Court Dismisses “Freelance Isn’t Free Act” Case For Lack of Subject Matter Jurisdiction

In a recent Order, captioned Bolanos v. Tanieka Misa Hooten, 21-cv-336 (SDNY Feb. 11, 2021) – a case in which plaintiff asserts a violation of New York City’s “Freelance Isn’t Free Act” (codified at N.Y.C. Admin. Code § 20-927 et seq) – the U.S. District Court for the Southern District of New York granted defendant’s motion to dismiss plaintiff’s case, which was asserted under  for lack of subject matter jurisdiction.

This decision, while relatively short, is instructive as to how courts evaluate the “amount in controversy” requirement (currently $75,000) in a scenario where a plaintiff seeks recovery under a non-federal fee-shifting statute.

In sum, federal courts are courts of “limited jurisdiction”, meaning that in order for a federal court to have “subject matter jurisdiction” over a particular case, there must be a specific basis for jurisdiction.

Among the grounds for federal subject matter jurisdiction is – where there is no independent basis for federal jurisdiction, such as a claim arising under a federal law such as Title VII of the Civil Rights Act of 1964 – so-called “diversity of citizenship” as set forth at 28 U.S.C. § 1332. That statute provides, in sum, that federal district courts have jurisdiction over civil actions if the “amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs,” and the parties meet certain diversity of citizenship requirements.

Here, plaintiff asserted that the amount-in-controversy requirement was met based on $7,500 in alleged statutory damages, and at least $112,500 in attorney fees.

This, held the Court, was insufficient:

The Court concludes that there is no reasonable probability that Plaintiff’s claim meets the $75,000 amount-in-controversy threshold for diversity jurisdiction. See Tongkook Am., Inc., 14 F.3d at 784. After filing a Complaint that revealed minimal information to suggest that threshold is met, Plaintiff’s January 27, 2021 submission assumes an exorbitant and disproportional amount attorney’s fees to contend that the jurisdictional amount is met. (Dkt. 5.)

Because New York City’s Freelance Isn’t Free Act, which serves as the basis of Plaintiff’s suit, provides that a prevailing plaintiff “shall” be awarded “reasonable attorney’s fees,” N.Y.C. Admin. Code. § 29-933(b), the Court may consider attorney’s fees in determining whether the amount in controversy has been met, see Givens v. W. T. Grant Co., 457 F.2d 612, 614 (2d Cir. 1972), overruled on other grounds, 409 U.S. 56 (1972). However, a statutory entitlement to such fees is not necessarily a statutory entitlement to federal jurisdiction. Under New York law, an award of fees “in excess of the amount involved in a litigation would normally appear to be unreasonable.” Diamond D Enter. USA, Inc. v. Steinsvaag, 979 F.2d 14, 19 (2d Cir. 1992) (emphasis, citation, and quotation marks omitted); see also Hallingby v. Hallingby, 453 F. App’x 121, 125 (2d Cir. 2012) (same). Other courts in this Circuit have found that an unreasonable award of attorney’s fees cannot serve as the basis for federal jurisdiction. See, e.g., Jeffrey’s Auto Body, Inc. v. Progressive Cas. Ins. Co., No. 5:12 Civ. 776 (MAD) (DEP), 2013 WL 592677, at *5 (N.D.N.Y. Feb. 14, 2013) (“For the amount in controversy to be met, the Court would need to find that there is a reasonable probability that if Plaintiff is successful on its GBL § 349 claim, it would be entitled to over $60,000 in attorneys’ fees…. Such an award, considering the relatively uncomplicated nature of this case and the limited recovery sought, would be unreasonable.”); Pollock v. Trustmark Ins. Co., 367 F. Supp. 2d 293, 297–98 (E.D.N.Y. 2005) (remanding a case where plaintiff alleged damages of $55,000 and “to reach the jurisdictional amount fees would have to be $20,000,” because “[s]uch fees would be unreasonable for this action and would not be awarded”); see also Ryan v. Legends Hospitality, LLC, No. 11 Civ. 3110 (RJS), 2012 WL 3834088, at *3 (S.D.N.Y. Aug. 1, 2012) (dismissing an action where the attorney would have to charge an exorbitant amount of fees to meet the amount in controversy).

The Court concluded that “Plaintiff’s claimed attorney’s fees, which amount to 15 times the amount of damages, would be unreasonable. Even an award of $67,500—the amount required to meet the $75,000 threshold—would be nine times the amount of damages and would not be reasonable”, and dismissed the case without prejudice.

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