Risk Management in Litigation
The Business Of Lawsuits
Even in the best cases there is a certain chance that a plaintiff or claimant will not be able to prevail or more importantly not be able to collect their judgment. That is a risk UNLESS (read on).
How to manage the risk
Our firm has developed a good risk management strategy when taking on large corporations in sales commission disputes. To begin with, we initially try to attain the commissions WITHOUT FILING A LAWSUIT. We have employed several successful strategies for years, in that regard.
When fair results “out of court” are not possible, we file lawsuits.
Once we reach that stage, the time and financial commitment by the client increase significantly. Of course, so do the potential rewards when we have statutes available that can double, triple or even quadruple the commissions owed in a judgment, and award attorney fees.
To safeguard this major commitment, and assure a satisfactory outcome after filing suit, we have sometimes employed a little-used remedy called a writ of attachment.
What is a writ of attachment?
A writ of attachment is a procedure that can be used in a lawsuit based on breach of a written contract, to obtain an order from the judge allowing the plaintiff to “attach” the defendant’s assets pending the resolution of the lawsuit. Meaning one can grab their assets, even before a judgment is taken, and hold them for protection until the lawsuit is resolved.
Attached assets are placed in a type of escrow account, monitored by the Court, until the lawsuit is resolved. If the plaintiff wins, they have a portion if not all of their judgment covered by the amount they seized from the defendant. A nice guarantee of success!
A case study
The first time my firm ever used this procedure was in 2002. Our client was a sales agency in the computer industry, had sold analog microchips in a large quantity, and was not paid its commission. The defendant would not engage in any settlement negotiations after we filed suit. In fact, they would not communicate with us at all.
So, we promptly filed for a writ of attachment and it was granted by the judge.
We then slapped a lien on the bank where the defendant’s account was held, and seized the sum of the sales commissions our client had been wrongfully denied. After receiving only silence in response to our prior communications to the defendant, suddenly our phones and e-mail were flooded with message is from their CEO, COO and CFO virtually begging us to release the funds we had seized, so they could make payroll.
The matter settled within 48 hours after they reached out, our side agreeing to release a portion of the funds we had attached, crediting the remainder towards the settlement they agreed to pay on terms. They abided by those terms and the settlement was paid, totaling $270,000. All of this happened within months of filing suit, because of the leverage of the writ of attachment.
Basic prerequisites for writs of attachment
Most importantly, the party seeking the writ must make a showing that they are suing based on a written contract, and that they are likely to prevail in the lawsuit. That is done through the submission of documentary evidence, usually in the form of written declarations and supportive documents.
Also key is providing documentation showing the exact amount of the commissions owed to the plaintiff, including the numbers to the right of the decimal point. When a plaintiff can do that, backing it up through documentation explaining exactly how the calculations were made, and when the debt became due, the granting of the writ will usually result.
Settlement will often follow!
Consequently, this is one great mechanism to protect investment in a lawsuit.
Contact us for more information.