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New York was one of 12 states where petitions were filed Tuesday with lawyer discipline authorities to limit attorneys’ contingency fees in personal injury cases that reach quick settlements. The proposal would limit attorney fees to their hourly rates in fast-settled tort cases, with a maximum cap of 10 percent of the recovery. A contingency fee of one-third of the recovery is routinely charged in personal injury suits. The nationwide effort is spearheaded by a Washington, D.C.- based nonprofit group, Common Good, which is headed by Philip K. Howard, a vice-chairman of Covington & Burling and the author of several books criticizing the American legal system. Michael J. Horowitz, a senior fellow at the Hudson Institute, who was general counsel to the U.S. Office of Management and Budget in the Reagan administration, also played a key role in the effort. The author of the brief filed in New York is Harold Reynolds, a former clerk of the New York Appellate Division, 1st Department, who took on the assignment pro bono, as did counsel in the other 11 states where petitions were filed. Reynolds contends in his brief, which is similar to those filed in other states, that in cases that settle rapidly, a one-third fee vastly overcompensates an attorney for the work performed and the amount of risk faced in bringing a suit that may fail. Also, the briefs contend that by creating an economic incentive for defendants to settle early, the rule change will help clear congested court dockets. Carlton Carl, a spokesman for the Association of Trial Lawyers of America, a plaintiffs’ lawyers group, attacked the proposal as another effort by “major corporate interests to make it more difficult for American families to obtain competent representation” to redress financial and physical injuries. Nathaniel Zylstra, a research fellow at the Hudson Institute in Washington, D.C., said that to the contrary, the effort is designed to “enhance the rights of consumers” by insuring that they receive a greater share of an early settlement. Nancy Udell, an attorney with Common Good, said the group is nonpartisan and last year raised more than two-thirds of its funds from individuals and foundations, rather than corporations. In addition to New York, petitions were filed in Alabama, Arizona, California, Colorado, Maryland, Mississippi, New Jersey, Ohio, Oklahoma, Utah and Virginia. A 13th petition was filed in Texas a month ago. According to Lester Brickman, a professor at Benjamin N. Cardozo School of Law and a legal ethics expert who strongly backs the proposal, about 20 states, including New York, have rules limiting attorney fees in contingency cases to one-third of the recovery. New York and California also have laws creating sliding scales for recovery in medical malpractice matters, so that in cases where there is a large recovery, fees are limited to somewhat less than 33 1/3 percent, he said. In the remaining states, Brickman added, contingency fees are unregulated, but accepted norms, which vary in different communities, range from one-third to one-half. DETAILS OF PROPOSAL The proposal requires attorneys for personal injury claimants to give defendants notice of their claim so they can make an early settlement offer. Once a defendant is served with notice of the claim, it would be obligated to make an offer within 60 days to gain the benefit of the lower fees required by the rule. The defendant would be given an option of sending the offer directly to the client as well as the attorney. Should the client accept the offer, attorney fees would be limited to the lawyer’s customary hourly rates for time expended on the case. In any event, the fee could not exceed 10 percent of the first $100,000 of the settlement amount, plus 5 percent of any remaining amounts. Attorneys who failed to serve the required notice of claim would be subject to the fee limits set forth in the rule. The New York petition was filed with each of the four departments of the Appellate Division, and Chief Judge Judith S. Kaye. Under New York law, each of the four departments is responsible for adopting rules governing the conduct of attorneys in their jurisdictions, though in recent years the departments have approved joint rules to promote uniformity throughout the state. In putting forward the proposal, Reynolds contended that the new rule is necessary to ensure that existing law governing fees is properly enforced. New York’s Disciplinary Rule 2-106 bars fees that are excessive when measured by the amount of work required by a case, the nature of the issues involved and the level of skill required. The proposed rule will “infuse into an area of personal injury practice a sense of ethical order long absent from it,” Reynolds wrote. The whole rationale for a contingency fee is the risk that no fee will ultimately be recovered, he argued, but an early settlement within the period set forth in the proposed rule “totally eliminate[s] that risk.”

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