FOURTH CIRCUIT COURT OF APPEALS REAFFIRMS VALUE OF CONTINGENCY FEES IN PROVIDING ACCESS TO JUSTICE
In a May 18 ruling, a federal appeals court issued a ringing endorsement of the value of contingency fees in preserving access to justice.
The case is In re Abrams & Abrams, which challenged a district court judge's refusal to honor a contingency fee agreement between the parties to a personal injury lawsuit. The Court wrote that contingency fees “provide access to counsel for individuals who would otherwise have difficulty obtaining representation.”
Contingency fees “are an acknowledged feature f our legal landscape, approved by our legislative and judicial bodies alike, that help secure for the impecunious access both to counsel and to the court,” the Court observed. Public Justice had filed an amici brief in the case urging the Court to rule as it did.
“Our concern had been that the notoriously-conservative Fourth Circuit might use this case as an occasion to unleash a full scale assault on the contingency fee system in its entirety,” said Public Justice Senior Attorney Leslie Brueckner, who assisted with the brief. “Instead, the Court ruled as we urged and, in so doing, powerfully reaffirmed the vital importance of contingency fees in ensuring access to justice."
This case arose out of an auto accident in a parking lot in North Carolina on New Years Eve, 2005. Mark Pellegrin was struck by a drunk driver and so severely injured that he will be incompetent for the rest of his life. The car was leased by the driver’s employer and insured by National Union, which denied coverage on the ground that the driver was drunk and refused to defend. Suit was brought against the driver in North Carolina state court by Mark’s father as guardian ad litem, and an uncontested bench trial resulted in a $75 million verdict.
Pellegrin then filed suit against National Union, alleging that the insurer was liable under its automobile liability policy and its umbrella policy for up to $21 million. National Union removed to federal court on the basis of diversity jurisdiction. In mediation, the parties agreed to a settlement of $18 million. The settlement was then submitted to District Judge Terrence Boyle for approval.
Judge Boyle approved the settlement only after slashing the fee to from the 33 1/3 % provided in the contingency fee agreement to a mere 3%. He did this despite the fact that the plaintiff in the case actively supported his attorney’s right to the fee, both as a point of personal honor and in recognition of the manner in which his son's lawyers provided for the lifetime needs of their severely disabled client. Despite the client's enthusiastic endorsement of the fee and the substantial risk of the attorneys recovering nothing for their work, the district judge opined that the fee was unreasonably large and reduced it from $6 million to $600,000.
In reversing this decision as an abuse of the court's discretion, the United States Court of Appeals for the Fourth Circuit repeatedly emphasized the vital importance of the contingency fee in ensuring that victims are able to seek compensation for their injuries. The Court reasoned that, although many claimants cannot afford to retain counsel at fixed hourly rates, they may be willing to pay a portion of any recovery they may receive in return for successful representation. The Court further noted that, because "contingency fee arrangements transfer a significant portion of the risk of loss to the attorneys taking a case," “[a]ccess to the courts would be difficult to achieve without compensating attorneys for that risk.” Upon remand, the Fourth Circuit ruled, the district court’s discretion must be guided by “a recognition of the important role played by contingency fees in this type of litigation.”
The amici brief was authored by Jeffrey White of the Center for Constitutional Litigation, with Brueckner’s input and assistance.