982 F.3d 996
6th Cir.2020Background:
- Plaintiff Richard “Rip” Hale, a long-time Morgan Stanley financial advisor, was disciplined several times between 2013–2016 and pursued claims (negligence, defamation, breach of fiduciary duty, IIED) in arbitration.
- After a four-day arbitration hearing, the arbitrator denied Hale’s claims and awarded $0.
- Hale filed a FAA § 10 motion in federal district court to vacate the arbitration award and asked the district court to award the relief he sought in arbitration (he had sought $14.75 million in arbitration).
- Morgan Stanley moved to dismiss for lack of subject-matter jurisdiction, arguing the amount in controversy was $0 because the award was $0.
- The district court dismissed, finding no diversity jurisdiction; Hale appealed.
- The Sixth Circuit reversed, holding the amount in controversy is measured by the relief alleged in the complaint (including the arbitration relief Hale sought), so diversity jurisdiction was satisfied.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether diversity jurisdiction exists for a FAA § 10 vacatur action challenging a $0 arbitration award | Hale: the complaint requests the relief sought in arbitration (about $14.75M), so the amount in controversy exceeds $75,000 | Morgan Stanley: the arbitrator awarded $0, so the amount in controversy is $0 and diversity is lacking | The court held courts should look to the amount alleged in the complaint (including requested arbitration relief); the amount in controversy was met and diversity jurisdiction existed |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (federal courts are courts of limited jurisdiction; party asserting jurisdiction bears burden)
- Horton v. Liberty Mut. Ins. Co., 367 U.S. 348 (1961) (amount in controversy ordinarily determined from the complaint)
- Ford v. Hamilton Inv., Inc., 29 F.3d 255 (6th Cir. 1994) (amount in controversy measured by complaint; vacatur of a small arbitration award cannot create diversity unless complaint alleges sufficient amount)
- Mitchell v. Ainbinder, [citation="214 F. App'x 565"] (6th Cir. 2007) (reaffirming that courts consider the amount alleged in the complaint and underlying arbitration demand when plaintiff seeks to reopen or vacate arbitration)
- Theis Research, Inc. v. Brown & Bain, 400 F.3d 659 (9th Cir. 2005) (discussing Ford and confirming amount-in-controversy analysis focuses on complaint's allegations)