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Oral Contracts: An Abyss for Deep Pockets

by rjmintz on December 1, 2017

A contract is formed any time two people make an agreement to do, or not to do something. Certain types of contracts, involving commercial transactions, must be in writing in order to be valid. But most contracts do not have to be written.

A promise that you make is considered to be a contract if the other party relies on your promise. Recently, we have seen girlfriends and boyfriends claim that they were promised certain things by their former mates. These alleged promises called for lifetime care and support or a specific dollar amount to be paid at the end of the relationship. Since, by its nature, an oral agreement has no visible trail, these cases come down to one person’s word against the other.

One interesting case involved the ownership of a California lottery ticket. George and Sarah lived together but weren’t married. He was eighty-five years old, and she took care of him. They kept some spare change and a few dollars in a coffee can in the kitchen. Sarah would take out a dollar every few days to buy a lottery ticket. Over the years, there were a few winning tickets worth $20 or $100, and she would put those winnings back into the coffee can to finance future tickets.

One day they hit the grand prize of $12 million—twenty annual payments of $600,000, less taxes. Soon after the celebration was over, human nature being what it is, George claimed that the money in the coffee can was really his money and he was the sole owner of the ticket. Sarah, shocked and hurt, claimed they had always treated the coffee can money as joint property and that she was justifiably entitled to half of the winnings. Both sides hired lawyers, and George refused to settle the case.

The case went to trial in San Diego, and the jury found for George. They believed his story that the money to buy the ticket belonged to him and that there was no legal agreement between them to share the winnings. George got to keep it all.

We certainly do not know who was telling the truth, and that’s exactly the point. Nobody ever knows for sure who is telling the truth in these situations. That’s why anyone with whom you are involved, in any kind of business or personal relationship, can claim that you broke a promise and that they are entitled to some amount of compensation.

An employee can claim that you promised him a job for life. Let’s say that you own a medical practice and you decide that the work of Dr. Jones, a physician who works for you, is no longer satisfactory. If you fire Jones, there is an excellent chance that he will sue you. In the lawsuit, he will claim that he is entitled to a percentage of ownership in your practice based upon an oral agreement which you made. That is all he needs to do. He doesn’t need any other evidence. He simply claims that you made certain promises about sharing the practice with him. Now you have to defend yourself and risk losing a portion of your business. It is now your word against his, and the jury can decide who they believe. These types of claims are made every day in our courts, and many employers end up making huge settlements with the fired employee in order to avoid the expense of litigation and the risk of loss.

A Japanese chip manufacturer in the Silicon Valley closed down its plant and laid off all the workers. The company was sued by all 868 workers for more than $1 billion on the grounds that they were promised lifetime employment. The case was ultimately settled for more than $20 million after millions of dollars in legal fees and thousands of hours of wasted time and energy.

Claims of a contract based upon an oral agreement are numerous and difficult to defend against. I have three cases in my office right now where the plaintiff is claiming a legal interest in the client’s business based on alleged promises to share ownership. These claims are powerful and effective because they are easy to fabricate, expensive to defend, and may involve millions of dollars.

Down load pdf of the entire bookComing next:  Negligence


The New Deep Pockets

by rjmintz on November 3, 2017

The new targets or the new Deep Pockets are those who have saved up some money for retirement, those who operate a successful business, and those who own a home or have some rental property with any equity. This number is a lot less now than it used to be. Real estate and stock markets have crashed. Many have lost their jobs and their businesses. Those who have survived are vulnerable because their savings are now even more valuable to them. The estimates are that there are more than 100 million adults in the population, and 30 million have mutual funds, savings, and a few even have some equity in their home. That’s 30 million people with something valuable to lose.

The Finemans of the world don’t get sued, and they don’t have to spend their time, energy, and money defending a case. They don’t get sued because they don’t have any money or anything worth taking. Aunt Ellen, who bought him the car as a gift, got sued because she had some money. She was the one who lost her home and all of her savings because she was the Deep Pocket. A lawyer’s job is to tie a party who has some money into a case so that he will get paid. A successful lawyer is one who can create a clever new theory of liability so that someone with money or insurance will be found legally responsible. Even if our common sense tells us that this Deep Pocket had nothing whatsoever to do with the injury, a judge or jury or court of appeals will decide a case based upon their own view of what is fair and rational.

A doctor prescribed antihistamines for a patient with an allergy. The patient ignored the warning label about driving while taking the medication and caused a serious auto accident. The patient had little insurance and few assets, so the doctor was sued. The plaintiff’s lawyer successfully argued that the doctor should have known that the patient might drive his car while on the medication. The jury found the doctor liable for $6.2 million in compensatory damages. The doctor’s malpractice insurance didn’t pay a nickel of the claim since the policy only covered claims by a patient—not those injured by a patient.

Was the doctor really at fault here? He lost everything he owned, and he didn’t do anything wrong. The mistake he made was not realizing that as a physician, and as someone who had a home and some savings, he was an inviting and vulnerable target for a lawsuit.

Down load pdf of the entire bookComing next:  Oral Contracts: An Abyss For Deep Pockets


The Appeal of Settling

by rjmintz on October 25, 2017

When a lawyer threatens to sue you, he is exploiting all of these facts about human nature. He knows that the outcome of the case will be uncertain regardless of the merit of the case. He knows that if you have reachable and collectible assets, the risk of loss will cause you extreme worry and stress. Finally, he knows that if you choose to fight the case, your time and your privacy will be violated and your resources will be depleted or exhausted by tens or hundreds of thousands of dollars in needless legal fees and costs. Doesn’t settling the case sound much more appealing and logical?

Settling is more appealing, and that is exactly what you should do. As unfair as it sounds, if you fight the case, you may well lose. You will certainly spend much more money and time, and you may never recover from the emotional toll, the damage to your personal relationships, and the impact on your business.

If you have available and reachable assets, which can be uncovered in an investigation, then the lawyers hold the leverage. They know that you are vulnerable, and you are better off settling the case. They want some easy money from you, and then they will move on to the next case. That’s how the legal extortion racket works.

The Easy Cases Are Gone

Over the past decade, as the number of lawyers and lawsuits have increased, the insurance companies have adopted a policy of not settling cases. In the past, insurance companies routinely settled virtually every claim for a multiple of the injured party’s medical expenses. A slip and fall or auto accident case was worth approximately six times the amount of the medical expenses incurred by the client.

When an individual went to an attorney claiming injury from an accident, the attorney would send the client to a cooperative doctor for extensive medical care and therapy. The doctors (and chiropractors) billed wildly for every imaginable treatment and procedure—almost all of which was unnecessary and was performed solely to inflate the amount of the medical bill. The physician would get paid out of the proceeds of the eventual settlement. The lawyer had a nice fat medical bill—multiplied by six under the standard formula—which he could then present to the insurance company. The insurance company paid the inflated claim then raised the rates on all its policyholders to cover these costs.

At least several generations of personal injury attorneys have made handsome livings by playing this game. But unfortunately for them, in most states, this game is over. Starting in the early 1990s, many insurance companies adopted a policy of no settlement. When the attorneys offered up the medical expenses, the claims adjusters were required by their companies to reject the claim. The policy was to litigate every claim all the way to trial.

It was understood that this strategy would be more expensive in the short run as the companies incurred huge legal bills fighting even the smallest claim. The upside was that the personal injury lawyers, deprived of their bread and butter fast settlements, would be driven out of business as their cash flow disappeared. Most attorneys can’t wait two, three, or five years to get paid. And they certainly don’t want to shell out all of the costs of bringing a case to trial, including depositions, expert witnesses, and discovery. Even worse is that after putting up all the money and going to trial, the case could be lost. Years of hard work and lots of money down the drain. That result means financial disaster and one more overeducated short order cook.

The insurance companies were like a pack of big goofy elephants. They had no idea that they had the power to step on and crush their lawyer adversaries. Once they decided to use their great strength—virtually unlimited capital—they were successful beyond their expectations. Lawyers stopped taking the “slip and falls,” the bogus auto accidents, or any other insurance case without a big potential payoff. The insurance companies were the big winners. The lawyers, their incomes and lifestyles seriously impaired, looked around for new groups to target—an easier and softer prey not so willing and able to fight back.

Download pdf of the entire bookComing next:  The New Deep Pockets


Asset Protection for Patients

by rjmintz on June 27, 2017

In light of the proposed appeal of The Affordable Care Act, we are re-issuing this Article about the importance of protecting your assets from unexpected medical bills and claims:

Asset Protection for Patients

By Robert J. Mintz

In a new and ironic twist, a growing number of individuals are now legally protecting themselves from their doctors. The idea may be surprising, but with rapidly disappearing health coverage, medical expenses are now a realistic and high probability threat to the lifetime savings of millions of Americans.  Just as physicians have been diligent about planning to minimize their malpractice liability risks, now patients are anticipating and protecting themselves against the serious financial consequences of unforeseen medical expenses.

No one doubts that there’s a monumental crisis in health care coverage. Forty-five million Americans have no medical insurance and even those with group or private policies are sometimes stuck with unexpected and un-payable bills. Higher deductibles and co-pays can easily balloon out-of-pocket costs beyond anything anticipated. Even those who think they have solid insurance, in a good plan, may find out, when it’s too late, that their coverage means a lot less than they thought.  Every day we hear stories from clients and the news about insurers refusing payment during or after treatment.  In a recent CBS News report about one of the nation’s largest insurers, Richard Blumenthal, Connecticut Attorney General, declared that “The company [Assurant Health] offers the illusion of coverage while challenging any large claim.” In the report, a former claims adjuster revealed that it was company policy to scrutinize any significant claim, often manufacturing excuses to avoid payment. Unfortunately, despite a few notable fines and lawsuit settlements, these hardball tactics appear to be the normal course of business for at least some insurers.

When Patients Can’t Pay

What happens when a large medical bill can’t be paid?  Usually the outcome is a lawsuit filed by the hospital or collection agency with a judgment and a lien filed against the patient’s home and accounts. In most states, a percentage of the debtor’s employment earnings can be garnished. Generally, before this point is reached, the patient files a personal bankruptcy to stop the wage garnishment and wipe out the medical bills and other accumulated debts. But that requires that he give up all of his assets including savings accounts, real estate and equity in his home.  These assets, except those that are specifically exempt, are turned over to the Court and divided among the creditors.

According to a 2005 study by Harvard University, about half of the 1.5 million annual bankruptcy filings are caused by illness and medical bills. And surprisingly, three fourths of those had health insurance at the start of the illness which triggered the filing. “Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy”, said Dr. David Himmelstein, the study’s lead author and an associate professor of medicine. “Most of the medically bankrupt were average Americans who happened to get sick.”

How Patients Protect Themselves

The high level of financial risk posed by an unpredictable medical event is now leading patients to take steps to protect their savings from this threat. For instance, I met with Mr. and Mrs. X last week, a couple in their early 50s. They have about $300,000 of equity in their home and $200,000 in savings. Mr. X is self-employed and Mrs. X works for a small company. Both are covered under her group plan, but, with rising costs, the company might cut back or terminate the plan sometime soon. Individual policies may be available at that point but the cost and extent of the coverage is unknown.  The goal of their planning is to protect their savings from large, unexpected bills at any point in the future.  Asset protection, using techniques such as a Family Savings Trust can effectively shield savings from these events, but the planning must be completed before the fact. If bills have been incurred, or expenses loom, planning is too late at that point.


Of course the real solution to the problem is for everyone to have affordable insurance which covers any health care costs. However, it’s almost impossible to imagine a scenario in which competing financial and political interests are able to agree and implement a worthwhile plan, at least for the foreseeable future. For now, many believe that their only reasonable choice is asset protection to minimize these risks.  Early planning and advice from a knowledgeable local attorney are essential to the success of these measures.


The Legal Extortion Racket

by rjmintz on February 28, 2017

What are the rest of the lawyers going to do? What about the other 95 percent of trial lawyers who are not so great and not such good lawyers? How is a lawyer who is not at the top going to feed his family? His chances of getting your case against Exxon-Mobil are about the same as hitting the lottery. Many of my close friends are personal injury attorneys. They think and dream about the one good case that will earn them enough to be on easy street. But the one good case never seems to come. Instead, most lawyers make a living by looking for somebody to sue and filing bad cases with bad facts. As long as a lawyer can find a potential defendant with even modest assets, he will attempt to make his case. If he doesn’t have a good case, he has to go with what he has. That’s how he makes a living.

The lawyer is willing to gamble that by filing a case he will be able to squeeze a settlement or play “lawsuit roulette” with the jury. Just like the population in general, from whom they are drawn, jurors can be confused and misled by emotional and irrational arguments. Experiments in human behavior show that most of the time individuals are unable to distinguish the truth from a lie. When asked to distinguish truthful from untruthful testimony based upon the demeanor and expression of the witness, in a majority of cases, the subjects in the experiment incorrectly identified the lie as the truth and the truth as the lie. The conclusion of the study has frightening implications. Jurors are more likely to believe a witness who is lying than one who is telling the truth.

This phenomenon has been understood and exploited for years by political leaders and others with a message to sell. A lie that is repeated forcefully and with conviction becomes accepted as truth. Think of the Nazi propagandists and the McCarthy type demagogues who convinced millions of people of the “truth” of their cause. More recently, public hysteria over so called “death panels” illustrates the relative ease with which fear and irrationality can be heightened and manipulated by skilled politicians to influence the outcome of the public agenda. Advertising messages repeated often enough are believed, regardless of the merits of the product and despite overwhelming evidence to the contrary. That’s the foundation of the advertising industry and is the basis on which political leaders and corporate interests present their programs.

In the same manner, a lawyer attempts to “sell” his case to the jury. Facts are distorted. Lies, half-truths, and perjured testimony are zealously advanced on behalf of the “injured” plaintiff. If things go right and the lawyer gets lucky or knows what he is doing, the jury will reward these efforts with a judgment for several hundred thousand or maybe a few million dollars. Every day in court a sympathetic plaintiff prevails against a wealthy or comparatively wealthy defendant— even in those cases which appear to be absurd, illogical, and utterly without merit.

Any lawyer who is still in business after a few years of practice has learned that the unpredictability of human behavior can be used to his advantage. The uncertainty of the outcome creates a potential risk of loss for even the most “innocent” defendant. Lawyers know that for most people the risk of financial loss also creates a highly uncomfortable level of emotional strain. If you have ever been sued—no matter what the cause—you understand that the unpredictability of the result and the possibility of economic loss can generate a severe degree of stress and emotional charge.

Download pdf of the entire book

Coming next:  The Appeal of Settling


The Ability to Pay

by rjmintz on February 10, 2017

The Ability to Pay

The reality of our legal system is that people are named as defendants in lawsuits not because of their degree of fault but because of their ability to pay. When an attorney is approached by a potential client who is claiming injury or economic loss, the attorney will consider whether a theory of liability can be developed against a party who can pay a judgment. This is called the search for the “Deep Pocket Defendant.”

The Deep Pocket Defendant will have substantial insurance coverage or significant personal assets. The measure of an attorney’s skill is his ability to create a theory of liability which will connect a Deep Pocket Defendant to the facts of a particular case.

Here is an example of what might happen in a particular case. Mr. Wilson is driving in his car. Mr. Fineman runs through a stop sign at an intersection, smashing into Wilson’s car and causing Wilson severe injury.

From his hospital bed, Wilson Googles “local attorneys” and calls the first attorney he sees, Alan Abel. He is what is known as a “contingent fee” lawyer. He works for a percentage of the ultimate recovery and determines whether to invest his time and money in a case based upon what his expected return will be. Since the time and expense of preparing for litigation can be considerable, an attorney cannot afford to take a case that is not likely to pay off. Remember—no recovery, no fee. Usually the attorney advances all costs and expenses, and in exchange, he recovers these costs plus 30 percent to 40 percent of any amounts that he can get from the defendant.

Before Abel decides to take Wilson’s case, he will want to do some serious research to determine the merits of the case. Not the legal merits—the financial ones. He will want to know whether Fineman has substantial assets in order to make the case worthwhile.

Abel runs a financial search and determines that Fineman has no insurance and no significant assets such as a home or a retirement nest egg. What happens? Is that the end of the case? As for Fineman, it probably is the end of the case. Abel is not going to waste his time suing someone who can’t pay. But Abel is not going to give up so easily. He has a client with substantial injuries and that means a large damage award—big bucks. But first he has to find someone who can pay.

Here is how a successful lawyer would analyze the case to try to draw in a Deep Pocket Defendant:

    1.  Was Fineman on an errand for his employer at the time of the crash? If so, the employer can be sued.

2.  Did Fineman have any alcohol in his system? The restaurant that served him may have liability.

3.  Was Fineman on any medication? The pharmacist, drug company, or physician may have potential liability for failure to provide proper warnings, or for writing or filling the prescription improperly.

4.  The stop sign Fineman ran through was in a residential neighborhood in front of someone’s house. Did the homeowner properly maintain his property and clear his foliage to provide an unobstructed view of the stop sign? If not, there is a case against the homeowner for negligence.

5.  Did the municipality take due care in the placement of the stop sign? Should it have used a traffic light instead? There may be a case against the city or county.

6.  The driver’s side door of Wilson’s car collapsed on impact. There is a possible case against the manufacturer for not making a more crash resistant frame.

Do you see how far we are moving away from Fineman—the person responsible for the accident—in an effort to tie in a remote Deep Pocket Defendant? In any rational legal system, Fineman would be regarded as the wrongdoer—he disobeyed the traffic law and he caused the injury. Instead, we have an attorney trying to force the blame onto someone else—who wasn’t at the scene and doesn’t even know the people involved.

The example that we just gave you is taken from a real case. Guess who ended up as the defendant.

In the actual case, the defendant was Fineman’s ninety-two-year-old widowed great-aunt Ellen. As it turned out, she had purchased the car for Fineman as a gift to him. Abel’s private investigator searched the assets of Fineman’s relatives and found that Aunt Ellen had a house that she owned and some savings in the bank. She was named as the defendant in the case and was found liable on a theory called Negligent Entrustment. The jury found that she should not have bought the car for him. She should have known that he was a careless driver and might cause an accident. She caused the accident by buying him the car. The verdict was for $932,000, and Aunt Ellen lost nearly everything she owned.

The point of all this is that the foundation of every lawsuit is a defendant who can pay. Once such a defendant is located, it is easy enough to construct a theory of why that defendant should be responsible. Judges and juries often act on their emotions—not on the law. And when the contest is between an injured or a sympathetic plaintiff and a wealthy or comparatively wealthy defendant, the plaintiff will win virtually every time, regardless of the defendant’s actual degree of fault.

As a result, the plaintiff’s attorney will search for a party who can pay a hefty judgment. In the old days, it was said that “He who has the gold makes the rules.” Now the saying goes: “He who has the gold pays the plaintiff.” The fact is that no matter how remote your connection to an injury, if you have even modest assets, an attorney for the injured party will attempt to show that you are somehow legally at fault and you will be named as a defendant in the case.

Down load pdf of the entire bookComing next:  Not Enough Good Cases to Go Around


The Litigation Explosion

by rjmintz on January 4, 2017

It has been estimated that 50,000 lawsuits are filed in this country every day of the week. This has come to be known as the “litigation explosion.” Whatever the causes—a breakdown of traditional values, the loss of a sense of community, too many hungry lawyers, wasteful insurance companies—the impact on each of us is significant.

When patients sue doctors, the cost of healthcare rises. To compensate for product liability claims, manufacturers add a premium to the price of their products. Litigation cripples business. It is time consuming, expensive, and emotionally charged. It detracts from our ability to focus on productive matters, as attention is directed away from matters of efficiency and innovation. Parties to a lawsuit spend so much time meeting with lawyers and fighting with the other side that nothing gets accomplished. As businesses are dragged under by the burdens of litigation, our whole society suffers.

If you are engaged in any business activity or if you have a professional practice, chances are that sooner or later you will be sued. And if you are sued, everything that you have worked hard to create will be placed in jeopardy. The costs of defending even a frivolous suit can easily reach $50,000 to $100,000. Once you get to court, you will find that the system is heavily weighted toward the sympathetic plaintiff, as judges and juries play Robin Hood with your money. These judges and juries are continually expanding theories of liability, and stratospheric damage and punitive damage awards are now routine. It is no longer uncommon for awards in negligence cases to exceed $1 million.

Our legal system should hold people responsible for their acts. If someone causes injury, that person should be required to fairly compensate the victim for his or her loss. Not many people would seriously object to this principle. The problem is that this general principle bears no relationship to what is actually occurring in the legal system today.

Download pdf of the entire bookComing next:  The Ability to Pay


Beating Estate Taxes Just Got a Lot Harder

by rjmintz on September 16, 2016

Many of the strategies used to reduce or eliminate estate taxes involve a technique known as a Family Limited Partnership. In the most popular version family wealth is transferred into a FLP and gifts of partnership interests are made to children or other family members.  Because of the rules currently in effect, the value of these gifted partnership interests can be discounted by thirty to fifty percent, saving potentially millions of dollars in estate taxes.

The IRS has battled taxpayers using this strategy in court for many years without much success.  Now, the IRS is proposing new regulations to minimize the tax advantages of the FLP.  Individuals, who have substantial estates which may be subject to tax, should take advantage of current tax laws to avoid the forthcoming restrictions.

Specifically under attack are those who attempt to discount the value of FLP’s funded with liquid assets or publicly traded securities.  See the New York Times Article “Navigating Tougher IRS Rules for Family Partnerships”; See also “Avoid Estate Taxes with Family Limited Partnership”.

Although the scope of the new proposals are not yet clear, the aim of the IRS is to eliminate the discount for FLP’s funded with cash or marketable securities which are easy assets to value. According to the IRS, simply by changing the form in which assets are held should not create the opportunity for substantial valuation discount and reduced taxes. Even if the partnership interests which are gifted cannot be sold for the value of the underlying assets because the benefit of the partnership assets may not be realized for many years, if ever, the traditional discount for lack of management and marketability may be ignored.


Selected Topics on Asset Protection – Updates

by rjmintz on August 11, 2015

We’ve just published our new book “Selected Topics on Asset Protection“.  It’s now available for a free download as a full book pdf, or you may choose independent articles from the Contents.  This new edition updates case law, legislation and new developments in the field of asset protection and represents an important addition to “Asset Protection for Physicians and High-Risk Business Owners“. Topics include “Piercing the LLC Veil” , “Protect Assets From Unexpected Medical Expenses” as well as other key articles about the latest court cases, legislation and changes in asset protection law.


The U.S. Supreme Court ruled this month that inherited IRA’s are not exempt from creditors in bankruptcy.

Mr. and Mrs. Clark were the owners of a small pizza shop in Soughton, Wisconsin.  In 2010 they filed for bankruptcy and closed the store.  Their only remaining asset was an IRA inherited from Mrs. Clark’s mother with a value of about $300,000.  Although regular IRA’s are generally protected from creditors, the Court unanimously determined that inherited IRA’s don’t serve a similar retirement purpose and should not be accorded protected treatment in bankruptcy.

The treatment of inherited IRA’s is now a significant estate planning issue for many individuals.  Those who hold IRA’s that may be left to children, should arrange for the IRA to be held in a manner which protects the asset from future or even outstanding claims against the children.  Creating and designating a properly designed spendthrift trust as the IRA beneficiary can often accomplish a significant level of protection for family members.

See full Reuters article


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