North Carolina gets a D on small-claims courts

The national legal-reform organization HALT released a “report card” several months ago rating each state’s small-claims-court system. North Carolina had the eighth-lowest score of all, earning a D.

Small-claims court is an alternative to the regular system of civil justice. The crucial difference is that in small-claims court, the litigants represent themselves, thus avoiding the high cost of hiring a lawyer. As a result, access to small-claims court often makes the difference between obtaining justice and simply having to swallow a loss caused by another person or company.

Suppose, for example, that you hire someone to put a new roof on your house. The company does the job and charges $6,000. But the next time there’s a heavy rain, the roof leaks badly. And when you complain, the roofer refuses to do anything about it.

You might think about suing the contractor. In North Carolina, however, the limit in small-claims court is $4,000. If you pursued your claim there, you’d automatically drop $2,000 of the loss. You could try the regular court system, but the procedures are more complicated there, and though hiring a lawyer isn’t legally required, it’s a virtual necessity. Trouble is, a lawyer will charge a substantial fee to take the case and will probably insist on a good chunk of money up front. Trying to recover the $6,000 might well generate half that much in legal bills.

Such cases are ideal candidates for small-claims court, and it’s too bad that North Carolina hasn’t done more to make that option available and user-friendly.

HALT’s analysis is based on six factors: the dollar limit on claims, the extent to which the system has advisers to help people navigate it, convenience (such as evening and weekend sessions), availability of mediation, assistance to winning parties in collecting judgments, and whether judges can use remedies other than monetary awards (such as injunctions). On the first two criteria, which account for 60 percent of the grade, North Carolina earned Ds. On the last four, the state got Fs.

Among other states in the Southeast, North Carolina is put badly to shame by Georgia and Tennessee (which HALT ranked the best and the sixth-best, respectively). On the other hand, North Carolina’s small-claims-court rating is only slightly worse than Alabama’s and a bit better than Louisiana’s.

What could the General Assembly do to make North Carolina a more small-claims-court-friendly state? The biggest thing would be to raise the cap on the dollar amount. As HALT’s senior counsel, Thomas Gordon, said, “A $4,000 limit on small claims leaves many people stuck in a legal no man’s land with a dispute that is too large for small-claims court yet not large enough to hire an attorney.”

Georgia’s small-claims limit is $15,000, allowing far more people to use these courts. Alaska just raised its cap from $7,500 to $10,000. HALT advocates that all states go to $20,000.

What’s North Carolina doing? The current $4,000 cap has been in place since 1999, when it was increased by $1,000. Last year, the state Senate passed a bill (SB 577) that raised the limit to $5,000, but the corresponding legislation in the House has languished in the doldrums.

The sponsor of SB 577, Sen. Daniel Clodfelter, says the problem in the House has nothing to do with the increase in the small-claims court limit; he thinks the bill may pass this year. But Clodfelter also believes that more substantial increases in the limit would meet stiff opposition from district court judges and clerks, who tend to see small-claims courts as competitors.

When it comes to the administration of justice, the state has a near monopoly. Except when people have agreed to arbitrate a dispute, they need to be able to use the court system. And small-claims court is the option individuals must have in cases where the extent of their loss is too big to simply forget about but too small to warrant the expense of hiring a lawyer.

In the interest of bringing justice within reach of more North Carolinians, the state should take steps to make our small-claims-court system more accessible and user-friendly.

[George C. Leef is director of the Pope Center for Higher Education Learning Policy.]

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