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Contingency fees are fine In “ Rein in contingencies” [NLJ, March 15], Jeffrey O’Connell and Brent Tantillo reprise arguments that five states and the American Bar Association have found wanting. Their argument is built on suppositions about contingency-fee practice that do not bear up under scrutiny. As the rejecting states understood, their fee proposal is unnecessary, unworkable and seeks to change ethical and procedural rules and substantive law to give an unfair advantage to defendants. That is why every state to consider the petition-Alabama, Arizona, Maryland, Ohio and Utah-has rejected it. O’Connell personally argued the matter in Utah, where the Utah State Bar committee delegated to hear the matter by the state Supreme Court found that O’Connell and Common Good [the entity that brought the challenge] failed to provide any evidence that contingency fees in Utah were not reasonable, that a problem existed or that existing rules were inadequate. The committee recognized that matters that result in early settlements can involve tremendous preparation, difficult negotiations and post-settlement work to satisfy subrogated rights and liens. Even when the workload is reduced, the committee acknowledged that attorneys routinely reduced their fees when they regarded them as excessive, as required by the existing rules. To cure an illusory problem, the petition sought to change ethical rules with substantial effect on procedural rules and substantive law, a purpose the committee found “entirely out of character with the general approach and goals of ethical rules.” Why propose it then? The petition acknowledged that one benefit would be that a defendant could offer less in “total payout [and] achieve the same compensation [to] the claimant.” The Utah State Bar committee stated that this was “far less a modification of ethical constraints and guidelines that govern Utah lawyers and far more a public-policy proposal that would materially alter the legal framework that prescribes litigants’ rights, responsibilities, and choices.” Contingency fees remain the key to the courthouse for most plaintiffs; their regulation should not serve instead as a vehicle for smaller settlement offers. Robert S. Peck Julie Anna Schroeder Washington The writers, both with the Center for Constitutional Litigation, represented the Utah Trial Lawyers Association in opposition to Common Good’s petition. The very existence of contingent fees has been criticized on this page by Jeffrey O’Connell and Brent Tantillo. The clamor to limit contingent fees is nothing new. This latest campaign of deception stems from petitions filed in 13 states by Common Good. Do not be fooled. Philanthropy, charity and genuine humane concern for tort victims are not its motivation. The current petitions are nothing short of a retooling of a 1994 proposal authored by Professor O’Connell and two other detractors of the contingent fee, Lester Brickman and Michael Horowitz, for the Manhattan Institute, another conservative think tank dedicated to diminishing the rights of injured people. No empirical evidence exists that lawyers overcharge their clients. In its absence, O’Connell and Tantillo scoff that contingent-fee lawyers cannot be trusted to honor their fiduciary obligations, even though sworn affidavits from attorneys in Utah who contested Common Good’s petition in their state affirmed that lawyers often voluntarily reduce an agreed-upon contingent fee to facilitate settlement or in the best interest of the client. It is not uncommon in airline disasters or other mass catastrophes for attorneys, representing multiple claimants under a single liability claim, to ab initio enter into a contingent-fee contract at levels far below one-third. I am sure there are some clients who have been mistreated by lawyers and some payments under contingent-fee contracts that were excessive. Where scruples are lacking, the method of compensation is irrelevant; judicial scrutiny is available on a case-by-case basis. Simply because a contingent fee may yield an amount greater than the lawyer would have received if he or she had been compensated on an hourly or flat fee basis does not mean it is unethical, nor does it besmirch the good name that most contingent-fee lawyers enjoy. The ABA has rejected this criticism in a formal opinion. Rules of professional conduct already require contingent fees to reflect not only the time expended, but the novelty and difficulty of the questions involved and the skill necessary, including the experience, reputation and ability of the lawyer. Who is to say that an early settlement offer was not prompted by a defendant’s recognition of the ability of a plaintiffs’ lawyer to prevail? To obfuscate causation, lawyers entrenched in the industry of discovery make burdensome demands. Every effort is made to deter lawyers from pursuing smaller cases by jacking up the costs in time and money for smaller claims. The determination that a case is worthy of pursuit does not mean that a favorable resolution for the plaintiff is a fait accompli. A contingent-fee contract means that the lawyer has assessed the risks and is willing to shoulder the burden of obtaining no judgment or an unenforceable one, retroactive changes in the law, the expense of trial and appellate review over many years, and the potential need to expend much time and effort. The large windfalls that critics deplore (or envy) rarely occur. The limitations the authors suggest will penalize those personal injury lawyers who rely on small cases for their livelihood. They would be out of business, leaving a large number of Americans without full and fair compensation for their injuries because they would lack proper representation. In theory, a plaintiff’s lawyer may settle early to reap what may appear to be a large fee relative to the number of hours spent. But that is not the ordinary experience. Defendants rarely concede liability. Plaintiffs’ lawyers are forced to pursue tortfeasors until the verge of trial even in cases of modest recovery. Professor O’Connell is incorrect that the “gaming incentive” of lawyers who represent the injured or their families on a contingent-fee basis is responsible for “bloated transaction costs.” Surely it would be in their economic self interest to maximize profits by minimizing hours and resources. Rather, counsel who bill by the hour have an incentive to drive up litigation costs. The real culprit is the economics of the insurance industry, which earns interest on the premiums it invests, making litigation delays advantageous. This is the impetus for defendants to withhold realistic settlement offers. If the authors were serious about curtailing legal costs, they would bite the bullet and demand prejudgment interest. Philip H. Corboy Chicago Brent Tantillo responds: Robert S. Peck, Julie Anna Schroeder and Philip H. Corboy obviously think very little of their fellow lawyers. So little, in fact, that without personal injury attorneys continuing to receive a third of any settlement-even if the attorney did little work or added little value to the claim-the keys to the courthouse doors will remain locked for plaintiffs. Nothing could be further from the truth. Personal injury attorneys routinely screen cases, picking those with the best chances of winning large judgments or easy settlements and leaving most victims to fend for themselves and take what is offered by insurance companies. Sadly, the tort bar is opposing a tool that will make it easier and faster for victims to receive compensation. The petitions filed in the 12 states do not seek an end to the contingency fee, despite Corboy’s assertions to the contrary. Quite simply, the proposed rule requires plaintiffs’ lawyers to advise defendants, in a letter, of the basic, discoverable facts of their clients’ claims. If a defendant makes an offer based on the letter and the plaintiff accepts, then the contingent fee cannot exceed 10% of the first $100,000 and 5% for amounts exceeding it. Note: There is no obligation for a plaintiff to accept an offer if one is made. If the parties don’t come to agreement, then it’s on to trial- with full discovery and 33% contingent fees. Robert S. Peck, Julie Anna Schroeder and Philip H. Corboy assert that there is no empirical evidence that personal injury attorneys overcharge. To the contrary, Professor O’Connell and I cited a forthcoming study of the Insurance Research Council, “Paying for Auto Injuries,” which proves otherwise. A national survey found that no matter whether a settlement takes one day or one year or the amount is $100 or $25,000, and no matter which of the opposing insurance companies pays the claim, median attorney contingent fees remain constant at 33%. According to another study, less than 1% of lawyer advertisements placed in the yellow pages engage in any form of price competition. In contrast, the evidence cited by the letter writers are sworn affidavits filed by Utah lawyers who stated they “routinely reduced their fees when they regarded them as excessive.” Even if we take these attorneys at their word-contrary to the Insurance Research Council study-such statements, which might be dismissed as self-serving, are most convincing because they turn out to be self-damning. That lawyers would imagine that such a clear conflict of interest exonerates them is an indication of ethical myopia of huge proportions. Nothing could more convincingly demonstrate the need for changes in the status quo. Finally, ever mindful of perceived and real conflicts of interest, I note that Professor O’Connell did speak for the proposed rule change in Utah. He spoke at the request of pro bono counsel Steven Densley, a member of the Utah bar. Professor O’Connell testified before the committee appointed by the Utah bar to hear different perspectives on this issue, and did so in his capacity as a professor of law at the University of Virginia; he was not paid for his testimony. Brent Tantillo Washington Tantillo is the deputy director of the Project for Civil Justice Reform at the Hudson Institute.

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