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2015 U. Ill. L. Rev. 1563 (2015)
The Economics of Plaintiff-Side Personal Injury Practice

handle is hein.journals/unilllr2015 and id is 1595 raw text is: THE ECONOMICS OF PLAINTIFF-SIDE PERSONAL INJURY PRACTICE David A. Hyman* Bernard Black** Charles Silver*** Little is known about the economics of plaintiff-side law firms, which typically work on a contingency fee basis. We begin here to fill that gap. We report on the fees received by 124 plaintiff-side personal injury firms located in four states (Illinois, Texas, and two additional undisclosed states). At all of the firms, cases with modest fees may help to keep the lights on, but occasional blockbuster cases account for an overwhelming percentage of earned fees. A one-third contin- gency fee is the most common arrangement but is not always collected ex post; when recoveries are low, firms often reduce or waive their fee. We also estimate the impact of various statutory contingency fee caps on these firms; the effect varies, depending on cap design and case- mix. But, many contingency fee caps dramatically affect the econom- ics of plaintiff-side personal injury practice. TABLE OF CONTENTS 1. INTRODUCTION ........................................... 1564 II. LITERATURE REVIEW, OUR DATA, AND STATUTORY RESTRICTIONS ON CONTINGENCY FEES.... ............ ...... 1566 A. Literature Review . ......................... ..... 1566 B. Our Data ............................... ..... 1569 C. Specific Firms in Our Study .................. ..... 1570 * Hyman is H. Ross and Helen Workman Chair in Law and Professor of Medicine, University of Illinois. Tel. (217) 33-0061, email: dhyman@illinois.edu. Hyman is the corresponding author. ** Bernard Black is Nicholas J. Chabraja Professor at Northwestern University, Law School and Kellogg School of Management. Tel. (312) 503-2784, email: bblack@northwestern.edu. *** Charles Silver is Roy W. and Eugenia C. McDonald Endowed Chair in Civil Procedure, Uni- versity of Texas Law School. Tel. (512) 232-1337, email: csilver@law.utexas.edu. We thank Nora Engstrom, Bert Kritzer, Stephen Daniels, several plaintiffs' lawyers who preferred not to be named, and participants in the 2009 Law and Society Annual Meeting, the 2012 Midwest Law & Economics Association Annual Meeting; and a Searle Center program at Northwestern Law School for helpful comments. We also received helpful comments when the Article was presented to the law & economics workshop at Northwestern University School of Law in 2013. Hyun Kim and Moham- mad Rahmati provided superb research assistance, and Nathan, Benjamin, and Eli Hyman hand-coded the data for two of the firms. We owe special thanks to the firms that anonymously shared detailed case-level information with us. Funding for this study was provided by the Jon David and Elizabeth Epstein Program in Health Law and Policy at the University of Illinois College of Law and the Center on Lawyers, Civil Justice, and the Media at the University of Texas School of Law. 1563

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