JTH Tax, Inc. v. Frashier

624 F.3d 635



Where a party claims, in good faith, an amount in controversy over $75,000.00, ensuing decreases in the amount do not remove federal diversity jurisdiction.


Plaintiff franchises tax preparation offices throughout the country. Defendant entered into a franchise agreement with plaintiff. Plaintiff sued defendant in federal court under diversity jurisdiction, claiming infringement of the franchise agreement and $80,000.00 in damages. Plaintiff later documented a motion for summary judgment in which it lessened its claim to $60,456.25. The district court at that point dismissed the complaint for its inability to meet the $75,000.00 amount-in-controversy requirement for diversity actions and plaintiff appealed.


Did decreases in plaintiff's asserted claims below the required amount in controversy--over $75,000.00--defeat federal diversity jurisdiction?




If a party in good faith claims an amount in controversy over $75,000, a federal court may only suspend if there is a "legitimate sureness that the offended party can't recover that amount." Later actions that decrease the recoverable sum don't deprive the court of jurisdiction. Here, Liberty's claim was made in good faith, and the diminishment of its damages in its motion for summary judgment does not deny the court of subject matter jurisdiction. It is also not clear that Liberty couldn't recover the necessary amount in controversy. Therefore, the judgment of the district court is reversed.

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