JTH Tax, Inc. v. Frashier
2010 U.S. App. LEXIS 23292
| 4th Cir. | 2010Background
- Liberty (JTH Tax) filed suit in 2009 in the Eastern District of Virginia against Frashier seeking $80,000 and a permanent injunction enforcing post-termination covenants.
- Frashier operated a Liberty franchise in West Virginia and later closed his franchise after Liberty filed and then dismissed a prior suit for breach.
- Liberty claimed Frashier breached post-termination duties by using his former office for a competing tax business and failing to return materials.
- Frashier contended he merely leased office equipment and furniture to another venture and now offers free tax preparation to the indigent.
- Liberty did not amend its complaint; in summary judgment briefing Liberty reduced its claimed damages to $60,456.25.
- The district court sua sponte dismissed for lack of $75,000 amount in controversy for diversity; Liberty appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the complaint allege a sufficient amount in controversy? | Liberty alleges $80,000 in damages in the complaint. | Frashier argues the aggregate amount falls short of $75,000 when considering the complaint plus later reductions. | Yes; complaint adequate to allege jurisdiction. |
| May subsequent reductions in damages defeat jurisdiction when the complaint alleged a sufficient amount? | Subsequent reductions in a motion for summary judgment do not oust jurisdiction. | Reductions show the plaintiff cannot recover the amount claimed. | No; jurisdiction turns on the good-faith amount in the complaint. |
| Can injunctive relief be counted toward the amount in controversy for diversity purposes? | Injunctive relief has value and can aggregate with damages to exceed $75,000. | Injunctive relief is not automatically enough to meet the threshold without considering its value. | Yes; injunctive relief can be counted by its value to plaintiff or cost to defendant. |
| How is the value of an injunction determined for jurisdictional purposes? | Liberty offers multiple plausible methods showing injunctive value well above the threshold. | No specific method shows value conclusively. | Value can exceed the threshold; calculation of injunction value is flexible provided plausible. |
Key Cases Cited
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (sum claimed controls; legal impossibility standard for dismissal)
- Wiggins v. N. Am. Equitable Life Assurance Co., 644 F.2d 1014 (4th Cir.1981) (heavy burden to show legal impossibility; good-faith amount matters)
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (reiterates controlling principle for amount in controversy)
- Griffin v. Red Run Lodge, Inc., 610 F.2d 1198 (4th Cir.1979) (jurisdiction not ousted by post-complaint matters where jurisdiction exists)
- Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333 (1977) (injunctive relief value informs amount in controversy)
- Dixon v. Edwards, 290 F.3d 699 (4th Cir.2002) (value of injunction assessed by larger of plaintiff's benefit or defendant's cost)
- Glenwood Light & Water Co. v. Mut. Light, Heat & Power Co., 239 U.S. 121 (1915) (jurisdictional amount for injunction depends on prospective relief value)
- Shanaghan v. Cahill, 58 F.3d 106 (4th Cir.1995) (plaintiffs may aggregate smaller claims to reach threshold)
- United States v. North Carolina, 180 F.3d 574 (4th Cir.1999) (merits considerations may coexist when jurisdictional facts are challenged)
- McDonald v. Patton, 240 F.2d 424 (4th Cir.1957) (addressing good-faith and mathematical accuracy in damages)