A big part of being successful in a lawsuit, for the plaintiffs, and their lawyers, is the ability to collect on a judgment that they might actually secure. I often represent small or, sometimes, struggling business in FLSA collective actions and Rule 23 class actions. I see, time after time, plaintiff lawyers make totally outlandish demands and I explain to them the financial fragility of the employer and that a settlement of “something,” whatever that may be, is better than winning a big judgment and getting nothing because the business is defunct and there are no assets or very few. They always don’t believe me and I am always telling them the truth!
A recent case illustrates this point about collectability and the belief/fear by plaintiff lawyers that the employer is looking to escape liability by moving or shielding assets. A class of home care aides alleged that their employers were getting rid of real estate assets to get out from under a possible $12.2 million judgment in a FLSA case. The employer has countered by asserting that these are appropriate real estate investments that have redounded to the benefit of the owners, making it more likely they could pay any such judgment. The case is entitled Podolak et al. v. ComForCare Health Care Holdings Inc. and was filed in state court in Pennsylvania.
The lawyer for the workers sought an injunction in Pennsylvania state court to prohibit the owners from selling real estate assets without first obtaining permission from the Court. The lawyer for the owners explained that the real estate deals were personal to the family and resulted in them being in a better financial position which would actually augment their ability to pay any judgment.
The plaintiffs’ lawyer has now backed off this allegation as the Judge warned him that he would order him to pay the defense costs if the plaintiffs could not substantiate their claim that assets were being dissipated. The case involves claims by more than 300 employees that the Company had split working hours between two facilities to avoid paying overtime, i.e. making it seem that employees worked no more than a total of forty hours. The damages are alleged to exceed $4.2 million, with liquidated damages making that total more than $8 million. Against this factual predicate, the owners sold a former storefront in a resort town and a condominium that overlooked downtown Pittsburgh, prompting the plaintiffs’ lawyer allegations about dissipation.
The Judge inquired whether the defendants would place sufficient monies in an escrow account so that any judgment would be secured. The defense lawyer countered by stating that she did not agree with the number (i.e. 12.2 million) that the plaintiffs had estimated. The defense attorney asserted that a naked accusation is not sufficient to cause her clients to invade their personal finances and set the money aside.
You see how sensitive plaintiff lawyers are to this (in their minds) shill game. Especially these days, when many businesses are failing and are going under, plaintiff lawyers may be better off using the bird-in-the-hand approach. Or risk getting nothing…