Youngstown Daily Legal News

Higher small claims cap proposal gets House approval

KEITH ARNOLD
Special to the Legal News
Published: March 22, 2016

Small business support bolstered by the backing of the Ohio Chamber of Commerce apparently was just the thing needed to help bolster the unanimous passage by the state House of Representatives of a measure that would raise a the monetary jurisdiction of small claims court.

House Bill 387 would increase Ohio’s small claims cap from $3,000 to $6,000, promoting ease for small businesses that wish to collect outstanding debts that previously were tried in the general division of the state’s municipal courts at greater cost to the plaintiff.

“Small claims courts were originally established to provide a venue for attempted recovery of lesser amounts of money or debts through a more simple process than other levels of courts,” said Chris Ferruso, National Federation of Independent Business/Ohio legislative director in support of the measure. “Small-business owners have limited resources, and seeking recovery in a higher court which includes attorneys’ fees and court costs, can force a small-business owner to forgo seeking recovery if potential costs to bring a suit outweigh the potential recovery, or seek a lesser amount than owed to avoid these additional costs.”

In either of the circumstances, the small business owner loses.

“The cap has not risen in nearly 20 years,” state Rep. Louis Terhar, R-Cincinnati, said, noting that small claims courts were established to provide a forum for parties seeking minor monetary recoveries in civil disputes.

Terhar jointly sponsored the bill with fellow Republican Rep. Jonathan Dever, also of Cincinnati.

“The small claims process saves both money and time by providing a less expensive alternative to settling a dispute and a quicker court proceeding,” Terhar added.

Ferruso told members of the House Local Government Committee that the increase is justifiable, considering other states’ small claims limits.

“The national average is just over $7,000,” Ferruso said. “Ohio would not be an outlier, and in fact would still remain below the national average, comparable with our neighboring states.”

NFIB/Ohio represents 25,000 members, which typically employ 20 or fewer employees and generate $1 million or less in annual sales.

“Our members come from all industry sectors and we look much like Main Street in any town,” Ferruso continued.

In previous testimony before the committee, Terhar advised the bill arose out of constituent concerns.

“This legislation came about as a result of concerns from business owners in my district who are struggling to collect on accounts payable because they fell into an area where they are higher than the current small claims limit, but too small to merit hiring an attorney to file an action in a municipal court,” he said. “Furthermore, due to the high cost of attorneys’ fees, it often is not feasible to go through a higher court.”

The joint sponsors thoroughly vetted HB 387 with constituents before introducing the measure.

“A vast majority of interested parties offered suggestions and eventually the NFIB, the Ohio Chamber of Commerce, the Ohio State Bar Association, insurance companies and the various judges affected agreed (with) an increase in the small claims authority level to $6,000,” Terhar said.

Brandon Ogden, director of the Ohio Chamber of Commerce Small Business Council expressed gratitude for the opportunity to have had a say in the legislation’s development.

He characterized the hike as “significant enough to be helpful but not so high as to be a hindrance to business,” before the House committee.

“The relaxed rules and quick decisions provide small businesses with an easier and more efficient method to resolve claims that otherwise may not be filed,” Ogden continued. “It cuts down on filing fees, time away from the business, and attorney’s fees.”

Bill analysis provided by the Ohio Legislative Service Commission estimated a minimal annual effect on municipal and county courts.

That easily could be addressed by the shifting of staff or reallocating existing resources.

“Under the bill then, there will be some revenue loss and some cost savings for any case that would otherwise have been heard on the court's regular civil docket,” the analysis outlined.

Under the bill, a relatively small number of new filings — no more than 10 percent annually — will move from the regular civil docket to the small claims division, analysis concluded.

“I believe we can all agree that our small claims limit needs (to be) adjusted to the times, and raising the cap will support Ohio small businesses by making it easier and less expensive to collect their own debts,” Terhar said.

Forty-three House members and a senator have signed on to HB 387 as co-sponsor.

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