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Civil Procedure Fall 2014

Notes on Amount in Controversy

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With the exception of certain federal claims that arise under a federal statute that expressly imposes an amount-in-controversy requirement, Congress eliminated the amount-in-controversy requirement for federal question claims in 1980. Why do you think Congress kept the AIC requirement for diversity cases? Note that Congress made the amount-in-controversy requirement “more than $75,000” in 1996.  

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To determine whether the amount in controversy is met, “[t]he rule…is that… the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.” St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)(footnotes omitted). The court looks at the circumstances “at the time the complaint is filed.” Stewart v. Tupperware Corp., 356 F.3d 335, 338 (1st Cir. 2004).

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In Hall v. Earthlink Network, Inc., the Second Circuit considered events that occurred after the complaint was filed only where the amount-in-controversy alleged was “made in bad faith.” 396 F.3d 500 (2d Cir. 2005).

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In Arnold v. Troccoli, the plaintiff filed in first state and then federal court. In state court the plaintiff only alleged $6000 worth of harm, but then in federal court increased the alleged damages to $15,000 (at a time when the amount-in-controversy was $10,000). The District Court dismissed the claim. The Second Circuit noted that plaintiffs deserved at minimum an “appropriate and reasonable opportunity to show good faith [belief]” that the alleged damages were “reasonably possible.” 344 F.2d 842, 846 (2d Cir. 1965).

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AIC and Aggregation of Claims

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The Federal Rules allow parties to join as plaintiffs or as defendants. As a result, courts have developed a number of rules regard aggregation of claims and amount-in-controversy.

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To meet AIC requirements, plaintiffs can aggregate all of her own claims against one defendant, “even when those claims share nothing in common besides the identity of the parties.” Everett v. Verizon Wireless, Inc., 460 F.3d 818, 822 (6th Cir. 2006).

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HOWEVER, multiple plaintiffs may not aggregate all of their claims against one defendant if the claims are not related. Only when claims would “enforce a single title or right, in which they have a common and undivided interest,” may multiple plaintiffs aggregate claims. Troy Bank v. G.A. Whitehead & Co., 222 U.S. 39, 40-41 (1911).  THIS IS A VERY TRICKY EXCEPTION. For the purposes of our course, you should assume it does not apply unless I tell you that plaintiffs have a common, undivided interest. A common and undivided interest is present where if one plaintiff’s claim failed, the other plaintiffs “would collect a larger share.” Durant v. Servicemaster Co. Trugreen, Inc., 147 F. Supp. 2d 744, 749 (E.D. Mich. 2001). A good example is a two-person partnership suing for a debt of $80,000. Technically, each partner's claim is only worth $40,000 but we let them aggregate based on a common, undivided interest. 

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Consider the following hypotheticals. Assuming diversity of citizenship is satisfied, is jurisdiction property where: 

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  1. One plaintiff sues one defendant for $35,000 of property damage and $45,000 of personal injury damages arising from the same accident.
  2. Two plaintiffs sue one defendant each for $45,000 in damages
  3. Two plaintiffs sue one defendant on the same issue, one seeking $40,000 and the other seeking $50,000 in damages.
  4. One plaintiff sues two defendants, for $45,000 each.
  5. One plaintiff sues one defendant for $35,000 of property damage and $45,000 of personal injury damages from unrelated accidents. 
  6. Two plaintiffs sue one defendant, each seeking $40,000 of damages.

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In McCarty v. Amoco Pipeline Co., the Seventh Circuit considered the difficult question of how AIC is measured when the plaintiff seeks injunctive relief. 595 F.2d 389 (7th Cir. 1979). 

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The (simplified) facts of McCarty are that Amoco placed a pipeline on the McCarty's land. The McCartys sued for injunctive relief in state court. Amoco removed the case on the basis of diversity and their claim that the cost of the injunction was greater than AIC. The McCartys challenged removal on the basis of the argument that they valued the injunction below AIC.

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The court considers three alternative approaches: (1) as the plaintiff values the injunction, (2) as the party seeking to have the claim heard in federal court values the injunction (plaintiff if brought in federal court, defendant if brought to federal court by removal), and (3) as either party values the injunction (if either party is over AIC, then jurisdiction is proper). The court rejects (1) because the supporting precedent holds that when the plaintiff values the injunction as more than AIC jurisdiction is proper but does not indicate that that is the exclusive means to get jurisdiction (i.e. the facts of McCarty). The court rejects (2) because of anomolous results -- "if a case originally brought in federal court were dismissed for failure to meet the jurisdictional amount from the plaintiff's viewpoint, it could yet end up in federal court if the plaintiff reinstituted the case in state court and the defendant—from whose point of view the required amount was present—then removed it."

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The court settled on (3), upholding removal, because "the interests of equity and fairness, as well as the purposes behind the removal statute, would here be well served by allowing the plaintiff's claim to be evaluated for jurisdictional purposes by applying the either viewpoint rule."