Book contents
- Frontmatter
- Contents
- Foreword: Sorting Out Our National Liability Crisis by Richard A. Epstein
- Acknowledgments
- LAWYER BARONS
- Introduction
- 1 The Origin of the Contingency Fee
- 2 How Profitable Are Contingency Fees?
- 3 Are Contingency Fee Profits “Reasonable”?
- 4 How Tort Lawyers Have Increased Their Profits by Restraining Competition
- 5 Why the Market Has Failed to Correct the Absence of Price Competition
- 6 Impediments Imposed by the Bar to Price Competition
- 7 The Effects of Incentives Created by Contingency Fees
- 8 How the Quest for Profits Influenced the Development of the Tort System
- 9 Lawyers' Role in the Expansion of Tort Liability
- 10 The Role of the Judiciary in Tort System Expansion
- 11 Current and Future Expansions of Tort Liability
- 12 The “Litigation Explosion”
- 13 Measures of the Rate of Expansion of Tort Liability
- 14 The Relationship between Injury Rates and Tort System Costs
- 15 The Impacts of Substantial Increases in Tort Lawyers' Effective Hourly Rates
- 16 Class Actions
- 17 Fees in Class Actions
- 18 How Class Action Lawyers Game Fee Setting
- 19 Securities Class Actions
- 20 Regulation through Litigation
- 21 A New Role for Punitive Damages
- 22 For-Profit Partnerships between State Attorneys General and Contingency Fee Lawyers
- Conclusion
- Appendix A A Critique of Alex Tabarrok
- Appendix B Calculating Tort Lawyers' Effective Hourly Rates in 1960
- Appendix C Electronic Discovery and the Use of Contract Lawyers
- Appendix D The HMO Litigation
- Appendix E The GM “Side Saddle” Truck Litigation
- Appendix F Modern Class Actions Undermine Democratic Precepts
- Appendix G Other Ways Lawyers Game Class Action Fees
- Appendix H Nonrecourse Financing of Tort Litigation
- Appendix I Political Contributions by Tort Lawyers and the U.S. Chamber of Commerce
- Appendix J Special Rules Favoring Lawyers
- Appendix K The Ultimate Medical Expense “Buildup”: Whiplash
- Appendix L The Effect of Punitive Damages on Compensatory Awards
- Index
1 - The Origin of the Contingency Fee
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Foreword: Sorting Out Our National Liability Crisis by Richard A. Epstein
- Acknowledgments
- LAWYER BARONS
- Introduction
- 1 The Origin of the Contingency Fee
- 2 How Profitable Are Contingency Fees?
- 3 Are Contingency Fee Profits “Reasonable”?
- 4 How Tort Lawyers Have Increased Their Profits by Restraining Competition
- 5 Why the Market Has Failed to Correct the Absence of Price Competition
- 6 Impediments Imposed by the Bar to Price Competition
- 7 The Effects of Incentives Created by Contingency Fees
- 8 How the Quest for Profits Influenced the Development of the Tort System
- 9 Lawyers' Role in the Expansion of Tort Liability
- 10 The Role of the Judiciary in Tort System Expansion
- 11 Current and Future Expansions of Tort Liability
- 12 The “Litigation Explosion”
- 13 Measures of the Rate of Expansion of Tort Liability
- 14 The Relationship between Injury Rates and Tort System Costs
- 15 The Impacts of Substantial Increases in Tort Lawyers' Effective Hourly Rates
- 16 Class Actions
- 17 Fees in Class Actions
- 18 How Class Action Lawyers Game Fee Setting
- 19 Securities Class Actions
- 20 Regulation through Litigation
- 21 A New Role for Punitive Damages
- 22 For-Profit Partnerships between State Attorneys General and Contingency Fee Lawyers
- Conclusion
- Appendix A A Critique of Alex Tabarrok
- Appendix B Calculating Tort Lawyers' Effective Hourly Rates in 1960
- Appendix C Electronic Discovery and the Use of Contract Lawyers
- Appendix D The HMO Litigation
- Appendix E The GM “Side Saddle” Truck Litigation
- Appendix F Modern Class Actions Undermine Democratic Precepts
- Appendix G Other Ways Lawyers Game Class Action Fees
- Appendix H Nonrecourse Financing of Tort Litigation
- Appendix I Political Contributions by Tort Lawyers and the U.S. Chamber of Commerce
- Appendix J Special Rules Favoring Lawyers
- Appendix K The Ultimate Medical Expense “Buildup”: Whiplash
- Appendix L The Effect of Punitive Damages on Compensatory Awards
- Index
Summary
MOST OF US WHO ARE WRONGFULLY INJURED AND WANT to seek compensation need to hire a lawyer. Lawyers, however, are expensive. To proceed, we would need a way to finance the cost of hiring a lawyer. Four methods of financing tort litigation merit consideration.
First, the government could provide financing. As early as 1495, England began subsidizing access to the courts for those who were impecunious and injured. The English system of government subsidies – later called “legal aid” – eventually proved both costly and inadequate, and in 1990, the British government instituted a “conditional fee” system, allowing lawyers to finance access by charging an “uplift” of up to double their regular fee if the suit were successful in exchange for the same amount of downward adjustment of the fee if the case was lost. The English “double or nothing” conditional fee, often referred to as a “a success fee,” however, is a far cry – incentive-wise – from the American contingency fee system, which ties lawyers' fees to the amounts recovered. Even so, English solicitors have done quite well under this system. The expectation was that the uplift would reflect the degree of risk that the lawyer was assuming so that upward adjustments would be balanced by downward fee adjustments. In fact, downward adjustments have been infrequent because solicitors carefully select the cases in which to charge a conditional fee and rarely suffer a loss.
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- Lawyer BaronsWhat Their Contingency Fees Really Cost America, pp. 17 - 32Publisher: Cambridge University PressPrint publication year: 2011
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