A SMALL BUSINESS CLAIM

Recently, a small business in New York asked me what can be done about a customer who was located out of state, did not do business in New York State, had no assets in New York State and entered into an agreement with the New York State client which provided that the New York State client would provide services for the customer out of state. Naturally, what happened was that the client performed the services out of state for the customer but the customer failed to pay the client. This is a common problem - the client can try and sue the customer in New York State but the customer may claim it is not subject to the jurisdiction of New York State. And even assuming that a judgment could be obtained against the customer, by default or otherwise, unless the out of state client agrees to pay the judgment immediately, the judgment would have to be sent to an out of state attorney to have the judgment enforced in the state where the customer had assets. There are some possible solutions to this problem, including a valid consent to New York jurisdiction clause in every contract with out of state customers, down payments, amounts held in escrow, bonds, etc., but let me relate one story about the problems with enforcing claims by a New York State small business with an out of state customer. I once received in federal court, after 2 years of litigation and a jury trial, a judgment for a New York State client against a small business in a neighboring state. It then took another year, with appeals, etc. to get the judgment finalized. But then, the biggest problem was enforcing the judgment as the out of state small business refused to pay the judgment and attempted to withhold all information about the location of its assets. After a year, I hired a private detective to go through the garbage of the small business to locate it's bank accounts. Finally, we were able to enforce the judgment and collect the monies due. This took 4 years: the amount of legal fees incurred equaled the amount of the monies collected so I agreed to cut my fee in half. But don't be fooled - getting a judgment may be easy, enforcing it can be hard!