In 2010, the Massachusetts Legislature increased the general small-claims limit from $2,000 to the current level of $7,000. Many commercial vendors are inclined to file actions for outstanding invoices on goods sold and delivered in small claims court, based on the correct assumption that small claims are less expensive to file (though not by much), as well as on the oftentimes incorrect assumption that they will take less time to resolve. One thing that many businessmen and women do not know is that any small claim matter may also be filed on the regular civil docket in District Court. Though procedure in District Court requires increased formality, this may be advisable in certain cases, even on a claim for only a few thousand dollars.
Should your business file its $5,000 collection matter in Small Claims or District Court? Here are five key considerations to discuss with your front office or collections attorney before making any decision:
1. Does the defendant possess any seizable assets?
Unlike in District Court, pre-trial attachment is not allowed in small claims court. Therefore, if you are in the position of being owed money from a customer who is unable to pay for reasons totally unrelated to your own contractual performance, (for example, the customer’s own financial mismanagement) it may be advisable to proceed in District Court and pursue an attachment of the defendant’s real or personal property. A request for attachment will require you to show your reasonable likelihood of success in the case.
2. Does the defendant possess any legitimate excuse for non-payment?
See #1 above. A plaintiff is unlikely to prevail on a pre-judgment attachment if the defendant appears to have a good faith defense supported by credible evidence.
3. If your case proceeds to trial, do you want a jury?…
…Because you will not have one in small claims court. Your court will be decided by a clerk-magistrate or an assistant clerk-magistrate (more on that below). In small claims, you will need to convince this person that any hotly-contested factual issues should be resolved in your favor. If you proceed in District Court and elect a jury trial, these issues will be deliberated upon by six of your “peers,” all residents of your judicial district (5 out of 6 must ultimately agree in your favor).
4. You have any time constraints on collecting payment?
On a contested claim for non-payment, you may be able to obtain a final judgment in small claims within 3-4 months, as opposed to waiting up to one year in District Court. At the same time the defendants may plan to file counterclaims against you and your company, which are allowed in both small claims and District Court. If the clerk magistrate decides to allow discovery in the case to go forward, (this is at his or her discretion) the process may end up taking just as long as in District Court.
5. Are your claims based on technical legal arguments?
Clerk magistrates and assistant clerk-magistrates are not required to be members of the state bar, though many are in fact licensed attorneys. As most small claim actions are highly fact-driven, the magistrate assigned to your case may not have substantial experience with the interpretation of state or local law. This may lead to errors of fact or law being applied, and necessitate a costly appeal to a District Court jury.