Skip to content

Proof That There Are Too Many Lawyers?

Most lawyers are like the opportunistic infections that attack the weakened immune system of heroin addicts. You can scrape off the scabs that encrust the skin, but if you don’t treat the underlying addiction, they’ll just grow back.

Or more plainly, lawyers are the symptoms and not the disease. That there are so many is an indication of deeper trouble, signs of a fundamental imbalance with the body politic.

In many “tort” lawsuits of the slip-‘n-fall kind, at least three things have gone wrong:

  1. A greedy plaintiff, with no notion of personal responsibility, decides that “somebody” has to pay for their “pain and suffering;”
  2. A jury agrees that since the defendant has more money than the plaintiff, they should socialize that money; or, in the manner of a French soldier, a company decides to take the legal abuse and pay up without a fight: a practice which encourages future lawsuits;
  3. And a lawyer with dollar signs for pupils decides to “get his.”

Incidentally, some Republicans wanted to include tort reform in the health care bill, but it was not allowed. Perhaps because the Trial Lawyers Association donates enormous sums to Democrat candidates and the DNC; much more than they give to the other side. See, for example, this New York Times article: Trial Lawyers Pour Money Into Democrats’ Chests.

After the ambulance has been chased down and the legal proceedings are over, whoever has the deepest pockets is made to pay. Knowing that the disease is rampant, most large companies wisely inoculate themselves against catastrophic money loss by purchasing insurance.

So when counselors come calling, companies refer them to their insurers. The insurers negotiate a structured settlement with the lawyer. This is typically in the form of an annuity, perhaps coupled with an up-front cash payment. The lawyer takes his 33% cut—plus office fees—gives the rest to the plaintiff, and then returns to the hunt.

This sequence of events is so usual that it is highly ritualized. It won’t be long, I imagine, before companies wise up and eliminate the insurer, who is nothing more than a middle man. Businesses will soon be able to pay directly into a lawyer’s fund—a sort of legal protection racket—so that the companies are completely insulated from harassing lawsuits. The attorneys themselves will figure how to best split the dough with “consumers.”

JG Wentworth

My proof? I don’t have any numbers, only the indirect evidence of Peach Tree Settlement and J.G. Wentworth.

These two are the most ubiquitous of the many companies that run endless, expensive commercials in which they promise to buy your “structured settlement.” You’ve heard them. “I need my money. Where is my money?” whines an ex-plaintiff in one prominent radio ad.

If lawyers are the disease, then these financial firms are like the vultures who pick the carcasses of the victim’s bodies clean. They pay hard cash for the ex-plaintiff’s annuities, typically at a highly discounted rate. They’re in the long game: a small amount of dollars up front buys them a guaranteed income stream for decades.

The ads for Peach Tree and Wentworth have been on radio and television for years. There are so many of them that you have to work at not hearing or seeing them. Naturally, these commercials, which show no signs of abating, aren’t cheap.

They must, therefore, have many, many customers else they would not have remained in business. And that means that there are an enormous number of lawsuits to create the stream—rather, torrent—of customers.

Therefore, there are too many lawyers.

It’s worse yet. All these facts lead to the conclusion that most of the money from law suits are going into the hands not of “consumers” but of legal and financial companies.

My prediction of the disease mutating and becoming more virulent;.that is, of companies eliminating the insurance middle man, is on track.

13 thoughts on “Proof That There Are Too Many Lawyers? Leave a comment

  1. You should read some of famous trial lawyer, Gerry Spences books or check out his website.

    Spence tells it like it is, claims he can teach someone everything they need to know to be a lawyer in 3 days.

    And can teach an 8 year old to brief a case.

  2. Matt:
    Who do you think is behind purchasing these structured settlements? You are a lawyer, you get a windful 33% while the impoverished victim gets 67%. The lawyers want to avoid the tax bite so the lawyer can then buy the 67% with a portion of their 33% – with the net result that the lawyer gets significantly more than the original 33% and can “hide” the income stream from the IRS!! God, what a scam.

  3. Lawyers Pour Money Into Democrats’ Chests
    Yo ho ho and a bottle of rum.

    Drink and the devil had done for the rest
    Yo ho ho and a bottle of rum.

    Oops, sorry about that. Don’t know how I made the connection.

    Although come to think of it, the rest of the song has some ideas

  4. The only rational free market solution to this is loser pays with a twist
    plaintiff attorney pays

    plus

    the other side of the abuse is curcuit judges who are bought and paid for by the trial bar

    I am a physician
    was sued 6 years ago for the first and only time in my career
    obviously frivolous in that the plaintiff could not get an expert witness to actually state that negligence occurred.
    the judge set a date by which plaintiffs were to depose their expert or suit would be dismissed
    no expert- judge postpones dismissal. Repeat 6 times over a 1.5 year period
    finally no more deadlines
    plaintiffs attorney says Ok – dismiss the case

    now hear this
    the f***ing judge ADVISES the plaintiffs attorney: if judge dismisses case, the case cannot be brought up again, but if attorney voluntarily dismisses, they have 1 year to bring case up again.

    this has gone on for six years without dismissal still – in the meanwhile i am paying aprox 10,000 per year more in malpractice premiums.

    go figure

  5. I have a colleague who was a pioneer in the structured settlement business. It started with mortgage securitization, moved into second mortgages, auto loans, credit cards, medical equipment leases, timber rights, and lottery winnings.

    The most morbid securitization was life insurance receivables. That one started with AIDS patients in the ’90s. The patient needs cash now for his treatments. He has life insurance and he is going to die soon because he has a terminal disease. My friend would pay to take over the rights to his policy, and continue to pay his premiums. When the patient dies, my friend would get receive the benefit. Made a lot of money, until the the drugs got good enough that people sopped dying.

  6. Doug M,

    It’s called viatication.

    Briggs et al,

    This American Life had a segment on purchases of “structured settlements” and other streams of payments (annuities).

    “Episode 329 – Nice Work If You Can Get It
    “Show description: Stories of sudden fame, quick riches, and the downside of the dream job.

    “This American Life producer Alex Blumberg talks with Ed Ugel, who had a very unusual dream job: he bought jackpots from lottery winners. When you win the lottery, your prize is often paid out in yearly installments. And Ed would offer winners a lump sum in exchange for their yearly checks. He’s talked with thousands of lottery winners, and the vast majority, he says, wish they’d never won. Ed is writing a book about his years in the “lump sum industry” called Money for Nothing: One Man’s Journey through the Dark Side of Lottery Millions. It comes out in September 2007.
    http://www.bing.com/reference/semhtml/List_of_2007_This_American_Life_episodes?q=“this+american+life”+annuity
    http://www.thisamericanlife.org/Radio_Episode.aspx?episode=329
    http://www.amazon.com/Money-Nothing-Journey-Through-Millions/dp/0061284173

    In the real world, settling with a stream of payments (annuity) rather than a lump sum frequently makes sense. The recipient may need income (to pay living expenses or medical bills) for life and be too young or otherwise unable to manage a lump sum of hundreds of thousands or millions of dollars. The recipient may be a minor or developmentally disabled. The payer makes a smaller cash payment (funding the annuity) for the same benefit and is more likely to settle. Lawyers (for both sides) frequently prefer a structured settlement (stream of payments) because they have seen lump sums disappear in more ways than you can imagine.

    Structured settlements are usually set up to prevent third parties from “buying” them. Questionable tactics are used to re-direct payments to the third party.

  7. Over here in New Zealand the people got so fed up with it all that they gave up the right to sue in exchange for a, currently government run, personal accident insurance scheme called ACC (Accident Compensation Commission). It is entirely “no fault” so if you have an accident it will pay out for rehabilitation, medical costs and loss of earnings as a result of that accident (regardless of whether it was your fault or someone elses). Everybody in NZ is covered (even tourists) and you pay for it in a variety of ways from a small 1.5% supplement to your taxes (capped at a certain level), to a supplement on fuel taxes to cover motor accidents. Businesses pay for cover at a rate dependent on their business area, history of accidents and results of random check ups.

    It is a very good system (but should be privatised) and it gets rid of all the infuriating adverts!

    When I moved to NZ I wasn’t sure about it as it seemed a little socialist for my liking but, having lived under both systems, I believe that ACC is the way forward!

  8. Japan solved the “lawyer problem” with a very simple tactic: they made the bar incredibly difficult to pass. If I remember correctly, the bar passage rate in Japan is around 3%. Compare that with California (one of the more difficult bar exams to pass), with a 60-70% pass rate depending on the quality of your legal education.

    Now, it may be that Japanese legal education just sucks (nothing shocks me about the quality of Japanese TERTIARY education), but I doubt it. I think the exam is just quite difficult and tortuous.

    Anyway, but reducing the numbers of new lawyers to maybe a thousand a year, Japan has made it nearly impossible to engage in frivolous lawsuits. It’s great if you want fewer lawsuits, but it also meant that suing for legitimate reasons was sometimes nearly impossible. How to find that nice delicious middle ground?

  9. Most lawyers encourage structured settlements in big cases because they know the cash that a plaintiff will receive will disappear quickly. often within a short time the only thing the plaintiff will still have is the structured settlement payment. Generally the portion of the settlement that is paid to the plaintiff for life but not guaranteed for a period of years cannot be sold and that is the only part the plaintiff is left with. I have one client receiving a monthly payment for a settlement made in 1983 and she deserves it. The payment to her is tax free because it is a payment for bodily injury. If she had received a lump sum any income on investment of the lump sum would have been taxable. When engineers, doctors and drivers reach perfection, and every one follows the golden rule we can reduce the number of lawyers.

  10. I have a feeling that the Peach Tree and Wentworth firms are much like the ACLU: you sue, defendant usually caves in, court awards costs to law firms. Win-win for Peach Tree and Wentworth (and ACLU), lose-lose for anybody unlucky enough to be sued. Win-lose for any members of a class action suit, who just might see $127.75 three or four years after the verdict. The lawyers, of course, get their 66% up front.

    tmitsss : “… payment schedule … not taxable because it is a payment for bodily injury … lump sum … taxable.” Can anyone make any sense out of this? The lump sum is a payment for exactly the same thing (bodily injury).

    When we “reduce the number of lawyers” (either by Shakespeare’s maxim or some other means), let’s put tax-law-writing lawyers at the head of the line. No waiting. Step right over the red cord.

    Speed About those lottery winners – I also read that the average big-jackpot lottery winner goes broke in about 5 years. I think this is because people who rely on lottery winnings have never had to manage large sums, never learned about personal finance or investing, and so are ripe for bad investments and shady deals.

    The problem I see with Ed Ugel’s plan is, how does he handle the tax owed (if he gets it, isn’t it income to him – as well as the winner?); second, he’s got to invest it to guarantee the series of payments. If he makes a bad guess, he loses and the winner loses.

    I’ll read the book.

  11. @ Ari

    I am reminded of the Diplomate of National Board (DNB) postgraduate exams in India – pass rate 4% in ‘lucrative’ specialties, like Orthopedics. Turns trainees into slaves.

    Same thing with the medical exams to become a member or a fellow of the Royal College of this or that in the UK – pass rate 4%. Traps incoming doctors in locum jobs – like permanent temps.

Leave a Reply

Your email address will not be published. Required fields are marked *