Let's Get Small

Mainstream legal reporting has its moments of accuracy, but also tends to be liberally larded through with misstatement, omission and dollops of authentic nonsense, especially when the report claims to have uncovered a burgeoning "trend." The Los Angeles Times succumbs to the hazards of the course today—on Page One, no less—as it ventures into the mysterious realms of the Small Claims Court and consumer class action law in a garbled story that seems to be about the former but that is really more concerned with the latter.

The Times pegs its report to a dispute between "angry consumer" Heather Peters and Honda Motor Company:

The Los Angeles resident is miffed that her 2006 Honda Civic hybrid doesn't get its claimed fuel economy. And she isn't satisfied with a proposed class-action lawsuit settlement that would give trial lawyers $8.5 million while Civic owners would get as little as $100 and rebate coupons for the purchase of a new vehicle.

But Peters believes that she found a venue where she can win justice and where Honda can't spend a single dollar on legal help.

On Jan. 3 she'll take her case to Small Claims Court in Torrance, where California law prohibits Honda from bringing an attorney. She's asking for the maximum of $10,000 to compensate her for spending much more on gasoline than expected. Honda said the Civic would get about 50 miles per gallon, but because of technical problems the car gets closer to 30 mpg.

By way of background: in California, the Small Claims Court exists as a division within the larger Superior Court. (Other jurisdictions, of course, have equivalent institutions, but California is the focus of the Times story, and of this blog.) The purpose of Small Claims Court is to take disputes involving relatively small amounts of money out of the more formal judicial system, in the hope that the claims can be resolved more quickly and at less expense than in a full-scale court case. A Small Claims case can often be concluded within weeks of filing, rather than the months or years entailed in a "real" lawsuit. Hearings are somewhat informal, and rules of evidence such as the hearsay rule are more loosely applied.  Typically, Small Claims cases are not heard by an actual judge. The hearing officer will most likely be a local volunteer attorney sitting as a temporary judge on the Court’s behalf.  The hearing officer is expected to apply the law as any other court would, but the relative informality of the Small Claims process inevitably leaves open the potential for some to go Solomonic and to do "what seems fair" regardless of legal niceties.

So then, to return to the Times report:

One point that the story alludes to but never states plainly—"burying the lede" as the journobloggers like to say—is that the jurisdictional limit on California Small Claims cases will be increasing as of January 1, 2012. Ms. Peters will be permitted to claim as much as $10,000 only because her hearing is scheduled for the first court day of the new year. If the case were heard today, the maximum award would be only $7,500.

• The increased jurisdictional limit has some oddities of its own. First, the $10,000 maximum only applies to claims asserted by actual human plaintiffs. Corporate plaintiffs are now, and will remain, able to seek relief in Small Claims Court only up to $5,000. For reasons that are not at all plain, the existing $7,500 limitation will remain in place even after January 1 for claims of "bodily injuries resulting from an automobile accident," in cases in which the allegedly negligent defendant "is covered by an automobile insurance policy that includes a duty to defend."

The claim by the Times that "Honda can't spend a single dollar on legal help" is bunk. The only thing Honda cannot do is send a lawyer to appear at the Small Claims hearing itself. Up to the courthouse door, Honda can (and presumably will) spend whatever it wants to obtain advice and assistance from its attorneys in preparing to put on a defense. Honda can be represented at the hearing by any employee it designates, so long as that employee is a non-lawyer whose primary job is something other than appearing for the company in Small Claims court. Whoever that employee may be, it is near to inconceivable that he or she will not have been fully briefed and prepared, armed with all necessary evidence, and likely supplied with a written legal brief, drafted behind the scenes by counsel, for the "guidance and assistance" of the hearing officer. To the extent that insurance coverage applies, Honda's liability insurer may well be paying for the necessary legal consultation.

Also not mentioned by the Times: if Ms. Peters claim results in a judgment against Honda, Honda has the option of appealing that judgment. In California practice Small Claims defendants have a right of appeal, but Small Claims plaintiffs do not. A small claims appeal goes before an actual Superior Court judge and is heard de novo: that is, it is an entirely new hearing, as if the original Small Claims proceeding had not happened.  More pertinent to the unreliable theme of the Times story: in Small Claims appeals, the parties are entitled to be represented by an attorney at the hearing, as Honda surely would be. 

Having glossed over the extent to which attorneys can and will involve themselves in Small Claims litigation, the Times sets its controls for the heart of hyperbole and and runs straight on into trend-spotting cliché:

If she's successful in getting others to follow her example, Peters could inspire a whole new litigation strategy in the auto industry and other businesses. Working together but filing lawsuits independently, consumers could force companies to go mano a mano with individual plaintiffs in far-flung courtrooms nationwide.

Call it a small-claims flash mob.

"This could create a lot of problems in the industry," said Aaron Jacoby, the Los Angeles defense attorney who heads the automotive industry group at the Arent Fox law firm.

Dewy-eyed invocations of "social networking and the Internet" follow, leading to the inevitable "to be sure" caveat and the equally inevitable exception to the caveat. Small Claimants have to "prepare arguments" and take time from work to show up in court, don't you know? It can be "daunting," adds attorney Jacoby, who almost certainly had more potent things to say than the 16 words the Times elected to quote. But...

there also could be some benefits, beginning with 'cutting the attorneys out of the equation in these cases,' said Richard Cupp Jr., who teaches product liability law at Pepperdine University.

Why might "cutting the attorneys out" be an unalloyed Good? In a further exercise in lede-burying the Times pivots its attention from defense counsel to plaintiffs' attorneys and strikes up what appears to have been the intended true theme of the story: the well known, often painful disconnect between the remedies that are obtained for individual class action plaintiffs—in the Honda cases, $100 to $200 cash and a potential discount of between $500 and $1000 on future Honda purchases—and the rather larger remedies obtained by the much smaller class of lawyers representing them—here, reportedly a share of $8.5 million in fees. One such lawyer is quoted expressing his pride in what he and his compatriots have wrought in crafting the settlement; his personal stake in the payout goes unquantified.

In the concluding segment of the story, we return to Peters and learn that this angry consumer may not be nearly so angry with Honda and its lawyers as she is with class counsel:

If successful, Peters, a state employee, could win damages many times the payment she would derive from the settlement. It helps that she's a former attorney herself (she let her license expire a decade ago), and thus has an easier time navigating the legal system than a typical consumer.

Although Peters hopes that others might also pursue their claims in Small Claims Court, she said if she wins a significant award, the figure could be used to scuttle the proposed class-action settlement in favor of one that would exact more money from the automaker.

'I am just trying to give people a tool kit that shows they have options besides capitulating for $100 or going out and hiring an expensive attorney,' Peters said.

Savvy State-employed recovering lawyer that she is, Heather Peters' decision to proceed in Small Claims Court suggests a calculated assessment on her part that whatever actual damages she or other individual Honda buyers may have sustained amount to something more than a few hundred dollars, but something less than $10,000 apiece. If that is the case, then she is likely right to think that proceeding by a class action offers no real advantage to her in terms of time and resources invested or the size her ultimate recovery. Going that route will not, however, eliminate Honda's attorneys entirely from the mix, much as the Times might wish it.

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Update [1300 PST]: Portland, Oregon-based class action attorney David Sugerman adds a few insights on his blog, including links to Heather Peters' website opposing the class settlement and to her Twitter feed. Interestingly, at this writing, Ms. Peters herself has not linked to the Los Angeles Times story.

Here's a question I am at least somewhat curious about: Who is responsible for this story coming to the Times' attention in the first place, and for building this into a front page story in a fading-but-still-relatively-major metropolitan newspaper? Is Ms. Peters handling her own PR?

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Photo: Tiny World Courthouse, Chambersburg, PA, via Ed South's Wonderful World of Blog. Post title lifted from Steve Martin, ca. 1977.

Comments

[Vandal Hurricane]

I live in the Golden State and let me tell you the small claims court hear is a godsend for those looking to take on a corporation or anyone for that matter and not end up taking it up the rear in attorney fees. It makes taking on battles on principal all that much easier to stomach too, hint hint: http://lawblog.legalmatch.com/2011/12/30/fighting-bad-mail-carriers-holiday-package-thieves/

[Eric T.]

Would it be fair to assume that any decision will not be precedent for any other case?

Or does the de novo hearing before an actual judge with actual attorneys change that equation if it goes there?

[David Sugerman]

A number of states--including Oregon--allow a defendant to remove cases from small claims to arbitration. Then there is counsel, discovery, motion practice, with consumers facing a Honda defense team. Seems like the better strategy might be to object.