In a recent interlocutory appeal of a matter involving an arbitration of a claim for $80 million, but in which only $10,000 was awarded, the Fifth Circuit held that the amount in controversy for purposes of establishing diversity jurisdiction over petitions to confirm or vacate arbitration awards, is the amount sought in the arbitration, and not the amount ultimately awarded. In choosing the “demand approach” over the “award approach,” the court analyzed both positions, and noted that treatment by other circuits has varied. The Fifth Circuit found that the demand approach is the better of the two because it takes into account the true scope of the dispute between the parties. The court also reasoned that the demand approach avoids the application of two conflicting jurisdictional tests for the same controversy (jurisdiction for petitions to compel arbitration are based on the amount of the demand). Further, the court explained, the award approach might promote frivolous motions to compel, where demands for less than the jurisdictional requirement may be filed in federal court and then stayed pending the result of the arbitration. Last, the court explained, the demand approach permits jurisdiction consistent with that which would be present if the case were litigated rather than arbitrated. Pershing, LLC v. Kiebach, Case No. 15-30396 (5th Cir. Apr. 6, 2016).
