Thursday, May 11, 2006

Lawyers: Outrageous contingency fees for lawyers?

In a quirky bit of fate, I read an article on CBC a couple of days after my last post, which dealt with mega-torts and mega-$ for lawyers through contingency fees. Often, lawyers will agree to take on a case based on a contingency arrangement, rather than a flat fee basis. The number has traditionally been 30% of the "winnings" in a case. Lawyers are careful to get into this kind of arrangement, because it can end up being a real gamble, unless the lawyer feels very strongly that they have a potential winning case. Contingency arrangements are common in personal injury law, because the potential payout has traditionally been quite high, thus resulting in a strong fee for the lawyer.

The article that I recently read told of the fees that would be paid out to lawyers for a recently settled case involving compensation for victims of residential schools in Canada - where many aboriginal children and youth were mistreated, abused and often neglected. The fees to the lawyers will amount to about $80 million. That's right $80,000,000.00. That's a lot of zeros! One firm from Saskatchewan, The Merchant Law Group, will receive about 1/2 of that. $40,000,000.00. One firm. They have 50 lawyers. That's $800,000.00 on average per lawyer. No doubt, the junior lawyers will see very little, if any of that money, and the partners will enjoy much higher yearly bonuses this year. The firm put forward that many of their lawyers had gone without pay for extended periods, and that they had invested over $2 Million of their own monies into the class action case. They represented about 9000 clients in the class action.

Hey, I'm all about making a decent living as a lawyer. I wouldn't have gone through the 10 years of education, and a year of articling if there wasn't some promise of a decent yearly take-home at the end of the rainbow. But $40M for one firm. That's outrageous. What makes it more outrageous is that it never even went to court. It was a back-room negotiation. The $40M firm admitted that it wished it had gotten more for its clients. I bet they wished that too.

The deal offers any former student a lump sum of $10,000 each, plus $3,000 for each year spent in the schools. An estimated average of about $30,000.00 for each living former student. It is estimated there are 80,000 people alive today who attended Indian residential schools, according to Statistics Canada. The total payout is about how much a secretary makes in one year. The average age of the former students is 60, but many are sick and living in poverty. This is compensation for many years of actual physical, sexual and mental abuse, plus years of post-abuse mental anguish. Now, consider that a large number of the victims are now dead, and no claim can be made. Do you think that the abuse suffered by residents of the schools has not affected further generations? I do. Here's why. My grandmother attended a residential school. I don't know how badly it sucked, but I do know that it did suck. We can all read victim stories to get an idea of what it was like. My grandmother did not get to be with her family for 10 months of the year for years. She got to go home for summer holidays. During the school year, she wasn't allowed to speak her native languages. That means that Cree was lost for her, for her children, her grandchildren and her great grandchildren. French was also lost, but luckily regained a couple of generations later through self-study.

I ramble on...

Here's the point. For something that affected an entire life, and the lives of the victim's progeny, the government is willing to hand out $30,000.00. Gee...thanks on behalf of all the claimants. For working really hard on the case for a few years, all the while servicing other clients, I would assume, 50 lawyers get to share $40,000,000.00. That's enough for many people to retire on. Retire well. Yeah, they worked hard, I am sure, but they didn't get what the claimants asked for. O the other hand, they chose to take a risk on 9000 clients and to put in a lot of time. But, in my opinion, the risk they took does not reflect 40 million dollar bills.

Am I off here? Am I crazy to think that this situation is really out of whack? Am I going against the grain too much as a member of the Law Society to say that this is bordering on immorality? Let me know.

P.S. How much is $40,000,000.00? It's hard to imagine for me, as I have been in student-related poverty for so long. Here's a funny post about how much $1,000,000.00 is. Here's some more trivia on the subject - how much does $1,000,000.00 weigh?


jarvis666 said...

Ari David Kopolovic said...

I seriously don't want to come off as being rude, but you seem rather fixated on the number itself; yes -it is clearly a lot of money, but I don't think that there is necessarily a problem with it.

Consider: What would have occured had no contingency-based arrangements been permitted? Would the plaintiffs have recieved a settlement at all? It seems likely to me that the costs of bringing an action would have been prohibitive for the class in the absence of contingency arrangements.

Inevitably, contingency arrangements usually mean that a successful plaintiff (or class of plaintiffs) will recieve less than they would have otherwise, if successful... but it also means that (1) they have less to lose if unsuccessful, and (2) that actions that would not otherwise get brought will in fact be brought.

Finally, I just took Civ Pro and our professor was insistent on saying that class actions NEVER (well, I suppose, almost never) go to court; they are always settled. Once a class is certified, the battle is essentially over since certification amounts to the judge saying "we know you screwed over all these people" to the defendant; thus the battle is in getting certified.

That said, you migh be right that the lawyers kept too much in this specific instance; I dont know enough about the typical margins to comment.

Anonymous said...

The law allows lawyers to manipulate the system and take taxpayers money for very little effort. The courts make disputes expensive and costly, and few lawyers question the ethics. It's nice to see an insider question the system which is long overdue for a change.