Settlement mills – how good are they for access to justice?

January 2, 2012 at 10:45 pm 1 comment

Settlement mills are allegedly edgy law firms that process high volume – law value personal injury cases. In a recent paper, Nora Freeman Engstrom provides detailed account of the practices of settlement mills and discusses their pros and cons. Interestingly, one of the arguments in favor of the mills is that they might provide access to justice for tort victims who otherwise would not have been able to find their way through the personal injury maze.

To start with, the characteristics of settlement mills is that they target a niche of relatively low value “cut and dry” cases. Very few ‘mill’ cases ever go to trial – most get settled for some amount. This is where the settlement mills provide value. They thrive on the disadvantages of the traditional tort system – quick compensation; predictability, low transaction costs and reduced court congestion. All this advantages are achieved through economies of scale, specialism and increased shift of work towards non-legal staff.

Do settlement mills increase access to justice? According to Nora Freeman Engstrom that might be the case if one compares for the alternatives in the US legal market. Lawyers working on contingency fee basis is the most obvious alternative route to justice. However, contingency fee personal injury lawyers are notoriously picky. Studies have shown that risk mitigation strategies result in high volume of client refusals. Close to 2/3 of the clients are not signed due to meager profit prospects.

It is a different story with settlement mills. Almost everyone who comes with a claim is signed and most of the cases are processed. Indeed, the trade off is the amount and depth of work. But the point of Nora Freeman Engstrom is that most likely these victims would have otherwise done nothing. Another argument  supporting the thesis that settlement mills in a way expand access to justice is that they advertise aggressively. Many tort victims relegate their claims because they do not know what to do and where to seek support. TV and printed adds (and perhaps internet) bridge that gap and signpost people to paths to justice.  Yet another argument, well depicted in the paper, is that most clients receive something. Simply the modus operandi of settlement mills is that they squeeze perhaps not optimal but some compensation from insurers. Moreover, this compensation usually arrives rather quick – within two to eight months from the accident.

The paper does not juxtapose other options for tort victims which exist outside the US. For instance legal cost insurance in some European countries is a potent alternative. State funded compensation schemes can also be compared against the costs, processes and outcomes of the settlement mills. Using the TISCO Methodology for measuring the costs and quality of access to justice might provide interesting parallels.

Inevitably there are drawbacks in the practice of settlement mills. In a nutshell the paper identifies and discusses in detail the following risks:

– settlement mills’ “assembly line” approach deprives tort victims of in-depth, intimate, fact-intensive, truth-searching process that underlie traditional tort

– clients with serious injuries or high claims run serious risk to wind up undercompensated

– as most of settlement mills’ work is performed by non-lawyer personnel there are no ethical or professional standards and concerns and

– settlement mills tend to sell service which is priced as legal service but has little to do with the traditional understanding of legal services.

Read the full text of  Sunlight and Settlement Mills here

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Entry filed under: Access to Justice, Costs of justice, Dispute Resolution, Negotiation, Research, Tort Compensation, Tort Law, USA.

Law in the Last-Mile: the Potential of Mobile Integration into Legal Services Access to justice jobs: Pro Bono Legal Officer based in Budapest, Hungary

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