By David R. Howard* & Jeffrey A. Schreiber**
For the sake of Massachusetts consumers and the Massachusetts court system, it is time that the Massachusetts Small Claims Court is modernized and otherwise brought into the 21st century. Valuable time is wasted by requiring all parties to appear at a small claims trial scheduled upon the docketing of the case. The reasons are because a defendant may agree to the debt. The defendant may be merely seeking an agreed payment plan with the creditor. Often, the defendant may admit to the debt, but his/her income is exempt from the claims of creditors. In that event, judgment will enter for the plaintiff. The court, however, is proscribed from entering a payment Order. More often than not, the small claims defendant fails to attend the scheduled hearing and a default judgment enters against the defendant. Hundreds of hours a week, of both consumers’ and court personnel time, are misspent. This time should be otherwise devoted to the adjudication of other district court cases such as criminal, domestic, larger balance civil cases, and traffic cases. The Small Claims Court has been computerized. This article does not address the modernization of the courts by its computerization.
The Small Claims Court implemented procedures designed to simplify discovery and pre-trial procedures embedded in the Massachusetts Rules of Civil Procedure. The plaintiff simply stated his complaint to a clerk on a preprinted form. The clerk, (not a process server), mailed a summons to the defendant. The defendant needed to do nothing but appear at the court scheduled time to either agree to judgment or oppose the complaint. This simplified approach, bringing two parties together in court, was crafted to reduce delays in litigation. It was meant to make it possible for litigants to appear before a Magistrate (in many states judges adjudicate small claims cases, not so in Massachusetts), and resolve disputes without attorneys. This was intended to reduce costs to the litigants. It too increased the likelihood that the litigants, with some guidance from court personnel, would reach a settlement without resorting to trial. Sometimes parties met with a magistrate within a few weeks the complaint was first filed, and prior to trial. It was intended that the individual cases would pass smoothly and expeditiously through Small Claims Court by decreasing the number of pending cases before the district court. Unfortunately, as more fully provided below, the opposite has occurred. A second procedural simplification was the relaxation of the rules of evidence. Magistrates were given the discretion to admit whatever evidence the magistrate thought appropriate to resolve the dispute.
SMALL CLAIMS COURT AND DEBT COLLECTION IN THE 21st CENTURY
Many of the reforms implemented to the Massachusetts Small Claims Courts a hundred years ago are still positive applications to today’s Small Claims Court. In those days, the cases in the Massachusetts Small Claims Court comprised of disputes between residents of the Commonwealth, neighbor vs. neighbor, small business vs. consumer to collect a debt, or consumer vs. small business to right a wrong. Today, those cases comprise a mere tiny minority of the cases brought in Small Claims Court. Rather, most of the cases are commenced by plaintiff banks, credit union, hospitals, and other medical providers, utility companies, cell phone companies, insurance companies, auto and student lenders, credit card issuers and debt buyers who pursue judgments against consumers for unpaid consumer debts. Debt buyers are companies that purchase defaulted debts, usually charged off credit card debts, from the original credit card issuer. The debt buyer stands in the shoes of the credit card issuer, sues the consumer, and seeks judgment for the unpaid balance due thereunder.[i] As a result, debt buyers are among the most prolific Small Claims Court plaintiffs.
So, how do we modernize the Small Claims Court system? The most dramatic change would be requiring defendants to timely respond to a complaint. The requirement that both parties to a case appear at magistrate hearings scheduled upon the docketing of a case must be eliminated. Most other states in the U.S., and all our surrounding New England states, have enacted rules requiring defendants to timely file a response. The response affords the defendant an option to disclose his/her income and liabilities. The defendant may admit to the debt, deny the debt, or in many cases, admit to the debt but say he/she cannot afford to pay the debt. Often, these consumer defendants request to enter into installment payment agreements. In those cases, the VT Small Claims Court, for example, automatically enters judgment for the plaintiff in the amount requested in the complaint plus the filing fee. After reviewing the defendant’s income and expenses, as disclosed by the defendant on a pre-printed form served with the complaint, the court enters a payment Order in the amount the defendant requests on the condition that the defendant’s income is higher than the level of income exempt from claims of creditors. Plaintiffs have 30 days to object to the proposed payment agreement. If a plaintiff’s objection is timely received, the court will schedule a hearing only on the payment terms, not as to liability or the amount of the judgment.1
In Rhode Island, the Small Claims rules make it very simple. Rule 6.01 states “If a defendant fails to answer and defend the claim after proper service, the court shall automatically enter a default and judgment against the defendant without further notice.”
New Hampshire small claims court procedure too is simple. The Court serves the defendant by mail. And, pursuant to NH RSA 503:6 II, “if the defendant fails to respond to the notice and the notice is not returned as undelivered, a default judgment [is] entered in favor of the plaintiff, who [is] notified by the court.”
In Connecticut, the small claims complaint is served on the defendant with a form for the defendant to answer the complaint. If the defendant does not timely file an answer, the court will enter, without a hearing, judgment against the defendant for the full amount of the plaintiff’s claim plus costs.
Massachusetts magistrates, do not independently evaluate the merits of a case. Rather, they rely on the defendant (if appearing) to argue the merits of his/her defense. But more and more defendants fail to appear at the hearing. In the defendant’s absence, court procedure dictates that a default judgment is entered against the defendant.
Courts rule in favor of the plaintiff because the defendant does not participate in the case. Although the evidence on why people do not respond to the suits is scant, the available information suggests that three factors drive many of these instances: 1) practical realities of consumer’s lives, 2) defendants do not have any defense to the claims, or 3) a lack of notification of the suit. Some consumers who owe a debt see no value in responding to a Small Claims Court lawsuit. Defendants believe that their cause is futile because they owe the money and simply give up in the face of debts they cannot afford to pay. [i] Other defendants choose not to appear in court because they cannot afford to take off work – or do not see the value- in missing work to go to court if they cannot afford to, among other things, pay the debt, find childcare, or secure transportation. [iii]
So, why is Massachusetts still scheduling a magistrate hearing at the time the small claims case is docketed? If years ago, the purpose was to afford every individual “their day in court,” that concept is obsolete. Defendants regularly decline to have their day in court for the reasons stated herein. There is no legitimate reason to compel court clerks to conduct hours and hours of calls of the list when at least 80% (and I suggest the number is more like 90%), of the defendants fail to appear. Further, there is no reason to compel defendants, who readily agree they owe the debts but who cannot afford to pay the debts, to appear in court. Often, these defendants’ income is so low as to be exempt from the claims of creditors. These defendants could easily file an answer stating so and provide the court with proof of their sparse income. In the Commonwealth, there are hundreds and hundreds of hours per week that are spent by court clerks conducting hearings at which barely any of the defendants appear. Consequently, magistrates enter default judgments in favor of the plaintiffs. Our neighboring New England states recognize the value of requiring defendants to timely answer Small Claims Court complaints. If an answer is not timely filed, a default judgment is entered. Why is the Massachusetts Small Claims Court docketing and immediately scheduling magistrate hearings when 90% of the defendants do not appear? Our neighboring states resolve the issue by entering default judgments when defendants fail to timely answer complaints. Why do we not do the same thing?
While the proposed changes may be simple, the process to implement these changes is not. Pursuant to G. L. c. 218, Section 21, the Executive Office of the Trial Court oversees legal matters brought within the Massachusetts Small Claims Court. Plaintiffs’ and Defendants’ lawyers, District Court and Small Claims court personnel, consumer lawyers, and any other stakeholder should implore the Chief Judge of the Trial Court to initiate the process of implementing the changes provided herein. By amending the Small Claims Rules to require defendants to timely file answers, as we do in our other courts, we can re-direct court resources where they are truly needed and, by doing so, simplify the administration of justice.
*David R. Howard serves as President of the Massachusetts Creditors Law Association and he is the Managing Attorney of Schreiber Law, LLC, a New England creditors’ rights law firm. The Board of Directors of the Massachusetts Creditors Law Association unequivocally endorses the suggestions contained in this article.
**Jeffrey A. Schreiber is the sole owner of Schreiber Law, LLC, and recently celebrated his 40th anniversary as a member of the Massachusetts Bar. Mr. Schreiber is a business and trial lawyer who concentrates his practice representing credit card issuers and national debt buyers would reach a settlement without resorting to trial. Sometimes parties met with a magistrate within a few weeks the complaint was first filed, and prior to trial. It was intended that the individual cases would pass smoothly and expeditiously through Small Claims Court by decreasing the number of pending cases before the district court. Unfortunately, as more fully provided below, the opposite has occurred.
A second procedural simplification was the relaxation of the rules of evidence. Magistrates were given the discretion to admit whatever evidence the magistrate thought appropriate to resolve the dispute.
[i] Warren, Jenifer (2020, May). How Debt Collectors Are Transforming the Business of State Courts: Lawsuit trends highlight need to modernize civil legal systems. (11) Pew Research Center. https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts
[ii] Warren, Jenifer (2020, May). How Debt Collectors Are Transforming the Business of State Courts: Lawsuit trends highlight need to modernize civil legal systems. (16) Pew Research Center. https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts
[iii] Warren, Jenifer (2020, May). How Debt Collectors Are Transforming the Business of State Courts: Lawsuit trends highlight need to modernize civil legal systems. (16) Pew Research Center. https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts