Good Business Sense: Part 5

Sunday, May 22, 2005 | 0

This is the fifth in a series of six by Pamela W. Foust. Earlier installments can be read by clicking on the article title in the side-bar at right.

"A system that's easy to game destroys human character."
- Charles Munger

Part Five: Going to Trial

On the day of his trial, the machine operator followed his attorney's instructions to arrive at the WCAB an hour early so that they could discuss his case. However, the attorney was 45 minutes late because he got stuck in traffic and the machine operator had to share what little time was left with four other clients whose cases were also set that morning. The attorney had an interpreter present to assist the machine operator in case he had any difficulties testifying in English. He told him that the interpreter would be able to answer any questions he might have and then he was gone. The machine operator was confused. He had assumed that since this was the date that had been reserved by the court for his trial, the insurance company would have to either pay him or he would tell his story to the judge and the judge would make them pay him. The interpreter told him the judge had other cases set for trial in addition to his and that many judges didn't like to go to trial at all. The attorney would try to settle his case but there was a good chance that nothing was going to happen.

The day before the trial, defense counsel spent about a half-hour on his trial preparation, which included a review of the file and a brief telephone conversation with the shop owner whom he planned to call as a witness if the trial actually went forward. Like his opponent, he too had other cases with other judges that morning and it wasn't until 10:00 a.m. that the attorneys were able to connect with each other. They were informed that the WCAB file couldn't be located and the trial would have to be continued to the next available date, which was five months in the future. The attorneys were charged with the obligation of reconstructing the Board file in advance of the new date. The interpreter told the machine operator that his attorney was involved in another case, so he asked her to tell him to go home and he'd be notified about the continued trial date. The shop owner was very upset when he discovered that he left his business and drove all the way across town for nothing, but the defense attorney explained that it couldn't be helped because they couldn't conduct the trial without the WCAB file.

Five months later, the machine operator and the shop owner returned to the WCAB for the second trial date. Although they both saw each other, they didn't speak and stayed as far apart from each other as possible. The attorneys both arrived late and couldn't get in to see the judge because he already had attorneys in his office and it looked as if they were going to be there for a while. They attempted to negotiate a settlement but it took defense counsel over an hour to get through to the claims adjuster by telephone because she was in a meeting and couldn't be disturbed. By the time he was able to speak with her and she rejected the figure he proposed, it was almost noon. The judge wasn't coming back in the afternoon because he had a dental appointment so the trial was again continued to another date five months in the future.

The machine operator was shocked and angry when the first trial date came and went and nothing happened. He didn't understand how they could do that to him when he had waited so long and had received official notification of the trial date from the WCAB. When it happened a second time, his anger turned into despair. He called the psychiatrist who re-evaluated him and adjusted his medications. For more than three years now, his entire life had revolved around this case and what upset him more than the delay itself was that no one else seemed to think there was a problem. His attorney acted as if everything was proceeding according to plan. The paralegal kept telling him to be patient. The people that worked in the doctors' offices insisted that this was just the way the system worked.

The attorneys didn't give the delays a second thought because for them, it was simply business as usual. In spite of the official policy that continuances were disfavored, most cases drifted through the WCAB's calendars for months and even years before they were finally laid to rest. Many, if not most of the cases weren't even ready to be heard. The applicants' attorneys found it convenient to conduct their practices from the Board, and placing a matter on calendar was often an effective means of placating an unreasonable client. For the defense attorneys, the best possible scenario was to have multiple cases set on the same date at the same Board which would enable the attorney to bill on all the files for the entire morning plus travel time. Getting them all continued by 10:00 a.m. was an extra bonus. Since the WCAB's policy was to automatically grant requests for hearing and to rule on objections at the hearing, ordering a case off calendar that shouldn't have been set in the first place would promptly result in a new Declaration of Readiness and a new hearing before a different judge. Some judges continued cases on the slightest pretext. Others, however, tried to enforce the policy against continuances, only to find that two attorneys with the same objective could easily concoct a story that would justify their request.

The defense attorney did not prepare at all for the third trial setting, nor had he prepared for the second one, for that matter. The insurance company was willing to pay for the time its attorneys spent preparing for trial but only once on a given case. After that, it took the position that the case had already been prepared for trial and to bill for any additional time was "double-dipping," even if the trial dates were separated by several months. Since he could not bill for his time, defense counsel had not opened the file except to make sure his secretary had reminded the shop owner of the new date. He was confident that there would be a last-minute settlement, but on the outside chance that he was forced to try the case, he'd just have to do his best and hope he could think on his feet fast enough to avoid looking like a fool.

The two attorneys sat down in the trial judge's office. The judge had been on the bench for 12 years and prior to that had spent most of his legal career as counsel for the State Compensation Insurance Fund. He was generally liked and respected by the bar and had no particular bias for or against either injured workers or employers. He was not one of those proactive judges who liked to inject his opinions into the case and impose his views on the attorneys prior to hearing the evidence. He believed that his role should be that of a neutral arbiter between two opposing litigants. If the attorneys were in agreement on a particular point, he wasn't about to stir the pot and run the risk of creating a dispute where none previously existed. He felt very strongly that it was not his job to come to the rescue of an insurance company that presumably had the resources and the sophistication to protect itself. If the injured worker gained a significant advantage because his attorney was more competent and better prepared than the attorney hired by the carrier, so be it. When that happened, the insurance company had only itself to blame.

Like most judges, he believed that the only good case was a settled case. With the tremendous volume of cases coming before the WCAB, it would be virtually impossible to give every litigant his proverbial day in court and if a judge were in trial constantly, there would be no time within working hours to write decisions and handle the mail. The only sensible solution was to put a lot of pressure on the attorneys to settle. After all, if he were inclined to work on weekends, he'd be representing clients and making some real money instead of the fixed salary he was paid by the State. If the politicians didn't see fit to hire enough judges to do the job, that wasn't his problem.

"I've reviewed the WCAB file and I don't understand why this case needs to be tried," the judge told the attorneys. "Why can't you just settle it. It looks like a fairly simple, straightforward case to me." He looked at counsel inquiringly.

"Well, Your Honor," said the machine operator's attorney, "counsel has given me his client's best offer and my client isn't willing to take it. And I couldn't in all good conscience recommend it to him considering the severity of his injuries and the fact that he's been off work for over three years now."

The defense attorney tried to point out that even if the machine operator injured himself when he lifted the pipe, he couldn't have been hurt that badly because he had managed to go to work and do his job every day until he was laid off. However, his opponent interrupted him, asking what he expected the poor man to do when he had a family to support and no other source of income? He had no choice but to work, counsel insisted, no matter how much he was suffering. Furthermore, he was prepared to testify that he was afraid to say anything because he knew of several other employees who had insisted on their rights and had promptly been fired.

"What about the ratings of the medical reports?" asked the judge. "What are we talking about in terms of permanent disability?"

"Well, that's where they have another problem, Your Honor," said applicant's counsel. "They have an initial AOE/COE report that's noncompensable, but their P.&.S reports aren't admissible because they got them after the MSC. And their witness isn't here either." However, he added, there really wasn't any point in discussing this further and instead of wasting valuable trial time, could His Honor please just call the court reporter so that they could start the trial?

The judge knew full well that most of this was for show and that the last thing the applicant's attorney wanted was to go to trial. What he really wanted was to settle the case on his terms. These days, applicants' attorneys could generally extract way more money out of an insurance company in a settlement than they could reasonably expect to get from the most liberal judge in an award. The judge also seriously doubted that the machine operator would confirm that story about other employees being fired. Counsel probably made it up on the spot. Nonetheless, both the judge and the attorney found misrepresentations of this type to be justified and even commendable. It was all part of the game and part of representing one's client effectively. The defense attorney made some good points, but he'd never follow though with them because when it came right down to it, he didn't care. It wasn't his money anyway. With a little pressure applied in the right place, thought the judge, the case would be settled and he'd be heading off to the gym by 11:30.

"Well, counsel," he said, looking at the defense attorney, "I'm surprised you haven't settled this case by now because it looks like your client is holding the short end of the stick. We should probably just get started, and perhaps this isn't entirely fair to the applicant, but I'm going to do you and your client a big favor. I'm going to make you go out and try a little harder to settle this case. Then, if your client doesn't want to listen to reason, they can't say I didn't give them every opportunity, if you know what I mean."

The two attorneys settled down in a booth at the coffee shop next door and spread out their files. "Here's the bottom line," said the machine operator's attorney. "If we hit on this case, and I think we will, your client is facing an exposure of as much as $150,000 plus future medical and you know there's been a recommendation for back surgery as well as carpal tunnel surgery, not to mention all those medications he's going to keep on taking for both his orthopedic and psychiatric conditions. Of course, you're also looking at about $80,000 in medical liens plus a year of EDD benefits, but you'd have to deal with that anyway. I'd be willing to take $75,000 and that's a real bargain. Problem is I don't know if my client will go along with it. First you have to tell me if you're willing to recommend it to your client and you can tell them that if they come back with anything less, we're going to trial."

Defense counsel thought about the proposal. He had $30,000 authority and it was a big jump from there to $75,000. On the other hand, there was nothing to be gained by a trial. Plus, it would mean he'd be stuck at the Board for the rest of the day and he had other things to do. He could bill for this case in the afternoon, but no one would believe that his other cases went past noon. If he went back to the office, he could work on his backlog and pick up some extra hours. Taking everything into consideration, it really wasn't a difficult decision to make. Now all he had to do was convince the claims adjuster.

"If I agree to settle my case for $75,000," said the machine operator, "how much of that would I get?"

"Well, 15 percent would go for my fee which is $11,250, and you'd get the rest. That's $63,750. That's a lot of money."

There was a time when $63,000 would have been a tremendous amount of money, but that was a long time ago. He owed $20,000 in back rent and loans from relatives that he'd have to pay as soon as he got the settlement. He didn't have a car. He'd lost three years of wages which, if he had been working, would have amounted to $66,000 alone. And what about all he had gone through and the sacrifices that his family had made?

"It's not enough," he told the attorney. "After what they did to me and all that I've suffered, they should have to pay me more than that."

"Well," said the attorney, "they're not going to pay you any more than that. I'm not even sure I can get you that much and if you let the judge decide, you could end up with nothing. In fact, if they offer the money and you don't take it today, the offer will probably be withdrawn and you'll be waiting another year for a lot less."

The defense attorney had been on the phone with the claims adjuster for a half-hour and he still wasn't getting anywhere with her so he decided it was time to play his trump card. "They're asking for penalties," he told her. "They're saying it was unreasonable for you to deny the claim knowing that the applicant had reported the injury to his foreman. I think the judge will probably go along with that. He mentioned that he'd keep an open mind but that he couldn't imagine how you'd ever explain that one. You'll have to come down and testify, of course." He paused to let that last comment sink in and pictured the claims adjuster squirming on the other end of the line. The thought gave him pleasure.

"Me explain?" said the claims adjuster. "Why should I have to explain anything? Let him explain how he was able to go on working for all those months if he was really injured."

"He's got an explanation," the attorney told her. "He's going to say that he was in terrible pain but he had to carry on and keep on working because he had a family to support and if he had made an issue out of it, they would have fired him. This judge is a raving liberal and he'll buy it. Plus, the applicant's attorney files everything at this Board. There are six or seven firms that have most of the cases and they pretty much get anything they want from the judges." The defense attorney didn't know whether this was actually true or not but the attorneys talked about it and the applicants' attorneys in question didn't do anything to dispel the general perception.

She was silent for a minute thinking about how unfair it was and wondering why there weren't defense attorneys who could get anything they wanted from judges. "I can't give you an answer right now," she snapped. "Call me back in twenty minutes." She immediately hung up the phone without giving him a chance to respond.

The claims adjuster stared at the file and tried to analyze the problem logically. If she authorized payment in error, there would probably be no repercussions because right or wrong, the carrier could simply recoup the loss from the employer in premium. If she withheld payment in error, that was a different story. If this judge whom the attorney claimed was so liberal and liked the applicant's attorney so much decided that she had denied the claim unreasonably, the carrier would get hit with penalties and that could add up to a sizable sum of money. They had recently changed the law to eliminate the outrageous penalties of the past, but this case would fall under the old law. Insurance companies hated penalties because the cost couldn't be passed on to the insured employer, or at least not legally. Sometimes they were able to pass them on anyway by burying them in settlements. That's why you'd see cases that were worth $20,000 soaking wet settling for $50,000. But you couldn't get away with that if the case went to trial and the judge spelled it out. No, insurance companies didn't like penalties at all and the claims manager of this particular insurance company was a real hardnose on the subject. In fact, he was pretty much a hardnose about everything, but he really outdid himself when it came to penalties. She had almost forgotten about the "three strikes, you're out" rule which kind of put a different slant on the whole thing.

Next (and final) in the series: Its All Just Business



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