The Tail That Wags the Dog: The Problem of Pre- Merit-Decision Interim Fees and Moral Hazard in the National Vaccine Injury Compensation Program

Abstract

Despite its laudable intent, the National Vaccine Injury Compensation Program (VICP) is broken. The VICP is designed to compensate those injured or killed by vaccines. The problem is that the current practice in the VICP allows private attorneys to withdraw from a case before any decision is rendered on the merits and get paid in full for their attorneys’ fees and investigative costs with tax dollars — even if the case ends up a total loser. Moral hazard is the economic phenomenon that insurance against loss reduces incentives to prevent or mitigate that loss. In the VICP, that insurance is the taxpayer paying attorneys’ fees and costs of even losing parties. This Article therefore argues that the VICP paying pre-merit-decision interim fees is contrary to law and, moreover, is bad public policy due to the moral hazard that results when neither the client nor the client’s lawyer bear the economic risk of loss and the cost of litigation. This moral hazard in the VICP can create needless litigation, clog federal court dockets, promote the churning of client files, and encourage lawyers to not finish cases. This Article solves the problem by using bedrock principles of statutory interpretation to demonstrate that a decision on the petition’s underlying merits is required before any payment of attorneys’ fees can be made in the VICP.