LexShares Case #249: A Total Loss
What happens when the plaintiff loses at trial, then loses their lawyer
The Numbers
| Invested | $50,000 |
| Returned | $0 |
| Net Profit | ($50,000) |
| MOIC | 0.00x |
| IRR | -100% |
| Holding Period | 1,079 days |
The Case
A landlord leased 18,000 square feet of office space to a county child services agency in Pennsylvania. The initial 10-year lease began in 2008. In 2011, the county exercised its option to renew for an additional 5 years — extending the lease through December 2022.
Then the county changed its mind.
In January 2016, the county notified the landlord it was unilaterally terminating the lease effective May 2016 — six and a half years early. The lease explicitly prohibited this: early termination triggered “accelerated rent” for the remaining term.
The landlord calculated damages at $3.25 million and sued.
The county filed a counterclaim alleging the landlord had failed to maintain the building properly. The landlord’s position: the lease didn’t allow termination for maintenance issues — only damages.
Timeline
| Date | Event |
|---|---|
| Apr 18, 2017 | My investment — $50,000 |
| Early 2017 | Landlord’s bank forecloses on the building |
| Dec 28, 2018 | Bench trial — judgment for defendant |
| Jan 2019 | Plaintiff files post-trial motions |
| May 2019 | Motions denied; plaintiff files appeal |
| Aug 2019 | Trial counsel withdraws from case |
| Oct 2019 | Defendant moves to dismiss appeal |
| Dec 11, 2019 | Appeal dismissed — no counsel appeared |
| Mar 31, 2020 | Investment written off |
What Went Wrong
Lost at trial. The bench trial in December 2018 resulted in judgment for the defendant. The judge apparently found the county’s maintenance counterclaim persuasive — or didn’t buy the landlord’s damages calculation.
The plaintiff was already in distress. The landlord’s bank had foreclosed on the building in early 2017. A plaintiff fighting its own financial collapse may not be the strongest litigant.
Trial counsel walked away. In August 2019, the plaintiff’s lawyer withdrew from the case mid-appeal. No explanation was provided in the case updates. This is a major red flag — lawyers don’t abandon appeals without reason.
No replacement counsel. The plaintiff interviewed new appellate counsel but couldn’t secure representation. The court gave them 21 days to find a lawyer. They failed. Appeal dismissed.
Government defendant fought hard. Counties have in-house counsel and no settlement pressure. They’re not worried about legal fees or bad publicity. They’ll fight to the end if they believe they’re right.
Warning Signs I Missed
| Red Flag | What It Meant |
|---|---|
| Government defendant | No settlement pressure, willing to litigate fully |
| Building foreclosed | Plaintiff was financially distressed |
| Counterclaim filed | Defendant had their own narrative about fault |
| Bench trial (no jury) | One judge decides everything — higher variance |
What I Learned
Government defendants are different. Private companies settle to avoid uncertainty and legal costs. Government agencies have salaried lawyers and taxpayer funding. They’ll fight if they believe they’re right.
Plaintiff financial health matters. A landlord who lost their building to foreclosure may not have the resources — or credibility — to sustain multi-year litigation. Distressed plaintiffs are higher risk.
Counsel risk is real. Lawyers can withdraw from cases. If the plaintiff can’t find replacement counsel, the case dies. This is an underappreciated risk in litigation finance.
Diversification saves portfolios. This $50,000 loss hurt, but it didn’t destroy my overall litigation returns. Position sizing and diversification are essential in an asset class where total losses happen.
Simple-sounding cases can be complicated. “Tenant broke lease, owes rent” sounds straightforward. But counterclaims, maintenance disputes, and unsympathetic plaintiffs can flip the narrative.
This was my 3rd LexShares investment and my first total loss. I held it for nearly 3 years, watched it lose at trial, lose its lawyer, and lose its appeal. The $50,000 is gone. The lesson cost extra.
