Diversity Jurisdiction - Amount in Controversy

Amount in Controversy

The United States Congress has placed an additional barrier to diversity jurisdiction, the amount in controversy requirement. This is a minimum amount of money which the parties must be contesting is owed to them. As of mid 2007, under 28 U.S.C. §1332(a), a claim for relief must exceed the sum or value of $75,000, exclusive of interest and costs and without considering counterclaims. In other words, the amount in controversy must be equal to or more than $75,000.01, and a federal court must remand a case back to state court if the amount in controversy is exactly $75,000.00.

A plaintiff may add different claims against the same defendant to meet the amount. Two plaintiffs, however, may not join their claims together to meet the amount, but if one plaintiff meets the amount standing alone, the second plaintiff can piggyback as long as the second plaintiff's claim arises out of the same facts as the main claim. See the article on federal supplemental subject matter jurisdiction here: supplemental jurisdiction.

The amount specified has been regularly increased over the past two centuries. Courts will use the legal certainty test to decide whether the dispute is over $75,000. Under the legal certainty test, the court will accept the pleaded amount unless it is legally certain that the pleading party cannot recover more than $75,000. For example, if the dispute is solely over the breach of a contract by which the defendant had agreed to pay the plaintiff $10,000, a federal court will dismiss the case for lack of subject matter jurisdiction, or remand the case to state court if it arrived via removal.

On personal injury claims, plainitffs will sometimes claim amounts "not to exceed $75,000" to avoid removal of the case to Federal Court. If the amount is left open, as required by the pleading rules of many states, the Defendant may remove the case to Federal Court unless the plaintiff's lawyer files a document indicating the claim does not exceed the jurisdictional requirement. Because juries decide what personal injuries are worth, compensation for practically any injury may exceed $75,000 such that the "legal certainty" test will not bar Federal Court jurisdiction. Many plaintiff's lawyers seek to avoid Federal Court because of the perception that its rules and procedures are more complicated than most state courts.