They’re at it again. The “Civil Justice Association of California” (CJAC) has introduced initiatives seeking to reduce contingency fees in civil cases to 20% of any sums derived by settlement or suit. Not only that, but it also wants a 60-day waiting period before accident victims can file lawsuits seeking compensation for their injuries and damages. These proposals are known as the Consumer Legal Fee Protection Act and Pre-Lawsuit Notice and Opportunity to Settle Act.
The Consumer Legal Fee Protection Act
This initiative pivots on the presumption that lawyers are gouging clients on any contingency fee rate in excess of a 20% maximum. It fails to take into account the risk involved when a lawyer undertakes a contingency fee case, nor does it address hourly legal fees of $300 per hour or more that most lawyers charge on other types of matters. The lawyer on the contingency fee case is likely advancing the costs of the case too. Costs advanced typically run several thousands of dollars, and on some cases, like a medical malpractice case, those costs can exceed six figures. Most clients can’t even afford filing and service fees along the other costs involved in keeping a routine auto accident case alive while paying a lawyer at his or her hourly rate every month.
Did Somebody Forget Overhead?
The proponents of the initiative didn’t even touch on how much it costs to run a law firm either. They utterly omitted it. Lawyers ordinarily rent their office space, or they have a mortgage on the building that their law firm is in. We’ve yet to meet one who works out of the back of his or her car, even in California. At a very minimum, a sole practitioner must cover the office rent or mortgage, pay the salaries of office personnel, cover the malpractice and premises liability insurance along with the office equipment on the premises and the utilities in it. Then, taxes must be paid on anything left over. If this initiative is legislated, some law firms will have their gross income cut in half in an already flat on its face economy. Law firm employees will lose jobs over this, and lawyers who once were able to sustain a practice on contingency fee cases will be forced into other practice areas or out of practice completely. Insurance companies would be quite pleased.
The Pre-Lawsuit Notice and Opportunity to Settle Act
Insurance companies will love this one if it becomes law. This provides for a mandatory period of 60 days for injury victims to try and settle personal injury cases against whomever they believe caused them injuries and damages. The proposed initiative is far too complex to address in this editorial, but it its requirements can be found here. Many personal injury claimants don’t even know the full nature and extent of their injuries within 60 days of the date of their accident. In liability insurance parlance, this is known as “trying to get them while their still bleeding.” Of course, much of this initiative turns on the proposed contingency fee reduction down to 20%. Under the initiative, a personal injury claimant can even elect to pay their attorney directly out of the gross settlement proceeds, or the attorney can seek an award from the court. Where does that money come from? That issue isn’t addressed either. If it becomes law, failure to comply with any provision of this onerous act is jurisdictional and subject to being ruled upon as being ineffective. What happens then? CJAC doesn’t address that. It’s not surprising though. As long as contingency fees are capped at 20%, CJAC will have achieved a crushing victory for liability insurance companies. Anything beyond that is a bonus.
By virtue of the proposed contingency fee cap limit, many lawyers are going to be apprehensive about taking smaller but meritorious cases. Expect that to result in Californians who were injured through no fault of their own returning to the courthouse doors wanting to get in, but without the financial and professional resources to pursue justice. They’re effectively locked out while large insurance companies continue to make even more money than ever before.
The Consumer Legal Fee Protection Act
This initiative pivots on the presumption that lawyers are gouging clients on any contingency fee rate in excess of a 20% maximum. It fails to take into account the risk involved when a lawyer undertakes a contingency fee case, nor does it address hourly legal fees of $300 per hour or more that most lawyers charge on other types of matters. The lawyer on the contingency fee case is likely advancing the costs of the case too. Costs advanced typically run several thousands of dollars, and on some cases, like a medical malpractice case, those costs can exceed six figures. Most clients can’t even afford filing and service fees along the other costs involved in keeping a routine auto accident case alive while paying a lawyer at his or her hourly rate every month.
Did Somebody Forget Overhead?
The proponents of the initiative didn’t even touch on how much it costs to run a law firm either. They utterly omitted it. Lawyers ordinarily rent their office space, or they have a mortgage on the building that their law firm is in. We’ve yet to meet one who works out of the back of his or her car, even in California. At a very minimum, a sole practitioner must cover the office rent or mortgage, pay the salaries of office personnel, cover the malpractice and premises liability insurance along with the office equipment on the premises and the utilities in it. Then, taxes must be paid on anything left over. If this initiative is legislated, some law firms will have their gross income cut in half in an already flat on its face economy. Law firm employees will lose jobs over this, and lawyers who once were able to sustain a practice on contingency fee cases will be forced into other practice areas or out of practice completely. Insurance companies would be quite pleased.
The Pre-Lawsuit Notice and Opportunity to Settle Act
Insurance companies will love this one if it becomes law. This provides for a mandatory period of 60 days for injury victims to try and settle personal injury cases against whomever they believe caused them injuries and damages. The proposed initiative is far too complex to address in this editorial, but it its requirements can be found here. Many personal injury claimants don’t even know the full nature and extent of their injuries within 60 days of the date of their accident. In liability insurance parlance, this is known as “trying to get them while their still bleeding.” Of course, much of this initiative turns on the proposed contingency fee reduction down to 20%. Under the initiative, a personal injury claimant can even elect to pay their attorney directly out of the gross settlement proceeds, or the attorney can seek an award from the court. Where does that money come from? That issue isn’t addressed either. If it becomes law, failure to comply with any provision of this onerous act is jurisdictional and subject to being ruled upon as being ineffective. What happens then? CJAC doesn’t address that. It’s not surprising though. As long as contingency fees are capped at 20%, CJAC will have achieved a crushing victory for liability insurance companies. Anything beyond that is a bonus.
By virtue of the proposed contingency fee cap limit, many lawyers are going to be apprehensive about taking smaller but meritorious cases. Expect that to result in Californians who were injured through no fault of their own returning to the courthouse doors wanting to get in, but without the financial and professional resources to pursue justice. They’re effectively locked out while large insurance companies continue to make even more money than ever before.
