McNutt v. General Motors Acceptance Corp.

Background

General Motors Acceptance Corporation of Indiana sued to stop enforcement of an Indiana 1935 law that regulated purchases of retail installment contracts, including licenses and caps on finance charges. A three-judge federal court entered a permanent injunction against the state law, and the case came to the Supreme Court on direct appeal. The company’s complaint alleged the dispute exceeded the $3,000 federal threshold, but the state denied that claim and the record contains no finding or evidence proving the required amount.

Reasoning

The central question was who must prove that a federal court may hear the case because the dispute meets the statutory $3,000 threshold. The Court reviewed prior practice and the statute directing federal courts to enforce jurisdictional limits. It concluded that a party asking for federal relief must both allege and support the essential jurisdictional facts. If those facts are challenged, the claimant must prove them by a preponderance of the evidence. Because the company’s allegation about the required dollar amount was put in issue and the record showed no proof or finding to sustain it, the District Court did not have the power to hear the case.

Real world impact

The Court reversed and ordered the federal suit dismissed for lack of jurisdiction. This decision does not rule on the merits of the Indiana law itself; it only requires companies to prove the federal dollar threshold before a federal court may decide such challenges. Lower courts are empowered to insist on proof of jurisdictional facts and dismiss suits that fail that test.