Been sued? Please share.

91 Replies

There are so many discussions on here about the most appropriate asset protection strategies for various situations. Umbrella policies, LLCs, holding LLCs, land trusts, etc. People debate whether someone else can simply "pierce the veil" of these entities.

I was wondering if anyone out there that has actually been sued. If so:

  • What were you sued for and for how much?
  • What asset protection structure did you have, if any? Insurance? LLC? Other?
  • What was the result?

I'd love to hear first-hand experiences of people whose asset protection strategy has actually been tested. I'm sure many others on here would benefit as well. Let's devote this thread to actual first-hand experiences instead of asset protection advice of which there is already plenty of on BiggerPockets.

Owned multiple rental properties for 20 years, not once even a peep about being sued over that entire term by anyone for anything.

Anedotal for sure, but the amount of fear mongering that goes on by people marketing "asset protection" products is almost shameful. I don't intend to be governed in life by my fears nor my childish desires to be percieved as a "player" by putting into place some Rube Goldberg configured apparatus of legal entities, trusts and special agreements.

Of course some degree of asset governance planning will always be prudent, but don't be swayed by those asset protection plan peddlers that do little more than exploit people's fear and vanity propensities to make a quick buck.

Asset protection is synonymous with anonymity. Those who are trying to hide the connections between themselves and their assets (and those who have done so successfully against litigation) aren't going to blab about it on a public forum.

Originally posted by @Christopher Smith :

Owned multiple rental properties for 20 years, not once even a peep about being sued over that entire term by anyone for anything.

Anedotal for sure, but the amount of fear mongering that goes on by people marketing "asset protection" products is almost shameful. I don't intend to be governed in life by my fears nor my childish desires to be percieved as a "player" by putting into place some Rube Goldberg configured apparatus of legal entities, trusts and special agreements.

Of course some degree of asset governance planning will always be prudent, but don't be swayed by those asset protection plan peddlers that do little more than exploit people's fear and vanity propensities to make a quick buck.

for me the only litigation has been partnership disputes.. IE minor partners taking a swing at us.. all get settle and asset protection is not germane.. I just don't see a lot of liability being a landlord which is what 99% of the folks on this site are.. unless your a slumlord. and if you cause a major injury or lead paint poisoning or asbestos etc.. I don't care what kind of asset protection you have your going to get sued personally.

Originally posted by @Max T. :

Asset protection is synonymous with anonymity. Those who are trying to hide the connections between themselves and their assets (and those who have done so successfully against litigation) aren't going to blab about it on a public forum.

I suppose that's true. I'd still find it valuable to hear a story from someone that got sued and lost and wished they had more protection.

Originally posted by @Ken Weiner :

There are so many discussions on here about the most appropriate asset protection strategies for various situations. Umbrella policies, LLCs, holding LLCs, land trusts, etc. People debate whether someone else can simply "pierce the veil" of these entities.

I was wondering if anyone out there that has actually been sued. If so:

  • What were you sued for and for how much?
  • What asset protection structure did you have, if any? Insurance? LLC? Other?
  • What was the result?

I'd love to hear first-hand experiences of people whose asset protection strategy has actually been tested. I'm sure many others on here would benefit as well. Let's devote this thread to actual first-hand experiences instead of asset protection advice of which there is already plenty of on BiggerPockets.

 Got sued. For $2,000,000. They lost, at every level. They appealed. Went all the way to the Ninth Circuit Court of Appeals. Set a Precedent. Went through 4 jurisdictions and took 6 years. What do you want to know?

.

Originally posted by @Ken Weiner :
I suppose that's true. I'd still find it valuable to hear a story from someone that got sued and lost and wished they had more protection.

....says the secret asset protection attorney. LOL  Talk about passive aggressive.

There have been long discussions on this and no fruit. No substance. No soup for you! 

The largest area of litigation I see in the LL space is deposit refund disputes.  Stress and headaches and small claims court over $200, often less.  Who has time for that?  A tie goes to the tenant here.  Be lenient and generous and part friendly. When you see them at the grocery store someday you can smile and say hi rather than ducking behind something.

Originally posted by @Account Closed :
Originally posted by @Ken Weiner:

There are so many discussions on here about the most appropriate asset protection strategies for various situations. Umbrella policies, LLCs, holding LLCs, land trusts, etc. People debate whether someone else can simply "pierce the veil" of these entities.

I was wondering if anyone out there that has actually been sued. If so:

  • What were you sued for and for how much?
  • What asset protection structure did you have, if any? Insurance? LLC? Other?
  • What was the result?

I'd love to hear first-hand experiences of people whose asset protection strategy has actually been tested. I'm sure many others on here would benefit as well. Let's devote this thread to actual first-hand experiences instead of asset protection advice of which there is already plenty of on BiggerPockets.

 Got sued. For $2,000,000. They lost, at every level. They appealed. Went all the way to the Ninth Circuit Court of Appeals. Set a Precedent. Went through 4 jurisdictions and took 6 years. What do you want to know?

.

 I was in a case in the 80s that ended up in the 9th circuit court.. and like you they lost we won.. :)  

Originally posted by @Steve Vaughan :
Originally posted by @Ken Weiner:
I suppose that's true. I'd still find it valuable to hear a story from someone that got sued and lost and wished they had more protection.

....says the secret asset protection attorney. LOL  Talk about passive aggressive.

There have been long discussions on this and no fruit. No substance. No soup for you! 

The largest area of litigation I see in the LL space is deposit refund disputes.  Stress and headaches and small claims court over $200, often less.  Who has time for that?  A tie goes to the tenant here.  Be lenient and generous and part friendly. When you see them at the grocery store someday you can smile and say hi rather than ducking behind something.

 Another STeve Vaughn pearl.. that is the ONLY litigation I have been in as a landlord is I would not give back the deposit they took me to small claims.. and that only happened ONE time in 500 plus homes owned..   Where it could help though is your drunk and kill someone 

things like that but for business ventures and especially land lording as long as your not a slumlord and letting the kiddos eat lead paint etc.. its just not a business with a ton of potential liability.   If it was insurance rates would be through the roof.. 

Originally posted by @Nick Britton:

My story is unique- I purchased a Seller Financed Triplex in South Florida under a new LLC in August 2016. Never missed a payment and I was served strange demand letters after demand letters from the Note Holder ( 92 year old lady) My wife was 7 months pregnant at the time. I did not owe. Responded to demand letters- and attorney recused himself. Fast forward 3 months she found another attorney who served the SOS on behalf of my company... Moral of the story that was thrown out in April.

June Came and she then again tried to foreclose on me- which as of 2 weeks ago was just thrown out.

My attorney is telling me to sue for harassment- before she files again (I am sure she will try....) Currently, she has had two DIFFERENT foreclosures thrown out in 120 days in Broward County. The head ache and stress is atrocious. 

 if your note is not due.. there Is no stress .. anyone can sue anyone.. this has nothing to do with asset protection which is where the fear mongering comes from.. 

Originally posted by @Jay Hinrichs : land lording as long as your not a slumlord and letting the kiddos eat lead paint etc.. its just not a business with a ton of potential liability.   If it was insurance rates would be through the roof.. 

 Great point about insurance premiums.  For $180k in structure replacement and $500k liability (that's the biggie) my premiums are usually under $500 a year for a LL policy.  Even more affordable relatively for primary res., but only $300k liability.

If every tenant sued for the dreaded slip n fall, how could insurance co's, whose job is to measure and actuate risk, offer 300-500k in liability protection for a measly $45 a month?

@Steve Vaughan   triers of fact are wise to slip fall.. I had a X associate whose wife supposedly had a slip fall at a restaurant or hotel cant recall 20 plus years. ago.. they were wringing there hands thinking of all the money they were going to get..  WEll insurance offered to settle for say 30k.. they wanted 250k..  went to trial.

Judge not happy.. denies their claim and awards the insurance company their costs..  so they paid their attorney some amount of money and ended up with a 60k judgement  LOL... now I guess they could have used some asset protection in reverse.. but they were judgement proof.. no money just greedy got what they deserved.. 

Originally posted by @Thomas S. :

@Ken Weiner .

You are not going to find the first-hand experiences you are seeking. For the most part they simply do not exist.

Obviously insurance is mandatory regardless.

full blown litigation in the US for the average mom and pop investor is much akin to a water landing in a commercial airliner.

does it happen yes it can.. is it often most just like most commercial pilots will fly 30 plus years without losing an engine.. but engines are lost as we know..  but its so rare .. you train for it.. just like a landlord should do you train to be one.. how to take care of your properties so you don't put your self in that position..   

The amount of time and money it takes to actually get to trial is reserved for insurance companies and bigger players the average tenant simply does not have the wherewithal to take a case to trial..  And the only cases attorneys take on contingency basically in the US is insurance claims in auto wrecks or against big tobacco or other medical things you see those advertised all the time big whopper class actions.. or if your in the South of the US big signs by the ambulance chasing attorneys looking for crash victims to go after insurance.. 

I have yet to see an add or a bill board from an attorney..    " HEY BEEN SCREWED BY YOUR LANDLORD CALL ME I CAN GET YOU MONEY"

now in Vegas there were billboards in the crash where attorneys would advertise keeping you in the home for a year or more for a fee of 1k or so.. filing motions to stop foreclosures.. but you don't need asset protection for that. 

Originally posted by @Jay Hinrichs :

@Steve Vaughan  triers of fact are wise to slip fall.. I had a X associate whose wife supposedly had a slip fall at a restaurant or hotel cant recall 20 plus years. ago.. they were wringing there hands thinking of all the money they were going to get..  WEll insurance offered to settle for say 30k.. they wanted 250k..  went to trial.

Judge not happy.. denies their claim and awards the insurance company their costs..  so they paid their attorney some amount of money and ended up with a 60k judgement  LOL... now I guess they could have used some asset protection in reverse.. but they were judgement proof.. no money just greedy got what they deserved.. 

 They had to pay legal fees of the defendant? Good, I agree.  That's insurance making an example of somebody right there.

For about $300 more per year, when folks get over the million dollar NW mark, umbrella insurance can kick in as well.  First all liability coverage on vehicles is doubled, then all real res property liability is maxed to $500k, then an extra mil or 2 on top.  And that's for the personally owned stuff.  An extra $245 per year through your auto carrier. Plus, on free and clear houses, its easy to self-encumber, at least appearing leveraged to anyone looking for a target.

I do and recommend having LLCs for commercial assets, just not for little houses with debt. My commercial lines liability coverage is $2M, but premiums are not $500 per year. More like $4k.

Account Closed Can you please elaborate more about your experience? Did you have a LLC structure in place when you got sued. How did such a structure helped you when you got sued?

Originally posted by @Vaibhav Puranik :

@Account Closed Can you please elaborate more about your experience? Did you have a LLC structure in place when you got sued. How did such a structure helped you when you got sued?

if you make it to the ninth circuit court you just spent 100k plus in attorneys fee's and LLC structure has no bearing.. and he won.. so end of that discussion.. believe me when I tell you if you are going to get sued you are going to get named personally.. no one sues just the entitiy they ALWAYS sue you personally.. does not mean they win.. but you will get sued..

If you do a couple of Google searches you nwill find one or two; it is that rare. If it is a big suit like someone going over a railing an LLC will be meaningless-liability insurance is the only shield for your personal assets. As others have said it is extremely rare.

Originally posted by @JR Rivas :
@Mike M. How much did that cost?

 That's a little complicated. The time it took for depositions, interrogatories, motions, producing exhibits, court appearances, briefs, etc was far more damaging than the money. It's hard to keep buying properties when you are constantly responding to things like that. It is a totally different way of thinking than buying properties. I got to where I could write my own motions and respond to theirs. But in order to win, you need to know the process and I think it's best to have an attorney for any court work. I had various attorneys through the years depending on a variety of things. I had one show up to court drunk. I had another take a 6 week trip to Europe when a brief was due. I had to write and submit the brief. (Can you say "abandonment"? It's a legal term when your attorney abandons you and doesn't tell the court. He had to "retire" after that one. I was out of pocket some $75k to $100k in attorney's fees and costs. If I had a *good, competent* attorney through the entire time I could have cut my costs. But, you don't know which attorney is good and which is a flake.

Originally posted by @Jay Hinrichs :
Originally posted by @Vaibhav Puranik:

@Mike M. Can you please elaborate more about your experience? Did you have a LLC structure in place when you got sued. How did such a structure helped you when you got sued?

if you make it to the ninth circuit court you just spent 100k plus in attorneys fee's and LLC structure has no bearing.. and he won.. so end of that discussion.. believe me when I tell you if you are going to get sued you are going to get named personally.. no one sues just the entitiy they ALWAYS sue you personally.. does not mean they win.. but you will get sued..

@Jay Hinrichs is absolutely right. No LLC is going to matter for a small investor. You will be named personally. The original Complaint (that is the term they use for the initial filing of the paperwork) had something like 12 names and entities they were suing. If you had "touched" the property in anyway or benefited from the transaction in anyway, you were added, just in case.

Some entities get removed along the way, but it takes a court order. And just because someone was named doesn't mean they did anything wrong. Generally it takes a "finder of fact", that means a Judge or a Jury to decide who is right and who is wrong. Sometimes the Judge will dismiss based on a Motion for Summary Judgement, sometimes he wont. I've read that about 90% of cases get settled just before trial. I'm a fighter. I was in the right. I wasn't going to settle.

My attorney(s) were able to get mine dismissed by the Judge(s) (this happened a couple of times) only to have the other side appeal. What is supposed to occur is when a Judge misuses the law, the other side can appeal. There was no misuse of the law here. In my case, they simple found something entirely new to throw against the wall to see if it would stick. It never did stick, but as a point of the law, the appeal(s) went forward and we litigated those as well.

 

Originally posted by @Max T. :

Asset protection is synonymous with anonymity. Those who are trying to hide the connections between themselves and their assets (and those who have done so successfully against litigation) aren't going to blab about it on a public forum.

 @Max Tanenbaum is correct. As a result of that lawsuit, which a long time ago now, I learned asset protection. I would not have been sued if I had not shown substantial assets. Now I have everything layered and I don't brag about what I have or don't have. I don't exist. I have No facebook presence, I don't use twitter, or any social media. I give generously but anonymously. I don't divulge who my partners may or may not be. I protect the information of anyone I may or may not work with, with great confidentiality. It is very foolish for someone who has assets to post & boast. 

In court, one of the ways the plaintiff identified me was "he was driving that Silver Mercedes of his when he came by". Lesson learned. I bought an additional car, an older sedan, which I use for driving neighborhoods & for when I buy a house or when I show a property to a prospect Tenant Buyer. I save the nicer car for taking the Mrs. out to nice restaurants, but I use my "work" car when dealing with real estate.

Originally posted by Account Closed:
Originally posted by @Max Tanenbaum:

Asset protection is synonymous with anonymity. Those who are trying to hide the connections between themselves and their assets (and those who have done so successfully against litigation) aren't going to blab about it on a public forum.

 @Max Tanenbaum is correct. As a result of that lawsuit, which a long time ago now, I learned asset protection. I would not have been sued if I had not shown substantial assets. Now I have everything layered and I don't brag about what I have or don't have. I don't exist. I have No facebook presence, I don't use twitter, or any social media. I give generously but anonymously. I don't divulge who my partners may or may not be. I protect the information of anyone I may or may not work with, with great confidentiality. It is very foolish for someone who has assets to post & boast. 

In court, one of the ways the plaintiff identified me was "he was driving that Silver Mercedes of his when he came by". Lesson learned. I bought an additional car, an older sedan, which I use for driving neighborhoods & for when I buy a house or when I show a property to a prospect Tenant Buyer. I save the nicer car for taking the Mrs. out to nice restaurants, but I use my "work" car when dealing with real estate.

Very interesting perspective. Just got a Tesla and this is making me rethink selling the Honda... Thanks for sharing!