It’s the Net Recovery That Really Matters

A few weeks ago, we settled an FTCA matter relating to a botched neurosurgery procedure at the San Diego VA. Especially considering the $250,000 California cap on non-economic damages and the relatively limited economic losses, we felt the $525,000 settlement was an excellent outcome.

We disbursed the money yesterday. And here is the best news: Because we were able to resolve the matter without having to file suit, the client’s net recovery was super impressive. With the 20% fee applicable to administrative settlements ($105,000) and less than $6,000 in costs, the client netted a bit over $414,000.

Why do I say the net was impressive? If we had had to litigate this case – as we originally expected – the client’s net likely would have been markedly lower. If the case had resolved for the same amount mid-way in the litigation process - a point in the process where cases often settle - the fee would have been 25% ($131,250) and the costs would have been at least a total of $25,000, quite possibly more. The client’s net would have been $368,750, over $45,000 less than the actual scenario. If we had had to try the case (or gotten within a week or two of doing so), the costs probably would be close to $100,000. Even if the costs were only $80,000, the client’s net would be over $100,000 less than the amount we just wired to him. And the last example assumes the court would have awarded $525,000. The client might not get any award, or he might get one for something less than $525,000, with the obvious impact on the net recovery. Indeed, if we tried this case, the court would have had to award about $660,000 for the client to get the same net he is getting now.

One might be tempted to look at this and note that the lawyer gets burned by earning a lower fee. Aside from issues of where a lawyer’s priorities ought to lie, that’s a simplistic view. Had we gotten even halfway through the litigation process, we almost certainly would have had at least a couple of hundred hours of lawyer/paralegal time in the case. As it is, we had less than 75. Even on the larger 25% litigation fee, the realized hourly rate would be 60-75% lower than what it is on the 20% administrative fee. I will take that reduced fee any day of the week.

In our business, the ultimate measure of success is not the top line number of a judgment or settlement. It’s what the client takes home after paying attorneys’ fees and costs. For both us and our clients that is sometimes easy to forget. But it is a reminder of that most important lesson: What is right for the client is what matters the most. Always.