fedLabs 101: small claims, big potential

Do you want to give power back to individuals?  Would you prefer to do so on a broad scale, at the local level, and without waiting for federal constitutional amendments, programs or court precedent?   Whether you're a liberal or libertarian, a lawyer, legislator or law student, I have a suggestion: start working to increase the dollar limits in small claims courts in your state.  I can't think of anything that could so quickly, and at so little cost, increase access to justice -- especially, if coupled with other modest reforms that have been shown to work well in several states (e.g., from adopting Plain English forms and evening hours, to exploiting digital technology -- as with California's Small Claims Self-Help Center).

The treatment of small claims courts is a great example of states as incubators for experimentation.  One result is that many dire predictions about increases in small claims jurisdiction (often made by the legal profession in an attempt to preserve its gatekeeper role for entry to the courts) have been shown to be incorrect.   

$$  We now have two states with dollar limits at $15,000 (TN, GA) and two at $10,000 (AK, NM), but thirty-eight states limit small claims jurisdiction to $5000 or less, with fifteen states still at or below $3,000.  (See chart, Jan. 2005, compiled by the Small Claims Reform Project of HALT - An Organization of Americans for Legal Reform).

For most Americans, small claims courts are an irrelevant part of the judicial system, but they could be much more.  In 2000, I made as good a case for small claims reform as I'm ever likely to make, in a Prairielaw.com article, "Supersize Small Claims".   Except for references to Y2K, it's still relevant, and I'm going to reproduce it here.  At the end of this post, you will find links to help you find out what's going on in your state, highlighting HALT's ongoing efforts -- such as its state by state Report Cards -- and ethicalEsq's related commentary.

Supersize Small Claims

There oughta be a (better) law.

Our courts need major re-programming, to make them accessible, client-centered dispute resolution centers — instead of the expensive, complicated, lawyer-centered bureaucracies they have become.

Total court reform is indeed a big, complex job. But our lawmakers could give a big chunk of the civil justice system back to the people by simply increasing the dollar limits allowed in small claims courts. By permitting claims up to $20,000 in these user-friendly "people’s claims courts," we could greatly increase access to justice, and greatly decrease the time and money spent to resolve the everyday disputes of consumers and small businesses.

Come a Long Way?

A visiting Martian would be perplexed by the state of our Republic in Year 2000.  On the one hand, we have an educated, prosperous, resourceful population that embraces the opportunities of the age of information and computers.  On the other hand, despite a representative form of government, we have a judicial system that still treats the populace like medieval serfs — like simple, illiterate folk, too lowly to bring our legal disputes directly before a court, and beholden to a scholarly barrister class to "represent" us in seeking justice (for a princely fee, of course).

In the early 20th Century, when our Martian observer last visited America, things seemed to be improving. At that time, we had a legal profession led by reform-minded titans, such as Louis Brandeis, who used their influence to create a system of small claims courts in the name of “Justice for All”. Using simplified procedures and rules of evidence, those courts allowed anyone to bring everyday consumer claims and simple business disputes before a judge for a quick, inexpensive resolution.

A century later, that same legal profession has become the greatest (maybe the only) beneficiary of our Byzantine court system, and the biggest impediment to its reform. Instead of producing champions like Brandeis, even its liberal wing seems content to become tobacco case billionaires and apologists for presidents, CEOs, and the status quo. The result, as Ralph Warner (lawyer-turned-Self-Help-guru) has recently pointed out, is that "over 150 million citizens of the ‘Land of the Free’ are legally disenfranchised" from our expensive, inaccessible court system.

Despite their May Day platitudes, the lords of the legal profession are not going to democratize our legal system.  If there is ever going to be a modern Magna Carta to assure universal access to our courts, the serfs are going to have to rise and take them back — with the help of politicians wise enough or scared enough to put the Peoples’ interests over those of the legal establishment and their Political Action Committees.

The Problem with Tiny Claims

For decades, small claims courts have proven that the average person can resolve disputes quickly, cheaply and effectively, without using lawyers. As they now exist, however, small claims courts have become irrelevant to most Americans — a downscale judicial stepchild, unfamiliar to most of the public, and relegated to handling cases too insignificant to warrant or attract lawyers.

The dollar limits are simply too low: in two dozen states, the maximum monetary award granted in small claims courts is $3000 or less. It's $1500 in Virginia and $2000 in Kentucky.  Only two states allow claims as high as $15,000. These paltry limits are anachronisms at a time when the average new automobile sells for $24,000, and many kitchen renovations include $5,000 gas ranges and $4,000 refrigerators.

As a result, many consumers and small businesses must give up valid claims that would otherwise be highly appropriate for the user-friendly small claims format, because hiring a lawyer would make the claim far too expensive to pursue in other courts.  Others are forced to take uncomplicated cases they could easily handle themselves to higher courts, where they pay hefty legal bills for lawyer services they don’t really need.

The $20K Upgrade Solution

In response, HALT, (a national consumer organization for legal reform) launched a project in 1998 to greatly expand the jurisdiction of these people’s courts, calling for states to raise the limits to $20,000. HALT’s Small Claims Reform project is promoting model legislation, which would also allow such courts to issue injunctive relief (ordering a party to stop or to take certain action), and eliminate lawyers in small claims courts (as has been done successfully in six states: Arkansas, California, Idaho, Michigan, Nebraska, Virginia).

HALT has it right. Upgrading "small" claims courts to “people’s claims courts”, with realistic dollar limits, is the best and quickest way to help ordinary people take charge of their own routine legal needs.

Other access-friendly reforms — such as increased use of computerization, plain-English forms, and self-help advisors at court — deserve support. But raising the dollar limits to $20,000 is clearly the most effective single step to making small claims courts relevant and responsive to a 21st Century nation and economy.

Bar to Reform

To no one’s surprise, the organized bar has been hostile or cool to such proposals, characteristically casting its opposition in the patronizing guise of protecting their clients. (See ABA Journal, Dec. ‘98, at 18). When a modest bill to raise New York’s limit from $3,000 to $5,000 was proposed in 1999, the New York Bar Association took no position on the proposal, which never came to a vote in the legislature, after being favorably voted out of committee.  The Maryland bar twice got their governor to veto legislation raising the dollar limits, although the bills had been passed unanimously in both legislative houses.

Improving access to justice, while saving consumer and taxpayer dollars, is a theme that should be popular with everyone and all parties (political, cocktail, as well as litigation). But, HALT’s efforts have had relatively modest success to date. In a nation that loves lawyer-bashing and lawyer jokes, the lack of political support for court reform can be understood only in the context of the immense power of the legal establishment and its mighty efforts to preserve control of our justice system.

In this election year 2000, we serfs ought to start asking our local and national leaders just whose side they are on in the battle to win back our courts. "$20K in Y2K" would be a very good political motivation litmus test.

Links of interest:

• HALT's Small Claims Report Cards (2004)
• HALT's Latest Project News (victories, defeat, pending legislation)
• Bills Pending in IL, CN, KY, IN
• Small Claims Reform: A Means of Expanding Access to the American Civil Justitce System, by James C. Turner and Joyce A. McGee, U.D.C. Law Rev., Fall 2000.

online self-help models:

• Representing Yourself in Small Claims Court  Clark County, NV
• California's Small Claims Self-Help Center

from ethicalEsq

• Small Claims Courts: Still Slackers  (May 4, 2004)
• . . . and One Step Back
• Baby Steps Won't Take Us to Small Claims Reform
• Are Lawyers Blocking Efforts to Revitalize Small Claims Courts?
• IL & Md Lawyer Groups Win First "Judee" Awards
• State Dollar Limits Chart

update (Jan. 25, 5 PM): Thanks to Lisa Stone at Law.com's Legal Blog Watch for pointing to this Small Claims debate.  I want to clarify, however, that I am in no way pointing to Michigan's small claims system as a model.  It has only a $3000 jurisidictional limit, and it received the 7th lowest grade in the nation on its 2004 Small Claims Report Card from HALT.

Comments

[Mike]

Finally - you get something right!

Smalls claims courts are great. No rules of evidence or other technicalities get in the way of the search for the truth. Two parties get to present their cases before a judge without having to shell out 25K (at least) in legal fees.

I think that big business, if it really thought long about the issue, could dig raising the jurisdictional limit of small claims courts. I watched Budget Car Rental win a 5K judgment (the jx. limit) against a person who totaled one of its cars. I imagine that business could sue for money lawfully owed them. It's quick, easy, and enforceable.

My suspicion is that second to lawyers, the biggest opponent of small claims court jx. increases are landlords. They are frequently (and justifiably) sued in small claims for refusing to return rental deposits. Keeping the jx. limit low allows them to continue unlawfully withholding large security deposits.

[David Giacalone]

Hey, Fedster (Most Gracious Host), I saw the first sentence of your Comment and tried to guess who wrote it -- and, given all the times you've agreed with me (I won't tell any of your ideologue friends), I was surprised. It's nice to see a public concurrence, however, from a famous young legal pundit.

You may be right that some landlords like the lower limits (I assume you're talking commercial landlords, because residential security deposits should be covered in most States), but I don't think landlords have the clout to stop small claims reform -- certainly not if the Bar supported it. Plus, a lot of landlords are plaintiffs.

You might be interested in the remarks from Stuart Levine, of the Tax & Business Law Commentary, which were left as a comment to the ethicalEsq post about the shenanigans of Maryland trial lawyers in stopping higher limits:

"The increase in the District Court's exclusive jurisdiction may be good or it may be bad, but it's clearly not good for small defendants, usually individuals seeking to fend off claims (presumably disputed claims) of corporate creditors. The bill strips the right to have the claim tried before a jury. Thus the bill was sought by large commercial interests who saw it as a way to expedite their ability to collect debts and claims against consumers. The intent of the bill in no way was to lower the attorneys' fees consumers are exposed to."

Personally, I'm willing to trade jury trials for better access and quicker results.

[Mike]

I saw the first sentence of your Comment and tried to guess who wrote it -- and, given all the times you've agreed with me ... I was surprised.

Should I have written "Finally - you get something right! :)"

[Aaron]

It is true that Michigan doesn't permit lawyers in small claims actions, but... Michigan makes it very easy for the defendant in a small claims action to have the case removed to District Court. (Easy, as in file a demand, have it moved.)

District Court is a court of limited jurisdiction, where cases involving less than $25,000.00 in damages can be resolved. Formal discovery is permitted only by leave of the court. But the rules of evidence apply, and it is possible to obtain a jury trial.

I am a fan first and foremost of nonprofit dispute resolution centers, where a lot of "small claims" cases, and cases which might call for "injunctive relief" between neighbors, can be resolved through facilitative mediation. If that process fails, I'm all for small claims courts with reasonable limits on damages (and agree very much that in this era a limit below $5,000 is unreasonably low). Right now, as David says, people with a claim that is not significantly above the small claims limit are given the choice between trying to go pro se in a regular trial court, of hiring a lawyer and eating up a significant portion (and perhaps all) of their recovery, or losing part of their damages as a consequence of bringing their actions in small claims court.

But at a certain point, if you are going to allow litigation in small claims court, given a high enough limit on damages you will either have to accommodate some level of discovery within the small claims system, or see a lot of cases removed to a regular trial court. I believe Tennessee requires an affidavit from the defense explaining why removal is warranted, but given that it appears that Tennessee also permits an appeal of right in the form of a new trial in the regular trial court, so I'm not sure how that really helps.

I would estimate that, given a high enough limit, you will give a strategic advantage to businesses and debt collectors, many of whom will happily sue people in small claims court to avoid allowing a defendant to engage in discovery. What has been the experience in Tennessee and Georgia?

[David Giacalone]

Mike, I seemed to have misplaced my emoticons, too. Good thing, you're on notice of my Implied Disclaimers.

Aaron, You've made some very good points. I agree that it's far too easy to remove cases from Michigan's small claims court, but that's not surprising -- Michigan's Report Card from HALT, gave it the 7th lowest grade in the nation, a "D".

I also agree that the community mediation programs are very important. I've done volunteer mediation at the Schenectady small claims court, as well as custody and visitation mediation for Family Court. HALT uses the existence of mediation in calculating its Report Card grades.

In fact, here are the criteria it uses:

Dollar Limit (40% of total grade): What is the maximum amount for which one can sue in small claims court.

Self-Help (20%): Does the court use small claims advisors—court employees whose primary job is to help people navigate the small claims system? Does the court provide printed guides to the small claims process? Does the court provide fill-in-the-blank forms to assist people suing or being sued?
Are attorneys prohibited? Can anyone other than an attorney represent people in court?

Convenience (10%): Does the court hold evening or weekend sessions? What is the court’s filing fee?

Mediation (10%): Does the court provide mediation? Is mediation mandatory? Do the parties have to pay for mediation?

Expedited Collection (10%): If someone sues and wins, does the court have systems in place to help that person collect a judgment—such as requiring explanation of the collection process, providing penalties for late payment, and requiring losing defendants to give a statement of their assets to winning
plaintiffs?

Injunctive Relief (10%): Does the court have the power to decide cases other than by awarding money, such as by ordering a party to do something or refrain from doing something?

I think courts should provide for simple discovery. For a good example, see California's Subpoena Page on its Small Claims website.

[Aaron]

I don't think of of a subpoena duces tecum (which is the excessively technical name for a subpoena which requires the witness to bring documents to a hearing) as a substitute for formal discovery.

Where does that leave a plaintiff, for example, if the witness shows up without the documents, claims the documents do not exist, or claims that they exist but that the witness doesn't have and can't obtain copies? Are small claims hearing officers truly inclined to issue contempt citations, to order adjournments, or to allow for some sort of investigation into whether the documents exist? Or, as my gut tells me is probably usually the case, is the plaintiff out of luck? And if you have ever used a subpoena duces tecum at a deposition, and have been met with a huge file of documents, you probably have an appreciation for the fact that getting documents is something quite apart from having the time to review and analyze the documents. Will a hearing officer truly allow time for fair review, if the witness produces a mountainous file? My small claims experience suggests not - but perhaps California has a better system in place?

In Michigan's district courts, some judges issue case questionnaires which must be completed by all parties, which incorporate elements of what would typically be included in any given party's interrogatories. Perhaps HALT could create a model questionnaire (or set of questionnaires) which could be used to that effect in small claims court, and advocate for their use (assuming that isn't already on its agenda).

[David Giacalone]

Aaron, The whole point of small claims court is to handle cases that do not merit the time and cost of full-blown discovery. I'm not sure that worse-case-scenarios are persuasive in formulating the policy debate, when the goal is to open access and update jurisdictional amounts in order to make small claims courts relevant to everyday consumer and small business legal disputes.

Most plaintiffs who do not themselves already possess the necessary documents will be able to adequately make their case by designating that defendant bring a small list of documents. A judge faced with a short list from plaintiff and a large pile of papers in response from defendant should be able to protect the integrity and fairness of the process by insisting that defendant prove compliance by pinpointing the relevant papers. Assuming bad faith on the part of defendants seems unwarranted, as does assuming indifference, incompetence or impotence on the part of the court.

The existence of functioning "laboratories" in several states should make the fashioning of questionnaires, instructions, simplified forms and procedures quite doable. I'm sure that HALT would be very pleased to receive grants from a state court system, the national judicature association, or state or national bar associations to coordinate and execute such a project.

[Aaron]

David, what I just suggested can hardly be described as "full-blown discovery". Beyond that, if you don't provide for some discovery in sizeable small claims cases, you'll see the actions moved to (or appealed to) a regular trial court in which case you lose the efficiencies and cost-savings of small claims.

Have you read many small claims complaints, or self-drafted demands for documentation? Granted, things may be better in states where some assistance is offered to the plaintiff, but where it is not the terms of a complaint or a plaintiff's list of desired documents may effectively necessitate that avalanche of paper, with absolutely no wrongdoing by a defendant. As you are certainly aware from many notorious cases, defendants are often very happy to bury a plaintiff in paper when served with an overbroad discovery request, even when the request is drafted by a lawyer. Small claims courts tend not to allocate a great deal of time to any given case, and a judge or hearing officer is not likely to want to sift through the papers to determine if the responding party (who may well be the plaintiff - although you assume the defendant) acted in bad faith. And "pinpointing" relevant materials, as you should know if you have dealt with this situation at a deposition, can chew up a lot of time even in the absence of gamesmanship.

I'm sure, also, that HALT would like a huge grant to do this type of work. Do you think that's likely to happen? If not, why bring it up?

[ruby]

some of the posts are a bit disconcerting for me, as i'm an inch away from filing the small claims track... i do realise the magistrate has limited time to hear my claim, yet i feel it is imperative to subpeona documentary evidence in my case especially, which may be an encumbrance, indeed. when the case ultimately boils down to showing the defendant has a lack of credibility, bordering criminal, along with the other necessities, i.e., photograph, letter, witness, et cetera this does seem rather time consuming. in civil cases where someone has used intentional deception, is what i am trying to show... this is no *small* undertaking! i've read a great deal, contacted many individuals, and will continue to do so until the time comes to right a series of wrong-doings. the main issue is theft, and the documentary evidence will not need so many words, if the magistrate will look it over... i'm hopeful...

best,
ruby