SMALL CLAIMS MAGIC

 

"I can’t offer you justice, I can only offer you process.” This is what most lawyers (and every lawyer should) tell their clients as they begin a litigation.  When you go to court, you don’t get justice, you get process and the process stinks.  If you haven’t been through litigation, ask a business owner who has been through litigation about their experience and you will find very few happy customers. Small business owners cannot afford the process.  General advice for small business is, avoid the judicial system at all costs.  To do so, we suggest a two prong approach.  

FIRST: Make sure all agreements you sign contain a small claims/arbitration clause.

SECOND: Bring all claims under $10,000 in small claims court and all claims over $10,000 in a private trial format as authorized by the arbitration clause.   For more information on private trials, click the Private Trials tab herein.

THE ADVANTAGES OF SMALL CLAIMS COURT OVER DISTRICT COURT

For claims under $10,000 the small claims court is a blessing.  The regular court known as the “District Court,” can also decide small claims but should be avoided at all cost.  Small claims court is often call the "People’s Court" because it is a special court where everyday people can resolve disputes quickly and inexpensively.  The rules are simple and informal.  The small claims court has jurisdiction over civil cases in which the plaintiff is seeking a money judgment up to $10,000.  Anyone over the age of 18 can bring an action in small claims court.  The person who sues is called the plaintiff; and the person being sued is called the defendant.

Advantages of Small Claims Court

1. In small claims court you can represent yourself or your company and you don’t need an attorney!  If your business is a corporation or a limited liability company your company must always be represented by an attorney. If the case is brought in District Court, however, you may still represent yourself as an individual.  It may be cheaper to represent yourself in District Court but you will be up against rules of evidence and procedures that will grind you to a powder.

2. In small claims court the rules of evidence do not apply.  You can introduce any evidence, including testimony, hearsay, and uncertified documents.  You don’t need to worry about technicalities, you just make the best case you can.  Always remember to use the evidence your common sense tells you will convince somebody else that you are right. You have seen Judge Judy or Judge Brown on TV.  That’s what it is like except the small claims court judges are not trying to entertain anyone so they tend to be nicer.

3. Small claims court cases are heard within a relatively short period of time after they are filed (about 60 days). Usually the judge decides the case immediately after the trial.  If a case is taken to District Court it could take 18 to 48 months to get to trial and cost tens of thousands of dollars and many client hours to do formal discovery procedures, such as interrogatories, requests for production of documents, and depositions.

4. In small claims court you are afforded a quick, inexpensive and sure appeal.  If you don’t like the judgment of the small claims court you can appeal to the District Court. On appeal, your case will be heard all over again with the small claims rules, but by a district court judge. Once the District Court judge rules, the game is over and there are no further appeals.  At the very most, the whole process usually takes less than 5 months, including appeals.

5. A judgment in small claims court is just as binding and enforceable as a judgment in District Court.

Disadvantages of Small Claims Court

1. Claims can not exceed $10,000.  If the claim exceeds $10,000 you must file a civil complaint in the District Court under the Utah Rules of Civil Procedure.

2. Small claims cases are to recover money only.  The defendant must owe you the money claimed.  Small claims cases cannot be used to sue a governmental entity, to acquire possession of property, to evict a tenant, to recover claims assigned to you by another, or for mental anguish.

3. Your first trial is usually before some young lawyer acting as a small claims judge. On appeal, the case will be heard by a District Court judge but under the relaxed rules of evidence and procedure of the small clams court.

Process for filing a Small Claims Case

A small claims action can be brought in any small claims division of any court in the county that has jurisdiction. The question most people ask is, how do I determine jurisdiction? The answer is simple and based on the facts. You will always have jurisdiction if you file the small claims action in the county where the evil-doer resides. However, if the evil-doer came to your office or picked up goods at your place of business, you also have jurisdiction in the country where your business resides.


Below is a summary of the process for initiating a small claims case. For more in depth and specific information  Click Here to access the Small Claims rules and Instructions on the Utah State Court's website.

1. You will complete one Affidavit and Summons (hereinafter "Affidavit"). The court clerks can help with procedural question, however, they can not give you legal advice or advise you regarding the wording of the Affidavit.

2. As part of your Affidavit you will be required to state:

a. the defendant's correct name and address

b. the amount you are seeking from the party and

c. how the debt arose. In this section you can put "See Attached" and attach another sheet so you have more room, however the attachment should not be more than one page long.

3. You will submit your Affidavit with the appropriate fee ($45-$70 dollars) to the Small Claims Court that has jurisdiction.

4. At the time you file, bring four copies of the Affidavit with you.

5. The Court will complete the Summons section of the document and set a date and time for the trial.

6. You will have to have a constable serve a copy of the Affidavit and Summons on the defendant(s).  Again the clerk will help you locate a constable.

7. For each defendant, you must submit a Proof of Service form to the Court.

8. It is very important that you appear on the date the trial is scheduled.  If you fail to appear the case will be dismissed "with prejudice" meaning you can never bring that claim against that defendant ever again.

9. You may bring witnesses to the trial.  The best witness is one who can testify based upon their own experiences.

10. You should bring all applicable documents with you to trial.

11. If you lose or you don t like the results you can appeal a small claims judgment by filing a notice of appeal within 30 days after the judges ruling.

If you have been named as a defendant in a small claims case, refer to the Small Claims Information and Instructions Package for information on how to respond.


Small Claims Court v. District Court Scenarios

The following fictional example compiled from real life experiences illustrates the advantages of small claims court:

Ricky Richgize stiffed Paul’s Plumbing for $11500 on a bathroom remodeling. Ricky says Paul scratched and damaged some cabinetry and a marble top while performing his work, which cost him $11,500 to replace (the replacement cabinet was a different color of marble and different style cabinet, if you know what I mean). Paul had seen the scratches before he began work and overheard Priscilla Picky-Richgize complaining about the marble color. Paul has two options. Contact his attorney to pursue $11,500 in the district court, or he can discount his fees to $9,900 and pursue the claim himself, or with a little assistance from us, in small claims court.

SCENARIO ONE

PAUL GOES TO DISTRICT COURT and after 18 months and $15,000 in attorneys fees, depositions of all the parties, meetings with his attorney, written interrogatories, request for production of documents, request for admissions, depositions of a couple of witnesses on each side, and a day long trial before Judge Wiseman, they are awaiting Judge Wiseman’s decision. Although the contract provides for attorney's fees, the court seems reluctant to award all the attorney's fees in the matter, especially when the attorney's fees exceed the amount in controversy.  Paul’s probable award of attorneys fees is $8000 if he wins or, on the other hand if he loses, he risks an award against him of $8000 for Ricky Richgize’s attorney’s fees (which by the way were $18,000, in actuality). Paul has a good case, he has a 75% chance of winning. 

Let s stop and analyze Paul’s upside and downside in district court: He’s out $15,000 in attorneys fees to put the matter in the hands of a Judge Wiseman. His probable recovery of attorneys fees are not going to exceed $8000. His maximum net up side is $4500. However, his maximum probable net down side includes his own attorney fees, being $15,000, plus the court’s probable award of attorney's fees on the other side of $8000 for a total downside of a negative $23,000.  But wait, it gets worse.  If Paul wins, Richgize will have had his ego tweaked having lost the case.  Even if Paul wins, the probability of Richgize appealing to the court of appeals is good because that’s just the kind of guy he is. Paul must factor in the possibility that the attorney for Richgize will cite some obscure error in evidence or a ruling of Judge Wizeman on a law and three years later and $10,000 more on each side spent on attorney's fees and costs of transcripts, etc. the appeals court may find some technical error and, horror of horrors, remand the case to be retried by the trial court by Judge Wizeman. Paul’s true downside could exceed $40,000.

SCENARIO TWO

PAUL GOES TO SMALL CLAIMS COURT and seeks $9500 in damages for breach of contract and he's given a court date about 60 days from filing. There is no attorney, there are no interrogatories, there are no requests for production of documents, there are no depositions.  The parties show up and take their best shot.  At small claims court Paul wins a judgment for $7,800, but it doesn’t matter who wins or loses in the first trial, the other party is probably going to appeal. The losing party files their appeal to the district court and 60 days later Paul and Ricky are presenting their ease, without the presence of attorneys in a 3 hour trial, to guess who, Judge Wiseman.  Paul’s maximum probable up side is $9900. He has spent no attorneys fees (or perhaps $500 for some assistance from us in preparing for trial) and has spent less personal time having taken 10 hours to prepare for trial and 2 hours to try the case for the first time and 5 hours to prepare for the second trial and 3 hours to try the case for a total expenditure of 20 hours.  Maximum probable down side is costs of filing fees and service of process under $200. Even if Ricky brings his attorney to trial, the court is unlikely to give Ricky more than $2000 in attorney fees.  But wait, there’s more.  There are no appeals. Neither Ricky Richgize nor Paul can pursue this matter beyond the District Court. When Judge Wisemand rules, it’s over, and over for good.

CONCLUSION

Hiring an attorney to take this case to District Court, will end up costing Paul more of his own time, perhaps double, in gathering documents, responding to written interrogatories, attending depositions, preparing with the attorney and trying the case, than the personal time he will spend simply preparing for both cases and trying both the first case and the appeals case in small claims court. His maximum probable upside is less in the District Court, his maximum probable downside in District Court is huge. It will take him 60 to 150 days from beginning to absolute end in small claims court, and will take him from 18 months to 5 years to complete the case to its absolute end in the District Court. District Court equates to more personal time, more up front out-of-pocket money, less upside potential and far more ominous downside risk with an appeal risk that can drive the case off the charts. Stay out of the judicial system.  This is why Abraham Lincoln said:

Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser -- in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.

Abraham Lincoln, Fragment: Notes for a Law Lecture, in 2 Collected Works of Abraham Lincoln 82 (Rutgers University Press, 1953). Available at http://quod.lib.umich.edu/l/lincoln/.

What was true in Lincoln’s day is even more apropos today.

 

Brought to you by Business Law Associates, L.C., Utah's Small Business Law Firm, 8170 S. Highland Dr, Suite E5, Sandy UT  84093, 801.944.5255.