Often in our law practice a client will consult with us regarding a collections matter: a civil litigation claim in which the client is owed money from another. The debt could consist of payments due under a contract for the sale of goods, services rendered by the client for which the debtor has not paid, or recompense for some amount of damages. It is incumbent upon us, as lawyers, to evaluate these claims for the client, in order to counsel the client as to whether and how to pursue making him or her whole.
The analysis of these types of civil litigation claims is not fundamentally different whether the client is an individual or a large corporation. The biggest difference in the prosecution of an individual’s claim as opposed to a corporation’s claim is that the corporation must be represented by an attorney in a case before the Court of Common Pleas. In all cases, however, the lawyer must assess whether the claim is legally viable, the costs involved in pursuing the case through judgment and execution, and the likelihood of recovery from the debtor. Only when all three are weighed in favor of moving forward will we counsel the client to pursue the collection.
The legal viability of the claim is sometimes a difficult element to gauge. Often, the debt has not been paid because the debtor perceives some injustice. For instance, if the goods delivered were themselves sound, but were not the items originally promised, that fact devalues the case. Similarly, if a service was performed, but was not completed (due, perhaps, to the client not being paid on time), the client will have the burden of proving that progress payments were a prerequisite to completion of the work, a burden that can be difficult where the contract itself is either unwritten or silent on the issue. Evaluating the viability of a claim requires both a working knowledge of the Pennsylvania law under which the claim will be prosecuted, and an appraisal of the merits of actually winning in front of a judge or jury. Detailed knowledge of the facts of the case is essential to the lawyer in making this determination, before plunging forward and later stumbling upon that some important fact that proves to be fatal to a successful conclusion of the case.
The costs involved in prosecuting a civil claim can be daunting, especially if the anticipated recovery will only slightly outweigh the costs even if the claim is successful. It hardly makes sense to hire a lawyer to pursue legal action for a debt of $100.00 or $500.00 even if the legal basis for the claim is sound. In Pennsylvania, civil claims for damages in the principal amount of $12,000.00 or less may be filed before the local district justice. This is the method commonly referred to as “small claims court.” The procedural rules for prosecuting civil claims before a district justice are far less stringent than the rules of civil procedure governing practice before the county Courts of Common Pleas, and the costs involved in prosecuting these so-called small claims are also small by comparison. Judgments from small claims court can be appealed as of right to Common Pleas by the losing party, and the case would have to start all over again.
However, claims in excess of $12,000.00 must be brought before the Pennsylvania Courts of Common Pleas from the outset, and these cases require correspondingly larger outlays of costs. Both the filing fees and the probable legal fees must be weighed, and it is safe to assume that as the relative legal complexity of the case and the amounts at stake increase, so will the costs, not only in terms of legal fees, but also in terms of the passage of time. Potential litigants should also remember that under the American legal system it is rare that a claim for reimbursement of legal fees be successful, even if the underlying claim is won.
Finally, even if the claim is valid and the potential recovery justifies the potential costs, the lawyer and the client must assess the likelihood of actually recovering money from the debtor. Judgments do not collect themselves. After winning a case, the successful litigant must pursue the equivalent of a second case to collect upon the judgment just won. Courts enforce their judgments by seizing and selling the assets of the judgment debtor.
The client might have an excellent claim against a penniless pauper, and the knowledge that the claim can be won easily and cheaply is little comfort if the debtor owns nothing and is therefore effectively judgment-proof. It is important to know something about the debtor when analyzing his or her ability to pay. Is he married? Does she own a car or a house? Are there other assets against which a judgment can be executed? Is it likely that the debtor will file for bankruptcy protection?
Occasionally there are other weapons which can be brought to bear to force a debtor to pay up even when she might otherwise laugh at the prospect of a money judgment. For instance, a debtor owing a judgment stemming from a PA motor vehicle accident could have his or her PA license suspended if the judgment is unpaid, and the threat of a license suspension might persuade the debtor to pay even when he might ignore the judgment itself. A residential landlord can, in certain cases, garnish the wages of a deadbeat tenant. 42 Pa.C.S. § 8127. A relatively small judgment might not justify the cost or expected return of attempting to sell a debtor’s personal property at a Pennsylvania sheriff’s sale, but that same judgment acting as a lien against real estate, if properly revived periodically, can languish for years until the debtor decides to sell or refinance the real estate. Additionally, in an age of increasingly important credit scores, a debtor might worry more over the bad credit rating a judgment might engender than the judgment itself.
Obviously, each client’s case must be analyzed individually to arrive at a fair assessment of whether the client will be justified in pursuing the claim. Even after a careful assessment, the vagaries of real-world litigation can throw the best laid plans awry. Doing your homework and consulting the experienced lawyers at Wolf, Baldwin & Associates, P.C. before plunging into litigation may save significant time, headaches, and dollars down the road.
Click here now to contact us and to schedule an appointment. We will be happy to analyze your collection case under Pennsylvania law.
- Plain Language Consumer Contract Act
- Pennsylvania's "Mini-COBRA" Law
- Employee Rights under the Personnel Files Act
- Fraudulent Transfers
- Contractor and Subcontractor Payment Act
- Debt Collection Pitfalls
- Piercing the Corporate Veil
- Statute of Limitations on Contract/Sales in Pennsylvania
- Statutes of Limitations in Pennsylvania
- Sovereign Immunity in PA
- Unfair Trade Practices and Consumer Protection
- Wage Payment and Collection
- Who Will Pay My Legal Fees?