## Facts

- Liberty, a national tax-preparation franchisor, entered into a franchise agreement with Frashier for a territory in West Virginia.
- The agreement contained post-termination obligations, including a non-compete covenant and duties to return customer lists and equipment.
- After a dispute in 2008 involving prior litigation and negotiations about Liberty purchasing rights for $80,000, Frashier closed his Liberty office and Liberty terminated the franchise.
- Liberty filed a diversity action in the Eastern District of Virginia seeking $80,000 in damages and a permanent injunction enforcing the post-termination provisions.
- Liberty did not amend its complaint, but later filed a summary-judgment motion seeking $60,456.25 in damages plus injunctive relief.
- The district court dismissed the case sua sponte for lack of subject-matter jurisdiction, concluding the amount in controversy did not exceed $75,000, and denied Liberty’s Rule 59(e) motion.
- Liberty appealed.

## Issues

1. Whether diversity jurisdiction is defeated when a complaint in good faith seeks more than $75,000, but later litigation filings suggest a lower recoverable amount.
2. Whether the value of requested injunctive relief enforcing post-termination covenants must be considered in determining the amount in controversy under 28 U.S.C. § 1332(a).

## Decision

- The Fourth Circuit reversed the dismissal and remanded.
- The court held the amount in controversy is determined at the time of filing, and subsequent events reducing the amount recoverable do not divest diversity jurisdiction when the initial claim exceeded $75,000 in good faith.
- The court found no basis to treat Liberty’s $80,000 damages demand as lacking good faith, given its connection to the parties’ contemporaneous $80,000 proposal.
- The court faulted the district court for revaluing jurisdiction based on Liberty’s later, lower damages computation and for failing to account for the value of the requested injunction.

## Legal Principles

- In diversity cases, the amount in controversy is generally measured as of the filing of the complaint (time-of-filing rule).
- A case may be dismissed for failure to meet the jurisdictional amount only when it appears to a legal certainty that the plaintiff cannot recover the amount claimed.
- A plaintiff’s post-filing reduction or refinement of its damages theory does not retroactively defeat diversity jurisdiction where the complaint alleged the threshold amount in good faith.
- The amount in controversy includes the value of requested injunctive relief, and courts must consider the combined value of monetary and equitable relief when assessing § 1332(a).

## Conclusion

The Fourth Circuit held that Liberty’s good-faith complaint alleging $80,000 in damages plus injunctive relief satisfied the diversity amount-in-controversy requirement at filing, so later reduced damages calculations could not eliminate jurisdiction; the dismissal was reversed and the case remanded.


JTH Tax, Inc. v. Frashier, 624 F.3d 635 (4th Cir. 2010)