JTH Tax, Inc. v. Frashier

Brief Fact Summary.

Liberty (plaintiff) and Harry Frashier (defendant) entered a franchise agreement in 2006. Liberty sued Frashier for $80,000 damages in federal court under its diversity jurisdiction, claiming violations of post-termination provisions of the franchise agreement. The court dismissed Liberty’s case for failure to meet the $75,000.00 amount-in-controversy required for diversity actions. Liberty appealed.

Synopsis of Rule of Law.

If an offended party asserts in good faith an amount in controversy over $75,000.00, the ensuing occasions that decrease the amount in controversy do not deprive a federal court of diversity jurisdiction.

Facts.

JTH Tax, Inc. (Freedom) (plaintiff) franchises tax preparation offices all through the nation. Harry Frashier (defendant) entered into a franchise agreement with Liberty in 2006. Liberty sued Frashier in federal court under its diversity jurisdiction, claiming infringement of post-termination provisions of the franchise agreement. Liberty's protest looked for $80,000.00 in damages and a permanent injunction requiring Frashier to consent to post-termination provisions. Liberty later documented a motion for summary judgment in which Liberty lessened its claim for money damages to $60,456.25. The district court at that point dismissed Liberty's grievance for its inability to meet the $75,000.00 amount-in-controversy requirement for diversity actions. Liberty appealed.

Issue.

If an offended party asserts in good faith an amount in controversy over $75,000.00, do ensuing occasions that decrease the amount in controversy deprive a federal court of diversity jurisdiction?

Held.

No. If an offended party asserts in good faith an amount in controversy over $75,000.00, the ensuing occasions that decrease the amount in controversy do not deprive a federal court of diversity jurisdiction.

Discussion.

If an offended party in good faith claims an amount in controversy over the $75,000.00 minimum required for diversity jurisdiction, a federal court may only suspend if there is a legitimate sureness that the offended party can't recover that amount. Subsequent actions that decrease the recoverable sum don't deprive the court of jurisdiction. Here, Liberty's dissension asserted $80,000.00 in damages. There is no evidence that Liberty made this case in bad faith, and Liberty's diminishment of its damages in its motion for summary judgment does not deny the court of subject matter jurisdiction. Also, it is not clear that Liberty couldn't recuperate the requisite amount in controversy. In figuring the amount in controversy., money damages and injunctive relief are considered. Regardless of the possibility that Liberty could just recuperate the $60,456.25 in monetary damages asserted in its motion for summary judgment, the injunctive relief sought has enough value to empower Liberty to achieve the requisite amount in controversy. Therefore, the judgment of the district court is reversed.