Coventry Sewage v. Dworkin Realty

Court Case Details
Court Case Opinion
USCA1 Opinion

December 7, 1995
United States Court of Appeals United States Court of Appeals
For the First Circuit For the First Circuit

No. 95-1410


Plaintiffs, Appellants,



Defendants, Appellees.



[Hon. Mary J. Lisi, U.S. District Judge] ___________________


Torruella, Chief Judge, ___________
Stahl and Lynch, Circuit Judges. ______________


Please make the following changes to the opinion issued on
November 22, 1995:

Cover sheet - delete "Incorporation" and insert
"Incorporated" for name of appellants' law firm

Page 2, line 18 - change "appellants" to "appellees"

United States Court of Appeals United States Court of Appeals
For the First Circuit For the First Circuit

No. 95-1410


Plaintiffs, Appellants,



Defendants, Appellees.



[Hon. Mary J. Lisi, U.S. District Judge] ___________________


Torruella, Chief Judge, ___________
Stahl and Lynch, Circuit Judges. ______________

David A. Wollin with whom Adler, Pollock & Sheehan Incorporated ________________ _______________________________________
was on brief for appellants.
Steven M. Richard with whom Tillinghast, Collins & Graham was on _________________ ______________________________
brief for appellees.

November 22, 1995

STAHL, Circuit Judge. Appellants, Coventry Sewage STAHL, Circuit Judge. _____________

Associates ("Coventry") and Woodland Manor Improvement

Association ("Woodland") brought a diversity action against

appellees, Dworkin Realty Co. ("Dworkin") and The Stop & Shop

Supermarket Company ("Stop & Shop"). The United States

District Court for the District of Rhode Island found that

the amount-in-controversy requirement of 28 U.S.C. 1332(a)

was not met and dismissed the case, pursuant to appellees'

motion under Fed. R. Civ. P. 12(b)(1), for lack of subject

matter jurisdiction. For the reasons stated below, and

because of the unusual facts of this case, we reverse.

I. I. __


Coventry and Woodland own and operate a private

sewer line and sewage pumping station servicing, among

others, a supermarket run by Stop & Shop, located on property

owned by Dworkin, a wholly-owned subsidiary of Stop & Shop

(hereinafter appellees will be referred to collectively as

"Stop & Shop").1 In June 1992, Coventry and Woodland

(hereinafter, collectively "Coventry") entered into a "Sewer

Connection Agreement" with Stop & Shop, whereby Stop & Shop

agreed to pay a service fee for sewer-main usage. The

service fee was based, in part, upon the number of cubic feet

of water consumed on the property. To determine the amount

1. The existence of diversity of citizenship is undisputed.

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of water consumed, the parties' contract relied on invoices

from the Kent County Water Authority ("KCWA"). The KCWA sent

these invoices to Stop & Shop, and Stop & Shop in turn

forwarded them to Coventry.

Because of a dispute over the reasonableness of an

increase in the service fee -- an increase Coventry claimed

was permitted by the contract -- Stop & Shop refused to pay

Coventry's bills which accumulated beginning in early 1994.

In October 1994, Coventry filed this action seeking recovery

of $74,953.00, the amount it claimed to be due based upon

water-usage numbers obtained from the KCWA invoices and what

Coventry claimed was the correct new service fee rate.

Coventry also sought contractual attorneys' fees. It is

undisputed that, at the time Coventry commenced the action,

it alleged the amount in controversy in the belief that it

exceeded the jurisdictional minimum, and not as a ruse to

invoke federal jurisdiction.

Shortly after the complaint was filed, but before

Stop & Shop filed its answer, Stop & Shop contacted the KCWA

about the invoices underlying Coventry's fee calculations.

The KCWA then sent an employee to the property who discovered

that there had been a misreading of Stop & Shop's water

meters, essentially caused by the adding of an extra zero to

the number of cubic meters actually consumed. By letter

dated November 18, 1994, the KCWA notified Stop & Shop that

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it was correcting the billing error by changing the amounts

of the invoices.

Based upon the KCWA's corrected invoices, Coventry

reduced the sum of its bills to Shop & Stop to only

$18,667.88, an amount that included the disputed fee

increase. Subsequently, Stop & Shop paid the undisputed

portion of the fee, $10,182.48, initially withholding the

disputed balance of $8,485.40. Stop & Shop ultimately paid

this remaining sum as well, reserving the right to recoup the

amount should it prevail in its challenge to the

reasonableness of the service fee. Stop & Shop, presumably

doubting the existence of diversity jurisdiction, asked

Coventry to voluntarily dismiss the federal action; Coventry

refused, however, apparently because of its intention to

pursue in federal court its claim for contractual attorneys'


2. We note that although attorneys' fees usually will not
constitute a portion of the amount in controversy, there is
an exception where, as here, the fees are contractual.
Department of Recreation v. World Boxing Ass'n, 942 F.2d 84, ________________________ __________________
89 (1st Cir. 1991). In this case, Coventry cannot avail
itself of this exception as a basis for federal jurisdiction
because, not only are there no specifics in the record as to
the amount of such fees, Coventry informed this court at oral
argument that its estimation of attorneys' fees was only

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Stop & Shop moved to dismiss the action under Fed.

R. Civ. P. 12(b)(1) for lack of subject matter

jurisdiction.3 The district court granted the motion,

finding that, "to a legal certainty," the amount in

controversy did not exceed $50,000 as required by 28 U.S.C.

1332(a). Notwithstanding the small amount actually in

controversy, Coventry appeals the dismissal of the action.

At oral argument before this court, counsel for Coventry

stated that the reason for the insistence upon federal

jurisdiction was that the case would get to an earlier trial

in federal court (including the appeal proceedings) than if

the case were pursued in state court.

II. II. ___


A. Standard of Review ______________________

We review de novo the district court's dismissal __ ____

for lack of subject matter jurisdiction under Fed. R. Civ. P.

12(b)(1). Murphy v. United States, 45 F.3d 520, 522 (1st ______ ______________

Cir.), cert. denied, 115 S. Ct. 2581 (1995). Although the _____ ______

facts pertinent to this appeal are undisputed, we are

nonetheless "mindful that the party invoking the jurisdiction

of a federal court carries the burden of proving its

3. Although the KCWA notified Stop & Shop of the error in
November 1994, Stop & Shop raised only a general, boilerplate
amount-in-controversy defense in its December 1994 answer,
and did not formally move to dismiss on the jurisdictional
basis until February 1995.

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existence." Taber Partners, I v. Merit Builders, Inc., 987 __________________ _____________________

F.2d 57, 60 (1st Cir.), cert. denied, 114 S. Ct. 82 (1993). _____ ______

B. Analysis ____________

Coventry argues that at the time it filed the

action, it claimed, in good faith, damages in excess of

$50,000; thus, the subsequent reduction of the amount in

controversy did not divest the district court of

jurisdiction. Coventry contends that the KCWA's post-filing

discovery of the billing error and changing of the invoice

amounts was a "subsequent event" that neither undermined its

good faith in filing, nor disturbed the court's jurisdiction

once it attached. Shop & Stop argues that the billing error

was a mere "subsequent revelation" that proved, to a legal

certainty, that the amount in controversy had always been

below the jurisdictional minimum and thus the court properly

dismissed the case for lack of subject matter jurisdiction.

This case illustrates the competing policies that

operate when a court makes an amount-in-controversy

determination. On the one hand, a federal court should

rigorously enforce the jurisdictional limits that Congress

chooses to set in diversity cases. See Pratt Central Park ___ __________________

Ltd. v. Dames & Moore, Inc., 60 F.3d 350, 352 (7th Cir. ____ _____________________

1995). On the other hand, preliminary jurisdictional

determinations should neither unduly delay, nor unfairly

deprive a party from, determination of the controversy on the

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merits. See id. at 351-52 (noting the undesirable cost of a ___ ___

prolonged jurisdictional inquiry that only serves to

determine which court will hear the case); 14A Wright &

Miller, Federal Practice and Procedure 3701 at 12-13 (1985) ______________________________

(noting competing policies). As a policy matter, the "which

court" determination ought to be made with relative dispatch

so that the parties may proceed to resolution of the

dispute'smerits. See Pratt Central ParkLtd., 60 F.3d at 352. ___ ______________________

For the purpose of establishing diversity

, the amount in controversy is determined by

looking to the circumstances at the time the complaint is

filed. Thesleff v. Harvard Trust Co., 154 F.2d 732, 732 n.1 ________ _________________

(1st Cir. 1946) (noting that "federal jurisdiction depends

upon the facts at the time suit is commenced, and subsequent

changes . . . in the amount in controversy [will not] devest

[sic] it"); 14A Charles A. Wright & Arthur R. Miller, Federal _______

Practice and Procedure 3702 at 28-29 n.31 (1985); Watson v. ______________________ ______

Blankinship, 20 F.3d 383, 387 (10th Cir. 1994); Klepper v. ___________ _______

First American Bank, 916 F.2d 337, 340 (6th Cir. 1990); see ___________________ ___

Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830 ___________________ _______________

(1989) (noting that for determining diversity of citizenship,

"[t]he existence of federal jurisdiction ordinarily depends

on the facts as they exist when the complaint is filed").

Moreover, it has long been the rule that a court decides the

amount in controversy from the face of the complaint, "unless

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it appears or is in some way shown that the amount stated in

the complaint is not claimed `in good faith.'" Horton, 367 ______

U.S. at 353 (quoting St. Paul Mercury Indem. Co. v. Red Cab ___________________________ _______

Co., 303 U.S. 283, 288 (1938)). When a plaintiff initiates ___

an action in federal court, the plaintiff knows or should

know whether the claim surpasses the jurisdictional minimum.

St. Paul, 303 U.S. at 290. ________

[The plaintiff's] good faith in choosing
the federal forum is open to challenge
not only by resort to the face of the
complaint, but by the facts disclosed at
trial, and if from either source it is
clear that his claim never could have
amounted to the sum necessary to give
jurisdiction, there is no injustice in
dismissing the suit.

Id. ___

Coventry and Stop & Shop both cite passages from

the seminal case of St. Paul, 303 U.S. 283 (1938), without _________

discussing its facts. We pause to do so here. In St. Paul, ________

the plaintiff-employer initiated a state-court action against

the defendant-insurer for payment of workers' compensation

benefits. Id. at 284-85. The plaintiff alleged an amount of ___

damages sufficient to permit the defendant to remove the case

to federal court. Id. at 285. Once in federal court, the ___

plaintiff filed two amended complaints. Attached to the

second amended complaint, which alleged the same amount of

damages as originally claimed, was an exhibit detailing the

damages; the exhibit revealed that the total sum of damages

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was no more than $1,380.89, an amount below the

jurisdictional minimum (then $3,000). Id. The court of ___

appeals, sua sponte, took notice of the exhibit and directed ___ ______

a remand of the case, reasoning that the amount in

controversy was less than the jurisdictional minimum and that

"[t]he court cannot close its eyes to the obvious, nor go

ahead with the trial of a cause of which it has no

jurisdiction." 90 F.2d 229, 230 (7th Cir. 1936).

The Supreme Court reversed, noting that there was

no evidence that, at the time the action was commenced, the

plaintiff could have ascertained the actual sum of the

damages, and that the later exhibit setting forth this sum

did not undermine plaintiff's initial good faith. 303 U.S.

at 295-96 (also observing that the sum claimed was comprised

of "numerous" items that, in turn, were each the total of

several other items).4 Accordingly, the Court reasoned that

4. The Court also noted that the removal posture of the case
additionally bolstered the finding of good faith in claiming
damages. St. Paul, 303 U.S. at 290-91. Because the _________
plaintiff initially filed in state court, it was unlikely
that the amount claimed was meant to somehow confer federal
jurisdiction. Id. ___
The Court reasoned that a defendant's right to remove was not
to be "subject to the plaintiff's caprice" by subsequent
events -- whether or not such events are under plaintiff's
control. Id. at 293-94; see also Pro Medica, Inc. v. ___ ___ ____ _________________
Theradyne Corp., 331 F. Supp. 231, 232 (D.P.R. 1971) ________________
(refusing to allow plaintiff's amended complaint, that
reduced amount of damages claimed to less than jurisdictional
minimum, to divest federal court of jurisdiction). Thus,
events occurring subsequent to removal, such as a
stipulation, an affidavit, or an amendment that reduces the
claim below the jurisdictional minimum, would not deprive the

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the case fell comfortably within the rule that "subsequent

reduction of the amount claimed cannot oust the district

court's jurisdiction." Id. at 295. ___

In a portion of St. Paul crucial to the instant ________

case, and from which the parties before us parse their

favorite phrases, the Court wrote:

The intent of Congress drastically
to restrict federal jurisdiction in
controversies between citizens of
different states has always been
rigorously enforced by the courts. The
rule governing dismissal for want of
in cases brought in the
federal court is that, unless the law
gives a different rule, the sum claimed
by the plaintiff controls if the claim is
apparently made in good faith. It must
appear to a legal certainty that the
claim is really for less than the
jurisdictional amount to justify
dismissal. The inability of plaintiff to
recover an amount adequate to give the
court jurisdiction does not show his bad
faith or oust the jurisdiction. Nor does
the fact that the complaint discloses the
existence of a valid defense to the
claim. But if, from the face of the
pleadings, it is apparent, to a legal
certainty, that the plaintiff cannot
recover the amount claimed or if, from
the proofs, the court is satisfied to a
like certainty that the plaintiff never

court of jurisdiction once it has attached. St. Paul, 303 ________
U.S. at 292-93.
Despite the added weight the removal posture
contributed to the good faith finding, the Court noted that
dismissal of the case would not have been warranted had
plaintiff originally brought the case in federal court. Id. ___
at 290. Therefore, we find the reasoning of St. Paul no less ________
applicable to the instant case, where Coventry originally
filed in federal court, and where there is no dispute as to
its good faith in its claimed amount in controversy.

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was entitled to recover that amount, and
that his claim was therefore colorable
for the purpose of conferring
jurisdiction, the suit will be dismissed.
Events occurring subsequent to the
institution of suit which reduce the
amount recoverable below the statutory
limit do not oust jurisdiction.

Id. at 288-89 (footnotes and citations omitted). ___

The rules gleaned from the foregoing passage may be

summarized as follows. First, federal courts must diligently

enforce the rules establishing and limiting diversity

. Second, unless the law provides otherwise, the

plaintiff's damages claim will control the amount in

controversy for jurisdictional purposes if it is made "in

good faith." If the face of the complaint reveals, to a

legal certainty, that the controversy cannot involve the

requisite amount, jurisdiction will not attach. Id. at 289, ___

291. Moreover, if later evidence shows, to a legal

certainty, that the damages never could have exceeded the

jurisdictional minimum such that the claim was essentially ____ ____

feigned (colorable) in order to confer jurisdiction, the

action must be dismissed. See also id. at 290 (noting that ___ ____ ___

plaintiff's good faith in choosing a federal forum may be

challenged by trial facts which establish that the "claim

never could have amounted to the sum necessary to give

jurisdiction"). Finally, if events subsequent to

commencement of the action reduce the amount in controversy

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below the statutory minimum, the federal court is not

divested of jurisdiction.

A careful review of St. Paul evinces its primary ________

concern for the plaintiff's "good faith" in alleging the

amount in controversy. When discerning a plaintiff's good

faith, a court may look to whether it "appear[s] to a legal

that the claim is really for less than the

jurisdictional amount." St. Paul, 303 U.S. at 289; see also ________ ___ ____

Horton, 367 U.S. at 353; Jones v. Landry, 387 F.2d 102, 104 ______ _____ ______

(5th Cir. 1967) ("Thus, there is but one test; good faith and

legal certainty are equivalents rather than two separate

tests."). But see Local Div. No. 714, Amalgamated Transit ___ ___ _________________________________________

Union v. Greater Portland Transit Dist., 589 F.2d 1, 9 (1st _____ _______________________________

Cir. 1978) (apparently finding alternative tests, noting that

where there is no evidence that the amount claimed was not in

good faith, it must appear "to a legal certainty" that the

amount in controversy does not exceed the jurisdictional

minimum), overruled on other grounds by Local Div. 589, ________________________________ ________________

Amalgamated Transit Union v. Massachusetts, 666 F.2d 618 (1st _________________________ _____________

Cir.), cert. denied, 457 U.S. 1117 (1981). _____ ______

The parties in the instant case spill much ink over

the meaning of "good faith": whether it includes an objective

as well as subjective component, and if so, whether

"objective" good faith includes "objective facts" as opposed

to "actual facts," etc. Stop & Shop argues that the

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"objective facts" were always the same: that it consumed much

less water than originally shown on KCWA's invoices, and that

although the claimed amount in controversy was over $50,000

at the time of filing, the "actual" amount in controversy is,

indisputably, less than the jurisdictional minimum. Coventry

counters that not only did it file with subjective good

faith, but, because a wholly independent third party's

actions were relied upon (indeed, it was Stop & Shop that

forwarded KCWA's invoices to Coventry), there is no reason

that Coventry "should have known" about the "actual" amount

in controversy and thus, it claimed the damages in

"objective" good faith as well.

This court has found that "good faith" in the

amount-in-controversy context includes an element of

"objective" good faith. In Jimenez Puig v. Avis Rent-A-Car _____________ _______________

Sys., 574 F.2d 37, 40 (1st Cir. 1978), we found that, ____

although the plaintiff had not acted "in deliberate bad

faith" in filing his damages claim for mental anguish, "[t]he

question, however, is whether to anyone familiar with the

applicable law this claim could objectively have been viewed

as worth [the jurisdictional minimum]." Id. (viewing ___

evidence in light most favorable to plaintiff, and finding

that, from the outset, plaintiff had no chance of recovering

statutory minimum); cf. Pratt Central Park Ltd. v. Dames & ___ ________________________ _______

Moore, 60 F.3d 350, 353 (7th Cir. 1995) (upholding _____

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contractual liability cap of $5,000, then dismissing for

failure to meet amount-in-controversy requirement). We find

that here, there is no dispute as to good faith, subjective

or objective.5 It is undisputed that Coventry alleged the

amount in controversy believing its accuracy at the time.

Furthermore, there is no evidence, and Stop & Shop does not

argue otherwise, that Coventry had any reason to believe, at

the time of filing, that KCWA's invoices, upon which the

service fee was calculated, were factually incorrect. We

find that, objectively viewed, at the time of its filing,

Coventry's claim was worth more than the jurisdictional


This case fits well within the rule that once

jurisdiction attaches, it is not ousted by a subsequent

change of events. See St. Paul, 303 U.S. at 295; Klepper, ___ _________ _______

916 F.2d at 340 (holding that summary judgment on one claim,

that reduced amount in controversy below statutory minimum,

did not divest court of jurisdiction); 14A Wright & Miller,

supra, 3702 at 35 (noting same). In Thesleff v. Harvard _____ ________ _______

Trust Co., 154 F.2d 732, 732 n.1 (1st Cir. 1946), we noted __________

that although plaintiff filed remittiturs that reduced the

amount in controversy below the jurisdictional minimum, the

facts at the time the action was commenced conferred

5. We decline, at this time, to make any sort of legal
distinction between "objective facts" and "actual facts" for
purposes of determining amount in controversy.

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jurisdiction which subsequent events could not divest. See ___

also Ford, Bacon & Davis, Inc. v. Volentine, 64 F.2d 800, 801 ____ _________________________ _________

(5th Cir. 1933) (refusing remand where an amended complaint,

removing co-plaintiff who had died after action was filed,

"merely discloses a fact which arose after the suit and

recognizes its legal consequences, without impugning the

original propriety of the jurisdiction"). As in the

amount-in-controversy context, the rule that jurisdiction is

not divested by subsequent events has also been applied to

the diversity-of-citizenship requirement. See Smith v. ___ _____

Sperling, 354 U.S. 91, 93 n.1 (1957); Mollen v. Torrance, 22 ________ ______ ________

U.S. 537, 539 (1824).

In the instant case, Coventry filed the complaint

because Stop & Shop refused to pay its bills totalling

$74,953.00. The amount in controversy, at the time of

filing, exceeded the statutory minimum regardless of the

then-unknown "actual facts" of Stop & Shop's water

consumption. It was not until Coventry filed the action that

Stop & Shop inquired about KCWA's invoices and KCWA

subsequently changed them to reflect accurately the amount of

water usage. Presumably, had the billing error never been

detected, the action would have proceeded on Coventry's

damages claim of $74,953.00. The fact that an independent

third party's error initially inflated the amount in

controversy above the jurisdictional minimum does not lead to

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the inevitable result that the third party's correction,

subsequent to the filing of the complaint, affects the

propriety of the jurisdiction once it attached.

Stop & Shop insists that, in this case, we should

draw a distinction between "subsequent events" and

"subsequent revelations." Stop & Shop argues that the

subsequent revelation that the actual amount of damages never

met the jurisdictional minimum -- as opposed to a subsequent

event that reduces that amount -- divests the court of

jurisdiction, regardless of what the parties knew or should

have known at the time of filing. At oral argument before

this court, counsel for Stop & Shop acknowledged that the

logical extension of this argument is that the court would

have been without jurisdiction over the case even if KCWA's

error had not been discovered until trial.

To support this argument, Stop & Shop cites three

cases that are factually distinguishable from the instant

one, and that, in any event, are not controlling upon this

court. First, in American Mutual Liab. Ins. Co. v. Campbell ______________________________ ________

Lumber Mfg. Corp., 329 F. Supp. 1283, 1284 (N.D. Ga. 1971), _________________

the plaintiff filed an action for amounts due on insurance

contracts. The plaintiff was forced to estimate its damages

claim because certain of defendant's records were not

available to it. Id. at 1285. During post-filing discovery, ___

the plaintiff learned that the actual amount in controversy

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was below the statutory minimum. Id. The court found that ___

the maximum amount recoverable on the plaintiff's theory

never varied, and noted that the correct amount in

controversy was ascertainable at the time the action was

filed. Id. at 1286. Thus, in dismissing the action, the ___

court reasoned that the plaintiff's realization that its

earlier estimation of damages was erroneous was not an

"event," under St. Paul, that reduced the amount recoverable. ________

Id. at 1286. ___

Second, in Jones v. Knox Exploration Corp., 2 F.3d _____ ______________________

181, 182 (6th Cir. 1993), the plaintiffs revealed in their

appellate brief that "it was not discovered until this appeal

that the amount in controversy is actually less than

$50,000." The court acknowledged that subsequent events that

reduce the amount in controversy, such as an amendment to the

complaint or an application of a post-discovery legal

defense, would not oust federal jurisdiction. Id. at 183. ___

The court reasoned that "[a] distinction must be made,

however, between subsequent events that change the amount in

controversy and subsequent revelations that, in fact, the

required amount was or was not in controversy at the

commencement of the action." Id. at 183. The court found ___

that there was no subsequent event that occurred to reduce

the amount; instead, there was only a subsequent revelation

that, in fact, the required amount was not in controversy at

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the time the action was filed. Id. Thus, the court ordered ___

dismissal based on lack of subject matter jurisdiction. Id. ___

Third, in Tongkook America, Inc. v. Shipton ________________________ _______

Sportswear Co., 14 F.3d 781, 782-83 (2d Cir. 1994), the _______________

parties realized during pre-trial discovery that, one year

prior to filing suit, the plaintiff had drawn a certain

amount upon a letter of credit that was erroneously added to

the damages claim. The court rejected plaintiff's argument

that the discovery of the failure to credit the amount

withdrawn was an "event subsequent to the institution of the

suit." Id. at 784-85. The court deemed the plaintiff's ___

previous withdrawal upon the letter of credit an "event which

preceded the commencement of the suit [that] objectively

altered the amount of [plaintiff's] claim." Id. at 786. ___

Thus, the sum certain in controversy was lower than the

jurisdictional minimum and the court ordered the case

for lack of subject matter jurisdiction.

In the instant case, Coventry did not base its

damages claim on a faulty estimation that required

recalculation during discovery, as in American Mutual; ________________

rather, it alleged the amount in controversy based upon a

third-party's information that neither party had any reason

to know
was erroneous. Unlike the "mere revelation" in Jones _____

that there was never the requisite amount in controversy, the

reduction in the amount in controversy here occurred only

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after KCWA's affirmative acts of checking the water meters

and changing the invoice amounts. Finally, although portions

of the Tongkook court's reasoning are not entirely consistent ________

with our decision here, we distinguish that case narrowly on

the facts; in Tongkook, the parties themselves made the error ________

affecting the amount in controversy approximately one year

prior to commencement of the suit. 14 F.3d at 782-83. Thus,

it appears that the plaintiff in that case should have known

that its claim did not exceed the jurisdictional minimum.

See St. Paul, 303 U.S. at 290 (stating that a plaintiff ___ _________

should know whether the claim meets the amount in controversy

requirement). In the instant case, an independent third

party with otherwise no connection to the case made an

apparently non-obvious error so that the amount-in-

controversy at the time of filing, in fact, exceeded the

jurisdictional minimum. Coventry had no reason to know that

its claimed amount of damages was in error. Moreover, the

reduction of the amount in controversy resulted from acts

occurring wholly after the action commenced. We hold that,

under these extraordinary circumstances, the district court's

jurisdiction was not disturbed by the subsequent reduction of

the amount in controversy.6

6. We note here a paradox. Under 28 U.S.C. 1332(b), a
plaintiff who files a claim in federal court based on
diversity jurisdiction is subject to the court's imposition
of costs if the plaintiff "is finally adjudged to be entitled
to recover less than the sum or value of $50,000." 28 U.S.C.

-19- 19

III. III. ____


For the foregoing reasons, we vacate the judgment

of the district court, and remand for further proceedings

consistent with this opinion. Each party shall bear its own


1332(b). Assuming that Coventry will persist in pursuing the
case in federal court, it seems odd that while it has
technically met the requirements of 1332(a), it may not
avoid potential liability under 1332(b)'s cost sanction.
Cf. Horton, 367 U.S. at 362 (noting the "strange result that ___ ______
while respondent has met the requirements of 1332(a), . . .
under 1332(b) it will be liable for costs for failing to
meet the same requirements) (Clark, J. dissenting). The
determination of whether or not to impose such cost sanctions
is, of course, within the sound discretion of the district

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