(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Alison Frankel

May 13 (Reuters) - An Uber-backed Nevada ballot

initiative that would impose the most sweeping and draconian

contingency fee limit in the U.S. has survived its first legal

challenge.

District Court Judge James Russell of Carson City ruled on

Friday that the ballot initiative to cap contingency fees in all

civil cases at 20% complies with Nevada requirements for

petitions seeking signatures from Nevada voters.

That's not a particularly high bar. As I've previously

reported, Nevada requires only that ballot initiatives present

prospective petition-signers with a single issue whose effects

are briefly and fairly described.

Russell held that the fee cap petition, which was proposed

by a political action committee backed primarily by the

ride-share company, satisfied both elements because it addresses

just that one matter and offers a "straightforward, succinct and

non-argumentative" description of the proposal's effects.

Opponents of the fee cap, including the Nevada Justice

Association and an association for Uber ( UBER ) riders who allege they

were sexual assaulted by Uber ( UBER ) drivers, have argued that the

initiative is misleading because it does not inform prospective

petition signers of the follow-on effects of the fee cap.

Challengers presented Russell with declarations from nearly

three dozen Nevada lawyers who said the fee cap would make it

harder for all kinds of plaintiffs - from patent owners and

defrauded shareholders to law enforcement officers injured in

the line of duty - to find lawyers to handle their cases.

(Lawyers typically receive contingency fees of 25-40% of their

clients' recovery.)

Fee cap opponents also argued that the proposal failed to

warn Nevadans that they will end up bearing more Medicaid costs

if personal injury plaintiffs can't find lawyers. Plaintiffs who

recover money from the defendants who caused their injuries must

reimburse the state Medicaid systems for the cost of their care.

If lawyers won't take their cases, fee cap opponents said,

Nevada taxpayers will be on the hook for the full cost of care

for Medicaid patients.

Russell credited challengers with "strong arguments" on the

fee cap's downstream effects of limiting access to legal counsel

and reducing reimbursements to Nevada's Medicaid system. But he

said these potential consequences were "too speculative and

hypothetical to be required to be included in the petition's

description."

The challengers said on Friday that they will appeal

Russell's ruling to the Nevada Supreme Court, citing the trial

judge's acknowledgement of their strong arguments about the

impact of the fee cap.

"We're confident that the Nevada Supreme Court will agree

with us that the voters need to be truthfully informed about

these important effects before Uber's ( UBER ) proposal can be placed on

the ballot," said the groups' lead counsel, Deepak Gupta of

Gupta Wessler, in an email statement.

Uber ( UBER ) did not respond to my email query about Russell's

decision. The company has denied allegations that it failed to

protect riders from sexual assault and has said reports of

assault have declined after its adoption of additional safety

measures.

The political action committee that filed the Nevada

petition said in a statement that Russell's approval of the

ballot initiative is "a win for plaintiffs and Nevada voters."

"Despite the misleading arguments of trial attorneys," the

statement said, "this ballot measure will put more money into

the victims' pockets, without in any way limiting an

individual's ability to sue or the amount victims can recover."

The 20% Nevada fee cap, according to a declaration filed by

challengers, would be by far the most restrictive in the

country. Two other states, Oklahoma and Michigan, impose fee

caps in all civil cases but the limits are 50% and 33%,

respectively. Several other states cap contingency fees in

medical malpractice cases but the lowest limit is New York's 30%

cap.

Even if the Nevada cap's critics don't succeed on appeal,

they will have additional opportunities to oppose the measure,

as Russell's ruling notes. Assuming that Uber ( UBER ) and the petition's

other supporters amass the requisite 100,000 or so signatures

from Nevada voters, the measure will proceed to the Nevada

legislature. If state lawmakers decline to enact the proposal

outright, the legislative can decide to present voters with an

alternative when the initiative goes before voters.

And before the initiative actually appears on general

election ballots, Nevada voters will receive state-approved

statements from the initiative's supporters and opponents,

outlining their arguments for and against the fee cap.

Both sides can also run public campaigns addressing the

proposed cap. If the Supreme Court allows Uber ( UBER ) and the other

backers to begin collecting signatures, I wouldn't be surprised

to see the proposal's critics start running ads explaining their

opposition.

Read more:

Uber ( UBER ) defends Nevada ballot petition to cap all contingency

fees at 20%

Uber ( UBER ) sex assault group sues to block Nevada bid to cap all

contingency fees at 20%