The Process and Cost of Suing for Non-Payment
If you are a construction contractor, subcontractor, or material supplier and have not yet received compensation for your work, there are many different ways that you could pursue payments. The most common ways to pursue delinquent payments include filing a mechanics lien or simply a preliminary notice. However, if you are past a lien filing deadline or have not sent a preliminary notice, you could instead file a construction payment to collect your unpaid construction payment. When considering filing a construction lawsuit, it is important to have information about each of your options before you start the process.
What You Need to do Before Suing
The first thing that you should do before beginning a lawsuit is to review your construction contract to make sure that the payment terms are clear. Further, check the terms of your contract to ensure that you have properly fulfilled your duties as outlined by the contract.
Next, verify the contact information for the other person involved in the agreement. The reason for this is that you want to double-check that you have been delivering the invoices to the correct address.
After you do each of these steps, you must send a demand letter that states the total amount the other party owes you. Additionally, finish the letter with a request to receive compensation immediately. This is a vital step you must take because you need to send this letter thirty days before you can file a lawsuit. Though you can write this letter yourself, hiring an attorney to create this letter is always a good idea. The reason for this is that a strongly worded demand letter that shows you are seriously considering litigation can get you paid.
What to Consider Before Suing
The primary consideration a company should make before filing a lawsuit is to compare the money an entity owes you and how much the litigation will cost. Though you may be able to recover court and attorney fees if you win your case, the amount you will receive it determined by the judge on your case. Thus, though you may be able to recover some costs, it will likely not total the entirety of your costs.
If the amount of money you are trying to recover is relatively small, it may be better to utilize a small claims court to lower your total costs.
Another consideration for companies is to decide if there is even any money to collect. In some cases, the entity you are suing will not have any money or assets to pay you in full. Additionally, if the entity has multiple lawsuits against them, you may win your case yet not be able to receive any money.
What is the Process for Filing a Construction Lawsuit
If you have not received payment 30 days after sending your demand letter, you can hire an attorney—or ask your existing attorney—to draft a petition for a lawsuit. This petition lists each of your allegations. Next, your attorney will send the petition to the court that will issue a citation and serve the debtor with the lawsuit.
Once the debtor receives the lawsuit, they have around three weeks to file their answer to this claim. If they respond to your initial claim by denying or refuting the allegations, then litigation will begin. However, if the debtor does not respond to your claim within the given time period, you can ask to court to grant you victory by default. If you are granted summary judgment, you will likely receive the amount of money that you requested. However, the judge will only grant proven expenses. Thus, if there are unprovable claims in your lawsuit, the judge will not approve your full request.
While each case is different, most lawsuits begin with the discovery phase. During this phase of the lawsuit, each party requests and sends evidence of their claims and defenses to each other. When looking to receive payment, your attorney will simply provide proof of the other party failing to make payment. In this situation, the opposing attorney will ask for copies of the payment application, change orders, and records showing any payments received. Finally, they will ask for documentation showing that the work completed matched the contract description.
In addition to sharing documentation, the discovery phase can also include depositions. Depositions are video tapped live questions-and-answers sessions that are given under oath. The purpose of the process is so that information is accessible to both parties.
Depending on the specifics of the case, the court may request that the parties utilize mediation instead of traditional litigation. Mediation is a form of alternate dispute resolution (ADR) that is an informal way to resolve disputes and avoid costly litigation. Instead of a judge ruling on the case, a neutral third party called the mediator resides to hear the case and works to facilitate discussion and negotiation between the parties. The goal of this form of ADR is to help both parties reach a mutually acceptable compromise regarding their dispute. Another difference between mediation and normal court hearings or arbitration is that this form of ADR is not legally binding.
What Evidence is Required to Prove Non-Payment
Here are some of the items you will need to help prove your case:
- Signed written contract with change orders. You can have a verbal contract, but it is harder to litigate as the parties often argue over who said what.
- As-built drawings.
- Emails, texts, or signed documents accepting the completed work.
- Photos of the completed work.
- Affidavits (sworn statements) from those with knowledge of the facts and circumstances or custodians of the books and records for the company testifying that payment was not received.
- Signed submittals.
How to Collect Judgment
Collecting a judgment can begin even before you file a lawsuit. To begin this process, you must find out where the company banks and what assets you could take from them. However, if you do not have this information, a construction attorney can help you search for it.
Writ of Garnishment
If you know where the entity banks, you can choose to file a writ of garnishment with the court. If the court approves this file, you can serve the garnishment to the bank. After issuing the garnishment, the bank has three weeks to respond. Further, after the bank receives the garnishment, they can freeze the funds within the debtor’s accounts. This allows you to receive your payment.
Writ of Execution
A writ of execution is useful when you either do not know where the entity banks or they do not have any funds in the bank. Instead of seeking money from bank accounts, you will look to take the non-exempt property to satisfy the judgment. One important note is that a police officer must serve the writ of execution. If the party still does not pay, the property is sold and the funds go to the judgment collector.
Contact Our DC Law Office for More Information
Finally, for more on the process and cost of suing for non-payment, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding construction law, check out our blog.