Out-of-state small claims (NC/PA) and jurisdiction/venue clause

[JohnnyMc]

What is the name of your state (only U.S. law)? North Carolina

Hello,

I am an LLC owner in NC that has an agreement with a debtor (a corporation in Pennsylvania) wherein the debtor agrees to pay my LLC monies owed ($6000) on a monthly basis. The debtor has defaulted. I have learned that I cannot file a small claim in NC because the debtor is out-of-state. As I understand it, a small claim could be filed in PA, though. My problem is that the agreement specifies that the jurisdiction and venue is my LLC's county in NC:

This Agreement shall be construed in accordance with the laws of the State of North Carolina, with jurisdiction and venue in XXXX County, NC.

Does this mean I will have to file a suit with my county's court against the debtor which would mean a much more expensive action since I cannot submit a small claim?

Thank you,

John.

 

[Zigner]

What is the name of your state (only U.S. law)? North Carolina

Hello,

I am an LLC owner in NC that has an agreement with a debtor (a corporation in Pennsylvania) wherein the debtor agrees to pay my LLC monies owed ($6000) on a monthly basis. The debtor has defaulted. I have learned that I cannot file a small claim in NC because the debtor is out-of-state. As I understand it, a small claim could be filed in PA, though. My problem is that the agreement specifies that the jurisdiction and venue is my LLC's county in NC:



Does this mean I will have to file a suit with my county's court against the debtor which would mean a much more expensive action since I cannot submit a small claim?

Thank you,

John.

I'm not sure that your poorly-worded clause is enforceable. You should run this by an attorney.

 

[JohnnyMc]

I'm not sure that your poorly-worded clause is enforceable. You should run this by an attorney.

Thank you for your very quick reply.

Sadly, my attorney wrote the agreement.

 

[adjusterjack]

I believe that you can waive that provision of the agreement and file in PA and hope that the defendant doesn't raise the issue and get it dismissed.

 

[Zigner]

Thank you for your very quick reply.

Sadly, my attorney wrote the agreement.

In that case, your attorney is the person to ask.

 

[HRZ]

a small claim action in Pa may be inefficient as it is ultra easy if you win for defendant to appeal and it's de novo into county court in Pa. ...try your paid NC counsel for thoughts.

 

[latigo]

What is the name of your state (only U.S. law)? North Carolina

Hello,

I am an LLC owner in NC that has an agreement with a debtor (a corporation in Pennsylvania) wherein the debtor agrees to pay my LLC monies owed ($6000) on a monthly basis. The debtor has defaulted. I have learned that I cannot file a small claim in NC because the debtor is out-of-state. As I understand it, a small claim could be filed in PA, though. My problem is that the agreement specifies that the jurisdiction and venue is my LLC's county in NC: . . . .

Does this mean I will have to file a suit with my county's court against the debtor which would mean a much more expensive action since I cannot submit a small claim? Thank you, John.

You've answered you own question.

If the chief district judge in the county won't assign the case to a magistrate for hearing as a small claim case (even on the strength of the quoted agreement) then you must file in the agreed North Carolina county and have it heard by a district judge.

The only alternative would be to obtain the written consent of the defendant to have the case tried in Pennsylvania.

I don't wish to be disheartening, but I have serious doubts of your ability without professional help to file in a North Carolina county court, obtain an order for out of state service of process upon the defendant; complete that service; prosecute your claim to a successful conclusion; and then have that North Carolina judgment "exemplified" and "transferred' to and become an enforceable judgment in Pennsylvania. With no assurance that the judgment is collectable.

Give some serious thought to assigning the claim for collection.

 

[Zigner]

The only alternative would be to obtain the written consent of the defendant to have the case tried in Pennsylvania.

Oh, you mean like a contract that allows for it?

 

[JohnnyMc]

Thank you for your answer which basically confirms what I feared. Evidently, my attorney gave me bad advice and has left me in a position where I'd likely spend more than I am owed to recover my money. Had I known, I would have specified the debtor's county in PA as the venue and would drive there.

Well, I've learned something and will be a lot more cautious in the future.

John.

 

[PayrollHRGuy]

I don't know that I would call it bad advice. It is not unusual at all to to have such a clause in an agreement. All of the contracts my company uses with clients in several states have the same clause with my county and state. It keeps us from having to deal with claims in other states which would be much more expensive to litigate than one here.

 

[Zigner]

For clarification: My comment was more to say that the phrasing of the clause was odd, not that the clause itself is uncommon.

 

[JohnnyMc]

I don't know that I would call it bad advice. It is not unusual at all to to have such a clause in an agreement. All of the contracts my company uses with clients in several states have the same clause with my county and state. It keeps us from having to deal with claims in other states which would be much more expensive to litigate than one here.

By bad advice I mean that I explained to my attorney that should the debtor default then I would want to file with the small claims court in NC and avoid the costs of going the district court route. I didn't know that NC requires both plaintiff and defendant to be resident in the state. I think my attorney should have explained that to me. I do understand that if the debt exceeds the small claims limit then my concerns are moot since I'd have to go to district court anyway.

 

[PayrollHRGuy]

Then you probably did get bad advice.

From the guide-to-small-claims-court.pdf www.legalaidnc.org/Documents/guide-to-small-claims-court.pdf

Where to Sue
If you are suing someone who lives in your own county, start the lawsuit there. If you are suing someone in a differ- ent county, you must start the lawsuit in that county. This means mailing or taking the forms and fees to the clerk of court in the other county.
Your trial will be held in the county where the defendant lives. If you are suing more than one defendant and they live in different counties, pick a county where one of them lives and sue them all in that county. For instance, if one of the defendants lives in your county but another defendant does not, you can sue both defendants in your county.

So unless the law allows a contract to override that you likely couldn't have ever had the chance to sue in NC Small Claims.

 

[HRZ]

Revisit doing it by the steps in district court in NC ..

 

[latigo]

Thank you for your answer which basically confirms what I feared. Evidently, my attorney gave me bad advice and has left me in a position where I'd likely spend more than I am owed to recover my money. Had I known, I would have specified the debtor's county in PA as the venue and would drive there.

Well, I've learned something and will be a lot more cautious in the future.

John.

This is a belated question, but how and by whom were you informed that your claim against the corporation couldn't be assigned to a magistrate to be tried as a small claim? Was it the decision of the chief district judge, that of some clerk or other court underling, or a standard fixed policy? Anyway did you make known of the contract clause whereby the corporation had agreed to jurisdiction and venue within the county? Does your attorney agree with the wisdom and finality of that decision?

Now with regard to your concerns as to the cost of litigation. Assuming that avoiding the expense of an attorney is a reason why you would favor a small claims action as opposed to one before a district judge, what leads you to believe that you as a non-lawyer could represent and advocate on behalf of the LLC?

The generally applied rule of law is that an LLC being an artificial legal entity distinct from it members "cannot can represent itself pro se". (Example: A recent decision out of the North Carolina Western District Court entitled, Sea Island Company v. The IRI Group, LLC.)

So, can you point to any legal authority in either North Carolina or Pennsylvania that makes an exception to that rule of law with respect to small claim actions?