Do not wait, it may be too late.
Get a lawyer. Get one now. Do not wait. It may be too late. Do not hesitate. Be the first one on your block to be represented by an attorney. Don’t wait until you think you need one. Don’t wait until you are faced with a problem collecting a fee and need help. Know one now and get advice before that happens.
You are in a business. I know it is a professional occupation, but it is also a “business;” a business based on contracts between you and your clients. And your clients have lawyers on their staff or use them on a retained basis. You have to get on an even par with them before they have the advantage over you. Do not delay any longer, stop and get a lawyer now and then come back to read the rest of this article. But if you put it off, do not blame me. Read on.
Jurisdiction and Venue
When your client tells you that they will not pay your fee, you then go to see your lawyer, with those immortal words on your lips: “Sue the ——–.“ The lawyer’s first question will probably be, “Where is the company located?” Chances are it is not located in your town, or may not even be in your state. Why are you being asked this question? There are several reasons. Your lawyer is licensed in your state and practices in your state with an office in your state and cannot go running around the country suing defendants in other states without using local counsel in that state. Besides which, it is inordinately expensive to do that.
But you say “Sue the company!” here in your town, in your state, and make them come to you. He says in response that, “We need to have jurisdiction and venue over the defendant company to be able to do that.” What does that mean?
Venue is the location where you are suing; in your case your town, your state. In order to be able to sue a defendant in that location, the defendant has to be located within the state or has to have committed some act as defined by the applicable statute that subjects it to the courts in your state. The definition of venue is as follows:
The proper or possible place for the trial of a lawsuit because the place has some connection with the events that have given rise to the lawsuit.
Jurisdiction on the other hand refers to the power of the court to try the case and is defined as follows:
A court’s authority to hear a wide range of cases that arise within its geographic area without any showing that a connection exists between the claims and the forum state.
As an example, a court may have a minimum dollar claim amount in order for the case to be tried in that court. In the case of federal courts, for example, the claim must be for a minimum of at least $75,000.00. Various levels of state courts may have similar requirements with differing amounts.
So the big question is usually about venue and whether the defendant is subject to being sued in your local court, and that will depend on the controlling statute in your state. Simply said, state laws generally require that the defendant company have a place of business in your state, or a representative came to visit you at your office and so became a presence in your state, or the defendant company was “doing business” in your state.
“Doing business” has a definition all by itself and varies from state to state. In some states it requires that the other party have been physically present in the state. In other states the fact that the company retained your services and knew that your work would take place in your state would satisfy the venue requirement.
Ask your lawyer
So now, seeing the problem, you seek counsel’s advice and this is what he might suggest you consider: insert a clause into your contract that requires that the company client submit to the jurisdiction and venue of the courts in your neighborhood in the event that any controversy arises out of the contract. It might read as follows:
This Agreement will be governed by and enforced in accordance with the laws of the state of _____. The parties agree that state and federal courts within the City of _____ and state of ____ shall have the exclusive jurisdiction over any litigation brought or arising out of this Agreement.
Now what you have is the ability to sue the company that has not paid your fee — in your own backyard — and the company has to come to you from wherever they are. That makes it inconvenient and expensive for them. The opposite of what they would like you to see happen. Will some companies balk at this provision? Yes, that can and will happen. But what other controversy is likely to arise out of your relationship other than the fee and the company’s failure to pay it? If the company objects, is that a warning sign for what could happen? It becomes your business decision.
Long Arm Statute
Some states have a statute that might say:
“… a court may exercise personal jurisdiction over any non-domiciliary…who in person or through an agent: …transacts any business within the state….”
It is called a “L o n g A r m” Statute. So you can reach out from your own state and sue that non-paying client on your home turf.
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In layman’s language this means that if someone has purposely availed himself of the privileges and benefits of your state’s laws, he is deemed to have subjected himself to the jurisdiction of the courts in your state.
Simply stated, what this means is if a client in California asks a recruiter in New York to find a candidate and then does not pay the recruiter the fee that is due, then the client can be sued in a New York Court. So if you are a California client you have to come a long way to defend that lawsuit.
But it may not be as simple as it sounds, because it too is subject to interpretation as to the meaning of “transacts business within the state.” So here again you have to ask your lawyer about the use of this statute to sue your non-fee paying client.
All Placements are Local
One last but very important matter to keep in mind — like the saying “All politics is local,” the same is true about all fee litigation; it too is local.
A lawyer can only bring suit in the state in which the lawyer is admitted to practice. A lawyer in one state cannot institute suit in another state where the lawyer is not admitted. That is why you need a local lawyer wherever you intend to sue. That is why having a local jurisdiction and venue provision or using a Long Arm Statute allows you to use your local counsel. So if you want or need to sue the company in its home state, you need to have your lawyer find local counsel in that state to do it.
But can your lawyer send the company a “lawyer letter?” Of course you could have that done. Will it have any effect? I doubt it and I consider it a waste. If the client is not paying, you need to think in terms of suing, not letter writing. In these days they are generally ignored.
I am a strong believer in using a lawyer to review your contract before it becomes the subject of a controversy. Your contract is the basis of your doing business and you should know what every provision means and what can or cannot be enforced in a court of law. You should not just use some competitor’s contract as though it was just a “form.” A contract is a living instrument as it governs the relationship between you and your client. Why not then be aware of what it all means? So, get a lawyer; now.
More on contracts to come in future articles.
Note: This article is not intended as legal advice. In all instances the reader is cautioned to consult with legal counsel when utilizing this information. A.B.F.