
Why I Spent $100k to Fight a $10k Small Claims Lawsuit - joelx
http://joelx.com/why-i-spent-100k-to-fight-a-10k-small-claims-lawsuit/12050/
======
godzillabrennus
My years of experience running service businesses has taught me that my
company should not act like a bank. Instead we learned how to leverage a
Factoring Company when deciding if there was any risk when taking on new
clients. Factoring Companies work with banks to do credit checks on your
prospective clients and provide you with a credit limit and term period of
which they think it's safe to do work with them.

Service companies shouldn't act like a bank and lend money (service) to
companies because we aren't equipped with tools to do it so we get burned as
easy targets. The Factoring Company can do that for you and they report unpaid
debts to all the major credit agencies for you. You'll very rarely regret not
paying XYZ, Inc. the small service company, you'll probably regret not paying
a factoring company that works with a bank like Wells Fargo for debt you
signed up for. Oh and a factoring company that works with big banks like Wells
Fargo will a lot more attorneys than XYZ, Inc. the small service company will
ever dream of having.

I used these guys:
[https://www.capitalcredit.com](https://www.capitalcredit.com)

They took us on as a client when we got to about $40k/month in revenue. Not
sure if that's still where they start. They were a lot more economical than
the trendy ones that advertise on Facebook though.

~~~
TamDenholm
i looked into factoring companies myself. I got 3 quotes and they were all an
absolutely terrible deal. This is a quote i got from one of the companies,
copied verbatim from the email they sent me, they were all around the same
terms:

    
    
      Based on a turnover through the facility of £200,000:
      Full service Invoice Factoring – including credit control and cash allocation
      £35,000 facility review limit
      Prepayment of 75% against invoices
      12 month contract with 3 months’ notice
      Service fee – 3.5% of invoices placed through the facility,
      subject to a minimum monthly fee of £470 (the higher of these two will be taken as the monthly fee)
      Discount fee - (cost of money) – 5.5% above base rate (0.5%).
      This is an annualised fee and based on an average borrowing of £20k would be £100 per month
      Set up fee – £350
      Annual renewal fee - £350
      Security: We would take a bond and floating charge and would request a director’s
      guarantee of 20% of the facility review limit.
    

I decided it wasnt worth it.

~~~
DanBC
Please don't use two spaces to blockquote text. It's broken on mobile. Please
stick to the > convention.

------
davideous
In my company's contract, we limit our liability to the amount paid by the
client. Without a liability limitation clause in the contract, you're taking
on a potentially unlimited amount of liability in each project. It's not worth
the risk. A few good paragraphs in the contract make all of the difference in
the world. If you don’t have a liability limiting clause, you should.

Also, this client engagement started going wrong from the very beginning, when
the team allowed so many changes for free, and even launched the website
without final payment.

I'm all in favor of over-delivering -- and I probably also would have fixed
the problematic PSDs for free -- but 294 hours of work on a 116 hour project,
launching the website without the required final payment, and then continuing
to do work is way too much.

~~~
uiri
_In my company 's contract, we limit our liability to the amount paid by the
client._

The amount paid by the client in this case was $12k so that wouldn't have
changed anything except perhaps the scary lawyer letter (which they
successfully deflected).

 _launched the website without final payment_

This was perhaps the biggest mistake here. It would have been much better to
fire the client: "OK, we're done here. You're fired. We're keeping your
deposit, ceasing work and not launching your site."

~~~
communejb
How do you fire a client? What's your contract clause read that allows this?
The challenge (as I see it), is that if you're contracted to perform X work
for Y cost, if you 'fire' the client, you're the one breaching the contract
and thus liable for a claim? What language do you use to 'fire' the client?

------
dtrizzle
"However, in the second trial the small claims cap of $10,000 is removed and
the judge can potentially award much more money in damages to the plaintiff."

This is wrong. $10,000 is the absolute damages cap in small claims court and
the small claims appeal (which is really just a new trial). See California
Code of Civil Procedure Section 116.220 and 116.221. The exact same claim is
simply heard in front of a new judicial officer. It is not possible to amend
the claim to add more damages in the appeal. See California Code of Civil
Procedure Section 116.770(d).

A judge could award another $1000 but only if the appeal was frivilous. See
California Code of Civil Procedure 116.790. This happens rarely.

* I'm a CA licensed attorney and just happened to attend the temporary judge small claims training just a couple weeks ago.

~~~
eganist
> * I'm a CA licensed attorney and just happened to attend the temporary judge
> small claims training just a couple weeks ago.

Fair to assume this is not legal advice to the OP (or anyone), then?

~~~
HappyTypist
Factual statements of judicial systems and procedures (e.g. "a judge can find
someone in contempt of court") is very different to legal advice ("a judge
will likely find you in contempt of court").

------
jonlawlor
Always show up in court if you are being sued. If no one shows up at all for
one side, they lose. He sent his assistant, but I doubt that made the judge
happy. That's probably the mistake that cost him 100k of his and his
employees' time.

~~~
cpayne
> Always show up in court if you are being sued

THIS!

If nothing else, its a sign of respect.

The judge doesn't know the history, doesn't know the background. He knows
there are two parties that don't agree.

He sees one side prepared, he sees the otherside who sends their assistant.

What would you do if you were the judge?

~~~
tgsovlerkhgsel
> What would you do if you were the judge?

My job, which includes attempting to determine the facts and deliver a just
decision, instead of making a reality-show-style popularity contest out of it.

~~~
paulddraper
Credibility is part of judgment.

The claim was that he didn't fully hold up his end of the contract. This isn't
a criminal case with forensics; this is small claims with a lot of he-said,
she-sad.

Not dodging court lends credibility to your side.

~~~
eridius
Attending certainly would add credibility, but it seems unconscionable that
the judge wouldn't even let the assistant present their defense at all.

------
fpgaminer
The abundance of comments here calling out all the author's mistakes is ...
strange. My reading of the post is that the author is very aware of what could
have been done better. I also think it's obvious to anyone what the missteps
were.

Truth is, we all have these tales. We've all made these "blunders". What this
article is about is not "Why I Let An Abusive Client Rob Me", it's an
explanation of why this small business owner expended his/her own time and
money to help fight injustice, and how our court system allows such injustice.
Comments about what the author did wrong in their interaction with a client is
off-topic, in my opinion.

Having also been on the receiving end of a frivolous lawsuit, my heart goes
out to the author. May your fingernails survive until the notice from the
judge arrives.

~~~
jcoffland
> Truth is, we all have these tales. We've all made these "blunders".

Why are you so sure of this? Don't you think it is possible others have been
smarter and have avoided making these kinds of mistakes?

~~~
tracker1
Just because you understand how to serialize a btree doesn't mean you know how
the legal system works, and assume it should be fair.

~~~
jcoffland
Sure but you don't let a client run up a huge tab, throw in a bunch of hours
for free then get upset when it all blows up in your face. Require partial
payment up front and then sick to your own rules. Otherwise you are
disrespecting you own business and that leads to others doing the same.

------
mrajcok
Did the contract in question have copyright to the work only transfer upon
payment in full? That is a key piece of leverage that you should include in
every contract. This way if the client continues to use the code you can
inform them that it is copyright infringement, potentially send the web host a
DMCA takedown notice, or have your lawyer pursue them for copyright
infringement.

That said, the "self-help" takedown sounded problematic -- much better to have
the option of a copyright infringement claim.

If a client pushes back on this provision you can explain that you are 100%
insistent but it only comes into question if they don't pay -- that has
resolved all objections in my experience, and if they pushed further I'd treat
it as a major red flag.

~~~
joelx
This comment is 100% on point. I include a clause in my contracts that I own
all of the work we do until payment is made in full.

It still would have been better to have not pushed the site live until the
payment was made though. We have a policy for that, but the team gets a bit
overeager.

------
xenity7
You can't avoid all conflicts with clients, but clear and constant
communication that feels at first like over communication is key to prevent
this kind of misunderstanding.

Here's what I've seen work with regards to client communication around scope -
especially scope overruns:

1) If the scope creep is minimal (like a 15 minute task that wasn't in a
bulleted list in the contract), don't even mention it. Just part of being a
good business partner

2) If the scope increase will be expensive IMMEDIATELY communicate to the
client that the ask is out of scope. Do this with an email, and call the
client and discuss the email with them - ideally before they read it (maybe
even call before sending it). It's important to have what's going on in
writing, but it's easy to misunderstand email and it's also important that the
client understands you are just making sure everyone is on the same page about
scope. Sometimes (often) the client may disagree about what is in or out of
scope, or push you to include more in the scope as a way of getting additional
work for free. Regardless of how this ends up , it's better to have the
conversation and understand where both parties stand before you actually
perform the work.

3) If you do agree to do the work you view as beyond scope for the original
price, it can be helpful to explicitly show this as a discount. In the
attached article, this would look on an invoice something like:

Professional Fees : 294 hours X $103/hour = $30,413 Investment: $(18,413) Fees
Due: $12,000

Pitched as an investment in the relationship and discussed frequently as it
happens, this is harder (but not impossible) to be angry about.

That said, this is one of the easiest things to screw up and hardest to get
right. Communication with clients is hard. Some people will never be happy.

~~~
joelx
>Professional Fees : 294 hours X $103/hour = $30,413 Investment: $(18,413)
Fees Due: $12,000

I REALLY like the idea of putting extra hours worked as a discount on an
invoice... thank you!

------
the_duke
> Dealing with this issue as well as other legal issues and reading multiple
> books on legal issues, winning at trial, etc I think has left me with the
> equivalent of half a law degree. I have lots of experience now writing
> contracts, researching and preparing for a lawsuit, and arguing persuasively
> in front of a judge.

After one court case? That's ... optimistic, to phrase it politely.

~~~
joelx
Great point. The "other legal issues" I mentioned were other lawsuits I have
been through:

-A patent troll sue me a few weeks ago (got it dismissed voluntarily)

-Another client with a stronger case sue for breach of contract a year ago (I won that and got attorneys fees). This was extremely stressful as it was for big money. I read several law books to prep for this one.

-Six year ago my first salesperson sued for commissions after I fired her (she won because I didn't have a contract)

I also don't want it to look like I get in a lot of lawsuits. I have had over
a thousand clients and only two ended in lawsuits. I have also had over 250
employees and thousands of contractors and have only been sued once there.

------
caseysoftware
In these scenarios, I push really hard to have a Phase 1 and a Phase 2.

Everything that we agreed to is Phase 1 and everything is is Phase 2 and does
not start until Phase 1 is complete, launched, and paid for.

In this case, it may not have protected him from all the crazy, but it would
have reduced that 294 hours to something much smaller. And then he could have
bailed on Phase 2 because the customer was an asshole.

~~~
communejb
How do you answer / respond to clients who commonly demand the addition of the
new feature / gizmo / gadget as part of phase I (in this case, as part of a
new website, they ask for a feature not originally scoped but desired to
launch with the new site)?

------
ivraatiems
Why didn't the author retain an attorney? If I got a demand letter for
hundreds of thousands of dollars, I wouldn't trust anyone but a lawyer to help
me deal with it. I certainly wouldn't send someone with even less knowledge
than me.

A competent lawyer would have made very short work of this claim, would have
kept the judge happy, and in the long run would have saved time and money.

The real lesson here is "know who to call and have money saved to retain
them."

~~~
joelx
Remember a demand letter is just a threat... It's only when you get sued that
actually need an attorney (unless you want one). The attorney who sent the
demand letter apparently was not willing to represent this case in civil
court, hence why we ended up in small claims.

In small claims court in California you are not allowed to be represented by
an attorney unfortunately.

~~~
ivraatiems
> Remember a demand letter is just a threat... It's only when you get sued
> that actually need an attorney (unless you want one). > In small claims
> court in California you are not allowed to be represented by an attorney
> unfortunately.

I'm sorry, Joel, but in my opinion this is just bad advice. In a case like
this one, if an attorney sends you a demand letter, an attorney should
respond. Yes, small claims court doesn't permit attorneys in all states, but
the original letter was a demand for $250,000, which is well beyond small
claims. Yes, it was a flatly spurious demand, but that doesn't make replying
without an attorney the best course of action. You need an attorney any time
someone opposed to you gets an attorney involved in a matter. Otherwise,
you're bringing a knife to a gunfight. Sometimes you get lucky and it turns
out the gun is loaded with blanks - that's what happened this time. You cannot
be certain you'll be that lucky all the time, in fact, in most cases you won't
be.

A competent attorney knows the law and _knows_ (not just _suspects_ ) when the
other side is being crazy. The letter you originally got is, on the surface,
ridiculous, but sometimes, _so is the law_. Frankly, I think responding to
their demand letter with a good, well-crafted on-law-firm-letterhead reply
(telling them to buzz off) would likely have made them back down, or at least
settle for a total cost less than what it cost you to deal with this on your
own. Lawyers know this is a game they're playing where each side cowers the
other - and if the letter writer wasn't willing to represent your former
clients all the way through the process, he probably knew that if his bluff
was called, his clients had no recourse. Further, an attorney would tell you
right away, and probably for free, how to avoid the biggest mistake you made:
not showing up to court. No half-decent lawyer would ever let you make that
misstep.

Yes, you would have lost out a little in having to pay somebody to handle the
response - but given the extreme risk and expense of (even frivolous) civil
litigation, I think the costs of an attorney likely pales in comparison to
what you did end up paying in time, money, and stress, plus the ability of an
attorney to lower the risk of the situation overall, even if they did charge
$1200 an hour (not all or even most do).

Edit: What I'm trying to say is - you seem intelligent and are clearly
successful. It's easy for a smart, successful person who has had good luck in
the past to think they've got something like this handled. What I am trying to
impress upon you is that in this case, you can't afford what might happen if
you're wrong, because it might cost you everything. The stakes are too high
not to go with the best option.

~~~
joelx
I will take your advice and involve my attorney in the future. Thank you!

------
mpnagle
I just want to say, as someone who has dealt with a very challenging client --
who refused payment on 30-40 hours I put in to work, after weeks of being
completely non-responsive before the client's deadline -- I can't say how much
I appreciate hearing stories like this one. We didn't take the course to court
-- we were two - three people and the contract was $10k as a whole, but it
left me feeling very raw about contract work. I have to say for me, this is a
great ad for this employer being a safe and employee-valuing place to work.

Thanks!

~~~
mjolk
Responding not to throw truisms at you; checking that I'm not crazy.

> I have to say for me, this is a great ad for this employer being a safe and
> employee-valuing place to work.

The employer is meant to shield his employees from this kind of stuff. i.e.
this is a "normal" employer.

Even if the clients don't pay the employer, the employer pays its employees --
that's the arrangement and the risk taken when you own the business
(alternatively stated, as an non-exec employee, you trade a premium on salary
to not deal with risk).

~~~
mpnagle
Oh, yeah, I think that's true that part of the employer-employee contract is
guaranteeing employees payment.

I guess I mean something a little different then. That it's really
heartwarming to see an employer 'go to bat' for his team's work and his
company. I was resonating with the experience of directly having freelanced
with a client feeling 'out of control.' I was really caught off-guard by it
and it felt (in hindsight a mistake) easy to give an inch and give another
inch. There's something here -- maybe I can't put my finger on it -- in this
blog post that makes me thing the author would be an incredible asset in
putting down hard limits and boundaries when they need to be put down.

~~~
mjolk
> That it's really heartwarming to see an employer 'go to bat' for his team's
> work and his company

He "went to bat" in court as to not risk a default judgment or additional
monetary loss. Talking about how your consulting company went _far_ out of
scope and criticizing/belittling an ex-client in a blog post is kind of
strange, in my opinion.

> I was resonating with the experience of directly having freelanced with a
> client feeling 'out of control.' I was really caught off-guard by it and it
> felt (in hindsight a mistake) easy to give an inch and give another inch

Yeah, that's really common. Sometimes it's a simple situation of communicating
the time demand or cost of client asks and other times, it's employing a firm
"no" or calculating if it's worth firing the client (never fun).

> There's something here -- maybe I can't put my finger on it -- in this blog
> post that makes me thing the author would be an incredible asset in putting
> down hard limits and boundaries when they need to be put down.

I made another post in the thread about this if you're interested[0], but it
appears as if this was an issue because of the exact opposite -- contractual
scope of work was not enforced and _substantial_ additional work was
performed.

[0]
[https://news.ycombinator.com/item?id=13348353](https://news.ycombinator.com/item?id=13348353)

------
devoply
People like these are mentally ill sociopaths that don't care about the needs
of the people they are hiring. The web development profession is filled with
dealing with people like these. It's a shit job at the lower end having to
deal with small business people. They are all barely scratching a living
themselves and the way they are doing it via technology leaves much to be
desired, and they expect you to pick up the slack. Honestly it's a shit
business and really no one should try to do it at the lower end. At the higher
end the same job fetches 100k and the clients are happy to pay for the work.
The only catch is that you have to be rich already to make 100k for the same
work that at the lower end fetches 10k. It's honestly a stupid mistake to do
it at the lower end.

~~~
dba7dba
Lol so true.

I see small business people who try to make a sense out of all this tech stuff
WHILE trying to avoid spending $$ a lot and yeah, some try to lie and cheat to
get what they want. Not all, just a few.

~~~
devoply
Quite a few.

------
mjolk
Eek. First off, joelx, sorry about the painful process. If things are truly as
presented here, I hope things turn out in your favor.

I'm inferring that the post is being polite in leaving off some of the
challenging aspects of the client, but as someone that's run a little
consulting shop, this alarmed me:

> <Client> at this point began to make lots of requests for out of scope items
> not included in the contract. My team bent over backwards to accommodate him
> and finish these items...we had gone far beyond what he had paid for. Our
> team had racked up 294 hours of work on a project that TheClientCompany had
> only paid 116 hours for.

Why wasn't this contract closed, and a new one opened, before the 150% work
overage mark?

Obviously, sometimes you need to eat a bit of work due to
misestimation/unexpected-unexpecteds/reputation/keeping your client happy, but
with the estimation of $12k@116 hours, this is $30k worth of work on a $12k
agreement (assuming the estimation didn't account for
legal/accounting/insurance/pre&post-sale time/expense, which are a bit more
static in my experience).

Was the client not politely informed that the requests were going well beyond
the scope of work? If you're beyond 2x of the agreement, I can understand that
the client started to think of the contract as inconsequential. When dealing
with customers without a technical staff (or experience in managing or running
something technical) that are asking you to over-deliver, it's often just an
issue of not knowing which asks are time-consuming/expensive -- and if you're
making it look easy, the client will think it's easy.

> Our contract requires that before a website launches, final payment must be
> made. My team launched despite this and continued to work on it for him.

When you flagrantly break the parts of the contract that protect your business
and interests, it's somewhat understandable that the client would expect to be
able to sign-off the work before payment.

Just my two cents, but I'm positive that those two pennies have saved me a ton
of money in walking away from certain clients during the negotiation phase.

> I ran right up to both of them, and punched him in the nose. I got in big
> trouble, but I thought it was worth it.

This metaphor, coupled with the story, makes it seem as if it's "worth it" to
hit a client back in front of a judge. Super weird, IMHO.

~~~
Fnoord
> This metaphor, coupled with the story, makes it seem as if it's "worth it"
> to hit a client back in front of a judge. Super weird, IMHO.

It is an analogy. One should _not_ copy exactly what happened in an analogy
literally to a situation (what I call "greater example"); instead, one should
apply _the lesson of the analogy_.

The situation of the analogy ("small example") was at elementary school, where
someone got hit, and wanted to get justice ("an eye for an eye"). He got
justice, but at a steep price. Standing up for oneself ensures they are not
(or at least less likely) becoming bullied again, but it has its price (e.g.
you may lose a teeth or 2, get reprimanded by school, get in contact with
police or sued, etc). The goal of eye for an eye might appear as self
gratification. That is perhaps part of the goal, but its a rather pointless
and -to put it friendly- unintelligent one. Another, far more important part
of the goal, is to ensure the other party realises (knows & feels) they were
wrong so that the other party does not resort to this behaviour again. Not
necessarily solely to the victim. Rather just to _any_ potential future
victims as well with whom the victim [would] share empathy and sympathy. One
could regard justice as a reaction of the autonomous system (in the "greater
example", called "society"), trying to correct its inhabitants/hosts, with the
goal of improving the autonomous system at a whole.

~~~
mjolk
Yeah, analogy -- thanks (was running on no sleep from travel).

I just don't think it fits the situation, even though I know what he was
trying to say. Submitting proof to authority that you had done nothing wrong
(as a defendant) is not the same as exacting revenge, even if the authority
didn't see the initial harm. Along with the other descriptors of his ex-
customer, it comes across as unprofessional.

~~~
Fnoord
> Submitting proof to authority that you had done nothing wrong (as a
> defendant) is not the same as exacting revenge, even if the authority didn't
> see the initial harm.

Its not about revenge, it is about justice. I explained revenge is not so much
about the person who experienced the initial blow, more so than potential
future victims.

> Along with the other descriptors of his ex-customer, it comes across as
> unprofessional.

I understand you feel that way but I disagree. It comes across as someone who
stands up for his right when put in unjust situations. A potential customer
should not need to fear him, as he is normally a solid business partner, and
may even work hard in your advantage (for free). He mentions he goes out of
the way for his customers, and his very example even proofs this. The people
who read his blog regularly supposedly know his personality better. There's a
conundrum in the fact that blog posts might be written for people who are more
in the know, whereas everyone in the world can read it. We see the effects of
that issue more regular, this is'd merely an example of the effect (is there a
name for it?).

He is also not posting personal details of the plaintiff. Not enough to
identify them. That is professional.

Then again, I am biased. I got bullied at school, and I generally didn't end
up returning physical violence. I wish I did. I'd be more mentally resilient
now. Not all is lost though.

------
cloakandswagger
This was the most challenging aspect I experienced when running a company
targeting small businesses for four years.

About 10% of your clients will be nightmares who will hold grudges over
relatively small sums of money. No amount of contract language will save you
from a user who has made use of the software for two years, decides that
they're unsatisfied with it and files chargebacks for every payment made over
that time.

Sadly, the most rational option is to acquiesce. Even "winning" a chargeback
case is a loss, as most payment providers still charge you for the handling of
the case and it is a black mark on your account, possibly putting you in
danger of losing payment processing ability completely.

------
harryf
Can't help thinking the underlying cause is here;

> my email back

...key negotiations happening over email. Make it face to face if you can or
at worst by voice and keep minutes for the record. So much misunderstanding
can be avoided this way.

~~~
mjolk
Talk in person first, sure, but confirm in written form after, whether this be
a signed piece of paper or acknowledgement over email.

------
TheRealPomax
Why did you post this before the actual verdict?

~~~
joelx
Writing this was cathartic after all of the stress on Friday. Also - if I
didn't do it now, I probably would not have done it later.

~~~
TheRealPomax
I mostly ask because of two reasons - the first being you expressed confidence
in winning earlier, but instead losing, and the second being that publicly
discussing a pending court case is generally frowned upon by the courts, and
pending a verdict can absolutely swing that verdict in a different direction.
Depending on the district doing something like this may even be grounds to
have your case thrown out, which would put you right back at the start of
finding a judge for the retrial, but now with a legal strike against you. It
would have been very wise to clear this with your (or even "a") lawyer.

(I absolutely understand the "getting it off your chest" aspect, but it would
have been a good idea to hit "save as draft" rather than immediately
publishing it)

------
tuna-piano
Very interesting to read about the different conflict-resolution approaches
between the Credit card company and the legal system. The CC process seemed
smart, lean, fair and efficient. The legal system seems absolutely terrible.

Why do we accept that level of service (delays, waiting, etc) from one of our
most important institutions?

The cynic in me says that since lawyers run the system, and lawyers get paid
by hours, they have no incentive to make the system more streamlined.

------
themgt
294 hours on a 116 hour project sucks, but my general rule is once the code is
deployed, we're not going to "take it back" over nonpayment. If you fail on
your final payment we will ask politely and insistently that you remit it -
and not work for you ever again if you don't. But, IANAL, but I can see doing
takebacks like this potentially putting you in real civil liability.

A real world equivalent would be like hiring an interior design company to
redesign your retail store, and as you're haggling over project sign-off &
final payment the interior designer decides to go into your store and
personally yank down the redesigned stuff until you pay. You may argue with
that metaphor's precision, but I'd guess that's exactly how it feels to the
e-comm shop owner. It's simply unprofessional and borderline vandalism which I
could easily see a court ruling caused more damages than e.g. a 3 month late
payment.

And as we see here, it's a way of pouring gasoline on a fire - a fire Joel
righteously wishes to assert he wasn't at fault for, but damn what a waste of
money and time. His lesson is, I was right and should have fought smarter,
rather than seeing he really didn't need to fight at all.

~~~
trome
Uhh, they don't own the IP if they haven't paid, bottom line. Having been in a
very similar situation to what you just described in regards to the retail
store, that is exactly what you do when they drag ass on paying, as you are
not a line of credit or a bank. If the customer resists call the sheriff and
recover your companies property, and invoice for damage/wear and
tear/depreciation & report on the credit of the former client.

What is unprofessional is not paying, if you can't afford something, don't buy
it! Also, half up front & half on completion is way too risky, it means at
different parts of a contract each party has a ton of risk.

~~~
rebuilder
Is it that straightforward? The client may not own the IP, but does that mean
you have the right to make changes to their site against their wishes? Forget
civil liability, I'd be worried about criminal liability from unauthorized
access etc.

~~~
trome
If I go and take something without paying, does the party I took it from have
the right to recover said object?

If you have access to the server, due to the customer adding your SSH keys or
similar, and they do not remove your keys, that is implied consent. They have
not bothered to close the front door, thus you can walk in and take back what
you own.

~~~
PeterisP
You have the right to demand that object and the court system may recover it,
but you cannot simply take it.

Even in your own example, for a physical stolen object "They have not bothered
to close the front door, thus you can walk in and take back what you own." is
a nice way to get in jail yourself.

~~~
dfraser992
There is a theoretical ethical/legal view of things - and then there is a
real-world practical view. If I was dealing with a company who already have
lawyers, then sure, I'd go the "right" way and use the legal system (on the
basis the legal system actually works...). But a bad client, who can't even
run their small business in a competent manner ... and who can't hire better
lawyers than me... the use of brute force (vs the legal way) is sometimes the
wiser choice. It is a risk to do such a thing, so you have to know the odds,
but it could save you some headache.

The legal system is nothing but a tool and a shit tool at that. People who
know how to manipulate it are better off than those who think it is more than
just a badly made tool - and the most frequent manipulators of it are the bad
actors.

I have realized the IT community is at some disadvantage in some sense,
compared to non-IT people, because we have such a implicit
faith/trust/belief/respect in rules - we spend all day trying to teach
computers to follow rules. The vast majority of humans on the other hand have
little respect for abstract rules and will do whatever they want, coming up
with justifications and rationalizations after the fact. Outside of IT, you
have to realize the only rules you have to follow is 'not get caught'. I'm not
saying don't act ethically, I'd encourage it, but a lot of people are not
interested in acting ethically at all, especially when it is detrimental to
what they want. So you have to learn how to deal with them effectively unless
you want to drive yourself crazy.

------
hocuspocus
Is it common to accept payment by credit card for such contracts, with a
possibility of chargeback at that? Sounds completely crazy to me (not in the
US).

~~~
ScottBurson
That surprises me too. I would expect contract work to be paid for by check or
wire transfer. But it's been almost 20 years since I was doing that kind of
work. Maybe these days, you have to take credit cards or lose the business.

------
atarian
> If I believe I am in the right I will fight through multiple appeals and
> beyond all financial reason to win.

[https://en.wikipedia.org/wiki/Pyrrhic_victory](https://en.wikipedia.org/wiki/Pyrrhic_victory)

As noble as your intentions are, this is not a scalable way of handling
hostile clients.

------
bambax
> _their revenues were quite small (to the best of my recollection it might
> have been a few thousand a month total sales)_

This may sound out of touch but my advice is: stay away from small clients.
They're a pain. It's their money. They're never happy. They find everything is
expensive. They love their product so much they can't understand why you don't
work for free, since it's such a great opportunity. They're unfamiliar with
industry's best practices or fees.

They change their mind often (to be fair, everyone changes their mind but big
companies understand that this means a new budget and a new contract, while
small ones don't).

~~~
joelx
I agree that small clients generally are much more difficult than large
clients. I would like to find more large clients.

I can say that the work we do now for large clients is light years superior to
work of our competitors since we have been through the wringer with people for
whom every penny they invest is important.

------
jawns
Title is inaccurate. At the very bottom of the post, he says that fighting the
suit over the past two years has cost him about $100K in his and his
employees' lost time.

That's not the same as having spent $100K to fight the suit.

~~~
fisherjeff
It is the same! It's a _huge_ mistake, especially as a business owner, to not
make that equivalence.

~~~
paulcole
I disagree. Unless that time could have been directly converted into billed
client work (or something with a tangible payoff) then it isn't the same at
all.

It's like people taking about their "hourly rate" when deciding to pay for
some convenient service. Your time is only worth that if someone is paying you
for it.

------
jaclaz
>Fighting this issue for the last two years has been frustrating and has cost
me well over $100k in my time and my employees time.

I am missing how/for what the 100,000 US$ were spent?

Lost time due to having to go to a Court several times + time for preparation?

>Each time I was scheduled to appear in court, I spent a couple of hours the
day before refreshing my memory on the case and the facts so that I could
present our side. I would miss most of the day of work.

If he lost 2 days of time each time for 5 times, that is maybe 2x5x10=100
hours.

US$ 1,000/hour sounds to me like a bit excessive as a cost.

~~~
joelx
You are correct, it is my best guesstimate on the opportunity cost of all the
time I spent fighting this.

Court time: 7-8 days

Preparing 3 ring binder with ~150 pages of evidence all laid out with tabs
(Exhibit A, B, C...): 5-6 days

Lost work from stress & sleepless nights: 5-10 days?

My hourly rate is hard to judge - I have 80 full time employees so I don't
bill directly for my work any longer. If a client were to insist on me doing
work directly for them, I would probably require $700 / hr to do so. I don't
think this is unreasonable as I talked to a lot of doctors and attorneys
routinely charging $600 to $1200 / hr. I think I have a similar level of
expertise at this point.

My cost estimate is probably on the high side :)

~~~
jaclaz
>My cost estimate is probably on the high side :)

Well, at least here, you cannot confuse "missed income" with "costs".

If you are payed (or can be payed) 700 US$/hour, you should be in a range of
around 1,400,000 US$/year of revenue. On this you pay taxes and you have (or
should have) some costs, even if minimal.

I wouldn't be surprised if, once you have detracted those, you remain with US$
350/hour (half of the revenue).

Then what you can spend (and that you can consider as cost) is US$ 350/hour.

And you cannot really consider the "stress and sleepless nights" as "cost",
come on, this is what may eventually be "moral damages", and 5/6 days to make
a binder with 150 pages? If we take the 350 US$/hour as cost, you have managed
in 6 x 10 = 60 hours 150 pages, let's double them to 300 including the ones
you discarded, that is 5 pages per hour or less than 1 page every 10 minutes
or US$ 70 each for just reading and printing or photocopying a sheet of paper
and putting in t in a binder, I understand the tabs, Exhibit A, etc. still ...
Realistically it cannot take more than 20 hours at the very most to assemble
such a binder.

8 days at court, 10 hours each, 80 hours + 20 hours, still 100 hours at the
most, and these should be multiplied by 350 , not 700.

------
Hydraulix989
So why wasn't it a drop in the bucket win? I don't understand how Donald had
any damage claims whatsoever.

~~~
brians
Joel's staff hurt the customer. Not delivering your work until paid is one
thing. Reverting the site is totally unacceptable. For one thing, it's use of
access you were granted to help the customer to hurt the customer. I wouldn't
be surprised to see CFAA prosecution for it---and despite the need to reform
the CFAA, this is something that ought to be a crime.

If a tradesman does work on some other Donald's house and doesn't get paid, he
can't go remove or undo the work---he can place a mechanic's lien or otherwise
go through the courts. We don't accept self-help that harms another, no matter
how unfair the dealing was.

~~~
blueatlas
Not to say it's right, but some tradesman do remove or undo their work:

[https://www.youtube.com/watch?v=J-LqLU7CxeA](https://www.youtube.com/watch?v=J-LqLU7CxeA)

~~~
PeterisP
There are a bunch of legal acts that explicitly give tradesmen rights to
recover materials and equipment installed e.g. in a customer's building in
case of nonpayment.

As currently worded (AFAIK, IANAL, depends on your jurisdiction, etc) these
acts do not apply to websites in the same manner.

------
jondubois
It seems a bit immature to punish a client by reverting changes without prior
notice. I'm not surprised they were angry.

It's also not reasonable to spend so much money on litigation. Whenever
someone talks about principles in business, in reality, it's all about ego.

Being right doesn't pay the bills.

------
jlarocco
Regardless of who eventually wins, this blog post comes off as arrogant,
juvenile and whiny.

It really wouldn't surprise me if "Donald" wins the case. The author quoted
116 hours and $12k and then failed to deliver, and then acted like a big baby
fighting and arguing about it.

~~~
heisenbit
The author gave valid reasons. One was a wrong assumption about the input
files and it looks like the author was willing to absorb that. Then more
changes were asked by the client.

Small fixed priced contracts are hard and limiting liability is critical.
Typical is limiting it to value of contract. Otherwise it is very limited
upside and unlimited downside. Key to make it work is change management but
that assumes reasonable people on both sides and getting started with it early
on.

------
cixin
Do people regularly accept payment via credit card for >1000USD in contracting
work?

It seems like a bad idea, whenever I invoice payment is stipulated as being by
bank transfer.

------
paulcole
A: Enjoys throwing good money after bad.

~~~
tylercubell
I vehemently disagree. Like the author, I've had to defend myself from a bully
abusing the legal system to enrich himself. It's not about the money, it's a
matter of principle. "Throwing good money after bad." This isn't some kind of
bad investment, this is a personal attack. When you get attacked, you fight
back. You don't sit there and take it. Enjoyment? Are you kidding me? There's
only debilitating anxiety. You have no empathy.

~~~
paulcole
>When you get attacked, you fight back. You don't sit there and take it.

Why would I fight someone who's clearly more experienced at being an asshole?
What am I going to "win"? I'd rather move on with my life and not waste time
and energy plotting how I'm going to fight back.

Even if this guy does "win", he hasn't taught the client a lesson. A leopard
doesn't change his spots. Dude's going to be awful to work with for life. All
he's done is burn time, money, energy to prove a point to himself that he
can't be "bullied."

I know some people are assholes and will try to take advantage of me. When one
does (fortunately rarely as they're not tough to spot), I cut and run. Why
continue to engage?

~~~
tylercubell
If you want to frame it in terms of "winning and losing", how about your self-
respect and dignity? It's not about proving a point or teaching a lesson, it's
about being able to sleep at night. It's about taking control of your own life
and seeking your own personal justice. Let people take advantage of you and
roll over -- that's your prerogative. I will go to the ends of the Earth to
defend myself when confronted.

~~~
paulcole
I sleep fine. I know that I don't have complete control over my life (nobody
does). I don't need to "go to the ends of the Earth" to defend myself. I'd
rather just shrug it off and move on to what's next.

To each his or her own I guess.

------
eternalvision
Article mistakenly says the last hearing was in January 2016, instead of
January 2017.

------
TwoBit
I wonder if you could counter sue him for frivolous lawsuit damages.

------
loeg
Not going to court summons was your $100k mistake.

