Failure to Allege Basis for Subject Matter Jurisdiction Can Result in Sanctions

If you’re going to file a lawsuit against someone, you’d better explain the basis for it. A complaint doesn’t need to include much detail, but it must at least allege facts showing that you’ve been wronged and that you are entitled to a remedy of some sort. In federal court, you must also demonstrate a basis to invoke the court’s jurisdiction. Failure to do so can result in monetary sanctions.

Take the case of Michael Harris v. Jeffrey Seto, brought in the Harrisonburg Division of the Western District of Virginia. Michael F. Harris and his company, M. F. Harris Research, Inc., filed a complaint against Jeffrey K. Seto, Matthew S. Johnson, and others, alleging fraud, breach of fiduciary duty, and corporate diversion. Harris stated in conclusory fashion that Seto and others defrauded him by scheming to take over his company and steal confidential information and business opportunities.

The complaint consisted of a two-page handwritten document. (Hint: that’s not the best way to make a good first impression with the judges). The complaint alleged nine counts but did not set forth the factual basis supporting them. According to the civil cover sheet filed with the complaint, Harris asserted the court’s jurisdiction was based on a federal question. He checked boxes describing the case as being in the nature of “Assault, Libel & Slander,” “Property Damage Product Liability,” and “Patent.” Defendant Johnson was the only defendant served and he wisely moved to dismiss the action for failure to state a claim.

In the federal court system, U.S. magistrate judges handle many aspects of pending cases subject to review by district judges. In this case, Magistrate Judge Waugh Crigler recommended that the case be dismissed with prejudice (i.e., permanently, without opportunity to reopen or refile) for failure to prosecute. The magistrate judge also issued a show cause order requiring Harris to prove the court had subject matter jurisdiction and explain how Harris Research, a corporation, could proceed without an attorney. The magistrate judge apparently took into account the fact that Harris had filed the same complaint in the Roanoke Division of the Western District where it was dismissed without prejudice for lack of proof of service on the defendants. The plaintiff’s motion to reopen the case there was denied because the complaint failed to state a claim upon which relief could be granted.

District Judge Michael F. Urbanski focused on the apparent lack of the court’s jurisdiction. The complaint raised no federal law violations that would suggest federal question jurisdiction and the parties were all based in Virginia so there could be no diversity jurisdiction. Judge Urbanski accepted the recommendation to dismiss the action for lack of subject matter jurisdiction, but dismissed it without prejudice, thereby leaving the door open to yet another bite at the apple. Given how much leeway Harris had already been given, the court cautioned that, if he does re-file the case, Rule 11 sanctions may be imposed if he doesn’t properly demonstrate the existence of subject matter jurisdiction.

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