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).
No, I don’t merely mean I need visitors to this new blawg. I need to hear from you about legal ethics reform efforts across the country, because I don’t have access to Members-only sections of bar association websites, or their journals and newsletters, nor to meetings behind closed doors, where proposals are made, amended, rejected or accepted. I’d also like to hear about reform programs sponsored by consumer action groups. So, please place your tips and news items into the ethicalEsq? “Suggestions” Box.
I’m especially interested in efforts to better-inform clients of their rights and options. Such as:
Other topics of interest to ethicalEsq? are described on our “About” page, and new topics are also welcome. We need your eyes and ears. Thanks.
Carolyn Elefant of MyShingle.com was nice enough to welcome me into the law blog neighborhood yesterday. Even better, she left a comment that gives me a chance to make my basic soapbox case against the use of a Standard contingency fee — the practice of charging virtually every injured client the same percentage contingency fee (usually one-third or 40% of the damages).
Carolyn’s sentiments seem to be representative of those made by plaintiff’s lawyers who represent individual p/i clients, and you should head over to this page of MyShingle.com to see a list of her postings on contingency fees. Here’s what Carolyn said in her comment yesterday:
“I find the Common Good’s fee cap proposal to be somewhat mean spirited in that it goes after the piddly little “penny ante” cases that help smaller clients but don’t have much impact on the broader legal system. Also, as you point out in your article, clients can always pay by the hour to have an attorney take a case. And I have offered this option to clients (particularly in cases of mediocre value) and none have ever agreed to even front their costs, let alone pay fees out of pocket. The bottom line is that many clients don’t want to put their own money at risk and if that’s the case, attorneys should get something extra for taking the risk instead. (This is all discussed in more detail in my posts).”
Here are my quick replies: (1) I don’t believe the Common Good proposal is trying to reform the whole system (which is why it is not tort reform, it’s legal ethics reform). The proposal is trying to protect the indvidual injured client by correcting the basic unfairness of using a Standard Contingency fee for “easy” cases: compared to how much time the lawyer has in the case and how much risk there was of not being adequately paid, he/she is taking an unfairly large amount of the victim-client’s damages. The personal injury plaintiff’s bar has turned the maximum percentage fee allowed in most jurisdictions (the percentage meant to cover the most risky and difficult cases) into the fee it demands in virtually every case. It asks clients with clearcut, easy cases (where the defendant is clearly liable and has funds) to subsidize clients with far riskier cases.
(2) Clients gripe plenty about how much lawyers take out of their damages, but they don’t file formal grievances because almost all Americans believe there is a rule setting the Standard fee level (be it one-third or 40%). And an apparent lawyers Code of Omerta keeps them uninformed.
(3) Yes, clients have the RIGHT to pay by the hour, but almost none of them KNOW they have that right. Despite their fiduciary obligations, p/i lawyers do not inform clients of the right. Given this failure, I strongly support having a specific ethical rule that requires an attorney to inform the client of that right — and the likely financial impact of various fee options — before entering into a contingency fee contract.
ABA Formal Ethics Opinion 389 (1994) specifically imposed those requirements and was totally ignored by the P/I Bar, which instead has rewritten the new Model Rule 1.5 to remove the sections that clearly supported the requirements in Opinion 389. (I discuss the shenanigans at Ethics2000 in my Open Letter to the FTC on the ABA and Contingency Fees.)
(4) I have found that the relatively few attorneys who tell an injury victim that they could pay by the hour do so only when the case is so bad the lawyer won’t do it on a contingency, and the smart client wouldn’t want to take the risk either. The test for whether the lawyer is looking after the client’s interests first is whether the lawyer tells the client in a relatively easy case, with substantial bucks a near certainty, that the lawyer will accept being paid by the hour rather than insisting on taking the stardard percentage for what will likely be relatively little work. At that point, the client and lawyer might negotiate a fixed hourly fee or a lower contingency percentage based on the lawyers good faith estimate of the risk and time involved.
If you’re not totally persuaded by these cogent arguments, check out the presentation of Cardozo Law Professor Lester Brickman on Contingency Fees before Ethics 2000. Update: And see our four-part, in depth treatment, of the economics and ethics of contingency fees, from April 2006.
Thanks to Tom Mighell of Inter Alia for giving us a mention this morning. Visiting Tom’s site started me down the road of daily blog reading.