High Court to Clarify When to File Suits

WASHINGTON, DC – The Supreme Court said Monday it will use a renters’ lawsuit claiming personal injury from toxic mold in apartments to clarify when plaintiffs can sue in federal or state court.

The question is a hot political topic, since consumers often pursue claims in state courts, where large payouts in class-action lawsuits tend to be made. Earlier this month, President Bush signed legislation aimed at steering big-money lawsuits to federal courts.

Under federal rules, a defendant has a right to “remove” a case from state to federal court when the two parties are citizens of different states and the claimed damages exceed $75,000.

While the case in question does not involve a class-action lawsuit, it would clarify what determines a corporation’s “citizenship” in both individual and class-action suits when a company has subsidiaries in multiple states.

At issue is whether Virginia renters Christophe and Juanita Roche can sue their landlord, Lincoln Property Co., in Virginia state court over exposure to toxic mold in their apartment. The Texas-based company has a subsidiary in Virginia.

In the lawsuit, the Roches allege the mold caused severe medical problems, including chronic headaches, memory loss and respiratory trouble. They also contend that while their apartment was being treated for mold removal, many of their valuables were misplaced or stolen.

The Richmond-based 4th U.S. Circuit Court of Appeals ruled the suit was permitted, on grounds Lincoln was a “citizen” of Virginia because its subsidiary conducted business in the state and thus had significant ties there.

Lincoln’s appeal of that ruling is supported by an array of business groups, from the International Council of Shopping Centers and the National Association of Homebuilders, who argue that the 4th Circuit’s ruling would unfairly expose them to litigation in state court.

“The decision will have a disproportionate and recurring impact on an important sector of the American business community – enterprises, like most real estate businesses, that operate in multiple states through affiliated entities,” the groups wrote in a joint friend-of-the-court filing.

Justices in recent months have sought to clarify the scope of federal jurisdiction, including whether lawsuits which allege harm less of less than $75,000 may be heard in federal court if the basic facts they allege are similar enough to be tacked onto other lawsuits that do meet the minimum requirement.

Earlier this month, Bush signed legislation that would allow class-action suits seeking $5 million or more to be heard in state court only if the primary defendant and more than one-third of the plaintiffs are from the same state.

The case is Lincoln Property Co. et al v. Roche, 04-712.

Author: Carolyn Willbanks