December 7, 1995
United States Court of Appeals United States Court of Appeals
For the First Circuit For the First Circuit
____________________
No. 95-1410
COVENTRY SEWAGE ASSOCIATES, ET AL.,
Plaintiffs, Appellants,
v.
DWORKIN REALTY CO., ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Mary J. Lisi, U.S. District Judge] ___________________
____________________
Before
Torruella, Chief Judge, ___________
Stahl and Lynch, Circuit Judges. ______________
____________________
ERRATA SHEET ERRATA SHEET
Please make the following changes to the opinion issued on
November 22, 1995:
Cover sheet - delete "Incorporation" and insert
"Incorporated" for name of appellants' law firm
Page 2, line 18 - change "appellants" to "appellees"
United States Court of Appeals United States Court of Appeals
For the First Circuit For the First Circuit
____________________
No. 95-1410
COVENTRY SEWAGE ASSOCIATES, ET AL.,
Plaintiffs, Appellants,
v.
DWORKIN REALTY CO., ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Mary J. Lisi, U.S. District Judge] ___________________
____________________
Before
Torruella, Chief Judge, ___________
Stahl and Lynch, Circuit Judges. ______________
____________________
David A. Wollin with whom Adler, Pollock & Sheehan Incorporated ________________ _______________________________________
was on brief for appellants.
Steven M. Richard with whom Tillinghast, Collins & Graham was on _________________ ______________________________
brief for appellees.
____________________
November 22, 1995
____________________
STAHL, Circuit Judge. Appellants, Coventry Sewage STAHL, Circuit Judge. _____________
Associates ("Coventry") and Woodland Manor Improvement
Association ("Woodland") brought a diversity action against
appellees, Dworkin Realty Co. ("Dworkin") and The Stop & Shop
Supermarket Company ("Stop & Shop"). The United States
District Court for the District of Rhode Island found that
the amount-in-controversy requirement of 28 U.S.C. 1332(a)
was not met and dismissed the case, pursuant to appellees'
motion under Fed. R. Civ. P. 12(b)(1), for lack of subject
matter jurisdiction. For the reasons stated below, and
because of the unusual facts of this case, we reverse.
I. I. __
FACTUAL BACKGROUND AND PRIOR PROCEEDINGS FACTUAL BACKGROUND AND PRIOR PROCEEDINGS ________________________________________
Coventry and Woodland own and operate a private
sewer line and sewage pumping station servicing, among
others, a supermarket run by Stop & Shop, located on property
owned by Dworkin, a wholly-owned subsidiary of Stop & Shop
(hereinafter appellees will be referred to collectively as
"Stop & Shop").1 In June 1992, Coventry and Woodland
(hereinafter, collectively "Coventry") entered into a "Sewer
Connection Agreement" with Stop & Shop, whereby Stop & Shop
agreed to pay a service fee for sewer-main usage. The
service fee was based, in part, upon the number of cubic feet
of water consumed on the property. To determine the amount
____________________
1. The existence of diversity of citizenship is undisputed.
-2- 2
of water consumed, the parties' contract relied on invoices
from the Kent County Water Authority ("KCWA"). The KCWA sent
these invoices to Stop & Shop, and Stop & Shop in turn
forwarded them to Coventry.
Because of a dispute over the reasonableness of an
increase in the service fee -- an increase Coventry claimed
was permitted by the contract -- Stop & Shop refused to pay
Coventry's bills which accumulated beginning in early 1994.
In October 1994, Coventry filed this action seeking recovery
of $74,953.00, the amount it claimed to be due based upon
water-usage numbers obtained from the KCWA invoices and what
Coventry claimed was the correct new service fee rate.
Coventry also sought contractual attorneys' fees. It is
undisputed that, at the time Coventry commenced the action,
it alleged the amount in controversy in the belief that it
exceeded the jurisdictional minimum, and not as a ruse to
invoke federal jurisdiction.
Shortly after the complaint was filed, but before
Stop & Shop filed its answer, Stop & Shop contacted the KCWA
about the invoices underlying Coventry's fee calculations.
The KCWA then sent an employee to the property who discovered
that there had been a misreading of Stop & Shop's water
meters, essentially caused by the adding of an extra zero to
the number of cubic meters actually consumed. By letter
dated November 18, 1994, the KCWA notified Stop & Shop that
-3- 3
it was correcting the billing error by changing the amounts
of the invoices.
Based upon the KCWA's corrected invoices, Coventry
reduced the sum of its bills to Shop & Stop to only
$18,667.88, an amount that included the disputed fee
increase. Subsequently, Stop & Shop paid the undisputed
portion of the fee, $10,182.48, initially withholding the
disputed balance of $8,485.40. Stop & Shop ultimately paid
this remaining sum as well, reserving the right to recoup the
amount should it prevail in its challenge to the
reasonableness of the service fee. Stop & Shop, presumably
doubting the existence of diversity jurisdiction, asked
Coventry to voluntarily dismiss the federal action; Coventry
refused, however, apparently because of its intention to
pursue in federal court its claim for contractual attorneys'
fees.2
____________________
2. We note that although attorneys' fees usually will not
constitute a portion of the amount in controversy, there is
an exception where, as here, the fees are contractual.
Department of Recreation v. World Boxing Ass'n, 942 F.2d 84, ________________________ __________________
89 (1st Cir. 1991). In this case, Coventry cannot avail
itself of this exception as a basis for federal jurisdiction
because, not only are there no specifics in the record as to
the amount of such fees, Coventry informed this court at oral
argument that its estimation of attorneys' fees was only
$10,000.
-4- 4
Stop & Shop moved to dismiss the action under Fed.
R. Civ. P. 12(b)(1) for lack of subject matter
jurisdiction.3 The district court granted the motion,
finding that, "to a legal certainty," the amount in
controversy did not exceed $50,000 as required by 28 U.S.C.
1332(a). Notwithstanding the small amount actually in
controversy, Coventry appeals the dismissal of the action.
At oral argument before this court, counsel for Coventry
stated that the reason for the insistence upon federal
jurisdiction was that the case would get to an earlier trial
in federal court (including the appeal proceedings) than if
the case were pursued in state court.
II. II. ___
DISCUSSION DISCUSSION __________
A. Standard of Review ______________________
We review de novo the district court's dismissal __ ____
for lack of subject matter jurisdiction under Fed. R. Civ. P.
12(b)(1). Murphy v. United States, 45 F.3d 520, 522 (1st ______ ______________
Cir.), cert. denied, 115 S. Ct. 2581 (1995). Although the _____ ______
facts pertinent to this appeal are undisputed, we are
nonetheless "mindful that the party invoking the jurisdiction
of a federal court carries the burden of proving its
____________________
3. Although the KCWA notified Stop & Shop of the error in
November 1994, Stop & Shop raised only a general, boilerplate
amount-in-controversy defense in its December 1994 answer,
and did not formally move to dismiss on the jurisdictional
basis until February 1995.
-5- 5
existence." Taber Partners, I v. Merit Builders, Inc., 987 __________________ _____________________
F.2d 57, 60 (1st Cir.), cert. denied, 114 S. Ct. 82 (1993). _____ ______
B. Analysis ____________
Coventry argues that at the time it filed the
action, it claimed, in good faith, damages in excess of
$50,000; thus, the subsequent reduction of the amount in
controversy did not divest the district court of
jurisdiction. Coventry contends that the KCWA's post-filing
discovery of the billing error and changing of the invoice
amounts was a "subsequent event" that neither undermined its
good faith in filing, nor disturbed the court's jurisdiction
once it attached. Shop & Stop argues that the billing error
was a mere "subsequent revelation" that proved, to a legal
certainty, that the amount in controversy had always been
below the jurisdictional minimum and thus the court properly
dismissed the case for lack of subject matter jurisdiction.
This case illustrates the competing policies that
operate when a court makes an amount-in-controversy
determination. On the one hand, a federal court should
rigorously enforce the jurisdictional limits that Congress
chooses to set in diversity cases. See Pratt Central Park ___ __________________
Ltd. v. Dames & Moore, Inc., 60 F.3d 350, 352 (7th Cir. ____ _____________________
1995). On the other hand, preliminary jurisdictional
determinations should neither unduly delay, nor unfairly
deprive a party from, determination of the controversy on the
-6- 6
merits. See id. at 351-52 (noting the undesirable cost of a ___ ___
prolonged jurisdictional inquiry that only serves to
determine which court will hear the case); 14A Wright &
Miller, Federal Practice and Procedure 3701 at 12-13 (1985) ______________________________
(noting competing policies). As a policy matter, the "which
court" determination ought to be made with relative dispatch
so that the parties may proceed to resolution of the
dispute'smerits. See Pratt Central ParkLtd., 60 F.3d at 352. ___ ______________________
For the purpose of establishing diversity
jurisdiction, the amount in controversy is determined by
looking to the circumstances at the time the complaint is
filed. Thesleff v. Harvard Trust Co., 154 F.2d 732, 732 n.1 ________ _________________
(1st Cir. 1946) (noting that "federal jurisdiction depends
upon the facts at the time suit is commenced, and subsequent
changes . . . in the amount in controversy [will not] devest
[sic] it"); 14A Charles A. Wright & Arthur R. Miller, Federal _______
Practice and Procedure 3702 at 28-29 n.31 (1985); Watson v. ______________________ ______
Blankinship, 20 F.3d 383, 387 (10th Cir. 1994); Klepper v. ___________ _______
First American Bank, 916 F.2d 337, 340 (6th Cir. 1990); see ___________________ ___
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830 ___________________ _______________
(1989) (noting that for determining diversity of citizenship,
"[t]he existence of federal jurisdiction ordinarily depends
on the facts as they exist when the complaint is filed").
Moreover, it has long been the rule that a court decides the
amount in controversy from the face of the complaint, "unless
-7- 7
it appears or is in some way shown that the amount stated in
the complaint is not claimed `in good faith.'" Horton, 367 ______
U.S. at 353 (quoting St. Paul Mercury Indem. Co. v. Red Cab ___________________________ _______
Co., 303 U.S. 283, 288 (1938)). When a plaintiff initiates ___
an action in federal court, the plaintiff knows or should
know whether the claim surpasses the jurisdictional minimum.
St. Paul, 303 U.S. at 290. ________
[The plaintiff's] good faith in choosing
the federal forum is open to challenge
not only by resort to the face of the
complaint, but by the facts disclosed at
trial, and if from either source it is
clear that his claim never could have
amounted to the sum necessary to give
jurisdiction, there is no injustice in
dismissing the suit.
Id. ___
Coventry and Stop & Shop both cite passages from
the seminal case of St. Paul, 303 U.S. 283 (1938), without _________
discussing its facts. We pause to do so here. In St. Paul, ________
the plaintiff-employer initiated a state-court action against
the defendant-insurer for payment of workers' compensation
benefits. Id. at 284-85. The plaintiff alleged an amount of ___
damages sufficient to permit the defendant to remove the case
to federal court. Id. at 285. Once in federal court, the ___
plaintiff filed two amended complaints. Attached to the
second amended complaint, which alleged the same amount of
damages as originally claimed, was an exhibit detailing the
damages; the exhibit revealed that the total sum of damages
-8- 8
was no more than $1,380.89, an amount below the
jurisdictional minimum (then $3,000). Id. The court of ___
appeals, sua sponte, took notice of the exhibit and directed ___ ______
a remand of the case, reasoning that the amount in
controversy was less than the jurisdictional minimum and that
"[t]he court cannot close its eyes to the obvious, nor go
ahead with the trial of a cause of which it has no
jurisdiction." 90 F.2d 229, 230 (7th Cir. 1936).
The Supreme Court reversed, noting that there was
no evidence that, at the time the action was commenced, the
plaintiff could have ascertained the actual sum of the
damages, and that the later exhibit setting forth this sum
did not undermine plaintiff's initial good faith. 303 U.S.
at 295-96 (also observing that the sum claimed was comprised
of "numerous" items that, in turn, were each the total of
several other items).4 Accordingly, the Court reasoned that
____________________
4. The Court also noted that the removal posture of the case
additionally bolstered the finding of good faith in claiming
damages. St. Paul, 303 U.S. at 290-91. Because the _________
plaintiff initially filed in state court, it was unlikely
that the amount claimed was meant to somehow confer federal
jurisdiction. Id. ___
The Court reasoned that a defendant's right to remove was not
to be "subject to the plaintiff's caprice" by subsequent
events -- whether or not such events are under plaintiff's
control. Id. at 293-94; see also Pro Medica, Inc. v. ___ ___ ____ _________________
Theradyne Corp., 331 F. Supp. 231, 232 (D.P.R. 1971) ________________
(refusing to allow plaintiff's amended complaint, that
reduced amount of damages claimed to less than jurisdictional
minimum, to divest federal court of jurisdiction). Thus,
events occurring subsequent to removal, such as a
stipulation, an affidavit, or an amendment that reduces the
claim below the jurisdictional minimum, would not deprive the
-9- 9
the case fell comfortably within the rule that "subsequent
reduction of the amount claimed cannot oust the district
court's jurisdiction." Id. at 295. ___
In a portion of St. Paul crucial to the instant ________
case, and from which the parties before us parse their
favorite phrases, the Court wrote:
The intent of Congress drastically
to restrict federal jurisdiction in
controversies between citizens of
different states has always been
rigorously enforced by the courts. The
rule governing dismissal for want of
jurisdiction in cases brought in the
federal court is that, unless the law
gives a different rule, the sum claimed
by the plaintiff controls if the claim is
apparently made in good faith. It must
appear to a legal certainty that the
claim is really for less than the
jurisdictional amount to justify
dismissal. The inability of plaintiff to
recover an amount adequate to give the
court jurisdiction does not show his bad
faith or oust the jurisdiction. Nor does
the fact that the complaint discloses the
existence of a valid defense to the
claim. But if, from the face of the
pleadings, it is apparent, to a legal
certainty, that the plaintiff cannot
recover the amount claimed or if, from
the proofs, the court is satisfied to a
like certainty that the plaintiff never
____________________
court of jurisdiction once it has attached. St. Paul, 303 ________
U.S. at 292-93.
Despite the added weight the removal posture
contributed to the good faith finding, the Court noted that
dismissal of the case would not have been warranted had
plaintiff originally brought the case in federal court. Id. ___
at 290. Therefore, we find the reasoning of St. Paul no less ________
applicable to the instant case, where Coventry originally
filed in federal court, and where there is no dispute as to
its good faith in its claimed amount in controversy.
-10- 10
was entitled to recover that amount, and
that his claim was therefore colorable
for the purpose of conferring
jurisdiction, the suit will be dismissed.
Events occurring subsequent to the
institution of suit which reduce the
amount recoverable below the statutory
limit do not oust jurisdiction.
Id. at 288-89 (footnotes and citations omitted). ___
The rules gleaned from the foregoing passage may be
summarized as follows. First, federal courts must diligently
enforce the rules establishing and limiting diversity
jurisdiction. Second, unless the law provides otherwise, the
plaintiff's damages claim will control the amount in
controversy for jurisdictional purposes if it is made "in
good faith." If the face of the complaint reveals, to a
legal certainty, that the controversy cannot involve the
requisite amount, jurisdiction will not attach. Id. at 289, ___
291. Moreover, if later evidence shows, to a legal
certainty, that the damages never could have exceeded the
jurisdictional minimum such that the claim was essentially ____ ____
feigned (colorable) in order to confer jurisdiction, the
action must be dismissed. See also id. at 290 (noting that ___ ____ ___
plaintiff's good faith in choosing a federal forum may be
challenged by trial facts which establish that the "claim
never could have amounted to the sum necessary to give
jurisdiction"). Finally, if events subsequent to
commencement of the action reduce the amount in controversy
-11- 11
below the statutory minimum, the federal court is not
divested of jurisdiction.
A careful review of St. Paul evinces its primary ________
concern for the plaintiff's "good faith" in alleging the
amount in controversy. When discerning a plaintiff's good
faith, a court may look to whether it "appear[s] to a legal
certainty that the claim is really for less than the
jurisdictional amount." St. Paul, 303 U.S. at 289; see also ________ ___ ____
Horton, 367 U.S. at 353; Jones v. Landry, 387 F.2d 102, 104 ______ _____ ______
(5th Cir. 1967) ("Thus, there is but one test; good faith and
legal certainty are equivalents rather than two separate
tests."). But see Local Div. No. 714, Amalgamated Transit ___ ___ _________________________________________
Union v. Greater Portland Transit Dist., 589 F.2d 1, 9 (1st _____ _______________________________
Cir. 1978) (apparently finding alternative tests, noting that
where there is no evidence that the amount claimed was not in
good faith, it must appear "to a legal certainty" that the
amount in controversy does not exceed the jurisdictional
minimum), overruled on other grounds by Local Div. 589, ________________________________ ________________
Amalgamated Transit Union v. Massachusetts, 666 F.2d 618 (1st _________________________ _____________
Cir.), cert. denied, 457 U.S. 1117 (1981). _____ ______
The parties in the instant case spill much ink over
the meaning of "good faith": whether it includes an objective
as well as subjective component, and if so, whether
"objective" good faith includes "objective facts" as opposed
to "actual facts," etc. Stop & Shop argues that the
-12- 12
"objective facts" were always the same: that it consumed much
less water than originally shown on KCWA's invoices, and that
although the claimed amount in controversy was over $50,000
at the time of filing, the "actual" amount in controversy is,
indisputably, less than the jurisdictional minimum. Coventry
counters that not only did it file with subjective good
faith, but, because a wholly independent third party's
actions were relied upon (indeed, it was Stop & Shop that
forwarded KCWA's invoices to Coventry), there is no reason
that Coventry "should have known" about the "actual" amount
in controversy and thus, it claimed the damages in
"objective" good faith as well.
This court has found that "good faith" in the
amount-in-controversy context includes an element of
"objective" good faith. In Jimenez Puig v. Avis Rent-A-Car _____________ _______________
Sys., 574 F.2d 37, 40 (1st Cir. 1978), we found that, ____
although the plaintiff had not acted "in deliberate bad
faith" in filing his damages claim for mental anguish, "[t]he
question, however, is whether to anyone familiar with the
applicable law this claim could objectively have been viewed
as worth [the jurisdictional minimum]." Id. (viewing ___
evidence in light most favorable to plaintiff, and finding
that, from the outset, plaintiff had no chance of recovering
statutory minimum); cf. Pratt Central Park Ltd. v. Dames & ___ ________________________ _______
Moore, 60 F.3d 350, 353 (7th Cir. 1995) (upholding _____
-13- 13
contractual liability cap of $5,000, then dismissing for
failure to meet amount-in-controversy requirement). We find
that here, there is no dispute as to good faith, subjective
or objective.5 It is undisputed that Coventry alleged the
amount in controversy believing its accuracy at the time.
Furthermore, there is no evidence, and Stop & Shop does not
argue otherwise, that Coventry had any reason to believe, at
the time of filing, that KCWA's invoices, upon which the
service fee was calculated, were factually incorrect. We
find that, objectively viewed, at the time of its filing,
Coventry's claim was worth more than the jurisdictional
minimum.
This case fits well within the rule that once
jurisdiction attaches, it is not ousted by a subsequent
change of events. See St. Paul, 303 U.S. at 295; Klepper, ___ _________ _______
916 F.2d at 340 (holding that summary judgment on one claim,
that reduced amount in controversy below statutory minimum,
did not divest court of jurisdiction); 14A Wright & Miller,
supra, 3702 at 35 (noting same). In Thesleff v. Harvard _____ ________ _______
Trust Co., 154 F.2d 732, 732 n.1 (1st Cir. 1946), we noted __________
that although plaintiff filed remittiturs that reduced the
amount in controversy below the jurisdictional minimum, the
facts at the time the action was commenced conferred
____________________
5. We decline, at this time, to make any sort of legal
distinction between "objective facts" and "actual facts" for
purposes of determining amount in controversy.
-14- 14
jurisdiction which subsequent events could not divest. See ___
also Ford, Bacon & Davis, Inc. v. Volentine, 64 F.2d 800, 801 ____ _________________________ _________
(5th Cir. 1933) (refusing remand where an amended complaint,
removing co-plaintiff who had died after action was filed,
"merely discloses a fact which arose after the suit and
recognizes its legal consequences, without impugning the
original propriety of the jurisdiction"). As in the
amount-in-controversy context, the rule that jurisdiction is
not divested by subsequent events has also been applied to
the diversity-of-citizenship requirement. See Smith v. ___ _____
Sperling, 354 U.S. 91, 93 n.1 (1957); Mollen v. Torrance, 22 ________ ______ ________
U.S. 537, 539 (1824).
In the instant case, Coventry filed the complaint
because Stop & Shop refused to pay its bills totalling
$74,953.00. The amount in controversy, at the time of
filing, exceeded the statutory minimum regardless of the
then-unknown "actual facts" of Stop & Shop's water
consumption. It was not until Coventry filed the action that
Stop & Shop inquired about KCWA's invoices and KCWA
subsequently changed them to reflect accurately the amount of
water usage. Presumably, had the billing error never been
detected, the action would have proceeded on Coventry's
damages claim of $74,953.00. The fact that an independent
third party's error initially inflated the amount in
controversy above the jurisdictional minimum does not lead to
-15- 15
the inevitable result that the third party's correction,
subsequent to the filing of the complaint, affects the
propriety of the jurisdiction once it attached.
Stop & Shop insists that, in this case, we should
draw a distinction between "subsequent events" and
"subsequent revelations." Stop & Shop argues that the
subsequent revelation that the actual amount of damages never
met the jurisdictional minimum -- as opposed to a subsequent
event that reduces that amount -- divests the court of
jurisdiction, regardless of what the parties knew or should
have known at the time of filing. At oral argument before
this court, counsel for Stop & Shop acknowledged that the
logical extension of this argument is that the court would
have been without jurisdiction over the case even if KCWA's
error had not been discovered until trial.
To support this argument, Stop & Shop cites three
cases that are factually distinguishable from the instant
one, and that, in any event, are not controlling upon this
court. First, in American Mutual Liab. Ins. Co. v. Campbell ______________________________ ________
Lumber Mfg. Corp., 329 F. Supp. 1283, 1284 (N.D. Ga. 1971), _________________
the plaintiff filed an action for amounts due on insurance
contracts. The plaintiff was forced to estimate its damages
claim because certain of defendant's records were not
available to it. Id. at 1285. During post-filing discovery, ___
the plaintiff learned that the actual amount in controversy
-16- 16
was below the statutory minimum. Id. The court found that ___
the maximum amount recoverable on the plaintiff's theory
never varied, and noted that the correct amount in
controversy was ascertainable at the time the action was
filed. Id. at 1286. Thus, in dismissing the action, the ___
court reasoned that the plaintiff's realization that its
earlier estimation of damages was erroneous was not an
"event," under St. Paul, that reduced the amount recoverable. ________
Id. at 1286. ___
Second, in Jones v. Knox Exploration Corp., 2 F.3d _____ ______________________
181, 182 (6th Cir. 1993), the plaintiffs revealed in their
appellate brief that "it was not discovered until this appeal
that the amount in controversy is actually less than
$50,000." The court acknowledged that subsequent events that
reduce the amount in controversy, such as an amendment to the
complaint or an application of a post-discovery legal
defense, would not oust federal jurisdiction. Id. at 183. ___
The court reasoned that "[a] distinction must be made,
however, between subsequent events that change the amount in
controversy and subsequent revelations that, in fact, the
required amount was or was not in controversy at the
commencement of the action." Id. at 183. The court found ___
that there was no subsequent event that occurred to reduce
the amount; instead, there was only a subsequent revelation
that, in fact, the required amount was not in controversy at
-17- 17
the time the action was filed. Id. Thus, the court ordered ___
dismissal based on lack of subject matter jurisdiction. Id. ___
Third, in Tongkook America, Inc. v. Shipton ________________________ _______
Sportswear Co., 14 F.3d 781, 782-83 (2d Cir. 1994), the _______________
parties realized during pre-trial discovery that, one year
prior to filing suit, the plaintiff had drawn a certain
amount upon a letter of credit that was erroneously added to
the damages claim. The court rejected plaintiff's argument
that the discovery of the failure to credit the amount
withdrawn was an "event subsequent to the institution of the
suit." Id. at 784-85. The court deemed the plaintiff's ___
previous withdrawal upon the letter of credit an "event which
preceded the commencement of the suit [that] objectively
altered the amount of [plaintiff's] claim." Id. at 786. ___
Thus, the sum certain in controversy was lower than the
jurisdictional minimum and the court ordered the case
dismissed for lack of subject matter jurisdiction.
In the instant case, Coventry did not base its
damages claim on a faulty estimation that required
recalculation during discovery, as in American Mutual; ________________
rather, it alleged the amount in controversy based upon a
third-party's information that neither party had any reason
to know was erroneous. Unlike the "mere revelation" in Jones _____
that there was never the requisite amount in controversy, the
reduction in the amount in controversy here occurred only
-18- 18
after KCWA's affirmative acts of checking the water meters
and changing the invoice amounts. Finally, although portions
of the Tongkook court's reasoning are not entirely consistent ________
with our decision here, we distinguish that case narrowly on
the facts; in Tongkook, the parties themselves made the error ________
affecting the amount in controversy approximately one year
prior to commencement of the suit. 14 F.3d at 782-83. Thus,
it appears that the plaintiff in that case should have known
that its claim did not exceed the jurisdictional minimum.
See St. Paul, 303 U.S. at 290 (stating that a plaintiff ___ _________
should know whether the claim meets the amount in controversy
requirement). In the instant case, an independent third
party with otherwise no connection to the case made an
apparently non-obvious error so that the amount-in-
controversy at the time of filing, in fact, exceeded the
jurisdictional minimum. Coventry had no reason to know that
its claimed amount of damages was in error. Moreover, the
reduction of the amount in controversy resulted from acts
occurring wholly after the action commenced. We hold that,
under these extraordinary circumstances, the district court's
jurisdiction was not disturbed by the subsequent reduction of
the amount in controversy.6
____________________
6. We note here a paradox. Under 28 U.S.C. 1332(b), a
plaintiff who files a claim in federal court based on
diversity jurisdiction is subject to the court's imposition
of costs if the plaintiff "is finally adjudged to be entitled
to recover less than the sum or value of $50,000." 28 U.S.C.
-19- 19
III. III. ____
CONCLUSION CONCLUSION __________
For the foregoing reasons, we vacate the judgment
of the district court, and remand for further proceedings
consistent with this opinion. Each party shall bear its own
costs.
____________________
1332(b). Assuming that Coventry will persist in pursuing the
case in federal court, it seems odd that while it has
technically met the requirements of 1332(a), it may not
avoid potential liability under 1332(b)'s cost sanction.
Cf. Horton, 367 U.S. at 362 (noting the "strange result that ___ ______
while respondent has met the requirements of 1332(a), . . .
under 1332(b) it will be liable for costs for failing to
meet the same requirements) (Clark, J. dissenting). The
determination of whether or not to impose such cost sanctions
is, of course, within the sound discretion of the district
court.
-20- 20