My company was hired as a subcontractor to build 6 Sephora makeup stores inside 6 select Kohl's department stores. 3 in Texas and 3 in California. We were given a 20% deposit for the stores in Texas totaling $144k. We were not given a deposit for the stores in California. Each store build was to last 21 days. 10 days into the first 2 stores(one in California and one in Texas) the company that hired us decided it wasn't working out so they fired us from our contract. The crew in Texas spent most of the $144k on the 1st store.(labor and materials)The crew in California spent approximately $90k. The company that hired us wants the 20% deposit back for the 2 stores in Texas because we didn't work on those stores. They do not want to compensate us for the money we spent totaling far more than the deposit given. They are threatening us with civil and criminal prosecution if we don't return the money stating that we committed criminal fraud.(extortion?) What are my options?
You should contact an attorney immediately. A lot will depend on whether they are threatening to sue you in California or Texas but I suggest you contact an attorney in each state. Your contract(s) will need to be reviewed for choice of law provisions, payment details, etc. In general, in California, the terms of your contract will govern as far as payment and how payment received was to be allocated and how termination from the project works. But regardless, even under an equitable theory, you should be paid for work you completed so long as you did not commit a breach of the contract. By that, I mean, if I pay someone to paint my house red and they paint my house black, I have a right to claim they breached the contract - they should not get paid for their work unless they fix their error OR they should waive payment so I can hire someone else to fix the error. Your case is more complex. The other side will likely claim you breached the contract/your work was subpar. In that case, you will need to convince a judge or jury that they are wrong. It will be important (regardless of whether they initiate action) to keep all records of time spent on the project, expenses incurred, and work you did - you should gather those items now so that you have a clear paper trail to show the other party as evidence that you satisfactorily performed and to show whether (and how much) you are still owed on the project.