1. "You might win your lawsuit and wind up with nothing."
Expecting a bundle from a big lawsuit? Don't start spending it yet. You may be shocked to learn how little you'll get to keep.
Lawyers may not like to mention it, but federal taxes — at a rate of 25 to 35% — can easily wipe out most of the money you win in civil lawsuits; bodily injury suits are the only exemption. You'll probably even have to pay federal taxes on the part that's earmarked for your attorney, unless you live in the one of the few regions, including Alabama, Michigan and Texas, where federal appeals courts have sided with taxpayers.
"It wasn't worth filing the suit," says a midwestern sales manager who settled a discrimination case against her employer confidentially for $150,000 in January. The woman will net $14,000 after lawyers' fees, expenses and taxes, says a source close to her case. Some "winning" plaintiffs even wind up in the hole. Realizing that such grim victories chill business, members of the National Employment Lawyers Association are prodding Congress to stop taxing discrimination awards and settlements, which often take the biggest hit. So far, they've had no luck.
2. "Gee, I don't know much about the law..."
Ask an attorney about anything outside his niche and odds are he won't know. Teacher Marie Karim learned that when she decided to sue the New York City hospital where she had developed an infection and a hernia in 1999 during exploratory surgery. Karim, 27, hired Sheri B. Paige because her mother had once consulted the Norwalk, Conn., lawyer about collecting a debt. Karim says Paige assured her that she had experience with medical malpractice cases.
More than a year later, Karim discovered that Paige had virtually no such experience and that she hadn't even filed the suit. Worse yet, the statute of limitations had run out. "I wanted to kill her," says Karim, who got $325,000 from Paige's insurance company in 2002 with assistance from a specialist in legal malpractice. Paige denies all wrongdoing and blames the entire mess on Karim. But in November 2002 a Connecticut lawyer grievance panel found probable cause to believe that Paige was guilty of misconduct. A hearing is set for this month.
Karim should have hired an expert — someone who does almost nothing but medical malpractice.You can find specialists in the lawyer directory Martindale-Hubbell, available in any library or online at lawyers.martindale.com, or in FindLaw (www.findlaw.com).
3. "...but I'd sure like to get to know you better."
Unlike doctors, lawyers in most states are allowed to have sex with clients. And many do. Nearly 20% of attorneys surveyed nationwide by the University of Memphis in 1993 admitted they or a lawyer they knew had had an affair with a client.
Lawyer-client flings, especially in divorce and family law cases, can warp the lawyer's judgment, prompting him to either prolong the dispute or sacrifice the client's interests to end it fast, notes Texas Wesleyan University law professor Malinda L. Seymore. The client may submit in the belief that if she does, the lawyer will do more to help her keep her home and children.
That's what Plantation, Fla., lawyer Steven W. Effman told two female clients to entice them to service him in his office, according to the women's sworn testimony. Not only did Effman fail to deliver on his promises, these clients say, but he actually had the nerve to bill at least one for their trysts. The Florida bar filed a complaint against Effman in 2002, and a court suspended his license for 91 days. Effman insists his affairs were consensual and denies making promises or billing for sex.
Despite such scandals, the American Bar Association didn't rule on the issue until 2002, when it noted that lawyer-client sex is generally unethical but it is up to each state whether to adopt an outright ban on the practice. Only six have.
4. "Okay, I've made some mistakes. Good luck finding them!"
Trying to learn whether a lawyer is a bad apple can be an exercise in futility. The ABA keeps a database of known ethics violators and makes the information available if you call 312-988-5321, but it relies on voluntary reports from state bar counsels. You could call the bar counsel in the appropriate state directly — listed at www.nobc.org — but that can also be a dead end unless the attorney has been suspended or disbarred. Many states just say he's "in good standing" even if he has had lots of complaints or worse.
Take Las Vegas lawyer Kenneth L. Hall. According to the Nevada bar, Hall has no disciplinary record. Run a search on him at Google.com, however, and you'll find a newspaper story about his suspension in 2001 for videotaping an intimate encounter he had with a woman in his office in the presence of her toddler daughter. Why doesn't the bar tell you about the suspension? Hall, 54, convinced a court to set it aside, though he admits to the tryst.
Beyond Google, which is free, you can do a background search by using commercial sites such as www.knowx.com or www.gaprs.com, which charge a small fee — typically $10 to $30.
5. "I never win."
So your attorney has plenty of experience in his field, but has that been as a winner or a loser? How you find out depends on the situation. If you're hiring him to defend you against a criminal charge, ask him if he ever worked in the prosecutor's office and for how long, because that's where the best criminal defense lawyers typically get their training. For any court case — criminal or civil — you also want to know how many cases he's actually taken to trial in the past five years. Experts say even five or six can be plenty, if at least one win is in a case similar to yours. If he says his cases usually settle, that's a bad sign. A guy who's known for always settling can't drive a hard bargain. "It certainly helps if the defendant knows [a lawyer] is ready to go to court," says Bert Braud, a Kansas City, Mo., litigator who takes at least one case through trial each year.
6. "I won't take your chump-change case."
Just because you have a strong legal case doesn't mean a lawyer will take it on — not if it is bad for his bottom line. That's especially true with claims involving securities arbitration, usually against brokers who have churned clients' accounts or put them in unsuitable investments. Most brokers require their clients to agree to arbitration when opening an account. The number of these cases has risen more than 56% since 1998, according to NASD Dispute Resolution, the group that hears 90% of such cases.
Trouble is, the few lawyers who know about this growing field generally refuse to handle claims of less than $50,000 because smaller cases generate small fees. Henri Draznin, a retired customer-service rep, found himself in such a bind. He couldn't find a lawyer willing to help him recover $9,000 he'd lost in high-yield bonds, which his broker had put him into without mentioning they were risky for a retiree. Draznin was out of luck until he found a legal clinic at New York's Pace University Law School, where students supervised by Professor Barbara Black helped him file an arbitration claim, winning him $4,046 in February 2003.
Short of finding a law school clinic eager to help you, what can you do? Contact the Legal Referral Service at the Association of the Bar of the City of New York at LRS@abcny.org. You can get a referral to an NYC attorney and arrange a $25 initial consultation. Or you can contact Public Investors Arbitration Bar Association (www.piaba.org) to get the name of a lawyer in your area who is experienced in securities. Try offering him a little more than his usual percentage — say, 33%, rather than 30 — to sweeten the pot.
7. "I charge as much as you'll let me."
Most lawyers can charge for their services in a variety of ways: a flat fee, an hourly rate of typically $100 to $300 an hour, or a percentage of the award, usually billed at 30 or 40%.
Which is best for you? If your case is simple, a flat fee is best. It gives the lawyer an incentive to solve the problem efficiently. When you're filing suit for, say, personal injury, employment discrimination or malpractice, you're generally better off paying a percentage. The incentive in these cases should be to get as much money as possible, fast, and if your attorney fails, you aren't stuck with a big bill. Have him take his fee after expenses, to keep his administrative costs down. Don't ever pay a percentage to settle an estate or for a divorce or a real estate deal. A $1 million closing or divorce is no more difficult than a $500,000 one, so why pay more?
If you have a strong civil suit, your best bet may be a hybrid fee: an hourly rate if the lawyer can solve the problem in a few hours, switching to a percentage if it takes longer or he has to sue. A Fortune 500 company executive hired Kansas City's Braud to handle a sex discrimination case in 2001, and the lawyer was able to wrest a six-figure settlement out of the employer in about 15 hours. His fee was $2,000 instead of the more than $33,000 she would have paid had he charged a percentage. If a lawyer resists such a deal, tell him you need to interview a few more attorneys before you decide whom to hire. He'll likely come around.
8. "You may be better off without me."
Many of the things lawyers do you can do for yourself, provided you have the time and inclination to learn how. You can write your own will, for instance, if you have a relatively uncomplicated estate. A good place to get help is legal software publisher Nolo (www.nolo.com), whose Quicken Lawyer 2003 Wills sells for $30.
For issues that are too complicated to be handled without some legal assistance, an interim step between going it alone and a lawyer is the paralegal. Depending on the state, these professionals can handle living trusts, bankruptcy petitions, house closings and uncontested divorces — and often for just a few hundred dollars. The only things paralegals can't do are give legal advice and represent you in court.
Before you sign on, look for experience and expertise in a particular field. It's also nice — but not essential — for the paralegal to hold a degree or certificate from one of the 800-plus training programs in the U.S. (247 of them approved by the ABA) or be deemed a registered paralegal by the National Federation of Paralegal Associations or a certified legal assistant by the National Association of Legal Assistants.
9. "Wanna sue me? Oops — you signed that away."
Most lawyers are competent and ethical. But what if yours screws up? Can you sue him? Not if you agreed to submit disputes to arbitration, where the rules of law and evidence don't always apply, and you'll have neither the right to a jury nor perhaps even the right to appeal.
Many lawyers insert compulsory arbitration provisions in their retainer agreements, which isn't necessarily unethical, according to the ABA, providing that the agreement doesn't insulate the lawyer from liability and the client understands what it means. Such a clause should be a warning for you to take your business elsewhere.
Inventor Walter R. Fields says he didn't realize he was giving up his right to sue when he hired Maslon Edelman Borman & Brand, a large Minneapolis law firm, to sue the builder of his mold-infested $1.2 million house. Disappointed when he lost his case, Fields tried to sue Maslon Edelman for malpractice, claiming, among other things, that the firm had failed to submit evidence of the mold in time. But in 2001 a Minneapolis court refused to hear the case because of an arbitration clause in Fields's retainer agreement. Fields also came up empty after arbitrators rejected his claim and two courts upheld the arbitration. He has declined to discuss the case further until he has exhausted all possible legal remedies. Maslon Edelman denies malpractice, claiming the mold was a side issue, and defends the arbitration clause, saying that Fields had weeks to review the agreement with a lawyer before signing.
10. "And even if you can sue, you can't win."
It's mighty tough to nail a lawyer for malpractice. Some 68% of malpractice claims from 1996 through 1999 closed without the client receiving payment from the lawyer's insurance company, and only 6.7% netted more than $50,000, according to a 2001 ABA survey.
Why is it so hard? For one thing, only an estimated 30 to 50% of lawyers even carry insurance, so collecting is a long shot. Plus, to win your case, you have to prove not only that the lawyer failed to perform but also that your case would have turned out differently had he done a better job. Hard to do, since a legal issue is seldom a slam-dunk, even if the lawyer does everything right.
Malpractice insurance doesn't cover everything anyway, as Leslie Cerrato learned in 2002, after she won a $250,000 settlement from her lawyer, Milo J. Altschuler. The prominent attorney pleaded no contest to the charge that in 1991 he put Cerrato over his lap in a Connecticut courthouse and spanked her to discourage nervous fidgeting in front of the judge. Altschuler authorized Cerrato to make her claim with his insurance carrier, American Home Assurance, but the company balked, insisting that malpractice insurance does not cover spanking. "[F]ondling the bare bottoms of female clients is not part of the practice of law," argued American Home. A federal judge agreed, dashing any hopes Cerrato had.