This initiative measure is submitted to the people in accordance with the provisions of Article II, Section 8 of the Constitution. This initiative measure adds sections to the Business and Professions Code; therefore, new provisions proposed to be added are printed in italic type to indicate that they are new.
SECTION ONE. This Act shall be known and may be cited as the "Lawyer Contingent Fee Limitation Act".
SECTION TWO. The People of the State of California find and declare:
(a) The contingent-fee arrangements lawyers typically negotiate with claimants, most of whom
are inexperienced and unsophisticated purchasers of legal services, often require claimants to pay
their lawyers too much for handling tort claims that a defendant has offered to settle.
(b) These excessive fees harm claimants by depriving them of compensation they deserve.
(c) The excessive fees also discourage early settlement of tort claims, forcing injured people to
suffer long delays in receiving compensation and clogging the courts with lawsuits that should not
have to be filed.
(d) Imposing a cap on the fees lawyers can charge for handling tort claims that a defendant has
offered to settle quickly would:
(1) Prevent lawyers from taking an unreasonable portion of the compensation offered or awarded
to an injured person.
(2) Encourage defendants to settle claims quickly.
(3) Enable injured people to be compensated more promptly.
(4) Relieve some of the present burden placed on the courts, reducing costs for taxpayers and
enabling other legal disputes to be resolved more quickly.
SECTION THREE. Sections 6146.1, 6146.2, 6146.3, 6146.4, 6146.5 and 6146.6 of Article 8.5
of Chapter 4 of Division 3 of the Business and Professions Code are added as follows:
6146.1. [CONTINGENT-FEE LIMITATIONS] (a) An attorney who represents a claimant
who has accepted an early settlement offer shall not collect a contingent fee that is greater than
15% of the amount of the early settlement offer.
(b) An attorney who represents a claimant who has rejected or failed to accept an early
settlement offer shall not collect a contingent fee that is greater than 15% of the amount of the
early settlement offer plus such percentage of the amount recovered in excess of the early
settlement offer as was agreed to by the claimant and the attorney.
(c) A claimant's attorney who has failed to make a demand for compensation pursuant to
Section 6146.2, or who has omitted from such demand information required under Section 6146.2
of a material nature which the attorney had in his or her possession or which was readily available
to him or her, shall not collect a contingent fee greater than 15% of the amount recovered.
(d) A claimant's attorney who has failed to provide his or her client a true and complete copy
of an early settlement offer received by the attorney, as required under subdivision (c) of Section
6146.3, shall not collect a contingent fee greater than 15% of the amount recovered.
(e) Reasonable costs and expenses incurred by an attorney up to the time of receipt of an early
settlement offer shall be deducted from that settlement offer for purposes of calculating the
maximum permissible fee under subdivisions (a) and (b).
(f) An attorney shall disclose, plainly and in writing, to claimants whom the attorney proposes
to represent on a contingent-fee basis, (1) the fee limitations imposed by this section and (2) the
fact that such limitations are maximum limits and that the attorney and claimant may negotiate a
lower fee. The attorney shall also provide to each such claimant a copy of this act.
(g) The fee limitations imposed by this section may not be waived.
(h) The provisions of this section apply to all attorneys practicing in California, including
attorneys prosecuting claims filed in federal court, to the maximum extent permitted by federal
law.
6146.2. [CLAIMANT'S DEMAND FOR COMPENSATION] (a) An attorney representing
a claimant on a contingent-fee basis shall send a demand for compensation by certified mail to
each allegedly responsible party. In the event that multiple allegedly responsible parties are known
to the attorney, a demand shall be sent on the same date to each such party. The demand shall
specify the amount of compensation sought and shall set forth the material facts, documentary
evidence, and other information relevant to the demand, including:
(1) The name and address of the claimant or of the person on whose behalf the claim is being
made.
(2) A brief description of how the injury or loss occurred.
(3) The names and, if known, the addresses and telephone numbers of all known witnesses to
the injury or loss.
(4) Copies of photographs in the claimant's possession which relate to the injury or loss.
(5) The basis for claiming that the party to whom the demand is addressed is responsible or
partially responsible for the injury or loss.
(6) A description of the nature of the injury or loss, including the dates and nature of the care
or services provided, and the names and addresses of all physicians and other health-care providers
that provided medical care or services to the claimant or injured party.
(7) Medical records relating to the injury, including those involving a prior injury or
pre-existing medical condition which would be discoverable by the allegedly responsible party
during the course of litigation or, in lieu thereof, executed releases authorizing the allegedly
responsible party to obtain such records directly from those health-care providers who provided
treatment to the claimant.
(8) Documentation of any medical expenses, lost wages, personal losses, and other economic
and non-economic losses suffered as a consequence of the injury or loss.
(b) The attorney shall mail copies of each demand to the claimant and to each and every
allegedly responsible party.
(c) A claimant's attorney who learns of an additional allegedly responsible party after making a
demand for compensation under subdivision (a) shall send a demand for compensation to the
newly discovered allegedly responsible party and simultaneously mail a copy of such demand to
each of the other allegedly responsible parties and to the claimant.
(d) In the event that a claimant's attorney learns of an additional allegedly responsible party
more than 90 days after making a demand for compensation under subdivision (a), the attorney
shall not be required to send a demand to that party nor shall the fee limitations imposed under
subdivisions (a) and (b) of Section 6146.1 apply with regard to any amount recovered from that
party, excepted as next provided. An attorney who fails as a result of a breach of the standard of
care to learn of an additional allegedly responsible party within 90 days of sending a demand for
compensation to another allegedly responsible party shall not collect a fee in excess of that allowed
under subdivisions (a) and (b) of Section 6146.1 with respect to any amount recovered from such
additional allegedly responsible party.
6146.3. [EARLY SETTLEMENT OFFER] (a) An offer by an allegedly responsible party to
settle a claim shall constitute an early settlement offer if the allegedly responsible party:
(1) makes the settlement offer within 60 days of receipt of a demand for compensation;
(2) communicates the offer in writing and by certified mail to the claimant's attorney;
(3) leaves the offer open for acceptance for a minimum of 30 days from the date of its receipt
by the claimant's attorney; and
(4) includes with the offer material information and documentary evidence in its possession
relating to the alleged injury or loss upon which the allegedly responsible party relied in making the
settlement offer, including:
(A) Copies of photographs which relate to the injury or loss.
(B) The basis for claiming, if it is so claimed, that the allegedly responsible party is not
responsible, or is less responsible than is alleged by the claimant, for the alleged injury or loss.
(C) Information regarding injuries or losses suffered by the claimant.
(b) An allegedly responsible party may amend or issue an additional early settlement offer
during the 60-day period set forth in subdivision (a). An amended or additional early settlement
offer shall be subject to the requirements set forth in subdivision (a).
(c) A settlement offer that is made to a claimant prior to receipt of a demand for
compensation, and which conforms to the requirements of subdivision (a), shall be deemed an
early settlement offer and shall have the same effect as if it were a response to a demand for
compensation.
(d) An allegedly responsible party is under no obligation to issue a response to a demand for
compensation. The fact that a demand for compensation was or was not made, the fact that an
early settlement offer was or was not made, and the amount of any demand or settlement offer
made are inadmissible pursuant to Section 1152 of the Evidence Code.
(e) An attorney who receives an early settlement offer shall provide a true and complete copy
of such offer to his or her client.
6146.4. [ENFORCEMENT] A claimant who is charged a contingent fee that is higher than
that authorized under Section 6146.1, except as provided under subdivision (d) of Section 6146.2,
may maintain an action against that attorney. Such claimant is entitled to recover from such
attorney three times the amount overcharged or $10,000, whichever is greater.
6146.5. [FIDUCIARY RELATIONSHIP] A fiduciary relationship applies with respect to
any fee agreement between an attorney and a claimant.
6146.6. [DEFINITIONS] For purposes of Sections 6146.1 through 6146.5, the following
terms have the following meanings:
(1) "Allegedly responsible party" means a person, partnership, or corporation alleged by a
claimant to be responsible for at least some portion of an injury or loss alleged by that claimant.
(2) "Amount recovered" means the total compensation, including the reasonable value of
non-monetary compensation, that an attorney has obtained on behalf of a claimant through
settlement, arbitration, or judgment, minus the reasonable costs and expenses incurred by the
attorney in prosecuting or settling the claim.
(3) "Claimant" means any natural person or persons seeking compensation in connection with
a tort claim including, but not limited to, a claim for personal injury or wrongful death. However, a
claimant does not include any person or persons seeking compensation in connection with a claim
covered by Section 6146, a claim for workers' compensation benefits, or a case in which a court
has certified the existence of a class action pursuant to state or federal law.
(4) "Contingent fee" means compensation, however calculated, that is payable only if an
amount is recovered.
(5) "Early settlement offer" means a settlement offer made in accordance with Section
6146.3.
SECTION FOUR. (a) Except as provided in subdivision (b) of this section, the provisions of this
initiative shall not be amended except by a statute that becomes effective only when approved by
the electorate.
(b) The provisions of this initiative may be amended only to further its purposes, by a statute
passed in each house of the Legislature by roll call vote entered in the journal, two-thirds of the
membership of each house concurring. In any judicial action with respect to such amendment, the
court shall exercise its independent judgment and shall determine whether the amendment is
supported by findings clearly and convincingly establishing that the amendment furthers the
initiative's purposes.
SECTION FIVE. If any provision of this act or application thereof to any person or circumstance is held invalid, that invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.