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MI Alternatives to Small Claims Court

Is a customer refusing to pay for repairs you made to her car? Were you involved in a fender-bender and the other driver won't pay to have your car fixed? These are the types of disputes that are handled by the Michigan small claims court. It's a court that's designed to be a fast, informal, and inexpensive way for people like you to get the money they're owed.

But maybe you don't want to file a lawsuit, not even in small claims court. That's OK. A lot of people don't like courtrooms or dealing with the "legal process." You do have some alternatives to filing a lawsuit in small claims court, such as:

  • Personal negotiation
  • Mediation
  • Arbitration

Any one of these tactics may help you get your money without having to step foot into a courtroom.

Personal Negotiation

This should be your first step, even if you're prepared to file a small claims lawsuit. All this involves is a simple phone call or letter to the defendant asking that he pay what's owed to you. Be polite and cordial. Maybe you can work out an agreement that benefits everyone.

If your initial conversations aren't getting you anywhere, then consider writing a demand letter. It's exactly what it sounds like: A letter demanding that the defendant pay you within a specific period of time, usually 15 to 30 days. To be effective, the letter should:

  • Briefly explain why you think the defendant owes you money
  • State exactly how much money you're demanding
  • Clearly state that you intend to take legal action, including filing a lawsuit in small claims court, if you're not paid within the time you give (15 to 30 days)

At the very least, you should mail the letter certified mail, return receipt requested. When you get the return receipt, make sure you keep it (along with a copy of your letter) so that, if necessary, you can prove later that defendant got the letter.

Mediation

Mediation is an informal meeting between you, the defendant, and a neutral third party, called a "mediator." Most of the time you'll meet together, but sometimes you and the defendant will meet separately with the mediator. The mediator's job is to help you both reach an agreement. She can suggest different options to help you reach that agreement, and she may even suggest a particular course of action, but she can't force or order either of you to do anything.

In most instances, mediation will be offered at no or little cost to you or the defendant. Depending on your and the defendant's willingness to negotiate and compromise, it can lead to a very quick and mutually satisfactory resolution of your claim. In Michigan, a mediation meeting can be set up within 10 days after you contact your local office of Michigan's Community Dispute Resolution Program. Also, about 90% of all cases that the parties agree to mediate end up with an agreement that's acceptable to both sides.

The Michigan small claims courts like mediation, mainly because it saves time and court resources. In fact, in Michigan, if you file a lawsuit in small claims court, you and the defendant likely will be asked to mediate your claim. Both parties have to agree to mediate, however. The case will go to trial only if one of you refuses to mediate, or if no agreement is made after mediation.

Some Rules to Know

There are some things to keep in mind about mediation, such as :

  • It's not binding, meaning that, even if you and the defendant reach an agreement, the mediator can't enforce it. So, if the defendant later breaks or "breaches" the agreement, you may need to start the whole process over again (personal negotiation, writing a demand letter, filing a lawsuit, etc.)
  • The mediator can't provide legal or personal advice. She can only suggest possible ways to settle the matter and help you both make sure that you reach an agreement that's good for you both
  • It's you and the defendant that make the terms of the agreement, not the mediator. The mediator will only write down or document what you've agreed to
  • The mediator doesn't make a "decision" in the case like a magistrate would in the small claims court. That is, she doesn't decide who "won." Rather, she merely helps you reach an agreement
  • At any time, either party can withdraw from mediation
  • If you and the defendant don't reach an agreement through mediation you can still file a lawsuit in small claims court. In other words, you don't waive your right to file suit simply because you agree to mediation. This is true for the defendant, too, if he has a "counterclaim" against you, that is, he claims that you owe him money
  • Attorneys are usually not present during mediation. You can, however, hire an attorney to advise you about your claim, if you'd like

Arbitration

Arbitration is very similar to mediation. Here, a neutral third party, called an arbitrator, listens to both sides of the story, just like a mediator does, in the hopes of helping you reach an agreement. However, there are some important differences between arbitration and mediation:

  • If you and the defendant can't reach an agreement, the arbitrator will make a decision in the case, that is, decide if you're going to get paid and how much
  • The arbitrator's decision is binding, unless you and the defendant agree beforehand that it isn't binding. This means that it can be enforced by the arbitrator and, if necessary, the courts, if you or the defendant don't follow the decision
  • After going through arbitration, you can't file a lawsuit in a Michigan small claims court
  • Arbitration can be expensive. An arbitrator may charge over $125 for a four-hour block of time to listen to and decide your case. But, if you win, the costs of arbitration are usually added to the amount the defendant owes you

As with mediation, you and the defendant have to agree to arbitration. However, you both also have to agree on the arbitrator. The district court clerk in your area may have a list of arbitrators that you may contact. Or, you can contact the American Arbitration Association for a list of arbitrators in your area.

Questions for Your Attorney

  • I can't get the defendant to answer my phone calls or letters. Is there any benefit to offering to mediate?
  • The defendant agreed to mediate my claim, but now he won't meet with or talk to the mediator. What should I do now?
  • What should I do if there's no local mediation office in my area but I want to try to mediate my claim before I file suit in small claims?
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