Pratt Central Park Limited Partnership v. Dames & Moore, Inc.

60 F.3d 350, 1995 U.S. App. LEXIS 17750
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 19, 1995
Docket94-2761, 94-3663
StatusPublished
Cited by73 cases

This text of 60 F.3d 350 (Pratt Central Park Limited Partnership v. Dames & Moore, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pratt Central Park Limited Partnership v. Dames & Moore, Inc., 60 F.3d 350, 1995 U.S. App. LEXIS 17750 (7th Cir. 1995).

Opinions

EASTERBROOK, Circuit Judge.

Dames & Moore, an engineering firm, performed a series of environmental risk assessments for the Alter Group, Ltd., between 1988 and 1990. Early in 1989 D & M evaluated the premises of Lind Plastic Products; it reported some asbestos but no underground contamination. Alter Group formed Pratt Central Park Limited Partnership to purchase the property. Later it came to light that the Lind property has two underground storage tanks containing hazardous chemicals. Alter (as we call both Alter Group and the partnership) has incurred cleanup expenses that it pegs at $90,000; the property has also declined in value because of the risk that further expenditures will prove necessary. Alter filed this suit under the diversity jurisdiction seeking compensation for breach of contract, including D & M’s warranty of competent performance. The district court dismissed the suit for want of jurisdiction, see Fed.R.Civ.P. 12(b)(1), (h)(3), ruling that a $5,000 limit of liability in the Alter-D & M contract keeps the stakes below the $50,000 jurisdictional minimum. 1994 U.S.Dist. Lexis 8632. Alter protests that whether it assented to a $5,000 cap is debatable, and that controversy protects federal jurisdiction under St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 590-91, 82 L.Ed. 845 (1938): “It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.”

This famous passage is a remark rather than a holding. The issue before the Court was whether events after removal from state to federal court — in particular, amendment of the complaint to reduce the amount demanded — divest a district court of jurisdiction. The Court answered “no.” See also In re Shell Oil Co., 966 F.2d 1130, after remand, 970 F.2d 355 (7th Cir.1992). Later cases converted the observation to a holding, see Bell v. Preferred Life Assurance Society, 320 U.S. 238, 64 S.Ct. 5, 88 L.Ed. 15 (1943), which serves as a logical counterpart to the conclusion of Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), that the failure of a claim on the merits does not divest the federal court of jurisdiction. Bell v. Hood held that if a claim purportedly based on federal law is not frivolous, then the court has jurisdiction even if the plaintiff ultimately loses. See also Crowley Cutlery Co. v. United States, 849 F.2d 273 (7th Cir.1988). Similarly, if a complaint sets out a dispute substantial enough to come within the diversity jurisdiction, the plaintiffs inability to prove an injury exceeding the minimum amount in controversy does not affect jurisdiction. Mt. Healthy City School District Board of Education, 429 U.S. 274, 277, 97 S.Ct. 568, 571, 50 L.Ed.2d 471 (1977); Rosado v. Wyman, 397 U.S. 397, 405 n. 6, 90 S.Ct. 1207, 1214 n. 6, 25 L.Ed.2d 442 (1970); Pace Communications, Inc. v. Moonlight Design, Inc., 31 F.3d 587, 591-92 (7th Cir.1994). The penalty for recovering less than $50,000 is the denial of costs, see 28 U.S.C. § 1332(b), not the loss of the whole judgment.

Requiring the plaintiff to prevail on the merits (or to recover more than $50,000) as a condition of federal jurisdiction would create two kinds of undesirable costs. First there would be a heightened cost of jurisdictional inquiry at the outset of the case. A judge would need to conduct proceedings, potentially complex, to determine whether the claim had sufficient substance to meet the jurisdictional requirements. In federal-question cases this inquiry would be a doppelgánger of the inquiry on the merits. In diversity cases this inquiry would probe the gravity of the [352]*352plaintiffs injury, calling for fact-finding proceedings that would presage the work of the jury. Yet the only purpose of making the inquiry would be to determine which court hears the case, a decision that ought to be taken swiftly. See Landreth Timber Co. v. Landreth, 471 U.S. 681, 696-97, 105 S.Ct. 2297, 2307, 85 L.Ed.2d 692 (1985); In re Continental Casualty Co., 29 F.3d 292 (7th Cir.1994). To make the “which court” decision expeditiously and cheaply, a judge must simplify the inquiry, and, as both St. Paul and Bell v. Hood observe, the judge must give the plaintiff the benefit of the doubt. The second kind of cost falls on the parties. If a judge dismisses a case for want of jurisdiction well into the litigation, the parties repair to state court — where they must bear the expense of litigation a second time, imposing unnecessary costs on the state tribunal in the process. By contrast, a conclusive decision on the merits, even if in the defendant’s favor (or in the plaintiffs for less than $50,000), ends the controversy, promoting both public and private interests in achieving peace.

All that said, however, it does not follow that the court must accept the plaintiffs perspective and proceed to adjudicate on the merits every case in which the lawyers can keep straight faces when making their presentations. Such a latitudinarian approach creates other costs — particularly the evasion of jurisdictional lines drawn by Congress. Ross v. Inter-Ocean Insurance Co., 693 F.2d 659, 661 (7th Cir.1982). Policing the border of federal jurisdiction is a necessity in any system having both limited (national) and general (state) courts. Set the barriers to federal adjudication too low, and the distinction collapses — for lawyers have a remarkable ability to propose improbable contentions with poker faces. The size of the federal bench, and the resources made available for adjudication, depend on assumptions about the ease of entry. To adjudicate a case fully just because the plaintiff has something of an argument may be the cheapest way to dispose of the current dispute, but it has costs for other litigants, who must wait in a longer queue, and the greater ease of access to the federal forum will attract new claimants for the limited time and resources of the federal bench. So there is necessarily a conflict between ready access to a federal court (the better to reduce costs in the immediate case) and rigorously enforcing the jurisdictional limits in marginal cases (the better to protect the interests of litigants whose claims are squarely within federal jurisdiction).

Conflicts of this sort between individual and systemic interests rarely yield to bright-line tests. Consider the “legal certainty” language of St. Paul itself. Does this mean “certain” knowing only what the plaintiff chooses to reveal in the complaint? Or does it mean “certain” after the judge has invested the energy needed to learn about the facts and the law? Many a case starts out looking uncertain to the judge, but as time passes and knowledge grows the outcome looks more and more inevitable.

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60 F.3d 350, 1995 U.S. App. LEXIS 17750, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pratt-central-park-limited-partnership-v-dames-moore-inc-ca7-1995.