Legal Question in Business Law in California

Re: Breach of Contract

Sue everybody in small claims court for 7500 and write off the other 2500.

Re: Breach of Contract

Mr. Stone's idea is very practical. The time and cost to go after $10K in regular court would eat up the extra $2,500.

Note that your contract, under which you could bring suit, is with the production company, not the artist, and hence the arbitration clause in the contract with the artist has no effect on your rights.

You should, of course, look to see if there is an arbitration, mediation, or attorney-fee clause in the contract with the production company, which is the only one to which you are a party and thus the only one under which you could sue (as far as I know).

I would advise you to think about the nature of your investment. If it were a loan, you have a legal right to repayment pursuant to the terms of the loan agreement. However, many so-called investments aren't loans; they are "equity" rather than "debt" deals in which you don't get a right to be paid principal and interest; you become a participant in the deal as a shareholder, partner, joint venturer or some other kind of risk-and-reward sharing arrangement. If the project makes a profit, you get a share; if it craters, you get little or nothing back.

Consequently, before you decide to sue or arbitrate, you really have to give careful thought to the nature of your rights, if any. What does your contract promise? What risks did you assume? Why are you entitled to any of your money back?

A final thought.......selling investments is highly regulated and requires anyone soliciting or accepting investments from strangers, or the public in general, to jump through a lot of hoops designed to protect the public from fraudulent or honest but poorly-designed investment schemes. Promoters can be liable to investors and/or subject to criminal penalties if they don't pre-qualify their investment schemes and the investors to whom they market them, provide written disclosures of the risks and details of the project, etc. Maybe you should ask a local securities lawyer for a free consultation to see if you have been scammed and if you have a remedy that might be bigger than $7,500 or even $10,000.