Ohio commercial litigation: Chasing deadbeats, it’s part of what we do!

By CHRISTOPHER P. FINNEY | MARCH 4, 2018

Someone owes you money.

But you have been slow to assign the collection to an attorney for fear of the legal fees and expenses.  This concern certainly is well-founded.

However, Finney Law Firm (a) has the experience, tools and “attitude” to maximize your return from that activity, and (b) is willing to work with you on creative fee relationships, so that the risk and cost of the collection activity does not fall fully on the your shoulders.

The challenge

In every piece of prospective litigation, I attempt to analyze with the client the three components to litigation success: (a) liability (establishing the legal basis the other party owes you money [for example, is the contract clear and the breach easy to establish?]), (b) damages and (c) collectibility.

Collectibility

Let us start at the end: does this target defendant have a pot to pee in?

If you were to get a judgment of any size against him, could we collect from this debtor the sums needed to make the litigation worthwhile form the inception?  Many times the answer is “no.”  If so, you might want to walk away from the matter.

Does the debtor own a house?  A business property?  If so, we can fairly quickly ascertain the mortgage indebtedness versus the value of the property.

Does the debtor own a business?  Car?  Other assets?  Many times debtors structure their lives and their assets in such a way that a creditor really can’t get anything from them — their house in in their wife’s name, and their other assets are well-hidden.

Liability

Ahhh, liability.

The client many times relates to us that liability is “open and shut.”  We file suit and the other side “surely will settle.”

Unfortunately it does not always pan out that way.  Clients frequently don’t understand the facts of their own case, don’t know all the facts, and wear rose-colored glasses about their prospects of success.  Further, even the simplest fact pattern that clearly leads to liability can be time-consuming and laborious in Court to bring to conclusion.

The client needs a realistic understanding of their chances of success and the Court path to a final enforceable judgement.

Damages

And that brings us to the damages calculation.  Defendants, Plaintiffs and Courts all have differing perspectives on how to calculate damages numbers.  And a separate blog entry would have to explore that issue in more depth.  But take, for example, the sale of a house.  Our client is the seller.  The buyer is clearly in breach.  But the seller sixty days later re-sells the house to another buyer for $5,000 more than the buyer in breach agreed to pay.  (And in today’s go-go real estate marketplace, that’s not an uncommon occurrence). What “damages” has the seller sustained from a clear breach of contract?  Other than the time-value of holding the property (taxes, insurance, utilities and maintenance), likely none.

Collection

So, once you file suit and convince the Judge to sign the entry granting an award of damages against a defendant,  you are “off to the races,”  Right?  Well, not exactly.

We have to first identify assets and income streams.  Does the target own a piece of real property?  A bank account?  A job? Securities accounts?  Do they own a closely-held business?  The Finney Law Firm has gum-shoe and cyber assets and relationships that help us to learn of the income and assets of clients in the collection process.

Tools for enforcement

Our tools to force payment of a legal judgment include:

• Attaching bank accounts.
• Garnishing wages.
• Liening and foreclosing on real property.
• Seizing and selling personal property such as office furniture and equipment, cars and manufacturing equipment. (This one usually gets their attention and frequently a quick check!)
• A creditor’s bill to force a third party who owes the deadbeat money to instead pay it to you.  These are very powerful.
• A receivership to place income-producing assets in the hands of a third party whose job it is to assure you are paid from the income stream of the asset or its liquidation.
• A Judgment Debtor Examination forces a creditor to tell you — under oath — where they are “hiding” their assets so that you can go and grab them.
• Use of subpoena power to learn from third parties where assets are being hidden.
• Working through the intricacies of bankruptcy court to either avoid the collections limitations the Court imposes or maximize the collection through their offices.
• Involuntary bankruptcy.  It takes three creditors banding together to place a debtor into bankruptcy, but this tools forces all the debtor’s cards on the table and stops them from playing games with assets that should belong to you.
• Fraudulent transfer actions can un-do illegal transfers of assets to friends and family members.  Most powerfully, the act of the fraudulent transfer to these third parties causes them to become defendants in that new action —  putting them on the hook for the debt, plus punitive damages and attorneys fees — for participating in the scheme.

Creative fee relationships

We are not oblivious to the challenges our clients face of withering legal fees and endless court appearances to collect a small and simple debt.  But at the same time, the tremendous work many times required to get a judgment and pursue it through collection also is known to us.

However, if we are going to recommend that a client proceed with a collections action — which necessarily means the economics should work out positively for the client — we are always willing to engage in a discussion about creative fee relationships (hourly fees, flat fees and contingent fees) to achieve the desired end.

The idea on a contingent fee is the more you collect, the more we make — everyone should be happy if the “ring the bell.”  But on the flip side, it it turns out to be a dry well — and many collection actions that seem promising on the front end turn out to be a dry well on the back end — then we share in the pain.

Conclusion

Collections work can be great fun, outmaneuvering a defendant who knows he owes the debt, but is using his wits — legal and illegal — to prevent you from getting to those assets.

So, let your deadbeats become our firm’s problem and allow us to turn that bad debt into an asset.  Call Chris Finney (513-943-6655) or Julie Gugino (513-943-5669) to learn how we can help you.