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Move Seeks to Limit Attorneys' Take in Personal Injury Lawsuits

Aired May 30, 2003 - 20:38   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

DARYN KAGAN, CNN ANCHOR: A lot of people out there thinking that lawyers are just making too much money, and some people also out there trying to do some thing about that.
In 13 states there's a move afoot among lawyers themselves to limit how much money attorneys can take in personal injury lawsuits. The move is being spearheaded by a group called Common Good. Its chairman, attorney Philip Howard, joins me here in New York. In Washington is attorney Barry Nace, who has a very different view.

Gentleman, good evening. Thanks for being with us.

PHILIP HOWARD, CHAIRMAN, COMMON GROUND: Good evening, Daryn.

KAGAN: Philip, let's start with you and your group, Common Good. It sounds good, it sound so beneficial, but isn't this just a group that is financed by a bunch of corporations who are trying to get away from some really big lawsuit decisions?

HOWARD: No, absolutely not. It's a group actually financed mainly by individuals and foundations like the Robert Wood Johnson Foundation, and our supporters include among others, Derek Bach, the chairman of Common Cause, another consumer-oriented group.

KAGAN: OK, give me the idea. That -- what? A bunch of ambulance chasers are out there taking too much of the take of people who have been wronged?

HOWARD: Well, you know, that's a bit of the problem. It's actually intended to create incentives for people to settle early so that victims of mistakes can get more money sooner. So the basic idea is that the plaintiff has to give notice to the defendant, and if the defendant makes an offer of settlement that's acceptable, plaintiff doesn't have to take it.

Then in that situation, the attorney can only collect no more than 10 percent of the fees instead of the usual one-third or 40 percent, so that the victim ends up getting more money. There's incentive for the defendant to settle, because it won't have to pay its attorneys either. And It's not fair -- it's not unfair to the plaintiffs' lawyers because in this situation, they hardly have to do any work.

KAGAN: Well, Barry, I have a feeling you're chomping at the bit there waiting to get in. BARRY NACE, ATTORNEY: Well, you know, it's the same thing we've heard many times in the past. This is more the proponents of tort reform idea that's doing something that's first of all going to affect the lawyer, thereby affecting the person who they are representing.

The interesting thing about this is that there is apparently no thought to reducing the defense attorneys' fees or the insurance company rates or the CEOs of the insurance companies and what they would get. This is just another attempt to just knock down the plaintiffs' attorneys and make it more difficult. We're the only ones that represent the people.

KAGAN: Philip, what about that? Why are you picking on plaintiffs' attorneys?

HOWARD: Well, first of all, I think the plaintiffs' attorneys mainly represent themselves. I think mainly represent themselves. It's important to have plaintiffs' attorneys, obviously. But this affects defendants' lawyers in exactly the same way.

KAGAN: How's that?

HOWARD: They typically charge by the hour, as the plaintiffs' lawyers have always said. So if there are no hours spent in the case because it's settled, they're going to probably charge even less.

KAGAN: Well, Barry, let's have you answer that. You have to say all cases are not created equally.

NACE: Right.

KAGAN: And why should lawyers get paid the same for every case?

NACE: Well, first of all, we have all kind of rules. We have ethical rules that tell us we have to charge a reasonable amount. And the suggestion that somehow, we're taking these big cases, writing one letter, and therefore the case is going to settle, it's nonsense. It doesn't happen that way.

We're the ones who want to see the cases get settled. We're the ones that don't get paid until the case is over. We like to get a settlement as fast as we can.

Over 30 years of doing this, I can tell you that writing letters, trying to get a case resolved, sending all kind of medical records, sending whatever you have, is generally worthless. The only way you're going ever to get a case resolved and settled is not by some scheme that they've come up with that hurts the little guy. But it's by having your ducks lined up and you're ready to go.

(CROSSTALK)

KAGAN: I want to get both your perspectives on this, on just where it's going -- 13 states. That sounds if not like a groundswell, then at least a trend. Do you think that this is some thing you can fight, or this is some thing that it's inevitable, it's going to be taking place?

NACE: Well, if you're asking me...

KAGAN: I am.

NACE: OK.

This is certainly not a groundswell. There's nobody that's really supporting this that has the interest of the consumers at heart. If you take the groups that represent the consumers from time to time, forgetting the trial lawyers, they are not supporting this. They recognize it for what it is. And it's just like I said, another tort reform attempt.

KAGAN: Philip, one more word from you.

HOWARD: Yes.

The Institute of Medicine is one of the -- from the government -- is one of the groups that's very consumer oriented that's been recommending this.

This doesn't take anything away from the plaintiffs. They don't have the obligation to accept the settlement. And the point of this is not to disadvantage, not that all cases settle early today -- is to provide an incentive so that people can settle early and get most of the money. That's the nice thing about the proposal.

KAGAN: All right. Philip Howard, Barry Nace, gentlemen, thank you for your perspectives, obviously, from two different sides there.

Now that we've heard from the polar opposites in this debate, let's try to get a more objective judgment.

Joining us now, Columbia law professor Sam Issacharoff to give us some perspective perhaps down the middle.

PROF. SAM ISSACHAROFF, COLUMBIA LAW SCHOOL: Well, I'm not sure I can go down the middle, but I think we all want something for less money. And that always seems like a good thing.

The problem is that when you start regulating in any market and you lower the price, you're going to get less supply. There's just going to be fewer lawyers out there providing legal services. And the question is: what is the aim that is trying -- that the proponents of this are trying to achieve?

One is to try to get lawyers to be more forthcoming with what their fees are and what are the different rights that consumers of their legal services have. That's a worthwhile objective. The way they're going about it, unfortunately, creates a distortion in the market, in my view.

KAGAN: How is that?

ISSACHAROFF: Well, what's going to happen is that lawyers are going to stop taking certain kinds of cases.

For example, if I'm a lawyer and I'm considering investing in some new pharmaceutical problem, or some new malpractice issue, even attorney malpractice, I have to invest a lot of my time, a lot of my capital, a lot of my resources. And if I'm going to start getting back very little on that I'm not going to make that initial investment. It's just like in any other market.

KAGAN: So what you're saying is that if this goes through as it now -- like they're planning, that there will be people out there who feel they were wronged and will not be able to find an attorney to represent them and take their case? You can actually see that happen?

ISSACHAROFF: Yes. There will be fewer attorneys. And I think that this is an attempt...

KAGAN: Some people might say that's not such a bad thing.

ISSACHAROFF: Well, I make my living saying the opposite.

KAGAN: I know you do.

ISSACHAROFF: But I think there's another feature to this also, which is that one of the main concerns that prompted this initially was that it seemed like every lawyer charged a third, every lawyer charged 40 percent. There was no market out there.

I think the Internet has dramatically changed the way people consume legal services, and what you see now is chat rooms where people say, Well, with my lawyer I got this and I got that. And increasingly, what you see is a stratification of fees, depending on the complexity of the case, depending upon the kinds of investments that have to go into developing the know-how to prosecute these kinds of cases.

KAGAN: But change is on the way? Do you think that's fair to say?

ISSACHAROFF: I don't think so.

KAGAN: Not necessarily.

ISSACHAROFF: I think the change is going to come from the market becoming more informed, from consumers becoming more informed.

These kinds of regulations really run against the spirit of free enterprise. And I think that by and large, even when it comes to lawyers, I think the United States remains basically a free enterprise society.

KAGAN: Even for lawyers.

ISSACHAROFF: Even for lawyers.

KAGAN: Professor Issacharoff, thank you so much for your perspective. Appreciate that. ISSACHAROFF: Thank you.

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