The Surgical Center Owner

All identifying information has been removed and/or changed in the below case study to protect the identity of my client.

Al is a orthopaedic surgeon in the midwest. A few years into his career, Al hired a local lawyer to create his asset protection plan. Much later in life, Al owned several surgical centers, which were used by a large number of surgical physicians. Somewhere along the way, a surgeon using one of the facilities committed malpractice. Both the surgeon and Al were implicated in the judgment for damages, which exceeded $7 million.

This is the point at which Al sought my counsel. The only reason I was able to help Al is that his asset protection plan had been created well before the malpractice incident occurred.

Al’s existing plan was far from perfect and left Al exposed in a number of significant ways. The main problem with his planning was that it had been improperly funded, since some of the assets that had been deemed responsible for the malpractice were also inside Al’s asset protection plan.

Nonetheless, I was able to help Al segregate some of his assets – several million dollars worth – and ship those assets offshore, where they could not be reached by the malpractice plaintiff. To date, those assets remain available for Al’s support, use, and enjoyment.

The first moral of this case study is that I could only help Al because he had an existing asset protection plan. If he had come to me with no plan, I would have turned him away. The second moral is that you need to create planning with someone who really understands asset protection law. Al originally paid another lawyer way more than what I typically charge, and his planning was not done correctly. That meant I had to be very creative in order to help Al protect himself after a lawsuit had been filed, which was an expensive process. Had I created Al’s original asset protection plan, he would have spent far less in total fees to gain much more comprehensive lawsuit protection for doctors.

Lawsuit Protection From Counterclaims – Going on the Offensive

Asset protection planning gives you the freedom to go on the offensive when it’s necessary.

It’s a given that asset protection planning protects you from you legal predators. Proper planning is quite effective at providing lawsuit protection, but it does something more as well. At least one of my clients is often on the legal offensive in pursuit of upholding his core principles. More recently, a client chose to file a lawsuit because he had been egregiously wronged and didn’t want to stand for it.

What’s the first thing most defendants do when they’re sued?

They file a countersuit. If you have asset protection, you don’t need to be worried about the countersuit.

Real Life Example

A couple signs a one-year lease for a waterfront home. The monthly rent was $12,500, and at the time of signing the lease, the couple paid the landlord $37,500 (first month, last month, and security deposit in the amount of $12,500 each). The lease contained a provision stating that the tenants could terminate the lease upon payment of $25,000. There was no provision in the lease dictating how much notice needed to be given for a termination or when the termination fee would be due.

Fast forward. The couple paid the rent as due for the month of June and, at the same time, delivered notice to the landlord via email that they would be terminating the lease effective June 30th. They requested that the landlord keep the security deposit together with the last month’s rent to cover the $25,000 termination fee.

The landlord responded via email, “No, the security deposit is not to be applied to the termination fee. You must transfer an additional $12,500 to me today in order for the termination to be effective.”

The tenants responded, also via email, “We will certainly transfer an additional $12,500 to you today, but will be please agree to inspect the property on our last day in residence – might be before June 30th – and return our security deposit at that time if you find nothing damaged?”

Landlord: “Yes, that is acceptable to me.”

The couple transferred an additional $12,500 to the landlord and heard nothing more from him until their last week on the property when the tenants sent him an email stating they would depart on the morning of June 30th. They requested a walk-through of the property on the evening of June 29th.

The landlord responded with an email and said, “I am out of the country. I will be back on the evening of June 30th and will check the property when I return.”

The couple departed the property, as planned, on the morning of June 30th. They left the home in immaculate condition – in better condition than they had found it. Unfortunately, from June 30th onward, the landlord became completely incommunicado. He would not return the couple’s emails or telephone calls, and he neither returned the security deposit nor gave an explanation as to why he was keeping it, as is required by law.

After several months of frustration, the couple hired an attorney to send the landlord a letter demanding the return of the security deposit. In response to the demand letter, the landlord asserted that the lease had not been properly terminated because the termination notice had not been delivered via certified mail, that the lease was still in full force and effect, and that the couple owed him an additional $50,000 in back rent (he conveniently ignored the fact that he had received and retained an additional $12,500 as part of the termination fee and didn’t even give the tenants credit for that money against what he claimed to be owed!).

Ultimately the couple chose to stand on their principles, and they sued the landlord for a return of their security deposit. [As a side note: I am very familiar with this case, and it is my opinion that the landlord acted criminally in this case and in past similar cases.]

As could be expected, the landlord countersued for a huge sum of money, including his attorney fees.

Lawsuit Protection Could Have Helped

The countersuit was terrifying for the couple, because they didn’t have any form of asset or lawsuit protection in place. The moment they received the landlord’s response to their demand letter, it became to too late for asset protection planning. As time passed, the landlord accrued more and more attorneys’ fees until the couple was facing a potential liability of several hundred thousand dollars.

By the time that came to pass, the couple’s fortunes had changed significantly, and they simply could not have afforded the loss. I can tell you first-hand that the experience was terrifying for them. Had they properly implemented an asset protection plan before going on the offensive, they would have had no reason for concern.

The lesson is that asset protection – in this case lawsuit protection from counterclaims – benefits you regardless of whether you’re on the offensive or the defensive. I advise all my clients who proactively litigate to protect against the lawsuit before it’s ever filed.

After a bitter fight lasting almost two years, the couple finally prevailed, but the cost of the litigation and the fact that the landlord was almost judgment proof in the end meant there were really no winners. What you can take away is that a little careful planning can provide you with protection from lawsuits whether you’re on the defensive or the offensive, and it will give you peace of mind when you most need it.