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Chris DDilemma
by on Sep 20, 2006 at 6:30:11 pm

I have completed 1 month's worth of freelance editing in my city for a company that is based in New York. The work was supposed to be ongoing and I was supposed to get paid monthly. On the day my first check was due, the company closed its local office and everyone here was out of a job. I have sent the company four invoices for a total of about $1700. The company now says they are facing bankrupcy and are doing their best to pay their vendors and save the company and appreciate my patience. I still have the drive that I was working on when the office closed. The drive is their property, but I still have not been paid. Now they are asking me to return the drive as they may need to sell off assets in order to pay their debts, but it will be October before they will be able to pay me.

Should I return the $250 drive and give up the only collateral I have? How long should I wait before I file with small claims court? If they declare bankrupcy, I can't get any money from them anyway.

Any suggestions?
Thanks in advance.

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tony salgadoRe: Dilemma
by on Sep 20, 2006 at 9:07:32 pm

Once they declare bankruptcy or are in the process you mayh never be paid the full amount owed.

The line or creditors ahead of you will take priority so in a nutshell I hate to say it you are screwed.

Unless of course you are protected under the labor laws of your State which consider your services to be under the category of employee not subcontractor.

If that is the case you may have a case to sue them under as an employee and use the labor laws which apply.

However it will be a long time before you see any money if at all.

Small claims is another option but unless you know where there assets are (ie bank accounts) your efforts may be fruitless when you attempt to collect the money. A judgement is worthless if you can't collect on it.

So what can you do? Well I am no lawyer so any advice below is to be considered "proceed at your own risk"

I would ignore their request for returning the hard drive until you receive the monies due you.

Explain to them you are not able to go to the post office because you have no money for gas to put in your car and in addition cannot afford the postage.

If they insist on having a courier pick up the hard drive then tell them that will not work either because you are never home as you now have to ride a bicycle 40 miles to your current job at 7-11 which is barely supporting yourself and three small children.

In a nutshell there are no options which will work until they pay your invoice which will enable you to have the time, money and effort to send the hard drive back.

Put it in their court to solve their problem and not make it your problem to resolve it for them.

In other words if they try to F@#k with you , then you just F#$k them back.

It's a mean world out there. Be bold and brave but hold your ground.

But you could also trust them and return the drive at their expense, wait it out and maybe get paid or maybe not.
It's all a matter of how much you trust and believe their word as well as how screwed up the company was well before they declared it quits.

Tony Salgado

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debeRe: Dilemma
by on Sep 21, 2006 at 12:28:43 am

You could return the drive to them. Reformatted.

The drive is their property. The files on it that you created are not their property, not until they pay you. That's your collateral.

If you have another drive of your own, copy the files from their drive, erase them from their drive and then return their property. At their expense and at your convenience, as Tony rightly suggests. You are under absolutely NO obligation to go out of your way to return it to them. It's their responsibility to make arrangements.

But you really can't knowingly keep it. It would still be considered theft, even if they owe you money. They are two independent issues. Connected, yes, but still independent.


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Chris DRe: Dilemma
by on Sep 21, 2006 at 12:59:18 am

Thanks for the advice Tony & Debe. I'll give the drive back to them, but I'm going to delete my files from it, and make them get it at their expense.
Not sure if they are telling the truth about going bankrupt. On my last day there, 5 days ago, they had just purchased $700 worth of drives that they were having me copy files onto from another drive that wasn't theirs.
Does a company facing bankrupcy do that? Sounds fishy to me.

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Steve WargoCorrection
by on Sep 22, 2006 at 8:12:18 am

It's not theft. It might be a "conversion" crime in some states but it's entirely civil in nature. If they brought it to you of their own free will and left it at your place of business, it is not theft. Theft is described as taking something against someone else's will, knowledge or permission, and (this is big) you have to plan on keeping it. That's why kids are not charged with "auto theft", but are charged with "joy riding" because they did not intend to keep the vehicle. Once they "convert" it to their use permanantly and it's obvious that they do not intend to abandon or return it, they can then be charged with theft.

I too would transfer the files to a safe place and return the drive by common carrier (a delivery service) with a full description, including accessory list and serial numbers. Get a signed receipt. Never actually admit that you have the original material.

Most likely, you are completely screwed. Sorry.

The above statement is not to be construed as legal advice. It's just my opinion.

Steve Wargo
Tempe, Arizona

It's a dry heat!

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Bob ColeRe: Dilemma
by on Sep 21, 2006 at 12:57:16 am

[Chris D] "The company now says they are facing bankrupcy"

I love the fact that you have the drive and material. The claim about facing bankruptcy smells funny to me, Chris. It may be more strategy than reality. Debe's idea may work, but if you erase the material and then lose it, you may be in trouble.

Definitely don't return the drive with its material; consider telling them that you will settle for half-payment, upon which you'll return the drive.

It's been years since I've had slow-to-pay problems, but I have one now, and it is no fun. Good luck.

-- Bob C

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Mark SuszkoRe: Dilemma
by on Sep 21, 2006 at 2:54:32 pm

I would take Debe's suggestion, return the blank, reformatted drive, but with a note saying you will keep the files until you get paid, and you are filing a Mechanic's Lein on the footage. They can pay you now or they can see you in small claims court.

The last minute flurry of file copying from other people's drives sounds like a tip they knew they were going to declare banckruptcy in advance and were using you to unknowingly rip off other unpaid suppliers. My guess is you will never get paid for this gig. But keep the files as insurance. If they use a court to pressure you, you can still give them up. Or you can play a waiting game with them.

Guys who operate like these folks are like jugglers: they have a number of balls in the air, timed so one incoming revenue source covers the previous bad debt, and so on and so on, the current project revenue is paying off an old debt or financing the next project, and they make everybody working on the current project "float", unpaid. Essentially they make you their bank, they are borrowing money without paying interest on it... your money.

This pyramid-like scheme is always fragile and depends on the timetable not being disrupted too long, or the juggling balls all arrive at the same time; old bills catch up to the new revenue stream. If your footage gets tied up in court with a suit and counter-suit, and they need it to complete another piece of the pyramid, their whole plan falls apart. This gives you more negotiation power then you thought you had, if they know that you know what their deadlines are.

Once the footage is past the expiration date for the deal it was part of, it is worthless to them and you will never hear from them again. Until then, expect a lot of whining, wheedling, cajoling and threats, whatever they think will work to get you to give up the prize. Make them work for it. You will be amazed when the money suddenly, miraculously appears. Warning: do not accept a counter-offer of a bigger payback than you are due, if you would just let them float. Insist all current debts must be paid in cash first.

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Ron LindeboomRe: Dilemma
by on Sep 21, 2006 at 3:01:50 pm

[Mark Suszko] "Insist all current debts must be paid in cash first."

And cash means no checks. None, nine, nada -- no matter what they say.

Ron Lindeboom

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Mark SuszkoRe: Dilemma
by on Sep 21, 2006 at 3:25:23 pm

Well, a certified bank draft type check is okay, as it's on the bank's credit, not theirs.

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tony salgadoRe: Dilemma
by on Sep 21, 2006 at 3:56:02 pm


FYI Little known secret I discovered from my bank which is certified checks can have a "stop payment" issued on them. An additional step of insurance when dealing with certified checks is to demand a letter from the bank written by the bank manager on bank letterhead which states that the funds will be guaranted upon presenting the certified check. Do not accept checks written from a bank which is out of state.

The check must be from a bank which has a local branch in your area.

If none of this applies then demand that the funds be wired to your account directly.

One last note Chris in my opinion has the upper hand even if the client sues him in court for the hard drive.
If Chris were to be sued Chris would then countersue for his claim on the fees due for his labor. If the client is really interested in getting his hard drive back then they or a representaive would be forced to be present in court.

Given the small value of the hard drive versus what is owed to Chris I doubt they would want to put in the time and effort to fight a court battle.

But since it is Chris's only leverage he should hold out and wait and see.

Any discussions regarding the drive should be immediately terminated and the discussion must immediately center on when is the payment for the labor to be paid in full.

Do not say to the client that the drive is being withheld until the labor is being paid off instead refuse to discuss that matter and focus exclusively on only payment for the labor.

Anytime the drive issue comes up cut them off and restate "Where is the check or wire transfer for my labor forthcoming"? When the respond we need the drive back before we send the check. Restate "I must have my labor paid in full immediately or else I will be taking the necessary legal and labor board actions available to me."

FYI in California an employeer who willfully withholds payment to an employee is subject to severe penalities one of which includes the day rate for the employee times thirty days. The penalities can add thousands of dollars in additional amounts due if an award is made.

Tony Salgado

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Ron LindeboomRe: Dilemma
by on Sep 21, 2006 at 4:12:34 pm

[tony salgado] "Little known secret I discovered from my bank which is certified checks can have a "stop payment" issued on them. An additional step of insurance when dealing with certified checks is to demand a letter from the bank written by the bank manager on bank letterhead which states that the funds will be guaranted upon presenting the certified check. Do not accept checks written from a bank which is out of state."

Tony is right, certified bank checks can have a stop payment applied to them the same as a regular check. They offer little more insurance than a regular check.

Californians at least have the security of the law which will bring the wrath of the District Attorney down on people who write checks and do not honor them. But that law only holds for NSF checks, not for checks that have had a stop-pay applied to them.

Ron LIndeboom

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Chris DRe: Dilemma: UPDATE
by on Sep 21, 2006 at 4:50:17 pm

Thanks for all the input, guys.
Here's the latest:
I talked to an executive of the company and very politely told her I was willing to work with them on this drive. I was looking to get paid, but since they hadn't paid me I was assuming the drive was a form of payment. It wasn't what I wanted and the money was worth far more to me than the drive. So if they could pay me half of what they owed me then I would send them the drive minus the files I created which I would send them upon full payment. She said obviously I didn't read the e-mail she sent me which said they were penniless. I asked if they had filed bankruptcy and she said they were on the verge, trying to avoid it.
She then told me to keep the drive if that was what made me happy.

Unfortunately, I didn't ask her if they were penniless, how they were able to afford $700 of brand new Maxtor drives.

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Mike_SRe: Dilemma: UPDATE
by on Sep 21, 2006 at 5:24:25 pm

Sounds like now is the time for that small claims court. She may not be chasing you for the drive, but a liquidator may well, an you have no paper to say it's now yours. Anyway, it's worth only a small fraction of the $$$ you are owed.

On another tack, presumably you hold the only offline of an edit which has not yet been onlined and delivered. Who is the end client? They stand to lose whatever they have put into the prod co up until now, and not have their programme finished.

Perhaps you need to contact the end user (copy to prod co) to fill them in on the situation, report that you are holding the project files for the time, and that when / if the prod co folds, they may want to approach you and the liquidator to see what they can salvage at what cost.

There's no reason for you to accept less than full $$ value on all work - the end client's options are all worse, and for the liquidator - who will hold all rights to the footage, which you can't use without her/his approval - but can return net cash into the liquidation so long as the client pays more into the liquidation for the completion than your overall bill.

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Ron LindeboomRe: Dilemma: UPDATE
by on Sep 21, 2006 at 8:06:10 pm

This is the time, as has been stated here on this board many times in similar situations, to bow out gracefully and with the kind of style that leaves your reputation intact.

If it were me, I would just offload the work and wipe the drive clean with the kind of reformatting that would make recovery impossible, and then bring them the drive with a paper that they could sign for the receipt of the drive (so there's no question but that it was returned).

Would I give them the work under any circumstances? No.

Your mileage may vary,

Ron Lindeboom

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Steve WargoRe: Dilemma: UPDATE
by on Sep 22, 2006 at 8:28:18 am

We just went through a 92 day slow pay recently and when we sued our client, we also sued their client, a well known stage actor. It was a demo for the stage actor. Our attorney also issued a cease and desist order to the client's client that informed them that we were the copyright holder to the footage and that they could not use it until all notes were paid in full in cash. We were paid, in cash, within 24 hours by our client.

On another matter, we produced a 30 minute infomercial for a regular client in January. We usually collect 50% up front but the client sweet talked my wife into waiting. I had no idea and when we were done, we just handed him the master, as we usually do. He has paid a total of $2000 since then. I am out all of my crew costs because we pay everyone regardless of whether we get paid or not.

The infomercial runs on the golf channel every sunday and the product is a vest that teaches muscle memory to the golfer. We start our legal proceedures this coming week. This has been a good client for years but he has always been a little slow on the pay side. I would be $7000 ahead if I had turned this job down. I fired my wife from the position in the company that she held. Sometimes, things just turn to crap, no matter who it might be.

Steve Wargo
Tempe, Arizona

It's a dry heat!

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John CuevasRe: Dilemma: UPDATE
by on Sep 22, 2006 at 3:08:17 pm

You fired your wife!!!

You might be out more then the 7k.

Johnny Cuevas, Editor

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Mark SuszkoRe: Dilemma: UPDATE
by on Sep 22, 2006 at 9:45:41 pm

I fired my wife too once, she was relieved. I was shooting a wedding that turned into needing to be a 2-camera thing just the night before, at the rehearsal, and I had nobody available to run second camera for the day of the service, which was only needed for b-roll and cutaway of the aisle procession and the vows. On the day of the shoot she double-pressed the go button on the camcorder in her nervousness and took the camcorder OUT of record for the essential shot. While the video was not ruined, it was not up to my standards without that cutaway, so I comped the client half, aplogized profusely, (they were puzzled by this as they thought it was all fine and didn't notice the lack of the cutaway) and told my wife "Honey, I love you very much, and always will, I was grateful you volunteered to help me out in a jam but it didn't work out and you are fired, let's go home, I'll cook tonight."

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Steve WargoRe: Dilemma: UPDATE
by on Sep 23, 2006 at 5:53:29 am

We're actually out $18k. I had $7k invested in wages, tape, services and rentals. The total invoice was a bit over the $18K.

So, I fired the wife. She was hurt. But, she went on to help a friend by running her business for 10 days while the friend went on a cruise. It turned out to be a great business with no overhead. The friend helped her get started and she got her first check for $2500 for one day's work last week. She will probaby net $300,000 the first year and at that point, I just may retire an go to work for her. But, we're still out the $18K.

As for hitting the record button twice, that's why we have all those talley lights on the front and back. Those accidents happen every day when we're under pressure, understaffed, late, whatever. It seems like no matter how many safeguards we put in place, there's always a way to blow it. I've worked with my wife for 11 years. I love working with her. I am so glad we don't work with each other any more. I'm confused.

Steve Wargo
Tempe, Arizona

It's a dry heat!

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Steve WargoRe: Dilemma: UPDATE
by on Sep 23, 2006 at 6:04:50 am

Hmmmmmm. If they own the drive outright, maybe you should accept it as partial payment. If she is still being civil to you, ask for a receipt for the drive transferring ownership. Make sure it's not part of a lease or loan. There is a way to check the serial number doing some sort of web search. Ask a leasing company how to go about this. A $700 drive isn't equal to your loss but it's something. If someone comes to get it later, then give it up. I doubt that will happen. Take the other's advice and see if you can salvage the job with the end client. Hell, try anything.

Steve Wargo
Tempe, Arizona

It's a dry heat!

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Tim KolbRe: Dilemma
by on Sep 23, 2006 at 1:44:14 pm

If bankruptcy is imminent, the court can order the return of all assets, it's even fairly common that they recover any large payments made in the last 60-90 days from creditors who have already cashed the check to redistribute the funds across the full range of creditors. The harddrive could be recalled by court order...or it may be so small as to not be bothered it seemed by the phone call you referenced in your UPDATE post.

I'm sure that $1700.00 is a lot of money for you as it is to me, but depending on how big the company is and what the liabilities are, and how old and overdue some of those liabilities are, it may not even make the list. On the other hand, if they paid you right now and went bankrupt, the court could easily recall that money to be redistributed to other larger/older creditors.

Again, depending on how large the company is, $700.00 worth of new harddrives may not be a larger financial item than a week's worth of office suppiles. I ran a small production business with 12 employees in the 90's and 700.00 would have been about 10% of my monthly health insurance premium for the company, and that doesn't count salaries, rent, vehicles, lease payments, etc. My monthly overhead in '98-99 was around $15,000.00 and that was without buying new assets, that was just paying ongoing operating expenses.

The harddrives shouldn't be used as an indication the company is not broke. A large business has large expenses and items that seem substantial to you and I might simply fall through the cracks for a large business.


Kolb Productions,
Creative Cow Host,

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JbaumchenRe: Dilemma
by on Oct 11, 2006 at 3:03:35 am

I'm curious as to how this has turned out. Just in case it's still pending, here's my $0.02.

I agree that you should transfer the files over to your own drive, then delete them from the 'clients' drive.

If they want the files, I'd be tempted to add a 'carring charge' on top of what they already owe. Settle for half? No way. Payment, how about a bank wire transfer directly into your account. To heck with checks.

If these guys are really going belly up, they should know that they aren't about to get the work you've done without a guaranteed form of payment.

Hope it will work in your favor if it hasn't already.

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Chris DRe: Dilemma
by on Oct 12, 2006 at 2:57:39 pm

They actually sent me a check for full payment earlier this week, and it cleared! I just returned the drive yesterday, so all seems to have turned out well in the end. It took 2 months to get paid, but hey, better late than never.

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