II

104TH CONGRESS

2D SESSION S. 1861

To provide for legal reform and consumer compensation, and for other

purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 11, 1996

Mr. MCCONNELL (for himself and Mr. DOLE) introduced the following bill;

which was read twice and referred to the Committee on the Judiciary

A BILL

To provide for legal reform and consumer compensation,

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Legal Reform and

5 Consumer Compensation Act of 1996’’.

6 SEC. 2. TABLE OF CONTENTS.

7 The table of contents for this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

Sec. 3. Findings.

TITLE I—EARLY OFFER AND RAPID RECOVERY

Sec. 101. Early offer and rapid recovery mechanisms.
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TITLE II—FAIRNESS IN LEGAL FEES

Sec. 201. Findings and purpose.

Sec. 202. Definitions.

Sec. 203. Creation of a fiduciary relationship.

Sec. 204. Written hourly rate fee agreement.

Sec. 205. Nature of demand for compensation.

Sec. 206. Time limit for, and requisite contents of, response setting forth settlement offer.

Sec. 207. Consequences of failure to include prescribed material with settlement

offer.

Sec. 208. No obligation to issue response; inadmissibility of demands, responses, and failure to respond.

Sec. 209. Effect of pre-demand settlement offer.

Sec. 210. Pre-retention offer.

Sec. 211. Post-retention offer when a pre-retention offer has been made.

Sec. 212. Post-retention offer when no pre-retention offer has been made.

Sec. 213. Calculation of attorney’s fee when there is a subsequent resolution of

the claim.

Sec. 214. Provision of closing statement.

Sec. 215. Effect of contravening agreements.

Sec. 216. Inapplicability.

TITLE III—APPLICABILITY AND RULE OF CONSTRUCTION

Sec. 301. Applicability to States; choice of law; jurisdiction; and construction.

Sec. 302. Effective date.

1 SEC. 3. FINDINGS.

2 The Congress finds that—

3 (1) the current liability system is, all too often,

4 a frustrating experience for many personal injury

5 claimants, resulting in a time-consuming process

6 which provides inadequate compensation for their in7 juries;

8 (2) for other personal injury claimants, the sys9 tem can provide a windfall of financial gain, greatly

10 in excess of their actual losses;

11 (3) the unpredictable and erratic system is a

12 product of a perverse incentive structure in which

13 the magnitude of noneconomic damages is directly
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1 linked to, and is a multiple of, the out-of-pocket ex2 penses incurred by the claimant;

3 (4) the incentives of the litigation system per4 petuate the overuse and abuse of the medical sys5 tem, costing the economy billions of dollars and cost6 ing every United States family hundreds of dollars

7 in unnecessary insurance premiums and health care

8 expenses;

9 (5) the system as it has recently developed—

10 (A) is highly regressive;

11 (B) is often duplicative of and inconsistent

12 with Federal regulatory and social welfare pro13 grams for the protection of injured parties;

14 (C) is burdened by an administrative cost

15 structure that causes a disproportionate amount

16 of its dollars to go to lawyers rather than to in17 jured parties;

18 (D) is particularly prejudicial to the com19 petitive position of the American small business

20 community;

21 (E) is a major and increasing threat to the

22 economic viability of American cities;

23 (F) imposes a major burden on the Amer24 ican economy and if reformed would signifi-
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1 cantly enhance American productivity and

2 consumer wealth;

3 (G) is replete with incentives that reward

4 abusive claiming and defensive behavior; and

5 (H) is therefore a major cause of the dan6 gerous disesteem increasingly felt by increasing

7 numbers of Americans toward the legal system

8 and, indeed, the rule of law itself; and

9 (6) there is a need for a system of early offer,

10 rapid recovery and consumer choice to enable claim11 ants to be made whole and recover all economic

12 losses without resort to complex and protracted liti13 gation.

14 TITLE I—EARLY OFFER AND

15 RAPID RECOVERY

16 SEC. 101. EARLY OFFER AND RAPID RECOVERY MECHA17 NISMS.

18 (a) PURPOSE.—The purpose of this title is to estab19 lish a system of early offer and rapid recovery to permit

20 personal injury claimants to recover their economic losses

21 from a responsible party in a timely manner.

22 (b) IN GENERAL.—Chapter 111 of title 28, United

23 States Code, is amended by adding at the end the follow24 ing new section:
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1 ‘‘§ 1660. Early offer and rapid recovery mechanisms

2 ‘‘(a) For purposes of this section:

3 ‘‘(1) The term ‘allegedly responsible party’

4 means a person, partnership, or corporation, and an

5 insurer thereof, alleged by the claimant to be respon6 sible for at least some portion of an injury alleged

7 by a claimant.

8 ‘‘(2) The term ‘claimant’ means an individual

9 who, in his or her own right, or vicariously as other10 wise permitted by law, is seeking compensation for

11 personal injury.

12 ‘‘(3) The term ‘clear and convincing evidence’

13 means that measure or degree of proof that will

14 produce in the mind of the trier of fact a firm belief

15 or conviction as to the truth of the allegations

16 sought to be established. The level of proof required

17 to satisfy such standard shall be more than that re18 quired under preponderance of the evidence, and less

19 than that required for proof beyond a reasonable

20 doubt.

21 ‘‘(4) The term ‘collateral benefits’ means all

22 benefits and advantages received or entitled to be re23 ceived (regardless of the right of recoupment of any

24 other entity, through subrogation, trust agreement,

25 lien, or otherwise) by an injured individual (or other
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1 entity) as reimbursement of loss because of personal

2 injury—

3 ‘‘(A) payable or required to be paid by—

4 ‘‘(i) Federal, State, or other govern5 mental disability, unemployment, or sick6 ness programs;

7 ‘‘(ii) under the terms of any Federal,

8 State, or other governmental or private

9 health insurance, accident insurance, wage

10 or salary continuation plan, or disability

11 income insurance; or

12 ‘‘(iii) any other program or compensa13 tion system, if the payment is intended to

14 compensate the claimant for the same in15 jury or disability which is the subject of

16 the claim; minus

17 ‘‘(B) the amount paid by such individual

18 (or by the spouse, parent, child, or legal guard19 ian of such individual) to secure the payments

20 described in subparagraph (A).

21 ‘‘(5) The term ‘economic loss’ means any objec22 tively verifiable pecuniary loss resulting from the

23 harm suffered, including past and future medical ex24 penses, loss of past and future earnings, burial

25 costs, property damage accompanying bodily injury,
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1 costs of replacement services in the home, including

2 child care, transportation, food preparation, and

3 household care, costs of making reasonable accom4 modations to a personal residence, loss of employ5 ment, and loss of business or employment opportuni6 ties, to the extent recovery for such losses is allowed

7 under applicable State law.

8 ‘‘(6) The term ‘entity’ includes an individual or

9 person.

10 ‘‘(7) The term ‘intentional misconduct’ means

11 conduct whereby harm is intentionally caused or at12 tempted to be caused by one who acts or fails to act

13 for the purpose of causing harm or with knowledge

14 that harm is substantially certain to follow when

15 such conduct caused or substantially contributed to

16 the harm claimed for, except a person does not in17 tentionally cause or attempt to cause harm—

18 ‘‘(A) merely because his or her act or fail19 ure to act is intentional or done with the real20 ization that it creates a risk of harm; or

21 ‘‘(B) if the act or omission causing bodily

22 harm is for the purpose of averting bodily harm

23 to oneself or another person.

24 ‘‘(8) The term ‘liability claim’ means a demand

25 for compensation by certified mail to an allegedly re-
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1 sponsible party, which shall set forth the material

2 facts relevant to the claim including—

3 ‘‘(A) the name, address, age, marital sta4 tus, and occupation of claimant, which term for

5 the purposes of this section includes the injured

6 party if claimant is operating in a representa7 tive capacity;

8 ‘‘(B) a brief description of how the injury

9 occurred;

10 ‘‘(C) the names, and, if known, the ad11 dresses, telephone numbers, and occupations of

12 all known witnesses to the injury;

13 ‘‘(D) copies of photographs in claimant’s

14 possession that relate to the injury;

15 ‘‘(E) the basis for claiming that the party

16 to whom the claim is addressed is at least par17 tially responsible for causing the injury;

18 ‘‘(F) a description of the nature of the in19 jury, the names and addresses of all physicians,

20 other health care providers, and hospitals, clin21 ics, or other medical service entities that pro22 vided medical care to the claimant or the in23 jured party including the date and nature of the

24 service;
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1 ‘‘(G) a copy of the medical records relating

2 to the injury and those involving a prior injury

3 or preexisting medical condition which an alleg4 edly responsible party would be able to intro5 duce into evidence in a trial or, in lieu of either

6 or both, executed releases authorizing the alleg7 edly responsible party to obtain such records di8 rectly from health care providers that produced

9 or possess them; and

10 ‘‘(H) relevant documents, including records

11 of earnings if a claimant is self-employed and

12 employer records of earnings if a claimant is

13 employed, and any medical expenses, wages

14 lost, or other pertinent damages suffered as a

15 consequence of the injury.

16 ‘‘(9) The term ‘noneconomic loss’ means non17 monetary losses including punitive damage claims

18 and further including without being limited to pain,

19 suffering, inconvenience, mental suffering, emotional

20 distress, loss of society and companionship, loss of

21 consortium, hedonic damages, injury to reputation,

22 and humiliation.

23 ‘‘(10) The term ‘punitive damages’ means dam24 ages awarded against any person or entity to punish

25 such persons or entity or to deter such person or en-
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1 tity, or others, from engaging in similar behavior in

2 the future.

3 ‘‘(11) The term ‘reasonable attorney’s fee’

4 means an hourly fee for services rendered subse5 quent to the execution of a written agreement estab6 lishing an attorney-client relationship that bears a

7 reasonable relation to the attorney’s actual efforts

8 on the client’s behalf. Fees shall not be deemed rea9 sonable to the extent that services provided by an at10 torney are attributable to any failure to provide rea11 sonably prompt notice pursuant to subsection

12 (b)(1)(A)(ii).

13 ‘‘(12) The term ‘serious bodily injury’ means

14 bodily injury which results in death, dismemberment,

15 significant and permanent loss of an important bod16 ily function, or significant and permanent scarring

17 or disfigurement.

18 ‘‘(13) The term ‘wanton misconduct’ means

19 conduct that the allegedly responsible party realized

20 was excessively dangerous, done heedlessly and reck21 lessly, and with a conscious disregard of the con22 sequences to or rights and safety of the claimant.

23 ‘‘(b)(1)(A) After an occurrence that may give rise to

24 a civil action or claim against any person, in any Federal

25 or State court based on any cause of action to recover
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1 damages for personal injury, any potentially allegedly re2 sponsible party has the option to offer, not later than the

3 later of—

4 ‘‘(i) 120 days after the injury; or

5 ‘‘(ii) 120 days after the initiation of the liability

6 claim,

7 to compensate a claimant for reasonable economic loss, in8 cluding future economic loss, less collateral benefits, and

9 including a reasonable attorney’s fee for the claimant.

10 ‘‘(B) If within 30 days of receipt of a liability claim

11 an allegedly responsible party notifies an unrepresented

12 claimant or a claimant’s attorney of a request for a medi13 cal examination of the claimant, and the claimant is not

14 made available for such examination within 10 days of re15 ceipt of the request, the time provided by this section for

16 issuing a response is extended by 1 day for each day that

17 the request is not honored after the expiration of 10 days

18 from the date of the request. Any such extension shall also

19 include a further period of 10 days from the date of the

20 completion of the medical examination.

21 ‘‘(C) The claimant may extend the time for receiving

22 the offer specified in subparagraph (A).

23 ‘‘(2) States may establish for all cases, including

24 cases covered by this title, a minimum dollar value for de25 fined classes involving death or serious bodily injury. A
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1 claimant shall have the option of accepting such minimum

2 dollar value payable in lump sum, or accepting the benefit

3 specified in paragraph (1)(A).

4 ‘‘(c) An offer under subsection (b) may include other

5 allegedly responsible parties, individuals, or entities that

6 were involved in the events which gave rise to the civil

7 action, regardless of the theory of liability on which the

8 claim is based, upon their request or consent.

9 ‘‘(d) Future economic losses shall be payable to an

10 individual under this section as such losses occur.

11 ‘‘(e) If, after an offer is made under subsection (b),

12 the participants in the offer dispute their relative contribu13 tions to the payments to be made to the individual, such

14 disputes shall be resolved through binding arbitration in

15 accordance with applicable rules and procedures estab16 lished by the Attorney General of the United States.

17 ‘‘(f)(1) The claimant may reject an offer of com18 pensation made under subsection (b) and elect to bring

19 or maintain a civil action. Upon rejection of the offer, the

20 claimant may recover economic loss, including future eco21 nomic loss, less collateral benefits. The amount of collat22 eral benefits shall be determined by the court in a pretrial

23 proceeding. In any subsequent proceeding in the action,

24 no evidence shall be admitted as to the amount of eco25 nomic loss for which collateral benefits have been paid to,
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1 or will be paid to, the claimant. The claimant may recover

2 for noneconomic loss to the extent authorized by other ap3 plicable law only if the claimant proves each element of

4 the claim for noneconomic loss by clear and convincing

5 evidence, that the allegedly responsible party caused the

6 injury by intentional or wanton misconduct.

7 ‘‘(2) A notice of such a rejection is required to be

8 made not later than 90 days after the date on which the

9 offer of compensation benefits is made. A failure to accept

10 the offer within the 90-day period is deemed a rejection.

11 ‘‘(g) Rejected offers may not be disclosed in any sub12 sequent action brought by the claimant.

13 ‘‘(h) Nothing in this section shall be construed to—

14 ‘‘(1) waive or affect any defense of sovereign

15 immunity asserted by any State under any law;

16 ‘‘(2) waive or affect any defense of sovereign

17 immunity asserted by the United States;

18 ‘‘(3) affect the applicability of any provision of

19 chapter 97;

20 ‘‘(4) preempt State choice-of-law rules with re21 spect to claims brought by a foreign nation or a citi22 zen of a foreign nation;

23 ‘‘(5) affect the right of any court to transfer

24 venue or to apply the law of a foreign nation or to

25 dismiss a claim of a foreign nation or of a citizen
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1 of a foreign nation on the ground of inconvenient

2 forum;

3 ‘‘(6) affect any applicable statute of limitations

4 of any State or of the United States, except as ex5 pressly provided in this title; or

6 ‘‘(7) impair any right of a provider of collateral

7 benefits to seek reimbursement outside of the claim8 ant’s cause of action where permitted by State law,

9 other than by a lien on the recovery of the claimant.

10 ‘‘(i)(1) This section shall not apply to accidental bod11 ily injury caused by the operation or the use of a motor

12 vehicle in claims in which an uninsured motorist or a per13 sonal protection insured is involved.

14 ‘‘(2) For purposes of this subsection the term ‘oper15 ation or use’—

16 ‘‘(A) means operation or use of a motor vehicle

17 as a motor vehicle, including, incident to its oper18 ation or use as a vehicle, the occupation of the vehi19 cle;

20 ‘‘(B) does not cover conduct within the course

21 of a business of manufacturing, selling, or maintain22 ing a motor vehicle, including repairing, servicing,

23 washing, loading, or unloading; and
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1 ‘‘(C) does not include such conduct not within

2 the course of such a business unless such conduct

3 occurs while occupying a motor vehicle.’’.

4 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

5 The table of sections for chapter 111 of title 28, United

6 States Code, is amended by adding at the end the follow7 ing new item:

‘‘1660. Early offer and rapid recovery mechanisms.’’.

8 TITLE II—FAIRNESS IN LEGAL

9 FEES

10 SEC. 201. FINDINGS AND PURPOSE.

11 (a) FINDINGS.—The Congress finds that contingency

12 fees play a useful and often critical role in ensuring access

13 to counsel and the courts on the part of those who would

14 otherwise be unable to afford such access, but that—

15 (1) personal injury claimants are often sub16 jected to unnecessary costs, delays, and inefficiencies

17 in processing their compensation claims;

18 (2) virtually all such claimants who are rep19 resented by attorneys are charged contingent fees;

20 (3) the ethical and legal validity of a contingent

21 fee is dependent upon an attorney undertaking risk

22 in exchange for sharing proportionately in the pro23 ceeds of a claim;

24 (4) the perverse incentives of the existing sys25 tem often encourage and reward defendants who
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1 take intransigent settlement positions and otherwise

2 unethically add to the costs and delays of settling

3 meritorious claims for, among other reasons, the

4 purpose of reducing the marginal rates of compensa5 tion received by claimants’ counsel;

6 (5) many deserving claimants receive inequi7 table compensation because—

8 (A) such claimants are required to pay at9 torneys approximately one-third or more of any

10 recovery even when there is little or no issue of

11 liability or damages and therefore little or no

12 assumption of risk by the attorney; and

13 (B) when a defendant or its insurer has

14 made a substantial settlement offer before the

15 attorney’s retention or shortly thereafter and

16 the attorney has added little or nothing to the

17 value of the claim to that point, payment of a

18 substantial contingent fee is nonetheless gen19 erally required;

20 (6) the current compensation system often fails

21 to provide sufficient financial incentives to effectuate

22 prompt and adequate compensation to deserving

23 claimants, resulting in—

24 (A) delays in adjudications and case settle25 ments often caused by intransigent defendant
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1 conduct that the present system perversely re2 wards and thereby deprives claimants of prompt

3 compensation;

4 (B) a substantial burden on Federal and

5 State courts contributing to very high case

6 backlogs; and

7 (C) regressive cost burdens and substantial

8 avoidable costs imposed on all parties resulting

9 from the long delays in resolving many claims;

10 (7) the current tort compensation system which

11 results in delays in resolving claims and which effec12 tively provides for increased noneconomic damages

13 and, therefore, increased legal fees as medical care

14 costs increase, provides perverse financial incentives

15 for both more intensive and unnecessary use of med16 ical care providers and the fraudulent incurrence of

17 medical care expenses, thereby adding materially to

18 the Nation’s health care costs and burdens;

19 (8) delays in resolving claims often result in

20 more intensive and unnecessary use of medical care

21 providers, thereby adding to the Nation’s health care

22 burden;

23 (9) the claims process gives rise to substantial,

24 avoidable transaction costs because of the lack of

25 adequate incentives for defendants and their insur-
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1 ers to offer prompt and equitable settlements to

2 meritorious claimants and because claimants’ attor3 neys exact a significant share of any settlement even

4 when their efforts do not generate or augment the

5 settlement offer;

6 (10) contingency fee practices, as described in

7 the preceding paragraphs, expose a clear and imper8 missible gap between (A) the ethical standards es9 tablished and promulgated by courts and professed

10 by the Bar, and (B) the actual practices of the Bar;

11 (11) contingency fee practices, as described in

12 the preceding paragraphs, bring substantial disre13 pute to the Bar and to the legal system as a whole

14 and loss of confidence in the rule of law itself, not

15 the least because they create and expose broad gaps

16 between the stated ethical principles of the legal pro17 fession and its real world practices;

18 (12) the inability of the Bar and the courts to

19 curb contingency fee abuses has led to higher settle20 ment costs, lowered compensation to injured per21 sons, excessive medical care costs and delayed claims

22 processing; and

23 (13) there is a need for adopting a procedure

24 to implement appropriate ethical and legal standards
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1 and to resolve personal injury claims more fairly and

2 promptly.

3 (b) PURPOSES.—The purposes of this title are to—

4 (1) enforce more efficiently and effectively ethi5 cal standards governing the reasonableness of law6 yers’ fees and correspondingly to implement the

7 stricter scrutiny that courts are obliged to apply to

8 contingent fees;

9 (2) reverse systemic incentives now in effect so

10 as to reward, and not to penalize, defendants who

11 make substantial early settlement offers;

12 (3) compensate claimants’ attorneys more ra13 tionally by calculating their compensation in relation

14 to the value of services rendered and risks under15 taken;

16 (4) compensate more fairly those seeking re17 dress for injuries by giving them a larger share of

18 promptly achieved settlements;

19 (5) further enhance the likelihood of early set20 tlement of claims by preserving a larger share of

21 early settlement offers for claimants;

22 (6) lower the costs of the personal injury tort

23 compensation system including unnecessary medical

24 and defense costs;
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1 (7) remove the burdens on interstate commerce

2 and the Nation’s health care programs that are im3 posed by the current tort compensation system;

4 (8) create a simple, self-enforcing system, con5 trolled by the parties, which forms an early basis for

6 establishing the sums and issues that are in dispute;

7 (9) reduce unworkable burdens now placed on

8 courts and bar grievance boards presently charged

9 with enforcing ethical standards through ex post

10 facto, case-by-case fact finding processes that pose

11 difficult burdens of proof and impose disproportion12 ate transaction costs on both parties and fact find13 ers; and

14 (10) provide alternatives to across-the-board fee

15 cap reforms, which often provide defendants with

16 unearned advantages and further encourage many

17 defendants in unethical protraction of settlement of

18 meritorious claims.

19 SEC. 202. DEFINITIONS.

20 For purposes of this title:

21 (1) The term ‘‘allegedly responsible party’’

22 means a person, partnership, corporation, and an in23 surer thereof, alleged by a claimant to be responsible

24 for at least some portion of a personal injury alleged

25 by claimant.
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1 (2) The term ‘‘claim’’ means an assertion of en2 titlement to compensation for personal injury from

3 an allegedly responsible party and, to the extent sub4 ject to a contingent fee agreement, to all other relat5 ed claims arising from such injury.

6 (3) The term ‘‘claimant’’ means an individual

7 who, in his or her own right, or vicariously as other8 wise permitted by law, is seeking compensation for

9 personal injury.

10 (4) The term ‘‘contingent fee’’ means the fee

11 negotiated in a contingent fee agreement that is pay12 able in fact or in effect only from the proceeds of

13 any recovery on behalf of claimant.

14 (5) The term ‘‘contingent fee agreement’’

15 means a fee agreement between an attorney and

16 claimant wherein the attorney agrees to bear the

17 risk of no or inadequate compensation in exchange

18 for a proportionate share of any recovery by settle19 ment or verdict obtained for claimant.

20 (6) The term ‘‘contingent fee attorney’’ means

21 an attorney who agrees to represent claimant in ex22 change for a contingent fee.

23 (7) The term ‘‘fixed fee’’ means an agreement

24 between an attorney and claimant whereby the attor-
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1 ney agrees to perform a specific legal task in ex2 change for a specified sum to be paid by claimant.

3 (8) The term ‘‘hourly rate fee’’ means the fee

4 generated by an agreement, or otherwise by oper5 ation of law, between an attorney and claimant pro6 viding that claimant pay the attorney a fee deter7 mined by multiplying the hourly rate negotiated, or

8 otherwise set by law, between the attorney and

9 claimant, by the number of hours that the attorney

10 has worked on behalf of claimant in furtherance of

11 claimant’s interest. An hourly rate fee may also be

12 a contingent fee to the extent it is only payable in

13 fact or in effect from the proceeds of any recovery

14 on behalf of claimant.

15 (9) The term ‘‘injury’’ means personal injury.

16 (10) The term ‘‘personal injury’’ means an oc17 currence resulting from any act giving rise to a tort

18 claim, including, without limitation, bodily injury,

19 sickness, disease, death, or property damage accom20 panying bodily injury.

21 (11) The term ‘‘post-retention offer’’ means an

22 offer of settlement in response to a demand for com23 pensation made within the time constraints, and

24 conforming to the provisions of this title, made to a
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1 claimant who is represented by a contingent fee at2 torney.

3 (12) The term ‘‘pre-retention offer’’ means an

4 offer to settle a claim for compensation made to a

5 claimant not represented by an attorney at the time

6 of the offer.

7 (13) The term ‘‘response’’ means a written

8 communication by claimant or an allegedly respon9 sible party or the attorney for either, deposited into

10 the United States mail and sent certified mail or de11 livered by an overnight delivery service.

12 (14) The term ‘‘settlement offer’’ means a writ13 ten offer of settlement set forth in a response within

14 the time limits set forth in this title.

15 SEC. 203. CREATION OF A FIDUCIARY RELATIONSHIP.

16 For purposes of this title, a fiduciary relationship

17 commences when a claimant consults a contingent fee at18 torney to seek professional services.

19 SEC. 204. WRITTEN HOURLY RATE FEE AGREEMENT.

20 Contingent fee agreements for the representation of

21 parties with claims shall also include alternate hourly rate

22 fees. If a contingent fee attorney has not entered into a

23 written agreement with claimant at the time of retention

24 setting forth the attorney’s hourly rate, then a reasonable
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1 hourly rate is payable, subject to the limitations set forth

2 in this title.

3 SEC. 205. NATURE OF DEMAND FOR COMPENSATION.

4 (a) IN GENERAL.—At any time after retention, a con5 tingent fee attorney pursuing a claim shall send a demand

6 for compensation by certified mail to an allegedly respon7 sible party, which shall set forth the material facts rel8 evant to the claim including—

9 (1) the name, address, age, marital status, and

10 occupation of claimant, which term for the purposes

11 of this title includes the injured party if claimant is

12 operating in a representative capacity;

13 (2) a brief description of how the injury oc14 curred;

15 (3) the names, and, if known, the addresses,

16 telephone numbers, and occupations of all known

17 witnesses to the injury;

18 (4) copies of photographs in claimant’s posses19 sion that relate to the injury;

20 (5) the basis for claiming that the party to

21 whom the claim is addressed is at least partially re22 sponsible for causing the injury;

23 (6) a description of the nature of the injury, the

24 names and addresses of all physicians, other health

25 care providers, and hospitals, clinics, or other medi-
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1 cal service entities that provide medical care to

2 claimant or the injured party including the date and

3 nature of the service;

4 (7) medical records relating to the injury and

5 those involving a prior injury or pre-existing medical

6 condition which an allegedly responsible party would

7 be able to introduce into evidence in a trial or, in

8 lieu of either or both, executed releases authorizing

9 the allegedly responsible party to obtain such records

10 directly from health care providers that produced or

11 possess them; and

12 (8) relevant documentation, including records of

13 earnings if a claimant is self-employed and employer

14 records of earnings if a claimant is employed, or any

15 medical expenses, wages lost, or other pertinent

16 damages suffered as a consequence of the injury.

17 (b) MAILING OF COPIES.—At the time of the mailing

18 of the demand for compensation, a claimant’s attorney

19 shall mail copies of each such demand to the claimant and

20 to every other allegedly responsible party.

21 (c) LIMITATION ON FEE.—A fee received by or con22 tracted for by a contingent fee attorney that exceeds 10

23 percent of any settlement or judgment received by his or

24 her client after reasonable expenses have been deducted

25 is unreasonable and excessive if the attorney has sent a
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1 timely demand for compensation but has omitted informa2 tion of a material nature that is required by this section

3 which he or she had in his or her possession or which was

4 readily available to him or her at the time of filing.

5 SEC. 206. TIME LIMIT FOR, AND REQUISITE CONTENTS OF,

6 RESPONSE SETTING FORTH SETTLEMENT

7 OFFER.

8 (a) POST-RETENTION OFFER.—To qualify its re9 sponse as a post-retention offer under this title, an alleg10 edly responsible party shall—

11 (1) issue a response stating a settlement offer

12 within 60 days from receipt of a demand for com13 pensation;

14 (2) send the response to claimant’s attorney

15 with a copy to claimant;

16 (3) state that the offer is open for acceptance

17 for a minimum of 30 days from the time of its re18 ceipt by claimant’s attorney and further state wheth19 er it expires at the end of this period or remains

20 open for acceptance for a longer period or until no21 tice of withdrawal is given; and

22 (4) include with the offer copies of materials in

23 its or its attorney’s possession concerning the alleged

24 injury upon which the allegedly responsible party re25 lied in making the settlement offer except material
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1 that such party or its attorney believes in good faith

2 would not be discoverable by claimant during the

3 course of litigation.

4 If reproduction costs under paragraph (4) would be sig5 nificant relative to the size of the offer, the allegedly re6 sponsible party may, in the alternative, offer other forms

7 of access to the materials convenient and at reasonable

8 cost to claimant’s attorney.

9 (b) TIME LIMITATIONS.—If within 30 days of receipt

10 of a claimant’s demand for compensation an allegedly re11 sponsible party notifies an unrepresented claimant or a

12 claimant’s attorney that it seeks to have a medical exam13 ination of claimant, and claimant is not made available

14 for such examination within 10 days of receipt of the re15 quest, the time herein provided for issuing a response is

16 extended by 1 day for each day that the request is not

17 honored after the expiration of 10 days from the date of

18 the request. Any such extension also includes a further

19 period of 10 days from the date of the completion of the

20 medical examination.

21 (c) INCREASE IN OFFER.—The settlement offer may

22 be increased during the 60-day period set forth in sub23 section (a)(1) by issuing an additional offer stating that

24 the time for acceptance is 10 days after receipt of the ad25 ditional offer by claimant’s attorney or 30 days from re-
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1 ceipt of the initial response, whichever is longer, unless

2 the additional response specifies a longer period of time

3 for acceptance as set forth in subsection (a)(3).

4 SEC. 207. CONSEQUENCES OF FAILURE TO INCLUDE PRE5 SCRIBED MATERIAL WITH SETTLEMENT

6 OFFER.

7 (a) IN GENERAL.—If an allegedly responsible party

8 or its attorney willfully fails to include the material re9 quired by section 206(a)(4) with a response stating a set10 tlement offer or does not otherwise make such material

11 available—

12 (1) a claimant may revoke its acceptance of

13 such settlement offer within 2 years of having ac14 cepted it; and

15 (2) any fees and costs reasonably incurred by a

16 claimant in revoking its acceptance of such settle17 ment offer and reinstating its claim is recoverable

18 from the allegedly responsible party, including the

19 losses suffered by a claimant who is precluded from

20 reinstating its claim by operation of a statute of lim21 itations.

22 (b) SANCTIONS FOR PARTY.—Willful failure of an al23 legedly responsible party to comply with section 206(a)(4)

24 shall subject such party to the sanctions applicable to a
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1 party who fails to comply with requests for the production

2 of documents.

3 (c) SANCTIONS FOR ATTORNEY.—Willful failure of

4 an attorney for an allegedly responsible party to comply

5 with section 206(a)(4) shall subject that attorney to the

6 same sanctions applicable to attorneys who improperly

7 counsel their clients not to produce documents for which

8 there has been a discovery request.

9 SEC. 208. NO OBLIGATION TO ISSUE RESPONSE; INADMIS10 SIBILITY OF DEMANDS, RESPONSES, AND

11 FAILURE TO RESPOND.

12 (a) NO OBLIGATION TO RESPOND.—Nothing in this

13 title imposes on an allegedly responsible party an obliga14 tion to issue a response to a demand for compensation.

15 (b) INADMISSIBILITY OF OFFER.—Demands for com16 pensation, early settlement offers, or the failure of an al17 legedly responsible party to issue same, are inadmissible

18 in any subsequent litigation, proceeding, or arbitration, to

19 the extent that evidence of settlement negotiations is inad20 missible in the jurisdiction where the case is brought.

21 SEC. 209. EFFECT OF PRE-DEMAND SETTLEMENT OFFER.

22 A settlement offer to an injured party represented by

23 a contingent fee counsel made before receipt of a demand

24 for compensation, which is open for acceptance for 60 days

25 or more from the time of its receipt and which conforms
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1 to the requirements of section 206, is deemed a post-reten2 tion offer and has the same effect under this title as if

3 it were a response to a demand for compensation.

4 SEC. 210. PRE-RETENTION OFFER.

5 (a) PROHIBITION OF PERCENTAGE FEE OF PRE-RE6 TENTION OFFER.—It is a violation of this title for an at7 torney retained after claimant has received a pre-retention

8 offer to enter into an agreement with claimant to receive

9 a contingent fee based upon or payable from the proceeds

10 of the pre-retention offer, provided that the pre-retention

11 offer remains in effect or is renewed until the time has

12 elapsed for issuing a response containing a settlement

13 offer as defined under section 206.

14 (b) UNREASONABLE AND EXCESSIVE FEE.—An at15 torney entering into a fee agreement that would effectively

16 result in payment of a percentage of a pre-retention offer

17 to a claimant has charged an unreasonable and excessive

18 fee.

19 (c) PRESUMPTIVE REASONABLE FEE.—An attorney

20 who contracts with a claimant for a reasonable hourly rate

21 or a reasonable fixed fee, or who is paid such a fee for

22 advising claimant regarding the fairness of the pre-reten23 tion offer, has charged a presumptively reasonable fee.
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1 SEC. 211. POST-RETENTION OFFER WHEN A PRE-RETEN2 TION OFFER HAS BEEN MADE.

3 (a) REASONABLE FEE BASED ON HOURLY FEE.—

4 A fee paid or contracted to be paid to a contingent fee

5 attorney by a claimant who has rejected a pre-retention

6 offer and who later accepts a post-retention offer of a

7 greater amount is an unreasonable and excessive fee un8 less it is an hourly rate fee that does not exceed 25 percent

9 of the excess of the post-retention offer over the pre-reten10 tion offer.

11 (b) REASONABLE FEE BASED ON PERCENTAGE.—If

12 the accepted post-retention offer is less than the pre-reten13 tion offer, a total fee for all services rendered that is great14 er than 10 percent of the first $100,000 of the post-reten15 tion offer plus 5 percent of any amount that exceeds

16 $100,000 after all reasonable expenses have been deducted

17 is an unreasonable and excessive fee.

18 SEC. 212. POST-RETENTION OFFER WHEN NO PRE-RETEN19 TION OFFER HAS BEEN MADE.

20 A fee paid or contracted to be paid to a contingent

21 fee attorney by a claimant who has not received a pre22 retention offer and who has accepted a post-retention offer

23 is an unreasonable and excessive fee unless it is an hourly

24 rate fee that does not exceed 10 percent of the first

25 $100,000 of the offer plus 5 percent of any amount that
32

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1 exceeds $100,000 after all reasonable expenses have been

2 deducted.

3 SEC. 213. CALCULATION OF ATTORNEY’S FEE WHEN THERE

4 IS A SUBSEQUENT RESOLUTION OF THE

5 CLAIM.

6 Irrespective of any pre-retention offer, the provisions

7 of section 212 regarding maximum allowable fees remain

8 in effect if a post-retention offer is not accepted by claim9 ant within the time provided by this title. Contingent fees

10 are unreasonable and excessive unless charged against the

11 difference between an unaccepted post-retention offer and

12 the judgment or settlement ultimately obtained by claim13 ant. When such judgment or settlement is lower than the

14 unaccepted offer, the fee limitations of section 212 apply

15 against the judgment or settlement.

16 SEC. 214. PROVISION OF CLOSING STATEMENT.

17 Upon receipt of any settlement or judgment, and

18 prior to disbursement thereof, a contingent fee attorney

19 shall provide claimant with a written statement detailing

20 how the proceeds are to be distributed, including the

21 amount of the expenses paid out or to be paid out of the

22 proceeds, the amount of the fee, how the fee amount is

23 calculated, and the amount due claimant.
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1 SEC. 215. EFFECT OF CONTRAVENING AGREEMENTS.

2 (a) VIOLATION.—A contingent fee attorney who

3 charges a fee that contravenes this title has charged an

4 unreasonable and excessive fee.

5 (b) EXCESSIVE AND UNREASONABLE FEES.—If the

6 fee violates subsection (a), then it is also excessive and

7 unreasonable to the extent that it has not been reduced

8 by any reasonable fees and costs incurred by claimant in

9 establishing that the fee agreement contravened this title.

10 (c) UNENFORCEABLE FEE AGREEMENTS.—Fee

11 agreements between claimants and contingent fee attor12 neys who have charged fees defined under this title as un13 reasonable or excessive are illegal and unenforceable ex14 cept to the extent provided in this title.

15 SEC. 216. INAPPLICABILITY.

16 (a) EVALUATIONS AND COLLECTIONS.—Except for

17 the provisions of section 203, nothing in this title applies

18 to an agreement between a claimant and an attorney to

19 retain the attorney—

20 (1) on an hourly rate fee or fixed fee basis sole21 ly to evaluate a pre-retention offer; or

22 (2) to collect overdue amounts from an accepted

23 pre-retention or post-retention settlement offer.

24 (b) AGREEMENTS IN WHICH CERTAIN OFFERS NOT

25 MADE.—The provisions of this title prohibiting the charg26 ing of contingency fees in the absence of assuming mean-
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1 ingful risk and defining reasonable and unreasonable fees,

2 shall have no effect on contingent fee agreements in cases

3 in which neither a pre-retention nor a post-retention offer

4 of settlement is made.

5 (c) MOTOR VEHICLE ACCIDENTAL BODILY IN6 JURY.—(1) This title shall not apply to accidental bodily

7 injury caused by the operation or the use of a motor vehi8 cle in claims in which an uninsured motorist or personal

9 protection insured is involved.

10 (2) For purposes of this subsection the term ‘‘oper11 ation or use’’—

12 (A) means operation or use of a motor vehicle

13 as a motor vehicle, including, incident to its oper14 ation or use as a vehicle, the occupation of the vehi15 cle;

16 (B) does not cover conduct within the course of

17 a business of manufacturing, selling, or maintaining

18 a motor vehicle, including repairing, servicing, wash19 ing, loading, or unloading; and

20 (C) does not include such conduct not within

21 the course of such a business unless such conduct

22 occurs while occupying a motor vehicle.
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1 TITLE III—APPLICABILITY AND

2 RULE OF CONSTRUCTION

3 SEC. 301. APPLICABILITY TO STATES; CHOICE OF LAW; JU4 RISDICTION; AND CONSTRUCTION.

5 (a) APPLICABILITY TO STATES.—Title I or II of this

6 Act shall not apply in a State if such State enacts a stat7 ute that—

8 (1) cites the authority of this subsection; and

9 (2) declares the election of such State that the

10 title shall not apply.

11 (b) CHOICE OF LAW.—In disputes between citizens

12 of States that elect nonapplicability under subsection (a)

13 and citizens of States that do not so elect, ordinary choice

14 of law principles shall apply.

15 (c) JURISDICTION.—This section shall not confer ju16 risdiction on the district courts of the United States under

17 section 1331 or 1337 or title 28, United States Code.

18 (d) CONSTRUCTION.—Nothing in this Act shall alter

19 or diminish the authority or obligation of the Federal

20 courts to construe the terms of this Act.

21 SEC. 302. EFFECTIVE DATE.

22 This Act shall take effect on the date of enactment

23 of this Act.

Æ