…the All-Inclusive Offer gives rise to many challenges, including a potential conflict of interest.
Some plaintiff lawyers have been known to terminate settlement discussions the moment the defence insists on delivering All-Inclusive Offers with a concomitant refusal to provide a breakdown. Most plaintiff lawyers, however, stick with the negotiations and do their best to workaround the challenges, such as:
a) how much to attribute to legal fees? The ratio will impact how much is left for “damages” upon which the contingency fee is based;
b) how much to attribute to disbursements? Again, the more the defence pays towards disbursements the less is paid in “damages ” upon which contingency fees will be calculated;
c) how to quickly do the math while your client patiently waits to hear how much will end up in their pocket.
The Challenging Math
Working with an All-Inclusive Offer is a challenging mathematical exercise for the claimant and their lawyer. First the claimant’s lawyer has to “re-engineer” the All-Inclusive Offer to its constituent elements. This is extremely challenging because the damages paid by the defence depends on how much is paid in legal fees by the defence, and how much is paid in legal fees by the defence is a derivative of how much is paid in damages. It requires a lot of math. It is time consuming if done properly. Most lawyers just “fudge it,” and simply hope they are never challenged on it.
…It requires a lot of math. It is time consuming if done properly. Many lawyers just “fudge it,” and simply hope they are never challenged on it.
Second, once the math is done, and the defence offer is pared down to its constituent elements, the claimant’s lawyer must then calculate what the client has to pay in solicitor-and-client fees (typically the contingency fee rate multiplied by the damages recovered, which is the all-inclusive sum less the legal fees, disbursements, and H.S.T. recovered from the defence).
And finally, once the legal fees have been calculated, and all H.S.T. worked out, the claimant’s lawyer typically continues to apply additional reductions (for such things like the claimant’s outstanding loans, unpaid treatment or medical services, assignments, prior lawyer accounts, a portion of disbursements not covered by the defence, etc), in order to determine for the claimant what their “take-home” recovery will be. Although the “take-home” recovery amount should be immaterial, in practice, this figure often ends up being the most important one (to the claimant), and forms the central basis upon which settlement instructions are obtained.
The Helpful Work-Around
Needless to say, the All-Inclusive Offer comes off-the-tongues of defendants effortlessly, but on the claimant side, there is a lot of work to be done before the offer transforms into something intelligible for the claimant and their lawyer.
The task of transforming an All-Inclusive Offer into an intelligible offer for the claimant is ideally done through a specialized software application. A software application that does the math instantly and effortlessly, frees the claimant’s counsel of the cumbersome and time-consuming math during offer exchanges at mediation, or otherwise. Although legal counsel are free to choose the methodology they prefer to use when breaking down an All-Inclusive Offer, 360Mediations makes an “All-Inclusive Breakdown Calculator, available online, based on the following truths:
a) the all-inclusive sum is first applied to cover the claimant’s disbursements, such that the “damages” (upon which fees are based) will be zero if the all-inclusive sum doesn’t surpass the amount of the claimant’s actual disbursements;
b) the defence pays legal fees at the rate of 15% on the first $100,000.00 of assessed damages (which can be modified if you like);
c) the defence pays legal fees at the rate of 10% on the damages assessed above $100,0000 (which can be modified if you like). See paper on “Resolving Costs at Mediation” for a more detailed explanation of these percentages;
d) the term “damages” includes prejudgment interest; and
e) the only vagary for claimant’s counsel is to determine how much of the claimant’s disbursements are being covered (or paid for) by the defence. This sometimes has to be estimated in situations where the defence hasn’t really provided any feedback: the calculator allows the user to input the amount of disbursements notionally paid for by the defence. A good rule of thumb is typically somewhere between 75% and 90% of the actual disbursements.
The on-line calculator provides enormous benefits …:
… it is fast,
… easy to use,
… provides results in real-time,
… work out settlement scenarios in advance,
… helps shield the lawyer from any assertion that they were callous with the math, and
… easily see if a modest adjustment of the contingency fee rate yields a good result for both the lawyer and their client….”
The on-line calculator provides enormous benefits – it is fast, easy to use, provides results in real-time, allows the lawyer to work out settlement scenarios in advance, potentially helps shield the lawyer from any assertion that they were callous with the math, and with the use of a slider, the lawyer can easily see if a modest adjustment of the contingency fee rate yields a good result for both the lawyer and their client. The calculator is designed to be mobile friendly so that it can be used on the road, and within a mediation environment. Please enjoy, and any suggestions are welcomed so as to make the calculator most amendable to your day-to-day practice.
LINK: http://360mediations.com/en/all-in-breakout-mobilecalc/
Authored by: David M. José (B.A, LL.B)
The information in this article or paper is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this paper should be construed as legal advice from 360Mediations, or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter.