Expert Advice

By William I. Goldsmith
     
      Civil Procedure
      New Rule Streamlines Collection Procedures
      On July 1, the process for handling most California collection cases?money claims for $25,000 or less arising from a transaction in which property, services, or money was acquired on credit?changed drastically.
      Before that, such straightforward collection matters were handled no differently than other civil actions?complete with multiple status conferences, case-management conferences, and hearings for orders to show cause. Though arguably necessary in larger and more complex matters, in simple collection cases these protracted conferences and hearings were not only a drain on the courts' administrative staff and judicial officers but also were costly for attorneys, plaintiffs, and defendants.
      Moreover, with 95 percent or more of such matters resolved by default judgment, these proceedings were usually attended only by appearance attorneys hired by plaintiffs counsel for the day. And in most cases, the appearance attorneys spent their time merely explaining to a judicial officer what was obvious from reading the docket itself?for example, that the request for entry of default judgment had been submitted but not yet acted on by the court, or that the defendant could not be timely served.
      Recognizing that changes had to be made in the best interests of the courts, litigants, and attorneys, the Judicial Council recently adopted California Rule of Court 3.740 to implement streamlined procedures for collection cases. For qualifying collections matters, litigants will now be initially exempt from the Fast Track rules for most civil cases.
      Acknowledging that a significant number of defendants in collection cases move, and move often?and that tracking them down is getting harder because of concerns relating to identity theft, consumers' privacy rights, and the like?litigants will now have six months from the filing date to effectuate service on all defendants. If service is not made within that time, or an order for publication has not been filed, the court will schedule a hearing to ascertain why reasonable monetary sanctions should not be imposed.
      But a few words to the wise: Do not wait until the last minute to file your proof of service of applications for an order for publication. Court staff will not look kindly on that. In fact, under the new provisions, these documents must be filed at least ten court days before the order to show cause hearing. (Cal. Rules of Court 3.740(e).) For attorneys who do a great deal of this type of work, it is also a good idea to use a five-month deadline internally, to give the court and your process servers and staff enough wiggle room for any unexpected contingencies.
      Once you have accomplished service, the court must automatically continue the order to show cause for 360 days from the date the complaint was filed. (Cal. Rules of Court 3.740(f).)
      Once served, litigants will have up to almost one full year to obtain a default judgment. Though attorneys typically are not compensated until they actually collect money, and so have every incentive to move these matters along as expeditiously as possible, errors are sometimes made in submitting the forms to court. And in some cases, the court enters the default but requests either an explanation or more documents to substantiate the claim.
      In these instances, counsel must take extra time to make the necessary corrections or obtain further documentation from the client. Again, it is best not to wait until the last minute to submit your request for default and judgment, to allow yourself enough time to correct any errors or address any questions before the 360 days run.
      If any defendant files a response in the case, the matter then comes back into the Fast Track system and is handled as any other civil matter. (Cal. Rules of Court 3.712(d).) The principal aim of these new rules is to address collection matters that proceed by default judgment.
      Finally, regardless of whether or not a response is filed, the new rules recognize that settlement is a good thing and that litigants should not be punished by being forced to appear in court merely to explain that a matter has settled. Thus, they provide that upon filing a notice of settlement, the court must vacate all hearings, case-management conferences, and trial dates. (Cal. Rules of Court 3.741.)
     
      William I. Goldsmith (bgoldsmith@goldsmithcalaw. com), a partner in the firm of Goldsmith & Hull in Encino, concentrates on creditors' rights and commercial litigation. He served on the Judicial Council committee that drafted the new procedural rule for collections cases discussed in this article.
     

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