BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Martha M. Escutia, Chair
2003-2004 Regular Session
SB 1811 S
Senator Morrow B
As Amended April 13, 2004
Hearing Date: May 4, 2004 1
Business and Professions Code; Family Code 8
GMO:cjt 1
1
SUBJECT
Attorney's Fees: Senior Citizens and Minors
DESCRIPTION
This bill would revise rules for attorney's fees in
litigation cases involving seniors and minors, as follows:
(1) It would void any contingency fee contract made by or
on behalf of a senior unless it is approved by the court
in which the litigation is pending; and
(2) In a case involving a minor, it would require the
court to fix the fees at 25 percent of net recovery of a
settlement award, or at 33 1/3 percent of a judgment
recovered at trial or on appeal or, in either case, a
lesser amount, in the court's discretion.
The bill would make legislative findings and declarations
relating to the need to have a uniform statewide standard
for attorney's fees for services on behalf of children, and
provide the same to senior citizens.
BACKGROUND
The State Bar Act establishes a comprehensive statutory and
regulatory framework by which attorneys are licensed and
disciplined. The Act regulates the fees attorneys may
charge for services rendered to their clients and
specifically addresses contingency fees.
(more)
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Business and Professions Code Section 6147 requires that
attorneys and clients receive copies of the contingency fee
agreement, which must be in writing and must contain
specified information. [See Comment 2.] Failure by an
attorney to comply with any provision of law regarding
contingency fee contracts renders the agreement voidable at
the option of the client.
The State Bar has adopted its Rules of Professional
Conduct, violations of which subject attorneys to varying
degrees of discipline. The Rules address the issue of fee
agreements, prohibiting attorneys from charging
unconscionable fees for example, and specifies, where
appropriate, standards for attorneys to adhere to. The
State Bar has in place a system and procedure for
arbitration or mediation of disputes concerning attorney's
fees, costs, or both, that are charged by attorneys,
whether from California or from other jurisdictions.
This bill, sponsored by the Civil Justice Association of
California, seeks to void contingency fee contracts made by
or on behalf of a senior citizen unless approved by a
court, and to fix the net recovery of a minor whether
recovery is by settlement or by judgment after trial or
appeal.
CHANGES TO EXISTING LAW
1. Existing law governs contingent attorney's fees that
may be charged to clients and in specified provisions,
such as the Medical Injury Compensation Reform Act
(MICRA), limits such fees to fixed percentages of
recovery. In cases involving a minor, where there is no
court-approved fee agreement, existing law requires the
court to fix the fees.
This bill would, in cases involving a minor and there is
no court-approved fee agreement, limit the fees at 25%
of the net recovery of a settlement award or 33 1/3% of
the net recovery of a judgment after trial or appeal, or
a lesser amount that the court may fix.
2. Existing law provides guidance to attorneys for
contingent fee agreements and requires that attorney's
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fees not be unconscionable. Various statutes fix
attorney's fees, such as Probate Code Section 10818 (for
ordinary fees in estate administration), and Business
and Professions Code Section 6146 (MICRA cases). Other
statutes require approval of a contingency fee agreement
by a court. [Family Code Section 6602 (minors); and
Probate Code Section 2644 (conservatorships and
guardianships).]
This bill would, with respect to contingency fee
agreements made by or on behalf of a person 65 years or
older, make such agreements void unless approved by the
court in which the litigation is pending.
COMMENT
1. Stated need for the bill
The author states that current law, which requires the
court to fix attorney's fees where there is no
court-approved agreement in a case involving a minor,
has resulted in a wide range of compensation that is
dependent on which county hears the case.
For example, the author states that courts in 18
counties use a "25% - 33 1/3% - 40%" formula (25% if
settlement award; 33 1/3% if judgment award; 40% if
award after appeal). Courts in eight counties, they
say, use a 25% limit but permit the judge to approve a
higher fee for "good cause" shown (Los Angeles, San
Francisco, Kern), or due to "unusual or extraordinary
circumstances (Alameda, Riverside, Imperial), or
"substantial justification" (Marin). In seven counties,
a firm 25% fee is imposed by the court. In several
others, the 25% limit is simply a guideline. Santa Cruz
County fixes a 25% attorney's fee, which may be reduced
at the court's discretion.
Additionally, the author states that some counties
impose the limits on the gross recovery in the case (Los
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Angeles), while others (San Mateo) specify net recovery.
In other counties, the court rules are silent. The
disparity in attorney's fees therefore, according to the
author, results in a disparity in recoveries by the
minors themselves.
This bill seeks to create a statewide, uniform standard
fee for litigating a minor's case and to require court
approval of a contingency fee contract between a senior
citizen and his or her attorney.
2. SB 1811 requires court approval of contingency fee
agreement, or else agreement is void; applies to all 65
year olds and older
This bill would void any contingency fee agreement made
by or on behalf of a senior citizen 65 years or older,
if that agreement is not approved by the court in which
the litigation is pending.
The bill appears to track Family Code Section 6602 which
applies to contracts involving minors. Upon petition by
an interested person, Section 6602 voids a fee agreement
that is not approved by the court.
a. If enacted, SB 1811 would emasculate EADACPA
Supporters of the bill state that this provision
would "put an end to the current practice that
encourages plaintiff's attorneys to include a claim
of elder abuse or neglect in every complaint
involving personal injury of an elderly adult, in
order to skirt MICRA's statutory limits on
contingency fees." [California Association of Health
Facilities letter dated April 2, 2004.] MICRA
(Medical Injury Compensation Reform Act) limits
attorney's fees in medical malpractice cases.
[Business and Professions Code Section 6146.]
CAHF cites Waters v. Bourhis (1985) 40 Cal. 3rd 424,
which held that an attorney should be entitled to a
higher fee for the entire settlement amount in cases
involving mixed causes of action and not just for
that portion of the complaint that is not subject to
MICRA limitations. "Because there is nothing in
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section 6146 that purports to limit the fee an
attorney may earn outside of the MICRA context, when
MICRA and non-MICRA causes of action are properly
joined in one proceeding we can find no basis for
limiting the fee that an attorney may permissibly
obtain for successfully litigating the non-MICRA
claim." [ Id. at 427.] Waters remains the law in
California.
Attorneys who regularly represent the elderly in
cases under the Elder and Dependent Adult Civil
Protection Act (EADACPA) are appalled at this
"backhanded attempt" to make it more difficult to
bring cases on behalf of the abused elderly and
dependent adults. They contend that EADACPA was
enacted specifically to enable interested persons to
engage attorneys to take up the cause of abused
elderly persons and dependent adults, which is why
Section 15657 of the Welfare and Institutions Code
provides for an award of reasonable attorney's fees
and costs. And, since most of the abuse occurs at
the hands of doctors, hospitals, skilled nursing
facilities and other health care facilities, a
complaint under EADACPA would likely include a MICRA
action.
The reality, they say, is that unless an
institutionalized elder is still mentally competent
to make decisions and enter into contracts, no fee
agreement can be formed. In such cases, either the
court will already have to entertain an application
for approval of a fee agreement, or the holder of a
durable power of attorney will enter into a contract
with the attorney. In either case, the elder would
be protected.
In fact, the California Association of Nursing Home
Reform reports that contrary to myth, there are very
few lawsuits against California's nursing homes: out
of some 44,000 beds in Los Angeles, for example, only
110 to 115 cases were filed in 2003.
The only real effect of SB 1811, they then say, would
be to deter the filing of these EDACPA lawsuits, and
risking the return of the elder abuse cases that
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motivated passage of EADACPA. Elder abuse cases are
expensive and difficult cases, they argue, and are
taken on behalf of people without any monies to
advance for the cost of multiple experts,
depositions, filing fees, records retrieval, etc.
SHOULD ENFORCEMENT OF EADACPA CASES BE DETERRED?
b. SB 1811 would require even competent 65-year-olds
and their families to seek court approval of
contingency fee contracts with their attorneys
Because SB 1811 is not specific to elder abuse cases,
it would have the secondary effect of preventing
fully functioning 65-year old and older persons or
their legal representatives from securing legal
assistance without court approval.
The Probate Code requires a court to scrutinize a
contingent fee agreement for legal services provided
to a conservatee, proposed conservatee, or ward.
Probate Code Section 2644 requires the court to first
determine that (1) it is to the advantage or best
interest of the ward or conservatee or the estate to
enter a contingent fee agreement; (2) the services
sought are in connection with a matter that is
customarily the subject of a contingent fee contract.
The statute then conditions the validity of the
contract on the court authorizing the execution and
approving the contract. The order may be obtained
by filing a petition with the contract attached, and
a noticed hearing.
Other than this statutory restriction and elder abuse
cases, competent 65-year-old and older persons are
free to contract with their attorneys, for example,
for a personal injury action against another, for
recovery of money or property, for execution on a
judgment, for bad faith actions against an insurance
company.
In the words of an 81 year old attorney who has
represented elderly clients in EADACPA cases, "[t]o
say that senior citizens and their families are a
class of people without capacity to contract for
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legal services unfairly demeans them. In addition,
there are ample judicial protections against
frivolous lawsuits or over reaching agreements
plaintiffs may make with their lawyers."
IS THIS BILL NECESSARY TO PROTECT ELDERS?
3. Lawsuits involving minors: attorney's fees limited to
25% of settlement, 33 1/3 % of judgment at trial or
after appeal
SB 1811 contains findings and declarations regarding the
well-being of children and senior citizens as an
important concern of the Legislature and the Judiciary.
It further finds that while current law provides
oversight on the percentage of contingency fees
attorneys can charge when representing a child, the
limits vary from county to county, "resulting in an
inequitable system that determines recovery for the
child based on mere geographical location."
This bill would make several changes to Family Code
Section 6602, which governs attorney's fees in
litigation involving minors.
a. Fee agreement void unless agreement approved by
court where litigation is pending
Under existing law, a contract for attorney's fees
for services in litigation made by or on behalf of a
minor is void unless the contract is approved, on
petition by an interested person, by the court in
which the litigation is pending. [Family Code
Section 6602.]
The bill deletes the phrase "on petition by an
interested person" from the provision. This would
mean that if no motion is brought to validate the
agreement, the minor's attorney may very well be
working for the minor under a void contract (he or
she may not find out until further down the line.)
Because SB 1811 would be silent on the need to file a
petition to approve a contract, or who should make
such a petition, more fee agreements would probably
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be disputed and sent to arbitration or mediation.
b. If settled, the court would fix the attorney's fee
at 25% or less of net recovery; if recovered after
trial or appeal, fixed fees at 33 1/3 %
SB 1811 would specifically provide that if a
settlement award is entered by or on behalf of the
minor, the court will fix the attorney's fees at 25%
of the net recovery of the settlement award, or less
at the court's discretion. If the award resulted
from a trial or an appeal, the fee would be fixed at
33 1/3 %, or less at the court's discretion.
Although there is no definition of "net recovery" in
Section 6602 of the Family Code, Section 6146 of the
Business and Professions Code contains a definition
of "recovered" (the net sum recovered after deducting
any disbursements or costs incurred in connection
with prosecution or settlement of the claim). Using
this definition, if the cost of litigation was
$10,000 for a $100,000 settlement award, the attorney
would receive 25% of $90,000, or $22,500 as
attorney's fees and $10,000 for costs. The client
would receive $67,500. If the attorney's fees is
based on the gross recovery, the fee would be
$25,000, costs $10,000 and the balance to the client
would be $65,000. If the award resulted from trial,
the attorney would get $40,000 ($30,000 fees plus
$10,000 costs) instead of $43,333 ($33,333 fees plus
$10,000 costs).
c. Will caps on attorney's fees result in diminished
access to the courts?
Opponents of SB 1811 all point to the real effect of
capping contingent fees: there will be fewer lawyers
motivated to take up causes of those who are least
able to take care of themselves.
Those attorneys who deal with contingent fee cases
are thus concerned.
Artificial limits on contingent fees limit access
to justice. Limits on contingent fees make it
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more difficult for attorneys to accept cases with
lower damages. Contingent fees must be high
enough to take into account the risk of losing, of
receiving a low settlement, or of having to try
the case through to appeal. The current system
takes these variables into account. . . .Why
should the legislature take action that will only
affect one side in a civil dispute? The agenda of
these proposals is clear - to take away the only
person standing up for an injured person and
demanding accountability.
-- Letter from Sanford Horowitz, Sonoma,
California, 4/30/04
Attorneys Against Abuse of Elders, LLP, stated it
directly: "Caps on contingent fees are patently one
sided and unfair to injured people. There are never
any limits on defense attorneys' hourly fees despite
their shamelessly grinding away meritless demurrers,
discovery and trial motions." [Letter dated
4/27/04.]
They further explain that while no one wants to be
forced to hire a lawyer, a contingent fee contract
gives consumers a fighting chance against
multi-million dollar corporations and their lawyers.
Contingent fee attorneys agree to accept a case in
return for a percentage of any recovery and do not
get paid unless the victim's lawsuit is successful.
"The contingency fee system makes it possible for
consumers who cannot afford an hourly fee to attract
quality attorneys and gives the victim an opportunity
to obtain counsel of equivalent quality to the highly
paid high rise attorneys and in-house staffs
assembled by insurance companies and large
institutions."
Supporters contend the opposite, stating that SB 1811
would protect consumers from unscrupulous attorneys.
[Letter from Silicon Valley Citizens Against Lawsuit
Abuse dated March 22, 2004.]
4. Contingent fee contracts are well regulated by
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statute and rules
Section 6146 of the Business and Professions Code limits
the attorney's fees that may be collected on a
contingent fee contract for legal services in connection
with a medical malpractice action. This statute is part
of the MICRA legislation that reformed medical
malpractice litigation in California. Under Section
6146, attorney's fees may not exceed:
40% of the first $50,000 recovered
33 1/3% of the next $50,000 recovered
25% of the next $500,000 recovered
15% of any amount on which the recovery exceeds
$600,000.
These limitations apply regardless of whether the
recovery is by settlement, arbitration, judgment or
whether the client is a responsible adult, an infant, or
a person of unsound mind.
Section 6147 of the Business and Professions Code
requires an attorney who contracts to represent a client
on a contingency fee basis to provide the client, or the
client's guardian, conservator, or representative a copy
of the contract at the time the contract is entered
into. Section 6147 also details five statements that
must be contained in the contract relating to the fee,
fee for other services, disbursements, and costs, and
stating that the contingent fee is negotiable between
the attorney and the client (unless covered by Section
6146). Failure of the attorney to comply with these
requirements renders the agreement voidable at the
option of the plaintiff.
The State Bar-adopted Rules of Professional Conduct,
Rule 4-200 prohibits an attorney from entering into an
agreement for, charging, or collecting an illegal or
unconscionable fee. The rule details various factors
that the State Bar uses to determine whether a fee is
unconscionable or not. Those factors include (1) the
amount of the fee in proportion to the services
performed; (2) the relative sophistication of the
attorney and the client; (3) the novelty and difficulty
of the questions involved and the skill requisite to
perform the legal service properly; (4) the likelihood
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that acceptance of the particular employment will
preclude other employment by the attorney; (5) the
amount involved and the results obtained; (6) the time
limitations imposed by the client or by the
circumstances; (7) the nature and length of the
professional relationship with the client; (8) the
experience, reputation, and ability of the attorney
performing the services; (9) the time and labor
required; and (10) the informed consent of the client to
the fee.
Support: Orange County Citizens Against Lawsuit Abuse;
Silicon Valley
Citizens Against Lawsuit Abuse; California
Association of Health
Facilities
Opposition: Attorneys Against Abuse of Elders, Inc.;
California Advocates for
Nursing Home Reform; Consumer Attorneys of
California; Law
Offices of Sanford Horowitz; Peter Lomhoff,
Attorney at Law;
Stebner and Associates; Houck & Balisok;
Consumer Federation of
California; MacCarley & Rosen
HISTORY
Source: Civil Justice Association of California
Related Pending Legislation: None Known
Prior Legislation: None Known
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