The Insolvency Defense
Sometimes the other side is going to win the lawsuit and there’s nothing you can do about it. When faced with that prospect I try to help my clients prove to the plaintiff that even if they win, they won’t be able to collect. In litigation, nobody really wants to win a meaningless judgment.
I recently was brought in to help a prominent company that was facing a multi million dollar lawsuit. This was a company with substantial income stream and assets, but but not much net value on liquidation. The lead counsel of the litigation wanted to be ready to file a chapter 11 case in the event the trial didn’t go well. Here was my strategy:
1. Plan to file the chapter 11 before the lawsuit. The delay will dampen the plaintiff’s energy and enthusiasm.
2. Tell the plaintiff that you’re going to file before the lawsuit as a professional courtesy. That will promote settlement discussions.
3. Create schedules that show liquidation value and share them with the plaintiff’s lawyer. Don’t show income. A winning plaintiff can force the defendant into liquidation, but can’t capture future income. There’s no requirement for a company to stay in business and work off the debt.
4. Plan to remove the case to federal bankruptcy court.
My client and referring counsel enthusiastically implemented my strategy. After intense negotiations between counsel and the insurance company the case settled. The chapter 11 case never had to be filed. Lead counsel and my client were very happy. It felt good to add value to help solve a problem that was really causing my client to lose sleep at night.
A Track Record of Success in Maryland, Virginia, Pennsylvania, & Delaware Commercial Litigation & Bankruptcy Cases
DISCLAIMER: Please note that every case is different and these verdicts and settlements, while accurate, do not represent what we may obtain for you in your case.
