Part 1- To Sue or Not to Sue

You have a customer who hasn’t paid his bill. Phone calls and letters haven’t worked, and you think you want to file suit. There are a number of factors to consider in making you decision.

First, how much is at stake? Is it an amount of money your company can afford to lose? Or does your business depend on the relationship with this customer? If the amount at stake is under $10,000.00, you will be able to file your suit in the justice court, where proceedings are quicker, cheaper, and you may be able to handle the matter without a lawyer. (More on that in Part 2 of this series.) If more than $10,000.00 is at stake, or the title to real estate is in dispute, or you need a special remedy such as foreclosure or an injunction, you will need to file in district or county court, and should not attempt to proceed without hiring counsel. Keep in mind that you may also recover interest on the amount due, plus court costs, and attorneys fees in many cases.

Next, make sure you know who your defendant is. Is it an individual, a proprietorship, a partnership, or a corporation, and do you have the defendant’s correct legal name? You will also want to list any assumed names used by the defendant. In other words, is it John Doe, also known as Jack Doe, and doing business as Doe Tire & Wheel, or is it Doe Tire & Wheel, Inc.?

When you have confirmed the correct name and organization of your defendant, the next step is to make sure you know where to find them, so that they can be served with notice of the suit. You will need a good home or work address for an individual or a proprietorship. A partnership can be served through one of the partners, at their home or work address. However, for a corporation, you will need to serve the corporation by having the citation delivered to the corporate President or Vice President, or the corporation’s registered agent. The corporation may be served at the registered agent’s office, or its place of business. You can find out a corporation’s registered agent, registered office and corporate officers by calling the Secretary ofState in Austin.

Next, determine if you have all of the documents you will need to present your case. Gather a copy of any written contract, invoices and payment records or ledgers, and any correspondence about the matter. No point in suing if you can’t prove they owe you anything! While you a recollecting these documents, consider what the defendant will say about the matter - do they have any legitimate defenses, or is there a possibility of a counterclaim? Defenses may include saying that they never ordered your product or agreed to pay for it, that it was returned, or that payment was already made. However, it is not unusual for counterclaims to be filed to avoid paying a debt, and you will want to consider how strong their case would be, in order to evaluate your risk. A counterclaim could involve any dispute arising out of the same transaction, such as usury, (charging too much interest), fraud, or violation of the Deceptive Trade Practices Act. Often, if a counterclaim is filed you will need to get a lawyer involved. If you think there is agood possibility that they could win on their countersuit, you may want to forgo filing suit to begin with.

Finally, if you get a judgment, (a court order for payment), does the defendant have the money to pay? Determining this can require some knowledge about whether the defendant has any bank accounts, receivables, or other assets which could be seized to pay the judgment. Your file may include a credit application from the defendant which could be updated to get a better idea about whether a judgment would be collectible.

In completing your pre-suit review, you may be able to discover and prepare for any number of potential problems, or may find that you have a more complicated situation than described here. If you think you may have a problem, or if you find that you have questions about your particular situation, call your favorite lawyer.

Where & How To Sue