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‹ FEATURED DISCUSSION

August 26, 2004

A brief rejoinder

By Lester Brickman

I think Professor Painter and I have covered most of the salient points. I offer only a brief rejoinder to three of Professor Painter’s arguments in his latest response.

1. Professor Painter identifies as a defect of the “early offer” proposal that alleged responsible parties (“ARPs”) may make “very low [settlement] offers.” The fact is true but not the characterization. The “early offer” proposal has a built-in self-effectuating mechanism to discourage defendants from gaming the system by making a “very low” settlement offer. If an ARP makes a derisorily low settlement offer in order to reduce the fee that the plaintiff lawyer will ultimately receive, this will deprive the ARP of the financial benefits made available by the proposal. Self-interest dictates that when ARPs believe that they will ultimately have to compensate the plaintiff, they will make settlement offers that are calculated to be sufficient (but not more) to deprive the plaintiff’s attorney of the incentive to go forward and continue the litigation through trial if necessary. If the ARP fails to make a sufficient early offer and it is turned down, it loses most of the benefits that the “early offer” proposal offers, including substantial savings on medical care cost “build up” and defense costs. To be sure, the sufficiency incentive already exists in tort litigation where the dominant determinant of whether a plaintiff will accept a settlement offer is usually plaintiff lawyer’s self-interest. What the “early offer” proposal does is move up the timing of such a settlement offer from much later to near the very beginning of the claiming process because of the benefits that an ARP can realize for doing so. The effect is to significantly reduce transaction costs.

2. Professor Painter again cites to statistics on tort lawyers’ income which he says belies the level of windfall fees that I indicate are commonplace. I have devoted an entire article to the subject. See Effectively Hourly Rates of Contingency Fee Lawyers: Competing Data And Non-Competitive Fees, 81 Wash. U.L.Q. 653 (2003). In that article, I conclude that the leading data on tort lawyers’ earnings ranges from the trivial to the unreliable to the unrepresentative. The Manhattan Institute has published a study, Trial Lawyers, Inc., concluding that tort lawyers’ gross $40 billion a year in revenues. A significant percentage of this revenue is in the form of windfall fees as I have explained previously. Effective hourly rates of tort lawyers range from $350 in auto tort claiming to multiples of that in product liability, medical malpractice and other specialty areas. A top echelon of tort lawyers commands effective hourly rates of $5,000 - $10,000.

3. With regard to the political context, it is interesting to note that in survey after survey, the American public, by wide margins, believes that lawyers charge too much. If the political merits of the respective proposals are compared, there is compelling reason to believe that a proposal that seeks to curb unethical price gouging by lawyers would be overwhelming endorsed by the electorate.

A final note. The “early offer” proposal has been widely reported in the media and is discussed in most legal ethics casebooks. Professor Painter’s New American Rule is also worthy of serious consideration and hopefully will also come to gain such attention.

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Attorneys' Fees and Ethics, Politics, Procedure



 

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.