NHEH Publications

Small Business? Try Small Claims

By Jacob Weeks, Attorney
Noland, Hamerly, Etienne & Hoss

                                        As published in the Salinas Valley Business Journal, April 2022

Ah, court.  It’s somewhere you hope your business will never end up—but sometimes it's exactly where you need to be.  I'm talking about Small Claims Court. In Small Claims, parties resolve disputes head-to-head, explaining themselves directly to a judge.  Both individuals and businesses can utilize this method. 

Say your business is facing a common contract dispute: amounts unpaid for services rendered.  The cost is substantial, but less than $5000—or $10,000 if you’re a sole proprietor.  That amount could be miniscule in full-scale litigation, where legal fees rise quickly.  But there is no doubt your business earned this amount and will depend on collecting it.  So, having wisely read this article, you take it to Small Claims.

Small Claims Court has its own rules and structure, which can help reduce costs for the party bringing the action.  The recovery limit helps, but it’s also due to the quicker timeline.  Cases can proceed from filing to hearing much sooner.  While cases in Superior Court may take a year or more to go to trial, you can expect a Small Claims hearing within a few months.  At the hearing, each party has only about five minutes to make their point. That’s a gamble in one sense – the pressure is on you to make your story convincing and clear.  But if the facts and the law are on your side, and you have the supporting evidence, you could have an order for payment before lunchtime.  It’s another reminder to save those receipts, invoices, and business communications.

Arguably, Small Claims Court is a very democratic corner of the legal system. No attorney may speak for a party at a Small Claims hearing, so the rhetorical playing field is leveled.  You’ll have to brave the hearing on your own, but there is no rule against obtaining an attorney's assistance preparing your Small Claims case. For many disputes, this is the prudent course of action.  This assistance should not take more than a few hours, and will help make sure your case is presented in the most efficient and effective manner.  

It’s also important to understand the limitations.  For example, under the state’s Code of Civil Procedure, the party who initiates a Small Claims proceeding cannot appeal the judge’s decision, while the defendant may appeal to the Superior Court.  Various time limits apply to bringing small claims, just as they do to higher-dollar cases.  For example, you’d have four years to bring a small claim for breach of written contract, or two years for an oral contract.  These limitations are in place partly to prevent abuse of the system by trigger-happy and lazy litigants alike.  Finally, a party cannot file more than two small claims exceeding $2,500 within one year.  In Monterey County, filing twelve small claims in a year, regardless of the dollar amounts, significantly raises filing fees.

Limitations aside, small claims can result in big savings, and quick results.  You might not even need a lawyer.  How many lawyers will tell you that?

This article is intended to address topics of general interest and should not be construed as legal advice. © 2022 Noland, Hamerly, Etienne & Hoss