Lawsuits: Winning has its limits

At first glance, a Post Falls man who recently won a high-profile defamation case looks like a millionaire. According to the May 24 Press story, Eric Posey was awarded $926,000 plus $250,000 in punitive damages.

Will he actually get that much? Unlikely.

Big civil court wins rarely represent the final deposit or some life-altering windfall. After all applicable bills or taxes are paid, repairs and ongoing health care or other costs accounted for, there’s the practical matter of trying to collect it. Sometimes individual defendants have few or hidden assets, some of which may be exempt from collection.

First, let’s look at the types of civil damages in Idaho (and most states):

Compensatory damages: Compensate for losses due to the defendant’s actions. These are subdivided into economic (e.g., medical, lost wages, property damage) and non-economic damages (pain and suffering, emotional distress, “loss of consortium” such as lost companionship and support of a spouse or child, loss of enjoyment such as serious injuries which make life harder to live or enjoy).

Punitive: Also called exemplary damages, they punish egregious behavior and deter others. In Idaho, the plaintiff has to prove by “clear and convincing evidence” that the defendant’s actions were willful and malicious (or fraudulent). Idaho law caps punitive damages.

Limits: Economic damages have no cap. Punitives are capped by Idaho Code 6-1604 to $250,000 or three times the amount of compensatory damages. For other non-economic damages, a wage-inflation-adjusted cap now amounts to about $458,000 (I.C. 6-1603). More may be permitted for “willful or reckless misconduct.”

Collateral sources and comparative negligence: Idaho follows the collateral source rule, so even if the injured party gets compensation from another source (such as insurance, savings, or another person), that doesn’t reduce the defendant’s potential liability for the same expense.

However, Idaho follows a modified comparative negligence system, meaning the injured party’s recovery is reduced in proportion to their own degree of fault. If an Idaho plaintiff is found to be 50% or more at fault for their injury, they’re barred from recovering any damages.

Income taxes: It’s complicated. Most categories of personal injury cases are considered to be compensation for actual losses, so that part isn’t taxed, although punitive damages are taxable as income. Defamation can involve more complex situations. Generally, lost wages are taxable, but damages for emotional distress may or may not be. To read the IRS rules, see irs.gov/government-entities/tax-implications-of-settlements-and-judgments.

Attorney fees and costs: Lawsuits aren’t cheap. There are court fees; transcription, deposition, experts and mediation costs; and of course, lawyers. Attorney fee contracts are private and vary. They can be hourly or contingency, calculated before certain costs or after. Personal injury and defamation cases are often (but not always) on contingency, the fee ranging 20-40%, with an average of 33.3%. Can attorney fees be part of the award? Yes, but it’s not a given.

Collecting and settlement: According to the U.S. Department of Justice's latest statistics, only 5% of personal injury cases reach trial (most are settled or dismissed). Some awards are reduced by agreement to avoid collection efforts. Cases may also be appealed.

Barring those, once all the math is done, there’s still the matter of collection (and identifying what’s available for attachment). Some case types are different, but generally, an Idaho judgment is good for five years and can be renewed once — giving most creditors 10 years to collect. If payment isn’t voluntary, it takes a writ of execution via the sheriff and an attempt to seize money, property and real estate.

Laws exempt some individual assets from collection. In Idaho, that includes Social Security and retirement income; child support payments; a home, furnishings, car and guns up to a certain value; and tools used in a trade or business.

So what percentage of court awards actually end up in a winner’s account? I couldn’t find research on this. Is it ever all? Rarely, if ever. Is it ever nothing? Yes; some never collect.

As lawyers always seem to say, it depends.

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Sholeh Patrick, J.D. is a columnist for the Hagadone News Network. Email sholeh@cdapress.com.