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February 10, 2015

MSC to consider parameters of subject-matter jurisdiction for district courts

The district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000.  MCL 600.8301(1).  However, as plaintiffs increasingly structure pleadings to stay under this threshold, the Michigan Supreme Court has agreed to decide whether the district court may retain subject-matter jurisdiction in cases where the plaintiff will seek more than $25,000 at trial, despite pleading lesser damages.  In Hodge v. State Farm Mutual Automobile Insurance Company, No. 149043, the Supreme Court has granted defendant leave to appeal the limited issues of whether a district court is divested of subject-matter jurisdiction when a plaintiff alleges less than $25,000 in damages in his complaint but seeks more than $25,000 in damages at trial, and if not, 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.
Linda Hodge brought an action in district court asserting a first-party no-fault claim.  At trial, Ms. Hodge presented evidence far in excess of the district court’s $25,000 jurisdictional limit.  The jury returned a verdict of $85,957 against State Farm, and the district court entered a judgment of $25,000 plus interest against the insurance company.  State Farm appealed in the circuit court which reversed and issued an order stating that the amount in controversy in this case was in excess of the $25,000 jurisdictional limit of MCL 600.8301.  The circuit court proceeded to order that the jury verdict and subsequent judgment be reversed and vacated for the reason that the court lacked subject-matter jurisdiction. 
In a consolidated appeal, the Court of Appeals affirmed the circuit court’s ruling that the district court lacked subject-matter jurisdiction and affirmed the orders vacating those judgments.  The Michigan Supreme Court has granted leave to appeal this decision.

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