You’ve invoiced for your work and sent statements. You’ve followed up with emails and phone calls. You’ve escalated the issue as much as you can. At this point, it’s clear that your customer has no intention to pay you what you’re owed. You do have the option sue your client (likely in small claims court) for nonpayment of fees — but is it worth it? Before you take action, ask yourself a few questions to determine if small claims is the right remedy for you.
Small Claims Basics
As far as legal remedies go, small claims court is an inexpensive and relatively quick option. You don’t need a lawyer to represent yourself and the judge will make a decision within a few days of the trial. Small claims court is specifically designed for smaller-ticket disputes. The most you can sue for ranges from $2,500 to $15,000 depending on the state you do business in.
Can You Sue Them?
In this Nolo article, attorney Ralph Warner points out that small claims court works best when both parties reside in the same state. Businesses can only be sued in a state in which they operate. You can sue an out-of-state resident, but only if you can manage to serve the person papers when the person is in your state. So, if you did some design work for a company in Florida but you’re in Oregon, for example, it may be difficult to use the Oregon small claims system for your claim unless the client has an Oregon office.
Is it Worth the Time and Energy?
Small claims court isn’t expensive to pursue, but it does take time away from revenue-producing activities. To begin the action, you must file paperwork with the court clerk and wait for a hearing date. Before the court date, you need to gather and organize all the documentation that supports your case — like contracts, canceled checks, and emails — to provide to the judge. You’ll be asked to explain your side, so you should prepare what you want to say beforehand.
Aside from the value of your time, there’s a mental cost to pay. Working on your case will be a constant reminder of the anger and frustration the client caused you, which won’t leave you in a healthy state of mind.
Do You Have a Good Case?
To succeed in small claims court, you need evidence of a breach of contract. If your contract is vague, confusing, or not in writing, it will be more difficult to prove that the contract’s been broken. You’re also responsible for proving that you completed and provided the work required of you under the terms of the contract. If the defendant felt that your work was substandard or you delivered the product late, it may be harder to win.
Can You Collect?
Just because a small claims court issues a judgment in your favor doesn’t mean that you’ll get paid. You’re responsible for collecting the judgment; the court won’t do it for you. If the defendant doesn’t pay, you can contact an enforcement agency and request a wage garnishment or that the defendant’s assets be seized. However, if the defendant doesn’t have enough money, the Superior Court of California notes that it can be quite difficult to collect the judgment.
What Will It Do for Business?
Taking a deadbeat client to small claims court is empowering, and you’re well within your right to do it. However, you also have to consider the effect it will probably have on your business. Perhaps taking your client to small claims court will show other clients that they can’t push you around. It’s also possible that the client you sue will bad-mouth you and harm your reputation. Even if you were in the right, other folks may get a skewed version of the facts. Potential clients may be hesitant to work with you knowing that you have a sued a previous client, even if you were within your rights to do it.