Pre-Litigation Considerations:
I want to sue, so now what happens?

You have received your last broken promise and you have decided that now you want to proceed with suit against the debtor. What is involved in filing suit? How much does it cost? How long does it take? Is it worth the effort and expense?

The first decision that will be made, in consultation with your attorney, is what type of action will be brought against your customer. The following are the most common causes of action for a typical collection account:

1. Open Account - an open account is typically an account in which purchases are periodically made, with the intent that purchases will be totaled in a single account. A statement is then periodically furnished to the debtor. An open account tends to be one of the simplest and most cost effective methods of establishing an obligation. Other related forms of action include an action on an account stated which is generally defined as an agreement stated between persons who have had previous transactions, fixing the amount due in respect to the transaction and promising payment. Another form of action is that of goods sold and delivered. In an action to recover on a claim for goods sold and delivered, typically the plaintiff must prove delivery of goods and show either an agreement upon the sale price or that the amount claimed represents a reasonable value of the goods actually delivered.
   
   
2. Breach of contract - In an action for breach of contract, the essential elements include the establishment of the valid and enforceable contract between the parties, a breach of said contract by the defendant, and the resulting damages to the plaintiff. Typically the benefits of bringing an action on a breach of contract, (including a credit application) include the ability to seek recovery of attorney's fees, interest at a higher rate, as well as other beneficial provisions contained in the contract (i.e., submission to jurisdiction and agreement as to venue).
   
   
3. NSF checks - When a customer provides you with a bad check, they also provide you with a very easy and valuable means of establishing your obligation as well as the opportunity to recover significantly more than the amount of the check provided that you follow the requirements of Florida Statute 68.065 (see NSF check letter in the forms section of this web site which is available free to clients for downloading). Florida Statute 68.065 provides that treble damages (three times the amount of the check) plus the amount of the check can be recovered from the maker should the maker or drawer fail to pay the amount owing to the payee within 30 days following a prescribed written demand thereof.

Additionally, by statute a creditor can recover costs of suit as well as reasonable attorney's fees.

Supporting documentation:

What proof will you need?

Typically your attorney will need the following supporting documentation to analyze your case and determine what would be the most cost effective cause of action to initiate: a credit application (see article " Does Your Credit Application Protect You"), a statement of account reflecting the dates of all charges, an itemization of the charges and the amount due; and any correspondence between the parties which contain any admission of liability by the customer or defendant. Invoices are usually not needed at the time an account is placed for collection, but may be needed should a suit be brought on a specific invoice. In order for any special terms or conditions printed on the invoice to be enforceable, the invoices generally need to be signed by an individual with the authority to bind the debtor. Delivery receipts can be introduced at trial to establish delivery of goods as well as any attendant terms and conditions as set forth in the delivery receipts. Any contracts, NSF checks or other documentation executed by the debtor should be provided for evaluation as well.

How Small is Too Small?

The size of the claim will determine the "jurisdiction" of the court which will hear your case. In Florida, all claims less than $5,000.00 are considered governed by the "Small Claims Court". Claims greater than $5,000.00 but less than $15,000.00 are heard by County Court Judges and any claims greater than $15,000.00 exclusive of interest, costs and fees are heard by a Circuit Court Judge.

Our office typically believes that suit for an action less than $2,500.00 may not be cost effective, especially if there is no contractual or statutory provision which will provide for the recovery of attorney's fees.

How Old is Too Old?

Statistically, the older your claim, the less likely your prospects for recovery, although there are always exceptions to this rule. One warning in dealing with older claims is that most states, including Florida, have a statute of limitations. Typically a civil action or proceeding must be brought within the time set forth in the statute or it will be barred. The most common statute of limitation for actions by creditors is the four year statute of limitation which deals with an action for a contractual obligation or liability not founded upon a written instrument, including an action for the sale and delivery of goods, wares, merchandise and on store accounts. If an action is founded on a written instrument, the statute of limitations is typically five years. Always check with your attorney regarding the facts in your particular case.

Jurisdiction and Venue

Where is suit filed?

In general, the jurisdiction of a court is its power to hear and decide cases. To be able to hear a case, the court must have jurisdiction of not only the parties in the lawsuit, but also the subject matter of the case. Jurisdiction is typically conferred by the state constitution and state statutes. By having jurisdiction over a case, the court has the authority to render orders and decrees that are legally binding upon the parties.

Besides jurisdiction, a plaintiff must determine in which "venue" the suit should be brought. Venue is the geographical area of responsibility for each court. In Florida, there is a county and circuit court in every county and each court has a geographical area of responsibility. Typically, venue is deemed to lie in either the county where the defendant resides or the cause of action accrued. On a cause of action on a contract for payment of money, when the contract debtor defaults on payments thereof, the cause of action is deemed to have accrued in the county where payment was to have been made. In such a case, if no place of payment is expressly agreed upon, it will be implied that payment was to be made in the county where the contract creditor resides. Additionally, a cause of action on a contract for payment of money, where the contract debtor has defaulted on payments thereof, accrues in the county where payment was agreed to be made and if no place of payment has been expressly agreed upon, it will be implied that payment was to be made in the county where the contract creditor resides. Notwithstanding statutory venue provisions, parties may provide by agreement where suit may be brought to enforce the agreement.

Costs and Fees

How much will this cost?

Legal fees and costs are a practical consideration for all litigation. As a result, the inclusion of a provision in a contract or credit application that provides for the recovery of the attorney's fees by a prevailing party may determine whether or not a party finds it cost effective to initiate litigation. Recent revisions to Florida statutes have expanded the ability of a litigant to recover attorney's fees in equal amounts from the losing party and the losing party's attorney.

Joseph & Marees provides each client with a written evaluation of their claim prior to filing suit as well as detailed explanations as to all fees and costs which will be incurred during the course of the litigation so that a client can properly evaluate the cost effectiveness of proceeding with litigation.

Contact us for any questions you have regarding proceeding with suit against a customer for an obligation owed your company.

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