Monday, July 18, 2011

Wall Street Journal Slams Marion County Small Claims Courts; Will the Supreme Court or Legislature Finally Demand Changes?

I have long complained about creditors forum shopping in Marion County small claims court and the practice of some of those courts in getting too chummy with attorneys for the creditors. This morning, the Wall Street Journal picks up on the issue.  Here is a portion of the WSJ article, I found on Yahoo:
MARION COUNTY, Ind.—For U.S. consumers with too many bills and not enough money, the end of the line is often a small-claims court like the one here in Pike Township.

Judge A. Douglas Stephens, who presides over all the township's small-claims cases, calls himself a "Renaissance redneck" and wears a small gun strapped to his ankle while on the bench. He says he has little patience for the "feeble protests" of people who try to dodge their financial obligations.

Shortly after his 2003 election, he recalls, two insurance executives in "bad suits" sat silently in the back of his courtroom to see if he would rule in favor of their company in a dispute involving damage from a car accident. He says he did, based on the facts.

These days, his calendar is packed with cases from many insurance companies—sometimes more than 200 a day—against residents who allegedly owe money for insurance premiums or car accidents. The defendants live not only in Pike Township but in townships all over Marion County. Judge Stephens says that American Family Mutual Insurance Co., based in Madison, Wis., files all its cases against county residents in his township because "they had a problem with another judge who was consistently too tough," whom he declines to name. Judge Stephens says he is "totally impartial." American Family declined to comment.

As companies and debt collectors try to collect on overdue bills that piled up during the financial crisis, the recession and their aftermath, they are borrowing a tactic from plaintiffs' lawyers: They shop around for the best places to bring their claims. Debt collectors aren't so much worried about whether a court will rule that the debtor owes the money—most cases are fairly clear-cut on that point—but about how aggressively collectors can pursue a debtor's assets.

Lawsuits to collect on bad debts have to be filed in the state where a debtor lives. In most cases, debt collectors don't get to choose the court in which the case will be heard. Unless it involves an especially large debt, it will be the small-claims court in the debtor's county, and there's no way for a debt collector to pick the judge.
...
Parts of Indiana are particularly unusual. Although the state requires suits to be filed in the county where the borrower lives, in Marion County and one other county, collectors can choose among township courts—each with a single judge. The courts handle all collection disputes involving up to $6,000.

"We lawyers call it forum-shopping," says Richard Gonon, a lawyer for Accounts Recovery Bureau Inc., a Reading, Pa., medical debt-collection firm that has filed cases in Marion County.
...
Debt collectors regard Indiana as friendly territory. Companies can file small-claims suits by mail rather than sending lawyers to file them in person. If a debt collector wins in court, nearly all of a creditor's assets can be pursued for payment, including real estate, pension payments and cars, which are off-limits in many other states.

Marion County, where Indianapolis is located, is the state's most populous county. It is carved into nine townships, each with its own court—a vestige of a time in which every Indiana resident was supposed to be able to reach a courthouse on horseback in one day.

Eighty percent of debt-collection cases against Marion County residents involved less than $6,000 in 2009, the latest year for which figures are available, so they were handled by township courts. State law allows debt collectors to file the suits in any of the nine courts.

Jeff Bennett, who oversees the Warren Township court's budget and staff, says township courts depend on filing fees of $81 per case to fund a chunk of their operations. He says that creates a "perverse incentive" for judges and their staffs to be "accommodating" to collectors.

...

Decatur Township has become the preferred courthouse for lawyers who collect soured debt on behalf of medical providers, according to Pam Ricker, who has managed the court's operations for more than 25 years. The township has no hospitals.

Ms. Ricker says a lack of public transportation discourages many defendants from showing up in court, resulting in automatic wins for debt collectors.

"We certainly have our loyal attorneys," said Ms. Ricker. The court provides lawyers with coffee in a break room and a fax machine for their clerical needs.

Of the 106 Med Shield cases scheduled to be handled by the court one day in February, just three involved defendants who lived in the township, according to an analysis of court records by The Wall Street Journal.
...
To see the rest of the article, click here.

The article seems to take a dim view of lawyers for creditors meeting with debtors before the hearing to see if a resolution can be reached.  I don't see anything wrong with the practice, as long as it is made clear to the defendant that he or she does not have to agree to any resolution and can take the case before the judge.  Many of the defendants have had no chance to communicate with the attorney to work out a resolution before the hearing.   Their appearance in court provides that opportunity.

But the rest of the article is on point.  Forum shopping is a terrible problem in the Marion County small claims courts.  Creditors can file cases in any small claims court they want to.  This creates competition among the small claims courts to provide a favorable forum for creditors.  Small claims courts, which are run by filing fees, have an incentive to keep creditors happy so they will continue filing in their courts. 

Marion County small claims courts often become far too chummy with creditors' attorneys, allowing them to set the court's schedule, use court offices for faxing and copying.  The article noted that in Center Township, constables, on behalf of creditors, pass out to documents to defendant debtors asking for information.

A year or so ago, my law firm had a client who was sued in a southern Marion County small claims court on a judgment with a hospital that was about 12 years old.  The amount was something like $400 and the court's records showed his wages had been garnished 11 years ago to pay the debt. 

It should have been a slam dunk win for the client.  The judgment was too old (the judgment becomes uncollectable after 10 years if not renewed, which it wasn't) and the hospital had no documentation showing how much was collected by the garnishment and how much still was owed.  Guess who won?   If your guess is the hospital's collection company, which files umpteen cases in that small claims court, you'd be correct.  Indiana law making old judgments uncollectable and the requirement that the plaintiff prove its case, didn't matter.

The issue of small claims court forum shopping and the accompanying perverse financial incentive to rule in favor of collection companies, raises at least an appearance that justice is not being dispensed in those courts.  Both the Indiana Supreme Court and the Indiana General Assembly have it within their authority to change the rules to restore the integrity of the judicial process in Marion County small claims courts.  It is time they take action.

17 comments:

Cato said...
This comment has been removed by the author.
Cato said...

That article sounds like Hamilton County.

Remember that Barry Scheck said that Indiana courts are completely results-oriented.

The problem with the creditors' meeting is that it takes place prior to the "trial." A defendant is approached by the plaintiff's attorney as if he works for the judge and was sent by a judge.

Having been sent by the judge, the judge is perplexed that settlement wasn't reached, though he gave the defendant a chance, really an order, to settle the case.

Now seeming unreasonable, the defendant has little chance at trial.

Indiana courts are preserving their integrity. Indiana has worked hard to make this a place where the individual is diminished and a power collective is exalted. The courts are enshrining into law that social classification that a few have spent a lot of money to build.

You're not stuck here. You'll find life, law and lawyers better among liberals.

Tiny23 said...

Paul judgments are presumed satisfied after twenty years, not ten-

IC 34-11-2-12
Satisfaction of judgment after expiration of 20 years
Sec. 12. Every judgment and decree of any court of record of the United States, of Indiana, or of any other state shall be considered satisfied after the expiration of twenty (20) years.

Tiny23 said...

Cato:

A) It is a violation of professional ethics for an attorney for a creditor to imply that he somehow represents the judge and not the creditor. If you know of attorneys doing this you should turn them in.

B) The reason most defendants will lose at trial in collection cases is that very few of them have any, you know, "LEGAL DEFENSES" to the act of defaulting on the contract or obligation that they voluntarily entered into. That's not liberal or conservative, that's just a fact.

Reform Believer said...

Forget about integrity. Township government is the Rasputin of Indiana. No matter how disgusting township government is proven to be, members of the Legislature will not turn their backs on their cronies in the townships.

Independent 1 said...

Can you tell us which counties still have township courts? I can remember back in the seventies that some townships ran speed traps for unwary motorists.

Hoosier Lawyer said...

Just a small correction. Judgments are still collectable after 10 years, they just aren't a lien on real property unless renewed. There was a Court of Appeals case on this within the past couple of years.

Paul K. Ogden said...

Thanks, HL, it's been awhile since I looked that up. I knew it was extremely confusing how they have it set up in the statute.

Independent, I thought Marion County is the only one that has township courts. The WSJ article though said another county in Indiana does. I don't think they mentioned which one. As far as I know, township courts have never done traffic court cases.

Paul K. Ogden said...

Thanks, Tiny. That's what I get for not looking up the statute before talking about the law.

american patriot said...

>>Remember that Barry Scheck said that Indiana courts are completely results-oriented.

Thank God at least one branch of state government is.

Maybe I should quit renting condos and start providing medical service, I have only collected on 1 small claims court judgment so far.
It's amazing that these poor people who can't afford to get to court can afford iPhones, alcohol, cigarettes and cable TV.

sharon said...

I'm currently being suid by medshield /decatur township small claims court.They are going to gaernish my wages on a hospital bill I was paying, and paying above the recommened amout.They added 550.00 in fees for the lawyer. I can't beleive this I'm sick to my stomach and having trouble sleeping. 2 weeks ago they took 200.00 from my check I called to find out why they said I owed interest on another bill that they suid me for ???? Why and how can they get away with this I work 6 days a week to make and just take it. What can I do about this I can't be the only one. The judge told me when the fat lady is in the window nobody else can get in. Is this a class action suit? please help

Irishking23 said...

It is so terribly unfair for a debt collector to sue a sick and disabled consumer debtor in a remote and distant Township. That does not speak well of the justice system.

US Veteran said...

Just went to Pike twp small claims court this morning for $1500 medical bill. Before court they have an assembly line where they tell u that u will be meeting w the attorney outside the courtroom.I agreed to pay $40 a mo. The atty went for it n then he produced a "COURT DOCUMENT" and he filled it out and had me sign it- agreeing to pay $40 a mo! My question is this- If Joe atty can make himself out to be a representative of the court and produce court documents from his briefcase and fill them out himself, why can't I do the same thing?

Irishking23 said...

US Veteran
It sounds like that collection agency attorney had you sign an Agreed Judgment form. That is not impermissble. Was it a Med Shield case?

Victor Deloach said...

A simple piece of advice for consumers: acquire services you can only pay. Let us be responsible members of our society by managing our financial obligations well.

criminal defense lawyer los angeles

Irishking23 said...

Yes Victor, I agree with what you said. I always paid my just and reasonable debts on time and had a stellar credit rating until some unscrupulous credit collection agency reported a false judgment against me to the various credit bureaus. It wasn't by accident either but done out of spite. It lost its court case against me and decided to malign me.

6pete6smith6 said...

Worst court, Worst Judge. He needs to be off the bench or retire. Judge Hockman is taking kick backs from the attorneys and Judge Hockman always sides with the collection attorney's that charge and obtain huge collection fee's. Decatur citizens, this Judge doesn't rule for the people and here's an glimpse of what he did in Marion County; "Myron Hockman, Prosecutor's office thought the 911 tape of a pleading, crying, and begging for help was nothing but laughable. Myron Hockman actually laughed at the tapes..."
The collection attorney's are nothing but bottom feeders, feeding off the poor. Judge Hockman and the collection attorney's are unethical. three cases filed in federal court in Indianapolis involve a plaintiff who lives in Hendricks County but was sued in Decatur Township. Kickbacks going to the Judge from the attorney's. Despite the reasons the plantiff argued, the Judge always ruled in favor of the collection agency.
That's who is working in our community. Disgusting.