The State of New York is among the states with the highest incidence of medical malpractice litigation throughout the United States. With respect to legal fees, nearly every New York medical malpractice attorney (as do most medical malpractice lawyers around the country) charges a type of fee known as a “contingency” fee, the amount of which is determined based upon the size of the settlement or judgment obtained when the case concludes. This fee structure is important for several reasons: (i) It allows people who have been harmed by negligent doctors to obtain high-quality legal representation without having to pay large legal fees out of their own pocket, which most victims could never afford; and (ii) it aligns the financial interests of the medical malpractice attorney with his or her client, as, under a contingency fee arrangement, the more money the client gets from his or her case, the more the attorney gets paid. It used to be, prior to the year 1985, that medical malpractice lawyers in New York customarily charged a contingency fee equal to one third of the recovery in a medical malpractice case. However, since 1985, and as a result of extensive lobbying by the medical industry designed to reduce medical malpractice litigation, the contingency fees that medical malpractice lawyers in New York may charge their clients have been restricted. This article intends to explain what the current limits on medical malpractice contingency fees are, and why those limits are detrimental to medical malpractice victims and attorneys alike.
In New York State, the contingency fee rates chargeable by medical malpractice attorneys are set by law, and are heavily scrutinized by the New York court system to ensure that attorneys comply with the limits on fees in medical malpractice cases. Specifically, Section 474-a of the New York Civil Practice Law and Rules prescribes a “sliding scale” of percentages that medical malpractice attorneys may charge as a contingency fee when they represent a plaintiff in a medical malpractice case. The law states that medical malpractice lawyers can charge the following percentages, which apply based upon the gross recovery made in a particular medical malpractice case: (i) 30% of the first $250,000.00 recovered; (ii) 25% of the next $500,000.00 recovered; (iii) 20% of the next $250,000.00 recovered; (iv) 15% of the next $250,000.00 recovered; and (v) 10% of all sums recovered over $1,250,000.00.
To understand how this works in practice, imagine that your medical malpractice lawyer settles your case for $2,100,000.00, and had to spend $100,000.00 in disbursement costs to litigate the case. Pursuant to the “sliding scale” fee schedule, after repayment of expenses, there would be $2,000,000.00 left out of which your lawyer’s fee would be calculated. The calculation would be done as follows, according to the rates described above: $75,000.00 + $125,000.00 + $50,000.00 + $37,500.00 + $75,000.00 = $362,500.00. Compare this to the $666,666.67 fee which your lawyer could charge if he or she were able to use the pre-1985 standard one third contingency fee (which, it should be noted, is the fee generally charged in non-medical malpractice personal injury lawsuits in New York state), and you can see that the “sliding scale” contingency fee significantly reduces the fees that New York medical malpractice lawyers can charge.
Although this may seem like a benefit to medical malpractice plaintiffs, the “sliding scale” contingency fee restrictions actually has a negative impact upon the relationship between medical malpractice lawyers and their clients. This is because, by limiting the fees collectable by medical malpractice lawyers as the gross recovery numbers increase, it creates a disincentive for the medical malpractice lawyer to refuse to settle the case cheaply (i.e., for less than it is truly worth) and to take a meritorious case to trial if the defendants refuse to compensate the plaintiff for the true value of their injuries. This system pits the financial interests of medical malpractice lawyers against those of their clients, which can be detrimental to the trust which is required for the attorney-client relationship to properly function. This is because the lawyer will not want to risk taking a very valuable case to trial for a fee of only 10% (which is effectively what happens in the context of very valuable medical malpractice claims) and thereby put his or her entire fee at risk. This financial disincentive to take valuable cases to trial, or to hold out for an increased settlement offer, is detrimental to the relationship between lawyer and client in the context of medical malpractice cases, as lawyers are incentivized to advise their clients to settle for less than their case is worth in many situations.
