Access to Justice in a World Without Lawyers: Evidence from Texas Bodily Injury Claims

Introduction I. Data Description II. Results A. Descriptive Statistics B. Multivariate Analysis 1. Changes in the Rate of Self-Representation over Time 2. Claim-level Factors a. Claim Size b. Claim Complexity c. Cost of Legal Services d. Regression Analysis III. Discussion A. Implications of Our Findings B. Time Trends C. Effect of 1995 Tort Reforms D. The Proof is in the Pudding E. Experience in Other States F. Wealth and Income and the Decision to Hire Counsel G. Limitations of Our Study Conclusion INTRODUCTION Price controls are unpopular, except when they are imposed on plaintiffs' lawyers. Sixteen states have caps on contingency fees; (1) none cap defense-side fees. (2) The federal government limits the fees plaintiffs can pay in Federal Tort Claims Act ("FTCA") cases, (3) Social Security disability cases, (4) and claims for veterans' benefits. (5) In 2003, 2004, and 2005, the House of Representatives passed a bill capping contingency fees in medical malpractice cases--only to see it die in the Senate each time. (6) Judges have followed suit; in recent aggregate products liability proceedings, three federal judges capped the plaintiffs' lawyers' fees after noting a "trend in the states to limit contingent fees to 33-1/3% or less of net recovery." (7) Claimants are the supposed beneficiaries of these restrictions, which are said to protect them from excessive legal fees. (8) The assertion is facially plausible: lawyers' fees are the biggest component of litigation costs, so policies that reduce fees may help claimants. Yet, the pressure to cap contingent fees comes from tort reform groups, representing drug manufacturers, medical providers, liability insurers, and other repeat players on the defense side in litigation. Like all interest groups, tort reform groups advocate policies that help their supporters. (9) Because tort reform groups have defendants' interests at heart, it is safe to assume that these groups expect caps on contingency fees to help defendants--most likely because price controls tend to cause the supply and quality of services to decline. (10) When lawsuits become less profitable for lawyers, plaintiffs' attorneys will predictably become more selective and may even move into other uncapped lines of work, or retire. Because expected marginal earnings also decline, lawyers will predictably invest less in the cases they do accept-that is, they will litigate less intensively. Will plaintiffs' ability to recover for their injuries also decline? Although most academics believe "meaningful access" to the tort system requires legal counsel, (11) claimants can always represent themselves. (12) Many tort claims settle without formal litigation, and nearly all settle without trials. (13) Some studies contend that claimants who represent themselves don't do that much worse than claimants represented by attorneys once attorneys' fees are subtracted. (14) If self-representation is a viable option, caps on contingency fees may have less of an impact on access than one might otherwise expect. (15) Conversely, if tort recoveries flow only or mostly to plaintiffs who either actually hire lawyers or can credibly threaten to do so, caps on contingency fees may make it difficult or impossible for many victims to obtain justice. We explore this issue by looking at patterns of representation among claimants who received payments for bodily injuries ("BI") in Texas during 1988-2005. Our database includes every closed claim with a payout greater than or equal to $10,000 (nominal) from five commercial lines of insurance. Approximately 7% of successful BI claimants represented themselves. Paid claims brought by persons who represented themselves had smaller payouts and were almost always resolved without litigation. Self-representation was roughly four times as common (12% versus 3. …