Decision ’96 : A ‘Cap’ That Doesn’t Fit Well : Prop. 202 limit on some lawyer fees is unfair to the consumer

Despite the millions spent by foes and backers of Proposition 202 on television ads alone, voters probably know little of substance about this measure. Proposition 202 is a complex measure that, if passed, will profoundly change the balance of power between individuals and corporations and between clients and their attorneys. We think the change would not be for the better.

Proposition 202, the so-called “Attorney Fee Cap,” applies only to damage suits, such as those resulting from an auto accident or a defective product, and it applies only to the attorneys who file those lawsuits. The measure would limit the contingency fees that attorneys customarily charge in these cases.

Proposition 202 is grounded in two commonly held concerns: that there is too much frivolous litigation in California and that there are too many lawyers who goad individuals into filing those frivolous lawsuits. But 202 is not the answer to those concerns. The initiative is being promoted as a consumer protection measure, and it is--to some extent. But consumers already have the tools to protect themselves against unreasonably high legal fees. They need to make better use of them to negotiate lower fees. Corporate clients do that routinely.

The state’s business and professions code specifies that legal fees are negotiable. The State Bar’s rules of professional responsibility prohibit so-called unconscionable fees, those out of “proportion to the value of the services performed.” But clients rarely bargain with lawyers over contingent rates and lawyers do relatively little price-cutting. In cases where the attorney invests little time or money, a fee of one-third of a settlement sounds unreasonable, and we, along with the proponents of this measure, decry the seeming lack of market pressures that permits rates like this. Because clients already have the right to negotiate lower fees or a sliding-scale fee, the present ample supply of trial lawyers should result in lower rates.

Proposition 202 would lower fees immediately for all consumers. Yet we oppose Proposition 202 because consumers would lose more from it than they would gain. The initiative defines claimants, those whose lawyers would be subject to the contingent fee restrictions, only as individuals. The fee limits would not apply to small businesses or corporations bringing suit against other firms or against individuals, no matter how frivolous the nature of those suits or unwarranted the legal fees charged.

As a result, there are real concerns that Proposition 202 could severely limit the ability of individual consumers with legitimate claims to retain a lawyer. Why would an attorney represent an individual for a 15% contingent fee when he or she could charge an institutional client 33% in a similar case? Proposition 202 could indeed constrain shady lawyers in their pursuit of dubious tort claims. But the blanket fee cap would also penalize individuals with legitimate claims involving, say, defective products, personal injuries or wrongful deaths. That outcome would not be in the best interest of any Californian.