Understanding Damages (or Is it worth filing a lawsuit?)


Civil & Commercial Litigation, & ADR – Understanding Damages (or Is it worth filing a lawsuit?)

Damages are monetary re-compensation sought, and potentially recovered, through a civil or commercial claim and resulting litigation for injuries or wrongs incurred, which have a financial value or set statutory means of recovery. Just because one has experienced an injustice, or been wronged or injured, does not necessarily mean that there is an opportunity or justification for financial recovery. One of the most important aspects of civil and commercial litigation, especially to attorneys, and their view of and willingness to take on a legal matter, is the amount of potential damages that may be recovered.

Generally, one has to have suffered economic harm or other harm that has a monetary value, such as a personal injury, to be able to recover monetary damages. This is different than if a party wishes to stop the conduct of another, where they would look to secure an injunction or restraining order. This article will initially explain the different types of potential damages and then it will discuss how damages may be calculated and if pursuit of them is worthwhile. In many cases, while there could be a valid claim, the costs that would be spent in litigation may not justify pursuing a minor amount of damages or the defendant may not have the resources to be able to pay off a judgment, leaving the plaintiff holding a paper IOU after expending costs on an attorney and lawsuit.

Types of Damages:

Compensatory damages (sometimes called general damages) are monetary damages awarded to an injured or wronged individual or business to put them in the position they would have been had the wrong not occurred. It is important to note that the definition does not include getting money from a defendant to penalize them or provide the plaintiff with an advantageous outcome, but simply put to make the injured party whole again. There are opportunities for punitive damages or recovery of attorney’s fees to deter bad behavior by the offending party, but these are relatively rare and generally upon the discretion of the judge overseeing the lawsuit, and have been rarely awarded in any substantial amounts in North Carolina Courts.

Another form of damages that may be present in a breach of contract action are liquidated damages, if they were outlined in the subject contract and are reasonable expectation of damages actually caused by the breach. Punitive damages may be awarded if the court finds that the defendant’s actions resulting in the injury or loss were reckless or malicious. As a form of punitive damages certain statutes, such as under the NC Unfair and Deceptive practices Act, allow the possible recovery of double or even triple (“treble”) damages, or attorneys’ fees to the winning party, where there was irreprehensible conduct on the part of the defendant. Statutory opportunities for the recovery of attorneys’ fees for a successful plaintiff provide great impetus for an attorney to take on and pursue a matter. It could be helpful to consult with an attorney to discover if there may be an opportunity for statutory punitive damages or the recovery of attorneys’ fees for any claims in a potential matter.

Damages Evaluation:

First, think “can a value be put on the harm I’ve incurred?” In matters with a breach of contract, resulting in financial damages, or where there is a personal injury that has caused the injured person to incur medical bills, such financial valuation is simple. However, where there is an environmental, employment, or other social or personal type injustice, putting a financial value on the injury or damage isn’t as simple, or maybe even possible.

Frequently I have people share stories wherein they feel that they have been personally wronged or are in a situation that they were part of the negative results but think the other sides conduct was worse. Just because someone feels “wronged” does not mean that it will be worth pursuing a lawsuit. There needs to be a measurable financial amount that can be awarded to right the alleged wrong, or a statute outlining recovery amounts or types for the bad acts. It is also important for people to look at the actions which resulted in the potential damages and claims from an unbiased and independent observer viewpoint, in order to recognize fault and, if it exists, put a value on a potential lawsuit. This is why consulting with and hiring an attorney is so important – as it is our job to evaluate and handle a matter zealously, but without emotion and personal involvement in order to understand the true value of the situation and potential recovery that may exist.

Second, one then needs to evaluate whether it financially makes sense to pursue the matter (i.e. cost-benefit analysis). In other words, would the costs in pursuing a lawsuit, including financial, temporal, and emotional, be covered and then some by the amount of damages pursued/claimed, and possibly awarded or won. Where there are minor financial injuries or amounts claimed, the matter would be pursued in small claims court ($5,000.00 and less in most of North Carolina). Small Claims court actions may make more sense for an individual to pursue on his or her own, without an attorney. But retainment of counsel can help people understand the legal avenues of recovery and elements of claims, and provide a more stress free resolution through the matter. Additionally, hiring an attorney for small claims matters will probably be much cheaper than large scale litigation and will provide the party with ease of mind and more comprehensive representation.

Finally, the major issue facing injured parties in today’s economy, and one of true importance in evaluating a potential lawsuit, is whether or not the defendant actually has anything of value or funds that can be accessed once a judgment is secured, if the lawsuit is successful. The best opportunity for plaintiff’s recovery is generally if the defendant has an insurance policy that can be tendered and provides coverage for the injury, loss, claims, and/or damages incurred. Individual and business clients should realize that if insurance is providing the defense and/or litigation costs and funds it can put the represented party in a stronger position, due to the insurance company’s financial abilities and deep pockets versus an individual plaintiff. Having insurance involved on both sides, as insurance companies are educated parties when it comes to litigation, can also provide faster and more efficient resolution, once the parties have an opportunity to fully evaluate the situation.

Forrest Merithew’s background involves civil and commercial litigation, and alternative dispute resolution, in an array of practice areas and industries, including insurance coverage and defense. He consults with potential plaintiffs and defendants facing claims or litigation to evaluate: liability, claims, damages, likelihood of success, and outline the steps and costs for proceeding in a lawsuit. Because of Forrest’s litigation and business law background he also provides liability and business consulting during creation and development to decrease the potential liability, which could result in costly and time consuming litigation in the future. The best protection is a progressive strategy that recognizes and addresses potential liabilities respective to one’s business or situation prior to any conflicts emerging.

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