I'll be in Summerlin, so that's a yes.

speaking of taxes i am wondering if you all are hearing that plaintiffs are getting absolutely ****ed now under the federal tax reform essentially paying taxes on money won at trial+paying taxes on attorneys fees won?.at least in the employment law context in missouri the attorneys fees awarded are often bigger than the actual damages by a good amount and consistently upheld.

i started working at a tiny boutique firm a few months ago that basically just does employment law and my boss is never happy with the settlement offers because he knows and the other side knows that lots of these cases are fact specific and will never get defeated at SJ-thus the threat of having to pay attorneys fees is huge. so anyway he basically just goes to trial all the time and has like 6 in the next 4 months as of right now with 4 attorneys in the office. i really like it its exciting but i'm pretty furious i didn't get in on this grift 5 years ago to make some bank real quick. before august 2017 in missouri all you had to do to win a case under missouri law was show that (race/sex/age/whatever) was a *contributing* factor to any unlawful discriminatory act (not even an adverse employment action necessarily) and you could get essentially uncapped punitive damages v anyone including the state and state agencies and very nice attorneys fees. there are only a few cases left still in the courts that accrued before the law changed. i have one i am working on with a mentor that i'm pretty sure we aren't accepting less than 1 million on which would mean a couple 100k for me. i haven't had near 100k in my bank account since i was 16 and blew it all on poker past the point i was any good like a lot of us and my girl is getting to the point where i need to get a ring and baby soon

now its motivating factor and basically all your damages, including punitive, are capped at 500k or less depending on size of employer. it's still not as bad as federal court where they literally just ****in grant summary judgment to defense and say things like "no causal connection here- they fired this guy 14 whole days after he complained about racism" . oh well i know a lot of conservative states have it worse it was pretty shocking missouri took so long to pass tort deform...way more is coming i'm sure. even kansas just ruled their punitive damages cap unconstitutional so there might be some hope there.

I took fed income tax fall 2017 right before the new law was about to get into effect and remember our professor stating how Congress really got the taxation of lawsuit awards incredibly wrong. But they had to fund those tax cuts somehow.

Aw man I missed this, didn't see it was on the next page. Left last night. Oh well next time maybe get dinner. Thought I remembered you live in the area.

I wonder if anyone is going to try to litigate this? I mean it's not income windfall, it's a cost for the client. I've never been 100% clear on EXACTLY what's taxable for the plaintiff, but I always thought it was basically only punitive damages. Is it specifically in the new tax rules like plaintiffs shall pay taxes on entire amount? Or is it just an IRS interpretation?

edit to add, what about class actions?

IRS has been pretty consistent for years that punitive damages are taxable and that damages for lost property are essentially treated as proceeds from a sale.

Mental distress, under current case law, is a mix of compensatory (not taxable) and, in essence, punitive damages that are taxable.

Yep, what has become brutal for certain plaintiff's is with the Tax Cuts and Jobs Act is that now the gross award to plaintiff's is taxed, the deduction for attorneys fees has been removed. Some plaintiff's are written into the IRC and are still allowed to take an above the line deduction.

So for instance, in the past if you won a 100k award against your lawyer for a legal malpractice claim and you had a 25% contingency fee agreement with maplractice lawyer, that 25k in attorneys fees was a deduction and you would only be taxed on 75k.

Under the current scheme, now the gross award is taxed to the plaintiff and there is no deduction for the attorney fees who brought the malpractice lawsuit. It makes very little sense.

so... 100m recovery, 40m to tax, 33m to attorney fees?

That’s pretty brutal.

i mean it makes sense if the goal is to encourage settlement and disincentive plaintiffs from having their day in court and potentially embarrassing or costing money to defendants who don't want their dirty laundry aired. my understanding is that there are easy ways to structure settlements to where they won't get taxed unfairly like that...but i have not actually been involved in these discussions other than at a surface level...not sure how it is in other states but in missouri there is a legal defense fund for the state that takes 50% of the punitive damages right off the bat too if you are awarded any


not a tax attorney but my understanding is that your post is basically correct...it's really illogical unless you look at it as a broader part of tort deform. it makes it very difficult for me to recommend going to trial on some of these cases when we are not even sure if we are entitled to punitives and i know as an attorney that even if we win she will have won a lot less than it seems bc of taxes on my fees. i'm not exaggerating when i say most of these employment law cases under the MHRA in Missouri seem to have higher attorneys fees awards than money going to clients so its my understanding they are getting taxed now on attorneys fees that are often larger than their own damage awards...very ridic


edit- some random article on forbes here says it doesn't apply to employment cases but thats not what i have heard so idk really

Does anyone have the section of the statute or IRS regs? Just curious to take a look.

It just seems like an oversight. I'm shocked it hasn't been fixed yet, especially since the trial bar lobby is supposed to be pretty strong. Just seems to contradict the 101 basic principle of tax stuff that you're only taxed on the profit.

I think you'd look in IRC 62(a) for what is allowed as an above the line deduction.

I represented a friend being sued for a credit card debt. Company brought a motion for summary judgment and included a cardmember agreement that contained an overly broad arbitration provision.

The arb provision was obviously intended so that the bank couldn't be sued in class actions but the way it was worded also applied to debt collection lawsuits.

I convinced the judge that the matter had to be arbitrated under the cardmember agreement and that summary judgment was inappropriate lol. Felt like actual lawyering for a moment.

Nice work. Feels good to use it against them. I remember back in law school when I thought those arbitration clauses were a good idea to cut down on needless litigation

Didn’t know how much they tilt things away from the consumer back then.

I know, it essentially will foreclose them from collecting this. They are seeking 5k but arb filing fee is $1500 plus the arbitrators hourly rate.

I imagine down the road the language in the arb agreements will change to have maybe a small claims exclusion or something. Opposing counsel was pissed and fought hard against my motion to compel arb.

Yeah and see honestly I think small claims under $5000 or something should be excluded. You don't need to go to arbitration for that, especially with these clauses that require you to go to TX or something regardless if you live in NY. Even if it is a smaller local bank, bottom line is you reached out to me in my state, why should I have to come to you for arbitration? That's 101 civil procedure.

Maybe it will start a push to being treated more like smaller claims for car accidents, make it more likely to settle it out over the phone because the company doesn't want to pay for a lawyer to go to court.

I was re-reading this to a friend. Couple things I noticed/get back to:

1. tort deform- LOL, nice, didn't notice this one the first time around.

I do wonder if this kind of thing will swing back around and tort reform efforts start getting undone in 5-10 years or something when there aren't enough good lawsuits out there and lawyers want to make money. Everything is a tide of loosening and restricting. Hopefully will also keep up with the trend (as far as I know) of less law school grads since 2010 or so. Also if a parade of horribles starts coming out of clients that should have gotten better outcomes starts getting into the media.

2. Isn't this double taxing? So the client pays the taxes on the lawyers fees. The lawyer pays the taxes on the income? I guess this is same idea why you do a corporation vs an LLC too. Just seems odd.

3. "in missouri there is a legal defense fund for the state that takes 50% of the punitive damages right off the bat too if you are awarded any"

Workers comp the attorney gets paid by a board and submits to them or something like that. Is there a similar setup and why they need to take the 50%? I mean can you submit to them for your fees if you don't win or something?

4. How do you even figure this out with a class action? Does every member of the class have to pay taxes on a pro-rated share of the attorneys fees?

haha! I've seen people do all sorts of weird stuff while defending depositions. Actually one of my favorite things my partner does is sometimes he will just stand up and walk out of depositions and tell opposing counsel not to ask anything he's not supposed to and come back 20 minutes later. He only does this rarely on cases where there isn't much to worry about, but every time I've seen him do it, it's hilarious. He also used to sometimes read the actual newspaper and hold it up really high and just casually object while not putting the paper down. I think this is more of a tactic to mess with obnoxious long winded defense lawyers than him really "reading the paper".

My old boss used to open giant stacks of letters with a letter opener and just throw them on the floor when he was done reading them. But he was/is a weird *******.

So the ADR entity sent the Bank a request for the arbitration filing fee and the Bank decided to discontinue with prejudice and give a full release.

I went into this telling my friend that my argument likely will not work and he has to be prepared to have the Court enter a judgment against him to having the debt totally released. Sick life.

Nice result, congrats.

Question for all you fine folks: Say a person who did not attend law school had a year to study for the bar. What would you say the odds are he/she could pass on the first try? Assume above average intelligence LDO.

They hypothetically have the availability to commit to it as a full-time pursuit? I would say the odds are decent. By the end of 1L you've already taken most of the coursework that is specific to the MBE, and actually post-graduation studying ends up forcing you to refresh on a lot of these subjects that were a lot fresher at the end of 1L.

The weighting of various aspects of the exam varies by jurisdiction, and I think a number of states moved to the UBE or something like that in recent years, which might make my answer outdated. But in the longtime model of MBE/essays, if you can slay the MBE you're most of the way home, as you can BS your way into partial credit on essay answers even when you're stumped (this is what I had to do on multiple essay questions).

The second and third years of law school don't do a ton to help you prepare for the bar. If a student is smart in class selection and focuses on clinics and the like, it can help you prepare for lawyering, but it doesn't do that much for bar prep.

Yeah if you had a year to treat it like a job and do nothing else should be able to pass. If you don’t pass it’s most likely due to a panic attack or something random, not because didn’t know material. Especially if focus on test techniques and take old tests to practice and learn how to take the test. The bar exam is a test of basic competency even though it’s two days long. Law school is more about teaching lawyering/how to think/evaluate problems.

People that say third year is a waste of time are annoying/doing it wrong, and it has very little to do with accreditation/taking the bar exam.

I've been at my big 4 firm's international tax department for less than 4 months and I am already half way out the door to advisory.

It started with me running low on work and getting staffed on an advisory project that just needed bodies. I showed off Excel and really just ability to grind the hours and make sense of Portugese documents despite not speaking a word of Portugese before I started.

I talked to the project lead and managed to get more hours, enough so this project will take ~50% of my projected hours for the next 3 months. If I play my cards right, I have a good chance to transfer to advisory when my first year is up.

I wanted management consulting to begin with. If I get in advisory, which is not quite MBB type of management/strategy consulting but will get me on assignments with the right experience to get into MBB type of management/strategy consulting or at least business school two years down the line, I'll be super happy.

Such an outcome is very close to the top of my hoped for outcomes when I turned down biglaw for Tax LLM + Big 4.

That’s incredible, congrats man!!

Two years in and have finally gotten to the place I wanna be. My work is a mixture of mostly sports, music, some general entertainment (general corporate, M&A, some talent work from the corporate side) and pro bono. The sports stuff is great, I love it. Closed four sponsorship deals opposite NFL teams so far this year with another three ongoing, one NBA with one ongoing, and ongoing NHL and MLS deals. Was not easy to get here but thrilled to be learning what I got into biglaw to do.