Archive for the ‘Disputes’ Category

Commercial Debt Collection – How Do I Collect When A Company Owes Me Money?

 businessman with financial symbols coming from hand

In today’s business culture we call businesses working with other businesses B2B. It has always been a popular practice to the alternative, business to consumer. The rules are different governing B2B as opposed to B2C. The legal and business world assume that the B2B relationship and players are more sophisticated.

This post discusses what happens when the B2B relationship sours and one company must collect what it is owed from another company. The most important distinction between the rules of B2B and B2C is that consumers are much more protected by government regulation. The Fair Debt Collection Practices Act protects the consumer, not businesses.

Phases of Collection

Most business think that when an account is overdue, then they call up a debt collection agency and the debt will be collected or its deemed bad debt. Businesses write off huge percentages of accounts receivable every year based off this flawed thinking.

There are at least two phases of debt collection, each of which could arguably be broken down into subcategories. You have a pre-debt fact gathering and document filing stage, as the first phase. Then there is the actual debt collection which can consist of many different options and this occurs after the debt is due. So more of a pre/post mindset.

Pre-Collection Phase – Getting Your Ducks In A Row

The pre-collection phase is often over looked and much more important than the post-collection phase. It is the foundation for the collection. This is the fact gathering and organizational portion.

This phase includes the initial fact gathering on the business. Your business should have an in-take sheet whereby it gathers all important information from the other business. Some of my clients even go as far as running credit checks on the business or getting personal guarantees from its senior members.

For contractors, suppliers and equipment lessors that I represent, this pre-collection phase is essential to keeping the accounts receivable low. This phase also includes sending out notices and filing liens, in a timely manner and properly. All of these essential elements make the post-collection process much easier, more efficient and most importantly successful. The old adage that I preach, is an ounce of prevention equals a pound of cure.

Finally another important aspect of the pre-collection phase is a well written contract between you company and your business client. This contract should have specific default and attorney fee provisions.

Collection Phase – It’s Time To Get Paid

Now your company has all of its intake information, gathered credit reports, personal guarantees, sent your notices, filed your liens, and have a well written contract, but your business client refuses to pay on its obligation to your company, what do you do?

There are a few options here and  only one good solution. Your business could write off the debt, it could try to collect internally, hire a debt collection agency or contact an attorney to collect. Obviously I’m biased here, but I do see this often. Writing off the debt is never good. Collecting internally can be okay but its slightly less successful than a debt collector. Attorneys can do all of the following steps which make the percentage chance of collection go up.

Your commercial debt collection attorney has a number of weapons at his disposal to collect on the outstanding debt. Many of them have time delays built in by law, which slows the process. First is to send a demand letter which includes the Louisiana Open Account Statue language. This is another avenue to get attorney fees and costs associated with the debt collection.

After the demand letter is sent out and thirty (30) days elapse, then its time to file suit against the debtor. Many businesses balk at this option because litigation can be costly and risky. Depending on the size of your debt, you attorney will likely take it on contingency which will minimize the litigation costs. From there your attorney will get a judgment, either by default or after trial.

Once the judgment is obtained, there are a number of possible means of collection. The attorney can examine the assets of the debtor, in a judgment debtor rule hearing whereby the debtor will be sworn-in and give testimony as to what the business owns. Further, the attorney can garnish banking and physical assets of the business. The judgment will be good for ten years and can thereafter be reinscribed. Once a judgment is granted collection chances go up.

Conclusion

In the end, some debts are simply bad and cannot be collected. Others, however may just be tricky or require persistence. Having a good commercial debt collection attorney at your side will greatly increase your collection rates and keep your accounts receivables low.

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Mediation – Success Involves The Right Frame of Mind

Measure SuccessHere at Wolfe Law Group, LLC, I mediate disputes many types. The disputes I usually handle are construction, collections, insurance claims, contracts and leases . Often times I am asked, what it takes for a mediation to be successful and if there is a trick to getting a successful mediation. Normally, it all depends on the parties frame of mind.

What Is A Successful Mediation?

The number one measuring stick and overall way the legal industry measures mediation success is whether the case settles, due to the mediation. This typically is a clean way for all parties to know whether the mediation was a success.

There are other types of successful mediation, whereby the parties agree to resolve some of the disputed issues but not all of them. In my mind, these partial settlements are a success.

Finally, I believe that just about every mediation that is completed and the parties work through the entire process is a success. Mediation is a unique tool that lets the parties prepare and evaluate the case strengths and weaknesses, before getting into a trial setting. There is no judge or decision maker, therefore parties as well as their attorneys can see what a neutral third party thinks of the merits. This can be very helpful and a real eye-opener for clients.

Another success story that comes out of working through the mediation process is knowing what the opposition is willing to do to resolve the dispute. You can determine whether you have someone who will work to get a resolution or an adversary who is irrational.

There Are A Number Of Factors That Go Into A Successful Mediation

There are many factors which can lead to a successful mediation. Each case is different therefore the importance of success factors will vary from dispute to dispute.

Ripeness is a big issue when it comes to whether a mediation will be successful. Some times its impossible to know if your matter is ripe until you engage in the mediation process, due to unexpected factors which may arise. Further, many attorneys will jump into mediation in order to get a quick deal. This practice is not beneficial to the client or the outcome of the dispute.

Attitude of the parties is another huge factor when it comes to the success of a mediation. There are disputes where all sides are irrational and cannot make a deal. There are other disputes when its just one party who is creating an impasse. A good mediator will work on parties to encourage positive attitudes with regard to making a deal. The mere fact that the parties agreed to come together, is a sign that reason is being applied and there’s a possibility for a deal.

Having all parties actually listen and work through all of the issues presented by each other party. Many times a party will only want to discuss its issues and not listen to what other are saying. This breakdown in the communication process can be very problematic for the mediation process.

Other Sources For Mediation Information

Mediation is quickly becoming one of the go-to methods for alternative dispute resolution. Its been around for a long time and will continue to be here because of its cost-effective alternative to standard litigation. There are a number of good sources which talk about successful mediation. NOLO.com has a good article with Ten Rules for Success. Marc Engel has a similar article with good information entitled 8 Steps to Make Mediation Successful.

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Attorney Demand Letter – Will It Get You Paid?

lawyer letter

Everyone in the construction industry has trouble getting paid at some point. In fact, when Construction Week Online conducted a poll inquiring who in the industry had payment problems, it found that a whopping 0% – that’s right, zero percent – reported they were always “paid in full and on time.”

Payment applications and invoices get sent out, and then it’s unfortunately a battle to always get cash flowing. What can you do to mitigate these circumstances and get paid more and more often?

The answer may be quite simple – sending a demand letter, and then sending an attorney demand letter / lawyer letter.

Getting Your Account Paid Means Prioritizing Your Invoice With Your Customer

First, non-paying customers are not uncommon, nor is it a problem unique to the construction industry.  One website I really love is the “World’s Longest Invoice,” which is just an on-going list of people and companies across the country who are not paying their bills.

If you’re going to turn a non-paying account into a paying account, you must first ask why the customer isn’t paying.  In most cases, it’s because your invoice is not a priority for that customer. This frequently boils down to something very simple: following up on invoices and amping up the pressure to pay.

Make your invoice or payment application top of mind. How? Make sure they have the invoice. Followup with phone calls and emails. Followup, followup, followup…and let us suggest sending a demand letter.

Payment Demands From Attorneys Presses The Right Buttons To Get You Paid

When followup phone calls, emails, and correspondence just doesn’t work, it’s time to start considering your other options. At the end of the tunnel is litigation, and you’ll want to avoid that at all costs. You can also file a mechanics lien to bridge the gap. Before these legal remedies, however, you may get good results from a simple and ineffective step: sending an attorney demand letter.

An attorney demand letter will accomplish two very important things:

  1. It will communicate to your customer that you are serious about the debt, and it will prioritize your account;
  2. The lawyer letter will put you in your best collectable position by availing you of all laws on your side to protect your right to payment.

There’s no reason why you should avoid sending a lawyer letter. It’s easy, and can be very affordable. Take our firm – Wolfe Law Group – for example. We have a flat fee to send an attorney demand letter. You don’t need to sign a complicated fee agreement, do a formal consultation, and worry about an hourly bill adding up.

You simply put your information into our online form and watch your letter get sent – it’s that easy. One flat fee and your customer gets the demand letter, and usually pays up.

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The Best Time to Mediate A Dispute is Yesterday

Eviction ImageHere on ConstuctionLawMonitor.com I like to blog about non-traditional ways to settle disputes between contractors and other feuding parties. Mediation is my favorite because I am a mediator. Its also my favorite because, generally, its the best and most efficient way to resolve disputes. There are circumstances whereby mediation will not work but that usually happens when irrational parties come to the table.

In this post I will explore the element of “when” is a matter ripe for mediation.

Timing Issues For Mediation

As discussed in other posts, there can be clauses within construction contracts wish mandate mediation. This type of clause is called a mediation or alternative dispute clause. In this instance, the contract will lay out exactly how the mediation and/or arbitration process should be handled when an dispute occurs between the parties.

So the timing element of a contractually mandated mediation is spelled out in the construction contract. Many times mediation is a precursor to any litigation or arbitration hearings. This basically works as to when there is a dispute, parties look to the contract to see how the mediation should be initiated.

Outside of contractually mandated mediation there is also voluntary mediation. By definition, all mediation is voluntary. The premise of all mediation proceedings is that the parties are there voluntarily. Otherwise the mediation will not work.

Once the parties are both there in good faith and voluntarily, then the process can work properly. Most mediation proceedings can be completed in one day. Sometimes more complex issues with numerous parties may take a bit longer and may span over a number of days. Either way is fine and the process is designed to facilitate both simple and complex.

Its Okay To Mediate A Dispute More Than Once

Often times parties think they only get one bite at the apple when it comes to mediation. Mediation is different than trial or an arbitration where there does not have to be a final decision made by the neutral party. A mediator is merely a facilitator to settlement. When parties mediate, they have to be the ones who make the final decision to settle.

In my experience, I have seen parties try to mediate disputes early on in the dispute and it did not work out. There was simply an impasse which could not be worked out that particular day. Then the parties dig back in and litigate or negotiate independently. Months and even years later, the parties will come to the table again to mediate and try to work out a deal. As long as the parties are engaged and willing to compromise there is always hope that mediation will work.

Other More Expensive Alternatives To Mediation

There are two main alternatives to mediation. Litigation and Arbitration are what I will discuss.

Litigation

As you may or may not know, litigation is the standard practice here in the United States, but it is old and antiquated. Litigation is also extremely expensive and slow. If a party files suit on a hundred thousand dollar construction dispute it will likely take years to completed. The process is slow and the parties know how to exploit the process so that it will move even slower. The only parties who make money off litigation are attorneys.

One of my favorite quotes regarding how bad litigation is from the French scholar Voltaire,

“I was never ruined but twice; once when I lost a lawsuit and once when I won one.”

Even as far back as the seventeenth century people were opposed to litigation. Needless to say, the process has become worse, not better.

Arbitration

Next is the somewhat better and more favored, arbitration. Arbitration is good because it is more efficient and cost effective than litigation. Parties get to select an arbitrator and then proceed ahead with more relaxed rules than traditional litigation. The problem here is that the arbitrators ruling in binding. Binding is scary because its all left to the discretion of one person.

I’ve experienced a number of arbitration rulings that have left me scratching my head wondering what the arbitrator was listening to. There is the possibility of appeal, but the standard is overwhelming and the ruling is rarely overturned.

Mediation is a voluntary negotiation process where a neutral third party helps to facilitate the parties making an agreement. In my mind this choice is clear to mediate.

 

 

 

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Louisiana Litigation Strategy: Offer of Judgment

Final OfferWhen litigating in Louisiana, both in State and Federal court there are some interesting tools that can be deployed by both sides of the dispute in order to encourage settlement.

The Louisiana version of this codification is more robust than the Federal one, but both are appropriate for discussion in this post. Federal Rule of Civil Procedure 68 will be talked about in more detail in future posts. For now we will focus on the Louisiana offer of judgment.

Louisiana Civil Code of Procedure Article 790

Even the title of this code article seems a bit confusing, which must be a precursor to the actual article itself. The Louisiana Civil Code Article 790 is entitled “Motion for judgment on offer of judgment.”

I had to sit down and read through this article a few times and read some case law on it to fully get the gist of what the Louisiana Legislature was trying to do when they passed a vote on the language of this article. Surely, the Legislature wanted to create a rule similar to the Federal Rule of Civil Procedure 68. But in true Louisiana fashion, we had to take things a step further.

The most interesting and controversial section is located in subsection C. La CCP 790(c) is creatively written text, it reads:

“C.  If the final judgment obtained by the plaintiff-offeree is at least twenty-five percent less than the amount of the offer of judgment made by the defendant-offeror or if the final judgment obtained against the defendant-offeree is at least twenty-five percent greater than the amount of the offer of judgment made by the plaintiff-offeror, the offeree must pay the offeror’s costs, exclusive of attorney fees, incurred after the offer was made, as fixed by the court.”

Layman’s Reading of Louisiana Offer of Judgment Article

In an effort to clear c0nfusion here, I have broken down the language above into the following formula like sentence:

(1) If the Plaintiff makes an offer to settle to the Defendant, and the final judgment equals more than 25% more than that offer, the Plaintiff is entitled to its costs to be paid by the Defendant for not accepting.

(2) If the Defendant makes an offer to settle and the final judgment equals 25% less than that offer, the Defendant is entitled to its costs to be paid by the Plaintiff for not accepting.

There are a few caveats here. The offer must be made more than 20 days before trial. If a party is awarded costs based on La CCP 970, then its only costs from after the offer is made. Costs are specifically exclusive of attorney fees according to the article.

If the offer is accepted, then the judgement is considered final, but neither party can appeal it due to the fact they both agreed to the offer. In essence, both sides to the litigation can use this article to its favor.

Case Law on Offer of Judgment

The Louisiana Fifth Circuit described the nature of La CCP 970 and what type of costs are included in the Hacienda Construction v. Newman decision from 2010. The court opined:

“These costs refer to costs of litigation, including court costs. Further, the court may include litigation expenses necessary to bring the case to trial after the offer was rejected, which may include the offeror’s evidence, experts, and deposition fees… The function of Article 970 is to compensate the rejected offeror who was forced to incur greater trial litigation costs than he would have if the offeree had accepted his settlement offer. The article is punitive in nature and therefore must be strictly construed.” Hacienda Constr., Inc. v. Newman, 44 So. 3d 333, 337 (La.App. 5 Cir. 2010). [Internal citations omitted]

To add even another twist, if the Defendant prevails in the suit, La CCP 970 does not apply. There is no need if the Defendant wins the suit. If the Defendant wins and is awarded a judgment then the awarding court has discretion to award costs and fees under La CCP 120. See the Broussard v. Martin Operating P’ship, 103 So. 3d 713, 741 (La.App. 3 Cir. 2012), case for further explanation. The court there looked at FRCP 68 case law and did not stray from previous jurisprudence.

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