Motions to Compel Bring Pressure and Get Clients Paid
Getting Clients Paid with Motions to Compel
We were contacted by a lawyer who had won a significant Texas judgment against a local businessman. The judgment was issued in favor of a California doctor following a dispute over a business loan. This case demonstrates the value of a motion to compel.
Unfortunately, the lawyer who won the case had very little experience collecting judgments and he had already tried and failed to collect this one. After we were hired, we contacted the attorney for the judgment debtor and suggested a reasonable solution that was in everyone’s best interest. However, the other side was similarly unskilled in post-judgment remedies so they rejected our proposal and offered to pay our client zero.
Faced with a defendant who refused even first-level discussions, we launched a three-pronged attack aimed at making sure our client got paid.
First, we contacted the debtor’s lawyer with our written discovery requests, which our team has developed over the past 20 years to help identify hidden assets and potential weaknesses a debtor’s claims.
We then issued third-party discovery requests targeting the Texas companies where the local businessman held an interest.
Finally, we sent subpoena notices to two of the debtor’s family members seeking information about his business dealings because we believed they had direct knowledge of his business dealings.
We were met with resistance once again when the defendant’s third-party business affiliates never responded to our discovery requests and the debtor’s counsel provided wholly insufficient answers.
Undaunted, we then filed a series of motions to compel against both the debtor individually and his third-party business partners. The day the judge was set to decide the issues, the debtor agreed to resolve the case while we were sitting in the courtroom by paying our doctor client the $150,000 he was owed.
This is a good example of the tenacity we bring to each case. Even though our client and his original attorney thought they had no chance of collecting the judgment, our team put enough pressure on the defendant and his business partners to make sure our client was paid while avoiding the time and expense of more advanced post-judgment procedures.
Deposing the Husband.
Deposing the Husband, or any significant other, can be a powerful tool that leads to collection.
While credit card collections are not what we typically handle, our team was up to the task when a client bought a small package of credit card debt that originally was issued by a local bank. Although we didn’t know it going in, a recent marriage for the woman who owed the debt would be key to collecting every penny of what our client was owed.
Once we heard the full story, we accepted the engagement and filed a lawsuit. We were going up against the debtor’s excellent lawyer, who was very skilled in delay tactics. For example, after we filed our motion for summary judgment, her attorney convinced the judge to issue two continuances, which only delayed the proceedings.
After we presented our arguments in court, the judge issued a judgment favoring our client and we began our post-judgment procedures, which included sending the opposing counsel our interrogatories (i.e., questions we wanted the debtor to answer) and our requests for production of documents. As often happens, the debtor’s answers were insufficient. After several additional hearings, the judge eventually forced the debtor to fully disclose her assets and business dealings.
That’s when we served discovery on her employer and gathered all her employment documents. At this point, it unfortunately looked like there was little chance the woman could pay a meaningful amount of the debt, making her “judgment-proof.”
Since we never waste clients’ resources when there is clearly little chance of successfully collecting a debt, we decided that we should depose the woman and likely close the case file “for now.” We sometimes will close a case “for now” only to reopen it later once we believe the debtor can pay, which can happen within a few weeks, months or longer depending on the circumstances.
During the debtor’s deposition, we discovered that she had recently married, which we immediately saw as an opportunity. That’s because experience has taught us that, given the chance, debtors will rarely disclose the full extent of their debt to their significant others.
We responded by sending a deposition notice to her husband. Within a week, his wife was offering to settle. It was clear that she did not want us talking to her husband, so we advised our client to not settle for anything less than the full balance of the debt, including interest and attorneys’ fees. Since the documents we collected showed that a lump sum payment was not possible, we helped our client quickly negotiate a favorable settlement that allowed the debtor to pay the full balance owed over a 30-month period.
Our client was ecstatic since they felt this debt was uncollectible from the beginning. That’s why we always remind ourselves that you never know where a debtor’s weakness lies. The trick is a willingness to be relentless, which is our specialty.
Bet the Company Litigation
Temporary Restraining Orders save companies everyday.
Time was truly of the essence when we met with our soon-to-be client one morning around 9:30 a.m. Sitting across the table, he told us the incredible story of how his company’s payroll had been hijacked by an employee who was demanding $60,000. This was literally a “bet the company” situation.
The problem arose when the employee, a manager, made sure that he alone had access to an administrative software program that processed the company’s payroll. He then changed all the passwords only two days before payroll was due and issued his illegal demand for cash.
After attempting a workaround by contacting the software provider, the company’s shareholders learned that it would take at least two weeks to implement a new program so employees could be paid. With the clock already ticking, our client told us that his company would collapse if he didn’t meet payroll.
Based on our experience in similar cases, we set out with the single-minded goal of convincing a judge to issue a temporary restraining order (TRO) that would force the manager to reset the passwords before payroll was due.
The labor-intensive process kicked off when we immediately began collecting affidavits to include in our TRO application. It was all hands on deck since we needed to get in front of a judge that afternoon.
After several hours of focused work to develop our case, we submitted the TRO request by 3:30 p.m. and were soon on our way to see the judge. After hearing our arguments, the judge granted the TRO in our favor. By 5:30 p.m., the manager had complied with the judge’s order and our client had rightful access to their software once again.
Later that night, I received an email from our new client, who I’d known for less than a day. It read:
[The defendant] nearly cost my family, extended family and my marriage everything. Your firm pulled my chestnuts out of the fire today. 65 families will continue on because of it.
It’s days like this that remind me and our entire team that we have the greatest job in the world.
Judgment Proof is just a word.
What does it mean to say someone is “judgment-proof?”
We frequently hear opposing counsel tell us that the debtor is “judgment-proof.” Most of them have no idea what they are talking about. We especially enjoy it when opposing counsel is a family friend of the debtor and tells us something like, “I’ve known these people a long time, I (insert: go to church with them, live next door to their parents, dated their sister, etc.) and they just don’t have anything. They are Judgment-Proof.”
This lawyer isn’t usually a collections specialist. Frequently they are family law attorneys, personal injury attorneys, attorneys who work with a big national firm or even work as in-house counsel for a company. Do you you think they’ve ever seen a client subjected to the forensic accounting that is post-judgment discovery? The answer is no. They have no idea what’s coming. Most of the time, these debtor’s are not judgment-proof. And they cannot withstand the close scrutiny of post-judgment procedures.
But some debtor’s are referred to by us as “judgment-proof.” What does that mean? In simple terms, it means we don’t see an avenue to collect sufficient funds to warrant the client expending resources for now. So we close the file “for now.” We explain our rationale to the client and we’ll come back to it in a year. Or two, or whenever. But the issue isn’t dead.
So fine, tell us you’re judgment-proof. We’re game.
Losing the Condo (Foreclosure and eviction)
Foreclosure, eviction and collecting debt.
This case happened in Austin. Foreclosure and eviction is what follows.
We were originally hired to foreclose on a condominium situated on the outskirts of the University of Texas campus. We followed our usual foreclosure procedures and obtained title to the property.
The client then entered into prolonged negotiations with the debtor to resolve the debt. The negotiations continued for over six months. At that point in time the debtor had not made payment on the debt for more than a year. Eventually, no resolution was found and we were instructed to evict the debtor from the property.
We filed the eviction in the justice court and prevailed. The debtor appealed. We then went to trial again in the County Court and prevailed again.
We had an agent of ours stop by the condominium a few days later to see what the debtor’s plans were for moving out. But the debtor said, “there was no foreclosure.” One of the worst cases of denial we have ever seen.
We then moved forward with a writ of possession. The debtor retained a lawyer in Austin to seek a temporary restraining order to stop the execution of the writ of possession. Just before the debtor’s property was to be put on the street we appeared before a judge in Austin. The judge denied the temporary restraining order and we went forward with the writ of possession as you can see in the attached photo.
The client then sold the condo at a profit and all’s well that ends well.