4.02.05. Damages

The final element in a legal malpractice claim is damages.  The plaintiff is able to recover whatever money she could have recovered in the original action if the lawyer had acted non-negligently.  An interesting question about calculating damages arises when the original action was taken on a contingency fee basis.

Charlie Client brought a malpractice lawsuit against Adrea Attorney.  Attorney and Client agreed that Attorney would represent Client in a personal injury claim against Daniel Defendant.  The fee agreement provided that Attorney would be entitled to 30% of any recovery made against Defendant.  However, Attorney negligently handled Client’s case resulting in Client recovering nothing from Defendant. Subsequently, Client sues Attorney in malpractice for her handling of the personal injury claim.  A jury returns a verdict as follows:  “Client would have recovered $100,000 in the personal injury claim against Defendant but for Attorney’s negligence.”  Should Client be able to recover the entire $100,000 from Attorney?

There is a split of authority on this issue.  Some states say no – the purpose of the malpractice case is to put the plaintiff in the same position he would have been if Attorney had acted handled the case properly.  Under that rationale, the contingency fee amount is properly deducted from the jury verdict – if Attorney had handled the underlying personal injury claim properly, the recovery would have been reduced by 30%, and therefore, it should be here too.  To allow Client to charge Attorney with the full amount would give Client more than he was entitled to.[1]  Under this rationale, Client would only be entitled to recover $70,000 from Attorney after the 30% contingency fee was deducted. Other courts (probably the majority position) take the opposite approach.  These courts say that allowing a deduction for a contingency fee denies the reality of the situation.  Client had to hire a second lawyer to pursue his legal malpractice claim.  If the contingency fee deduction is allowed, then Client is charged twice:  first for the reduction of the original contingency fee and next for pursuing the malpractice claim (likely also a contingency fee).  These courts say that plaintiff is made whole only by allowing Client to recover the entire amount awarded with no reduction for the original contingency fee agreement.[2]  In these jurisdictions, Client would be able to recover the entire $100,000 from Attorney. 

[1] Horn v. Wooster, 165 P.3d 69 (Wyo. 2007).

[2] Hook v. Trevino, 839 N.E. 2d 434 (Iowa 2013).