Many times a small business owner does not pursue a bounced check or customer’s failure to pay an amount due, thinking that it is too expensive. By the time attorney’s fees and court costs are paid, the cost of collecting the debt far exceeds the debt itself. There is another option for a small business owner and that is filing an action in Commercial Claims Court. A Commercial Claims Court is the equivalent of small claims court for businesses. Commercial claims actions are limited up to $3,000, and a lawyer is not necessary. A commercial claims action can only grant a monetary judgment and cannot order or compel the defendant to perform any promise that was made in a contract.
A commercial claims action is designed for a corporation, partnership, association and even a municipal corporation to initiate a claim against a defendant. A commercial plaintiff is limited to no more than five commercial claims actions anywhere in New York for a calendar month. A corporation, partnership, association or municipal does not have to be represented by an attorney. A partner in a partnership or authorized officer, director or employee of a corporation who has authorization to settle the case or conduct a trial on behalf of the corporation can appear in court as a representative of a commercial plaintiff. In Jefferson County, Watertown City Court has jurisdiction to act as a Commercial Claims Court.
One of the first tasks, a commercial plaintiff must decide is who to sue. If the defendant is a non-business, then the complete name and address should be in the company records. In addition, if the action arose as result of a consumer transaction, a “demand letter” must be sent to the defendant before a commercial claims action can be started. A consumer transaction is where your business provided money, property or services to the defendant and was primarily for personal, family or household purposes. A copy of a demand letter can be obtained from the Watertown City Court Clerk and must be sent to the defendant at least 10 days and no more than 180 days before the lawsuit is started. The “demand letter” officially notifies the defendant of the obligation being sued for. In order to use the Watertown City Court as your legal forum, the defendant must live, work or have a place of business in Jefferson County. If the defendant does not, then the action must be filed in the appropriate court in the county in which the defendant does live, work or have a place of business.
If, on the other hand, the defendant is a business, the commercial plaintiff must be certain that the correct entity is sued. Is the defendant a corporation, an LLC or partnership? A corporation’s or LLC’s name can be ascertained online at the New York State Secretary of State’s website. A partnership’s name can be verified in the Jefferson County Clerk’s Office. There is no need to send a “demand letter” to a business entity since it is considered a non-consumer transaction.
The next step is to initiate the law suit by filing a claim with the Commercial Claims Court Clerk. The appropriate legal forms can be obtained from the Watertown City Court Clerk. The commercial plaintiff must provide a brief statement of the facts that form the basis of the action. If the claim is based on a consumer transaction, the commercial plaintiff must sign a verification that it has filed not more than five commercial claims anywhere in New York for the last calendar month and that a demand letter has been sent to the defendant within the appropriate time period. The court clerk will send the court papers informing the defendant of the law suit and the court date by certified mail and first class mail. If the court papers for some reason cannot be served on the defendant by the post office, it is the responsibility of the commercial plaintiff to hire a professional process server to ensure the court papers are serviced on the defendant.
Before trial, the commercial plaintiff should gather all of the evidence necessary to prove its case. This would include such items as any contract, itemized bills, payment records, written estimates, receipts, canceled checks or pictures. You should prepare sufficient copies for the judge, the defendant, a witness to review if necessary and yourself. If you are alleging damages, two different written itemized estimates of the cost of repair or service are needed.
If part of your evidence is testimony of witnesses or documents held by third persons, it will be necessary to request the court clerk to issue subpoenas. There are two types of subpoenas. The first type of subpoena commands a witness to appear in court to testify. The second is called a “subpoena duces tecum” and it commands the custodian of documents to appear in court alone with the requested documents. The party requesting subpoena is responsible for serving the subpoena on the individual, payment of witness fees and mileage.
If you have prepared your case adequately, trial will be simply telling the judge your side of the story and presenting the evidence in a chronological order. Although there are certain legal formalities, Commercial Claims Court is designed to be a simplified court action. If your business has experience bad checks or overdue balances on accounts, perhaps you should consider a commercial claims action.
Larry Covell is a professor of business at SUNY Jefferson and an attorney. Contact him at firstname.lastname@example.org. His column appears every other month in NNY Business.