How to Feed a Lawyer (and Other Irreverent Observations from the Legal Underground)

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June 28, 2004


Rufus T. Firefly

The problem that I've always seen with the bar exam is that the exam itself replicates law school too much. There's not much point in testing someone who's graduated with passing grades from an accredited law school on general legal knowledge and the ability to write and reason. Nonetheless, some kind of licensing should be required, if only for the public perception. Better minds than mine, which includes, you know, everyone, will have to come up with the answer. But some kind of system akin to medical internships/residencies where practical skills are taught and then tested in a real life environment might be be one solution that could be debated.


I'm not a mind reader, either, but perhaps conflicts of interests between personal injury litigants and their lawyers working on contingent fee are most evident in potential settlement considerations. While there may be commonality of interests, there is not parity of interests between injured parties and their lawyers on contingent fees. Personal injury lawyers probably have quite different cost-benefit interests in cases than those of their injured plaintiffs. Since most personal injury cases settle before adjudication, it seems that conflicts of interests could arise more often than not.


Happy to expand on what I wrote, but before I begin let me say that the billable hour is the insidious demon that defense lawyers deal with. Or 'don't deal with' is probably more accurate.

Here's the problem with contingency fees. While it allows plaintiffs' attorneys to take on cases that have some risk and spread the risk across several cases (which is obviously a benefit to clients who would not otherwise have an attorney) it diminishes the judgment of plaintiff lawyers as a whole (we're talking about trends here, not the behavior of particular actors within the system). The tendency, after a while, is to be more inclined to accept risky cases. And for newly minted lawyers who are trying to get started there is a tendency to take on the riskiest cases.

Perhaps the real problem with the contigency fee system isn't that it exists, but rather that it exists within a legal framework where law schools have great financial incentive to take in as many students as they can and to graduate as many as they can. Law schools are 'cash cows' in case you haven't heard. So, you put those two factors together and you get a lot of poorly trained, debt-ridden, and aggressive young lawyers that will take on cases that are marginal.

Now what excuse to the older, well-seasoned, financially secure plaintiffs' lawyers have for bringing marginal cases? Well, they're used to it. There are other reasons and other archtypes of lawyers that we can discuss. The bottom line is that it isn't a good thing our current contingency fee system. In jurisdictions where judges are elected and have to raise money it is the plaintiffs' lawyers who provide the bulk of the donations.

Perhaps the contingency fee system doesn't create a conflict of interest between the lawyer and the client, but it certainly creates a conflict of interest with respect to reforming the legal system. Like I said, on the defense side of the equation, the billable hour is the big white elephant that no one wants to talk about. On the plaintiff side it's contigency fees and campaign contributions to judges. If we want to have an occupation that is thought of as a profession (as opposed to a trade) then it behooves all of us to look at the picture from a viewpoint that doesn't include our economic interest. Judgments are always cloudy when we shape them according to what makes money for us, rather than according to what is best from a larger societal perspective.


Rufus: I once posted some thoughts at De Novo about teaching practical skills, and threw out this idea: "A more radical solution would be to change the nature of the third year of law school altogether. Don’t many already consider it wasted? Turn the third year into an opportunity for a yearlong apprenticeship with actual lawyers under the umbrella of the law schools; the law schools would function in the role of ombudsman, facilitating the communication between the law students and their firms."

Nic: As for conflicts of interest in settlement, can you be more specific? Do you mean a situation in which the client wants to keep fighting, but the lawyer wants to settle? Or the reverse? Or are you suggesting a situation in which the lawyer wants to settle before he's worked up the case to the point where he can get full value? And whatever your answer, how does it differ from a situation in which a lawyer is pursuing a commercial case on behalf of a business or individual? (And what about civil defense lawyers who recommend their corporate client not settle--or who don't pursue settlement at all--so that they can continue to bill to the file?)


Ernie: Thanks for the comment. On this weblog, I once posted a much-too-long analysis (or defense?) of contingency fees here. A few brief thoughts about your comment:

a) Are you opposed to all "risky" cases? There's nothing inherently wrong with risky cases, in my opinion. Or do you mean to say "frivolous" cases? (You also call them "marginal" cases.)

(b) If your point is that the contingency fee system leads lawyers to take on frivolous cases, I'd say that although there are exceptions, I generally don't agree. In my experience, lawyers who take on frivolous cases tend to go broke quickly.

(c) I think there's a bit of a logical leap when you say the contingency fee system is broken, then add "[i]n jurisdictions where judges are elected and have to raise money it is the plaintiffs' lawyers who provide the bulk of the donations." If you mean that the elected judges are sanctioning frivolous cases in order to get donations, see (b).

(d) The way judges are selected certainly merits discussion, but I don't think there will ever be away to take politics out of the equation in some shape or form.

(e) I completely agree that "it behooves all of us to look at the picture from a viewpoint that doesn't include our economic interest." When I defend contingency fees, which I also did as a defense attorney, I'm often thinking of my typical client: someone who was wronged but who wouldn't be able to afford to seek redress without the benefit of the contingency fee system.


Foremost, I was thinking of cases where, objectively, the clients ought to continue to litigate, but, objectively, from the lawyers' business point of view, he ought to settle rather than invest more time and effort in the relatively risky prospects of a fraction of the potential rewards. I was speculating that this might be an area of conflict of interest, not specifically stated by Ernie. Cases of personal injury might differ from commercial cases, in many ways, not the least of which might be that damages are not restricted to economic loss, and the decision to settle is often not simply a business decision for the plaintiff. Personal injury cases might also differ from commercial cases where the plaintiffs don't have the financial resources to pursue litigation except on a contingent fee basis, in which case they are very much not on an equal footing with the lawyers representing them in settlement negotiations. The completely different point, of lawyers, whether for defendants or plaintiffs, litigating by the hour without an interest in reasonable settlement is thematic for the [non]billable hour.

Crime & Federalism

Re: Contingency fees.
I waited tables for a couple of years before law school. At lunch, tips were smaller because people ate less and the menu prices were lower. Dinner tips were usually large. When we would work a lunch shit, out motto was, "turn 'em and burn 'em." In other words, collect your $5 tip and get them out of there. If we did this quickly enough, some lunches would nearly rival our economic return fro a dinner shift. The same thing can happen with contingency fee cases. Maybe you can settle early for a nice amount of money that leads to an hourly rate of $2500. If you work the case up, you (and thus the client - let's properly order things the way most PI lawyers think) will make more money, but your hourly rate would decrease.

My issue with contingency cases is that too often risk is not spread out over a bunch of cases. I worked for a large PI firm, and they would not take a case unless it was a pretty sure bet that a recovery would follow. The firm could tell with about a 90% certainty when a case had value. Nonetheless, that firm would charge a 40% congintency fee whether or not the case went to trial.

Evan, how can a large contingency fee be justified when attorneys with good instincts for the value of a case only take cases very likely to lead to success?
[Note: No sour grapes here. I am a card-carrying member of ATLA.]

Re: Practical law schooling.
How about a little bit of personal responsibility? I have worked on dozens of actual cases. I can handle a case from the filing of the Complaint to filing writs and appeals. I have attended over 100 hours of CLE seminars - usually for free. I gave up after a long time of trying to drag my friends off to receive this valuable practical training.

If students want the schools to spoon feed them, then I can't feel too sorry if the spoon contains vinegar. But (for selfish reasons) I would like a litigation seminar to be part of every law student's second year. I get sick of hearing people who have never responded to discovery, produced documents, or been stood up by defense counsel show up at a deposition that they want to be litigators. Do most law students have *any* idea what litigation entails? Most of it is mindless. And thus, I want them to quit talk about being future litigators until they have done some litigation.


C&F: You ask: "Evan, how can a large contingency fee be justified when attorneys with good instincts for the value of a case only take cases very likely to lead to success?"

I put my thoughts about contingency fees, and explained my own practices, in the post I linked to above in my response to Ernie. In answer to your (rhetorical?) question--I don't normally charge 40% like the firm you mention, but I wouldn't say 40% is always unjustified. I also disagree with your premise a bit. Although like the firm you mention, I reject a lot of cases and try not to pick losers (usually the "losers" belong to people who shouldn't be thinking about suing in the first place), some cases don't work out as planned in the beginning, and of those that do, some take a long time and a lot of money to prosecute, despite a correct prediction about the ultimate outcome. So it's hard to tell in the beginning what's going to happen in the end.

I think when you ask, "How can a large contingency fee be justified," you are really asking a different question--how much should plaintiffs' lawyers earn? To answer that question, one must also ask whether there is any evidence the victims of negligent conduct are not being fairly compensated because they're having to pay their lawyers. I certainly don't think that's the case. (The issue of whether some awards are too large is a separate issue, unrelated to the size of a contingency fee.)


My question was not rhetorical: thank you for responding. Two points. You wrote? "[S]ome cases don't work out as planned in the beginning, and of those that do, some take a long time and a lot of money to prosecute." The client pays the costs, too, although you do front them. But I agree that where cases require a lot of time, then the fee should be substantial, but still reasonable, see below.

You say: "'How can a large contingency fee be justified,' you are really asking a different question--how much should plaintiffs' lawyers earn?"

I should have make a supposition clear. I am a capitalist. Making a lot of money sounds good to me. But the rules of professional conduct warrant that a legal fee be reasonable. I do not think that a contingency fee that leads to a $2000 hourly rate is reasonable. Delicious? Yes. Reasonable? No case where the court applies the lodestar method - premised on a reasonable hourly rate - find those sums reasonable.

Do victims of corporate misconduct deserve a lot of money? The answer is yes if the frame of reference is the cases I've worked on. But the contingency fee takes money away from the client, whom the trial lawyer purportedly serves. Gerry Spence teaches at his TLC Seminars to say, "Give my client a full cup of justice." Then he takes 33.3% to 40% out of the cup. If the client is as worthy of receiving money as the lawyer makes it seem, then shouldn't the lawyer do his best not to take money from that cup?


C&F: You've provided one measure of unreasonableness: a "contingency fee that leads to a $2000 hourly rate." I would say, speaking of personal injury cases, that that would definitely be the exception, not the rule. In a case that settled for $100,000, the lawyer being paid a 1/3 contingency gets $33,333. At $2,000/hour, that's only about 17 hours or two days of work. Unlikely.

As for Gerry Spence, I don't have a problem with him charging 1/3 or 40% if his clients are getting fully compensated for their injuries.

Rufus T. Firefly

Being on the defense side, I don't usually care about a plaintiff's lawyer's fees. That's an issue between the plaintiff and her lawyer. That being said, there wre many times when I was in practice when I would make what I thought was a reasonable offer and be told by my adversary that it wouldn't do because considering the amount of work he had put in he would not make a big enough fee. Essentially, I was being told that my client should pay more because it took longer to get to a settlement and it took more work than oroginally estimated. This didn't happen all the time, but it happened often enough to make me believe that some plaintiffs' lawyers will reject or advise against settlements that are fair if they conclude that they are not getting enough of a return on their investment. Of course, that alone is not a reason to scrap the system, but some kind of reform, and don't ask me today what that is, might be warranted.

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