September 20, 2020

Volume X, Number 264

September 18, 2020

Subscribe to Latest Legal News and Analysis

No Guarantee to Supplemental Jurisdiction: Court Declines to Exercise Jurisdiction Over Counterclaim

Supplemental jurisdiction, in simple terms, is a statutory tool that enables federal district courts to entertain claims not otherwise within their adjudicatory authority. The claims however should be “so related to claims . . .[in the federal-court case] that they form part of the same case or controversy.” (28 U.S. Code § 1367 et seq.) Exercising supplemental jurisdiction is discretionary, and “[t]he district courts may decline to exercise supplemental jurisdiction over a claim…” when reasons permit.

In a recent case out of the Eastern District of Michigan, Tillman v. Mich. First Credit Union, No. 19-12860, 2020 U.S. Dist. LEXIS 139056 (E.D. Mich. Aug. 5, 2020), the Court refused to exercise supplemental jurisdiction over the counterclaim filed by defendant Michigan First, on grounds that the claims and counterclaim “[did] not present two sides of the same coin.” Plaintiff here, not unlike any of the other cases we have covered against Michigan First, alleged that Michigan First failed to cure an inaccurate and misleading tradeline. According to Plaintiff, the debt described in the tradeline was charged off and the monthly payment should have been zero, but was not. Michigan First, through its counterclaim, alleged that Plaintiff signed a post-discharge reaffirmation agreement in which she agreed to repay the remaining balance on the loan. Plaintiff allegedly failed to make the required payments, and Michigan First contended that a balance was still outstanding. Plaintiff moved to have Michigan First’s counterclaim dismissed on grounds that the Court did not have subject matter jurisdiction, and the Court should not exercise supplemental jurisdiction. The Court agreed.

The Court found that the question of whether Plaintiff reaffirmed the debt did not prove or disprove Plaintiff’s allegation against Michigan First and whether Plaintiff was in breach of the “new contract” would not relieve Michigan First of its duty to properly investigate and correct an inaccurate entry under the Fair Credit Reporting Act. The Court found that although the parties to the claims and counterclaim may be the same, the “causes of action [were] appreciably different,” and “[e]ntertaining the counterclaim would allow the breach of contract dispute to predominate over the FCRA claims,” which the Court found  went against the principles behind the FCRA. The Court thus dismissed the counterclaim without prejudice, and indicated that it should proceed separately in state court.

The Court remained unmoved by Michigan First’s argument that the parties would – if the counterclaim proceeded in state court – have to litigate the case in two forums. In fact, the Court noted  that “plaintiff…initially chose a state forum to bring her federal causes of action [and] it was this defendant that brought the case to federal court and then attempted to assert a purely state-law claim. If inefficiencies result, it is solely the defendant’s doing.”

Unfortunate result for Michigan First, but when there is no independent basis for jurisdiction, there is no guarantee that a court will exercise discretion to keep a claim.  As the Court here noted, supplemental jurisdiction “is not a mandatory command.”

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 224

TRENDING LEGAL ANALYSIS


About this Author

Zarish Baig Litigation Attorney Squire Patton Boggs Los Angeles, CA
Associate

Zarish Baig is an associate in our Litigation Practice, managing a wide variety of cases, including data privacy, Telephone Consumer Protection Act, breach of contract, white collar criminal matters, and internal and government investigations.

Before joining the firm, Zarish worked as a litigator in a mid-sized firm in the San Francisco Bay Area; and prior to that, as a litigator in Calgary, Canada. Zarish has experience representing clients from all over the world.

Zarish is a skilled trial lawyer and has participated in all stages of litigation on behalf of her clients....

213-689-5152