Amount in Controversy of Underlying Dispute Not Arbitration Award Controls Jurisdiction
by Michael Fox
Since federal courts are courts of limited jurisdiction and the FAA itself does not confer jurisdiction, when an action to confirm or vacate an arbitration award is filed with diversity as the jurisdictional basis, there must be $75,000 in controversy. How is that amount in controversy measured - by the underlying controversy or the award? Theis Research, Inc. v. Brown & Bain (9th Cir. 10/20/04)[pdf] posed the question perfectly. A $200 million dollar malpractice claim resulted in a zero award. In a challenge to the award was there jurisdiction or not? Because you properly look to the underlying dispute there was jurisdiction according to the 9th Circuit. No help to the plaintiff in this case who had filed the suit seeking to vacate the award since it was affirmed.
Update: I thought this case seemed familiar. In doing some catch up reading on other blogs, I see that I was close, but not exactly correct. This case had not been decided but the 9th Circuit had another go at the same issue once before. That time it came out with the opposite conclusion, but later withdrew that opinion and decided the case on other grounds, opening the door for this "correct" reading. At least the latter is the view of Howard Bashman at How Appealing, where I found this post which provided all of the details about the prior case.