BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 221 (Simitian)
As Amended May 2, 2011
Hearing Date: May 10, 2011
Fiscal: No
Urgency: No
EDO
SUBJECT
Small Claims Court: Jurisdiction
DESCRIPTION
This bill would increase the small claims court jurisdictional
limit from $7,500 to $10,000 in an action brought by a natural
person. This bill would, until January 1, 2014, delay operation
of this section with respect to bodily injury claims resulting
from vehicle accidents.
BACKGROUND
Small claims courts were established for the purpose of
providing a forum for parties seeking minor recoveries in civil
disputes. Attorneys are prohibited from representing parties in
small claims courts, thus leading to a somewhat more informal
environment.
As a part of the unification of the California courts, the
Judicial Council of California and the California Law Revision
Commission (CLRC) commissioned a project to study the three
tracks of civil litigation (unlimited civil claims, limited
civil claims, and small claims). In 2002, the results of the
California Three Track Civil Litigation Study (three track
study) were published. The three track study looked at issues
of access to justice, quality of justice and infrastructure
needs in small claims cases. A piece of the three track study
addressed the jurisdictional limit for small claims courts that
was set at $5,000 in 1990. (AB 3916 (Lempert) Chapter 1683,
Statutes of 1990.)
(more)
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One of the recommendations from the three track study was to
create pilot projects to study the effects of raising the small
claims jurisdictional limit to $7,500 for some jurisdictions and
to $10,000 for others. The pilot projects were recommended due
to concerns that small claims court filings would significantly
increase. Without an adequate number of judges or temporary
judges who were sufficiently trained, there were concerns that
an increase in filings would negatively impact the parties'
rights.
Another concern the three track study discussed was the
underlying due process concerns associated with small claims
courts. By electing to use the small claims court (rather than
hire an attorney for a small claim in civil court) both parties
are giving up their right to counsel and plaintiffs are giving
up their right to appeal the ruling. However, the three track
study also concluded that significant issues relating to access
to justice were raised by a low jurisdictional limit in small
claims court.
SB 422 (Simitian, Chapter 600, Statutes of 2005) was intended to
implement some of the recommendations of the three track study.
Among other things, 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.
Consumers Union, which historically had opposed increases in the
small claims jurisdictional limit, supported SB 422 "because it
limit�ed] the increase to $7,500 and to cases brought by natural
persons only, and �made] 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." SB 422 was also supported by
the Consumer Attorneys of California and the Judicial Council.
This bill would increase the small claims court jurisdiction
from $7,500 to $10,000 for a natural person. This bill would
delay operation of this section until January 1, 2014, for
bodily injury claims resulting from vehicle accidents.
CHANGES TO EXISTING LAW
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Existing law provides that small claims courts have jurisdiction
in an action brought by a natural person, if the amount of the
demand does not exceed $7,500. (Code Civ. Proc. Sec. 116.221.)
Existing law provides that a natural person may not file more
than two small claims actions that exceed $2,500 in any year.
(Code Civ. Proc. Sec. 116.231.)
This bill would provide that small claims courts have
jurisdiction in an action by a natural person, if the amount of
the demand does not exceed $10,000.
This bill would not impact the limitation on a natural person
filing more than two small claims actions exceeding $2,500 in
any year.
This bill would repeal a duplicate provision of Code of Civil
Procedure Section 116.221.
This bill would delay operation of this section until January 1,
2014 only for bodily injury claims resulting from vehicle
accidents.
COMMENT
1. Stated need for the bill
The author writes:
It is difficult to find an attorney to represent you in a case
where the amount in dispute is less than $7,500. Attorney's
fees are too high to justify the expense, thus denying justice
to many parties.
In support of this bill, Judicial Council writes, "�our] support
for SB 221 takes into account the increasing difficulty of
litigants to find attorneys willing to take cases valued at
$10,000, or even higher, given the rising costs of litigation.
The council is also mindful of the many challenges faced by
self-represented litigants trying these actions as limited civil
cases, which is an inefficient and burdensome process for the
courts as well. Many litigants with claims in excess of the
small claims limit have nowhere to turn, other than small claims
court."
2. Small claims court jurisdictional limit increase from $7,500
to $10,000
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This bill would raise the jurisdictional limit for a natural
person to file a claim in small claims court. This bill would
not raise the jurisdictional limit for a business or any other
entity other than a natural person.
a. Small claims courts provide access to justice for
parties
In the three track study, the CLRC noted that "small claims
court�s] �are] a critical part of the court system. Litigants
with smaller cases cannot justify the expense of an attorney,
but many pro per litigants face substantial and often
insurmountable difficulties in trying to represent themselves
in regular civil court. The availability of a simplified
procedure that is both quick and fair is essential. Further,
what constitutes a 'smaller case' rises over time with
inflation and with the cost of attorney representation."
According to the United States inflation calculator, what cost
$7,500 in 2005 would cost close to $8,500 in 2011. While it
is difficult to quantify the cost of attorney representation,
it can be presumed that attorneys are increasingly less likely
to take cases with smaller claims on a contingency basis or to
charge such a minimal fee that a small claims litigant could
afford. This is especially true in light of the difficult
economic situation in which many Californians find themselves.
As a result, parties are either forced to lower their claims
to fall within the jurisdictional limit or end up in civil
court which is significantly more formal and expensive. The
Judicial Council writes "according to small claims advisors,
self-help advocates and others familiar with these matters,
the inability of litigants with claims valued at $10,000 to
find lawyers who are willing to take their cases has
significantly worsened over the years with the burgeoning
costs of litigation. Although the issue has not been subject
to formal study in California, the fears expressed about the
harmful effects of increasing the small claims court
jurisdiction do not appear to have taken place." For these
reasons, it is increasingly important to provide a forum for
litigants to resolve their smaller claims.
b. California small claims jurisdiction compared to other
states
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Approximately fourteen states are considering legislation that
would increase the small claims court jurisdictional limit.
Currently, California's existing jurisdictional limit is
slightly higher than most states, although a few states are
also considering increasing the jurisdictional limit to
$10,000. It is important to recognize that California has a
higher cost of living, so the higher jurisdictional amount for
small claims courts would appear to be justified. As reported
recently in the San Jose Mercury News, a recent study
conducted by a nonprofit watchdog group HALT (Help Abolish
Legal Tyranny) ranked California second in the nation for
small claims court systems. However, "California got bumped
down a notch in large part because it did not follow
recommendations to increase the limit for small claims cases
up to $10,000 from its current $7,500 level."
c. Filing fees
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.
In contrast, to file the first paper in an unlimited civil
case, the state-wide minimum fee is $395 and $370 for a
limited civil case greater than $10,000 and $225 for a claim
that is $10,000 or less. This can be cost prohibitive for a
low-income litigant. By increasing the jurisdictional limit
for small claims courts, litigants are able to exercise their
legal rights in those courts without being inhibited by high
filing fee costs in civil court.
d. Small claims filings
One of the concerns raised in 2005 regarding the increase in
the jurisdictional amount for small claims was that there
would be an influx of cases filed, thus significantly
impacting the small claims courts. However, according to
Judicial Council's most recent statewide court statistics
report, small claims filings have been fairly stagnant,
initially dropping and then increasing slightly since the
jurisdictional increase in 2006 (256,086 in 2005-06; 224,485
in 2006-07; 227,733 in 2007-08; and 232,378 in 2008-09), while
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filings for limited civil cases have steadily increased every
year since 2006 (503,353 in 2005-06 and 783,863 in 2008-09).
According to the Judicial Council, "in the first year after
the change from $5,000 to $7,500 occurred (2006-2007), there
was actually a slight decrease in small claims filings
(continuing a long-term trend). Subsequently, there have been
modest increases in small claims filings each year. It appears
that other factors besides the increase in jurisdictional
limits may account for most of the recent increases in small
claims filings. This is suggested by the fact that filings in
limited civil cases (i.e., cases under $25,000) have increased
even more precipitously than small claims filings during the
past few years. Thus, although the increase in jurisdictional
limits in small claims may have had some impact on filings in
small claims cases, it appears that the downturn in the
economy is an even larger factor."
e. Jurisdictional increase is limited to claims brought by a
natural person
This bill would only increase 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.
f. Delayed operation of this section for bodily injury
claims resulting from vehicle accidents
With respect to the prior version of this bill, concerns have
been raised from the California insurance companies regarding
their contractually agreed upon duty to defend their insured.
The Association of California Insurance Companies (ACIC)
contends that "a central feature of most insurance
policies-one that is not ordinarily subject to policy
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limits-is the 'duty to defend' undertaken by the insurer on
behalf of the insured." As a result, ACIC believes 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." Further, ACIC noted that "the majority of
insurance claims fall below the $10,000 limit-in effect
depriving a majority of insured claimants their right to a
legal defense provided by their insurer." ACIC does note,
however, that as to the current version of the bill, they
would prefer a four-year delayed operative date. The Personal
Insurance Federation of California (PIFC) echoed the concerns
raised by ACIC and with respect to the prior version also
wrote that "SB 221 opens the door to increased fraudulent
claims. We already see a great deal in small claims court
where there is no discovery, no opportunity for verification
of medical bills or to dispute what is claimed. And there is
a multiplier effect - fraud often operates with multiple
passengers in a car, each bringing an individual claim in
small claims court where a favorable judgment is easier to
obtain. This may exceed the coverage limits of the insured
and as a result, they become personally liable - having had no
defense to which they were contractually entitled."
Additionally, the Civil Justice Association of California
(CJAC) was also opposed to the prior version of the bill. At
the time of the writing of this analysis, it is not clear
whether these amendments address the opposition's concerns.
This bill was amended to delay the operation of this section
with respect to bodily injury claims resulting from vehicle
accidents until January 1, 2014. The Judicial Council has
indicated that during this time they will be looking further
into the small claims court process as a follow-up to their
earlier efforts on the three track study. As part of this
process, the issues raised by ACIC and PIFC that specifically
relate to fraud in automobile claims can be addressed in the
context of possible reforms of the small claims court process.
3. SB 422 Intent language
SB 422 was amended to include language stating that it is the
intent of the Legislature that before the jurisdictional limit
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is raised again certain services should be sufficiently funded.
Specifically, SB 422 suggested that the small claims courts
provide (i) in-person advice from legal professionals; (ii)
adequate staffing levels that provide services to both parties
and that; (iii) small claims courts 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. (Code of Civ. Proc. Secs. 116.260 and 116.940; see
also California Rules of Court 3.2120.) According to Judicial
Council, all of the counties in California provide small claims
legal advisors who help with small claims court and consumer
problems. Additionally, most counties provide self-help centers
which help with many legal issues. This appears to address the
concern about providing parties with in-person professional
legal advice. The second criterion is more difficult to
quantify, although Judicial Council notes that efforts have been
made to accomplish this goal. Finally, as a result of SB 422,
in 2007 Judicial Council amended the Rules of Court relating to
the training of temporary judges. Temporary judges are
routinely 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. (California Rules of Court Sections
2.811-2.818.)
In support, Judicial Council states "notably, SB 221 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."
4. Technical amendments
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The author has agreed to take the following amendments to
clarify that the delayed operative date for increasing the
jurisdictional limit for bodily injury claims resulting from a
vehicle accident is limited to claims brought by a natural
person and would only apply when a defendant is covered by an
automobile insurance policy which includes a duty to defend.
This means that a non-insured defendant or an insured defendant
without a duty to defend could be subject to the $10,000
jurisdictional limit.
1.On page 2, line 9, after the word "brought" insert "by a
natural person".
2.On page 2, line 12, after the period; insert "This section
shall apply only where a defendant is covered by an automobile
insurance policy which includes a duty to defend."
Support : California Apartment Association; Consumer Attorneys
of California; Judicial Council
Opposition : Association of California Insurance Companies (prior
version); Civil Justice Association of California (prior
version); Personal Insurance Federation of California (prior
version)
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
SB 422 (Simitian, Chapter 600, Statutes of 2005), among other
things, raised the small claims court jurisdictional limit from
$5,000 to $7,500.
AB 1459 (Canciamilla, Chapter 618, Statutes of 2005) was
identical to SB 422.
AB 1131 (Ackerman, 2000) and SB 110 (Ackerman, 2001) would have
applied small claims jurisdiction to suits by an assignee in
specified circumstances. AB 1131 was held in the Senate
Judiciary Committee and SB 110 was held in the Assembly.
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SB 1342 (Lockyer, 1997) would have increased the small claims
court jurisdictional limit to $10,000 in auto accident cases.
This bill was held in the Assembly.
AB 246 (Lempert, 1997) would have increased the small claims
court jurisdictional limit to $7,500. This bill was vetoed.
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