Tuesday, March 13, 2018
Too clever by a cent
A student shared this story about a plaintiff who sued Southwest Airlines in Missouri state court for the "amount of $74,999.99 and nothing more." The author praises the plaintiff and his lawyer for their cleverness and creativity in keeping the case exactly one cent below the jurisdictional threshold to keep the case in state court. (According to the author, Southwest recently ceased providing service to Branson, so the plaintiff may benefit from the local controversy if the case remains in Taney County, MO, rather than moving 50 miles to the nearest federal court).
If the attorney's goal was to show off his cleverness in keeping the case in state court and his mastery of federal jurisdiction, however, he failed--by one cent. Section 1332 requires that the amount in controversy "exceeds $ 75,000." The federal jurisdictional minimum is $ 75,000.01 and the maximum amount to keep the case in state court is "$ 75,000 and nothing more," not $74,999.99.
I make sure to point this out in class, using the example of a complaint that pleads "the amount in controversy is $ 75,000" would not establish jurisdiction. It is nice to have a specific, erroneous, example to work with. It also shows the students that this stuff matters, at least to how the lawyer is perceived--if you are going to make a big show of cutting under the jurisdictional amount by one cent, make sure you get it right.
This thread shows that the "fundamental mistake" is the one made by the drafters of § 1332. "exceeds the sum or value of $75,000" draws a line between $75,000.00 and $75,000.01. Compare that with "equals or exceeds the sum or value of $75,000," which would draw the line between $74,999.99 and $75,000.00.
Which of these two lines is more psychologically salient? The one in which six out of seven digits differ. There's a reason plaintiffs gravitate to $74,999.99. It's not just that it's the more conservative of the two amounts in controversy one could plead. It's also that it's the one more people would pick if they had to give their best guess.
Posted by: James Grimmelmann | Mar 17, 2018 9:57:00 PM
Wasserman and others here , may find I guess , great interest in that post ( not related to the current post ) :
Posted by: El roam | Mar 17, 2018 8:29:28 AM
People who say that it can be remanded are absolutely right. But lots of defendants remove wrongfully, and fixing this takes a motion that you might or not get your fees and expenses on.
Plaintiff clients want their cases heard. Taking a loss of a hypothetical cent to move up your case by four weeks or so--I'm not sure what motion calendars are like in this jurisdiction--strikes me as a no-brainer.
Posted by: Anonymous Civ Pro Prof 2 | Mar 16, 2018 7:50:50 PM
I would not have been able to resist closing your post as:
"--if you are going to make a big show of cutting under the jurisdictional amount by one cent, make sure you get it right. That's my two cents."
Posted by: concerned_citizen | Mar 16, 2018 4:32:53 PM
That should be § 1446(c)(2)(A)(ii).
Posted by: Howard Wasserman | Mar 15, 2018 4:28:28 PM
Lost in this discussion (and unmentioned in my original post) is that, cleverness aside, it may not work. Under § 1446(c)(2)(ii), a notice of removal may look through the amount demanded in the complaint if state law "permits recovery of damages in excess of the amount demanded." So if the plaintiff could recover more than $ 75k (not more than $ 74,999.99), the case is removable.
Posted by: Howard Wasserman | Mar 15, 2018 4:24:48 PM
It seems to me pretty clear that lawyers are trying to make a show of being one cent below the threshold, for rhetorical or theatrical reasons. But it is also pretty clear that they are basing that by using $ 74,999.99, they base that theatrical show on a misreading of the statute (or an anticipated misreading of the statute by defense counsel and/or the district court that might deny the motion for remand).
So they add in an extra cent as "good policy." And perhaps it is. But once you are are above that exact penny, the theatrical effect is diminished. Once we get beyond .01, why not five cents, or a dollar, or $ 1000, or $ 3000.
Posted by: Howard Wasserman | Mar 15, 2018 4:21:17 PM
"There are published decisions making the very point he does; the penny can matter."
A comment referenced various cases where that is true, but that the penny led people to use the ninety-nine cents amount. It seems to me that there is a supposition from those who we have reason to think would know that a penny does matter. Just not necessarily in the same way.
The person in the cited case used felt they were "exactly" correct but turned out to be a penny off. Perhaps, two cent wiggle room is good policy.
Posted by: Joe | Mar 15, 2018 2:57:25 PM
I don't see how it shows that at all. Neither the plaintiff nor the defendant apparently recognized the issue in Freeland.
Some issues in the law are difficult. This one is not. There's a right answer and its plainly in the statute. If I'm the plaintiff and my "$75,000 and no more" tort suit gets removed, my remand motion will quote the statute, cite Freeland and other decisions, and remand will be forthcoming, possibly with a fee award under 28 U.S.C. 1447(c), because a pittance of research would have revealed the jurisdictional defect. Keep in mind: busy federal district and appellate courts don't want garden-variety tort suits. If there's a clear basis for remand to state court, they're almost always happy to oblige.
Posted by: Curmudgeonly Ex-Clerk | Mar 14, 2018 2:14:40 PM
Freeland shows why the lawyer’s and not Howard’s approach makes sense. The poor plaintiffs file in common pleas court, get removed to the federal district court, then go to the sixth circuit, before they get bounced for amount in controversy? That poor plaintiff’s lawyer.
Posted by: Anony lawyer | Mar 14, 2018 1:59:47 PM
One may read the case in link hereby ( Freeland v. Liberty ) very interesting but bit different in fact , here :
Posted by: El roam | Mar 14, 2018 1:35:43 PM
Any error is without consequence here (because neither $74,999.99 nor $75,000.00 result in federal jurisdiction), but I'm not sure why Professor W.'s post has attracted criticism. There are published decisions making the very point he does; the penny can matter. E.g., Freeland v. Liberty Mut. Fire Ins. Co., 632 F.3d 250, 252-53 (6th Cir. 2011) (holding that action seeking $75,000.00 was "exactly one penny short of the jurisdictional minimum of the federal courts"; vacating district court's judgment and dismissing suit sua sponte for lack of jurisdiction even though "the district court did not address it and the parties did not raise the issue in their briefs").
Posted by: Curmudgeonly Ex-Clerk | Mar 14, 2018 1:15:19 PM
"Lots people in the 8th Circuit are acting on a wrong reading of the plain language of the statute."
Who knows. Maybe, they are acting in a way understandable to how the relevant parties react. I think Anon's comment might have bite.
I find that it is helpful not to cut it totally close, especially when some might confuse "on the nose" as over the edge. "I'm exactly right" sometimes doesn't quite work. Having a penny wiggle room in a way that "looks" right (even if it isn't technically correct) seems a practicable good idea, even if it is wrong on paper (something a professor might focus more on).
Posted by: Joe | Mar 14, 2018 10:53:03 AM
Seriously? "Read the damn statute" is rarely an effective argument to make to a judge. Teaching students that they will always win if the law is on their side breeds a sense of entitlement that will quickly be their undoing once they are out in the real world, litigating these issues.
Posted by: Anon | Mar 14, 2018 9:14:39 AM
J’s analysis is correct. Those of us who practice for a living know the rule (but not the statute) is “keep it under $75,000 to stay out of federal Court.” If you get cute to the point that everyone is digging out Title 28 (including the Court), then what good is it? At that point you’re probably fighting over the statute and you’re costing your client hundreds or thousands in fees and disbursements.
But I don’t want to pile on Howard too much. Howard, if you want to statutory nitpick with your students in a productive way that they will long remember, do so with statutes of limitation and/or computation of time. At least once every 5 years a busy litigator will have a fight or heart attack on whether they are timely with something or one day late.
Posted by: Anony lawyer | Mar 14, 2018 8:33:06 AM
This reminds me of how, whenever I make an assignment due on a certain day, I'm tend to say it's due at "11:59 pm." There is certainly a clearly correct answer to whether midnight is "12 am" or "12 pm" (i.e., the former), but even the momentary confusion it could cause just isn't worth the headache. Drop down a minute, or drop down a cent, and it's completely clear and there's no problems.
Also, they did it for publicity. And they got much more publicity with $74,999.99 than they would have with $75,000. Seems well worth dropping the extra cent to be sure they received the news coverage they did, in fact, receive. So I don't think it's an error at all, really. I know a lot of people find the theatricality of law to be unpleasant, but it's a very real part of what lawyering is sometimes.
Posted by: J | Mar 13, 2018 9:21:57 PM
John: Interesting. Lots people in the 8th Circuit are acting on a wrong reading of the plain language of the statute.
Asher: I don't spend a lot of time on this and I do not test on it, so I don't know if I make a "big point" of it. But I think it is fundamental to highlight what the language of the statute is and what it means. What I hope is not that they remember what it is, but that they learn how to read a statute. So that when they do forget and they look up the statute, they know how to figure out what it means. And yes, in this case, any error does not harm the client's interests. But that does not mean we should not teach students to avoid even harmless errors, especially by spending one minute reading the statutory language.
Posted by: Howard Wasserman | Mar 13, 2018 8:16:53 PM
On perhaps a more substantive legal-education note than some of the comments above, I'm interested by your referring to this as a pretty fundamental mistake, and by your saying that you teach this very example in class because "this stuff matters." My civil procedure professor, a fairly major figure in the field who I respect enormously, also made a big point of this in class and tried to catch us on exams with it; I suspect bar examiners do too. But why is it that people like you or my professor think this point is so fundamental, or even worth spending class time on? When will this penny make a difference? This lawyer has maybe cost his client a cent without affecting the jurisdictional outcome; that doesn't seem too fundamental. It only shows that his understanding of the diversity statute is a penny off.
Conversely (inversely?), I can imagine that some people in his shoes plead the "right" number, and that some defense counsel embarrass themselves with frivolous notices of removal. Maybe they could even be sanctioned by especially hard-headed district judges, though I would hope not. But I would hope that a lawyer in that position who doesn't know the rule would stop and think that maybe the plaintiff knows what he's doing and look into the matter before he removed. Of course, he might not and probably a few lawyers have frivolously removed on this ground. But why is it terribly important to teach students to avoid a frivolous mistake that only a small fraction of lawyers would make or ever even be in a position to make, especially when that frivolous mistake will never affect the outcomes of cases? Aren't there are much more frequent or important procedural blunders that students should be taught to avoid? Defense lawyers who make the mistake will still get to defend the cases in state court after being slapped around for their frivolous removal.
Finally, I suppose a plaintiff's attorney that wanted to plead his way into federal court could mess up by claiming only $75,000 in damages. That's an actually consequential mistake. But how often do plaintiffs plead what they think is the minimum amount in controversy in order to get into federal court? And what remotely competent lawyer would stake their choice of forum on their dim recollections of first-year civil procedure anyway? I suspect that most of the people who make this mistake have been taught the correct number in law school, forgot, looked up the amount in controversy requirement, saw it written somewhere that it's $75,000, and proceeded from there.
I don't see, then, what great good it does to make a fuss of this point in civil procedure classes; it's not actually that important, and making a point of that kind of granular detail is unlikely to ensure recall of that granular detail years later. It strikes me that law professors like teaching the point because of the tendency among especially educated lawyers to attach great significance to practically inconsequential errors that, within the legal culture, are thought to somehow separate the educated from the untutored. This lawyer's mistake is the procedural equivalent of bad bluebooking; his client's interests aren't harmed at all, even less so than they could potentially be by bad bluebooking and the biases against counsel that do it, but the lawyer just looks stupid to people in the know. (Which isn't to suggest that I have anything against persnicketiness about uniform citation forms.) I guess it's worthwhile to teach students how to avoid harming their reputation, even if it makes no sense that reputational harms should attach to a certain kind of error, but the view that this sort of thing actually is "fundamental" just doesn't wash with me.
Posted by: Asher Steinberg | Mar 13, 2018 7:01:38 PM
is "too clever" really the right phrase?
anyway, i did a quick Lexis search on use of $74,999.99 in the Eighth Circuit and elsewhere and found a bunch of decisions where that language was used. maybe they're all "too clever" or maybe they've decided that one penny is a small price to pay for clarity. and here's a case from that circuit showing that the plaintiff's counsel knew exactly what was what.
"Plaintiff now moves for remand, arguing that the Court lacks jurisdiction because the amount in controversy does not exceed $75,000. In support of his motion, plaintiff submits an affidavit including a stipulation that the amount of damages claimed in his action do not exceed $74,999.99 and that he will not accept more than that amount. Defendant does not oppose plaintiff's motion to remand."
Berry v. Renaissance Hotel Mgmt. LLC, No. 4:09-CV-1261 CAS, 2011 U.S. Dist. LEXIS 39945, at *2 (E.D. Mo. Apr. 12, 2011)
Posted by: John Steele | Mar 13, 2018 6:39:14 PM
I understand that the Motion for remand would be simple, but there is perhaps a greater chance that he wouldn't even need to file one by simply writing "74999" instead of "75000."
Also, I think a reasonable, alternative way to read the complaint is, instead of showing off for the benefit of the public/press, he was preemptively signalling to Southwest that it should be prepared to litigate in state court, and for an amount that they might consider a nuisance fee. That can be a fairly effective tool for driving them to settle more quickly rather than risk protracted litigation in a less-friendly court.
Posted by: yoobee | Mar 13, 2018 6:28:18 PM
Methinks that on the score of showing off, there is a pot here, and there is a kettle.
Posted by: civproprof | Mar 13, 2018 5:53:44 PM
You can deride it as sneering, I guess. But the lawyer was showing off. I think it's fair game to call him on a pretty fundamental mistake.
Posted by: Howard Wasserman | Mar 13, 2018 4:48:12 PM
One may read here for example ( inherent power ) although not in such context as mentioned in the post :
Posted by: El roam | Mar 13, 2018 3:40:27 PM
The plaintiff will be heartbroken to learn that he successfully avoided removal to federal court but failed to avoid a sneering blog post.
Posted by: notaprof | Mar 13, 2018 3:26:40 PM
Bit funny , but one should not forget that doctrine of : " inherent jurisdiction " or " inherent power " . Typically , if there is an unintentional procedural mistake, and unreasonable resources are needed to fix it ,insisting on formal unsubstantial issues like of 1 cent , would be unreasonable and waste of resources . If a party intentionally has abused procedure , maybe a reasonable judge would insist upon 1 cent.
Posted by: El roam | Mar 13, 2018 3:16:02 PM
Nothing that I could find under Missouri law.
As to the gut reaction that the case could be removed, his every simple Motion for Remand, saying "read the damn statute" to a judge who doesn't want the case in the first place should easily overcome that gut reaction.
I suppose you could say that if he is trying to impress the public and the press, $74,999.99 works better. I am not ready to give that much credit.
Posted by: Howard Wasserman | Mar 13, 2018 1:54:14 PM
OR...the attorney decided that the appearance of "$74999.99" in the complaint makes it clear that the amount in controversy is below the threshold, whereas "$75000" might trigger a gut reaction to allow the case to be removed to federal court. Given that it is only a potential difference of one cent, the attorney might have reduced the number by a penny to avoid getting into an argument about the language of the statute and potentially trigger an additional filing to explain it. Just a thought, but it seems plausible.
Also, is it possible that there is some significance to the $75k amount under Missouri law, notwithstanding the threshold for establishing diversity jurisdiction in federal court?
Posted by: yoobee | Mar 13, 2018 1:49:38 PM