28 USC § 1332 and Calculating Amount in Controversy
28 USC §1332 provides that where no plaintiff is a citizen of the same state as any defendant, a federal court may assert diversity subject matter jurisdiction if the ‘amount in controversy’ exceeds $75,000. How is the amount in controversy calculated? As a general rule, courts will defer to the plaintiff’s good-faith demand in her complaint. For example, if a plaintiff alleges, in good-faith, that she suffered $80,000 in damages, this should be enough to satisfy the amount in controversy requirement. Even if the plaintiff recovers $1,000, significantly less than the threshold requirement, this will not affect subject matter jurisdiction.
However, if the court concludes to a “legal certainty” that the amount in controversy is insufficient, then the court should dismiss the case for lack of subject matter jurisdiction. For example, let’s say a plaintiff sues over an alleged breach of contract. If the contract has a clause that limits liability to $50,000, then the court will probably dismiss the case on grounds that the amount in controversy does not satisfy the threshold requirements of 28 USC § 1332.
If a plaintiff has multiple claims against a single defendant then the court may aggregate claims to satisfy the amount in controversy. For example, a $40,000 breach of contract claim and a $50,000 tort claim against one defendant can be combined. $90,000 > $75,000.
But courts may not aggregate claims against multiple defendants or claims by multiple plaintiffs.
In limited circumstances claims by multiple plaintiffs can be aggregated if they are all alleging a common and undivided interest. For example, if several plaintiffs claim that together they own a piece of property worth $95,000, a court will treat this as a claim for $95,000. But if one plaintiff alleges $50,000 in damages and another plaintiff alleges $45,000 in damages, these claims should not be aggregated. You can practice amount in controversy questions in my civ pro quiz book, available on iBooks.