A 20% cap on lawyer contingency fees in Nevada is supported by Uber but few business organizations, perhaps reflecting concern that such measures can end up doing more harm than good.
The ballot initiative in Nevada is also supported by groups representing retailers and trucking companies, but the U.S. Chamber of Commerce and its Nevada affiliates have remained silent on the measure. A similar measure proposed by the Civic Justice Association of California, which also would have capped contingency fees at 20%, failed in 2022 amid strong opposition by trial lawyers and consumer advocates.
Uber has poured $4 million into this ballot initiative in Nevada through Nevadans for Fair Recovery, according to state campaign finance records. The measure is opposed by trial lawyers through Uber Sexual Assault Survivors for Legal Accountability, a group they formed for the purpose.
In the middle are Nevada businesses, which may shy away from publicly supporting the measure partly out of concern for angering the powerful trial lawyer lobby and partly because they fear the measure will make the litigation climate worse. One possible effect of capping how much lawyers can charge: A shift toward third-party litigation funding, where hedge funds and other outside financiers pay the bills in exchange for a percentage of legal fees or even money the plaintiff wins.
Reducing the take available for lawyers might make funding litigation less attractive to outside parties, said Samir Parikh, a professor at Lewis & Clark Law School who studies litigation finance. But it might also shift the balance of power toward outside funders when it comes to upstarts Parikh calls “hungry firms” in a recent academic article.
“The well-financed plaintiff firms are well capitalized. They’re not really relying on litigation finance, except to hedge their risk,” Parikh said. That may not be the case with “hungry law firms,” he said, who rely on litigation funders to pay for expensive television marketing campaigns to draw in potential clients for mass tort litigation.
Whether those outside funders would be discouraged by a fee cap is unknown, he added.
The U.S. Chamber Institute for Legal Reform, which owns Legal Newsline, last year publicly supported Senate Bill 179, which would have mandated disclosure of third-party litigation funding agreements. But that bill, which also would have held funders jointly and severally liable for any costs imposed on the plaintiff, died in committee.
The U.S. Chamber hasn’t weighed in for or against this ballot initiative, and the Las Vegas Chamber said it has not taken a position.
An experiment in Florida more than 40 years ago could reveal why some businesses are leery of tinkering with the rules of civil litigation. In 1980, legislators passed a loser-pays rule, similar to the U.K., to control spiraling medical malpractice costs.
Doctors and insurance companies quickly lost enthusiasm for the measure, however, as they found it impossible to collect legal fees from poor, unsuccessful plaintiffs and were shocked by the size of the fees they had to pay winning plaintiff lawyers.
With nearly every interest group lobbying for its repeal, wrote Manhattan Institute researcher Marie Gryphon in a 2010 analysis, lawmakers eliminated loser-pays in 1985.
The backlash may have been premature, Gryphon wrote. A few years later, researchers found more than half of med-mal plaintiffs dropped their cases voluntarily while the law was in effect, compared with 44% before and after.
Loser-pays also discouraged plaintiffs from taking their cases to trial, although average settlements rose and trial verdicts almost tripled.
Most observers drew the conclusion that loser-pays, by making litigation riskier and less lucrative for trial lawyers, both discouraged frivolous suits and drove up the cost of meritorious ones for insurers and defendants. That wasn’t a bargain businesses were willing to accept in Florida. The uncertainty of what impact a fee cap will have on litigation costs in Nevada might be giving businesses pause as well.