Evaluating whether to bring a business litigation claim necessarily entails considering whether a potential defendant will be able to pay the eventual judgment obtained, or pay a fair settlement of the claim. Not every potential defendant has deep pockets. There can be many motivating factors for filing suit, but one very important factor will usually be whether a defendant can pay for the harm caused. In evaluating whether to file suit against a potential defendant without deep pockets, consider the following:
- Is there insurance coverage for the defendant? If there is insurance, there is a deep pocket.
- Is there indemnification for the defendant? Sometimes, a defendant is legally entitled to be indemnified for claims asserted. If so, you probably have a deep pocket.
- If there is no deep pocket, is there a reason to bring suit other than the possibility of collecting on a judgment? For instance, do you need to protect a trade secret? Do you need to establish your rights in a property or a contract? Is it important to protect your business’ reputation, or send a message to others who would harm you business? If so, there is nothing wrong with moving forward against a defendant who is probably unable to pay the eventual judgment. However, as with all matters, be sure to set a budget for litigation that makes sense.