One of the biggest complaints I’ve heard about plaintiff lawyers is that when a case settles they take for themselves more money than they give the client. This complaint paints the plaintiff bar as a greedy, heartless bunch getting rich off of the pain and suffering of others. When you put it like that, even I hate all plaintiff lawyers.
As far as I can see, there are only two situations where a lawyer gets more of the settlement than the client. The first is if the client signs a 50% retainer agreement on the gross settlement and then allows for reimbursement from the settlement of the lawyer’s case costs. Under this scenario, the client will always receive less than 50% of the settlement.
If you don’t want the lawyer to get most of the settlement, there is an easy way to avoid this situation. Don’t sign a 50% contingency agreement! Indeed, run (don’t walk) out of the lawyers office. If a lawyer is charging a 50% contingency fee, that tells me that the lawyer is not very good at maximizing a settlement and instead, takes a big chunk of the settlement for himself.
The second way a lawyer can receive more settlement money than the client is a bit more complicated. Here’s something you may not know: if a person is injured due to another person’s negligence, and if the medical expenses are paid by Workers Compensation, Medicare, Medicaid, DPW, ERISA employee benefit plans and certain HMOs, you have to reimburse the payer from the settlement. The problem we run into is that if there is a reason for the plaintiff to compromise and settle the case for less than full value, some of these organizations still demand to be paid in full and do not compromise. This can create a very difficult situation.
Assume that a person is injured and has $100,000 in medical care paid for by workers’ compensation insurance. Assume that the full value of the case is $500,000. Now, also assume that shortly before trial a key witness disappears. Suddenly, it’s much harder to prove your case at trial.
There is no question that the defendant’s insurance company is going to take advantage of that fact. They are not going to pay the full $500,000 because now there is a better chance they can win at trial and you receive nothing. What do you do? You compromise. You accept $250,000 in settlement.
But what if the workers’ compensation carrier doesn’t compromise on its demand? What if they want the full $100,000? In this situation, the lawyer takes his 1/3rd fee of $83,333, leaving $176,667. The workers’ compensation carrier gets its $100,000. This leaves for distribution to the client the amount of $76,667. And so in this instance, the lawyer gets more than the client.
Doesn’t seem fair does it. It’s not? But until federal and state laws are changed to address this problem we are all stuck with it.
The good news is that a lot of times we are able to compromise the lien and increase the amount of the settlement our clients receive. A good lawyer will make every effort to do so. A bad lawyer will not.
What kind of lawyer did you have?
