CARSON CITY, Nev. (Legal Newsline) - A plaintiff who suffered neck injuries when a construction company forklift punched through the window of his car can collect millions of dollars in attorney fees on top of a $5.9 million jury verdict, the Nevada Supreme Court ruled, in a decision also enforcing severe penalties on the defendant for telling jurors it was bankrupt.
Bahram Yahyavi sued Capriati Construction after the forklift collided with his car. Capriati filed for bankruptcy after the accident, but still had liability insurance coverage. Yahyavi’s lawyers made a $4 million settlement offer a few months before trial, which Capriati rejected.
Nevada law allows plaintiffs to recover attorney fees on top of whatever the jury awards if they recover more than they offered to settle the case before trial. The law is seen as an incentive for settling out of court.
At trial, Yahyavi’s lawyers accused the construction company of losing the forklift operator’s employment records. The company responded by saying it was in reorganization, which prompted the plaintiff lawyers to object that it would prejudice the jury by implying Capriati didn’t have enough money to pay a judgment.
The trial judge agreed with the plaintiff and prohibited Capriati from contesting liability, struck its remaining witnesses and told the jury the company had insurance to cover “any verdict.” The jury ordered Capriati to pay Yahyavi $5.9 million. Since that exceeded his earlier settlement offer, the judge ordered an additional $2.3 million in attorney fees, or 40%.
Capriati and its insurers appealed to the Nevada Supreme Court, saying the trial judge improperly imposed case-ending sanctions by striking its witnesses, who were going to testify that Yahyavi’s damages were inflated. The company also argued Nevaxda law only allowed Yahyavi’s lawyers to be paid for work after the settlement offer was rejected, not their entire contingency fee.
The Nevada Supreme Court rejected both arguments in a Nov. 10 decision. While plaintiffs can’t use evidence of liability insurance to prove the defendant acted negligently, they can “if the defendant first introduces evidence suggesting its inability to pay a judgment,” the court said.
“Capriati first introduced evidence of its bankruptcy, thereby suggesting that it was unable to pay a judgment in favor of Yahyavi,” the court ruled. “The district court appropriately instructed the jury that Capriati had liability insurance to satisfy any judgment.”
The court rejected Capriati’s argument it was misleading to tell the jury it had insurance to cover “any judgment,” saying it was warranted to cure the “prejudicial effect of Capriati’s conduct.”
Capriati also argued the court improperly ordered $2.3 million in contingency fees or 40% of the $5.9 million verdict after Capriati and its insurer rejected a $4 million settlement offer nine months before trial. The court should have calculated the fees that were incurred after the settlement offer was rejected, the company said, and used a “lodestar” analysis based on hours worked and market rates.
The Nevada Supreme Court, saying it was clarifying an uncertainty under state law, ruled that trial courts can award the entire contingency fee as post-offer fees because it doesn’t vest until the client wins.
“Our holding is consistent with public policy justifications supporting contingency-fee agreements,” the court said. Awarding fees on top of the jury verdict “properly serves as punishment for rejecting a reasonable offer of judgment.”
A lodestar calculation isn’t necessary, the court went on, although trial judges still must examine the fee for fairness under other standards including whether the fees are reasonable and the claim was pursued in good faith.
In a partial dissent joined by two other justices, Douglas Herndon said the majority went too far by allowing lawyers to collect their entire contingency fee instead of money for work done after the settlement offer was rejected. A lawyer starts earning fees when the lawsuit is launched, the dissenters said, and it is unfair to make defendants guess about whether there is a contingency-fee arrangement when calculating whether to accept or reject a settlement offer.