Blogger at Law

Understanding Contingency Fees: Risk and Reward

May 3rd, 2009

In many cases, a client can secure legal representation without any out of pocket expense for attorney fees by hiring a lawyer on a contingency fee arrangement. The way a contingency fee works is that a lawyer agrees to be compensated from the proceeds of a settlement and judgment. Usually, the contingency fee is 33% of the “gross amount recovered.” If the case is unsuccessful, the lawyer gets no fee. The contingency fee arrangement, which permits a client to fund their case with the anticipated proceeds of success, helps many folks have access to justice who otherwise could not afford it. This is a good thing.

Another advantage of a contingency fee is that it can motivate a lawyer to get the best result in the shortest amount of time. Lawyers who work by the hour have to fight against the tendency to take their time, because time is money. It is understandable why many clients prefer a contingency fee.

However, lawyers who advertise on television have created an expectation that all legal representation can be had without costs or fees. Folks seem to think that lawsuits are free. The availability of this arrangement can create a sense of entitlement to legal representation that fails to understand the economics of litigation or appreciate the risks it represents to the attorney. Just because you do not have to pull money out of your pocket does not mean that lawsuits don’t cost money or that eventually you will not pay for your lawsuit. It just means that you do not pay until the end.

On the other hand, many think 33% is too much. My most rewarding cases involved helping really good people who had something really bad happen to them. Helping these clients changed me for the better, and it also paid well. But helping others does not always pay well, and sometimes it does not pay at all. Sometimes (and hopefully not often) there are cases that amount to nothing. And even though a good lawyer chooses his cases wisely, it is inevitable that you will lose a case here and there.

But 33% only represents payments for the attorney’s time; there is still the matter of expenses. Filing fees, copying costs, long distance charges, computerized legal research, deposition costs, and mediation expenses are also costs of a lawsuit. Sometimes, there are expert witness fees. Excluding legal fees, a lawsuit can cost anywhere from $1000 to $20,000. (Some cases it can be more.) Who pays for this?

It depends. In certain cases, a lawyer may advance these costs, and depending on the case, advancing significant costs may result in a higher contingency fee. It is not uncommon for a lawyer who risks significant amounts of money in addition to significant amounts of time to get 40% of the proceeds plus reimbursement for expenses. So, the lawyer must evaluate: Can the lawsuit fund legal fees plus costs and leave enough to provide reasonable compensation for the harm suffered by the client? This is the question, and of course, there is always the chance of losing.

My Two Cents: In bigger cases, a client should opt to pay expenses if possible. The additional 7% is like interest since it compensates the attorney for the additional risks and the time value of money. In a case with potentially large damages, an additional 7% might be a significant amount. I always work with my client to create an arrangement that is fair to us both. But, a client should realize the risks to the lawyer as well as the impact on letting their lawyer fund their case.

Every case is different, and not all cases can work on a contingency fee. But, getting your attorney vested in the result means each of you have the same interests. (The hourly fee can be an disincentive.) The only way to know for sure what your fee options are is to ask the lawyer you are interested in hiring. And realize that just because money might not be your primary motivation, our legal system not only costs money but compensates damages with money. So, ask. Take time to understand the economics of your case. It does not mean you are greedy; it just means you understand the realities of our civil justice system.

Tags: Attorney Fees, Costs of litigation
Posted in Litigation, Practice of Law | No Comments »

Fairness in Nursing Home Arbitration Act of 2009: Prevent Mandatory Nursing Home Arbitration

April 24th, 2009

I have another nursing home neglect case in which a nursing home (this time Magnolia Place of Greenville) has required a potential resident to waive her right to a jury trial in order to be admitted. The nursing home industry has been hit hard by lawsuits for negligence that result in serious injury to their elderly residents. So, instead of improving care, the industry has instead attempted to force residents to give up their right to a jury trial. The problem is that there are a limited number of nursing home beds in our state. The number of beds available to poor South Carolinians are even more limited. So, families, who are without meaningful choices to begin with, are forced to choose between skilled nursing care and their constitutional rights.

Hopefully, the Congress will come to the aid of the elderly and their families. The Fairness in Nursing Home Arbitration Act of 2009 is currently pending in both chambers of Congress. The bills would prohibit nursing homes from requiring residents to agree to pre-dispute binding arbitration clauses. The present state of care in nursing homes is already something you wouldn’t wish on your love one if you had a choice, and allowing nursing homes to prevent judges and juries from holding them responsible when they cause death or serious injury to their residents is simply bad public policy.

Tags: arbitration
Posted in Nursing Home Law | No Comments »

The Right to Work

April 16th, 2009

The case of Carolina Chemical Equipment Company v. Daniel B. Muckenfuss 322 S.C. 289, 471 S.E.2d 721 (S.C. 1996) contains one of the clearest expressions (albeit borrowed) of a basic right to work:

[T]he right of an individual to follow and pursue the particular occupation for which he is best trained is a most fundamental right. Our society is extremely mobile and our free economy is based competition. One who has worked in a particular field cannot be compelled to erase from his mind all of the general skills, knowledge and expertise acquired through his experience. These skills are valuable to such employee in the market place for his services. Restraints cannot be lightly placed upon his right to compete in the area of his greatest worth.

Now this is a recognition of an authentic “right to work.” So, despite the fact that an employee does not own his job, he owns his body and mind, his labor, his knowledge, and his experience. Right? Well, sort of. For more discussion of protecting the right to work as well as the Muckenfuss case visit my other blog: Beat Your Non-Compete.

Tags: Employment Law
Posted in Employment Law, Non-Compete Litigation | No Comments »

Twitter-at-Law: Connected Lawyers Know More

April 10th, 2009

If you are not a lawyer on Twitter, you probably don’t know @RussRunkel, @elinfonet, @ Eric_B_Meyer or @taxgirl (my personal favorite). And if you don’t know these four, there are many others you don’t know. And what else don’t you NOT know? These four and about 20 other lawyers whom I follow on Twitter are connecting me to articles about the law, cases about issues important to my practice area, and blogs about the practice of law (blawgs).

Also, Twitter has a search capability that allows you to do use a search engine to search all the “tweets” on a particular topic. So, if I want to know what is being said about “noncompetes” or the Employee Free Choice Act (EFCA), I can search those terms and find people and ideas that will be helpful to me.

Of course, there is always the risk of information overload. Twitter can consume your time and attention. But for me, I have found that the reward has been well worth it. I am connected to interesting and smart people who are connecting me to ideas and information. I am a better-informed lawyer, and my clients are better represented. Does your lawyer use Twitter?

Posted in Practice of Law | No Comments »

Severance Agreements and Release of Claims

April 6th, 2009

I meet with people weekly to review severance agreements. Almost all severance agreements include a release of claims. A release of claims is an agreement whereby the one person agrees not to assert claims or file lawsuits against the other. It is logical to wonder if an employer is willing to pay something for a release of claims, whether your claims might actually be worth more money. And it is possible that requiring an employee to sign a release of claims to collect severance might be a violation of federal law. So, what do you do?

First, it is not a bad idea to consult an experienced employment lawyer. Of course, there is a cost. I charge $265 for a one hour consult, but will try to review the agreement ahead of time if it is scanned or faxed. It is hard to let go of the cash having just lost a job, but saving money can end up costing money.

So, what does someone get for $265? The short answer is an hour of my time. During the one hour consultation, I review the agreement and explain its terms. I also review the facts of the client’s discharge to determine if the termination is discriminatory or wrongful under the law. If the client has employment law questions, I answer them. And then I advise the client of any alternatives that might be available to severance, whether that being negotiation or litigation.

Severance which involves a release of claims is essentially an offer to purchase an employee’s right to sue. If someone is selling a car, she needs to know the Blue Book value of the car to decide if she is getting a good deal. If someone is settling legal claims, then she needs to know her legal rights to determine if the settlement amount is fair. Usually, this requires an experienced employment law litigator.

Can a discharged employee make a counteroffer? Sure. But, it can be difficult to negotiate more severance, especially without the leverage of a valid legal claim. Companies need a good reason to pay an employee more money, and sympathy usually doesn’t work. And even with the assistance of a lawyer, without a legitimate legal basis to bring a lawsuit, there is very little incentive for a company to pay more severance.

However, even though an employer might not be willing to pay additional severance, some will agree not to contest a claim for unemployment benefits. If an employee has been fired and has no legal recourse, there is value in being permitted to resign. Most of the time, it is more important to think about getting the next job instead of trying to hang onto the last one. In some cases, an employer will agree to let an employee resign and still not contest a claim for unemployment benefits.

More and more, the severance includes a re-affirmation of a non-compete agreement’s obligations. If an employee has a non-compete, then it is even more important to seek legal advice. Non-competes add to the pain of termination, and sometimes severance negotiations can provide an opportunity to negotiate a shorter non-compete.

Finally, whatever the severance agreement, employees need to make sure all the promises are in writing. Some make the mistake of relying on an oral promise. If it is important to the deal, it needs to be in writing.

Tags: Employment Law, termination, wrongful discharge
Posted in Employment Law, Litigation | No Comments »

Employee Free Choice Act: Restoring a Balance of Power

March 23rd, 2009

laborimage1 On February 19th, I wrote a column, Eroding Employee Rights Has Opened Door for Unions for the Greenville News in support of the Employee Free Choice Act (EFCA), which began:

Never before in my almost 17 years of representing employees with work-related disputes have I gotten so many calls. So many I can’t take them all: People not getting paid for the hours they work, not getting commissions for sales as promised, and being fired for no reason at all. I have met with more people in a 90-day period who have been fired for no fault of their own, but who on the way out the door were presented with a noncompete agreement signed months or years earlier under threat of discharge. Employers who do such things cannot blame employees when they call an employment attorney or when they join forces and form a union.

Click to read entire article.

Posted in Practice of Law | No Comments »

An Ounce of Prevention: Choosing The Right Nursing Home

March 20th, 2009

Senior woman Nursing home care is not improving. And although I believe that lawsuits on behalf of residents seriously injured by abuse and neglect provide incentives for corporate caregivers to improve care, there is no remedy as good as prevention. And prevention is first the responsibility of the family, and choosing the nursing home is likely to be the most critical exercise of that responsibility.

Medicare’s Guide to Choosing a Nursing Home is a great place to start. The guide is 67 pages and contains a check list to use when you make a visit to nursing homes as well as a section on how to pay for nursing home care.

Also, Medicare.gov’s Nursing Home Compare allows you to search nursing homes by state, county or name. You can look at a nursing home’s last 3 inspection results. Nursing homes are rated by 5 start system which takes into account quality measures, staffing and inspection results. Quality measures show, among other things, how well the nursing home helps people keep their ability to dress and eat, or how well the nursing home prevents and treats skin ulcers

This information provides families with a tool for protecting elderly family members. Take an ounce of prevention and someone you love will be better for it. It might save their life.

Tags: nursing home negligence
Posted in Nursing Home Law | No Comments »

Jurors are Tweeps Too: Web-based Mistrials A Trend

March 20th, 2009

Jurors are instructed not to conduct independent research about issues in the cases they are selected to decide. They must decide the case on the evidence presented. They must not discuss the case until deliberations and then, only while in active deliberations with other jurors. But, as a series of cases over the last week have demonstrated, locking jurors away in a room no longer guarantees they will be cut off from the outside world.

The New York Times reported in Mistrial by iPhone: Juries’ Web Research Upends Trials “a juror in a big federal drug trial in Florida admitted to the judge that he had been doing research on the case on the Internet, directly violating the judge’s instructions and centuries of legal rules. But when the judge questioned the rest of the jury, he got an even bigger shock.” The judge learned that eight other jurors were also using their phones to do research about the case and had no choice but to declare a mistrial.

Just a week earlier in What a Twit! Twitter-using Juror May Cause $12.6 million Mistrial the New York Daily News reported a motion for a new trial in a case that resulted in a $12.6 million judgment was based upon a juror’s internet postings to Twitter.com. “The motion alleges the juror researched information about the case and communicated with others outside the jury about the case.”

Just a couple of days ago, a jury found Pennsylvania state senator, Vincent J. Fumo guilty on all 137 counts of conspiracy, fraud, tax offenses and obstruction of justice. However, the day before verdict was announce one juror was posting to Facebook and Twitter during jury deliberations. The Philadelphia Inquirer reported in Fumo Lawyers Target Juror Deliberations that each day of deliberations, a juror sent a text message via Twitter and FaceBook, including “This is it . . . no looking back now.” And then the day before the verdict: “Stay tuned for a big announcement on Monday everyone!”

Two takeaways from these three stories: (1) Jurors are Tweeps (people on Twitter) too, and this is a fact of life and now a fact of law. But, these examples are just new manifestations of an age old problem of keeping jurors from outside influences. The system counts on jurors to serve according to the rules. (2) Lawyers are monitoring jurors online activity. Social media offers lawyers (and the clients they represent) a new way to research jurors, before, during and after trial.

Tags: trends
Posted in Litigation | No Comments »

Too Harsh to Enforce: Unemployment and Economic Reality

January 28th, 2009

istock_000004809289xsmall South Carolina’s unemployment rate has hit 9.5%, and all indications are that it will continue to rise. And as hard as it is for the unemployed to find a job, for too many it is made even more difficult because of a noncompete, which prohibits the unemployed person from working in the field she has the most and/or the most recent experience. The third prong in a court’s evaluation of enforceability is whether enforcement of the noncompete would be “unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood.” As with most questions of fact, context is critical, and it would seem particularly so on this question.

The logic of the argument against enforcement is clear: Unemployment means more people competing for jobs. Skill and experience are generally the most valuable assets someone has to offer a prospective employee, and if an job seeker is barred from seeking employment in the field in which she has the most experience and/or the most recent experience, what are her chances of finding a job? Less for sure. And during a recession, much less.

And in an environment of tightening credit, if an employee does not have access to credit, the scenario becomes more harsh. And even more to the point: When the geographic scope of a covenant not to compete would require an employee to move to get a job, the housing market becomes relevant. Ability to sell one’s home within a reasonable time is critical when you are forced to move to find work.

And, what if the former employee is a budding entrepreneur, not so much scrapped for cash, but simply wanting to start her own business? Should a court consider the fact that a noncompete might prevent job creation in a shrinking job market? The fourth prong considers whether enforcement is reasonable from a standpoint of public policy. And as Congress considers extreme measures to stimulate the economy, should the court be enforcing restraints on trade that stifle economic growth?

These are good questions (if I say so myself), which can be turned into persuasive arguments. I have a case at the moment that I intend to make the argument that this economy makes enforcement of almost any noncompete too harsh and oppressive. Stay tuned.

Posted in Non-Compete Litigation | No Comments »

Massachusetts Bill Would Ban Non-Competes

January 15th, 2009

The law is titled “An Act to Prohibit Restrictive Employment Covenants.” The bill would render unenforceable “any written or oral contract or agreement arising out of an employment relationship that prohibits, impairs, restrains, restricts, or places any condition on, a person’s ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment relationship has ended.” Those who violate the act would be liable for attorney fees to employees who challenge such an agreement.

The bill is intended to promote competitiveness and attract entrepreneurs to Massachusetts. Perhaps, South Carolina looking to become more “pro-business” may consider following suit. Instead of providing expensive incentives to attract businesses to relocate, legislators could make South Carolina a sanctuary for entrepreneurs. Read more about the Massachusetts’ bill.