Jeffrey M. Verdon Law Group, LLP
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For Donald Sterling's Mistress: More Than One Kind of "Protection" Was Necessary

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Dear Clients, Colleagues, and Friends,

Last month, a Los Angeles judge ordered V. Stiviano, the former mistress of ex-Clippers owner Donald Sterling, to pay $2.6 million to Sterling's wife Shelly for gifts that were part of the Sterling's community property. These gifts included a $1.2M house, three luxury cars, extensive shopping trips and world travel.

No one would fault Shelly Sterling for wanting her day in court against her husband's ex-mistress, but I can't help put on my "asset protection lawyer hat" and wonder if Ms. Stiviano could have better protected her ass... Assets, that is.

Without getting into legal minutiae, let's assume that V. Stiviano rightfully obtained legal title to all the gifts, and that the gifts may have also been given for adequate consideration (as she argued). With that in mind, the result of this case is important not because V. Stiviano had to return the alleged gifts but because a variation of these facts could arise and readily apply to some scary real-world examples.

Take these two cases of buyer's remorse, for example:

Seller, the owner of a decades-old independent bookbinding company, decided to retire. In early 2007, he sold his company at a nice cash profit to Buyer, a private individual with little business experience, but a passion for bookbinding. Less than one year later, the Kindle E-Reader hit the market, changing the way the world reads books. Between the business inexperience of Buyer and the downward spiral of the paper book market, Buyer quickly ran the bookbinding company into the ground. Angry that the business failed and seeking any scapegoat other than himself, Buyer sues Seller, arguing that the Seller defrauded him. Whether or not the Seller prevails in his defense of these specious claims, between the aggravation and legal fees, there goes Seller's cash profit.

The same kind of situation can also crop up in the exchange of real estate. Buyer fails to perform an adequate inspection of the property and then, when a significant problem later pops up, Buyer claims that Seller misrepresented the condition of the property as a reason to either void the deal and get his money back or to obtain damages.

Now take an example under the doctrine of joint and several liability:

Joint and several liability is a form of liability used in civil cases where two or more people are found liable for damages. This often occurs in torts, most commonly in multi-party car accidents where one defendant party may be 75% at fault and the other defendant party 25% at fault, for example. The winning plaintiff in such a case can collect the entire judgment from any one of the defendants, or from any and all of the defendants in various amounts until the judgment is paid in full. In other words, if any of the defendants do not have enough money or assets to pay their proportional share of the award, the other defendants must make up the difference.

In the V. Stiviano case, even if she didn't do anything wrong, she could hypothetically be held jointly and severally liable to Shelly Sterling due to her close relationship with the wrongdoer, Donald Sterling, and her knowledge of his marriage. If that occurred, and we further assume that Donald Sterling was insolvent (he wasn't, but let's play the hypothetical worst case scenario for V. Stiviano here), and V. Stiviano was found to be jointly and severally liable, then Shelly could pursue the entire judgment from V. Stiviano.

Is your head spinning yet? These examples illustrate how just about anything you do can come back to bite you in the "assets." How can you protect yourself?

For V. Stiviano, it wasn't enough to argue that gifts were freely given, that transfer of title was legal, and that there was adequate consideration provided. She still has to give the money back. What she should have had in place was an asset protection plan.

Whether you are seeking to protect your business assets or your personal assets, a timely and effectively created asset protection structure can protect against future unforeseen liability claims, "firewalling" your assets from all types of risks, including the ones outlined above. Most cases that settle do so because the plaintiff is presented with "doubt as to collectability." Creating "doubt as to collectability" is what we do and do well. Lawsuits cannot be avoided. They are a reality of life, just like "death and taxes." But, the affluent person and closely held business owner can wrap their valued personal and business assets in "firewall" protected structures which create doubt as to collectability, resulting in the future unforeseen lawsuit not filed or, if filed, likely settled for pennies on the dollar.

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