$9.4 MILLION VERDICT LOST: THE IMPORTANCE OF ACCURATE CASE VALUATION

Upon learning that he had settled his case for 96% less than the jury was poised to award, the plaintiff claimed that he never authorized his attorney to settle the case. The plaintiff’s attorney claimed that there must have been a miscommunication. Citing the alleged miscommunication, the state court judge presiding over the settlement determined “serious” misconduct had been committed by the plaintiff’s lawyer, yet nevertheless recently scheduled a retrial of the case.

There are two key lessons to take away from this story. First, an attorney should always be very clear with his or her client when communicating a settlement offer. An attorney who acts outside the scope of authority is subject to serious consequences.

Second, an attorney must carefully evaluate the facts and law of the client’s case to ensure proper valuation. In order to properly value a client’s case, the attorney must prepare the case from the outset of the representation as if the case is to be tried. That means understanding all viable claims for each potential defendant, what elements need to be proved for each claim, what evidence will be required to establish each element, where each piece of evidence will come from, and a range of damages for each claim.

In this instance, it appears that the plaintiff’s attorney adequately prepared his case, but either panicked or otherwise lost site of the fact that he had sufficiently proved his case. In so doing, he nearly undersold his client’s case by more than 96%. Of course, there’s no certainty in litigation and there’s always a risk that a judge or jury will not award a client what the case is worth even when the attorney has sufficiently proved his case. However, if an attorney thoroughly prepares the case from the outset as if it is to be tried, and carefully establishes each element of each claim at trial, then the attorney can be confident that the jury will appropriately compensate the client and avoid underselling the case for a tiny fraction of its true value.

Ultimately, the apparent miscommunication between the attorney and his client may prove to be a blessing in disguise, allowing the plaintiff to re-try his case for a much higher dollar amount, or use the first jury’s near-verdict as leverage for a much higher settlement value.

Full article below re-printed below.

By Ciaran McEvoy

Daily Journal Staff Writer

LOS ANGELES – The state court judge presiding over a personal-injury settlement gone awry has scheduled a retrial despite finding that “serious” misconduct was committed by a prominent plaintiffs’ lawyer.

A routine court proceeding became dramatic earlier this year when a $350,000 settlement agreement unraveled after it emerged the jury had been poised to award the plaintiff $9.4 million.

In denying a defense motion to dismiss the case with prejudice on Wednesday, Los Angeles County Superior Court Judge Michael M. Johnson took time to tell plaintiffs’ lawyer C. Michael Alder of AlderLaw PC that he “engaged in misconduct by misleading the court.”

Johnson stopped short of finding Alder’s misconduct was sufficiently “egregious” or “shocking” to merit dismissal of his client’s lawsuit with prejudice. The judge also gave the defense 20 days to amend its answer and to file a cross-complaint and suggested they could move to dismiss the lawsuit later.

The botched settlement, first reported by the Daily Journal in February, garnered widespread attention in part because Alder is president of the Consumer Attorneys Association of Los Angeles. Alder represents Pablo Valdez Hernandez, a developmentally disabled man who was injured in 2010 when he was ejected or – as the defense contends – jumped from an ambulance traveling on Interstate 8.

On Jan. 30, as a jury was poised to announce its verdict after deliberating for less than two days in Hernandez’s trial against Schaefer Ambulance Service Inc., Alder and defense lawyer James E. Siepler of Pollard, Mavredakis, Cranert, Crawford & Stevens engaged in last-minute negotiations that resulted in an agreement to settle the case for $350,000.

As the dismissed jurors filed out of the room, but before the settlement was read into the court record, Alder walked out of the courtroom. After being informed the jury was going to issue a $9.4 million verdict, Alder began yelling, cursing and – in Johnson’s words from a March 18 hearing – “all hell broke loose.” Alder demanded the jury be brought back in to read the verdict, Johnson said at last month’s hearing, adding that “Mr. Alder was out of control.”

After coming back from a 90-minute lunch break, Alder apologized for his behavior and informed Johnson that Hernandez never agreed to the settlement.

At Wednesday’s hearing, Alder admitted to misleading Johnson by not telling him he lacked Hernandez’s authority to settle the lawsuit. But he denied defense allegations made by Curt C. Cutting of Horvitz & Levy LLP that he abandoned his client’s case, committed a fraud on the court and engaged in “egregious misconduct.”

“It was a chaotic event and it didn’t go very well,” Alder said, “but there was no fraud.”

The incident, Alder said, was a result of a “miscommunication” and “chaos” brought on by attempting to settle the case at the last minute. He offered to pay some defense court costs, stating, “I’m trying to do what I can to protect my client.”

“You misled the court,” Johnson told Alder on Wednesday. “Wasn’t there time to tell the truth?”

Siepler disputed Alder’s side of the story as “disingenuous” and “not accurate,” stating that it appeared Alder communicated three different settlement offers to Hernandez during a 40-minute negotiation session on Jan. 30.

The case is scheduled to be retried in January 2013 in Johnson’s courtroom with the same plaintiffs’ lawyers. Defense counsel now consists of the Pollard firm as well as Lewis Brisbois Bisgaard & Smith LLP. Hernandez v. Schaefer Ambulance Service Inc., BC451751 (L.A. Super. Ct., filed Dec. 22, 2010).