By: Andres Gomez
As you know, a 1201(G) penalty is one imposed due to a failure to pay a judgment within 30 days of when it becomes due. As of late, we have seen more and more plaintiff attorneys threatening 1201(G) penalties for what they perceive is an issue that can net them more money in the form of penalties and attorney fees. Here are two examples:
1. There is a settlement agreement reached as to the claim as well as attorney fees, but the value of penalties is still being debated. Opposing counsel, in an effort to push for a complete and final settlement, threatens to file a 1201(G) motion for penalties.
2. At settlement, there is an agreement reached for a full and final settlement of the claim along with an agreement that the payor will pay outstanding bills. One of the providers has not received the payment and opposing counsel threatens a 1201(G) motion for penalties.
Remember, a 1201(G) penalties arise from the failure to pay a final nonappealable judgment within 30 days after it becomes due. Oftentimes, plaintiffs’ attorneys try to leverage this penalty to achieve a particular result. Here are some tips for avoiding these penalties:
1. Make sure you are clear on whether there is a judgment or not. As in example number one, while there was a settlement agreement as to a portion of the claim, another portion was unresolved. There were no settlement documents prepared and no judgment entered approving such. Therefore, the plaintiff’s attorney was not entitled to claim a 1201(G) penalty. We have seen many attorneys use this threat to get a little more in penalties when they are not due, as was the case in that example. Remember that a 1201(G) penalty only applies when there is an actual judgment.
2. Be clear on what the judgment states. The 1201(G) penalties come from the failure to pay a final nonappealable judgment. Be cautious when agreeing to additional items, such as in Example 2, to make sure that the judgment is clear. In that example, the agreement for payment was ambiguous as to when the payment to the provider would be made. What if a provider submits their bill 25 days after the judgment, leaving only 5 days to process and pay? Additionally, the statute provides 60 days upon receipt of notice of the bill to pay. When the language of any such agreement is ambiguous, it can lead to such claims. When you receive a judgment from your attorney, make sure you discuss what the obligations coming from it are and make sure that you ask about any provision you are unclear about.
3. Monitor your vendors. Make sure that if a judgment has a provision to fund an MSA, that it is done so timely. I have noticed a push lately from plaintiff attorneys inquiring about the funding of MSAs and heard “unofficially” from a couple that they would have filed a 1201(G) claim if they learned it had not been funded.
Remember that judgments have to be observed and paid (subject to some exceptions due to appeals). Always make sure you are clear on what is due and when. Get with your attorney to make sure that all parties are clear on what the judgment obligates them to do and/or pay. 1201(G) penalties are easily avoidable but plaintiff attorneys seem to want to weaponize them more lately.
