. Note: Brian, see our posts “do standard” fees still exist?” (April 5, 2006) and “Better Data Show Contingency Fees Too High” (Feb. 23, 2004).

    Comment by Brian Huddleston — June 5, 2003 @ 7:56 pm

  5. Sorry for the late comment, 3 years late, actually, but I just came across this post. There are two problems with Carolyn’s idea.

    First, I see major ethical issues with taking a client to see if you can settle the case and then dump them when you cannot settle the case.

    Second, the insurance companies would figure out your system fairly quickly and then never offer you money on any cases. At that point, who are you helping?

    Comment by Jonathan — March 20, 2006 @ 2:27 pm

  6. . . . saying that no firm has been willing to budge from the statutory maximums . . .

    Which is just as likely to be evidence that the statutory maximums are too low

    Second, show me any other business that charges less than the statutory maxmiums–look at cable tv, credit cards, etc. etc.

    Comment by Moe Levine — April 11, 2006 @ 3:22 pm

  7. Moe,  I had not realized that p/i lawyers using a Standard Contingency Fee were “making up in quantity” for too-low fees — that’s why they spend all that money on ads to bring in new clients!  (I still think you have an obligation to each client separately to charge a reasonable fee for his or her particular case.)  And, the States that mandate disclosure of a “right to negotiate contingency fees” are just having a little inside joke at the client’s expense.

    I’m still of the opinion that lawyers have higher ethical and fiduciary duties
    to clients to avoid charging excessive or unreasonable fees than do cable
    tv companies or “any other business” to their customers. 

    Comment by David Giacalone — April 11, 2006 @ 4:37 pm

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