GUEST POST—Lawyer Oversupply: Does producing more and more Attorneys result in better prices for average consumers? Does it Actually help the new Lawyers themselves? (Part I)

(While I’m out, Connecticut attorney Samuel Browning is contributing a two-part series on attorney oversupply. -LSTB)

Lawyer Oversupply: Does producing more and more Attorneys result in better prices for average consumers? Does it Actually help the new Lawyers themselves?

We are graduating thousands more ABA-accredited law school students each year than there are attorney jobs. This oversupply is at least a third of the total number of graduates each year, it may actually be higher.

Fortunately this oversupply is not leading to increased frivolous litigation, probably because of fixed costs required to litigate, and other inhibitors and constraints within the present legal system.

The increased supply of attorneys, while initially serving to keep some legal fees lower for the consumer, will probably not lead to any more increased savings for the consumer because there are set expenses needed to litigate certain cases, for which the client will generally have to pay.

Part I

If 44,000 Law School Students are graduating each year they all must be going out there, and filing law suits, litigious behavior is on the rise! They will of course be able to pay off their law loans by creating work for themselves, chasing ambulances.

In Connecticut, where I practice law, this is definitely not the case. Let’s start with the following observation about state courts, which handle approximately 90% of all court cases in America. Private attorneys only have control over whether the caseload in civil cases goes up and down. In criminal and traffic cases which make up about a third of the docket in a Judicial District in Connecticut, cases are initiated by the police who make arrests, and the prosecutors who decide whether to prosecute. It’s out of the hands of the private bar, except when they personally get arrested themselves, but typically this only creates one or two criminal cases at a time.

Similarly marriages break down long before attorneys get involved, and evictions are filed because people stop paying rent. The Connecticut Law Tribune pointed out in 2010 that “approximately 75 percent of all family cases have at least one pro se party and the percentage is not that much lower in general civil actions.”

If the family docket is approximately another third of a typical court’s case flow, (and it was by file volume in Connecticut’s Middlesex Judicial District where I used to work) then only approximately a third of cases are civil, and therefore can be created by enterprising attorneys. Daniel Schwartz has previously discussed these issues on his legal blog and using statistics provided by the judicial branch, pointed out that the numbers of most types of civil cases have remained relatively stable between 1992-1993 and 2009-2010 for example:

	92-93	97-98	03-04	09-10
Administrative Appeals (ALL)	2,347	1,416	1,630	1,661
Collections	18,592	15,339	12,600	25,930
Torts (This includes slip and fall, and defective premises suits)	5,967	6,516	4,925	4,852
Vehicular Torts	9,980	12,899	11,599	10,183
Foreclosures	12,303	11,834	10,046	26,728

As Attorney Schwartz observes, “The number of foreclosure cases has doubled in the last 18 years (up to 26,728 cases in 2009-2010) and the number of collections cases is at its highest levels (up to 25,930 cases in 2009-2010).” But “take these cases out of the overall numbers because they are economically-driven, you come up with an amazing statistic: The overall number of civil cases filed has actually gone down over the last 18 years – from 26,725 to 25,617.”

What Schwartz does not say, is there is another factor driving this increase in lawsuits. The plaintiffs, (banks in the case of foreclosures) and corporations (in the case of collections) are part of the propertied establishment. They have the money to pay for lawyers, lawsuits, and filing fees, and therefore are in position to initiate lawsuits at their choosing. This does not mean that they have created many additional legal jobs. If you go to the property/foreclosure docket in most Connecticut courts, you will inevitably see a solitary attorney from such foreclosure firms as Hunt, Liebert, Jacobson P.C. overseeing up to 100 foreclosure files a day. The number of foreclosure and collection cases has risen far faster than the number of attorneys paid to work on them.

By contrast, if John or Jane Public wishes to hire a private attorney they usually have a great deal of difficulty coming up with a retainer fee, of say five to ten thousand, which they would need for a contested divorce. If they are being evicted, or sued for purposes of collections, they will typically have no disposable money to hire a lawyer. So any suing by the little guy, is going to be highly limited unless an attorney decides to take the case on a pure contingency basis.

In the past personal injury attorneys could often, and relatively easily, call up insurance adjusters and obtain, say $20,000 settlements for limited injuries, without having to first file suit. In the last 20 years, insurance companies, and other monied defendants have become progressively tougher and tougher, resulting in PI lawyers having to sink, more and more capital into their cases (with probable exceptions of some plaintiff friendly urban areas like New York City, and the state of West Virginia). This of course leads to choices about which cases to take, and which ones to spend resources on.

Let me provide an example, I once looked into handling a case in which a mentally ill woman was in the bathroom when her ceiling collapsed upon her and a relative had to drive her to a hospital. She had aches and pains but it was a soft tissue injury case. She also did not attend more than one of her physical therapy sessions, and since she was on disability she had no economic damages. Add to this a lien by the state of Connecticut for prior medical treatment which would have taken half of any settlement, I had to do the following math. The case was worth maybe $15,000 /2 = $7,500 – deposition expenses, and filing fees, we were looking at a recovery of possibly $5,000 at best of which I would receive only 1/3rd. So I passed. Such calculations underlie most attorneys’ economic decisions whether to take a particular case.

In Connecticut, a civil filing fee is typically $300, and there is an additional fee for having the case heard by a jury of $425. Let’s suppose you have four depositions to take, a plaintiff, a defendant, and two witnesses. Typically a court reporter will charge $3.50 a transcript page, with a page per minute of deposition time. Let’s suppose three hours of deposition for each party, and two hours for each witness. That’s ten hours, or 600 pages of transcript. At our per page price, that’s $2,100 plus an appearance fee for the court reporter each time they show up. It could be more or less than $100, but that brings us up to $2,500 for a routine civil case. If you bring in experts (especially medical doctors) they will typically charge you $325 per hour or more door-to-door.

In short, for a simple, bare bones contested, civil matter an attorney can easily spend $3,000 to $3,500 just to get his case ready for trial, which is the most likely point the opposing side is willing to talk about a decent settlement offer. Jury selection and a simple trial itself will take between one to two weeks of time. Let’s call that 80 billable hours. At $200 an hour, the Attorney would be shooting for a return of $16,000, or at contingency rates, an award of approximately $43,000 to make trial worth their time.

There are many administrative hearings that would cost less to do, and there are also trials which are much more expensive, but the math indicates that when John or Jane Public walk in the door to retain Al Solo Attorney, Al either wants a strong case, to go pure contingency, or he’s going to want a retainer fee, that will typically be over $3,000 and more typically over $5,000, unless say, there is a statute that permits the awarding of attorney’s fees, or alternately, it’s a couple-hour affair like a small claims court case.

The result is that plaintiff’s attorneys and defense attorneys who are representing private individuals either will take cases they view as strong, or they will demand a multi-thousand dollar retainer to make sure they do not lose money if they do not collect a judgment. There are of course many well-funded plaintiff’s firms which have no problem taking the majority of their cases on a contingency basis. However the more under-employed new lawyers law schools graduate each year, the more under-funded solos end up in the market, and these attorneys are hardly in the financial position to forgive retainer fees and bankroll the expenses of many, if not most of their cases.

The two other largest categories of cases other then civil are criminal and family law. In criminal cases, because of the sterling quality of most defendants, defense attorneys demand a hefty retainer up front, because they otherwise have no assurance of being paid. Divorce actions which can drag on for years, and can be bitterly fought, also occasion such retainer demands. As a result no matter how many attorneys one were to create, there is a ceiling of private individuals who can pay their retainer fees, and a finite number of cases that are promising enough to be taken on, at no cost to the plaintiff. At least in Connecticut, if you adopt a pay-as-you-go approach with a client of limited financial means you are never going to receive a normal attorney’s wage from a case. I once had another lawyer attempt to refer me a contested family case from a court 30 miles away when he left the practice of law. He had been doing it as a favor, and he didn’t seem to understand why I wouldn’t take it for a flat fee of $125 per court appearance. If you want to earn minimum wage as an attorney you shouldn’t accept such arrangements.