Oh, I see why you sued Starbucks
January 31, 2016 6:21 AM   Subscribe

When people win big civil lawsuits, does this money change their lives?

I always hear of people suing employers or companies and receiving a huge payout (well, huge by my living standards, small change to the 1%). Does this money have a huge impact on their lives? Do they receive the money in a lump sum and then never have to work again? Or is it paid out over the course of their lives, and consequently makes no real difference? Do you keep all the money won in a civil suit or do you have to pay taxes on it? I'm very curious about how this works.
posted by Enchanting Grasshopper to Law & Government (14 answers total) 4 users marked this as a favorite
You typically pay your attorney 1/3 of the settlement, plus expenses. You don't pay taxes on it though. Sometimes it's a lump sum, more often, it's a structured settlement, with payouts over many years (Hence all those commercials for JG Wentworth or Peachtree Settlement on daytime TV.)

If you're getting big money, you're probably pretty messed up. THAT'S the life-change that's impacting. Most people would rather be healthy than rich in these cases, and in a lot of cases the people die before the payments are concluded.

In the case of whistle-blowers or folks who sue employers, they may never be employable again because no one wants to hire people they deem to be litigious.

So many times these cases are punchlines to jokes, butthe lady who spilled McDonald's hot coffee in her lap had third degree, disfiguring burns.
posted by Ruthless Bunny at 6:57 AM on January 31, 2016 [12 favorites]

You don't pay taxes on it though.

Actually that varies depending on what the settlement is for. Lost wages are taxable for example.
posted by dcjd at 7:12 AM on January 31, 2016 [5 favorites]

An acquaintance of mine got a huge honkin' settlement after a road sign fell on him, shattering his pelvis. It was a really significant amount of money, but it largely went to pay for his immediate care and recovery -- multiple very painful surgeries, almost two years of full-time rehabilitation when he couldn't work at all, a significant period of time living in a rehab/nursing home type place (I don't know the proper word, but he couldn't care for himself at all at first), and now ongoing pain management, procedures, and rehabilitative exercise some 15 years after the event. These medical costs will be with him until he dies. The initial two years of intensive treatment took up probably well over half of the overall settlement.

He did buy himself a newish Toyota Corolla with the money, and he paid off some student loans -- although as he wasn't working, he had no other way to pay them off. Otherwise it basically all went to his medical care.
posted by Eyebrows McGee at 7:52 AM on January 31, 2016 [8 favorites]

I saw a house-buying TV program featuring a young lady who'd had a huge settlement after a car accident left her in a wheelchair, needing a lot of help with personal care and having trouble speaking clearly.

As they explained it, the settlement covered her care expenses for life (and she was young, so that was a lot of money). Of course she needed to invest the settlement money, so she used a couple million of it to buy a VERY VERY FANCY London apartment near the university where she was studying, and get it fully adapted with wide doorways and a built-in motorised up-and-down desk and so forth.

She was pretty explicit that she was looking forward to having a fancy party apartment, which nobody else can afford in London at 18 or 19 unless their parents are unspeakably wealthy. As an investment vehicle for her care-for-life money I'm thinking a fancy party apartment in London is a pretty good bet.

I also learned that (in the UK) sometimes the lawyers and insurance company will agree to delay any settlement in return for the insurance company paying for all necessary costs/rehab in the meantime. This way the injury can stabilise so everyone has a better idea of what care needs are going to be involved in the long term, before starting to argue over the settlement figure. In the meantime it is in the interests of the insurance company to invest in rehab to reduce the potential long term care costs. When they do get around to arguing the settlement, it takes into account whether they think the person will be able to work, and what their care needs will be, and whether they'll need an adapted house/car/etc.
posted by emilyw at 8:28 AM on January 31, 2016 [2 favorites]

Response by poster: If you're getting big money, you're probably pretty messed up. THAT'S the life-change that's impacting. Most people would rather be healthy than rich in these cases, and in a lot of cases the people die before the payments are concluded.

multiple very painful surgeries, almost two years of full-time rehabilitation when he couldn't work at all, a significant period of time living in a rehab/nursing home type place (I don't know the proper word, but he couldn't care for himself at all at first), and now ongoing pain management, procedures, and rehabilitative exercise some 15 years after the event. These medical costs will be with him until he dies.

I saw a house-buying TV program featuring a young lady who'd had a huge settlement after a car accident left her in a wheelchair, needing a lot of help with personal care and having trouble speaking clearly.

I in no way meant to minimize the permanent harm that many people undergo that results in these settlements. I apologize if the question came off that way. When I wrote it, I was thinking more about when someone gets fired from a bartending job for unlawful discrimination, and they sue and win, rather than undergoing any physical or mental trauma that leaves them with a disability.
posted by Enchanting Grasshopper at 9:18 AM on January 31, 2016

Best answer: There are three basic types of compensation in personal injury suits: Monetary damages, which cover things like medical expenses and lost wages; non-monetary losses, which compensate for things like pain and suffering; and punitive damages, which are added on as punishment for the party at fault.

Depending on where you're reading about these awards, they may not even be true. There are a lot of urban legends out there about people getting big damage awards for silly reasons. Some never happened at all, some are just grossly misrepresented, some have embellishments added or important parts intentionally left out. There is just a shameful lot of insurance company propaganda that's been remarkably effective at convincing the public that there is a litigation crisis in the US.

And those stories have been responsible for creating a general consensus about lawsuits that has been responsible for a lot of tort reform measures, which limit the amount of damages, including monetary damages, that injured parties can legally recover.

IIRC, there's a pretty good explanation in the documentary Hot Coffee, which is available on a bunch of different streaming services right now, so I'd recommend watching it.

So first, a lot of the seemingly huge awards you read about are already earmarked to pay for current and ongoing medical bills, for replacing lost property, or paying the actual wages and benefits the injured party lost.

And if you're talking about things like the recent Walmart discrimination case, those initial awards don't always stand. The woman who filed that case has not gotten the award yet, and Walmart is already asking the judgment to be reduced or set aside. That happens quite a bit, and the headlines when it does don't get the same legs that the initial awards do.

So my guess is that the number of people who have sued for and actually received really big awards for non-monetary damages is small enough that it'd be hard to really come up with a typical case.
posted by ernielundquist at 10:03 AM on January 31, 2016 [6 favorites]

Best answer: I have one family member who sued a guy for running a red light and hitting her, which messed up her spine permanently. She got a significant amount of money, but her quality of life has been severely damaged. She is in pain all the time. She can't ride a bike, she can't swim, she can't ski, and even sitting and standing is hard after a while. She can't do anything she used to do and thinks of herself as a "cripple." She says she would give all the money back just to have her normal life again.

I have another family member who sued her employer for gender discrimination and a hostile work environment. I think that she wanted the revenge because they were such dicks to her, but she said in the end, after the drawn out legal process, the stress of it all, and legal fees, the reward she got just wasn't worth it to her. To be fair, this family member has done pretty well for herself in terms of money, but she said she wouldn't go through it again. I thought about suing a former employer when my boss was a sexist piece of shit and then fired me for calling in sick, but she told me not to bother. I'm glad I didn't -- instead, I just moved on, got a job with a boss who is decent, and advanced through my career to the point now where I'm paid way more than my former boss ever was and I've worked for much nicer companies than he ever has. The best revenge is living well, and when I think about my sexist former boss still working at the same shitty place after all these years, I smile a bit because I "won." If anything, him firing me was a blessing in disguise, I just couldn't see it at the time because I was too angry.
posted by AppleTurnover at 11:14 AM on January 31, 2016 [4 favorites]

Best answer: I was a plaintiff's employment lawyer. We had good cases, but clients rarely got truly life-changing amounts of money. That is because the money you can recover by law is more or less tied to your actual damages - eg lost wages. Typically a large portion would be taxed, and 1/3 would go to the firm. Clients had also often been out of work for a while, and faced a long road finding a new job at times, so they had bills piling up. So we're not talking massive windfall money, but typically enough to pay off bills and maybe have a nice chunk left over to save. Mostly I think my clients felt emotionally vindicated to win and get a good settlement.

The exception to this is false claims (fraud on the government) cases where plaintiffs can get a giant windfall (a percentage of the fraud). It would be interesting to find out what became of those guys!
posted by yarly at 11:54 AM on January 31, 2016 [4 favorites]

On preview - what AppleTurnover describes is also true in my experience.
posted by yarly at 11:56 AM on January 31, 2016

Large legal judgments are often paid out as structured settlements -- the plaintiff gets a smallish payment up front, plus structured payments over time. This is supposed to protect the damaged party from quickly squandering their entire "windfall," and provide for their continued support over time. Sadly, this arrangement can attract flocks of predatory brokers, who will offer to buy the structured settlements for pennies on the dollar. As usual, the neediest are most vulnerable.
posted by Corvid at 2:38 PM on January 31, 2016 [1 favorite]

You generally get life changing awards only when your life has already been changed much for the worse but in a way that doesn't cost you money -- death a child, death of a spouse you didn't depend upon for financial support, truly horrific mistreatment at work.

And anecdotally the people who get these awards do about as well as lottery winners and professional athletes -- in many cases blowing it all if they don't have the education and other resources which enable you to spend and invest sensibly and avoid scammers and family and friends with their hands out. Every successful plaintiff lawyer with these kinds of cases can tell you the stories.
posted by MattD at 4:56 PM on January 31, 2016

Best answer: My mom was in an accident on a commercial air flight. She won a sizeable verdict against the airline and airplane manufacturer after having taken the case to trial. I'm not sure how long it was before we won the lawsuit.

Before the accident, both my parents worked (mom was part time at that moment because we kids were little), my dad had been progressing steadily in his business career, and things were going pretty well for us. After the accident, we had lots of medical bills, mom couldn't work any more, and my dad was working really hard just to keep the family above water. We lived in a shabby little rented house and expenses were kept to a minimum (our clothes came from the thrift store, we drank powdered milk because it was cheaper than real milk, etc.) Mom was in pain all the time and couldn't even care for us for the first post-accident year (my sister and I had to go live with one set of grandparents). The house we lived in had lots of stairs and wasn't really suited to my mom's new disability. Those were really difficult and stressful years for my parents.

After we won the money, my parents bought a nice new house and updated it so that my mom could live there easily (bathroom fitted out for her, laundry room and master bedroom on the main floor, a home office so mom could resume working, etc.) We had two cars, and they were newer and nicer used cars than the old hatchback we used to have. My parents went on some nice vacations. Basically, the verdict returned my parents to the lifestyle level they probably would have been at without the accident with a bit extra for her pain. The money did make a real difference to us, and I remember those post-verdict (and pre-divorce) years as the happiest period of my childhood. That said, I think our lives would have been much better if my mom didn't have to live with chronic pain (every single moment of her life since the accident) and limited mobility. Anyone in my family would give up every cent in a second if we could somehow take away the injuries resulting from the accident, and I say that even though having a disabled mom has been good for me in some ways (I had to pull my weight around the house which was a good preparation for marriage).

I'll also say that I agree that emotional vindication was important. Even though my mom had been in a well-documented plane accident and had physical evidence of her injuries (x-rays, etc.), the airline, manufacturer, and their defense lawyers acted for years liked she was a crazy person imagining she'd been injured. I guess part of it is that there is no concrete physical proof of the pain a person experiences. They probably could have settled everything years earlier for much less money, as my parents were pretty desperate at times, but stuck with this narrative which was profoundly insulting to my parents. It really mattered to my mom that the jury believed her.
posted by Area Man at 7:47 AM on February 1, 2016 [3 favorites]

I've sued and won in a car accident suit (a guy hit me head-on because he was eating Chinese food and driving in the rain), so has my mother (Honda seat belt failure crushed her foot), and one of my uncles was killed in a freak boating accident that turned into a class-action suit due to a failed steering mechanism that got hung and caused the boat to drive in circles at high speed, chopping both water-skiiers into small pieces. My best friend also sued a weight-loss doctor who told her she had incurred permanent heart damage and had 5-7 years to live - she just settled her malpractice suit last year, but it took nearly 10 years of court appearances to finalize.

In nearly all cases, after legal fees were paid and cars replaced/bodies buried/doctor's ability to practice medicine revoked, we each walked away with $10-$12k apiece.

These are very very different lawsuits, all with very clear-cut cases, the only difference was the amount of time it took to settle the cases and the numbers of litigants paid out.

So, yeah, in my personal experience, getting a settlement big enough to keep you from ever working again would likely mean you're paralyzed or an extreme outlier. These cases likely garner media attention for their rarity, and all the cases I cited were given lump-sum payments via check.
posted by Unicorn on the cob at 9:50 AM on February 1, 2016

Best answer: A friend of mine was hit on foot in a car accident and SERIOUSLY fucked up. Like he was in the hospital for months and had to have tons of surgeries, including basically having his face rebuilt. It ended up being a six figure settlement, iirc.

He saw something like less than 20k after all the medical expenses, lawyer costs, fees, etc. The medical stuff wiped out almost all of it.

He's healthy, mostly pain free, and still young... But has a complete fear and hatred of hospitals now and apparently had to deal with some super shitty/abusive people in the rehab process. He also had to move back in with his parents.

He spent most of the money on a really extravagant awesome trip to europe with his best friend where they spent months partying it up, seeing cool shit, hiking, just everything. They did basically everything you could think of doing on a Cool Trip To Europe.

As far as i know that plus living expenses wiped it out. I think realistically minus that stuff, it probably would be closer to the 10-12k mentioned above and maybe even less.

Another friend of mine was run over on their bike, pretty horribly injured, and lost her job over it because of some shady shit with management("covering your shifts was really unfair to your coworkers", it was probably an actionable situation in and of itself but that's pretty hard to do from a hospital bed). I don't know exactly how much she got but after everything involved the amount leftover was in the "buy a new laptop and some music gear" range, not "landing your helicopter and getting into your ferrari".

Lastly, my mom was involved in a hit and run, also on a bike. It seriously injured her, destroyed her really nice bike, and the person who did it was driving a stolen car. Slam dunk case right? Her health insurance, the car owners insurance, and some other insurance company all trie to pass the buck. Meanwhile, the guy who did it fled the country when he saw how much heat was coming down. It took about a fucking decade to be completely resolved, destroyed her credit, and left her with utterly nothing and permanent lasting injuries and brain damage. Basically everyone from the cops to the insurance companies just kept going ¯\_(ツ)_/¯. She went through more than one lawyer, iirc. I have no idea how much exactly she was awarded, but i know it BARELY covered the medical expenses.

All of them, i know 100% for sure, wish none of it had never happened. The money was close to meaningless by the time it arrived and was never a life changing amount.

And, i only have second or third hand experience, but the people i've heard from through my network who DID get 7 figure settlements are REALLY FUCKED in some way. Whether it's health problems or not. Your life got changed, but the money seems to almost always be "well at least i wont die in a cardboard box on the side of the road" or worse "at least when i die, they wont be putting me in a cardboard box" rather than WOO LETS PARTY. When you get that kind of money it's usually because you can't work.

The closest i've seen to the latter is enormous settlements from divorces where one party had lots of money. Or maybe contesting bullshit wills. If you're in court for something that isn't that and you get awarded that much and it doesn't get appealed/shot down, you're probably in a wheelchair or are in the process of spending a very long time in a hospital.
posted by emptythought at 6:17 PM on February 1, 2016

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