Friday, November 30, 2007

tort reform and contigency fees

A contigency fee is where an attorney recieves a portion of the winning if they win the case.

What the contigency fee does is two fold: First it builds up the lawyer lottery. To win the lottery you have to play and the more you play the more likely you are to win. So the more the lawyer sues people the more likely he is to win the lottery. The lottery is the right combination of suffering and pain combined with activist judges and money happy juries that can result in out of control settlements. All you have to do is keep playing the lawyer lottery and you will get that big judgement. Then once you get that judgement you get 25% to 50% of all that money. Of course you can build up fear of paying out on the lottery and get insurace companies and corporations to just give you money to go away. Then you can take 25% to 50% of that also.

Secondly it takes money from those truly suffering. For example, I recently hear of a family that was rear ended on a free way. The individual responsible for the wreck sold cars for a living. The car had been loaned to him as part of his employment. A look at this mans record would have indicated a history of unsafe driving and therefore loaning cars to this person was unwise and put the car lot as part of the responsible party in the accident. So now this case is interesting to a lawyer because there are deep pockets and they can maintain a percentage of responsbility. This creates a lottery situation. Notice that if this persons record was clean then there was a much smaller chance a lawyer would take this case. so the lawyers begin pursuing the lottery. In response the insurance companies decide to avoid the potential pay off and settle for around 5 million in suffering and lost wages to the family and spouse of the wife killed in the car. The lawyer takes 1.5 million of this money. The family's suffering, medical bills and lost wages are calculated out at 5 million and the lawyer get 1.5 of it. for what? If the money is for those truly hurting, how does this much money go to a lawyer. Take a paralyzed person for example. I've heard lawyers talk about how this is the biggest lottery ticket. Because that person can sit in the courthouse and juries are going to feel awful on top of the incredible money they can ask for concerning long term medical costs. therefore if a paralyzed person needs 2 million to pay medical costs, how does a lawyer justify taking 600K to 1 million of that in contigency fees?

options:
1. reduce the allowed amount to around 10%.
2. eliminate this as an option and force costs to be charged. I don't like this because then lawyers would be incented to delay the action to bill more time.
3. force the loser to pay for courts costs. again we have the issue of lawyers delaying action to increase billable time.
4. all lawyers go on the gov't as salaried employees or work for corporations as salaried employees and bonus them on how quickly justice is served.

Wikipedia list the strengths and weaknesses as
[edit] Advantages
A contingency fee arrangement provides access to the courts for those who cannot afford to pay the attorneys fees and costs of civil litigation. Contingency fees also provide a powerful motivation to the attorney to work diligently on the client's case. In other types of litigation where clients pay the attorney by the hour for their time, it makes little economic difference to the attorney whether the client has a successful outcome to the litigation. Finally, because lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be reduced..

[edit] Disadvantages
Contingency fees do not guarantee civil justice, or even access to the courts. Lawyers sometimes "cherry-pick" only the strongest claims which are most likely to succeed. Not all cases are immediately transparent. Some require extensive investigation before the chances of success can be properly assessed. Such cases might be turned away because even the initial assessment of their strength is costly and risky.

1 comment:

philip_tucker said...

how does a lawyer justify taking 600K to 1 million of that in contigency fees

Well, if the lawyer is really good, maybe that person got a $5 million instead of $3 million settlement, in which case it would be a bargain. I don't see it as any different from an agent getting 10% of the contract he negotiates for his client. You could make the same argument, "Drew Rosenhaus can't even throw a football, why should he get 5 million of Peyton Manning's contract?"