A Big Guide to Small Claims Court- Part I: Sue 'em All

This is the first part of a multi-part series that explores and explains filing and winning a small claims court case. 

You’re owed under $2,500 from some deadbeat client.  You’ve tried everything to get paid, but all you’ve gotten is the run around.  Everyone now says the same thing:  “Sue them in small claims court.”  

Ok.  Good advice.  Now what?  In this first post, we'll explore the fundamentals of small claims court: who you can sue, whether a lawyer helps, whether you can get sued back, and what you can sue for.

First, it is important to understand what is “small claims court?”  Almost every jurisdiction in the country has a slightly different system, but the principle is the same: because there is less money in dispute (“small claim”) than typical large-corporation cases, the regular rules of the Court are relaxed.   But that does not mean you can just show up and get justice.  There are still procedures to follow.  It is important to know what to expect and how to navigate the system.

Although small claims processes are different in every jurisdiction, we think the small claims court in Brooklyn, New York, which we know (too) well is a good place to provide some insight into what to expect from any small claims court.  If you happen to be in Downtown Brooklyn, the Kings County Civil Court, which contains the “Small Claims Part,” looks like this:

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You can sue anyone anywhere in the country from anywhere in the country, subject to the local court's rules. In New York City, the person you're suing must have an address in New York.  But in other places, they will likely allow you to sue someone anywhere in the nation, with one important caveat: unless your out-of-state client has assets in the state, you’re going to have to get the other state's courts to recognize and enforce your New York judgment. It can be done, but it takes some time and effort.  That’s beyond the scope of this article, so look for it in future parts.  

Once you’ve decided on the right court, it’s time to find a lawyer who can bring your claim, right? Nope.  In many states individuals cannot be represented by a lawyer in small claims court.  However, even in jurisdictions where lawyers are allowed, you won’t find many.  The smaller amount of money in dispute rarely justifies the fees a lawyer would charge. Unless you’re working with a high volume practice (like Indepayment’s Network Participants) you’re not going to find a good lawyer to work your $2,500 non-payment case on contingency. You’re now your own crack civil litigator.  Best to watch a few episodes of Boston Legal, Ally McBeal, or LA Law, depending on your age, to brush up on the basics of presenting a cogent and convincing case.  Actually, skip that.  Just get your facts straight and documents in order.

Tip: in New York City and some other larger jurisdictions, corporations or partnerships or limited liability corporations sue in a different part of the small claims court that specifically handles claims by those types of entities, which generally also has relaxed rules, but not as relaxed. If you did the work as a corporation, LLC, or partnership, you can sue as your entity, if you have one.  If you decide to use the commercial part of the small claims court, you likely want a lawyer to help you.

In New York, like most places, you can only sue for money in small claims court.  The amount you can sue for in New York City is topped at $5,000.  In California its $7,500 statewide.  In other places it is less.  For example, outside of New York City in New York State the cap is $3,000.  The limitation on the relief (legal outcome) you can get is something to seriously consider, because if you’re looking to make someone do something (i.e. return the code you developed for which you were not paid or stop the deadbeat from using the logo you designed for them) the small claims court is not going to do that.  They are only there to award money, or not.  You’ll need to sue in a different court that has the power to make those types of orders.

The person you’re suing can also sue you back for money damages within the jurisdictional limit ($5,000 in New York City). That is called a “counter-claim.”  If they do it right, they will make the counter-claim within five days of getting your forms from the Court (explained below).  However, they can pretty much do it at anytime, which is especially annoying because it could delay the case if a counter-claim is asserted on the court date.  In that case, in most jurisdictions, the Court will adjourn the case for about 20 days to allow you to prepare to defend the counter-claim...

Don’t worry too much about counter-claims.  They’re not too common, and they do not come out of the blue.  You know you’re in a dispute with someone, and they have the claim.  When a counter-claim is made, you basically become the plaintiff on your claim and the defendant on the other.  Lots of times, the person you’re suing will bring a bogus claim hoping the judge (or arbitrator as the case may be) will split the baby and the case will end up a wash.  In reality, that does not often happen.  The judge or arbitrator is pretty good at spotting nonsense counter-claims.  We’ll go over the procedure for defending a counterclaim in a future post.

Now, what happens if someone sues you back for more than $5,000?  Interesting question. The entire case is supposed to be transferred to a court that has jurisdiction over those types of those larger cases.  That’s actually the best result for you because you don’t want the small claims court to decide that larger claim.  You’ll also want the time and opportunity to get rid of that case.  Don’t worry too much about all that.  It is rare.  Most people who know that someone can sue them for something much bigger than the money they are owed are reluctant to pull the tiger’s tail. Basically, before you use small claims court, it is best to think about tigers and tails.

Up next: Filing the case.

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