By Jeremy Pasternak

CAOC “Forum” – May 2006

We know that so-called tort reform has nothing to do with effects on business (a recent poll puts litigation near the bottom of corporate America’s list of concerns) or rising insurance rates (which are the industry’s attempt to offset its losses in its real business, investing), but rather is simply a political gambit to try to limit funding from a block which traditionally supports democratic candidates. Of course the “reformers'” arguments ignore the fact that without companies being held accountable in the courts, the public would have no protection from dangerous products, corporate fraud, or for that matter, outright discrimination based on race, gender, and the like. As one great trial attorney put it after receiving a multi-million dollar bad faith verdict, “The only way to regulate insurance companies is with juries.”

Enough preaching to the choir. Let me point out something else which makes no sense about tort deform, and which relates directly to the theme of this month’s issue of Forum.

Aside from the fact that the tort deform “movement” is a ruse for another agenda and blatantly anti-human-being, one of its premises, that the plaintiff’s bar is “anti-business,” just makes no sense.

To hear the tort deformers tell it, we in the plaintiff’s bar are as anti-business as Karl Marx. And to spin their tales about why we need to limit the public’s access to the courts, they rarely if ever talk about “big” business. Instead, they talk about the proverbial “mom and pop” businesses that are supposedly under constant assault. The reason for this is obvious: small business has a human face and is sympathetic in a way that big business never can be.

But law firms are businesses, too. They are corporations, partnerships, and sole proprietorships. They have offices, infrastructure, and employees. They pay taxes. They provide services. And which are the small ones? We are. We are the “mom and pops” of the legal industry.

Plaintiffs’ firms are, by nature, small. This is for the most part due to simple economic/capitalist realities. Large firms bill their associates out at hourly rates well in excess of what those associates take home. Their labor force is a profit center. Plaintiffs’ firms work almost exclusively on contingency arrangements, and therefore every employee is, in essence, a cost, not a profit center. This just goes to show that our businesses are governed by the same economics as any other business out there. Yet there is this concept that we are not businesses.

In fact, we are perhaps the best embodiment of capitalism out there. If we don’t make money for our customers, i.e. our clients, we don’t make any money. And most of us take on the whole financial risk of the business ventures (i.e., cases) that we take on with our partners (i.e., clients). Compare this to CEOs who are paid literally millions in compensation even when their companies are failing because of their misfeasance – or even malfeasance. Or, to stay closer to home, compare it to lawyers who drag cases out when they could and should have been settled because they are being paid by the hour.

If we apply the comical conservative/corporate-speak used by the tort deform crowd, we are the best “incentivized” to provide “integrated solutions” for our client’s “challenges.” Yet we are viewed as having nothing to do with “business goals.”

I firmly believe that we are doing good works, and most of us got into this area of the law with the intent to do good works. But that is no reason for the tort deformers – or us for that matter – to pretend that we are not also businesses as well.

There is nothing wrong with a business making money; this is, after all, the United States. So why the occasional reticence to brag about the big verdict outside of the legal profession? Because the tort deformers have everyone so turned around that a big verdict is automatically associated with the word “excessive.” Why shouldn’t the presumption be, “Gee, that company must have really done something bad” or “that person must have been really injured”?

I find this particularly problematic among some of my colleagues who, like me, represent employees. We like to think of ourselves as civil rights lawyers, and we are. But that does not mean that we are required to take a vow of poverty, and it troubles me when I hear some of my employment-law brethren evidence their distaste for “business.” Unless they are independently wealthy or funded by some grant source I don’t know about, they are “in business” too, and as contingency lawyers their personal monetary success or lack thereof, that is, how “well” they do, reflects the “good” they are doing.

So again, even when looking at the very righteous goal of helping the public and our clients, our financial success is a good measure of whether that goal is being achieved. And therefore again, it makes no sense to pretend that we are not businesses as well.

Which brings us to this month’s issue of Forum. This month’s articles address the business side of what we do. How to financially manage our firms, grow them, and staff them. How to have appropriate fee agreements so as to properly establish our relationships with our clients (doing good) while securing our right to compensation (doing well). How to balance work and our personal lives so we can do our jobs without losing our minds. If we do things better, if we are better businesspeople, then presumably we can do better business. And if we do better business, we better serve our clients and the public.

The fairest criticism of capitalism is that it can tend to look only at the bottom line, without regard for fairness, human rights, or civil rights, and thereby exploit or harm the very people who support it, that is, the consumers. Our business has a built-in factor to avoid that. As I often tell my clients, I like our contingency agreements because my interests are aligned with theirs. What a great business model.

Jeremy D. Pasternak has law offices in San Francisco. He is a member of the Forum Editorial Board.