Judgment Proof or Justice Proof?

Generally speaking, people bring suit against another because they feel wronged by another to the point where they need a third party, namely a Court, to make them whole and exact justice against the wrongdoer.  Laying aside, for the purposes of this post, the chances of success for such suits, which, of course, rely upon things like legal merits and sufficient evidence, the persons bringing suit expect their suit, if successful, to bring them the justice they feel they deserve.  Although such an expectation seems intuitive and obvious, most people are shocked to learn that, even if they win a verdict, they may not receive the justice they desire, sought, and may even deserve.

Very often people do not receive the justice they seek because the person or entity that they sue is what attorneys call, “judgment proof.”  What does it mean to be judgment proof?  A judgment proof person is someone who, although subject to a judgment, cannot pay it by virtue of his circumstance.  The easiest way to explain it is by way of example.

A common example is this: suppose Larry gets into a car accident with Fred and, as a result of the accident, Larry suffers extensive damages and/or injuries.  It is clear from the evidence available that Fred is totally at fault for Larry’s damages and/or injuries.  Fred, as it turns out, is uninsured.  To make matters worse, Fred does not own a home, has little to no money in his bank account, has no significant assets, and/or has a spotty employment record.

As one may expect, Larry initiates a law suit against Fred in order to be compensated for his various damages and injuries.  The evidence available is clear, sufficient, and unambiguous in favor of Larry.  The legal arguments to support Larry’s case clearly have merit.  Due to the evidence and legal merits, Larry’s law suit against Fred is successful and he wins a judgment of $100,000 against Fred.

At first, Larry feels vindicated and that justice was done; after all, an independent fact-finder and tribunal, the Court, viewed all of the information presented and found in Larry’s favor.  The Court publicly found that Fred was in the wrong and Larry in the right and that Fred must make Larry whole through the payment of $100,000 to Larry.

While basking in his moral and emotional victory, Larry then attempts to collect on the $100,000 verdict.  Unfortunately, no matter how willing Fred may be to pay off the $100,000, he has no real assets to pay it.  Of course, he could, out of good will and conscience, establish a payment plan to Larry to pay off the judgment, but what if he doesn’t do that?  What are Larry’s options?  In Pennsylvania, Larry cannot garnish Fred’s wages.  He cannot put a lien on his real estate, as he owns none.  He could try to freeze and take the money in Fred’s bank account, but it is not much and will not come close to paying the $100,000.  As the hypothetical scenario involves a car accident, Larry may be able to get Fred’s driver’s license suspended, but that does not really equate to payment on the judgment and, indeed, if one has a judgment as a result of another sort of case (i.e.: not a car accident) even this remedy is unavailable.

See, Fred is judgment proof.  As the old saying goes, “you cannot get blood from a stone.”  In the same way, one cannot get money from someone who has none.  So, was justice done?  Well, inasmuch as Larry got a verdict in his favor, yes it was.  Also, inasmuch as Fred will likely always have the $100,000 judgment hanging over him, which will impede or prevent his ability to get a mortgage or loan in the future until it is paid, yes it was.  Unfortunately, though, the justice of being made whole by being paid the judgment means, for many like Larry, such lawsuits, taken as a whole, are unjust as judgments such as Fred’s will likely never be paid.

Unfortunately, there is not much which can be done about this sort of thing.  Gone are the days of debtor’s prisons and/or indentured servitude to pay off such debts, and even then the debt may not have been truly paid off.  So, potential plaintiffs should beware the peril of outlaying time and money pursing a law suit against someone who may never be able to pay it.

The general advice provided above should serve as an corollary or an addendum to a previous post on this blog called “Losing Even Though You Win” which deals with outlaying more money to bring suit than you will win at the end.  The example of a judgment proof defendant is the problem identified in “Losing Even Though You Win” taken to the extreme.

Judgment proof litigants are more common than one may think and, despite not receiving the justice one believes one is deserved, it should give one pause before bringing suit against someone as it may, at the end of the day, cause an injured party to lose even more money than the damages already suffered as a result of another.

Church Bulletin Discount: Discrimination or Good Business?

For those interested in how religion and the law intersect, there is a new case to watch for in Lancaster County.

Evidently, a local restaurant, Prudhomme’s Lost Cajun Kitchen, in an effort to generate some extra business, offers a 10 percent discount to anyone who brings in a current “faith bulletin” on Sunday. Although churches traditionally publish bulletins each Sunday, the restaurant, presumably to avoid claims of religious discrimination, offers the discount upon receipt of what they call a “faith” bulletin, which would include bulletins from one’s local synagogue, mosque or other house of worship, as well as a church. It should be noted that one does not actually have to attend a house of worship to secure its bulletin, nor does the restaurant conduct any sort of inquiry into one’s religious beliefs. The discount is obtained upon production of the bulletin, much like a discount being obtained upon producing a coupon.

Despite the restaurant’s efforts to avoid allegations of discrimination, it did not seem to account for a local atheist for whom securing a faith bulletin is either impossible or grievously difficult. Accordingly, about a month ago, 80-year-old John Wolff, who has never patronized the restaurant regardless of the discount at issue (he only learned about the discount through anInternet search of the restaurant after hearing good things about its food), filed a complaint with the Pennsylvania Human Relations Commission on the basis of discrimination against his nonreligion. Additionally, the Freedom From ReligionFoundation, of which Wolff is a member, has issued letters and a telephone call encouraging the restaurant to discontinue is bulletin discount promotion.

In pursuit of his claims, Wolff will likely have to demonstrate how the discount is discriminatory and/or how it is different from discounts offered for children, senior citizens, ladies’ nights or the presentation of a coupon.

Although no legal decision has yet been reached – the matter is still pending before the Pennsylvania Human Relations Commission – the restaurant has not wasted any time in promoting the issue even more than before, likely to the chagrin of Wolff. In addition to continuing to offer the Sunday 10 percent discount upon presenting a faith bulletin, the restaurant is will be selling T-shirts commemorating its “legal battle” (the restaurant’s term) with Wolff.

This matter is still developing and it will be interesting to see how it will continue to unfold.

Originally published on August 7, 2012 in “The Legal Intelligencer Blog” and can be found here.

Child Support: Based on Income Not Expenses

I have litigated many child support cases and I have found that many people are under the impression that, somehow, one’s expenses are relevant to the calculation of child support.  I hate to be the bearer of bad news, but for practically every child support case out there, one’s income is the driving factor behind calculating child support, not one’s expenses.

For the most part, a child support obligation is calculated by considering the father’s income and the mother’s income and discerning where those numbers fall onto a pre-determined chart of child support obligations created by Pennsylvania lawmakers.  So, for example, if the combined monthly income of the parents is $5,000, the chart referred to above indicates that, with that sort of parental income, one child is entitled to receive $944 per month in child support.  That $944 is divided between the parents according to the proportion of their incomes.  So, for example, if the father earns $3,000 out of the aforementioned $5,000, he earns 60% of the parental income and would be responsible to pay 60% of the $944 in child support, or $566.40 per month.  Any extraordinary costs for the child regarding, say, tuition, little league, out-of-pocket medical expenses, and other sorts of extraordinary expenses, would be added proportionally between the parents onto the $566.40.  I note the term “extraordinary” above as these expenses, which add to a child support obligation, are not for things like new clothes, food, housing, and regular activities, as those expenses are what child support is designed to cover.

With the above in mind, here is a typical example of the sort of conversations I have regarding one’s expenses and child support: an obligor (the person who owes child support) earns $50,000 per year in income, but has a $600/mo car payment for his BMW which he just bought.  He will come to me and ask me to “run the numbers” to give him an estimate as to what his child support could be were he to go to court on the issue.  I oblige and give him an estimate of his child support obligation and his response is, almost invariably, something like “that’s way too much!  How can I possibly pay for my car with that sort of child support obligation?”

Unfortunately for him, and many others like him, the bills and expenses that one has elected to incur are irrelevant to the child support obligation you must pay.  The law presumes that one will use his disposable income for the benefit of the children one has brought into this world.  Therefore, if one has elected to purchase a very expensive car or house, or the like, and not leave enough money to spare for the support of one’s child, then some choices will have to be made and, unfortunately, some potentially negative economic consequences will be incurred, such as foreclosure or repossession or bankruptcy.  Child support is garnished directly out of one’s earnings in most cases so money will not be left in a paycheck for the $600/mo car payment.

The general advice seems obvious: if one has a child, then one must ensure one has not leveraged his/her income to the point where s/he is unable to afford support for that child.  The law presumes what every parent should: one’s financial priorities are with one’s children, not for one’s elective purchases like expensive cars or houses and such.  Unfortunately, it takes the law to teach many people such a basic lesson in parenting, but hopefully it is ensuring children, who are innocently born and raised, are receiving sufficient support for their needs.

Who is an Expert?

Check out Faye Cohen’s blog post “Who is an Expert?” on her blog Toughlawyerlady here.

Supreme Court Spotlight: Obamacare – Victory or Defeat?

Here is an article, by Theodore Y. Choi, Esquire who is a former associate at my firm.  This article can be found on my website here and was originally published in Upon Further Review on July 18, 2012, and can be seen here.

I am a Superlawyer Rising Star!

I am proud to say that I have been named a 2014 Superlawyer’s Rising Star; this is my 4th time. For more information on this look here.  Thanks so much for all the support I have received! 

Court Takes Interest in Contract Case

A recent opinion issued by the Supreme Court of Pennsylvania has clarified how interest is to be assessed on the party who breaches a contract in the matter of Truserv Corporation v. Morgan’s Tool&Supply Co., Inc. 39 A.3d 253 (2012).

In the Truserv matter, the two parties entered into a contract which required the Defendant Morgan’s Tool & Supply Co., Inc. to make payments to the Plaintiff Truserv Corporation pursuant to a line of credit. According to the contract, interest would be applied upon Defendant’s default on the payments owed to Plaintiff. There was an open factual question as to the precise rate of interest that would apply, but there was no dispute that the contract applied interest upon defaulting on payments.

Consequent to Defendant’s defaulting on its payments owed to Plaintiff, Plaintiff brought suit against Defendant for breach of contract and related claims. Although Plaintiff filed suit in 1999, between typical delays and, more importantly, Plaintiff’s failure to actively pursue the claim with any dispatch, a trial on the matter did not occur until 2008, nearly nine (9) years later. The trial court found in favor of Plaintiff on the breach of contract but denied its claim for interest on the basis that Plaintiff did not mitigate its damages by artificially increasing the total interest owed by Defendant due to its own inaction in the litigation. Plaintiff appealed and the trial court’s decision was upheld by the Superior Court of Pennsylvania. Plaintiff again appealed, this time to the Supreme Court of Pennsylvania which reversed the decisions in the lower courts. The basis of the Supreme Court of Pennsylvania’s decision is described in the ensuing paragraphs.

The Supreme Court’s analysis included making a distinction between what it called “contractual” interest and “prejudgment” interest. The Supreme Court defined contractual interest as interest specifically mandated by the terms of a contract. As a result, the Court ruled, contractual interest becomes “an integral part of the debt [owed] itself.” Upon its review of applicable case law, the Court ruled that a court has no discretion as to whether to apply contractual interest upon a debt owed. In other words, if the contract mandates the application of interest, then the court must apply it on any debt owed due to the terms of the breached contract. Furthermore, the Court also ruled that it has no authority to, from the bench, change the terms of a contract into which both parties entered. Therefore, if a legitimate and enforceable contract requires interest, then the Court is obliged to enforce it.

The Supreme Court went on to describe prejudgment interest as interest that is, though not expressly in a contract, applied as damages to compensate an aggrieved party for the detention of its money rightfully due to it/him/her. The Court limited the application of prejudgment interest to matters where the amount owed is a definite sum of money per the terms of a contract. This is distinguished from damages incurred as a consequence of the breach as opposed to the money owed due to the default itself pursuant to the terms of the contract. Just as above, the Court ruled that it has no discretion as to whether to apply prejudgment interest; it simply must apply it when any definite sum is owed per the terms of the breached contract.

As described above, the Court ruled that it lacks discretion in the matter as to whether the interest ought to be applied. The Court also went on to rule that a party in Plaintiff’s position has no obligation to mitigate its damages. Defendant argued that the interest claimed by Plaintiff ought to have been reduced as Plaintiff, Defendant averred, artificially allowed the interest to accrue due to its failure to take prompt action in pursuing its claims. The Court specifically ruled that a party – like Plaintiff in the instant matter – has no obligation to mitigate its damages when both it and the breaching party have an equal opportunity to reduce the possible damages. The Court ruled that Defendant could have, at any time, stopped the accrual of interest by simply paying the debt owed to Plaintiff. Indeed, the Court noted that there was precedential authority to suggest that interest under a contract is simply not subject to mitigation at all. As if its rulings above were not clear enough, the Court rather overtly concluded that “a party who breaches a contract containing an express promise to pay interest may not be permitted to reduce or escape entirely his contractual obligation by subsequently arguing that the nonbreaching party did not prosecute its breach of contract claim with dispatch.”

As a relatively minor matter, the Court had to determine whether a so-called “service charge” essentially functioned as interest under the terms of the contract at issue herein. The Court defined a service charge as a charge imposed as an incident to the extension of credit whereas, by contrast, interest is compensation for the use or detention of money. The Court ruled that how the “service charge” functioned in the instant matter was more akin to interest than a service charge regardless of the terms used which appear on the contract.

Based on the above, the Pennsylvania Supreme Court ruled that the decisions of the trial and Superior Court are reversed and Plaintiff is entitled to the full amount of interest as calculated under the contract. Finally, as noted above, there was an open fact question as to what interest rate ought to apply on the amount owed due to Defendant’s breach of contract. The Supreme Court, while reversing the lower courts’ decision on the application of interest, remanded the matter to determine the applicable interest rate.

This article was originally published on July 18, 2012 in “Upon Further Review” and can be found here.

Substantial Evidence Must Convince Court in Child Abuse Cases

A recent case decided by the Commonwealth Court of Pennsylvania, G.V. v. Department of Public Welfare, 125 C.D. 2011 (Pa.Cmwlth. 2012) has profoundly changed the burden of proof necessary to have someone listed on the ChildLine & Abuse Registry (“ChildLine”) as a perpetrator of child abuse.

In the above referenced case, G.V. was accused of abusing his sixteen (16) year old great niece C.S.  The alleged abuse was reported to Children and Youth Services (“CYS”) which conducted an investigation resulting in a finding of “indicated.”  Per the finding of “indicated”, CYS went forward and filed a report with ChildLine that G.V. is a child abuser.  G.V., disagreeing with CYS’s aforesaid report, timely requested a hearing.  G.V. lost the appeal. G.V. then appealed to theCommonwealth Courtarguing that CYS did not meet an appropriate burden of proof in order to rule against him.

An indicated report is one where “substantial evidence” is presented. “Substantial evidence” is defined as “[e]vidence which outweighs inconsistent evidence and which a reasonable person would accept as adequate to support a conclusion.”  23 Pa.C.S. Section 6303(a).  If CYS cannot meet the burden of “substantial evidence”, then a finding of “indicated” is expunged.  Otherwise, CYS has the authority to report the “indicated” finding to ChildLine.  ChildLine is, according to the Court, used “by the statutorily-designated government officials, law enforcement and other entities and individuals in responding to the inquiries of employers, school districts, churches, boy and girl scouts, and other organizations creat[ing] the very real potential and probability for disclosure to groups and individuals not specifically authorized to receive the information.”  G.V argued that the “substantial evidence” standard is inappropriately low considering the impact a finding of child abuse can have on someone’s reputation.

The Court acknowledged that cases which involve a significant loss of freedom or livelihood, as well as cases involving child-related civil proceedings require clear and convincing evidence.  By contrast, the Court also acknowledged that the Pennsylvania General Assembly has specifically indicated that the lowest evidentiary standard is to be applied when the well-being of a child is at issue.  Absent from any existing law, the Court noted, is any guidance as to what evidentiary standard is required for listing someone on ChildLine or disclosing the information to a third party.  Indeed, the Court also acknowledged that few things are more serious to one’s reputation than a finding that child abuse is suspected against the party.

In conducting its analysis as to what the appropriate evidentiary burden should be for listing someone on ChildLine or disclosing the information to a third party, the Court started with the terms of the Constitution of Pennsylvania, which states in Article 1 Section 1 that protecting one’s reputation is among one’s fundamental “inherent and indefeasible rights”.  Therefore, as the Constitution places such a great emphasis on the right to the protection of one’s reputation, the Court concluded that it does require a higher standard of proof in order to satisfy the due process to take away that right.

The Court then looked to the Supreme Court of Pennsylvania for guidance to develop a methodology for reviewing a due process violation.  The Supreme Court has laid out three (3) factors which must be analyzed: (1) the private interest that is affected by the official action; (2) risk of an erroneous deprivation of that interest; and, (3) the government’s interest.

Looking at the private interests potentially affected, the Court noted that the information on ChildLine  – which includes one’s name, the dates and nature of the instances of suspected child abuse, among other things – could be accessed for and/or by potential employers, school districts, civic organizations, adoptions, foster parenting, daycare operators, and other places and/or persons.  The Court ruled that having one’s name on ChildLine certainly impacts one’s freedom and/or livelihood. Indeed, based on the above, the Court noted that the Pennsylvania Supreme Court appreciated the fact that merely being on ChildLine is accompanied by a stigma to one’s reputation that cannot be exaggerated.  Therefore, the Court ruled that simply being put on ChildLine demands a higher level of scrutiny.  The Court then discerned that in Pennsylvania Law, in matters where rights and/or interests greater than simply money are involved, a clear and convincing standard has been consistently used.

Finally, the Court determined whether the government’s interest in having more complete reporting and investigation of child abuse, quicker protection of children from abuse, and improving the process for the above, outweighs erroneously depriving someone their good reputation, freedom, and livelihood.

After consideration of all of the above, the Court ruled that in order to secure a finding of child abuse, the evidentiary standard is “substantial evidence”; however, in order to have someone placed onto ChildLine, the evidentiary standard of “clear and convincing” must be met. In this manner the Court balanced the very real and present dangers of child abuse and efforts to combat it, with due process requirements present in other aspects of the legal process.

The Court was left in the quandary of not having a clear statutory legislative mandate dictating what the appropriate standard of proof is for the ChildLine.  As much as the idea of “protecting” child abusers may be distasteful, the G.V. decision comes with an acknowledgment that the previously used burden of proof of merely substantial evidence simply does not adequately protect the rights of those accused of child abuse.  Having one’s name placed indefinitely onto the ChildLine has been determined to be a significant loss of freedom.  Indeed, the registry is viewed by the Court as a “black list”.  Although listing alleged child abusers on ChildLine may serve to protect children from abuse, the Court is now making it clear that even such noble goals as protecting children must be checked against the depravation of the liberty of the accused due to the misapplied stigma of being mislabeled a child abuser.

Although the ruling appears somewhat innovative, or perhaps Solomonic in its apparent attempt to satisfy both concerns for children as well as the falsely accused, it may simply be judicial conformity with the spirit of existing procedures of the Department of Public Welfare (“DPW”) which do attempt to balance the rights and needs of both the victim and the accused.  As these sorts of cases unfortunately continue to arise, this ruling goes far in ensuring all parties receive adequate protection under the law by raising the bar for the DPW/CYS to hurdle when attempting to have an alleged child abuser perhaps permanently labeled as such.

Originally published on October 19, 2012 in “The Legal Intelligencer” and can be found here and reprinted in The Pennsylvania Family Lawyer in Volume 35 Issue No. 1 (March 2013)

What Relief Do You Want?

Check out Faye Cohen’s blog post “What Relief Do You Want?” on her blog Toughlawyerlady here.