Several lessons to be learned from small-claims court

MONEY POWER: Kiplinger's Personal FinanceFebruary 16, 2014 

In small-claims court, you’ll witness enough human drama to provide the script for a long-running reality-TV series. But entertainment isn’t all this free show has to offer.

Here are six lessons I gleaned from a morning at the people’s court.

1. Learn the drill. Most states limit awards, from $3,000 to $10,000. With those relatively small numbers, it usually doesn’t make sense to hire a lawyer (although most states allow it).

2. Try mediation first. Many states require that you try court-supervised mediation before going before a judge, which gives you the chance to solve the problem creatively, says Nancy Cohen, a mediator in the Washington, D.C., area. One solution? An apology. “Sometimes, it’s not about the money,” she says.

3. Cut to the chase. After listening to digressions on both sides, the judge elicits the basics in the case of two former roommates. Angelo paid Brian upfront to rent a room in Brian’s house for three months. A month later, Brian’s girlfriend moved in, and Angelo had to leave. Angelo wants a refund for the remaining amount. That makes sense, but a shaggy-dog story that included a stolen TV has tried the judge’s patience. Bad idea. Before going to court, practice to get to the essentials. Here, the issue is the rent. Angelo wins the $770.

4. Do your homework. The next plaintiff is suing her brother-in-law for defamation of character (she says he spread rumors that they met at a hotel) and is asking for $5,000 in pain and suffering. According to the judge, defamation is defined as making a false statement or having a reckless disregard for the truth that causes harm. The plaintiff’s story meets neither standard. Case dismissed.

5. Bring the paperwork. “Most of us don’t talk about expectations or write down how to handle differences that may come up,” says Cohen. That’s especially true of business dealings between friends, who often rely on oral agreements. Such agreements are accepted in small-claims court, but a written contract or a few pictures make for a better case.

6. Count on common sense. One plaintiff did bring evidence: a beige comforter, plus a pillow sham with gold embroidery. Once, the comforter bore the same embroidery as the sham; post-dry cleaning, it did not. The dry cleaner’s response: The embroidery needed special treatment that the label didn’t spell out. That’s the manufacturer’s fault, not hers, she says. The judge is skeptical — the dry cleaner seems to know how the comforter should have been treated. He awards the plaintiff $300, which is the cost of the comforter minus depreciation. In small-claims court, fairness prevails.

Jane Bennett Clark is a senior editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.

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