Baba-Dainja EL v. AmeriCredit Financial Services, Inc.
2013 U.S. App. LEXIS 5579
| 7th Cir. | 2013Background
- Plaintiff bought a used pickup truck in 2011 for $28,000 and financed it under a six-year installment contract at 23.9% interest.
- The dealer assigned the contract to AmeriCredit; after the first payment, plaintiff sent AmeriCredit a copy stamped “accepted for value and returned for value for settlement and closure” and instructed collection from the U.S. Treasury.
- AmeriCredit repossessed and resold the truck, charging plaintiff $11,322.28 to cover the shortfall on the installment contract.
- Plaintiff, proceeding pro se, sued AmeriCredit and two officers in federal district court for $34 million in compensatory damages and $2.2 billion in punitive damages; the district court dismissed as frivolous.
- Plaintiff amended the complaint; the district court again dismissed, later invoking diversity jurisdiction and entering a merits-based, prejudice-dismissing order.
- AmeriCredit asserted a counterclaim for the $11,322.28 plus prejudgment interest and fees; plaintiff did not answer, and a default judgment for AmeriCredit was entered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the district court have federal jurisdiction over the suit? | Plaintiff claimed admiralty or diversity-based federal jurisdiction. | Only diversity could provide jurisdiction; admiralty was not proper. | Jurisdiction lacking; admiralty insufficient and diversity not properly established. |
| Is AmeriCredit's counterclaim within federal jurisdiction? | Counterclaim rests on state law and requires federal jurisdiction; plaintiff contends lack of amount in controversy. | Counterclaim could engage supplemental/diversity-based jurisdiction if amount in controversy met thresholds. | Counterclaim not within federal jurisdiction; dismissal appropriate without prejudice. |
| Was dismissal with prejudice proper as a sanction for frivolous litigation? | Dismissal with prejudice may be improper if jurisdiction is lacking; sanctions were not properly imposed. | Frivolous suit justifies preclusive sanction. | Not proper here; sanction should be sanctioned via inherent authority if warranted. |
| What is the proper disposition of the default judgment and related proceedings on remand? | Remand should preserve plaintiff's rights; federal proceedings should be cleanly separated from state-law matters. | Default judgment should stand if valid; otherwise sanctions and remand to adjust. | Vacate the judgment and remand with directions to dismiss without prejudice or with prejudice as sanction; vacate the default judgment on the counterclaim; dismiss counterclaim without prejudice. |
Key Cases Cited
- St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (Supreme Court 1938) (legal certainty standard for amount in controversy in diversity cases)
- Brereton v. Bountiful City Corp., 434 F.3d 1213 (10th Cir. 2006) (dismissal for lack of jurisdiction without prejudice; abuse of discretion noted for rare sanctions)
- Beauchamp v. Sullivan, 21 F.3d 789 (7th Cir. 1994) (frivolous federal claims and dismissal with prejudice guidance)
- Hagans v. Lavine, 415 U.S. 528 (U.S. Supreme Court 1974) (limits on relying on nonfederal questions to create jurisdiction)
- Romero v. International Terminal Operating Co., 358 U.S. 354 (U.S. Supreme Court 1959) (admiralty jurisdiction over maritime activities; federal questions not always required)