March 3rd, 2014

New York Changing Its Contingency Fee Formula

Ever since the Great Flood swept over the earth in the days of Noah, or at least since I was sworn in 28 years ago, New York’s contingency fees formula in personal injury cases has remained static: Lawyers get paid their contingency fee off the net recovery, not the net gross.

And now that is changing.

A short tutorial for those who might not get the significance: If a case settles for $100, and the lawyers advanced $10 in expenses, then they first get paid back their $10 and the legal fee is calculated on $90. Thus, a $60 recovery for the client and a $30 fee for the attorneys if the fee was based on one-third of the net recovery. (Medical malpractice cases, while being far more difficult and complex, have lower fees.)

If, on the other hand, we were paid off the gross recovery, the client would be paid $66.67 and the attorneys’ fee would be $33.33. Then the client would pay back the $10 in expenses and net out $56.67. The effect of compensating attorneys off the net was that the attorneys were paying ⅓ of the expenses of the litigation.

But New York’s second appellate department has now changed rule NYCRR § 691.20(e), which formally read that the fee:

shall be computed on the net sum recovered after deducting from the amount recovered expenses and disbursements for expert medical testimony and investigative or other services properly chargeable to the enforcement of the claim or prosecution of the action.

Now, however, counsel is permitted to give the new clients a choice of how they wish to do it. The clients can either front the costs themselves (which most are economically unable to do) and allow the fee to be calculated against the net, or the clients may elect to front the costs themselves and have the fee calculated against the gross. Here’s the new rule: Contingency Fees in PI Rule Change

Is this good for clients? At first blush, some might say no because it means that the attorneys are no longer paying ⅓ of the disbursements — in the end the client is getting $56.67 instead of $60, in the example I used.

But in actuality, a great many cases aren’t so clear cut as to whether lawyers will take them or not because some are not financially viable by using the “net” formula. If there is only $25-50,000 in insurance, after all, and a lawyer thinks she may have to pay $5,000 – $10,000 in expenses, many will simply decline the representation.

We see this happen in medical malpractice cases all the time due to the low fees, resulting in the medical community enjoying de facto immunity for most acts of malpractice due to the very low legal fees we have in New York. While tort “reformers” claim this is a good thing, the real-world result is that the loss is then borne by the victims and taxpayers who must front the costs of the loss instead of the people or institutions responsible.

Word has it that the other three appellate departments in New York will soon follow suit with the altered fee calculation.

But one rule remains hard and fast and unchanging- when we lose we get zip. And we will also, most likely, be eating the expenses.

March 30th, 2009

Medical Malpractice Reform Fails in New York

Yesterday, budget negotiations between the Governor and legislative leaders failed with respect to reforming New York’s medical malpractice laws. This leaves thousands of people without attorneys who may have legitimate claims for malpractice, but no one to investigate them.

New York has some of the lowest medical malpractice legal fees in the nation. As a result of mid-80’s legislation, countless people who have been harmed by malpractice over the years have been unable to obtain representation. But reform of that law, that was part of the budget negotiations just concluded, failed according to a source I spoke with earlier today.

Unlike most negligence cases, where the top legal fee 1/3 of the recovery, malpractice legal fees are substantially lower. New York’s “sliding scale” fee structure looks like this:

30% of the first $250,000 of the sum recovered;
25% of the next $250,000 of the sum recovered;
20% of the next $500,000 of the sum recovered;
15% of the next $250,000 of the sum recovered;
10% of any amount over 1,250,000 of the sum recovered.

Thus, while malpractice cases are significantly more difficult to bring, and cost a great deal more (due to the necessity of hiring additional experts), the fees are lower than in other personal injury matters. Essentially, the lower fees, greater expense and significant technical difficulty of bringing such suits have given de facto immunity to the medical profession for many claims.

The New York Post, in an opinion column last week, claimed such a change in the legal fee structure was a “bonanza” to lawyers. The piece by Post columnist Fredric U. Dicker claimed that there would be “windfall” earnings to lawyers, evidence that he really doesn’t have much clue as to what he is writing about. He clearly knows nothing of the actual economics of bringing a malpractice claim and proving it, or that they rarely settle easily. Nor does he appear aware the largest cases almost always need to have any fee approved by a judge.

While I’ve never met him, I have no doubt Dicker would change his tune in a hear beat if he was the one who was injured by the negligence of others, just like these other people. He also probably doesn’t know that the medical malpractice “crisis” has been debunked as a hoax (and yet more here) and probably doesn’t know why malpractice premiums for New York doctors jumped dramatically recently. He might, perhaps, be interested in the price gouging by some medical malpractice insurers, or how malpractice gets covered up, or even about the White Coat of Silence, but he would only be interested if he had an open mind.

Dicker didn’t report that most malpractice victims are without recourse and forced to bear all of the loss. Time and again I receive phone calls from people desperately trying to find counsel, and learn that I am but one attorney in a long list that has rejected the matter simply because of the economics of the matter.

Once upon a time in America we believed that people should be held responsible and fix their mistakes. But the right wing Post has apparently dropped that in favor of political partisanship.

If medical practitioners want to put malpractice lawyers out of business, there is a way to do it. But it isn’t by victimizing the patient a second time.

More on the subject at Point of Law supporting the Post editorial.

November 28th, 2006

How much are the legal fees in a personal injury case?

In part one of this FAQ, I discussed 1) the need to find a lawyer in your area, and; 2) concerns one should have if they are solicited by an attorney. Now we turn to legal fees:

3. How much are the legal fees in a negligence case?

Most New York personal injury law firms operate the same way:

First, there is no legal fee for an initial consultation. If the case is taken it is usually done on a contingency basis, which means that the lawyer gets paid only if the client gets paid. This is an incentive for the lawyer to only take good cases with serious injuries, and it relieves a burden from clients who would not otherwise be able to afford a good attorney.

Legal fees are governed by the Judiciary Law, which establishes a limit of 1/3 of any recovery as the fee, with the exception of medical and dental malpractice cases where the fee is lower (see below).

Over the course of the representation, there will be expenses that most attorneys will generally advance on behalf of the client, such as for medical records, experts, stenographers, and certain court filings. There may be exceptions to this, and a good attorney will candidly discuss them with you. (For example, if a settlement offer is made that the attorney recommends accepting, and the client refuses, the client might be asked to front any additional expenses.)

At the time of recovery, the firm will first reimburse themselves for the cash outlay for expenses and then do an apportionment of the remaining recovery. For example, if a case settles for $100 and there was $10 in expenses paid by the attorneys on behalf of the client, then the $10 would be paid back to the attorney and the remaining $90 would be used to determine the legal fee.

4. What are the fees in New York medical malpractice and hospital malpractice cases?

Medical, dental and hospital malpractice cases are also governed by the Judiciary Law, which sets forth a legal fee “sliding scale” structure that looks like this:

30% of the first $250,000 of the sum recovered;
25% of the next $250,000 of the sum recovered;
20% of the next $500,000 of the sum recovered;
15% of the next $250,000 of the sum recovered;
10% of any amount over 1,250,000 of the sum recovered.

Thus, while malpractice cases are significantly more difficult to bring, and cost a great deal more (due to the necessity of hiring additional experts), the fees are lower than in other New York personal injury matters. In fact, they are some of the lowest in the nation. Because of this, many New York firms have a much higher threshold barrier in taking malpractice cases. Essentially, the lower fees, greater expense and significant technical difficulty of bringing such suits has given virtual immunity to the medical profession for smaller claims. Samples of some of the New York medical malpractice cases my firm has handled can be viewed at this link, and they demonstrate the complexity of many matters.

In future FAQs, I hope to cover the need for speed in certain things, the issues around how to “value” a potential case, and other subjects.