Thompson Law Group, P.C.

Bankruptcy filed to forestall execution of $25.9 million verdict

In Pennsylvania and other states, a crippling money judgment against a company may result in the company deciding to file bankruptcy. In some instances, that may be done to delay the execution of the judgment pending appeal, and to allow for possible reorganization of other debts of the company. In some cases, a bankruptcy may be filed where multiple lawsuits or verdicts threaten to exceed the capacity of the company to pay, such as in the case of many simultaneous asbestos judgments.  

In one recent case, a Yellow Cab company filed for bankruptcy within hours of a $25.9 million jury verdict entered against the company. The verdict was in favor of a man who became severely brain damaged in an accident in which he was a Yellow Cab passenger. The bankruptcy filing was viewed by the man's lawyers as an evasive maneuver to escape payment.

It also allowed the cabs to keep running while court proceedings continued forward. In many cases, a bankruptcy court may permit an entity or person in bankruptcy to pay the personal injury creditor from available insurance coverage. It is unclear  whether there is insurance in this case.

Additionally, here Yellow Cab argues that the company does not own the cab involved in the accident. Two individuals, the driver and the owner of the cab, were also defendants in the Illinois accident case. Apparently, the company contracts with independent owners of cabs in some kind of legal arrangement.

The complexities of the issue will be now be put under the aegis of the Bankruptcy Court, perhaps only to prevent asset distribution pending a decision from the appellate courts in the civil litigation. One critical issue may be to what extent Yellow Cab controls the cabs, their schedules, their fares and their safety and maintenance procedures. If the verdict stands on appeal, the bankruptcy court will have greater authority to determine the complex insurance and asset distribution issues that need to be parsed out. In general, the legal principles governing the case would be similar to the legal rules applying in Pennsylvania.  

Source: Chicago Tribune, "Yellow Cab files for bankruptcy after $26 million verdict", Ameet Sachdev, March 19, 2015

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