LITTLE ROCK - The city of Sherwood funds a substantial portion of its budget with a hot-check court that essentially serves as a modern-day debtors’ prison, a federal lawsuit filed Tuesday alleges.

The American Civil Liberties Union of Arkansas, the Washington-based Lawyers’ Committee for Civil Rights Under the Law and the New York law firm Morrison and Foerster filed the suit in U.S. District Court in Little Rock against the city of Sherwood, Pulaski County and Sherwood District Court Judge Milas Hale.

Named as plaintiffs in the suit are five people who have been prosecuted in the Hot Check Division of Sherwood District Court, as well as “all others similarly situated.”

According to the suit, under an agreement entered into in the mid-1970s, the Sherwood District Court has “a virtual monopoly” on the prosecution of misdemeanor hot-check violations in Pulaski County. The court, working with city and county law enforcement agencies, uses real or threatened arrests and incarceration to coerce payments from people who cannot afford to pay, the plaintiffs claim.

The suit alleges that the city, the county and Hale have built up over the years a “debt enforcement and collection scheme” that results in widespread arrests and jailing of citizens and multiple new fines, fees and court costs.

People who are prosecuted in Sherwood’s hot-check court are not asked about their ability to pay, are not asked about their ability afford an attorney, are coerced into waiving their right to an attorney and are subjected to arbitrary and discriminatory treatment compared to people who owe money to private creditors, the suit alleges.

“If ever there was a case about the criminalization of poverty, this is it,” Rita Sklar, executive director of the ACLU of Arkansas, said at news conference in Little Rock announcing the suit. “A single bounced check written 10 years ago for $15 can be leveraged into a debt of thousands and thousands of dollars in fines and fees for inability to pay the original check and then inability to pay the payments that were set up, that the person was coerced into agreeing to.”

Sklar said the court meets in secrecy, with the public and press not allowed to be present and the defendants not allowed to have representation. She said that if a person denies having written a bounced check, Hale pulls out the person’s waiver-of-counsel form and compares the signature on it to the signature on the bounced check.

“You have a judge acting as a prosecutor, judge and jury, it appears to me, with no advocate. It’s really something quite out of the Middle Ages,” Sklar said.

She also said there is a racial element to the court, alleging that three out of four defendants are black.

The suit seeks an order declaring the hot-check court unconstitutional and requiring Sherwood and Pulaski County to repay all money illegally obtained from citizens through the court, which Sklar said could total in the millions.

Sherwood City Attorney Steve Cobb and Pulaski County Attorney Adam Fogleman did not immediately return calls Tuesday seeking comment.