BILL ANALYSIS Ó
SB 221
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Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 221 (Simitian) - As Amended: May 19, 2011
PROPOSED CONSENT
SENATE VOTE : 38-0
SUBJECT : Small Claims Court: Jurisdiction
KEY ISSUE : SHOULD THE MONETARY JURISDICTION IN SMALL CLAIMS
COURT BE RAISED FROM $7,500 TO $10,000 FOR NATURAL PERSONS?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill increases the small claims court jurisdictional limit
from $7,500 to $10,000 in an action brought by a natural person.
Parties would still be limited to filing just two cases per
year above $2,500. This bill delays the increase for bodily
injury claims resulting from car accidents until January 1,
2015.
The jurisdictional limit was last increased from $5,000 to
$7,500 in 2005. The author believes that the increase will help
plaintiffs with cases over $7,500 but still well below what most
attorneys would consider taking. The bill is supported by,
among others, Consumer Attorneys of California, the Judicial
Council and the California Apartment Association. There is no
known opposition.
SUMMARY : Increases the jurisdictional limit for many small
claims court actions to $10,000. Specifically, this bill :
1)Increases small claims courts jurisdiction in an action by a
natural person from $7,500 to $10,000.
2)Notwithstanding #1, provides that if a defendant is covered by
an automobile insurance policy that includes a duty to defend,
limits, until January 1, 2015, small claims court jurisdiction
to $7,500 for damages for bodily injury from automobile
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accidents.
EXISTING LAW :
1)Provides that small claims courts have jurisdiction for an
action brought by a natural person, if the amount of the
demand does not exceed $7,500. (Code of Civil Procedure
Section 116.221. Unless stated otherwise, all further
references are to that code.)
2)Prevents a party from filing more than two small claims
actions in any calendar year in which the amount demanded
exceeds $2,500. (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. Requires small claims temporary judges to take specified
courses on ethics and substantive law under rules adopted by
the Judicial Council. (Section 116.240.)
4)Requires each county to provide free assistance to small
claims litigants. Requires small claims advisors to provide
appropriate assistance on a range of topics, including
preparation of filings, procedures and information on
collecting judgments. (Sections 116.260, 116.940.)
COMMENTS : 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 or $7,500 for natural persons. 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 novo trial in superior court.
This bill seeks to increase the jurisdictional limit for small
claims court actions brought by natural persons from $7,500 to
$10,000, except that the increase in the jurisdictional limit
for damages for bodily injuries resulting from car accidents
does not go into effect until 2015. Parties would still be
limited to filing just two cases per year above $2,500.
In support of the bill, the author writes: "Studies show, and
the Judicial Council confirm that it is nearly impossible to
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find representation for cases involving less than $25,000 in
damages. For individuals with damages between $7,500 and
$25,000 justice is difficult to come by and the usual result is
to settle at the jurisdictional limit of $7,500. SB 221 will
close that gap."
History of Small Claims Jurisdictional Limits : The current
small claims court jurisdiction of $7,500 was established by AB
1459 (Canciamilla, Chap. 618, Stats. 2005) and SB 422 (Simitian,
Chap. 600, Stats. 2005). The history of jurisdictional
increases, including the value of those limits in 2002 dollars,
calculated by the California Law Revision Commission (and
updated by Committee staff), 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
2006 $7,500 $6,693
2011 $10,000 $7,999
Data provided by the Judicial Council shows that the number of
small claims filings has dropped by about 34 percent in the last
decade, but has held relatively flat since the 2006 increase in
the filing fee:
Fiscal Year Number of Filings
1998-99 349,455
1999-2000 320,574
2000-01 308,466
2001-02 319,165
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2002-03 315,148
2003-04 284,096
2004-05 256,086
2005-06 236,526
2006-07 224,485
2007-08 227,733
2008-09 232,378
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 recommended 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
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evaluate the pilots.
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 suggested that, due to the extensive concerns
raised by many organizations representing divergent interests, a
greater degree of consensus could be achieved before the
Commission issues a final recommendation. CLRC suggested 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).)
The 2005 bills were intended to implement some of the
recommendations of the three-track study. Among other things,
AB 1459 and SB 422 raised the $5,000 jurisdictional limit set in
1990 to $7,500. The increase accounted for inflation as well as
consideration of the increased costs associated with hiring an
attorney and general costs associated with civil litigation.
The bills were also tied to increased resources for small claims
advisors and a mandate for better training of temporary judges.
Consumers Union, which historically had opposed increases in the
small claims jurisdictional limit, supported the 2005 bills
"because it limitÝed] the increase to $7,500 and to cases
brought by natural persons only, and Ýmade] several other
improvements, such as improvements related to . . .
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."
Those bills were also supported by the Consumer Attorneys of
California and the Judicial Council.
Filing Fees for Small Claims are Substantially Less Than
Ordinary Civil Actions : Filing fees for small claims courts are
substantially less than filing fees for unlimited and limited
civil cases. A plaintiff who has filed 12 or fewer claims in
small claims court in the prior 12 months must pay a filing fee
between $30 and $75 depending on the amount of the claim. For
more than 12 claims in a 12-month period the filing fee is $100
regardless of the claim amount.
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In contrast, the filing fee for an unlimited civil case is $395,
$370 for a limited civil case greater than $10,000, and $225 for
a claim that is $10,000 or less. These fees can be cost
prohibitive for litigants with smaller claims.
Jurisdictional Increase is Limited to Claims Brought by Natural
Persons : Like the 2005 legislation, this bill only increases
the small claims court jurisdiction for claims brought by a
natural person. The small claims court's jurisdiction would
remain at the $5,000 limit for an action brought by a business
or any other entity. The policy behind keeping a lower
threshold for businesses is to protect consumers who may become
defendants. Because the action is brought in small claims
court, those consumers will not have access to an attorney.
There is a greater likelihood that businesses will have access
to more resources and may potentially have access to outside
legal services. This defeats the purpose of small claims court
and could result in a consumer potentially being held to pay a
significant amount of money without the aid of an attorney and
with very little recourse. Since the increase proposed by this
bill is limited to claims brought by a natural person, Consumers
Union is neutral on this bill.
Bill Delays the Increase for Claims of Bodily Injury in Car
Accidents : This bill delays for three years the jurisdictional
increase for damages actions for bodily injury from automobile
accidents, if a defendant is covered by an automobile insurance
policy that includes a duty to defend. This delayed increase
is the result of concerns raised by insurance companies
regarding their contractually agreed upon duty to defend their
insured. The Association of California Insurance Companies
(ACIC) had written that if the jurisdictional limit is raised
for these cases, three things would happen: "first, insurers
would be unable to meet their contractual obligations. Second,
consumers would be deprived of a benefit under their insurance
policies for which they paid a premium. Third, insurers will be
unable to defend against fraud which increases each time the
small claims court cap is raised." However, it is important to
note that insurance companies raised these same concerns in 2005
when the jurisdictional limit was last raised and they have not
presented any evidence of harm suffered as a result of the 2005
increase.
2005 Legislation Contained Legislative Intent to Limit Further
Jurisdictional Increases in Small Claims Court : The 2005
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legislation included legislature intent language which specified
that, before the jurisdictional limit was to be raised above
$7,500, certain services had to be improved. Specifically, AB
1459 and SB 422 stated before limits are raised again the small
claims courts should (1) provide in-person advice from legal
professionals; (2) provide adequate staffing levels both to meet
demand and to permit the small claims advisors to provide
services to both parties without conflicts of interest; and (3)
have "professional, well-trained, compensated decision makers
who meet standards established by the Judicial Council."
By statute, each county must provide small claims advisory
services. In order to increase the capacity of those advisory
services, the filing fee for small claims cases above $5,000 was
set at $75, $3 of which is used to support the small claims
advisors program. While this has certainly helped increase the
capacity of those advisors, it is not clear that all counties
offer in-person services. The second criterion of adequate
staffing levels has also undoubtedly been improved by the $3 fee
and Judicial Council notes that efforts have been made to
accomplish the second goal. However, it is difficult to
determine whether this second goal has been achieved.
Finally, as a result of the 2005 legislation, Judicial Council
amended the Rules of Court improving the training of temporary
judges. Unpaid, temporary judges can be used in small claims
courts instead of an appointed or elected judge. Certain
education, experience, and training requirements must be met in
order for the court to appoint a temporary judge. Among other
things, a temporary judge must be an attorney who has been
admitted to practice for at least five years and must have
completed training in bench conduct and demeanor, ethics, and
specific substantive law training for small claims courts.
However, while training has improved, small claims cases are
still routinely heard by uncompensated, temporary judges.
Thus, while the three goals from the 2005 legislation have
likely not been fully accomplished, efforts have been made on
all the goals to improve the quality of justice in small claims
court.
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
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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 the modest increase in the
jurisdictional limit of up to $10,000 contemplated by this bill,
combined with the additional safeguards to help ensure that the
process is fair to all parties established in 2005, such as
increased advisory services and better trained judges, should
satisfy constitutional due process requirements.
ARGUMENTS IN SUPPORT : In support of the bill, the Judicial
Council writes that the bill "keeps intact key protections from
the 2005 legislation - the increased jurisdictional amount would
only apply to actions brought by natural persons, and the
enhanced training requirements for temporary judges and
increased funding for small claims advisors would continue under
this measure. Given the passage of time, the rising cost of
litigation, and the lack of evidence of adverse court impacts
from the last jurisdictional increases, the Judicial Council
believes that SB 221 strikes the appropriate balance of
providing increased access to justice for some individual
consumers while at the same time not overwhelming the courts."
REGISTERED SUPPORT / OPPOSITION :
Support
California Apartment Association
California Association of Realtors
Consumer Attorneys of California
Golden Rain Foundation
Judicial Council
Third Laguna Hills Mutual
Opposition
None on file
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Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334