“Litigation Discount”, Really?

FullSizeRender (1) I first heard the term “litigation discount” a few weeks ago from my adversary on a New York debt collection case.  My client, a Chinese mattress pad manufacturer, was owed monies for goods shipped to New York.  The defense was a claim that the cartons in which the mattress pads were shipped were damaged.  As a result, her client had to repack the goods in new cartons in order to resell to a big box retailer.  Shipping the goods was her client’s responsibility.  The terms were F.O.B. (Freight on Board); consequently any damage should have resulted in a claim with the shipper rather than with my client.  Counsel’s position was that irrespective of the issues of the case, her client should be entitled to a “litigation discount”.

Counsel explained that our client would incur costs in obtaining a visa and traveling to New York to appear and testify at a deposition and at trial.  If the matter was settled, our client would save these costs. As a result, her client should receive some benefit because our client would save the cost of traveling to New York to prosecute the case.  The fact that our client had to secure counsel and file the case due to her client’s non-payment and failure to file a claim with the shipper was absent from her argument.

Over the course of more than 20 years in debt collection, I have settled thousands of cases.  Some cases were settled for the full amount, others for a percentage of the balance owed.  This was the first time I had ever heard the phrase “litigation discount”, a debtor’s entitlement to a discount for saving the creditor monies that would have been spent on travel to continue prosecution on their New York debt collection case.

When offered a settlement of less than the full amount owed, clients will weigh the “cost” of continuing litigation as opposed to immediate payment.  Considering a “litigation discount” whereby the debtor benefits from their “unclean hands” or wrong doing will do nothing more than anger the client  and continue litigation.

It has been our experience that debtors and their attorneys will create new and different ways to try to beat the system and forestall a debt just due and owing. We handle deceptive tactics by pursuing payment, not buying into shady arguments that allow the debtor to capitalize on their unclean hands.  If you’re getting the run around from your client instead of payment, contact an experienced New York debt collection attorney and get paid the monies that you are rightfully owed.