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Counterclaims Don't Count in Determining Amount in Controversy

100 dollar bills in diagonal rows.jpgThe amount of money at stake in a court case helps to determine which court has jurisdiction over a matter. But, what happens, when the amount being fought over balloons after the parties start suing each other? Maryland's Court of Special Appeals answered that question in McKlveen v. Monika Courts Condominium.

Monika Courts filed a complaint in the District Court of Maryland for Prince George's County in March 2011 against McKlveen, the owner of a Monika Courts Condominium unit. Monika Courts alleged that McKlveen owed unpaid assessments and claimed damages of $3,219 plus interest of $127 and attorney's fees of $724 for a total of $4,070.

McKlveen also filed a complaint - called a counterclaim -- against Monika Courts on June 6. She said Monika Courts failed to credit the payments she had made. She said that Monika Courts' debt collection action violated the Maryland Consumer Protection Act and the Maryland Consumer Debt Collection Act. McKlveen alleged damages of $11,000 and $15,000, respectively. McKlveen also requested a jury trial. The district court then transferred the case to the Circuit Court for Prince George's County.

The district court is also known as "small claims" court. Presently, that is defined as $5,000 or less. Additionally, all matters tried in the district court are decided by judges, there is no option for a jury trial in district court.

Monika Courts asked the circuit court to do one of two things: dismiss Klveen's counterclaim or strike her jury demand. Monika Courts argued that McKlveen had tried to take the case out of the district court by filing a counterclaim that exceeded the court's monetary jurisdiction. McKlveen, however, argued that her counterclaim should count toward the amount in controversy.

The trial judge observed that there was little precedent - existing case law -- in Maryland on the issue. Nevertheless, the judge was persuaded by a statement in a Court of Special Appeals case decided in 2009, where the court said counterclaims should not be considered in determining whether the amount in controversy requirement is satisfied. The circuit court interpreted this language as dicta - something said in passing which is generally not important -- because the counterclaim in that case, McDermott v. BB&T Bankcard Corp., 185 Md. App. 156, was filed after the case had been transferred to the circuit court. In this instance, McKlveen filed her counterclaim before the case was transferred to the circuit court. The circuit court also noted that the Court of Appeals had instructed the lower courts to look at federal case law in applying the amount in controversy requirement. In its review of federal cases, the circuit court found that counterclaims are not typically considered when determining the amount in controversy for jurisdictional purposes. Finally, the circuit judge also pointed to three reasons for not considering damages asserted in a counterclaim when determining the amount in controversy. First, relying on the complaint only provides a quick rule of thumb that allows for simplicity, clarity and ease of administration in the Maryland courts. Second, giving defendants the ability to determine the amount in controversy would greatly expand the number of cases entitled to trial by jury, which is contrary to the regard for the district court's jurisdiction and authority. Finally, as "master of the complaint" a plaintiff should be permitted to set or even reduce the value of a claim so as to take advantage of the time and money savings inherent in the district court's expedited litigation. The trial court ordered that the demand for a jury trial be stricken and sent the case back to the district court. McKlveen appealed.

The Court of Special Appeals reminded that it had said in McDermott that counterclaims should not be considered in determining whether the amount in controversy requirement is satisfied - a deliberate expression of its opinion upon the issue and one not to be regarded as dicta. And, the court continued, even if McDermott did not control, there is ample support for the proposition that the value of the amount in controversy depends solely on the plaintiff's complaint. Maryland case law strongly indicates that the value of the amount in controversy is drawn only from the "demand in the pleading." And, the majority of federal courts that have ruled on the matter have said that counterclaims should not be considered. The amount in controversy, therefore, depends on what is alleged in the plaintiff's complaint.

In this case, the amount in controversy amounted to $4,070.96. Because that amount does not exceed $15,000, neither party met the requirements for requesting a jury trial, the state's intermediate appellate court said.

The case was released November 28.

Baltimore, Maryland-based Belsky, Weinberg & Horowitz has represented consumers in mortgage, bankruptcy and debt collection cases for many years. Call us at 410-234-0100 or email us for a free consultation and let us help you.

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