Concept
Amount in Controversy
Diversity jurisdiction
Amount in Controversy
The time-of-filing rule settles when citizenship is measured, but a case with complete diversity can still fail for a second reason: the dispute may be too small. Section 1332(a) gives the district courts original jurisdiction only where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.1 The Constitution contains no such floor. Congress added it to keep minor disputes in state court, and it has raised the figure over time, so that federal judges are not occupied with petty controversies.2
A threshold of this kind creates a practical puzzle. A court must decide at the outset whether it has power to hear the case, yet it cannot try the case to learn what the claim is worth. The rules below answer that puzzle in order: the standard the court applies to the plaintiff's claim, what may be counted toward the figure, how separate claims are added together, and what follows when a counterclaim is filed or the plaintiff recovers less than the threshold.
Good Faith and Legal Certainty
Because the court has only the pleadings to go on, the test gives the plaintiff the benefit of the doubt. In St. Paul Mercury Indemnity Co. v. Red Cab Co. the Supreme Court held that a claim for more than the required amount is generally accepted if made in good faith, unless it appears to a legal certainty that the claim is really for less than the jurisdictional amount.3 In practice the judge looks at the injuries the complaint alleges and asks whether a jury could possibly award more than $75,000 for them. If the answer is yes, the amount is in controversy, even when the plaintiff will probably recover less.4 Only a judge who is convinced that the claim is certainly not worth that much will dismiss.
Good faith in this test does not mean a sincere belief. The decision in Diefenthal v. C.A.B. shows the difference. Two passengers who were refused seats in a smoking section each sued for $50,000 for embarrassment and emotional distress, at a time when the threshold was $10,000, and the court dismissed.5 A plaintiff's genuine belief in a large verdict does not satisfy the requirement, because there must be a legal and factual basis for recovering the required amount.6 Without that limit, any lawyer could create jurisdiction by typing a large number into the complaint. The same scrutiny applies to punitive damages. They count when state law makes them recoverable, but a defendant who contests them can require the plaintiff to offer competent proof, and the party invoking federal jurisdiction bears the burden of showing it exists. In Del Vecchio v. Conseco, Inc. a $600 compensatory claim paired with a $75,000 punitive demand was sheer speculation.7
The test also looks forward only as far as the filing. Imagine a plaintiff, Santini, who sues for serious injuries that would support an award above the threshold, and the jury finds the defendant was not negligent. The amount requirement was met, because the claim plausibly sought more than $75,000, and the judge enters judgment on the merits.8 Measuring the amount by what is finally awarded would make every losing plaintiff's judgment void for want of jurisdiction, and the plaintiff could simply try again in state court. The two situations differ in one fact: Santini had a tenable basis for the larger recovery, and the Diefenthals did not.
What Counts Toward the Amount
The statutory figure excludes interest and costs, so a plaintiff whose damages are $70,000 cannot reach the threshold by adding accrued interest and court costs.10 Beyond that exclusion, the amount in controversy is what is directly at stake in the judgment, which depends on the applicable substantive law. Side effects of the decision, such as its stare decisis or collateral estoppel value for other disputes, are not counted.11 In a suit on the amount of overdue bond coupons, for example, only the coupons count, even though the ruling will settle the validity of the bonds. In an installment-payment case such as a disability policy, courts generally count only the installments due at filing.12
The measure also depends on the relief sought. When the plaintiff asks for an injunction, the court values it, and one accepted approach allows jurisdiction if the value to the plaintiff, the cost to the defendant, or the value to the party invoking federal jurisdiction exceeds $75,000.13 Pain and suffering and emotional distress may be counted if the governing law allows them, but the more speculative the item, the more skeptically the court views it. The plaintiff is also the master of the claim. A plaintiff who in good faith asks for less than the threshold has only that sum in controversy, even if the underlying claim was worth more.14
Counting also follows the harm, not the number of legal theories. Suppose a buyer pays $40,000 for a coat sold as mink that turns out to be muskrat, and sues in one count for fraud and in another for negligence. The loss is one coat worth $40,000, and calling it two wrongs does not double it, so the requirement is not met.15 By contrast, a plaintiff who sues two defendants in the alternative for a $120,000 injury meets the amount against each, because either one alone might be liable for the whole.16
Aggregation of Claims
The fifth step changed older law. In Zahn v. International Paper Co. the Court had held that every class member must meet the amount and that a plaintiff who fell short must be dismissed even though others qualified, a rule that followed from the Court's earlier decision in Snyder v. Harris barring aggregation in class actions.24 In Exxon Mobil Corp. v. Allapattah Services, Inc. the Court held that once one plaintiff's claim satisfies the amount and no other jurisdictional defect exists, the court has original jurisdiction over the civil action, and § 1367 then reaches the related claims of the others.25 The reason is that the amount requirement asks whether a dispute is important enough for federal court, and one small claim does nothing to reduce the importance of a large one.26 Complete diversity is different, because a nondiverse party on the opposite side removes the justification for a federal forum and leaves no original jurisdiction to which anything can attach.27 The details of supplemental jurisdiction belong to the next reading. Class actions under the Class Action Fairness Act follow their own $5 million aggregate rule, covered later in this chapter.28
Counterclaims
A counterclaim by the defendant cannot be added to the plaintiff's claim to reach the threshold. Suppose a plaintiff sues for $30,000 and the defendant counterclaims for $65,000. Jurisdiction is assessed on the original complaint, and if the counterclaim counted, the defendant could choose a federal forum by answering with the counterclaim or avoid one by moving to dismiss instead.30 That choice would amount to consent to jurisdiction by the parties, which they cannot give. Where the plaintiff's own claim exceeds $75,000, a compulsory counterclaim may be heard regardless of its amount, while a permissive counterclaim needs its own jurisdictional basis.31
Costs for Small Recoveries
Section 1332(b) addresses a plaintiff who files in federal court and is finally adjudged entitled to recover less than $75,000, computed without regard to any setoff or counterclaim, exclusive of interest and costs. The court may deny the plaintiff costs and may impose costs on the plaintiff.33 The remedy is costs, not dismissal, because the amount was measured at filing. Courts have held that a plaintiff who reasonably expected a larger verdict and claimed it in good faith still receives costs, and a claim not made in good faith is dismissible even after trial or sanctionable under Rule 11.34
Good Faith and Legal Certainty
The amount requirement has to be decided at the start of the case, when the judge has nothing but the pleadings and cannot try the claim to learn what it is worth. The Supreme Court gave courts a workable rule for this in St. Paul Mercury Indemnity Co. v. Red Cab Co. A plaintiff's claim for more than the required amount is generally accepted if it appears to be made in good faith, unless it appears to a legal certainty that the claim is really for less than the jurisdictional amount.36 The judge looks at the injuries alleged in the complaint and asks whether a jury could possibly award more than $75,000 for them. If it could, the amount is in controversy. If it could not, the case is dismissed.
The test gives the plaintiff the benefit of the doubt. Because the question is possibility, a plaintiff who will probably recover more than $75,000 but might not satisfies it, and so does one who probably will not recover that much but conceivably could.37 The party invoking federal jurisdiction does not have to prove the larger figure. It is enough to show that some possibility exists that this much is at stake.38 Suppose a lawyer sues another lawyer for $80,000, claiming to have done one-third of the work behind a $240,000 fee, and the defendant swears that any work done was less than one-quarter of the total. The affidavit raises a genuine factual dispute about the value of the claim, but it does not show that the claim is certainly worth $75,000 or less, so the court cannot dismiss.39 A deferential test serves the purpose of deciding early. Making the plaintiff prove the amount would require a preview of the trial just to learn whether the court may hold one.
Deference has a limit, and Diefenthal v. C.A.B. marks it. Two airline passengers who were refused seats in the smoking section each sued for $50,000 for embarrassment and emotional distress, when the statutory threshold was $10,000, and the Fifth Circuit affirmed dismissal.40 The word "good faith" in St. Paul Mercury therefore cannot mean sincerity. The passengers may well have believed they deserved a large verdict, but a genuine belief does not satisfy the requirement. There must be a legal and factual basis for a recovery of the required amount, and when no evidence could support such an award, the case is dismissed however convinced the plaintiff and the lawyer are.41 Otherwise any lawyer could create federal jurisdiction by typing a large number into a complaint, and the requirement would exclude nothing. The case is the kind of petty controversy the requirement exists to keep in state court.
The moment of measurement matters as much as the standard. The amount is fixed at the outset by what the plaintiff reasonably claims, so a later loss or a smaller recovery does not retroactively remove jurisdiction.43 Imagine that Santini sues Chang for serious injuries that would support an award above the threshold, and the jury finds that Chang was not negligent. The amount requirement was met, because the complaint plausibly sought more than $75,000, and the judge should enter judgment for Chang on the merits.44 Measuring the amount by the outcome would turn every defense verdict into a dismissal for want of jurisdiction, and the plaintiff who lost could sue again in state court. The Diefenthals and Santini differ in one fact: Santini had a tenable basis for a large recovery and merely failed to prove liability, while the Diefenthals had no basis for theirs at all.
Two backstops keep this deference from becoming an invitation to inflate. A plaintiff who files in federal court and is finally adjudged entitled to less than $75,000 may be denied costs and may be made to pay the defendant's costs under § 1332(b).45 Courts have read that provision gently, however, so a plaintiff who reasonably expected a verdict above the threshold and claimed it in good faith still receives costs. A claim not made in good faith is subject to dismissal even after trial, or to sanctions under Rule 11.46 When a plaintiff sued in state court and the defendant removes, the defendant has to carry the burden of showing the amount. In Troupe v. C & S Wholesale Grocers, Inc. the court denied a remand motion because the defendant showed that, if the plaintiff prevailed, her damages would more likely than not exceed the threshold.47
What Counts Toward the Amount
The threshold in § 1332(a) is a matter in controversy exceeding $75,000, exclusive of interest and costs.49 The exclusion exists because interest and costs grow with time and with the effort of litigating. If they counted, a plaintiff with a modest claim could reach federal court by waiting, or by pointing to expenses the lawsuit itself will generate. The exclusion is not applied mechanically, though, because it reaches only charges that sit on top of the dispute. Interest that is itself the substance of the claim is part of what the plaintiff is suing for. Suppose a creditor holds a note with a $70,000 face value and sues for it together with $10,500 of interest that the note itself fixed as part of the debt. The claim is $80,500, and the requirement is met. Now suppose a different creditor sues on a $70,000 debt and asks for the further interest that has built up because the debtor paid late. That interest is a charge for delay, it is excluded, and the claim stays at $70,000. Attorney's fees follow the same reasoning. When a contract or statute makes fees recoverable as part of the claim, they are part of what is at stake, and courts treat a defendant's expected defense costs the same way when they flow from the obligation being litigated.50
The amount must also be something the judgment itself will decide. A plaintiff cannot reach the threshold by pointing to side effects the decision may have in later disputes, such as its value as precedent or its preclusive effect.51 In a suit on overdue bond coupons, only the coupons count, even though the ruling will settle the validity of the bonds. In a suit to restrain a tax, the court looks to the tax that will fall due while the case is pending, not to the capitalized value of the tax or to the value of doing business free of it.52 The unifying idea is that the amount in controversy is the amount involved as the direct legal effect of the judgment, and the governing substantive law decides what that effect is. For that reason a disability policyholder who sues for benefits usually counts only the installments due at filing, whereas an insurer who sues to cancel the whole policy for fraud puts the entire contract in controversy.53
Because courts split on whether the plaintiff's side or the defendant's side of the ledger controls, a careful analysis checks both. A plaintiff who seeks to stop a competitor's practice may value the benefit at $40,000, while the cost to the competitor of ceasing is $200,000. Jurisdiction exists under the more generous accepted measure, and a court that uses only the plaintiff's viewpoint would reach the opposite result. The same viewpoint reasoning explains why a challenge to a business regulation is measured by the difference between the business's value with and without the regulation.56
Punitive damages count when state law allows them for the claim, but they receive closer scrutiny than other items. The court first asks whether punitive damages are recoverable as a matter of state law. If they are, jurisdiction exists unless it is clear beyond a legal certainty that the plaintiff could not recover the required amount.57 In Del Vecchio v. Conseco, Inc., Indiana law allowed punitive damages for fraud and breach of fiduciary duty, so the first question was answered. The plaintiff then claimed only $600 in compensatory damages and sought $75,000 in punitive damages, a ratio of 125 to 1, and the court called a punitive award of that size speculation. When a defendant contests punitive allegations, the plaintiff must support them with competent proof, because otherwise an inflated punitive demand would defeat the statutory limit.58 The rule works in both directions. A plaintiff with a $20,000 compensatory claim in a state that forbids punitive damages for that tort cannot count them at all, while a plaintiff in a state that permits them can count a punitive award that is realistically within reach.
Aggregation of Claims
So far the amount requirement has been treated as a question about one claim: what is at stake between this plaintiff and this defendant. Real lawsuits often contain several claims, several plaintiffs, or several defendants, and the question becomes whether small amounts can be added together to cross $75,000. The rule that governs is called aggregation, meaning the totaling of separate claims to reach the jurisdictional minimum, and the doctrine mostly says when totaling is forbidden.60 The answer depends on who is being added to whom, so each configuration of parties needs its own treatment.
The simplest configuration is one plaintiff and one defendant. A single plaintiff may add together every claim she has against a single defendant, even when the claims are unrelated to one another.61 Suppose a plaintiff sues one defendant for $20,000 on an accident claim, $30,000 for libel, and $40,000 for breach of contract. Each claim is small, but together they total $90,000, and the requirement is met. The reason lies in the structure of the relationship. The pair of one plaintiff and one defendant is the unit that could have met the threshold alone, and if every claim succeeds the defendant may owe more than $75,000. Adding claims inside that pair therefore does not pull in a case that was never worth federal attention.62
The rule changes once a second defendant appears. A plaintiff may not add claims against different defendants to reach the amount.63 Suppose a plaintiff sues D1 for $40,000 and D2 for $60,000 in a single action arising from one business dispute. The total is $100,000, but neither relationship reaches $75,000, and the requirement is not met. Change the numbers so that the claim against D1 is $120,000 and the claim against D2 is $60,000. The claim against D1 is sufficient on its own, but the claim against D2 cannot borrow from it, so D2 must be dropped.64 Courts apply this even to a plaintiff who has already aggregated claims against D1: two $40,000 claims against D1 satisfy the requirement, yet a single $40,000 claim against D2 does not ride along.65 If it did, a plaintiff could manufacture federal jurisdiction over a small claim by joining a defendant who faces a large one.
A related situation looks like aggregation but is not. Suppose a plaintiff is injured in a collision and cannot tell which of two drivers is at fault, so she sues both for $100,000 in injuries. Either defendant might be held liable for the full amount, although only one will actually pay. The plaintiff is not adding anything together. She meets the amount against each defendant separately, because each faces a possible judgment above $75,000.66
Multiple plaintiffs raise the mirror-image problem. Coplaintiffs with separate and distinct demands may not pool them, because each plaintiff's stake must independently satisfy the amount.67 The Court applied this to a class action in Snyder v. Harris, where no class member's claim was large enough, and the claims could not be added up even though the class was bound together by one judgment.68 Imagine two bus passengers injured in the same crash, one claiming $50,000 and the other $30,000 against the same carrier. Neither claim reaches the threshold, and joining them in one complaint does not help. The logic parallels the multiple-defendant rule: a plaintiff whose claim could not support federal jurisdiction alone should not acquire it merely because someone else sued alongside.69
There is one narrow exception for plaintiffs. If two or more of them unite to enforce a single title or right in which they share a common and undivided interest, the value of the whole interest is the amount in controversy.70 Suppose two beneficiaries of a trust sue the trustee bank, claiming that improper investments cost the fund $80,000. Neither has a separate loss, because a win restores the full $80,000 to the common fund and a loss restores nothing, so the whole $80,000 is in controversy and both may sue.71 The exception is rare. Plaintiffs who want the same relief or resist the same claim do not thereby share a common interest, and a parent who sues for a child's injuries and for the medical bills cannot combine them, because the first claim belongs to the child and the second to the parent.72 The same is true of tort victims from one accident, since each has a separate right to damages.73
The most important modern qualification comes from Exxon Mobil Corp. v. Allapattah Services, Inc. Before that decision, a plaintiff whose claim fell short had to be dismissed even if a coplaintiff's claim was large enough, which was the result in Zahn v. International Paper Co.74 Allapattah held that when at least one claim in the complaint satisfies the amount requirement and no other jurisdictional defect exists, the court has original jurisdiction over that claim and can then consider supplemental jurisdiction under § 1367 over the others.75 The Court reached that result because the amount requirement, unlike the diversity requirement, can be analyzed claim by claim. A single non-diverse party destroys original jurisdiction over every claim and leaves nothing for supplemental jurisdiction to attach to, but a claim that is too small does not infect a claim that is large enough.76
The change is easy to apply, and it has a boundary. Suppose P1 and P2, both New Yorkers, sue D, a New Jerseyan, over the same transaction, with P1 claiming $100,000 and P2 claiming $50,000. P2 may ride along on P1's claim for amount purposes.77 If P3, also a New Jersey citizen, tried to join, she would be barred, because supplemental jurisdiction does not supply complete diversity.78 The same logic reaches diversity class actions: if a named plaintiff meets the amount and diversity is complete, unnamed members with smaller claims may remain.79 Allapattah does not revive aggregation, however. When no plaintiff individually meets the amount, there is no qualifying claim to attach to, so the small claims still cannot be added together. Section 1367(b)'s limits are taught with supplemental jurisdiction, and the special $5 million aggregation rule for class actions appears in the CAFA section below.80