Maryland Personal Injury Cases: Settlement Sheets and Accounting

A.    Settlement Sheet

          In Maryland, personal injury attorneys are usually retained on a contingency fee basis.  When a recovery is obtained in a personal injury case via settlement or judgment in Maryland, the attorney must provide the client with a written statement that shows how the client’s net recovery was calculated.  See Maryland Rule 19-301.5(c) (“Upon conclusion of a contingent fee matter, the attorney shall provide the client with a written statement stating the outcome of the matter, and, if there is a recovery, showing the remittance to the client and the method of its determination”).   This is known as a Settlement Sheet.

          A proper Settlement Sheet specifies all disbursements that were made from the gross recovery:

          $100,000.00                  Personal injury settlement

       – $  33,333.33                  Attorney’s one-third contingency fee

       – $       165.00                  Filing fee

       – $       600.00                  Review of medical records by Dr. Smith

       – $         50.00                  Medical records from Holy Cross Hospital

       – $    1,200.00                  Court reporter for deposition of Defendant

       – $          60.00                  Process server 

      = $   64,591.67                  Client’s net recovery

          A defective Settlement Sheet will not delineate the individual litigation expenses:

          $100,000.00                  Personal injury settlement

       – $  33,333.33                  Attorney’s one-third contingency fee

       –  $   2,075.00                   Litigation expenses incurred

      =  $  64,591.67                  Client’s net recovery

If the client does not receive a proper Settlement Sheet that accounts for all individual disbursements, the client should demand an accounting.

B.    AN ACCOUNTING

          In a personal injury case, the client can demand that the attorney provide a complete accounting.  See Maryland Rule 19-301.15(d) (“upon request by the client” in a personal injury case, the attorney “shall render promptly a full accounting regarding such property”).   In rendering a complete accounting, the attorney must disclose all invoices for litigation expenses allegedly incurred (filing fees, court reporters, medical records, etc.) as well as the cancelled checks evidencing the payment of these litigation expenses.

          When an accounting is performed, the following type of errors can be discovered:

  •          Charging the client for office expenses (such as photocopying) in the  absence of a provision in the retainer agreement allowing for reimbursement of such office expenses;
  •           Deducting a litigation expense twice;
  •           Deducting expenses that were incurred in another client’s case;
  •           Deducting expenses that were never incurred; and  
  •           Overstating the amount of an expenses.

          While an isolated accounting error may be the result of carelessness, a pattern of accounting errors constitutes evidence that the attorney was attempting to defraud the client.

          If a dispute arises between the client and the attorney regarding whether certain expenses were properly deducted from the client’s recovery, the attorney is required to maintain the disputed portion of the recovery in the law firm’s Attorney Trust Account until the dispute is resolved.  See Maryland Rule 19-301.15(e).

 

 

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