For diversity jurisdiction, how does a court determine the amount in controversy?

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.

Aggregating Claims

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.

These claims satisfy the amount in controversy requirement

But courts may not aggregate claims against multiple defendants or claims by multiple plaintiffs.

These claims do not satisfy the amount in controversy requirement

  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.