The Economics of Plaintiff-Side Personal Injury Practice

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), and estimate the impact of various statutory fee caps on those firms. 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 contingency fee is the most common arrangement, but is not always collected ex post; when recoveries are low, firms often reduce or waive their fee. The estimated effect of caps on contingency fees varies, depending on cap design and the mix of cases a firm handles. But many fee caps dramatically affect the economics of plaintiffside personal injury practice. 1 Hyman is Ross and Helen Workman Chair in Law and Professor of Medicine, University of Illinois. Tel. 217-333-0061, email: [email protected]. Hyman is the corresponding author. Black is Chabraja Professor at Northwestern University, Law School and Kellogg School of Management. Tel. 312-503-2784, email: [email protected]. Silver is McDonald Endowed Chair in Civil Procedure, University of Texas Law School. Tel. 512-2321337, email: [email protected]. We thank Professor Nora Engstrom, 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. Hyun Kim and Mohammad 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 by the Center on Lawyers, Civil Justice, and the Media at the University of Texas School of Law.