On June 19, 2013 Governor Pat McCrory signed legislation dramatically changing the jurisdictional amounts for the various divisions of civil court in North Carolina.  For many years, the amount in controversy limit for small claims actions has been $5,000 and the cut-off for District Court has been $10,000.  The new law doubled the small claims threshold to $10,000.  More significantly for many litigants, the limit for District Court went from $10,000 all the way to $25,000.  As a result, only cases in which more than $25,000 is at stake will be heard in Superior Court.  This bill applies to cases filed on or after August 1, 2013.

The statute also changes the upper limit for cases covered by North Carolina’s attorneys’ fee statute from $20,000 to $25,000 to mirror the new Superior Court threshold.  This statute, N.C. Gen. Stat. §6-21.1, allows a successful plaintiff in a personal injury or property damage case to recover his or her attorneys’ fees up to $10,000 where the court finds an “unwarranted refusal” by the defendant to negotiate.  This statute is used by plaintiffs’ lawyers in smaller cases to try to maximize their clients’ recovery.  Expect to see the statute invoked more frequently.  The limit was just increased from $10,000 to $20,000 during the 2011 legislative session.  The new cap will ensnare more cases and is likely to result in plaintiffs’ attorneys making more money on smaller cases.

Further, the statute requires arbitration for civil disputes where the amount in controversy is up to $25,000.  This increases raising the prior cap of $15,000 and also makes arbitration mandatory rather than allowing judicial districts to decide whether to participate in the program or not.  Where a party files in small claims, loses, appeals, loses again in arbitration, and appeals for trial de novo, the court must consider this “as a significant factor in favor of assessing all court costs and attorneys’ fees” against that party.  While the likely goal of swiftly adjudicating smaller cases is worthy, in our experience the arbitration program is often ineffective at closing cases.  Many counties have not participated in the past and the program seems to be underfunded.  This expansion will further tax the capability of arbitrators and court personnel to keep up with a significant volume of cases. 

We expect this legislation to expand the number of civil cases filed in small claims and District Court and probably diminish the number in Superior Court.  It remains to be seen whether and how efficiently small claims courts and the District Court Division can handle what is likely to be a far greater burden on a system that already struggles to keep up.  The new law may also be troubling to those sued in this State, since District Court judges and small claims magistrates are less accustomed to dealing with certain types of civil claims that have historically been filed in the Superior Court Division.