The Discovery of Private Financial Information in Commercial Litigation – Are your Secrets Safe and, if so, Until When ?

     Imagine that you are a Plaintiff in a very large, complicated, and potentially, very expensive commercial litigation matter.   You meet with your attorney to discuss the case.   You review the facts.   You ask the attorney how much it will cost and, of course, the attorney declines to describe with certainty the ultimate cost of the case.   It depends, she explains, on various factors outside of her control, mostly relating to the reaction/behavior of the other party and their attorney after they are sued. She assures you, however, that it will be expensive.   There will be pleadings to be filed, discovery to be requested, depositions to be taken and, potentially, a very long trial.

            Naturally, you ask her –  what are your chances of winning ?   Once again, your attorney demurs explaining, instead, that it is too soon to determine the answer to that question.   That will depend, she explains, upon such things as the types of documents which are produced in discovery, the credibility of the witnesses and the Judge who will be assigned to the case.   These are all factors which have to be balanced she says.

            You then move on to your next question.   If I win, and get a Judgment, will I be able to collect?   Once again, your attorney balks at answering the question.   You then ask: “Isn’t there a way for me to find out how much money the other side has before I embark upon this very expensive endeavor?   Before I spend hundreds of thousands of dollars on legal fees, can I find out how much money the opposing party has in the bank?”   The answer is, in most cases, unfortunately, “no.” 

            In Florida, private financial information is generally shielded from discovery until such time as the plaintiff recovers a Judgment.   At that point, the parties are permitted to engage in “discovery in aid of execution.”   Discovery in aid of execution is a method for obtaining personal financial information from a party once you win the case and recover a judgment. You can then obtain the personal financial information from the defendant but only once you have a judgment. This essentially means that litigation, like many things in life, can be a gamble.   However, there are certain ways to make an educated determination about whether such a Judgment might be collectible.  

  1. Hire a Private Investigator.

     While this may be an expensive endeavor for some, in many cases, it can be a cost saving measure.   A private investigator is permitted to research and interview individuals with whom the prospective Defendants have contacts and will pull together all publicly available documents and assemble a general financial profile reflecting the Defendant’s lifestyle and habits.  From these documents, a Plaintiff should be able to make an educated decision about whether the person or company whom you plan to sue has assets which will satisfy a Judgment.  However, be forewarned that a financial report that is not regularly updated during the course of the case, will not be very useful. 

  1. Things Change Over Time.

      As you probably know, lawsuits can be time consuming. It can sometimes take a substantial period of time to litigate an action to judgment and then to collect upon that  judgment. The good news is that, during the time period prior to collection, there is something called “pre-judgment interest” which will ensure that the debt accrues interest. The pre-judgment interest rate is generally determined, on a yearly basis, by the Florida Comptroller. This year the pre-judgment interest rate is 4.75%.

     Moreover, as litigation progresses, sometimes  rich people become poor and poor people become rich. As a general matter, a party’s financial circumstances can fluctuate.   This is something that, to the extent possible, a litigant should pay attention to. It is generally not the job of counsel to monitor the financial health of the opposing party. 

     Nonetheless, counsel can often gauge the seriousness with which a party defends a case by the type of attorney they hire (generally, the more expensive attorney, the more money they have) or by what level of ferocity in which the case is being defended.   In other words, if the other side hires a lawyer, after the commencement of a case, that files one or two pleadings and sits back and does nothing thereafter, you can make an educated determination that the Defendant has imposed a budget upon counsel.   Conversely, if opposing counsel becomes immediately involved in taking depositions, serving discovery and files a series of motions, it is reasonable to assume that there is money in the trust account of the lawyer defending the litigation – that lawyer has obviously received a generous retainer.   And, generally, few litigants  will fund the defense of litigation unless they have something to protect.

2. Personal Financial Information May Be Discoverable if it is Related to the Case.

     There are instances in which personal financial information may be discoverable prior to judgment and that is if it is relevant to the actual merits of the case , If your claim is that the opposing party siphoned off hundreds of thousands of dollars from your business, and transferred that money into his personal bank account, the Court likely will order production of personal bank records.   However, the rationale behind this is that the personal bank records are relevant to an issue directly involved the case.   It is not so that you can see how much money the opposing party has in the bank.  

3.  Conclusion

     Commencing litigation of any kind is a calculated risk.   There is a risk that you will lose the case, there is a risk that you will end up paying the other side’s attorneys’ fees, and there is a risk that you will collect nothing.   However, during the course of the proceedings, competent counsel is generally able to make educated assessments, with the help of investigators and general intuition, as to whether the opposing party will pay at the end.   Rarely does someone defend a case vigorously when there is no money to protect.   Carefully analyzing your options throughout the process dramatically increases the likelihood of a successful outcome.

 

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