The Torts Business
Professor Edward P Richards
Jurisprudential Purposes of Tort Law
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Compensation for accidents and intentional
wrongdoing
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Making the victim "whole"
Deterrence for future acts
Punishment for past acts
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What Can You Get in a Tort Lawsuit?
Money
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What Can You Not Get in a Tort
Lawsuit?
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Life
Limb
Health
Love
Time
Specific performance
Attorney's fees
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What is Involved in Bringing a Tort
Claim?
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Attorney time
Management of discovery documents
Expert Witnesses
Deposition Costs
Court Fees
Trial support, such as preparation of
exhibits
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What Does a Tort Claim Cost?
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Simple claims, such as auto accidents, that do
not go to trial
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Attorney time/Paralegal Time
Limited office expenses
Say, $1000, plus the value of the professional time and
overhead
Med Mal
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Experts - $5-$20,000 pretrial
Discovery and deposition costs, $5-20,000 pretrial
Total through trial - $20-100,000, plus time
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Paying for Tort Law
Pay as You Go
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Plaintiff pays hourly fees and expenses as
they are incurred
If this is the only way that attorneys may
charge, what is the impact on claims that
can be brought?
What does this do for plaintiff's attorney
income?
What about defense attorney income?
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Contingent Fees
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25-50% of the total award
Expenses come from the plaintiff's share
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If you are nice, you take them off the top, then
figure your fee.
If not, you figure your fee, then subtract the
expenses from the client's remainder
Attorney loans expense money until the
claim is paid
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What if there is no recovery?
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Limits on Contingent Fees
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Until recently, only the US allowed contingent fees
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What would this tell you about the prevalence of tort
litigation in other countries?
Some states cap fees on big cases
Limits on loaning clients money and expenses
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Used historically in the US to limit claims
Still some limits
I do not know if LA has limits
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Referral Fees
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Paying for cases
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Cannot pay non-lawyers
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Do you think they just walk in the door?
Try to get a hotel room near a plane crash.
Source of endless conflicts between plaintiff's lawyers and
disciplinary committees
In most states, can only pay lawyers for work
done
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Incentive for endless subterfuge
Why might lawyer referral fees be a good thing?
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Defense Lawyers - The Other Half of
the Tort Dance
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Hourly
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Very expensive
Usually paid by insurance in negligence
cases
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Plus expenses, lots of expenses
Trend toward fixed fee - bad for associates
You can go broke winning cases
What is the incentive for a defense lawyer?
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Transaction Costs in Tort Cases
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Plaintiff's side
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Defense
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Simple cases, 1/3
Complex cases with expenses and experts, 50+%
Insurance adjustor time on small cases
Lawyer fees on complex cases - probably at least 30% of
the average payout
Also costs of running the insurance company
The injured person probably gets no more than
1/3 of the money paid on a claim.
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The Consequences of
Contingent Fees
The Most Dreaded Words in Tort
Practice
Judgment
proof
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The Saga of Little Timmy
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Little Timmy is flattened by a drunk driver running
over the sidewalk
Defendant is wearing a Sears uniform and driving
a Sears truck
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Start looking at new boats
Defendant is wearing old jeans, does not have a
green card, and stole the truck
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Refer client to social worker
Say you support universal health insurance
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Are You Hurt Bad
Enough to Get a
Lawyer?
What do you have to recover to justify
taking a case?
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What are your out of pocket expenses?
What is the lost opportunity cost of the
time?
What is the probability of recovery?
What is the timeframe for getting the
recovery, i.e., the net present day
discounted value of the return?
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Simple Auto Case
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Assume the there are some medical costs and
property damage
Assume the defendant is insured
Assume there is a colorable claim for liability
The odds are you will resolve without a lawsuit,
and you might take a case only worth a few
thousand dollars
Even less if you do not any other work
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Medical Malpractice Case
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Discovery costs/Expert witness costs
Higher probability it will go to trial
Long period / Lower probability of return
Capped damages
150k if you are hungry - leads to poor case
management
400K if you are serious
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Financial Culling
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Clients with real claims and substantial injuries,
but not enough provable damages get no
representation
Judgment proof defendants - no representation
One of the invisible costs of the torts business
A prime reason why arbitration is not used to
eliminate medical malpractice tort litigation
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Paying all just claims would cost a lot more than the
current system
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Consequences of Judgment Proof
Defendants
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If the defendant is judgment proof, then you
need one that is solvent
This has fueled the breakdown of causation
of analysis and traditional notions of
responsibly
The courts want to provide for the injured
and their lawyers, to do so they must
expand liability
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Making the Client Whole
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A goal of tort law is making the injured
person whole, i.e,. paying them the money
measure of their damages if liability is
proven
This is a theoretical impossibility
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Whatever are the probable damages, the plaintiff
can only get 50-60% of them
But without contingent fees, there is no recovery
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The Damages Game
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The only solution is to expand the measure
of damages to allow the recovery of
enough money to pay the attorney and to
give the client enough money to solve his
problems.
In the 1950s, Melvin Belli called this the
adequate award problem
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The Transformation of Tort Law
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The expansion of recoverable damages to all the
plaintiff to recover enough money to pay the
lawyer and have enough left to be close to whole
The recognition of tort cases as an asset that
could justify financing
The development of information exchanges that
allow tort lawyers to coordinate cases and share
information.
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Damages Worksheet