Not a Simple Case of Greed

South of the Suwannee has a comment on what looks like an interesting constitutional issue. Because I think the posting understandably kinda misses a key point, I'm going to take the liberty of quoting the whole thing:

Why Lawyers Have a Bad Image

Sheldon Schlesinger is a 77-year-old Fort Lauderdale attorney who has had a lucrative career in the personal injury field.

That's fine, someone has to represent the injured.

In fact, his firm's website proclaims, “Through all of the work we have done, our personal injury lawyers have never lost sight of what is most important — the health of our clients.

Not many people are going to be sympathetic to him, however, when he froze payments to a paralyzed girl in order to collect more than his $1,000,000+ fee authorized by the State Legislature.

Schlesinger wants another $677,000 (which I doubt will change his lifestyle nor put his law firm in danger of unprofitability) and obviously he thinks he deserves it.

And it seems he's willing to let the real victim continue to suffer to get his payoff.

I'm sure that is how most people would see this story. But not me — and not because I belong to the lawyers' mutual protection society either.

Although the linked-to story is a bit thin, what seems to have happened is this:

  • Minouche Noel (now 19 years old) suffers terrible injuries as an infant at the hands of a state entity and is paralyzed as a result;
  • Noel (client) and Sheldon Schlesinger (lawyer) sign a contingency fee agreement. We don't know the details, but state law caps contingency fees in these cases at 25% for legal fees and 6% for lobbying fees. One report says his contract provided for 20% of the recovery;
  • Lawyer wins $8.5-million award from a jury in 1999 against state of Florida;
  • Florida law prohibits payouts over $200,000 for negligence by government officials unless the legislature votes the money;
  • Seven years of lobbying, including work by lobbyists hired by lawyer, finally result in legislation funding the payment;
  • But the bill caps the lawyer's own fees at $1,074,667, and the lobbyist's fee at $85,000. That's well below the statutory limit, and, lawyer says, less than was agreed.
  • Via the Miami Herald, we learn that “Court records show that the Schlesinger law firm earlier this month filed a lien against Noel and her parents, who now live in Brevard County after moving from Fort Lauderdale.” The Noels on July 9 agree to pay $546,000 to the law firm and another $120,000 for lobbying expenses.

Bottom line: Since the lawyer never agreed to the compensation limit in the bill, he filed a lien against the payment. It may be that the July 9 agreement satisfied the lien, in which case the issue is resolved legally. South of the Suwannee says the filing of the lien was horrible and greedy since it threatened to delay (or actually delayed?) the payout to the victim. And from a quick online scan of the press, the newspapers all seem to agree that this is a simple case of lawyerly greed.

Assuming the facts above are correct, however, I think that this instant conventional wisdom is wrong: this isn't a case of greed, and it isn't simple.

First, there's that pesky US Constitution. Article I, sec. 10 states,

Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

In short, the Constitution bars states (but not Congress) from “impairment of contracts”. I'd say that this Florida legislation stands a good chance of violating of that constitutional prohibition. The modern test states that a state statute which substantially impairs a private contract falls afoul of this prohibition unless the state has “a significant and legitimate purpose behind the regulation, such as the remedying of a broad and general social or economic problem.” See Energy Reserves Group v. Kansas Power & Light 459 U.S. 400 (1983). I am not at all sure that this narrowly targeted bill meets that test. And surely it can't be wrong to stand on constitutional principle?

Second, and simpler, I think it could fairly be argued that Mr. Schlesinger is not being simply greedy, or that even if he were being greedy then his greed serves a public purpose. It seems to have taken enormous perseverance — almost twenty years — to first win the case and then obtain this payment for his client. If the state legislature is free after the fact to fix payment at whatever it pleases, ignoring its own statutes that set reasonable bounds on what contingency fees can be, this will further reduce the incentive for people to take on the arduous and risky job of suing the state for its negligence. In short, victims will have a lot more trouble finding lawyers who won't demand money up front. And a system that required a lawyer to lobby for her fee as well as for her client's payment is a bad system — it creates a built-in conflict of interest between lawyer and client, one that might require hiring yet another lawyer to manage the lobbying process (at further expense to the client).

Having set the ground rules for contingency fees by statute, and running a rigged game in which it is so very, very hard for persons hurt by Florida state entities' negligence to recover, the state legislature should not also be able to pull the rug out from under the agreements that make those recoveries possible.

I don't know if there was some means other than the lien by which Mr. Schlesinger could have preserved his rights and the legal position. If there was one that wouldn't delay payments to the victim, he should have taken it. But even that's not a simple question: I wonder if declaratory judgment, for example, might have run the risk that a court would have declared the entire bill void, leaving his client with nothing. Which would be an even worse result.

As the Herald article notes, “Bruce Rogow, the lawyer who filed the lien on behalf of Schlesinger, said the law firm was following the letter of the law. Rogow said the wording of the claims bill, HB 593, limited what the attorneys could be paid out of Minouche Noel's portion, but it did not limit what Jean and Flora Noel could pay the attorneys.”

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2 Responses to Not a Simple Case of Greed

  1. SOTS says:

    Very well explained — I’ve linked to this on my blog.

  2. SEO says:

    You gotta love legal loopholes and greed!

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