Tuesday, November 29, 2005

California Increases Small Claims Dollar Limit to $7,500

California's Small Claims Court system was created to provide a cost-efficient means for resolving smaller disputes. Through the end of 2005, the maximum amount that a party may recover in Small Claims Court is $5,000. This creates a problem for a party with a claim in the amount of, say, $7,000. Filing a Small Claims Court lawsuit will allow the party to avoid attorneys' fees but the maximum recovery will be $5,000. On the other hand, a Superior Court lawsuit will require an initial expense of about $1,000 plus perhaps thousands of dollars more if the case is not quickly resolved.

On January 1, 2006, the jurisdiction of the Small Claims Court will be increased to allow claimants to recover judgments of up to $7,500. However, the new law only applies to cases filed by individuals and does not apply small claims lawsuits filed by business entities such as corporations or LLCs. The new law provides for new training regulations for people who serve as judges in small claims lawsuits.

This increase still creates issues for a person or business with, say, a $9,000 claim, for the same reasons that currently affect a claim in the $7,500 range. However, the jurisdiction increase does dramatically help parties with claims in the $5,000 to $7,500 range.

There are a few steps that all businesses should take to empower them to recover debts without having to use the court system. For example, businesses should make sure that they have attorneys' fees provisions in their form contracts that allow them the ability to recover all or most of the attorneys' fees that they incur. Obviously, it is also important for businesses to make sure that their customers are signing a contract as part of any transaction.

If you have questions regarding the Small Claims Court procedure or if you would like to learn more about terms to include in your contracts used by your business, please feel free to contact us.

About the Author
Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.


anon12341234 said...

You have to set the limit somewhere... and you cant ever please everyone

Carl Starrett said...

I would have preferred that they increase the limits for other types of plaintiffs as well. Businesses should have the same rights as consumers in small claims court in my opinion.

ppi claims said...

At least they're doing something to control the disputes. It all depends on the implementation.