When Texans need legal advice, they should be confident their attorney is acting both ethically and lawfully to represent them. Attorneys play an important role in the legal system, helping Texans seek justice in the courts when they have a legitimate dispute.
In the 1970s and 1980s, Texas had a reputation for jackpot justice because powerful personal injury trial lawyers had controlled the Legislature and courts for decades, stifling efforts to promote accountability and ethical standards within their ranks. Over several years, the Legislature has taken steps to right the course. However, more can be done to ensure attorneys represent their clients in an ethical and lawful manner.
2011, 2013: Reducing Ambulance Chasing (Barratry)
Soliciting clients, which is more commonly known as “ambulance chasing,” is called barratry in the law—and it is both illegal and unethical. In fact, barratry has been illegal and unethical for decades. A lawyer who unlawfully and unethically solicits clients can be fined, imprisoned and disbarred. But in reality, prosecution for barratry is relatively rare. In two recent sessions, however, the Legislature created a new mechanism for addressing unlawful client solicitation by lawyers.
2011’s Senate Bill 1716 allows a person who was solicited by a lawyer to sue the lawyer to have an unlawfully procured attorney-fee contract declared void and force the lawyer, or any other person who participated in the unlawful conduct, to disgorge all fees earned from the case. The plaintiff can also recover the attorney fees incurred in pursuing the barratry case.
When the 2011 statute was enacted, lawyers who had committed barratry began to voluntarily void their fee contracts when faced with lawsuits in order to avoid the statutory penalties. In House Bill 1711 of 2013, the Legislature amended the 2011 statute to allow the civil barratry action to proceed even if the lawyer’s fee contract was voluntarily voided, and the Legislature added a $10,000 civil penalty that the plaintiff could recover from the lawyer.
See also Hail/Windstorm/TWIA
2003: Reining in Class Action Attorney Fees
Before 2003, defendants often resolved class action lawsuits by giving coupons to the class members and paying a substantial sum of money to the lawyer representing the class based on the value assigned to the coupons. The coupons were to be used to obtain a discount when buying more of the defendant’s products, but of course, many were never used. These “coupon settlements” benefitted the plaintiff lawyers and the defendants, but did little to make the class members whole or address any alleged wrongdoing by the defendant.
In 2003, as part of the game-changing House Bill 4, the Texas Legislature addressed class action litigation abuse. The Legislature abolished contingent fees based on a percentage of the recovery in class action litigation (e.g., 33% of the class’ recovery paid to the lawyer if the case was successful) in favor of hourly rate-based attorney fees that require a showing of hours actually worked by the attorneys. The new law also allowed a court to award up to four times the fee calculated using the hourly rate method if the work done and risk taken by the lawyer deserved an enhanced fee. But a lawyer was no longer automatically entitled to a percentage fee based on a value assigned to the settlement.
The new law also provided that when a class action lawsuit filed in a Texas state court is settled using coupons as the compensation to the class, the class lawyers must be paid in coupons in the same proportion as the class. (To our knowledge, no lawyer has found coupons to be a meaningful form of compensation for himself.)
See also Lawsuit Procedures
1999, 2007: Limits on Contingent-Fee Contracting with Governmental Entities
Before 1999, the Texas Attorney General could freely contract with private attorneys to pursue claims on the state’s behalf. Using this authority, Texas attorneys general would occasionally contract with private attorneys to represent the state on a contingent-fee basis, the most infamous example being Attorney General Dan Morales’ decision to contract with five private attorneys to pursue claims against tobacco companies. The result was that the five attorneys, who did very little actual work on the case, received $3.3 billion in fees when the cases resolved as part of a national settlement.
The ill-conceived fee award in the tobacco litigation prompted the Texas Legislature to act. In Senate Bill 178 of 1999, the Legislature passed a law prohibiting percentage-based contingent-fee contracts between the state of Texas and private attorneys. Only hourly rate fee contracts are permitted, which if made contingent on success, may include a 4x premium to account for results obtained and risk taken. The law also prohibits the Texas Attorney General from awarding an hourly–based contingency fee contract without concurrence of either the Legislature or a special committee that includes the lieutenant governor and speaker of the House when the Legislature is not in session.
In 2007, in an amendment to House Bill 3560, the Legislature provided that a Texas public agency could not enter into a percentage-based contingent-fee contract with a private attorney without review and approval by the Comptroller of Public Accounts. As a result, most city and county governments are somewhat restricted in their ability to enrich private attorneys through lucrative contingent-fee contracts, although the recruitment of public-sector clients by some attorneys continues to occur on a regular basis.
See also Courts and Judges