IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES THE ...

DRAFT: NOT FOR DISTRIBUTION OR CITATION WITHOUT EXPRESS PERMISSION OF THE AUTHOR IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES: THE PRECARIOUS NATURE OF PLAINTIFFS’ PRACTICE IN TEXAS Stephen Daniels It was the best of times, it was the worst of times, it was the age of wisdom, it was the age foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way ... A Tale of Two Cities, p. 1 [maybe place in fn] Plaintiffs’ lawyers practice in inherently unstable markets that are shaped by both the relevant legal rules and the broader environment in which they work. The legal rules define formal procedures and causes of action, and the claims on which their practices are built emerge from the environment in which they work as do the attitudes jurors bring with them. In addition, their work is shaped by the one-shot nature of their client base; by the contingency fee system on which they rely almost exclusively; and by the increasing amount of competition for business. Legal rules and the surrounding environment are never static, and even small changes can affect plaintiffs’ lawyers’ practices in significant ways. If nothing else, the contingency fee system and the “one-shot” nature of the client base make this type of law practice an especially precarious enterprise. As one Texas plaintiff’s lawyer simply put it, “we live on the edge of extinction all of the time.” The 1990s were an especially challenging period for Texas plaintiffs’ lawyers in the wake of tort reform’s legislative changes; tort reform’s aggressive public relations campaigns; and a very different state supreme court.1 In many respects, it was the worst of times for some, but it was also a relatively good time for others. To stay in business, lawyers must be able to respond successfully to such challenges, and not all do. They must be able to maintain a steady flow of clients with injuries the civil justice system will compensate adequately and at a cost that will allow the lawyer to do so profitably. Our earlier work has described some of the ways in which Texas plaintiffs’ lawyers have reacted to the changes they see in the market for their services. We have described the ways in which they get clients and how certain kinds of formal legal changes can have a substantial Typical of plaintiffs’ lawyers’ view of the Texas Supreme Court is the assessment of a Houston attorney, “Our Supreme Court is just barely to the right of Atilla the Hun, and you know, all of the defense people know it.” 1 1 effect on lawyers’ ability to get clients even when those changes have nothing to do directly with the rules surrounding client acquisition.2 Particularly important are formal changes that, intentionally or not, disrupt the referral networks that bring most clients to lawyers. The 1991 changes in workers compensation,3 for instance, had a major effect on plaintiffs’ lawyers – who lost twice when these case began to disappear. Many plaintiffs’ lawyers handled at least some workers compensation. These cases provided a regular source of income that covered a small practice’s overhead; and perhaps more importantly, these cases created a client base that, in turn, produced referrals of new business. Word-of-mouth referrals from former clients are a major source of new business. In addition, the loss of these cases also affected lawyers higher in the food chain who relied upon referrals from those handling workers compensation cases for thirdparty cases. One such lawyer from Houston who relied upon such referrals said that the changes in workers compensation “destroyed the old referral system (between lawyers) we had in Texas.” His higher-end practice built on referrals of third-party cases from lawyers handling workers compensation collapsed. We have described the pessimism of many “bread and butter” plaintiffs’ lawyers (those handling low to modest value cases) who watched their practices shrink and their profit margins evaporate.4 Their reactions have been largely defensive – geared only to immediate survival. For them, it is a matter of “hunkering down” and hoping for the best. Many worry that they will not survive. A Fort Worth lawyer whose practice relied heavily upon low to modest value car wreck cases summarized the situation bluntly: “Without cash flow coming in you can’t pay your bills and you can’t fund your cases ... we are in a brutal process of some [lawyers] being weeded out – and I may be one of them.” Six months after he was interviewed, this lawyer was out of business. Other lawyers were more graphic in characterizing their predicament. One said “It’s Darwinism – survival of the fittest.” For many lawyers, the 1990s were indeed a season of darkness – a winter of despair. We have also described the more optimistic view of the innovators who are want to try some other than just riding out the storm. They look for opportunities within the changing plaintiffs’ market and innovate in an effort to exploit those opportunities. They explore or try to develop new markets for their contingency fee-based services (such as commercial litigation or nursing home cases or new arenas in products liability). They also experiment with different ways of modeling their practices (such as the use of technology), but especially with regard to the perennial challenge of a contingency fee practice – getting clients. In short, they are the entrepreneurs who are trying something new or different where others are hoping to merely hold on until the market returns to its older ways. The innovators presume that where ever their market is headed, it will not return to the past. For some lawyers, the 1990s were more a season 2 3 4 Daniels and Martin, 1999. Cite Korioth Daniels and Martin, 2000. 2 of light – offering some spring of hope. Building on our earlier work, we want to present a detailed picture of the Texas plaintiffs’ bar at the end of the 1990s. It will be based on 96 in-depth interview with Texas plaintiffs’ lawyers and a large-scale mail survey with 554 useable responses.5 It takes as it starting point the premise that all lawyers in private practice must make a profit if they are to continue offering legal services. We presume that this has always been the case and fundamentally shapes what lawyers do in their practices. Profit is the minimum requirement for accomplishing anything else a law practice hopes to accomplish. In other words, everybody must generate enough business and income from it to “keep the lights on.” The challenge for many plaintiffs’ lawyers at the end of the 1990s was keeping the lights on.6 Our discussion is divided into three broad parts. The first talks about who these lawyers are and what their practices look like, and outlines the structure of the Texas plaintiffs’ bar. The Texas plaintiffs’ bar is not a monolithic structure or one with a small handful of well-known high fliers and a mass of anonymous plodders. It is a complex hierarchy, and some knowledge of it is necessary to understanding what is happening to plaintiffs’ lawyers’ practices at the end of the 1990s. The second part describes plaintiffs’ lawyers’ perceptions of the changes in the market environment in which they work – their “common sense” notions of things. It is also necessary to know something of this “common sense” because this is what they rely upon in trying to figure out how to “keep the lights on.” Following a logic that ties aggressive tort reform political and public relations campaigns to changes in jury behavior and then to changes in “going rates,” they believe that their working environment has substantially changed for the worse. The third part examines lawyer reactions to those changes and what is happening to their practices. Our findings describe what may be a contracting plaintiffs’ lawyers’ market in which some lawyers are facing a dark and uncertain future, while others are facing a much brighter one. As a general proposition, whether one is going “direct to heaven” or going “direct the other way” seems to depend on where in the structure of the Texas plaintiffs’ bar one is situated. The lower in that structure, the more likely a bleak future; and the higher in the structure the more likely a promising future. I. THE TEXAS PLAINTIFFS’ BAR A. The Size and Basic Structure of the Plaintiffs’ Bar 5 6 A more detailed discussion of our methods can be found in the Methodological Appendix to this article. Cite Calve, 1996 3 The exact size of the Texas plaintiffs’ bar is hard to know with precision, in part because there is no simple definition of what a plaintiff’s lawyer is. In Texas, is it a lawyer who is certified in personal injury trial law by the State Bar of Texas? If so, the plaintiffs’ bar will be relatively small – 1,657 according to the Texas Board of Legal Specialization [double-check numbers].7 Is it simply a lawyer who is a member of the Texas Trial Lawyers Association (TTLA) or the Association of Trial Lawyers of America (ATLA)? Is it a lawyer who does nothing but plaintiffs’ work on a contingency fee basis, or is it a lawyer does any plaintiffs’ work at all? We are interested in lawyers for whom plaintiffs’ work done on a contingency fee basis accounts for most or at least a substantial part of their business. For our mail survey, we drew from a list of 5,284 Texas lawyers provided by the Texas Trial Lawyers Association (TTLA) in 1999. That list included current TTLA members, former TTLA members, and lawyers identified by TTLA as “prospects” – lawyers thought by its members on the basis of their local knowledge to be practicing at least some amount of plaintiffs’ work and who have never been TTLA members. While not an ideal source, it probably represents the best available estimate and list of the population of Texas plaintiff’s lawyers at the end of the 1990s. According to the State Bar of Texas there were 58,468 lawyers in private practice in the state in 1999 [double check this number – it might include more – out of state, government, etc].8 The TTLA list, then, represents 9.0% of those in private practice in 1999. Even if we assume that this list misses some lawyers who consider themselves to be plaintiffs’ lawyers, it is unlikely that more than 10% of those in private practice in the state are plaintiffs’ lawyers. More specifically, we limited our study to lawyers for whom plaintiffs’ work done on a contingency fee basis currently accounts (meaning late 1999-early 2000, the time of our survey) for at least 25% of their caseload or has at some time during the five years previous years. For the lawyers in our interviews, none had less than 50% of their caseload devoted to plaintiffs’ work, with a number as high as 90%. Table 1. presents data on the survey respondents for current business ( again meaning at the time of the survey). TABLE 1. Plaintiffs’ Work as Current Percent of Caseload (N=552) Percentile Percent Plaintiffs’ 10th 25.0% 25th 50.0% 50th 90.0% 75th 99.0% 90th 100% Mean: 74.47% Median: 90.0% Mode: 100% (n=131) It shows that the bulk of the lawyers in our survey are not simply lawyers who 7 8 Cite Texas Board of Legal Specialization, pp. 4-5 Cite State Bar of Texas 4 occasionally do some plaintiffs’ work, they are plaintiffs’ specialists who devote most of their practices to such work. The largest percent of them (131 or 23.7%) do plaintiffs’ work exclusively, and only one-quarter of them have more than 50% of their business in something other than plaintiffs’ work. In short, it makes sense to talk not only of an identifiable plaintiffs’ bar in Texas, but to talk of one comprised of lawyers who have chosen to specialize in this particular legal market. Texas plaintiffs’ lawyers do not see themselves as a largely undifferentiated mass. There is a structure and a hierarchy in the plaintiffs’ bar, and the best way in which to describe the bar’s structure is to divide lawyers on the basis of the value of their average contingency fee case. Doing so will not capture everything that is important – such as a lawyer’s reputation for professionalism and integrity, but it does seem to be the most important indicator in the eyes of plaintiffs’ lawyers. For instance, in talking about the unsavory reputation of a well-known Texas plaintiffs’ lawyer with a record of winning big cases, a Houston lawyer said, “He’s a good lawyer ... I don’t know if he chased that airplane or not [getting clients], but if I was on that airplane, I’d want him to be my lawyer. If I walk out of here and get hit by a truck ... then I would like to have X take it [the case].”9 One way to illustrate this is to look at what draws referrals of big cases to some lawyers rather than others. As one lawyer said: In order to get that big case, what’s going to happen is some lawyer is going to bring it to you. And the reason he brings it to you is because, at least in his mind, you have a reputation for being equipped to deal with it, and equipped to get a good result, which is important to him because he’s going to get a referral fee. And so what you’ll have, I think, in just about any community ... is a handful of what everybody considers to be the “heavy hitters.” The ones that for some reason always end up with the big cases ... And the reason one of those guys gets it is because it is taken to him or her by some other lawyer because of their reputation. The legal community has to see the firm in such a way that they believe the firm will get a good result and can finance the case ... People have to know you have the money. Not everyone who successfully handles big cases will have a reputation for professionalism, integrity, or the like; but when it comes to defining the pecking order, it’s the size of the cases that counts most. Table 2. presents data from the responses to a question on the average value of the contingency fee cases he handled over the 12 months prior to the survey.10 While the mean In fn – example from Austin – quote about lawyers with a “mill” – but now they’re winning some big cases, etc. – the winning big cases gets respect Throughout this article we will refer to Texas plaintiffs’ lawyers in the masculine because, as we will show, the vast majority of them are male. 10 9 5 TABLE 2. Value of Average Contingency Fee Case 12 Months Prior to Survey (N=546) Percentile Case Value 10th $5,000 25th $15,000 50th $37,000 75th $200,000 90th $1,000,000 Mean: $1,002,181 Median: $37,000 is just over $1 million, 90% of the averages are under that amount. The median is a far more modest $37,000, which indicates that most plaintiffs’ lawyers’ practices are not built on big, complex cases involving millions of dollars. They are built on more modest cases. Since we want to describe the Texas plaintiffs’ bar in terms of its structure, a straightforward way of doing so is to divide them according to the percentile on reported case value into which they fall. The first group, 132 lawyers, includes those with average case values of less than $15,000. The second group, 141 lawyers, includes those with average case values between $15,000 and $37,000. The third group, 134 lawyers, includes those with average case values between $37,001 and $200,000. The last group, 139 lawyers, includes those with average case values greater than $200,000. We will label the two groups below the median as “bread and butter” lawyers – bread and butter1 (BB1) and bread and butter2 (BB2). The two groups above the median we call “heavy hitters,” and we will label them as heavy hitter1 (HH1) and heavy hitter2 (HH2). In describing Texas plaintiffs’ lawyers generally, as well as discussing their perceptions of the legal environment and their responses, we will occasionally divide them into these four groups to see what difference place in the structure makes. A key aspect of a lawyer’s place in the plaintiffs’ bar’s structure is the geographic market in which he works. There is substantial variation in the geographic scope of the markets in which plaintiffs’ lawyers work and it follows the average case size. We divided geographic markets into three simple groups: local, meaning most cases come from the county in which a lawyer’s principle office is located or from adjacent counties; regional, meaning a substantial number of cases come from one or more Texas counties non-adjacent to the principle office site; and statewide/national, meaning a substantial number of cases come from all over Texas or from other states. Table 3. shows the variations among the four groups of lawyers. As we go up the hierarchy, geographic markets become less local and more regional and more state-wide or national. Few lawyers in the lowest two groups work state-wide or beyond. 6 TABLE 3. Geographic Markets Bread & Butter1 Bread & Butter2 (n=131) (n=132) % Local % Regional % State/Nation 81.7 16.8 1.5 68.9 27.3 3.8 Heavy Hitter1 (n=134) 52.2 31.3 16.4 Heavy Hitter2 (n=139) 32.4 28.8 38.8 (chi square 115.010, sig .000 ) Their practices may be very local, not simply being limited to their own county and the surrounding counties, so localized that they concentrate on a particular neighborhoods or ethnic community. A San Antonio lawyer provides an example, “I think over time I’ve had a good many calls from people simply saying, ‘I live in this area’ or ‘I pass your office,’ et cetera. So I’m trying to build something more in terms of tapping the neighborhood.”11 Lawyers in the second two groups are less likely to be so localized. Typically, lawyers with regional practices try to expand their market by developing geographic niches and targeting particular parts of the state either because they see a market opportunity or because they believe juries are more pro-plaintiff. For instance, a medical malpractice firm in Central Texas has targeted East Texas and the Panhandle as market opportunities: we file a lot of suits and get a lot of cases from the Lubbock/Amarillo area (the Texas Panhandle) and from the Jasper/Lufkin area (East Texas) and we don’t work too much down in South Texas ... Of course, Lubbock has got a big medical community up there and things happen. The East Texas area has terrible medical care period, so bad things happen there. A San Antonio lawyer talks about a regional practice that is based, in part, on places with friendlier juries. He described his geographic market as “San Antonio and the counties within 50 or 100 miles, except we do a bunch of border work which is Eagle Pass, Del Rio and Laredo. Because there aren’t very many lawyers there and those are very good counties for plaintiffs.” Another San Antonio works in the same area for much the same reason, “its still a decent place to try a case.” A lawyer whose practice concentrated for years on one minority area in Dallas provides another example. He spoke with some pride about his commitment to the community: “Most of my clients are minority. The reason that is so is because it has always been so. I represented granddaddy. He sent his his kids and his relatives and his friends, and I represented them. Now, I’m working on the grandkids.” 11 7 Lawyers handling larger, more complex cases may need an even broader geographic market in order to find enough of the business in which they specialize. A high-end litigator located in San Antonio described his geographic market as “Well, its Texas.” At the extreme, some of these lawyers have no real geographic boundaries on their market. Said one such lawyer: the pharmaceutical is national and aviation is national. We still depend upon ... we still want major cases in this area [his part of Texas] for some of our other lawyers and so we will have some local and statewide competition. I mean, a major trucking disaster, something like that, we’re just as interested in that case as Frank Branson [of Dallas] may be or Mike Gallagher (of Houston] or Bill Whitehurst [of Austin]. So, we can’t lose sight of our backyard, but in the pharmaceutical area its national and aviation is national.” A lawyer specializing in the most serious injuries suffered by oil rig workers has cases from almost anywhere — even injuries occurring in the North Sea. B. The Lawyers The examples above all help to illustrate the idea of hierarchy in the Texas plaintiffs’ bar. To flesh-out the structure a bit more we will create an “average” plaintiffs’ lawyer based on the mean and/or median responses to questions in our survey. The purpose is to provide a kind of summary statement that can be used as a point of comparison for the characteristics of the lawyers in each of our four groups: BB1 and BB2, and HH1 and HH2. In doing so, we will emphasize the characteristics of their practices rather than demographic characteristics. There is little significant difference among the groups in terms of demographic characteristics. 1. The “Average” Texas Plaintiffs’ Lawyer The average plaintiffs’ lawyer is 44.9 years of age (median: 44 years) and has 14.7 years (median: 13 years) of experience as a plaintiffs’ lawyer. He is male (85.7%) and CaucasianWhite (the classification used by the State Bar of Texas) (86.3%).12 Most likely he was born in Texas (59.1%), or in Texas or a bordering state (67.6%). He graduated from a Texas law school (80.1%), most likely the University of Texas-Austin (18.8%) or South Texas (16.9%). Politically, he is likely to be a Democrat (64.1%), and he describes his political views as liberal (43.9%) or moderate (40.4%). [try to find comparables for plaintiffs’ lawyers generally or elsewhere] This picture varies little among the four groups of lawyers, and the differences found are The few minorities there are among the respondents are likely to be Hispanic/Latino (the classification used by the State Bar of Texas) – 9.2%. There were just 7 African-Americans – 1.3%. The comparable figures for the State Bar at the time of the survey were Hispanic/Latino – 5.5%, and African-American – 3.5%. In terms of gender, the State Bar was 74.0% male. The average age was 43 years and the average years in practice was 14. (cite Spanhel and Cannon, 1999). 12 8 variations on a theme. Compared to the “average” lawyer, the BB1 lawyer is slightly more likely to be a minority (Hispanic/Latino) and more likely to be born locally. He is a bit less likely to be a graduate of a Texas law school, but more likely to be a graduate South Texas rather than UTAustin if he is. He is also a bit more moderate in his political views. The BB2 lawyer is more likely to be a Texas law school graduate and a graduate of UT-Austin than the “average” lawyer. He is the most Democratic and the most liberal. The HH1 lawyer, in contrast, is somewhat less Democratic and more moderate than liberal in his views. Finally, the HH2 lawyer is also likely to be moderate in his views. This “average” plaintiffs’ lawyer works in a small firm of 2 to 5 lawyers (43.1%) or is a solo practitioner (37.6%).13. His practice is almost exclusively plaintiffs’ work done on a contingency fee basis (mean: 74.5% of business; median: 90.0%), and in this sense he has chosen to specialize in this particular legal market. Most likely, he works in a local geographic market (58.6% of lawyers) rather than a regional (25.9%) or a statewide/national market (15.5%). This means that most of his cases come from the county in which his principle office is located or an adjacent county. And, he has only one office location (71.7%). The “average” lawyer’s practice is a modest one. He has fewer than 70 open cases (mean: 66.1 open cases; median 30). His firm receives fewer than 40 calls per month from potential contingency fee clients (mean: 36.2; median: 15). Personally, he receives fewer than 20 such calls per month (mean: 18.9; median: 10). Only a minority of those calls result in a signed contingency fee contract. For the firm it is 25% or less (mean: 25.4%; median: 15%); and for him personally, it is fewer than it is 30% or less (mean: 26.7%; median: 20%). [compare to Kritzer in fn]. The average value of his contingency fee cases is just $37,000. Despite the attention given to television and other forms of aggressive advertising, the largest percentage of the “average” lawyer’s cases come through referrals from former clients (28.9%).14 The next largest percentages come from lawyer referrals – from non-plaintiffs’ lawyers (19.1%) and from other plaintiffs’ lawyers (18.3%). Only 12.3% of his cases come from For all Texas lawyers in private practice, 36% are solo practitioners; 61% are solos or work in firms of two to five attorneys; and 17% work in firms of more than 60 attorneys (Spanhel and Cannon, 1999). Also – something from Kritzer on Wisconsin or Van Hoy on Indiana. There is a whole other category of activities used to get clients that our survey, for obvious reasons, could shed no light on – activities of questionable legality like the use of “runners.” A lawyer interviewed talked of two kinds of runners used in Texas. First, “there’s an independent who sells his services to whoever the highest bidder is ... that you’ll see in Houston and maybe in the Dallas area ... they’re just sitting there ... listening to a police scanner or watching the news and then they’re going out and getting the information and they’re calling.” Second, “I think you have the individual who has an investigator on board and the investigator is a runner. He’s going out and going to the accident scene or he’s getting the accident list and is making the call.” He continued, “I know a couple in East Texas that had ex-DPS officers that they hired and had in-roads and they were first on the scene of the accident [They] would go and have photographs from the DPS and go to the house and say, ‘I learned of this accident and we want to represent you.’ So, I mean, its was a very well-organized type of process.” In addition, he said that this firm also had runners in the African-American community: “They had in the Black community in Orange several people that were just trucking them. They paid $150 a case.” 14 13 9 all forms of advertising combined, with the Yellow Pages being the most important (8.4%). Television accounts for only 2.6% of his cases.15 Even though advertising does not bring most of his client to him, the “average” lawyer does some advertising (70.0%).16 Most likely, he will use the Yellow Pages (54.4%) or the Internet (22.0%), rather than television (10.2%) or other forms of advertising.17 The largest percentage of the “average” lawyer’s caseload is made up by automobile accident cases (33.3%).18 Only four other areas accounted for 5% or more of his docket: medical malpractice (10.9%), commercial cases (7.1%), products liability (6.6%), and domestic relations cases (5.0%).19 If he claims any particular specialization within the broad area of a plaintiffs’ practice, it is most likely in automobile accident cases (35.8%). The next most likely specialization is litigation (24.8%), followed by medical malpractice (22.1%) and products liability (19.7%). Despite his claim to some specialization, he is not likely to be certified by the State Bar of Texas (34.7% certified). If he is certified, it is in personal injury trial law (25.4%) or civil trial law (10.9%). In short, the “average” lawyer is a plaintiffs’ practice generalist. The “average” lawyer takes very few of his cases all the way to a court verdict (8.4%). The largest percentage of his cases are settled after filing but before trial (35.3%). Nearly 30% Of course, for some plaintiffs’ lawyers television advertising is the primary source of business and for the obvious reason these are likely to be among the lawyers we with whom we will be most familiar. Those who get most of their business from television are mass advertisers with local or regional practices. They are high volume/low case value practices (or “mills”), and the costs of saturation advertising and the staff needed to handle a high volume of calls keeps the number of such practices low. The heaviest television advertisers will spend upwards of $1million a year or more. For example, Jim Aldler of Houston, probably the most widely-known television advertiser in Texas at the time of the survey, spent almost $1.4 million in the Dallas/Fort Worth television market for the period July 1998 through June 1999, and $3.3 million in the Houston market for the period January 1997 through June 1999 (and another $130,000 in San Antonio for calender year 1998) cite Competitive Media Reporting, 1999a, 1999b, 1999c. There remains a minority who stubbornly refuse to advertise because they believe it is unprofessional – provide quote as an example. Still, those who do advertise often complain that it does not pay for itself. In the survey we asked those who use the Yellow Pages if the advertisement had paid for itself over the previous 12 months. Almost one-half – 48.3% – said no. The problem is not the failure to generate calls, it is the quality of the calls and the cost of screening them. As one lawyer said, “advertising brings in a few good cases [and] a lot of junk cases.” 17 18 16 15 Compare to Kritzer Almost all plaintiffs’ lawyers do at least some auto – 80.2% of the respondents reported handling least some at the time of the survey. Most lawyers do not handle these cases at all: 45.5% handled at least some medical malpractice; 31.4% handled some commercial; 40.9% handled some products liability; and 22.0% handled some domestic. In fact, the only type of case that at least 50% of the lawyers say they handle at least some of is auto. This means that most lawyers, in reality, do not handle such big ticket cases like malpractice or products liability. Some types of cases are handled by only a small handful of specialists. For instance, only 3.9% said they handled any aviation disaster cases and only 13.7% said they any handle mass tort cases. 19 10 (29.7%) are closed through mediation and 26.3% are settled before filing without mediation. His net income from his legal practice is between $125,000 and $149,999 per year. 2. The Bread & Butter1 Lawyer This is the lawyer at the bottom of the plaintiffs’ bar hierarchy. The average value of his contingency fee cases is less than $15,000. This lawyer is likely to be a solo practitioner (55.8%) or works in a small firm of 2 to 5 lawyers (35.5%). As one said, “I’ve got one lawyer who works for me. I’ve got two secretaries.” His practice, too, to is almost exclusively plaintiffs’ work done on a contingency fee basis (mean: 70.0% of business; median: 85%), but slightly less than the “average” lawyer. He works almost exclusively in a local geographic market (81.6% of lawyers) rather than a regional (16.2%) or a statewide/national market (2.2%). This means that almost all of his cases come from the county in which his principle office is located or an adjacent county. And, he has only one office location (72.7%). This lawyer is more likely than the “average” lawyer to be a solo practitioner and to work in a local market. This lawyer has more open cases than the “average” lawyer. He may have more than 100 open cases (mean: 116.2 open cases; median 45). His firm receives fewer than 40 calls per month from potential contingency fee clients (mean: 37.8; median: 18), similar to the “average” lawyer overall. Personally, he receives just over 20 such calls per month (mean: 21.9; median: 12.5), slightly more than “average” lawyer. While only a minority of those calls result in a signed contingency fee contract, the figures are higher than those of the “average” lawyer. For the firm it is 35.1% (median: 30%); and for him personally, it is the same (mean: 35.1%; median: 30%). The average value of his contingency fee cases is less than $10,000 (mean: $6,828; median: $7,250). The BB1 lawyer, compared to the “average” lawyer, has a larger practice of smaller cases; and while he does not get many more calls, he does sign a higher percentage of those calls to a contingency fee contract. The largest percentage of the BB1 lawyer’s cases come through referrals from former clients (36.4%), more than the “average” lawyer. As a San Antonio solo practitioner described it, “you represented somebody, did them a good job and their brother or sister, friend at church has an accident, and they say, my lawyer did a good job, call him.” Unlike the “average” lawyer, the next largest percentage of cases comes from advertising (20.0%), especially the Yellow Pages (14.8%). Lawyer referrals are less important – from non-plaintiffs’ lawyers (10.0%) and from other plaintiffs’ lawyers (10.5%). The BB1 lawyer advertises (72.5%). Most likely, he will use the Yellow Pages (60.9%) or the Internet (18.1%), followed by television (13.0%) and newspapers (12.3%). Just over one-half of the BB1 lawyer’s caseload is made up of automobile accident cases (51.2%), far more than the percentage for the “average” lawyer.20 As one such lawyer described his practice, “we do anything from car wrecks to on the job injuries as long as its not workers’ 20 Only 7.4% of these lawyers said they handle no auto. 11 compensation — we exclude that ... Probably on a percentage basis, 70% of my cases are car wreck ... It can be as small as $2,000.” His caseload is quite different than the “average” lawyer’s. The only other area accounting for 5% or more of his docket is domestic relations (7.7%). The next highest percentages are for criminal cases (4.8%) and premises liability (4.5%). Medical malpractice (3.2%), commercial cases (3.2%), products liability (1.8%) and far less important for the group 1 lawyer.21The only type of case that at least 50% of these lawyers say they handle at least some of is premises liability (55.9%). The BB1 lawyer handles simple, mundane issues. A number said they primarily handle “vanilla car wreck cases,” meaning low value cases without serious injury or death that will not go to court. If he claims any particular specialization within the broad area of a plaintiffs’ practice, it is most likely in automobile accident cases (47.8%), more so than the “average” lawyer overall. The next most likely specialization is litigation (21.0%), followed by premises liability (18.1)% and medical malpractice (14.5%). He is less likely to be certified by the State Bar of Texas than the “average” lawyer (23.9% v. 34.7%). If he is certified, it is in personal injury trial law (18.1%) or civil trial law (9.4%). In short, the BB1 lawyer is a plaintiffs’ practice generalist handling relatively simple, mundane cases in somewhat higher volume than the “average” lawyer. The BB1 lawyer takes very few of his cases all the way to a court verdict (6.7%). Consistent with the nature of his caseload, just over one-half of his cases are settled before filing (51.2%). The next largest percent are settled after filing, but before trial (22.4%). Mediation is much less important (18.0%). His net income from his legal practice is $100,000 to $124,999. 3. The BB2 Lawyer This lawyer is also in the lower echelons of the plaintiffs’ bar hierarchy. The average value of his contingency fee cases is between $15,000 and $37,000. The BB2 lawyer is likely to be a solo practitioner (55.8%) or to work in a small firm of 2 to 5 lawyers (40.9%). His practice, too, to is almost exclusively plaintiffs’ work done on a contingency fee basis (mean: 72.5% of business; median: 80%); and like the BB1 lawyer, this is slightly less than the “average” lawyer overall. He works primarily in a local geographic market (68.9% of lawyers) rather than a regional (27.3%) or a statewide/national market (3.8%), but he is not as local as BB1 lawyer. Like the BB1 lawyer, he has only one office location (74.0%). This lawyer, too, is more likely than the “average” lawyer to be a solo practitioner and to work in a local market. This lawyer’s has fewer open cases than the BB1 lawyer, and a number closer to that of the “average” lawyer. He may have as many as 50 open cases (mean: 49.5 open cases; median 35). His firm receives fewer than 40 calls per month from potential contingency fee clients (mean: 35.3; median: 20), similar to the “average” lawyer overall. Personally, he receives fewer Most BB1 lawyers do not handle these cases at all: 65.4% handle no medical malpractice; 80.1% handle no commercial; and 69.9% handle no products liability. 21 12 than 20 such calls per month (mean: 18.3; median: 10), the same as the “average” lawyer overall. Only a minority of those calls result in a signed contingency fee contract, the rate being about the same as that for the “average” lawyer overall. For the firm it is 26.7% (median: 15%); and for him personally, it is 18.3% (median: 20%). The average value of his contingency fee cases is in the low $20,000s (mean: $22,863; median: $25,000). In terms of his practice, the BB2 lawyer is more similar to the “average” lawyer than the BB1 lawyer (with the exception of case value). The largest percentage of the BB2 lawyer’s cases come through referrals from former clients (34.1%), more than the “average” lawyer overall and similar to the BB1 lawyer. Unlike the BB1 lawyer, however, the next largest percentage of cases comes from non-plaintiffs’ lawyer referrals (17.7%) followed by plaintiffs’ lawyer referrals (14.2%). This is a conscious strategy. A younger BB2 lawyer from Austin said, “my partner and I have established relationships with about eight or ten firms around town that regularly send us cases, and we have both made a bit of an effort to promote ourselves within the community and among lawyers.” Advertising comes next, accounting for 13.0% of the cases, with the Yellow Pages (9.3%) being the most important. Still, this lawyer, like the BB1 lawyer, advertises (71.2%). Most likely, he will use the Yellow Pages (56.8%) or the Internet (21.2%), followed by television (10.7%) and newspapers (10.1%). Again, the largest percentage of the BB1 lawyer’s caseload is made up by automobile accident cases (40.0%); more than the percentage for the “average” lawyer, but less than the BB1 lawyer.22 His caseload is different than that of the “average” lawyer, but not the same as the BB1 lawyer’s. The other areas accounting for 5% or more of his docket domestic relations (7.3%), medical malpractice (6.9%), employment cases (6.0%), premises liability (5.9%), and criminal (5.5%).23The only type of case that at least 50% of these lawyers say they handle at least some of is premises liability (51.5%). While the BB2 lawyer handles primarily simple, mundane issues, he is more likely to try handling more complex matters more than the BB1 lawyer. If the BB2 lawyer claims any particular specialization within the broad area of a plaintiffs’ practice, it is most likely in automobile accident cases (41.3%). The next most likely specialization is litigation (26.8%), followed by premises liability (21.0%), products liability (21.0%), and medical malpractice (20.3%). These are all slightly higher than the figures for the BB1 lawyer. He is not likely to be certified by the State Bar of Texas (39.4%). If he is certified, it is in personal injury trial law (33.6%) or civil trial law (8.8%). In short, the average BB2 lawyer is a plaintiffs’ practice generalist handling relatively simple, mundane cases; but he handles slightly more complex matters than the BB1 lawyer. The BB2 lawyer takes very few of his cases all the way to a court verdict (6.1%). Unlike 22 23 Only 8.8% of BB2 lawyers said they handle no auto. The BB2 lawyer is somewhat more likely than the BB1 lawyer to handle medical malpractice cases (53.7% do not handle compared to 65.4% for BB1), commercial cases (71.3% do not handle compared to 80.1% for BB1), and products cases (59.6% do not handle compared to 69.9% for BB1). 13 the BB1 lawyer, the majority of his cases are not concluded by a settlement before filing (31.6% before filing). The largest percent are settled after filing, but before trial (33.9%). Mediation is more important for the BB2 lawyer, at about the same rate as the “average” lawyer (29.1% BB2, 29.7% overall). The subtle differences between the BB1 lawyer and the BB2 lawyer do not translate into a higher net income. Like the BB1 lawyer, his net income from his legal practice is $100,000 to $124,999. 4. The HH1 Lawyer This lawyer is different, in some respects, than those in the lower echelons of the plaintiffs’ bar hierarchy. He is less likely to be a solo practitioner (32.8%), and more likely to work in a small firm of 2 to 5 lawyers (45.5%). His practice, too, to is almost exclusively plaintiffs’ work done on a contingency fee basis (mean: 73.3% of business; median: 90%). He is less likely to work primarily in a local geographic market (52.2% of lawyers) than the lower echelon lawyers (local: 81.6% and 68.9%, for BB1 and BB2 respectively), and more likely to work in a statewide or national market (16.4%) compared to BB1 and BB2 lawyers (statewide: 2.2% and 3.8%, respectively). However, he still is likely to have just one office location (69.5%). The HH1 lawyer’s practice is modest in size. He may have as many as 50 open cases, but probably fewer (mean: 48.6 open cases; median 25). His firm receives fewer than 40 calls per month from potential contingency fee clients (mean: 38.6; median: 20), similar to the “average” lawyer overall. Personally, he receives fewer than 20 such calls per month (mean: 18.5; median: 10), the same as the “average” lawyer overall. Only a minority of those calls result in a signed contingency fee contract, the rate being about the same as that for the “average” lawyer overall. For the firm it is 24.2% (median: 15%); and for him personally, it is 26.8% (median: 20%). The average value of his contingency fee cases is less than $80,000 (mean: $76,515 median: $71,000). The largest percentage of the HH1 lawyer’s cases come through referrals from former clients (26.2%). The next largest percentage of cases comes from plaintiffs’ lawyer referrals (21.5%) followed by non-plaintiffs’ lawyer referrals (20.7%). The HH1 lawyer gets a much larger percent of his cases from lawyer referrals generally than lawyers in the lower echelon of the hierarchy. He gets 42.2% from such referrals compared to 20.5% for BB1 and 31.9% for BB2. In fact, some of these referrals may come from those lawyers lower in the hierarchy. For instance, one HH1 lawyer said: There are plaintiffs’ lawyers that may not want to get into litigation. The gentleman who was just here talking to me is a friend from law school. He’ll take a case until he has to file suit on it. Once he files suit, he sends it to us. A lot of lawyers are like that. They don’t want that. They want to see if they can flip them with the insurance company and get them done ... if it involves anything more, they will get rid of them. We have a ton of referring lawyers just like that.24 24 This is reminiscent of the BB1 lawyer – just over one-half of his cases are settled before filing 51.2%. 14 On the other hand, the HH1 lawyer gets fewer cases from client referrals: 26.2% compared to 36.4% and 34.1% for groups 1 and 2 respectively. Advertising is less important, accounting for only 9.2% of cases, compared to 20.0% and 13.0% for BB1 and BB2, respectively. Among the different forms of advertising, the Yellow Pages (6.0%) were the most important. Still, this lawyer does advertise (65.7%). Most likely, he will use the Yellow Pages (50.7%) or the Internet (20.1%), followed by television (7.5%), mail to other lawyers (6.7%), mail to consumers (6.0%), and newspapers (6.0%). Again, the largest percentage of this lawyer’s caseload is made up by automobile accident cases (27.1%), but at a rate much lower than the BB1 and BB2 lawyers (51.2% and 40.%, respectively).25 The other areas accounting for 5% or more of his docket are medical malpractice (13.1%), products liability (8.8%), commercial (8.7%), employment cases (6.4%), and premises liability (5.0%). Compared to BB1 and BB2 lawyers, criminal (3.9%) and domestic relations cases (3.2%) are less important for the HH1 lawyer. A larger percentage of HH1 lawyers do not handle any of these cases compared to BB1 and BB2. For HH1 lawyers, 83.3% handle no criminal and 84.8% handle no domestic relations. In comparison, the percentages for BB1 are 77.2% not handling any criminal and 65.4% not handling domestic relations. For BB2, the percentages are 77.2% and 70.6%. The only other type of case that at least 50% of HH1 lawyers say they handle at least some of is medical malpractice (53.4%). The HH1 lawyer handles fewer simple, mundane issues and is more likely to handle more complex matters. If the HH1 lawyer claims any particular specialization within the broad area of a plaintiffs’ practice, it is most likely in automobile accident cases (37.3%) but at a rate lower than BB1 (47.8%) and BB2 lawyers (41.3%). The next most likely specialization is litigation (26.1%), followed by medical malpractice (23.9%), products liability (23.9%), premises liability (17.2%), and commercial (15.7%). He is not likely to be certified by the State Bar of Texas (34.1%). If he is certified, it is in personal injury trial law (25.8%) or civil trial law (9.1%). The HH1 lawyer takes very few of his cases all the way to a court verdict (8.5%), but slightly more than BB1 or BB2 lawyers (6.7 and 6.1%). Unlike the BB1 lawyer, the majority of his cases are not concluded by a settlement before filing (15.8% before filing). The largest percent are settled after filing, but before trial (41.3%). Mediation is more important for the HH1 lawyer (31.5%). The differences between the HH1 lawyer and the BB1 and BB2 lawyers do translate into a higher net income. His net income from his legal practice is between $125,000 and $149,999. 5. The HH2 Lawyer This lawyer is also different, in some key respects, than those in the lower echelons 25 18.2% of HH1 lawyers said they handle no auto. 15 of the plaintiffs’ bar hierarchy. The HH2 lawyer is unlikely to be a solo practitioner (15.8%); rather, he is likely to work in a small firm of 2 to 5 lawyers (50.5%). His practice, too, to is almost exclusively plaintiffs’ work done on a contingency fee basis (mean: 82.0% of business; median: 95%), more so than lawyers in any of the other groups. He is unlikely to work primarily in a local geographic market (32.4% of lawyers) compared to the lower echelon BB1 and BB2 lawyers (local: 81.6% and 68.9%, respectively), and most likely to work in a statewide or national market (38.8%). One of these heavy hitters described his practice as “pretty well statewide ... in a two-week period I tried three cases. I tried a legal malpractice case for the plaintiff ... in Dallas; I tried a personal injury case in Amarillo involving two pick-ups that came together on a country road; and I tried an intentional infliction of mental distress case in Austin ... All these were big cases.” However, the HH2 lawyer still is likely to have just one office location (70.6%). The HH2 lawyer’s practice is modest in size. He may have as many as 50 open cases, but probably fewer (mean: 48.2 open cases; median 20). His firm receives fewer than 40 calls per month from potential contingency fee clients (mean: 33.6; median: 20). Personally, he receives fewer than 20 such calls per month (mean: 16.8; median: 8). Only a minority of those calls result in a signed contingency fee contract. or the firm it is 16.6%; median: 10%); and for him personally, it is 17.9% (median: 10%). The HH2 lawyer and his firm receive fewer calls than lawyers in the other groups and smaller percentages are signed to a contingency fee contract. The HH2 can do this because the average value of his contingency fee cases is far larger than the other groups (mean: $3.8 million; median: $750,000). Unlike lawyers in the other groups, the largest percentage of the HH2 lawyer’s cases come through referrals from other lawyers. Over one-half (55.3%) come from lawyer referrals, equally divided between other plaintiffs’ lawyers (27.5%) and non-plaintiffs’ lawyers (27.8%).26 He may invest heavily in cultivating lawyers referrals and marketing himself and his firm. Said one HH2 lawyer: Last year ... we spent about $80,000 on programs that were designed to touch our former clients – our referring lawyers – and make sure that we were, you know, they were sure that we wanted their business ... if my referring lawyers go away, I’m in trouble ... I’ll always have to be thinking about new referring lawyers ... that’s why we’re spending a lot of time, energy and money on them ... We have this year a new business development program in which each lawyer sat down with ... our consultant and said, okay, where am I most likely to be able to improve my business sources ... we’ve been working to tailor a new business development program around each lawyer [in the firm] and then a couple of programs around the partners, like we’re going to do a little golf tournament with some of tried and true referring lawyers. We’re mentioning them in our newsletter ... They For HH2 lawyers with highly specialized practices, almost all of their business may come from lawyer referrals. For instance, one Houston medical malpractice specialist said that “probably 90% of our cases are from other lawyers.” The lawyer quoted above about his three trials in two weeks said that “over 75% of my practice was and is referrals from other lawyers.” 26 16 really get stroked for sending us business.27 Referrals from former clients are far less important (18.6%) for the HH2 lawyer. And advertising is even less important, accounting for only 6.9% of cases, compared to 20.0%, 13.0%, and 9.2% for BB1, BB2, and HH1 lawyers, respectively. Among the different forms of advertising, the Yellow Pages (3.2%) were the most important. Still, this lawyer does advertise (71.2%). Most likely, he will use the Yellow Pages (48.9%), followed by the Internet (28.1%), mail to other lawyers (25.2%),28 and newspapers (11.5.0%). This lawyer’s use of mail to other lawyers far exceeds that of lawyers in the other three groups and reflects the HH2 lawyer’s heavier reliance on lawyer referrals for getting business. Unlike lawyers in the other three groups, the largest percentage of this lawyer’s caseload is not made up by automobile accident cases (14.7%). In fact, over 40% of HH2 lawyers handle no automobile cases (44.9%). The largest percentage of the HH2 lawyer’s caseload is made up of medical malpractice cases (20.7%). The other areas accounting for 5% or more of his docket, in addition to automobile and medical malpractice, are commercial (12.9%), products liability (11.5%), and mass torts (9.5%). Cases that are important for lawyers in the lower echelons of the hierarchy comprise only a small proportion of this lawyer’s business. Criminal and domestic relations are each less than 2% of his caseload. Premises liability accounts for only 3.8% and employment-related cases 2.6%. Over 90% handle no criminal (91.9%) and no domestic relations (91.2%).29 The HH2 lawyer, in short, handles very few simple, mundane issues, focusing instead on a smaller number of more complex and higher value cases. If the HH2 lawyer claims any particular specialization within the broad area of a plaintiffs’ practice, it is most likely in medical malpractice (31.3%) and not automobile. The next most likely specialization is litigation (26.9%); followed by products liability (26.1%); nursing home case (17.2%) and automobile (17.2%); commercial (16.4%); and mass torts (15.7%). While he too is not likely to be certified by the State Bar of Texas, the HH2 lawyer is the most likely of the four groups to be certified (40.1%). If he is certified, it is in personal injury trial law (24.8%) or civil trial law (16.8%). The HH2 lawyer takes few of his cases all the way to a court verdict (12.1%), but more This lawyer’s description of his firm’s plans for getting business is an excellent illustration of how different the practices of HH2 lawyer’s are from those of BB1 lawyers. A Dallas medical malpractice specialist sent his marketing brochure to every lawyer in private practice in Texas. A Houston medical malpractice specialist in Houston, more modestly, sent his brochure to every lawyer practicing in Houston to San Antonio and south. In comparison, the percentages for BB1 are 77.2% not handling any criminal and 65.4% not handling domestic relations. For BB2, the percentages are 77.2% and 70.6%. In contrast, only 58.8% of HH2 lawyers handle no commercial cases, compared to 80.1% for BB1 and 71.3% for BB2; and 76.5% of HH2 lawyers handle no mass torts compared to 92.6% for BB1 and 88.2% for BB2. 29 28 27 17 than any of the other three groups (6.7%, 6.1%, and 8.5%, respectively). Consistent with a docket made up of more serious, complex cases, few of his cases are concluded by a settlement before filing (7.2%). The largest percent are settled after filing, but before trial (43.3%) or through mediation (40.7%). The differences between the HH2 lawyer and those in the other three groups translate into a higher net income. His net income from his legal practice is between $150,000 and $199,999. As we move up the hierarchy, the geographic market in which a lawyer works broadens. How a lawyer gets his business changes, moving from word-of-mouth client referrals to lawyer referrals (and the use of marketing rather than advertising). The nature of business changes away from the simple, mundane and low-value cases to the more complex and higher value cases, and away from the mainstay of automobile cases to cases like medical malpractice, products liability and commercial matters. Both the lawyer and his firm receive fewer calls on a monthly basis and sign fewer to a contingency fee contract. The lawyers become choosier. And, they are more likely to take a case to trial. II. LAWYERS’ PERCEPTIONS OF CHANGES IN THE MARKET ENVIRONMENT The 1990s were a challenging time for plaintiffs’ lawyers in Texas and elsewhere.30 They faced a working environment that was changing in ways they believed made it more difficult for them to remain profitable. But plaintiffs’ lawyers have always worked in a precarious market. A number of factors are responsible for this: the legal environment; the geographic area in which a lawyer practices; the one-shot nature of their client base; the contingency fee system; and increasing competition for business. The first two are the most important, and are the ones on which we will focus. The legal environment defines something as an “injury” with potential remedies. The geographic environment – in varying ways and amounts – provides the raw material for those “injuries.” It also is the source of the jurors who will make decisions about those “injuries.”31 All lawyers’ practices are shaped by the rules, procedures and processes that define some area of law. For plaintiffs’ lawyers it is primarily tort law – the law on the books as well as the law in action. The practices of plaintiffs’ lawyers are especially sensitive to the state of the formal law. The law changes with some frequency and affects plaintiffs’ practices in a variety of interrelated ways (this is especially so with the many changes brought by tort reform in the past 25 years). Most basically, it creates, alters, or obliterates causes of action and causes of action, in turn, define substantive markets in which plaintiffs’ lawyers choose to work.32 Change in the law 30 31 32 Cite Gilbert, Ollanik and Wenner article in Trial (1997) Cite to Daniels and Martin, 2000 for a more detailed discussion of this issues. See Daniels and Martin, supra note x; Van Hoy, supra note y. 18 may provide new or enhanced opportunities for some plaintiffs’ lawyers, but it can also put others of out of business. As a part of defining causes of action, the law also defines the standards to use generally (e.g., the negligence system) or the standards to use with different causes of action (e.g., strict liability for products liability). The particulars of these standards make it easier or more difficult for plaintiffs to prevail (e.g., moving from contributory to comparative negligence). This is of great importance to plaintiffs’ lawyers because of their reliance on the contingency fee. The law sets the rules for the kinds of damages available, their amounts, and the processes for getting them (e.g., caps on non-economic damages or on punitive damages, etc.). The law defines the procedures to be used and the rules to be used (e.g., a requirement for pre-trial mediation or the rules for discovery), again which may make it easier or more difficult for plaintiffs. The contents of such rules will provide opportunities and limitations that will help shape the plaintiffs’ lawyers’ practices. As important in helping to shape the practices of plaintiffs’ lawyers is the law in action or the broader institutional environment in which plaintiffs’ lawyers work. Here we are talking about the processes, rules and going rates that define the ways in which most injury claims are handled. Few go to trial and those that result in a monetary payment usually do so through a negotiated settlement. Lawyers and insurance companies have developed their own informal processes for handling injury claims over the years with their own standards or “going rates” (which are usually tied to what juries decide in the few cases that do go to trial).33 Lawyers may build their practices around these informal processes and going rates for particular types of cases. For instance, a lawyer may have a high volume practice concentrating on lower value car wreck cases – a practice built on a particular set of informal processes for settling cases without trial (less risk and less expense) and particular understandings about how much and what kind of damages can be normally expected for certain situations (“pain and suffering” being x times demonstrated medical expenses). Changes in these informal processes and going rates can have a serious impact on lawyers’ practices. For instance, insurance companies may see that plaintiffs are winning fewer of the cases that go to trial or that juries are awarding less in those that do. As a result, the companies may take a much harder position in negotiating settlements or offer less money to plaintiffs. The practical effect of such a change is less money coming to the plaintiffs’ lawyer who relies almost exclusively on the contingency fee. A Dallas lawyer with a higher-volume practice told us, “two years ago, the average [settlement] per case was $1,100 more for the routine auto case. That’s pretty significant when you’re doing small cases to begin with.” In the 1990s, this practice area became even more precarious because of tort reform. This includes the formal legal changes made as well as the political and public relations campaigns waged by the reformers. Those campaigns did much to affect the broader institutional environment surrounding civil litigation.34 In this section we will examine Texas plaintiffs’ 33 34 Cite to Galanter, etc. See Daniels and Martin 19 lawyers perceptions of these changes and their consequences. In our survey, we asked lawyers whether each of a set of formal legal changes instituted in the 1990s affected their practices positively or negatively. As we would expect none of those changes had a generally positive effect on their practices. TABLE 4. Perceived Effects of Legal Changes on Lawyers’ Practices Positive 1991 Workers’ Comp Changes (n=534) Caps on Punitive Damages (n=535) Med Mal Requirement (n=530) DTPA Changes (n=529) Venue Changes (n=528) Joint and Several Changes (n=537) Frivolous Suit Sanctions (n=536) 4.9% 3.9% 6.6% 5.1% 4.2% 5.4% 6.3% No effect 27.4% 36.4% 49.6% 40.4% 45.8% 38.4% 82.3% Negative 66.9% 58.5% 41.7% 52.7% 50.0% 69.1% 11.4% However, not all of the changes had an especially strong negative effect. For instance, frivolous suit sanctions seem to have had no effect one way or the other. Stiffer filing requirements for medical malpractice suits were somewhat more likely to be perceived as having no effect than a negative effect. Changes in venue rules and in DTPA (deceptive trade practices) were more likely to be perceived as having a negative effect, by about one-half of respondents. The strongest negative effects were from joint and several liability changes, workers’ comp changes and caps on punitive damages. Most interesting are the differences in perceptions based on where a lawyer is situated in the hierarchy. Perhaps the easiest way to show this is to compare the two groups at either end of the structure – BB1 and HH2. One change – in workers’ compensation35 – was felt more strongly by BB1 lawyers; 75.0% responded that it had a negative effect (65.2% said a strong negative effect). In comparison, 48.9% of HH2 lawyers responded that it had a negative effect (46.0% said it no effect).36 Three changes – caps on punitives, venue changes and joint and several liability changes – were felt more strongly by HH2 lawyers. For caps on punitives, 68.3% of HH2 lawyers responded that this change had a negative effect, while 50.4% of BB1 lawyers did. In addition, an almost equal percentage for BB1 (47.3%) responded that the cap on punitives had no effect on their practices. For venue changes, 61.5% HH2 lawyers responded with an assessment of a negative effect, compared to 40.3% for BB1 lawyers. A little over one35 36 Explain briefly – Korioth, 1991 For some HH2 lawyers, the negative effect was on the referral network that brought to them third-party cases that emerged from workers’ compensation cases. [a quote to illustrate] 20 half of the BB1 respondents (57.4%) said there was no effect. Finally, 80.6% of HH2 lawyers said that joint and several liability changes a negative effect on their practices compared to 57.3% of BB1 lawyers. These differences make sense in light of the differences between the two groups of lawyers in terms of their business. Workers’ comp cases were a crucial part of the business of many lawyers situated at the lower end of the hierarchy. As we noted at the beginning of the article, the 1991 changes in workers comp had a major effect on some lawyers who lost twice when these cases began to disappear. Many plaintiffs’ lawyers handled at least some workers compensation, These cases provided a regular source of income that covered a small practice’s overhead; and perhaps more importantly, these cases created a client base that, in turn, produced referrals of new business. Word-of-mouth referrals from former clients are a major source of new business. Typical are the words of a Fort Worth attorney: The big difference was that I had at any given time 25 to 30 workers’ comp cases. That’s the main difference between my practice now and before. I never had hundreds of workers’ comp cases, but I’d have 25 or 35 of them. If you have that, several of those are going to be operated disc cases. After you work them up and get the doctor’s evaluation, most of those will settle for around $35,000 or $40,000. You make 25% [the pre-1991 fee] on it. You pay your office overhead and that funds the rest of your practice. That is the difference, I don’t have that now [and] referrals from the workers’ comp client base are kind of dried up. Caps on punitives, venue changes and joint and several liability changes were likely to be more important for lawyers handling higher-value, more complex cases.[in fn – note 3 changes in which there was not much difference] Venue changes disrupted established working networks and made it more difficult to file in counties that may have been friendlier to certain kinds of cases. A very successful litigator said the following when asked how tort reform would affect his practice: “because of the fact, at least in the railroad end of it, that we have a statewide practice, venue has been very important to us ... that was changed [in 1995] in such a way that its going to drastically affect my business. It takes me out of counties that I’ve practiced in now for 26 years.” This same lawyer talked about the caps placed on punitive damages. He first said that while the firm has won some punitive damage awards, collection was another matter. He then when to say that the affect of the change would be on the settlement process. You know, this is a curious thing and you are not going to believe it when I tell you, but in the history of this law firm I don’t think we have ever collected but about $200,000 in punitive damages ... I wouldn’t try to tell you we are the leading firm, we’re not at all [in reality, they are], but we have a very solid reputation. And that’s an astonishing fact. Now, the threat of punitive damages obviously helps settle a lot of cases. It’s like the threat of treble damages in an insurance code case -- very few people ever collect those 21 treble damages -- but the fact that you may get stuck for more than your policy limits, or whatever it is, is an incentive to, let’s try to get this case resolved. Another HH2 litigator said the same thing about the cap on punitive damages and about the changes in joint and several liability: In the days before the caps on primitive damages and the days when you still had new cases coming in that had joint and several liability on them, it let you be more intellectually creative on what you’re willing to do with the case and how you might find a remedy with a happy result .... Now, what happens is you’ve got to... analyze it in terms of the other side... they know that their liability is capped therefore they will make an offer ... you started getting a lot different, a lot different reaction from folks when you try to settle cases. You can’t get the value of a case you used to be able to get ...Historically, you would settle a case for it’s ... at least I would... settle a case for it’s actual dollar value because of the threat of punitive damages. Now you’re talking about settling it for a fraction of your actual dollar value. Because BB1 lawyers typically deal with low-value cases, they are unlikely to face this kind of problem. Interestingly, higher and more consistent percentages of negative effects came in response to more general questions about the legal environment in which plaintiffs’ lawyers work. Tort reform generally, the tort reform public relations campaigns, and the Texas Supreme Court are perceived as having the greatest negative influence on plaintiffs’ lawyers’ practices, much more so than any of the specific, formal changes covered in Table 4. Each of these matters affects the TABLE 5. Perceived Effects of Changes in Legal Environment on Lawyers’ Practices Positive Tort Reform Legislation Generally (n=538) Tort Reform Public Relations Campaigns (n=540) Local Jury Verdicts (n=537) Current Settlement Valuations by Insurers (n=540) Texas Supreme Court decisions 3.9% 3.9% 9.7% 4.8% 4.8% No Effect 5.8% 5.0% 15.1% 8.3% 2.4% Negative 90.5% 91.1% 75.2% 86.7% 92.8% everyday working environment, in the lawyers’ eyes, by affecting the jury or the jury pool. That working environment is shaped, to a large degree, by what the players believe is happening with juries. A series of Texas Supreme Court decisions have made it more difficult for plaintiffs to successfully bring suit for money damages, largely by taking key matters from the jury and 22 giving them to the judge at a time during which the judiciary was becoming more conservative and business-oriented (see Hardbarger, 1998). The very idea of tort reform, and especially the tort reform public relations campaigns that have touted it, are seen as especially pernicious because of their supposed direct effect on the jury pool in many counties. As one interviewed lawyer characterized it, “they’ve done a great job of poisoning the jury pool and creating massive misinformation.” Again, there are some differences in perception of negative effects depending on where in the hierarchy a lawyer is situated. But, these are differences in degree. Generally speaking, all plaintiffs’ lawyers share a strong sense of negative reaction to these environment-affecting matters. For jury verdicts, the percentage saying the negative effect was higher BB1 lawyers (86.3%) as compared to HH2 (65.9%). The percentage saying negative was also higher for BB1 in terms of unsure case valuations (91.0% v. 79.9%). These differences are also most likely the result of differences in business between the two groups – in particular, the heavy reliance on auto cases by BB1 lawyers. Because of their frequency, these claims tend to be settled according to well understood “going rates” tied to what a jury would probably do. For the three items with the highest overall percentage of negative effect – tort reform generally, the public relations campaigns and the Texas Supreme Court – the difference between these two groups for percent negative was not as much as 5 percentage points. In other words, perceptions of the effects of these general changes in the legal environment seem to transcend one’s place in the hierarchy. This connection between the public relations campaigns and juries is crucial for understanding plaintiffs’ lawyers’ perceptions of changes in their working environment and ultimately their responses to those changes. Their logic runs roughly as follows: Interest groups pushing for tort reform have for many years engaged in an aggressive public relations campaign to gain support for their cause and to demonize plaintiffs’ lawyers (their primary opponents) as well as their clients. The jury pool – people who are potential jurors in civil cases – is one target for these campaigns. The purpose is to influence what they would do once on a jury. The campaign has been successful in effecting the jury pool and juries have become more prodefense, more anti-plaintiff, and more anti-plaintiff lawyer.37 As a result, insurance companies have toughened their stance in the settlement process that disposes of the vast majority of cases. This means that insurance companies are less willing to settle or settle on terms favorable to the plaintiff and more willing to litigate. This means that the process is riskier, takes more time, and costs more money. In short, the “going rates” have changed. As a result, some plaintiffs’ lawyers working on a contingency fee basis are making far less money (see Calve, 1996; Daniels and Martin, 2000; Daniels and Martin, 2001). This logic is illustrated quite graphically in the comments of a Houston plaintiffs’ lawyer: Some lawyers even argue that people are less willing to bring lawsuits for damages. In talking about the public relations campaigns a Dallas lawyer said: “I think the real problem we encounter ... People come in to me and they are almost abjectly apologetic ... if they have to sue somebody, its like admitting that they’ve sexually abused their children. They are embarrassed about it.” Of course, there is a subtantial literautre that suggests the reulctance to sue may have little to do with the tort reform pubilc relations campaigns. Cites – RAND, Engel, etc. 37 23 The biggest problem I’ve seen is the effect on juries. Tort reform, you can call it a legislative agenda ... and you can look at it from a statutory standpoint ... But what I see as the most severe impact is right over there, when you go to pick a jury. And juries have gotten mean, real mean. They’ve been convinced that everything in their lives, from heart attacks to hemorrhoids, is because of a system out of control. And when you have a tort reform advocate on the jury panel and you’re asking questions, all you have to do is listen to the phraseology. Its all the same: too many frivolous lawsuits, outrageous jury awards, greedy trial lawyers. The guy is repeating the mantra. A San Antonio plaintiffs’ lawyer makes the direct connection between the public relations campaigns and jury verdicts. There’s an organization called Texans Against Lawsuit Abuse which has been very, very pro-active in regard to attacking the tort system. They have done a very effective job in doing that ... Many jurors have just bought the propaganda put out by the insurance industry that the cost of all these verdicts is driving jobs to Mexico and Taiwan. You know, you’re job is next, so you better do something about it. That’s the subtle message ... But right now, the climate is such, at least in this community, that jurors are not enamored with personal injury plaintiffs or personal injury lawyers. So verdicts are low. And a Fort Worth insurance defense lawyer we interviewed provides the link to insurance company behavior in the settlement process. The insurance companies that hire his firm “say we ain’t payin’ nothing ... Right now they’re real tight with money ... because juries are real tight right now.”38 On the other side, this can also be seen in the remarks of a Houston plaintiffs’ lawyer regarding the tougher stance by insurance companies: “the insurance companies will say, let me show you these Blue Sheets [the local jury verdict reporter] and what they show.” As these examples indicate, changes in jury verdicts – real or perceived – reverberate throughout the civil litigation process because they help set the “going rate” for settling claims.39 In light of such perceptions, we asked a series of more specific questions about jury behavior over the five years prior to the survey. In discussing the responses, we will be limited to the 474 lawyers (85.9% of the total respondents) who said they were in practice as plaintiffs’ lawyers in the five years prior to the survey. TABLE 6 Perceptions of Changes in Jury Behavior for Five Years Prior to Survey 38 He, too, thinks the public relations campaigns have effected jurors, he calls the campaigns his “silent helper.” There is at least some evidence that the perceptions about juries may have some validity for auto cases and non-economic damages. See Daniels and Martin, 2000. 39 24 (n=460) More Liability: Likely for Plaintiff Economic Damages: Likely to Award Non-Economic Damages: Likely to Award 1.5% 5.0% 1.3% Less 85.7% 72.4% 91.5% Same 12.0% 22.0% 6.3% None 0.9% 0.7% 0.9% Most said that juries are less likely to decide for the plaintiff on liability. Most said juries are less likely to award economic damages. And most said juries are less likely to award noneconomic damages. Changes in non-economic damages are particularly important for the lawyer handling small to modest cases (BB1 and BB2). As one BB1 lawyer summarized the situation: I mean, when I look at these jury verdict reports, and I see that a jury found the defendant was in a car wreck – 100% negligent, the defendant ran a stop sign and hurt somebody, and they award $6,742 in property damages to the plaintiff and they award $1,192.50 in medical bills, zero pain and suffering, zero metal anguish, zero disability, zero physical impairment, you know, whatever. I look at that like, good God, what have we come to? ... They didn’t give a shit, you know. There are people on juries who say, “I couldn’t award anything for pain and mental anguish ... So, that’s the biggest problem I see, its just in attitudes. The problem for him is that non-economic damages are where he is likely to cover his fee; cover out-of-pocket expenses; and earn whatever profit there will be. He faces the prospect of taking less money for himself or seeing his client with less money to pay bills, etc. For a BB1 lawyer, the first option is not an attractive one. Such lawyers are loath to cut the money going to the client in order to enhance their own financial gain. This is because of the damage it would do to their word-of-mouth client referrals, and they rely heavily on such referrals for new business. Of course, lower the fee and/or not fully covering expenses also has a cost. As one BB1 lawyer said, “it takes away money that you would normally have to finance other cases.”40 We also asked, more specifically, if in the lawyer’s experience juries are now making lower awards than five years earlier in cases with comparable injuries. Of the 462 responding to this question, 90.5% said juries are making lower awards (BB1, 94.6% and HH2, 88.5%). More skeptical and stingier juries lead to additional changes in the institutional environment, especially the behavior of insurers. As shown in Table 5, the vast majority of respondents (86.7%) said that current settlement valuations by insurers are having a negative The BB1 and HH2 responses: on liability, both said less likely, 87.5% and 83.2%, respectively; for economic damages, both said less, but the percentage was higher for BB1 – 87.5%, than HH2 – 61.9%; and for noneconomic damages, both said less, BB1 – 92.9%, HH2 – 90.3%] 40 25 effect on their practices. All the participants in the civil litigation process — plaintiffs’ lawyers, defense lawyers and insurance companies — look to jury verdicts to set the going rates used to settle the vast majority of matters that do not go all the way to a trial.41 If they believe juries are becoming more pro-defense, insurers will adjust their approach to settlement. They will toughen their stance in the settlement process, and plaintiffs’ lawyers believe this is indeed what has happened. We pursued this perception of altered insurer behavior by asking lawyers about pre-trial settlement values; about costs of bringing a typical case to conclusion; and about the time required to bring a typical case to conclusion – all compared to five years prior to the survey. Table 7 summarizes the findings and shows that most respondents believe that settlement values have decreased and that costs have increased. A smaller majority said that the time required to conclude a case has increased. Additionally, with regard to settlement values, we asked if the multiplier used by insurers to settle cases (e.g., X times specials — medical costs, etc.) has changed compared to five years ago. This is a key indicator because a lower multiplier would mean a lower value for the same level of damages. The current mean multiplier, according to the 408 lawyers responding to this question, is 1.7 times specials (median=1.7). Five years ago the mean multiplier was 3.3 times specials (median=3.0).42 This idea is usually associated with the work of Marc Galanter and what he calls the “radiating effects of courts.” He argues that even though jury verdicts resolve only a small proportion of all civil disputes, they have a symbolic value and impact that extends well beyond their frequency. They transmit signals about cases that contribute “a background of norms and procedures against which negotiations and regulation in both private and governmental settings takes place. This contribution includes, but is not exhausted by, communication to prospective litigants of what might transpire if one of them sought a judicial resolution. Courts communicate not only the rules that would govern adjudication of the dispute, but also possible remedies and estimates of the difficulty, certainty, and costs of securing particular outcomes.” See Marc Galanter, “The Radiating Effects of Courts,” in Empirical Theories About Courts, Keith Boyum and Lynn Mather, eds. (1983): 121. Also see Galanter, “Jury Shadows: Reflections on the Civil Jury and the Litigation Explosion,” paper presented at the 1986 Warren Conference on Advocacy in the United States. For a discussion of jury verdicts and “going rates” see Daniels and Martin, Civil Juries and the Politics of Reform, 62-68 (1995). In terms of value, both BB1 and HH2 said it decreased, but the percentage for BB1 lawyers was higher: decreased: 92.9% v. 73.3%. This may well reflect the differences in business and the BB1 lawyer’s heavy reliance on auto cases. In terms of cost, both said it increased, but the percentage was a little higher for HH2 lawyers: 93.0% v. 83.7%. Again, this may reflect differences in business and the HH2 lawyer’s docket of more complex cases that cost more to prepare. In terms of time, both said time increased: BB1 59.3% and HH2 62.8%. Interestingly, for the multiplier the figures are identical at a mean of 1.7 now and a mean of 3.2 or 3.3 five years ago. 42 41 26 Table 7 Lawyer Perceptions of Shifts in Insurer Behavior Increased About the Same Pre-Trial Settlement Value (n=465) Cost for Typical Case (n=460) Time for Typical Case (n=465) 9.2% 87.8% 60.2% 6.5% 9.6% 28.0% Decreased 84.3% 2.6% 11.4% At least in Texas, then, the perception among plaintiffs’ lawyers is that the legal environment in which they work has been changing in ways that threaten their ability to prosper, or in some cases to even survive – especially the lawyers in the lower echelons of the hierarchy. This is their “common sense” view, and they work everyday on the basis of this “common sense.” In the next section we will examine how what is happening with their practices in this changing, precarious market and their reactions. III. THE EFFECTS ON LAWYERS’ PRACTICES Whether as a result of tort reform or not, it appears that plaintiffs’ market may be contracting in terms of the demand for their services and their willingness to supply services.43 Perhaps there are fewer injuries and deaths because of accidents. The total number of injuries and deaths due to accidents is hard to gauge, but at least for one of the mainstays of a plaintiffs’ practice – injuries and deaths because of auto accidents – this does not appear to be the case.44 Although we have no data on the claim, as noted earlier, some plaintiffs’ lawyers say that people are more reluctant to even contact a lawyer because of the tort reform public relations campaigns.45 Perhaps lawyers’ practices are changing – by choice or not. In our survey we asked lawyers who were in practice as plaintiffs’ lawyers for at least five years (N=474) a One indicator is that filings for tort cases in district and county courts combined fell in Texas during the second half of the 1990s, both in terms of the rate of filings per 1000 population and the raw number of filings. And is the decline in the raw filings that is most suprising. Texas’ population continued to increase throughout the 1990s, and there could be a decline in the rate of tort filings if the population increased faster than filings. But, we would probably expect the raw number of filings to continue to increase. It did not and the decrease occurred in both auto torts and non-auto torts, the two categories used for reporting purposes by the Court Administrator’s Office (get correct title). The number of tort filings increased each year from 1985 (the first year for which complete figures for both levels of trial courts are available) through 1987. Filings dropped in 1988 and 1989 (less than 10%), and then began increasing again in 1990, reaching a peak of 65,262 in 1995, an increase of 41.3% from 1989 to 1995 (rate per 1000 population increased 26.6%). Starting in 1996, the number of filings began steadily decreasing to 49,346 in 2000 – a decrease of 24.4% (the rate decreased 31.7%). Give basics on Texas auto accident data for 1990s – the number of injuries and deaths because of auto accidents not has not declined -- data from Texas accident reports. 45 44 43 Refer back to quote from Dallas lawyer 27 number of questions about changes in their practices. Specifically, we asked about what was happening to their practices in the later 1990s and what they were doing in response. To start, we asked what percentage of their caseload was plaintiffs’ contingency fee at the time of the survey and what the percentage was five years earlier. For the 474 respondents, the mean percentage for the two time declined somewhat – from 80.1% to 74.2%, but the median remained unchanged at 90.0%. A more pertinent question is how many lawyers have a higher percentage of plaintiffs’ contingency fee work currently than five years earlier. Most lawyers are at about the same percentage or a lower one in terms of their own caseload. Only 15.8% have a higher percentage of their business in plaintiffs’ work now, while 38.6% have a lower percentage and 45.5% are at about the same percentage. The picture was similar when we asked about the percentage of the firm’s business made up by plaintiffs’ work.46 Most firms are at about the same percentage or a lower one. Only 18.1% had a higher percentage of plaintiffs’ work; 37.9% had a lower one; and 44.0% were about the same. In short, while the respondents remained plaintiffs’ specialists, to the extent there was any movement it was away from this kind of work. Both BB1 lawyers and HH2 lawyers remained plaintiffs’ specialists. But, a larger percentage of BB1 lawyers (46.6%) are handling less plaintiffs’ work than are HH2 lawyers (23.3%). HH2 firms are handling about the same percentage of plaintiffs’ work currently (mean, 79.3%; median, 95.0%) as they were earlier (mean, 78.5%; median 95.0%). The largest percentage of HH2 firms (51.8%) handle about the same percentage of plaintiffs’ as before. BB1 firms are handling about the same percentage currently (mean, 77.9%; median, 80.0%) as before (mean. 77.9%; median, 90.0%). Unlike the firms at the higher end, however, the largest percentage of BB1 firms (50.8%) are handling less plaintiffs’ work and only 18.7% are handling more. Evidence of contraction in the plaintiffs’ markets is found in changes in the numbers of calls received per month and the percentage signed to a contingency fee contract. Survey respondents reported that they were receiving fewer calls from potential clients at the time of the survey compared to five years earlier. This was the case in terms of calls for the firm as a whole or for the lawyer individually. In terms of firms, an average of 33.9 calls per month were received at the time of the survey (median, 15.0), compared to an average of 46.8 five years earlier (median, 25.0). The largest percentage of firms – 60.9% – were receiving fewer calls, and only 22.1% were receiving more. Calls for the lawyer individually also declined. At the time of the survey, lawyers individually were receiving an average of 18.0 calls per month (median, 10.0). Five years before the average was 27.8 calls (median, 18.0). The largest percent of lawyers – 60.4% – were receiving fewer calls, and only 18.5% were receiving more.47 With fewer calls coming in, we might expect that both firms and lawyers individually 46 47 The earlier mean was 75.9% and the recent mean was 71.6%, and the medians were 90.0% and 85.0%. Do simple significance test on the differences 28 would be taking a larger percentage of those calls to maintain the same level of business – in other words, they would somewhat less choosy. In fact, just the opposite is the case. Firms are signing-up a smaller percentage of calls – the mean is 25.9% of calls (median, 15.5) compared to 35.9% five years earlier (median, 30.0%). The largest percentage of firms – 53.6% – were signing-up a smaller percentage of calls, and only 8.9% were signing-up a larger percentage. Individual lawyers are signing-up a smaller percentage too – an average of 27.2% of calls (median, 20.0%) compared to an average of 36.4% before (median, 30.0%). The largest percentage of lawyers – 50.7% – are signing-up a smaller percentage of calls, and only 9.1% are signing-up a larger percentage.48 A smaller percentage of calls are being signed-up, largely as a response to the changing environment in which these lawyers work. Many plaintiffs’ lawyers said they need to be more careful in the current environment. As one simply put it, “We’re getting increasingly selective because the process of taking a case to court is getting enormously expensive ... I front the costs and if we lose, I eat the costs.” Of course, if a lawyer is not handling more valuable cases, this can be problematic for his financial survival. We might expect, then, a greater willingness to take more lucrative cases even if they involve more risk. In our survey, we asked lawyers if they would take a medical malpractice case involving severe brain damage to a newborn resulting from alleged negligence by the attending physician or whether they refer the case to someone else. At the time of the survey, 46.8% of respondents said they would take the case, and 45.6% said they would have taken it five years earlier. The risk, cost and complexity of the case would explain why a larger percentage of lawyers would not take it at either point in time. What is important is the percent of lawyers who changed their minds about taking it. Most lawyers did not. Of the 203 lawyers who said they would have taken the case five years ago, 75.4% did not change their minds and would still take the case now. Of the 242 lawyers who said they would have not taken the case five years ago, 77.7% still would not take it. If we look at the two different groups of lawyers at either end of the hierarchy, we will find that BB1 lawyers are generally unlikely to take the medical malpractice case and the HH2 are more likely. Still, the question is whether a larger percentage of BB1 lawyers would change their minds and take the case now. Most BB1 lawyers did not change their minds about taking the case; and if those that did changed to not taking the case now. In other words, they are more cautious and less willing to take the risk even in the face of fewer calls coming in and a smaller percentage being signed-up. Of the 30 BB1 lawyers who would have taken the case five years, 63.3% would still take the case and 36.7% said they would not take it now. Of the 80 BB1 lawyers who said they would not have taken the case five years ago, few changed their minds – 85.0% still would not take it now. For HH2 lawyers, 60.2% would take the case now and 57.5% would have taken it five years before. However, unlike the BB1 lawyers, if lawyers in this group changed their mind it would be to accept the risk and take the case now even if they would not have five years earlier. 48 Simple significance tests on the differences 29 Of the 61 HH2 lawyers who would have taken the case five years ago, 80.3% would still take it. Of the 46 HH2 lawyers who have not have taken it before, 67.4% still would not while 32.6% would take it now. In other words, the HH2 lawyers apparently see less reason to be as cautious in the current environment as their BB2 counterparts. While they too are getting fewer calls and signing-up a smaller percentage, they appear more willing to take the risk on a case with a larger potential return. We also asked lawyers if they would take a simple car-wreck case that involved only soft tissue injuries worth $3,000 and minimal property damage if the liability appeared to run to another party who was adequately insured. In particular, we are interested in whether BB1 are lawyers less likely to take the kind of “bread and butter” case their practices have been built on. The remarks of an Austin lawyer reveal the importance of such cases, “the kinds of cases I have, the ‘bread and butter,’ so to speak, day-in day-out cases are auto cases. They pay the bills and carry me between big cases.” Similarly, a San Antonio lawyer said, “auto basically covers the overhead ... keeps the salaries paid and that sot of thing.” Yet, in the current environment, these kinds of cases are very problematic as illustrated by the following comments of a San Antonio BB1 lawyer: Low impact, soft tissue cases, we’re very selective with because the insurance companies are not paying for those cases as well as juries are not giving money for those cases ... in today’s climate, if someone goes in with that type of case, they’re automatically cast out as a person that’s only there for the money, regardless of the injury ... there’s a very good chance that you’re just not going to be able to achieve your full fee as per the contract. And “today’s climate,” of course, is the result of the public relations campaigns and their affect on the jury pool. To provide some context, at the time of the survey 40.8% of all respondents would take this case, while 75.2% would have taken it five years earlier. A significant drop. Of the 339 lawyers who said they would have taken the case five years ago, 48.4% changed their minds and said they would not take the case now. Only 8.8% of the 103 lawyers who would not have taken the case five years ago said they would take it today. Five years prior to the survey, almost all BB1 lawyers would have taken the case – 93.9%. At the time of the survey, this was down to 64.9% of BB1 lawyers. Most of the 105 BB1 lawyers who said they would have taken the case five years ago changed their minds and would not take the case now – 66.7%.49 We might assume that the explanation is something close to what was said by the San Antonio lawyer quoted above. But if “bread and butter” auto cases become problematic, these lawyers are in trouble. As an Austin lawyer said, “If I didn’t have car wrecks ... I’m out of here!” Fewer calls, a smaller percentage of calls signed-up, and less willingness to take “bread and butter” cases makes financial survival much harder. Few BB1 lawyers (only 7) said they would not have taken the case five years ago, and only 2 of them changed their minds and said they would take it now. 49 30 We would not expect most HH2 lawyers to be interested in the “bread and butter” car wreck case, especially in the current environment. Few of them would take the case today – just 18.4%. However, almost one-half would have taken it five years ago – 47.3%. If anyone changed his mind about the case, it would be to not take the case today. Of the HH2 60 lawyers who would not have taken the case five years ago, only one changed his mind and said he would take it now. Most of the 53 lawyers who would have taken the case before changed their minds and would not take the case today (62.3%). Of course, passing-up such cases is not likely to make much difference, if any, for the HH2 lawyer’s fortunes. Instead, he appears more willing to take the potentially lucrative medical malpractice case. To pursue the reluctance to take a simple car wreck case, we asked lawyers whether they would take the case or not if particular types of clients were involved. We asked if they would such a case if the client was unemployed; if the client has a criminal record; or if the client had been a personal injury plaintiff in the past. The idea is that not only have some kinds of cases become problematic in the current working environment, but so also have certain kinds of plaintiffs. As one Houston lawyer explained his approach to screening clients: We look for a client with no prior problems. It makes a good impression ... those are the types of cases we’ve gone there, tried, got verdicts. Because we found that people [jurors] – that as long as you don’t have somebody up there that has a lot of prior claims, and makes a good impression, is a working person – they’ll award them some money ... What they [jurors] don’t want to see is Joe Blow who has a soft tissue back injury, but also had a soft tissue back injury two years ago, and fours years ago, and doesn’t work and is unemployed, has three kids and is on welfare. And those are lot of cases that get tried [and lose]. And again, in the view of many plaintiffs’ lawyers, the reason juries are more skeptical of the plaintiffs’ themselves is the tort reform public relations campaigns.50 We asked lawyers if they would take that simple car wreck case today if the client was unemployed. Most would not – 39.6%. Five years ago, just over one-half would have taken the client – 56.0%. More important is the question of how many lawyers changed their minds about such a client. Of the 205 lawyers who would not have taken the client five years ago, only 7.8% changed their minds and said they would take the person today. Of the 261 lawyers who would have taken the case before, just over one-third (35.0%) changed their minds and would not take the client today. For the potential client with a criminal record, only 27.2% of the lawyers would take that person today. Five years ago the percentage was 41.4%. Of the 272 lawyers who would not have taken this client five years ago, only 3.7% changed their minds to say they would the person today. Of the 191 lawyers who have taken this client in the past, 39.3% changed their Again, the empirical literature would agree with the skepticism, but not necessarily for the same reasons. Cite Hans book. 50 31 minds and would not take the person today. Finally, for the potential client who had been a personal injury plaintiff in the past, 36.6% of the lawyers would take the person today. Five years ago, 54.4% of the lawyers would have taken the client. Of the 210 who would not have taken this person in the past, only 7.6% of them changed their minds and said they would take the client today. Of the 249 who would taken the client before, 39.0% changed their minds and would not today. It would seem, then, that these kinds of clients were not seen as ideal in the past by many plaintiffs’ lawyers and they have become even more suspect in the current environment. BB1 lawyers are more likely to take each of the three potential clients today and in the past compared to all respondents, but often their clientele is comprised of some number of people who do not fit a middle-class stereotype. For the client who is unemployed – 62.6% of BB1 lawyers would take the person now. Five years, just over three-quarters would have (77.0%). Interestingly, of the 26 of the BB1 lawyers who would not have taken the client five years, 23.1% (6) changed their minds and would take the client today. Of the 87 who would have taken the client five years ago, 25.3% changed their minds and would not take the client today. For the potential client with a criminal record, 43.5% of BB1 lawyers would take the person today. Five years ago the percentage was 62.8%. Of the 42 BB1 lawyers who would not have taken the client five years ago, only 7.1% (3) would take the client today. Of the 71 who would have taken the client before, 35.2% changed their minds and would not take the client today. Finally, for the client who was a personal injury plaintiff in the past, 56.1% of BB1 lawyers would take this person today. Five years ago, 74.1% would have taken the person. Of the 28 lawyers who not have taken the client in the past, 17.9% (5) changed their minds and would take the person today. Of the 83 lawyers who have taken the case before, 31.3% changed their minds and would not take the client today. While the BB1 lawyer is somewhat choosier with regard to clients than in the past, he is still more likely to take more problematic clients. He is taking fewer of his bread and butter cases. While he is taking fewer problematic clients in the bread and butter cases he does take, he still has a relatively high percentage of them – largely because he has little choice in a competitive market for clients. This in turn could further jeopardize his chances for success in the current environment. HH2 lawyers, of course, are not likely to take a simple car wreck case with any of these clients, and they are taking even fewer today. For the client who is unemployed, only 18.1% of HH2 lawyers would take the client today. Five years ago, 28.7% would have. Of the 82 HH2 lawyers who would not have taken the client in the past, only 2 (2.4%) changed their minds and would take the person today. For the client with a criminal record, only 11.2% of HH2 lawyers would take the client today. Five years ago, it was 21.1%. Of the 90 HH2 lawyers who not have taken the client five years, none said they would take the client today. Of the 24 HH2 lawyers who would have taken this person five years, just over one-half changed their minds and said they would not take the client today. For the person who was a personal injury plaintiff in the past, 19.1% said they would take the client today and 30.1% said they wold have taken the person in the past. Of the 80 HH2 lawyers who not have taken the client five years ago, only 1 (1.3%) said he would take the client today. Of the 34 HH2 lawyers who would have taken the client five years ago, 38.2% changed their minds and said they would not take the person today. In short, the HH2 lawyers were choosy in the past and they are even more so today – because 32 they can afford to operate this way . For the problematic client with a legitimate claim, it means they may have a hard time getting a better lawyer to handle their case. We also asked lawyers about changes in their business. There is little overall change in the business of all respondents generally. Auto cases remain the largest percentage of business by far – an average of 33.7% (median, 25.0%) at the time of the survey and an average of 37.6% (median, 35.0%) fiver years ago. And most lawyers handle at least some auto (only 9.5% do not today) and did in the past (only 9.0% did not five years ago). But the slight decline in auto suggests that some more subtle shifts may be occurring. For instance, there seem to be more lawyers handling commercial cases now (mean, 7.0% of business) than five years ago (mean of 5.0%). More lawyers are handling at least some commercial – 23.5% handled at least some five years ago and 30.3% handle at least some today. This is an area in which some lawyers see an opportunity because they believe it is immune from the tort reform public relations campaigns. Said one lawyer who re-oriented his practice towards commercial cases: [juries] are less likely to be swayed by all the propaganda about tort reform And there’s so much baggage that goes with a PI case ... assuming that the injured plaintiff is trying to pull one over on somebody, is trying to get rich. That’s just their [juror’] perception when they walk in these days ... In commercial cases, I don’t think most of them, the average man on the street, has a real strong feel for those issues [commercial issues] ... they don’t see someone wearing a black hat or someone wearing a white hat. But, commercial is not an area all lawyers are exploring. BB1 lawyers are not moving into this area. Currently, it makes-up, on average, 2.6% of business, and five years ago it madeup 2.1%. Today, 17.4% of BB1 lawyers handle at least some commercial business and five years ago 14.3% did. HH2 lawyers, in contrast, are exploring this area’s possibilities. Currently, it makes-up, on average, 13.6% of business, and five years ago it made up 8.7%. Today, 40.7% of HH2 lawyers handle at least some commercial business, while 31.4% did five years ago. In contrast, some BB1 lawyers are looking to non-tort matters like domestic relations. Currently, on average, 8.1% of BB1 business is domestic relations. This is up from 4.5% five years earlier. Currently, 34.8% of BB1 lawyers handle at least some domestic relations compared to 26.7% five years earlier. In contrast, domestic relations makes up only 1.2% of HH2 business, and it made up 1.6% before. Few HH2lawyers handle this business at all – 8.0% today. Five years earlier the percentage was 8.8%. HH2 lawyers are handling less auto – 14.6% of business today and 20.7% five years ago. In addition to commercial cases, HH2 lawyers are handling more medical malpractice – 20.5% of business today, 15.5% five years ago (which we expect given the discussion above on how many changed their minds about handling these cases compared to five years ago). Probably the best summary indicators of what all of these changes mean to the practices of plaintiffs’ lawyers are whether the average value of their contingency fee cases has increased or not and whether their net income from their legal practice has increased or not. For all respondents, the average case value declined from a median of $40,000 five years before the 33 survey to $30,000 at the time of the survey. Net income also went down, from $150,000$199,999 to $125,000-$149,999. For BB1 lawyers, the median case value declined from $10,000 to $7,500. Almost all BB1 lawyers – 85.3% – saw they average value of their typical contingency fee case decline. Their net income also went down from $125,000-$149,999 to $100,000-$124,999, and almost one-half (49.1%) saw their net income go down (30.6% saw income increase). As one BB1 said: I made less money last year than I have made the 5 years preceding that. Since about... well since about ‘93-94 it’s gone down each year. Last year it went down significantly. I like practicing law; I like helping people, and at one time I thought you could make some money doing it. There is the independence part about it I like--I like owning my own office (there is that part of it). But frankly, I question how much longer I can do it. Really, that is the reality of it. For some lawyers, then, the late 1990s may have indeed been the worst of times. For HH2 lawyers, average case value increased from a median of $400,000 five years before the survey to $700,000 at the time of the survey. Most HH2 lawyers (61.2%) saw their average case value increase, and the largest percentage (43.4%) saw their income increase (26.5% saw it decline). While the late 1990s may not have been the best of times for all HH2 lawyers, in general they were relatively good times. 34