Smoot v. Mazda Motors of America, Inc.

• Decision Date: 29 November 2006
• Docket Number: No. 05-4577.,05-4577.
• Citation: 469 F.3d 675
• Parties: Magdalene M. SMOOT and Ryan M. Smoot, Plaintiffs-Appellants, v. MAZDA MOTORS OF AMERICA, INC. and Tokio Marine and Fire Insurance Company, Ltd., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

469 F.3d 675

Magdalene M. SMOOT and Ryan M. Smoot, Plaintiffs-Appellants, v. MAZDA MOTORS OF AMERICA, INC. and Tokio Marine and Fire Insurance Company, Ltd., Defendants-Appellees.

No. 05-4577.

United States Court of Appeals, Seventh Circuit.

Argued September 20, 2006.

Decided November 29, 2006.

Peter S. Balistreri (argued), Dubin, Balistreri, Fuchs & Schelble, Milwaukee, WI, for Plaintiffs-Appellants.

Jeffrey S. Fertl (argued), Hinshaw & Culbertson, Milwaukee, WI, for Defendants-Appellees.

Before EASTERBROOK, Chief Judge, and POSNER and EVANS, Circuit Judges.

POSNER, Circuit Judge.

The district judge, after barring the plaintiffs' expert from testifying, dismissed this diversity personal-injury suit (the substantive issues in which are governed by Wisconsin law) on the ground that without expert testimony the plaintiffs could not prove their case.

Before reviewing that ruling, 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). 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, N.Y. 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, 97 S.Ct. 568, 50 L.Ed.2d 471 (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. Besides unpleasant medical treatments for Mrs. Smoot that included her having to wear an orthopedic repositioning appliance on her jaw, she claims to have sustained permanent injuries consisting of TMJ pain, clicking, popping, and inability to open her mouth fully and eat and chew all varieties of foods, permanent scarring, and humiliation at work because she is a customer service representative and her injuries prevent her from speaking normally. (Her husband's claim is for loss of consortium.) We conclude that the district court had jurisdiction.

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., 466 F.3d 562 (7th Cir.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.

To the merits, at long last. Mrs. Smoot was driving her one-year-old Mazda at 35 to 40 m.p.h. when she struck either a chunk of asphalt that had been dislodged from the pavement (her current version) or, more likely, a large pothole (the defendants' version—but also what Mrs. Smoot told the police officer who investigated the accident). Deployment of the airbags was triggered by the collision, causing the injuries of which she complains. The day before the accident she had received a notice from Mazda that there was "an increased risk of airbag deployment in a low speed crash or minor impact to the undercarriage" in the model that Mrs. Smoot was driving, and that the owner should contact a Mazda dealer to have the airbag control unit reprogrammed. Her husband had made an appointment with the dealer for a few days later—too late.

The windshield and front left wheel and tire of the car were damaged in the accident, apparently from the impact with whatever it collided...