More and more small business owners are turning to small claims court to settle business disputes when they have been unable to reach an acceptable compromise through negotiation or mediation. Small claims court offers them speed and cost efficiency. In several states, business-friendly changes in the law are making it easier for businesses to use the court efficiently. For example, New York state has established a separate commercial small claims court in Manhattan and other areas. Unfortunately, other states still block businesses' efforts to use small claims courts to resolve their disputes. For example, in California, a business may not bring more than two lawsuits for more than $2,500 in a 12-month period. And in some other states–including Pennsylvania–incorporated businesses are required to be represented by an attorney under certain circumstances, which prevents incorporated businesses from saving money by handling their own legal affairs.

This chapter focuses on how to handle substantive disputes between businesses in small claims court. Typically, these center on a claim that one party's work for the other was done poorly, late, or not at all. (Cases involving the simple failure to pay a bill are covered in Chapter 18.) Although many disputes between small businesses involve a failure to pay money, a significant number are more complicated. Commonly these more complex disputes involve people who have had a continuing business relationship and find themselves in the midst of a major misunderstanding that goes beyond the refusal to pay a bill. Often, both parties are in court because they feel badly used–perhaps even ripped off or cheated–by the other.

A surprising variety of businesspeople use small claims court for small business disputes. They include:

  • A dentist who was furious at a dental equipment wholesaler who passed off slightly used equipment as new.
  • An architect who wasn't paid for drawing preliminary plans for a small retail complex when the development failed to get financing.
  • A phototypesetter who refused to pay her former accountant because she disputed the value of the latter's services.
  • A landscape designer who tried to enforce an oral agreement, which he claimed allowed him to increase his fee when he accommodated a client by making changes to final plans.
  • An author who claimed that her publisher had taken too long to publish her book.
  • A client who claimed that his lawyer's incompetence was a prime reason he had to pay too much to settle a case.

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