Monday, February 7, 2011

The most significant penny in the history of American jurisprudence? 6th Circuit remands case over one cent

What caused the court in Freeland v. Liberty Mutual Fire Insurance Co. (6th Cir. 2/4/11) [pdf] to write so eloquently about the fate of the penny?  

The penny is easily the most neglected piece of U.S. currency. Pennies tend to sit at the bottom of change jars or vanish into the cracks between couch cushions. Vending machines and parking meters will not accept them. Many people refuse to bend down to pick up a penny off the ground, deeming the reward not worth the effort. And a member of Congress even introduced legislation that would effectively eliminate the penny by requiring merchants to round their prices to the nearest nickel. See Currency Overhaul for an Industrious Nation (COIN) Act, H.R. 5818, 109th Cong. § 3(a) (2006). In this case, however, the penny gets a rare moment in the spotlight. The amount in controversy in this declaratory judgment action is exactly one penny short of the jurisdictional minimum of the federal courts.

A civil case arrives in federal court in one of two ways: the plaintiff files it, or the defendant removes it from state court. Either way, the federal court must have subject matter jurisdiction over the case—that is, the case either must arise under a federal statute, or all plaintiffs must hail from different states than all defendants and the amount at stake must exceed $75,000.

Make no mistake, these courts take their 3446286184_bdf555237f_mlimited jurisdiction seriously. Need proof? Freeland v. Liberty Mutual Fire Insurance Co. dismissed a case over one cent. The case involved a $100,000 insurance policy, over which the parties did not dispute the first $25,000 in coverage. Therefore, the court concluded that the amount in controversy was $75,000, not $100,000, which fell one penny short of the key necessary to open the gates to the federal courthouse. 

Imagine litigating a case for more than two years, only to learn that the entire case was litigated in the wrong court. The court was sympathetic (to a point), but remanded the case nevertheless:

The Court recognizes that vacating the district court’s judgment and remanding this case is painfully inefficient. This is especially so in light of the substantial resources that been spent litigating the merits of this case and the infinitesimal amount by which the amount in controversy falls short. But the Court simply has no choice in the matter.… The district court lacked the authority to grant Liberty Mutual’s motion for summary judgment. The only proper course is to remand this case back to state court for lack of federal jurisdiction.

In litigation, the little things really do matter.

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