Tips and Suggestions from NICB. The Problem - Collusion

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1 California Small Claims Court Tips and Regulations Note: These comments apply only to the law as of February 2016 and any application after that date must be consistent with any change in the law. This document should not be construed as legal advice; rather it is the observations and commentary of its authors. Tips and Suggestions from NICB The Problem - Collusion Many small claims SIU case actions involve insured, and an uncooperative attorney and there is no right to discovery. Thus in many of the cases, the claimants are not available to investigators, either because of shielding by the attorney or because their contact information is not valid. This is particularly troublesome in a forum where the jurisdictional limit is $10,000. With multiple claimants, the case's value may often exceed policy limits and exceed what the recovery in Superior Court would yield. Tips Exchange of Evidence Plaintiff parties must show up at the court house for the hearing or they lose. At the hearing, the Court will often order all the parties to meet in the hallway to exchange evidence and discuss the case for settlement purposes. The hearing therefore is often the first available opportunity to interview parties, especially during this court ordered hallway conference. NICB Assistance NICB has successfully contacted previously unavailable parties at the hearing and obtained confessions, admissions and inconsistent facts. NICB agents are available to help member companies prevent fraud. NICB's data regarding claimants, medical providers and SIU strategies may be of particular value in these matters. If the carrier is able to obtain a written "drop letter" from the attorney, then (assuming contact information is accurate) either an NICB agent or the adjuster should contact the claimants and witnesses directly and obtain their statements. Without coaching or other interference, admissions and confessions are more likely. Those statements should then be transcribed and supported by a declaration from the investigator and introduced at the hearing. Even a refusal to discuss the case with the carrier or agent may prove persuasive to the Court when combined with other SIU red flags. In cases where the insured admits the accident never happened, one tactic may be to present this evidence to plaintiff's counsel and urge him or her to confront his clients with it. This was done in a case and plaintiffs counsel dropped the claim. Expert Evidence Expert evidence may also be persuasive in small claim cases, especially when accompanied by good photographs. In some cases, a judge educated on SIU issues will recognize inconsistent damages and may award a defense verdict. In others, the

2 damage may not persuade the Court of fraud, but may dispute the degree or mechanism of injury. This is especially true in minor impact case or collision with obvious preexisting damage. Carrier representatives that do appear at hearings need to be trained in how to present evidence to the court. Words like "I think," or "we believe" or other types of opinion oriented statements have no weight in a small claims trial. What a party thinks is not evidence. If a carrier representative gets the opportunity to address the Court, they should know how to lay a foundation for the evidence (in other words authenticate it) and be prepared to argue both its relevance and importance. In fact, most judges tend to give a lot of weight to the carrier representatives for just being organized and able to present a brief, to the point, supported account. There are judges who will enforce a time limit on the presentation and a specific judge in West L.A. Court actually imposes a 10 second time limit to present the facts. This time limit may be a bit too short. A brief procedural statement may be important as well. The judge may take into account the fact that the claim was denied by the carrier or dropped by the claimant's attorney, which is why it ended up in small claims court. Collusive Testimony by Insured In collusion cases, the insured will often attempt to help the plaintiff s case more than his own. This puts the carrier in a difficult position of having to impeach its own insured. An outside party, such as an NICB Agent, may be in a better position in these cases to interview the insured to ascertain where the insured's true loyalties lie. And do not forget, the carrier has an independent right to appeal and may better address the issue of collusion there. Files are closed for any number of reasons by the carriers, dropped by attorneys and withdrawn by the parties only to show up in small claims court shortly after the statute of limitations applies. Failure to Notify Carrier In many cases, the insured is served by the plaintiffs and does not notify the carrier of the service of process. While this may make defense at the initial stage difficult, it may be another fact supporting collusion on appeal. Interview of Parties Prior to Hearing An interview of the plaintiffs at the time of the hearing may also turn up fictitious or altered documents that the claimant tries to submit to the court such as: Medical reports Tow slips Proof of LOE The practiced eye of an investigator familiar with these types of cases should spot fictitious or altered documents, but that does not mean the Judge will, so be prepared to refute the document's authenticity. NICB is concerned about the opportunity for fraud in these types of cases and urges carriers to prepare a thorough and assertive defense; otherwise, unscrupulous individuals will learn that small claims is the best avenue to pursue fraudulent cases, possibly expanding the problem significantly.

3 Summary Small Claims Act Note: These comments apply only to the law as of February 2016 and any application after that date must be consistent with any change in the law. This document should not be construed as legal advice; rather it is the observations and commentary of its authors. Summary There is no extension of time for time limits for service by mail The court has jurisdiction for all matters, as to all parties for amounts up to $7, (a)(1) and can award, in addition, equitable relief in the form of recession, restitution and specific performance (b) If the plaintiff is a natural person (in other words, not a corporation or other business entity) then the amount is increased to $10, No one may file more than two small claim actions in any given year, where the amount exceeds $2,500 and the plaintiff must file a declaration stating they are in compliance with this (a) (b) The case may be heard by a temporary judge (in other words a lawyer who has taken a special course) if both parties agree (a) Actions No formal pleading is necessary to start the case, other than the court approved form and no pretrial discovery is allowed (a) (b) After the claim is filed, the Clerk of the Court will issue an order directing the parties to appear with documents and witnesses no earlier than 20 days and no later than (a) After the claim is filed, the Clerk may serve it with or without the order by mail providing for a return receipt (b) Service of process can be made by the method described above or delivered to the defendant in person or done by substitute service as described in the Code for Superior Court Complaints (a) Service must be completed within 15 days of the hearing (or 20 if the party resides outside the county) (b) Proof of service must be filed with the Court 5 days before the hearing (c) A defendant who does not reside in California, and is the owner or operator of a vehicle involved in an accident within California may be served by constructive service on the DMV as described in the California Vehicle Code, Section et. seq (g) Venue is determined under the same standards as the code generally (a) The defendant can challenge venue without appearing (b) If the Court finds venue improper (even with no challenge) the Court shall dismiss without prejudice and may transfer to the proper location (c) (1) If the defendant challenges venue and does not appear and the Court finds venue proper, the Court shall postpone the hearing for at least 15 days for new time and date (c) (2) If the defendant sues plaintiff in excess of the jurisdictional limit in a related Superior Court action, the matters may be consolidated in the Superior Court action (a) The small claims court is not required to transfer the action and may rule on it and transfer or refuse to transfer (c)

4 Hearing The hearing and disposition of the small claims action shall be informal, with the goal of dispensing justice promptly, fairly, and inexpensively If defendant fails to appear, the plaintiff must still present and prove their case (b) An attorney may not participate in the hearing (a) An insurer can assist a party, but not at the hearing, but may testify to anything they have personal knowledge of Only the plaintiff and defendant can conduct or defend the action (a) A party in the armed forces or in jail may appear through representative (e)(f) A husband or wife may appear on behalf of the other if they sued or are sued together (k) If the Court determines a person is unable to present or defend their claim, the Court may allow another to assist them at the hearing (l) If a person needs an interpreter to assist a party who does not speak sufficient English, but not an attorney (a) The Court shall make a reasonable effort to maintain a list of interpreters who will aid for no fee or a reasonable fee (b) If there are no interpreters available at the first hearing that Court shall postpone the hearing at least once so that the party may obtain the assistance of an interpreter (d) Either party may make a written request to continue the hearing for good cause at least 10 days prior to the hearing Motion to Vacate and Appeal Plaintiff may not appeal, although may file a motion to vacate if they fail to appear (a) Defendant, who appeared, may appeal to the Superior Court (b) Insurers may appeal a claim in excess of $2,500 if they stipulate coverage applies (c) A defendant who fails to appear may not appeal but may file a motion to vacate (d) Plaintiff, who failed to appear, may file motion to vacate within 30 days of mailing of notice of entry of judgment (a) Either party may make a motion to correct a clerical error or vacate a judgment due to an erroneous legal basis within 30 days of the judgment, but may be filed only once (a)(b) A defendant who failed to appear may file a motion to vacate within 30 days of notice of entry of judgment (a) The defendant must appear at the hearing or file a declaration that justifies their failure to appeal with facts supporting the motion. The Court shall grant the motion for good cause (b)(c) If the Court denies the motion, the defendant may appeal within 10 days, but only the ruling on that decision (e) If the Superior Court vacates the Judgment, the Court can hear the motion if everyone is present and agrees or can transfer it back to the Small Claims Court for hearing (f)

5 If the defendant was not properly served (and did not appear) the defendant may file a motion to vacate, with supporting declaration within 180 days after they discover or should have discovered the judgment (a) The Court may suspend enforcement of the judgment pending a hearing and the Court shall grant the motion to vacate for good cause (b)(c) A notice of appeal must be filed within 30 days of notice of entry of judgment (b) A new period of appeal begins if a modified judgment is entered and served, but is not extended by the filing of a motion to correct an error (c) The hearing on appeal is heard before a new judicial officer, is conducted informally, there is no discovery or right to a jury, although an attorney may appear (a)to(c) The judgment of the Superior Court is final and not subject to appeal (a) On appeal, the Court, for good cause and to achieve substantial justice, may award a party, attorney fees not exceeding $150 and the party's loss of earnings and travel costs, not exceeding $ (c) If the Court finds the appeal was brought without substantial merit and not in good faith, but only to harass and delay the other party, the Court may increase the above costs to $1, If the appealing party fails to appear at the hearing or if the appeal is not heard within a year, the Superior Court may dismiss the appeal (a) Comments Small Claims Court is designed to expedite claims. To do this the Legislature eliminated the pretrial discovery process that exists in other types of civil claims. The hearings are also informal, no attorneys are allowed to represent litigants, and there is only a limited right to appeal These limitations can make prosecuting or defending a lawsuit more difficult for an insurer. Because of this, SIU must be on guard. Small claims actions may be the easiest forum to succeed with a questionable claim. The greatest protection afforded by the legislature is the limit of recovery. An individual may only recover $10,000 in any one claim and may not bring more than two claims in excess of $2,500 per year , Therefore, in any action where the plaintiff's claim exceeds $2,500, make certain that the plaintiff has filed a declaration with the court establishing that they have not exceeded the limit This may not protect against the instant fraud, but will help to limit the number of times an organized group can use small claims. One of the most effective tools given the carrier is a right to an independent appeal. If the judgment in the small claims action exceeds $2,500, the carrier may appeal that judgment independent of the insured and apparently even if the insured failed to appear. This puts the defense in the carrier's hand and makes the carrier a party who can conduct the appeal and use counsel This also gives the carrier the ability to put on its own evidence, including reconstruction report, bio medical evidence or other experts. A caution here though is that if the carrier appeals, the carrier must stipulate to coverage.

6 This should not paralyze the carrier however. If there is no coverage, the carrier need not be concerned. If coverage will be afforded, then there is no harm in stipulating. And failing to afford a defense can be very dangerous in these instances even if the insured fails to cooperate or is involved in the fraud. That is because the duty to defend exceeds the duty to indemnify. In other words, even if the carrier has evidence the loss did not occur, that does not in all instances relieve the carrier of its duty to defend. The insured is entitled to a defense even against a meritless and fraudulent claim. Note that the appeal to the Superior Court is more of a trial de novo. In other words, an appeal examines and rules on the record from the Court below. Here, it is a retrial. The matter is reheard without reference to the hearing of the small claims court hearing below (c) This is actually to the carrier's benefit when pursuing an independent appeal because the carrier is not bound by any mistakes made by the insured below. A carrier has every right to assist its insured in preparation for a small claims action Therefore there is nothing wrong with preparing the insured, helping them with evidence and exhibits and transporting them to court. But the carrier may not participate in the hearing. This does not preclude the insured from calling any witness with personal knowledge of relevant material, including an insurer. Therefore, the insured may call an adjuster or investigator who has taken a party's statement. Or a witness who photographed the scene or the vehicles or has personal knowledge about the damage or the repairs, etc Having the insured present the carrier's evidence this way is supported by the code and is a good way to get important evidence in front of the judge at the hearing. Be cautious of methods used by plaintiffs counsel to conduct the hearing. A popular one is to supply the interpreter. All parties have the right to an interpreter. The Court in some cases may provide one, but if not, the matter will be continued so that the party can secure an interpreter But the code twice forbids an attorney from acting as an interpreter. It could be argued that this section likewise forbids paralegals or other agents of an attorney.

7 California Code of Civil Procedure Note: These comments apply only to the law as of February 2016 and any application after that date must be consistent with any change in the law. This document should not be construed as legal advice; rather it is the observations and commentary of its authors. This is not the complete Act, and statutes regarding administrative issues, collection and enforcement have been omitted Legislative findings and declarations The Legislature hereby finds and declares as follows: (a) Individual minor civil disputes are of special importance to the parties and of significant social and economic consequence collectively. (b) In order to resolve minor civil disputes expeditiously, inexpensively, and fairly, it is essential to provide a judicial forum accessible to all parties directly involved in resolving these disputes. (c) The small claims divisions have been established to provide a forum to resolve minor civil disputes, and for that reason constitute a fundamental element in the administration of justice and the protection of the rights and property of individuals. (d) The small claims divisions, the provisions of this chapter, and the rules of the Judicial Council regarding small claims actions shall operate to ensure that the convenience of parties and witnesses who are individuals shall prevail, to the extent possible, over the convenience "Of any other parties or witnesses Definitions In this chapter, unless the context indicates otherwise: (a) "Plaintiff' means the party who has filed a small claims action. The term includes a defendant who has filed a claim against a plaintiff (b) "Defendant" means the party against whom the plaintiff has filed a small claims action. The term includes a plaintiff against whom a defendant has filed a claim. (c) "Judgment creditor" means the party, whether plaintiff or defendant, in whose favor a money judgment has been rendered. (d) "Judgment debtor" means the party, whether plaintiff or defendant, against whom a money judgment has been rendered. (e) "Person" means an individual; corporation, partnership, limited liability partnership, limited liability company, firm, association, or other entity. (f) "Individual" means a natural person. (g) "Party" means a plaintiff or defendant. (h) "Motion" means a party's written request to the court for an order or other action. The term includes an informal written request to the court, such as a letter. (i) "Declaration" means a written statement signed by an individual which includes the date and place of signing, and a statement under penalty of perjury under the laws of this state that its contents are true and correct. 0) "Good cause" means circumstances sufficient to justify the requested order or other action, as determined by the judge. (k) "Mail" means first-class mail with postage fully prepaid, unless stated otherwise Provisions not applicable in small claims actions The following do not apply in small claims actions: (a) Subdivision (a) of Section 1013 and subdivision (b) of Section 1005, on the extension of the time for taking action when notice is given by mail. (b) Title 6.5 (commencing with Section ) of Part 2, on the issuance of prejudgment attachments.

8 Small claims division In each superior court there shall be a small claims division. The small claims division may be known as the small claims court Jurisdiction (a) The small claims court has jurisdiction in the following actions: (1) Except as provided in subdivisions (c), (e), and (f), for recovery of money, if the amount of the demand does not exceed five thousand dollars ($5,000) (2) Except as provided in subdivisions (c), (e), and (f), to enforce payment of delinquent unsecured personal property taxes in an amount not to exceed five thousand dollars ($5,000), if the legality of the tax is not contested by the defendant. (3) To issue the writ of possession authorized by Sections and of the Civil Code if the amount of the demand does not exceed five thousand dollars ($5,000). (4) To confirm, correct, or vacate a fee arbitration award not exceeding five thousand dollars ($5,000) between an attorney and client that is binding or has become binding, or to conduct a hearing de novo between an attorney and client after nonbinding arbitration of a fee dispute involving no more than five thousand dollars ($5,000) in controversy, pursuant to Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code. (b) In any action seeking.relief authorized by subdivision (a), the court may grant equitable relief in the form of rescission, restitution, reformation, and specific performance, in lieu of, or in addition to, money damages. The court may issue a conditional judgment. The court shall retain jurisdiction until full payment and performance of any judgment or order. (c) Notwithstanding subdivision (a), the small claims court has jurisdiction over a defendant guarantor as follows: (1) For any action brought by a natural person against the Registrar of the Contractors' State License Board as the defendant guarantor, the small claims jurisdictional limit stated in Section shall apply- (2) For any action against a defendant guarantor that does not charge a fee for its guarantor Or surety services, if the amount of the demand does not exceed two thousand five hundred dollars ($2,500), (3) For any action brought by a natural person against a defendant guarantor that charges a fee for its guarantor or surety services, if the amount of the demand does not exceed six thousand five hundred dollars ($6,500). (4) For any action brought by an entity other than a natural person against a defendant guarantor that charges a fee for its guarantor or surety services or against the Registrar of the Contractors' State License Board as the defendant guarantor, if the amount of the demand does not exceed four thousand dollars ($4,000). (d) In any case in which the lack of jurisdiction is due solely to an excess in the amount of the demand, the excess may be waived, but any waiver is not operative until judgment. (e) Notwithstanding subdivision (a), in any action filed by a plaintiff incarcerated in a Department of Corrections and Rehabilitation facility, the small claims court has jurisdiction over a defendant only if the plaintiff has alleged in the complaint that he or she has exhausted his or her ad1ninistrative remedies against that department~ including compliance with Sections and of the Government Code. The final administrative adjudication or determination of the plaintiff's administrative claim by the department may be attached to the complaint at the time of filing in lieu of that allegation. (f) In any action governed by subdivision (e), if the plaintiff fails to provide proof of

9 compliance with the requirements of subdivision (e) at the time of trial, the judicial officer shall, at his or her discretion, either dismiss the action or continue the action to give the plaintiff an opportunity to provide that proof. (g) For purposes of this section, "department" includes an employee of a department against whom a claim has been filed under this chapter arising out of his or her duties as an employee of that department Additional jurisdiction In addition to the jurisdiction conferred by Section , the small claims court has jurisdiction in an action brought by a natural person, if the amount of the demand does not exceed seven thousand five hundred dollars ($7,500), except for actions otherwise prohibited by subdivision (c) of Section or subdivision (a) of Section Fees for filing and service by mail (a) In a small claims case, the clerk of the court shall charge and collect only those fees authorized under this chapter. (b) If the party filing a claim has filed 12 or fewer small claims in the state within the previous 12 months, the filing fee is the following: (1) Thirty dollars ($30) if the amount of the demand is one thousand five hundred dollars ($1,500) or less. (2) Fifty dollars ($50) if the amount of the demand is more than one thousand five hundred dollars ($1,500) but less than or equal to five thousand dollars ($5,000). (3) Seventy-five dollars ($75) if the amount of the demand is more than five thousand dollars ($5,000). (c) If the party has filed more than 12 other small claims in the state within the previous 12 months, the filing fee is one hundred dollars ($100). (d) (1) If, after having filed a claim and paid the required fee under paragraph (l) of subdivision (b), a party files an amended claim or amendment to a claim that raises the amount of the demand so that the tiling fee under paragraph (2) of subdivision (b) would be charged, the filing fee for the amended claim or amendment is twenty dollars ($20). (2) If, after having filed a claim and paid the required fee under paragraph (2) of subdivision (b), a party files an amended claim or amendment to a claim that raises the amount of the demand so that the filing fee under paragraph (3) of subdivision (b) would be charged, the filing fee for the amended claim or amendment is twenty-five dollars ($25). (3) If, after having filed a claim and paid the required fee under paragraph (1) of subdivision (b), a party files an amended claim or amendment to a claim that raises the amount of the demand so that the filing fee under paragraph (3) of subdivision (b) would be charged, the filing fee for the amended claim or amendment is forty-five dollars ($45). (4) The additional fees paid under this subdivision are due upon filing. The court shall not reimburse a party if the party's claim is amended to demand a lower amount that falls within the range for a filing fee lower than that originally paid. (e) Each party filing a claim shall file a declaration with the claim stating whether that party has filed more than 12 other small claims in the state within the last 12 months (f) The clerk of the court shall deposit fees collected under this section into a bank account established for this purpose by the Administrative Office of the Courts and maintained under rules adopted by or trial court financial policies and procedures authorized by the Judicial council under subdivision (a) of Section of the Government Code. The deposits shall be made as required under Section of the Government Code and trial court financial policies and procedures authorized by the Judicial Council.

10 (g) (1) The Administrative Office of the Courts shall distribute six dollars ($6) of each thirty-dollar ($30) fee, eight dollars ($8) of each fifty-dollar ($50) fee, ten dollars ($10) of each seventy- five-dollar ($75) fee, and fourteen dollars ($14) of each one hundred-dollar ($100) fee collected under subdivision (b) Or (c) to a special account in the county in which the court is located to be used for the small claims advisory services described in Section , or, if the small claims advisory services are administered by the court, to the court. The Administrative Office of the Courts shall also distribute two dollars ($2) of each seventy-five-dollar ($75) fee collected under subdivision (b) to the law library fund in the county ill which the court is located. (2) From the fees collected under subdivision (d), the Administrative Office of the Courts shall distribute two dollars ($2) to the law library fund in the county in which the court is located, and three dollars ($3) to the small claims advisory services described in Section , or, if the small claims advisory services are administered by the court, to the court. (3) Records of these moneys shall be available from the Administrative Office of the Courts for inspection by the public on request. (4) Nothing in this section precludes the court or county from contracting with a third party to provide small claims advisory services as described in Section (h) The remainder of the fees collected under subdivisions (b), (c) and (d) shall be transmitted monthly to the Controller for deposit in the Trial Court Trust Fund. (i) All money distributed under this section to be used for small claims advisory services shall be used only for providing those services as described in Section Nothing in this section shall preclude the county or the court from procuring other funding to comply with the requirements of Section Filing of more than two small claims actions (a) Except as provided in subdivision (d), no person may file more than two small claims actions in which the amount demanded exceeds two thousand five hundred dollars ($2,500), anywhere in the state in any calendar year. (b) Except as provided in subdivision (d), if the amount demanded in any small claims action exceeds two thousand five hundred dollars ($2,500), the party making the demand shall file a declaration under penalty of perjury attesting to the fact that not more than two small claims actions in which the amount of the demand exceeded two thousand five hundred dollars ($2,500) have been filed by that party in this state within the calendar year. (c) The Legislature finds and declares that the pilot project conducted under the authority of Chapter 1196 of the Statutes of 1991 demonstrated the efficacy of the removal of the limitation on the number of actions public entities may file in the small claims courts on claims exceeding two thousand five hundred dollars ($2,500). (d) The limitation on the number of filings exceeding two thousand five hundred dollars ($2,500) does not apply to filings where the claim does not exceed five thousand dollars ($5,000) that are filed by a city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity. If any small claims action is filed by a city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity pursuant to this section, and the defendant informs the court either in advance of the hearing by written notice or at the time of the hearing, that he or she is represented in the action by legal counsel, the action shall be transferred out of the small claims division. A city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity may not file a

11 claim within the small claims division if the amount of the demand exceeds five thousand dollars ($5,000) Case heard by temporary judge (a) With the consent of the parties who appear at the hearing, the court may order a case to be heard by a temporary judge who is a member of the State Bar, and who has been sworn and empowered to act until final determination of the case. (b) Prior to serving as a temporary judge in small claims court, on and after July 1, 2006, and at least every three years thereafter, each temporary judge shall take the course of study offered by the courts on ethics and substantive law under rules adopted by the Judicial Council. The course shall include, but not be limited to, state and federal consumer laws, landlord-tenant law along with any applicable county specific rent deposit law, the state and federal Fair Debt Collection Practices Acts, the federal Truth in Lending Act, the federal Fair Credit Billing Act, the federal Electronic Fund Transfer Act, tort law, and contract law, including defenses to contracts and defenses to debts. On substantive law, the courts may receive assistance from the Department of Consumer Affairs, to the extent that the department is fiscally able to provide that assistance Individual assistance for small claims litigants In each county, individual assistance shall be made available to advise small claims litigants and potential litigants without charge as provided in Section and by rules adopted by the Judicial Council Pleadings necessary to initiate action, pretrial discovery not permitted (a) No formal pleading, other than the claim described in Section or , is necessary to initiate a small claims action. (b) The pretrial discovery procedures described in Section are not permitted in small claims actions Commencement of action (a) A plaintiff may commence an action in the small claims court by filing a. claim under oath with the clerk of the small claims court in person, by mail, by facsimile transmission if authorized pursuant to Section , or by electronic means as authorized by the court. (b) The claim form shall be a simple non-technical form approved or adopted by the Judicial Council. The claim form shall set forth a place for (1) the name and address of the defendant, if known (2) the amount and the basis of the claim; (3) that the plaintiff, where possible, has demanded payment and, in applicable cases, possession of the property; (4) that the defendant has failed or refused to pay, and, where applicable, has refused to surrender the property; and (5) that the plaintiff understands that the judgment on his or her claim will be conclusive and without a right of appeal. (c) The form or accompanying instructions shall include information that the plaintiff (1) may not be represented by an attorney, (2) has no right of appeal, and (3) may ask the court to waive fees for filing and serving the claim on the ground that the plaintiff is unable to pay them, using the forms approved by the Judicial Council for that purpose Procedure once claim is filed (a) When a claim is filed, the clerk shall schedule the case for hearing and shall issue an order directing the parties to appear at the time set for the hearing with witnesses and documents to prove their claim or defense. The case shall be scheduled for hearing no earlier than 20 days but not more than 70 days from the date of the order.

12 (b) In lieu of the method of setting the case for hearing described in subdivision (a), at the time a claim is filed the clerk may do all of the following: (1) Cause a copy of the claim to be mailed to the defendant by any form of mail providing for a return receipt. (2) On receipt of proof that the claim was served as provided in paragraph (I), issue an order scheduling the case for hearing in accordance with subdivision (a) and directing the parties to appear at the time set for the hearing with witnesses and documents to prove their claim or defense. (3) Cause a copy of the order setting the case for hearing and directing the parties to appear, to be served upon the parties by any form of mail providing for a return receipt Service on defendant (a) Service of the claim and order on the defendant may be made by anyone of the following methods: (1) The clerk may cause a copy of the claim and order to be mailed to the defendant by any form of mail providing for a return receipt. (2) The plaintiff may cause a copy of the claim and order to be delivered to the defendant in person. (3) The plaintiff may cause service of a copy of the claim and order to be made by substituted service as provided in subdivision (a) or (b) of Section without the need to attempt personal service on the defendant. For these purposes, substituted service as provided in subdivision (b) of Section may be made at the office of the sheriff or marshal who shall deliver a copy of the claim and order to any person authorized by the defendant to receive service, as provided in Section , who is at least 18 years of age, and thereafter mailing a copy of the claim and order to the defendant's usual mailing address. (4) The clerk may cause a copy of the claim to be mailed, the order to be issued, and a copy of the order to be mailed as provided in subdivision (b) of Section (b) Service of the claim and order on the defendant shall be completed at least 15 days before the hearing date if the defendant resides within the county in which the action is filed, or at least 20 days before the hearing date if the defendant resides outside the county in which the action is filed. (c) Proof of service of the claim and order shall be filed with the small claims court at least five days before the hearing. (d) Service by the methods described in subdivision (a) shall be deemed complete on the date that the defendant signs the mail return receipt, on the date of the personal service, as provided in Section , or as established by other competent evidence, whichever applies to the method of service used. (e) Service shall be made within this state, except as provided in subdivisions (f) and (g). (f) The owner of record of real property in California who resides in another state and who has no lawfully designated agent in California for service of process may be served by any of the methods described in this section if the claim relates to that property. (g) A nonresident owner or operator of a motor vehicle involved in an accident within this state may be served pursuant to the provisions on constructive service in Sections to 17461, inclusive, of the Vehicle Code without regard to whether the defendant was a nonresident at the time of the accident or when the claim was filed. Service shall be made by serving both the Director of the California Department of Motor Vehicles and the defendant, and may be made by any of the methods authorized by this chapter or by registered mail as authorized by Section or of the Vehicle Code. (h) If an action is filed against a principal and his or her guaranty or surety pursuant to a guarantor or surety ship agreement, a reasonable attempt shall be made to complete

13 service on the principal. If service is not completed on the principal, the action shall be transferred to the court of appropriate jurisdiction Counterclaim (a) The defendant may file a claim against the plaintiff in the same action in an amount not to exceed the jurisdictional limits stated in Sections , and The claim need not relate to the same subject or event as the plaintiff's claim. (b) The defendant's claim shall be filed and served in the manner provided for filing and serving a claim of the plaintiff under Sections and (c) The defendant shall cause a copy of the claim and order to be served on the plaintiff at least five days before the hearing date, unless the defendant was served 10 days or less before the hearing date, in which event the defendant shall cause a copy of the defendant's claim and order to be served on the plaintiff at least one day before the hearing date Venue (a) Venue and court location requirements in small claims actions shall be the same as in other civil actions. The court may prescribe by local rule the proper court locations for small claims actions. (b) A defendant may challenge venue or court location by writing to the court and mailing a copy of the challenge to each of the other parties to the action, without personally appearing at the hearing. (c) In all cases, including those in which the defendant does not either challenge venue or court location or appear at the hearing, the court shall inquire into the facts sufficiently to determine whether. venue and court location are proper, and shall make its determination accordingly. (1) If the court determines that the action was not commenced in the proper venue, the court, on its own motion, shall dismiss the action without prejudice, unless all defendants arc present and agree that the action may be heard. If the court determines that the action was not commenced in the proper court location, the court may transfer the action to a proper location pursuant to local :rule. (2) If the court determines that the action was commenced in the proper venue and court location, the court may hear the case if all parties are present. If the defendant challenged venue Or court location and all parties are not present, the court shall postpone the hearing for at least 15 days and shall notify all parties by mail of the court's decision and the new hearing date, time, and place Transfer of action when defendant's claim exceeds jurisdictional limit (a) If a defendant has a claim against a plaintiff that exceeds the jurisdictional limits stated in Sections , , and , and the claim relates to the contract, transaction, matter, or event which is tile subject of the plaintiffs claim, the defendant may commence an action against the plaintiff in a court of competent jurisdiction and request the small claims court to transfer the small claims action to that court. (b) The defendant may make the request by filing with the small claims court in which the plaintiff commenced the action, at or before the time set for the hearing of that action, a declaration stating the facts concerning the defendant's action against the plaintiff with a true copy of the complaint so filed by the defendant against the plaintiff: The defendant shall cause a copy of the declaration and complaint to be personally delivered to the plaintiff at or before the time set for the hearing of the small claims action. (c) In ruling on a motion to transfer, the small claims court may do any of the following: (1) render judgment on the small claims case prior to the transfer; (2) not render judgment and transfer the small claims case; (3) refuse to transfer the small claims case on the grounds that the ends of justice would not be served. If the small claims action is

14 transferred prior to judgment, both actions shall be tried together in the transferee court. (d) When the small claims court orders the action transferred, it shall transmit all files and papers to the transferee court. (e) The plaintiff in the small claims action shall not be required to pay to the clerk of the transferee court any transmittal, appearance, or filing fee unless the plaintiff appears in the transferee court, in which event the plaintiff shall be required to pay the filing fee and any other fee required of a defendant in the transferee court However, if the transferee court rules against the plaintiff in the action filed in that court, the court may award to the defendant in that action the costs incurred as a consequence of the transfer, including attorney's fees and filing fees Who may be party; appearance by guardian ad litem (a) Any person who is at least 18 years of age, or legally emancipated and mentally competent may be a party to a small claims action. (b) A minor or incompetent person may appear by a guardian ad litem appointed by a judge of the court in which the action is filed Hearing and disposition of action The hearing and disposition of the small claims action shall be informal, the object being to dispense justice promptly, fairly, and inexpensively Presentation of evidence at hearing (a) The parties have the right to offer evidence by witnesses at the hearing or, with the permission of the court, at another time. (b) If the defendant fails to appear, the court shall still require the plaintiff to present evidence to prove his or her claim. (c) The court may consult witnesses informally and otherwise investigate the controversy with or without notice to the parties Attorney participation (a) Except as permitted by this section, no attorney may take part in the conduct or defense of a small claims action. (b) Subdivision (a) does not apply if the attorney is appearing to maintain or defend an action in any of the following capacities: (1) By or against himself or herself. (2) By or against a partnership in which he or she is a general partner and in which all the partners are attorneys. (3) By or against a professional corporation of which he or she is an officer or director and of which all other officers and directors are attorneys. (c) Nothing in this section shall prevent an attorney from doing any of the following: (1) Providing advice to a party to a small claims action, either before or after the commencement of the action. (2) Testifying to facts of which he or she has personal knowledge and about which he or she is competent to testify. (3) Representing a party in an appeal to the superior court. (4) Representing a party in connection with the enforcement of a judgment Assistance to party by insurer or other expert Nothing in this article shall prevent a representative of an insurer or other expert in the matter before the small claims court from rendering assistance to a party in the litigation except during the conduct of the hearing, either before or after the commencement of the action, unless otherwise prohibited by law; nor shall anything in this article prevent those individuals from testifying to facts of which they have personal knowledge and about which they are competent to testify

15 Participation by individuals other than plaintiff and defendant (a) Except as permitted by this section, no individual other than the plaintiff and the defendant may take part in the conduct or defense of a small claims action. (b) Except as additionally provided in subdivision (i), a corporation may appear and participate in a small claims action only through a regular employee, or a duly appointed or elected officer or director, who is employed, appointed, or elected for purposes other than solely representing the corporation in small claims court. (c) A party who is not a corporation or a natural person may appear and participate in a small claims action only through a regular employee, or a duly appointed or elected officer or director, or in the case of a partnership, a partner, engaged for purposes other than solely representing the party in small claims court. (d) If a party is an individual doing business as a sole proprietorship, the party may appear and participate in a small claims action by a representative and without personally appearing if both of the following conditions are met: (1) The claim can be proved or disputed by evidence of an account that constitutes a business record as defined in Section 1271 of the Evidence Code, and there is no other issue of fact in the case. (2) The representative is a regular employee of the party for purposes other than solely representing the party in small claims actions and is qualified to testify to the identity and mode of preparation of the business record. (e) A plaintiff is not required to personally appear, and may submit declarations to serve as evidence supporting his or her claim or allow another individual to appear and participate on his or her behalf, if (I) the plaintiff is serving on active duty in the United States Armed Forces outside this state, (2) the plaintiff was assigned to his or her duty station after his or her claim arose, (3) the assignment is for more than six months, (4) the representative is serving without compensation, and (5) the representative has appeared in small claims actions on behalf of others no more than four times during the calendar year. The defendant may file a claim in the same action in an amount not to exceed the jurisdictional limits stated in Sections , , and (f) A party incarcerated in a county jail, a Department of Corrections and Rehabilitation facility, or a Division of Juvenile Facilities facility is not required to personally appear, and may submit declarations to serve as evidence Supporting his or her c1aim, or may authorize another individual to appear and participate on his or her behalf if that individual is serving without compensation and has appeared in small claims actions on behalf of others no more than four times during the calendar year. (g) A defendant who is a non-resident owner of real property may defend against a c1aim relating to that property without personally appearing by (l) submitting written declarations to serve as evidence supporting his or her defense, (2) allowing another individual to appear and participate on his or her behalf if that individual is serving without compensation and has appeared in small claims actions on behalf of others no more than four times during the calendar year, or (3) taking the action described in both (1) and (2). (h) A party who is an owner of rental real property may appear and participate in a small claims action through a property agent under contract with the owner to manage the rental of that property, if (1) the owner has retained the property agent principally to manage the rental of that property and not principally to represent the owner in small claims court, and (2) the claim relates to the rental property. (i) A party that is an association created to manage a common interest development, as defined in Section 1351 of the Civil Code, may appear and participate in a small claims action through an agent, a management company representative, or bookkeeper who appears on behalf of that association. (j) At the hearing of a small claims action, the court shall require any individual who is appearing as a representative of a party under subdivisions (b) to (i), inclusive, to file a