There Ought to Be a Law on Lawyers’ Fees

In spite of the fact that Orange County is first in the state and fourth in the nation in filing lawsuits, few consumers are knowledgeable in the law or in hiring an attorney. This places them at a great disadvantage when they need legal representation.

Consumers often agree to pay their attorney too much, such as one-third or more of any award, without knowing what questions to ask or what their rights are. The consumer may not be told that he can pay on an hourly basis.

Under contingency fee arrangements in personal injury cases, a plaintiff’s attorney receives payment only if the client recovers an award. Typical contingency fee arrangements state that, in the event of an award, the personal injury attorney would receive one-third to 40% as compensation.

If the case is resolved with no recovery for the plaintiff, the attorney is not entitled to compensation. Although this relationship implies there is some risk involved for the attorney, the law allows attorneys to charge a contingency fee even if a case is devoid of any significant risk.

Unquestionably, contingency fees ensure that access to the courts is available to everyone (although we have yet to find an attorney who will represent the poor, innocent defendant under contingency). Where California law falls short, however, is that it does not require enough upfront disclosure on the part of the personal injury attorney when offering a contingency fee arrangement.

By failing to require these disclosures, the law allows too much potential for abuse, and actually fails to protect consumers against unscrupulous attorneys.

Evidence of the problem can be found within the legal industry itself. The State Bar of California operates a special arbitration program which attorneys are required to offer their clients in the event of a fee dispute.

In 1997 alone, the State Bar and county bar associations handled approximately 120,000 complaints of which 2,800 were matters related to fee disputes. Clearly, a problem exists. While the State Bar’s arbitration program offers consumers some recourse, it is really addressing only a symptom and not the basic problem.

Legislation to correct these shortcomings and provide more protection for consumers has been introduced by state Sen. Tim Leslie (R-Carnelian Bay). This “Injured Consumers Bill of Legal Rights” would increase legal protections for consumers who hire a personal injury attorney by requiring the attorney to provide additional “upfront” disclosures. The bill initially was introduced as Senate Bill 2214, but was stonewalled in the trial lawyer-controlled Senate Judiciary Committee. Leslie is planning to reintroduce the bill in the Assembly.

Prior to entering a contract, attorneys would be required to inform plaintiffs of their right to choose whether to pay the attorney on an hourly or contingency fee basis. The bill also would require the attorney to provide estimates of time and expenses that would be required to litigate the dispute.

Thus, consumers would know in advance the likelihood of a speedy resolution of the case, and would be protected against paying exorbitant fees for little work. The Injured Consumers Bill of Legal Rights also would require the attorney to provide periodic progress reports, including an accounting of hours and expenses. Finally, upon resolution, the attorney would be required to disclose the actual amount of time spent, and if entitled to a contingency fee, what that fee would amount to in terms of an hourly rate.

As a final protection, the consumer would have the right to have the contingency fee reviewed for fairness by an independent arbitration panel. Although some personal injury attorneys might object to these requirements, it is important to point out that by providing these disclosures, the attorney is in fact protecting him or herself against a fee dispute.

If a dispute does arise, the written disclosures required by the bill would provide the attorney legal standing. In virtually every other business relationship and in dealing with other professionals, consumers have the right to know the price they are paying and what they are paying for.

These disclosures are no more than those legislated by the lawyers for accountants, architects, dentists, physicians and the rest who work. Physicians have had to provide “informed consent” to the patient for 25 years. That same right should be extended to the attorney-client relationship.

Consumers who have been injured have the right to make an informed decision about how to compensate their attorney. The consumers need some protection so that more of the award goes to the truly injured and less to the trial lawyers.