A few years ago I was asked to speak to a group of settlement professionals and share my experiences of what it was like to be a plaintiff oriented structured settlement expert. As I sat in the crowd I listened as a couple of the major figures in this organization debated the fine distinction between a "rebate" of commissions vs the more gentile term " commission sharing." I listened to the back and forth for a good hour, with one going on about the evils of defense brokers rebating commissions to self insured and property casualty firms while his opponent defended these as legal business arrangements forced upon the settlement industry by casualty insurers. It then was my time to speak and I started out my little talk with a recollection of back in the mid 1980's of when I was assigned a major case by a major casualty company upon which I stood to make a commission of $100,000, which to me was no small sum. However, the day before I got on the plane to Texas to settle the case I was summoned to a meeting with the casualty claims adjuster and was informed that unless I gave him $20,000 in cash before getting on that flight I was off the case and one of my more compliant competitors would instead handle this settlement.
As my audience sat there stunned at the brazen nature of this claims manager I turned to the two settlement professionals who had just minutes before been arguing passionately over the exact semantics of what constituted a rebate, and I said, " Now guys...THATS a rebate!" which pretty much brought the house down.
The reason I retell that story is not to relive one of my few moments of comic timing, but instead to start a discussion about what is going on in the plaintiff side of our industry as regards "buying plaintiff business." I won't use the term rebate, although I clearly think some of the actions I see and hear about fall neatly under that definition, but I will raise the spectre that the very segment of the industry that screamed the loudest and took the highest moral ground when it came to defense brokers being party to "commission sharing" with casualty firms and self insureds, is now in an insane competition as to who can give away more money to trial lawyers in a desperate attempt to try and lock up business on the plaintiff side.
Before you accuse me of over stating my case, lets just look at some of the examples that are now part of the marketing and business plans of plaintiff experts that we all know about:
1. Firms that are advertising credit's on court room technical services on current or future cases ( emphasis mine) if the trial lawyer uses their affiliated structured settlement broker on a case of a certain size.
2. Firms that are actively seeking to create limited partnerships or LLC's with large mass tort or plaintiff firms for the purpose of sharing compensation in return for exclusive status as broker on their client lists.
3. Settlement firms tying contributions to state trial organizations on the condition that they be the only provider of settlement services for that organization and the use of affinity or preferred provider status through six figure contributions to trial lawyer organizations.
I could go on with some lesser examples but just those four, if they had been done by a defense broker with a defense organization would have raised a deafening chorus of denunciations from our supposedly pure plaintiff firms about how this was restricting the choice of the plaintiff and was a conflict of interest.
What i'd like to know is why is the settlement industry so quiet about these potentially horrific conflicts of interest or self defeating marketing models?
Lets take each one at it's face.
If anyone understands the value of using affiliated businesses to provide business opportunities it is myself. Through my marketing, video and production facilities and other businesses I have a lot to offer firms that currently work with me or might consider working with my firm, Wahlstrom & Associates. However, I have never, and will never make using my plaintiff consulting firm and settlement services a mean's by which trial lawyers receive compensation or credit from one of my affiliated firms. Our settlement services, and i'm speaking about our industry now, must be free of coercion and inducements to do business with a firm on the basis of a financial rebate or business credit that somehow benefits the trial lawyer or others. We are in the business of represented broken, scared, hurting and often legally incompetent people in the biggest financial decision they will ever make in their lives. We should never create a circumstance where a trial lawyer is tempted or influenced in the least in their choice of settlement professional by a financial or other business inducement.
The second example of creating special purpose organizations to lock up business from major plaintiff firms is to my mind an ethical swamp we do not want to go wading in. Aside from the horrible economics of the deal, these relationships unless totally disclosed to the client and with the option for the client or attorney to use another broker at any time, are potentially more rotten then any rebating deal done by casualty companies and defense brokers ever were. Basically, I expect lousy behavior from claims managers and insurance companies who are focused on paying as little as possible to an injured person. What I don't expect is a trial lawyer to feel a sense of entitlement to the compensation of a settlement or financial professional who is actively and professionally working to find the best program, the best price and the best plan for their injured client they are duty bound to protect. Thats not to say that there aren't workable deals where a firm can't profit from a huge source of referrals instead of creating an in house agency such as is common in many large law firms in the estate planning and trust area, but I do think few of the deals i'm aware of or that are presented to me rise to the level of full and complete disclosure to the client and protections to insure they get the best deal at all times.
The third example is a tough one, but one that we as professionals need to address. We currently have an Arms Race to see who can give away the most money in political contributions, trial lawyer contributions and donations for every convention, tournament, dinner or social a lawyer group is having. I personally write a lot of checks to trial lawyers organizations, although typically for events with a direct purpose or some social value to myself or my firm. I'm careful and selective, and i'm sure my saying "no" to some of them has cost me some business and steered business to my competitors. However, I've been hearing horror story after horror story from trial lawyers who have used "the approved broker" for their organization, and have been terribly disappointed in the results or service they received. What we need to ask ourselves is, given our business model which is increasingly one where a broker on each side is compensated, whether or not the poor service received by many trial lawyers isn't directly tied to the slim profit margin's firms have on this business after making all the donations, payments and fund raising? Lets face it, there is only so much juice you can squeeze out of the annuity fruit and slim margins very often lead to poor service, hard ball sales tactics and refusal to share compensation with other brokers, simply because the money to be earned on a deal is all spent before it's made.
In summary, I have to say that the plaintiff side of our business appears to be on a fast track to poverty and the commoditization of our profession due to the marketing of our services as something that can be bought by the low bidder or firm most willing to kick back money in some fashion. The facts are that we are working largely on a 2% commission on most cases now after splits, our cost of doing business has never been higher and the sharing of commissions, legally or illegally, morally or immorally, wisely or stupidly is going to further limit our ability to provide high quality service and raise our professional standards. It's a free market, and competition is the name of the game, but I know that i'm staking my future on the same principals as my past. I'll take my chances that my clients want a plaintiff advocate, not just what appears to be the lowest possible price or some paltry check as thanks for steering me to their clients. We owe the families, the widows, the injured and the orphaned a lot better then that.