Background: In August of 2001, a recruiter who operates as a franchise of my company entered into an agreement with a local company in his city to search for a Vice President of Marketing. This company has a profitable E-Commerce Electronics company that generates a $75,000,000-$100,000,000 volume. The recruiter has a 20+ year relationship with the Vice President of Human Resources and unfortunately took this assignment on a hand shake, which as we all know, is a breach of Cardinal rule #1: always get a binding, signed fee agreement.He took the assignment in good faith, worked on it for months, and it culminated in the company making an offer at $120,000. The fee owed to us was $30,000. The candidate started in December 2001 and we sent our invoice to the Vice president of HR. A week later he called my recruiter and informed us that they would not pay the bill. Their position was that we were not responsible for getting him hired, only for referring him and therefore didn’t do $30,000 worth of work. We were also told that since we did not have a signed fee agreement, although we did send them one, that we had no valid contract with them.
Why this happened: In the middle of our search, the Board of directors of this firm removed both the CEO and President and replaced them with new people. When the VP who my recruiter knew, took the invoice to get it signed, the new President flipped out at the fee amount and took the opportunity to renege on our verbal agreement for no apparent reason than he wanted to and thought he could get away with it.
Our Strategy: We accumulated all correspondence, written materials, airline ticket receipts etc, sent it all to our attorney and began legal action. I received an email from the President who in a cavalier fashion implied that our firm was stealing from them and that we had absolutely no case. I responded by telling him I had a folder 4 inches thick with cold evidence that we were in fact responsible for recruiting and placing the candidate in his company. He offered me $3,000 to go away. I declined in a very professional way. He countered with an offer of $5,000. I declined in a very professional way again but did tell him I would accept $24,000 to end the suit there and then. He of course declined.
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Outcome: This company had no evidence we DIDN’T work in their behalf so it was no shock that they didn’t adhere to the court’s timing to submit Discovery. Sanctions were brought against them and a judgment of a fine was made to be determined at a later date. Now it was time for the Deposition. Guess what? They never showed. So to make a long story short, they lost the case by DEFAULT JUDGEMENT.After they lost the case, they still tried to settle at $10,000, then $15,000, then $25,000 and finally agreed to pay us $32,500. It seems when our attorney filed the final motion; his Associate made a mistake and filed for $32,500 instead of $30,000.The court ruled on the $32,500. We agreed to drop the extra 10% for the sanctions if they paid the judgment by Sept 4, 2003. They agreed and wired the money.
Moral of Story: Don’t trust anyone, not even your best friends. In a business transaction, keep it business. Get agreement signed. Also, when you know you’re in the right, stick to your guns. Finally, have a really great attorney you can trust.