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Saturday, Jun 10, 2023


By CHRISTOPHER WOODARD Staff Reporter A bill that its author says would give small businesses more leverage to collect debts from deadbeat businesses awaits a decision in the state Senate after clearing the Assembly. AB2484, authored by Assemblyman Robert Hertzberg, D-Van Nuys, would allow the plaintiffs in small breach-of-contract suits to collect damages of up to 50 percent of the amount in dispute on top of what’s owed them. Under the law as currently written, a business owner can only hope to recoup the contract amount if he or she takes a deadbeat client to court despite incurring substantial legal costs in the process. “It’s a big problem,” said Hertzberg. “A lot of times it costs more money to settle the dispute than what’s at dispute.” If approved by the Legislature and signed by the governor, AB2484 would go into effect Jan. 1, 1999 as a three-year pilot program only in Los Angeles County. The law would apply only to business contracts of under $25,000, the amount generally considered to be too small to be worth going after in court. According to figures released by Hertzberg’s office, 350,000 civil cases were filed in municipal courts statewide last year, of which 7 percent, or 25,197, involved breach-of-contract or warranty cases. More than half of those, 13,651, were filed in Los Angeles County. Hertzberg considers the number of such lawsuits relatively small, but said that’s because small businesses are discouraged from taking their cases to court. “Since the system takes so long to go through and it’s so expensive, someone who’s owed $10,000, say, will often compromise and take $5,000,” he said. “What I’m trying to do is change the table stakes. I’m trying to create an environment where a small-business person can send out a notice and change his bargaining position so instead of getting a $5,000 settlement, he gets $7,500.” Sheldon Mende, president of the Encino Chamber of Commerce and owner of a printing company called Triad Graphic Partners, has first-hand experience with the problem Hertzberg’s bill seeks to address. Mende said he did a job for a company that simply refused to pay. When he approached the firm and asked for his money, he was told he could take them to court. Countless hours and $7,000 in legal fees later, a judge agreed with Mende that his firm was owed the money. The only problem was, the law allowed Mende to collect only the original contract amount, $5,000. “On one hand I was happy I won, but it seemed to me vastly unfair that to get my money I had to pay all this money in attorney fees,” said Mende. Supporters of the bill include the Encino and Universal City-North Hollywood chambers of commerce, the United Chambers of Commerce of the San Fernando Valley and the Los Angeles Area Chamber of Commerce. The bill has also garnered support from the California Business Alliance, the California Association of Realtors and the United Chambers of Commerce. Hertzberg proposed the pilot project as a way to assess the impact of the law before implementing it statewide. L.A. County was chosen because its large and complex court system would provide a good model for how the law would work statewide.

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