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

 

[zdas04]

TheTick,
It still is a bit early to take that kind of hit, those guys charge a lot. Taking them to court would probably be around 4% of the total (recoverable by contract), collection would be around 50% (not recoverable).

allgoodnamestaken,
Not my first rodeo. The language on default includes the losing party in the suit being liable for legal fees. I do have their agreement that they are obligated to pay me regardless of who does or does not pay them in writing. Basically they are saying "we don't have the money until we get paid, sucks to be you". The guy has called a couple of times and keeps saying "we don't have it", and when I reply that if someone has to get a bridge loan, it really should be them. To that they reply, "well, it won't be us". When I asked "are you paying your light bill?", they say "yes, those guys will turn off the lights. Your project is over, what are you going to turn off?". The guy I talked to last week said that they intend to pay as soon as they get paid, but not before.

The law firm I've been working with asked me to destroy all information I had received through them from the defendant by December 7 (standard settlement requirement). I replied with "I am unable to put any additional work on this project until I get paid, and [the search] firm has indicated that they have no intention of paying" with copies to all of the corporate officers in the search firm. Apparently several of them had pretty heated conversations with the law firm. If it queers that consent decree then all the better. I have no patience with people who don't pay their bills.

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]

"...what are you going to turn off?". How about their corporate business license to practice?

Mike McCann, PE, SE (WA)

 

[berkshire]

So there is still a quid pro co. You have something the law firm would like to see destroyed. And you are unable to do that until you get paid.
B.E.

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

 

[Ron]

David...good reply to the law firm. Have you considered Guido?

 

[zdas04]

Oh, have I considered Guido? I know a bunch of bomb techs too. But at the end of the day I would be out of pocket with those sorts of options and would never get paid. Lose-lose even if it feels good.

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

 

[TheTick]

I don't like spite, but I believe it has its uses. Even if I get nothing, they must pay their pound of flesh.

 

[msquared48]

But only flesh, Tick, only flesh.

Mike McCann, PE, SE (WA)

 

[TehMightyEngineer]

Leave a bad yelp or google review, that'll learn 'em!

Professional and Structural Engineer (ME, NH)
American Concrete Industries

http://www.americanconcrete.com

 

[TheTick]

You have something that the law firm does not want sold or published.

 

[zdas04]

I do, but I'd rather not burn that bridge (they do a lot of patent suits in Oil & Gas and there aren't a lot of people putting themselves out as Experts in that field who are also patent holders, I'm thinking that once I eventually get paid, I'll notify the search firm that with their default our contract is void and notify the law firm that I'm available without paying the search firm's commission). I'm just hoping that the Law Firm is successful at applying pressure on their client to pay, but that isn't going all that well either.

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]

The law firm should cover you, as they have the money, even if they have not been paid. That would just be the right thing to do. After all, it is that time of the year, right? Moving on...

If they want, they could also blacklist the other firm under the table and effectively shut them down through a little communication. Not hard to do with the proper network. But I never said that, did I?...

Mike McCann, PE, SE (WA)

 

[MacGyverS2000]

From the law firm's perspective, I wouldn't want to work with a search firm that will continue to alienate their clientelle when it suits them... it would eventually become an albatross around the law firm's neck, too, as they run out of expert witnesses who won't be burned twice.

Dan - Owner

http://www.Hi-TecDesigns.com

 

[moltenmetal]

Go get 'em David- these people are deadbeats and you need to teach them a lesson. I can guarantee you that you are not the first person they've stiffed.

When your product is services, you have a very hard time repossessing what you've delivered. If a client has no assets we can seize in the case of nonpayment, we handle that by means of an up-front retainer equal to an estimate of the last payment we expect to receive from them. If a payment is overdue, we stop work that day and the retainer covers us against being stiffed. If a client can't or won't pony up the retainer, we don't do the work. I'm sure that turns some potential clients off, but since we're employee owned, bad debts come out of our own pockets. We'd rather turn away business than be stiffed by people.

We honour our payment commitments to our subs based on the payment terms we agree with them before starting work. We negotiate payment terms with our clients separately. If a client is late paying us, we don't use that as an excuse to delay payment to our subs- that's what operating lines of credit are for, and why late payments are assessed interest. The only time we're late paying subs is when somebody screws up, misplaces an invoice etc., or when there's a matter of noncompliance where delayed payment is used as a lever to get the issue resolved. That's how solvent businesses behave in my opinion. I'm sure there are fields of business where "you get paid after we get paid" is the norm, and I'm very glad I don't work in one.

 

[zdas04]

Moltenmetal,
Great point about the retainer. In fact, the search firm demanded a retainer before they would commit to telling me about the project. When I asked them about it, they said that they had paid it out to me for earlier invoices that the plaintiff was late paying them. In the future I'm going to look at getting a retainer prior to committing.

I run my business exactly the way that you run yours. I recently had a vessel built for a client and the fab shop wouldn't sign an agreement with the (international) client so I contracted with them. When the fab shop's invoice came due, I paid it and then had to wait another 30 days to get paid for it. No problem, I had added a "carrying cost" to the price I quoted on the vessel to pay for any bridge loans that slow payment might require. In the end everyone lived up to their contracts and life was good. It is when people take contract terms as "guidelines" (like the "Pirate Code" in Pirates of the Caribbean) that things get ugly.

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]

I ALWAYS get a retainer, and in legal cases, enough to cover 2/3 of the anticipated work prior to any court appearances. No exceptions. To me, if a client balks at that, there could be problems later.

Mike McCann, PE, SE (WA)

 

[zdas04]

msquared,
That sounds like good advice. At what point in the process do you start drawing the retainer down? I've been on 7 cases that I thought were about half over when the case settled and my work stopped cold. I suppose I could take the last invoice out of the retainer and refund the rest.

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:

I try to get 90% of the time I expect to spend with the 2/3 retainer before any court action. That minimizes any losses to me, and has been workable and reasonable for the client.

If the client proves good over time, as with any client, I will relax that some, but not too much, as with any other type of project. I am still not a bank here, as you well know.

Mike McCann, PE, SE (WA)

 

[Ron]

David....I also get a retainer, especially for new clients. I generally ask for a 10 hour retainer and I will bill against that for 1/2 the retainer, then hold the rest of the retainer for the final billing. For larger or long term projects, a larger retainer is necessary. I have required a $25k retainer on at least 1 project and similar on others.

 

[zdas04]

Good to know. $25k is 1/4 of what I'm currently being stiffed for, but it would have at least covered my out of pocket expenses on this project.

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]

At 100k David, this is worth a court battle.

Mike McCann, PE, SE (WA)