A plaintiff, a citizen of State A, filed a lawsuit in federal court against a defendant, a citizen of State B, seeking $80,000 in damages for breach of contract. The federal court has jurisdiction over the case based on diversity of citizenship. After discovery, the defendant filed a motion to dismiss, arguing that the plaintiff's damages claim could not realistically exceed $50,000. How should the federal court rule on the defendant's motion?
- AGrant the motion because the amount in controversy must exceed $75,000, and the defendant has shown that the plaintiff's claim cannot realistically exceed $50,000.
- BDeny the motion because the plaintiff's good faith assertion of damages exceeding $75,000 is generally sufficient, unless it appears to a legal certainty that the claim is for less.
- CGrant the motion because the court must independently assess the probability of the plaintiff recovering more than $75,000.
- DDeny the motion because the amount in controversy is determined solely by the plaintiff's initial pleading, regardless of subsequent evidence.
Show answer & explanationAnswer & explanation
Correct answer: B. Deny the motion because the plaintiff's good faith assertion of damages exceeding $75,000 is generally sufficient, unless it appears to a legal certainty that the claim is for less.
Federal courts generally defer to the plaintiff's good faith assertion of the amount in controversy. Dismissal is only warranted if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount. The defendant's argument about the realistic limit of damages is usually insufficient to overcome this presumption.
Why the other options are wrong
- A. This is incorrect because the 'legal certainty' standard is very high; simply showing the claim 'cannot realistically exceed' is not enough to displace the plaintiff's good faith assertion.
- C. This is incorrect. The court does not independently assess the probability of recovery unless there is a strong challenge to the plaintiff's good faith assertion, which must meet the 'legal certainty' standard.
- D. This is incorrect. While the plaintiff's initial pleading is the starting point, the amount in controversy can be challenged if it appears to a legal certainty that the claim is for less than the jurisdictional minimum.
Amount in Controversy (Diversity Jurisdiction)
For diversity jurisdiction, the amount in controversy must exceed $75,000. This is generally met if the plaintiff claims damages in good faith exceeding this amount, unless it appears to a legal certainty that the claim is for less.
- Must exceed $75,000, exclusive of interest and costs.
- Plaintiff's good faith assertion is usually sufficient.
- Dismissal only if it appears to a 'legal certainty' that the claim is for less.
Memory trick: Diverse parties, Big Money, Legal Certainty.