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On the contrary, it would have been amazing if Google had sent a highly trained lawyer to deal with this. The amount in question, about $760, is probably less than a day's wages+benefits for a Google lawyer.

If you want to optimize for justice, there are plenty of failures in Google and Google's ad programs. They seem to be pretty clear about their intention of optimizing for profit, though.

As the article states, lawyers aren't allowed in small claims court.

The same para-legal would have sufficed with better preparation -- finding out the reasoning for account termination (i.e., non-content domain).

Do small claims have any bearing on legal precedent? Could someone site the legal reasoning in this case to also sue Google for their small claims, or even higher amounts?

No, (at least in Canada) they do not. Small claims is not judged by a "real" judge and those courts do not have the ability to set precedent. Same with most traffic courts. Of course you can always bring up the judgment in another small claims court, just won't be taken as rule of law.

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