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Look Before You Leap! Don’t Sue for an Uncollectable Judgment

When a client walks in the door and says “I really don’t care about the money, it’s just the ‘principle’ of the matter,” the wise lawyer may reply: “You shouldn’t sue for ‘principle’, unless it’s ‘principal plus interest’”, i.e. money.

The meaning of this old pun, of course, is that the only satisfaction likely to be gained in litigation is financial satisfaction. You are not likely to make your adversary weep, or leave town, apologize, or reform his cheating ways. But if you have a strong case, a “winning case” where you are likely to prevail at trial and get a judgment, and your adversary has assets against which you can collect a judgment, if and when you win your lawsuit, then you can sue for principle and principal (and interest, and maybe even attorneys’ fees).

The smart client will understand that, unless his or her trial lawyer is willing to take a case on a contingent fee basis, i.e. where the attorney will only collect attorneys’ fees from moneys the client collects from his adversary, the client is the one who is taking the financial risk. Litigation is likely to get very expensive. (If an attorney is willing to take a case on contingency, the client has little to lose by proceeding in litigation, except for time and perhaps out of pocket expenses.) It is a waste of time and money, usually, to sue a deadbeat, or a person with a long line of creditors. On the other hand, if there is an asset you can attach, a lawsuit might be very worthwhile.

Ethically, of course, attorneys are obligated to place the client’s interests first, and not recommend a lawsuit that will earn the lawyer a good fee if it will not likely earn the client a good result as well.  But human nature being what it is, his or her litigation attorney may be tempted by the legal fees.  A client should not be shy about engaging the attorney in a frank and detailed discussion about whether and how a judgment can or might be collected.  This is every bit as important as the discussion concerning the strength of the client’s case, i.e. whether he or she can win at trial and get a judgment.

Pre-Lawsuit Investigation and Analysis of “Collectability”

The question of whether a “winning case” will be “collectable” is often complex, and somewhat speculative, and can involve many issues beyond the primary question of whether the target defendant has money or assets. It may involve a consideration of whether additional defendants might be included, or where the lawsuit should be filed, in State or Federal Court, or what specific claims might be plead to trigger additional remedies for collection, what insurance might exist, etc. It will usually involve some analysis of whether pre-judgment remedies might be available, such as liens, or writs of attachment, to “freeze” assets so that the defendant(s) cannot hide, transfer, or encumber them. It may involve investigation of real estate records, corporate filings with the Secretary of State, Court records of other litigations/judgments, and even credit reports, to locate and identify assets, or competing creditors. The specifics of these considerations and inquiries are too various and complex to discuss in meaningful detail here.  But the point is, an experienced litigation attorney should conduct a pre-lawsuit investigation and analysis of collectability, and discuss it with the client, to agree on a plan of action before filing any lawsuit.

Free Consultations by Experienced Attorneys at Gehres Law Group, P.C.

The experienced business litigation lawyers at Gehres Law Group understand the importance of analyzing collectability at the outset of a case, and advising the client and planning the case accordingly. Our attorneys are available for free consultations to evaluate your case and share with you the wisdom of their experience to help you decide whether you should file a lawsuit. We encourage you to take advantage of our knowledge and decades of experience successfully representing clients in litigation.

By | 2017-09-11T05:46:33+00:00 March 19th, 2017|Business Law, Business Litigation|Comments Off on Look Before You Leap! Don’t Sue for an Uncollectable Judgment