BILL ANALYSIS
SB 422
Page 1
Date of Hearing: June 28, 2005
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
SB 422 (Simitian) - As Amended: June 21, 2005
As Proposed to be Amended
SENATE VOTE : 24-14
SUBJECT : SMALL CLAIMS COURT: JURISDICTION
KEY ISSUES :
1)SHOULD THE MONETARY JURISDICTION IN SMALL CLAIMS COURT BE
RAISED FROM $5,000 TO $7,500 FOR NATURAL PERSONS?
2)SHOULD THE FILING FEE FOR SMALL CLAIMS CASES FOR AMOUNTS OVER
$5,000 BE INCREASED TO $75, AND SHOULD $23 of that fee GO TO
ENHANCE SMALL CLAIMS ADVISOR SERVICES AND $2 TO LAW LIBRARY
SERVICES?
SYNOPSIS
This bill seeks to increase the jurisdictional limit for small
claims court from $5,000 to $7,500 for natural persons only.
Parties would still be limited to filing just two cases per year
above $2,500. The bill would also increase the filing fee for
small claims cases over $5,000 to $75 and use $23 of those fees
to better fund small claims advisory services and $2 to fund law
library services.
The jurisdictional limit was last increased in 1991 from $2,000
to $5,000. The author argues that the limit should be increased
if only to keep pace with inflation. In addition, the increase
will help plaintiffs with cases over $5,000 but still well below
what most attorneys would consider taking. Consumers Union
supports the limited and carefully crafted jurisdictional
increase in the bill, particularly because it is tied to other
improvements for consumers, including better access to advisory
services and better trained judges. The bill is also supported
by the California Probation, Parole and Correctional
Association, the California Judges Association and Consumer
Attorneys of California. The bill is opposed by insurance
companies, the California Financial Services Association and the
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California Spa and Pool Industry Education Council.
SUMMARY : Increases the jurisdictional limit for small claims
court to $7,500. Specifically, this bill :
1)Increases the jurisdictional limit for small claims court for
natural persons to $7,500.
2)Declares that the quality of and access to justice in small
claims court varies widely between jurisdictions. The system
could be improved by: a) increased use of commissioners and
compensated and more frequently serving temporary judges; b)
improvements in the availability and knowledge of small claims
advisors; and c) increased availability of qualified
interpreters.
3)Declares the intent of the Legislature that, by limiting the
jurisdictional increase to natural persons, the bill
specifically excludes other forms of persons, including, but
not limited to, corporations, partnerships, unincorporated
associations, governmental entities and such other forms of
persons as may now exist or may exist in the future, other
than individuals from the jurisdictional increase.
4)Declares the intent of the Legislature not to raise the
jurisdictional limits again, particularly with respect to
individuals, until funding is available to provide sufficient
and adequate advisors and well-trained judges.
5)Increases the filing fee for cases over $5,000 to $75, with
$23 of that used to fund advisor services and $2 to fund law
library services. The library fee must supplement and not
replace existing resources. This section is only effective if
the measure implementing the Uniform Civil Filing Fee Act does
not become effective on or before January 1, 2006.
6)Requires small claims advisors to provide appropriate
assistance on a range of topics, including preparation of
filings, procedures and information on collecting judgments.
7)Requires actions to collect money to separately state the
original debt, along with all payments, fees and charges.
8)Requires, effective July 1, 2006, small claims temporary
judges to take specified courses on ethics and substantive law
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under rules to be adopted by the Judicial Council.
EXISTING LAW :
1)Provides that the monetary jurisdiction in small claims court
for a single claim is $5,000. (Code of Civil Procedure
Section 116.220.)
2)Prevents a party from filing more than two small claims
actions in any calendar year in which the amount demanded
exceeds $2,500. (Code of Civil Procedure Section 116.231.)
3)With the consent of the parties, allows a small claims case to
be heard before a temporary judge who is a member of the state
bar. (Code of Civil Procedure Section 116.240.)
4)Requires each county to provide free assistance to small
claims litigants. (Code of Civil Procedure Sections 116.260,
116.940.)
FISCAL EFFECT : As currently in print, this bill is keyed
fiscal.
COMMENTS : On April 26, 2006, this Committee passed AB 1459
(Canciamilla), which would have increased small claims
jurisdiction to $10,000 for natural persons. That bill has
since been amended to reduce the jurisdictional increase to
$7,500.
This bill, which is now identical to AB 1459, seeks to increase
the jurisdictional limit for small claims court from $5,000 to
$7,500 for natural persons only. Parties would still be limited
to filing just two cases per year above $2,500. The bill would
also increase the filing fee for small claims cases over $5,000
to $75, with $23 of that fee used to better fund small claims
advisory services and $2 to fund law library services.
Small claims court is designed to provide an easily accessible
forum for resolution of minor disputes. Any case may be filed
in small claims court, provided the maximum amount sued for is
$5,000. Parties in small claims court may not be represented by
counsel in the court. If the parties do not object, small
claims cases are often handled by temporary judges. The
plaintiff in a small claims case gives up his or her right to
appeal, but the defendant may appeal, and the appeal is a de
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novo trial in superior court.
The small claims court jurisdiction of $5,000 was established by
AB 3916 (Lempert), Chapter 1683, Statutes of 1990. The history
of jurisdictional increases, including the value of those limits
in 2002 dollars, calculated by the California Law Revision
Commission, are as follows:
Year Jurisdictional Limit Value
in 2002
1921 $ 50
$ 540
1949 $ 100
$ 684
1957 $ 150
$ 941
1961 $ 200 $1,201
1967 $ 300
$1,563
1971 $ 500
$2,169
1976 $ 750 $2,244
1981 $1,500 $2,818
1989 $2,000 $2,924
1991 $5,000 $6,656
Data provided by the Judicial Council shows that the number of
small claims filings has dropped by about 30 percent in the last
decade:
Fiscal Year Number of Filings
1993-94 446,930
1994-95 432,897
1995-96 430,991
1996-97 430,027
1997-98 387,744
1998-99 349,455
1999-2000 320,650
2000-01 304,424
2001-02 315,289
2002-03 308,672
The author believes that it is necessary to raise the
jurisdictional limit of small claims court because the limit has
not been raised in ten years and attorneys "will not take cases
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below $25,000 leaving those with cases between $5,000 and
$25,000 without a remedy."
As part of studies required pursuant to court unification, both
the Administrative Office of the Court (AOC) and the California
Law Revision Commission (CLRC) have addressed the issue of small
claims court jurisdiction. The AOC's study, Report on the
California Three Track Civil Litigation Study (July 31, 2002),
prepared on behalf of the AOC by Policy Studies, Inc.,
extensively reviewed the court process for small claims cases,
as well as limited and unlimited civil cases. The report found
that small claims courts provide necessary court access to
litigants with cases too small to justify either attorney
representation or a full-blown trial. However, because the AOC
report expressed concern about several potential negative
effects of increasing small claims jurisdiction, the report
recommended retaining the existing $5,000 jurisdictional limit,
but testing the effects of raising the limit to $7,500 and
$10,000 through pilot projects. The potentially negative
effects noted in the report are:
1)Many litigants in small claims court have difficulty
presenting their cases and proving their claims. These
difficulties would likely be increased if more complicated
cases came in with the increased jurisdictional limit.
2)The additional workload in small claims court due to increased
jurisdictional limits could strain court resources,
particularly with respect to temporary judges and
commissioners.
3)The quality of justice issues surrounding use of temporary
judges would increase with a rise of the jurisdictional limit
and the impact of a wrong decision, particularly on plaintiffs
who have no right to appeal in small claims court, would be
increased.
The AOC report recommends that if the pilots are used to test
increasing the jurisdictional limit, temporary judges should be
required to undergo extensive training, small claims advisors
should be located at the courts to provide in-person assistance
and there should be rigorous data collection in order to
evaluate the pilots. This bill seeks to address many of the
concerns noted in the AOC study by requiring better training of
temporary judges and better services provided by small claims
advisors.
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The CLRC, after a thorough study of the issue, made a tentative
recommendation to increase the jurisdictional limit of small
claims cases from $5,000 to $10,000. However, the tentative
recommendation suggests that, due to the extensive concerns
raised by many organizations representing divergent interests, a
greater degree of consensus be achieved before the Commission
issues a final recommendation. CLRC suggests a possible
compromise would be to limit any jurisdictional increase to
$7,500. (California Law Revision Commission, Jurisdictional
Limits for Small Claims and Limited Civil Cases, Comments on
Tentative Recommendation, Study J-1321 (Sept. 10, 2003).) This
bill seeks to address concerns raised by the CLRC study by
limiting the jurisdictional increase to $7,500 and by addressing
many of the concerns raised through improvements to the small
claims advisors services and better training of temporary
judges.
Consumers Union (CU), which has had a history of opposing
increases in the small claims jurisdictional limit, supports
this bill. CU had been concerned about the potential unfairness
of exposing individual consumers to a judgment of up to $7,500
without representation by counsel and with limited advisory
services and uneven quality of temporary judges. However, CU
has worked closely with the author's office to craft amendments
to alleviate their concerns, and, as a result:
Consumers Union supports this measure because it limits
the increase to $7,500 and to cases brought by natural
persons only, and makes several other improvements, such
as improvements related to the nature of claims brought to
collect debt, periodic training for judge pro tems,
augmenting the content and accessibility of small claims
court advisory services, a mechanism to pay for these
improvements, and a set of findings describing the
additional problems that should be solved before any
subsequent increase in small claims court jurisdiction.
The Consumer Attorneys of California support the bill, arguing
that with the additional protections to consumers in SB 422, it
is time to adjust the small claims limit. "It is increasingly
difficult for an injured consumer to find an attorney who can
handle a case valued under $7,500. Insurance companies fight
claims of this size with the same intensity as one valued at
$100,000. . . . These injured consumers need a forum to resolve
their disputes."
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The Judicial Council supports the policy change of increasing
the jurisdictional limit in small claims court to $7,500 for
actions brought by natural persons, but is concerned about the
fiscal consequences of the bill. The Judicial Council believes
that the $50 of the $75 fee that, under the bill, will go to
trial court funding is not sufficient to backfill the courts'
loss due to cases that had previously been filed as limited
civil cases now, as a result of the increased jurisdictional
limit, being filed in small claims court. While the Judicial
Council supports the "increased funding for small claims
advisors and law libraries, the [SB 422] proposal . . . would
result in an estimated loss of between $100,000 and $400,000 to
the Trial Court Trust Fund."
The Judicial Council is developing a Uniform Civil Filing Fee
proposal to raise fees in civil cases, including small claims
cases, and this bill conflicts with that proposal. The Judicial
Council would like to see the small claims fee increase be done
in conjunction with the Uniform Civil Filing Fee proposal. To
accommodate the necessary coordination, the fee increase
proposed by this bill only takes effect if the measure
implementing the Uniform Civil Filing Fee Act does not become
effective on or before January 1, 2006. Since the Uniform Civil
Filing Fee has not yet been put in legislation, this bill will
need to be amended to reference the appropriate legislation when
that occurs.
Due Process Concerns . Small claims court provides a forum where
minor disputes can be resolved expeditiously and inexpensively.
However, in exchange for speed, reduced costs and simplicity,
many due process safeguards are reduced or eliminated. Among
other things, there is no right to a jury trial, no right to be
represented by counsel, evidence rules are much more limited and
the plaintiff has no right to appeal while the defendant's
appeal is limited to a de novo trial. Courts have upheld the
process, even given the limitations to due process rights of the
parties, given the small amounts of money involved. ( See
Houghtaling v. Superior Court (1993) 17 Cal.App.4th 1128.) A
significant increase in the jurisdictional limit could be found
to be unconstitutional.
However, it is likely that a modest increase in the
jurisdictional limit of up to $7,500, combined with additional
safeguards to help ensure that the process is fair to all
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parties, such as increased advisory services and better trained
judges, will satisfy constitutional due process requirements.
ARGUMENTS IN OPPOSITION : The Association of California
Insurance Companies argues that raising the jurisdictional limit
will cause insurers and policyholders to suffer. Since small
claims litigants cannot be represented by counsel, insurers will
be unable to meet their contractual obligation to defend their
insureds claimants in small claims court. To comply with their
duty to defend, insurers will be required to:
[A]ppeal to Superior Court - for a trial de novo -
those cases in which the decision of the small claims
court is questioned. In these appeals, counsel can
appear for the parties. If that is the only avenue
available for the insurers to represent their
customers, the number of such appeals is likely to
increase substantially over current numbers. That
eventuality will result in higher costs to the
judicial system - precisely the opposite effect of the
intended purpose of operating small claims courts in
the first place!
Echoing that position, the Personal Insurance Federation of
California and State Farm oppose the bill unless cases where
another party has a duty to defend the defendant as part of a
contractual agreement are specifically excluded from the
jurisdictional increase. This would exclude from the
jurisdictional increase cases where the defendant is insured.
The California Financial Services Association (CFSA) does not
oppose the jurisdictional increase to $7,500, but request two
other changes. Currently parties are limited to filing just two
cases per year above $2,500, half of the current small claims
jurisdictional limit of $5,000. CFSA would like to increase
that jurisdictional limit for multiple filers to half of $7,500
($3,750). CFSA would also like to delete the requirement in the
bill that actions to collect money separately state the original
debt, along with all payments, fees and charges, because that
requirement "is unnecessary and only adds additional bureaucracy
to the process."
The California Spa and Pool Industry Education Council opposes
the bill because "whenever there is a dispute between the
consumer and the contractor, smalls claims courts habitually
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rule in favor of the consumer, regardless of the complaint's
merit." It is important to note that defendants in small claims
court have a right to appeal an unfavorable ruling and such
appeal is a de novo review.
Technical Amendments : The following technical amendment will
help ensure that fees are appropriately used for small claims
advisors as directed in this bill and that the bill effectively
coordinates with the Uniform Civil Filing Fee Act:
1)On page 6, line 28, after "account" insert:
pursuant to this subsection
2)On page 8, delete line 30 and insert:
Sections 4 and 6 of this act, which add Section 116.232 to,
and amend Section 116.910 of,
3)On page 8, line 34, delete "Section 4" and insert:
Sections 4 and 6
Pending Related Legislation : AB 1459 (Canciamilla), which would
have increased small claims jurisdiction to $10,000, passed out
of this Committee. That bill has since been amended to reduce
the jurisdictional increase to $7,500, and is now identical to
SB 422.
Prior Legislation : SB 1342 (Lockyer, 1997) would have raised
small claims limit to $10,000 in auto accident cases; AB 246
(Lempert, vetoed by Governor Wilson in 1997) would have raised
small claims jurisdiction limit to $7,500; AB 2506 (Andal, 1993)
would have raised small claims limit to $10,000.
REGISTERED SUPPORT / OPPOSITION :
Support
California Probation, Parole and Correctional Association
California Judges Association (in support of increase to $7,500)
Consumer Attorneys of California
Consumers Union
Opposition
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Association of California Insurance Companies
California Financial Services Association (unless amended)
California Spa and Pool Industry Education Council
Personal Insurance Federation of California (unless amended)
State Farm (unless amended)
Analysis Prepared by : Leora Gershenzon / JUD. / (916)
319-2334