Clark v. Starwood — Federal Court Amount in Controversy Requirements Cannot Be Assumed
By Dr. Gary L. Deel, Ph.D., J.D.
In a previous article, I wrote about the difference between state and federal courts and how certain requirements must be met in order to litigate in federal court. For the uninitiated, here is a quick review of those requirements:
There are two ways into federal court. One is the presence of a federal question — in other words, the substantive issue of the case at hand must concern a question about federal law. The other way is through what is called “diversity jurisdiction,” which is intended to provide a neutral forum for legal disputes between parties who do not share the same state of residence.
For a case to be eligible for diversity jurisdiction, two separate criteria must be met. First, no plaintiff may share a common principal place of residence with any defendant. And secondly, the amount in controversy must exceed $75,000.
The first part of the diversity jurisdiction test is fairly straightforward and unambiguous. Individuals and business entities may generally have one and only one principal place of residence. Even if they travel, own property, or conduct business in more than one state, the party in question must choose one state as their primary residence.
For businesses, this would usually be where the organization is registered and/or where the headquarters is located. For individuals, this would typically be where their primary home is situated, where their driver’s license has been issued, where they receive the bulk of their postal mail, and/or where they pay state income taxes (if applicable).
But the amount in controversy requirement is not quite as simple. Again, the rule requires that more than $75,000 must be “in controversy,” which means that the projected monetary relief being sought must be greater than this number. But of course, the parties to a lawsuit may disagree significantly about the actual scope of such relief.
For example, a plaintiff who breaks their hip after slipping on a banana peel that was left on the floor of a grocery store may feel their damages are worth millions of dollars. But it would be unsurprising if the grocery store disputes this and…