(Reuters) - Lawyers deserve to be paid for their work. Contingency fee lawyers, who assume the risk that their clients’ cases will flop, deserve to be rewarded when their clients win. That’s how our system assures access to the courts for people who can’t afford to pay hourly rates.
But an expert report filed earlier this month by Harvard professor William Rubenstein in the multidistrict litigation by retired NFL players claiming brain injuries, raises some very pointed questions about the value of the services contingency fee lawyers provided to their clients. U.S. District Judge Anita Brody of Philadelphia appointed Rubenstein in September to advise her on her authority to cap fees for lawyers who represent individual retirees and, if appropriate, to recommend what the cap should be.
The Harvard prof’s report, as I’ll explain, concluded that under precedent from the 3rd U.S Circuit Court of Appeals, Judge Brody does indeed have inherent authority to restrict fees, despite private contracts between clients and their contingency fee lawyers. Based on factors including the timing of the billion-dollar settlement and the work performed by lawyers for individual players, Rubenstein recommended Judge Brody cap their fees at 15 percent of their clients’ recovery.
Those lawyers have until Jan. 3 to file formal responses to Rubenstein’s report but they’ve already begun to push back. This week, the Locks Law Firm, which represents more than 1,100 of the approximately 20,000 retired NFL players in the MDL, asked Judge Brody to reconsider whether to allow Rubenstein to be deposed. Several other law firms also called for Rubenstein to be deposed, as well as requesting additional time to respond to his report.
Rubenstein’s report, in other words, is making contingency fee lawyers nervous – and rightly so. The Harvard prof details how NFL retirees who signed private contingency fee contracts could, unless Judge Brody caps fees, end up paying 60 percent of their recovery in legal fees, while those who relied only on class counsel will pay out just 15 percent. Those extra legal fees might be worth it if individual lawyers were to net significantly higher recoveries for their clients, but because recoveries through the settlement are based on players’ medical diagnoses, Rubenstein questioned whether the quality of individual representation makes much of a difference. At most, he said, private lawyers can assure that their clients receive a fair share of the settlement. That service, he said, should not entitle lawyers to as much as 40 percent of the client’s recovery.
It’s important to keep in mind that the NFL concussion litigation began with hundreds of individual personal injury suits by retired players. The suits were consolidated in an MDL before Judge Brody. Before any individual cases were worked up for trial, the NFL and lead plaintiffs lawyers reached a proposed settlement. Thereafter, plaintiffs lawyers spent their efforts trying to sell the settlement to Judge Brody, re-negotiating to respond to her concerns, then finalizing and beginning to implement the deal.
The innovative structure of the settlement revived the use of a class action to resolve thousands of personal injury claims. That structure has crucial consequences for legal fees because, as you know, class counsel fee awards are set by judges. In the NFL case, the league agreed not to oppose a fee request of less than $112.5 million, or about 15.6 percent of the players’ recovery. Last February, class counsel requested approval from Judge Brody for $112.5 million in fees and costs. (They later asked for an additional 5 percent set-aside fee to cover the ongoing costs of administering the settlement; Rubenstein’s report recommended that Judge Brody deny the additional set-aside.)
So all of the NFL retirees who participate in the settlement are paying for the lawyers who worked on the deal. There’s a fight, of course, over which firms are entitled to a share of class counsel fees and how much of the pot should go to particular lawyers. But that’s taking place in public filings and will ultimately be decided by Judge Brody.
Judge Brody brought Rubenstein into the case as an expert to look at the parallel question of the additional fees class members may owe to their individual lawyers. About half of the NFL retirees, according to Rubenstein, signed private contingency fee contracts outside of the auspices of the class action, but Rubenstein and a legal researcher were able to track down about 600 of them (mostly attached as exhibits to attorneys’ lien filings). The contractual contingency fees in the contracts they examined ranged from 15 percent to 40 percent, with a median of 30 percent.
The threshold question for Rubenstein was whether Judge Brody has the power to interfere with these private contracts. His report concluded there is no doubt, under longstanding 3rd Circuit precedent, that she does. (His key citations were to the 3rd Circuit’s 1985 ruling in McKenzie v. Maynard, 758 F.2d 97; and 1973’s Schlesinger v. Teitelbaum, 475 F.2d 137.) “That is so because the court has the inherent authority to regulate attorneys appearing before it, and any attorney representing a player making a claim in this class action settlement is effectively appearing before this court,” the report said.
The class action structure of the settlement, the report said, imposes a duty on Judge Brody to oversee the interests of class members. That duty encompasses policing their payouts to lawyers, Rubenstein wrote. (The report suggested that even if the case had not been settled as a class action, Judge Brody would still have had the authority to cap fees. In an exhibit, Rubenstein listed several other cases in which federal judges have set fee caps abrogating private contingency fee contracts between lawyers and clients. They are a mix of class actions and consolidated litigation, including the Vioxx and Zyprexa MDLs and the Deepwater Horizon case, which was settled as a class action.)
The more controversial piece of Rubenstein’s report is probably the low cap he recommended. His proposed 15 percent cap is at the very low range of the NFL contingency fee contracts he and his researcher located. But Rubenstein argued the low cap reflects the relatively small risk contingency fee lawyers assumed in the NFL case, the scant legal work the cases required before settlement and the minimal impact of individual lawyers on their clients’ recovery.
Firms lowered their contractual contingency fee rates in the course of the NFL litigation, Rubenstein found. In contracts signed before 2011, when lawyers faced the prospect of litigating individual cases against the NFL on their own, 40 percent fees could be considered “expected and appropriate,” the report said. But even after the NFL moved to consolidate the cases in an MDL, the average contingency fee in the contracts he examined was 30 percent, although “lawyers contracting to represent clients were well aware that the costs of doing so had been greatly reduced.”
Nearly 35 percent of the contingency fee contracts Rubenstein found were actually signed after the NFL and lead plaintiffs lawyers first proposed a settlement. By then, he said, it was apparent that these private lawyers wouldn’t be litigating individual cases against the NFL. Most of them, the report said, would probably just be shepherding clients through the proposed claims process. Yet the average contingency fee in the late-stage contracts Rubenstein located was more than 25 percent – an unjustifiable processing fee, in Rubenstein’s view.
When Judge Brody first appointed Rubenstein, she said she would make him available for a deposition about his conclusions. After he submitted his report, the judge changed her mind. The report, she said in a Dec. 11 order, “is sufficiently comprehensive and detailed that I have decided that it will be most helpful to the court and most efficient for the fee process to have interested parties simply respond in writing to Professor Rubenstein’s opinions.”
In this week’s filings, firms argued they should have an opportunity to ask Rubenstein questions about his assumptions and generalizations before Judge Brody relies on his recommendation to strip them of fees they are contractually entitled to. “Without that process – a deposition and a facts-and-circumstances assessment of a particular fee contract – the cap is a denial of a contracted interest, that is, the benefit of the parties’ bargain, without an opportunity to be heard,” the Lubel Voyles motion said.
The Locks motion, though it commended Rubenstein for laying out the grounds for his recommended fee cap, said there are “basic flaws in many of his assumptions.” The motion suggested that Rubenstein might concede a higher contingency fee cap if he were questioned about the purportedly flawed assumptions at a deposition.
I’d say it’s unlikely Judge Brody will change her mind about deposing Rubenstein, at least not before she receives the response briefs due on Jan 3. If the early complaints about the recommended 15 percent fee cap are a leading indicator, those responses should get the new year off to an exciting start.