The jury verdict in the Merck/Vioxx trial generated a good bit of debate about tort reform, and one of the common topics in that discussion is the effect that contingent fees have on the civil justice system. Contracting for a contingent fee is a way in which a plaintiff can hedge the cost of a lawsuit by shifting a portion of the risk of loss to an attorney. Many tort reformers propose to do away with — or at least severely restrict — contingent fees on the premise that they inevitably lead to increased frivolous litigation.
Along those lines, Ted Frank passes along this interesting AEI project from Alex Tabarrok (of Marginal Revolution fame) and Eric Helland in which they review the results of their study on the probable effects of limiting contingent fees. In short, they question whether the purported benefit of capping contingent fees merits the extreme measure of limiting the contractual right of a plaintiff to contract for a contingent fee:

If America is a “lawsuit hell,” then contingent-fee lawyers are often considered its devils. Contingent fees have been called unwarranted and the lawyers who accept them have been denounced as unethical and uncivilized. Furthermore, in the midst of increased filings and escalating awards, it is difficult not to notice that some plaintiffs’ lawyers have become very rich. As a result, tort reformers have called for limits on contingent fees and many states have obliged. But limits have been enacted without any evidence that contingent fees were either responsible for the liability crisis or that limiting them would produce benefits.

This study, one of the first empirical examinations of contingent-fee limits, finds that contingent fees benefit plaintiffs and do not cause higher awards. Furthermore, contingent-fee limits are unlikely to reduce lawyers’ income very much, since they will simply switch to hourly fees. Since hourly fee lawyers are willing to take more cases to court than contingent-fee lawyers, contingent-fee limits can increase the number of low-value “junk suits.”

Tort reform is an important goal, but limiting the contractual rights of plaintiffs and their lawyers is an unattractive and likely ineffective method of achieving that goal.

The Chronicle is reporting this morning that 39 year-old Don Willett, an Austin attorney with close ties to President Bush, will be nominated today by Governor Rick Perry to replace Priscilla Owen on the Texas Supreme Court.
Mr. Willett is a native Texan who graduated from Baylor University and received a JD with honors and an AM in Political Science from Duke University in 1992. After law school, Mr. Willett clerked for Judge Jerre S. Williams of the U.S. Court of Appeals for the Fifth Circuit and then worked in employment law at the Austin office of Haynes & Boone for several years.
From 1996-2000, Mr. Willett served as Research/Special Projects Director for then-Governor Bush in Texas and advised Mr. Bush on various political and legal issues. He parlayed that position into a Domestic Policy & Special Projects Advisor position on the Bush-Cheney 2000 Presidential Campaign and then later on the Presidential Transition Team. In 2002, Mr. Willett was appointed as Deputy Assistant Attorney General in the Office of Legal Policy where he developed civil and criminal justice initiatives and special projects for the President, including coordinating assistance with judicial nominations and confirmations. After that stint, Mr. Willett served as Special Assistant to the President and Director of Law and Policy for the White House Office of Faith-Based & Community Initiatives and, most recently, as a key advisor for his old friend, Texas Attorney General Greg Abbott.
After nomination, Mr. Willett could serve on the Supreme Court without Senate confirmation until the Legislature is called into session, but he would still have to run for election to the seat next year.

One of the more interesting (and longstanding) local civil lawsuits turned an interesting corner yesterday.
U.S. District Judge Lynn Hughes — unquestionably the Houston federal judge most likely to challenge the government’s position in any case — handed down this 133 page broadside yesterday ordering the Federal Deposit Insurance Corp. to pay Houston financier and longtime environmentalist target Charles Hurwitz $72.3 million in sanctions for the FDIC’s conduct in connection with prosecuting a civil lawsuit to hold Mr. Hurwitz and other directors of the defunct United Savings of Texas personally responsible for $250 million in connection with the $1.6 billion loss resulting from the S&L’s 1988 failure.
There is a lot of background to this saga. The FDIC sued Mr. Hurwitz — the chairman and chief executive of Houston-based Maxxam Inc. — and other United Savings directors (including the talented Barry Munitz) in 1995. Interestingly, the FDIC did not contend in the lawsuit that Mr. Hurwitz and Maxxam had looted United Savings; rather, the agency contended merely that Mr. Hurwitz and Maxxam had an obligation to invest more money in the sinking ship of United even after it was clear that the S&L was going down the tubes.

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