Can dealers pursue satisfaction in small claims court?

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I couldn’t help but enjoy New York Times reporter David Segal’s article on Ralph Nader’s tiff with US Airways. It caused me to realize that small claims court may be an effective venue for dealers to collect debts, settle disputes or seek restitution. 

In essence, small claims court offers a simple, lawyer-free legal process that is much cheaper and faster than a regular civil court. As an added bonus, it could even be less costly than using a collection agency. That’s because, normally, the claimant and the defendant represent themselves. In many states, California for example, lawyers are actually barred from small claims court. There are no juries. The parties simply appear before a judge, present their witnesses where applicable, and the judge usually renders an immediate verdict. Time: only about a half hour!

Daytime television even has a few small claims court-like shows including “Judge Judy," “The People’s Court” and “Judge Joe Brown.” These are not true courts (they are actually arbitrations) but they are very good facsimiles that give you an idea of how it works.

Small claims court filing fees, which have been rising in many states lately, typically range from $15 to $150. More importantly, also rising has been the amount of claim the court will allow. The majority of small claims courts now range from $5,000 to $15,000 with Delaware’s $1,500 limit the lowest and Tennessee the highest at $25,000. A few states limit businesses’ use of the court, but that’s rapidly disappearing, too.

Anecdotally, in a phone survey of nine dealers, I found none that had ever used small claims court to collect from a customer or supplier. “I never thought about it,” was their typical answer. But lots of other businesses apparently do. Last year, for example, the 25 small claims courts in Los Angeles County handled some 67,000 small claims cases including many by small businesses, according to the Los Angeles Times.

Arguably, winning a judgment in small claims court doesn’t guarantee you’ll get paid. While wages, money or property can be used to satisfy a judgment, it can still be difficult to collect unless the defendant agrees to pay voluntarily. That said, however, L.A. small business owner Sean Bennett says he’s used small claims court several times to successfully collect money owed by former clients. “By taking it to small claims court two things are going to happen: It's going to get their attention, No. 1, or you just get a judgment against them." Bennett’s claims have ranged from $700 to $800.

Now, returning to Segal’s story about Ralph Nader. It seems Nader had to cancel two round-trip tickets to Knoxville at $1,380 each on US Airways. He incurred two $150 cancellation fees, but he didn’t get the rest of his money back. Instead, the airline offered credits that could not be transferred and had to be used within a year. Otherwise, they would be forfeited. “The airlines have been pursuing this forfeiture thing for a decade now - it’s like printing money,” Nader contends.

So, he wrote to US Airways and demanded a refund. The airline said no. He then called repeatedly, all the way to the CEO. No calls were returned. Finally, he got to speak to an assistant to the US Airways general counsel and mentioned three words: small claims court. Bingo! He received a letter granting full refund, even including the $300 cancellation fees.

“Small claims court is an unknown venue to most people,” Nader says. “Few people know how simple the forms are, how accommodating the judges are. A lot of them are even open at night."

Something worth looking into in your state.

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