The Wall Street Journal ran this article on Thursday about plaintiffs’ lawyers and the BP oil spill. The article states:
Plaintiffs’ attorneys are scrambling to avoid being frozen out by a $20 billion fund aimed at compensating Gulf of Mexico oil-spill victims outside of court.
According to Louisiana attorney Daniel Becnel:
"People are firing their lawyers left and right," said Daniel Becnel, a Louisiana attorney who has filed numerous claims against BP on behalf of fishermen, shareholders and others.
This is a big change of tune for Becnel since early May, when he predicted that he would settle with BP within 90 days.
It does appear that the claims fund will negate the need for a lot of litigation. Claims fund administrator Kenneth Feinberg is universally respected and has the trust of both BP and the government to be fair in administering claims. Feinberg is hopeful that claims will be paid within 60–90 days after being submitted. A claimant who decides to hire an attorney on a 40% contingency fee contract would need to collect 40% extra just to break even. So it makes sense for victims to try to resolve their claims on their own before hiring lawyers.
Obviously, plaintiffs’ lawyers who hoped to generate revenue from oil spill litigation may end up disappointed. But they will not be the only ones. Defense firms who were gearing up for a decade of contentious litigation will be sick. BP hired $500 per hour lawyers who stand to make hundreds of millions from the litigation.
When the dust settles, I bet that defense lawyers would earn more in fees from protracted litigation than plaintiffs’ lawyers. And the defense lawyers shoulder none of the risks. Unlike plaintiffs lawyers, defense lawyers are not responsible for payment of litigation expenses and bill their clients either monthly or quarterly. This means that they typically do not run the risk of having to pay for office overhead for an extended period of time with no revenue coming in. Further, the longer and more contentious the litigation, the more money defense lawyers make.
Plaintiffs lawyers, on the other hand, can put so much time and money into a case that it winds up working out badly for the lawyers.
On the whole, defense lawyers make more money than plaintiff lawyers and they do it within a less risky business model. This fact is conveniently omitted from the WSJ article and virtually every article that mentions plaintiff attorneys’ fees.