7th Circuit Explains “Sovereign Citizens” Movement, But Says District Court Should Have Declined Jurisdiction Over the Claim

In El v. AmeriCredit Financial Services, Inc., — F.3d —-, 2013 WL 1150210 (7th Cir. 2013), Judge Posner writing for the Court of Appeals for the 7th Circuit reversed the District Court’s dealing with a plaintiff who purportedly was a member of the Sovereign Citizens movement.

The plaintiff bought a used pickup truck in 2011 for $28,000 and financed the purchase by means of a six-year installment contract that specified an interest rate of 23.9 percent. The dealer who sold him the truck assigned the contract to AmeriCredit. But after making the first installment the plaintiff sent his new creditor a copy of the installment contract that he had stamped “accepted for value and returned for value for settlement and closure,” and told AmeriCredit to collect the balance of the money due it under the contract from the U.S. Treasury. AmeriCredit repossessed the truck, sold it, and billed the plaintiff $11,322.28 to cover the difference between the price at which the truck had been resold and the unpaid balance on the installment contract. ¶   The plaintiff responded by suing AmeriCredit and two of its officers in a federal district court in Illinois for $34 million in compensatory damages and $2.2 billion in punitive damages. Needless to say, he was proceeding pro se. The district judge couldn’t make sense of the complaint and dismissed it as being frivolous. Frivolous it is, though not completely unintelligible. It has the earmarks of the “Sovereign Citizens” movement. As explained by the FBI, “Sovereign citizens view the USG [U.S. government] as bankrupt and without tangible assets; therefore, the USG is believed to use citizens to back U.S. currency. Sovereign citizens believe the USG operates solely on a credit system using American citizens as collateral. Sovereign citizens exploit this belief by filing fraudulent financial documents charging their debt to the Treasury Department.” Federal Bureau of Investigation, “Sovereign Citizens: An Introduction for Law Enforcement” 3 (Nov.2010), http:// in-fo.publicintelligence.net/FBI-SovereignCitizens.pdf (visited March 6, 2013). ¶ The plaintiff based federal jurisdiction on the admiralty and diversity jurisdictions of the federal courts. Admiralty jurisdiction over his case may seem unavailable to him on two grounds: the case has nothing to do with maritime activities; and, “in the absence of diversity of citizenship, it is essential to jurisdiction that a substantial federal question should be presented .” Hagans v. Lavine, 415 U.S. 528, 537 (1974); see also Frederick v. Marquette National Bank, 911 F.2d 1, 2 (7th Cir.1990); Beauchamp v. Sullivan, 21 F.3d 789, 790 (7th Cir.1994); Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 817 n. 5 (4th Cir.2004). The first ground is solid, but not the second. Article III, section 2 of the Constitution confers federal jurisdiction over admiralty cases. But cases don’t have to arise under federal law in order to be within the admiralty jurisdiction, Romero v. International Terminal Operating Co., 358 U.S. 354 (1959)—they just have to involve maritime activities. Often, how-ever, they do arise from federal law, either statutory or judge-made. It is unclear what the plaintiff’s admiralty claim arises from, but clear that the claim is not within the admiralty jurisdiction because it has no relation to maritime activities. (The Sovereign Citizens movement does not recognize the limitation of the admiralty jurisdiction to maritime activities. See “Why We Are in the Admiralty Jurisdiction,” Apr. 18, 2004, http://freedom-school.com/law/Admiralty.htm (visited March 7, 2013), where we read, for example, that “any of the actors working for the United States are vessels…. We are all vessels; human bags carrying ‘sea water.’ ”)

After the Plaintiff amended his complaint, the finance company filed a cross-complaint.  The Court dismissed the Plaintiff’s amended complaint with prejudice, and entered a default judgment on the contract balance on the Counter-Claim the finance company had filed.  Plaintiff appealed.  Judge Posner held that the district court should have found no federal jurisdiction in Plaintiff’s complaint, dismissed it without prejudice, and declined to rule on the merits of either the Complaint or Counter-Claim.