Determining Loss of Earnings Claims During a Despondent Economy

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1 Determining Loss of Earnings Claims During a Despondent Economy By: Nathan Lee, Esq. A majority of us have or will witness accounts of a plaintiff claiming personal injury. He or she may claim multiple reasons for the injury along with millions of dollars in damages. The difficulty truly sets in when one needs to evaluate claims for loss of earning, specifically during this recovering economy. Many factors come into play in personal injury situations, including unemployment, underemployment and immigration status. Often times, insurance companies struggle to evaluate the loss of earnings claims due to these circumstances. That being said, it is imperative that each claim is thoroughly analyzed and litigated from the beginning. How to Determine a Loss of Earnings Claim In situations where persons have been severely injured, individuals are often rendered unable to work. According to California laws, those who have been injured are entitled to claim loss of income. Although claiming a loss of income is beneficial, providing proof becomes a tedious task as specific documentation is required. If the appropriate documentation is not presented, it is unlikely the insurance company will consider the loss of earnings claim. Furthermore, a jury will not include loss of earnings damages in a verdict. Confirmation from a doctor must be presented in order to receive disability from work. Once this has occurred, it is mandatory for the injured party to evaluate the value of their time. However, this can become problematic in California for the self-employed, unemployed and underemployed. Steps to Gauge Future Loss of Earnings When the time comes to evaluate a person s future loss of earnings, evaluation is not determined by actual earnings, whether prior to, or succeeding to the injury. The person s lost ability to earn money is the main focus when damages are calculated. For a plaintiff to gain entitlement to recover present damages for future consequences, evidence must be presented proving that there is indeed a high probability leading to a reasonable certainty that future lost earnings will result from the original affliction. 1

2 Situations involving sizable claims for future lost earnings are determined by the party s education and employment history, which brings much debate. To determine the amount of future earnings, parties generally rely on economists and vocational rehabilitation experts. Before moving forward with this process, certain standards must be met by the plaintiff to prove their upcoming lost earnings. Computing Lost Earning Capacity In order to calculate earning capacity, one must look at general damages. These damages are merely inferred from the injury, while disregarding proof of actual earnings either prior to or after the injury has taken place. According to California Civil Jury Instructions (CACI) 3903D, it is ultimately put on the plaintiff to provide reasonable value for his or her loss. Having a work history is not mandatory. Additionally, a party does not need to deliver adept testimony concerning future earning ability. Working with Partial Lost Earning Capacity Claims Partial lost earning capacity contains both subjective and objective factors. Evidence such as a plaintiff s testimony in which his injury lead him to finish work demands at extended hours or the plaintiff not being able to work the full shift, are just a few samples of subjective evidence. In order to authenticate the subjective evidence, objective evidence must be presented. This includes the doctor of the plaintiff testifying to the objective evidence, thereby confirming the plaintiff s ability to work specific hours. It is the duty of the defense counsel to do a full assessment of the lost earning capacity claim and to abide by the jury s instructions that the plaintiff is requesting. In most occasions, defense attorneys can prepare to see the evidence that the plaintiff is required to present to properly sample their loss of earnings claim. Deciphering Future Earning Claims of Undocumented Employees Immigration status is a major factor that is overlooked by attorneys when evaluation takes place in relation to claims for future earnings. In cases where plaintiffs are undocumented, loss of future earnings is significantly limited to what they would potentially earn in their originating country. In reference to California law, if the injured plaintiff has been working without proper documentation, such as a green card or temporary worker status, any of the wages for loss claims at trial could potentially be limited to future earnings in their country of origin. California law states that when an illegal alien or undocumented worker has not or will not take the proper actions to legalize his or her status and is likely to continue residency in the United States without documentation, a court should not offer damages based on the individual s earning potential in the United States. 2

3 Instead, a pre-trial hearing can take place where the defendant can provide evidence of the plaintiff s unlawful stay in the United States, and the likelihood of the plaintiff s deportation. If successful, the plaintiff must prove to the court that he has taken the appropriate steps to correct his deportable status. However, if the plaintiff has failed to do so, future earnings based on U.S. wages will not be granted. If the judge agrees with the plaintiff, then evidence relating to his legal status will be excluded. Next, the projected earning capacity will be determined based on past and future income in the U.S. If the defendant has won the argument, the judge will determine future earnings based on what the plaintiff would anticipate receiving in his lawful country of origin. During the discovery phase and prior to trial, it is the defense attorney s responsibility to ask questions regarding the plaintiff s date and location of birth, as well as loss of income or earning capacity. In most instances, the plaintiff will object to any questions in relation to his immigration status. Thus, the defense attorney should be prepared to compel these responses. A line of questioning should take place by the defense to determine the plaintiff s citizenship in the U.S. During discovery, it is crucial that the education level, type of work in the plaintiff s native country and wages in country of origin are determined. If these questions are not proposed by the defense counsel, the amount awarded by the jury could substantially increase. Optimal results will only be obtained in instances where the plaintiff s immigration is determined in the early stages. In such cases where immigration status is not relevant, efforts can be directed towards early discovery to better assess potential lost earnings 3

4 Post Cassel Where does Cassel leave clients who feel they should have the right to sue their lawyers for misconduct or mishandling that occurs during a mediation? Likewise, where does it leave the practicing bar and the ever-growing number of professional mediators in terms of how they practice and how they continue to use the concept and policy of absolute mediation confidentiality? One of the fundamental underpinnings of mediation is the principal that what is said, written, or prepared expressly for mediation may not be used for any evidentiary purpose outside of the mediation. The statements made and documents used in the mediation are not available for use in any subsequent proceeding. California Evidence Code Sections 1119 and 1126 clearly proscribe such use of any statements or evidence. Likewise, Evidence Code Section renders a mediator incompetent to testify in a subsequent civil proceeding. The California Law Revision Commission is currently studying the issue of the relationship between mediation confidentiality and attorney malpractice and other misconduct. In fact, public comment on that issue has been requested. Stanford Law School has recently established the Stanford Law and Public Policy Laboratory which is also investigating the issue. The California Conference of Bar Associations has proposed to revise mediation confidentiality statutes to facilitate proof of attorney malpractice. The California Legislature has mandated the California Law Revision to analyze the relationship between mediation confidentiality, attorney malpractice and other misconduct. The analysis includes reviewing the purpose and impact of those laws on public protection, professional ethics, attorney discipline, client rights, the willingness of parties to participate in voluntary rather and mandatory mediation, and the effectiveness of mediation, as well as any other issues that the commission deems relevant. Among other matters, the commission is requested to consider the use and advocacy of Evidence Code Sections 703.5, 958 and 1119, California Court rulings, including the Cassel decision, the availability and propriety of contractual waivers, and, perhaps most importantly, the law of other jurisdictions including the Uniform Mediation Act, which has been adopted in some states. There is clearly afoot a move for change in California. The Supreme Court has stated unequivocally that it is the position of the legislature to effectuate any change in the current rule of mediation confidentiality. Could the legislature adopt the Uniform Mediation Act ( UMA )? Under the terms of the UMA, mediation confidentiality is a waivable privilege, not an evidentiary exclusion rule as it currently is in California. There are exceptions to confidentiality contained in the UMA, including an exception for malpractice claims. As stated in the UMA, if a malpractice claim is filed, the testimony of any participant in the mediation may be used in either the defense or the prosecution of the claim. Interestingly, the UMA does not allow the mediator to testify in such a malpractice claim. I do not think it likely that the California Legislature will adopt the UMA. 4

5 The Future of Mediation Confidentiality It is clear that the future of mediation confidentiality in California is open to debate. There are strong proponents of exceptions to the Evidentiary Exclusion Rule of confidentiality in attorney malpractice claims. It is equally clear that there is very strong opposition to such a legislatively created exception and as a practicing mediator over the last 15 years, I would find it very disquieting and perhaps even crippling to the mediation process if absolute confidentiality were not the rule. One thing is clear: Good practice should require all participants in a mediation, parties, counsel, insurance representatives, experts and anyone else present, to sign a stipulation incorporating California Evidence Code Sections 1119 et seq. The mediator should explain in clear terms the meaning and import of those Evidence Code Sections and the nature and scope of mediation confidentiality. The mediator should not rely on a representation by counsel that he or she has prepared the clients for the mediation. A clear and concise explanation by the mediator, answering any questions asked, can avoid future problems. It is equally clear that good practice mandates that in drafting a mediation settlement agreement, all parties and their representatives review and sign the agreement, acknowledge that it incorporates all terms of the settlement and addresses the needs and concerns of all parties. My personal practice is to address the parties, either in joint session or separately, as to the settlement agreement and to specifically inquire if the agreement is inclusive of all deal points. This avoids later confusion and backsliding when the formal release and settlement agreement is prepared by counsel. I have also found it very helpful to include language in the settlement agreement vesting jurisdiction in the mediator to include any dispute that may arise regarding the settlement. I recently mediated a case where one party had picketed the business of the other party on several occasions prior to the mediation. This was a very serious issue in the mediation but the subject was not addressed in the mediation settlement agreement. As a result, there was a request for a stipulated injunction as part of the settlement, which greatly complicated final resolution and could have been avoided if the best recommended practices had been followed. It is clear that the issue of mediation confidentiality is evolving and over the course of the next decade, there may be legislatively created exceptions for various situations, including claims of attorney malpractice arising out of the mediation process. For the time being, the exclusionary rule of absolute confidentiality remains intact in California. With more than 15 years experience in alternative dispute resolution, Richard M. Williams has been involved in over 700 cases as either an acting judge pro tem, special master, arbitrator or mediator. Mr. Williams is also a partner with the business litigation, real estate and insurance defense law firm of Gray Duffy, LLP. He can be reached at rwilliams@grayduffylaw.com. 5