Discussion:Being sued over contract
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Discussion Forum Index --> Tax Questions --> Being sued over contract
Whammync01 (talk|edits) said: | 22 October 2007 |
| Hello all, I just wanted to know what all of you think of this. I moved from a small town in 04 I had a client base of 570 clients at that time. I decided that I could not commute the 100 miles to do these returns. I sold my database for 25000.00. The person that bought my database made out to be the nicest, honest, best person I had ever met. This wound up to be not true as I found out. The contract was short and simple. She was only purchasing database, no equipment, no lease etc. I was to work for the first season, which I did to make the transition smooth. I was also to be available in future years for help if any problems arised, which I am I never changed phone #s address etc. so she could contact me if needed.I was to not compete for 5 years in 3 counties that she listed, no mileage, just the 3 counties listed. She found out that I opened an office in a county that was not listed and that I mailed out a flyer pertaining to the fact that I was opening in this county an now she has filed a suit against me for breech of contract. There was nothing in contract about any contact to clients, and the ones I sent this to had requested it. She lost 50% of clients the year I worked for her as she was 3 times the price that I had been. Clients were upset. I just wanted to get some input from some of you as to what you think about this.I have an atty, and they say not to worry but, I do. All of your input is appreciated.
Thanks whammync01 | |
| 22 October 2007 | |
| Depends on the verbage of the contract. If the flyer was mailed to clients residing in one of the counties listed in the contract - I would be very upset if I were she. You may be OK as far as the contract is concerned but it is unseemly to me. | |
| 22 October 2007 | |
| The lawyer is paid to do most of your worrying. I tell my clients to stay reasonably sober, use a high qaulity self-tanning lotion in moderation (men too), no jewelry except a wedding band (don't buy one if your're not married), and shined shoes (women, no stilletto heels). That's all YOU have to worry about. These agreements are not favored in the vast majority of states as they act as a restraint of trade, therefore, they are strictly construed against the drafter of the agreement. I assume your lawyer has read the contract over very carefully, perhaps advertising was not mentioned. Anyway... it will do absolutely no good for you to fret, answer your lawyers questions truthfully, help him get the discovery done: it may very well end up in mediation etc. etc. [Edit: I'm also trying to figure out what her damages are? I mean, she raised fees 300% and she still has 50% of your clients? Is she seeking some sort of injunction, possible, but I doubt it. | |
| 22 October 2007 | |
| In an ideal world with a decent attorney. I had a client whose lawyer managed to lose one where a 10 mile restrictive covenant was measured at 9.85. (permission was asked and granted, albeit verbally.) | |
EKelley737 (talk|edits) said: | 22 October 2007 |
| I've been involved in non-compete agreements in the past and they can go either way depending on circumstances. Even though you were in an unlisted county did you send mailers to ex-clients? That would be a big no-no. If you haven't made any contact to previous clients then that should weigh heavily in your favor. By the way if you had 570 tax clients and sold them for only $25,000; how much do you charge per return???? | |
Death&Taxes (talk|edits) said: | 22 October 2007 |
| What is contact? Would the agreement prohibit you from advertising your new office on television or radio or in the print media just because viewers, listeners or readers in one of those counties might see it? In these days some agreements are hardly enforceable.
I do read into the post that you did send the flyer to old clients in the three counties, because they asked you to do so. If you did so, it does sound as if you were competing, especially in today's world where data can be sent so many ways. | |
| 22 October 2007 | |
| As far as I am concerned, this is pretty straight forward. She had a non-compete in three counties and she used direct mail into those counties. It seems to be a clear violation.
You indicted that you essentially sold 570 clients for $25,000. That is only $43.86 per client. No wonder she tripled your prices. | |
Whammync01 (talk|edits) said: | 30 October 2007 |
| Thanks all for your comments. I appreciate all of your input. I can see from here just as I thought there are different views especially concerning the if's. If it was written this way, if it was written that way etc. I have a good attorney, I was just a little concerned over ethics here as, that is what is important. I did not intend to do anything unethical, I just thought I would see what you all thought. My average return is 125.00 and up a few are less, students, retired ind. etc. However I have some that pay 300.00+ depends on returns. I should have asked for more money but, I wanted someone that would treat the clients as I had and be within the same price range etc. She led me to believe all of this until after contract was signed. I wanted her to prosper. This did not happen as soon as the first client walked in and was told of the huge price increase they started canceling appts. I tried to talk to her about this and she said she had rather do fewer returns, charge more and work less than do the volume I did for the price I did them. So that is what happened.
Contract does not state anything about client contact. | |
Whammync01 (talk|edits) said: | 30 October 2007 |
| Thanks all for your comments. I appreciate all of your input. I can see from here just as I thought there are different views especially concerning the if's. If it was written this way, if it was written that way etc. I have a good attorney, I was just a little concerned over ethics here as, that is what is important. I did not intend to do anything unethical, I just thought I would see what you all thought. My average return is 125.00 and up a few are less, students, retired ind. etc. However I have some that pay 300.00+ depends on returns. I should have asked for more money but, I wanted someone that would treat the clients as I had and be within the same price range etc. She led me to believe all of this until after contract was signed. I wanted her to prosper. This did not happen as soon as the first client walked in and was told of the huge price increase they started canceling appts. I tried to talk to her about this and she said she had rather do fewer returns, charge more and work less than do the volume I did for the price I did them. So that is what happened.
Contract does not state anything about client contact. | |
| 30 October 2007 | |
| I agree with the person taking action. I would be absolutely ticked if you mailed to MY clients in MY counties that you sold and in the area that you agreed to stay out of for the solicitation of business. Do I have this wrong?
Reverse the field and ask the question from the other vantage point...You just bought a book of business and negotiated and agreed to a non-compete (customers and geography) from the seller. You then go to your mailbox and pull out a mailing from the person you just bought a book of business from? Are you serious? I find it pretty hard to believe that you would even come here and ask the question, to tell the truth...I guess you are looking for support for a pretty bad and yes, in my opinion, very unethical decision made to pursue your former clients. You should be sued for undervaluing your book of business if that was possible. Sorry to be so harsh, but come on! And what she did with bill rates, etc. after the purchase has nothing to do with anything. I can only speculate as to how we got here...when they left her for whatever the reason, you said to yourself..."heck, these folks are easy pickins...I'll send them a note and get them back. They already left her anyway, I can just go get them back." A whole different story it would have been had the former clients sought you out on their own. | |
Doug Phillips (talk|edits) said: | 30 October 2007 |
| I agree with 94nole. | |
| 30 October 2007 | |
| I agree as well but would have said it sans gonads...hehehehehe | |
| 30 October 2007 | |
| Good news is this is simple breach of contract action and it does not sound like grounds for recession exist. Therefore, you'd only be on the hook for the damages proximately caused by your actions (i.e. sending out the mailer to former clients in the forbidden counties.).
But that's where it gets interesting, if she had already lost the purchased clients (due to the increase in rates), then your mailer did not damage her because they had already declined her services and you took nothing from her. Of course, if they were still her clients, well that changes things. Regardless, I'd bet dollars to donuts that she will succeed in obtaining an injunction forbidding you from engaging in this sort of activity again for the duration of the agreement and there's probably an attorney's fees provision in the agreement so you may get stuck with her lawyer's bill. | |
| 31 October 2007 | |
| figure your max damages as the amount of your fees on clients in those 3 coutnies that stayed with you. *you shouldn't have mailed to them* Offer an immediate settlement of 1/3 (or less, depending on how many) of that amount. Her lawyer will tell her to take the money and run.
ed | |
| 31 October 2007 | |
| As I said more subtly more than a week ago, you have no ethics, you have no leg to stand on. | |
Death&Taxes (talk|edits) said: | 31 October 2007 |
| Everyone is ripping Whammy a new one. I used a question to say the same thing earlier, but now I would note that tax preparation is an intensely personal business. Build a following and you practically need an Uzi to blow them away. People don't want to go elsewhere once a trust is established between the parties. Both of you should have covered this at the beginning: 'what if someone from here drives to where I am going to move and wants me to do their work, or what if they mail the stuff to me?' Now it may be that you went out of your way to send these people letters 'cold' in which case, this is not defensible.
But it may be that they found you and contacted you. If the latter, the situation is almost a 'Catch 22' in that if you respond, "I can't talk to you because of the agreement I signed with Ms. X. Please continue to use her." you will probably lose that client for both you and your successor, so no one wins. But it would have taken little to pick up the phone and let your buyer know, and give her a percentage of that fee for the remaining years of the agreement. My feeling is that you knew this would happen, and the buyer, if she had any brains, should have known the nature of the business. If you are any good, I am sure she found out the first year when people said, "Oh, ole Whammy knew what to do with that figure" or "Whammy got me a bigger refund." Even so, she was naive; you sound more calculating. Pick up the phone and try to settle without the lawyers making money from the suit. | |
Corptaxhelp (talk|edits) said: | October 31, 2007 |
| Whammy, I doubt you'll be held in violation of your non-compete. It sounds as though you tiptoed to the line and shouted 'neener-neener' but I doubt you will be found guilty of breaching your contract if your lawyer says you are in the right. (He has seen the document and I have not.)
That said, you're a bit of a schmuck for poaching her clients. Clearly, sending a mailing to her territory advertising your services is outside the spirit of the agreement. You said that she seemed like 'the nicest, honest, best person' you have ever met. I don't see anything nefarious in her behavior. The biggest claim you have against her seems to be that she raised her rates. So far, I think she is the more honest person here. You should start coming up with a settlement offer. I don't know what your attorney charges but mine would quickly eat into that $25,000. I'm sure she'll settle for less than it will cost to litigate. My recommendation would be for you to pay her $43.86 for ever client of hers that you picked up from her territory already. Her clients are defined as the ones you sold her. Further, you two should agree upon a referral fee for future client transfers. You shouldn't do direct mailings to her counties. | |
