Champerty and Contingent Fees VI
Bill Long 12/15/05
The Debate Continues--19th and early 20th Century
One of the vices historians need to overcome is the vice of historical inevitability. This is the belief that all things that exist now were destined to happen. Elimination of slavery? Of course, because of commitment to equal rights for all. Women's suffrage? Sure, same reason. On a more mundane level it might be tempting to write the history of contingency fees in America by looking back at the current scene (where they are permissible in all 50 states) and conclude, "Of course, they were destined to triumph." The purpose of this essay is to give two more glimpses into the debate, one from 1848 and one from 1924, which should make the result in 2005 not appear inevitable.
The Field Code of 1848
Space does not permit here an evaluation or even description of the role of David Dudley Field (1805-1894) in the shaping of American law in the mid-nineteenth century (this essay gives you a start). Suffice it to say that he was the author of the most influential code of civil procedure in American history, which was adopted by the New York legislature in 1848 (1848 NY Law, ch. 379). Sec. 303 of the code had to do with attorney fees. It provided that all statutes establishing or regulating the costs
"and fees of attorneys, solicitors, &c., in civil actions, and all existing rules and provisions of law restricting or controlling the right of a party to agree with an attorney, &c., for his compensation are repealed, and that the measure of such compensation shall be left to the agreement, express or implied of the parties."
The history of attorney fees in America is a complex and interesting topic, but in one fell swoop the Field Code allowed "freedom of contract" between attorney and client in legal matters. The last phrase says it all: "The measure of such compensation shall be elft to the agreement, express or implied, of the two parties."
Published along with the text of the code was a report, entitled First Report of the Commissioners on Practice and Pleading (cited in J. Leubsdorf, "Toward a History of the American Rule on Attorney Fee Recovery," 47 J of L and Cont. Prob 9, 18 (1984)). In it Field said:
"We cannot perceive the right of the state, to interfere between citizens, and fix the compensation which one of them shall receive from the other, for his skill or labor...It has no more just right to do this, than it has to fix the price of property...If it be said, that the attorney is an officer, admitted by the courts, and therefore, in a position different from the others, we answer, that he is not a public officer, chosen to perform public duties. He is admitted to practice in the courts for private purposes, and on behalf of private persons. He is, in every respect, a private agent..Freedom of industry is one of the strongest demands of the time."
Over the next 60 years the Field Code would become adopted, with some changes, in more than 25 states, mostly in the Midwest and West. By adopting the approach of Field just mentioned, the overwhelming sense was that contingent fee arrangements ought to be permitted. Freedom of contract, a constriction in the definition of champerty and the evident need of impoverished but injured litigants all fueled the movement to adopt contingent fees. One more thing. In 1884 the United States Supreme Court officially validated a contingent fee contract for legal services in the following language:
"Contracts by attorneys for compensation in prosecuting claims against the United States are not void because the amount is made contingent upon success, or upon the sum recovered. And the well-known difficulties and delays in obtaining payment of just claims justifies a liberal compensation in successful cases, where none is to be received in case of failure," Taylor v. Berniss, 110 US 42, 45 (1884)
A Return to Reality--A MA Case from 1924
But leave it to Massachusetts to enter in and, if not lead a Tea Party, at least try to throw cold water on everything. A case from 1924 shows us that not everyone was on the "contingent fee bandwagon." At issue in Holdsworth v. Healey was a contingent fee contract between a woman and her attorney wherein the attorney would collect 50% of the judgment against a physician who was alleged to have maltreated the woman (144 NE 386). In a strikingly brief opinion, the court held:
"No elaborate discussion is required to demonstrate that the contract on which the present action is founded is champertous and hence illegal," Id. at 387.
But the Supreme Judicial Court of MA didn't stop there. It said:
"The principle against champerty is salutary. It has been long established. There appears to be no reason for relaxing it. The case at bar is within the express authority of numerous of our decisions...."
Finally, as if on a roll, the court concluded:
"Our law is in accord with the great weight of authority elsewhere as declared in recent as well as older decisions, although there are adjudications somewhat contrary" (and the court cited five other states where this was the rule--ME, NH, IN, WI and AL.*).
[*It also cited an AR case, which is confusing, since Arkansas, since 1857, had allowed contingent fees.]
Despite the bravado of the MA court in 1924, MA really had very little support in holding out against contingency fees. By the early 1960s only MA and ME disallowed them. An influential law review article in 1963 urged MA to get rid of its objection to contingent fees, which it did, along with ME, by 1965. And, then, just to show you that MA still has a bit of the spirit of "I will hold out until the end, and then one-up you in reform," in 1997 it got rid of the entire doctrine of champerty (Saladini v. Righellis, 687 NE 2d 1224), a move that not many other states have followed.
One final essay, surveying an important law review article on the issue, concludes my series.
Copyright © 2004-2009 William R. Long