At Gregg H. Glickstein, P.A., our legal team is dedicated to helping clients resolve their business and contract disputes. We understand that having a well-written agreement is crucial if you want to avoid future conflicts with your business partners and other entities you might work with. Below, our attorney discusses the case of Ham v. Portfolio Recovery Associates, LLC, and explains the importance of having a strong contract in place when conducting business deals.
Case Analysis
In this case, a commercial collection agency commenced two county court actions to collect relatively small debts of less than $5,000 from two different debtors. The plaintiff acquired the debts from a bank that had entered into written credit card agreements with the two debtors. The debtors used the credit cards to make charges and apparently didn't pay the bank based on monthly credit card statements. The credit card agreements contained provisions for the recovery of attorney's fees in the event of litigation to enforce the contract obligations.
The plaintiff collection agency purchased the debts from the bank and sued the debtors based on the credit card statements, but not under the credit card agreements based on a cause of action for account stated.
Often times, collections cases involving contracts in which invoices are generated and not paid include counts for breach of contract and for account stated, among other counts, as an alternative basis for recovery.
As this case illustrates, attorney's fees can dwarf the amount of a claim. Because of this, entitlement to attorney's fees is a very important issue in such cases, and decisions to pursue such claims are often influenced by the ability/inability to recover attorney's fees. Furthermore, some contracts deliberately omit attorney's fee provisions or specifically provide that the parties will each bear their own attorney's fees in the event of litigation for strategic reasons.
Contracts include these provisions because it will discourage the other party from suing over the contract because of the inability to recover attorney's fees. This can occur when the drafter of the contract is in a superior financial position (collectible) and anticipates the party suing it will likely be uncollectible as to attorney's fees.
Usually, the plaintiff in a collection case like this would sue on the contract and for account stated to take advantage of the attorney's fee provisions in the respective credit card agreements. Here, the collection agency plaintiff likely bought a high number of receivables from this bank at a big discount. Because the collection agency expects to win some and lose some based on the bank's receivables, it presumably made a strategic decision to limit its exposure to attorney's fees if it lost by not suing on the credit card agreements, and instead limiting its claims to a single count claim for account stated based on the credit card statements.
As explained in Judge Kinsey’s opinion, cause of action for an account stated simply requires a business relationship, not a contract, and the existence or nonexistence of a contract may be irrelevant to a claim for account stated. As it turns out, and assuming this course of action pursued by the collection agency plaintiff was done strategically to avoid attorney's fee exposure, the plaintiff lost the battle but the debtors lost the war based on the amount of the attorneys' fees sought by the debtors' attorneys.
Boca Raton Business Attorney
Do you need help drafting contracts for your business? If so, you should get in touch with our legal professionals at Gregg H. Glickstein, P.A. We can review the details of your case and get started building a legal strategy that will protect the interests of your business.
Call (561) 953-6662 to schedule your case evaluation with a Boca Raton business attorney. Don’t hesitate, give us a call today.