Legal Consumers' Protection Act: A Solution in Search of a Problem?
LACBA Update, June/July 2002
By Michael Tenenbaum, member, LACBA Professional Responsibility and Ethics Committee. Tenenbaum represents companies and executives in business litigation. The opinions expressed are his own. He can be reached at firstname.lastname@example.org
Author's note: At press time, AB 2939 was being heard by the California Assembly Judiciary Committee; the last day for the bill to be passed out of the Assembly is May 31, 2002.
Under a deceptively voter-friendly name, the "Legal Consumers' Protection Act" -- Assembly Bill 2939 (Pescetti/Papan) -- promises added safeguards for the California consumer who hires a lawyer on a contingency fee basis. If anything, however, the bill's four main proposals serve only to remind us of the various ethics rules and statutes that already provide the very consumer protections the bill pretends to introduce. (Maybe that's not surprising, coming from a state assembly whose 80 members introduced more than 3,000 bills in the current session alone.) Indeed, to the extent that they aren't entirely unworkable, at least two of the bill's proposals even contravene well-established ethics laws.
1. In perhaps its most laughable effort, AB 2939 would amend Section 6147 of the Business & Professions Code to afford a client "three working days in which to rescind the [contingency fee] contract for any reason."
Yet, the law already allows a client to end the agreement with the contingency fee lawyer within three days -- or even after three years. See, e.g., General Dynamics Corp. v. Superior Court, 7 Cal. 4th 1164, 1174 (1994) (reaffirming "as bedrock law...the unilateral right of the client to sever the professional relationship at any time and for any reason").
Moreover, if the client does so before the contingency (i.e., a recovery) occurs, the lawyer is left with only a claim for the reasonable value of his or her services, payable only out of any future recovery.
Thus, unless the lawyer were to provide substantial services in those first three days, the client who otherwise fires the lawyer after such time wouldn't owe the lawyer much of anything anyway.
2. AB 2939 would also amend Section 6157.2 to require contingency fee lawyers to include in their advertising a statement as to "whether the cost[s] shall be added to the fee if the litigation is successful."
Yet, Section 6147 already requires such disclosure -- of "how disbursements and costs incurred in connection with the prosecution or settlement of the claim will affect the contingency fee and the client's recovery" -- in the place where it really counts, namely, the client's fee agreement. See Cal. Bus. & Prof. Code § 6147(c)(2). Do our legislators really want to see such superfluous disclosures in every ad a lawyer places on the side of a bus?
3. AB 2939 would also amend Section 6147 to require lawyers to provide every prospective contingency fee client with a written disclosure statement that includes -- in addition to the important information the statute already requires -- the "estimated likelihood of success of the merits or of a settlement of the case, including whether liability is likely to be admitted by one or more of the potential defendants."
For many good reasons, however, the standards adopted under Rule 1-400(E) of the Rules of Professional Conduct actually prohibit lawyers from making communications "which contain guarantees, warranties, or predictions regarding the result of the representation." (Cal. Bus. & Prof. Code § 6157.2 also prohibits such prognostication.) The existing ethics rules wisely recognize the dangers of turning lawyers into clairvoyants.
4. Finally, AB 2939 would amend Section 6147 to require contingency fee lawyers to "keep accurate records of the time spent on the client's case," to calculate for the client the effective hourly fee based on the contingency fee recovered, and to submit to "an objective review of a contingency fee by a court or a bar association committee to ensure that it's reasonable and fair under the circumstances."
Of course, this proposal apparently ignores the existence of Rule 4-200(A), which provides that a lawyer may not enter into an "agreement for, charge or collect an illegal or unconscionable fee."
Moreover, by providing that the "conscionability" of a fee is determined on the basis of facts and circumstances existing at the time the agreement is made -- not when it's sought to be enforced -- cases like Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866 (9th Cir. 1979), recognize that even "windfall" contingency fees are often justified by the risk that lawyers will receive nothing for their efforts.
In view of the ethics rules and statutes already in place to protect clients in their dealings with contingency fee lawyers, AB 2939 appears to be a solution in search of a problem.
Instead of bolstering consumers' rights, its provisions would ultimately breed litigation between lawyer and client, discourage lawyers from accepting cases on contingency, and thus actually deprive consumers of the ability to retain a lawyer to pursue their claims.