Hodge v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 06 June 2016
• Docket Number: Docket No. 149043.,Calendar No. 2.
• Citation: 499 Mich. 211,884 N.W.2d 238
• Parties: HODGE v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
• Court: Michigan Supreme Court

499 Mich. 211

884 N.W.2d 238

HODGE

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

Docket No. 149043.

Calendar No. 2.

Supreme Court of Michigan.

Argued Oct. 13, 2015.

Decided June 6, 2016.

Richard E. Shaw, Detroit, for plaintiff.

Hewson & Van Hellemont, PC, Oak Park (by James F. Hewson and Stacey L. Heinonen ), for defendant.

James G. Gross, PLC (by James G. Gross, Detroit), for Auto Club Insurance Association.

LARSEN

, J.

This case involves the proper application of MCL 600.8301

, which grants the district court “exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000.00.” For at least 160 years, Michigan courts have held that the allegations in the complaint establish the amount in controversy.¹ We affirm that principle today.

This case arises out of a lawsuit for no-fault damages filed in the 36th District Court. Plaintiff Linda Hodge was struck by a car in Detroit and sustained serious injuries. She brought this suit for first-party no-fault benefits against defendant State Farm Mutual Automobile Insurance Company, which insured the driver who struck her. She sought damages for her medical expenses, loss of wages, and attendant-care needs. In two separate parts of her complaint, Hodge stated that she sought damages “not in excess of $25,000.”

During discovery, State Farm came to believe that Hodge would present at trial proof of damages in excess of $25,000. Such proofs, in State Farm's view, would take the “amount in controversy” above the district court's jurisdictional limit. State Farm, therefore, filed a motion in limine, seeking to prevent Hodge from presenting evidence of claims exceeding $25,000 and to prevent the jury from awarding damages above that limit. The district court denied the motion.

At trial, Hodge did present proof of injuries exceeding $25,000, including more than $150,000 in attendant-care services alone. At the conclusion of the trial, the jury returned a verdict of $85,957. The district court then reduced its judgment for Hodge to $25,000 in damages and $1,769 in no-fault interest.

State Farm appealed in the Wayne Circuit Court, claiming that the amount in controversy exceeded the district court's jurisdictional limit and that capping Hodge's recovery at $25,000 could not cure the defect. The circuit court agreed and reversed the district court's order of judgment.²

The Court of Appeals initially denied plaintiff's application for leave to appeal. After this Court remanded for consideration as on leave granted,³ the Court of Appeals consolidated this case with another brought in district court by plaintiff's counsel that raised the same jurisdictional question. In the consolidated appeal, the Court of Appeals affirmed the circuit court's decision, holding that although the district court's jurisdiction “will most often be determined by reviewing the amount of damages or injuries a party claims in his or her pleadings,”⁴ the district courts here were divested of jurisdiction when the “pretrial discovery answers, the arguments of [plaintiff's] counsel before trial and the presentation of evidence at trial,” pointed to damages in excess of $25,000.⁵

The plaintiff in each of the consolidated cases sought leave to appeal in this Court. We initially granted leave to appeal in the companion case, Moody v. Home Owners,⁶ and held this case in abeyance pending our decision in Moody.⁷ However, this Court subsequently granted the plaintiffs-appellants' motion to dismiss their own appeal in Moody.⁸ We then vacated our abeyance order and granted leave to appeal in this case, limited to two issues:

(1) whether a district court is divested of subject-matter jurisdiction when a plaintiff alleges less than $25,000 in damages in his or her complaint, but seeks more than $25,000 in damages at trial, i.e., whether the “amount in controversy” exceeds $25,000 under such circumstances ... and, if not, (2) whether such conduct nevertheless divests the district court of subject-matter jurisdiction on the basis that the amount alleged in the complaint was made fraudulently or in bad faith.^{[9 ]}

The 1963 Michigan Constitution, art. 6, § 1

, establishes the circuit court as a “trial court of general jurisdiction,” and authorizes the Legislature to establish courts of limited jurisdiction. The Legislature exercised this constitutional authority in 1968 by creating the district court.¹⁰ MCL 600.8301(1) establishes the district court's limited jurisdiction:

The district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000.00.^{[11 ]}

The plain language of MCL 600.8301(1)

, read in conjunction with art. 6, § 1 and MCL 600.605,¹² establishes that, in civil actions where no other jurisdictional statute applies, the district court is limited to deciding cases in which the amount in controversy does not exceed $25,000.¹³ The district court, therefore, may not award damages in excess of that amount.¹⁴ The question before this Court is how to determine the “amount in controversy”: by the pleadings or by the proofs at trial?

Our cases have long held that courts are to determine their subject-matter jurisdiction by reference to the pleadings. As far back as 1855, when determining whether the circuit court or the justice of peace had jurisdiction over a dispute,¹⁵ this Court held that “jurisdiction must be determined ..., where it depends on amount, by the sum claimed in the declaration or writ.”¹⁶ This “well settled” rule would apply, the Court surmised, even if the plaintiff presented proof of damages, or the jury returned a verdict, exceeding the court's jurisdictional limit.¹⁷ Neither the parties nor our own research has revealed any case deviating from this common-law rule.¹⁸

Nor is there any reason to believe that the Legislature intended to depart from this well-settled practice when it created the district court and established by statute the monetary limits on its jurisdiction. When the Legislature, without indicating an intent to abrogate the common law,

borrows terms of art in which are accumulated the legal tradition and meaning of centuries of practice, it presumably knows and adopts the cluster of ideas that were attached to each borrowed word in the body of learning from which it was taken and the meaning its use will convey to the judicial mind unless otherwise instructed.^{[19 ]}

Here, the statute neither defines the critical term, “amount in controversy,”²⁰ nor in any other way suggests an intent to depart from the long-established rule that the pleadings determine the amount in controversy for purposes of the court's subject-matter jurisdiction.

Thus, it is not quite right to say, as did the Court of Appeals, that nothing in MCL 600.8301(1)

,²¹ MCR 2.227(A)(1),²² or MCR 2.116(C)(4)²³ “requires that a court limit its jurisdictional query to the amount in controversy alleged in the pleadings.”²⁴ Instead, the statute and court rules are properly read as incorporating the long-settled rule that the jurisdictional amount is determined on the face of the pleadings.

Both the Court of Appeals and defendant urge that dictionary definitions of statutory terms support a contrary result. We find the cited references unhelpful. The Court of Appeals noted that Black's Law Dictionary defines “amount in controversy”²⁵ as “[t]he damages claimed or relief demanded by the injured party in a lawsuit.”²⁶ But this definition is at least as consistent with the common-law rule as it is with the new rule espoused by the Court of Appeals. The dispute here is over how and when to determine the “damages claimed or relief demanded”: on the pleadings or on the proofs? As a method for determining the district court's subject-matter jurisdiction, then, the Black's definition of “amount in controversy” is simply incomplete.

Defendant's resort to the dictionary fares no better. MCR 2.227(A)(1)

allows a court to transfer an action to another tribunal when it “determines that it lacks jurisdiction of the subject matter of the action.” Defendant cites multiple dictionaries for the proposition that “determines” implies the result of research or investigation. From this, defendant argues that a court may look beyond the pleadings to determine its jurisdiction. But the conclusion does not clearly follow from the premise. Even if “to determine” implies that inquiry will precede decision, neither the court rule nor common English usage conveys the sense that the inquiry need be prolonged. Just as government officials routinely “determine” age or identity by looking at photo ID, a court might well “determine” the jurisdictional amount by looking at the pleadings.

We are left, therefore, with the firm impression that in adopting

MCL 600.8301

, the Legislature intended to continue the longstanding practice of determining the jurisdictional amount based on the amount prayed for in the complaint. The Court of Appeals was aware of this “ancient” common-law rule,²⁷ but thought it inapplicable because the plaintiff pleaded “a claim for relief ostensibly within the limits of the district court's subject-matter jurisdiction but then plac[ed] in dispute through evidence and argument at trial an amount of damages much greater than the court's jurisdictional limit.”²⁸ We recognize, as did the Court of Appeals, the potential for “artful pleading” that the common-law rule creates,²⁹ and we have our own concerns about the implications of the rule.³⁰ But, absent a finding of bad faith,³¹ we do not believe that these concerns affect the district court's jurisdiction, which has always been determined based on the amount alleged in the pleadings.

The common-law rule is marked not only by its longevity but by its simplicity. The ad damnum clause in the plaintiff's complaint is a straightforward measure of the court's jurisdiction. And its accompanying limit on recovery should deter fully-informed plaintiffs from too-readily seeking to litigate a more valuable claim in district court. By...