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The Importance of Assuring Subject Matter Jurisdiction Exists Prior to Commencing a Case in Federal Court

The recent case, HICA Education Loan Corp. v. Meyer, 12 Civ. 4248 (S.D.N.Y. 2014), underscores the need of parties to assure that a Federal Court has proper subject matter jurisdiction prior to commencing an action within the Federal Courts. Almost two (2) years after HICA Education Loan Corp. commenced an action against Amy Meyer seeking payment on a student loan in the amount of $72,722.61, the Court held, sua sponte, that it lacked subject matter jurisdiction over the matter. In this respect, one is reminded of then Second Circuit Judge (now Justice) Sotomayor’s decision in Handelsman v. Bedford Village Associates, L.P., where the Second Circuit dismissed a case for want of subject matter jurisdiction after a bench trial was had before the Southern District of New York. Handelsman v. Bedford Village Associates, L.P., 213 F.3d 48 (2d Cir. 2000).

The Court’s reasoning in HICA was twofold. First it held that it lacked diversity jurisdiction over the matter, as the amount being sought was below $75,000.00. Second, it held that there was no federal question involved as “virtually all district courts that have considered the question of whether a collection action for nonpayment of a HEAL loan arises under federal law have concluded that federal question jurisdiction is lacking.”

It is of note that the docket sheet revealed that HICA had already brought a motion for summary judgment against Ms. Meyer which was unopposed. Further, Ms. Meyer previously submitted an answer to the complaint and raised affirmative defenses, none of which were for lack of subject matter jurisdiction.

The lesson from HICA is simple. Prior to commencing a matter in Federal Court an experienced attorney must determine whether a basis exists for subject matter jurisdiction. If, at any point during the litigation, it becomes apparent that the Court does not have subject matter jurisdiction over the action, the case may be dismissed, either on motion or sua sponte.

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