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Collection nightmare and how to avoid it
January 19, 2022
Collection nightmare and how to avoid it
          Kovacs Security, a New York alarm company, entered into a commercial fire alarm contract with its customer in September 2017.  The customer gave a deposit and then sent a termination letter in November 2017 because the fire alarm wasn’t delivered in time.  The customer sued the alarm company in small claims court for return of the deposit.  The alarm company engaged a collection attorney to sue the customer [not K&K] in 2019.  The litigation has a long history [and longer future, but that will be addressed below].  The customer moved for summary judgment in the small claims against, which was denied because of questions of fact.  The customer moved for summary judgment to dismiss the alarm company’s complaint.  The lower court denied the motion; the customer moved to reargue; the lower court granted re-argument but then still denied the motion to dismiss.  The customer appealed, which was decided in December 2021.  The appellate court did dismiss the alarm company’s cause of action for “account stated” but did not dismiss the cause of action for breach of contract.
          So what’s been accomplished since this contract was signed in 2017 and since the lawsuit started in 2018?  Not much.  The small claims action is consolidated with the action started by the alarm company.  The customer is seeking return of a $4000 deposit and the alarm company is seeking to recover for breach of the contract, the balance of the $12,500 purchase price and $125 per month for 120 months.  [it appears the alarm company used a K&K commercial fire alarm form, though the vintage of that form and what changes were made are not discussed in the Appellate Court decision.
          What prompted this topic?  A few minutes before I read the Appellate decision one of my attorneys advised me that she accepted a settlement of $9000 for a $12,000 case.  I asked why.  She informed me that we started the collection matter about 4 months ago and we had an Arbitration Award which we were seeking to confirm in court; the court hearing is scheduled for later this week.  She told me that we would probably have to wait 12 to 18 months before the court processed the case and we were able to get the judgment, and that’s assuming we prevailed on the petition].  In short, we were forced to compromise an almost certain judgment of at least $12,000 [probably $15,000 with additional legal fees] for $9000 because of a broken court system in New York.  I don’t know what it’s like in your town but the New York courts are backed up years; it’s a disgrace. 
          So the above case is not going to be determined for a few more years.  It doesn’t appear that the customer has a lawyer [remarkable she navigated this far, but as broken as the court system is the judges are very keen to protect consumers] but this case will either settle or get tried and when, no-body knows, and after it’s tried, waiting for the court clerk to enter the judgment could take another year to so. 
          How can you avoid a mess like this?  There are several ways, other than never going after a delinquent account, which is not something I recommend often.
          First, use updated Kirschenbaum Contracts™.  The contracts have strong collection provisions and the contracts are tightly written to avoid issues.  The contracts also have an arbitration provision which permits the collection matter to move quickly and inexpensively.
          Second, engage K&K's collection department.  Think your attorney knows your alarm contract better than we do?  Think your attorney knows how to prosecute a breach of that contract action better than we do?  Think your attorney has a Superman outfit under his suit?  Well, your attorney doesn’t know your contract better, doesn’t know how to prosecute a breach of the alarm contract better and sure as hell isn’t Superman. 
          It’s still a New Year and about time to get with the program, the Concierge Program.  Establish a relationship with K&K and get ahead of the curve.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301