Q: Being sued personally in small claims court for work done by our S-Corp. Are we liable?
Customer filed with Builders board and was denied as claim was over a year old. Now have filed small claim against us personally. Do they even have a case if not filed in the Corp name? Does our corp bond play into this at all? We have 'demanded a hearing' to avoid a default judgment. What happens if we present our case but lose?
A: Based on the facts as presented, the S-corp appears to be an improper party. Accordingly, prior to the hearing, I would demand from the plaintiff voluntary dismissal of the action. In fact, I might even attempt to move the hearing date for, inter alia, to give the plaintiff more time to consider the consequences of not dismissing the S-corp. Then, if the plaintiff does not voluntarily dismiss, at the hearing, I would request sanctions (at least from the court's inherent authority). Frankly, in my career, I have had extremely limited experience in small claims court (though I did have one case in Oregon that I moved to the circuit court) and typically, sanctions can be difficult to obtain and perhaps even more so from a small claims court. However, if a suit is patently frivolous (filing or maintaining suit against the wrong party would be one such example of frivolity), a party, even pro se, should be appropriately sanctioned.
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