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Professor Brickman: Good, rare decision to question 9/11 fund fees

On September 27, Surrogate Judge Renee Roth issued a decision asking three law firms to justify their "contingency fees" for representing clients who collected from the September 11 fund. Cardozo Law Professor and Point Of Law contributor Lester Brickman writes:

Surrogate Court Judge Renee Roth�s decision to inquire into the reasonableness of contingency fees charged by three law firms for representing families before the September 11 Victim Compensation Fund is both perfectly appropriate and exceedingly rare. Surrogate court judges virtually never subject lawyers� contingency fees to a determination of reasonableness. Instead they virtually always rubber stamp the fees irrespective of whether the risks borne by the lawyer justify the percentage of the recovery that the lawyer is charging. In most tort cases, lawyers charge a standard fee � one third of the recovery -- irrespective of whether the representation involves any meaningful risk. But the ethical justification for a contingency fee is that the lawyers is taking a risk that there will be little or no recovery or that he or she will have to devote considerably more time to the representation than anticipated. Accordingly, charging a standard contingency fee in a matter where the lawyer knows at the outset that there will be a substantial settlement -- given the seriousness of the injury, the amount of insurance coverage and the absence of any doubt as to liability -- is unethical if not fraudulent. Nonetheless, it is a common practice for lawyers to do so and for courts and disciplinary authorities to ignore the clear ethical violations. Thus, it was a moment of rare candor when Judge Roth announced that since the September 11th Victim Compensation Fund was certain to make large awards, "for the lawyers involved in such a process, there was no contingency upon which to support a contingency�type fee."

In determining the reasonableness of the fees in question, Judge Roth will be looking at whether there was any meaningful risk borne by the lawyers, the amount of the work that they did and whether the results achieved exceeded what most lawyers would have attained in these cases. A reasonable way for Judge Roth to proceed would be to determine a reasonable hourly rate fee for the actual work done by the lawyers. If Judge Roth then determines that the lawyer obtained a recovery that exceeded what would reasonably have been expected at the outset of the litigation, that is, added value to the claim by their efforts, then it would be appropriate to add to the hourly rate fee, a percentage in the 5-10% range of the value added by the lawyer. However, endorsing a percentage fee applied to the entire recovery would likely overcompensate the lawyers because that would include a premium for assuming risk though the process of securing a substantial portion of the award from the Fund involved no risk.

The operative principle that appears to apply to the applicability of rules of ethics to contingency fees is that the greater the fee, the less the applicability. Judge Roth�s decisions to apply ethical standards to determine the reasonableness of contingency fees is an act of judicial courage that stands in sharp contrast to the actions of most judges.

Readers who are interested in a more detailed exposition of Professor Brickman's views on contingency fee abuses should consult his and Professor Richard Painter's August featured discussion on the topic, and/or one of his many articles on the topic available for download on this site.

For additional commentary on the 9/11 Fund, see our editor's posting on Overlawyered last month. I note as an aside that the Manhattan Institute is in the planning stages of a conference on the 9/11 Fund and its lessons for January of next year.



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.