The Financial Post just reported the findings of a recent study funded by the Insurance Bureau of Canada (“Law professor questions whether contingency fees benefit clients”, Legal Post, January 18 2017). Professor Allan Hutchinson of York University’s Osgoode Hall Law School wrote A Study of the Costs of Legal Services in Personal Injury Litigation in Ontario.
Professor Hutchinson acknowledged the access to justice and other benefits to plaintiffs arising from CFAs. Nevertheless, he concluded: “As things stand now and as a result of the research done for this study, it cannot be reported that the present scheme in regard to CFAs is operating to protect and advance the interests of clients in their dealings with lawyers.”
Perhaps most damaging to the legal profession was his assessment of the response to his initial survey. He writes, “… the Plaintiffs’ Bar seems to be almost uniquely united in striving to resist any efforts to render the fee-charging process more transparent and knowable. Accordingly, this Report has been written not only without any assistance from the Plaintiffs’ Bar, but with its concerted opposition.”
Initial reader comments from the Legal Post article mention the risks lawyers take, the costs they carry, and the motivation created to do one’s best for the plaintiff:
- “Not only do they have the costs of fronting the expenses with regard to the case, but they also have the risk of loss and getting nothing in return. Therefore, [contingency] payments must be higher [than] your hourly rate … You also need to do a study comparing the relative value of settlements and judgements on contingency cases. I think that contingency cases are great because it transfers the risk and reward to those who actually have the ability to determine the outcome of the case. This reward structure motivates the Lawyer to do his best on the case and to earn a higher reward for his client.” Nicholas McLeod, Brantford
- “What this article does not address is the fact that in personal injury files and most contingency fee arrangements … the law firm does not get paid until the case settles at trial or otherwise. This means the law firm carries the file for years before getting paid. One has to remember that during that time, disbursements are incurred, staff and overhead need to be paid. So although the [ultimate] fees paid may be higher than an hourly rate, the lawyer/firm should also be compensated for the delay in payment, and for carrying the file and fronting disbursements when the client could not.” Suzanne Quinn, HQ Law
- “Contingency fees are limited by the law societies across Canada. Many cases result in the lawyer getting paid nothing for all their work, or far less than an hourly rate. Sometimes the percentage ends up being more than the hourly rate. The clients usually are happy to agree to pay a percentage in return for no risk of paying anything unless they win. Every contingency case I do puts my faith in my client, in my skill as a lawyer, on the line. On the other side is a lawyer paid a large rate by an insurance company, doing everything it can to defeat my client … I only get paid for winning. Not many professionals are held to such a high standard.” Thomas P. Harding, Trial Lawyers Advocacy Group
Gray Hammond, an independent consultant, has over 35 years of market research expertise. He read the body of the study and made these observations:
- The Insurance Bureau of Canada commissioned the study. There is always a reason that an industry association commissions research for media publication. Perhaps the IBC wants to influence the Attorney General, or the Law Society, in the current deliberation of CFA’s. Maybe they want to warn off prospective plaintiffs who are considering a call to a personal injury lawyer.
- The professor reviewed only 62 judgements from January 2010 to April 2016 that scrutinized CFA’s. This sampling method can include only instances of dissatisfied clients or compulsory court approval of fees. This excludes all cases where the plaintiff was satisfied with the outcome. In his words, “The data that was available … is wholly inadequate for describing the typical experience of Ontario personal injury plaintiffs …” A quick tally of testimonials on lawyers’ websites would easily exceed 62 in very short order. A survey among plaintiff clients who have settled in recent years would be a better quantitative indicator of both positive and negative client sentiment.
- Most (but not all) of these 62 judgements were Personal Injury cases. In only two cases did the lawyer’s share exceed 40% of the settlement.
- The conclusions are qualitative, not quantitative. The words “many” or “some” are used throughout the report, in the absence of hard numbers: “… some lawyers pushing on and back the limits of what is permitted in CFAs, but also some are engaged in routine disregard of both the letter and spirit of the rules and regulations …”
- The professor originally tried to survey trial lawyers about CFAs, but “met with a ‘firestorm’ of negative emails and phone calls”. His review of selected cases appears to be a second-best methodology of necessity – using his words, “a far from ideal way of proceeding with the study … the conclusions drawn from the data may well be limited and flawed … might well not be representative of the overall situation and may well be distortive of it.” Possibly a survey sanctioned by a professional legal body, allowing anonymous response, and perhaps offering to share the overall results with stakeholders, would be better received and with a better response rate.
In short, this report examines only 62 judgements – not all of them Personal Injury cases, and not all of them initiated by dissatisfied Plaintiffs – to make sweeping criticisms about the entire CFA system. Already a major insurance company is trumpeting the results (in a January 25 press release) to cast doubt on not just CFAs, but on advertising and referral fees too (although these were not mentioned in the study). An accurate assessment of the situation requires a considerably more rigorous approach.