Client Who Won't Pay

[zdas04]

I recently did some work as an expert witness. The lawyer hired a search firm that found me. I signed a contract with the search firm that said in effect I would submit invoices and they would pay them within 60 days of the invoice date. The contract says NOTHING about the law firm paying the search firm or the defendant (in this case) paying the law firm. Just that the search firm would pay me. I have two invoices that have both gone over 90 days old. I (long since) contacted the search firm and was told "we know that your contract does not specify that you have to wait until we get paid, but we don't have the money to pay you so forget it." The snotty, cavalier response set me off, but I decided to wait until the first of December (when one invoice will be 150 days and the other will be 120 days old) before doing anything like visiting my lawyer (which I'd rather avoid paying for).

I've been in business for 12 years and this is the very very first time that I've ever had an invoice pass 90 days unpaid. I know, I have been outrageously lucky (or really good at not working for deadbeats). The norm seems to be some percentage of invoices that never get paid. How do you guys go after deadbeat clients? Combined, these guys are into me for nearly $100k so small claims is out of the question. I have written very strongly worded e-mails to all of the officers of the company. All I can think of remaining is to sue them, but I'm in New Mexico and the contract says that the court of jurisdiction is New York so suing them gets pricey (although the contract does allow prevailing party to collect legal fees, it may be a while before I see any of it and I don't want to be out of pocket any more than I already am).

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[Ron]

David...a few comments....

Though the horse is out of the barn, signing a contract with a jurisdiction outside your general locale is always difficult. You might be able to get that part of the contract set aside though, particularly if you did services in your own state of residence and primary practice. You might have some luck with going back to the law firm for which you provided services. They might be willing to pay you or help you get paid, particularly if your service was beneficial to their outcome. Chances are they have a client with a deep pocket or good insurance, so maybe you'll find something there.

Search and referral firms are often low on assets and can disappear quickly. If you can trace the ownership, you might have some recourse legally, but it will cost you. Also, many attorneys who specialize in collections often work on a contingency, though it is usually high (40-50 percent).....but then 50 percent of something is better than nothing. Ideally you could prove this is a pattern of action by the company and their practice could be fraudulent. That might get some punitive damages in there! Your lawyer will be amazingly valuable in the contractual advice, assuming he/she is contact savvy.

Their attitude would piss anyone off. They have no sense of ethics.

Good luck. This one might have been an expensive lesson in contract review and client vetting.

Ron

 

[zdas04]

Good advice Ron. With my usual clients, the MSA is take it or leave it (I've refused to sign a bunch of them, but if you want the work you sign the contract) so I'm in the habit of treating contracts as a go-no-go and either sign it as is or walk away from the work. Never would have thought of arguing over the jurisdiction language. I will now.

I've had such a run of good luck with search firms that I never even asked myself the question "what do I do if they don't pay?". I have talked to the lawyer I was working with and the ultimate client is in to them for a bunch of money (3 partners in the firm and a bunch of associates full time for over a year and no payment since February) so he's not going to be a lot of help.

I get cold calls for expert witness stuff several times a month, I always look at the complaint and see if I can support the position they want me to support (mostly I can't and walk away), but next time even before reviewing the complaint I'm going to vet the firm. Live and learn.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[msquared48]

David:

Judges generally will get really pissed off if an expert witness is not paid. Just a hint...

Mike McCann, PE, SE (WA)

 

[hokie66]

New York...maybe you can get Vito and Tony to pay them a visit.

 

[BUGGAR]

Ps.: Take Mike's hint.

I took a few beatings when I ran my one-man office. I walked away from trying to collect because of the anger it caused in me. I never did get rich but I survived. It happens to all of us.

 

[berkshire]

David,
In this case you need a lawyer who specializes in collections. You may have to bankrupt the search company.
B.E.

You are judged not by what you know, but by what you can do.

 

[Ron]

David,
Mike's right. I had to go to the judge presiding over a case once to get paid by the attorney. He was not happy with the attorney and by the time he was through with him, the only one happy was me!

 

[KevinDeSmet]

It is a dog-eat-dog world which we have created, don't be so surprised.

 

[Ron]

....and to quote "Norm"....we're all wearing Milkbone underwear

 

[JedClampett]

zdas04, would it of made a difference to you in taking the work, if the contract would have had said "paid when paid?"
In our company, we won't (maybe can't) pay our subcontractors until our client ponies up. We can't be loaning money to our clients by paying our subcontractors 60 days before we get the money. I'm not sure how this is spelled out in our contracts, but I'm sure it's clear.
It's kind of apples and oranges, since you had a different arrangement. But I wonder about the business acumen of any entity who would guarantee payment before they get the money.

 

[zdas04]

JedClampett,
I wouldn't have signed a contract that said "paid when paid". I would not work through your company if that is your contract language. In that situation I would have no influence on how aggressively your company was pursuing payment and I don't do passive very well. In a situation like that I would either walk or I would sign a contract with your client (with the agreement of your firm).

The search firm had two tasks: (1) find someone for the job; and (2) pay them. For that the search firm added 25% to my invoices. Over the whole relationship they've made considerable money for no ongoing work. For that obligation to pay me, they made a bunch of money. They failed to meet even that minimal obligation.

I've worked through third parties before, and this is always the deal. One of them in London (the client was in South Africa) guaranteed payment within 7 days and met it every time--they were averaging 85 days in getting paid by the company that I was working for, but the third party had their business structured to provide the float for a substantial fee, nothing wrong with their business acumen, just a different business model than yours. I though I was getting a deal like I had in London here, but I was wrong.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[Ron]

"Pay When Paid" usually is a euphemism for "Pay If Paid"! I don't generally sign those contracts either. Another bad one is a "pass through" where you are obligated "second hand" to your client's contract with someone else and you don't even get an opportunity to review the client's contract. That could be the case here where the referral firm had a contract with the law firm with "pass through" provisions that you got stuck with.

 

[zdas04]

The way I read my contract (and the search firm agreed with my understanding) was that it absolutely was not a passthru contract. They are obligated (and admit it) to pay any invoice submitted in a timely manner, in the proper form that is not rejected by the client in a timely manner (2 weeks). They acknowledged that they owe the money, but stated that they don't care and are unwilling to "provide loans to big legal firms or big Texas Oil & Gas firms", they think that it is more appropriate for me to provide loans to sleezy search firms. I just keep getting angrier. I'm approaching the point where I'd be willing to pay most of the owed amount to cause them pain. I'm still going to let is soak until after the first of the month, but it is getting harder.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[Ron]

Can't blame you David. I'd be seething as well. Yes, it is sometimes worth a net zero just to make their life as miserable as they made yours!

 

[msquared48]

Take it to the Judge, David. This is no joke.

Mike McCann, PE, SE (WA)

 

[zdas04]

I would, but the case is the new "Inter Parte Patent Review" process and there really isn't a "judge" to take it to. In my deposition there was a procedural issue that came up and the other side's lawyer called the clerk and she rounded up 3 random judges to hear the issue. The lawyer on my side said he had never heard of any of them and when all the documents were together there would be a different panel to review them and hear arguments. It is a strange process.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[berkshire]

David ,
Bankrupt the search firm and get an official receiver appointed.
When a company enters bankruptcy, a trustee is appointed to liquidate the company's assets and use the proceeds to pay the creditors. The money owed them is one of the company’s assets.

If they do not pay the debt, they will face collection efforts. Since the company is going through bankruptcy, it will generally use an outside collection agency or third party collection agency. Once the money is collected, it goes to the trustee who then pays the company's creditors.
B.E.

 

[allgoodnamestaken]

Are there any clauses in the contract that provide relief to one of the parties if the other side breaches the terms? In the future make sure any such agreements you sign have explicit clauses involving breach of contract, non-payment, and relief.

Do you have the part where they admit they owe you the money and not the firm they connected to you, in writing? An email from a company representative or employee? If so it may make your life a little easier later.

Hire a New York lawyer to write a letter outlining your intention to sue them for the amount owed plus damages plus legal fees if they don't pay within 30 days. If they don't respond to a legal threat, they aren't going to pay you the money without being sued, ever. At that point you have to decide if you're willing to pay for lawsuit to try to recover the money, bearing in mind that just because the contract said legal expenses could be covered, that doesn't mean you'll win them nor that the amount you win will cover all of your fees.

 

[TheTick]

Can you sell the debt to a collection agency?