Sworn Account to Breach of Contract Litigation

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Often times, what starts out as a simple sworn account case ends up being something more complicated when the debtor tries to fight the lawsuit any way he/she can. Let's face it, it's a lot easier to say that there was something wrong with the client's accounting or the performance of the contract than to successfully prove there was never any agreement in the first place.

This brings up the two most common defenses to suits on sworn account. The first is that the accounting is wrong. It should be noted that this is only a partial defense and has special requirements to be effective. When the Defendant files a sworn denial of the account based on inaccurate accounting, the Defendant must do the following:

1) Identify in the sworn statement the errors in the accounting / identify the disputed charges; and

2) Tender the undisputed charges either to the other side or the registry of the court.

Disputed Accounting Defense

If the Defendant fails to perform the first requirement, the court may rule the sworn denial deficient and grant judgment anyway. Normally, the Court will first give the Defendant an opportunity to amend the sworn denial prior to ruling it deficient. (JH&A would file what is called a Special Exception Motion to get the Court to initiate this action.)

If the Defendant fails to tender the undisputed charges, the Defendant makes a significant monetary mistake. You see, in order for the Defendant to avoid having to pay attorney's fees in the suit, the Defendant must not lose any portion of the suit. When the Defendant tenders the undisputed portion, he takes that portion out of dispute and the Plaintiff cannot recover attorney's fees since they are no longer incurred to recover those amounts. However, if the Defendant fails to tender the undisputed amounts, even if the Defendant ultimately prevails on the disputed amounts, the Plaintiff will still have to have incurred attorney's fees to recover the undisputed amounts. Thereby, the Plaintiff still recovers his attorney's fees at the end of the suit.

Breach of Performance Defense

This occurs when the Defendant believes it can be proved that the Plaintiff failed to perform a material term of the contract. As above for undisputed amounts, it is still best for the Defendant to tender the value of the contract that is believed was actually delivered. (See Withdrawing Funds from the Court Registry.)

The problem with prosecuting a sworn account lawsuit when it morphs into a full fledged breach of contract matter is that the full range of legal proof must be mustered and the full costs of attorney's fees are incurred preparing and conducting what is often a several day trial. Whereas attorney's fees in a sworn account case are often a few thousand dollars, a full blown trial of a breach of contract case will run five or sometimes six figures in fees incurred. A sworn account case has a few documents and an affidavit or two. A breach of contract case has hundreds of documents, pictures, videos, several depositions, one or two experts at a minimum. The difference can be staggering. At the end of the day though, its this litigation that spurred the decision for most of us at JH&A to become lawyers in the first place. It's what we do.

Again, JH&A will do a another suit evaluation in such instances, considering all the same factors we do in a Pre-Suit Evaluation, just with the larger numbers. Often times, we will continue on with the lawsuit on the same contingency basis as originally agreed. However, if the firm's risk quotient has significantly changed, we do reserve the right to modify the agreement to a mixed fee or straight hourly fee, as may be business judgment appropriate.

The firm evaluates such cases every day, regularly making assessments that still provide for enhancement of everybody's bottom line.

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