Lessons from Suing an Ex-Client

For 15 years that I have been working for myself, I've never had to sue a client to get paid ... until recently. It was for a large amount of money that was beyond the scope of small claims and I had tried for months to get the company to even address the overdue invoices but to no avail. So I took them to court and won. Here are some lessons I learned that might help you if you find yourself in a similar situation:

• Document everything -- You want complete, overwhelming, and even crushing proof that you are owed money. That involves a) showing that there was an agreement for you to provide services to the ex for a given amount, b) showing that you delivered as you were supposed to, and c) that you had duly invoiced them and given them a chance to square things. This is easier than you might think. A signed contract is preferred. But in any case, you want all emails sent back and forth, as well as notes you may have taken at discussions. The emails are something you can export from your email reader. It helped that I always store every email from a client in either a client folder or project-related folders, as makes the most sense. Digging up the emails that I had sent required a bit of hunting in the Sent folder. I sorted them by recipient and then looked up the various people to whom I had sent emails. I checked for every name that had sent me an email, as well. Total time to ready things for my lawyer: about 30 minutes.


• Demand letter -- You want to have given a reasonable amount of time trying to get paid. That might be a few months. At the end of this period, you send a demand letter via certified mail, return receipt requested, so you have proof of delivery. (Actually, I sent mine via UPS ground and had the delivery receipt.) IN the letter, you lay out the entire chronology of what happened, including all efforts you made to try and resolve the issue and get paid, as well as every promise to pay that they made. What you ideally want is proof that they had accepted your work and had not disputed that you had done your part. If there has been any dispute, you should try to resolve it so you leave them no leg to stand on.


• Get a litigator -- Not all lawyers are litigators. You want one that is, because he or she will know all kinds of tricks to move things along. In my case, we filed suit, they tried playing innocent, but never answered the suit by filing a response. That put them into a corner. Then they asked for a settlement agreement. After back and forth via email (because you have written proof then), we agreed to terms, and then they didn't sign the agreement and didn't pay when they said they would. My lawyer was able to go to the courthouse and, after a mandatory three week wait, get the clerk to enter the settlement agreement. They were now stuck. We could have gone for a default, but that would have taken longer. It helps when your lawyer knows exactly what the options are.


• Be realistic but stick to your guns -- The ex wanted to settle for the original amount owed without interest. They kept pushing, but I refused. I was willing to go to court because I was so angry, so they backed down. One place where they didn't back down was that they wanted a non-disparagement agreement, my word that I wouldn't say bad things about them. My lawyer said that it should be mutual. I wasn't crazy about the idea, but eventually gave in for two reasons. I wanted to get paid, and I knew that given the court filings, it was going to end up on their corporate credit report and that any company doing any kind of due diligence would come across it. So I didn't have to say a single word; they had screwed themselves.


• Look for the pressure points -- Even after we had entered the settlement agreement (which threw their lawyer, who wasn't a litigator, for a loop), they wouldn't pay. My lawyer pointed out that he could order their bank to freeze their account, if I could get the name of the bank. Luckily, I had been paid some by them, though at the time wasn't recording bank info for client payments. But I called my bank and learned that not only does your bank keep copies of your checks as they are paid on file, but they keep copies of all checks that you deposit, as well. A $5 fee got me the front and back of one of the checks, so I was able to pass over the bank name and account. It's amazing how quickly a company can decide to cooperate when they can't get any of their money out of their accounts.


• Be persistent -- Even after all this, when their lawyer promised to wire money to my lawyer, it didn't come. So we prepared for stage two: issuing subpoenas to employees as well as large clients. Yes, we were going to drag in people who regularly paid them money and, likely, freeze any funds they would send. My lawyer let them know about this plan, and suddenly the money was there that day. Heh.

If you push, you can get paid, assuming that they have money. And when they keep paying themselves and landlords and utility companies, they have money. At that point, be indifferent to how much pain you are about to cause them. If they wanted to work something out, they could have, saving everyone grief. Hiring a lawyer isn't cheap. Mine worked on contingency, which could have mean as much as a third of the total. But I had come to the point that it was clear nothing would otherwise show up.