One of the keys to learning how to protect your personal assets from lawsuits is to understand how lawsuits work. The American Society for Asset Protection has broken down the proceedings of a lawsuit into six simple steps.
Step 1. Injury or Loss
The beginning of a lawsuit is an injury or loss of some kind. To protect our individual rights, there needs to be a legal system that holds people responsible for their actions when they cause injury to another. Not many people would object to this idea. However, in the United States today there are few lawsuits which apply this principle. There are over one hundred million lawsuits currently pending in the courts, and it is estimated that a new lawsuit is filed every thirty seconds. There are nearly one million attorneys in America, and 100,000 new attorneys graduate from law school each year. There are not enough good cases to support this workforce of attorneys; therefore, in order to stay in business, attorneys must find people with assets to sue.
Step 2. Find a Defendant(s) Who Can Pay
Most lawsuits are done on a contingency basis, so one of the first things an attorney does before accepting a case is to perform an asset search to see if the defendant would be worth pursuing. Attorneys search for a candidate with substantial personal and business assets available for seizure and/or significant insurance coverage. All too often, people are named as defendants in a lawsuit because of their ability to pay, not because of fault or error.
If you have assets that can be seized through a judgment, you are a potential target for these trial attorneys. One the other hand, if you don’t have assets that can be seized to satisfy a judgement, you became a very unattractive target for a trial attorney. To protect your personal assets from lawsuit, you will want to have your assets in legal entities such as LLCs (Limited Liability Companies) and FLPs (Family Limited Partnerships). With your assets in properly drafted and funded LLCs and FLPs, the attorney’s asset search will find no assets that can be taken through a lawsuit.
Step 3. Construct a Theory of Liability
If the person immediately responsible for the loss or injury does not have the ability to pay, the attorney will search for a deep-pocketed defendant and a theory of liability that can be developed against him or her, showing why that defendant should be held responsible. The success of the trial attorney is dependent upon this. Trial attorneys make up one of the largest lobbyist groups in the country and have created laws to increase the level of vicarious liability. Vicarious liability means you can be held responsible for the actions of others. Trial attorneys have worked hard to ensure that whoever has the money can be held responsible for negative outcomes through vicarious liability, even if they committed no wrong.
One example of this is called premise liability. Premise liability is a law that was lobbied for by trial attorneys. This law states that the owner of a property is responsible for any injury or loss that occurs on that property. This is why you see lawsuits where a homeowner is held responsible when a robber is injured while robbing a home. The homeowner did nothing wrong. The robber was trespassing and stealing but by law the homeowners is still responsible if the robber is hurt while on their property.
Another case involving premise liability occurred to a theater owner who was held liable for the death of a person standing outside his theater. The individual was shot while on the theater owner’s property, so an attorney filed a lawsuit against the theater owner using the law of premise liability. The person who shot the man had no assets so the trial attorney had no interest in filing a lawsuit against the killer. The theater owner had assets so he became the target of the lawsuit.
Step 4. Trial
A good trial attorney can often win over a jury with emotion, irrational arguments, and false information. A study was done to determine how effective people were in distinguishing a witness that was telling the truth from a witness that was telling a lie. The majority of the time the subjects in the experiment identified the truth as a lie and the lie as the truth. This study has significant implications in the court room. Based on these findings, there is greater probability of the jury believing a lie than believing the truth. Every day we see trial attorneys winning cases that appear to be irrational, absurd, and without merit. Many attorneys will even pursue a bad case if they can find a defendant with the ability to pay. They hope that they can obtain a settlement or convince the jury to award cash to the injured, needy plaintiff from the comparatively wealthy defendant. Many jurors have freely admitted that they have overlooked whether the defendant was at fault if they felt sorry for the plaintiff. Judges and juries often play Robin Hood, giving money to a sympathetic plaintiff.
Step 5. Judgment
If the plaintiff (person filing the lawsuit) wins the trial and the defendant (the person they are suing) is found responsible for the injury or loss, the court renders a judgment to compensate the plaintiff for their injury and/or loss. It is now routine for judgments to be in the millions of dollars.
Step 6. Collect on Judgment
The court provides the judgment but the judgment is of no value if there is no way to collect on the judgment. While a family could win a wrongful death judgment against a murderer, many murderers do not have enough assets to justify a lawsuit. For this reason, it is rare for a murderer to be sued for the wrongly death of their victim.
An exception to this was in the case of O.J. Simpson. Although he was found not guilty during his murder trial, O.J. was sued by the families of Nicole Brown Simpson and Ronald Goldman and was found liable for their wrongful deaths. The courts awarded a judgment of $33.5 million in damages to the victim’s families. O.J. Simpson was sued because he had assets which the attorneys felt they could collect on. While the attorneys for the families of Nicole Brown Simpson and Ronald Goldman have been able to collect on some of the $33.5 million judgment, most of the judgement has not been collected. Now, decades later, the attorneys continue to work to collect on the judgment.
Settlement
Anytime during the lawsuit process you can come to a settlement to end the lawsuit. Attorneys know that even if you win a lawsuit against you, you still lose because it costs you thousands of dollars in legal fees to defend yourself. The cost to defend yourself, even against a frivolous lawsuit, can cost hundreds of thousands of dollars. The trial will also take time and cause mental and emotional strain. Your privacy and reputation can be damaged, and the uncertainty of the outcome can result in a high degree of stress and anxiety.
exploit all of these factors when they sue you. The attorneys know that you may be willing to settle the case—even if the case holds little or no merit—just to have it behind you. If you have available and reachable assets, the attorneys know they have leverage to get you to settle. Many attorneys make a living collecting settlement after settlement from innocent defendants (victims). This is what we call legal extortion.
The key to protecting your personal assets is to structure your assets in properly drafted and funded LLCs and FLPs. If you have no reachable and seizable assets, the trial attorney’s strategies of legal extortion will not be effective against you. The American Society for Asset Protection works with the nation’s top asset protection attorneys to help professionals structure their assets so when a trial attorney performs an asset search they will not want to pursue a lawsuit against them.