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socrateaser
socrateaser, Attorney
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We won a tentative decision on a business to business lawsuit

Customer Question

We won a tentative decision on a business to business lawsuit for over $1MM. There is also a punitive damage award for hundreds of thousands of dollars on top of the million dollar tentative decision for the judgment. How do we collect? We are concerned that if the judgment is made final then the company will bankrupt itself and hide assets. The company is willing to settle but claim they have little to no liquid assets and want a payment plan. We would like a lump sum now and a payment plan with the rest. What contingencies need to be put in place to ensure they pay? Ideas include making them personally liable, making the judgment go in full force if they miss a payment, etc. Is there such thing as a performance bond for a payment plan? What do we need to do to intelligently set it up so the full amount is paid? How does CCP 664.6 apply? Is there something more, better? We demand that they stipulate to judgment in event of default under specified terms for said judgment.
Submitted: 5 years ago.
Category: Business Law
Expert:  socrateaser replied 5 years ago.

Punitive damages don't happen on a mere contract claim. What is the judgment for (it makes a difference)?

 

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Customer: replied 5 years ago.
Here is the language of the tentative decision (less the names of the parties involved):

"[Company A] wrongfully profited by the use of [Company B]'s proprietary information and wrongfully interfered with the existing and prospective contractual relationship which resulted in economic loss to [Company B] in the amount of [$1,XXX,XXX.XX].

"The Court further finds that [Company B] has established by clear and convincing evidence that the conduct of [Company A] which caused harm to [Company B] involved fraud, malice and oppression. Accordingly, based upon the evidence presented relating to the net worth of [Company A], the Court awards punitive damages in the amount of $X000,000.

"The Court further finds that the defendants shall be enjoined from the use of [Company B] materials in the course of sale...further enjoined from marketing...at any of the locations identified in [Company B] materials."

--Note: Company A is still doing business. There are a few days left before a final judgement or settlement is made. Talks of settlement include a lump sum payment along with monthly payments and collecting accounts receivable. Also, adding a stipulation that if Company B defaults that the judgement becomes enforcable immediately. How do you recommend we structure it to ensure we get paid and they don't default?

Does that help clarify? Anything else?
Expert:  socrateaser replied 5 years ago.

A judgment the result of fraud, malice and oppression cannot be discharged in bankruptcy -- with the caveat that you will have to file an "adversary complaint" in bankruptcy court, which is like a second lawsuit, to have the court deem the debt nondischargeable. So, that may be an added future expense to try to save your judgment.

 

If it were me, I would let the judgment issue, because that judgment is entitled to full faith and credit and that will get your bankruptcy claim perfected faster and for less money.

 

After that, I think that I would ask for the debtor to identify its assets so that I could determine whether there was anything that could be sold to pay some of the debt upfront. Simultaneously, I would want all payments to the debtor made to an account over which I had signing authority, such that I could withdraw a certain percentage of the proceeds from each payment, and leave the rest for the debtor.

 

That way, there would be no "slow pay."

 

Whether you can accomplish all this I have no clue. But, as you've surmised, running the debtor out of business is guaranteed to not get you paid.

 

Customer: replied 5 years ago.
Thank you. We want them to stipulate to judgment. How do we structure the deal so they stipulate to judgement that will go in force (if they don't fulfill a payment plan) and not appeal?
Expert:  socrateaser replied 5 years ago.

You can't simply hold off on the judgment.

 

1. You can enter into a settlement that produces a voluntary dismissal, after which the settlement becomes the enforceable instrument as a substitute contract, but, of course shows no evidence of fraud and can be wiped out in bankruptcy -- so, in my opinion would be a very bad resolution.

 

2. You can allow the judgment to be made, and then negotiate a separate payment plan while maintaining the judgment as separately enforceable afterwards for the next 10 years, and renewable for another 10.

 

Considering that you will almost certainly receive a favorable judgment at this point, then unless you believe that the defendant will spend the $20,000+ to appeal the decision, I don' see what you have to gain by negotiating.

 

I could, of course, be missing something, because I'm not involved in the case enough to know all the knarly details, so that's just my 2 cents.

 

 

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