A.F.A. Tours, Inc. v. Whitchurch

937 F.2d 82 (2d Cir. 1991).

One-Sentence Takeaway: To extent that court thought former employer alleging trade secrets misappropriation could not meet $50,000 federal diversity jurisdiction threshold, court should not have dismissed without giving plaintiff opportunity to present substantiation that value of its claims exceeded $50,000.

Summary:

A.F.A. Tours (Plaintiff) filed a complaint in federal district court against Desmond Whitchurch (Defendant), a former tour guide, for misappropriation of trade secrets.

Whitchurch moved for summary judgment. The district court granted the motion on the grounds that there was no possible way that any fact finder would award damages to T.F.A. Tours and no possible basis for reaching the fifty thousand dollar amount in controversy requirement for diversity jurisdiction. A.F.A. Tours appealed to the Court of Appeals for the Second Circuit. It contended that the dismissal was improper because the trial court failed to provide it an opportunity to show that it satisfied the jurisdictional amount, and failed to apply the proper standard to A.F.A. Tours’s requests for damages and injunctive relief.

The issue on appeal was as follows:  What is required for dismissal for lack of subject matter jurisdiction for failure to satisfy the amount-in-controversy requirement for diversity?

The court of appeals held that, unless provided otherwise by law, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. In order to justify dismissal, it must appear to a legal certainty that the claim is for less than the jurisdictional amount.

The Supreme Court of the United States established this test in St. Paul Mercury Indemnity Co. v. Red Cab Co. Federal district courts have jurisdiction over diversity actions where the amount in controversy exceeds $50,000, exclusive of interest and costs. The court can impose costs on the claimant if the claim is later found to be less than $50,000.

In this case A.F.A. Tours was not afforded ample opportunity to prove that its claim could have exceeded $50,000.