## Facts

- Rudd‑Melikian, Inc. executed a promissory note dated March 21, 1967, payable to Irving Brainin in the principal amount of $10,000, due ten months after date with 8% interest per annum.
- Before the note matured and before any payment was made, Rudd‑Melikian, Inc. entered bankruptcy, prompting Brainin to accelerate the note.
- Brainin demanded payment from the note’s endorsers, K. Cyrus Melikian and Lloyd K. Rudd; payment was not made.
- Brainin sued the endorsers for $10,324.44, consisting of the $10,000 principal plus contractual interest at 8% through the filing of the complaint.

## Issues

1. Whether, for diversity jurisdiction under 28 U.S.C. § 1332(a), contractual interest specified in a promissory note and accruing before maturity may be included in the amount in controversy, or must be excluded as “interest and costs.”

## Decision

- The Third Circuit affirmed the district court’s denial of Melikian’s motion to vacate the default judgment for lack of subject-matter jurisdiction.
- The court held that the claimed amount in controversy exceeded $10,000 because the contractual interest sought (accruing as part of the loan agreement before maturity) was properly included.
- The court denied rehearing and adhered to the prior affirmance.

## Legal Principles

- Under 28 U.S.C. § 1332(a), “interest” excluded from the amount in controversy refers to interest sought as a penalty or damages for delay in payment after a debt is due.
- Contractual interest that is part of the original bargain—i.e., the agreed price for the use of money—and accruing before maturity is part of the substantive debt and may be included in the amount in controversy.
- When the pleaded claim includes principal plus pre-maturity contractual interest that together exceed the jurisdictional minimum, diversity jurisdiction is satisfied even if principal alone equals the threshold.

## Conclusion

The court sustained diversity jurisdiction and the default judgment because the plaintiff’s claim properly included pre-maturity contractual interest as part of the underlying obligation, pushing the amount in controversy above the statutory minimum exclusive of excluded delay-interest and costs.


Brainin v. Melikian, 396 F.2d 153 (3d Cir. 1968)