Attorney’s fee might seem excessive, but it covers plenty
Q. Perhaps you’re aware of the current recall of certain CPAP machines that contain a foam used for noise abatement that can emit carcinogens. I contacted an attorney regarding a lawsuit against the manufacturer. His charge is 40 percent of the recovery plus expenses for expert witnesses, postage and many other things. Why it is so costly to me, the plaintiff ? It’s likely this attorney will send his cases to another attorney for a referral fee. Aren’t they taking advantage of economies of scale to cover research and other costs? Are there other ways to be represented in a lawsuit like this, preferably at a lower cost?
A. The main reason plaintiffs’ attorneys charge this much is because they are taking a big risk with their time and money.
The 40 percent contingency fee may initially sound like a lot, but you must consider everything it covers, including advertising, initial evaluation, overhead, all of the time devoted by what often ends up being numerous teams of lawyers from different law firms, payment of all necessary expenses incurred in developing and prosecuting the case, and the premium necessary to justify the risk of losing the entire investment.
While you are correct that many of the lawyers you see advertising on television, the internet, billboards and even on billboard trucks that drive around town will never actually work on a case, they often spend hundreds of thousands of dollars a month on advertising. They must then spend more money to evaluate the people who respond to the marketing, only a fraction of whom will have viable claims.
Not all lawyers have the resources or risk tolerance to spend large sums of money on advertising to get clients signed up, knowing that any potential payback is uncertain and many years in the future.
Once the clients who appear to have viable claims are signed up, they do often get referred to other lawyers at one of a small number of law firms who lead the actual litigation. This division of labor enables law firms to work together to achieve the economies of scale you mention and to make the process more efficient. These firms must then take on the task of working up each individual claim as well as building the proof necessary for the overall case.
The law firms are fighting against some of the largest and richest companies in the world. This means they must be prepared to budget very large sums (often many millions) over the next five to 10 years to fund office overhead, expert testimony, court costs, travel costs and many other things. You will only be charged for your pro rata share of all the expenses if there is a recovery on your individual claim.
Because the law firms are representing you and others on a
purely contingent fee basis, they will earn no money for many years. These firms are hoping to get paid one day, but there is no guarantee of success. If they lose the lawsuits, they will have spent considerable amounts of time and money, possibly millions of dollars, while you will have spent nothing.
You could hire your own attorney whom you pay by the hour to work on your case. The lawyer will almost certainly want you to cover all court costs, expert fees, deposition costs, including all travel expenses and the attorney’s time spent working on your case. If you win years from now, you might collect more. But you might also collect less. Worse, if you lose, you collect nothing, but you will have had to pay considerable amounts of money for nothing.
You could interview other law firms and try to find a lower contingency fee rate. The rates, however, don’t typically vary by much, as the pie must be large enough to cover all of the players and the expenses mentioned previously.
The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@lipmanpc.com.