Friday, November 12, 2010

Solving the $75,000 question

State court or Federal court? Where do you want to go? Depends on the case, and it depends on your jurisdiction. In this product liability case, one side wanted State court, the other side wanted Federal. This case will mostly be of interest to lawyers who deal with diversity jurisdiction, as the Second Circuit untangles the $75,000 question.

The case is Moltner v. Starbucks Coffee Co., decided on November 2. Plaintiff bought hot tea at Starbucks, double-cupped and lidded. "She had difficulty removing the lid [to add sugar] and in the course of her attempts to pry it off, the tea spilled onto her left leg and foot. Moltner suffered severe enough burns to require a skin graft. Her hospital stay also occasioned a number of secondary injuries, including bed sores and a fractured sacrum and herniated discs caused by a fall out of bed."

Some cases proceed to Federal court because the plaintiff sues under Federal law. Others make it Federal court under "diversity jurisdiction," where plaintiff and defendant are from different states and the damages exceed $75,000. This case tells us what to do when the Complaint does not specify a damages amount. After the case is filed in State court and it satisfies the diversity jurisdiction requirements, the defendant can remove the case to Federal court within 30 days of service of the complaint.

Moltner's Complaint did not specify any damages. The rules allow you to do this. But when Starbucks removed the case to Federal court more than 30 days after it was served with the case, Moltner objected, preferring State to Federal court. But Moltner cannot have it both ways. It cannot omit the damages amount from the Complaint and then object when the defendant removes the case to Federal court more than 30 days later. Starbucks was allowed to do this so long as it removed the case to Federal court 30 days after Moltner identified the monetary damages in a follow-up pleading produced in litigation. The Second Circuit (Miner, Katzmann and Cote [D.J.]), holds, "the removal clock does not start to run until the plaintiff serves the defendant with a paper that explicitly specifies the amount of monetary damages sought."

Moltner had a creative argument around this rule. Her lawyer argued that, based on the nature of her injuries, Starbucks had to know that her damages exceeded $75,000. But unlike the bright-line rule adopted by the Second Circuit, Moltner's proposed rule is fuzzy. "Requiring a defendant to read the complaint and guess the amount of damages that the plaintiff seeks will create uncertainty and risks increasing the time and money spent on litigation. Under Moltner's approach, if a defendant waits to remove until the damages have been specified, the parties will dispute, upon removal, whether the defendant should have known from the complaint that the jurisdictional threshold was met."

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