Guest post by Aaron Hall.
Minnesota consumers can now bring more cases to conciliation court, and many see this as good news. Unlike regular district court, conciliation court was created to handle “small claims” with relaxed rules and procedures so people don’t need to hire an attorney.
Conciliation Court in Minnesota
In the past, Minnesota conciliation court has been limited to $4,000 for consumer credit actions and $7,500 for most other claims. Recently, the Minnesota Legislature raised the $7,500 claim limit for conciliation court to $10,000 beginning August 1, 2011 and then $15,000 beginning August 1, 2014. The $4,000 cap for consumer credit actions will remain. This means that consumers with disputes for under $10,000 can bring those lawsuits in conciliation court. There were a number of reasons the change was helpful:
- conciliation court lets people settle small claims without having to pay attorneys to help with complex court rules
- the $7,500 limit had not kept pace with inflation
- the losing party can appeal for a new trial in district court, so no due process rights are lost
- fewer formal cases in district court can help reduce the burdens on the court system
This change will not affect businesses, which still need to hire a licensed attorney to represent the company. Likewise, this change will not have any effect on large or complex litigation, which will remain in district court due to the amount of money or complexity involved.
Finally, this change will not affect consumers who have arbitration agreements. Often, consumers are required to sign an arbitration agreement as part of a credit application or contract with a large company. Consumers who sign an arbitration agreement have already waived their right to court, including conciliation court, and need to bring their cases in the arbitration process.
Conciliation Court in Other States
In many other states conciliation court is referred to as “small claims court.” The jurisdiction of these small claims courts ranges from $2,500 dollars in Alabama and Rhode Island to $25,000 in Tennessee. Minnesota’s $10,000 limit is near the higher end of the spectrum with only Tennessee and Delaware ($15,000) exceeding it. Minnesota is by no means an outlier however, as several other states, including both Texas and Wisconsin, similarly have $10,000 dollar limits. It is common for most states to periodically raise the limit: California recently increased to $10,000 as of January 2012 and Wisconsin similarly increased to $10,000 effective July 1, 2011. Nebraska on the other hand, automatically adjusts their limit of $3,5000 every five years based on the consumer price index. Many other states also have a variety of other limits on bringing a case to small claims court – many having to do with eviction proceedings – but Minnesota appears to be the only one with a separate limit for consumer credit actions.
Are Small Claims Limits Necessary?
It is arguable that an upper limit in small claims courts is unnecessary altogether. Judgments in conciliation courts are appealable to district courts and therefore, in theory, market forces naturally place an upper cap on claims brought in conciliation court. It is in the interest of anyone that loses a significant amount of money in a conciliation court judgment to hire a lawyer and go to district court – where the case will be heard de novo. When claims reach a certain monetary amount, parties will avoid bringing large claims in conciliation court in the first place as they are aware that the other party will simply appeal if they receive a large judgment against them.
On the other hand, small claims court inherently involves relatively (at least from a legal standpoint) unsophisticated parties that might not be aware of the appealable nature of conciliation court judgments. Upper limits thus act as a sort of check to ensure that people act in their best interest and avoid wasting time in conciliation court when they should immediately seek a lawyer. Extremely high upper limits would not serve this purpose, whereas very low limits would prevent certain smaller cases from ever being heard due to the high cost of attorney fees would making it financially irrational.
Given that the average cost of smaller lawsuits falls in the $4,000 to $6,000 range, a $10,000 dollar limit is fairly reasonable, if not too low. To illustrate, consider a situation where an individual has just received a $10,000 dollar judgment against them. A lawyer has told them that they will file an appeal at district court – for $5,000. That individual may only file the appeal if she believes there is a 50% chance or higher of winning. If the judgment were $15,000 dollars, they would file it if there were a 33% chance or higher. The upper limit may serve to prevent situations where someone would appeal when there was only a very slim chance of prevailing. A limit of $20,000 or less strikes a reasonable balance on this goal, while at the same time still permitting most cases where it is not financially reasonable to hire an attorney.