Why Is $20,000 An Hour Not Enough?

In: All News   Posted 05/15/2003

WASHINGTON – U.S. Sens. John Cornyn and Jon Kyl (R-Arizona) offered an amendment to S. 1054, the Jobs and Economic Growth Act of 2003, to combat the abuse of excessive attorney fees which violate attorneys’ ethical obligations and fiduciary duties. The landmark legislation, introduced last month, enacts much needed reform to the way some attorneys are paid in the nation’s largest cases, most notably the state Medicare tobacco settlement. The bill also sets a minimum payment for attorneys involved in that settlement at $20,000 an hour.“Our legislation will curb the abusive attorney fees which have been increasing in recent years, leaving consumers and the states with less and less,” Cornyn said. “When implemented, this proposal will not only enforce attorney’s fiduciary duties to their clients, but dramatically increase the share that consumers receive from the settlement.” the Intermediate Sanctions Compensatory Revenue Adjustment Act of 2003 (ISCRAA) reinforces the longstanding law of attorneys’ fiduciary duties to the clients by applying a mechanism in current tax law to enforce those duties in a particularly high risk category of cases. Such cases have been singled out by courts as posing special risks of unethical windfall fees. The courts have noted that allowing such fees in judgments of $100 million or more have a distinct tendency of grossly overcompensating attorneys for actual services rendered.“Specifically, the bill limits fees to no more than 5 times the reasonable hourly rates in lawsuits with judgments over $100 million,” Cornyn said. “And despite recent complaints from the trial lawyer lobby, only attorney fees, not costs incurred by the plaintiff attorneys, are subject to a cap.” As ISCRAA applies to current and future fees paid pursuant to the state Medicaid tobacco litigation settlement, the legislation will restore as much as $9 billion to the states, including approximately $677 million for Texas. This bill is the beginning of a much larger reform of the civil justice system. Sen. Cornyn, as a member of the Judiciary Committee, will play a leading role in coming months in this reform. Last month, the committee passed the Class Action Fairness Act of 2003. Cornyn co-sponsored the bipartisan legislation to reform the class action system and make it simpler, fairer and faster. Cornyn said, “The problem of runaway frivolous lawsuits has reached crisis proportions and is adversely impacting, among other areas, access to health care and interstate commerce.” Sen. Cornyn served previously as the state’s attorney general, and on the Supreme Court of Texas.See below for more information on ISCRAA-ISCRAA: The Kyl-Cornyn Bill to Enforce Fiduciary Attorney Fee Standards in Mass Tort Litigation the Intermediate Sanctions Compensatory Revenue Adjustment Act (ISCRAA) limits attorneys fees to no more than 500% of reasonable hourly rates in lawsuits resulting in judgments greater than $100 million. ISCRAA uses an existing provision of the tax code to enforce basic, universally accepted fiduciary standards governing the award of attorneys fees. To avoid punitive tax rates, an attorney would be required to restore the excessive portion of any fee to the client. Because ISCRAA applies to current and future fees paid pursuant to the state Medicaid tobacco litigation settlement, ISCRAA will restore approximately $9 billion to the states.• Limiting speculative, fee-driven mass tort litigation. The current mass-tort litigation crisis is driven in large part by the enormous and unethical fees commanded by some plaintiffs attorneys. Because their fees are so grossly disproportionate to their actual efforts, these lawyers can pursue even speculative lawsuits that lack a legitimate foundation – even only an occasional victory produces massive profits. By requiring that fees be proportional to attorneys’ actual work, ISCRAA inevitably will limit this type of litigation. To prevent evasion of its standards, ISCRAA also aggregates identical claims when brought against common defendants – thereby limiting the coercive effects of this type of litigation. • Protecting Fiduciary Interests. Attorneys long have been acknowledged to be fiduciaries who occupy a position of trust in their dealings with their clients. One obligation that flows from this status, universally recognized in the ethics rules of all 50 states, is the attorney’s duty to not charge an unreasonable or excessive fee. Thus courts traditionally have read a reasonableness requirement into every attorneys fee contract. • Protecting Interstate Commerce. Because of the large size of the litigations to which it applies, ISCRAA unquestionably is an appropriate exercise of Congress’s power to regulate and protect interstate commerce. Experts have estimated that ISCRAA probably will apply to only 15-20 litigations a year. $100 million is a standard threshold used by the federal government to determine whether an economic transaction significantly impacts interstate commerce. • Guaranteeing Mass-Tort Plaintiffs Access to Counsel. ISCRAA’s fee formula is as generous as the most liberal limits adopted by state courts, and considerably more generous than the limits that federal courts have applied in $100 million cases. ISCRAA protects fiduciary interests, while providing plaintiffs lawyers with ample incentive to provide high-quality legal representation in large lawsuits.