A $5,764 Small Claims Judgment Leads to …

competing conclusions of unconstitutionality under two separate constitutional provisions, in two separate jurisdictions.


The history of the litigation in In re Hailey, decided by the Virgin Islands Supreme Court last Wednesday:

2014: Tropic Leisure Corp. gets a $5,764 judgment in Virgin Islands small claims court against Jerry Hailey.

2015: Tropic Leisure domesticates the judgment in North Carolina, presumably so it can then enforce it against Hailey's property in North Carolina. But Hailey appeals, and (in 2017) the North Carolina Court of Appeals holds that the judgment violated the Due Process Clause. Why? The Virgin Islands small claims court, the North Carolina court concluded, not only forbade people from being represented by counsel (common for small claims courts) but also didn't offer a chance to have the case be reheard anew in a court which did allow counsel.  Tropic Leisure petitioned for review by the N.C. Supreme Court and then the U.S. Supreme Court, but both courts (still in 2017) denied review.

Back in 2015: Hailey sues Tropic Leisure in North Carolina, claiming that the Virgin Islands small claims judgment violated his constitutional rights under color of law.

2018: Hailey wins a $29,311 jury verdict in North Carolina, and also gets $182,070 in attorney fees. There's an appeal pending to the North Carolina Court of Appeals.

2019: Hailey then tries to domesticated the North Carolina judgment in the Virgin Islands.  After some complicated procedural stuff, the case ended up in the Virgin Islands Supreme Court.

2020: The Virgin Islands Supreme Court just held that the North Carolina judgment violated the Petition Clause of the First Amendment, by penalizing nonfrivolous litigation:

Here, the two North Carolina judgments impose civil liability on the respondents for filing a successful lawsuit against Hailey in the Small Claims Division of the Superior Court of the Virgin Islands resulting in a judgment that, while not enforced by the North Carolina courts, still remains valid and enforceable in the Virgin Islands.

(It also held that, under Virgin Islands law, defendants in small claims cases were never denied the right to counsel, because "a matter filed in the Small Claims Division should be transferred to the Civil Division [where counsel can be used] whenever counsel is retained or even just requested.")

No word on whether Hailey will be petitioning for U.S. Supreme Court review, or what both parties' aggregate attorney fees now are.

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  1. They need to transfer the case(s) to their respective Big Claims courts.

  2. As always, in a legal dispute between two parties, the real winner is the lawyers. Everyone else loses.

    1. Your point is a massive overgeneralization.

      1. Indeed. Various kinds of civil rights laws permit the court to award legal fees to the prevailing plaintiff (and sometimes, though rarely, to prevailing defendants) despite the normal “American Rule” under which each side bears its own costs and fees. They do this because, however important the rights these laws protect, the claims often lack significant pecuniary value, which makes contingent-fee representation impracticable, and are usually raised by people who could not afford to pay their lawyers out of their own pockets. How else could someone screwed out of a minimum-wage job because of race, gender, religion, or what-have-you bring a lawsuit? Plaintiffs who have, lose, or seek, low-paying jobs can barely pay for themselves, let alone pay for lawyers, and one-third of, say, a year’s worth of minimum-wage backpay and modest emotional distress damages would rarely tempt a lawyer to take even a meritorious case. So the laws, essentially, bribe lawyers to take these low-value cases.
        There is nothing uncommon in the fees exceeding the plaintiff’s recovery, even significantly exceeding it. (it is hard to bring a federal case to trial for under six figures.) This is not a bug, it is a feature. Without the “bribe,” the case would not be brought at all, and the plaintiff would get nothing. So plaintiffs come out ahead. Sometimes defendants settle cases for economic reasons that they might otherwise fight, and possibly win, because of the added risk of a significant fee award.
        But it just isn’t true that everyone loses except the lawyers, unless what you really mean is that these kinds of cases should not be brought. Which is what many people do mean.

        1. “Without the “bribe,”….

          When the bribe exceeds the dollar value of any judgement by multiple-fold…
          You gotta wonder. Is the tail wagging the dog here?

          “(it is hard to bring a federal case to trial for under six figures.) ”
          That’s a completely different problem. One that should be solved. It shouldn’t cost $100,000+ to bring a case to trial, even in federal court. Perhaps some sort of cap on costs…

          1. Right, because price controls work so well, and are so easily enforced.

            1. There are price controls and price controls.

              If courts are deciding the fees, seems like enforcement could be pretty easy there.

          2. Why “shouldn’t” it cost what the market says it costs to bring a federal lawsuit to trial? And what can be done about it? A statutory cap on lawyers’ hourly rates? How many hours of work do you think it takes to prepare and try a federal lawsuit? Courts review fee requests and are quite willing to slash hours spent on useless busywork, but it’s still going to be in the multiple hundreds of hours, even without padding or extra work done because your opponent is being a jerk. How about an enormous expansion of civil legal aid lawyers, paid a flat salary, win or lose, to handle cases like these? Is this really what you want? That’s not what I would expect from folks here.

            1. “Why “shouldn’t” it cost what the market says it costs to bring a federal lawsuit to trial”

              As a market, that’s a quite restricted, distorted market by a variety of reasons. For example, the ability to pass costs onto other people through legal judgement, as opposed to choice. It’s like buying a steak where you’re able to pass the cost of the steak onto the table next door. It heavily distorts the market. There are other reasons.

              “And what can be done about it? A statutory cap on lawyers’ hourly rates?”
              That’s an idea. How about this compensation schedule? A maximum hourly rate of $152 an hour for federal court cases.

              “How many hours of work do you think it takes to prepare and try a federal lawsuit?”

              Let’s use your number. “Multiple hundreds of hours”. Seems excessive, but lets call it 400 hours. That’s 10 weeks solid, 2.5 months, this and nothing else (at standard 40 hour weeks. For the sake of argument). That’s $60,000.

              Now, I could ask WHY it takes 10 weeks solid work from a single lawyer, full time, to prepare for a single trial. And perhaps, just perhaps, the paperwork burden should be lowered so it doesn’t take 10 weeks. I could also point out that assuming the lawyer got that rate (Which you almost certainly think is too low), he or she would still be paid well in excess of sitting federal circuit court judges.

              And as for what you would expect from “folks here”, we’re a diverse group.

              Really, I’m throwing some questions around here that ask why someone is going to be hit with such a massive legal bill, well in excess of any actual damages or monetary amounts to begin with. That should speak to the market distortion going on.

              1. Assigned counsel get paid win or lose. If you’re proposing that plaintiff’s lawyers in civil rights cases get paid those rates win or lose, you will get a lot of takers. Many of whom will take on weak cases that they would not dare take if, as is the case now, they have to win to get paid. But who would pay them win or lose? Why should a victorious defendant pay? So who pays?

                1. If we’re treating this as a market, as you seem want to.

                  Then the person who hires the lawyers pays.

              2. I could also point out that assuming the lawyer got that rate (Which you almost certainly think is too low), he or she would still be paid well in excess of sitting federal circuit court judges.

                I don’t think sitting federal circuit court judges have to pay their, inter alia, staff, electric bills, Internet service providers, and rent out of their own pockets.

            2. Why “shouldn’t” it cost what the market says it costs to bring a federal lawsuit to trial?

              Because justice shouldn’t be a luxury good.

        2. And thats all well and good, but it just seems, like, I doubt those minimum wage workers can get much relief anyway, and it allows a bunch of non-meritorous cases to cost a company or group hundreds of thousands of dollars.

          And why are lawyers entitled to that kind of money anyway?

          At the very least, one could pass statutory limits on appeals or federal jurisdiction, with clearer rules. It seems to me that most of the money is being spent in legal fights over procedure, jurisdiction, fees, countless motions all saying exactly the same thing, etc … which only a very small minority actually concerned with the facts that made the case important in the first place.

          I think that’s the main issue. If you need the “bribe” to actually interest lawyers in taking the case, fine. But it seems that an entire system has been built to milk people who file suits or are attacked out of money through esoteric debates that are irrelevant to the actual issue at hand, and that’s dumb.

      2. And yet, surprisingly accurate.

        A $5,000 default judgement for you in small claims court, because someone didn’t pay their bill, leads somehow to liability for over $200,000 against you? 90% of which goes to the lawyers?

        Just not right.

  3. Back in 2015: Hailey sues Tropic Leisure in North Carolina, claiming that the Virgin Islands small claims judgment violated his constitutional rights under color of law.

    Huh, they sued another private citizen because a VI authority violated someone’s constitutional rights? How does that work?

  4. More generally, I thought it was a truth universally acknowledged that at least half of the great constitutional breakthroughs in any jurisdiction come from extremely petty litigation.

    In the US you have Marbury v. Madison, which – let’s face it – was extremely petty from Madison.

    In the UK there’s the metric martyrs, where the High Court held that there was such a thing as a “constitutional statute” which could not be repealed except expressly. That case was about a couple of market salesmen who had been fined for not using kilograms. (Thoburn v. Sunderland City Council.)

    In the Netherlands a big one is Meerenberg, which established that the Crown did not have the constitutional authority to create new criminal offences. That case was about an insane asylum where they refused to register their inhabitants in the regular register of inhabitants.

    &c &c &c

    1. Also extremely petty, but not quite so constitutionally important, is the UK Supreme Court case of Isle of Wight Council v. Platt (2017), where a parent got fined £60 for taking their kid out of school to go on vacation during term time. Several appeals later, the Supreme Court quashed that fine because the statutory rule was that parents had to make sure their kids “regularly” attended school, and taking them out of school once to go on holiday didn’t change the fact that the defendant’s kid otherwise regularly attended school…


      1. No, the Supreme Court upheld the fine.

  5. That North Carolina judgement seems horrible, at least on first impression.

    1. What color of law does a private individual have? Filing a suit does not make you a state actor.

    2. I have never seen a case holding that there is a right to counsel in any civil action, let alone a small claims action. And given the 6th A. has been held not to apply to summary offenses I can’t imagine why a vague (non existent?) due process right to counsel in a civil suit would apply to a small claims issue.

    1. I will recognize that on point 2 many states have either enacted statutes or read their constitution to so guarantee, but those aren’t enforceable against another jurisdiction. And perhaps there have been some tangential cites one could make in the wave of lawsuits regarding Title IX disciplinary hearing procedures.

      But a free standing right to counsel in all civil actions is a major departure precedent.

    2. @ mse326: You’re confusing two different things — whether a civil litigant has a right to counsel paid by the State due to the litigant’s indigency and whether a civil litigant has a right to counsel at his own expense.

      You’re right that in general, there’s no constitutional right, under the Sixth Amendment or otherwise, for the former. But I’ve never before seen or heard of any U.S. state (or territory) refusing to permit someone the benefit in court of private counsel whom the client has retained at his or her own expense for advice & representation.

      FWIW in Texas, where I’ve been licensed for 39 years, our “justice of the peace” courts serve as small claims courts, and even today it is still very common, especially in rural counties, for the JP to be a nonlawyer, and for litigants to proceed pro se. Lawyers are welcome at the parties’ own expense, however, and the JPs will enforce Texas laws that shift the prevailing party’s fees to the loser in appropriate cases where that’s authorized by statute. But Texas JP courts are not “courts of record”; they don’t have a court reporter; and “appeals” therefrom to county court, where the judge will definitely be a lawyer and pro se litigants proceed at their own considerable peril, are “trials de novo,” meaning everyone starts over as if the JP court proceedings had never happened.

      My favorite experience in Texas JP court is related in the tale of the trial judge who based his ruling on a coin flip, and he was indeed a very wise and just Justice of the Peace.

  6. Even if the North Carolina Court was correct in holding that the Virgin Islands Small Claims Court rules prohibiting attorneys violated Tropical Leisure Corp’s constitutional rights, I don’t see how liability for those court rules could possibly be attributed to Tropical Leisure Corp.

    I think the Virgin Islands decision is basically correct that a plaintiff cannot be held liable for filing a non-frivolous, good-faith lawsuit regardless of whether the court’s procedural rules for that lawsuit were constitutional or not.

    And even if the North Carolina court was correct in holding that a small claims court judgment from a state whose courts don’t allow attorneys cannot be enforced in North Carolina, it had no right to hold the original plaintiff personally liable for the infirmities of the original court’s procedural rules.

    1. Agreed. If the North Carolina trial court’s conclusion were correct, every plaintiff would be acting under color of law whenever they file a lawsuit and would be potentially financially liable for things they have absolutely no control over.

  7. Also, I think the North Carolina court is off its rocker on the merits. The US Constitution does not guarantee a right to an attorney in small claims cases. And the Full Faith and Credit Clause requires enforcing the judgment.

    1. “And the Full Faith and Credit Clause requires enforcing the judgment.”

      Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.

      The Virgin Islands is not a state. By it’s plain text, the Full Faith and Credit Clause does not apply.

      1. @ MatthewSlyfield: But see 28 U.S.C. § 1738, which extends the Full Faith & Credit Clause to U.S. territories.

        I haven’t checked, but my guess is that the 2015 North Carolina litigation was under that state’s version of the Uniform Enforcement of Foreign Judgments Act, which I shan’t link (to keep my comment from being bounced into the endless limbo of moderation), but which you can quickly Google for yourself. Section 1C-1705(a) thereof permits a judgment debtor to seek relief from a foreign judgment “on the grounds that the foreign judgment has been appealed from, or enforcement has been stayed by, the court which rendered it, or on any other ground for which relief from a judgment of this State would be allowed.” (Emphasis mine.) I presume that the North Carolina appellate courts would grant relief from a judgment rendered by a North Carolina court that had denied a civil litigant his/her/its right to counsel (at his/her/its own expense), and that that’s the basis for the 2015 decision there.

    2. @ ReaderY: You’re confusing the right to be represented by counsel at all and the right to be represented by counsel paid by the State. See my comment above.

  8. Not that I necessarily agree with the North Carolina appeals court, but isn’t there a difference between outright prohibiting counsel and simply not guaranteeing the right to counsel?

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