- Big news: California judge: contingency-fee lawyers hired by state present inherent conflict of interest. [POL roundup; Santa Clara v. ARCO]
- Must-read post about Westrup Klick’s fishing for clients in class actions. [Cal Biz Lit; Lattman; Bodner v. Oreck Direct]
- Why not let the market decide the optimum level of securities litigation? [Jim Copland @ NY Sun; AEI event; 10b5 blog; W$J]
- More on subprime mortgages. [Frank @ POL; Michael Lewis @ Bloomberg via Kirkendall]
- Watch what you say about lawyers dept.: Filmmaker complains about lawsuit in memoir, gets sued by former opposing attorney for libel [Ferlauto v. Hamsher @ Don Murphy]
- Update on clinic sperm mixup case [On Point]
- Tunc pro nunc: Justice Roberts is a funny guy [Kerr @ Volokh]
- So is this Arkansas attorney. [Snopes]
- Seven years ago on Overlawyered, Pets.com sues Conan O’Brien show over sock-puppet dogs; ATLA tries to threaten senator. Three years ago: $3M verdict (including punitive damages) for failing to fire truck driver who had speeding tickets; also three years ago, motorcyclist runs from police at 130 mph, crashes, dies, family sues. Two years ago, blogger takes big paycut and gets new job.
Posts Tagged ‘contingent fee’
Walks like a contingency, quacks like a contingency
An article in the West Virginia Record discusses a survey of physicians complaining about questionable expert witnesses in medical malpractice cases. For some reason, physicians seem to think that experts will say whatever they’re paid to say. But the president of the West Virginia Trial Lawyers Association denounces the survey, including the doctors’ complaints about experts being paid on contingency:
“And you can’t have contingency experts. I abhor that, anyway. There are State Bar rules are [sic] against that.”
In fact, pretty much everyone agrees that it’s unethical to pay expert witnesses on a contingency fee basis. Most states seem to have explicit ethical rules against it; New Jersey certainly does.
But how effective do you think those rules are? They didn’t stop Nagel Rice and Mazie, a New Jersey plaintiff’s law firm, from trying to weasel out of paying its expert witness recently for his work on a med-mal case, leading the expert to sue the firm for his fees. Why did Nagel try to get out of paying? Because, as Nagel admitted in his testimony in that case, they had lost the med-mal lawsuit:
And I said, “And in addition to that, we lost the case. It’s cost my firm over $100,000 in out-of-pockets.” I said, “So, I want you to consider two things: one, it was your first time on the stand; two, I think your 17 hours is really heavy-handed; and, number three, we took a blood bath in this case. And what I do with experts over the course — I’ve been doing this almost 30 years is that where you take a huge loss, experts will virtually always work with you.”
In case that wasn’t clear, he clarified, according to the New Jersey Law Journal (subscription required):
Nagel says his firm does not seek discounts from experts on losing verdicts. Rather, expert witnesses who have an ongoing relationship with his firm tend, of their own volition, to increase their bills in the event of a victory and to cut them after a defeat.
Yup. Spontaneously. “Of their own volition.” If there’s a difference between charging more if you win/less if you lose, and a forbidden contingency, let me know.
Incidentally, perhaps Nagel ought not to have invested $100,000 in the med-mal case in the first place, without doing a little due diligence. One reason that they might have lost was because the plaintiff’s claim that she suffered severe back pain and was permanently disabled by her doctor was successfully undermined by the defendants. As explained by the Appellate Division (PDF):
Video surveillance tapes showed Meegan walking, driving, bending over to talk to children, and lifting her daughter’s bicycle into the back of a car, all without any difficulty whatsoever.
Oops. Pesky facts.
Immunity – up to a point
Walter stole my thunder on the dismissal of the blog comment lawsuit against Lycos, but I thought it raised an important point. One of the common refrains of the Trial Lawyer crowd is that tort reform is not needed, because there are already mechanisms for the courts to deal with frivolous litigation, and because contingency fees mean that plaintiff’s lawyers have no incentive to take on meritless cases. The theory of tort reformers, on the other hand, is that the lottery nature of litigation means that plaintiff’s attorneys can take on long shot cases, because they only need to win a handful of “deep pockets” suits to come out ahead.
Which theory best explains lawsuits like this one? It’s difficult for Section 230 of the Communications Decency Act to be much clearer. It grants (as the First Circuit noted) “broad immunity to entities, such as Lycos, that facilitate the speech of others on the Internet.” This isn’t controversial; the First Circuit described its decision as “joining the other courts that have uniformly given effect to Section 230 in similar circumstances.” (Emphasis added.) So why would the plaintiffs not only sue on such a meritless theory, but actually appeal after losing in the District Court?
(I should note that I don’t have any specific evidence that this was a contingency case; nonetheless, the larger issue — namely, how can we successfully disincentivize plaintiffs and plaintiffs’ lawyers from bringing meritless suits — remains. Immunity from liability is great — but it isn’t the same as immunity from litigation. Lycos won this suit — twice — but how much did these victories cost?)
UPDATE: I had forgotten that the plaintiffs in this case, UCS and its CEO, Michael Zwebner, and their lawyer, John Faro, are no strangers to Overlawyered; they’re the same folks who sued Wolf Blitzer because of posts on Lycos’s message board from an anonymous poster who used the screen name Wolfblitzzer0. (See also updates on March 12, 2005; October 15, 2005).
Billion dollar cleanup
Overlawyered has been covering the Rhode Island lead paint trial for quite some time. A year ago last February, a jury found lead paint makers liable (and see links therein); on Monday, a Rhode Island judge issued a 197 page opinion (PDF) rejecting all the motions filed by the manufacturers, and upholding the jury verdict. Associated Press; Providence Journal. There will, of course, be an appeal.
It’s a case which fits well with the theme I mentioned yesterday, with all the elements of litigation as Robin Hood-style wealth redistribution:
- Creative lawyering, to turn a non-case into a case: this is really a products liability case, but if it had been tried under that theory, the state would have lost. So the plaintiffs called lead paint a “public nuisance,” even though any harms here are identifiably private.
- Irresponsible victims: The proximate cause of lead-paint-related injuries is the failure of homeowners and landlords to fix peeling paint. But we wouldn’t want to hold people responsible for maintaining their own homes.
- Going after the deep pockets rather than wrongdoers: Homeowners can’t sue themselves, and landlords don’t have nearly as much money as Sherwin Williams and the other paint manufacturers? So of course the paint manufacturers are liable. Never mind that the paint was perfectly legal when it was sold, sometimes as long as 50 years ago or more. Never mind that the plaintiffs didn’t and couldn’t prove that any of the outstanding problem was caused by any of the defendants.
- Unlimited liability, unrelated to any money made by the manufacturers for the products in question: the judge hasn’t even figured out how much this cleanup will cost, but he’s nonetheless sure that it’s reasonable to hold that the paint companies should have done this already. Estimates range from a billion dollars to several billion, to clean up any remaining lead paint.
- Dubious benefit to actual victims: people who have children affected by lead paint aren’t the ones who receive money as a result of this case.
- Shades of the tobacco cases: private trial lawyers inducing the state to sue, and then then pretending to be acting on behalf of the public.
Of course, we get the obligatory disingenuous comments from the plaintiffs:
Jack McConnell, a lawyer representing the state, called the judge’s decision a “huge, huge victory for lead-poisoned children, homeowners and taxpayers.”
Except, of course, for taxpayers and homeowners who are shareholders in paint companies. Or taxpayers and homeowners who are looking to buy products whose prices will have to rise to cover the costs of lawsuits that may spring up decades down the road because of some unforeseeable risks.
And how it’s a victory “for lead-poisoned children” is a mystery, given that the only outcome of this case is that the paint companies will have to pay for the costs of cleaning up homes. The children who have actually been poisoned do not see a cent from this judgment. Jack McConnell and Motley-Rice, the lawyers “representing the state,” will rake in a few hundred million dollars in contingency fees, though.
Walter Olson also comments at Point of Law.
Wilkes & McHugh sued over alleged Tenn. fee grab
Tampa-based Wilkes & McHugh, which has enjoyed much success filing suits against nursing homes in many states, “is now on the defense end of a suit that contends the firm knowingly violated Tennessee law regarding contingency fees.” Former client Debbie Howard, who hired the firm to sue a Memphis nursing home, says it “engaged in an unlawful scheme to collect 40 percent or 45 percent in contingency fees of settlement amounts, although Tennessee law caps fees to 33 and 1/3 percent in medical malpractice cases. The complaint says the law firm charged the higher and unlawful contingency fee to hundreds of clients in Tennessee.” In its response, the law firm says the complaint is “scurrilous” and based on falsehoods, and says Howard never appealed a Tennessee court order approving the fees. (Liz Freeman, “Tampa law firm faces contingency fees lawsuit”, Naples (Fla.) News, Jan. 14; Scott Barancik, “Firm gets a taste of dish it serves”, St. Petersburg Times, Feb. 17). For more on the law firm, see Mar. 13-14, 2001, Jul. 6, 2005, and Jun. 22, 2006, as well as Scott Barancik, “Law firm’s success against nursing homes has a price”, St. Petersburg Times, Jul. 24, 2004.
The Cesar Borja case gets more complicated
New York City police officer Cesar Borja died tragically young of lung disease last month. Advocacy groups (including a website that regularly accuses tort reformers of using oversimplified “pop” anecdotes) and Senator Clinton pushed his story to the media to promote a multi-billion-dollar taxpayer giveaway program (that, not incidentally, would provide contingent fees for attorneys) by claiming that Borja was sickened as a hero working “fourteen-hour days in the smoldering pit”, and was killed by alleged government lies about the safety of the air (though the government did call for respirators that they admitted Borja didn’t wear) and the media bought it in front-page tabloid stories. (That same website has been promising since it started to link “Ground Zero workers’ challenges to a larger critique of the tort reform movement”, but has yet to formally justify that non sequitur.)
Except more facts are coming to light about Borja, and as the New York Times reports, “very few of the most dramatic aspects of Officer Borja’s powerful story appear to be fully accurate”:
- On September 11, Borja reported for duty… at the tow pound in Queens where he spent most of his career.
- Borja did not work near the site until December 24, 2001, “after substantial parts of the site had been cleared and the fire in the remaining pile had been declared out.”
- Borja thus never worked in the smoldering pit.
- Borja never worked a 14-hour shift; rather, he worked a few shifts for a total of 17 days directing traffic to add to his overtime pay, most of which were in March and April 2002, and all blocks away from Ground Zero.
- Borja smoked a pack a day until the mid-1990s.
Of course, evidence may yet arise linking Borja’s death to his work near the site. The New York Police Department and doctors, however, have yet to do so. (Sewell Chan and Al Baker, “Weeks After a Death, Twists in Some 9/11 Details”, New York Times, Feb. 13). About 50,000 Americans are diagnosed with pulmonary fibrosis each year; the fatal disease has no cure.
Update: David Nieporent has an amusing comment about Bizarro-Overlawyered’s shameless reaction to the revelation.
The post David responds to makes the mistake of making clear its political motivations for exaggerating health hazards from Ground Zero cleanup: a partisan smear of possible Republican presidential nominee Rudy Giuliani.
Lowering fees — and infuriating colleagues?
“I recently ran a television advertisement offering to represent car accident victims in exchange for a 15 percent contingency fee, which is more than 50 percent less than the traditional 33 percent contingent fee. …One of the goals of my advertising campaign is to reform the tort system in the marketplace, without the need for legislation. … Making a lower contingency fee the centerpiece of an ad campaign, albeit just for car accident victims, educates consumers about the standard fee and how a lower contingency fee can benefit them, by putting more of the net recovery in their pocket.” New Haven, Ct. attorney Joshua A. Winnick sure isn’t angling for popularity among his peers (“Putting a Price on Plaintiffs Work”, Connecticut Law Tribune, Dec. 28). More: David Giacalone.
$2 million 9/11 fee under fire
“Laura Balemian, whose husband Edward J. Mardovich died in the World Trade Center, received one of the largest awards paid out by the September 11th Victim Compensation Fund: $6.7 million. But she in turn paid out what is almost certainly the highest legal fee. While the vast majority of victims were represented before the fund pro bono or for a nominal fee, Balemian paid her lawyer, Thomas J. Troiano, a one-third contingent fee, or over $2 million.” In an affidavit, 9/11 fund special master Kenneth Feinberg calls Troiano’s fee “shocking and unconscionable”, and says that fund guidelines recommend that attorney fees be kept under 5 percent of family recoveries; Troiano, however, says Mrs. Balemian knew what she was getting into and that his efforts produced outstanding results. (Anthony Lin, “Attorney’s $2 Million 9/11 Fee Called ‘Shocking, Unconscionable'”, New York Law Journal, Aug. 29; Alfonso A. Castillo, “9/11 widow battles over attorney’s fee”, Newsday, Sept. 1; MyShingle, Aug. 28).
Update: Story also covered in this American Justice Partnership publication (PDF).
Contingency fee-o-rama
Anyone interested in the ethical, practical and philosophical case for and against the lawyers’ contingency fee (or contingent fee; usage varies) should be sure to check out two new resources:
* At Point of Law, the new Featured Discussion just underway pits George Mason lawprof Alex Tabarrok, who’s generally supportive of contingency fees, against Jim Copland of the Manhattan Institute, who’s critical;
* David Giacalone, who has written extensively on the problems inherent in protecting clients from overreaching by their lawyers, has now posted a four-part series (one, two, three, four) laying out his views on the pluses and minuses of the contingency fee more systematically than his blog posts have done up to now.
For my own views, see Chapter Two of my 1991 book The Litigation Explosion, which Point of Law has posted in PDF format.
Pigs at the Slaughterhouse?
The team of lawyers who recently won the largest-ever bad faith insurance verdict in Pennsylvania — more than $7.9 million — are asking U.S. District Judge Cynthia M. Rufe to make new law by awarding them $2.3 million in fees, the largest award of attorney fees that would ever have been granted in such a case.
The lawyers argue that the lodestar approach,under which their fee would be about $323,000, is flawed for two reasons: because the lawyers who bring such cases almost never bill for their work at an hourly rate, and their clients have most often agreed to a contingent fee in which the lawyers will be paid a set percentage of any verdict or settlement they win, usually one-third.
As a result, Tanner and Newman argue, the lodestar approach “unduly focuses the court’s scrutiny on a fictional contrivance as opposed to an approach which accurately reflects the manner in which such cases are handled.”
Of the $7.9m jury verdict, $6.25m is punitive damages, which, the defense argue, is a sufficient pot of money out of which the lawyers can extract their fees. (Law.com, Apr. 7)