The Business of Personal Injury/Medical Negligence Litigation Part I: The Plaintiffs\' Bar

When a group of lawyers are universally embarrassed about their incomes, something must be afoot. And it is. While the Street has been abuzz for the last few years with talk of seven-figure incomes for corporate partners at top law firms in downtown Toronto, an elite group of plaintiffs’ personal injury and medical negligence practitioners has quietly taken over bragging rights as the top fee earners in the profession. And, as much as the corporate hot-shots may think the world revolves around them and their prestigious clients, we are not talking about country cousins here. Nor are we talking lunch money.

It is a practice area that generates stomach-churning risks. Day in, day out these lawyers make high-stakes decisions that essentially require them to personally fund their clients’ litigation. The practice rewards only those with finely honed judgment, intuitive business savvy, negotiation skills in their purest form, and a high degree of professional excellence.

These superstars of the legal profession can be found in most major metropolitan centres across the country. While Canada’s financial centre is home to the majority of the profession’s highest fee earners, personal injury and medical negligence lawyers throughout the country have matched, and in many cases surpassed, their corporate colleagues in earning power.

In some cases, the earnings comparison between personal injury lawyers and corporate lawyers isn’t even close. On being advised that the top corporate lawyers in Toronto could earn between $800,000 and $1.4 million, one senior plaintiff’s counsel remarked, “I can make the high end pretty easily.” Another lawyer, one of the most respected personal injury practitioners in the country, was prepared to confirm that a similar range was “realistic” for his practice. Pressed as to whether his earnings surpassed $2 million, the lawyer was careful not to deny the assertion: “I don’t think it would be prudent for people to know too much about exactly what we earn.”

Two million dollars is the exception, perhaps the highest lawyer’s income in Canada. But clearly $1 million is not out of line for top plaintiffs’ practices. “Up to $1.5 million is reasonable in a good year,” says top-ranked Lawrence Mandel, Q.C., of Toronto’s Thomson, Rogers. Roger Oatley of Oatley, Purser in Barrie, Ontario, and Robert Roth of Sommers & Roth in Toronto, also top-notch plaintiffs’ counsel, are of much the same mind.

But a comparison of the earnings of high-end corporate lawyers and the most successful personal injury/medical negligence specialists is not necessarily apples and apples. As leading plaintiffs’ counsel Joseph Murphy, Q.C. of Vancouver’s Murphy, Battista, cautions, one has to take into account that corporate lawyers tend to be in large firms where earnings are not as direct a reflection of individual financial contribution as they are in smaller firms where personal injury specialists thrive.

In Edmonton, Kevin Feehan of Fraser Milner Casgrain LLP, a highly regarded plaintiffs’ counsel who also has a commercial litigation practice, is an anomaly in a firm known throughout Alberta for its prowess in defence litigation. Feehan is among the select group of partners who are the firm’s highest earners. Yet he acknowledges that he “leaves some money on the table” for his partners—and does so happily because of the personal and professional satisfactions he derives from practising at the national firm.

“If you take the top five per cent of earners in the legal profession in BC, half of them would be personal injury lawyers,” Murphy notes. But he is confident that the incomes earned by lawyers in his specialty are not out of line. “I look at things like the Stockwell Day defamation case where the fees on both sides were $750,000,” he says. “How do you do that without spending a single day at trial?”

The highest earners in the personal injury/medical negligence practice area are those in boutiques or smaller firms who practise in the field exclusively. “Even then, you need first-rate acumen and a tremendous volume to approach the high-end numbers,” says Jerome Morse, who does both plaintiffs’ and defence work at the Toronto office of Lerner & Associates LLP.

The top earners in Alberta and BC also present a broader demographic than those in Ontario. The difference is in the statutory schemes that govern motor vehicle accidents. Ontario lawyers have endured various incarnations of no-fault legislation in the last decade. Under the current regime, injured plaintiffs are limited to no-fault benefits unless their injuries are “catastrophic”, a word that the governing statute narrowly defines. “It has become very difficult to break into personal injury practice, because the small cases don’t exist anymore,” says Oatley.

On the other hand, even at-fault individuals are entitled to statutory accident benefits (SAB). “Some lawyers specialize in no-fault cases, especially in cashing out the SABs for a lump sum, often through the mechanism of a structured settlement,” says Mandel. “These lawyers may also have some tort cases, but they tend to settle them without going to court, and some of them make a decent living. With very few exceptions, the high earners in Ontario are the lawyers who take on the catastrophic big damages cases.”

In Alberta, however, volume-driven middle and low-end tort work is still a very profitable business. “What separates the high-end practices, like ours, from the personal injury shops that take on masses of files, is that we concentrate on serious cases that we are prepared to take to trial,” says Virginia May, Q.C., a name partner in highly regarded May Jensen Shawa Solomon in Calgary. The firm’s seven lawyers spend about 30 per cent of their time on medical negligence cases, 20 per cent on other personal injury work, and the rest on commercial litigation.

“Most of the very few people who have serious personal injury practices in this province have very profitable firms, but they are not earning a fortune, certainly not anything approaching $1 million,” May adds. “Rather, the most lucrative personal injury practices, the ones where the lawyers earn way more than the senior partners at Bennett Jones, are the ones with the kind of cases that settle after a few discussions with an adjuster.”

But Brian Devlin of O’Brien Devlin Markey MacLeod, who has a high-end personal injury practice in Calgary, believes that Alberta practitioners have the same earning potential as their Ontario counterparts. Primus inter pares is Edward Pipella, Q.C. of Pipella Warren in Calgary, who is generally regarded as the most financially successful member of the plaintiffs’ bar. Others with a reputation for very high earnings are Joanne Ingram at McCaffery Goss Mudry in Calgary and James H. Brown, the name partner at James H. Brown & Associates in Edmonton.

But this much is clear: wherever they are being earned, these stratospheric incomes come at a hefty price.

The people in our business who are earning the high incomes earn it in every sense of the word,” insists Roger Oatley. “They work like hell, they’re at the top of their game, and they take enormous risks on behalf of their clients. It’s a pressure cooker kind of practice with complex work, significant exposure and clients with urgent expectations.”

These urgent expectations, in catastrophic cases, regularly transcend the pure practice of law. One of the most important decisions for a seriously injured plaintiff, whose earning capacity is impaired and who has extensive future health-care expenses, is how to invest his or her settlement or damages recovery. Frequently, the safest, most sensible investment is the structured settlement, which generates a tax-free annuity underwritten by the largest life insurers in Canada.

When clients consider the form of their investments, they frequently turn to their lawyers as their first point of contact. And although lawyers cannot, strictly speaking, give investment advice, they do have the influence, and perhaps the duty, to direct their clients to the most appropriate options and advisors. Lawyers with the experience to understand when a structured settlement is a viable option rely heavily on a small group of structured settlement specialists who work with plaintiffs (or if disabled, their committees) and defendants to explain the advantages, set up the appropriate structure and secure the most favourable annuity.

Structured settlements are a $250 million a year business in this country. Unfortunately, they are complex mechanisms in an extremely competitive industry whose intricacies are not easily grasped by inexperienced lawyers, let alone their clients. Consequently, the historical record is that many ill-advised plaintiffs simply take their lump sum payments and are left with nothing after a short period of time. Even conservative estimates suggest that only half the damage awards that should be invested in structured settlements are in fact placed in these financial vehicles.

“Lawyers can play a significant role in a client’s investment decisions,” says Ralph Fenik, Managing Partner of the Guelph, Ontario-based McKellar Group, by far the country’s largest structures broker. “They can do that without offering financial advice merely by referring the client to a competent structures broker.” As Bob Baxter, President of Toronto-based Baxter Structures, notes, the simple act of referral can be a powerful influence. “Remember that, in the big picture, the plaintiff has been working closely with the lawyer for years and has come to respect his opinion and judgment.”

Helping clients with investment options is only one of the pressures, both personal and professional, that intensify with the magnitude of a big-ticket personal injury/medical negligence practice. “As your reputation grows, you get larger and larger cases, and more and more of them, so that you end up financing enormous sums in disbursements and work-in-progress,” Roger Oatley notes. “If you manage the risks successfully, the practice can be very rewarding. If you don’t, the financial consequences are disastrous.”

By way of example, Richard Shekter of Toronto’s Shekter, Dychtenberg carried the celebrated personal injury case of Roberts v. Morana and more than $200,000 in disbursements for over a decade. After a difficult, lengthy trial in which liability was hotly contested, followed by an acrimonious appeal, Shekter secured a judgment in excess of $5 million. In that context, his court-approved solicitor and client fee of $1,350,000 inclusive of disbursements—less than $200,000 in excess of the party and party costs—seems eminently reasonable.

Clearly, the personal financial consequences would have been serious had Shekter misjudged the liability aspects of his case. “But in this business,” Shekter deadpans, “if you’re in for a penny, you’re in for a pound.” Which only demonstrates that judicious file selection is of the highest priority. “We could have thousands of files,” says one top Ontario practitioner, “but we turn away a couple a day.” Organizing trial timetables to accord with good cash flow practices, adds Virginia May, is also important.

Even a properly managed personal injury practice, however, can put a damper on liquidity. “It’s the nature of a growing personal injury practice that you have to leave much of your income in the firm. If you take into account the tax liabilities, the capital needs and the funding of receivables and work in progress, you can have a great income on paper and not much money in your pocket,” Oatley says. “Most of the time, you need a very friendly banker to survive.”

Seventeen of Thomson, Rogers’ 21 lawyers, who support a staff of 112, have plaintiffs’ personal injury practices, running the gamut from motor vehicle work and medical malpractice through to occupiers’ liability. With only a smattering of insurance defence work left over from earlier days, and a few commercial litigation files, these lawyers represent perhaps the largest group of “pure” plaintiffs’ personal injury lawyers in the province.

Thomson, Rogers operates a large, highly leveraged business. The firm has 2,000 files, $5.5 million in outstanding disbursements and $20 million in work-in-progress. Some of the disbursements and work-in-progress are in files with life spans of up to seven years. “A true plaintiffs’ lawyer carries his clients, and if he has a high volume of files, he has a big bank loan,” says Lawrence Mandel. “Also, if he loses the case, he doesn’t get paid.”

In Ontario, motor vehicle work, the mainstay of most personal injury practices that do not focus on medical malpractice, has become a gamble for plaintiffs’ lawyers. Unless clients meet the threshold for “catastrophic” injuries, they are unable to recover in tort. And what is catastrophic isn’t always clear: “Someone who loses both legs by amputation and has no other injuries wouldn’t qualify as having a catastrophic injury under the current legislation,” Mandel points out.

So how do plaintiffs’ lawyers manage the risk? “The key is to remember that a successful lawyer must also be a successful business person,” says Oatley, who is leaving Oatley, Purser at year’s end with the firm’s eight other personal injury lawyers to establish a boutique called Oatley Vigmond. “You can never take your eye off the risk and you must constantly assess it, more so in medical malpractice cases than any other kind of brief. You can never allow your ego or your sympathy for your client to cloud your judgment, and as much as possible, you must have your client share the risk with some financial involvement.”

But having a catastrophically injured plaintiff financially involved, Oatley concedes, is seldom practical. “The more serious the injury, the more expensive the litigation and the less likely it is that the client has any money,” says Joseph Murphy in Vancouver. That reality, says John McLeish of John McLeish & Associates, a five-lawyer Toronto-based plaintiffs’ personal injury boutique, has led to a carefully promulgated business philosophy. “We take risky liability cases if the damages are large,” McLeish explains. “For instance, if I can formulate a theory of liability, I’ll take on a quadriplegic case where the client knowingly dived off a dock into shallow water, but I won’t do it where the injuries are a fractured clavicle and a broken leg.” Still, McLeish admits, “I do take on cases that break my heart even if they don’t fit our business criteria”—but having that liberty, he adds quickly, “is one of the great things about this kind of work.”

For the most part, however, McLeish has what he calls a “threshold of potential damages” below which he won’t take on a case; similarly, his partners have their own thresholds. “And every year, our thresholds get higher,” he says. The firm’s three partners carry 125 files each, with outstanding disbursements exceeding $1 million. The firm’s two associates (a third is coming in February) work on the partners’ files.

May Jensen in Calgary also confines its personal injury and medical malpractice cases to high-end briefs. “We work like British barristers,” says Virginia May. In Vancouver, Murphy, Battista’s eight lawyers, who spend 95 per cent of their time on personal injury work, avoid what Joseph Murphy calls “run-of-the-mill whiplash cases” among its 1,200 files. “The only way to make high-end personal injury and medical malpractice profitable, given the large investment of time and money, is to identify problem cases early and to come away with good results in the cases with which you proceed,” he explains. “And that isn’t always easy, because catastrophic cases are very complicated. In fact, the simplest way to get a $1 million award is to screw up a $2 million case.”

When lawyers are operating on contingency fees, as they do in Alberta and British Columbia, good results impact directly on earnings. On the other hand, the relatively high limits that the Law Society of British Columbia has set for contingency fees—33-1/3 per cent for motor vehicle cases and 40 per cent for other types of cases—is a telling measure of the risks involved. “The vast majority of lawyers charge fees at the maximum,” Murphy says. “But lawyers who handle the larger cases, those worth millions, charge fees that are substantially less than the maximum and that are proportional to the risk and the timing of the disbursements.”

The fact that Ontario still does not permit contingency fees is more myth than substance. As Mr. Justice Coulter Osborne, Ontario’s Associate Chief Justice, pointed out recently in McIntyre Estate v. Ontario, “almost all” personal injury litigation on the plaintiffs’ side in the province “is undertaken on some agreed contingency fee arrangement.”

Ultimately, then, good judgment in file selection, good risk management and good results translate into remarkable earnings. But nowhere is this combination more difficult to achieve than in medical negligence litigation, where the defence bar is led by the likes of McCarthy Tétrault LLP, Gowling Lafleur Henderson LLP, Lerner & Associates, and Lenczner Slaght Royce Smith Griffin in Ontario; and Bennett Jones and Field Atkinson Perraton in Alberta. The top medical negligence practitioners at these defence firms are as much fun as barbed wire.

Richard Sommers, Q.C., and Robert Roth are perhaps the highest-profile medical negligence lawyers in the country. Three of the four lawyers in their firm do medical negligence work on the plaintiffs’ side almost exclusively. They are members of a very thinly populated specialty. “As far as I’m concerned, there are only a handful of competent lawyers doing medical negligence cases successfully on a regular basis,” say Roth.

Jerome Morse, a prominent plaintiffs’ personal injury lawyer at Lerner & Associates who moved to the defence side in medical malpractice cases three years ago after the Canadian Medical Protective Association (CMPA) retained his firm, is of much the same mind. “It’s very insightful to be on this side of the desk,” according to Morse, “because of the garbage we see from the many plaintiffs’ lawyers who don’t know anything about how to put together a medical malpractice case.”

Major medical negligence cases are so complicated that Messrs. Sommers and Roth frequently try cases together. “In our experience, these cases are very major undertakings. Certainly more than one person could handle alone,” Roth says. “These days, we’re looking at a minimum of six weeks to try a malpractice case, and it’s not unusual for them to take four to six months.” A recent case lasted for a year, and, at press time, Sommers and Roth were in Ottawa for a trial that had occupied more than 60 days of court time since mid-May.

With this caseload profile, medical malpractice specialists simply cannot afford to take on smaller malpractice cases, which in any event have no “nuisance” settlement value. As Virginia May notes, the CMPA will try any case in which there is a genuine argument, spending hundreds of thousands in fees even if the damages are relatively small. “There is no automatic cutoff for what is a big case, but you have to weigh the cost and the risk against the potential damage award, and in malpractice cases that usually doesn’t add up unless the damages are close to seven figures,” Roth says.

That’s because the risks are enormous. “Medical malpractice is a procedural and substantive minefield for lawyers,” says Brian Devlin. “The cases are very skillfully defended and there remains some reluctance—although much less than previously—among doctors to testify against their colleagues.”

At the heart of the minefield is causation, an issue usually taken for granted in the motor vehicle cases that form the bulk of most personal injury lawyers’ practices. According to Devlin, “Causation has become more of an issue than standard of care.” So much so, adds Virginia May, that defence counsel will attempt to break the chain of causation “with evidence of the most expensive and excruciatingly tortuous kind.”

To determine whether a potential client has a viable case, counsel must obtain expert opinions on both causation and standard of care. The cost of these opinions, which must be in hand before the decision to commence proceedings can be made intelligently, is between $3,500 and $7,500, largely because expert witnesses must be paid to obtain and review a host of medical records.

Most lawyers try to get at least part of the funding for the early investigation from their clients, but that’s not always possible. “Eight or nine out of ten cases have no merit,” Mandel says, “and if you take a chance and guess wrong, you get clobbered on the investigative disbursements.” And even when the investigation points to a viable claim, the costs of proceeding are so substantial, he adds, “that you don’t even concern yourself with bothering the client about money anymore.”

Morse, whose medical negligence cases for plaintiffs had expanded to half of his overall practice before Lerner & Associates took on the CMPA work, explains the risk dynamics as follows: “You might interview 50 potential clients a year. A lawyer would be lucky if half could afford the up-front disbursements, so you really have to use your expertise and experience in deciding whether to bear the costs of investigation. In turn, the investigation might generate 10 or 12 cases worth pursuing, of which three or four would fall by the wayside as you learned more about the facts. So 50 interviews get you seven or eight files. Now, because the CMPA wins two out of every three trials—though that success rate is probably lower where experienced plaintiffs’ counsel are on the other side—you have to be in a position to invest substantial sums in lawsuits that you might not win. Ultimately, of the 10 or 12 viable cases your investigation generates, you’re going to take lumps on five or six. I’ve blown off $50,000 or $60,000 in disbursements alone on a single case, even though I had a lawyer who was also a physician working with me. What I’m saying is that medical malpractice is not for the faint of heart, but only for lawyers who are sufficiently expert to generate good volumes, highly skilled at negotiation and trial, and well-financed.”

Even as experienced a medical malpractice lawyer as Virginia May says medical malpractice cases can reduce overall profitability in a firm that does not take them on exclusively. “But they are intellectually fascinating because of the high risk,” she adds, “which makes them very enjoyable.” On the other hand, as Brian Devlin notes, lawyers don’t have to worry about policy limits problems, common in motor vehicle cases, in their pursuit of medical negligence damages.

Getting to the point of enjoying the luxury of a practice that pushes policy limits, however, is a long and difficult process. “It takes 25 years of litigating bad necks and bad backs to get to the top,” says one lawyer. “And then you’re still worrying about carrying files where the photocopying disbursements alone exceed $10,000.”

The bottom line is that it’s a business. And like most lucrative businesses, big-ticket personal injury and medical negligence practices are all about significant risk, shrewdly assessing that risk, and then altering the equation by bringing considerable negotiation or advocacy skills to the table. In a profession better known for its aversion to risk, it is hard to begrudge the financial success of the top plaintiffs’ counsel who embrace it.

Julius Melnitzer is a Toronto legal affairs writer. The Business of Personal Injury/Medical Negligence Litigation (Part 2): The Defence Bar will appear in the January 2002 issue of Lexpert.