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Billions from corporations to tort lawyers, fueled by victories with contingency

For many plaintiffs’ lawyers who sue companies on a contingency-fee basis, the litigation rewards them with Croesusian sums. One scholar has “estimated that contingent fees in tort cases are generating upwards of 22 billion dollars in annual income and are increasing at a substantial rate.” The law professor, Lester Brickman, in “The Market for Contingent Fee-Financed Tort Litigation: Is It Price Competitive?,” Cardozo L.R., Vol. 25 at 68 (2003) cites this awesome flood of funds, much of it flowing from corporate defendants. As canny law firms invest those billions in more lawsuits, and the many satellite activities that sustain such lawsuits, law departments will face more and better litigation (See my post of Aug. 24, 2005 on the flow of funds to law firms in securities cases.).

Brickman states one other jaw-dropping fact. “Over the past 40 years, the average effective hourly rate of the contingent fee bar has increased, in inflation-adjusted dollars, by 1000 percent to 1400 percent” (id. at 69). Lucre like that will draw in talent and encourage investments, all to the detriment of law departments.