Tuesday, December 20, 2005

From the archives, a cautionary tale:

Yesterday’s rant about collections reminded me of the time I defended a client in a collection case brought by his former attorney.

The client had a loan with the old Cosmopolitan Bank. He didn’t pay according to the terms of the loan. The bank took exception to this, and sued.

Note to aspiring attorneys: There are all sorts of cases like this one available for you. Don’t take any of them. No matter how hungry you are, or how late the rent is. Read on to find out why.

The client had failed to pay the loan in a timely fashion because he was broke. This happens. (See previous posts.) But the client felt he had to respond to the bank’s suit, so he engaged Mr. Greedy (not his real name) to handle the case. The client gave his attorney written instructions: Settle the case. He told Mr. Greedy, "negotiate for me the best posture." He still didn’t have the money to pay the loan installments as they fell due, much less catch up on the arrearage. He wanted Mr. Greedy to get him smaller payments, or perhaps an agreement from the bank to take less than they were owed.

Another note to aspiring attorneys: Clients always want you to negotiate when their backs are up against the wall and they have nothing to offer. That’s just about the only time they want you to negotiate. Otherwise, any suggestions you might make regarding compromise or being reasonable will be viewed as treasonous or worse. This makes negotiation difficult in most cases.

And settlement would have undoubtedly been difficult in this case, not unless you define ‘settlement’ as ‘unconditional surrender.’

But Mr. Greedy apparently had no intention of negotiating. He told the client that "the bank would never settle without a trial." Well, usually, we think of a trial as something that happens when people don’t settle.

So Mr. Greedy launched an all-out assault on the bank’s case. He filed motions, he filed discovery. He must have taken depositions, too, because he ran up a bill of over $17,000. One of the problems with the case, when I got it, was trying to figure out what Mr. Greedy had billed. But it was more than the bank billed, I knew that for certain. The client’s original note with the bank was for about $28,000. By the June 1995 date when summary judgment was entered against the client the principal balance of the note was down to around $23,000, but unpaid interest was over $13,000. The bank was awarded another $13,000 in attorneys’ fees, bringing the judgment against the client to around $50,000.

But the best part was that, somewhere along the way, Mr. Greedy told the client that, if a judgment was entered against the client, the client would lose his credentials to work in the futures industry (another of those businesses where income fluctuates, which is how people get into trouble in the first place). But Mr. Greedy was becoming increasingly distressed with the client’s payment of Mr. Greedy’s bills. I think the client paid about $7,000 for the services described above. But Mr. Greedy wanted a lot more. To satisfy the bill, Mr. Greedy suggested that the client sign over his house to Mr. Greedy "as trustee." If the client failed to do this, Mr. Greedy would withdraw from the case. And client would lose his credentials.

Note to the Attorney Registration and Disciplinary Commission: Yes, Mr. Greedy was reported.

Well, Mr. Greedy withdrew his representation. Summary judgment was entered against the client. And the client did not lose his credentials. He still was permitted to make money in his chosen field.

But Mr. Greedy wasn’t done. He sued for $12,000 in what he said were unpaid fees (including interest calculated according to some sort of method I never did quite figure out).

And that’s when I undertook the client’s representation. I responded to Mr. Greedy’s summary judgment motion with one of my own – and I won. The legal arguments may be not be as interesting to you as I thought they were at the time. The bottom line is that I got Mr. Greedy’s case knocked out of court.

For my services I billed the sum of $3,769.00.

I’m still waiting for this bill to be paid, too.

No comments: