Thursday, June 21, 2007

Fourth Circuit affirms district court's jurisdiction to uphold arbitration award under jurisdictional amount

In CHOICE HOTELS INT’L v. SHIV HOSPITALITY, Choice Hotel filed a complaint in federal district court seeking seeking $116,432.28 . The arbitrator ultimately awarded $59,208.75. When Choice moved to confirm the award in the district court, Shiv argued that because the award was less than the $75,000 jurisdictional amount for diversity cases, the district court did not have jurisdiction. The Fourth Circuit disagreed:

Choice Hotels demanded well over $75,000 in its complaint, and there is no allegation that claim was not in good faith. That Choice Hotels did not win a judgment in arbitration for that amount is irrelevant in this context. "Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction." St. Paul Mercury Indem. Co. v. Red Cab Co.,303 U.S. 283, 289-90 (1938); see Hood v. Bell, 84 F.2d 136, 137 (4thCir. 1936) (holding that a court does not lose diversity jurisdiction"because of a subsequent change in the conditions upon which jurisdiction was originally based"). Because the district court simply stayed this action, and then reopened it to confirm the award, we must determine the amount in controversy from the complaint itself. We therefore hold that the district court had subject matter jurisdiction under § 1332 because the good faith amount in controversy contained in Choice Hotels’ complaint well exceeded the $75,000 threshold.

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