Archive for the ‘Law Changes & Updates’ 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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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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Home Improvement Contracting – Things Have Changed

Louisiana State Senate Chamber

Louisiana State Senate Chamber (Photo credit: jimmywayne)

Often times, people ask why it is referred to as the “practice of law.” Quite simply, the answer is because the law is always changing. In May of this year, I wrote about potential changes that could impact the construction industry following the 2013 Session of the Louisiana Legislature. Suffice it to say, the legislature did not go out of its way to amaze the populace with any widespread change in any field (insert general cynicism here). In the past calendar year, though, it has done some things that are immediately relevant in the construction field. Importantly, with regards to home improvement contracting, things have changed.

Casting a Wider Net

Before a discussion on the changes to home improvement contracting, I would direct you to previously written articles on this blog home improvement contracting generally. In March 2012, Seth Smiley wrote a very succinct article, outlining the most important aspects of the home improvement contracting articles, found at Louisiana Revised Statutes 37:2175.1 – 2175.6. From this article, we see that one of the most important aspects of determining the applicability of the home improvement contracting provisions rests on the definition of home improvement contracting. Previously, La. R.S. 37:2175.1 stated:

[e]very agreement to perform home improvement contracting services, as defined by this Part, in an amount in excess of seventy five hundred dollars, but not in excess of seventy-five thousand dollarsshall be in writing…

Since then, things have changed. During the 2012 legislative session, the Governor signed Act 193, which expanded the range of home improvement contracting projects to include any project between one thousand five hundred dollars and seventy-five thousand dollars. This very tightly limited the amount of work a person could contract to do without needing to be registered as a home improvement contractor with the Louisiana State Licensing Board for Contractors (LSLBC). Compounded upon the price range limitation, is the incredibly broad definition of “home improvement contracting,” which according to La. R.S. 37:2150.1(7) means :

the reconstruction, alteration, renovation, repair, modernization, conversion, improvement, removal, or demolition, or the construction of an addition to any pre-existing owner occupied building which building is used or designed to be used as a residence of dwelling unit, or to structures which are adjacent to such residence or building.

Given the fact that the LSLBC is not one to define these terms with much specificity, it can be argued that almost any type of work or home repair you contracted to perform from August 2012 to the present time calls for a home improvement contractor certificate. If you do not already have one, now might be the time to consider speaking with an attorney or contacting the LSLBC.

Expanding the Exceptions

At the same time that the home improvement contracting statutes have been made more restrictive with regards to contracts to perform certain work, certain exceptions have recently been expanded upon to make it easier on the handy homeowner. As I discussed in my May article, Senate Bill 81 proposed to expand the rights of homeowners that wished to perform certain home improvement contracting services upon their own property. After some tweaking, this exception will not become the law, effective August 1, 2013, albeit in slightly different form. The idea of relaxing the requirements for homeowners prevailed, but in different language. The statute governing exceptions to the home improvement contracting part (La. R.S. 2175.5), will now read, in part:

A. The following persons are excepted from the provisions of this Part:

(2)(a) A homeowner who physically performs the home improvement work on his personal residence.

(b) An individual who physically performs home improvement work on other property owned by him when the home improvement work has a    value of less than seven thousand five hundred dollars.

Summary of Things Changed

Essentially, the following questions will need to be asked:

  • First, am I the person contracting to perform any of the type of work as defined by 37:2150.1(7)? If I am the person that will be performing that work, is the amount in writing and am I getting paid for it? If I am getting paid for it, is it more than $1,500 but less than $75,000? If it is, you need to be registered.
  • Second, am I the person that is performing the defined work? Is that work being performed on my person residence? If yes, I do not need to be registered. If not, is that work being performed on propert I own that is not my residence? If that is the case, is the work to be performed valued at more than $7,500? If it is, I need to be registered as a home improvement contractor.

Confusing? Hopefully not. As always, though, the safest thing to do is consult an attorney because, as practitioners of law, we necessarily need to keep ourselves, and our clients, updated in changes to the law. The above is a perfect illustration of that point.

 

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Posted in:     Construction News, Law Changes & Updates, Licensing, Louisiana, Regulations  /  Tags: , , ,   /   1 Comment

Louisiana State Licensing Board for Contractors (LSLBC)- Not To Be Taken Lightly

Senate Judiciary Committee Hearing

(Photo credit: Talk Radio News Service)

In recent weeks, I have seen a spike in the number of issues coming across my desk that directly involve the Louisiana State Licensing Board for Contractors (“LSLBC”). While every situation has its own idiosyncrasies, when you find yourself being called to appear before the LSLBC, chances are very good you have a licensing problem. Here at the Wolfe Law Group, we have posted about Louisiana licensing law numerous times and have counseled numerous clients regarding their particular license issue. However, we have not really gone beyond the procedural legalese and really explained why the LSLBC is not to be taken lightly.

What is the LSLBC?

For many contractors, the first experience they have with the LSLBC is when they receive a letter from the LSLBC notifying them of a hearing they must attend because they have been accused of violating one of the statutes under the LSLBC’s jurisdiction. I know, that statement is just full of things “legal.” However, it is essential to understanding what the LSLBC is and why it should be taken seriously.

The LSLBC is an arm of the state government. It is not a court. This explains why many people are a little surprised when they are called before the LSLBC for a “hearing.” Even though it is not a court, since it is an agency of the state, it has been granted all of the powers to regulate aspects of the construction industry in Louisiana. Most importantly, this includes the power to punish those who violate certain statutes, particularly with regard to licensing requirements. This was a point of concern for one client recently: if the LSLBC isn’t court, how can it have jurisdiction over my company and fine us? The simple answer: it has jurisdiction over your company because you did work in this state and this state says that it has jurisdiction over your company. It has been this way since 1956, when the legislature created the LSLBC as it exists today, along with all of the rules that the LSLBC is charged with enforcing. All of which can be found in Louisiana Revised Statute 37:2150 et seq.

Any person that performs construction work in the State of Louisiana is subject to these provisions, and any person or company that performs work in this state that is not licensed is subject to punishment. This is why it is so important for contractors (especially out-of-state contractors) to get licensed or certified before beginning work in Louisiana. If you do not, it is the LSLBC that will come calling.

Who is the LSLBC?

The ladies and gentlemen that make up the LSLBC generally have two things in common. First, they are appointed by the Governor to sit on the Board for terms up to six years. Second, they have experience working in the construction industry. These qualifications are important in understanding where the LSLBC is coming from when it exercises its agency powers. While ruminations regarding the appointed nature of a Board position are best reserved for other arenas of public discourse, it is incredibly important for contractors to understand that the LSLBC consists of people with actual construction experience. These are people that “know what you’re going through,” so to speak. They have an understanding of that difficult homeowner, or that fight to get paid. With the exception of two “at-large” positions, this experience is a requirement to sit on the LSLBC, which makes the system inherently more fair.

Of course, this is a difficult concept to explain to a person or business that is being accused, by the Board, of violating one of its rules. I would suggest, though, that it is better (and financially safer) to be governed by a group of colleagues from within your profession, as opposed to a group of people who are removed from, or unrelated to, the construction industry. The LSLBC will always be an institution that exists to safeguard the construction profession. While this will sometimes manifest itself in coming down hard on members of that profession, it will likely be a fair, educated, and even-handed determination. Regardless, though, while a good approach is to know who and what you are up against, a better approach is to avoid that confrontation.

I Have a Hearing – What Now?

Of course, the hope is that you will not be called before the LSLBC for any violation. Whether you are an in-state contractor or out-of-state contractor, hopefully you have already contacted an attorney to make sure your licenses and registrations are current, relevant and secured. If you haven’t – do so! This should avoid being called before the LSLBC for any licensing violation. Sometimes, though, it cannot be avoided (for example, when a homeowner files a complaint about workmanship). Regardless of the underlying complaint, should you find yourself holding that letter demanding your appearance, you should not hesitate in contacting an attorney. For one, the procedure during an LSLBC hearing is almost entirely different from what one would normally expects at a hearing.

You will be required to enter a “plea” before the proceedings begin (sounds like criminal court). You will be entitled to review the evidence compiled against you, but this review happens on the day you show up for the hearing. You might be questioned by an attorney for the Board, or be able to ask questions of the Board’s investigator. Sometimes you might be able to have a more informal discussion of your matter with the Board itself, or they might just see all the evidence and make a determination. Sometimes, you might not even need to show up if you  offer to settle the matter, in writing, beforehand. It is, however, almost a guarantee that you will be fined with at least the administrative fee of $500.00. To se a general outcome of 2012 cases, see here.

The moral of the story: agency hearings are a different kind of animal, which is more likely to throw people for a loop. Your best bet is to prepare yourself by preparing your best case. Even though the situation is more informal than a court proceeding, the question is the same: has there been a violation of some law. Who better to help navigate that course than a lawyer with experience in that field of law?

 

 

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In The Pipeline – Changes in Louisiana Construction Law

Louisiana State Capitol, Baton Rouge

Louisiana State Capitol, Baton Rouge (Photo credit: Wikipedia)

If there is any one constant in the legal profession, it is that the law is an ever-evolving, dynamic thing. While there are some general principles that tend to not change all that drastically over the years, the devil truly is in the details. Having to keep abreast of these changes is why you’ll hear people refer to the “practice” of law – we attorneys must continue to learn and adapt as we continue through our careers. Here at Wolfe Law Group, we make sure to have our ears to the ground in order to provide the most up-to-date information for our clients and their businesses. This legislative session, there are several proposed changes in Louisiana construction law, all of which may critically impact how contractors do business in this state. This post is the first of two parts discussing those changes.

 Proposed Changes to the Private Works Act

There are currently three bills in various stages of the legislative process that would significantly change how different parties secure their rights to payment. The first, Senate Bill 183, is the furthest along of the three, having successfully passed through the Senate and out of the House Committee on Civil Law and Procedure. It is the only bill this session, and the first bill since 1999, that seeks to amend La. R.S. 9:4802. This statute outlines which parties are entitled to assert claims for payment against an owner and a contractor. Should this bill become law (which is likely given the total lack of opposition in the Senate or in the House Committee), lessors of movables would be required to provide formal notice to contractors and owners within 10 days of their materials being used on a project, as opposed to simple delivery of a lease. This change might sound insignificant, but it is because of that very reason why it is important for us to keep our clients informed. Without paying proper attention to how the law evolves, current or potential clients might lose their ability to secure payment because they were unaware of this formalizing shift in the law.

The other two bills, House Bill 190 and House Bill 362, propose changes to La. R.S. 9:4822. This statute is arguably the most important in the Private Works Act because it outlines and defines the time and notice requirements that must be met in order for parties to secure their right to make a claim to secure payment. House Bill 190 has passed through the House and awaits a vote in the Senate Committee on the Judiciary. This bill proposes the least significant of changes, merely stating clearly that statements of claim and privilege need not have attached copies of unpaid invoices unless the statement specifically states they are attached. House Bill 362, however, would extend the time requirements for parties to file their claims by double. When notices of contract have been properly filed and you are one of the parties entitled to a privilege by La. R.S. 9:4802, you would have sixty (60) days to file your claim after the notice of termination, as opposed to the current thirty (30) day window. If you are a contractor that properly filed your notice of contract (if necessary), you would have one hundred twenty (120) days to file your claim following termination or substantial completion, instead of the current sixty (60) day window. These deadlines are extended throughout the statute: all 30 day limits are changed to 60 days, and all 60 days are changed to 120 days. The success of this bill has yet to be seen: unlike the others, it hasn’t even made it out of committee yet, and the session is fast coming to a close.

An Easing of Home Improvement Contracting Registration

Securing and maintaining the proper licensing and registration is incredibly important in the construction world here in Louisiana. The knowledge and expertise required in performing such work or providing these services is why it is always recommended that people seek out professional assistance, especially for work around the home. Surprisingly, and not necessarily wisely, Senate Bill 81 proposes to modify the status quo in relaxing registration requirement for home improvement contracting. Currently, no person shall undertake or perform or agree to perform home improvement contracting services unless they are registered with the Residential Building Contractors Subcommittee of the State Licensing Board for Contractors as a home improvement contractor. The proposed law (which unanimously passed the Senate and is scheduled for floor debate in the House on May 16th), adds the following exception to La. R.S. 37:2175.2:

No individual shall undertake on his own property self-performed home improvement contracting services having a value in excess of seven thousand five hundred dollars unless registered with and approved by the Residential Building Contractors Subcommittee of the State Licensing Board for Contractors as a home improvement contractor.

Basically, the legislature is trying to make it easier for a homeowner to perform certain work on his or her property without having to go through the necessary registration channels. While this might not be an issue for some, it is worrying that something as particularized as home construction may be continuing down a path of non-regulation. The true extent of this relaxation, of course, will remain to be seen.

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Posted in:     Construction News, Filing Requirements, Law Changes & Updates, Licensing, Louisiana, Mechanics Lien, Payment Requirements, Regulations  /    /   1 Comment