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The proposal to restrict attorneys' fees is flawed. It groundlessly asserts that Utah plaintiffs' lawyers repeatedly violate the existing Rules of Professional Conduct by overcharging
their clients in contingent fee cases. It incorrectly declares that the courts are burdened by tort litigation. It misleadingly implies that the only service that lawyers render to their
clients is in getting them money. And it disingenuously states that the public will benefit by a proposal that will have the effect of limiting access to legal services.
Utah is
not the first state where a petition like Common Good's has been put forth. Nearly identical proposals were rejected by the supreme courts of Alabama and Arizona without comment. The ABA
has twice rejected similar proposals, in 1994 and again as part of its Ethics 2000 project.1 The Utah Supreme Court and the Utah State Bar should resist the clamor from self-styled tort reform organizations whose proposals are disguised as being citizen friendly when, in fact, they impede access to justice, reward dilatory tactics of insurers and deprive citizens of a level playing field.
Utah Lawyers Are Not Overcharging Their Clients
It is axiomatic that the person or entity that puts forth a proposal should bear the burden of showing that it is needed.2 Neither Mr. Densley nor the group calling itself "Common Good" has provided evidence that Utah lawyers are breaching ethical standards. Indeed, if such conduct has come to their attention, they have a duty to report it.3 Decisions regarding Utah lawyers should not be made on the basis of claims of misconduct in other states, nor should they be based on anecdotes, speculation, or assumptions.
Rule 1.5 of the Utah Rules of Professional Conduct, as it now exists, sets forth clear guidelines as to when and how fees of all kinds may be charged. Whether contingent, hourly
or of some other character, "clearly excessive" fees may not be charged. Among the factors to be considered in determining the reasonableness of a fee are:
1.
The time and labor required, the novelty and difficulty of the questions involved and the skill requisite to perform the legal service properly;
2.
The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
3. The fee customarily charged in the locality for similar legal services;
4. The amount involved and the results obtained;
5. The time limitations imposed by the client or by the circumstances;
6. The nature and length of the professional relationship with the client;
7. The experience, reputation and ability of the lawyer or lawyers performing the services; and
8. Whether the fee is fixed or contingent.4
A fee may be charged
that is contingent on the outcome, so long as it is appropriate in the circumstances and reasonable in amount, and as long as the client has been fully advised of the availability of
alternative fee arrangements.5 The representation agreement must be in writing and must spell out the method by which the fee is computed and the way that expenses will be handled.6 Furthermore, at the conclusion of a contingent fee matter, the client must be given a written statement that shows the remittance to the client (if there is one) and the method by which it was determined.7 If a client is dissatisfied with the fee arrangement, he or she can make it known. If a fee dispute cannot be resolved between the lawyer and the client, courts are available to review the reasonableness of fees.8 Furthermore, the Utah State Bar has committees that can become involved in helping to determine if fees charged are appropriate.9
In a brief that was filed with the Utah Supreme Court's Advisory Committee on Professional Rules of Conduct, affidavits from multiple Utah lawyers were provided to show
compliance with existing ethical rules and guidelines.10 Numerous examples were cited where lawyers have voluntarily reduced an agreed upon contingent fee in order to facilitate settlement, help the client, or acknowledge an unexpected break in the case. No examples were cited by proponents of this proposed rule change where unethical conduct in Utah was countenanced.
Utah Courts Are Not Overburdened by Tort Litigation
According to the Utah courts' website,11 in 2002 a total of 294,561 cases were filed in Utah's district courts. Of that number, 2,165 (less than 1%) of them were classified as "torts," which included malpractice, personal injury, property damage and wrongful death. During the same year, there were 7,675 probate cases (adoptions, guardianships, commitments, etc); 21,167 domestic cases (divorces, custody disputes, etc.); and 8,754 property rights cases (condemnations, evictions, foreclosures, etc.). If a rule were to be adopted that extinguished all forms of torts in Utah, the caseload would be reduced by less than 1%. This is hardly indicative of a burden on the courts that requires intervention.
Contingent Fee Lawyers Earn Their Fees Just Like All Lawyers Do
For some reason, proponents of this rule to restrict fees assume that it is easy to predict which cases
will be resolved quickly. Nothing could be further from the truth.12 Facts seldom fall easily into place. Witnesses can be hard to find. Viewpoints differ. Government investigations are incomplete or inadequate. Insurance companies dissemble.13 Injuries are of uncertain severity and complexity. People are not bumpers and fenders. They are unique. Furthermore, they are almost always new to the legal process. They are sometimes frightened, wary and in need of help. They have lots of questions. Lawyers do not just waltz in, take money from willing insurance companies, peel off a large cut and toss the rest to the client. Typically, a contingent fee lawyer deals with the following issues:
Researching the law on questions that are raised in what should be the most straightforward of situations;14 answering client questions about insurance coverage, medical bills, threatened termination from work, etc.; obtaining historical as well as medical information; interviewing witnesses (the client, family members, witnesses and others); obtaining medical reports and prognoses; obtaining employment information and income loss information; hiring experts (reconstructionists, doctors, economists, etc.); working with insurers (health and accident, workers' compensation, etc.) on collection matters, subrogation liens and coverage questions; handling minors' claims; establishing special needs trusts; working with structured settlements (qualified assignments, release language, etc.); helping the client to navigate a complicated maze of insurance intricacies (liability, health and accident, underinsured, uninsured, no-fault, worker's compensation and a variety of federal and state entitlements, coverages and programs); and otherwise helping to reassure and represent people who feel overwhelmed and vulnerable.
It shows an inadequate understanding of the role and duties of a lawyer for the proponents of this fee restriction rule to think that contingent fee representation is ever like
picking low hanging fruit. It is an affront to the integrity of the plaintiff's bar and to the bar in general to argue to this effect.
Public Access to Legal Services Will Be Restricted, Not Fostered, by This Proposal
The contingent fee has been rightly called the poor man's key to the courthouse. Those who are
injured, out of work and inundated by unexpected bills and expenses can seldom afford to pay an attorney's hourly rate for representation. Most victims would be deprived of access to the
courts if not for the willingness of some attorneys to risk their time and often their own money to provide legal services with the only prospect of payment for their services coming at
the end of the case and then, only if the case is successful. Thus, any proposal that would discourage a lawyer from taking those risks could reduce the number of times that an insurer
would have to make a payment of any kind to the victims of their tortfeasor insureds.
Common Good's proposal would cap contingent fees at 10% of the first $100,000 of recovery and
5% thereafter. If an attorney were to be compensated at the rate of $150 per hour, on a case that returned $100,000 of recovery, that would be the equivalent of 66.7 hours of work. If the
recovery were $50,000, that is 33.3 hours of work. If the recovery were $15,000 that is 10 hours of work. If the compensation rate is more than $150 per hour, then even less time can be
justified. It requires a certain dedication for any lawyer to be willing to spend his or her time and risk his or her money on a cause that can take unexpected twists and turns and be of
uncertain outcome. Lawyers who understand that there are no "slam dunks" in litigation respect the fact that, but for the contingent fee, many people would not be able to obtain
legal redress for their injuries.
For those that think $150 an hour (or more) is a hefty fee for a lawyer to earn, it should be remembered that out of this the lawyer must pay for
all overhead (rent, telephones, secretary, insurance, computers, office machines, dues, library, etc.). If "tort reformers" can succeed in creating an economic disincentive for
lawyers to take smaller tort cases, then they can successfully deprive victims of access to justice and make more money. What a novel idea!
It is no criticism of insurance
companies to say that they seek to reduce the amount of money that they pay in claims. They are most often corporations who have a duty to maximize their profits by reducing the claims
that they pay. They are not supposed to be altruistic. Given their responsibilities to shareholders and policyholders, they can only pay money when to not pay it would subject them to
legal or economic sanctions that would harm their profits. Thus, it is folly to suppose that, without the threat of legal or economic sanction that the lawyer provides, an insurance
company will "do the right thing" or be "fair and reasonable." It is simply sound public policy to permit citizens to have every possible means to level the playing
field by having legal representation. Within the parameters of the present rule 1.5, citizens can obtain such representation by entering into contracts of their own choosing with terms
that they work out between themselves and their lawyer without interference from their adversaries.
The Proposed Rule Will Result in More Litigation
The fee limitations proposed by Common Good would only apply to "personal injury matter[s]."15 A "personal injury" is defined as "the incurrence of bodily injury, sickness or death."16 The definition invites confusion. Harassment in the work place can produce sickness, as can disputes with insurance companies. Are those cases included? What about will contests that obviously involve death? Are life insurance disputes covered? They involve the incurrence of death. Maybe health and accident coverage disputes are subject to the rule since they involve the incurrence of sickness. Are civil commitment proceedings comprehended? They often involve the incurrence of mental illnesses, which could be a form of "sickness." These and similar issues will ultimately have to be litigated.
Proponents argue that parties are not forced to settle their cases and, once they have complied with the notice requirement, can always refuse to accept "early
settlement" and proceed with a normal contingent fee contract. However, if it is later determined that the early notice failed to contain "accurate and sufficiently detailed
information to allow the allegedly liable party to assess the claim and make a reasonable offer of settlement," then the contingency fee agreement is voided, and the rule's fee
limitations are imposed.17 Does anyone doubt that satellite litigation will arise as defendants (and their insurers) who are hit with large verdicts claim that the notice was inadequate and that, therefore, the fee should be capped?
Thus, rather than solving a problem (a problem that does not exist), the proposed rule only creates problems and raises issues that will result in more, not less, litigation.
The Proposed Rule Is Inequitable
Perhaps the biggest problem with the proposed rule is its one-sidedness - the obvious unequal protection of the law that results from
imposing this restriction on only the plaintiff's side of a limited class of clients and only on a limited segment of the bar. There are no consequences for a defendant or his counsel who
chooses not to make an early offer of settlement (even where liability is clear) or who rejects a reasonable offer of settlement from the plaintiff. The defendant is not even required to
make an early offer of settlement. Thus, the net effect of the rule is to require the plaintiff to lay out his case to the defendant before the plaintiff has had an opportunity to take
any discovery from the defendant and allows the defendant to put undue pressure on the plaintiff to buy a pig in a poke, that is, to accept a settlement offer before the plaintiff knows
the full extent of his damages or of the defendant's wrongdoing (or even the identity of all the potentially responsible parties).18
The rule also drives a wedge
between the plaintiff and his attorney by creating conflicting incentives. The plaintiff may have an incentive to accept an early offer of settlement, particularly when the defendant is
telling him that he won't do better at trial and will have to pay his attorney a greater percentage of his recovery if he rejects the offer. At the same time, plaintiff's counsel may have
an incentive to reject what he thinks is an unreasonably low offer and earn his full, agreed upon fee. An ethical rule that creates a conflict of interest between an attorney and his or
her client is a contradiction in terms.
It is argued that a plaintiff's attorney whose work warrants a fee in excess of the limit placed by the rule can apply to the court for an
adjustment. However, in order to make such an application, the lawyer must act against the interests of his client and violate the conflict of interest rules. This will foster disharmony
between lawyer and client and may cause lawyers with foresight to avoid representation where such conflicts can arise. This will reduce the pool of attorneys willing to take contingent
fee work and consequently reduce the public access to legal services.
The proposed rule presents other problems as well. It requires the submission of a notice that then gives the
potential defendant 60 days to make an early settlement offer. Presently, insurance companies have duties to investigate claims when they arise. Under the proposed rule, insurance
companies could sit back and wait for the claimant's attorney to do the work and submit the notice. Does anyone think that the savings realized in this shift of responsibility to the
plaintiff's attorney will result in higher payments to victims?
The proposed rule also does not address the need for creative fee structuring when the primary motivation of a
claimant (who cannot afford to pay an hourly fee) is to secure non-monetary remedies such as injunctions and apologies or when the claimant wants the opportunity to confront his or her
wrongdoer or make the wrongdoer appear in court and defend his conduct.
The rule also ignores the problems that are encountered when a statute of limitations is going to run and
there is not time to submit a notice and wait 60 to 90 days for a response.
The detrimental effect on an attorney's willingness to take smaller cases on a contingent fee has
already been discussed. Suffice it to say that clients who can afford to pay for legal representation are not affected by this rule. Those affected are ones who cannot afford legal
representation and who rely on the contingent fee to give them access to justice.
Conclusion
The Rules of Professional Conduct are not mere suggestions. They are
requirements, the nonobservance of which can result in disbarment. Therefore, they must be cautiously studied, carefully written, easily understood and subject to uniform application. The
proposed rule limiting contingency fees in a narrow class of cases is ill conceived, inequitable and unnecessary. It is a solution in search of a problem. Utah should reject it out of
hand.
Footnotes
1. See ABA Comm. on Ethics and Professional Responsibility, Formal Op. 389 (1994); Stephanie Francis Ward, Group Seeks Cap on Contingency Fees, A.B.A. J. eRep. (May 23, 2003).
2. See, e.g., Koesling v. Basamakis, 539 P.2d 1043, 1046 (Utah 1975) (the proponent of a proposition bears the burden of proof, including the burdens of production and
persuasion).
3. Utah Rules of Professional Conduct Preamble, para. 11, & Rule 8.3.
4. Id. Rule 1.5(a).
5. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 389 (1994).
6. Utah Rules of Professional Conduct Rule 1.5(c).
7. Id.
8. See, e.g., Jones, Waldo, Holbrook & McDonough v. Dawson, 923 P.2d 1366, 1371 (Utah 1996); Centurion Crop. v. Ryberg, McCoy & Halgren, 588 P.2d 716, 716-17 (Utah 1978).
9.
Presumably the Fee Arbitration Committee, the Client Security Fund Committee, the Ethics Advisory Opinion Committee and the Disciplinary Committee are all available to assist in questions involving the propriety of a fee.
10. The petition to limit fees was originally filed with the Utah Supreme Court. The court referred it to the Supreme Court Advisory Committee on Rules of Professional
Conduct for study. The committee asked for briefs to be submitted in support of and in opposition to the proposal. Briefs were submitted in May and July 2003. Oral argument was heard by
the full committee in October 2003.
11. The court's website can be accessed at http://www.utcourts.gov/stats/FY02/dist/ fy2002_9.htm. All statistics cited in this section are
available on that website.
12. At oral argument on this proposal, Mr. Densley cited certain advertising efforts of lawyers who claim that they can usually tell a prospective
client on the phone whether they have a "good case" as proof that cases were easy. Deciding that a case has potential and is therefore a "good case" does not mean that
it is an easy case or that it will be resolved quickly or without significant opposition, risk and expense. A case is a "good case" when a lawyer's assessment of risks means
that he or she is willing to take it on a contingent fee.
13. See, e.g., Campbell v. State Farm Mut. Auto. Ins. Co., 2001 UT 89, ¦¦ 28-32, 65 P.3d 1134 (citing examples of State Farm's misconduct), rev'd on other grounds, 123 S. Ct. 1513 (2003).
14. In what should be the most straightforward of cases, insurance companies contest the necessity and reasonableness of medical care; they demand so-called
"independent" medical examinations by doctors and others who have known biases; they hire accident reconstructionists, engineers and human factors experts who minimize the
forces of impact in collisions and obfuscate causes and effects; they demand production of medical records that may be twenty years old; and they throw up roadblocks to prompt resolution
by forcing parties to incur costs and expenses that can deter pursuit of smaller cases.
15. See Mem. in Supp. of Pet. for Rulemaking to Revise the Ethical Standards Relating to Contingency Fees app. A, ¤ 1 (available online at http://cgood.org/library/download/Early%20Offer%20Petition.pdf?item_id=25733).
16. Id.
17. See id.
18. See Paul M. Simmons, The "Common Good" Proposal to Limit Contingency Fees: Where's the
Commonality? Utah Trial J., Summer 2003, at 10-16.
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