Right now, trial lawyers everywhere are planning strategy (and calling in favors), hoping to prevent the adoption of the early-offer settlement rules recently proposed by Common Good.  The proposed rules would increase the victim's share -- by reducing the lawyer's share -- of damages won in a personal injury lawsuit. [As discussed previously in our postings on May 30, 2003 and June 3, 2003 .]

Well, ethicalEsq? has the perfect plan to avoid adoption of the Common Good proposal in the 13 states where petitions are pending, or anywhere else. If p/i lawyers, bar associations, disciplinary committees, the courts, and the entire legal profession simply follow each of these suggestions, there will be no reason to make the changes proposed by Common Good to the existing rules of ethics. Indeed, this blawg will be the first to say just that. It's easy:

(1) Start to follow and enforce the current rules concerning the proper use of contingency fees. Stop your denial of these obligations, which were clearly spelled out in the American Bar Association's Formal Ethics Opinion 94-389, based on long-established principles, Rules and Commentary.  Opinion 389 isn't available online from the ABA, but I have summarized it quite fairly in a Prairielaw.com column (you can ignore the intro's sarcasm and skip down to the Law and Ethics section).

The Ethics Opinion states that a contingency fee "does not violate ethical standards as long as the fee 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." [Note: You are not being cute nor ethical merely telling the client "we have no alternative fee arrangements."] According to Op. 389, a long list of relevant factors needs to be discussed with every client in every case, and "a lawyer who always charges the same percentage of recovery regardless of the particulars of a case should consider whether he is charging a fee that is, in an ethical context, a reasonable one." In short, the choice to use a contingency fee belongs to the client and any percentage fee charged should reflect how likely the client is to win, how much money is likely to be rewarded and collected, and how much work the lawyer is likely to have to do (that is, the apparent risk taken by the lawyer).

(2) Because the requirements are almost universally ignored by lawyers and their watchdogs, it's time to follow this recommendation from Op. 389:

"[A]ny lapse from the applicable requirements by some members of the profession suggests that the profession should redouble its efforts to assure that the ethical obligations associated with entering into a contingent fee arrangement are fully understood and observed."

This means creating CLE seminars, articles and brochures, and imposing some actual attorney discipline. Also, it should mean going to the public to let consumers know their rights, because that knowledge will allow clients to protect themselves and spur fee competition among p/i lawyers. To show good faith and effort, mandatory statements of client rights should be promulgated, to ensure that each prospective client has enough information to make a smart choice in bargaining for a fair contingency fee or another arrangement, such as paying by the hour.

(3) Publically reject the recent changes to Rule 1.5 of the Model Rules of Professional Responsibility that were clearly made to protect lawyers from the ethical and fiduciary obligations required in Op. 389. (See My Open Letter to the FTC )   Opt out of the Ethics 2000 conspiracy by specifically asking the ruling body in each local jurisdiction to keep the current version Rule 1.5.

If you don't take this advice, you'll prove Common Good's case and deserve everything you get -- or don't get. However, if the profession immediately take the steps outlined above, Common Good's complicated, micro-managing proposals will be unnecessary to protect clients from excessive contingency fees. And, that is, or should be, everyone's goal.

Just in case the FTC staff hasn't targeted KBA's little conspiracy to restrain competition, I suggest the Association take a close look at a 16-page, fully annotated, letter sent by the FTC to the Alabama Supreme Court just last September, addressing proposed restrictions almost identical to those being considered by KBA. There's a good Press Release, too (Oct. 3, 2002), if the KBA advertising committee is too busy for footnotes.

Here's an excerpt from the FTC Press Release:

As to the "dignity of the profession" argument, the FTC's Alabama Letter concluded: "[B]road rules to enforce criteria of 'dignity' may prevent the communication of useful, nondeceptive information and thus inhibit competition and consumer choice. Strict rules to enforce 'dignity' may not give consumers enough credit, for consumers apparently respond more positively to advertising that would be considered 'dignified.' And consumers appear to be less offended by certain supposedly undignified methods than professional themselves are."

Two Cents from Jackie Cliente: Here's some truth in advertising about Your Editor: His lowest grade in law school (B-) was in Professional Ethics (in 1975). The entire grade was based on a term paper, in which the budding consumer/competition advocate argued that a lawyer should be able to engage in any advertising that is truthful and nondeceptive -- even if annoying as hell. Especially galling to the traditionalist professor was Editor's conclusion that, despite centuries of banned advertising, "The public appears to respect General Mills more than the Attorney General." Thought you'd want to know.

Update (filed 6/16/03):  Bert Foer at the American Antitrust Institute sent over a copy of Comments submitted on May 30, 2003, by Public Citizen to the Kentucky Bar association's commission on advertising rules.  In a  Press Release dated June 2, 2003, Public Citizen announced and described the filing, with links to the 29-page (pdf.) submission, as well as letters sent on May 30th to antitrust officials at the Department of Justice and Federal Trade Commission, asking for investigation of the rules.  Dealing with each of the proposed restrictions on advertising, Public Citizen argues in great detail that the new rules would prevent truthful and nonmisleading advertising and stifle competition (especially from plaintiff's attorneys who use tv to attract clients), resulting in violations of both the First Amendment and antitrust laws.

The California Supreme Court held yesterday that a plaintiff in a legal malpractice action may not recover lost punitive damages as compensatory damages from the lawyer. The full opinion in the case of Ferguson v. Lieff, Cabraser, Heimann & Bernstein (S10444, 6/9/03) can be found at this link (provided by How Appealing).

Three judges who concurred with the opinion's application of the new rule in the class action setting dissented to its application to all cases. Writing in her concurring and dissenting opinion, Justice Joyce Kennard said the following about clients outside the class action context:

"[T]he majority effectively denies such injured clients anything but a nominal recovery of compensatory damages, insulating the attorneys while failing to fully compensate the clients for the loss caused by the malpractice."

According to Justice Kennard, just one other state completely insulates attorneys from liability for lost punitive damages in malpractice suits.   Therefore, since insurance companies and lawyers have been living with that exposure, she says there is no need to go this far to prevent a malpractice crisis.  [The Justice cites to 3 Mallen & Smith, Legal Malpractice (5th ed. 2000) Damages, Sec. 20.7, for the general rule imposing the liability for lost punitive damages on lawyers.]

Justice Kennard argues that "If the attorney has not performed competently, the attorney is liable for the client's injury, including punitive damages lost to the client because of the attorney's deficient performance."

Law.com has an article today on Ferguson, as well as an article from 2001 about a California appellate court that reached a contrary conclusion.   An earlier piece on Ferguson (March 7, 2003) notes that Ferguson's lawyer in the malpractice suit, David Becht, "knows he's not popular with his fellow lawyers on this issue. Not a single person or agency weighed in on his side in the form of an amicus, he said."  It adds: "His opponents would say that's because the harm of allowing punitive damages for legal malpractice far outweighs any good."

Plaintiffs' personal injury lawyers and malpractice insurance companies (interesting bedfellows?) are breathing a big sigh of relief today.  But, this is a perfect "ethicalEsq? Moment" -- a chance to ask, not whether the decision makes life easier for lawyers, but whether it jibes with an attorney's professional and fiduciary obligations to the client, and with basic fairness.

In an article that will soon be published by the University of Illinois Law Review, Cardozo Law Professor Lester Brickman argues that lawyers qua judges have been busy insulating attorneys from fiduciary and professional obligations, while developing and applying such norms to other professions.  Indeed, Brickman compares attorney efforts to obtain punitive damages from others (including professionals such as medical doctors), with cases that came to a result similar to yesterday's Ferguson opinion and give lawyers immunity. 

What do you think? Please tell us with a Comment.

Two Cents from Jack Cliente:  Isn't the chance of getting big punitive damages a major part of the services and sales pitch of many lawyers?  (It plays a big part in the career choice of more than a few attorneys, doesn't it?)   When a lawyer's malpractice destroys that chance, why shouldn't the client have a chance to prove a real loss and be compensated?  What's so different about lawyers as defendants that warrants that protection -- other than the fact that lawyers make the rules?

ethicalEsq?ethicalEsq?

Several thanks to The Southern California Law Blog for mentioning us several times over the past few days. 

The Federal Trade Commission announced in a press release on June 6th, that its staff had filed an amicus brief opposing the proposed class action settlement in the Texas case of Haese v. H&R Block, Inc. -- due mostly to excessive attorneys fees.  The plaintiffs claimed that H&R Block helped them get income tax "refund anticipation loans," but failed to disclose it was receiving a "kick back" from the lending bank on each RAL.  The settlement would give the 700,000 class members coupons for a $20 H&R tax prep rebate, software and planning booklet for five years.  Based on the alleged face-value of the coupons, plaintiffs' lawyers estimated the value of the settlement at $261 million, and requested attorneys' fees of $49 million.

In its amicus brief, the FTC staff:

• explained at length why the purported face value of the coupons "wildly exaggerates the true value of the settlement to class member"
• noted the apparent strength of the case on the merits, and that the attorneys' fees would comprise "the only cash relief provided to anyone"
• opined that the reqested $49 million fee draws into question the adequacy of counsel's representation, and suggests the settlement may not have been the result of arms-length negotation
• called for using the "lodestar" method for calculating the fees (hours worked times an appropriate hourly rate), due to the inability to estimate the true value of the settlement;
• pointed out why the class counsel's offer to divert $26 million of its fees to the class (if it got the whole $49 million) "raises concerns that warrant the Court's scrutiny."
• concluded that the excessive fee request shows the settlement on the whole to be improper and contrary to the public interest

Prior efforts by the FTC to limit excessive attorney fees in class action suits, as part of its Consumer Protection mission, are described in a 9/29/02 Washington Post article.  The Commission's targets have included instances where the suits are "piggybacking" on government cases and the lawyers were therefore neither taking much risk nor doing much "heavylifting." FTC Chairman Timothy J. Muris is quoted saying: "if it's a choice between the money going to consumers or to the plaintiffs' attorneys, we'll take the consumer every time."

• Two Cents from the sidekick Jack Cliente: We've been online for a week, and one kibitzer has already complained that we're a "Johnny one-note" harping on excessive contingency fees.  Seems to me, we'd have a lot more topics and good news to report, if bar associations and courts would start promoting programs to better inform clients of their rights, and maybe enact some enlightened ethics rules (like those proposed here).

ethicalEsq?ethicalEsq?

Thanks to Ken at the Crimlaw blawg for mentioning us tonight. Public P.S. to Ken:  As my alter ego Jack Cliente says above, I wish we had more non-contingency-fee news. After my first eight days blawging, 5 of my 10 substantive postings have been on other topics -- but, I had to "create" the topic, there was no actual news to report.  Plus, none of those other topics has garnered a comment. 

By the way, I don't dislike the use of contingency fees.  I dislike applying a  Standard Rate without taking into account the circumstances of each client's case -- e.g., the likely risk and the amount of work.  That's kind of like all criminal lawyers charging a fixed, flat fee that assumed you'd have a full-blown trial.  Please tell your buddies in those small p/i firms that they might soon be big firms, if they tried attracting clients from the start with lower contingency rates tailored to each case, rather than only cutting rates to prevent client defections.  Bravo for the clients who know enough to bargain.

Thanks also to the eclectic Jeremy of  too many topics, too little time for linking to ethicalEsq?.  How do you young folk get so much done?

Got a few a minutes for truth and justice?  Please grab your local Yellow Pages directory and open to Lawyers.  I'd like to know how many of the ads for personal injury lawyers state the percentage or share of the contingency fee to be charged or say the firm will negotiate fee options with the client.

You see, I've been challenged to demonstrate my claim that the average p/i client is confronted by virtual silence about fee levels and is given only one real choice -- accepting the local Standard Contingency Fee rate (and therefore handing over to the lawyer one-third or more of any injury award, no matter how much risk or work is involved for the lawyer).

I can't do a major scientific study, but I'd settle for a small poll.  Given the rabid Yellow Pages rivalry for injured clients, my notion (after a decade as a crack antitrust theorist), is that we'd see fee levels mentioned in those fullpage ads, if lawyers thought that even a small part of the public expected to be able to shop or negotiate for percentage fees.   We'd also see fee levels mentioned if a serious (hungry?) competitor were willing to break ranks with his or her colleagues and attract clients with lower fees.  By never mentioning the size of a fee, the inevitability of the local Standard -- which any adult walking down the street can quote you -- is emphasized, as if it were etched in stone.

ethicalEsq? would like to know what you find in your home town Yellow Pages or similar telephone directory. Drop us a Comment or use our "Suggestions" Box to let us know

• how many fullpage ads you found for p/i lawyers seeking injured clients (don't forget the front or backcover)
• how many of the ads mention the percentage fee to be charged
• how many of the ads mention a sliding scale or the opportunity to negotiate fees
• how many offer to let clients pay on an hourly basis rather than with a no-win/no-fee contingency arrangement

If you know of any studies on this topic, let ethicalEsq? know about them, too.  Thanks in advance for your help.

P.S.  Whatever the global numbers may be as to how many p/i lawyers only offer their clients the local Standard fee, I believe (as does ABA Formal Ethics Opinion 94-389) that every lawyer has an ethical obligation to fully inform every p/i client of the basis for the percentage offered by the lawyer in that case (e.g., likelihood of success, range of potential award, amount of lawyer time likely to be needed -- in sum, the overall risk the lawyer believes he or she will be taking).   In addition, the lawyer must give the client the option of a number of possible fee arrangments, including paying a fixed hourly fee. 

Sabrina at beSpacific highlighted the Nevada Legal Resources Directory yesterday, and its sponsor, the L.E.A.N.  Project (Legal Electronic Assistance for Nevadans).  Nevada's efforts to make legal services more affordable and accessible need to be studied and imitated by other states.  Implementing such programs should be an important part of the activities of bar associations, firms and individual lawyers, in fullfilling their ethical obligation to improve access to the law and to perform meaningful public service.

The L.E.A.N Project was created to provide user-friendly access to Nevada legal information and free and low-cost legal assistance to Nevadans.  In addition to including agencies that provide legal advice per se, the Directory also has information and links to agencies that provide help with law-related issues like alternative dispute resolution, child support enforcement, consumer information, debt management, domestic violence, employee activism, and minority affairs.

Florida led the way last year with its required Statement of Insured Client's Rights [Rule 4-1.8(j)].  Starting July 1, 2003, insured clients will have even more protection in Florida, to help ensure that they are not misled when a lawyer is representing both the insurance company and the insured in personal injury and property damage tort cases. The new requirements added to the Rules of Professional Conduct will (1) specifically obligate the defense lawyer to explain from the start to the insured client when the lawyer also represents the insurance company, in order "to minimize confusion and inconsistent expectations that may arise" [Rule 4-17(e)]; and (2) help clarify for the client when lawyers practicing under a law firm name are functioning as insurance staff attorneys [Rule 4-7.10(j)].