Can I be sued for "lost revenue"?

[cfitz2113]

What is the name of your state (only U.S. law)? Potential defendant is in Tennessee, potential plaintiff is in New York


I am a web designer operating a business set up as a sole proprietorship. I undertook a project for someone in NY to develop a complex website. He paid a retainer/initial deposit and signed a contract specifying 3 additional payment milestones for the project.

I delivered about 40-45% of the work (his total payments were about 35% of the contracted price), and, due to some unfortunate circumstances, had to terminate the project.

This was about 6-8 weeks ago.

About a week ago, I got an email from him demanding a refund of the initial deposit/retainer. He did not demand a refund of the second payment milestone. (He did not pay anything beyond the 2nd milestone). His logic was that a "retainer" is fully refundable if a project is not 100% completed. My position is that the retainer assured that I would receive "at least" that much for my work, even if he defaulted on any of the other payment milestones.

I refused to give a refund for the retainer, citing the fact that he had accepted and paid for about 40% of the total work, and had actually paid for less than that.

Now he is threatening to sue me for "lost revenue" of 3 months, which is the figure he has arrived at as how long me having to end the project without completing it has set him back on his timeline.

He stated that he is going to wait until 3 months after the site is operational and making money, then, use that 3 month period as a basis to create a dollar amount of damages for "lost revenue" to seek against me.

I don't believe he can do this, especially since our contract contained no specific project delivery date (though in correspondence, I did project estimated timelines), but I'm trying to determine if there is really substance to his threat.


Also, does becoming an LLC offer me personally any protection, and if so, and I became an LLC only -after- the incident, would it still shield me?


Regarding jurisdiction - the plaintiff is in New York, I am in Tennessee. Yet we never met, and all work product that changed hands was done through email. So who has jurisdiction? TN? NY? Federal only?


Thanks for any input and advice.



Chris

 

[seniorjudge]

Q: Also, does becoming an LLC offer me personally any protection, and if so, and I became an LLC only -after- the incident, would it still shield me?

A: Possibly and no.



Q: Regarding jurisdiction - the plaintiff is in New York, I am in Tennessee. Yet we never met, and all work product that changed hands was done through email. So who has jurisdiction? TN? NY? Federal only?

A: Possibly all three.

 

[cfitz2113]

Thanks for your quick response.

Regarding jurisdiction - can he sue in any and all courts having jurisdiction, or is there some sort of "double jeopardy" clause for civil claims as well? (Though I know that federal court and state court prosecutions for the same crime are allowable under an exclusion to double jeopardy)


With regard to his claim that I can be sued for lost revenue when:

• the contract itself did not specify a required delivery date
• the only delivery projections given were in informal email correspondence
• I can bring up arguments against his "3 month" timeline

Thanks again!

 

[seniorjudge]

Q: Regarding jurisdiction - can he sue in any and all courts having jurisdiction, or is there some sort of "double jeopardy" clause for civil claims as well?

A: Res judicata. Google.

 

[cfitz2113]

Thanks, I read up on it.

Only other question is the most important one - is there even a basis for a lawsuit in the first place?

 

[Zigner]

Thanks, I read up on it.

Only other question is the most important one - is there even a basis for a lawsuit in the first place?

Anybody can sue anyone for anything at any time.

If you are sued, you will have to defend yourself.

Whether we think there is a basis or not (or even if YOU don't think there's a basis), you can be sued.

 

[seniorjudge]

Anybody can sue anyone for anything at any time.

If you are sued, you will have to defend yourself.

Whether we think there is a basis or not (or even if YOU don't think there's a basis), you can be sued.

I agree.
...

 

[cfitz2113]

You legal minds are so technical.

Yes, I agree that you can sue anyone for anything these days.

The more specific question is, is this generally the type of claim that can actually be successful, as opposed to a claim that will be easily dismissed?

 

[Zigner]

You legal minds are so technical.

Yes, I agree that you can sue anyone for anything these days.

The more specific question is, is this generally the type of claim that can actually be successful, as opposed to a claim that will be easily dismissed?

Yours doesn't sound like a simple "easily dismissed" case.

 

[seniorjudge]

You legal minds are so technical.

Yes, I agree that you can sue anyone for anything these days.

The more specific question is, is this generally the type of claim that can actually be successful, as opposed to a claim that will be easily dismissed?

Sorry...we can't see into the future.

 

[cfitz2113]

I understand that no one can say with authority what will happen.

I just didn't know if "lost revenue" based on "what ifs" is even something a court would take seriously, as a matter of law and/or precedent.

Obviously lawsuits are dismissed as frivolous or speculative every day. I was hoping that this one would be similar.

 

[Rexlan]

He will need to prove the damages and the described method is one of many to measure them.

I think he is certainly entitled to a full refund, at a minimum. A half completed complex website is almost worthless. You might make that offer and see if it with a kiss will resolve the issues for everyone.

 

[tranquility]

While the law changes through time, one of the first cases I read in contracts class was, Hadley v. Baxnedale, Court of Exchequer, 1854. Foreseeability is the key. Unless the contract specifically stated all the possible damages from you not performing, I'd say he can't get consequential damages (lost profits) from you not finishing the project.

From a basic remedies standpoint, they would be exceedingly hard to prove up for a new business area. From a contractual standpoint, such damages are not generally contemplated as a black letter rule of law.

The law changes and the few contracts cases I see seem to reach for income damages more and more. But, I don't think they're getting it.

While you're looking up things on the internet, I bet the case I cited is on wikipedia--which should tell you more.

 

[seniorjudge]

...
While the law changes through time, one of the first cases I read in contracts class was, Hadley v. Baxnedale, Court of Exchequer, 1854.
...

That was decided after I got out of law school.

 

[cfitz2113]

Rexlan,

A very large portion of the deliverables provided were vector format graphics (including a custom logo) and a layered Photoshop file containing the core site design. Any company after me could and would have used this material with no complications. In web design terms, this was like giving someone a hammer, which they can of course use to drive any nail.

As for the programming side, the database structure was conceptualized and set up in mySQL, which is the overwhelming standard for web development, and any of the code that was done was completed in PHP, which is also an overwhelming standard. In other words, it's not as ubiquitous as the "hammer", but 80-90% of web developers could have also used it without having to start from scratch in any way.

So I'm hoping that if it does come to suit, these facts will work in my favor. The company he chose did in fact throw out everything but the design work (which alone was worth what he paid ) in order to develop the site on some obscure platform, but, he didn't have to choose a company that would do that.