Friday, July 13, 2007
The power of persuasion and contingent fees
I spent much of the last two days writing a letter. A two page letter.
Well, I actually didn't spend the days writing -- mostly, I agonized over what to say and how to say it best and then, finally, late yesterday evening, punched it out. But, still, it comes out to a page a day... which is not exactly productive.
Those of you who visit often, and see the torrent of words I frequently spew out, may be confused by this claimed inability to compose.
But, you see, I was writing a demand letter.
I have a personal injury case in which I represent the injured party, the plaintiff. The case has advanced to the point where defense counsel agrees that it may be appropriate to consider settlement: He's not going to admit I have a good case... but he realizes that this is one where his client might have some exposure. He would emphasize the word "might."
Now you don't just pull a number out of the air when you make a demand. A demand is like an artillery shell: If you overshoot or undershoot, your opponent never breaks a sweat. It's only when your demand lands reasonably close to counsel's own evaluation of the case that you have a chance to accomplish something.
When I did defense work, many of my insurance clients were interested in settling... for the right price. Why pay me, they reasoned, when they'll wind up paying the other side eventually anyway? (I never liked this reasoning. When I was doing defense work.)
So from time to time a carrier would instruct me to solicit a settlement demand from opposing counsel. Some opposing lawyers would read this as a sign of weakness -- they'd see blood in the water. The testosterone would start flowing... and a wildly overstated demand would follow.
To my enormous relief. "Thank you," I'd say (to myself) as I hung up the phone or opened the letter and passed the "bad" news on to the carrier that was paying my bills. Now they'd have to pay my bills a little longer.
But it's different on the other side of the fence -- where I am now in this case. I don't get paid unless and until there's a recovery. And you can't just pull a settlement number out of the air: A lawyer must first obtain his client's authorization. And just as soon as you start talking numbers with clients, clients start bouncing those numbers off their friends, relatives and neighbors. One of the early posts in this blog lamented the corrosive impact that barstool barristers can have on a client's trust in his or her own lawyer's recommendations.
And, worse, not every client understands that a demand, if it's calculated reasonably, will never simply be accepted. It is a number that it is uncomfortably close to -- but in excess of -- defense counsel's evaluation. Opposing counsel will necessarily be instructed to negotiate down from that number.
Then there's this complication: The more time you put into a contingent fee case, the less money you really make. If you earn a fee of $10,000 for 100 hours of work, that's $100 per hour. (Not TV lawyer territory -- but it should pay the rent.) But if you must put in 500 hours, your effective hourly rate is $20. The hours really pile up as you get closer to trial.
And the other thing that piles up are expenses: If you go to trial, you have to pay for your client's doctors to come to court or give evidence depositions. This may cost thousands of dollars per doctor... and add not a penny to the value of your case. Indeed, that money is coming out of what your client can take home at the end of the process. In a big enough case, the fees charged by doctors or experts would not matter -- but in a smaller case, the cost of a doctor's testimony may be the difference between settling and having to take your chances with a jury.
So as I sat down to write this letter... all these factors were in my mind. I had obtained my client's authority to make a particular demand, based on my research into what juries have awarded other parties in similar cases. But no two juries are alike. No two cases are exactly alike.
And, to top it off, I could do with a settlement about now. Tuition bills are coming due again... and -- as regulars here know -- I have been hampered by illness this year. A self-employed person who doesn't work can't earn money.
So I agonized. How can I persuade opposing counsel that my demand is reasonable? How do I know he won't say "thank you" -- just like I used to -- as soon as he reads the letter?
I tried to summon all the powers of persuasion that I possess. And then I thought of Moses standing in Pharaoh's court. Moses' efforts at persuasion were divinely inspired... and ultimately unsuccessful. And if he couldn't persuade, with the kind of help he was getting, what chance do I have?
It comes down to this, I'm afraid: I've ranged my shot as best I could. If defense counsel's carrier figures my demand is somewhere near what it is likely to pay out down the road, it will instruct defense counsel to make a counter. And maybe we can get the case done -- and maybe we can't. I guess that enrolls me in the Chicago School of Economics from which come so many of our judges on the Seventh Circuit Court of Appeals.
Sometimes there can be an overlap between theory and practice.
But that interesting notion will have to wait to be explored at a different time.
I have another letter to write. (And, yes, this post may be considered as part of the agonizing process for letter no. 2.)