me vs. big corp: who to sue and where?

[marck]

I apologize for the long post. My situation is a bit complicated, which is why I would especially appreciate your help!

I'm self-employed in Maryland. For the past several years, I had a good relationship with a client company in California--repeat business, quick payments. In July, this CA company, while owing me about $4K for my services, was suddenly closed by its parent, a large multinational with a U.S. base in Florida. The CA company was just shut down, not declared bankrupt, and the FL company has plenty of money.

I've spent the last several months trying to collect on the $4K bill from both the FL and CA offices, with no luck. When I call FL, they refuse to talk to me, telling me to call CA. When I call CA, nobody responds. I've also re-sent my invoice, along with firm but polite requests for payment, in several e-mails (tracked, so I know they were opened) and a Fedex letter to the CA company's president and to its CFO. (They were kept on for a few months, apparently to tie up loose ends.)

Last week, I finally got a brief e-mail from the CFO acknowledging the debt, but he said liquidators are coming in and I'd be notified "soon" about whatever settlement they decided on. This is not acceptable to me.

Meanwhile, I've learned that the CA president has bought some of the assets from the closed company, including the project I worked on, for a new company. His partner told me they only plan to pay the old debts they have to, like to the warehouse to release the goods--and my services don't belong in that category.

It seems that my only hope of recovering a substantial part of this debt is to file suit, probably in Small Claims. But:

* Who do I file against: the parent FL company, the closed CA company, or the new startup?

* Where do I file: in my home state of MD (with its $2.5K cap for small claims), in FL, or in CA?

Thanks in advance for any insight!

 

[JETX]

It sounds to me like you are letting yourself get sidetracked by this issue of ownership. I would suggest that you need to step back and look at the issue of "Who REALLY owes you the money". To do this, you have to make a couple of determinations:
1) What company was your work ACTUALLY done for??
2) Who were your 'company contacts' and what company did THEY work for??
3) Was there a written agreement in place??
4) Where did you send your invoices and what company were they addressed to??
5) What company assigned the work to you??

The answers to the above will help you determine who the defendant might be... and where they are located.

If your answers to the above all point to the California company, that is your defendant and NOT the parent company (though you could list them as a co-defendant).

Now, once you have determined who the 'enemy' is, then you can proceed with trying to determine jurisdictional venue.

The question of legal venue is always a challenge and the 'route' to determination is often not clear.

In your case, you have several options.....
1) File in YOUR local courts. Your success in keeping it there would be determined by whether they challenge the venue and by what the specifics of the situation are. Some issues to consider: Did you do ALL of your work in your location?? Was a contract entered into?? If so, where was it signed?? Does the Defendant have offices or do business in your state??? What location, if any, is stipulated in an agreement (if any)???

2) File in CA courts. Again, the Defendant could challenge that move based on some of the above arguments. Plus that 'corporation' may no longer have seizable assets.

3) And this is the best 'coverall' answer... sue in the Federal courts. That way you eliminate the issue of jurisdiction entirely. Of course, this will require you to hire an attorney.

Finally, I can't help but feel that, unless you have a significant amount of 'layman legal skill', you will very probably require an attorney to pursue this matter..... and that may not be economically practical for $4,000.00.

 

[marck]

Thanks for your quick response!

>> I can't help but feel that <snip> you will very probably require an attorney to pursue this matter..... and that may not be economically practical for $4,000.00.

Yes, that's the catch-22 I was afraid I was in: too big an amount for me, little self-employed person, to just "write off," but too small an amount to pay a lawyer. That's why I thought I should pursue it in Small Claims instead of a higher court.

>>I would suggest that you need to step back and look at the issue of "Who REALLY owes you the money".

* There was no formal written agreement, just a "paper trail" of e-mails, purchase orders, and invoices, all with employees of the CA company.

* OTOH, the payments all came from "FL company dba CA company."

* The 1099s came from the FL company.

* The California Secretary of State's Web site lists the incorporation of the FL company at the CA company's address.

I should also mention that the FL office's official designation is "central services" for all the divisions of the multinational in this country. As far as I can tell, it doesn't actually produce anything itself; it just supplies accounting, management, etc. for the other offices, including the one in CA.

I guess I'm basically asking if I could make a case for naming the FL company as the main defendant. The CA company would probably have little or no assets by the time a suit went to court, since those assets are being disposed of by FL's liquidators. Also, FL precipitated the whole problem by closing down the CA operation literally overnight.

I've even been told by former CA employees that FL ordered CA to stop all payments to creditors. If I could get sworn testimony of this, would it help anything?

Thanks again; it's an education, if nothing else. It's even got me thinking about taking the LSATs!

 

[JETX]

Since you really have little to lose, I might consider filing a small claims action in my 'home county' listing BOTH the CA and the FL corporation as Defendants. Then serve both of them and see if they challenge venue. There is a possibility that they could fail to respond to your suit and you would get a default judgment. You could then domesticate that judgment to FL to try to enforce it. All of this will cost a few $100, but it might just succeed.

Don't forget that, unless you can separate the invoices into multiple actions, you will have to settle for the jurisdictional limits of the court.

 

[marck]

Thanks again, Halket!

>>...consider filing a small claims action in my 'home county' listing BOTH the CA and the FL corporation as Defendants.

I think that's probably what I'll try, even though I'll only get, at best, $2.5K of the $4K owed.

>>Don't forget that, unless you can separate the invoices into multiple actions, you will have to settle for the jurisdictional limits of the court.

Yep, that's taught me an important lesson: never have a line item on an invoice that's more than your state's cap! Had I known, I could have easily split the total into two invoices of $2K each, i.e., "work for week 1" and "work for week 2."

 

[JETX]

You might still try splitting into two cases. This will double your costs (two filings, two services, etc.), but depending on the court you might 'get away' with it. I would consider asking the court staff.

 

[marck]

Thanks yet again for your insight.

The latest news is that the liquidators at the CA office are supposed to be sending offer letters to creditors like me this week. Any idea what kind of percentage I might expect on my $4K bill? If it's anywhere close to what I'm owed, I'll obviously take it, but if it's, say, 10 cents on the dollar, I'll probably try filing a suit--and talk to the clerk about the possibility of splitting the claim.

The CFO in CA says the main (FL) office set up several "barriers" between it and CA--apparently, mainly so FL could walk away without responsibility for the shutdown, even though it was ordered by FL. One barrier he mentioned was separate incorporation in the state of CA, but I'm not sure that really holds up, since the incorporation seems to be "FL dba CA."

My ability to successfully pursue FL in Small Claims would seem to hinge on proving CA was part of it. Any suggestions on what might help support that? The FL Web site mentions things like the "acquisition" of CA as a "division" of FL. Would that help?

BTW, according to the CA CFO, there is no bankruptcy--they were just told to shut the doors and liquidate. Would this have any bearing on an eventual suit?

 

[JETX]

Q1) "Any idea what kind of percentage I might expect on my $4K bill?"
A1) There is NO way for any of us to know what they might offer.

Q2) "The CFO in CA says the main (FL) office set up several "barriers" between it and CA--apparently, mainly so FL could walk away without responsibility for the shutdown, even though it was ordered by FL. One barrier he mentioned was separate incorporation in the state of CA, but I'm not sure that really holds up, since the incorporation seems to be "FL dba CA.""
A2) If the business was set up as a d/b/a of the Florida corporation, the FL corporation is NOT isolated and would be subject to debts of the d/b/a organization.

Q3) "My ability to successfully pursue FL in Small Claims would seem to hinge on proving CA was part of it. Any suggestions on what might help support that?"
A3) Certified copies of any documents showing that the CA business was in fact a subsidiary or debt liability of the FL corporation.

Q4) The FL Web site mentions things like the "acquisition" of CA as a "division" of FL. Would that help?"
A4) Depends entirely on the realities of the 'acquisition' and the structure of the two companies.

Q5) "BTW, according to the CA CFO, there is no bankruptcy--they were just told to shut the doors and liquidate. Would this have any bearing on an eventual suit?"
A5) Absolutely. A bankruptcy filing would stop any and ALL efforts of a court or attempts to enforce.