Hands Off My Money! How to Win Your Small Business Dispute + Bonus Case Study!

I really don’t know how a person can run a small business without also being a lawyer. You do a lot of transactions, of one kind or another, and every transaction runs the risk of somebody trying to fuck you and take your money. That’s not to say that everybody out there is trying to get away with something—most aren’t—but a not insignificant number of transactions end up in some kind of dispute. You have to be able to protect yourself from corporate rapine, among other things.

As a small business, you’re frequently at an inherent disadvantage. Your counterparty is often a bigger entity with more resources and more bargaining power. Maybe to do business with them, you’ve been forced to sign some shitty one-sided contract of adhesion that lasts for years or automatically renews without notice to you. A year into the contract, you realize this company sucks, but good luck breaking up with it. Somebody has just done fucked you and taken your money. Just like that.

   The Village Lawyer  . Pieter Brueghel the Younger (1621).

The Village Lawyer. Pieter Brueghel the Younger (1621).

Keeping Your Money: Suggested Tactics

So how do you get control of this sordid business and hold on to your money? It obviously helps to be a lawyer, especially a litigator. If you know the law and do commercial disputes for a living, you have valuable resources to throw into the fray. Most people aren’t lawyers, thank goodness, so that’s not going to be a fallback except in rare instances. You can always hire a lawyer to do it for you, and you absolutely should if there’s a lot at stake. But what do you do when $2000 are on the table, or even $5000? Attorney fees probably make hiring a lawyer unrealistic. You’re on your own, just like you were when the landlord in your last apartment complex tried to shake you down for your security deposit over some dubious move-out charges.

You don’t need a lawyer, though, as long as you’re in command of the facts and have your eye on the endgame. What you’ve got to do is make it as expensive as possible for the other side get (or keep) your money. Shady companies have lots of folks they can take advantage of, and where they choose to focus their resources is just a cost-benefit question. Change that calculus for them, and they’ll go take a shit on somebody else. If enough people make it painful enough for them, maybe they’ll start re-thinking the way they’re doing business altogether.

Usually mere resistance, without something more assertive, isn’t going to work. If they don’t already have your money, you have a certain tactical advantage. They’ve got to work to come get it. But if they do have your money, you’re in a weaker position, because the burden is on you to get it back. The key is to identify what, specifically, they did wrong, and leverage it as hard as you can to get what you want. If you can credibly claim they violated some consumer protection law, where you could get punitive damages, that will probably get their attention.

  Handsome Caucasian Lawyer.  That’s the actual name of this stock photo listed on the  Internet .

Handsome Caucasian Lawyer. That’s the actual name of this stock photo listed on the Internet.

Let There Be Treble Damages!

Treble damages, punitive damages, statutory damages, attorney fees. Appropriate use of these terms is to your advantage. A threat to involve the State AG’s office or federal regulators may be worth throwing into the mix, especially if it’s a consumer dispute. Whatever you do, put it in writing, and then send certified copies to the company’s general counsel and CEO. Important people don’t want to spend their time dealing with your shitty little $1500 dispute. That, too, is to your advantage, so long as you’re credible and willing to invest in the dispute.

A well-placed review of the company on a third party’s review site can also be effective if done right. In fact, find three or four sites and put your review up everywhere. I’m not talking about a stupid-ass Yelp review, in the manner of some self-satisfied nincompoop rating a ramen shop 1 star because he does’t understand the difference between ramen and pho, and thought he was going to a pho restaurant. “This so-called pho restaurant does not serve pho. The noodles were all thick and chewy and the soup was covered in a layer of fat. Disgusting! DO NOT EVER GO TO THIS RESTAURANT. I know authentic pho and this was NOT authentic. Totally fake!”

My point: your review has to make sense and be compelling. It’s not about being an opinionated buffoon, it’s about being factual, credible, and committed to getting a result. Obviously, this tactic only works if the company in question cares about online reputation. Some do—considerably. Last year, as part of a confidentiality clause in a settlement agreement I entered with a tech service provider, I was required to pull down my reviews of the service. It was really important to them that the reviews come down.

For things to work out, though, you have to be in the right, preferably as a legal matter. At least you need to have equity on your side—some sense that, even if not unlawful, you’re being treated unfairly. I’m not suggesting that you go out and take advantage of somebody, after all. I wouldn’t tell to you act like Donald Trump and screw contractors as routine business practice. I’m suggesting there are ways to level the playing field when somebody bigger is trying to take advantage of you.

Aramark: A Case Study

And now a small case study, involving the linen services company Aramark. Terrible company. The worst. We used Aramark for towels and aprons at our stores until earlier this year. At some point, after using the service for 18 months or so, we noticed the prices had increased dramatically, without notice or explanation. When we tried to find out why, we couldn’t get anyone to call us back. Meanwhile there were all sorts of problems with the deliveries—overcharges, missing items, etc. Aramark wouldn’t address those either. So we terminated the service and switched to a new vendor.

Aramark responded by trying to charge us $5000 for “liquidated damages” because, they said, we had a multi-year contract that we were breaching by terminating. We’d never seen this so-called “contract,” and had no reason to think one existed, let alone that we couldn’t terminate it for cause. Give me a break.

Aramark’s demand and my responsive demand are below. Please note: I do not ordinarily write demand letters quite as gleefully contemptuous, as toweringly disdainful, as this one. I’ve worked hard to purge snark from my legal writing over the past decade, as much as possible, but sometimes it cannot be helped. It also seems my id is liberated, just a bit, when I’m representing myself instead of a client. Spoiler alert: Aramark never contacted us again after this letter.

An Outrageous Demand

Aramark Demand Letter. We got two of these things, one for each of our stores. They wanted over $5000 in total.

An Appropriate Response

Dear Mr. Hall,

I am in receipt of your letters dated January 26, 2018 regarding the above-referenced account, entitled “Breach of Contract” and using terms like “liquidated damages,” which, as a non-lawyer, you clearly do not understand.  Your threatening use of this term to consumers is misleading and is likely in violation of California consumer protection and unfair competition law.  

I write to confirm that Shiba Ramen Corporation (“SRC”) will be terminating Aramark service as of February 28, 2018, per our prior written notice dated January 21, 2018 (“Notice”).  Should Aramark attempt to enforce its so-called “rights,” as you threaten in your letters, you can rest assured Aramark will find itself on the receiving end of a lawsuit for damages, as well as complaints to the California Attorney General and other applicable consumer protection authorities. 

I am SRC’s General Counsel and a professional civil litigator, and I look forward to providing maximum public exposure to Aramark’s dubious and unlawful business practices.  I also look forward to taking discovery about Aramark’s conduct, including your deposition, where you can tell me, under penalty of perjury, all about your knowledge of “liquidated damages,” and your practices of improperly threatening consumers to continue with unenforceable “contracts.”  Your letters make me wonder whether any class action attorneys are investigating Aramark’s practices.  If you take any adverse action against SRC, we will be sure to find out.  Surely you have sent out countless letters to aggrieved consumers threatening liquidated damages and inducing them to either pay money they do not actually owe, or to continue using Aramark’s deficient services.

With respect to the merits of your claim against SRC, we do not understand that we have any contractual obligation to use Aramark’s service through December 17, 2018.  We have never seen any such contract, and nothing has ever been provided to us by Aramark.  Is it Aramark’s typical practice to fail to provide supposed “contracts” to customers, and then claim “breach of contract” when a customer terminates in consequence of Aramark’s deficient services?  Just making a wild guess here, I’d say the answer is a resounding “yes.”

Even if there is some sort of “contract,” it is undoubtedly terminable for cause.  As explained in our January 21 Notice, a copy of which is attached for your convenience, Aramark’s service has been deficient in numerous material respects.  Indeed, Aramark has invoiced us for services that have not been provided, and thereafter failed to resolve those problems when brought to its attention.  Our position is that Aramark owes us money, not the other way around.  Moreover, Aramark’s monthly invoices increased dramatically, without explanation, during the course of 2017.  When we attempted to contact Aramark customer service about our invoices, we were given no explanation, and the Aramark representatives who promised to follow up with us never actually did. 

Now, getting back to Aramark’s “liquidated damages.”  Please note that liquidated damages clauses like the one you are purporting to enforce—I have not actually seen it, because no “contract” was provided to SRC—are considered unenforceable penalty clauses by California courts.  As the Supreme Court has stated, a liquidated damages clause is unenforceable where, as here, it “bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach.”  Ridgley v. Topa Thrift & Loan Ass’n, 17 Cal.4th 970 (1998). 

Your absurd demand for over $5000 in “liquidated damages” is obviously an unenforceable penalty.  Do you seriously think any court would require a consumer to pay this kind of money for services that have not been provided, particularly in connection with a contract of adhesion that has not even been provided to the consumer?  Aramark suffers no damage from our termination because it no longer gives us any products or services.  We have paid for all Aramark services received to date, and that is all the law requires.  We do not have anything of yours in our possession, except for previously-invoiced materials that Aramark will be collecting prior to the February 28 termination date.     

Your unconscionable conduct is just the kind of thing that will trigger attorney fee awards and punitive damages.  And, of course, Aramark will be subject to actual damages for invoiced services that it did not provide, and for any overbilling in connection with SRC’s accounts. 

This is not a fight you want, I assure you.  You will lose and it will cost you.

Jake Freed

President & General Counsel/Shiba Ramen Corp./California State Bar No. 261518

Cc: Aramark Executive Offices & General Counsel