JTH Tax, Inc. v. Frashier
United States Court of Appeals for the Fourth Circuit
624 F.3d 635 (4th Cir. 2010)
JTH Tax, doing business as Liberty (plaintiff), franchises tax-preparation offices nationwide. Harry Frashier (defendant) signed a franchise agreement with Liberty in 2006. After Frashier allegedly violated the agreement's post-termination provisions, Liberty sued him in federal court under diversity jurisdiction, seeking $80,000 in damages plus an injunction. While the case was pending, Liberty filed a summary-judgment motion that lowered its damages claim to $60,456.25. Relying on that lower figure, the district court dismissed the case for falling short of the $75,000 amount-in-controversy minimum. Liberty appealed.
Whether a federal court loses diversity jurisdiction when a plaintiff who alleged in good faith an amount in controversy over $75,000 later reduces that amount.