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Chapter 5 Sample
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The High Cost of Lawyering in America Today "The separation of powers among the executive, legislative, and judicial branches of government has been emasculated. All three branches are now virtual subsidiaries of the American Bar Assn.." --- From a letter written by Sidney Kash of Manhattan Beach to the Opinion section of the Los Angeles Times, issue dated 9/4/94
A few days later the same station broadcast a news report on 1/15/95 indicating that state tax figures show that lawyers are among the five (5) top money-making occupations in the State of California. It pointed out that legal fees were shown to now exceed $16 billion per year according to just released 1992 figures, and that this number was higher than any other state in the union. Not only that, this figure spent on legal fees exceeds amounts spent in the state "... on auto repairs, funerals, tanning salons, one hour photo finishing, videotape rentals, detectives, armored car guards, bug exterminators, laundry, haircuts, day care, shoe repairs, and septic tank cleaning --- combined."1 It was further announced that the number of lawyers in the state had increased by 26% in the last 8 years. During the same period their fees had increased by 57%. [Excuse me, but isn't that like twice the rate of increase of their number?] Also, during this same time period lawyer services for the poor only constituted 1% of states legal fees. So what have they been doing with the money? It certainly wasn't going to providing services for the poor! The radio station concluded that given the paltry 1% of fees devoted to services for the poor; one could readily surmise where the lawyers priorities lay. A January 3, 1995 caller to the Rush Limbaugh show said that New York newspapers had reported that law firms in New York had recorded their biggest income jumps ever. The papers reportedly indicated that law firms are one of the richest occupational income segments in New York City. And the caller hastened to point out: "... and they're not productive!" Apparently, the New York experience with wealthy and affluent lawyers closely parallels the California experience of same. Congressman Bob Dornan, a guest on the same show same date, added that legal suits are wrecking the medical profession in the United States, and that tort reform was badly needed. In fact, the Republican contract with America currently calls for personal injury and product liability tort reforms --- these in an effort to hold down the crippling costs of excessive related lawsuit awards. We'll have more to say about the consequential and related costs of lawsuits to society in a later section in this chapter. Walter K. Olson in his book The Litigation Explosion2 corroborates Congressman Dornan's and Governor Wilson's earlier noted observations telling us that New York officials estimated that payouts in lawsuits against doctors and hospitals in the state had increased 300-fold in a generation --- that's not 300%, it's 300 times as many lawsuits as before. Olson observed that by 1990 New York obstetricians with good records were paying $100,000 a year for liability insurance. Comparatively, Miami neurosurgeons with good records were paying $220,000 per year for their liability insurance. Add to these monetary payouts the fact that most of the money in these payouts goes to pay lawyers and legal fees; Olson presents an expert who believes that on average only about 15% of lawsuit awards ever goes to the actual claimants. And a study by the Rand Corporation indicates that well less than half ever makes it to the claimant. A U.S. News & World Report article3 dated 1/30/95 includes a byline: Fees first, Clients later, over a section which says that in cases against asbestos manufacturers after legal service fees and expert witness costs have been paid; injured parties will typically wind up with less than a third of the money paid by the defendant. Olson tells us that between 1977 and 1985, New York City made lawsuit payouts which jumped from an initial $24 million to $114 million.4 During that period the size of an average settlement rose from $7,100 to $31, 700. He cites a survey which says that America spends five times as much as its major industrial competitors on personal-injury disputes. The survey also concludes that during recent times the gap has widened, and during the last two generations the cost of injury litigation has risen fourteenfold after inflation. Meanwhile the US. economy has correspondingly only increased threefold. Olson sums it all up in a very telling quote:5
Then there is the January 30, 1995 issue of US. News & World Report with a feature article entitled: How Lawyers Abuse the Law. It cites Olson as a legal reformer who states that "Money is being redistributed in irrational ways" [via the actions of lawyers]. The article further cites a study which shows that more than 80% of malpractice claims filed in New York are without merit. It continues that nationwide, litigation costs for cities and counties are probably now in the $9 billion range. Last year it reports that New York City paid an estimated $270 million in liability judgements and settlements. Then there are cases of fraudulent or at least overly excessive billing practices. The How Lawyers Abuse the Law article cites a case where a lawyer billed a bankruptcy client for $177,844 for time spent preparing the bill! In another cited case, a lawyer drafted a legal motion which applied to thousands of separate cases, so he billed the client 3000 separate times for the same 12 minutes of legal work. The article goes on to cite a Jim Schratz, an auditor who supposedly works full-time investigating lawyers' bills, as asserting that he finds overcharges of 25% to 50% in 90 percent of the cases he examines. Another legal auditor supposedly found a lawyer who billed 62 hours of work for one day. Now if you think the accusers are too hard on the lawyers; then consider the findings from a survey of lawyers about this problem. In that survey the How Lawyers Abuse the Law article finds more than 60% of lawyers admitting to having personal knowledge of bill padding. As a matter of fact they probably regard this practice as relatively routine and to be expected occasionally in their line of work. The How Lawyers Abuse the Law article in another section tells us that the lawyers take on cases handled under a contingency fee arrangement is usually between a third to half of whatever is finally awarded. In one contingency fee case involving a Coca Cola delivery truck and a school bus of children, plaintiffs lawyers earned as much as $30,000 an hour. Not bad pay for someone who only has to get a college education, go to 3 years of law school and learn how to look up cases and outcomes in law reference books. It would seem that only moderate to average intelligent persons could figure out how to look up legal tenets in a bunch of reference books. We're not talking rocket science here, you know! Yet the amount of money these lawyers make and the power and influence they wield over America's society and the daily lives of its individuals is phenomenal and astounding when duly considered. There was an irate letter written to the Los Angeles Times by Martin A. Klein III of Newport Beach, reprinted on 2/12/95 under the byline:"Consultants' Fees Seem Out of Whack." Klein complained about the high fees paid to consultants to give advice to Orange County, California during its bankruptcy financial crisis debacle caused by the City Treasurer's earlier, widely reported poor investment strategies. Judging by public information available on fees paid to such consultants, Klein felt it was interesting to observe which occupational group of consultants received the highest pay. He presented figures which showed that Lawyers were paid $450 per hour compared to Accountants at $400 per hour, and Public Relations professionals at $350 per hour. Reflecting on the high hourly rates paid these consultants, and the fact that lawyers were the highest paid; Klein indicated that it was apparent whose "perceived" input to the County was considered the most valuable. Considering the performance thus far of the so-called expert consultants and county administrators in this financial fiasco; one could probably argue that a $10 per hour clerk could give just as valuable advice. Most untrained professionals would have easily guessed that interest rates were rising not going down, and so such risky investments banking on decreased interest rates should not have been made. But, in any case, note that our good friends: the lawyers always come out on top! Another newspaper article complained that private attorneys who were representing three top officials (employees) in the Orange County financial crisis fiasco had already billed the County for $120,000. And this occurred presumably just after the lawyers had barely begun to do any work on their cases. In fact it was reported that the County expected to spend about $12.1 million by June ['95] paying attorneys, accountants, and other consultants in connection with the governmental bankruptcy. It's so nice to know that after the County has lost millions, in fact possibly $1 2 billion, that we could always count on the legal professionals not to charge exorbitant prices --- not to "pour gasoline on a raging fire." I mean they wouldn't make matters worse, would they? It's so refreshing to see that in the County's hour of need so many lawyers would come forward to donate their time to assist the County and its taxpayers, to help them get out of this crisis. We know they would be so civic minded as to gladly make it their duty to help in every way! What? You say no. Raise taxes, and lay off the teachers! I'm sorry, I obviously confused them for someone else. There was another letter complaining about the high fees paid to lawyers in the state of California. It appeared in the Los Angeles Times, January 29, 1995 issue. To preserve it's crystal clear meaning I have reproduced it below:
Richard gives us a glimpse into the fact that there is more to the high cost of lawyers than straight consideration of just their direct legal fees. Their actions and lawsuits can have negative consequences for business and the economy far in excess of the high fees they charge. This point is made in various sections throughout this chapter and as it continues to develop I will have very much more to say about it. That is, there are many more consequential, related and follow-on costs to society imposed by lawyers and their commonly accepted practices than just consideration of their directly paid fees, and share of lawsuit awards. Even a Washington D.C. attorney wrote an article complaining about the budget-buster, high fees being charged by legal advisors in the Orange County California bankruptcy crisis. Kenneth R. Fineberg6 reported that outside consultants, including lawyers had billed Orange County for $4 million for just the month of December, 1994. He pointed out that law firms accounted for $867,000 of the amount. Then he went on to indicate that litigation is expensive, and in the case of the Orange County bankruptcy, with the meter running "to gain every possible advantage" the total cost which is expected to reach anywhere from $12 million to $17 million; could well indeed "break the bank." In the light of these figures Feinberg suggests that it would be less expensive and more prudent to come up with more cost-efficient mediation outcomes, as opposed to relying on the typical litigation approach. He concludes: "It would be an unfortunate, costly waste of Orange County resources and tax dollars for 'business as usual' to prevail, culminating in the hiring of hordes of lawyers and guaranteeing an unprecedented legal morass."
1.This appeared in a Los Angeles Times newspaper article entitled: "When Rights Supersede Common Sense," by George F. Will, in the Commentary section, January 22, 1995, p. M5 (unnumbered) 2.Walter K. Olson, The Litigation Explosion: What Happened When America Unleashed the Lawsuit?, Truman-Talley Books - Plume, New York, 1991 3.How Lawyers Abuse the Law, article by Stephen Budiansky, Ted Gest, and David Fischer in U.S. News & World Report, January 30, 1995, pp. 50-56 4.Walter K. Olson, The Litigation Explosion, 1991, p.6 5.Walter K. Olson, The Litigation Explosion, 1991, p.7 6.The information for this paragraph came from an article written for the Los Angeles Times entitled Mediation is Cost-Efficient, Timely Way to Avoid Litigation by Kenneth R. Feinberg, dated 3/26/95, p. B9 |