What are the downsides to filing a claim in small claims court?
UPDATED: February 20, 2013
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We urge you to be very careful before starting any Small Claims action and to consider consulting with a lawyer before you do. For example, before you start a lawsuit consider the following:
There is always the possibility of a "counter claim." If you sue someone in Small Claims Court, it is usually possible for the person you sue to "counterclaim" which essentially means to sue you back. If so, this can mean that you may not collect on the fender bender, and instead may have to pay the other side's claim for damages to its car.
Limited damages are available. Every Small Claims Court has a maximum amount it can award. If the maximum amount you can recover in your state's Small Claims Court is $2,000 and you have the potential to recover $10,000, you would be giving up your right to seek the extra $8,000.
Simplified procedures may hurt you. For example, in Small Claims Court you generally can't get to examine records that may be very important to your case which the other side – or third parties – have.
Limited rights to appeal. What the judge or court appointed arbitrator says is usually final, even if the judge or arbitrator made a serious error in terms of the facts or the law.
Lack of "punitive damages" and "value as precedent". If the defendant's conduct was outrageous, in some instances it is possible for a regular court to award "punitive damages" to punish the defendant and discourage others from similar behavior. Most Small Claims Courts can not award "punitive damages.
Small Claims decisions are rarely useful as "precedent" in other cases involving the same issue or the same party. So if you were just one of many victims of a fraudulent sales scheme or defective product, and you want "to teach the wrongdoer a lesson" a Small Claims action may not be the way to go.
Impact on your other rights. Say you successfully sue for the damage to your car. That may preclude you from recovering anything for the whiplash that you later recognize was caused by the fender bender. Also, if a passenger in your car later sues you, you may not be able to turn around and sue the other driver.
Again, in many cases it may makes sense to consult with an attorney before you bring suit in Small Claims Court.