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Old 10-03-2019, 05:49 PM
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Lawyers: What is ethical when working on contingency?


Hypothetical:

A law firm accepts a plaintiff's civil suit on contingency. They will keep 33% of the award, if there is one; nothing if there is not. Halfway through the case, the defendant presents evidence that was unexpected by both the plaintiff and the lawyers, and the plaintiff's case takes a turn for the worse.

The firm determines that the risk/reward tradeoff is no longer in the firm's favor. That is, based on the cost to the firm to pursue the case, and the probability of winning, the expected value of the outcome is negative.

The plaintiff figures that the law firm signed up for this and they have to stick with it, and the plaintiff has nothing to lose except his time by pursuing it to the bitter end.

Is it ethical for the firm to discourage the plaintiff from pursuing the case? That would be the firm putting its own interests ahead of its client.
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Last edited by CookingWithGas; 10-03-2019 at 05:51 PM.
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Old 10-03-2019, 08:25 PM
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IANAL but I think in those circumstances it would be totally ethical for the plaintiffs lawyers to discourage him from persuing the case, I think it would be unethical for them not to, not just to protect their own interests but to protect his as well

it is incorrect to say the plaintiff has nothing to lose, even though his lawyers are working on contingency if he loses the suit the defendant's legal costs may be awarded against him
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Old 10-04-2019, 06:28 PM
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IANAL, but I wouldn’t be surprised if they have the ability to walk away written into the agreement.
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Old 10-04-2019, 06:39 PM
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Works on contingency? No! Money down!
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Old 10-04-2019, 09:42 PM
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Originally Posted by Smapti View Post
Works on contingency? No! Money down!
Punctuation matters.
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Old 10-04-2019, 09:44 PM
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Originally Posted by steepone View Post
IANAL but I think in those circumstances it would be totally ethical for the plaintiffs lawyers to discourage him from persuing the case, I think it would be unethical for them not to, not just to protect their own interests but to protect his as well

it is incorrect to say the plaintiff has nothing to lose, even though his lawyers are working on contingency if he loses the suit the defendant's legal costs may be awarded against him
Suppose the plaintiff has a different estimation of the likely outcome. The plaintiff may be wrong, but he is their client. If he doesn't take their advice to drop the case or attempt to settle, it is ethical--or even legal--for them to just walk?
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Old 10-04-2019, 10:18 PM
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What do you mean by "halfway through the case?" Are the lawyers Just sending letters to each other? Have depositions been taken? Has a trial date been set but not begun? Has the trial already started?

IMHO, unless the time to trial is so close that the plaintiff can't reasonably expect to get a delay to find another lawyer, the lawyer has every right to advise the plaintiff to get another lawyer. It certainly happens often enough in criminal cases.

For that matter, let me turn the question around. Suppose the plaintiff starts out with what appears to be a relatively straightforward worker injury case, and retains one of those lawyers who advertises on daytime TV. The company being sued decides to throw mega resources at fighting the case, and it becomes clear the plaintiff's lawyer is being overwhelmed. Is it unethical for the plaintiff to say, "I think you're in over your head here, and I'd like another lawyer"?

(Yes, I know the lawyer could receive a referral fee for handing the case over to a bigger law firm, but they'd still miss out on the potential big payday a jury verdict could bring.)

Last edited by Kent Clark; 10-04-2019 at 10:18 PM.
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Old 10-04-2019, 10:29 PM
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Generally a lawyer can elect to leave a client unless doing so would cause undue hardship. If they're making the decision the night before the start of or in the middle of the actual trial, the judge will probably force them to continue as the plaintiff won't have time to get another lawyer to take over the case. If it's not a situation like that, though, the firm can elect to simply withdraw from the case and tell the plaintiff to find another lawyer to represent them. They would not be able to charge for any work that would have been paid for by the contingency, so they're writing off a (probably significant) amount of money, but they don't have an open ended obligation to sink more and more resources they won't recoup into a case they can't win, and it would be unethical for them to give up on winning the case but keep showing up to technically still be representing the plaintiff.
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Old 10-05-2019, 07:18 AM
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Quote:
Originally Posted by Kent Clark View Post
What do you mean by "halfway through the case?"
Sorry for the lack of precision; halfway through the trial.

Quote:
Is it unethical for the plaintiff to say, "I think you're in over your head here, and I'd like another lawyer"?
Is there a code of ethics and an ethics board to which clients are accountable?
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Old 10-05-2019, 10:36 AM
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Halfway through trial the lawyer can’t walk away (with very limited exceptions). The lawyer can certainly strongly urge a settlement for a low amount if that’s the best that can be negotiated.

It’s worth noting that “evidence completely unexpected” would mean it wasn’t disclosed in discovery and would in most cases be inadmissible at trial. Civil trials usually don’t have significant surprises.
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Old 10-05-2019, 11:08 AM
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Quote:
Originally Posted by Pantastic View Post
If it's not a situation like that, though, the firm can elect to simply withdraw from the case and tell the plaintiff to find another lawyer to represent them. They would not be able to charge for any work that would have been paid for by the contingency, so they're writing off a (probably significant) amount of money,
The first firm can't charge, but they still have a contingency claim for the work they've already done, which would be recognised in the transfer to the second firm. If the second firm does actually win the case, the first firm would have a pro rata claim for the work they did on the file.
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Old 10-05-2019, 01:58 PM
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The first firm can't charge, but they still have a contingency claim for the work they've already done, which would be recognised in the transfer to the second firm. If the second firm does actually win the case, the first firm would have a pro rata claim for the work they did on the file.
That's true, but my thought was that if the new development in the case is bad enough that the firm wants to abandon the case and is willing to risk getting nothing, it's probably bad enough that it means they don't expect a new firm to be able to take over and win. OTOH the development could be something like 'Ok, we've just discovered that ABC corp was working with XYZ corp on this. While we could represent you against ABC corp, XYZ corp is already a client of ours and it would be a conflict of interest to represent you against them.' In that case the firm would withdraw from the case, but would also expect that there's a reasonable chance of the case coming through, and would still be entitled to contingency pay for the work they did.
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Old 10-05-2019, 02:24 PM
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Kind of relevant:

Elizabeth Holmes/Theranos can't pay her lawyers; lawyers want to quit...

https://www.mercurynews.com/2019/10/...lawyers-claim/
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Old 10-05-2019, 02:41 PM
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Originally Posted by Procrustus View Post
[....]evidence completely unexpected would mean it wasnt disclosed in discovery and would in most cases be inadmissible at trial. Civil trials usually dont have significant surprises.
I do not understand the rules and process of discovery, so maybe my whole question is built on a house of cards.
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Old 10-05-2019, 02:55 PM
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I do not understand the rules and process of discovery, so maybe my whole question is built on a house of cards.
The point is that generally speaking, by the time a case reaches trial theres very little chance of unexpected evidence. During the discovery process both sides have already exchanged all the relevant evidence.

A trial is about presenting evidence to the finder of fact (the jury or the bench), not about the two sides surprising each other with evidence.
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Last edited by Acsenray; 10-05-2019 at 02:58 PM.
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Old 10-08-2019, 10:31 PM
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Quote:
Originally Posted by CookingWithGas View Post
Suppose the plaintiff has a different estimation of the likely outcome. The plaintiff may be wrong, but he is their client. If he doesn't take their advice to drop the case or attempt to settle, it is ethical--or even legal--for them to just walk?
I Think it would be unethical for the lawyers to just walk away once they had started the suit, though that may depend on just how unwinnable the case has become

I think the lawyers would also have an ethical duty not to waste the court's time which would have to be weighed against their ethical duty to their client

I have no idea of the legal side
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Old 10-09-2019, 07:48 AM
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The ABA Model Rules of Professional Conduct, which inspire many state Bar Association's rules for professional conduct, seem like a good place to start in answering this question.

Here's ABA Model Rule 1.16, Declining or Terminating Representation.

Quote:
Client-Lawyer Relationship
(a) Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:

(1) the representation will result in violation of the rules of professional conduct or other law;

(2) the lawyer's physical or mental condition materially impairs the lawyer's ability to represent the client; or

(3) the lawyer is discharged.

(b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if:

(1) withdrawal can be accomplished without material adverse effect on the interests of the client;

(2) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent;

(3) the client has used the lawyer's services to perpetrate a crime or fraud;

(4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement;

(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or

(7) other good cause for withdrawal exists.

(c) A lawyer must comply with applicable law requiring notice to or permission of a tribunal when terminating a representation. When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation.

(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers relating to the client to the extent permitted by other law.
The short answer appears to be, "Yes", it's ethical, provided the tribunal hasn't told the lawyer they must continue representing the party. And provided the lawyer can comply with the laundry list in (b).

In practice, I would think the plaintiff's counsel would urge settlement. As a bonus, at least for the contingency fee agreements I am aware of, most agreements provide a smaller portion of the recovery to the attorney if there is a settlement instead of a verdict.
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Old 10-09-2019, 08:11 AM
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The ABA Model Rules of Professional Conduct, which inspire many state Bar Association's rules for professional conduct, seem like a good place to start in answering this question.
b7 certainly leaves some latitude, doesn't it?
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Old 10-09-2019, 08:22 AM
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b7 certainly leaves some latitude, doesn't it?
Yep. Albeit, I doubt it is terribly difficult for a client of a plaintiff's lawyer to demonstrate material adverse effect on their interests: their new attorney has to receive the old files, probably re-do a lot of the investigation, hire their own experts perhaps, and otherwise materially delay the case. And if the new attorney sees the piece of information that scared the old attorney away, they may not want the case. It could easily be that no attorney will take the case, which sounds like materially adversely affecting the client to me.

I have no information on this, but it also sounds like a great way for the old attorney to get sued. Properly managing client expectations, along with thorough constant communication, goes a long way towards preventing this.

Further, and I would have to dig out the Texas rules to confirm, many state's ethical guidelines are tighter than the Model Rules.

But yeah, that "or" combined with (7) leaves a lot of wiggle room.
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Old 10-09-2019, 12:22 PM
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Quote:
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In practice, I would think the plaintiff's counsel would urge settlement. As a bonus, at least for the contingency fee agreements I am aware of, most agreements provide a smaller portion of the recovery to the attorney if there is a settlement instead of a verdict.
That would be unusual in the contingency context. Typically, contingency fees are structured without reference to whether there is a settlement. For example, in Florida the bar rules allow a lawyer toclaim a fee of up to one-third of the recovery if the case is presuit, or up to 40% once a complaint is filed. It doesn't matter whether there is a trial or not.
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Old 10-09-2019, 03:57 PM
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That would be unusual in the contingency context. Typically, contingency fees are structured without reference to whether there is a settlement. For example, in Florida the bar rules allow a lawyer toclaim a fee of up to one-third of the recovery if the case is presuit, or up to 40% once a complaint is filed. It doesn't matter whether there is a trial or not.
Maybe it's different here. The ones I've seen---and it was awhile ago---were e.g., 25% if settled, 30-40 if verdict or judgment, 40 or more if appellate work were required. But definitely a lower amount for settlement. I think the rules here allow for a higher recovery than the FL rules do.

It could very well be that I misread the agreement where it said presuit or before complaint was filed, and thought it meant settlement.
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Old 10-10-2019, 09:00 AM
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A fee structure which encourages the lawyer to litigate a case to conclusion is also unlikely because it contravenes fairly widespread public policy (one of the few policies that both legislatures and the bar agree on) that Settlement Is Good. I suspect what you may have seen is either the structure for fees that the lawyer might be able to collect from the opposing party (e.g., in a bad faith or sanctions context), which are included for the client's information only.
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Old 10-10-2019, 09:46 AM
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IANAL, but based on my experience as a PI and an expert witness, I can tell you what often happens.

Let's say we have a slip & fall case. The plaintiff asks for $3M. The plaintiff's attorney thinks they have a good case because the plaintiff is in a wheelchair.

Along the way, a PI gets video of the plaintiff bowling in a league (out of the wheelchair) and square-dancing several times a week. The video is shown to the plaintiff and his attorney in a private meeting.

As the PI who got the video for the defense, I expect the plaintiff to drop the lawsuit and slink back home. Nope. The plaintiff's attorney takes the plaintiff into a conference room and says, "Look...you screwed up. Settle for $50K and be glad you're not going to jail or being countersued. $50K just about covers our expenses so far."

Last edited by ZonexandScout; 10-10-2019 at 09:47 AM.
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Old 10-10-2019, 11:46 AM
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Originally Posted by allyn View Post
Kind of relevant:

Elizabeth Holmes/Theranos can't pay her lawyers; lawyers want to quit...

https://www.mercurynews.com/2019/10/...lawyers-claim/
When I hired a lawyer for my divorce, she wanted $5,000 up front before she began working. Why wouldn't Holmes' lawyers do the same?
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Old 10-10-2019, 11:56 AM
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When I hired a lawyer for my divorce, she wanted $5,000 up front before she began working. Why wouldn't Holmes' lawyers do the same?
Maybe they did have a retainer, but when the clients check out as relatively dependable, the retainer is not going to cover the entire cost of the representation in advance, especially for extensive litigation.

(Just as a matter of interest, when you pay a lawyer in advance, many (if not all) state bar associations require the sum to be held in a separate account and the lawyer can draw from it as E earns it according to es regular fee schedule.)
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