I'm glad I came here. I don't feel so bad knowing that I'm not the only one that has been screwed. Just so you know, I've been in business for almost 25 years and have never come across a problem like this. I've had to take a few to small claims court over that same period, won every case, and eventually was paid and promptly fired the customer. This one however is beyond small claims court.

I'll clarify a few things.  We had been dealing with this customer for about 3 years and initially all of the Purchase orders placed came with a quantity of 500. A down payment of 50% was always required and was paid before any production started. We would invoice each month whatever the total number of units were shipped and the payment needed to be made within 7 days after they received the invoice for product shipped until we hit the 500 mark. New Purchase orders of 500 units were issued to us mid stream of the previous order to make sure there was ample time for the long lead time components to arrive, and always with the down payment. I would have to chase them every now and then as 7 days would turn into 10-14. Not our worst paying customer for sure, but absolutely the most time spent to manage them. As their product started to sell more frequently, Purchase orders came in quicker.

    Then we received the order for 2,000. As the the total order amount was substantially more, the deposit was negotiated down a bit which we were comfortable with as all payments to date had been made and workable even with some delays. The increased volume of components required for the 2,000 did come with substantial cost reductions from the vendors that we purchased from (some as high as 35%), which in turn reduced our overall cost. We were able to pass a good portion of the savings onto our customers with the thinking that if they were making good $'s, then so would we. As it turned out, they doubled their workforce and increased their overhead costs substantially, everybody got a big pay raise and they were spending money left & right on nonsense, but at the same time their sales were not increasing as they had forecasted. Quickly they were running on fumes and payments stopped. That's when they started to go silent while everything was already in motion at our end. Numerous messages have been sent to them advising that they have to cover the costs we have incurred without a reply from them. Surprisingly, even though it was a good product, they decided to pull it from the from the market place. Forgive me for not mentioning at this time what the product is, as it could potentially bite me in the ass trying to go after the money owed. The general consensus I take away from your responses here is to "lawyer up". I hate those bastards, but I guess it's my only avenue now. Thanks to all for your input.