Legal Fees, The Middle Class and the Hog Rule
Most lawyers don’t talk much about legal fees with members of the general public. Why should they? It’s rare that good news brings a person to a law office. More often than not, crisis drives the need for a lawyer, and a lawyer’s request to be paid for his or her services is begrimed by the very need that drives a client to seek help.
But lawyers do talk among themselves about fees, and here’s what many are saying just now: The middle class is dead. This is especially so in the criminal courts, where the overwhelming majority of folks accused of crimes are now represented by public defenders.
“The good old days are long gone,” a friend confided in me the other day. “You just can’t make a decent living hanging out at the G.A. courts any more.”
He was referring to the low-level criminal courts, designated by the formal name “Geographical Area.” The state is divided into regions. New Haven is G.A. 23. Middletown is G.A. 9. Torrington is part of G.A. 18, located in Bantam, an odd and quirky designation. All criminal cases are first presented in the state’s G.A. courts; the more serious offenses, such as murder, rape and bank robbery, head to the Judicial District courts.
A decade or so, folks had ready cash to pay legal fees for small- to middle-level trouble. The crash in 2008 wiped out equity lines of credit; folks have had to spend down to survive. When chaos strikes, clients, and their families, are, more often than not, broke.
We get multiple letters and calls each week from folks requesting that their sorrow be our “pro bono” case. While lawyers have a responsibility to take some cases without a fee, all lawyers are slaves to their overhead. No one can make payroll on good will alone. We turn down the overwhelming majority of callers who request pro bono representation.
In the case of personal injury law, state law limits the amount of a recovery a lawyer can claim as a contingency fee. There is no such limit for federal causes of action.
Contingency fees are not permitted in some areas of the law. They are expressly prohibited in criminal and family law cases, where the interests a lawyer protects are so fundamental, and the client’s dependency on the lawyer’s good counsel is so great, the law takes pains to assure that the lawyer’s financial interest and the client’s liberty or family interests do not conflict.
But in personal injury cases, whether they be car accidents or medical malpractice, contingency fees, typically a percentage of the financial recovery obtained, are common.
Under state law, there is a structured cap on the fees a lawyer can recover in personal injury matters. A lawyer can take the first third of the first $300,000, 25 percent of the next $300,000, 20 percent of the next $300,000, 15 percent of the next $300,000 and 10 percent of any recovery over $1.2 million.
Thus, for a $1.5 million judgment, a lawyer can recover a fee of no more than $310,000. Were the fee a one-third contingency, the fee would be $500,000. Lawmakers no doubt wanted to make sure the clients, and not lawyers, enjoyed the benefits of big judgments.
Clients are free to waive this fee cap, but they must do so in writing, in a form required by state law, and be given time to consult another lawyer before agreeing to do so. Some of the state’s more prominent firms will not take extremely risky, and potentially very lucrative cases, without such a waiver.
A recent lawsuit filed in New Haven shows what can go wrong when clients and lawyers disagree about their fee agreement.
The parents of a young boy horribly injured at birth by his physician and requiring lifelong care were awarded a $58 million judgment by a Waterbury jury in 2011. The case settled for $25 million in post-judgment proceedings.
The boy was represented by Bridgeport-based law firm Koskoff, Koskoff & Bieder, P.C., a firm with a long tradition of excellence and a sterling reputation.
According to the complaint, the Koskoff firm had a written retainer agreement binding it to fee caps under state law. There was no waiver.
Under the retainer agreement, the Koskoff firm was entitled to a fee of roughly $2.7 million. Instead, the firm wanted more. One of its partners, a former president of the Connecticut Trial Lawyer’s Association, asked the boy’s parents to come in an sign a new agreement, entitling the firm to a fee of one-third, or $8.6 million.
The parents sensibly refused. A deal is a deal, they contended.
When the funds from the settlement were finally distributed, the Koskoff firm still took more than the $2.7 million the retainer agreement permitted. It kept a whopping $7 million. How did it justify this?
According to the complaint, the retainer agreement actually signed required the firm to honor the mandatory fee caps unless the fee cap statute was not in effect. If the stature were not in effect, the firm could collect a fee of 28 percent.
The fee-cap statute has been in effect non-stop since 1987. It’s hard to know what the lawyers at Koskoff were thinking when they drafted the retainer agreement. Did they expect the fee limit law to be repealed?
Pressure was brought to bear on the family to sign a new retainer. One of the firm’s lawyers called the couple to ask: “Who are the best lawyers in the country?” I guess he was asking them for a raise.
Koskoff, Koskoff & Bieder is a wealthy firm. Lawyers joke the firm weighs its money, rather than counting it. In this case, if the allegations against it are true, the firm should simply refund all the fee from the boy and his family with an apology for breaking the one rule no lawyer forgives: it’s known as the hog rule, as in taking more than you should.