ATTORNEYS; MEDICAL MALPRACTICE;
September 25, 2003
MEDICAL MALPRACTICE—ATTORNEYS’ FEES
By: George Coppolo, Chief Attorney
You asked whether other states limit the amount of fees attorneys may collect in medical malpractice cases.
Sixteen states, including Connecticut, have a statute or court rule that establishes a specific limit or sliding scale on contingency fees attorneys may charge clients who file a medical malpractice claim. (California, Connecticut, Delaware, Florida, Illinois, Indiana, Maine, Massachusetts, Michigan, New Jersey, New York, Oklahoma, Tennessee, Utah, Wisconsin, and Wyoming). Many of these statutes and rules, including Connecticut’s, apply to a much broader category of cases than just medical malpractice.
We did not find any state that sets a numerical or percentage limit on the fees that health care providers or their insurers may pay for legal representation. But we did find several states that allow or require the court to determine the reasonableness of the attorney’ fees doctors, or their insurers, and plaintiffs pay.
Most, like Connecticut’s, establish a sliding scale that places an upper limit based on the amount of the settlement or judgment. Connecticut allows 33 and 1/3% of the first $ 300,000, 25% of the next $ 300,000, 20% of the next $ 300,000, 15% of the next $ 300,000 and 10% of amounts exceeding $ 1,250,000. (This sliding scale applies to any lawsuit to recover damages resulting from personal injury, wrongful death, or property damage involving contingency fees, not just to medical malpractice cases. ) A few states such as Tennessee and Utah set the limit at one third regardless of the recovery. One state, Florida, establishes different limits depending on the stage the case gets to. For example, it allows a higher limit if the case goes to trial and even more if the case is appealed.
Four of these states explicitly allow a court to authorize a larger fee (Illinois, Maine, New York, and Wisconsin), and Wyoming explicitly allows the client and attorney to contract for a larger fee.
Connecticut does not explicitly allow a client to waive the statutory fee limits. But one Superior Court case held that the client could waive the limits because (1) the law did not explicitly prohibit a waiver, and (2) the legislative history supported the position that the legislature intended to allow clients to waive it. Because the court decided the case on statutory construction grounds it did not address the constitutional challenges the plaintiff raised against the law if it were interpreted as prohibiting waivers.
Connecticut appears to be the only state thus far whose courts have allowed clients to waive the protection of a law that establishes a cap on attorneys’ fees. California courts faced the same issue but decided the law could not be waived.
A state law without a waiver right would likely be challenged on constitutional grounds including equal protection, due process, separation of powers, and access to court. A New Hampshire court invalidated the New Hampshire attorney fee cap law on constitutional grounds. But courts in Indiana, Maryland, and Tennessee upheld their laws against constitutional challenge.
It would appear that a constitutional challenge would have less of a chance to succeed if the law allowed a court to approve fees beyond the cap especially for (1) cases that are economically impractical for attorneys to undertake because they involve extraordinary costs, time, and risk, and (2) situations where the cap on fees might prevent the inured person from being able to retain an experienced counsel or being able to retain any attorney at all.
Instead of a specific limit or a sliding scale, six states require or authorize court approval of the reasonableness of attorney fees under various circumstances (Hawaii, Iowa, Maryland, Nebraska, New
Hampshire, and Washington). In all of these states, other than Iowa, it appears that the court may determine the reasonableness of both the plaintiff’s and defendant’s attorney’s fees.
COMPARISON IN TABLE FORM OF STATE LIMITATIONS ON ATTORNEY’S FEES
Following in Table 1 is a comparison of laws that establish specific percentage limits for plaintiff’s attorney’s fees in medical malpractice cases.
Table 1: Percentage Limitations on Medical
Malpractice Attorney’s Fees
Sliding scale fees may not exceed 40% of the $ 50,000, 1/3 of the next $ 50,000, 25% of the next $ 500,000, and 15% of damages exceeding $ 600,000. (Bus. & Prof. §6146)
Sliding scale fees may not exceed: one third of first $ 300,00; 25% of next $ 300,000; 20% of next $ 300,000; 15% of next $ 300,000; and 10% of damages exceeding $ 1. 2 million. (CGS §52. 251c)
Sliding scale fees may not exceed: 35% of first $ 100,000; 25% of next $ 100,000; and 10% of damages exceeding $ 200,000. (Del. Code Ann Tit . 18 §. 6865)
Separate sliding scales for cases settling before filing an answer or appointing an arbitrator, cases settling before or after going to trial, and cases in which liability is admitted and only damages contested; 5% extra for cases appealed (See note below. ) * (Atty. Conduct Reg. 4-1. 5(f)(40(b))
Sliding scale fees may not exceed one third of first $ 150,000; 25% of next $ 850,000, and 20% of damages exceeding $ 1 million. (Ill. Comp. Stat. Ann. §110. 2. 1114) Attorney may apply to the court for additional compensation under certain circumstances. (§735. 5/2. 111 4)
Plaintiff's attorney fees may not exceed 15% of any award that is made from Patient’s Compensation Fund (covers portion of an award that exceeds $ 100,000). (Ind Code Ann. §16. 9(5). 51)
Sliding scale fees may not exceed: one third of first $ 100,000; 25% of next $ 100,000, and 20% of damages that exceed $ 200,000; for purpose of rule, future damages are to be reduced to lump-sum value. (Me. Rev. Stat. Ann. §24. 2961)
Sliding scale fees may not exceed: 40% of first $ 150,000, 33. 33% of next $ 150,000, 30% of next $ 200,000 and 25% of damages that exceed $ 500,000; further limits if claimants recovery insufficient to pay medical expenses. (Mass. Ann. Laws Chap. 231. § 601)
Maximum contingency fee for a personal injury action is one third of the amount recovered. (Mich. Court Rules 8. 121(b))
Sliding scale fees may not exceed one third of first $ 500,000, 30% of second $ 500,000, 25% of third $ 500,000 and 20% of fourth $ 500,000; and amounts the court approves for damages that exceed $ 2,000,000; 25% cap for a minor or an incompetent plaintiff for a pretrial settlement. (Court Rules §1: 2107)
Sliding scale fees may not exceed 30% of first $ 250,000, 25% of second $ 250,000, 20% of next $ 500,000, 15% of next $ 250,000 and 10% over $ 1. 25 million. (N. Y. Jud. §474a) The court may allow higher fees upon application of the claimant or his attorney.
Fee may not exceed 50% of net judgment. (§5. 7)
Fee may not exceed one third of recovery (Tenn. Code Ann. § 29-26-120)
Contingency fee may not exceed third of award. (§78. 14. 7(5))
Sliding scale may not exceed: third of first $ 1 million or 25% or first $ 1 million recovered if liability is stipulated within 180 days, and not later than 60 days before the first day of trial, and 20% of any amount exceeding $ 1 million. But court may approve higher limit in exceptional circumstances. (§655. 013)
Where recover is $ 1 million or less: third if claim settled within 60 days after filing, or 40% if settled after 60 days or judgment is entered; 30% over $ 1 million. But parties may agree to pay more. (Ct. Rules, Contingent Fee R. 5)
* Note on Attorneys’ Fees Florida:
The Supreme Court of Florida has declared that attorneys' fees in excess of the following amounts are presumed unreasonable:
1. In cases that settle before filing an answer or appointing an arbitrator, 33 1/3 percent of any recovery up to $ 1,000,000, 30 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 20 percent of any excess over $ 2,000,000.
2. In cases that settle subsequently or go to trial, 40 percent of any recovery up to $ 1,000,000, 30 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 20 percent of any excess over $ 2,000,000.
3. In cases in which liability is admitted and only damages are contested, 33 1/3 percent of any recovery up to $ 1,000,000, 20 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 15 percent of any excess over $ 2,000,000.
The Court allow an extra 5 percent over what is otherwise allowed In cases that are appealed (Fl. Atty. Conduct Reg. 4-1. 5(f)(4)(B) (West Supp. 1998)).
Following in Table 2 is a comparison of state laws or court rules that either allow or require a court to approve attorney fees in malpractice cases. Each of these statutes or rules, other than Iowa’s, applies to defendants as well as to plaintiffs.
Table 2: States with Court Review and Approval
Court may determine reasonableness of either party’s fees upon request (Ariz. Stat. 12-568)
Court must approve attorney fees. (§607. 15. 5)
Court may review plaintiff’s attorney’s fees in any personal injury or wrongful death action against specified health care providers or hospitals. (§147. 138)
Court or pretrial arbitration panel will review disputed fees in medical injury actions. (Cts. & Jud. Proc. §3. 2A. 07)
Court review for reasonableness of attorney fees in cases against health care providers for the party that requests it. (§44. 976)
Fees for actions resulting in settlement or judgment of $ 200,000 or more shall be subject to court approval. (§508: 4. e)
In any medical injury the court may determine the reasonableness of each party's attorney fees if requested by the party. (§7. 70. 070)
Following is a more detailed summary of the laws and rules summarized in Table 1 and 2. We have divided these laws into two categories. The first are those states that establish a limit or a sliding scale on fees. These are the states included in Table 1. These all apply to the fees the person filing the lawsuit may pay his attorney. The second category, are those states that allow the court or some other entity determine whether the fees are reasonable. These are the states included in Table 2. Most of these laws apply to both the person filing the lawsuit (the plaintiff) and the defendant.
STATES WITH LIMITS OR SLIDING SCALES ON ATTORNEY’S FEES
California limits the contingency fees attorneys may collect in a medical malpractice case to 40 percent of the first $ 50,000, 33 1/3 percent of the next $ 50,000, 25 percent of the next $ 500,000, and 15 percent of any amount that exceeds $ 600,000 (Cal. Bus. & Prof. Code § 6146). This limit applies whether the recovery is by settlement, arbitration, or judgment. If the fee is based on an award of periodic payments, the court must place a total value on the payments based upon the claimant’s projected life expectancy of the claimant, and then calculate the contingent fee percentages.
California courts have held that the fees may not exceed the caps; thus, clients may not waive the law’s protection and pay more than the cap allows (Schultz v. Harney 33 Cal. Rept. 2d 276, (1994); Fineberg v. Harney and Moore 255 Cal. Rept. 299 (1989).
Connecticut law limits lawyers' contingency fees in personal injury,
wrongful death, and property damages cases to a certain percent of
the damage award or settlement agreement (CGS § 52-251c). Connecticut law has a sliding scale that places an upper limit on contingency fees based on the amount of the settlement or judgment. It allows 33 and 1/3% of the first $ 300,000, 25% of the next $ 300,000, 20% 0f the next $ 300,000, 15% 0f the next $ 300,000 and 10% of amounts exceeding $ 1,250,000.
In addition, (1) the fee must be based on damage awards and
settlements actually received; (2) costs, other than ordinary
overhead and expenses, can be charged in addition to the
contingency fee; and (3) any contingency fee contract involving
personal injury, property damages, or wrongful death must comply
with all applicable Superior Court rules governing attorneys.
One Superior Court judge held that tort victims could waive this protection (In re Estate of Salerno, 42 Conn. Supp. 526 (1993)). Some attorneys have asked their clients to waive this protection in certain medical malpractice cases.
Delaware limits the contingency fee attorneys may collect in medical malpractice claims to 35 percent of the first $ 100,000 in damages, 25 percent of the next $ 100,000, and 10 percent of any remaining award (Del. Code Ann. tit. 18, § 6865). A party may also elect to pay his attorney on a per diem basis if a written contract providing for such compensation is drafted at the time he is retained.
The Supreme Court of Florida has determined that attorneys' fees in excess of the following amounts are presumed unreasonable:
• In cases that settle before filing an answer or appointing an arbitrator, 33 1/3 percent of any recovery up to $ 1,000,000, 30 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 20 percent of any excess over $ 2,000,000.
• In cases that settle subsequently or go to trial, 40 percent of any recovery up to $ 1,000,000, 30 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 20 percent of any excess over $ 2,000,000.
• In cases in which liability is admitted and only damages are contested, 33 1/3 percent of any recovery up to $ 1,000,000, 20 percent of any recovery between $ 1,000,000 and $ 2,000,000, and 15 percent of any excess over $ 2,000,000.
The court allowed an extra 5 percent over what is otherwise allowed in cases that are appealed (Fl. Atty. Conduct Reg. 4-1. 5(f)(4)(B)).
An attorney's contingent fee in a medical malpractice case is limited to (a) 33 1/3 percent of the first $ 150,000 recovered, (b) 25 percent of the next $ 850,000 recovered, and (c) 20 percent of any amount over $ 1,000,000. But, if the claimant's attorney performs extraordinary services involving more unusual time and effort, the attorney may ask the court for additional compensation (735 Ill. Comp. Stat. Ann. § 5/2-1114).
An attorney’s fee may not exceed fifteen percent of any award from the state’s Patient Compensation Fund (Ind. Code Ann. § 34-18-18-1 (West Supp). There is no cap on attorneys' fees in cases not brought against health care providers who are covered by the fund.
An attorney may not collect contingent fees in excess of 33 1/3 percent of the first $ 100,000 recovered, 25 percent of the next $ 100,000 recovered, and 20 percent of any amount above $ 200,000 in any lawsuit alleging professional negligence (Me. Rev. Stat. Ann. tit. 24, § 2961). Future damages must be reduced to a lump-sum value. But the court may review the reasonableness of the attorneys' fees in a particular case and authorize a larger percentage.
An attorney may not collect a fee in a medical malpractice case which, after being deducted from his client’s recovery, will leave an amount for the claimant's compensation that is less than the total amount of the claimant's unpaid past and future medical expenses, unless the attorney's fee is either 20 percent or less of the claimant's recovery, reduced to 20 percent or less of the claimant's recovery, or reduced to a level that permits the claimant to be paid his unpaid past and future medical expenses (Mass. Ann. Laws ch. 231, § 60I). Also, they may not exceed the following limits: (a) 40 percent of the first $ 150,000 recovered, (b) 33 1/3 percent of the next $ 150,000 recovered, (c) 30 percent of the next $ 200,000 recovered, and (d) 25 percent of any amount by which the recovery exceeds $ 500,000.
An attorney’s fee is left to the express or implied agreement of the parties, subject to court rule (Mich. Comp. Laws Ann. § 600. 919). Court rules limit contingency fees in any personal injury and wrongful death case to one third of the amount recovered (Mich. Ct. R. 8. 121).
Attorney’s fees may not exceed: (a) 33 1/3 percent of the first $ 500,000, (b) 30 percent of the second $ 500,000, (c) 25 percent of the third $ 500,000, (d) 20 percent of the fourth $ 500,000, and (e) a reasonable amount approved by the court for the excess over $ 2 million (N. J. Ct. R. § 1: 21-7). If the claimant is a minor or incompetent, no fee may exceed 25 percent of any pre-trial settlement.
An attorneys' contingent fee in a medical malpractice case may not exceed: (a) 30 percent of the first $ 250,000, (b) 25 percent of the next $ 250,000, (c) 20 percent of the next $ 500,000, (d) 15 percent of the next $ 250,000, and (e) 10 percent of any amount over $ 1,250,000 (N. Y. Jud. Law § 474-a). The court may allow higher fees if either the claimant or his attorney asks the court to determine this issue. If the court allows a higher fee it must make a written order stating the reasons for granting the greater compensation (N. Y. Jud Law 474-a).
Attorneys may lawfully contract for a percentage of the recovery, but it may not exceed 50 percent (Okla. Stat. Ann. tit. 5, § 7).
An attorney's contingency fee in a medical malpractice case may not exceed 33 1/3 percent of all damages awarded to the claimant (Tenn. Code Ann. § 29-26- 120). The cap was held to be constitutional in Newton v. Cox, 878 S. W. 2d 105 (Tenn. ), cert. denied, 513 U. S. 869 (1994).
In a medical malpractice lawsuit, an attorney may not collect a contingency fee that exceeds one third of the amount recovered (Utah Code Ann. § 78-14-7. 5).
The law limits attorneys' fees in medical malpractice cases to: (a) 33 1/3 percent of the first $ 1,000,000 recovered, (b) 25 percent of the first $ 1,000,000 recovered if liability was stipulated within 180 days after the complaint was filed and no later than 60 days before the first day of trial, and (c) 20 percent of any amount that exceeds $ 1,000,000. But the court may approve attorneys' fees beyond these limits in exceptional circumstances (Wis. Stat. Ann. § 655. 013).
The law specifies that the following contingent fees are presumed reasonable and not excessive in casualty or wrongful death cases where the total recovery is $ 1,000,000 or less: (a) 33 1/3 percent, if the claim is settled prior to or within 60 days after suit is filed, or (b) 40 percent, if the claim is either settled more than 60 days after filing suit or judgment is entered upon a verdict (Wyo. Ct. Rules Ann. , Contingent Fee R. 5). In casualty and wrongful death cases involving a recovery of more than $ 1,000,000, 30 percent of the excess over $ 1,000,000 is a reasonable contingent fee. But, the law specifies that contingent fee rules are not intended to abridge the freedom of the attorney and client to contract for different percentages.
STATES WITH GENERAL LIMITS AND REVIEW PROVISIONS
Hawaii does not limit attorneys' fees in medical malpractice actions. But, in all personal injury or wrongful lawsuits that result in a judgment attorneys' fees for both the plaintiff and the defendant are limited to a reasonable amount as approved by the court. In lawsuits in which a settlement is reached, the plaintiff or the defendant may request that the amount of their respective attorneys' fees be subject to the court’s approval (Haw. Rev. Stat. § 607-15. 5).
Iowa does not place a limit on the fees an attorney may recover in a medical malpractice action. But, Iowa courts must determine the reasonableness of fee arrangements between medical malpractice claimants and their counsel (Iowa Code Ann. § 147. 138).
When attorneys' fees are in dispute, an arbitration panel or court must approve it (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-07).
Until recently, all claims for medical malpractice had to be reviewed by an arbitration panel under the Health Claims Arbitration Office (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-02). The law formerly allowed a waiver of arbitration if all the parties agreed, (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-06A), but since 1995 either party may waive arbitration (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-06B).
If the arbitration panel determines that a health care provider is liable to the claimant or claimants, it then itemizes and apportions damages (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-05). Any party may reject the panel's findings. But those findings are admissible and presumed correct in any subsequent court proceedings, unless the court vacates them (Md. Code Ann. , Cts. & Jud. Proc. § 3-2A-06). If a subsequent verdict is not more favorable to the rejecting party, the rejecting party must pay the other party’s costs.
Nebraska does not place a limit on the fees a medical malpractice claimant's attorney may recover for services rendered. But, in all cases against a health care provider for professional negligence, the court, upon motion of either party, must review the attorneys' fees incurred by that party and allow such compensation as the court finds reasonable (Neb. Rev. Stat. § 44-2834 (1993).
In addition, if the court finds the loosing party did not have a reasonable chance to recover or to defend a malpractice claim, it may order the loosing party to pay the prevailing party’s 1) reasonable costs of preparation and trial, including reasonable attorney’s fees, and 2) reasonable loss of earnings the trial caused.
A patient has the right to agree with his attorney to pay for the attorney's services on a mutually satisfactory per diem basis. Such election must be exercised in writing at the time he retains the attorney or by written agreement he enters into thereafter with his attorney.
A court has held that a court review of arrangement for attorney's fees is constitutional (Prendergast v. Nelson, 199 Neb. 97, 256 N. W. 2d 657 (1977)).
All fees for actions resulting in a settlement or judgment of $ 200,000 or more are subject to court approval ( N. H. Rev. Stat. Ann. § 508: 4-e). Specific limits applicable to medical malpractice cases, (N. H. Rev. Stat. Ann § 507-C: 8), have been held to be unconstitutional. Carson v. Maurer, 120 N. H. 925, 424 A. 2d 825 (1980).
While there is no defined cap for attorneys' fees in Washington, either party charged with the payment of attorneys' fees in a tort action may petition the court within 45 days of receipt of the final billing for a determination of the reasonableness of that party's attorneys' fees (Wash. Rev. Code Ann. § 4. 24. 005).
The court must consider the following when making its decision:
1. The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
2. The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
3. The fee customarily charged in the locality for similar legal services;
4. The amount involved and the results obtained;
5. The time limitations imposed by the client or by the circumstances;
6. The nature and length of the professional relationship with the client;
7. The experience, reputation, and ability of the lawyer or lawyers performing the services;
8. Whether the fee is fixed or contingent;
9. Whether the fixed or contingent fee agreement was in writing and whether the client was aware of his or her right to petition the court under this section; and
10. The terms of the fee agreement.
Our statute is silent as to whether a client can waive the contingency fee limits that the statute imposes. One case addressed this issue. Judge Vertefeuille held that tort victims could waive their right to the protections afforded by the contingency fee law. She also decided the plaintiff's waiver was valid, and the fee arrangement the plaintiff entered into with her attorney was reasonable (In re Estate of Salerno, 42 Conn. Supp. 526 (1993)).
Testimony at the trial indicated that several experienced plaintiff’s attorneys wanted to represent her or at least investigate her case but refused to do so because the cap made representation economically infeasible. Her case involved harm caused by exposure to toxic chemicals, and according to the testimony, would have likely involved a lengthy and expensive trial to resolve.
On January 4, 1991, Rita Salerno was appointed conservatrix of the estate and person of her husband, Pasquale Salerno, a 37-year old who was totally and permanently disabled. He contracted toxic hepatitis and suffered from severe organic brain syndrome. He was unable to care for himself and required round-the-clock personal care, which was provided by his wife.
Mrs. Salerno contended that her husband's condition was caused by exposure to certain toxic chemicals where he worked. From 1979 to 1989, he was employed as a vapor degreaser and exposed to various chemicals. His medical reports confirmed that his condition was related to toxic chemical exposure.
In November 1990, Mrs. Salerno contacted Attorney Richard Bieder about suing the chemical manufacturer. Bieder advised her that he was willing to represent her but that he would need to investigate the claim first and the cost of investigation could be substantial. Salerno could not pay for the investigation or for legal representation on an hourly basis since she only received $ 978 a month in Social Security benefits.
Section 52-257c establishes a fee cap for contingency cases. It provides in relevant part:
(a) in any claim or civil action to recover damages
resulting from personal injury, wrongful death or damage
to property occurring on or after October 1, 1987, the
attorney and the claimant may provide by contract, which
contract shall comply with all applicable provisions of
the rules of professional conduct governing attorneys
adopted by the judges of the superior court, that the fee
for the attorney shall be paid contingent upon, and as a
percentage of: (1) damages awarded and received by the
claimant, or (2) settlement amount pursuant to a settle-
ment agreement. (b) in any such contingency fee arrange-
ment such fee shall be the exclusive method for payment
of the attorney by the claimant and shall not exceed an
amount equal to a percentage of the damages awarded and
received by the claimant or of the settlement amount
received by the claimant as follows: (1) thirty-three
and one-third per cent of the first three hundred
thousand dollars; (2) twenty-five per cent of the next
three hundred thousand dollars; (3) twenty per cent of
the next three hundred thousand dollars; (4) fifteen per
cent of the next three hundred thousand dollars; and (5)
ten percent of any amount which exceeds one million two
hundred thousand dollars.
Bieder advised her that he could not represent her for the amount specified by this statute because it was not economically feasible. Bieder told her that his firm would have to advance the investigation cost which was likely to be $ 20,000 to $ 25,000. He also told her that the litigation would probably be contested, that a trial was likely, and that his time to represent her would probably be worth $ 200,000 to $ 400,000. Under the fee cap, payments of such a fee would probably not be possible.
Bieder offered to represent her for 30%, subject to approval by the probate court. Before finalizing the agreement, Bieder advised her to contact other experienced attorneys to see if any would represent her in compliance with the cap.
She and Bieder contacted seven or eight attorneys. All were experienced in complex tort cases. Each expressed an interest in taking the case or investigating it, but each declined to do so because the statutory cap made it economically unfeasible.
Mrs. Salerno, as conservatrix, applied to probate court for permission to enter into the 30% fee agreement. The court denied the application because, as a court of limited jurisdiction, it did not have the authority to declare the statute invalid.
She then filed a pro se complaint as conservatrix of the estate and on her own behalf seeking damages from the chemical makers. The defendants, represented by Day, Berry and Howard, Howd and Ludorf, and Cummings and Lockwood, removed the case to federal court.
District Judge Nevas approved the fee agreement after a hearing and after Mrs. Salerno waived her rights under the fee cap statute. He expressed serious reservations about the statute’s constitutionality and stated a preference for state court to first decide this issue.
Mrs. Salerno appealed the probate court decision not to approve the fee agreement to the Superior Court. She contended that the fee cap is unconstitutional in each of the following respects:
1. it denies the plaintiff equal protection of the laws under Article First, § 20 of the State Constitution;
2. it violates Article First, § 1 by creating an exclusive public emolument or privilege for the insurance industry and defense bar;
3. it denies tort victims due process of law; and
4. it improperly interferes with judicial rule-making authority and violates separation of powers.
The plaintiff further contended that the fee cap statute should be construed to permit tort victims to waive their rights under the statute and enter into other fee arrangements.
Most of the attorneys contacted by Mrs. Salerno testified at the Superior Court trial. They explained why the cap made it economically unfeasible to handle such a case. They indicated that most complex toxic tort cases are not settled but rather proceed to what normally are lengthy trials. The value of time spent by a firm, according to these attorneys,
can be anywhere from $ 200,000 to $ 400,000 or more, calculated on an hourly basis. Yet if the verdict amount is $ 1,200,000, the maximum attorney's fee is $ 280,000 under the statutory cap.
They also testified that complex tort cases often require the attorneys to advance funds for investigation and for hiring experts and that in such cases, out-of-pocket costs can be $ 200,000 or more.
Judge Vertefeuille resolved the case on nonconstitutional grounds. She first noted that rights granted by statute can be waived unless the statute is meant to protect the general rights of the public rather than private rights. She then cited instances where statutes relating to litigation have been construed as conferring a private right that can be waived (e. g. , statute of limitations for tort actions, right to trial by jury, defense of statute of fraud).
She concluded that the fee cap statute clearly confers a private right and does not protect the general rights of the public. She also cited the legislative history where proponents of the law indicated that it could be waived (29 H. R. Proc. pp. 5830-33 (1986)).
She concluded that the benefits of CGS § 52-251c could be waived, Salerno's waiver of the fee cap was valid, and the fee agreement reasonable.
If the legislature determines the current situation allowing clients to waive the attorney fee cap is problematic, it has at least three options. One option is to pass an amendment to specify that clients cannot waive the law’s protection. As noted before, California courts have interpreted its law as not allowing waivers. This option would almost certainly result in a challenge to the law’s constitutionality. In the Salerno case Judge Vertefeuille stated that the plaintiff “ presented to the court a compelling case for declaring the statute unconstitutional”. It is not possible to know for sure whether such a challenge would be successful. At least two states have upheld their attorney fee cap law against constitutional challenges (Indiana and Tennessee) while at least one state (New Hampshire) has invalidated its attorney fee cap law.
Another option might have a greater chance to withstand constitutional challenge. At least four states explicitly allow a court to authorize fees in a greater amount than the fee cap allows in unusual or extraordinary circumstances (Illinois, Maine, New York, and Wisconsin). Such an approach might tend to eliminate the possibility that a person with a meritorious claim would be unable to retain an experienced attorney because of the amount of expenses required for expert witnesses and the amount of time and risk involved.
A third option is to eliminate the fee schedule but allow a court to approve the reasonableness of the attorney’s fees. At least six states have adopted this approach (Hawaii, Iowa, Maryland, Nebraska, New Hampshire, and Washington). In each of these states other than Iowa, the court may or must approve the fees of both the plaintiff and the defendant.
Please let me know if you want additional information about constitutional issues involved in a law that does not allow for greater fees under unusual circumstances.