Title: Hodge v. State Farm Mutual Automobile Ins. Co. (Opinion - Leave Granted)

State: michigan

Issuer: Michigan Supreme Court

Document:

HODGE v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY 
 
 
Docket No. 149043.  Argued October 13, 2015 (Calendar No. 2).  Decided June 6, 2016. 
 
 
Linda Hodge filed suit against State Farm Mutual Automobile Insurance Company in the 
36th District Court for first-party no-fault benefits related to injuries she sustained when she was 
struck by a car insured by State Farm.  Hodge’s complaint indicated that the amount in 
controversy was $25,000, which was within the district court’s jurisdiction.  During discovery, 
State Farm came to believe that Hodge would present at trial proof of damages in excess of the 
district court’s $25,000 jurisdictional limit.  The 36th District Court, Kenneth J. King, J., denied 
State Farm’s motion in limine to prevent Hodge from presenting evidence of claims exceeding 
$25,000, and to prevent the jury from awarding damages in excess of $25,000.  At trial, Hodge 
did present proof of injuries exceeding $25,000, and the jury returned a verdict of $85,957.  The 
district court reduced the verdict to the jurisdictional limit of $25,000, and it awarded $1,769 in 
no-fault interest.  State Farm appealed in the Wayne Circuit Court, claiming that the amount in 
controversy exceeded the district court’s jurisdictional limit and that capping Hodge’s damages 
at $25,000 could not cure the defect.  The circuit court, Brian R. Sullivan, J., agreed and reversed 
the district court’s order of judgment.  The Court of Appeals denied Hodge’s application for 
leave to appeal.  The Supreme Court remanded the case to the Court of Appeals for consideration 
as on leave granted, and the Court of Appeals consolidated it with Moody v Home Owners Ins 
Co, another case that raised the same jurisdictional question.  The Court of Appeals, MARKEY, 
P.J., and FITZGERALD and OWENS, JJ., affirmed the circuit court’s decision that the district court 
was divested of jurisdiction when pretrial discovery, counsel’s arguments, and the evidence 
presented at trial pointed to damages in excess of $25,000.  Moody, 304 Mich App 415 (2014).  
Plaintiffs in the consolidated cases appealed in the Supreme Court.  The Supreme Court initially 
granted leave to appeal in Moody v Home Owners, and held Hodge’s appeal in abeyance pending 
the outcome in Moody.  The Supreme Court subsequently granted plaintiffs’ motions in Moody 
to dismiss their appeals, vacated the abeyance order in Hodge, and granted Hodge leave to 
appeal two issues: (1) whether a district court is divested of its subject-matter jurisdiction when a 
plaintiff alleges less than $25,000 in damages but seeks more than $25,000 at trial—that is, under 
such circumstances, whether the “amount in controversy” exceeds $25,000, and (2) if not, 
whether the district court is otherwise divested of its subject-matter jurisdiction, under such 
circumstances, on the basis that the plaintiff acted fraudulently or in bad faith by alleging 
damages within the district court’s jurisdiction. 
 
 
In a unanimous opinion by Justice LARSEN, the Supreme Court held: 
 
Michigan Supreme Court 
Lansing, Michigan 
Syllabus 
 
Chief Justice: 
Robert P. Young, Jr. 
 
Justices: 
Stephen J. Markman 
Brian K. Zahra 
Bridget M. McCormack 
David F. Viviano 
Richard H. Bernstein 
Joan L. Larsen 
This syllabus constitutes no part of the opinion of the Court but has been  
prepared by the Reporter of Decisions for the convenience of the reader. 
Reporter of Decisions: 
Corbin R. Davis 
 
 
The “amount in controversy” is determined by the ad damnum clause in a plaintiff’s 
complaint.  When a complaint alleges damages not exceeding $25,000, the district court has 
subject-matter jurisdiction over that complaint. 
 
 
A district court is not divested of its subject-matter jurisdiction over a complaint alleging 
an amount in controversy not exceeding $25,000, even though the plaintiff’s pretrial discovery 
answers, counsel’s arguments before trial, and evidence presented at trial, all indicate that the 
plaintiff’s damages far exceeded the district court’s jurisdictional limit.  In this case, Hodge filed 
in district court a complaint for damages not exceeding $25,000.  Pretrial conduct and the 
introduction of evidence at trial indicated that Hodge’s damages far exceeded $25,000.  
However, the circuit court wrongly decided that the district court was divested of jurisdiction 
when the amount of damages shown exceeded $25,000.  The district court was not divested of 
jurisdiction because the complaint claimed damages within the district court’s jurisdictional 
limit, even though the damages actually exceeded $25,000.  In the absence of bad faith, the 
prayer for relief controls the amount in controversy and the amount of damages a plaintiff may 
recover.  
 
 
The Supreme Court did not address whether the allegations were pleaded in bad faith 
because defendant did not raise the issue. 
 
 
Reversed, the district court judgment reinstated, and the case remanded to the district 
court for further proceedings.  
 
 
Justice MARKMAN concurred with the majority’s opinion in full and wrote separately to 
explain his view that a plaintiff pleads in bad faith when he or she alleges an “amount in 
controversy” consistent with the district court’s $25,000 jurisdictional limit with the intention to 
present evidence and argument inconsistent with that amount.  The question of proper 
jurisdiction does not end with a plaintiff’s willingness to accept damages capped by the district 
court’s jurisdictional limit.  A plaintiff may gain an unfair advantage by pleading in bad faith, 
and the district court must divest itself of jurisdiction when a plaintiff has obtained the district 
court’s jurisdiction by pleading in bad faith.  The district court has a continuing obligation to be 
vigilant in identifying bad-faith conduct, and it must be prepared to question sua sponte its own 
jurisdiction at any stage of the proceeding. 
 
 
 
 
 
 
 
 
 
 
 
©2016 State of Michigan 
FILED  June 6, 2016 
 
 
S T A T E  O F  M I C H I G A N 
 
SUPREME COURT 
 
 
LINDA HODGE, 
 
 
Plaintiff-Appellant, 
 
 
v 
No. 149043 
 
STATE FARM MUTUAL AUTOMOBILE 
INSURANCE COMPANY, 
 
 
 
Defendant-Appellee. 
 
 
 
BEFORE THE ENTIRE BENCH 
 
LARSEN, J. 
This case involves the proper application of MCL 600.8301, which grants the 
district court “exclusive jurisdiction in civil actions when the amount in controversy does 
not exceed $25,000.00.”  For at least 160 years, Michigan courts have held that the  
 
 
Michigan Supreme Court 
Lansing, Michigan 
OPINION 
 
Chief Justice: 
Robert P. Young, Jr. 
 
 
Justices: 
Stephen J. Markman 
Brian K. Zahra 
Bridget M. McCormack 
David F. Viviano 
Richard H. Bernstein 
Joan L. Larsen 
 
 
 
 
 
2 
allegations in the complaint establish the amount in controversy.1  We affirm that 
principle today.  
This case arises out of a lawsuit for no-fault damages filed in the 36th District 
Court.  Plaintiff Linda Hodge was struck by a car in Detroit and sustained serious 
injuries.  She brought this suit for first-party no-fault benefits against defendant State 
Farm Mutual Automobile Insurance Company, which insured the driver who struck her.  
She sought damages for her medical expenses, loss of wages, and attendant-care needs.  
In two separate parts of her complaint, Hodge stated that she sought damages “not in 
excess of $25,000.” 
During discovery, State Farm came to believe that Hodge would present at trial 
proof of damages in excess of $25,000.  Such proofs, in State Farm’s view, would take 
the “amount in controversy” above the district court’s jurisdictional limit.  State Farm, 
therefore, filed a motion in limine, seeking to prevent Hodge from presenting evidence of 
claims exceeding $25,000 and to prevent the jury from awarding damages above that 
limit.  The district court denied the motion. 
At trial, Hodge did present proof of injuries exceeding $25,000, including more 
than $150,000 in attendant-care services alone.  At the conclusion of the trial, the jury 
returned a verdict of $85,957.  The district court then reduced its judgment for Hodge to 
$25,000 in damages and $1,769 in no-fault interest.  
State Farm appealed in the Wayne Circuit Court, claiming that the amount in 
controversy exceeded the district court’s jurisdictional limit and that capping Hodge’s 
                                              
1 See Strong v Daniels, 3 Mich 466, 473 (1855).  
 
 
 
3 
recovery at $25,000 could not cure the defect.  The circuit court agreed and reversed the 
district court’s order of judgment.2   
The Court of Appeals initially denied plaintiff’s application for leave to appeal.  
After this Court remanded for consideration as on leave granted,3 the Court of Appeals 
consolidated this case with another brought in district court by plaintiff’s counsel that 
raised the same jurisdictional question.  In the consolidated appeal, the Court of Appeals 
affirmed the circuit court’s decision, holding that although the district court’s jurisdiction 
“will most often be determined by reviewing the amount of damages or injuries a party 
claims in his or her pleadings,”4 the district courts here were divested of jurisdiction 
when the “pretrial discovery answers, the arguments of [plaintiff’s] counsel before trial 
and the presentation of evidence at trial,” pointed to damages in excess of $25,000.5   
The plaintiff in each of the consolidated cases sought leave to appeal in this Court.  
We initially granted leave to appeal in the companion case, Moody v Home Owners,6 and 
held this case in abeyance pending our decision in Moody.7  However, this Court 
subsequently granted the plaintiffs-appellants’ motion to dismiss their own appeal in 
                                              
2 Hodge v State Farm Mut Auto Ins Co, unpublished order of the Wayne Circuit Court, 
issued February 1, 2012 (Docket No. 10-012109-AV). 
3 Hodge v State Farm Mut Auto Ins Co, 493 Mich 937 (2013). 
4 Moody v Home Owners Ins Co, 304 Mich App 415, 430; 849 NW2d 31 (2014). 
5 Id. 
6 Moody v Home Owners Ins Co, 497 Mich 866 (2014). 
7 Hodge v State Farm Mut Auto Ins Co, 853 NW2d 334 (Mich, 2014). 
 
 
 
4 
Moody.8  We then vacated our abeyance order and granted leave to appeal in this case, 
limited to two issues:   
(1) whether a district court is divested of subject-matter jurisdiction when a 
plaintiff alleges less than $25,000 in damages in his or her complaint, but 
seeks more than $25,000 in damages at trial, i.e., whether the “amount in 
controversy” exceeds $25,000 under such circumstances . . . and, if not, (2) 
whether such conduct nevertheless divests the district court of subject-
matter jurisdiction on the basis that the amount alleged in the complaint 
was made fraudulently or in bad faith.[9]  
 
***** 
The 1963 Michigan Constitution, art 6, § 1, establishes the circuit court as a “trial 
court of general jurisdiction,” and authorizes the Legislature to establish courts of limited 
jurisdiction.  The Legislature exercised this constitutional authority in 1968 by creating 
the district court.10 MCL 600.8301(1) establishes the district court’s limited jurisdiction: 
The district court has exclusive jurisdiction in civil actions when the 
amount in controversy does not exceed $25,000.00.[11]  
 
                                              
8 Moody v Home Owners Ins Co, 858 NW2d 462 (Mich, 2015). 
9 Hodge v State Farm Mut Auto Ins Co, 497 Mich 957 (2015). 
10 MCL 600.8101, as enacted by 1968 PA 154. 
11 When the Legislature established the district court in 1968, it set the court’s 
jurisdictional limit at $3,000.  See 1968 PA 154.  The Legislature has twice raised the 
jurisdictional limit, to $10,000 in 1971, see 1971 PA 148, and to $25,000 in 1996, see 
1996 PA 388. 
 
 
 
5 
The plain language of MCL 600.8301(1), read in conjunction with art 6, § 1 and 
MCL 600.605,12 establishes that, in civil actions where no other jurisdictional statute 
applies, the district court is limited to deciding cases in which the amount in controversy 
does not exceed $25,000.13  The district court, therefore, may not award damages in 
excess of that amount.14  The question before this Court is how to determine the “amount 
in controversy”: by the pleadings or by the proofs at trial? 
Our cases have long held that courts are to determine their subject-matter 
jurisdiction by reference to the pleadings.  As far back as 1855, when determining 
whether the circuit court or the justice of peace had jurisdiction over a dispute,15 this 
                                              
12 “Circuit courts have original jurisdiction to hear and determine all civil claims and 
remedies, except where exclusive jurisdiction is given in the constitution or by statute to 
some other court or where the circuit courts are denied jurisdiction by the constitution or 
statutes of this state.” 
13 The 1963 Michigan Constitution, art 6, § 1 dictates that the circuit court is to be the 
only court of general jurisdiction, but that the Legislature may establish courts of limited 
jurisdiction.  The Legislature slightly restricted the circuit court’s jurisdiction in 
MCL 600.605 by removing the circuit court’s original jurisdiction in cases “where 
exclusive jurisdiction is given in the constitution or by statute to some other court . . . .”  
The Legislature granted such exclusive jurisdiction to the district court in 
MCL 600.8301(1).  However, because the Legislature only has the authority to establish 
courts of limited jurisdiction, the district court’s jurisdiction is limited to the explicit 
grant of Chapter 83 of the Revised Judicature Act of 1961.  See MCL 600.8301 et seq. 
14 See Zimmer v Schindehette, 272 Mich 407, 409; 262 NW 379 (1935) (declaring void a 
judgment rendered by a justice of the peace that was in excess of his jurisdiction).  See 
also Clohset v No Name Corp (On Remand), 302 Mich App 550, 567; 840 NW2d 375 
(2013) (“We are cognizant of the fact that, generally speaking, a district court cannot 
render a judgment that exceeds its jurisdictional limit.”). 
15 The 1850 Michigan Constitution, art 6, § 18, specified that “justices of the peace shall 
have exclusive jurisdiction to the amount of one hundred dollars . . . .”  The 1908 
Michigan Constitution had a similar clause.  See 1908 Michigan Constitution, art 7, § 16. 
 
 
 
6 
Court held that “jurisdiction must be determined . . . , where it depends on amount, by the 
sum claimed in the declaration or writ.”16  This “well settled” rule would apply, the Court 
surmised, even if the plaintiff presented proof of damages, or the jury returned a verdict, 
exceeding the court’s jurisdictional limit.17 Neither the parties nor our own research has 
revealed any case deviating from this common-law rule.18 
                                              
16 Strong, 3 Mich at 472.  This rule appears to be even older than Strong.  The Court in 
Strong noted that even before the adoption of the 1850 Constitution, at issue in that case, 
“it was never doubted, that the test of jurisdiction was the amount claimed in the 
plaintiff’s writ.”  Id. at 470. 
17 Id. at 473 (“[T]he justice will not be ousted of his jurisdiction by the jury returning a 
verdict, or by proof of damages beyond his jurisdiction.”). 
18 We note that the federal courts also apply this principle.  See, e.g., St Paul Mercury 
Indem Co v Red Cab Co, 303 US 283, 288; 58 S Ct 586; 82 L Ed 845 (1938) (“The rule 
governing dismissal for want of jurisdiction in cases brought in the federal court is 
that . . . the sum claimed by the plaintiff controls if the claim is apparently made in good 
faith.”).  Several other states are in accord.  See, e.g., Brunaugh v Worley, 6 Ohio St 597, 
598 (1856) (“The jurisdiction of the court of common pleas depends upon the amount 
claimed in the petition.”); Wagner v Nagel, 23 NW 308, 309 (Minn, 1885) (“It is well 
settled in this court that where the jurisdiction of a court depends upon ‘the amount in 
controversy,’ this is determined by the amount claimed.”); Sellery v Ward, 21 Cal 2d 300, 
304; 131 P 2d 550 (1942) (“Where the action is brought in good faith and the cause of 
action stated is within the jurisdiction of the court in which it is commenced, the mere 
fact that the judgment is for less than the jurisdictional amount of that court does not 
establish that it was without jurisdiction.”); Brannon v Pacific Employers Ins Co, 148 
Tex 289, 294; 224 SW 2d 466 (1949) (“It is a fundamental rule that in determining the 
jurisdiction of the trial court, the allegations of the petition made in good faith are 
determinative of the cause of action.”); Holmquist v Spinelli, 139 Conn 429, 431; 94 A 2d 
621 (1953) (“From the earliest times in this state, and in a long line of cases, it has been 
held that the amount of the matter in demand is to be discovered only by reference to the 
complaint.”); White v Marine Transport Lines, Inc, 372 So 2d 81, 84 (Fla, 1979) (“[T]he 
good faith demand of the plaintiff at the time of instituting suit determines the ability of 
the particular court to entertain the action.”). 
 
 
 
7 
Nor is there any reason to believe that the Legislature intended to depart from this 
well-settled practice when it created the district court and established by statute the 
monetary limits on its jurisdiction.  When the Legislature, without indicating an intent to 
abrogate the common law,  
borrows terms of art in which are accumulated the legal tradition and 
meaning of centuries of practice, it presumably knows and adopts the 
cluster of ideas that were attached to each borrowed word in the body of 
learning from which it was taken and the meaning its use will convey to the 
judicial mind unless otherwise instructed.[19]  
Here, the statute neither defines the critical term, “amount in controversy,”20 nor in 
any other way suggests an intent to depart from the long-established rule that the 
pleadings determine the amount in controversy for purposes of the court’s subject-matter 
jurisdiction. 
                                              
19 Sekhar v United States, 570 US ___, ___; 133 S Ct 2720, 2724; 186 L Ed 2d 794 
(2013), quoting Morissette v United States, 342 US 246, 263; 72 S Ct 240; 96 L Ed 288 
(1952).  See also In re Bradley Estate, 494 Mich 367, 377; 835 NW2d 545 (2013) 
(“[W]hen the Legislature chooses to employ a common-law term without indicating an 
intent to alter the common law, the term will be interpreted consistent with its common-
law meaning.”); Alvan Motor Freight, Inc v Dep’t of Treasury, 281 Mich App 35, 41; 
761 NW2d 269 (2008) (“[W]hen enacting legislation, the Legislature is presumed to be 
fully aware of existing laws, including judicial decisions.”). 
20 “Pursuant to MCL 8.3a, undefined statutory terms are to be given their plain and 
ordinary meaning, unless the undefined word or phrase is a term of art.”  People v 
Thompson, 477 Mich 146, 151; 730 NW2d 708 (2007).  If a word or phrase is a term of 
art, it “shall be construed and understood according to [its] peculiar and appropriate 
meaning.”  MCL 8.3a.  Although the term “amount in controversy” was not specifically 
used in the 1850 or 1908 Constitutions, it has long been a part of our state’s legal lexicon 
and was used in 19th century Court opinions to indicate the amount at stake in the suit.  
See, e.g., Olcott v Hanson, 12 Mich 452, 455 (1864) (opinion of MARTIN, J.); Truesdail v 
Ward, 24 Mich 117, 120 (1871) (opinion of GRAVES, J.).  That amount was always 
determined based upon the amount claimed in the pleadings.  See, e.g., Strong, 3 Mich at 
470. 
 
 
 
8 
Thus, it is not quite right to say, as did the Court of Appeals, that nothing in 
MCL 600.8301(1),21 MCR 2.227(A)(1),22 or MCR 2.116(C)(4)23 “requires that a court 
limit its jurisdictional query to the amount in controversy alleged in the pleadings.”24  
Instead, the statute and court rules are properly read as incorporating the long-settled rule 
that the jurisdictional amount is determined on the face of the pleadings. 
Both the Court of Appeals and defendant urge that dictionary definitions of 
statutory terms support a contrary result.  We find the cited references unhelpful.  The 
Court of Appeals noted that Black’s Law Dictionary defines “amount in controversy”25 as 
“[t]he damages claimed or relief demanded by the injured party in a lawsuit.”26  But this 
definition is at least as consistent with the common-law rule as it is with the new rule 
espoused by the Court of Appeals.  The dispute here is over how and when to determine 
                                              
21 “The district court has exclusive jurisdiction in civil actions when the amount in 
controversy does not exceed $25,000.00.” 
22 “When the court in which a civil action is pending determines that it lacks jurisdiction 
of the subject matter of the action, but that some other Michigan court would have 
jurisdiction of the action, the court may order the action transferred to the other court in a 
place where venue would be proper.  If the question of jurisdiction is raised by the court 
on its own initiative, the action may not be transferred until the parties are given notice 
and an opportunity to be heard on the jurisdictional issue.” 
23 “The motion [for summary disposition] may be based on one or more of these grounds, 
and must specify the grounds on which it is based: . . .  The court lacks jurisdiction of the 
subject matter.” 
24 Moody, 304 Mich App at 426. 
25 When defining a legal term or phrase with a pedigree as long as “amount in 
controversy,” little is likely to be gained from defining the individual words it comprises.  
Thus, we find unpersuasive the Court of Appeals’ close examination of the individual 
words “amount” and “controversy.”   
26 Id. at 430, quoting Black’s Law Dictionary (9th ed). 
 
 
 
9 
the “damages claimed or relief demanded”:  on the pleadings or on the proofs?  As a 
method for determining the district court’s subject-matter jurisdiction, then, the Black’s 
definition of “amount in controversy” is simply incomplete. 
Defendant’s resort to the dictionary fares no better.  MCR 2.227(A)(1) allows a 
court to transfer an action to another tribunal when it “determines that it lacks jurisdiction 
of the subject matter of the action.”  Defendant cites multiple dictionaries for the 
proposition that “determines” implies the result of research or investigation.  From this, 
defendant argues that a court may look beyond the pleadings to determine its jurisdiction.  
But the conclusion does not clearly follow from the premise.  Even if “to determine” 
implies that inquiry will precede decision, neither the court rule nor common English 
usage conveys the sense that the inquiry need be prolonged.  Just as government officials 
routinely “determine” age or identity by looking at photo ID, a court might well 
“determine” the jurisdictional amount by looking at the pleadings. 
We are left, therefore, with the firm impression that in adopting MCL 600.8301, 
the Legislature intended to continue the longstanding practice of determining the 
jurisdictional amount based on the amount prayed for in the complaint.  The Court of 
Appeals was aware of this “ancient” common-law rule,27 but thought it inapplicable 
because the plaintiff pleaded “a claim for relief ostensibly within the limits of the district 
court’s subject-matter jurisdiction but then plac[ed] in dispute through evidence and 
argument at trial an amount of damages much greater than the court’s jurisdictional 
limit.”28  We recognize, as did the Court of Appeals, the potential for “artful pleading” 
                                              
27 Id. at 432. 
28 Id. at 433. 
 
 
 
10 
that the common-law rule creates,29 and we have our own concerns about the 
implications of the rule.30  But, absent a finding of bad faith,31 we do not believe that 
                                              
29 Id. 
30 For example, an unscrupulous attorney might, without fully informing his client, limit 
his client’s recovery to $25,000 by filing in district court but then seek attorney fees 
based on the full amount of damages returned by the jury, thereby sacrificing his client’s 
interests to his own.  In this regard, we remind the trial courts that an attorney is entitled 
to recover a reasonable fee for advising and representing a client in a personal protection 
insurance (PIP) action.  MCL 500.3148(1).  After calculating the baseline attorney fee 
figure, the trial court should consider, though is not limited to, a number of factors when 
determining a reasonable fee for such representation.  Pirgu v United Servs Auto Ass’n, 
___ Mich ___, ___; ___ NW2d ___ (2016) (Docket No. 150834), slip op at 13.  These 
factors are:  
(1) the experience, reputation, and ability of the lawyer or lawyers 
performing the services,  
(2) the difficulty of the case, i.e., the novelty and difficulty of the 
questions involved, and the skill requisite to perform the legal service 
properly, 
(3) the amount in question and the results obtained,  
(4) the expenses incurred, 
(5) the nature and length of the professional relationship with the 
client, 
(6) the likelihood, if apparent to the client, that acceptance of the 
particular employment will preclude other employment by the lawyer,  
(7) the time limitations imposed by the client or by the 
circumstances, and  
(8) whether the fee is fixed or contingent. [Id. at ___.] 
Factor (3) suggests that the fees awarded must be reasonable in light of the 
$25,000 limit on a plaintiff’s recovery in district court. 
31 This Court has held that a court will not retain subject-matter jurisdiction over a case 
“when . . . fraud upon the court is apparent” from allegations pleaded in bad faith.  Fix v 
 
 
 
 
11 
these concerns affect the district court’s jurisdiction, which has always been determined 
based on the amount alleged in the pleadings. 
The common-law rule is marked not only by its longevity but by its simplicity.  
The ad damnum clause in the plaintiff’s complaint is a straightforward measure of the 
court’s jurisdiction.  And its accompanying limit on recovery should deter fully-informed 
plaintiffs from too-readily seeking to litigate a more valuable claim in district court.  By 
contrast, the rule articulated by the Court of Appeals renders the district court’s 
jurisdiction contingent and uncertain and raises a host of new complications.  The Court 
of Appeals believed that the district court in the instant case was divested of jurisdiction 
when the “pretrial discovery answers, the arguments of . . . counsel before trial, and the 
presentation of evidence at trial[] all showed that” what it deemed the “amount in 
controversy . . . far exceeded” the district court’s jurisdictional limit.32  But if plaintiff’s 
proofs here were excessive, would proofs exceeding the jurisdictional limit by $1,000 be 
enough to divest the district court of jurisdiction?  $100?  $1?  What would be the effect 
on the resources of the court system?  If a plaintiff presented evidence over the 
                                              
Sissung, 83 Mich 561, 563; 47 NW 340 (1890).  In Fix, this Court dismissed the 
plaintiff’s suit as being brought in bad faith because the amount claimed was 
“unjustifiable” and could not be proved.  Id.  However, beyond that holding, our cases 
give no indication of what would constitute bad faith sufficient to oust the court of 
jurisdiction.  The Court of Appeals seemed concerned with plaintiffs filing in district 
court knowing that provable actual damages exceeded the $25,000 jurisdictional limit.  
See Moody, 304 Mich App at 431.  We question, but do not decide, whether a fully-
informed plaintiff acts in bad faith by filing a claim in district court, thereby limiting his 
own recovery to $25,000.  In this case, defendant made no allegation of bad faith in the 
pleadings and there has been no finding of bad faith by the district court.  
32 Moody, 304 Mich App at 430-431. 
 
 
 
12 
jurisdictional cap on the last day of testimony, would the entire trial have to begin anew 
in the circuit court?  Could a losing plaintiff conveniently “discover” and submit receipts 
above the jurisdictional amount on the last day of a trial that is not going his way?  
Would the district court be divested of subject-matter jurisdiction if a jury returned a 
verdict beyond the jurisdictional limit, even though neither party had argued for that 
amount?  What would happen if a plaintiff wished to present multiple theories of 
recovery?  None of these questions attend the longstanding common-law rule.  
We, therefore, hold what the jurisprudence of this state has long established: in its 
subject-matter jurisdiction inquiry, a district court determines the amount in controversy 
using the prayer for relief set forth in the plaintiff’s pleadings, calculated exclusive of 
fees, costs, and interest.33  Hodge’s complaint prayed for money damages “not in excess 
of $25,000,” the jurisdictional limit of the district court.  Even though her proofs 
exceeded that amount, the prayer for relief controls when determining the amount in 
controversy, and the limit of awardable damages.  Because there were no allegations, and 
therefore no findings, of bad faith in the pleadings, the district court had subject-matter 
jurisdiction over the plaintiff’s claim. 
 
                                              
33 See Krawczyk v Detroit Auto Inter-Ins Exchange, 117 Mich App 155, 163; 323 NW2d 
633 (1982) (“As a general rule, neither costs, attorney fees nor interest is considered in 
determining the jurisdictional amount.”), affirmed in part, reversed in part on other 
grounds, 418 Mich 231 (1983). 
 
 
 
13 
We reverse the Court of Appeals’ decision that the district court lacked subject-
matter jurisdiction, reinstate the judgment of the district court, and remand to the district 
court for further proceedings. 
 
 
Joan L. Larsen 
 
Robert P. Young, Jr. 
 
Stephen J. Markman 
 
Brian K. Zahra 
 
Bridget M. McCormack 
 
David F. Viviano 
 
Richard H. Bernstein 
 
 
 
 
 
S T A T E  O F  M I C H I G A N 
 
SUPREME COURT 
 
 
LINDA HODGE, 
 
 
Plaintiff-Appellant, 
 
 
v 
No. 149043 
 
STATE FARM MUTUAL AUTOMOBILE 
INSURANCE COMPANY, 
 
 
 
Defendant-Appellee. 
 
 
 
MARKMAN, J. (concurring).   
At issue here is the subject-matter jurisdiction of the district court, which is 
exclusive in “civil actions when the amount in controversy does not exceed $25,000.00.”  
MCL 600.8301(1).  I join the majority because I agree that “amount in controversy” as 
used in MCL 600.8301(1) refers to the “prayer for relief set forth in the plaintiff’s 
pleadings . . . .”  I further agree that a trial court may be ousted of subject-matter 
jurisdiction when “fraud upon the court is apparent” from pleadings made in “bad faith.”  
I write separately only to identify circumstances that, in my view, might raise questions 
concerning “bad faith” pleading and thereby warrant dismissal of a case for lack of 
jurisdiction.  While bad-faith pleadings are rare, when these do occur, they undermine the 
law of our state and the integrity of our judicial process, and they give rise to conditions 
at trial in which a party may be unfairly prejudiced.  
 
 
2 
I.  FACTS & HISTORY 
This case arose when plaintiff sued defendant in the 36th District Court for first-
party no-fault benefits after plaintiff had been struck by a vehicle driven by a person 
insured by defendant.  Plaintiff’s complaint alleged bodily injury, including a “closed 
head injury,” “pains in left shoulder, back, neck area, [and] lower back,” and a “bruise on 
[the] left ankle.”  She also alleged financial injury, including “expenses for care, 
recovery, or rehabilitation,” “loss of wages,” “replacement services,” and “attendant 
care.”  In her complaint’s prayer for relief, plaintiff sought “damages in whatever amount 
Plaintiff is found to be entitled not in excess of 25,000.00 . . . .”  The parties then engaged 
in discovery, and, based on information provided by plaintiff, defendant estimated that 
plaintiff’s claim was worth nearly $250,000.  As a result, defendant filed a motion in 
limine to prevent plaintiff from offering at trial evidence that her claim exceeded 
$25,000, but the district court denied that motion.  Plaintiff eventually submitted 
evidence at trial of injuries exceeding $25,000, including more than $150,000 in 
attendant-care services.  The jury returned a verdict of $85,957, which the district court 
duly reduced to $25,000.   
Defendant appealed in the Wayne Circuit Court, arguing that the district court 
lacked subject-matter jurisdiction.  The circuit court concluded that plaintiff claimed 
damages exceeding $25,000 and thus reversed the district court.  Plaintiff then appealed 
in the Court of Appeals.  After we directed that Court to consider the case as on leave 
granted, it agreed with the circuit court, concluding that the district court had been 
divested of jurisdiction when plaintiff “presented evidence of damages far exceeding [its] 
 
 
3 
$25,000 subject-matter jurisdiction.”  Moody v Home Owners Ins Co, 304 Mich App 415, 
431; 849 NW2d 31 (2014).  We then granted leave to appeal on two issues: 
(1) whether a district court is divested of subject-matter jurisdiction when a 
plaintiff alleges less than $25,000 in damages in his or her complaint, but 
seeks more than $25,000 in damages at trial, i.e., whether the “amount in 
controversy” exceeds $25,000 under such circumstances, see MCL 
600.8301(1); and, if not, (2) whether such conduct nevertheless divests the 
district court of subject-matter jurisdiction on the basis that the amount 
alleged in the complaint was made fraudulently or in bad faith.  [Hodge v 
State Farm Mut Auto Ins Co, 497 Mich 957, 957-958 (2015).] 
II.  ANALYSIS 
I agree with the majority’s analysis of the two issues on which this Court granted 
leave.  I write separately only to elaborate on my views as to the second issue-- under 
what circumstances may a prayer for relief, although nominally falling within the district 
court’s statutory “amount in controversy” requirement, nonetheless clearly exhibit bad 
faith and thereby warrant dismissal.1  In my view, the relevant jurisdictional inquiry does 
not automatically come to an end when a plaintiff evidences a willingness to accept an 
amount less than the jurisdictional maximum; rather, particular circumstances may 
warrant a district court’s inquiring more deeply into whether the amount in controversy 
was, at the time it was alleged, alleged in bad faith.2  I emphasize that bad-faith pleadings 
                                              
1 See, e.g., 20 Am Jur 2d, Courts, § 103 (“The plaintiff’s pleadings are generally 
determinative as to the amount in controversy unless the defendant specifically alleges 
and proves the amount was pleaded merely as a sham for the purpose of wrongfully 
obtaining jurisdiction or can readily establish that the amount in controversy does not fall 
within the court’s jurisdictional limits.”) (emphasis added). 
2 One federal practice treatise states that “[u]nder well-settled principles of pleading, the 
plaintiff is the master of the statement of his claim.”  14AA Fed Prac & Proc Juris (4th 
ed), § 3702.  But the treatise goes on to note that the plaintiff’s choice controls only 
“absent a showing of bad faith.”  Id.  In the instant case, because the present record does 
 
 
 
4 
to obtain subject-matter jurisdiction have been extraordinarily rare-- indeed this and the 
two cases mentioned in note 3 of this opinion are the first brought to this Court’s 
attention during my tenure, and I believe further inquiry in this regard must be 
undertaken.3  For the reasons set forth below, however, I believe it is important that it be 
made clear, for the integrity of both the legislative and judicial branches, that this Court 
will not tolerate cases or controversies that ought to be heard in one court being heard in 
another as a result of a bad-faith pleading.  
A.  BAD FAITH 
Subject-matter jurisdiction “is the power to hear and determine a cause or matter.”  
Bowie v Arder, 441 Mich 23, 36; 490 NW2d 568 (1992) (quotation marks and citation 
omitted).  Because a court has no inherent subject-matter jurisdiction, such jurisdiction 
must be “conferred upon [the court] by the power which creates it.”  Detroit v Rabaut, 
389 Mich 329, 331; 206 NW2d 625 (1973).  Jurisdiction accordingly “arises by law,” and 
a court must, notwithstanding a party’s stipulation, consent, or waiver, “take notice of the 
limits of its authority” in order to safeguard the integrity of the judicial process by 
ensuring that it does not exercise authority it does not have.  Bowie, 441 Mich at 56.  
Hence, if the court “recognize[s] its lack of jurisdiction,” it must “act accordingly by 
                                              
not sufficiently reflect that plaintiff’s allegations were made in bad faith, because 
“defendant made no allegation of bad faith in the pleadings,” and because “there has been 
no finding of bad faith by the district court,” see the majority opinion at note 31, I believe 
that this Court currently lacks a basis to conclude that plaintiff pleaded in bad faith.   
3 Two other such cases recently have come before the Court.  Moody v Home Owners Ins 
Co, 497 Mich 866; 858 NW2d 462 (2015); Madison v AAA of Mich, 858 NW2d 463 
(2015).  Counsel in these two cases is also plaintiff’s counsel in the instant case. 
 
 
5 
staying proceedings, dismissing the action, or otherwise disposing thereof, at any stage of 
the proceeding.”  Fox v Bd of Regents of Univ of Mich, 375 Mich 238, 242; 134 NW2d 
146 (1965) (quotation marks and citation omitted); accord Straus v Governor, 459 Mich 
526, 532; 592 NW2d 53 (1999) (“[A] court at all times is required to question sua sponte 
its own jurisdiction . . . .”) (quotation marks and citation omitted). 
This Court has long recognized that when a plaintiff’s pleadings are clearly made 
in bad faith for the purpose of satisfying a trial court’s subject-matter jurisdiction, the 
trial court is ousted of jurisdiction and must dismiss the matter.  See Fix v Sissung, 83 
Mich 561, 563; 47 NW 340 (1890).  Fix concerned a dispute between neighbors 
stemming from a gaggle of the plaintiff’s geese “trespassing” on the defendant’s 
property.  The defendant took possession of the geese and refused to return them unless 
the plaintiff first paid for property damage caused by the geese and for the cost of feeding 
them.  The plaintiff then sued the defendant in the circuit court for return of the geese.  
The defendant moved to dismiss for lack of subject-matter jurisdiction, arguing that 
because the geese were worth less than $100, only a state justice of the peace could hear 
the case.4  The plaintiff responded with a declaration that the geese were worth $200, and 
the trial court permitted the case to proceed.  However, it also warned the plaintiff that it 
would dismiss the case if he “should fail to bring himself within the statute”-- that is, 
within the jurisdictional limit-- based on the evidence presented at trial.  Id.  
Notwithstanding this admonition, the “plaintiff offered no proof [at trial] as to the value 
                                              
4 Const 1850, art 6, § 18 (“In civil cases justices of the peace shall have exclusive 
jurisdiction to the amount of one hundred dollars . . . .”). 
 
 
6 
of his geese, and strenuously opposed the introduction of evidence by the defendant of 
their value.”  Id.  The trial court admitted such evidence, which showed that the geese 
were worth only $9, and dismissed the case.  
The plaintiff appealed in this Court, arguing that his case fell within the circuit 
court’s jurisdiction because he had alleged the geese’s value to be $200, well above the 
$100 jurisdictional limit of state justices of the peace.  We acknowledged that a trial 
court’s jurisdiction may be properly retained on the basis of a good-faith allegation of 
property value exceeding the jurisdictional limit, even where the value proved at trial 
does not ultimately exceed the jurisdictional limit.  But because the plaintiff’s declaration 
that the geese were worth $200 was “unjustifiable,” we concluded that “the value 
alleged . . . was made in bad faith, and was a fraud upon the court.”  Id.  Accordingly, we 
affirmed the trial court’s dismissal.  Fix thus stands for the proposition that a court 
subject to a jurisdictional limit may dismiss a complaint for lack of subject-matter 
jurisdiction, notwithstanding that the jurisdictional allegations are nominally valid, when 
the court concludes that those allegations were clearly made in bad faith.   
As Fix demonstrates, a plaintiff pleads in bad faith by pleading an amount in 
controversy with an intention to present evidence and argument-- i.e., to litigate that case-- 
in a manner inconsistent with that amount.  Such bad faith in the pleadings may be 
assessed based on evidence subsequently offered at trial, but it is important to recognize 
that the result in Fix was not a product of bad faith exhibited at trial, but a function of 
bad faith evidenced in the complaint, which became clearly apparent only after the 
plaintiff’s submissions at trial demonstrated both that he had fabricated the value of the 
 
 
7 
geese in order to satisfy the court’s jurisdictional threshold and that he had no initial 
intention to present a $200 case to the court.   
The plaintiff in Fix thus inflated the value of his claim to exceed a court’s 
minimum jurisdictional limit.  By contrast, plaintiff in the instant case may have 
diminished the value of her claim to avoid exceeding a court’s maximum jurisdictional 
limit.5  Notwithstanding the seeming distinction between Fix and the instant case, Fix is 
nonetheless clear, as the majority recognizes, that a court’s lawful jurisdiction cannot be 
premised on a pleading made in bad faith.  And there is no logical reason why the Fix 
principle should be limited to jurisdiction obtained by a bad-faith pleading that overstates 
the value of a claim and not also apply to jurisdiction obtained by a bad-faith pleading 
that understates the value of a claim.  A plaintiff simply does not have unchecked 
discretion to create jurisdiction in either way.  See, e.g., In re Return of Forfeited Goods, 
452 Mich 659, 671; 550 NW2d 782 (1996) (“It is well established that [j]urisdiction of 
the subject-matter cannot be given by consent.”) (quotation marks and citation omitted; 
alteration in original).    
                                              
5 Plaintiff sought $25,000 in damages, yet discovery and evidence subsequently indicated 
that her claim may have been worth as much as $250,000.  Questions of bad faith aside, 
why a plaintiff might be prompted to reduce recovery by as much as 90% in order to have 
it heard in one judicial venue instead of another is itself a matter of considerable 
consequence for the fairness of the justice system and the equal rule of law, although 
beyond the scope of inquiry in this case.  At the very least, however, I do believe that 
plaintiff’s attorney had a professional and ethical obligation to explain clearly to the 
client both the rationale for such a substantial reduction in recovery and the likely waiver 
of the right to sue for the balance of the claim in excess of the jurisdictional maximum.  
MRPC 1.4(b) (“A lawyer shall explain a matter to the extent reasonably necessary to 
permit the client to make informed decisions regarding the representation.”); see also 
MRPC 1.7(b).    
 
 
8 
B.  DISTRICT COURT JURISDICTION 
Having set forth Fix’s general principle that pleading in bad faith ousts a trial court 
of jurisdiction, I turn then to the specific question of the jurisdiction of the court at issue 
in this case, the district court.  Our Constitution establishes “one trial court of general 
jurisdiction known as the circuit court” and authorizes the Legislature to further establish 
“courts of limited jurisdiction.”  Const 1963, art 6, § 1 (emphasis added).6  The 
Legislature in response established the district court,7 which “has exclusive jurisdiction in 
civil actions when the amount in controversy does not exceed $25,000.00.”8  
MCL 600.8301(1) (emphasis added).  I agree with the majority’s straightforward 
observation that the district court is thereby “limited to deciding cases” within that 
amount.    
By separating disputes according to whether the amount in controversy exceeds or 
does not exceed $25,000, § 8301(1) reflects the Legislature’s intention to classify civil 
                                              
6 See also MCL 600.605 (“Circuit courts have original jurisdiction to hear and determine 
all civil claims and remedies, except where exclusive jurisdiction is given in the 
constitution or by statute to some other court or where the circuit courts are denied 
jurisdiction by the constitution or statutes of this state.”). 
7 MCL 600.8101(1) (“A district court is established in the state.”). 
8 Many other states have trial courts whose jurisdictions are limited by dollar thresholds.  
See Dollar Amount Jurisdiction for Tort, Contract, Real Property, and Small Claims 
Filings 
in 
State 
Trial 
Courts, 
2010, 
available 
at 
 [http://perma.cc/69K6-MM8A]; see also 21 CJS, Courts, 
§ 22, pp 31-32 (“Under various constitutional or statutory provisions, superior courts of 
general jurisdiction are limited in their jurisdiction to cases involving amounts in excess 
of a specified amount, and inferior courts of limited jurisdiction are limited in their 
jurisdiction to actions involving amounts between specified amounts.”).   
 
 
9 
cases according to their value.9  Accordingly, a case with a value exceeding $25,000 is 
intended for the circuit court and constitutes a “circuit court case,” and a case with a 
value not exceeding $25,000 is intended for the district court and constitutes a “district 
court case.”  It follows that a plaintiff with a “circuit court case” acts in accordance with 
the law when he or she pleads the appropriate amount in controversy in the circuit court, 
and a plaintiff with a “district court case” acts in accordance with the law when he or she 
pleads the appropriate amount in controversy in the district court.   
But, of course, it may come to pass as a result of evolving circumstances, as 
perhaps it has in the instant case, that a party will plead an amount in controversy not 
exceeding $25,000 and yet litigate what is a “circuit court case”-- one with a value 
exceeding $25,000-- in the district court.  Such a pleading would not then reflect the bona 
fide value of the case.  Nonetheless, such a pleading is not necessarily one made in bad 
faith because the plaintiff may intend to litigate the “circuit court case” as a “district court 
case” by presenting only the arguments and evidence needed to demonstrate entitlement 
to the lower damages reflected by the amount in controversy stated in the pleading.10   
                                              
9 See, e.g., 21 CJS, Courts, § 22, at 32 (“[T]he policy [of specifying a jurisdictional 
amount] is to force litigants whose disputes involve only comparatively trifling amounts 
to resort to inferior courts . . . .”).   
10 It is also possible that a plaintiff could file a case in the district court in the good-faith, 
but incorrect, belief that the case has a value not exceeding $25,000 and learn only later 
in the proceedings that the case, in fact, has a value exceeding $25,000.  Such a plaintiff 
could not be said to have pleaded the amount in controversy in bad faith.  Although the 
trial court is not ousted of jurisdiction in such circumstances, it remains responsible for 
enforcing its procedural and evidentiary rules, and for exercising its trial-management 
prerogatives, in a manner that ensures that any inconsistency between the amount in 
controversy pleaded and the actual value of the case does not prejudice or disadvantage 
the defendant.   
 
 
10 
However, when a plaintiff pleads an amount in controversy with the intention to 
litigate a case inconsistent with that amount, the plaintiff has thwarted the Legislature’s 
intention, and the pleading has been made in bad faith.  In other words, while the plaintiff 
may have nominally pleaded a case within the district court’s jurisdiction by alleging an 
amount in controversy not exceeding $25,000, he or she did so with the intention of 
litigating a “circuit court case” in the district court in contravention of the Legislature’s 
intention that such a case belongs in the circuit court.  A plaintiff does not, at least in my 
judgment, comply with § 8301(1) merely by pleading-- and thus being willing to accept-- 
an amount in controversy not exceeding $25,000; rather, to avoid a finding of bad faith, 
the plaintiff must plead with the intention to comply with the legal obligation to litigate 
that case in a manner consistent with the jurisdictional limit set by the Legislature.  So 
when a plaintiff has a case with a value exceeding $25,000-- that is, a “circuit court 
case”-- and wishes to litigate in the district court by pleading an amount in controversy 
not exceeding $25,000, he or she may do so consistent with the Legislature’s intentions 
only by litigating the case as though it is valued at the pleaded amount, to wit, as a 
“district court case.”   
Pleading an amount in controversy in bad faith not only is incompatible with the 
Legislature’s intention, but also is incompatible with the integrity of the judicial process, 
which requires the district court to exercise only the power “conferred upon it by” the 
Legislature.  Rabaut, 389 Mich at 331.  When a plaintiff pleads in good faith, a court can 
effectively police the boundaries of its jurisdiction simply by examining the face of the 
pleadings, but when a plaintiff pleads in bad faith, because the pleadings fall only 
nominally within the court’s power, the court risks, through no fault of its own, 
 
 
11 
exercising authority that the Legislature did not intend it to exercise.  Such an exercise of 
power is incompatible with the integrity of our judicial process, and when it is a function 
of the plaintiff’s own conduct in the pleadings, the court is justified in finding that he or 
she has pleaded in bad faith.11  
As suggested above, litigating a “circuit court case” in the district court is 
incompatible with both the Legislature’s intention and the integrity of the judicial 
process, and, consequently, a pleading intended to facilitate this as a litigation strategy is 
a pleading made in bad faith.  That bad faith is further exemplified by the sheer 
incompatibility of a “circuit court case,” whose value exceeds $25,000, with the 
capabilities of the district court, which is designed for cases with values not exceeding 
$25,000.  As a general proposition, it is reasonable to assume that the greater the amount 
of the claim, the more strenuously the parties will litigate, the more evidence will be 
placed before the jury, and the more numerous and complex will be the issues presented.  
By distinguishing the jurisdictions of the district court and the circuit court on the basis 
that the former generally hears cases with lesser amounts in controversy and the latter 
cases with greater amounts in controversy, the Legislature also presumably intended that 
                                              
11 A court must continually question its jurisdiction at every “stage of the proceeding.”  In 
re Estate of Fraser, 288 Mich 392, 394; 285 NW 1 (1939).  The district court in 
particular must be vigilant in assessing its own jurisdiction because under some 
circumstances both parties may have an interest in litigating a “circuit court case” in the 
district court-- the plaintiff’s own decision would initiate the litigation in that venue, and 
the defendant might prefer the capped liability that results when a higher-value “circuit 
court case” is brought in the district court.  Under such circumstances, the district court 
might be alone in upholding the integrity of the legislative and judicial processes.  Id. 
(“Courts are bound to take notice of the limits of their authority . . . .”). 
 
 
12 
the former generally hears cases of lesser complexity and the latter cases of greater 
complexity.12   
This Court’s own rules underscore the different levels of complexity inherent in 
typical “district court cases” and typical “circuit court cases.”  For example, the discovery 
rule permits discovery as a matter of course in “circuit court cases” while permitting it 
only with the court’s leave or by the parties’ stipulation in district court cases.  See MCR 
2.302(A)(2).  The case-evaluation rule is another example of a rule distinguishing 
between the two types of cases; the rule authorizes the shortening of deadlines for 
hearings and party briefs only in the district court.  See MCR 2.403(A)(4).  Such rules 
thus, in accordance with the Legislature’s intention, treat “district court cases” and 
“circuit court cases” differently, investing the former, where the amounts of disputes are 
lower, with procedures designed for more expedited resolution.13  Because of these and 
other differences in both court rules and statutes, as well as in the accumulated histories 
and experiences of the judges on these courts, the circuit court is the court best equipped 
                                              
12 The Legislature also has directed to the district court criminal matters of relatively 
lesser complexity.  See MCL 600.8311 (giving the district court jurisdiction over 
“[m]isdemeanors punishable by a fine or imprisonment not exceeding 1 year”; 
“[o]rdinance and charter violations punishable by a fine or imprisonment”; 
“[a]rraignments, the fixing of bail and the accepting of bonds”; certain “[p]robable cause 
conferences”; “[p]reliminary examinations”; and “[c]ircuit court arraignments”).  The 
district court’s civil and criminal jurisdictional statutes clearly indicate the Legislature’s 
intention to direct toward that court relatively less complex, less consequential, and more 
straightforward cases and controversies. 
13 That the district court is intended to hear relatively less complex matters is further 
evidenced by the fact that the court rules direct to the district court summary landlord-
tenant proceedings, MCR 4.201 to MCR 4.202, and small-claims actions, MCR 4.301 to 
MCR 4.306. 
 
 
13 
to hear “circuit court cases” and the district court, though being best equipped to hear 
“district court cases,” is correspondingly less well-equipped to hear “circuit court cases.”  
Therefore, a pleading resulting in the litigation of a “circuit court case” in the district 
court is also less compatible with the district court’s innate capabilities. 
The district court’s jurisdictional limit, and what this requires of a plaintiff, can be 
appreciated perhaps by considering the following hypothetical.  A plaintiff wishes to 
bring a personal-injury claim of less than $25,000 based on an injury to a single arm.  
This “one-arm case” may be brought in the district court, and the plaintiff will be free to 
fully present arguments and evidence as to the full extent of the injury.  By contrast, 
another plaintiff wishes to bring a personal-injury claim that exceeds $25,000 based on 
injuries to both arms and both legs.  In order to recover the full measure of damages, this 
“four-limb case” must be brought in the circuit court, because that court alone can award 
relief in an amount exceeding $25,000.  The question posed by the instant case is whether 
the four-limb case, if brought in the district court by pleading an amount in controversy 
of $25,000, must be dismissed for lack of subject-matter jurisdiction on the basis that 
such a pleading was clearly made in bad faith.  The answer, as suggested by the analysis 
above, depends on what type of case the plaintiff intended, when filing his or her 
pleading, to litigate.  If the plaintiff intended to present evidence of the full extent of his 
or her injuries-- that is, if he or she intended to present the four-limb case-- then he or she 
pleaded in bad faith because, despite having pleaded an amount in controversy not 
exceeding $25,000, he or she intended to litigate a “circuit court case” in the district 
court.  In these circumstances, because the plaintiff’s bad faith creates the risk that the 
district court will hear a “circuit court case,” the district court must dismiss the case.  A 
 
 
14 
plaintiff intending to litigate the four-limb case in the district court may do so, but only 
by restricting himself or herself to the presentation of arguments and evidence consistent 
with the amount in controversy pleaded, and not merely by demonstrating a willingness 
to accept damages not exceeding $25,000.  Thus, the critical inquiry in assessing bad 
faith is whether the plaintiff clearly intended to litigate a case inconsistent with the 
amount in controversy pleaded.  
However, whether the plaintiff intends to present a case consistent with the 
amount in controversy pleaded may be a difficult question because the plaintiff’s 
intention to engage in litigation tactics illustrative of bad faith will not often be obvious 
from the face of the complaint.  The trial court therefore must be attentive to assessing 
the presentation of arguments and evidence that may reasonably communicate that the 
plaintiff in reality has pursued a “circuit court case” in the district court for the purpose of 
obtaining some litigation advantage.14  
                                              
14 In the instant case, plaintiff alleged a “closed head injury,” “pains in left shoulder, 
back, neck area, [and] lower back,” and a “bruise on [the] left ankle,” as well as 
“expenses for care, recovery, or rehabilitation,” “loss of wages,” “replacement services,” 
and “attendant care.”  It is not clear from these allegations that plaintiff’s claim had a 
value exceeding $25,000; nor is it clear that by filing the case she intended to litigate a 
“circuit court case” in the district court.  But had the district court inquired into the issue 
of bad faith at the pleadings, it may nonetheless have concluded, similar to the court in 
Fix, that plaintiff clearly had no intention of litigating a case consistent with the amount 
in controversy pleaded.  Such an inquiry may have revealed that plaintiff intended from 
the outset to litigate a “circuit court case” in the district court by presenting evidence of 
injuries exceeding $25,000.  As in Fix, evidence of such an intention might show that the 
pleadings themselves were clearly made in bad faith and thus warrant dismissal. 
 
 
15 
C.  EVIDENCE OF BAD-FAITH PLEADING 
A plaintiff acts in bad faith when he or she litigates a “circuit court case” in the 
district court for the purpose of obtaining some litigation advantage.  The district court 
must be vigilant to such conduct, which, because it may suggest the plaintiff’s intentions 
at the time of his or her pleadings, may constitute evidence of the plaintiff’s pleading in 
bad faith.  I offer an illustrative listing of circumstances that may support a finding of bad 
faith in the amount in controversy pleaded.  
1.  EXCESSIVE EVIDENCE 
One way by which a plaintiff may achieve an unfair advantage by litigating a 
“circuit court case” in the district court is, despite having pleaded an amount in 
controversy not exceeding $25,000, by presenting evidence of injuries that do exceed 
$25,000.  Such conduct places the defendant at a disadvantage because although liability 
is limited to $25,000, the defendant will nonetheless be required to prepare a defense that 
is not similarly limited.  In the instant case, for example, defendant first learned during 
discovery that plaintiff’s injuries could be as high as $250,000.  Even though plaintiff 
was willing to accept only $25,000 in damages, defendant had to be prepared to litigate a 
$250,000 case, i.e., a “circuit court case.”  A defendant facing a “circuit court case” must 
be prepared to defend against a “circuit court case,” regardless of the venue in which that 
case is filed.  This greater preparation may lead to higher legal costs, which may at some 
point come to be viewed as disproportionate to the liability created by the amount 
pleaded, and ultimately create undue pressures to settle, where no such pressures may 
 
 
16 
have been created had the plaintiff litigated a bona fide “district court case.”15  By taking 
advantage of the jurisdictional rules, the plaintiff has shifted the defendant’s settlement 
calculus from a traditional evaluation of case strengths and weaknesses to an evaluation 
of the benefits of litigating in the district court and of the expenditure of “circuit court 
case” legal costs. 
2.  ABSENCE OF DISCOVERY 
Similar unfair advantage in arguing a “circuit court case” in the district court may 
be gained by the absence of mandatory discovery in the district court.  As a general rule, 
“parties may obtain discovery by any means provided in [MCR 2.301 et seq.],” but “in 
the district court, no discovery is permitted . . . except by leave of the court or on the 
stipulation of all parties.”  MCR 2.302(A)(1), (2); see also Ward v McNamara 
Community Hosp, 426 Mich 855 (1986).  This “major limitation[] on discovery,” 1985 
Staff Comment to MCR 2.302, is consistent with the Legislature’s intention that the 
district court hear only cases whose values do not exceed $25,000, many of which may 
be straightforward enough to render discovery unnecessary.  Moreover, in genuine 
“district court cases,” the absence of discovery often enables parties to avoid the 
expenditure of time and resources more typically associated with “circuit court cases.”  
                                              
15 I am cognizant that the backdrop of such a case will always be that a $25,000 
maximum settlement may be significantly less than the defendant might have faced in the 
circuit court.  However, once filed in the district court, a case becomes a “district court 
case,” and a defendant should not have to settle on the basis of “circuit court case” 
considerations.  More importantly, whatever the practical equities facing the two parties, 
the people of this state are entitled to have the laws of their representatives respected and 
the jurisdiction of their courts honored.  
 
 
17 
But where the plaintiff seeks to litigate a “circuit court case” in the district court, 
the absence of discovery could greatly hinder a defending party.  When a plaintiff pleads 
an amount in controversy for the purpose of obtaining district court jurisdiction, yet is 
allowed to present argument and evidence significantly exceeding $25,000, the defendant 
could face a hardship because of an inability to learn more about the claim and to present 
a complete defense.  In the absence of discovery, the plaintiff’s settlement leverage 
described above is further magnified because the defendant must then weigh the 
potentially disproportionate costs of litigating a “circuit court case” against the financial 
exposure of a “district court case,” and must do so without full knowledge of the 
plaintiff’s claim.  Thus, not only has the plaintiff gained an unfair advantage by our rules 
of jurisdiction, he or she has gained an unfair advantage by our rules of procedure.  In the 
instant case, for example, it is possible that plaintiff may have withheld most of, if not all, 
the details of her injuries and their treatment, because the full extent of plaintiff’s 
injuries-- amounting to as much as $250,000-- came to light only during subsequent 
discovery.  Yet in pleading an amount in controversy to obtain the jurisdiction of the 
district court, plaintiff may have been motivated at least in part by the possibility that 
there would be little or no discovery in that court.  That such discovery ultimately 
occurred should not distract from an inquiry into why plaintiff, whose case had a potential 
value of $250,000, pleaded a “district court case” and then appeared to litigate a “circuit 
court case,” for what matters is plaintiff’s bad faith at the pleadings.  Only an amount in 
controversy pleaded for the purpose of litigating a “circuit court case” in the district court 
ousts the district court of jurisdiction.  
 
 
18 
3.  OFFER OF JUDGMENT 
A plaintiff may further obtain an unfair advantage in arguing a “circuit court case” 
in the district court through the offer-of-judgment rule, MCR 2.405.  Under that rule, one 
party (the offeror) may make a settlement offer, and if the other party (the offeree) rejects 
the offer, the offeree may be liable for the offeror’s litigation costs unless the offeree 
improves his or her position at trial.  The rule thereby “encourage[s] settlement and . . . 
deter[s] protracted litigation.”  Hamilton v Becker Orthopedic Appliance Co, 214 Mich 
App 593, 596; 543 NW2d 60 (1995) (quotation marks and citation omitted).  But an 
unfair advantage may also be gained because offers of judgment “are formulated by the 
parties themselves, creating the possibility that a party may make an offer not in a bona 
fide attempt to settle the case, but merely to create the possibility of securing an award of 
costs.”  Freeman v Consumers Power Co, 437 Mich 514, 519 n 8; 473 NW2d 63 
(1991).16  In particular, an unfair advantage may be gained when a plaintiff files an offer 
of judgment just below the jurisdictional maximum amount in controversy.  The 
defendant, in choosing whether to accept or reject the offer, say an offer of $24,900, must 
                                              
16 The offer-of-judgment rule may be contrasted with the case-evaluation rule, MCR 
2.403.  The latter also seeks to shift fees to a party that refuses to accept an offered “case-
evaluation award.”  But unlike an offer of judgment, which is formulated by the offering 
party itself and may not always reflect “a bona fide attempt to settle the case,” a case-
evaluation award is formulated “by three lawyers who are wholly uninvolved in the 
litigation” and thus not susceptible to a plaintiff’s gamesmanship.  Freeman, 437 Mich at 
519 n 8.  Case evaluation is prominent in the circuit court.  See MCR 2.403(A)(2) (“Case 
evaluation of tort cases filed in circuit court is mandatory . . . .”); ICLE, Michigan Civil 
Procedure (April 2014), § 14.1, p 1034 (“Most cases in circuit court in which monetary 
relief is sought are submitted to case evaluation.”).  It is not, however, required in the 
district court.  See MCR 2.403(A)(4).   
 
 
19 
then consider, not only its own costs of litigating to a verdict, but also the risks of having 
to pay the plaintiff’s costs, for which the defendant will be liable unless it can improve on 
the $24,900 at trial.  But because the plaintiff may be offering evidence in support of 
injuries well in excess of $25,000, and thereby litigating a “circuit court case” in the 
district court, the defendant, to achieve a more favorable result at trial, faces the task of 
having to convince the jury to discredit what may be a substantial amount of plaintiff’s 
evidence in order to reduce the final award to an amount below $24,900.  Thus, by 
submitting an offer of judgment just below the district court’s jurisdictional maximum 
while litigating a “circuit court case,” plaintiff may be able to gain an unfair advantage 
under the jurisdictional and procedural rules by recovering nearly the same amount 
(either $24,900 or $25,000), regardless of whether defendant accepts or rejects the offer 
of judgment.   
4.  JURY CONFUSION 
Pleading a jurisdictional amount in bad faith in the district court may also entail 
interference with the jury function.  The presentation of evidence of injury typical of a 
“circuit court case” may, as explained above, unfairly and directly disadvantage the 
defendant.  It may also unfairly and indirectly disadvantage the defendant by skewing in 
plaintiff’s favor a jury finding of liability, despite the fact that findings of injury and 
liability are distinct considerations.  Professor Brian Bornstein, for example, asserted this 
result after presenting mock jurors with factual scenarios in which evidence of liability 
was held constant while evidence of the magnitude of injury varied.  Bornstein concluded 
that fact-finders “will make different [liability] judgments depending upon the severity of 
 
 
20 
the plaintiff[’]s injury.”17  That is, the more abundant the evidence of injury presented, 
the more likely it is, all else being equal, that liability will be found.  This is not only a 
matter of social-science evidence, but a matter that may be seen as affirmed by ordinary 
and commonsense understandings of human psychology: where two parties present 
evidence and seek damages for injuries done to a single arm, the party who is allowed to 
present evidence, beyond the scope of the case, that he or she also suffered injury to the 
other three limbs will tend to fare better between the two litigants.  Evidence of the 
injuries to all four limbs might be relevant in a “circuit court case,” but in the district 
court, evidence of injury beyond the one arm might be irrelevant and prejudicially 
excessive.  Consequently, the plaintiff’s advantaging himself or herself of such an effect 
might well suggest bad faith.18  
5.  JURY INFLUENCING 
By litigating a “circuit court case” in the district court, the plaintiff may also take 
advantage of another cognitive bias, known as the “anchoring effect,” that could affect 
the jury.  According to Professor Daniel Kahneman, this “occurs when people consider a 
particular value for an unknown quantity before estimating that quantity.”19  He asserts 
that the anchoring effect influences decisions even if the “particular value” considered 
                                              
17 Bornstein, From Compassion to Compensation: The Effect of Injury Severity on Mock 
Jurors’ Liability Judgments, Journal of Applied Social Psychology, 28:16 (1998), 
pp 1477, 1478, 1485.   
18 Defendant here challenged plaintiff’s offering of “excessive” evidence of injury as 
“cumulative.”  The motion was opposed by plaintiff and denied by the trial court.   
19 Kahneman, Thinking, Fast and Slow (Farrar, Straus, and Giroux, 2011), p 119.   
 
 
21 
has nothing to do with the quantity to be estimated.  In the context of a jury trial, the 
anchoring effect suggests that the jury’s final award may sometimes be unduly affected 
by a large initial presentation of damages.20  Accordingly, a jury may rely on a plaintiff’s 
initial “anchoring value” to set the award’s range and then reach a final award by 
“discounting.”21  Consider the case, for example, in which a plaintiff who has suffered 
injury to four limbs is allowed to sue in the district court and the jury apprehends-- 
perhaps from the presentation of the case or from its own inferences-- that the value of 
the claim is $100,000.  The jury may in the end decide to “discount” the claim by some 
amount, say 50%, on the basis that the testimony regarding pain and suffering was only 
partially credible, yielding a final award of $50,000.  The court will reduce the $50,000 
award to $25,000, in accordance with the plaintiff’s pleading and the limits of its own 
jurisdiction.  If, however, the plaintiff had been required to litigate the case in the district 
court as a “district court case,” say one in which he or she had suffered injury only to one 
arm, the jury’s 50% discount would have applied to a $25,000 claim, yielding a final 
post-discount award of $12,500.  While a plaintiff may have no control over the discount 
a jury applies to the amount the plaintiff seeks to recover, by litigating a “circuit court 
                                              
20 See, e.g., Chopra, The Psychology of Asking a Jury for a Damage Award, Plaintiff 
Magazine, March 2013, p 7 (“Early research looking at the way jurors used anchoring in 
the context of jury damage awards suggested that the larger the lump sum request made 
by plaintiff’s counsel, the larger the average award.”); Sunstein et al., Assessing Punitive 
Damages (With Notes on Cognition and Valuation in Law), Behavioral Law & 
Economics (Sunstein ed) (Cambridge University Press, 2000), p 235 (“The amount 
demanded by the plaintiff also affected the size of the awards, most likely an anchoring 
effect, which influences the award directly . . . .”).   
21 See Sunstein et al., Assessing Punitive Damages, p 243.  
 
 
22 
case” in the district court, a plaintiff separates the value of the claim from the amount of 
damages sought and potentially facilitates a legal environment in which the anchoring 
bias inures to his or her advantage. 
III.  CONCLUSION 
A party pleads in bad faith by setting forth an amount in controversy within the 
district court’s jurisdiction while intending to litigate a “circuit court case” in the district 
court.  See Fix, 83 Mich at 563.  While bad-faith pleadings are rare, when they do occur, 
they undermine the law of our state and the integrity of our judicial process, and they 
give rise to conditions at trial in which a party may be unfairly prejudiced.  In particular, 
because each of the parties may, under some circumstances, view litigating a “circuit 
court case” in the district court as being within the party’s interest, the district court is 
obligated to be vigilant in identifying bad-faith conduct, and it must be prepared to 
“question sua sponte its own jurisdiction” in order to preserve the aforementioned values.  
Straus, 459 Mich at 532.  Such jurisdiction may be questioned “at any stage of the 
proceeding,” and when the circumstances clearly demonstrate that jurisdiction has been 
obtained by a pleading in bad faith, the case must be dismissed.  Estate of Fraser, 288 
Mich at 394. 
 
 
Stephen J. Markman