Regular Monitoring of Guaranty Litigation is Critical
February 3, 2019
In my Teaching and Publishing blog, I just got done saying that, “suing a restaurant tenant guarantor post-possession is often a huge waste of time.” My reasoning for that was three-fold:
1. Most guarantors are just as broke as the single-asset restaurant corporation that was the defunct tenant.
2. If the guarantors are not broke, the amount owed is not worth pursuing in a New York Court if it is under $100,000.
3. I questioning the wisdom of a post-possession collection effort against many guarantors.
But I will counter that somewhat here in the Our Stories blog by giving a recent example from my practice of how to do Good Guy litigation successfully.
My healthy skepticism of this type of legal work prompts me to keep a careful watch on such litigation. I track each matter I work on with a spreadsheet such as this[1]:
Here are the important things to look for in these situations. Each case on the sample spreadsheet took a year. That’s not bad. On XYZ Case, the client made, even after paying legal fees, 67 cents on the dollar and on ABC Case, even after legal, the same client made 12 cents on the dollar. The average over the two cases was about 35 cents on the dollar. Again, not bad. Moreover, notice that what my firm was paid in legal fees was LESS than what the client netted. That, too is important. These cases should not exist for a lawyer to make out better than a client.
What’s the lesson? Regular monitoring of these matters, including the legal fees spent and the likelihood of success as these guaranty matters unfold, is critical.
Respectfully submitted,
[1] This is an example of a spreadsheet I made for an actual client, but with details slightly changed.
