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NJ Alternatives to Small Claims Court

Sometimes you're owed money. Maybe a customer is refusing to pay for repairs you made to her car, or a driver won't pay to have your car fixed after a fender-bender. These are the types of disputes that are handled by the New Jersey small claims court, which is designed to be a fast, informal, and inexpensive way for people to get the money they're owed.

However, maybe you don't want to file a lawsuit, not even in a small claims court. You still have some options. Some alternatives to filing a lawsuit include:

  • Personal negotiation
  • Mediation
  • Arbitration

Any one of these tactics may help you get your money without having to walk into 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 she pay what's owed to you. Be polite and cordial. Maybe you can work out an agreement that benefits everyone.

If your first attempts aren't working, 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, like 15 or 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 given (15 or 30 days)

Mail the letter certified mail, return receipt requested. It's a bit more expensive than regular mail, but it may help later. For example, if you end up having to file a lawsuit, the return receipt you get will prove that the 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 or speak on the telephone separately with the mediator. The mediator's job is to help you both reach an agreement. He can suggest different options to help you reach that agreement, and he may even suggest a particular course of action, but he 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.

The courts like mediation, mainly because it saves time and court resources. In fact, in New Jersey, if you file a lawsuit in small claims court, the court usually will order mediation before the case goes to trial. In small claims, the court's law clerk or another member of the court's staff will act as the mediator. They have extensive training in mediating disputes. If no agreement is made, then the case will go to trial.

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. He 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
  • The mediator doesn't make a "decision" in the case like a judge would in the small claims court. That is, he doesn't decide who "won." Rather, he merely helps you reach an agreement that you and the defendant are happy with
  • 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
  • Arbitrators are either lawyers with several years of experience or retired trial court judges
  • Arbitration can be expensive. An arbitrator may charge over $125 for a four-hour block of time to listen to and decide your case. Because of the costs, arbitration isn't used much in the small claims area

You and the defendant have to agree to arbitration, and you have to agree on the arbitrator. The court clerk's office 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?
  • How much will you charge me to file a lawsuit and represent me in small claims court? Would a small claims lawsuit and the court fees cost me less than an arbitrator?
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