Reversal: Small claims courts cannot order mediation, ADR

Parties cannot be ordered to participate in alternative dispute resolution in small claims proceedings, the Indiana Court of Appeals ruled Thursday, reinstating a dog-bite case that a judge had dismissed after litigants refused to participate in court-ordered mediation.

When Kay Kim and Charles Chuang alleged a neighboring dog bit their own two dogs at an outdoor common area in their condominium complex, they sued the Village at Eagle Creek Homeowners Association, Inc. and Muhammed and Andleeb Javed seeking damages.

The Marion County Small Claims Court of Pike Township ordered the parties to participate in alternative dispute resolution, including either mediation or arbitration. A mediator was picked, but Kim and Chuang refused to pay more than $70 for the mediation, rejecting the mediator’s requested $200 per hour to be split equally between the parties and a retainer of $300 to be paid by both sides.

The mediator later resigned from the post, informing the court that due to correspondence between Kim, Chuang and himself, he felt that he was “in an adversarial relationship with the Plaintiff[s]” and could no longer act as mediator in the case. The small claims court thus sua sponte set a Rule to Show Cause hearing and ordered Kim and Chuang to appear and show cause as to why they should not be held in contempt for failing to attend mediation.

The small claims court ultimately dismissed Kim and Chuang’s case with prejudice, citing their refusal to attend court-ordered mediation and their unwillingness to change their position on the mediator’s cost. Kim and Chuang appealed, arguing the small claims court erred in its dismissal.

The Indiana Court of Appeals reversed for the plaintiffs, noting that although the small claims court had ordered the parties to participate in mediation or arbitration, they were not required to do so pursuant to the Indiana Rules for Alternative Dispute Resolution.

Specifically, members of the appellate panel noted that Indiana Rule for Alternative Dispute Resolution 1.4 only lists that its rules shall apply in all Circuit, Superior, County, Municipal and Probate Courts in the state.

“The Marion County small claims courts are not included in this rule; therefore, cases filed in these courts are not subject to the rules, and the parties in these cases cannot be ordered to alternative dispute resolution, including mediation or arbitration,” Judge James Kirsch wrote. “In the present case, therefore, contrary to the order by the small claims court, the parties could not be ordered to mediation.”

It did note, however, that while parties cannot be ordered to participate in alternative dispute resolution in Marion County small claims proceedings, the appellate court’s holding does not bar parties in those small claims proceedings from being compelled to participate in alternative dispute resolution when they have contracted to be subject to such processes.

“Under Indiana Small Claims Rules, the ‘sole objective’ of the informal proceedings is ‘dispensing speedy justice between the parties according to the rules of substantive law’ and the proceedings ‘shall not be bound by the statutory provisions or rules of practice, procedure, pleadings or evidence … .’ We find that the inapplicability of the Indiana Alternative Dispute Rules to small claims cases furthers this objective in that barring alternative dispute resolution streamlines the small claims procedure and brings about ‘speedy justice between the parties,’” the panel concluded.

The small claims court was thus found to have erred in its dismissal in Kay Kim, et al. v. Village At Eagle Creek Homeowners Association (Vec Hoa), et al., 19A-SC-00970. The case was reversed and remanded for further proceedings.

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