What you need to know about lawsuits under $10,000
Many people get into disputes over sums of money that are very important, but not big in the greater scheme of things. While consulting an attorney is always advisable, and engaging an attorney may be an appropriate way to address a small lawsuit, it isn’t always the right approach. Additionally, there are risks of bringing small lawsuits that one should be aware of before getting involved in one.
By a “small lawsuit,” I am referring to a lawsuit of $10,000.00 or less. In many cases, it is difficult to justify the expense of engaging counsel to pursue such small claims. This is especially true if the right to recovery is not absolutely clear. When the right to recovery is absolutely clear, it may make more sense to engage counsel to pursue a small lawsuit. But, where there are significant factual disputes, the attorney fees and costs related to litigation often amount to far more than what is in dispute. Too many times, that happens, and the tail ends up wagging the dog.
Another real risk in small lawsuits comes from the availability of attorney fees. The general rule in Washington is that –absent a statute or a contract provision providing for attorney fees—each party pays their own attorney fees. That can be bad or good.
In small lawsuits, RCW 4.84.250 provides that the prevailing party will be entitled to a reasonable attorney fee from the party who does not prevail. Let’s take the example of a plaintiff who believes they are owed $8,000.00 by their remodeling contractor. The plaintiff engages John Doe attorney to represent them in a lawsuit against the contractor. It is not unusual for a plaintiff in this situation to spend, let’s say, $5,000.00 or $6,000.00—and oftentimes more—to prove their $8,000.00 case. If the judge or arbitrator determines that Plaintiff has not proven their claims by a preponderance of the evidence, the plaintiff will encounter three negative results: (1) they have not recovered the money they believe they are owed; (2) they are out the money spent on their own attorney fees; and, (3) they will end up with a judgment against them for the defendant’s attorney fees which could easily exceed $5,000.00 or $10,000.00. This is why it is very important to pursue small lawsuits with care.
There are at least three options for addressing small lawsuits:
- Seek recovery in Superior Court
- Seek recovery in District Court
- Seek recovery in Small Claims Court
Seeking recovery in Superior Court has its advantages. It is the correct court to seek recovery in if you are seeking something in addition to money damages—let’s say you are also seeking rescission of a contract. In that case, the Superior Court has the jurisdiction to grant both the money damages sought as well as the declaratory relief regarding the validity of the contract.
Superior Court can also be an appropriate place for smaller disputes even if declaratory or injunctive relief is not sought. In Superior Court, cases with damages of less than $100,000.00 are subject to mandatory arbitration. This means that either party may force the case into arbitration—a far less formal method of dispute resolution than an actual courtroom trial. While there is an opportunity for requesting a new trial with the court in the case of a bad outcome at arbitration, that is rarely done. The mandatory arbitration system also pays for an arbitrator. Thus, the financial burden on the parties is minimized. That said, the attorney fees provisions of RCW 4.84.250 can still have harsh results in these cases.
District Court is another potential avenue for seeking recovery in small lawsuits. In District Court, discovery is quite limited. Additionally, the time for getting on the court’s trial calendar is much shorter than in Superior Court. Pro se litigants may have better luck with representing themselves in District Court as the court deals with more pro se litigants (i.e. litigants without attorneys) than Superior Court.
Small Claims Court
A final option for dealing with small lawsuits is Small Claims Court. If you have the time and your dispute is $5,000.00 or less, I highly recommend considering taking the matter to Small Claims Court. Even if your claim is for somewhat more than $5,000—let’s say $6,000 or $7,000—it may be worth waiving the damages over $5,000 to have the matter heard in Small Claims Court.
Attorneys are generally not allowed to practice in Small Claims Court. Thus, the plaintiff and defendant will almost always represent themselves in the court proceedings. Usually, court consists of a one-time hearing in which a judge will hear the evidence and decide who is right. The standards for presenting evidence are also very relaxed in comparison to Superior Court or District Court. The process is really designed for dispute resolution without attorneys. Thus, for people who have the time and small amounts in controversy, Small Claims Court can present an excellent forum for dispute resolution.
It is certainly advisable to consult counsel about small disputes. But, if you consult with a good attorney, don’t be surprised if they tell you that it is not worth engaging their services to pursue a small lawsuit. And, be wary of attorneys who are too eager to take fees for small cases. It may turn out that they have more time on their hands or fewer clients than they need. Regardless, consulting with an attorney and considering the options above is a wise idea if you find yourself in a dispute that might result in a small lawsuit.