The trial will consider whether the law firm is entitled to a $42 million contingency fee under circumstances criticized by Ted in this space two years ago and David Giacalone more recently. [NYLJ]
Posts tagged as:
contingent fee
Some in Britain are not happy about the combination of no-fee, no win lawyering (relatively recently legalized over there) and a taxpayer compensation scheme for medical negligence. [Times Online]. More: GruntDoc headlines his post, “In case you thought Nationalized Health would take the lawyers out of it…”.
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A week ago we quoted reader Phil Grossman’s comment on this subject, provoking a discussion among readers. Now Grossman writes in with a followup:
Here’s the story on bar associations forbidding “discounting of contingency fees for clients coming to lawyers directly so that those lawyers do not have to pay referral fees”.
I had told you that I had seen reports out on the Internet saying that. But it now appears that what those reports were reporting on was that bar associations do not allow lawyers to raise their contingency fees to make up for paying referral fees in those cases where they are paying referral fees. And that really amounts to the same thing as not allowing lawyers to discount fees in cases where they are not paying referral fees. Because if they were allowed to give discounts to clients where they didn’t have to pay referral fees, they would be charging clients who come to them with a referral fee to be paid, more than clients who come to them without referral fees to be paid.
- Harvard’s Charles Nesson argues that Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 violates Constitution by letting civil lawyers for RIAA enforce a criminal law [AP/MSNBC, Elefant]
- In some circles, bitter disappointment at reports that Obama camp probably won’t pursue Bush predecessors as war criminals [Paul Campos, Horton/Harper's; earlier]
- Latest on wrangle over “exorbitant” fee: Alice Lawrence’s deposition-skipping before her death could endanger her estate’s claim against Graubard Miller law firm [NYLJ, earlier]
- One benefit of role as law school mega-donor, as Mark Lanier is with Texas Tech, is that you get to rub (hunting-jacket) elbows with visiting Supreme Court justices [WSJ law blog]
- Lou Dobbs and Phyllis Schlafly were among those who pushed bizarre theory of secret conspiracy to merge U.S. into “North American Union” with Canada and Mexico [John Hawkins]
- Senate Dems plan to abolish secret ballot for installing unions in everyone else’s workplace, so how come they insist on one for themselves in deciding how to handle Joe Lieberman? [Dan Riehl via McArdle]
- Congrats to historian Rick Brookhiser and City Journal editor Myron Magnet, among recipients of 2008 National Humanities Medal [White House release, Brian Anderson, NRO]
- Jarek Molski, California entrepreneur of disabled-access complaints, loses bid for Supreme Court review of his designation as vexatious litigant [AP, Bashman]
- Chemerinsky, other critics should apologize to Second Circuit chief judge Dennis Jacobs over bogus “he doesn’t believe in pro bono!” outcry [Point of Law and update]
- New York high court skeptical of ultra-high contingency fee in Alice Lawrence v. Graubard Miller case [NYLJ; earlier here and here]
- Panel of legal journalists: press let itself be used in attack on Judge Kozinski [Above the Law]
- Unfree campaign speech, cont’d: South Dakota anti-abortion group sues to suppress opponents’ ads as “patently false and misleading” [Feral Child]
- Even if you’re tired of reading about Roy Pearson’s pants, you might still enjoy Carter Wood’s headlines on the case at ShopFloor ["Pandora's Zipper", "Suit Alors!"]
- Rare grant of fees in patent dispute, company had inflicted $2.5 million in cost on competitors and retailers by asserting rights over nursing mother garb [NJLJ]
- Time to be afraid? Sen. Bingaman (D-N.M.) keen on reintroducing talk-radio-squelching Fairness Doctrine [Radio Equalizer]
- “Yours, in litigious anticipation” — Frank McCourt as child in Angela’s Ashes drafted a nastygram with true literary flourish [Miriam Cherry, Concurring Opinions]
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MDL Judge Eldon Fallon orders plaintiffs’ attorneys’ fees in the $4.85 billion settlement to be capped at 32%. Hooray, right? Certainly, the trial bar is capable of arguing for itself that the ruling is wrong and it is entitled to a couple of hundred million more, but I might just have to take their side here.
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- Lawyers’ contingency fee is temptation to ethical corner-cutting in consumer debt collection, too [Miami Daily Business Review, Popehat; Orlando's Palmer Reifler & Associates, mass mailing of demand letters to accused shoplifters]
- Discussion continues on loser-pays with me and many others at NewTalk, and note comment from Ontario lawyer [through today]
- Age bias suit by Hollywood writers gains traction. Next, actors? [Ink Slingers via Class Action Blawg weekly review]
- Class action against Quebec lottery on behalf of problem gamblers finally set for trial [CP/Yahoo, Lee Distad via Class Action Blawg, earlier]
- Should we and other commentators avoid mentioning litigants’ real names so as not to intrude on their Google legacy? [comments at Ron Miller/Md. Injury]
- California lawmakers OK feel-good “Donda West Law” but it won’t do much to keep impulsive clients from rushing into plastic surgery [GruntDoc, Cameron Turner/EURWeb, Truth in Cosmetic Surgery Blog]
- Probably not a swift career move for lawyer to tell bar disciplinary panel “Go to hell.” [ABA Journal]
- Class action forces HUD to allocate more to some Indian recipients, so it cuts other programs, bad news for North Carolina’s Lumbee tribe [Fayetteville, N.C. Observer courtesy US Chamber]
- Environmental authorities won’t press charges against man who shot protected rattlesnake that had just attacked and bitten him [eight years ago on Overlawyered]
Analyzing the upcoming race between the incumbent, Darrell McGraw, and his clean-government opponent, Dan Greear, the West Virginia Record has an extensive story on the West Virginia attorney general’s habit of giving lucrative no-bid contingency-fee contracts to his campaign contributors, as well as holding on to settlement money for his own personal slush fund. I am quoted at length and described as “widely regarded as one of the country’s leading voices in tort reform.” Also notable are quotes from another “Washington, D.C.-based lawyer who has written articles about the need for reform.” Kim Strassel also has a good piece on the subject in Friday’s Wall Street Journal:
To Mr. Greear’s advantage, his opponent is a case study of abuse in office. Mr. McGraw, in more than 14 years as West Virginia’s attorney general, has been a pioneer in the practice of filing questionable lawsuits against big companies, secretly doling out the legal work to outside trial lawyer friends who reap millions in fees. Those lawyers then turn around and donate heavily to Mr. McGraw’s re-election.
Polls show the public, in theory, disapproves. In a Tarrance Group survey last year, 75% of West Virginians think an attorney general should publicly disclose outside contracts with lawyers. Nearly 60% think attorneys should have to competitively bid for those jobs.
It’s this that motivates Mr. Greear. “I’ve watched what’s going on and thought: ‘If I were doing this to a client, I’d lose my law license.’ I don’t think any fair-thinking person can think this is good government, or good solid legal representation for West Virginia,” he tells me.
Also helping is that Mr. McGraw’s own sense of political immortality has recently landed him, and his state, in hot water. In 2001, he appointed four private law firms to sue drug companies for alleged deceptive advertising of OxyContin. Having forced a settlement in 2004, he handed his tort allies $3.3 million of the $10 million haul. Mr. McGraw had sued on behalf of state agencies (including the state’s Medicaid program) — yet his office kept the rest of the settlement money.
The federal government, which pays a significant portion of the state’s Medicaid bills, remains furious the program received none of the settlement, and is now threatening to withhold millions in Medicaid money. Mr. Greear is hitting hard on the uproar, using it to suggest Mr. McGraw has lost sight of why he’s suing companies, other than for the headlines.
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We now know how many people signed up for the Grand Theft Auto: San Andreas class action settlement out of the millions of members in the purported class.
Tier 1 (up to $35.00) (no exchange required): 416
Tier 2 (up to $17.50) (exchange required): 22
Tier 3 ($10.00) (exchange required): 131
Tier 4 ($5.00) (no exchange required): 2,050
Disc Exchange w/o cash: 57
2676 total claimants, receiving a total cash value of at most $26,505, though likely even less than that, given that the plaintiffs’ attorneys record no actual cash distribution.
The seven “representative” class members are asking for approval to receive another $24,500, or nearly half of the total cash recovery.
Of course, as we’ve discussed, none of these people had a legitimate cause of action or suffered any legally cognizable injury. But how much are the plaintiffs’ attorneys (from thirteen different offices of twelve different law firms!) asking for for this travesty of a lawsuit and settlement–one that was entirely redundant of the taxpayer-funded investigation conducted by the Los Angeles district attorney? They claim their time devoted to the litigation was worth $1,317,433, but are “generously” claiming a 28% discount for a total fees-and-costs request of $1 million.
Recognizing that this 3774% contingent fee looks fishy to the least scrutinizing of judges applying Rule 23 review, the plaintiffs have sought to inflate the appearance of accomplishment through a $870,000 cy pres award to the National PTA and ESRB. (As I’ve discussed, cy pres awards that do not directly benefit class members should not be used to justify fee awards.) They also inflate the award by claiming that the costs of notice, administration and disk replacement should be attributed to the size of the accomplished result, thus puffing matters up to over $2 million, consisting nearly entirely of empty calories for the plaintiffs they purport to be representing.
Alas, I was the only class member to docket a formal objection to this rip-off. (While it was my idea to object, I can take no credit for the objection brief, which was written by my attorney, Larry Schonbrun.) On Thursday, the plaintiffs’ attorneys filed a brief defending the settlement, with many cites to Overlawyered as ad hominem attacks on the objection. The court’s hearing is June 25.
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City governments, sometimes in league with private counsel working on contingency fee, “have started suing banks and mortgage companies to recoup their costs” on such services as “fire departments, police, code enforcement or even demolition” in blighted neighborhoods. “The lawsuits were filed in recent months under different theories, in state and federal court. Cleveland and Buffalo filed suits under public nuisance laws. Minneapolis’ suit was brought on consumer fraud grounds, while Baltimore took the unusual approach of filing suit in federal court under alleged Fair Housing Act violations.” Bank of New York says it was included in Buffalo’s suit against 39 lenders even though it neither originated nor purchased loans, but merely acted as trustee. (Julie Kay, “Empty Homes Spur Cities’ Suits”, National Law Journal, May 9).
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Philadelphia federal district court judge Harvey Bartle III has awarded $567.67 million in fees to plaintiff’s lawyers in the gigantic fen-phen litigation, which has lasted nine years. Judge Bartel accepted 70 firms’ claim to have spent 578,048 hours on the suit (Alison Frankel, American Lawyer, Apr. 10). Ted, at Point of Law, notes that the sum does not include large contingent fees obtained on behalf of claimants who opted out of the group settlement.
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- “I did not know what kind of monster we were dealing with”: dramatic testimony from Judge Lackey on Scruggs corruption [Folo; and repercussions too]
- New at Point of Law: Pork-barreling Albany lawmakers shell out for just what NY needs, three more law schools; Sarbanes-Oxley unconstitutional? Ted goes after JAMA on Vioxx; sadly, appeals court overturns Santa Clara opinion that nailed ethical problems with govt.-paid contingency fee; legal aid lawyers, to subprime borrowers’ rescue? and much more;
- Cadbury claim: we own the color purple as it relates to chocolate [Coleman]
- A world gone mad: Innocence Project directors include… Janet Reno? [Bernstein @ Volokh]
- Not unrelatedly: Can a California prosecutor be held liable for wrongful murder conviction of man freed after 24 years? [Van de Kamp versus Goldstein, L.A. Times via Greenfield]
- With all his lawyer chums from Milberg-witness days, you’d think Ben Stein could have saved the makers of his creationist movie from stumbling into textbook IP infringements [Myers, again, WSJ law blog]
- Groggy from dental anesthesia, plus a half a glass to drink: then came the three felony DUI counts [Phoenix New Times, Balko via Reynolds]
- Shell says boaters had years of notice that mandated ethanol in fuel was incompatible with fiberglass marine gas tanks, which hasn’t stopped the filing of a class action [L.A. Times via ABA Journal]
- Terrorism asymmetry: “They say ‘Allahu Akbar!’ we say ‘Imagine the liability!’” [McCarthy/Lopez, NRO]
- Deborah Jeane Palfrey convicted [WaPo; earlier]
- David Neiwert truly born yesterday if he thinks Kevin Phillips is noteworthy for his record of being right [Firedoglake; some correctives]
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- UK: Paramedic twists ankle on steps responding to emergency call, plans to sue elderly couple [Daily Mail]
- Critics say litigiousness is part of the business plan for rental outfit Leasecomm, which has sued its customers more than 92,000 times [Boston Globe, Daily News Transcript]
- Great big predators of the alternative press? Jury awards $15 million against SF Weekly to its main competitor, Bay Guardian [SF Chronicle]
- Tacoma public schools sued after mentally ill student brings gun to school and kills classmate [KOMO]
- How the parties traded positions with each other on trade [Gordon, Commentary]
- Now Canada has its own “human rights” complaint against plastic surgeon who declines to undertake transgender-related surgery [Steyn, Macleans; earlier Catholic hospital case from California]
- Florida Supreme Court hears appeal of Joe Anderson $18 million “false light” defamation verdict against Gannett’s Pensacola News-Journal [WSJ law blog; earlier]
- Ottawa lawyer Richard Warman keeps suing bloggers and dragging websites before those Canadian hate-speech tribunals, so no criticizing him please [Levant, Five Feet of Fury (& more), Steyn]
- Discontent continues over judges’ standardless discretion in granting alimony awards [NLJ]
- Death of widow Alice Lawrence isn’t expected to end her litigation with law firm Graubard Miller over contingency fee [NYLJ; earlier]
- Labor arbitrator tells Florida school to rehire employee who reported to work with cocaine in his system [six years ago on Overlawyered]
In the state of Mississippi during the last 5 years, 27 law firms have been retained by Mississippi Attorney General James Hood to purse state lawsuits on contingency. Those firms have collectively donated more than a half-million dollars to Hood in the last two election cycles. Apparently, the legislature is troubled by this combination of for-profit motivation and campaign fundraising, and has passed a bill to pursue competitive bidding before signing contracts of more than $500,000 with private lawyers. It also requires a review board to examine contracts, and it limits contingency fees to $1 million.
Hood isn’t pleased — and the WSJ has his number:
Should state Attorneys General be able to outsource their legal work to for-profit tort lawyers, who then funnel a share of their winnings back to the AGs? That’s become a sleazy practice in many states, and it is finally coming under scrutiny — notably in Mississippi, home of Dickie Scruggs, Attorney General Jim Hood, and other legal pillars…
This kind of quid pro quo is legal in Mississippi and most other states. However, if this kind of sweetheart arrangement existed between a public official and business interests, you can bet Mr. Hood would be screaming about corruption. . . . A decision to prosecute is an awesome power, and it ought to be motivated by evidence and the law, not by the profit motives of private tort lawyers and the campaign needs of an ambitious Attorney General.”
That leaves a mark.
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- Calling it “oppressive”, committee chair in Mississippi legislature vows to defeat proposal to ban restaurants from serving obese patrons [AP/Picayune-Item; earlier]
- Latest in whales vs. sub sonar: judge deep-sixes Bush’s attempt to exempt Navy from rules against bothering marine mammals [CNN; earlier]
- Much-criticized opener of ABC’s new series Eli Stone aired last Thursday, and Orac takes a scalpel to the vaccine-scare script [Respectful Insolence, which also covers new autism studies]
- Scary proposal approved by California assembly would strong-arm larger private foundations — and businesses that deal with them — into “diversity” numbers game [Lehrer/Hicks @ L.A. Times]
- New Dutch study finds thin people and nonsmokers cost health system more in long run than obese and smokers — theories behind Medicaid-recoupment litigation are looking more fraudulent every day, aren’t they? [AP]
- Late, but worth noting: blogger nails John Edwards’s demagoguery on Nataline Sarkisyan case [Matthew Holt @ Spot-On, via KevinMD; more here, here, and from Ted here]
- Puff piece on food-poisoning lawyer William Marler [AP/KOMO]
- Ready, set, all take offense: Sen. McCain likes to tell lawyer jokes [WSJ law blog]
- In suit charging UFCW with “racketeering”, Smithfield cites as an underlying offense union’s having lobbied city councils to pass resolutions condemning the meatpacker; company has hired Prof. G. Robert Blakey, who denies the RICO law he drafted is a menace to liberty [Liptak, NYT; some earlier parallels in federal tobacco suit]
- Golden age of comic books was 1930s-1950s, but golden age of comic book litigation is now [NLJ]
- New at Point of Law: Hillary’s “disastrous” mortgage scheme; Qualcomm sanctions ruling could curb discovery abuse; if Mel Weiss has been kind to you, why drop him down memory hole?; new academic theory on uniformity of contingency fees; the trouble with patenting tax avoidance strategies; and much more [visit][bumped Wed. a.m.]
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Speculation continues to mount that central bribery-scandal figure Timothy Balducci may be cooperating with prosecutors, and perhaps has been doing so for some time; Balducci had not yet been arraigned as of this weekend, and the indictment quotes extensively from conversations he held with other defendants, in addition to those that took place in Judge Lackey’s bugged chambers. (Peter Lattman and Ashby Jones, “In Scruggs Probe, Focus Turns to Another Lawyer”, WSJ, Dec. 1)(sub-only). In the latest of his extensive posts on the case, David Rossmiller adds to the picture: “From the verbatim quotes by Balducci given in the indictment, one logically can surmise that investigators had substantial recorded evidence that would have given them tremendous leverage over Balducci in obtaining his cooperation against the others.” In addition, certain elements in the indictment’s description of Balducci’s actions suggest that by mid-October, presumably flipped by investigators, he had begun taking steps that could be used to document targets’ knowing participation in the conspiracy (in particular, his return to Dickie Scruggs to finance a purported second-round bribe, and his statement in the presence of Zach Scruggs and Sidney Backstrom that “we paid for this ruling”).
Rossmiller also analyzes the underlying Jones v. Scruggs dispute over legal fees, in which the Jones firm, formerly one of the five participants in the Scruggs Katrina Group (SKG), alleges that it was “frozen out” and ejected by the remaining four firms, allotted only token fees after shouldering the substantial work of case briefing. Why would it have been advantageous to the Scruggs firm to have Judge Lackey shunt this dispute into arbitration? One key reason is that proceeding with a court battle, even if successful, might have risked exposing to the public many of the internal workings of SKG and perhaps also of Scruggs’s own firm. (Having read the Jones complaint, I would note that Jones was alleging that Scruggs had made a common practice of squeezing collaborating lawyers out of their fee shares in earlier, unrelated litigation during his career. The evidence put forth to support such an allegation, apart from whether it turned out to support a claim for punitive damages, might result in public airing of all sorts of messy and embarrassing episodes from the past.)
John Jones and Steve Funderberg, the lawyers whose firm sued Scruggs et al in the underlying Jones v. Scruggs suit, have given an interview to the Mississippi press; Jones says he knows Scruggs well and has represented him in court, but that the relationship changed drastically “when the money hit the table”; of go-between Balducci, Funderberg said, “Knowing Tim Balducci as I do, I am utterly flabbergasted that he would ever be a part of something like that or believe he could ever get away with something like that”. (Jon Kalahar, “Former Scruggs Colleague Says Money Changed Him”, WTOK, Nov. 30).
At Y’AllPolitics, Alan Lange traces many of the recurring connections between the dramatis personae and notes that the “whole crowd” was deeply involved in the much-criticized MCI contingency-fee back taxes negotiation, which we posted on at the time at Point of Law. “Attorney General Jim Hood allowed his largest campaign contributor, Joey Langston, to be the plaintiff lawyer and also appointed Tim Balducci as a Special Assistant Attorney General in that case”. Langston, for whom Balducci used to work, is now among lawyers representing Scruggs.
Some noteworthy reactions to the indictments: “This is maybe the worst day of my life,” says longtime Scruggs friend Don Barrett, quoted in an Associated Press piece that also rounds up some of the high points of Scruggs’ career (Michael Kunzelman, “Scruggs’ career in jeopardy”, AP/Hattiesburg American, Dec. 1). “I’m disappointed in him,” Katrina client Lyman Cumbest of Pascagoula, who’s suing State Farm, said of Scruggs. “With all the money he had, he didn’t have to bribe a judge. He’s got more money than he could ever spend.” (”FBI probe in judicial bribe case to continue”, Jackson Clarion-Ledger, Nov. 30). Byron Steir at Mass Tort Litigation Blog comments (Nov. 30):
If true, all of these allegations suggest remarkable hubris in at least some of the top plaintiffs’ lawyers. One wonders about the effect of a lifestyle of private jets and multiple wins of multiple millions (or tens of millions) in fees. One also wonders about the effect of high-risk, winner-take-all, contingency fee litigation. Brash and aggressive personalities seem to thrive in such an environment — but they too must keep in mind that lawyers ultimately serve the client (not the other way around) and that no one (especially not the lawyer) is above the law.
And more: “It just boggles the mind,” said Biloxi trial lawyer Jack Denton. “Here is a man who has had an enormous amount of success, who reached a level very few attorneys, if any, have reached. Why would he risk everything over a legal dispute over attorneys’ fees?” David Rossmiller, quoted in the same story, has one possible reply, which is that people may begin reevaluating “how this amazingly successful man got to be so amazingly successful.” (Richard Fausset and Jenny Jarvie, “Katrina lawyer at the eye of a storm”, Los Angeles Times, Nov. 30)(& welcome Tom Kirkendall readers).
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Alice Lawrence had timely paid $18 million over 22 years to Graubard Miller in a lengthy dispute over her husband’s estate. The law firm had billed her on an hourly basis—until there was a $60 million settlement offer on the table, at which point it suddenly renegotiated its retainer agreement to be a 40% “contingent fee”, though there was obviously nothing contingent about the award, and the firm wasn’t offering to repay the money it had already billed. Five months later, there was a $105 million settlement—and Graubard Miller claimed as its fee for the five months of work $42 million of the $45 million additional money that it had negotiated, for a total of $60 million for the case. Lawrence asked the New York courts to protect her, but a 4-1 majority of the Appellate Division upheld the decision (via Lattman). The New York Times article (not to mention Bizarro-Overlawyered, which unsurprisingly doesn’t care much about fraud and rip-offs when they’re occasioned by attorneys against widows) doesn’t even begin to mention the fact that the “contingent fee” didn’t provide any risk for the law firm: the retainer agreement had a floor whereby Graubard Miller got to charge an hourly rate for the first year of trial even if it didn’t collect anything, guaranteeing it another $1.2 million on top of the $18 million it had already collected. The best coverage in the New York Law Journal, which notes that Graubard Miller schnorred another $7.8 million in gifts and gift taxes from Lawrence, whose total payment thus totaled nearly $68 million. (Anthony Lin, “Late 40 Percent Retainer Pact Survives Widow’s Dismissal Bid”, Nov. 29; Anthony Lin, “Widow’s Suit Seeks Return of $50M in ‘Excessive’ Fees and Gifts”, Sep. 16, 2005).
Unfortunately for Lawrence’s case, she did negotiate the Graubard Miller firm down from its original 50% (!) contingent-fee proposal, so in one sense she wasn’t completely the unwitting pawn of the firm, even though Graubard Miller failed to suggest that she consult independent counsel about the multi-million dollar negotiation. The question becomes whether the attorney-client relationship is at all fiduciary, or whether it’s purely contractual—in which case, one wonders why there is such an elaborate screening mechanism to permit prospective attorneys to participate in the guild in the first place.
It’s nice that the New York courts are so respectful of contracts that they dismiss cases at an early stage of the litigation. One hopes that they do that in situations other than those involving the fiduciary duties of attorneys.
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