First Lesson For New Plaintiff’s Lawyers: If It Was Easy, Everyone Would Be Doing It
[Update: Elie Mystel has his own critique of Frank's argument. Eric Turkewitz takes a step back to applaud the robust debate. Note that Point of Law and Overlawyered remain on my blogroll despite my frequently disagreements with their authors.]
Every month, I’m presented with class action settlements where class members have legitimate objections and want to object, but my attorneys don’t have the time because of other opportunities or commitments. Every month, I’m presented with still other class action settlements where class members would have legitimate objections, but no class member ever approaches me. … I don’t have a monopoly on class action objections or helping consumers and shareholders. At the risk of creating competition that cannibalizes my donors, go do what I do, maybe you’ll do it better.
He might be right that there’s money to be made in representing objectors to class action settlements, because there’s the potential for objectors’ attorneys to be awarded attorney’s fees for their efforts. It strikes me as a plausible line of work, although, like all contingent fee work, a risky one, and one where you’re always worrying about the origin of your next cases. I must also admit that the long-term economics are a bit concerning to me: while your potential for reward is sharply limited (because you’re unlikely to be awarded anything above a reasonable hourly rate for the time worked, and even that is only paid months or years after the work is performed), your potential for loss is not (because you can walk away from cases without recovering a dime for your work or your expenses).
But that discussion of the merits of the practice puts the cart before the horse: plaintiffs’ law firms don’t just discover viable legal claims somewhere in the world and file them, they only enter the picture after clients find and hire the lawyers. Marketing lawyers is hard work. If Frank has some suggestions for how lawyers can pick up a steady stream of strong class action objection cases then he could potentially create jobs by sharing those suggestions. Similarly, if he is indeed presented with multiple meritorious, potentially-profitable objections every year that he turns down for lack of time, then he could do what most plaintiff’s lawyers do when they don’t have the time or resources for a meritorious case: send them to other competent lawyers.
More to the point, class action settlement objections are a unique and limited market and the dangers (both to lawyers and to clients) of inexperienced lawyers trying to jump into that field aren’t great. If that’s all Frank wrote about, I’d just let it pass. But Frank goes on to say something much more dangerous to lawyers and clients alike:
Ivy League schools have been discriminating against Asian-Americans for years; affirmative action programs produce illegal racial discrimination and entitlement to attorneys’ fees in places other than New Haven; the Obama administration is engaging in any number of lawless counterproductive activities that could be stopped by litigation; there’s a potential opportunity to profitably advocate on behalf of mass-tort clients victimized by their attorneys. Mad at your law school? Find a friendly tenured law professor and bring an antitrust class action against the AALS. Sue telemarketers that violate the TCPA: be the one who takes down those bastards at Card Services. Go, find clients, toil in obscurity and poverty for a few years, come out millionaires.
And these are just some of the things I would do if I didn’t have to sleep or if there were 144 hours in the day or I could clone myself five or six times. And it drives me nuts because nobody’s doing them!
I left him a comment on these suggestions, and someone else in the comments nailed it on the head:
What you’ve just described is a $100 bill on the sidewalk. Everyone who comes across it would be happy to pick it up. The fact that so many lawyers struggle to develop a practice implies either (1) that the $100 bill doesn’t exist, or (2) that it’s much harder to find than you think.
I’ve written many times before about the perils and problems of contingent fee representation. (See in particular this post on small firm business models and this post on contingent fee work as venture capitalism.) Frank is arguing for inexperienced, poorly capitalized lawyers to dive right into expensive and prolonged complex litigation involving procedural mechanisms (e.g., the class action) and causes of action (e.g., antitrust) that are routinely attacked by no less a force than the United States Supreme Court against defendants with essentially unlimited resources, like “Ivy League schools” and “the Obama administration.”
Don’t take my word for it; the same day as Frank recommended unemployed or disgruntled lawyers sue the Ivy League, an appellate court in New York affirmed dismissal of the class action against New York Law School. Think Yale or Harvard will put up less of a fight?
Sue the Obama administration? Sure, but be sure to see the over 1,000 cases alleging Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971) civil rights claims that were dismissed this year. Be sure to also read Iqbal v. Ashcroft, in which the Supreme Court rewrote by stealth the Rules of Civil Procedure to dismiss a detailed civil rights case brought by some of the pre-eminent constitutional rights lawyers in the country.
Consumer class actions? Sometimes that can work against telemarketers, but the companies are often some fly-by-night from which you’ll never collect a penny. Oh, and before you go running off to file a class action and invest thousands of hours of work and hundreds of thousands of your own dollars, be sure to see this article from Daniel Fisher at Forbes about the current Supreme Court term, or just read the title: “Class-Action Lawyers Face Triple Threat At Supreme Court.” How well do you think class action lawyers will fare? Before you answer that, answer this: when’s the last time a consumer class action prevailed at the Supreme Court?
Then comes this last piece of advice for would-be plaintiff’s lawyers from Frank:
Even if all you’re looking for is money, the plaintiffs’ mass-tort bar charges their clients 35-40% of recovery and flies around in Gulfstream jets. Be the one to charge clients 20-30% and settle for flying in first class.
Initially, this isn’t as sweet a deal as Frank thinks. In the Vioxx litigation, for example, the Court capped fees across the case at 32% plus reasonable costs — then also ordered 6% of every settlement be paid out of the attorneys’ fee towards to Plaintiffs Steering Committee, thereby making the maximum fee 26%. So if he’s really talking about offering clients a guaranteed discount, he’s talking about something well below 26%.
But let’s get to the reality of it all. I’m part of the plaintiffs’ mass-tort bar. I don’t have a Gulfstream, I fly coach, despite being 6’5”, and I do it for a simple reason: because the money comes out of my firm’s bank account. In a best-case scenario, years later, when the cases settle, my firm can be reimbursed for it, at cost, without interest. I prefer not to throw my firm’s money out the door, particular because plaintiffs’ law firms are the only businesses in the country that are required by the IRS to pretend their expenses are profits.
But I do know a lawyer whose firm uses a Gulfstream, and I noticed a funny thing about them. When there’s an Actos court conference in state court in Illinois, this lawyer signs in, in person. Same for Actos in Louisiana federal court, and vaginal mesh in West Virginia federal court, and so on across the country. They ask me, “are you going to the mass torts conference in Vegas? Are you going to the AAJ conference in Florida?” They’re going. They’re everywhere, and they do a hell of a job representing their clients. When it comes time to negotiate a settlement, the defendants know it. (And the Gulfstream isn’t charged in full to clients, only “reasonable” travel costs are.)
Can the young pup fresh out of law school do that? Can a former associate who burned out after five years of advising on real estate transactions for small businesses do that? Some mass torts work looks simple from the outside, and sometimes there’s a cheapskate way to do them, but only if you don’t worry too much about the client and your duties to them. That’s what a “mass torts lawyer” charging substantially below 26% — which, recall, was the maximum actual fee awarded in Vioxx — would inevitably be doing: going through the motions until they could take a lowball settlement and run away, rather than taking a huge risk for a modest fee. Or, perhaps worse for everyone involved, they could desperately sign up and hold on to every claim, leading themselves into bankruptcy and their clients into dismissal.
To be fair, there is indeed theoretical money to be made by inexperienced lawyers in mass torts by referring the cases to the lawyers in the Gulfstream. Ah, yes, but here’s the rub: to refer clients, they need to actually get the clients first. While it’s often claimed — including claimed implicitly by Frank in his post — that getting mass torts clients is as easy as waving a flag with a dollar sign on it, truth is, competition for these claims is fierce, the clients are smart, and, for every case you’re confident is strong, there’s a dozen cases you’re unsure of and worried about signing up, and two dozen cases you spend hours investigating just to end up rejecting.
Mass torts is not an area in which you want to dabble and start throwing around discounts. It’s work, it’s risky, and it can be very, very expensive. (For more on the importance of experience in general, please review the remarks of Bruce Campbell.) Indeed, even when mass torts cases work out, they don’t pay a dime for years; they spend those years eating your money and time. Perhaps you can talk the power company into accepting redacted medical records as payment, because you’ll have lots of those, but not two nickels to rub together.
And that’s the lesson to be learned from all of this: Warren Buffet can “be brave when others are fearful,” but an inexperienced lawyer certainly cannot. If there was some easy way to make money as a plaintiff’s lawyer, everybody would be doing it. The absence of apparently meritorious consumer class actions, antitrust cases, and low-fee mass torts doesn’t reveal mass stupidity or conspiratorial greed among the plaintiff’s bar, it reveals the sheer difficulty, risk, and expense of pursuing these claims.