A.F.A. Tours, Inc. v. Whitchurch, 937 F.2d 82 (2d Cir. 1991).

Facts

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

Procedural History

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 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.

Issue

What is required for dismissal for lack of subject matter jurisdiction for failure to satisfy the amount-in-controversy requirement for diversity?

Holding and Rule

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.

Disposition

Vacated and remanded.

See Erie Railroad Co. v. Tompkins for a law school civil procedure case brief involving a diversity action for personal injuries. The case overruled
Swift v. Tyson and laid the foundation for the Erie Doctrine which holds that federal courts in diversity actions must apply both state decisional and
statutory law.
Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149 (1908).

Facts

Mottley and his wife (P) were injured while riding a train on the Louisville & Nashville Railroad (D) in 1871. A settlement was reached in a personal
injury lawsuit whereby Mottley would release claims for damages against the railroad in exchange for a contract that granted them free transportation
for life. The railroad refused to renew the Mottleys’ pass in 1907 because an act of Congress forbade the giving of free passes or free transportation.

Mottley filed an action in federal court in the Western District of Kentucky. Diversity jurisdiction was unavailable because Mottley was domiciled in
Kentucky and the railroad was incorporated in Kentucky. Mottley contended that Louisville & Nashville Railroad would raise a constitutional
defense in its answer thereby creating federal subject matter jurisdiction.

The court tried the case on the merits and entered judgment for Mottley. The railroad appealed directly to the Supreme Court which sua sponte raised
the issue of whether the federal courts had jurisdiction to hear the case.

Issues

1. Does the mere allegation of an anticipated defense that arises under federal law create a federal question giving a federal court jurisdiction?
2. May a suit be dismissed at the appellate level for lack of subject matter jurisdiction?

Holding and Rule (Moody)

1. No. The mere allegation of an anticipated defense that arises by some provision of the Constitution does not create a federal question giving a federal
court jurisdiction.
2. Yes. A suit may be dismissed at the appellate level for lack of subject matter jurisdiction.

Anticipating that a defendant will raise a defense that includes a federal question is not sufficient to claim subject matter jurisdiction. There was no
diversity of citizenship and the only way to maintain this suit would be if it arose under the Constitution or laws of the United States. The court held
that the mere allegation that a defendant will raise a federal question in his answer is not sufficient to create jurisdiction. Mottley’s complaint was
based on a contract claim and did not raise a federal question.

Disposition

Judgment reversed.

Notes

A suit already tried may be dismissed for lack of subject matter jurisdiction. In this case neither party raised the jurisdictional issue. The court raised
the issue sua sponte and found that the federal question jurisdiction alleged by the plaintiff did not exist.
Subject matter jurisdiction does not exist where there is merely the anticipation of the raising of a federal question in a reply. It is not sufficient that
the complaint mentions some anticipated defense and asserts that the validity of the defense is governed by federal law.

See Martin v. Hunter’s Lessee for a constitutional law case brief in which the Supreme Court held that had appellate jurisdiction over cases involving
a federal question on appeal from state courts.