The Trifecta of Perspectives

Transcription

1 The Trifecta of Perspectives Darryl M. Phillips Entergy Services, Inc. 639 Loyola Avenue, Suite 2600 New Orleans, Louisiana (504)

2 Darryl M. Phillips currently serves as Assistant General Counsel for Entergy Services, Inc. He received his Bachelor of Arts, Communications and Public Relations (1984) and Juris Doctorate (1989) from Loyola University, New Orleans, LA. He is admitted to practice law in the states of Louisiana and Texas. Darryl came to Entergy from private practice which became part of a national law firm where he was the owner and managing partner of the New Orleans, Jackson, Mississippi and Houston, Texas offices. He has served as a member of the firm s Management Committee that was responsible for managing the operations of 18 offices around the country. He has extensive litigation experience in the casualty and commercial areas. He has also represented the City of New Orleans, and served as a Chief of Litigation, during changes in the Mayoral Administration. Darryl has considerable trial experience as a first chair trial lawyer representing both plaintiffs and defendants in casualty matters, including products liability cases and medical malpractice actions. He has tried and handled commercial/transactional matters including Federal False Claims Acts (Qui Tam Actions) in federal and state courts in Louisiana and Texas. He has handled cases in various jurisdictions, including Arkansas, Georgia and Mississippi. He is the Past President of the New Orleans Bar Foundation and a longstanding member of the New Orleans Bar Association Board of Directors. He has maintained an AV rating with Martindale Hubbell, and served in the United States Marine Corps Judge Advocate General s Office, or The JAG.

3 The Trifecta of Perspectives Table of Contents I. Introduction...5 II. What Is Your Opponent s Business Model?...5 III. When Serving, Keep Your Eye on the Net!...6 IV. Compensation...7 V. Don t Assume Your Opponent Knows Everything About the Client...8 VI. Controlling the Client...8 VII. It Is Harder to Score If All You Play Is Defense!...9 VIII. The Underutilized Structured Settlement Offer...9 IX. Cost of Defense Settlement Offers Can Actually Help Your Opponent...10 X. Conclusion...11 The Trifecta of Perspectives Phillips 3

4

5 The Trifecta of Perspectives I. Introduction This presentation is not an attempt to provide a one size fits all strategy for dealing with your opponent in civil litigation. Instead, it attempts to provide a look into the factors that may motivate or influence your opponent throughout the case. Understanding your opponent s hidden intent, real motivation and ultimate goal will help you anticipate and respond to situations that will arise as the case progresses. While litigation in itself is fluid, there are certain features or principles that are more predictable. Your job is to recognize and analyze the actions and/or inactions of your opponent to obtain the best result for your client. Since your opponents will avoid willingly showing his/her hand, you must become better at reading the signs your opponent leaves on the litigation terrain. Rouse him, and learn the principle of his activity or inactivity. Force him to reveal himself, so as to find out his vulnerable spots. Sun Tzu, The Art of War II. What Is Your Opponent s Business Model? Part of the litigation terrain consists of understanding your opponent s business model. The model under which your opponent operates will have an influence on his decision making process. A plaintiff s civil litigation practice is a business and is subject to the same basic economic realities that affect all businesses i.e., Revenue minus expenses = Owners Equity/Net Profit. And, because of this economic reality, operational costs and cash-flow are huge factors. Unlike the typical defense firm, a plaintiff firm s monthly cash-flow may fluctuate greatly from month to month. It can be normal for firms to go through periods of feast or famine. Some are more able to adapt than others. For example, a high volume personal injury practice with a high case resolution rate will generally have a more consistent cash flow than a boutique plaintiff s personal litigation firm. However, a high volume practice generally comes with higher overhead (more case intake people to answer phones and screen cases, more case handlers, more attorneys, more space and advertising budget) which in turn requires that the case load move quickly and efficiently through the work pipeline. One of the most significant influencing factors when dealing with a firm operating under this model is to get the cases resolved as quickly and efficiently as possible. Maintaining a consistent cash flow that equals or exceeds the monthly overhead is one of the most challenging aspects of running a personal injury litigation practice. Personally, I am most familiar with the boutique plaintiff injury firm. Its income flow is generated from fewer cases, with a higher rate of return, or fee. Everyone remembers the big hit, but no one remembers the months of consistent overhead and case funding required in the interim. If the monthly revenue does not equal the monthly expenses, then your opponent is operating in a negative cash flow position. Those with the ability to self-fund can inject the capital needed to balance the income-revenue stream. Others rely on a line of credit that acts as a back-stop. Most lawyers try and use their lines of credit sparingly and only as a last resort, especially if they are debt adverse. Below are some factors relevant to each of the more standard business models: Solo/General Practitioner Generally lower overhead; Potentially greater profit margins; Limited ability and resources; The Trifecta of Perspectives Phillips 5

6 Easily overwhelmed; Limited docket of cases; Day-to-day operations may pose distractions; A generalist, handling a wide variety of cases; and Focus may tend to be more on month to month fee generation. Small-Medium Size Firms Greater overhead; Greater case capacity; Internally competitive; Fee and case sharing issues; Rainmaker vs Worker issues; Unequally Yoked Members; and Differing work ethics of the members. Loose Partnerships Sharing common overhead i.e. (rent, office equipment and expenses); Limited or no legal fee sharing; Individualized case sharing, when necessary; and Financially distinct with regard to revenue. Plaintiff s Litigation Firm Firm brand/reputation draws the business; Members tend to specialize; More organized & efficient from an operational standpoint; Higher overhead and operating expenses; Substantial case financing ability; More defined partnership roles; Actual Firm/ litigation shop; Higher revenue generation; Less financial vulnerability; Greater access to capital for case funding; and More high-end cases, requiring more capital investment. III. When Serving, Keep Your Eye on the Net! When in settlement negotiations, think past the amount of your settlement offer. While it is true that a lot of experienced defense lawyers will take the position that: I m only concerned about the amount my client has to pay to resolve the case. While this is true from your client s perspective, your job is to act as a bridge between the adverse parties. To be an effective bridge you must be able to view the case from various perspectives. People communicate better when they are capable of speaking the same language. Your job is to learn what business model you are facing in litigation. The more you know, the better prepared you can be. 6 Young Lawyers June 2017

7 As most of you already know, personal injury attorneys are generally paid on a contingency fee basis. In my 27 years of practice, I have never handled a personal injury case on an hourly basis. The contingency fee usually ranges from 33.33% up to 45% depending on the type of case. I have seen some contingency fees as high as 50%, if the case goes on appeal. Most automobile accident cases are handled on 33.33% with the fee moving up to 40% in the event the case goes, or is set for trial. More complicated cases such as products liability case, and medical malpractice cases start at about 40% 45%, largely due to the amount of work involved and the capital investment required to work these cases up. The fee can move upward at various stages in the claims/litigation process. Keep in mind that in exchange for this fee interest, the PI attorney is funding the case and those case costs will be deducted at the conclusion of the litigation, generally after the fee. As an unwritten rule, most reputable plaintiff attorneys avoid being in a situation where they take more out of a settlement than the plaintiff nets. Keep in mind that for the PI attorney, each plaintiff represents an avenue to new business i.e. friends, family and associates. The last thing a plaintiff s lawyer wants in the community is a client saying: My lawyer took all my settlement money This is a future business killer! Understanding how the settlement is presented to the client is also helpful. For example: Favorable: * Unfavorable: $100,000 Settlement * $100,000 Settlement ($33,333) Legal Fee * ($33,333) Legal Fee ($10,000) Costs * ($10,000) Costs $56,667 Client s Portion * ($15,000) Medical Exp. * $41,667 Client Net ($15,000) Client s Medical Exp. * $41,667 Client s Net, After Medical Exp. * While as corporate or private defense counsel your primary focus is on the gross amount of the settlement, keep the client s net recovery in mind. The client s net may well be the driving force behind accepting or rejecting your settlement offer. Therefore, when you make a settlement offer, keep in the back of your mind the approximate net amount the plaintiff will receive. I do not suggest that you increase your settlement offer solely based on the net to the plaintiff; however, it is useful in understanding the settlement process from your adversary s perspective and talk in terms of approximate net to his/her client so you are both speaking the same language. IV. Compensation One of the greatest challenges in operating a pure personal injury practice is finding the right compensation scheme for the non-partner lawyers handling your docket of personal injury cases. While your opponent has a pretty good idea of how you are paid, whether it is as in-house counsel or outside counsel, do you have any idea of how his personal compensation is determined? For example: Straight Salary creates higher monthly expenses for a personal injury firm with fluctuating monthly income. Some believe a straight salary does not provide enough incentive for the lawyer to move the docket and maximize the value of the cases. Straight Fee Percentage lowers the firm s monthly salary expense, but makes it difficult for the lawyer to cover his/her personal living expenses. The Trifecta of Perspectives Phillips 7

8 Base + Production is an attempt to merge the benefits of both the above compensation models. The base salary is usually relatively low and the non-partner lawyer is incentivized but producing and maximizing the fee potential of his docket of cases. There are countless variations of this model and the model may vary from lawyer to lawyer within the firm. While in the corporate sector, predetermined salary with a possible bonus tends to be the norm. A defense attorney tends to bill time by a fraction of the hour. Those compensation structures may not be the norm at a pure plaintiff s litigation firm. Remember, the pure personal injury attorney is not sending or collecting on a monthly bill that is due in thirty days. Instead, he is incurring case costs as his docket increases and the cases are worked. The pure personal injury attorney only gets paid his fee upon case resolution. Meanwhile, he is funding the cases and covering the law practice overhead, retaining only revenue minus expenses. V. Don t Assume Your Opponent Knows Everything About the Client There are often considerable differences between the information provided in the initial client interview and what information is uncovered during discovery. In the average garden variety case, during the initial interview the client wants representation, so he/she tends to stress the good points while minimizing or not even mentioning the bad. And, believe it or not... there are clients that actually lie to their lawyers! It would be a mistake to always assume that your opponent knew about the negative information before you uncovered it during your discovery. Even from the corporate defense perspective, we spend a tremendous amount of time trying to determine whom, within the company is the best source of information for the issues presented during the case. The lawsuit itself alleges that the company was negligent, the employees involved tend to be protective of their procedures, safety record, work crew and reputation. These factors influence the frank and open discussion you need to fully evaluate the company s potential risk. We too, may discover damaging information during the depositions of our employees or company representatives. Because of these conflicting interests on both sides of the case, it is counterproductive to automatically assume that the adverse lawyer was fully aware of the damaging information uncovered during discovery, or worse yet, at trial. If your ultimate goal is the settle the case, and your opponent has unrealistic expectations, then use that negative information to show the lawyer that his client cannot really be trusted. Create doubt and make your adversary begin to think: What else don t I know? Remember, the personal injury lawyer is funding the case and it s the lawyer that takes the financial loss if the case is unsuccessful. Negative information significantly impacts the case evaluation and hi/her willingness to invest the time and effort into a protracted fight. VI. Controlling the Client Based on my years of practice, defense lawyers tend to think the plaintiff lawyer has much more control over the client than actually exist. Keep in mind, from the defense side you are generally working with a client that you have a prior relationship with from previous cases. A comfort level and sense of trust has developed over time. Your adversary, the plaintiff lawyer, is probably representing this client for the first time. The client is probably unfamiliar with the litigation process and has an entire perception base on non-lawyer friends, relatives, television, and now social media. A lot of plaintiff lawyers will have what I refer to as a comfort & confidence curve to get over before he has gained the full trust of the client. Lawyers gain the client s confidence by accurately predicting the future. The more you show his or her predictions to be wrong, the less 8 Young Lawyers June 2017

9 confidence the client has in that lawyer. Settlement negotiations provide the perfect environment to sow the seeds of doubt. An experienced personal injury lawyer will generally be very conservative and even non-committal when the client starts asking: What is my case worth? Conversely, defense counsel wants to make sure his client is aware of the worst case scenario. Where there is serious adverse evidence detrimental to your opponent, force your opponent to spend valuable time and effort trying to explain and/or defend the negative information. If your opponent is busy defending or trying to explain away negative information, he/she is not putting on their case, but playing defense. VII. It Is Harder to Score If All You Play Is Defense! One of the most glaring observations I have made in moving from a plaintiff s attorney to defense counsel is how the entire defendant s focus and resources are spent refuting plaintiff s allegations, i.e. playing defense. As lawyers, we all know that the plaintiff has the burden of proof and if that burden is not satisfied, theoretically the defendant should prevail. However, if you have tried enough cases, you know that in the real world that is not always the case. In plaintiffs favorable venues, we have all seen situations where plaintiffs win cases with relatively weak evidence. I suggest that you defend your client as if you have the burden of proof and leave nothing to chance. Do not simply rely on a closing argument that is limited to: The plaintiff has failed to prove his case by a preponderance of the evidence. To the average person that sounds like, Yeah we did it, but he can t prove it! Always look for opportunities to take the offensive. For example, when there is a pre-accident medical record in which the plaintiff made similar complaints of radiating back or neck pain. Most defense lawyers would refute the plaintiff s claims by simply presenting the medical records when cross-examining the plaintiff and his treating physicians and/or have the contents of the prior accident medical record addressed by their IME physician. We can all agree that in general, that is the text book defense use of contradicting medical evidence. As a former plaintiff lawyer my preference is to always have control of the narrative. Not only would I use the adverse medical records as noted above, but on the presentation of the defense case, call a live witness healthcare provider who took the history or made the note, walk the jury through the importance of recording an accurate narrative, how that information is used to accurately diagnose the patient, etc. Prove, through live witness testimony that the plaintiff is lying and/or exaggerating. While the example above is rather simple, look for opportunities to play offense and make the plaintiff play defense. You score more points when you have the ball! VIII. The Underutilized Structured Settlement Offer In my experience, making offers in the form of a structured settlement is one of the most underutilized settlement strategies in the defense lawyer s arsenal. The reason a structure is so underutilized is that the defense lawyer will normally start by asking plaintiff s counsel would his client be interested in a structure. The plaintiff lawyer s typical default response is: No, let s talk lump sum numbers. At that point the discussion ends since the defendant does not want to waste time having structured settlement proposals prepared when the plaintiff is said to be not interested. First, most plaintiffs do not know what a structured settlement is if his lawyer has not explained it to him. Second, the plaintiff often times does even know a structured settlement is an option. A lot of plaintiff s The Trifecta of Perspectives Phillips 9

10 lawyers stay away from them because they add a level of complexity to the process. I have found that a structured settlement is a great way to close a gap between the settlement demand and settlement offer. Structures tend to work best with an injured person who has had a consistent work history; one who has struggled living paycheck to paycheck; parents with young children; minors with caring but financially unsophisticated parents; and persons that are thinking long-term. A person who has never really worked for a living, has not learned the value of money or basic principles of investing is typically not going to be willing to accept a structured settlement. There are actually people whose plan after they get their lawsuit settlement is to party like rock stars until it runs out, then return to the life they had before. While it may seem irrational, I ve seen that mentality enough over the years to know it exists more than you would think. That being said, even when the plaintiff s lawyer says he s not interested in a structure, send him one in writing to force him to have to explain it to his client. Use the same approach in mediation, so that the mediator explains the benefits of a structure as well. A structured law fee, under the right circumstances can also be very attractive to a lawyer who wants to lessen the overhead pressure. IX. Cost of Defense Settlement Offers Can Actually Help Your Opponent The situation to which I am referring is when defense counsel receives an early and unrealistically high settlement demand before he has had a chance to effectively evaluate the liability, causation and damage elements of the case. The defense counsel will forward the demand to his client that is usually an insurance adjuster, or corporate counsel. The defense lawyer s client is usually offended by the demand or settlement recommendation, but knows he has some exposure. The defense client, before thinking it through, instructs you to respond with a written cost of defense settlement offer of $5,000 $10,000. When you receive an early and unrealistically high settlement demand, ask your opponent for a detailed breakdown of each element of damages to help determine how the plaintiff came up with his settlement figure. Further, ask that your opponent include the documents he is relying on to support each of his elements of damages. Explain to our opponent that you need that additional information for your client to consider so that you can adequately respond to his demand. Based on the information provided, or lack thereof, you can usually and easily recognize where the elements of damages are exaggerated. The plaintiff s lawyer will also know that you know! I believe this is a much better strategy than simply responding with a knee jerk cost of defense settlement offer. When you do decide to provide the cost of defense offer what effect are you trying to achieve? Most think it s a way of showing the plaintiff that your client thinks very little of his case, even when there is real defense exposure. In reality, it plays right into the plaintiff s narrative of how: unfair and unreasonable the insurance company/corporation is; they don t really care about you or your injuries; it is all about saving money to them; you need me to get you fair compensation; and you can t trust them to look out for your best interest. Then, when the case settles for multiples of the amount of your cost of defense offer, your opponent s narrative is confirmed and it becomes the life experience shared with the plaintiff s family and friends. You have made that narrative easier for your opponent to sell to the members of the jury in those cases that do go to trial. Finally, you have unwittingly provided your adversary with a great marketing device. 10 Young Lawyers June 2017

11 X. Conclusion The factors that influence your opponent vary in the order of importance from case to case. Those factors also change in importance throughout the case. To recognize and understand these factors will help to identify vulnerable spots that may not be readily apparent from your reading pleadings, correspondence and discovery responses. I have attempted to identify some of the underlying factors that may influence your adversary s case evaluation and settlement value throughout the litigation. Once you understand your opponent, you are in a better position to plan, respond and react to situations that arise as the case progresses. In the end, the goal is to achieve a better result for your client. Since the vast majority of cases will settle prior to going to trial, this discussion is more heavily weighted towards positioning the case for favorable settlement. However, always keep in mind the primary rule of litigation: Being prepared for trial leads to a good settlement, while being prepared for settlement, leads to a bad trial. Therefore, always be prepared to try the case, while keeping in mind that: The greatest victory is that which requires no battle! Sun Tzu, The Art of War The Trifecta of Perspectives Phillips 11

12