Ally Bank v. Finstad

Background

Ally Bank filed this action in North Dakota state court against Lee R. Finstad. Ally alleged that Finstad defaulted on a contract secured by a 2016 Chevrolet Corvette. Ally repossessed and sold the vehicle, applied the proceeds to the contract balance, and alleged that Finstad still owed $20,808.61.

Finstad removed the case to the federal court in North Dakota, citing diversity jurisdiction, which generally permits federal courts to hear disputes between citizens of different states when more than $75,000 is in controversy. After removal, Finstad filed a third-party complaint against Miller Chevrolet, LLC. He alleged that Miller Chevrolet should be responsible for the amounts Ally claimed because he lacked capacity to contract after being released from a hospital following a serious automobile accident.

Miller Chevrolet moved to dismiss for lack of personal jurisdiction in North Dakota. Instead of responding to that motion, Finstad moved to transfer the case to the District of Minnesota. The North Dakota federal court transferred the case and treated Miller Chevrolet’s motion as moot. In Minnesota, Miller Chevrolet answered and moved for judgment on the pleadings.

Jurisdictional Issues

Before hearing the motion for judgment on the pleadings, the court ordered the parties to explain why the case should not be sent back to state court for lack of subject-matter jurisdiction, meaning the federal court’s legal authority to hear the case. The court identified three issues: whether removal violated the forum-defendant rule, whether the amount-in-controversy requirement was met, and whether the parties were completely diverse, including Miller Chevrolet’s citizenship as a limited liability company.

The court held that removal violated the forum-defendant rule in 28 U.S.C. § 1441(b)(2). That rule generally prevents a defendant from removing a diversity case when the defendant is a citizen of the state where the action was filed. Finstad had acknowledged that he was a citizen of North Dakota, and Ally filed the action in North Dakota. The court found no indication that Finstad had not been properly joined and served. It rejected Finstad’s argument that the violation was merely procedural and had been waived because Ally and Miller Chevrolet did not object. Applying binding Eighth Circuit precedent, the court concluded that the violation deprived it of subject-matter jurisdiction and required remand.

The court also held that the amount-in-controversy requirement was not met. Ally’s complaint demanded $20,808.61, which was well below $75,000. Finstad did not provide information in his removal notice or response to establish that more than $75,000 was actually in controversy. The court declined to rely on Finstad’s later third-party complaint or an improperly filed unsigned affidavit. The third-party complaint was filed after removal and therefore could not establish the amount in controversy at the time of removal. The court also explained that the Corvette’s purchase price did not establish the amount at issue, which concerned the remaining contract balance.

Disposition

The court ordered that the action be REMANDED to the State of North Dakota District Court, Grand Forks County. Because the court lacked subject-matter jurisdiction, it did not decide Miller Chevrolet’s pending motion for judgment on the pleadings. Judge Eric C. Tostrud signed the order.