Amount in Controversy

Amount in Controversy

Section 1332(a) joins a dollar requirement to its citizenship requirements. The district courts have original jurisdiction of civil actions “where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs,” and that clause comes before the list of alignments, so it governs every one of them.¹ A case between citizens of different States, a case between a state citizen and an alien, and a case that joins aliens as additional parties all need more than $75,000 at stake. The verb is exceeds, so a claim worth exactly $75,000 falls short and one worth $75,001 clears the line. Parties who are completely diverse but fighting over too little belong in state court.

The amount in controversy, also called the jurisdictional amount, is the damages claimed or the relief demanded by the party who invokes the court’s power.² That definition looks to the claim as stated at the outset, and the timing produces most of the doctrine in this section. A court must decide whether it has power before it hears any evidence, so it cannot wait to learn what the plaintiff will recover. It needs a method for judging a claimed figure at the threshold, a rule for which items belong in the count, and rules for the common case in which no single claim reaches the figure but several claims, or several claimants, together might.

The subsections below take these problems in order: how much weight the plaintiff’s own figure carries, what goes into the figure, when one plaintiff may add claims together, how several plaintiffs fare after Allapattah, and what happens when a plaintiff who sued in federal court recovers less than $75,000. In that last situation § 1332(b) lets the court deny costs to the plaintiff and even impose costs on it.³ The dollar requirement is a test separate from citizenship, and a complete diversity analysis checks both halves and names the one that fails.

The Legal Certainty Test

Section 1332(a) demands more than $75,000 but does not say how a court is to tell, before any evidence comes in, whether that much is really at stake.⁴ St. Paul Mercury Indemnity Co. v. Red Cab Co. supplied the method. Unless the law gives a different rule, “the sum claimed by the plaintiff controls if the claim is apparently made in good faith,” and dismissal is proper only when it appears to a legal certainty that the claim is really for less than the jurisdictional amount.⁵ The test starts from the plaintiff’s own figure and asks the challenger to show that the figure cannot be reached.

A court must settle its jurisdiction at the start of the case, when the value of a claim often cannot be known until trial, and that timing explains the test. A plaintiff may seek well over $75,000 in good faith and recover nothing because the jury finds no negligence or accepts a defense.⁶ The rule also tracks the statute, which asks whether more than $75,000 is in controversy and does not make jurisdiction depend on a recovery above that sum. Where there is legitimate debate whether a jury might return a verdict above the amount, Congress’s requirement is met.⁷ Article III itself sets no minimum. Congress added the floor to keep minor diversity cases out of federal court, fixing it at $500 in 1789 and raising it periodically since.⁸ Because the floor is a housekeeping measure and not a constitutional barrier, the test is liberal, and the practical burden of showing that the minimum cannot be reached falls on the party resisting federal jurisdiction.⁹

Students often misstate the test by reversing it, as though the plaintiff had to show that a recovery above $75,000 is likely.¹⁰ The plaintiff in fact gets every benefit of the doubt. If the pleaded facts show that the plaintiff might recover more than $75,000, the requirement is met, and dismissal follows only where the plaintiff certainly will not recover that much on the claim asserted.¹¹ The judge looks at the injuries alleged in the complaint and asks whether a jury could possibly award more than $75,000 for them.¹² Weakness on the merits plays no part in that question. A plaintiff who pleads $100,000 on a contract claim that the statute of limitations has already barred expects to recover nothing, yet $100,000 remains in controversy, because the limitations defense goes to whether the plaintiff wins and the amount measures what is at stake if the plaintiff does.¹³

That result is typical of personal-injury claims. Pain and suffering, emotional distress, and punitive damages have no objective yardstick, so a court rarely can say that a jury would certainly stay below the threshold, even when out-of-pocket losses fall short of it.¹⁴ The court can reach that conclusion only when the pleaded facts or the governing law show that the plaintiff could not be awarded more.¹⁵ The dismissals that do occur therefore sort into two groups: those in which the facts describe no injury large enough, and those in which the law fixes a ceiling.

Diefenthal illustrates the first group. It was decided under an earlier, lower threshold, but its reasoning carries over. The Diefenthals claimed that an Eastern Airlines flight attendant had brusquely told them that no first-class smoking seats were vacant, and they demanded $50,000 for embarrassment and humiliation.¹⁶ The district court said it could not see how those allegations could reach the threshold, allowed an amendment, and warned that the amount would again be in question. The amended complaint alleged only that an attendant had maliciously and intentionally treated them in a manner calculated to cause serious embarrassment and humiliation, with no physical contact, no physical or emotional impairment, no loss of reputation, and no demand for punitive damages.¹⁷ The court of appeals rejected their argument that a good-faith request for $50,000 was enough. A federal court must give due credit to a plaintiff’s good-faith claim, it reasoned, but it “would be remiss in its obligations if it accepted every claim of damages at face value, no matter how trivial the underlying injury,” especially when the plaintiff fails to specify the factual basis of the claim after jurisdiction is challenged.¹⁸

The case also shows what a plaintiff must do once the figure is challenged. The party invoking federal jurisdiction has the burden of establishing the factual basis of the claim by pleading or affidavit, which lets the court test its jurisdiction without a full trial on the merits.¹⁹ A plaintiff can therefore amend to allege damages more fully or file affidavits detailing the injuries. The Diefenthals knew that both the court and Eastern questioned the basis of their claim, and they never specified it.²⁰ Evidence of injury that could possibly support a verdict above the threshold keeps the case in federal court, even if the eventual recovery is smaller.²¹

The second group of dismissals rests on law. When state law bars or caps the kind of damages claimed, the only recovery the plaintiff can obtain may not exceed $75,000, and the case is dismissed however large the alleged loss.²² State law governs what a diversity plaintiff may recover, so the federal court applies the state limit when it tests the amount, and a cap on punitive damages can bring a combined demand below the threshold.²³

A legal ceiling and a thin factual showing end in the same dismissal by different routes, and the difference tells a plaintiff what to do. Where the law sets a ceiling, the court could accept every fact as pleaded and the recovery would still fall at or below $75,000, so the only answer is an argument that the cap does not apply. In Diefenthal nothing in the law limited the recovery, but the pleaded facts described no injury that a jury could value near the figure, so the answer lies in evidence of concrete harm. In a rare third case the demand is so out of proportion to the injuries alleged that it is not made in good faith.²⁴ The deference the test gives the plaintiff also runs the other way. Where state law lets the plaintiff limit the recovery, a plaintiff who restricts the damages claimed to a figure below the threshold should prevent removal, because a plaintiff may give up a recovery above $75,000 and the choice will be respected.²⁵

Step two separates the legal-ceiling cases from the Diefenthal cases. Step four is where an answer should state the standard in its generous form, so that a plaintiff with a documented injury and no cap never has to show that a verdict above $75,000 is likely.

What Counts Toward the Amount

The last phrase of § 1332(a), “exclusive of interest and costs,” is the only text that tells a court what to leave out of the count.²⁷ The legal certainty test governs how a court treats the plaintiff’s figure once it is on the table; this subsection asks what may go into the figure. Nearly everything the complaint demands counts. Interest and costs are the statutory exceptions, and attorney’s fees and punitive damages count only if the governing law makes them part of the relief.²⁸

Interest and costs are excluded because they are incidental additions to a claim. Court costs, and interest that accrues with the passage of time before and after judgment, are add-ons to the dispute and are not what the parties are fighting over.²⁹ The exclusion reaches only that kind of interest. When the parties’ contract makes interest part of the debt, as accrued interest on a note is part of what the borrower promised to repay, the interest belongs to the claim and counts with the principal. Interest that arises only because the defendant paid late, after the obligation matured, compensates for delay and falls on the excluded side of the line.

Attorney’s fees are a different item from costs, and they count when the law gives the plaintiff a right to recover them. A contract or statute that shifts fees makes the fee part of the relief the plaintiff can demand, so the fee is part of what is in controversy. In the ordinary case each side pays its own lawyer, and the fee is an expense of litigating the claim that adds nothing to its worth.

The core of the count is damages. A court includes compensatory damages, economic and non-economic alike, and punitive damages, so long as they are claimed in good faith, and lost wages, pain and suffering, and out-of-pocket losses sit in the same total.³⁰ Punitive damages need more care, because they count only if state law allows them for the claim pleaded. In Del Vecchio v. Conseco, Inc., the court described a two-part inquiry for the case in which punitive damages are needed to reach the figure. The first question is whether state law makes punitive damages recoverable on the claim, and if it does, the court has jurisdiction unless it is clear beyond a legal certainty that the plaintiff would under no circumstances be entitled to recover the jurisdictional amount.³¹ A standard illustration shows the result. McGee’s actual damages are $60,000, and if the State allows punitive damages for the kind of action he brings, the requirement is likely met, since a court can hardly say to a legal certainty that a jury will not add $15,000.01 when punitive awards turn on the jury’s view of how extreme the defendant’s conduct was. If the State bars punitive damages for that claim, the only allowable damages do not exceed $75,000, and the case is dismissed.³²

Counting is not multiplying. McGee might sue a truck dealer for breach of contract and breach of implied warranty to recover the $50,000 by which the truck was worth less than he paid. Even if he wins both counts he recovers only the $50,000 he lost, because no court awards double damages for two theories of the same relief.³³ The complaint places $50,000 in controversy, and a lawyer who adds a third count gains nothing toward the threshold.

The court reads the amount from the complaint, and defenses do not reduce it. When jurisdiction must be settled, the defendant’s defenses are unresolved and the jury may yet find that one of them is established, so the court asks what the plaintiff demands if the plaintiff wins.³⁴ A defense goes to whether the plaintiff wins, and the amount measures what is at stake if the plaintiff does.

A defendant’s counterclaim cannot be added to the plaintiff’s claim to reach the amount. Allowing that would let the parties consent to subject-matter jurisdiction indirectly, which is impermissible, and if both claims are valid they offset each other, so there is no possibility that more than $75,000 will be recovered.³⁵

Claims for injunctive relief must meet the same dollar requirement, and the hard question is whose valuation to use. The usual approach looks to the cost to the plaintiff if relief is denied, which is the value of the right the plaintiff seeks to protect against the defendant’s interference.³⁶ Some courts instead test the amount by what compliance with the injunction would cost the defendant.³⁷ A plaintiff who seeks to enjoin a power plant’s nuisance might put the harm at $60,000 in lost property value, while the plant’s owner may value the injunction in the millions, measured by lost production or the cost of remediation equipment.

The courts of appeals have split on the answer. Most hold that the controversy must be worth more than $75,000 to the plaintiff, while others find jurisdiction if the benefit or cost to either party could exceed that sum.³⁸ Under the majority view the power plant case fails at $60,000, while under the either-viewpoint approach the owner’s compliance costs carry it over the line. Exams build fact patterns around this split, so an answer should say that courts disagree and then apply the approach the jurisdiction follows.

The either-viewpoint approach has a limit, which Del Vecchio illustrates. The plaintiff tried to avoid Snyder v. Harris, which holds that Rule 23 leaves in place the rule against combining multiple persons’ claims to reach the minimum amount, by measuring the amount through the defendants’ total unjust enrichment across the proposed class.³⁹ The court of appeals answered that the amount in controversy can be measured from either party’s viewpoint, but each plaintiff’s claim must remain separate from every other plaintiff’s from both standpoints. What the defendants risked paying that plaintiff counted, and their exposure to the entire class did not.⁴⁰ The viewpoint question therefore decides how to value one claim and leaves untouched the separation of different plaintiffs’ claims, which the next subsections develop.

Steps two and four catch the errors that cost the most points, because delay interest and unsupported fee claims are easy to add by habit.

Aggregating One Plaintiff’s Claims

Section 1332(a) asks whether the “matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs,” but it does not say whether the matter in controversy is each claim alone or everything the plaintiff demands in the suit.⁴² The difference decides real cases, because a plaintiff holding three claims worth $30,000 each has a $90,000 dispute only if the claims may be counted together. Aggregation rules answer the question. They add the value of separate claims when the law treats them as one controversy and keep them apart when it does not.

The most generous rule comes first. A single plaintiff may add together every claim asserted against a single defendant, even when the claims have nothing to do with one another, and the Supreme Court has long held as much, as it recalled in Allapattah.⁴³ In a standard illustration, a plaintiff brings a $35,000 contract claim, a related $20,000 claim for tortious interference with that contract, and an unrelated $40,000 trespass claim against one defendant. The three total $95,000 and clear the threshold.⁴⁴ The trespass claim shares no facts with the others, so relatedness plays no part in the count. That feature separates aggregation from supplemental jurisdiction, which asks whether claims form part of the same case, because the dollar count never requires a transactional relationship among the claims.

The rule fits what the dollar requirement measures. The requirement asks how large the dispute is between the plaintiff and the defendant brought into the case, and everything one person claims against another belongs to that dispute, however many events or theories divide it. If the plaintiff wins every claim, the recovery from that defendant could exceed $75,000, which is the possibility the requirement looks for.⁴⁵ Counting claims one at a time would make access to federal court depend on how the plaintiff chose to divide the demand into counts, while the size of the quarrel stayed the same.

The rule stops at the edge of a single defendant. A plaintiff cannot add claims against different defendants to reach the threshold, so the plaintiff’s claim against each defendant must satisfy the statutory figure on its own.⁴⁶ Each added defendant brings a separate controversy with its own value, and a second claim against someone else does not make the dispute with the first defendant any more significant.

The same line runs through a single complaint that pairs a large claim with a small one. In a standard illustration, Holmes sues his employer, International Investigations, for $200,000 for breach of contract in firing him, and in the same suit sues his supervisor, Watson, for $50,000 for libel based on a memo about his work. The claim against the employer meets the amount and can proceed in federal court, but the claim against Watson does not, and Holmes cannot bootstrap the weaker claim onto the stronger one, even if the parties are completely diverse.⁴⁷ Supplemental jurisdiction does not rescue the claim against Watson either, because a plaintiff’s small claim against a second defendant gets no help from a large claim against the first.⁴⁸ The next subsection explains why.

One qualification applies when defendants are jointly liable for the same claim: the whole claim then counts against each of them. In a standard illustration, McGee’s boat is lost in a $100,000 collision that either of two defendants may have caused, and because the law in some States would let him collect the full amount from either, each may be liable for the entire $100,000, so the requirement is met against each.⁴⁹ Nothing is added in that case. Each defendant can be made to pay the whole judgment, so the claim against each is worth all of it, and each faces a demand above $75,000. The two contractors in the last hypothetical differ on exactly this fact, because each answered only for its own work and so faced only its own smaller claim.

The label attached to the theory therefore matters less than what the plaintiff demands. A plaintiff who in truth seeks only a share from each defendant has pleaded several liability and has no whole claim to count against anyone.

Step three carries the doctrine’s one real qualification, and step five keeps the ledgers apart, so a student who builds one ledger per defendant avoids the usual error of adding every figure in the complaint into one sum.

Multiple Plaintiffs and Allapattah

Section 1332(a) requires that more than $75,000 be in controversy, but its text does not say whose stake the figure measures when several plaintiffs sue together.⁵¹ Several plaintiffs raise a problem that the single-plaintiff rule does not reach, because each holds a claim of its own, and the claims may be worth more together than any one is worth alone. The Supreme Court’s decisions in Clark v. Paul Gray, Inc. and Zahn v. International Paper Co. answered that such claims could not be added, and that answer governed until Exxon Mobil Corp. v. Allapattah Services, Inc. changed it in 2005 while leaving one limit firmly in place.⁵² This subsection takes the old rule and its single exception first, then the change, then the limit that still defeats a plaintiff who joins the caption with a small claim.

The traditional rule, announced in Clark, treats the amount requirement as a test that each plaintiff must pass on the plaintiff’s own claim. Clark arose under federal-question jurisdiction, which then carried an amount requirement much like the one in diversity cases, and the Court held that every plaintiff must separately satisfy it.⁵³ Zahn carried the rule into diversity, holding that it followed inescapably from Clark that “any plaintiff without the jurisdictional amount must be dismissed from the case, even though others allege jurisdictionally sufficient claims.”⁵⁴ Under that regime, a plaintiff with a $30,000 claim gained nothing by joining a coplaintiff whose claim against the same defendant was worth $100,000, and the smaller claim left federal court.

The rule fits the way claims work. Joinder lets several plaintiffs try their claims together for convenience, but each plaintiff’s claim remains a separate dispute with its own value. If the court could add separate stakes, the size of one plaintiff’s dispute would depend on who else appeared in the caption. The rule holds even when the claims arise from one event: tort claims by multiple plaintiffs may not be aggregated, though the plaintiffs sue the same defendant and their claims arise from the same event, transaction, or business practice.⁵⁵

One exception allows the addition. When several plaintiffs unite to enforce a single title or right in which they share a common and undivided interest, the amounts each seeks may be aggregated.⁵⁶ The circumstances are rare and generally involve a single piece of property or a single insurance policy. There the rights of one plaintiff cannot be determined without affecting the rights of the others, so the court appropriately values the whole fund or property in determining the amount.⁵⁷ The exception covers only the small class of cases in which the law has ruled that various interests are to be treated as one, such as a husband and wife’s interest in their home in a community property State, or partners’ interest in partnership assets.⁵⁸

Shared goals do not create such an interest. Plaintiffs who want the same relief or resist the same claims are not co-owners of a single right.⁵⁹ A parent who seeks damages for a minor child’s injuries and reimbursement for medical expenses incurred on the child’s behalf cannot aggregate the two. The injury claim belongs to the child, the expense claim is the parent’s own loss, and the parent-child relationship does not create a joint and common interest.⁶⁰ The spouses hold one indivisible right, while the parent and child hold two different rights that arose from one event. That distinction matters again below, because the family in the Star-Kist case has the parent-and-child structure that the exception does not reach.

Allapattah reopened the question by another route. The Court asked whether a federal court in a diversity action may exercise supplemental jurisdiction, the power to hear related claims, over additional plaintiffs whose claims fall below the amount, when those claims belong to the same case or controversy as the claims of plaintiffs who meet it.⁶¹ The Court answered yes. Where the other elements of jurisdiction are present and at least one named plaintiff satisfies the amount requirement, 28 U.S.C. § 1367 authorizes supplemental jurisdiction over the claims of the other plaintiffs in the same Article III case or controversy, even though those claims are for less than the jurisdictional amount.⁶² Supplemental jurisdiction has its own reading, so this subsection takes from it only what the diversity problem needs. Each small claim stays small and rides on a claim that independently clears $75,000.

The Star-Kist case, which the Court decided with a class action brought by about 10,000 Exxon dealers, shows the result on a small scale. A nine-year-old girl sued Star-Kist in the District of Puerto Rico after she sliced her finger on a tuna can, seeking damages for unusually severe injuries, and her family joined the suit seeking damages for emotional distress and certain medical expenses.⁶³ The district court found that none of the plaintiffs met the amount, and the First Circuit ruled that the girl, but not her family members, had alleged damages in the requisite amount.⁶⁴ The Supreme Court reversed the First Circuit, so the family’s claims could stay in federal court alongside the girl’s. The family had joined under Rule 20, which permits joinder when the claims arise from the same transaction and present a common question, and their claims grew out of the girl’s injury.⁶⁵ Under the old rule the parent’s expense claim could never have been added to the child’s; now it enters through the child’s claim as a related claim.

The Court reached that result in two moves. It first rejected the view that a district court lacks original jurisdiction over a civil action unless it has original jurisdiction over every claim in the complaint. That view requires either that all the claims stand or fall as one indivisible action, or that a single claim or party outside original jurisdiction “contaminates” every other claim.⁶⁶ A well-pleaded complaint with one claim that satisfies the amount requirement, and no other jurisdictional defect, therefore places that claim within the court’s original jurisdiction. The Court then read § 1367. Subsection (a) is a broad grant that reaches claims involving the joinder or intervention of additional parties, and subsection (b) subtracts from it in diversity cases by withholding supplemental jurisdiction over claims of plaintiffs joined under Rule 19 or intervening under Rule 24, and over claims against defendants joined under Rule 20. Its text says nothing about plaintiffs permissively joined under Rule 20 or class members certified under Rule 23. The Court drew the natural, indeed the necessary, inference that § 1367 confers supplemental jurisdiction over claims by Rule 20 and Rule 23 plaintiffs, an inference strengthened, at least for Rule 20 plaintiffs, by the express exclusion of claims against Rule 20 defendants.⁶⁷

The Court found the contamination theory sensible for one requirement and senseless for the other. The amount requirement ensures that a dispute is important enough to warrant federal attention, and the Court observed that “the presence of a single nondiverse party may eliminate the fear of bias with respect to all claims, but the presence of a claim that falls short of the minimum amount in controversy does nothing to reduce the importance of the claims that do meet this requirement.”⁶⁸ A small claim leaves the large one as important as before, while a nondiverse opponent removes the reason for a federal forum from the whole case. Section 1367(a) therefore unambiguously overrules the holding and result in Clark, and it would be extraordinary to say that the statute left Zahn standing, since Zahn rested in substantial part on Clark.⁶⁹

The same reasoning governed the dealers’ class action, in which the Eleventh Circuit had allowed supplemental jurisdiction over class members below the minimum so long as a class representative met it, and the Supreme Court affirmed.⁷⁰ A single named plaintiff with a qualifying claim carries the unnamed class members along. Class actions, including the separate $5,000,000 statute that Congress enacted for them in the same year, receive their own treatment in a later section.⁷¹

The limit on Allapattah comes from the order in which the statute works. Supplemental jurisdiction attaches to a claim the court could hear on its own, so the court must first have original jurisdiction over at least one claim in the action, and incomplete diversity destroys original jurisdiction with respect to all claims, leaving nothing to which supplemental jurisdiction can adhere.⁷² A plaintiff who shares a State with any defendant therefore defeats the entire action, and the nondiverse plaintiff’s own small claim is the least of the problem, since the large claim of a diverse coplaintiff falls along with it. The usual exam error is to treat the nondiverse plaintiff as one more small claim that supplemental jurisdiction can absorb.

Rule 21 supplies the repair the hypothetical describes, because a court may drop a party on motion or on its own initiative at any stage, even after verdict, to eliminate a nondiverse party.⁷³ The Court treated the two requirements differently on purpose. For the amount, it followed the broad text of § 1367 and overruled Zahn, while for citizenship, Strawbridge continues to govern, so supplemental jurisdiction enters a diversity case only after the alignment satisfies complete diversity as an original matter.⁷⁴

Allapattah also gives no help when no plaintiff clears the line, because § 1367 requires original jurisdiction over some claim before it can add others. In a standard illustration, Holmes sues Meyer for $50,000 for injuries in an auto accident, and Holmes’s wife, hurt in the same accident, joins as a coplaintiff seeking $30,000. Neither claim meets the amount, the claims cannot be added together, and the case must be dismissed.⁷⁵ Because no claim is properly before the court on its own, there is nothing to which other claims can be added under § 1367.⁷⁶ How a plaintiff’s own claims are counted still matters, though. A plaintiff whose aggregated claims against one defendant exceed $75,000 anchors the case, and supplemental jurisdiction then relieves the other plaintiffs of the amount requirement.⁷⁷

Justice Ginsburg’s dissent would have read the statute more narrowly. On that view § 1367 essentially codifies the doctrines of pendent and ancillary jurisdiction as they stood when Finley was decided, overriding only Finley, and the reading would have affirmed the First Circuit in the Star-Kist case and reversed the Eleventh Circuit in the dealers’ case.⁷⁸ The majority drew the opposite inference from the text of § 1367(b), which names Rule 19 and Rule 24 plaintiffs but not Rule 20 or Rule 23 plaintiffs.⁷⁹ The majority’s reading controls, and the dissent is useful because it shows the choice the Court made.

The relief Allapattah gave additional plaintiffs does not extend to additional defendants, because § 1367(b) expressly withholds supplemental jurisdiction over claims against defendants joined under Rule 20.⁸⁰ Two plaintiffs can use supplemental jurisdiction against one defendant, but one plaintiff cannot use it against two defendants. The interpretation leaves a result that no one could have intended, but it is consistent with the literal wording of the statute.⁸¹ The asymmetry matches the Holmes and Watson illustration from the last subsection, where the claim against the employer cleared the amount, the libel claim against the supervisor did not, and the weaker claim could not be attached to the stronger one.⁸²

The first step does the gatekeeping, because Allapattah can relieve a small claim of the amount requirement only after the court has original jurisdiction, and a shared State between any plaintiff and any defendant removes that jurisdiction before the amount is ever examined. The fifth step marks the line the old rule still draws: plaintiffs whose claims are separate and distinct, none of which clears $75,000, cannot be rescued by adding the claims together.

Recovering Less Than the Threshold

Section 1332(b) governs what happens when a plaintiff who chose a federal court finishes with a judgment worth less than the jurisdictional figure. Unless another federal statute makes express provision, when a plaintiff who files the case originally in federal court is finally adjudged entitled to recover less than $75,000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged entitled and exclusive of interest and costs, the district court “may deny costs to the plaintiff and, in addition, may impose costs on the plaintiff.”⁸⁴ The consequence is a decision about who pays the expenses of litigation. The statute says nothing about vacating the judgment or dismissing the case, and that restraint follows from the way the amount in controversy is measured.

A court must decide whether it has power before it hears any evidence, so the amount in controversy is measured at the outset by what the plaintiff claims in good faith. A plaintiff who pleads more than $75,000 in good faith meets the requirement even if the plaintiff later loses or recovers less.⁸⁵ Measuring by the outcome would produce a strange result. A plaintiff who lost, or who won less than the threshold, would hold a judgment from a court that never had power to enter it and could try the claim again in state court, while the defendant who won would have won only the chance to defend a second time. The standard in St. Paul Mercury avoids that result, because it permits dismissal only when it appears to a legal certainty that the claim was really for less than the jurisdictional amount, and a disappointing verdict does not supply that certainty.⁸⁶ A recovery far below $75,000 therefore does not by itself make the verdict subject to reversal and dismissal on appeal for lack of jurisdiction.

The same reasoning covers the plaintiff who recovers nothing. The amount in controversy measures what is at stake if the plaintiff wins, so a $100,000 claim that the statute of limitations will defeat still places $100,000 in controversy on the day the complaint is filed.⁸⁷ A defense verdict or a jury’s low valuation shows that the claim was worth less than the plaintiff hoped; it shows nothing about whether more than $75,000 was legally possible when suit began. What the cost provision adds is a mild deterrent. A plaintiff who inflates a demand to reach the federal forum risks paying costs for the attempt, while the court’s power to enter the judgment stays untouched.

An exam stem that reports a $120,000 complaint and a $40,000 verdict asks two questions that differ in timing. The first is whether the court had jurisdiction, and the answer is yes if more than $75,000 was legally possible when the case was filed. The second is what the court may do about costs, and the answer is that it has discretion to deny the plaintiff’s costs and to impose costs on the plaintiff.

A claim that the law itself holds below the threshold is handled at the other end of the case.

The two plaintiffs differ in one fact, which is whether the law fixed the shortfall before trial. The bicyclist’s shortfall came from a jury’s valuation of intangible harms, which no one could predict with certainty, so jurisdiction stood and only costs remained open. The warehouse owner’s shortfall was fixed by statute in advance, so the court could dismiss at the outset, as the legal certainty test allows.⁸⁸

Several phrases in § 1332(b) keep the sanction narrow. The recovery is computed “without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled,” so the question is how large the plaintiff’s own claim proved to be before anything is subtracted.⁸⁹ That mirrors the rule at the front end, where a defendant’s counterclaim cannot be added to the plaintiff’s claim to reach the threshold, so the plaintiff’s claim alone is measured in both directions.⁹⁰ Interest and costs also drop out of the computation, so a judgment of $74,000 that passes $75,000 only with prejudgment interest still counts as a recovery below the threshold.⁹¹ The text also reaches only a plaintiff who files the case originally in federal court, so a plaintiff whose case arrived by removal falls outside it.⁹²

Even when the statute applies, the word may leaves the decision to the district judge, and courts use the measure infrequently, typically only when the plaintiff has acted in clear bad faith.⁹³ The rarity fits the design. A plaintiff whose good-faith claim drew a lower verdict has done nothing the sanction was meant to punish, and a court that penalized every shortfall would be penalizing the ordinary difficulty of valuing damages that have no objective yardstick.⁹⁴ The opening clause of the statute also preserves other federal statutes, so an express provision elsewhere about costs controls.⁹⁵