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New Horizons in the Law

October 2010, Volume 46, No. 10

Adapt or perish 

Gary Jackson

Plaintiff lawyers have faced many challenges in recent years. By considering new approaches and adapting to change, your practice can evolve and prosper.

Over the last several years, a relentless storm has besieged the practices of plaintiff lawyers. Legislative restrictions, judicial hostility, economic crisis, and technological and informational sea changes are among the many forces threatening the success of our work and the fulfillment of our mission to protect people’s rights.1

Consider some of the changes we have faced over the last decade. State legislatures beholden to corporate interests have enacted tort “reform” initiatives such as caps on noneconomic damages2 and abolition of joint and several liability.3 In some jurisdictions, attorney contingent fees have been capped at levels that render many cases financially impossible to pursue.4 Claims once decided in our courts are now compelled to mandatory arbitration.5 Activist, partisan judges and the U.S. Congress have eviscerated the class action as a potent tool to protect consumers.6 Jurors view our clients and us with more suspicion than ever before.

At the same time, the market in which we once comfortably practiced has changed dramatically. Plaintiff “megafirms” have emerged to compete with smaller practices. National television advertising has eroded local firms’ ability to reach potential clients. Yellow Pages ads are being replaced by constantly moving Internet marketing advances.

Last but not least among this litany of misfortunes is the economic meltdown, an ominous reality not only for our clients but also for us, our firms, and the thousands of attorneys and recent law school graduates without jobs.

One could argue that while we have more lawyers than ever before,7 there are far fewer opportunities to represent injured or aggrieved parties—not a promising combination. But I believe such a fatalistic conclusion is misguided and self-defeating. For those of us prepared to actively adapt to this new environment, many opportunities are knocking.

Successful adaptation to our new circumstances demands seizing new practice opportunities, embracing innovative billing options, cultivating new relationships and sources of work, and—most important—discarding rigid expectations, patterns, and assumptions. Meeting these challenges requires what our colleague John Romano refers to as “not just thinking outside the box, but thinking as if there were no box.”8

These times demand constant reevaluation of our practices and foresight in shaping our business plans. Plaintiff lawyers who ignore the numerous paradigm shifts affecting their practices do so at their peril. They may survive, but they will not thrive.

At the outset, I should emphasize that expecting plaintiff lawyers to transform their practices wholesale is unrealistic. Most of us are not going to become criminal defense or bankruptcy attorneys or move into any other area that would require significant retraining. But such dramatic steps are unnecessary.

Emerging practice areas

New types of cases are emerging that fit squarely with our experience, skills, and goals of representing the less powerful. For instance, the economic downturn has generated a rash of corporate misconduct aimed at borrowers, consumers, and small businesses. Lender liability claims brought by developers against banks have surged and do not appear to have reached their peak.9 Some of the cases have now been tried.

For example, in May, an Ohio jury awarded nearly $19 million (including more than $12 million in punitive damages) to a developer and several homeowners in a case against Webster Bank.10 The suit alleged that the bank had deliberately and wrongfully withheld construction funds, causing a condominium project to fail.

Most lender liability cases are based on a financial institution’s breach of the implied covenant of good faith and fair dealing arising out of contracts. At a time when the government is bailing out banks, such cases have both merit and visceral appeal.

The economy’s deterioration has also contributed to a swell of consumer cases, principally on statutory grounds. Since the recession began in late 2007, federal lawsuits filed under the Fair Debt Collection Practices Act have more than doubled.11 As borrowers have fallen behind on their debts, lenders (under financial pressure themselves) have increasingly engaged in unlawful collection practices. Moreover, the stress under which many financial institutions are operating has led some to adopt other profit-driven practices that run afoul of consumer statutes or common law. Specifically, excessive overdraft fees,12 bogus credit insurance,13 and bait-and-switch schemes14 are just a few of the practices that have landed banks in litigation.

The country’s economic tumult has also caused an increase in legal malpractice claims. Historically, the prevalence of legal malpractice suits has correlated to economic conditions.15 In a downturn, such cases typically arise from legal work performed in failed financial deals, foreclosures, and bankruptcy cases. Mistakes lawyers make in closing real estate transactions may be inconsequential in boom years but financially crippling in a market where property values are falling precipitously. Reflecting this trend, legal malpractice insurance carriers are reporting a substantial uptick in claims.16

New statutes may also provide promising avenues for expanding the plaintiff lawyer’s practice:

•A law permitting attorneys to charge fees in cases brought on behalf of veterans not only improved the claimants’ quality of representation but also opened up a burgeoning practice area that did not exist before 2007.17

•Compliance requirements imposed by the Credit Card Accountability Responsibility and Disclosure Act, enacted last year, also may pre­sent fresh opportunities to represent consumers against banks and card issuers.18 The new law vastly expands the potential for increased consumer actions under the Truth in Lending Act.19

•Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act should further strengthen consumer protection and may furnish additional prospects for representation.20

In the next few years, economic conditions may change in ways that render other practice areas viable and attractive. The point is that plaintiff lawyers cannot stand still as the rest of the world adapts to new circumstances.

Beyond the usual suspects

Another category of potential cases might best be described as those that simply escape our attention. Too often, we complacently view our market as personal injury claims, ignoring the vast universe of other cases that could use our advocacy.

These might include eminent domain or condemnation lawsuits contesting gov­ernmental valuation of property. Another typically overlooked category is represent- ing homeowners, condominium associations, and other building owners in construction defect claims. We also have opportunities to represent ­franchisees against overreaching franchisors and to advocate for small businesses in their disputes with more powerful corporate interests.

Many other cases fall outside the range of a plaintiff lawyer’s usual subjects. But it pays to take a wider look around. By narrowing our “visual field” to personal injury claims, we squander the chance to grow our practices and overcome the obstacles we face. More important, we deprive many deserving litigants of our unique skills, experience, and passion.

You could argue that plaintiff lawyers are much better suited to representing plaintiffs in business cases than are our defense-oriented counterparts at large corporate firms. That which renders a trial lawyer an effective champion for defendants does not necessarily make him or her a prudent choice for plaintiffs. Trial consultant David Ball sums it up this way: “Lawyers who represent plaintiffs and those who represent defendants must look at the world completely differently; which side you represent dramatically affects the entire representation of a case—jury selection, opening statement, examination of witnesses . . . everything.”21 We need to market ourselves more effectively as plaintiff lawyers for essentially any case.22

Innovative fee structures

Most plaintiff lawyers abhor the thought of recording their time. However, the potential benefits of keeping and billing hours in appropriate cases may far exceed the inconvenience.23 By limiting our billing exclusively to contingent fee arrangements, we abandon a substantial pool of plaintiff cases.

Many people and entities (such as investors and small businesses) have traditionally used law firms that bill them on an hourly basis. In the current economy, many cannot afford to pay the going rate. Generally, law firms that bill by the hour are risk averse and avoid contingent fee engagements. In these circumstances, the plaintiff lawyer who customarily charges a contingent fee has a strategic advantage; he or she is accustomed to undertaking risk and can employ more flexible and less costly fee arrangements.

The available options are limited only by your creativity. If the case you’re considering is extremely compelling, it may be prudent to accept it on a straight contingent fee basis. However, many of these types of cases cannot be evaluated as reliably as personal injury lawsuits. Under those circumstances, a blended rate may be appropriate.

For instance, my firm has billed clients at half our usual billable rate and half our customary contingent fee. In another variation of this approach, we have agreed to cap the hourly billing at a specified amount (such as $100,000), with a modified contingent fee. In complex cases that require significant time, another alternative is to charge a full hourly rate to assess the merits of the case—and then convert to a contingent fee once you determine whether the case is worth pursuing.

These are just examples. The options are virtually unlimited, and they allow you to be competitive in a way that plaintiff lawyers too frequently overlook.

New and renewed relationships

Other attorneys are among the best referral sources for plaintiff lawyers. Nonlitigators, for example, can refer business clients who have claims. “Hourly” or defense litigators may send you cases when there is a conflict, when a client cannot pay a full hourly rate, or when the issues fall outside their range of expertise.

Also, the approaches described in this article are not mutually exclusive. Let other lawyers know that you are prepared to represent a business plaintiff, charge a blended rate, or handle a will caveat. Communicating the evolving scope of your practice to lawyers and others will only enhance your efforts.

A more specific category of attorneys who may serve as effective referral sources is bankruptcy lawyers. As the number of receiverships and corporate bankruptcy filings has skyrocketed, so has the need for able trial lawyers to prosecute claims on behalf of receivers and bankruptcy trustees. Many corporate entities that are currently in bankruptcy or receivership ended up there as a result of a third party’s tortious conduct. Claims against the third party represent a potential asset of the bankruptcy estate or receivership.

My firm represented a limited partnership in receivership in its claim against a Big Four accounting firm on a straight contingent fee basis.24

We are also acting as special counsel for a bankruptcy trustee in prosecuting a developer’s lender liability claims against a major bank. We are handling that case on an hourly basis with a cap, then converting to a low contingent fee.25 Plaintiff lawyers are uniquely qualified to pursue such claims and strategically positioned to enter into creative fee arrangements that other lawyers might not entertain.

Adopting these approaches should help plaintiff lawyers withstand the tumultuous currents of change we ­confront. By remaining complacent, plaintiff attorneys ensure their gradual obsolescence, not unlike an eight-track tape player or Selectric typewriter.

A deft, nimble response to these evolving realities should ensure our survival. More important, it can provide underserved clients the quality of representation they deserve.

Gary Jackson is a partner in Jackson & McGee in Charlotte, North Carolina.

Notes:

  1. For a lengthy and truly depressing discussion of this trend, read Michael Orey, How Business Trounced the Trial Lawyers, Bloomberg Businessweek (Jan. 8, 2007).
  2. See e.g. Tex. Civ. Prac. & Rem. Code Ann. §74.301 (2005).
  3. See e.g. Okla. Stat. tit. 23 §15 (2008).
  4. See e.g. Fla. R. Prof. Conduct §4-1.5(f)(4)(b).
  5. See e.g. Stolt-Nielsen S.A. v. AnimalFeeds Intl. Corp., 130 S. Ct. 1758 (2010).
  6. See e.g. id.; see Class Action Fairness Act of 2005, 28 U.S.C. §§1332(d), 1453, and 1711–15 (2006).
  7. ABA, National Lawyer Population by State (2009), http://new.abanet.org/marketresearch/PublicDocuments/2009NATL_LAWYER_by_State.pdf.
  8. Taos group (an informal group of plaintiff lawyers that meets annually to discuss business issues) meeting, Oct. 2008.
  9. See Steve Cocheo, The Return of Lender Liability, ABA Banking J. (Mar. 13, 2009), www.ababj.com/briefing/the-return-of-lender-liability.html.
  10. See Bruce Cadwallader, Jury Dings Bank for $19 Million in Condos Flop, Columbus Dispatch (June 2, 2010), www.dispatch.com/live/content/local_news/stories/2010/06/02/jury-dings-bank-for-19-million-in-condos-flop.html.
  11. Tony Pugh, More Consumers Suing Bill Collectors, Charlotte Observer 1D (July 4, 2010), www.charlotteobserver.com/2010/07/04/1540875/more-consumers-suing-bill-collectors.html.
  12. See e.g. In re Checking Account Overdraft Litig., MDL No. 2036, No. 1:09-MD-02036-JLK (S.D. Fla. Mar. 11, 2010).
  13. See e.g. Watlington v. Capital One Bank (U.S.A.), N.A., No. 1:2010-cv-00171 (M.D.N.C. filed Mar. 2, 2010).
  14. See e.g. In re Chase Bank USA, N.A., “Check Loan” Contract Litig., 2009 WL 4063349 (N.D. Cal. Nov. 20, 2009).
  15. Karen Sloan, Legal Malpractice Suits May Surge, Natl. L.J. (Feb. 23, 2009).
  16. See Laws. Mut. Liab. Ins. Co. of N.C., Meet Your Lawyers: Lawyers Mutual 2009 Annual Report 3 (2009) (“Perhaps the most significant change that our company has faced is the economic collapse of 2008, which has had a profound effect on claim activity, specifically real estate claim activity. Claim count in this area of practice is up more than 50 percent from historic norms, as is the cost associated with defending and resolving these claims.”), www.lawyersmutualnc.com/annual-reports.php.
  17. Veterans’ Choice of Representation and Benefits Enhancement Act, also known as “Attorneys for Veterans” legislation. 38 U.S.C. §5904 (2006).
  18. Pub. L. No. 111-24, §107, 123 Stat. 1734 (2009).
  19. 15 U.S.C. §1637 (2006). Even more significant, violation of the new statute can carry significantly higher penalties than those available under the previous law. Penalties were raised from between $100 and $1,000 to $500 and $5,000. 15 U.S.C. §1640.
  20. The act, Pub. L. No. 111-203, 124 Stat. 1367 (2010), broadens the scope of private rights of action by expanding whistleblower provisions, imposing more stringent duties on broker dealers, and explicitly permitting individual actions against credit-rating agencies.
  21. James A. Roberts III & Gary W. Jackson, Business Plaintiffs: Not an Oxymoron, Bus. N.C. (July 1, 2003).
  22. Of course, this would exclude representing financial institutions as plaintiffs in collection cases, insurance companies in applications for declaratory relief, and other similar situations.
  23. Keeping time records serves several useful functions. First, it allows a law firm to evaluate its comparative return on different types of cases. Second, billing records may be required to receive compensation for work involving fee-shifting statutes or class actions. Third, such records come in handy when you bill a client by the hour.
  24. See e.g. Ray v. Deloitte & Touche, L.L.P., 2006 WL 1064503 (N.C., Mecklenburg Co. Super. Bus. Apr. 21, 2006).
  25. See e.g. First Tenn. Bank v. Hagood Reserve, No. 09-CVS-15152 (N.C., Mecklenburg Co. Super. July 3, 2009); In re Hagood Reserve, LLC, No. 3:10-BK-30725 (Bankr. W.D.N.C. filed Mar. 17, 2010).


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