Task force demands changes to Indiana small claims court
There's growing outrage over what 13 Investigates uncovered in Marion County Small Claims Court: Attorneys charging fees more than double what people actually owe.
It's a court that's been allowed to operate under its own rules. Now an Indiana Supreme Court Task Force is demanding some changes.
Financial disputes less than $6,000 over medical bills, credit card debt or unpaid rent are settled in Marion County Township Courts. The idea is to ensure everyone gets a fair shake, even with small amounts.
But 13 Investigates found loose procedures and the drive for profit threatening to outweigh justice.
"I relied on the justice system, and it failed," said Ashley Wilson of Anderson, who questions a 2006 doctor bill for $200 that she thought was written off. She was ordered into Marion County Small Claims Court in Decatur Township and ordered to pay the bill and $450 in attorney fees and other court costs.
13 Investigates found Medical Collection attorneys regulars in Decatur Township, and getting access to court records, facilities, and the very people they're suing.
Debtors unaware of their rights are directed into a private room with no legal representation to meet with collection agency attorneys.
13 Investigates found those attorneys tacking on large fees, forcing people like Ashley Wilson to pay judgements three to four times more than actually owed, all with the court's approval.
"People that can't afford their medical bills, can't afford to pay attorneys for collection agencies five times the amount of their original bill," Ashley told 13 Investigates.
Derek Johnson is one of the attorneys collecting high fees. He files thousands of medical collection lawsuits each year on behalf of two medical collection agencies, and according to this affidavit gets $450 for every settlement or judgement he gets in Decatur Township Small Claims Court, even if the outstanding bill is just $50!
"Why won't you talk to us about what's happening here Small Claims Township court?" 13 Investigates asked Johnson.
"Because I'm not interested in speaking to you, thank you," Johnson responded as he hurried away from our cameras.
Companies Accused of Abusing the System for Profit
"What it is, is taking advantage of the system and it's taking advantage of people like me," said Brandon Magor. Brandon says he's been pushed around by companies that play the system.
In 2010, he applied for a rental with free gated parking at the historic St. Agnes in downtown Indianapolis. But to his surprise the apartment lease didn't include free parking.
Brandon alerted the Management Company he wanted the advertised deal -or- his money back.
"I was told we will take you to court, we will win and we will get a lot more money than your monthly rent," he said, recalling the conversation he had with a member of the management team.
Brandon decided to fight back and faced off against the company at Center Township Small Claims Court.
He won and walked away with a $275 judgement. His only out of pocket expense was $35 for application fees.
But within days Brandon learned the battle wasn't over.
The management company appealed the case to a Marion Superior Court, and counter-sued him for stopping payment on his deposit check.
"It was revenge - them using the system to prove a point," insisted Magor.
The attorney for the Management Company, Steven Ernhart, told 13 investigates the company did nothing wrong and exercised its right to appeal and seek recovery of the deposit. He points out that Magor's initial case was based on the advertisement.
Months later and without an attorney, Brandon's big win became an outrageous loss.
The management company and its attorney Steven Ernhart won a judgment for the deposit check in the amount of $1,061.57, court costs of $217.00, an interest charge of $60.30 and attorney fees of $3,612.25.
All told, Brandon was ordered to pay $4,951.12.
"To this day I lose a little sleep over it every now and then, just knowing how unfair that was," Brandon told 13 Investigates.
"It's imperative that people that go there feel like they've had their day in court," said Judge John Baker, who sits on the Indiana Court of Appeals, and led the charge to investigate complaints into Marion County Township Courts.
His team found:
Notices to appear in court arriving too late for debtors to respond;
Attorneys not filing in the same township where the debt originated or where debtor's live, giving rise to allegations of forum shopping. Forum shopping implies that attorneys filing most if not all of their cases in a particular township where they get favor and big fees;
Instead of being a part of the Superior Court system and following all of its rules, the courts in Decatur, Franklin, Lawrence, Perry, Pike, Washington, Warren, Wayne and Center townships are all under the control of a township trustee.
How does this happen?
"It happens because the legislature allows it to happen," explained Baker. He says the township system was devised in 1975 to keep good judges from being ousted based on political party lines, like they were in Marion County following Watergate.
Eventually lawmakers voted to return 91 of Indiana's 92 counties back to superior or municipal courts, leaving Marion County the odd one out.
Baker says he can only explain it as "a historical, political accident."
Baker says it's time for "aggressive reform" and recommends all nine township courts become part of the Superior Court system.
"Would you call the system a system of justice?" asked 13 Investigates.
After a short pause Baker responded: "We're sure trying to make it such," he said.
The Task Force has resulted in some new policies that took effect on March 1, 2013.
The summons to court must now be received at least 20-days before the initial hearing. (exceptions include: when possession of real estate is sought and in emergency situations)
Debtors can have their cases transferred to closer townships except when the case is between a landlord and tenant. The change of venue must be filed within ten days after being served with the summons or notice.
Judgments shall not include attorney fees unless agreed by both parties. Attorneys must now show the hours worked and the hourly rates for their fees. But that doesn't guarantee those high fees will go away. The judge still has the final say. In Decatur Township, Judge Hockman believes "it costs the same to file a $6,000 claim as a $50 one."
Finally, small claims judges must inform debtors they do not have to meet with the opposing party or its attorney.
The task force, with the help of graduate students at IUPUI, put together a new brochure to help advise residents of their rights and responsibilities when it comes to Marion County Small Claims Courts.
New Uniform Policies