I have a piece of litigation that has gone on for more than four years. At its height, there were eight defendants. Two defendants did not defend and I obtained default judgments against them. One of the two then went bankrupt. The other did not go bankrupt but when we did a judgment debtor examination it became very clear that this fellow had absolutely no money, a lineup of creditors going around the block and the chances that my client would ever see a dime were absolute zero. Then, one by one over the next four years, another five defendants either went into receivership or into bankruptcy or, in one case, came so close that my client accepted an absolutely paltry amount to settle because it was better to get that amount than nothing.
Well, yesterday the last shoe finally dropped with the bankruptcy of the only remaining defendant.
In the meantime, over the past four years my client has been lead on a merry chase against these eight defendants. And what does my client have to show for his efforts – four years worth of legal bills. I suppose that it is some small consolation that the client will be able to write off the legal fees and the bad debts on his business’ tax returns, but it’s only a small consolation.
I am not going to say that this is a travesty and that the bankruptcy laws and the civil litigation procedures should be immediately revamped, etc., etc. That is not only a knee-jerk reaction but, more importantly, it’s an unfair assessment when you take into account all of the competing business and legal interests that intersect in situations like this. The silver lining, I suppose, in all of this is the fact that the first defendant went bankrupt early in the proceeding and this gave my client the opportunity to decide whether he wanted to take a gamble that the others wouldn’t go bankrupt as well. So, if the purpose of this post isn’t to rail against the system, then it’s purpose has to be to serve as a warning that litigation shouldn’t be taken too lightly because if the defendants go bankrupt, then a lot of good money can be thrown after bad. However, this doesn’t only apply to defendants because the plaintiffs can go bankrupt also. I have another matter where it looks like the plaintiff is going to go bankrupt any day now. If that happens, it is highly unlikely that the trustee-in-bankruptcy would want to continue with the lawsuit. The result is that my client will have to “eat” its costs of defending what was a bogus lawsuit for the last six months as the plaintiff will not be around to pay even a portion of my client’s costs.
Something to think about.