Law School Case Brief
Ben. Nat'l Bank v. Payton - 214 F. Supp. 2d 679 (S.D. Miss. 2001)
The rule is well established, both in removed actions and actions originally brought in federal court, that the jurisdictional facts must be judged as of the time the complaint is filed; subsequent events cannot serve to deprive the court of jurisdiction once it has attached.
In 1995, defendant Obie Payton purchased a home satellite system , which he financed through a revolving credit card account with plaintiff Beneficial National Bank, U.S.A. ("Beneficial"). That account was later assigned to plaintiff Household Bank (SB), N.A. ("Household"). In 2001, Payton filed suit against Beneficial and Household in Mississippi state court alleging that his participation in the transaction was induced by fraudulent misrepresentations and other wrongful conduct on the part of Household and its agents. Shortly thereafter, Beneficial and Household filed a lawsuit in federal district court to compel arbitration of the dispute pursuant to § 4 of the Federal Arbitration Act (FAA), 9 U.S.C.S. § 4, and an arbitration agreement contained in Payton's cardholder agreement. Payton filed a motion to dismiss the federal action for lack of subject matter jurisdiction; the district court denied the motion on the ground that the diverse citizenship of the parties and Payton's demand in his state court complaint for over $ 10,000,000 gave rise to jurisdiction based on diversity of citizenship under 28 U.S.C.S. § 1332. Thereafter, Payton filed a motion in state court for leave to amend his complaint in order to expressly limit his damages demand to less than $ 75,000, the requisite amount in controversy for federal diversity jurisdiction. Then, in the federal action, Payton filed a motion to dismiss for lack of subject matter jurisdiction on the ground that the district court no longer had subject matter jurisdiction.
Should the district court grant Payton's motion to dismiss for lack of subject matter jurisdiction?
The court denied Payton’s motion to dismiss and granted the motion by Beneficial and Household to compel arbitration. The court ruled that despite Payton's effort to limit his damages in his state court action to an amount below the requisite amount for federal diversity jurisdiction, the court had diversity jurisdiction at the time the Beneficial and Household filed the instant action. Subsequent events, the court ruled, could not serve to deprive the court of jurisdiction once it attached. In granting the motion to compel, the court ruled that the cardholder agreement permitted Beneficial to change the agreement's terms, which it did by adding the arbitration clause. Payton failed to reject the clause. Even though the clause contained no retroactive language, it was sufficiently broad to cover the parties' dispute, as it recited that it applied to "any claim, dispute, or controversy arising from or relating to this agreement or the relationships which result from this agreement."
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