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When attorney and tech entrepreneur Stephen Kane recently used the word “disruptive,” he, surprisingly, wasn’t talking about the startup economy. He was referring to small claims court.
A startup and small-business lawyer, Kane has seen a number of companies lose thousands of dollars in unpaid invoices or undelivered products and services. Generally, if clients hope to collect what they’re owed, the most effective option is small claims court, where they’d present their case to a judge in a courtroom without an attorney. But, with the pressure of representing themselves and the expenses of prior consultations with lawyers, many find the experience to be a losing battle.
Kane had an epiphany: Businesses and individuals should have the option to mediate these cases themselves, and see the same level of efficacy – entirely online.
Arbiclaims is Kane's answer, a platform striving to become a virtual alternative to small claims court. The Web-based service, which specializes in breach-of-contract disputes (such as a landlord not returning a security deposit or someone who damaged a car refusing to pay to have it fixed), hosts 30-minute online “trials” with a plaintiff and defendant, presided over by a legally trained arbitrator.
“Overall, I’m motivated by the prospect of democratizing the legal system and increasing access to quality justice...With Arbiclaims, you get a fair hearing very quickly without hassle and without having to spend money to hire an attorney,” Kane said.
Here’s the process: a plaintiff files a claim against someone who owes her money – if the defendant is an individual, the threshold is $10,000, and if it’s a business, $5,000, mirroring the small claims thresholds dictated by California law. Arbiclaims invites the defendant to participate, letting her know she may have to go to small claims court if she declines. Each side then submits evidence (such as a contract or email thread), and the trial is conducted via webcam by an arbitrator who Kane said is one of a pool of “experienced lawyers from the best law firms and schools who also display a knack for judgment and an ability to effectively communicate with our customers.”
The arbitrator makes a final binding decision within three weeks.
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Founder Stephen Kane
But is a ruling from Arbiclaims really tantamount to that of a court judge? Doesn’t a plaintiff’s case lose clout if it’s conducted online, rather than in court?
“Arbitration is just as enforceable as a court judgment,” Kane said. “Someone using Arbiclaims can take the arbitration decision to law enforcement once they get the arbitration decision confirmed...and use the judgment to get what they’re owed by impounding a bank account or garnishing wages.”
Beyond that, Kane contends that Arbiclaims liberates both parties from the yoke of a congested court system. In addition to saving time, it costs less: $129 per person, with a 3 percent deduction of the winner’s settlement. The decision-making period is significantly shorter than it would be in court — Kane said waiting two to three months is standard in Los Angeles County. Finally, Kane said, arbitrators spend more time on each case than court judges or commissioners.
“The most striking issue is that most small claims court cases are given about 10-15 minutes of attention, in LA County at least. Total. There’s little or no time spent before the court appearance reviewing the documents and the case. The small claims court commissioner or judge pro tem – a practicing lawyer hearing cases on a part-time basis – typically hears cases all day, back to back. Each side walks up, says their piece for a few minutes, and the commissioner decides right there, again, without necessarily having review the cased beforehand,” he said.
Arbiclaims will launch within the coming weeks, Kane said. In the meantime, he’s pursuing funding and reviewing resumes for arbitrators with plans to bring two or three more on board.
In time, Kane hopes, the startup will offer a simple antidote to a small claims system that makes the process of arbitration more accessible, efficient, and effective.
“We hope to democratize and improve access to quality justice for those who currently don’t have it. And in doing so, inspire people to consider how they might resolve their differences outside of the rough and tumble of the current legal system,” he said. “If we’re successful at resolving small claims matters, we intend to explore where else we can add value on the dispute resolution front.”
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