In this issue of The Expert Witness, we present two articles concerning the component of the plaintiff’s award that is referred to as the “management fee.” What we argue is that there are actually two types of such fees.
The first of these, and the one that is usually discussed under the generic term “management fee,” refers to expenses that plaintiffs incur for advice concerning investment decisions. The first article in this newsletter discusses the arguments, both for and against, inclusion of the cost of this investment management fee in the plaintiff’s award. After a detailed analysis of this issue, we conclude that such a fee is justified only in exceptional circumstances.
A second form of management fee may arise in cases in which plaintiffs have suffered impairment in their mental capacity – usually children injured at birth or adults injured in catastrophic accidents. As these individuals often require assistance with many, if not most, of the decisions concerning management of the expenditure of their awards, a second fee, an expenditure management fee, may be necessary.
The second article in this issue identifies three potential components of this fee: the costs of guardians, life care planners, and trustees. It concludes that, although this fee may well be substantial – perhaps on the order of $50,000 per year – it is often given very little attention by cost of care and financial experts.