Ethics matters, too: the significance of professional regulation of attorney fees and costs in mass tort litigation.

• Author: Moore, Nancy J.
• Position: Response to article by Judith Resnik in this issue, p. 2119 - Mass Torts Symposium

Professor Resnik begins her paper, Money Matters: Judicial Market Interventions Creating Subsidies and Awarding Fees and Costs in Individual and Aggregate Litigation, by noting what she regards as the obvious insufficiency of current law regarding the payment of attorney fees and costs in mass tort lawsuits.(1) According to Professor Resnik, there is a "shared sense that `something' needs to be done,"(2) but there is no consensus on what that "something" is.(3) Professor Resnik's solution appears to be increased regulation by judges,(4) including heightened attention to the relationships among differently situated lawyers; for example, lawyers who are class counsel or members of a plaintiffs' steering committee and lawyers who represent individual clients.(5)

I teach and write in the area of lawyer ethics, not civil procedure or mass torts. As an ethicist who is not as familiar as others with what is happening in the world of mass torts, I hope I will be forgiven if I have not fully understood the nature and extent of the problem that Professor Resnik is attempting to solve.(6) I have been much informed by Professor Resnik's paper, as well as by her earlier work, including several collaborative efforts that describe, in rich detail, what she refers to as the elaborate "layers of lawyers" who perform various roles in these lawsuits.(7)

In Money Matters, Professor Resnik addresses two fundamental problems involving the ethical propriety of lawyer conduct in mass tort litigation.(8) The first problem is directly related to the payment of attorney fees and costs. The concern is that given the enormous amount of money at stake, lawyers are putting their own financial interests above the interests of their clients; that is, lawyers are receiving unreasonably large fee awards(9) and are being reimbursed for unreasonable costs and expenses.(10)

The second problem involving attorney conduct does not relate directly to the payment of fees and costs, but rather reflects concern for the adequacy of a lawyer's representation in a mass tort lawsuit. Here, Professor Resnik makes three separate arguments. First, she notes that lawyers have an interest in obtaining the most money they can get for the least amount of work and then argues that acting on this interest sometimes leads plaintiffs' lawyers to enter into collusive settlements with defendants.(11) Second, she worries that lawyers do not adequately represent the diverse and conflicting interests among different classes of litigants; for example, claimants with strong, high-end claims may be favored while claimants with weak, low-end claims may be neglected.(12) Third, she argues that there is an unfortunate tendency among some lawyers to focus exclusively on achieving financial outcomes, thereby ignoring the needs and desires of litigants to be involved in the litigation process.(13)

As to the first problem, there is no question that some lawyers charge or seek excessive fees in mass tort (and other) litigation.(14) Professor Resnik does not discuss in detail what makes some fees excessive, so neither will I. Rather, she simply urges judges to actively monitor lawyer conduct in this area.(15)

I agree that judges should actively monitor attorney fees and costs. I do not agree, however, that there is any need for vigorous justification of this aspect of a judge's role. In particular, I reject the argument that judges in aggregated cases function effectively as clients(16) and that it is because they do so that they should actively monitor attorney fees and costs.(17)

The ability to determine a fee award in the absence of individual fee agreements(18) does not turn judges into fee-paying clients. Indeed, the law of lawyering has never equated payment of legal fees with client status.(19) Moreover, given the perceived need to enhance attorney loyalty to the litigants themselves---including both individual clients and members of a class(20)--I believe it is potentially dangerous to rely on the metaphor of judge as client or purchaser of legal services in order to justify judicial activism in valuing the legal services performed.(21) Rather, I would prefer to rely on the more traditional role of a judge in a quantum merit action, in which judges commonly award attorney fees in the absence of valid fee agreements, valuing the benefits conferred by lawyers to their clients.(22)

Similarly, I see no need for any elaborate justification of a judge's ability to regulate even in situations where lawyers have entered into written fee agreements with individual plaintiffs. If, as in In re Copley Pharmaceutical, Inc.,(23) a judge reduces the percentage of fees recoverable under these private agreements, in order to pay for the attorney fees of class counsel or members of a plaintiffs' steering committee,(24) I see nothing startling or radical in that judicial conduct.

Rather, I would analogize this particular form of judicial activism to the traditional role of a judge who monitors the reasonableness of attorney fee agreements.(25) This monitoring occurs in disciplinary proceedings (albeit rarely) and more frequently in actions to collect a fee or void a fee agreement.(26) In addition, judges have traditionally reviewed the reasonableness of certain fee agreements before approving settlements, for example, in cases involving minors.(27)

Turning now to the second set of problems--that is, those related to the fairness of settlement agreements and the adequacy of the lawyer's representation(28)--I believe Professor Resnik is saying that the way in which attorney fees and costs are paid in mass tort lawsuits exacerbates attorney loyalty problems inherent in both class action and contingency fee litigation.(29) If this is so, then this is clearly a problem that needs to be addressed.

In addition, however, she may be saying something else that is far more controversial--that judges should be using the payment of fees and costs as a means of changing the behavior of lawyers in socially desirable ways. For example, judges should structure fees in a way that increases the lawyer's attention to the diversity of interests among litigants or that increases the participation of litigants in the lawsuit.(30) I have serious concerns about whether increased judicial activism of the sort proposed by Professor Resnik is either necessary or desirable. Indeed, more traditional aspects of ethics and the law of lawyering have a substantial role to play, at least in the case of lawyers representing individual clients.

For example, lawyers representing individual clients are already under an ethical obligation to keep their clients informed of the status of a matter and to comply with reasonable requests for information.(31) It is unclear why we need additional financial incentives to get lawyers to do what they are already required to do,(32) even when their role is somewhat circumscribed by a plaintiffs' steering committee.(33) Similarly, lawyers representing individual clients are already under an obligation to avoid impermissible conflicts among their clients.(34) Moreover, under the aggregate settlement rule, lawyers are prohibited from entering into block or aggregate settlements without first informing the clients of the existence and nature of all the claims and the participation of each person in the settlement.(35)

Professor Resnik might well respond that it is all well and good that lawyers have these obligations under current ethical rules, but that these rules are regularly violated with impunity. This may well be true, although I think that she gives insufficient attention to the role played by professional norms in shaping lawyers' conduct.(36) In any event, what she calls a tradition of "laissez-faire lawyering"(37) has never depended on an assumption that individual clients could effectively monitor the performance of their lawyers.(38) Indeed, the extent to which clients are necessarily dependent on the trustworthiness of their lawyers is what justifies the role of the lawyer as a fiduciary.(39) Rather, if judges do not typically review settlement agreements in individual cases or otherwise actively monitor attorney-client relationships, it is because lawyers, as professionals, are expected to adhere to professional norms.(40) Nevertheless, contrary to Professor Resnik's image of "laissez-faire lawyering," courts have always maintained a significant oversight role.

In addition to the role that judges play in directly monitoring attorney fees and costs,(41) there are a number of traditional routes by which litigants seek redress for attorney misconduct. For example, violations of conflict of interest rules are sanctionable through legal malpractice and breach of fiduciary lawsuits.(42) Perhaps of even greater concern to mass tort lawyers today is the recent decision of the Texas Supreme Court in Burrow v. Arce, in which the court held that lawyers may be subject to total or partial fee forfeiture as a sanction for serious violations of an ethical rule.(43) Burrow involved allegations that mass tort lawyers breached their fiduciary duties to their clients by violating the aggregate settlement rule.(44)

Perhaps legal ethics can and should do more to ameliorate what Professor Resnik sees as serious lapses in lawyers' ethical conduct in mass tort lawsuits. I doubt, however, that much can be done by way of amending rules of professional conduct. For example, fee agreements that structure the "layers of lawyers"(45) in aggregate litigation(46) are already governed by Rule 1.5.(47) In addition, Rule 1.5 requires that all fees be "reasonable."(48) It might help to clarify that one of the factors that determines whether a contingent fee is reasonable is the degree of risk to the lawyer taking the case,(49) but whether particular fee arrangements are proper may be best left to courts to decide on an individual basis.(50) Similarly, although litigation costs and expenses should also...