Should a Failing Business Heading for Bankruptcy File an Antitrust Action? - the Pro's and Con's
Last Revision: 3/8/98
Should a Failing Business Heading for Bankruptcy File an Antitrust Action?
Here is a discussion of the pro's and con's:
The Arguments Favoring Commencement of an Antitrust Suit:
- You no longer have to worry about making payroll and payroll taxes, or paying your personal living expenses, or maintaining corporate records and fending off creditors with fewer personnel to handle the work
- You would probably have more money to cover needed litigation expenses
- You probably have better proof that you suffered antitrust injury (a requirement in antitrust cases) than if you were making money hand over fist
- You can concentrate more on the suit than on the failing business
- There would be no need to update your damages, or provide further disclosure. The disclosure (through document production and the answering of any interrogatories) made after you have gone out of business will probably not have to be supplemented with additional discovery prior to trial
- You will have less financial and other pressure on you, which would be of benefit to the action
- You will be more available to your attorney because you won't be bogged down with numerous creditor telephone calls, debtor excuses, juggling of accounts and credit cards, and creditor lawsuits in various courts
- the filing of a petition in bankruptcy would stop all litigation automatically (including the antitrust action), until the automatic stay is lifted by court order; note: this is not to be construed as any urging or recommendation that a bankruptcy petition be filed;all I'm saying is that the filing of a petition in bankruptcy is not necessarily destructive of your antitrust suit
- If you file a chapter 11 petition seeking reorganization of your company, your antitrust claim can be continued by your company, with the same management
- If you file a chapter 7, or if your chapter 11 filing is converted into a chapter 7 (for purposes of liquidating the company), your antitrust claim can be taken out of the bankrupt company through application to the court for approval of a deal with the bankruptcy trustee (such as a deal where the trustee pays none of the litigation expenses but gets 20% of the recovery after legal fees right off the top)
- The case becomes simplified, because ordinarily there would no longer be any claim for injunctive relief, either on a preliminary injunction basis (during the litigation) or as final relief by the court in its final judgment (and decree)
Now, the Arguments against Starting an Antitrust Action If Your Company Is Heading for Bankruptcy:
- You could lose your antitrust claim in a Chapter 7 situation because the trustee (who may have been appointed by creditors including one or more of the persons you would be suing) may refuse to enter into an agreement with you or may buy your antitrust claim for cash to pay to the other creditors
- Do you really want to bring an antitrust suit at this time, having done nothing for years (presumably), do you want to start the needed action at the time when you are obviously going to go out of business?
- Is your time and money more valuable devoted to some other activity than an antitrust suit?
There are just some of the thoughts which come to mind. If you have a legitimate antitrust suit, and can obtain a competent attorney to do the legal work essentially on a contingent-fee basis, your exposure is low; the time requirements are not too great, contrary to what many might think; the attorney does most of the work; you would only have about 3-4 days of depositions of you during the next year; you don't have to sit in (or listen in by telephone) on any or all of the other depositions.
In summary, a good antitrust suit is something like a lottery ticket to win a large sum of money, with only a limited number of tickets having been sold. If the chances of recovery of a substantial sum (ordinarily through settlement) are 1 out of 3 - and I have no statistics to bear this out or disprove this hypothetical figure - then you should consider that there the jackpot only has 4 tickets issued, with one ticket (perhaps yours) to be the winner.
Those odds are not bad, considering that the state-run lotteries have a million to one odds against winning the lottery.
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Copyright © 1998 by Carl E. Person