help, legal dispute

[samclem]

I agree with others that the buyer seems to be taking a shortsighted, pound-foolish view. Yes, he didn't get everything he had hoped for, and that is probably worth something, but probably not 20% of the business sale price.


The small claims court limit in CA is $5000. If the buyer won't pay a reasonable portion ($10K ?) of the remaining due amont, your Mom should consider filing a case there. Lawyers are specificaly excluded from participating (until after the hearing), so costs would be low. Most importantly, the buyer would know that word would get out to all your Dad's friends and former clients (including the seasonal ones he hasn't met yet) that he is refusing to pay what he owes and that your Mom is having to take him to court. Not good PR. I woud also think that this would not expose her to being accused of bad-mouthing the buyer --she's not making contact with these clients, and the lawsuit isnt frivilous--the buyer owes the money and isn't paying. Any result (the buyer pays up before going to trial, your Mom wins the case, or your Mom loses the case) offer more satisfaction, in my opinon, than just walking away from the issue.

I'm not a lawyer and did not sleep at a Holiday Inn Express last night. It probably shows.

[samclem]

PS to above:

Mom should see if she can get a court date of April 13th. Not only is it Friday the 13th, but it is also the last business day before the tax filing deadline. That will be nice icing on the cake for the defendant. What is 3 hours out of the office in early April worth to an accountant?

[samclem]

And another thing . . .

If it is at all plausible given your Mom's personalty, a "good cop, bad cop" approach with the buyer might work, with you as good cop.

"Well, I told Mom about our last conversation, and it did not go well. She's probably too close to the situation emotionally--she worked with Dad all those years, knows what they both sacrificed to make the business a success, and, frankly, feels like you are trying to take advantage of her. Sher knows what Dad would say about this. She seems to be angrier the longer she thinks about it.
. . . At first I thought the money wasn't the important thing, that she was only mad about how this has happened. But, then I remembered that she'd put the lump sum from the sale into an annuity after Dad died so she'd be gauranteed an income for as long as she lives. The first payment is in nine months, she'd planned to live on the installment payments from you this year, it all seemed very secure--how could she know that you'd do this? She can get an advance on the annuity, but that will cost her. I think this is another thing that is making her mad.
. . . One thing that has been good is all the support she's gotten since Dad died from all the folks we know fom the business. She talks all the time about the great clients Dad had. More than clients, really, more like family. I'm glad they make it a point to call her. You've got a great bunch of customers.
. . . You know how Mom is, always busy. Anyway, she's worried about the tight money situation now, but won't let me help her. She says she's got a lot of skills that she can use. She told me that, with the contract voided, one silver lining is that the "noncompete provisions" were no longer in efffect and she can talk to Joe Billings (main competitor across town) about doing some seasonal work with him for the next six months. She's sure she can be of use--she's got talent, and Joe is always looking for good clients.
. . . Anyway, I told Mom that I think this is all a big misunderstanding and that you probably just needed to think things over. She likes you and she wants the best for you, and she can't believe that you're thinking about not fulfilling this contract. I know everything will turn out fine in the end. She's such a hellcat, though. I can smooth things over for a while, but I need to hear back from you soon before she does something rash . . .

[Patrick]

Quote:

Originally Posted by samclem I agree with others that the buyer seems to be taking a shortsighted, pound-foolish view. Yes, he didn't get everything he had hoped for, and that is probably worth something, but probably not 20% of the business sale price. The small claims court limit in CA is $5000. If the buyer won't pay a reasonable portion ($10K ?) of the remaining due amont, your Mom should consider filing a case there. Lawyers are specificaly excluded from participating (until after the hearing), so costs would be low. Most importantly, the buyer would know that word would get out to all your Dad's friends and former clients (including the seasonal ones he hasn't met yet) that he is refusing to pay what he owes and that your Mom is having to take him to court. Not good PR. I woud also think that this would not expose her to being accused of bad-mouthing the buyer --she's not making contact with these clients, and the lawsuit isnt frivilous--the buyer owes the money and isn't paying. Any result (the buyer pays up before going to trial, your Mom wins the case, or your Mom loses the case) offer more satisfaction, in my opinon, than just walking away from the issue. I'm not a lawyer and did not sleep at a Holiday Inn Express last night. It probably shows.

This would probably not work due to the arbitration clause in his contract. The judge would just dismiss it and say go to arbitration.

[kramer]

Just a few quick notes, thanks for the replies.

There is no direct tie-in between services provided and payments. However, the time period of payments (12 months) is the same time period that my dad was to be available. But everything is in separate clauses and not necessarily related. Also, the guy had trouble coming up with the initial amount, he is cash-poor (meaning that it was more the idea of installments). I get the sense he is a high income earner spend-it-all type.

My mom has no background in accounting. She was just a paper pusher, phone answerer, etc.

Any legal proceedings have to go through arbitration.

Ed, on the lump sum issue, 15% is a huge difference. Depending on circumstances, I would still rather wait until Jan. 2 to receive it. If there is less than 1 in 6 chance of him flaking after a written agreement, it would be worth it. I presume the minimum time to resolve this is a couple of weeks, anyway, to get something drafted.

I don't know if my dad had a lawyer draft the agreement and neither does my mother. Knowing my dad, I doubt it.

Based on what I know, I think we would be happy with $10K in January. I think this guy's ability to pay lump sum could be an issue, too.

Also, if we say let's stall payments and wait until after tax season and see what happened, then a lot of our leverage has disappeared.

When you think about it, the remaining tax clients probably average about $200 per client. If you figure he paid around 75% of revenue for those clients, then even losing 20 only reduces the business value by 20 x $200 x .75 = $3000. I mean, how many clients was he going to ask to call my dad and then have my dad change their mind?

Kramer

[Patrick]

Do you have a severability clause in the agreement?

[Martha]

Kramer, don't let us make you overthink this. I believe that you are on the right track from what you have said in your previous posts. Remember, there is no compensible breach of contract until he actually needs to consult with your father, is unable to AND damages result directly from that breach.

Settle up before tax season and if you get a lump sum, make it due in January.

I think agreeing to take $10,000 in a lump sum is more than fair on your part.

Good luck to you and your mother.

[kramer]

Well, I talked with the buyer at length this morning, and he is going to continue to pay. Basically, he just wanted to whine a little and let us know about his concerns.

His main concern was not even related to my father's death. He said that it seemed like 15% of the clients were not local and that they might be harder to retain. And then, of course, he does not have my dad to fall back on for intros now.

Basically, I just tried to address his concerns and kept it positive: That we are helping him behind the scenes with recommendations (which is true), That any damages are strictly speculative at this point, That there is always some attrition and this is priced into the purchase price.

But I think that main points he responded to were that because of my dad's poor health most clients were expecting a transition (it was a question many clients brought up with my dad the past two years) AND that he can use existing monthly/quarterly clients as references (it was like he had never thought of that).

Thanks again for all the input here. And I still may need it later if the payments stop. He is going to pay two payments next week (which is 20% of the remaining money due). I get the sense he has a cash flow issue. I think he had to cash in an IRA to buy the business in the first place (60K down) and he recently bought a 5000 square foot house. And he was even partner in a successful firm before this, etc., but still had trouble raising the 60K for my dad's business. So I could see that living on the edge has greatly increased his worry level. His cash flow should increase greatly during tax season.

Kramer

[samclem]

kramer,

Great! Looks like the gentle aproach worked well. Good thing you didn't pay atention to all those whackos urging you to play hardball!