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New Jersey Law Journal

May 16, 2003

Petitions in 12 States Propose Limiting Attorney Fees in Personal Injury Cases

BYLINE: By Daniel Wise
AMERICAN LAWYER MEDIA

Petitions filed on May 6 with lawyer discipline authorities in 12 states, including New Jersey, seek to limit attorney contingency fees in personal injury cases that reach quick settlements.

The petitions propose to limit attorney fees to their hourly rates in fast-settled tort cases, with a maximum cap of 10 percent of the recovery. A contingency fee of one-third of the recovery is routinely charged in personal injury suits.

Petitions were filed in Alabama, Arizona, California, Colorado, Maryland, Mississippi, New Jersey, New York, Ohio, Oklahoma, Utah and Virginia. A 13th petition was filed in Texas a month ago.

According to Lester Brickman, a professor at Benjamin Cardozo School of Law and a legal ethics expert who strongly backs the proposal, about 20 states have rules limiting attorney fees in contingency cases to one-third of the recovery. New York and California also have laws creating sliding scales for recovery in medical malpractice matters, so that in cases where there is a large recovery, fees are limited to somewhat less than 33-1/ percent. In the remaining states, Brickman added, contingency fees are unregulated, but accepted norms, which vary in different communities, range from one-third to one-half.

The proposal calls for attorneys for personal injury claimants to give defendants notice of their claim so they can make an early settlement offer. Once a defendant is served with notice of the claim, it would be obligated to make an offer within 60 days to gain the benefit of the lower fees required by the rule. The defendant would be given an option of sending the offer directly to the client as well as the attorney.

Should the client accept the offer, attorney fees would be limited to the lawyer's customary hourly rates for time expended on the case. In any event, the fee could not exceed 10 percent of the first $100,000 of the settlement amount, plus 5 percent of any remaining amounts.

Attorneys who fail to serve the required notice of claim would be subject to the fee limits set forth in the rule.

The nationwide effort is spearheaded by a Washington, D.C., nonprofit group, Common Good, which is headed by Philip Howard, a vice chairman of Covington & Burling and the author of several books criticizing the American legal system. Michael Horowitz, a senior fellow at the Hudson Institute, general counsel to the U.S. Office of Management and Budget in the first Reagan administration, also played a key role in the effort.

Nancy Udell, an attorney with Common Good, said the group is nonpartisan and last year raised more than two-thirds of its funds from individuals and foundations, rather than corporations.