Lawyers’ ‘double-dipping’ goes to court
Ontario appeals panel to determine if woman in personal injury case can lead class action
“I know clients don’t like to pay fees, that’s an unfortunate situation.” JANE CONTE PERSONAL INJURY LAWYER
Phil Trudel was heading west along Burnhamthorpe Rd. in Mississauga one afternoon when another car coming south off a side street ran a stop sign and slammed into his Dodge Ram pickup truck.
On another day, Amita Shah and her husband, Jayesh, were driving north on Mavis Rd. when their car collided with a driver making a left turn out of a plaza driveway while the driver was talking on her cellphone.
Both Trudel and the Shahs were injured in these separate accidents. Both hired a personal injury lawyer on contingency — “you don’t pay unless we win.” And both believe they received thousands of dollars less from their settlements than they were entitled to under Ontario law.
Why? In each case, their lawyers appear to have taken both a percentage cut of the settlement dollars and an additional payment to cover “costs.” Under Ontario law, legal “costs” in these contingency cases actually belong to the clients under the theory that the lawyers have been paid a fee through their cuts of the damages.
An ongoing Star investigation found personal injury lawyers in Ontario routinely take this second payment, which critics call “double-dipping.”
Like many clients past and present, and hundreds of personal injury lawyers, Trudel and the Shahs will be closely watching a potentially precedent-setting case that begins Wednesday in a Toronto court.
The Ontario Court of Appeal will determine whether the case of a woman from Brooklin, Ont., against Toronto law firm Neinstein & Associates should be certified as a class action.
The case centres on Cassie Hodge, a mother of two who developed chronic pain after a car accident in December 2002. She alleges that double dipping and other factors reduced her take from a $150,000 settlement to just $10,000. Class counsel Peter Waldmann writes in his submissions to court that lawyer Gary Neinstein and his firm took from clients both a percentage of the damages and the costs.
Chris Paliare, the Neinstein firm’s lawyer, argued in his factum that the case should not be certified. In a letter to the Star, Paliare also noted “there have been no legal determinations on the allegations raised by Ms. Hodge, nor have there been any factual findings in her case against the Neinstein firm.”
Originally, a Superior Court judge refused to certify the Neinstein case as a class action. Then the Divisional Court reversed that decision. Now, that decision to certify is being appealed by Neinstein and his firm. If the case is certified, between 4,000 and 6,000 former clients of the Neinstein firm could potentially join the “class” and the case, barring any further appeals, would proceed to trial or a settlement.
The Neinstein case could have wide-ranging ramifications for other personal-injury cases in Ontario. A recent Star series prompted dozens to come forward with their stories.
The Shahs’ accident happened near a Home Depot plaza in Mississauga in 2009 when a distracted driver pulled in front of their car. Their car struck the driver’s side of the other vehicle. Amita Shah, 51, still suffers from leg tremors, anxiety and pain. Her husband, Jayesh, 54, was in the passenger seat and his shoulder was injured by the impact.
The Shahs hired Conte & Associates, a personal injury law firm with locations in Whitby and Vaughan run by Jane Conte, who in a promotional video for her firm is seen getting out of a white BMW convertible with the licence plate “SEEUNCRT.”
Like many clients of various firms the Star has interviewed, neither Amita nor Jayesh Shah truly understood the contingency fee retainer Amita signed. The document states the firm will take as its fee 30 per cent of the amount recovered, plus the “costs” awarded.
The case settled in 2015 for $295,000, according to settlement documents. The detailed accounting shows Conte’s total payment for her services was $95,346 — composed of a fee of $70,346 plus an additional amount termed “costs” of $25,000. There were also a series of disbursements, including $1,250 for photocopies and $1,091.30 for “Legal Link,” a company that on its website says it provides “business-critical information to the legal and business communities.” In the end, the Shahs received $154,496.27 — just over half the settlement.
Jayesh Shah said he was generally happy with the lawyer’s work, but then noticed the $25,000 in “costs.” He did not know Ontario law banned this in contingency agreements and complained only because they were surprised at the flat-fee charge. After a back-and-forth, Conte agreed to return half that amount, Jayesh told the Star.
Conte told the Star that despite the description of the fee on the documents, she does not take costs.
“Our fees charged after handling both these matters for six years were fair and reasonable, and everything was explained in detail to our clients resulting in a good result, which our clients acknowledge,” Conte said in an email.
In a phone interview with the Star, Conte said: “I know clients don’t like to pay fees, that’s an unfortunate situation.”
Conte said the final statement of account the Star is basing its information on, dated 2015 and sent by Conte to the Shah family, “was in fact never processed in this matter and was prepared in my absence while I was out of the country with a terminally ill family member.” Conte recently sent the Star different documents dated five months after Shah’s original bill. Shah says he never received a copy.
This second statement showed the fees paid to Conte & Associates were now $82,719.77 — a difference of $12,626.50, which appears to account for the approximate 50-per-cent reduction in the amount called “costs.”
In another email to the Star, Conte said the retainer agreement, which states that “costs” will be taken, was “changed by our office eight years ago, shortly after I left my previous firm and opened C&A, and reflects the proper calculations.”
Conte told the Star she would supply a current retainer agreement, but has yet to do so despite five requests from the Star.
The crash that severely injured Phil Trudel in December 2012 deployed his truck’s airbags and spun the vehi- cle 180 degrees so that it came to rest facing the opposite direction, he says. Trudel was knocked unconscious when his head smashed into his steering wheel, leaving him with a concussion, head, neck and back injuries, tinnitus in his left ear and PTSD, he says. Within a month of getting out of hospital, Trudel chose a lawyer after he saw a television ad for Preszler Law Firm featuring an urbane gentleman in a suit and tie. (The Star recently reported that the man in the firm’s ads is actor John Fraser, not a lawyer).
Trudel called the Preszler firm, prompting a visit to his home in Puslinch, Ont., by lawyer David Preszler, a son of the firm’s founder.
Trudel said he found Preszler’s contingency fee agreement confusing, but signed it anyway.
“I was trying to take care of my injuries . . . I was dealing with my insurance company, I had to take time off work . . . You’re in a different world,” said Trudel, who works as an employment co-ordinator at a nonprofit social work agency.
One part of the contingency fee agreement states the Preszler firm would take as its fee 20 per cent of all damages and interest on damages, “plus a percentage of damages that is equivalent to the partial indemnity fees recovered from the defendants (if any),” plus HST. “Partial indemnity fees” is a commonly used term in legal circles for “costs.”
Confusingly, in another paragraph, the agreement says that the law firm would not include “any amount either awarded or agreed to by way of costs” when calculating its fee.
After the case settled in June 2016 for $90,000, Preszler sent Trudel a statement of account. It appears to show the firm taking nearly $11,000 in partial indemnity costs (or an amount equivalent to that), in addition to $14,546.62, which equals 20 per cent of the damages.
Lawyer Jeff Preszler told the Star his firm “did not retain the actual costs awarded to Mr. Trudel as part of the settlement.” Rather, he said the firm’s fee “is a variable percentage, a portion of which is calculated in relation to partial indemnity fees plus HST.”
“In this case, our fee was taken from the damages only as is permitted under the Act,” Preszler said in an email. “The amount charged to Mr. Trudel is fair, reasonable, and is in fact roughly half of the docketed time that we actually incurred on Mr. Trudel’s case.”
Preszler went on to say that his firm takes “significant risks under the contingency fee agreements that our clients, including Mr. Trudel, choose to sign.”
“We spend hundreds of hours with no guarantee of payment. None of our cases are perfect, and all of them involve risks of varying degrees,” he said.