Freelance Editorial Association News, Fall 1997 Volume 13, Number 3
Debra Aglaia
At some time all of us may have trouble receiving payment from a client. The client may be a habitual late payer, have temporary cash flow problems, be in a state of confusion because of a merger or consolidation, or plan to go out of business. Whatever the reason, those of us who freelance are susceptible to bearing the brunt of our clients' money problems and may find ourselves pursuing payment through the courts.
As professionals, we know to make every effort to obtain payment from clients before resorting to legal action. Doing things such as calling the person with whom you've worked on the project, calling the company's financial officer, calling the company's general manager and/or owner, following up with letters, and following up with more letters sent by certified mail are all good ways to let your client know that you won't be ignored. But sometimes our best efforts fail and the only recourse is legal help.
This is where your state's Small Claims Court may come in—and where the process gets more complicated. Each state (even counties within the same state) has different requirements that must be met before you can file a small claim.
If you haven't already done so, I suggest that you get information from your county or state small claims office so you have it handy. Small claims courts are consumer-oriented, and these courts often have brochures detailing court requirements and procedures or will be able to provide information over the phone. But remember that court clerks are not attorneys and will not provide legal advice (they are not knowledgeable and such action is prohibited). Collections agencies are another source of advice. Although not always willing to talk, agents are experts in collecting and can provide information about what to do before taking the legal route and what the legal requirements are should you take that route.
Requirements for Filing a Claim
Personally, I am dismayed at the litigiousness of our society. However, seeking information is not litigation. For your own protection, it's wise to know in advance the requirements for filing a small claim because this information can and will have a bearing on how you pursue payment. Before discussing how you pursue payment, I will address the questions that a small claims office will expect you to answer.
What is the amount of your claim? Be sure it doesn't exceed the amount dictated by your state. Each state has its own rules for what constitutes a small claim; for example, in Missouri the amount is $3,000. If your claim amount is greater than what the state allows, you may need the services of an attorney. If you think your claim does not exceed the maximum state-dictated amount, then consider the costs of pursuing a small claim. Extraneous costs include mileage to court buildings, telephone calls, court filing fees, and sheriff's costs for serving a summons. These costs may be reimbursable by the court, but your total claim may not be reimbursable for an amount over the state's maximum. In other words, if your state's maximum small claim amount is $2,000, your claim is $1,950, and the extraneous costs total $200, you may not be able to claim $2,150 ($1,950 + $200) because your claim will be limited to $2,000. A note of caution as well, the court may or may not have procedures for adding extraneous costs such as filing fees and sheriff's summons fees to your judgment. It's a good idea to know this in advance and add the actual and expected extraneous costs to the original amount. For example, if the client's payment should have been $700 and your spend $100 filing a small claim, then submit your original court petition for $800.
Have you made and documented every "reasonable effort" to obtain payment outside of the court? Because a small claim is considered a suit, and the court considers a suit to be a "serious matter," the court will expect you to make an equally serious effort to settle your dispute before filing a claim. Unless you have pursued payment and meet the court's requirements, you will not be able to file a small claim.
Your state or county small claims office may treat small claims against individuals differently from those against corporations.
If you and your client reside in the same state, it could be easier to pursue a small claim. If, however, your client conducts business in a different state, you may be required to pursue the claim in the state in which your client resides. According to St. Louis County, a small claim can be pursued either in the county where the claimant's (your) capital city is located or "in the county where the facts of the case occurred." For example, I live in St. Charles County, MO; my client was located in Hartford, CT. The St. Louis County small claims office directed me to contact the Fairfield County (CT) police for information about filing a small claim. Your state or county may advise differently.
Considerations for Filing a Claim
Information about pursuing an out-of-state claim is necessary to determine whether the cost of filing a claim is worth the benefit you expect. Does the state in which the defendant (your client) resides have a mechanism by which you can sue for a small claim? Will you have to appear in person in this state's small claims court? These are a few of the questions I would ask myself when considering whether to file a small claim against a company located in another state.
Although the purpose of small claims court is to "resolve disputes quickly, informally, and with little cost," it is still a complicated, lengthy, and time-consuming process. As such, it's important to consider if the time and effort of pursuing your claim is worth the possible outcome before you start the process.
The court may award a judgment to you, but you will not automatically receive the amount awarded. As the plaintiff to which the judgment is awarded, you will be able to request that the court attach your client's assets (for example, company vehicles, capital equipment, bank accounts). But if no assets exist, you may receive nothing.
Also, being first in line to file a small claim (which requires having information on hand about your state or county small claims court) could give you an edge in gaining attachment to a company's assets. For example, although I suspected that my client might be going out of business, I didn't get to small claims court until two weeks after the company closed down. Even though I had already made every "reasonable effort" and met the court's requirements for filing a petition, the actual hearing did not occur until two months later (three months after the company shut down). I was awarded the judgment for my fees ($705) and my petition as well as the extraneous costs (an additional $87). However, my court's procedure requires that a garnishment (the legal summons) not be issued until two weeks following the judgment. A month later, I received a check for $82.39.
Would I have received more if I had acted sooner? I'll never know. The point is that I may have acted on my first suspicion that this company was going out of business had I already educated myself about what would be required and how long the small claims process would take. The purpose of this article is to help you make a more informed decision should the time come.
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