Background
An injured party (the ``plaintiff'') may sue a person, business, or government (the ``defendant'') to recover damages for personal injury, death, or property loss. These types of cases are referred to as ``tort'' cases. The amount of damages to be paid in a tort case may be determined by negotiation and settlement, court trial, or arbitration. Settlement may occur at any stage of the process.
Typically, tort cases are handled on a ``contingent fee'' basis, which means that the plaintiff's attorney is paid a percentage of the settlement or judgment only if the case is won or settled in favor of the plaintiff. Generally, attorney contingent fees are negotiated between the plaintiff and the attorney. Current law limits attorney contingent fees for tort cases only in medical malpractice cases. In all cases, attorneys are required by law to provide written contracts that specify, among other things, the contingent fee agreed upon and the extent to which the plaintiff may be required to compensate the attorney for matters not covered in the contract. The court may reduce a contingent fee if it finds the fee unjust.
Proposal
This measure limits the amount of contingent fees attorneys representing plaintiffs could charge their clients when the defendant makes a prompt offer to settle the tort claim. Specifically, if the plaintiff accepts a prompt settlement offer, the attorney contingent fee would be limited to no more than 15 percent of the offer. If the plaintiff rejects a prompt settlement offer, the fee would then be limited to no more than 15 percent of the prompt settlement offer, plus an additional amount agreed to by the attorney and client. The additional amount would be a percentage of the recovery in excess of the prompt settlement offer. Contingent fees also would be limited to no more than 15 percent in those cases where attorneys do not fully disclose prompt settlement offers to their clients.
The measure provides that these fee limitations may not be waived.
The measure requires the plaintiff's attorney to disclose to his or her client (1) the fee limitations imposed by this measure and (2) that lower fee rates can be negotiated. The measure also requires these attorneys to disclose all offers of prompt settlement of tort disputes to their clients.
Fiscal Effect
The fiscal impact of this measure on state and local governments is unknown. It could result in either net savings or costs, depending largely on how attorneys and their clients respond to its provisions. The responses could affect the number of cases filed, the number of cases settled before trial, and the amount of the awards in cases against state and local governments.