The Uncollectible Judgment - Thinking outside the box
While today’s fractured economy has produced more judgments than ever before, a higher number of those judgments are uncollectible. Just when is a judgment uncollectible? That line is blurred with the right set of circumstances and some thinking ‘outside the box’.
As a case in point, several years ago I received a judgment from a physician who had been duped out of her savings by a boyfriend. A wage garnishment was served upon the boyfriend’s shell corporation. The corporation indicated the debtor was not employed. I had solid information about the debtor’s employment, so I sued the corporation. Having successfully prevailed on the creditor’s suit, judgment was now entered against the corporation.
I subsequently discovered that the corporation was entangled in federal litigation over patent rights in which it was the plaintiff. The defendant was a high-profile software company. I immediately filed a lien in the case; however a review of the case file was disappointing. I did not think the debtor would prevail. In fact, it appeared the case was frivolous. As a lien holder, I would receive monies only if the debtor was triumphant. This was not going to happen.
It soon became apparent to me that the debtor firm conducted no actual business other than frivolous litigation on its one (nearly defunct) patent.The debtor nonetheless was able to retain a major law firm on a contingency. This firm was aggressively pursuing the deep-pocket defendant, causing that firm to incur substantial legal fees. I put in a call to the attorney for the software company and inquired if the client might be interested in putting an end to the litigation. An idea was floated to him. I would go back to court and obtain an order transferring all of the debtor’s patent rights to me in order to satisfy the judgment. Once the order was obtained, the judgment was for sale – for the full amount of the judgment. As the new owner of the patent, the software company would be able to shut down the federal litigation. There was silence on the other end until it finally hit him what I was suggesting. “Oh…. I see what you’re doing….” He indicated the idea ‘had merit’ but he would need to speak with his client.
The client gave the go-ahead. I filed and successfully prevailed on the necessary motions to seize the debtor’s patent which was the core of the federal lawsuit. As it turned out, however, somebody beat the software firm to the punch. The victory in court smoked out the law firm for the debtor. To protect its interest in the case, the firm satisfied their client’s judgment.
So what was the outcome of the patent litigation? As I correctly surmised, the debtor could not prove its case in court. Moreover, it was ordered to pay the defendant’s legal fees. Unfortunately, the debtor’s law firm was out hundreds of hours on their contingency agreement….. as well as the $35,000 they paid to me.
Ramona Featherby is a judgment recovery specialist in San Diego, California and past President of the California Association of Judgment Professionals.
Copyright 2011, Ramona Featherby