by Lisa Brennan
Small claims court is billed as an easy, low-cost way to access the judicial system without all those pesky rules that bog down the regular court process. This can be a helpful venue particularly to adjudicate low-dollar disputes between individuals. But small claims court is still court, with all of the legal implications that go along with it. Even with lower dollar amounts and lower levels of formality, the court’s power cannot be discounted. And especially for small businesses, they will have additional considerations when pursuing an action in small claims court or defending an action there. This blog article is designed to give a broad overview of the process to business owners and important information you should know as you navigate the small claims court process.
What is a “Small Claim”?
Virginia’s general district court (the lower-level trial court in Virginia) has a special division of the general district court which is designed to hear small disputes – defined as those seeking a claim of $5,000 or less, exclusive of interest (Va Code§ 16.1-122.2). This amount does not adjust for inflation and has been the same in Virginia for well over a decade. The small claims court has concurrent jurisdiction with the general district court in Virginia meaning that either court would be authorized to hear the case.
Who Can Sue and Be Sued in Small Claims Court?
Any person or business may bring smalls claims suit in general district court the same as they would in general district court. The court provides the forms needed to file suit. The exception is that the small claims court does not have jurisdiction over certain lawsuits against the Commonwealth under the Virginia Tort Claims Act (Va Code § 8.01-195.1 et seq.) or suits against state officers or employees for claims arising out of the performance of their official duties (Va Code § 16.1-122.1).
Public Record
Small claims court is not a court of record, meaning that there will not be transcript of exactly what was said and by whom in court. If appealed, an entirely new trial will take place rather than relying on anything said or any determination that was made in small claims court. However, it is still a public proceeding. Some information about the parties, case or trial date may appear in publicly available court records. There may be several other parties in the courtroom and your trial is not private.
For small businesses seeking to protect their reputation, a lawsuit for any reason can shine an unwanted spotlight on their business operations. The reputational risk in suing or being sued in small claims court is an additional business consideration to weigh in determining their next steps.
I’ve Been Summoned to Small Claims Court. Now What?
If you are sued in small claims court, the claims paperwork will be formally served to you typically by the sheriff. It may also include certain preprinted information from the court about the small claims court process.
The trial will be conducted on the first return date to court listed on the claim, unless a continuance is granted. Bring all evidence and witnesses to court on the date of the trial. Either side is entitled to subpoena witnesses who are needed in court.
At the trial, the judge has broad discretion in what type of evidence that they hear, often foregoing the more formal rules of evidence. The plaintiff will typically present their case first, and the defendant will then have an opportunity to respond. This makes court accessible for those unfamiliar with technical court procedures and complex evidentiary rules like “hearsay.” Both sides are allowed to make their arguments by presenting all relevant information to the judge in plain terms.
Can a Defendant make a Counterclaim?
Yes, as long as it does not exceed $5,000 (Va code § 16.1-122.3(F).
Who Represents Me? Do I Need an Attorney?
Legal representation in court is one of the most important considerations for those operating businesses as an LLC or corporation. Typically, an LLC or corporation is required to be represented in court by an attorney (See Va Code § 16.1-88.03). Because a business organization is considered its own separate entity from its owners, those owners are unable to represent the company in court. Doing so would be considered the unauthorized practice of law, which is prohibited by law (Va Code § 54.1-3904).
In small claims court, however, neither party is represented by an attorney. Attorneys are further unable to give legal advice on the matter. For a small business operating as a partnership, LLC or corporation, this offers them the limited opportunity to represent themselves, where they would otherwise be unable to and where an attorney’s fees would otherwise be cost prohibitive particularly on a small dollar claim (See Va Code § 16.1-122.4).
Attorneys are allowed in smalls claims court for a few limited purposes. If you wish to remove the case from small claims court to general district court, you may have an attorney solely to request removal (Va. Code § 16.1-122.4(B)). And an attorney who happens to be an owner, general partner, officer or employee may come to court to represent their own company in a small claims action (Va Code 16.1-122.4).
Can the Case be moved to another court?
The Defendant sued in small claims court may remove the case to general district court, where they may be represented by an attorney, and all usual rules and formalities of the judicial process apply. As mentioned above, an attorney may represent a defendant in small claims court for the purpose of removing the case to general district court.
How is a Judgment Collected?
Any judgment in small claims court is collected the same way that it would be if the judgment were issued in the general district court in Virginia (Va Code § 16.1-122.6).
Can I appeal a Small Claims Court Decision?
Yes, decisions of the small claims court generally can be appealed to the circuit court in Virginia for a new trial.
What Next?
If you decide to file suit in small claims court or are sued in small claims court, it is important to treat it just as seriously as you would with any other court action. Ordinarily, I would tell you to give us a call and we’ll be happy to help you understand your rights and claims. But attorneys are not allowed to advise participants to small claims court. And that makes sense. The process is supposed to be a simple, streamlined process between non-attorneys. If one side secretly has a ringer, that defeats the whole purpose.
While we cannot help you with a small claims court proceeding, we can always help you design your transactions to put you in the strongest position possible should you ever have to go to court. Talk with us today, and we’ll help you build stronger agreements!