How Much Can Professional Plaintiffs Make?
Thanks to the unique nature of the TCPA (and our justice system), it’s always cheaper to write a check to a plaintiff than to defend a case in court, regardless of whether it has any merit. Thus, at least 50% of claims are settled after sending out a demand letter, before a lawsuit is ever filed. Many of the cases that are filed end with the defendant’s default, and many more filed cases are settled before trial. So how much can an active professional plaintiff actually make from extorting small companies and filing frivolous lawsuits?
Obviously, we can only guess, but our guess is a very educated one, and based on the actual experience of several Blacklist Alliance attorneys, who have settled hundreds of cases over the course of the past 15 years.
No professional worth his salt will send a demand letter until he’s collected at least 3 or 4 calls. This is a practice known as “warehousing” and it’s routinely used to maximize damage demands. Most if not all plaintiffs demand at least $1,500 per call prior to filing suit, and many improperly request $4,500 per call. For the purposes of this article and a VERY conservative estimate, we will assume an average claim consists of two calls and the amount stated in the demand letter is $3,000.
Obviously, demand letters represent the starting point of settlement negotiations. Roughly 50% of all cases are settled after receiving a demand letter. The average settlement is around $2,000, but for the purposes of this article we’ll put that number at $1,500.
For the remainder of this article, we’ll be focusing on “Lone Gunmen” plaintiffs, who represent themselves in small claims court. Small claims courts are courts of limited jurisdication, in which maximum damages are capped to about $5,000-$10,000, depending upon the local court. As a rule, when filing small claims cases, Plaintiffs always demand the maximum amount the court is able to award, regardless of whether the law even supports the amount they claim to be owed. On average, that amount is $5,000.
Default Judgments: Plaintiffs enjoy a number of unique advantages in small claims court, not the least of which is that defendants rarely take such cases seriously, and often ignore them and don’t appear for the trial. Thus, at least 50% of all small claims cases end in a default judgment for the plaintiff. And, whenever a case defaults, the court will award whatever amount the plaintiff requested in the complaint. This results in an average default judgment in the amount of $5,000.
Defended Cases: Plaintiffs nearly always win at the small claims level, but the court will often reduce the amount of damages because the defendant was able to demonstrate that the violation was not “knowing and willful.” When counting all cases won or lost, the average amount a Plaintiff makes is about $2,000 per case.
Using the conservative assumptions outlined above, if a professional plaintiff sends out two letters per month (24 per year), two calls per letter each of which demands $3,000, here’s how much he’ll make:
Prelitigation: Twelve claims will settle for $1,500 each, result in an annual income of $9,000.
Filed Cases: The Plaintiff will file twelve lawsuits based on the unsettled claims. Out of those lawsuits, six will end in a $5,000 default judgment ), and the remaining six will generate $2,000 per case when you average wins, losses, and settlements. This results in an average return of $3,500 per filed casde.