Should I sue my former contractor?

Question

Hi All,

I overpaid a contractor and they have failed to perform on the contracted work. There were red flags but I had worked with this contractor before and did not have issues. I am weighing suing the contractor but not sure if it makes sense. My estimate is they walked with $30,000 and Im not sure if it is worth it to go after them. My concern is we sue and they cant pay the settlement and we got tied into bankruptcy court. If anyone has any helpful advice, it would be appreciated.

Stuart Udis · Answer

I know this is not what you want to hear, but $30,000 claims are rarely worth the pursuit when considering the legal fees involved. Secondarily, even if you feel you have a viable claim it's important to understand who will be responsible for payment in the event you succeed. Insurance is generally the best way to recover in the event of a loss, but most contractors carry insurance that only covers property damage or bodily injury liability meaning even if you are successful and obtain a judgment, you are reliant on the GC to make good on a payment. You could theoretically spend on legal only to obtain a judgment worth as much as the paper it's written on. It's usually best to frame claims in a way that captures the attention of an insurance carrier. This unfortunately does not appear to be a claim that would as I understand the issue to be an overpayment on services. If you elect to proceed with a claim, I disagree with others suggestion of filing a complaint with the state licensing agency. If your objective is to put them out of business, sure that could help. However, if your objective is to collect on the $30,000 you will have a better chance if they remain a viable business where they can't afford to have a judgment interfere with their ability to obtain credit and efficiently operate their business.

JD Martin · Answer

I would sue on $30k. First off, you say you've done business with them before so it's unlikely they are a fly by night operation unless your previous business with them was a week ago. So there's a legitimate chance they stand to suffer in a lawsuit. Second, if you can afford to lose $30k by not suing, then you can afford a few thousand more on a reasonable attorney to get the process started and see if you can collect some of what is owed. If you can't afford to lose $30k, then you would definitely want to try to recover some money. Either way is a gamble but if they are a legitimate business you may have a chance at 25-50 cents on the dollar or more and that's a better return than zero. Finally, you are doing everyone else who follows behind you a disservice by not calling out scams when you see them. The next guy might be someone who loses his life's savings to the same contractor and blows his brains out. It sounds sick but it happens all the time, and it often happens when good people see something and choose to do nothing.

Bruce Woodruff · Answer

I would sue in Civil Court. First, $30k is a lot of money and secondly, they can't just be able to screw people like this, there have to be consequences.

Sure you may force them into BK, but so what? They may be forced to re-structure and pay creditors something...or not, but still they need to feel some pain for this.

I would pay an attorney to send them a letter first. Threaten the court action and give them 10 days to pay up first....

JD Martin · Answer

Thoughts:

1. Nowhere in his post did he ask if he should sue "to be made whole'. He essentially asked if it was worth it to go after him.

2. All money "invested" is a gamble. In this case he has low downside and high upside, assuming he keeps a firm cap on what he is willing to spend. This is not a Vegas slot machine gamble. He has real forms of redress available to him. We're not talking about going after a deadbeat tenant for a thousand bucks. $30k is a nice down payment on investment property in a lot of the country. If you have so much money that $30k wrongly appropriated is worth just kissing into the wind, good for you, but the original poster does not or else he wouldn't have asked the question in the first place.

3. Holding people to account for breaking the law - and if he's misappropriated this man's funds, that's what he has done - is not a waste of time; it's the foundation of all property law. If there are no consequences to theft, there's no law. As a society we define levels of theft according to seriousness - a kid stealing a candy bar versus Bernie Madoff - but we have pretty clear definitions of what is theft. Maybe one day stealing $30k will be like stealing a candy bar, but for now that's more money than probably 90%+ of Americans will ever hold in their hand. Saying it's a waste of resources is no different than the police in big cities saying they're not going to investigate or prosecute shoplifters any more because it's too much trouble. Guess what? In those cities they've lost some pretty significant retail businesses because of that attitude. I'm sure the people that lost their jobs when the stores closed didn't think it was "no big deal".

If we allow these kinds of things to go unchecked, eventually there won't be any investment opportunities other than what you can hold at the point of a gun. All of us in a society have some responsibility towards supporting the rule of law, especially when it's fair and just. I'm not saying the guy has to mortgage his home or take it to the Supreme Court, but to do nothing is an abrogation of one's responsibility to your fellow citizen.

Bruce Woodruff · Answer

@Stuart Udis Depending upon the state, you can go after their bond as well. Only $15k, but better than nothing. And going to the State license Board will not put them out of business....just disciplinary action and fines usually...

Stuart Udis · Answer

@Bruce Woodruff If a contractor has a history of disciplinary actions against them, that will impact their reputation, their ability to generate work and stay in business. If the objective is to collect on a judgment (if that is the only means for Kevin to be made whole), I see no benefit in filing any disciplinary actions. I don't necessarily agree with the position, but if the objective is to collect the $30,000, it can only do harm to the contractor's business which is adverse to Kevin's objective.

Sebastian Bennett · Answer

@JD Martin why gamble if the best odds are to retrieve 25-50 cents on the dollar? Between time and expense the logical thing to do is to invest any future capital in a new endeavor and cut your losses. Also, the question was whether to sue and try to be made whole, not what is best for everyone that comes behind Kevin. The steps that may be best for Kevin's attempt at collection aren't necessarily going to be the best for everyone that follows. I was involved in a business opportunity a few years ago where one of the partners misappropriated company funds. It was a tough lesson but after much deliberation we opted to cut out losses because of the time and expense that would have been requried to collect on the losses.

Bruce Woodruff · Answer

Been there done that for decades. A customer complaint to the CSLB might just wake them up and generate some action. Point is that it is not as Black/White as you are thinking.....

Should I sue my former contractor?

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