If you are filing an arbitration-related award in federal court based on diversity jurisdiction, proceed with caution. You need to know how the federal court you are considering calculates the amount in controversy for diversity purposes. This article discusses the different approaches courts have taken when faced with this issue.
The Federal Arbitration Act (FAA) is not an independent basis for federal jurisdiction.1 Therefore, an arbitration-related application under the FAA can only be brought in federal court if there is an independent ground for the court’s jurisdiction. Typically, when an application is filed in federal court to confirm or vacate an arbitration award, or to vacate and remand the matter back to the arbitrator, jurisdiction is based on diversity of citizenship pursuant to Section 1332(a) of Title 28 of the United States Code. To obtain federal court jurisdiction based on diversity of citizenship, the dispute must meet the amount- in-controversy requirement —currently set at $75,000. How a federal court calculates the amount in controversy will depend on the procedural posture of your case, what type of motion you are filing, and where in the country you are filing the motion. This article discusses the two approaches courts take to this issue.