The Volokh Conspiracy - Smackdown and Dissent from Smackdown:

A very interesting exchange between Seventh Circuit Judges Posner and Easterbrook in the majority, and Judge Evans in the dissent, about what courts should do about certain kinds of procedural errors by lawyers. Beyond the obvious schadenfreude appeal of such things, and the case's utility as a reminder to lawyers to be careful, there's an important question here about what courts should do in such situations; fortunately, both opinions are thoughtful and eminently readable.

POSNER, Circuit Judge [joined by EASTERBROOK, Circuit Judge].... Before [reaching the merits], we remark the confusion in the parties’ briefs concerning the elements of the diversity jurisdiction. The jurisdictional statement in the appellants’ brief states that the federal district court’s jurisdiction was based on diversity of citizenship “and the jurisdictional amount of $75,000.” In fact diversity jurisdiction depends on the jurisdictional amount’s exceeding $75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a).

(Show the rest of the opinion excerpts.)

The jurisdictional statement goes on to recite that the plaintiffs are citizens of Wisconsin (a proper jurisdictional allegation since the plaintiffs are natural persons) and that defendant Mazda “is a foreign corporation incorporated under the laws of the State of California.” A corporation, however, has two places of citizenship: where it is incorporated, and where it has its principal place of business. 28 U.S.C. § 1332(c)(1). If Mazda’s principal place of business is in Wisconsin, diversity is destroyed.

To ensure that litigants in diversity cases attend carefully to the dual citizenship of corporations, our Circuit Rule 28(a)(1) requires the jurisdictional statement in a diversity case to specify both the state (or other jurisdiction) in which a corporate party is incorporated and the state in which its principal place of business is located. The appellants’ jurisdictional statement violates our rule but more remarkably it does not so much as mention the second defendant, the Tokio Marine & Fire Insurance Company.

The appellees’ jurisdictional statement begins promisingly by stating that the appellants’ jurisdictional statement “is neither complete [n]or correct.” But neither, it turns out, is the appellees’. It does not mention the amount in controversy, erroneously alleged in the appellants’ statement; and concerning citizenship it violates Rule 28(a)(1) by stating that the appellees are “citizens of a different state” from the appellants, without indicating what state they are citizens of. It turns out that the insurance company is actually a citizen of a foreign country, so that the relevant provision of the diversity statute, unmentioned in either jurisdictional statement, is 28 U.S.C. § 1332(a)(2).

We asked the parties to submit supplemental jurisdictional statements. The appellants’ supplemental statement corrects the omission of Mazda’s principal place of business (also California), but blunders with respect to the insurance company by stating that it is “a corporation organized under the laws of Japan with a United States branch domiciled in the State of New York with its principal place of business located at 230 Park Ave, New York, NY 10169” (emphasis added). The location of a branch office is irrelevant to diversity jurisdiction. But reference to “domicile” and “principal place of business” naturally raises the question, unaddressed in the statement, whether this branch might be a corporation having its principal place of business in New York but incorporated elsewhere, such as Wisconsin.

We might have expected the blunder to be corrected by the major Chicago law firm representing the appellees. No such luck. Its supplemental jurisdictional statement repeats that the insurance company “is a foreign corporation organized under the laws of Japan with a U.S. Branch. The principal place of business of the U.S. Branch is New York, New York.” The fact that “Branch” is capitalized and its principal place of business alleged suggests that it might be a corporation, but at argument the appellees’ lawyer said no, it’s just a branch. When asked by one of the judges why then it was mentioned in the jurisdictional statement, the lawyer replied inconsequently that “with a U.S. Branch” is Japanese corporate lingo.

The appellees’ supplemental jurisdictional statement contains two further errors. It says that the amount in controversy “allegedly” exceeds $75,000. Actually, as we know, the amount in controversy in the appellants’ jurisdictional statement is $75,000, not $75,000 plus.

In addition, the use of the words “alleged” or “allegedly” in this connection is erroneous. The amount in controversy in a diversity case is the stakes that the plaintiff or defendant alleges, and provided the allegation is not false to a “legal certainty” the amount is taken as true for purposes of jurisdiction. E.g., Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 276-77 (1977). In other words, “When the complaint includes a number, it controls unless [the plaintiff’s] recovering that amount [in the litigation] would be legally impossible.” Rising-Moore v. Red Roof Inns, Inc., 435 F.3d 813, 815-16 (7th Cir. 2006). The appellees’ use of “allegedly” suggests an inclination to question whether the amount in controversy exceeds the jurisdictional minimum, but they do not pursue the point.

We are satisfied that the parties’ errors in regard to the amount in controversy are harmless, given the severity of the injuries alleged. [Details omitted. -EV]

But the lawyers have wasted our time as well as their own and (depending on the fee arrangements) their clients’ money. We have been plagued by the carelessness of a number of the lawyers practicing before the courts of this circuit with regard to the required contents of jurisdictional statements in diversity cases. See, e.g., BondPro Corp. v. Siemens Power Generation, Inc., No. 05-3077, 2006 WL 2972108, at *1 (7th Cir. Oct. 19, 2006) (per curiam), and cases cited there; Hicklin Engineering, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006); Wild v. Subscription Plus, Inc., 292 F.3d 526, 528 (7th Cir. 2002). It is time, as we noted in BondPro, that this malpractice stopped. We direct the parties to show cause within 10 days why counsel should not be sanctioned for violating Rule 28(a)(1) and mistaking the requirements of diversity jurisdiction. We ask them to consider specifically the appropriateness, as a sanction, of their being compelled to attend a continuing legal education class in federal jurisdiction. E.g., In re Maurice, 69 F.3d 830, 832, 834 (7th Cir. 1995); DiPaolo v. Moran, 407 F.3d 140, 144, 146 (3d Cir. 2005); In re Dragoo, 186 F.3d 614, 615-16 (5th Cir. 1999).

Are we being fusspots and nitpickers in trying (so far with limited success) to enforce rules designed to ensure that federal courts do not exceed the limits that the Constitution and federal statutes impose on their jurisdiction? Does it really matter if federal courts decide on the merits cases that they are not actually authorized to decide?

The sky will not fall if federal courts occasionally stray outside the proper bounds. But the fact that limits on subject-matter jurisdiction are not waivable or forfeitable—that federal courts are required to police their jurisdiction—imposes a duty of care that we are not at liberty to shirk. And since we are not investigative bodies, we need and must assure compliance with procedures designed to compel parties to federal litigation to assist us in keeping within bounds.

Hence Rule 28 and hence the responsibility of lawyers who practice in the federal courts, even if only occasionally, to familiarize themselves with the principles of federal jurisdiction. It would be delightful, but irresponsible in the extreme, for us to ignore the limits on our jurisdiction, forget the rules intended to prevent us from ignoring those limits, direct the Clerk of the court to tear out the parties’ jurisdictional statements before distributing the briefs to us, and jump directly to the merits of any case that the parties would like to litigate in federal court.... [Merits discussion omitted. -EV]

EVANS, Circuit Judge, concurring. I join the court’s opinion [as to the merits question]. But I decline to join the court’s stinging criticism of the attorneys regarding their less-than-perfect jurisdictional statements. Sure, the plaintiffs should have said the amount in controversy exceeds

$75,000, not that it is $75,000. And sure, both sides stumbled on their declarations regarding the dual citizenship of the corporate defendants. But, at best, these are low misdemeanors; yet the court treats them like felonies. I would not label these minor flaws as “blunders,” nor would I come close to saying this is “malpractice” which must be stopped. Also I would not issue an order to show cause, and I certainly would not suggest that an appropriate sanction might be to compel the lawyers’ attendance at “a continuing legal education class on federal jurisdiction.”

What happened in this case is not particularly unusual. The plaintiffs, represented by what appears to be a small law firm, filed this suit almost five years ago in state court where jurisdictional requirements are easily satisfied and rarely questioned. The defendants, represented by a “national law firm with lawyers in 27 offices coast-to-coast” (according to the firm’s Web site) removed the case to federal court.

That there is diversity jurisdiction has never been questioned by anyone, including at least two district court judges who issued written decisions as the case poked along for four years through discovery and several in-court proceedings. The plaintiffs then lose their case on summary judgment and file an appeal raising the issue that cuts to the very heart of their suit. Given this situation, when all eyes are really on the guts of the case, I think we should be more tolerant of the jurisdictional statement hiccups that have occurred here.

(Hide.)

On a completely unrelated note, let me remark the unusual use of the term "remark" in the first sentence quoted above. It's quite legitimate, even to a prescriptivist, but I don't recall ever having seen it.

	[Eugene Volokh, November 30, 2006 at 11:52am] Trackbacks Smackdown and Dissent from Smackdown: A very interesting exchange between Seventh Circuit Judges Posner and Easterbrook in the majority, and Judge Evans in the dissent, about what courts should do about certain kinds of procedural errors by lawyers. Beyond the obvious schadenfreude appeal of such things, and the case's utility as a reminder to lawyers to be careful, there's an important question here about what courts should do in such situations; fortunately, both opinions are thoughtful and eminently readable. POSNER, Circuit Judge [joined by EASTERBROOK, Circuit Judge].... Before [reaching the merits], we remark the confusion in the parties’ briefs concerning the elements of the diversity jurisdiction. The jurisdictional statement in the appellants’ brief states that the federal district court’s jurisdiction was based on diversity of citizenship “and the jurisdictional amount of $75,000.” In fact diversity jurisdiction depends on the jurisdictional amount’s exceeding $75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a). (Show the rest of the opinion excerpts.) The jurisdictional statement goes on to recite that the plaintiffs are citizens of Wisconsin (a proper jurisdictional allegation since the plaintiffs are natural persons) and that defendant Mazda “is a foreign corporation incorporated under the laws of the State of California.” A corporation, however, has two places of citizenship: where it is incorporated, and where it has its principal place of business. 28 U.S.C. § 1332(c)(1). If Mazda’s principal place of business is in Wisconsin, diversity is destroyed. To ensure that litigants in diversity cases attend carefully to the dual citizenship of corporations, our Circuit Rule 28(a)(1) requires the jurisdictional statement in a diversity case to specify both the state (or other jurisdiction) in which a corporate party is incorporated and the state in which its principal place of business is located. The appellants’ jurisdictional statement violates our rule but more remarkably it does not so much as mention the second defendant, the Tokio Marine & Fire Insurance Company. The appellees’ jurisdictional statement begins promisingly by stating that the appellants’ jurisdictional statement “is neither complete [n]or correct.” But neither, it turns out, is the appellees’. It does not mention the amount in controversy, erroneously alleged in the appellants’ statement; and concerning citizenship it violates Rule 28(a)(1) by stating that the appellees are “citizens of a different state” from the appellants, without indicating what state they are citizens of. It turns out that the insurance company is actually a citizen of a foreign country, so that the relevant provision of the diversity statute, unmentioned in either jurisdictional statement, is 28 U.S.C. § 1332(a)(2). We asked the parties to submit supplemental jurisdictional statements. The appellants’ supplemental statement corrects the omission of Mazda’s principal place of business (also California), but blunders with respect to the insurance company by stating that it is “a corporation organized under the laws of Japan with a United States branch domiciled in the State of New York with its principal place of business located at 230 Park Ave, New York, NY 10169” (emphasis added). The location of a branch office is irrelevant to diversity jurisdiction. But reference to “domicile” and “principal place of business” naturally raises the question, unaddressed in the statement, whether this branch might be a corporation having its principal place of business in New York but incorporated elsewhere, such as Wisconsin. We might have expected the blunder to be corrected by the major Chicago law firm representing the appellees. No such luck. Its supplemental jurisdictional statement repeats that the insurance company “is a foreign corporation organized under the laws of Japan with a U.S. Branch. The principal place of business of the U.S. Branch is New York, New York.” The fact that “Branch” is capitalized and its principal place of business alleged suggests that it might be a corporation, but at argument the appellees’ lawyer said no, it’s just a branch. When asked by one of the judges why then it was mentioned in the jurisdictional statement, the lawyer replied inconsequently that “with a U.S. Branch” is Japanese corporate lingo. The appellees’ supplemental jurisdictional statement contains two further errors. It says that the amount in controversy “allegedly” exceeds $75,000. Actually, as we know, the amount in controversy in the appellants’ jurisdictional statement is $75,000, not $75,000 plus. In addition, the use of the words “alleged” or “allegedly” in this connection is erroneous. The amount in controversy in a diversity case is the stakes that the plaintiff or defendant alleges, and provided the allegation is not false to a “legal certainty” the amount is taken as true for purposes of jurisdiction. E.g., Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 276-77 (1977). In other words, “When the complaint includes a number, it controls unless [the plaintiff’s] recovering that amount [in the litigation] would be legally impossible.” Rising-Moore v. Red Roof Inns, Inc., 435 F.3d 813, 815-16 (7th Cir. 2006). The appellees’ use of “allegedly” suggests an inclination to question whether the amount in controversy exceeds the jurisdictional minimum, but they do not pursue the point. We are satisfied that the parties’ errors in regard to the amount in controversy are harmless, given the severity of the injuries alleged. [Details omitted. -EV] But the lawyers have wasted our time as well as their own and (depending on the fee arrangements) their clients’ money. We have been plagued by the carelessness of a number of the lawyers practicing before the courts of this circuit with regard to the required contents of jurisdictional statements in diversity cases. See, e.g., BondPro Corp. v. Siemens Power Generation, Inc., No. 05-3077, 2006 WL 2972108, at 1 (7th Cir. Oct. 19, 2006) (per curiam), and cases cited there; Hicklin Engineering, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006); Wild v. Subscription Plus, Inc., 292 F.3d 526, 528 (7th Cir. 2002). It is time, as we noted in BondPro, that this malpractice stopped. We direct the parties to show cause within 10 days why counsel should not be sanctioned for violating Rule 28(a)(1) and mistaking the requirements of diversity jurisdiction. We ask them to consider specifically the appropriateness, as a sanction, of their being compelled to attend a continuing legal education class in federal jurisdiction. E.g., In re Maurice, 69 F.3d 830, 832, 834 (7th Cir. 1995); DiPaolo v. Moran, 407 F.3d 140, 144, 146 (3d Cir. 2005); In re Dragoo, 186 F.3d 614, 615-16 (5th Cir. 1999). Are we being fusspots and nitpickers in trying (so far with limited success) to enforce rules designed to ensure that federal courts do not exceed the limits that the Constitution and federal statutes impose on their jurisdiction? Does it really matter if federal courts decide on the merits cases that they are not actually authorized to decide? The sky will not fall if federal courts occasionally stray outside the proper bounds. But the fact that limits on subject-matter jurisdiction are not waivable or forfeitable—that federal courts are required to police their jurisdiction—imposes a duty of care that we are not at liberty to shirk. And since we are not investigative bodies, we need and must assure compliance with procedures designed to compel parties to federal litigation to assist us in keeping within bounds. Hence Rule 28 and hence the responsibility of lawyers who practice in the federal courts, even if only occasionally, to familiarize themselves with the principles of federal jurisdiction. It would be delightful, but irresponsible in the extreme, for us to ignore the limits on our jurisdiction, forget the rules intended to prevent us from ignoring those limits, direct the Clerk of the court to tear out the parties’ jurisdictional statements before distributing the briefs to us, and jump directly to the merits of any case that the parties would like to litigate in federal court.... [Merits discussion omitted. -EV] EVANS, Circuit Judge, concurring. I join the court’s opinion [as to the merits question]. But I decline to join the court’s stinging criticism of the attorneys regarding their less-than-perfect jurisdictional statements. Sure, the plaintiffs should have said the amount in controversy exceeds* $75,000, not that it is $75,000. And sure, both sides stumbled on their declarations regarding the dual citizenship of the corporate defendants. But, at best, these are low misdemeanors; yet the court treats them like felonies. I would not label these minor flaws as “blunders,” nor would I come close to saying this is “malpractice” which must be stopped. Also I would not issue an order to show cause, and I certainly would not suggest that an appropriate sanction might be to compel the lawyers’ attendance at “a continuing legal education class on federal jurisdiction.” What happened in this case is not particularly unusual. The plaintiffs, represented by what appears to be a small law firm, filed this suit almost five years ago in state court where jurisdictional requirements are easily satisfied and rarely questioned. The defendants, represented by a “national law firm with lawyers in 27 offices coast-to-coast” (according to the firm’s Web site) removed the case to federal court. That there is diversity jurisdiction has never been questioned by anyone, including at least two district court judges who issued written decisions as the case poked along for four years through discovery and several in-court proceedings. The plaintiffs then lose their case on summary judgment and file an appeal raising the issue that cuts to the very heart of their suit. Given this situation, when all eyes are really on the guts of the case, I think we should be more tolerant of the jurisdictional statement hiccups that have occurred here. (Hide.) On a completely unrelated note, let me remark the unusual use of the term "remark" in the first sentence quoted above. It's quite legitimate, even to a prescriptivist, but I don't recall ever having seen it.