Block on Trump's Asylum Ban Upheld by Supreme Court
Seventh Circuit Judge Richard Posner’s civil procedure opinions often read like the textbook you wish you had in law school. Judge Posner has a knack for explaining procedure in a step-by-step process, noting why the court disposes of particular arguments.
Wednesday, Judge Posner explained in one of his textbook-style federal jurisdiction opinions why an allegation that the amount in controversy is $2 billion does not mean that the amount is $2 billion.
Baba-Dainja El bought a used truck for $28,000, which he financed through a six-year installment contract with a 23.9 percent interest rate. (Yikes.)
The dealer assigned the contract to AmeriCredit. After making the first installment, El sent his new creditor a copy of the installment contract that he had stamped "accepted for value and returned for value for settlement and closure." El told AmeriCredit to collect the balance from the U.S. Treasury. AmeriCredit repossessed the truck, sold it, and billed El for $11,322.28 to cover the unpaid balance.
El responded by suing AmeriCredit (pro se, naturally) for $34 million in compensatory damages and $2.2 billion in punitive damages. Even though the AmeriCredit litigants were based in different states, that doesn't mean he satisfied federal jurisdiction.
El based federal jurisdiction on the admiralty and diversity jurisdictions of the federal courts. Admiralty jurisdiction is triggered by two elements: Maritime activity and federal question. Posner clarified, "cases don't have to arise under federal law in order to be within the admiralty jurisdiction ... they just have to involve maritime activities." Unfortunately, El's claim was not within the admiralty jurisdiction because it was unrelated to maritime activities.
Dismissal with prejudice is generally inappropriate because it may improperly prevent a litigant from refiling his complaint in a court that has jurisdiction. Dismissal with prejudice is proper if the reason there's no federal jurisdiction is that the plaintiff predicated jurisdiction on a frivolous federal claim. Judge Posner explains that the difference between a federal question that is frivolous and a diversity case that is frivolous is that the latter case is within the federal jurisdiction because a substantial claim is not a condition of diversity jurisdiction.
The opinion suggests that everyone involved -- El, AmeriCredit, and the district judge bungled this case:
The judge should have dismissed the counterclaim for want of federal jurisdiction, though without prejudice because AmeriCredit should be allowed to refile it as a new suit in an Illinois state court ... The amount AmeriCredit would be suing for might be too small to make suit worthwhile unless it would have an in terrorem effect that would make future debtors less inclined to try to stiff AmeriCredit, which seems unrealistic. Rather than file a counterclaim over which the district court had no jurisdiction, as AmeriCredit's lawyers should have realized from the get-go, or bring suit in state court, AmeriCredit could have asked the judge to impose sanction on the plaintiff under [FRCP] 11 for filing a frivolous suit.
Judge Posner's opinion in this case is full of great tips for addressing diversity jurisdiction deficiencies. If you need a refresher on the topic, you can find the opinion here.
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