Need some advice on a difficult situation. Completed an audit for a manufacturing client here in Alabama on Alabama Power. Found $127K in billing errors, utility already issued the refund check. Now client is claiming our analysis was 'incomplete' and refusing to pay our 30% contingency fee ($38K). Our LOA is solid and clearly states payment terms. What enforcement options have others used successfully? Considering small claims but the amount might be too high.
Client refusing to pay - enforcement options?
Gwen, that's frustrating but unfortunately not uncommon. In Vermont, small claims maxes out at $5K so that won't work for your situation. You'll likely need to file in regular civil court or consider arbitration if your LOA includes an arbitration clause. Before going legal though, I'd send a formal demand letter with a 30-day deadline. Sometimes that's enough to get them to reconsider.
Chester's right about the demand letter. I had a similar situation with SDG&E down here in San Diego. Client tried to reduce our fee after we found $89K in errors. I sent a demand letter drafted by my attorney, and they paid within two weeks. The key is making it clear that you're prepared to pursue all legal remedies including attorney fees if your LOA includes that provision.
Grace makes a good point about attorney fees. That's language I always include now - 'prevailing party entitled to reasonable attorney fees and costs.' It makes clients think twice about frivolous disputes. Also, if you haven't already, document everything about your analysis process. Get statements from the utility confirming the errors and refund amounts. Makes your case much stronger.
Rachel's documentation advice is spot-on. I keep detailed work papers for every engagement now, including time logs and correspondence with utilities. Had one client in Texas try to dispute our findings until I produced the email chain with Oncor confirming the tariff errors. Suddenly they weren't so interested in fighting. Also consider whether this client might be worth writing off to avoid the hassle - depends on your time and legal costs.
Marcus raises the write-off question, which is tough but sometimes practical. However, $38K is significant money and you don't want word getting around that you can be stiffed without consequences. I'd definitely pursue this one. In Louisiana, I've had good success with attorney demand letters that reference potential bad faith and breach of contract claims. Sometimes the threat of additional damages gets their attention.
Juan's right about not wanting to set a precedent. Word travels fast in business circles. One thing to consider - if they're claiming your analysis was incomplete, offer to address their specific concerns first. Sometimes clients just want to feel heard. If their objections are baseless (which sounds likely if the utility already cut the refund check), it strengthens your position and shows good faith.
Derek makes a good tactical point about addressing their concerns. I had a similar situation in Ohio with FirstEnergy. Client complained about our work, so I prepared a detailed response addressing every point they raised. Turned out they were just fishing for reasons to reduce the fee. Once I demonstrated the thoroughness of our analysis, they backed down and paid in full.
This thread is really helpful. I'm dealing with a smaller dispute in Texas with AEP - only $12K but still significant for my practice. Frank's approach of detailed response documentation seems like a good middle ground before going legal. Question for the group - how long do you typically give clients to respond to demand letters before filing suit?
Jeff, I usually give 30 days for demand letter response, but that can vary depending on the amount and your relationship with the client. For Gwen's $38K situation, I'd probably give them 30 days then file. The key is following through - empty threats just encourage more bad behavior from clients. Document everything and be prepared to go the distance.
Great discussion here everyone. Gwen, one additional thought - consider whether you have any leverage through the utility relationship. Sometimes utilities will note in their records which consultant identified the errors. If Alabama Power has documentation showing your work led to the refund, that's powerful evidence. Also, bad paying clients often have other issues - might be worth checking their credit and payment history with other vendors before deciding how hard to pursue.