Show Me the Money

I am often consulted by prospective clients who want to sue over $10,000 or $20,000. They are disappointed and sometimes angry when I tell them to forget it. If they do not know me well, they may assume that I turn down their case because I am a cold-blooded reptile. I may be a viper, but that is not the reason I turn down the case. Although they may be owed money and there may be a clear basis for liability, most lawsuits for less than six figures make no economic sense. It would not serve the client’s interest or mine to file a suit that would not yield enough money to justify the cost of litigation.

Let us assume that there is $20,000 owed. You always have to factor in hazards of litigation, so let us say that the odds of winning are 50/50. Therefore, the lawsuit for $20,000 is really only worth $10,000. Since the attorney’s fees could easily top $10,000 on each side, the lawsuit would not be worth pursuing.

My client Al was in the other day. His nephew Charlie borrowed $10,000 and did not pay him back. He figures that his case is a sure thing–the defendant owes the money and there is a signed promissory note. However, there is always a risk of loss without regard to the merits of one’s case. What if Charlie testifies that he paid Al back in cash? It may be a lie, but juries are not infallible at discerning truth. Some people are very convincing liars.

Attorneys win cases they should have lost and lose cases they should have won, viewed only by the facts at issue. This is not because of skill or lack of skill; it is because of random factors. For example, what if Charlie signed the promissory note after losing to Al at a poker game? Money owed for an illegal contract might not be collectible in a court of law, or jurors might be unwilling to enforce a gambling debt.

Just as military adventures often succeed or fail for no apparent reason, court cases can turn on circumstances that no one could have predicted and that may never be apparent. There is no certainty in these things. In evaluating the financial or economic value of a lawsuit, the case has to be discounted to take into account the risk of loss, as well as the costs of expert witnesses, attorneys, filing fees, and so forth.

Many people sue over small amounts of money, but there are usually other factors in play: The plaintiff may be a business that wants to make it clear to customers that it will pursue them over unpaid bills or pilfered merchandise. The plaintiff may be prosperous enough to want to sue on “principle” or to make a point. The plaintiff may hope to recover attorney’s fees from the other side if the plaintiff wins the suit (this is possible if the defendant litigates in bad faith or in certain types of cases such as civil rights or consumer-protection complaints). The plaintiff may have legal services for free or reduced cost through a legal-services plan, or because the plaintiff is a business with attorneys on retainer. Finally, the attorney may have taken the case and filed the complaint thinking there was more at stake than there was. It may be necessary to file a lawsuit to find out how much really is involved.

Sometimes I pursue cases on principle. I represented a teacher who was beaten up by a bully. I knew that I would never make any money on the case, but I felt that the teacher needed his day in court. I won the case, but the $5,500 judgment was not worth it from an economic sense and my one third of the recovery was far less than the value of the time I put into the case.

When visiting an attorney to explore the idea of suing someone, do not forget that the attorney is in business to make money. You may have suffered insult, assault, damages, and injury, but recourse to the law is an expensive and haphazard course for redress. If the attorney tells you that you do not have a case, she or he is turning down a potential paycheck. The attorney would take the case if it were worth pursuing. The problem is that not all wrongful conduct will give rise to substantial monetary damages. Trying almost any lawsuit will take upwards of 50 hours, which would be an investment of $10,000 worth of time for the attorney. Many kinds of cases, such as civil rights or medical malpractice, cost hundreds of thousands to try. Unless the potential recovery is at least 10 times the cost to try the case, a contingent fee agreement — where the lawyer only gets paid for winning — is not a good bet for the attorney. Seldom will a potential recovery of less than $200,000 justify a contingent fee.

I was recently consulted by Jane, who is now a former friend. She has been very badly treated by certain family members. They not only insulted her to her face, they posted nasty, and untrue, stories about her on Facebook. They were calling her “two-faced” and “stingy,” among other things. As Samuel Johnson said, “Fate never wounds more deep the gen’rous heart/Than when a blockhead’s insult points the dart.” Jane was justifiably offended.

Jane wanted a personal protection order and a suit for libel. She was quite upset that I was not willing to file suit against the family members who were treating her so badly. Although she assumed that I did not care that she was being mistreated, for a personal protection order there needs to be assault, not just insult; and for libel there has to damage to a monetary interest to make the case worth pursuing. Sooner or later she will realize that I was more her friend than an attorney who would take her money to pursue her grievances in court. I was not willing to do so, knowing that the pleasure of seeing family members squirming in court would come at too high a price.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney
 
 
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