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Transcript
May 25, 2000


Excessive Legal Fees:  Protecting Unsophisticated Consumers, Class Action Members, and Taxpayers

Panel Two: Fees in Traditional Litigation: A New Reform Proposal

MS. BARBARA OLSON: When I was asked to moderate this panel I realized that several disclosures would be necessary: I not only work for Blach & Bingham but I am also a lobbyist working with Haley Barbour. Legislating by litigation would put many of my colleagues, and me, out of work. I also have the distinction of being a graduate of Cardozo Law School. I didn’t get to take any of Professor Brickman’s classes as a student but now I see I certainly should have.

I will start my remarks today by considering the multi-state tobacco settlement. We’ve all heard about the 500 million dollars that will go to lawyers annually for the next 25 years. Most of us also know about the two or three hundred lawyers who signed the settlement agreement. The New York Times has estimated, I believe, that tobacco-related lawyers’ fees could reach thirty billion dollars. The first installment, 8.2 billion dollars, went to the lawyers behind the Florida, Mississippi, and Texas settlement. Eight hundred and seventy four million dollars went to Dick Scruggs’ law firm alone, with 339 million earmarked especially for him.

I mention these figures as a reminder that, when we discuss the issue of lawyers’ fees, we are talking about millions and billions of dollars. When you consider these figures, the first question should be: what is being done with this money? The most significant place that this windfall is going is the political arena. Sixty million dollars have been contributed to anti-tort reform candidates. The Associated Press estimates that trial lawyers gave 4.1 million dollars during the first 6 months of 1999. Since 2000 is an election year, I would imagine current spending is closer to that 4.1 million increased by a couple of zeros. There is then, at present, a source of money that rivals what both the Democratic and Republican parties are giving to candidates. This is one reason why campaign finance reform is such a pressing issue.

Richard Painter is here today to speak about another area of reform: limits on excessive fees. Richard is well known for his work in the ethics area. He is a Professor at law at the University of Illinois College of Law. He authored Legal Ethics Casebook with Judge Noonan from the 9th circuit. And he’s also authored Securities Law Casebook. He testifies often in both houses of Congress on securities class actions. And he clerked for Judge Noonan on the 9th circuit after graduating from law school.

Jim Wootton, our next speaker, is the President of the US Chamber Institute for Legal Reform. He distinguished himself by becoming one of the thorns in ATLA’s side because he worked on and helped enact the Y2K act of 1999, which limited liability for Y2K failures. Prior to coming to the Chamber he headed two nonprofit corporations, the Safe Streets Alliance and the Safe Streets Coalition. There he was a principal drafter and advocate for truth-in-sentencing provisions, which wound up in the 1994 crime bill. He has written numerous articles, graduated from both the University of Virginia and the University of Virginia Law School, and is a member of the Virginia Bar.

Before I turn things over to the panelists, I have a hypothetical that may help explain how Jim Wootton’s American Rule works. Imagine my name is Patty. I am a 40 year old mother and I’ve been in a terrible car wreck. In that wreck, I was driving my Ford Van and my 3 year old child was thrown from the vehicle and killed. I have some awful injuries and significant pain and suffering. I drive to my lawyer who is well known. I tell him about my case.

Would the American Rule apply any differently if I lived 100 miles from a lawyer? In that circumstance, I wouldn’t really have access to a market. I’ve driven to my lawyer because I’ve read about the hundreds of thousands of dollars he has recovered for other people. Further, would it be any different if I tell my lawyer that, at the time of the crash, my child wasn’t wearing a seatbelt? Or that I had been drinking a little bit before the accident occurred? My suit is not cut and dry; the lawyer will have to do considerable work. How would the American Rule apply with the lack of market and the absence of clear liability?

PROFESSOR RICHARD PAINTER: Before we get to Patty—a good opportunity to test the new American Rule and see how it works in practice—I want to provide some background and ask, what is a contingent fee? In the contingent fee, three services are bundled into one. One is legal services being provided by the lawyer. Another is financing by the lawyer—litigate now, pay later. The third component is litigation insurance; if you lose your case the lawyer will pay the cost of the legal services. The premium for this litigation insurance, of course, is the percentage of the case conveyed to the lawyer in the contingent fee arrangement.

Why are these three products bundled together and not sold separately? Much of this has to do with champerty laws. It is prohibited at common law to finance the litigation of another person or pay someone else’s lawyer in return for a percentage of future returns. In the United States, we’ve developed an exception to the prohibition of champerty. Lawyers may provide champerty through litigation insurance and financing in a case when they represent the client on a contingent fee.

How efficient is the market in setting lawyers’ fees? Does the market dictate a price to the client, the consumer, that reflects the risk involved? If it does, you would expect three factors to influence the size of the contingent fee. First, how much lawyer time is needed? While you can’t know this for sure, lawyers can usually estimate how much time they will need for a case in advance. In Patty’s case, the lawyer would see that there is going to be some trouble down the road. Patty had been drinking, her child was not wearing a seatbelt. The case will not be easy to settle with the insurance company. In an easier case, recovery would be likely, and the time needed for the case would be substantially less.

The second factor in calculating fees is likelihood of success. Patty’s case, as mentioned, is not especially strong. There is also a third factor, the size of the case. If the injuries are egregious, the amount of the judgment is likely to be higher; if a contingent fee is being charged, of course, that means the lawyer will recover more money.

You would expect, in this country, an efficient market for lawyer champerty, which is essentially what the contingent fee is. (Furthermore, for public policy reasons, the United States has encouraged its lawyers to provide this service.) In an efficient market you would expect these three factors—lawyer time, likelihood of success, the size of the case—to vary and, therefore, pricing of the cases to differ. A lawyer’s portfolio of cases should have a range, something that Larry Fox admitted. Some cases should charge 20%, some 50%. I am not sure I am willing to go up to 70% because I suspect if the chance of success is so low that you may very well have a strike suit on the horizon; but 50% is reasonable in a few cases. There might be many 15% and 10% and 5% cases out there, but there should be a range.

Well, is there a range? That is an empirical question; we can test the market to see if it is really efficient. Lester Brickman wrote an article on this issue in UCLA Law Review a number of years ago.17  More recently, Herbert Kritzer, from the University of Wisconsin, has done work on the topic.18  He is quite skeptical of Lester’s claims that the market is not efficient. Lester’s point is that, in effect, lawyers are charging the same fee for every case, that is, 33%. In many cases more than this percentage is being charged but very rarely less.

In Kritzer’s study of the Wisconsin Bar, he found that 53% of cases involved retainers specifying a fee as a flat percentage of recovery. An additional 39% used a variable percentage. Of the cases with a fixed percentage, a 33% contingency fee was used 92% of the time. The cases with a variable percentage started out at 25% for pretrial work, but once there is any substantial amount of work, more than one or two pretrial hearings, you kick up to 33%, and then 40% or more on appeal. Kritzer found that a rigid 25%, 33%, 40% fee schedule dominated in the additional 39% of cases using a variable percentage fee.

Kritzer’s data shows quite clearly—although I am not sure he intended it to work out this way—that Lester is right. This market isn’t working the way you would expect an efficient market to price cases. We don’t see a range from the 5% to 50%. We see the cases sticking around 33% (and tending upwards) but very little on the downside.

Why is this the case? As Kritzer points out, and I think he is right, the problem is lack of information.19  The client is not in a good position to comparison shop. This is not like a corporation hiring a CEO; this is an injured person in a disadvantaged situation.

Let’s return to the example of Patty who, as you recall, is miles away from the lawyer that she wants to hire. Let’s assume that she knows very little about the lawyers in her immediate proximity, that she knows very little about the legal profession and very little about the three factors (likelihood of success, size, time) that should determine how the case is priced.

The client must have information; when there isn’t information, markets don’t work. My other area of teaching and writing is in securities regulations. One of the hallmarks of securities regulation is that if you get the information out there, the markets work a lot more efficiently than if you do not. The same is true in the lawyers’ fees context.

The New American Rule bridges the information gap with minimal market interference. The rule is a simple set of propositions originally put together by Jim Wootton. I was brought in on the project to flesh things out with more detail. Jim’s proposal, in essence, is that every contingent fee lawyer should offer the client both a percentage fee and an hourly rate. At the end of litigation, the client chooses which to pay. Almost every client is going to choose the lower fee. In other words, the lawyer says, “I charge 20% as a contingent fee, but this fee will not go above $1,000 an hour.” If the case is particularly risky, this fee can be set at $2,000 an hour or even $5,000 an hour as long as the parties agree.

Jim does not like me to describe this choice as a cap. It is, however, a limit on how high contingency fees can go. Lawyers who, unlike clients, have all the information about a case, guarantee that the fee will not exceed X percent per hour. Let’s pretend that Patty had a much better case—the child was wearing a seatbelt and mom was completely sober. Under the new Rule, it would be much more difficult for a lawyer to take advantage of Patty.

Under contingent fee arrangements as they currently operate, the lawyer can talk Patty into a 33% fee, as seems to be the typical case. The lawyer can tell Patty that her case seems strong, but things are more complicated than she thinks: insurance companies never like to settle; they are on the look out for fake injuries. Convincing them otherwise takes time. The judge on this case is a real jerk and doesn’t like plaintiffs. These claims are believable because the lawyer has all the information and Patty has none; she has no choice but to agree. Meanwhile, Patty has a slam dunk case that is going to be settled with a one-hour telephone call, a call that brings in 33% of $300,000 for the lawyer.

Deception will not be eliminated with the Rule, but at least Patty’s fee won’t go any higher than, say, $1,000 an hour. Her lawyer would, under the Rule, be obliged to tell her that the fee is going to be 33% or $1,000 an hour, whichever is higher. With that sort of information at the outset, Patty may just shop around.

That is the essence of the New American Rule. There are other requirements that Jim suggests that help the Rule function more smoothly. One of them is that the lawyer must provide the client, at the outset, with a non-binding time estimate. Once again, this is information the lawyer has that the client doesn’t have. This may not be an accurate estimate. It may turn out to be wrong. But at least it helps bridge the information gap.

Similarly, the New American Rule would require lawyers to post on their web pages the prices they have quoted to other clients. Specifics on each client are not necessary, just the low for the previous year, the medium, the high, and perhaps the top quartile for both the percentage and hourly rates. The client, then, can see where his case fits in the lawyer’s portfolio. The client can also see if the lawyer refuses to budge from a high hourly number. If in every case the client is quoted a 33% or 40% fee and the lawyer’s cases are diverse (in terms of the three risk factors), perhaps clients would feel cheated; risks vary, but the prices don’t. Clients would be encouraged to get second quotes or to visit web pages to see how other lawyers price their cases. This is minimal disclosure that is not very burdensome in an age when many law firms are setting up web pages and posting information about their services and credentials.

I suggest one additional requirement: namely, that every lawyer disclose how far their cases deviate from their non-binding hours estimates. This could be done on a yearly basis. Clients could then see which lawyers consistently low-ball the number of hours they need; this would discourage deceptive practices that get around the Rule’s requirements. The client would see that in the typical case the lawyer was 10% off. Clients could use this information to discount the estimate they received or to recalculate it.

It may seem that there are a lot of calculations involved in choosing a lawyer under the Rule. It’s really just some basic addition, subtraction, and a little multiplication. Web pages and software can make this process easy. Many clients could, for the first time, at least get an idea which lawyer is best for them depending on how they think the case is likely to come out, what their preference is with respect to risk, and a variety of other factors.

At the end of the day, the New American Rule is about disclosure of information and minimal interference with the contract. All it does is ask lawyers to name a per hour limit on fees, encourage them to be up front about the amount of time they are likely to spend on a case, and determine, in advance, how much they will be compensated for risk. Other proposals have been floated; for example, Lester Brickman wants to regulate the pricing of contingent fees. You can get lawyers out of the champerty business altogether, which is what many countries do by prohibiting a contingent fee. I see the new American rule as a more measured response to the problem; it can facilitate markets through the sharing of information.

MR. JAMES WOOTTON: First of all, I want to thank Judy Pendell for taking this idea and sharing it with Richard. Having him think the Rule is a good idea gives me great comfort; he is better able to evaluate its merits than I. I had the experience of practicing law in a small town. Part of the reason I came up with this Rule is because of what I understand about the practice of law through personal experience. Let me illustrate this with a story.

When I graduated from the University of Virginia Law School, I stayed in Charlottesville—the aspiration of many UVA lawyers—and opened my own firm. Almost immediately, the Supreme Court decided Bates vs. State Bar of Arizona, the case that basically outlawed bar association restrictions on lawyer advertising.20 

I had been an economics major as an undergraduate, and I thought the fact that lawyers were charging a point for real estate closings in Virginia was ridiculous. Under this system, if you had a $100,000 house, lawyers were going to charge you $1,000 and on up the scale. On top of this, the seller of the house also had to buy title insurance. The amount of risk being born by the lawyer in this circumstance was pretty small; theirs was a pretty ministerial act. In a lot of places, closing is done by title companies or by savings and loans.

I decided to put an advertisement in the Sunday paper that I would do these things for substantially less, which would have made me a lot of money. I was a solo practitioner. I needed the business. Nothing happened, however; nobody responded to my ad. No one, that is, except the bar association, who notified me that I was subject to a secret disciplinary proceeding for having violated their rules. I thought about that for a while. I’m sure they would have given me a fair hearing in secret. But I decided to talk to the reporter who covered the courthouse in Charlottesville about what was going on and he found it rather intriguing. He wrote a story about my situation and put it on the front page of the Charlottesville Daily Progress along with my ad and I suddenly had all kinds of business. The bar association dropped their complaint.

I think the bar association is ill equipped these days to regulate the practice of law. I know that is heresy; I know that there is great resistance to that idea among traditional bar members. I am not unsympathetic to their objections, but I think you have to earn the right to be a self-regulator. The bar has lost that right.

The New American Rule, as Richard explained, is pretty simple. You go into an office and the lawyer tells you two numbers. One is an unrestricted hourly rate. It can be anything that the lawyer thinks is appropriate to the level of risk in the case as well as to other factors such as the amount of damages you might recover. The other number is a percentage of the recovery. I made it a percentage of the net recovery because I think a lot of games are played on the expense side of things. That could be subject to negotiation.

The American Rule came out of conversations that Judy arranged with me, Wally Olson, and Professor David Bernstein of George Mason. Wally and David talked about all the things we might do to reform lawyers’ fees, such as loser pays and some other ideas. In the course of our discussion, David mentioned a new development in England, an attempt to bridge the gap between government funded legal services and access to the justice system. The English have come up with a conditional fee. A client sees a lawyer and negotiates an hourly rate; the deal is, you pay nothing if you have no recovery but you pay double the hourly rate if you do. There is no cap; the fee could conceivably eat up the whole recovery.

That system has some weaknesses from my point of view, so I came up with an idea that is a hybrid of the American rule and the English rule. People think of the American rule as a contingency fee. It’s not. It’s simply that clients pay their own attorney fees. The contingency fee allows clients who don’t have the means, to get access to the justice system. The New American Rule, to repeat, is a hybrid: it says that you get two price quotes and at the end of the day, you get to choose between the two.

As Richard mentioned, there are other prophylactic measures that we are suggesting. For example, a monthly statement of hours is required from the lawyer who works on your case. Lawyers will hate this rule for many reasons. It’s an administrative burden; but more importantly, it will expose how much time is really spent on cases. The client benefits, of course, from this information. I’ve seen studies that show that the number one complaint of clients is lawyer procrastination; if lawyers send a bill every month saying they didn’t do anything it will give clients more control of the situation.

Another element of the Rule concerns something that Larry mentioned during the last panel; namely, we don’t think that the same rules ought to apply to the sophisticated consumer of legal services. The Rule basically doesn’t apply when the client has a non-contingency fee lawyer who is advising on a separate contingency fee arrangement. This means if you have a general counsel, an in-house counsel, or an outside counsel for other purposes, it wouldn’t apply to you. You can make whatever deals you want. If you are a sophisticated consumer of services you are going to be able to cut a sophisticated deal.

One thing the public understands about attorney fees is that they are a zero sum game. Anything that is paid to the attorney is not being paid to the client. In a choice between the defendant and the client, the public is for the client. Between the client and the lawyer, the public is for the client. What the Rule does is give some power to the client since they are in an unequal bargaining position. At the end of the day, as Richard explained, the Rule is about disclosure. It’s about lowering information costs. I’d like to see this applied in the class action setting as well, but that’s a complicated balancing act that has to correspond with other reforms.

The hypothetical client, Patty, is in a difficult situation. She needs to drive 100 miles to her lawyer and she doesn’t have a lot of choices. Without choices, she is even more under the control of her lawyer because it’s very costly to shop around. The Internet is a phenomenal tool at least in this: it lowers information costs. This low cost gives power to the client population. At the end of the day, the only thing the Rule does that really interferes with the market is give clients a little help. We basically give clients the power to choose. The Rule forces disclosures about time and money; you decide whether or not you want to pay the hourly rate of your lawyer.

Having practiced law in a small town, my experiences may be a little different from academics following this issue. My experience is that lawyers don’t like to take cases where there is any question about liability. If they’ve got a lot of business, they will not take cases where there is no promise of a win. The next issue, then, is what are the size of the damages in a particular case.

Imagine a driver in an automobile accident is terribly injured. The accident was clearly not his fault. This driver goes to a lawyer and asks for help. The lawyer discovers some information in an initial interview; the client is sent to a doctor, and then a paralegal pulls the file together and does most of the rest of the work. The file then goes to the insurance adjuster.

Let’s say that there is a $300,000 policy limit. Generally, the insurance company will sit on the claim for a while. They will act like they are really working the file when they are not; they don’t want to incur any unnecessary costs and they know that the case is a loser. At the end of a decent interval a check is sent. It’s made out to the lawyer—in some states, it will be made out to the lawyer and the client—and it is deposited in the lawyer’s trust account. Checks will be cut at a closing. The client comes in, receives (assuming no expenses) $200,000; the lawyer pockets the other $100,000.

It may be that a particular lawyer’s reputation made the insurance company pay faster; for that, they ought to get a premium on the hourly rate. It may be that lawyer is particularly effective and gets quick results. The financial aspects of the deal, however, ought to be disclosed to the client. Clients who are really disabled, and many of them are, may never work again. This money is going to be what keeps them from depending entirely on government payments. $100,000 is a significant sum to that person. We as the keepers of the legal profession ought to be sure that practitioners are not using their ability—either their market ability or their ability to litigate—to take advantage of the people that need to be compensated.

Larry’s argument—that rough justice settles these things over time—is a fallacy because lawyers get to pick the cases. If lawyers had to take every case that walked in their doors, they would have some cases that are dogs and they would have to litigate them. They would have cases with high liability and they would finance the unprofitable cases with them. But, that isn’t what lawyers do. Lawyers are businessmen like everybody else. They make their money—I learned this the hard way, as a solo practitioner—by saying no to high-risk cases. We ought to make public the calculations that lawyers do so clients can benefit from the information.

AUDIENCE QUESTION: Much has been said about the vulnerability of plaintiffs and how they should be protected from their lawyers. I hear a lot of complaints about corporate law firms overcharging as well. What are your proposals for this kind of abuse? What in the Rule deals with corporate law firms and defense counsel?

PROFESSOR PAINTER: I am very critical of contingent fees, for example, in mergers and acquisitions. I am not happy with the AOL and Time Warner merger; Time Warner’s counsel agreed to take a 30 million dollar contingent fee if the deal closes and, I believe, a couple of million dollars whether or not the closing occurs. This is my personal opinion: the deal was approved by the Time Warner Board and certainly they are a sophisticated consumer of legal services in need of far less protection then someone like Patty.

That said, I think shareholders have rights in these situations. There are abuses in this arena and they need to be focused on. It is, however, up to shareholders to bring pressure on management and make sure boards negotiate fees in the interest of the company and its shareholders. It’s better to bring the pressure there, within the corporations. There is less need for regulation by the bar. Corporate lawyer overcharging problems are agency problems. It’s a matter of corporate law; the client and the shareholders of the client must insist on fairness. In sum, I do think there are problems and they need to be addressed. But it’s a separate issue.

AUDIENCE QUESTION: You’ve talked about all the disclosures mandated by the Rule. I wonder what, at the end of the day, is left of the fiduciary duty of lawyers. To refer to your example, Jim. Let’s say there is an open and shut case with clear liability, lots of paper work, disclosure, internet information. It’s an open and shut case and the lawyer gets his $100,000. Shouldn’t there still be the requirement of a reasonable fee in accordance with legal ethics? Won’t all this paper work and disclosure business undermine the movement towards enforcing the reasonable fee provisions and the fiduciary obligations of lawyers? Isn’t that the real bottom line we seek?

MR. WOOTTON: It’s a good question. I think Judge Griesa’s quote from Madison that men are not angels is apt. I would add, though, that review by the courts of fees continues under the Rule for determining what is reasonable. There is nothing given up as a part of our reform. Instead, the court is going to have more information about what is a reasonable fee; they are going to have access to monthly billing statements and how many hours are being devoted to the case. You are going to have the various estimates that were made to clients. The court might even have information about what firms are doing in a variety of other cases. These disclosure requirements are not tremendously burdensome given the technology we have today.

AUDIENCE QUESTION: Have you done a study of pricing by other entities that bear risk? For example, insurance companies charge premiums to sell insurance to people who fall across a pool. The pool can be people who are high risk, low risk, medium risk. Have you compared what lawyers charge across their portfolios with the variation in the premiums that insurance companies charge for bearing risk? It would be interesting to know if lawyers are doing something that looks pretty much like what insurance companies are doing. The same might be true for real estate agents. They charge contingent percentages. They get paid if they sell property. They don’t get paid if they don’t. But my understanding is that they charge standardized premiums across entire portfolios of properties even though properties vary in value, likelihood of sale, amount of time/effort required to sell, and marketing. I’m asking, in short, if you have any cross-disciplinary evidence that leads you to believe there is really a unique problem in law. Further, if it is your position that the same degree of standardization exists in different industries, does that mean there is not only a lack of competition in law, but a lack of competition in insurance and real estate world as well?

PROFESSOR PAINTER: I have not done an empirical study of the type that you describe. But I have thought about this issue. Real estate fees can exemplify competitive pricing. In the real estate business, higher priced homes often go to separate real estate companies. Some communities, at least, charge lower percentages and there is a good deal of negotiation that occurs. There are also “give-backs” of the fee being negotiated at closing: when an offer is made on a house, the broker brings an offer to the seller. If it’s not particularly attractive, the dealer may give a portion of the broker fee in return for the offer being accepted. As I say, I have not looked at this in any detail, but it seems that there is a fair amount of adjustment going on in that market.

There seems to be some variation in the insurance business as well. If you are an old or sick person, your life insurance rates will be different than people’s rates who are young and healthy. There seems to be a spreading out. I gather, though, that there are some areas where there may very well be stickiness regardless of the amount of risk involved—that the insurance is being priced the same for everybody. My conclusion is, where that occurs, there may be a lack of competition. There may be competition with respect to quality, service, and so forth, but a red flag is raised: in a competitive market for champerty, which is what this really is, some cases should be priced differently than others.

To return to Patty, if she had been drinking, that’s a harder case to win than then a slam-dunk case. The fee percentage should be different in different cases. It’s a red flag to me when lawyers’ fees are constant and I think in other industries this should be a red flag as well. Providing clients with information helps solve the problem by giving clients more power to select a lawyer.

AUDIENCE QUESTION: Is the standard contingency fee that you refer to common only in cases of a certain type? Are other cases handled through flat fees, hourly rates and so forth?

PROFESSOR PAINTER: Kritzer found, in his Wisconsin study, that when there was a flat fee used, 92% of cases were at a rate of 33%. Are you asking if lawyers sometimes offer an hourly rate to bypass the whole contingency arrangement?

AUDIENCE MEMBER: Yes, like realtors handling closings on a flat fee rather than on a percentage of the property value.

PROFESSOR PAINTER: Kritzer found very few alternative arrangements. They made up 1%, 2%, maybe 3% of his survey of Wisconsin plaintiffs’ lawyers.

AUDIENCE MEMBER: In particular types of cases?

PROFESSOR PAINTER: Personal injury cases.

AUDIENCE MEMBER: Isn’t it possible that personal injury cases, at least personal injury cases of a certain size, have attributes that make the contingency fee structure appropriate and the 33% figure a good benchmark in terms of reasonable compensation? In cases where 33% would be inappropriate, the lawyer charges through a different fee structure—that is, in M&A cases, real estate cases, divorce cases. In other words, don’t we see the fee structures geared to cases where that fee structure is appropriate?

PROFESSOR PAINTER: That assumes that all victims in automobile accidents have the same circumstances—the injuries are the same, the amount of lawyer of time is the same. Personal injury cases can not be generalized; it is difficult to see why there should be a benchmark of 33%. It could, however, be the mean.

AUDIENCE MEMBER: Well, except that if Patty’s chance of liability is weak, isn’t it possible that no lawyer is going to take her case on a contingency fee? A lawyer is going to say, look, the chance of recovery here is minimal. I’ll charge you an hourly rate otherwise I won’t take the case.

MR. WOOTTON: If I understand your point, it may be confusing the level of risk that is undertaken in any given case, which would allow for some kind of scale over the percentage of recovery, and the hourly rate. Whether or not cases traditionally are done on a contingency basis at all, they are done on a flat fee or an hourly rate based on the client’s ability to pay. The contingency is the part of the fee that is the financing provided by the lawyer. My experience is lawyers don’t finance their fee when there isn’t a very high likelihood of recovery.

[ panel one ] [ panel three ]

 


Center for Legal Policy.

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PDF AVAILABLE (602K)

SUMMARY:
The legal and popular press have followed an intense debate driven by concerns that many consumers of legal services are being charged excessive legal fees without their consent--either because they are not direct parties to a lawyer-client contract (class action members and taxpayers who pay the fees for government actions) or because they lack the knowledge and experience to negotiate a fair fee. The debate is fueled by the counterpoint denials that such problems exist. This book discusses these issues.

TABLE OF CONTENTS:

Introduction

Conference Highlights

Panel One: The Scope of the Problem and Responses by the Judiciary and Bar

Panelists:

Mr. Stuart Taylor, Senior Writer, National Journal

Professor Lester Brickman, Benjamin N. Cardozo Law School

Mr. Lawrence Fox, Partner, Drinker, Biddle & Reath

The Honorable Thomas Griesa, U.S. District Court, Southern District of New York, 2nd Circuit

Panel Two: Fees in Traditional Litigation: A New Reform Proposal

Panelists:

Ms. Barbara Olson, Counsel, Balch & Bingham LLP

Professor Richard Painter, University of Illinois Law School

Mr. James Wootton, President of the U.S. Chamber Institute for Legal Reform

Panel Three: Fees in High Stakes Litigation: Class Actions and Suits by Government Agencies

Panelists:

Mr. Fred Barnes, Executive Editor, The Weekly Standard

The Honorable Vaughn Walker, U.S. District Court, Northern District of California, 9th Circuit

Professor Roger Cramton, Cornell University Law School

Professor Charles Silver, University of Texas Law School

Mr. Michael Horowitz, Director of the Project for Civil Justice Reform, The Hudson Institute

Mr. Robert Peck, Senior Director of Legal Affairs, Association of Trial Lawyers of America

Mr. C. Boyden Gray, Partner, Wilmer, Cutler & Pickering

Center For Legal Policy Conference
Co-sponsored by the Manhattan Insitute, the U.S. Chamber of Commerce, The Federalist Society, and The Hudson Institute
 Washington, D.C.

 


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