SJC Rules in Favor of Malpractice Plaintiff

SJC courtroomCrowe & Mulvey, LLP has successfully challenged a Superior Court judge’s ruling that would have made it more difficult for people of limited means to pursue medical malpractice cases.

The Supreme Judicial Court ruled earlier this week that the Superior Court judge applied the wrong legal standard in deciding whether to reduce the bond required to be posted by a plaintiff who is not successful at the medical malpractice tribunal.  The decision, Faircloth v. DiLillio, held that the judge must determine whether the plaintiff herself can afford the $6,000 bond, even if the plaintiff’s attorney has agreed to advance litigation costs.

The history of the case, handled by Crowe & Mulvey, LLP lawyers Liz Mulvey and Florence Carey, was chronicled in an earlier post.  The plaintiff, a young girl with severe brain damage, had lost at the medical malpractice tribunal, despite presenting the opinion of a board-certified obstetrician that her injuries were due to the defendant’s negligence.   According to the statute, the required bond is to be reduced if the plaintiff is indigent, to insure access to the courts for all, but the Superior Court held that the plaintiff’s lawyers should be required to post the bond because they were paying other costs.

The Supreme Judicial Court held that a lawyer’s agreement to advance litigation costs could not be considered by the Superior Court in deciding whether to reduce the bond.  Instead, the judge must consider only whether the plaintiff has made a “good faith effort” to satisfy the tribunal standard, and whether a reasonable person in the plaintiff’s position who was paying his own expenses would spend his own money to post the bond.

Because dismissal ensues if the bond is not posted, the SJC recognized that requiring the attorney to post the bond could put him in an impossible position vis-a-vis his client, who might want the bond posted when the attorney did not wish to do so.  Further, the Court noted that attorneys might be less willing to represent people of limited means if they knew they might be exposed to liability for the full amount of the bond.  The SJC’s decision insures that medical malpractice victims will not be denied access to a jury trial because of their inability to pay the cost of a bond, and that decisions about the amount of the bond will not be made based on the lawyer’s finances.

Read the full Faircloth decision here.

When a Contingent Fee is Not Contingent

dollar_familyIn a previous post, I discussed the benefits of contingent fee agreements, which are the standard compensation arrangement for personal injury cases.   Although subject to more detailed rules than hourly or other fee agreements, the contingent fee system for the most part works flawlessly, to the satisfaction of the many thousands of clients and lawyers who enter into these agreements every year.  This isn’t to say that there are never any problems with contingent fee agreements.  But for the most part, those problems arise when a lawyer tries to use a contingent fee agreement in an unusual way.

A recent decision by the Massachusetts Appeals Court underscores the limitations on the appropriate use of contingent fee agreements.  In Landry v. Haartz, a lawyer tried to enforce a contingent fee agreement in a case where he had represented a couple in a business transaction concerning the sale of their share in a family enterprise.  Unlike some more colorful family business disputes in recent memory, the plaintiff and her sibling co-owner remained on friendly terms throughout, and the sale was concluded quickly, and at a value set by the corporation’s accountants.  The jury found that the lawyer, who had the burden of proof, had failed to prove that the amount of the contingent fee was reasonable under the circumstances, and therefore could not enforce the contract.

While on its face concerning to lawyers who handle contingent fee cases, Landry is actually a situation where there was no real risk to the lawyer, and no significant uncertainty about the outcome of the transaction.  Given the pre-existing business agreement and the friendly relations between the siblings, it is difficult to say that the lawyer’s services contributed significantly to producing the resulting sale.  In the absence of any “contingency” that might or might not occur, a contingent fee is often inappropriate.  This case probably would have turned out much better for the lawyer if there had been litigation about the terms of the sale or the value of the business.

The situation in Landry stands in stark contrast to most personal injury cases, where there are usually significant uncertainties about liability and/or the amount of damages, and where there is usually a genuine risk that the plaintiff may get no recovery at all.  In those cases, not only does the lawyer take a serious risk in contributing his time and money to the effort, his services play a major role in accomplishing a favorable outcome for the client.  Unlike Landry, in these cases, there is a genuine contingency: the client may recover nothing, in which case the lawyer gets no fee and loses his investment in the expenses; the recovery may be far less than the lawyer and client expect or hope at the outset, in which case the lawyer’s compensation is much less than a regular hourly rate; or the recovery may be adequate to provide the lawyer with a fair return on his investment, while allowing the client to receive excellent legal services that he could not otherwise afford.

The important message for clients, lawyers and judges who deal with contingent fee agreements is that the fee must be reasonable, at the time the agreement is signed.  This determination involves considering the nature of the case, and what difficulties may be anticipating in proving liability and/or damages, the skill required to handle the case, and the expected investment of time and money that might be involved.   In the vast majority of cases, both client and lawyer will feel at the end of the case that their arrangement was fair to both of them.

Read the Appeals Court’s decision in Landry v. Haartz on the court’s website.

Contingent fee opens courthouse doors to people regardless of means – also serves as important check on frivolous lawsuits.  If client has money to pay lawyer, lawyer cares less about merits, because being paid.

What You Should Know About Contingent Fees

pie shareContingent fee agreements–arrangements that call for a lawyer to receive a percentage of the client’s recovery by way of compensation for legal services–are often criticized, but usually not by the clients who sign them.  While early English and American courts disfavored contingency fees, believing that they encouraged litigation, this type of fee arrangement has been recognized and approved by courts for more than a hundred years.

Contingent fee agreements, which are common, if not universal, in personal injury cases, provide important societal and individual benefits.  These agreements make quality representation available to even the poorest individuals, and allow them to pursue meritorious claims against individuals, corporations and insurance companies who have enormous resources to fund litigation.  They assure the client of the lawyer’s best efforts, by giving the lawyer a financial incentive to achieve the best possible result for the client.  And they provide a return to the lawyers who invest their own time and money to pursue what they believe are meritorious claims.

But there is an important benefit to society and the judicial system as well.  The practical effect of the contingent fee system is to encourage lawyers to screen cases carefully, and to pursue only those that have merit. The shrill cry of the insurance industry that contingent fee agreements encourage frivolous lawsuits is ridiculous.   A lawyer who repeatedly brings baseless claims will soon find himself unable to pay his office expenses.

Indeed, it is the lawyers who are paid by the hour, no matter what the result, who have no incentive to resolve a case or to be concerned with its merits.  The longer the case goes, the more they can bill.  And if they lose the case for their clients, they still get paid.  These are the lawyers who represent corporations and insurance companies.

Most states have special ethical rules that apply to contingent fee agreements.  Rule 1.5 of the Massachusetts Rules of Professional Responsibility applies to contingent fee agreements in the Commonwealth.  In addition to a requirement that the agreement be in writing, lawyers must be sure the client understands the percentage of the fee, and how case expenses will be paid and reimbursed.  The New Hampshire Rule 1.5 and the Rhode Island Rule 1.5 are similar, although less detailed.  In some specific types of cases, such as Massachusetts medical malpractice cases and cases brought under the Federal Tort Claims Act, there are separate statutes that limit the amount of a contingent fee.

In addition to paying a percentage of the recovery as a contingent fee, most agreements require reimbursement of any costs that have been paid by the law firm during the case.  Many firms will advance all of the costs until the time of settlement or verdict, so that there is no out-of-pocket cost to the client at all.

If you are considering hiring a law firm under a contingent fee agreement, you may want to ask some or all of the following questions:

  • Exactly how is the fee calculated?
  • Am I required to pay any costs to have my case evaluated?
  • What do I owe if you decide not to take my case?
  • Am I required to pay any costs during the litigation process?
  • What kinds of costs should I expect in my case?
  • If there is no recovery in my case, do I owe anything, either for costs or attorney’s fees?
  • If I change law firms, what do I owe to your firm?
  • What legal work is covered by the fee, and is there anything that isn’t covered?
  • What happens if there is an appeal of my case?

It is important to read the agreement carefully, and ask questions until you’re sure you understand all of the terms.  If you’re unsure, take the agreement home and read it at your leisure until you’re comfortable with what you’re signing.  Once you’ve signed, the lawyer should sign the agreement as well, and give you a copy for your personal files.

Once the agreement is signed, most cases proceed smoothly, and clients are usually satisfied with the result.  In a future post, I will describe some of the problems that arise when these agreements are not used correctly.