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Like horseshoes and hand grenades

Paul Fletcher//September 22, 2010

Like horseshoes and hand grenades

Paul Fletcher//September 22, 2010//

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Here’s one for the civil procedure junkies.

A veterinary supplies company says that a vet named Rasnic owes it $74,139.24 and wants to sue to collect. Can the company, Merial Ltd., sue in federal court?

It’s a contract action and there’s no federal statute involved, so the plaintiff has to rely on diversity of citizenship under 28 U.S.C. § 1332(a) to get into federal court. Company is based in Georgia, defendant is from Scott County. Check. The magic number for diversity jurisdiction, any one-L will tell you, is $75,000. So Merial is about 800 bucks short.

Wait, Merial also wants interest of about 15 grand and $2,500 in attorney’s fees, based on language in its invoices. However, the federal rule says $75K, “exclusive of interest and costs.” Rasnic asked that the claim be dismissed.

Merial still can go forward in federal court, according to U.S. Magistrate Judge Pamela Meade Sargent in Merial Ltd. v. Rasnic. The judge provides a handy primer on what to argue when you’re oh-so-close to that 75K figure. Tuck a copy of this one in your federal procedure file.

The judge noted there were a number of exceptions to the interest-doesn’t-count rule, although they didn’t apply here. And some states may allow interest as “incidental damages,” although Virginia doesn’t.

Merial argued the interest and attorney’s fees were part of the parties’ agreement, citing language in its invoices. The wording on the front of the invoices, copies attached to the pleadings, says the merchandise sold was subject to the terms and conditions printed on the back of the invoice. The words on the back allowed for 12 percent annual interest and reasonable attorney’s fees if the balance wasn’t paid, according to the complaint.

But the judge noted, “Merial has not provided copies of the back of these invoices.” So close, then again, so far away.

Actually, not a problem. Sargent applied the “legal certainty test” to Merial’s claim, which saved the day. That test provides that the defendant must show “to a legal certainty” that the plaintiff can’t meet the jurisdictional amount, a pretty tough task.

The judge wrote that the fact that Merial says the invoices have the interest and fees language on the back makes it easy to get over that bump, at least for the purpose of this motion. Rasnic’s claim that he didn’t agree to those terms can wait till later.

Sixteen pages later, Merial and its lawyer can relax, knowing they don’t have to start over in state court. Memo to counsel: Next time, copy both sides of the invoice.

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