Can a claimant avoid federal jurisdiction by stipulation?
Our federal courts do not designate certain orders as “orders of importance” the Commercial Court makes, but if they did, a recent ruling by North Carolina Middle District Judge William L. Osteen, Jr. might qualify. This short blog post reviews such a removal order because the plaintiffs have stipulated that they will not seek and would not accept more than the amount of controversy necessary for the federal jurisdiction over diversity.
Review pre-trial detention in a previous case
To explain further, let’s travel back in time to July 2020 and revisit my message discuss another decision returning a case to state court. This case, Cannon v. Automoney, Inc., included a motley crew of questions regarding whether the amount in dispute exceeded the $ 75,000 needed for the diversity competency. In the end, after a considerable number of calculations, the court concluded no and sent the case back.
Calculations aside, the defendants in this case also argued that pre-trial detention was inappropriate because the plaintiffs refused to stipulate that they would not ask for or accept more than $ 75,000. The court rejected this argument, citing several previous decisions saying that such a stipulation was not necessary to confirm that the amount requirement in dispute was not met.
Plaintiffs cut the defendants’ second bite to apple
Today’s short article discusses this topic: McDonald v. Automoney, Inc. Mcdonald’s has a similar case been brought by the same lawyer for the plaintiffs in the Cannon Case. Both cases involved auto title loans. In both cases, North Carolina resident plaintiffs were suing two South Carolina companies, so each met the diversity citizenship requirement for federal jurisdiction.
Not willing to take the risk that a new judge might look favorably on the argument that the defendants raised in Cannon, the Mcdonald’s the plaintiffs gave the defendants exactly what they were looking for – an allegation in the complaint that “[e]Each plaintiff states that they will not seek, seek or accept damages in excess of $ 75,000. To reinforce this stipulation, several claimants have provided additional statements with their request for remand stating the same.
In the fourth circuit, both elements of this stipulation are important: the promise not to seek more than $ 75,000 and the promise not to accept it. Mcdonald’s relied on a unpublished fourth circuit case where the Fourth Circuit ruled that federal jurisdiction was appropriate despite a promise not to ask for more than $ 75,000 because they also failed to stipulate that they would not accept more than $ 75,000.
Applicants knew how to make the stipulation and maintain the stipulation
Without delving too deeply into history – a story that dates back to dictas in a 1938 Supreme Court case– because plaintiffs in some states (including North Carolina) may have the right to recover more than what they ask for in a complaint, the most recent practice has been to require a binding stipulation or affidavit that ‘a complainant does I accept over $ 75,000 to defeat the Diversity Competency Referral.
This is precisely what the Mcdonald’s the complainants did. This led Judge Osteen to follow another recent decision of the Middle District where the complainants associated a stipulation of the complaint with statements in support of their request for referral. Indeed, the opinion concludes by underlining “and will not accept” in the stipulation. It was this point – a binding promise that complainants will not accept more than the amount required for jurisdiction – that was at the heart of the remand decision.
Take away food
Mcdonald’s is another reminder that wise complainants can keep their cases out of federal court by including a stipulation in a complaint as well as statements in support of a referral motion. The flip side is that defendants can use these cases to justify staying in federal court, unless plaintiffs agree to limit the amount of recovery they will accept.