Court Opinion

ID: 9495012
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:52:38.424269+00
Date Added: 2024-06-11T17:56:46.115018
License: Public Domain

NIEMEJER, Circuit Judge,
dissenting:
On James Dunlap’s motion to dismiss this action for lack of subject matter jurisdiction under 28 U.S.C. § 1332 (conferring diversity jurisdiction), the district court found and concluded that “it lack[ed] subject matter jurisdiction because the amount in controversy regarding Dunlap’s individual claim has not been shown to exceed the jurisdictional threshold [of $75,000].” Accordingly, it dismissed the complaint and closed the file. Although Dunlap suggested alternatively that the district court should abstain under the doctrine of Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the district court never reached that issue because of its ruling on the jurisdictional issue.
The only issue raised on appeal is whether the jurisdictional amount required by 28 U.S.C. § 1332 has been satisfied under the principles of St. Paul Mercury Indemnity Company v. Red Cab Company, 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938) (“[T]he sum claimed by the plaintiff controls [for satisfying the jurisdictional amount] if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal” (footnotes omitted)). Without addressing the only issue presented to us, stating that “we need not reach the amount in controversy issue,” the majority raises and decides the application of the Rooker-Feldman doctrine, based on the decisions in D.C. Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), and Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923).
Because I believe that the district court had subject matter jurisdiction under 28 U.S.C. § 1332, I would reverse and remand to permit the district court to decide, in the first instance, any other issues that the parties may raise, such as whether, under Colorado River, the district court should abstain. This is particularly prudent in this case because of the lack of record evidence about the status of state court proceedings and doubt about the applicability of the Rooker-Feldman doctrine.
Friedman’s, Inc. and the insurance companies commenced this action under § 4 of the Federal Arbitration Act, 9 U.S.C. § 4, to compel arbitration of Dunlap’s claims. This action is essentially a parallel “backup” suit to the state action where arbitration has already been compelled. Jurisdiction of this action is not conferred by the Federal Arbitration Act itself. Rather, the Act focuses the jurisdictional inquiry on whether the district court would have had jurisdiction if no arbitration clause had been applicable. The first sentence of § 4 specifically so provides:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.
*1999 U.S.C. § 4 (emphasis added). Thus, rather than focusing attention on the scope and nature of the arbitration commanded by agreement, § 4 directs that jurisdiction be determined by the nature and scope of the controversy underlying the arbitration agreement. While an arbitration agreement may limit the scope of the arbitration by limiting the amount of any award to an amount that is less than the jurisdictional amount, it is the nature and scope of the controversy underlying the arbitration, not the potential arbitration award, that is considered for determining jurisdictional amount. See Doctor’s Assocs., Inc. v. Hamilton, 150 F.3d 157, 160-61 (2d Cir.1998). The facts in Hamilton are remarkably similar to those before us, and I see no reason to reach a contrary result. The plaintiff in Hamilton alleged that a franchise agreement had been entered into pursuant to fraud, demanding $1 million from the franchisor, a sum well in excess of the $75,000 jurisdictional minimum. The franchise agreement, however, had an arbitration clause limiting damages in arbitration to $50,000. In concluding that the underlying controversy, not the scope of the agreed-to arbitration, determined the jurisdictional amount, the Second Circuit instructed that district courts must “look through” the arbitration award to the underlying cause of action to determine whether the amount in controversy exceeds $75,000. Id. at 160.
In the case before us, the controversy centered around (1) Dunlap’s purchase of a ring from Friedman’s, Inc., (2) the financing of the purchase, and (3) the inclusion of credit life and property insurance. Alleging that the purchase of insurance was concealed from him, Dunlap asserted a host of statutory violations, claiming penalties and other damages, including punitive damages. While the strict, contractual amounts involved were less than $75,000, Dunlap’s request for punitive damages led to his claim for over $1 million.
There is no evidence in the record that Dunlap’s claim in the underlying controversy was not made in good faith, and there is no suggestion by either the parties or the district court that it was “a legal certainty that [Dunlap’s] claim [was] really for less than the jurisdictional amount.” St. Paul Mercury, 303 U.S. at 289, 58 S.Ct. 586. Indeed, unless Friedman’s, Inc. and the insurance companies are successful in compelling arbitration, there would be no legal limitation on the amount of Dunlap’s claim. Rather than focusing on the underlying controversy, however, the district court focused on what could have been recovered from the arbitration, noting that the arbitration did not provide for punitive damages. Accordingly, the district court erroneously dismissed this case for lack of subject matter jurisdiction, overlooking the express command of 9 U.S.C. § 4 that jurisdiction be determined from the underlying controversy “save for such [arbitration] agreement.”
Not only has the majority failed to address subject matter jurisdiction — a necessary, first requirement, see Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (“On every writ of error or appeal, the first and fundamental question is that of jurisdiction, first, of this court, and then of the court from which the record comes” (quoting Ex Parte McCardle, 7 Wall. 506, 514, 19 L.Ed. 264 (1869)))—it has also introduced an issue not decided below and not briefed by the parties on appeal, a particularly risky proposition when it is doubtful that the Rooker-Feldman doctrine even applies in this case. First, Dunlap, who would be the party to assert the doctrine, won dismissal of his case on subject-matter jurisdictional grounds. He, therefore, would not be asserting what the *200majority has asserted for him. Moreover, he could not be seeking to apply the Rooker-Feldman doctrine because it was the plaintiffs (Friedman’s, Inc. and the insurance companies) who filed this action as a parallel backup to the state court’s decision, not Dunlap. This action cannot fit the premise that it was commenced to review a state court judgment.
Second, we have no record of the status of state court proceedings or the arbitration ordered in those proceedings.
Finally, because the Rooker-Feldman doctrine addresses the route to be taken for appeals of state court judgments, denying any route that takes appeals to lower federal courts, the doctrine addresses, with rare exception, efforts to review final state judgments. See Feldman, 460 U.S. at 482, 103 S.Ct. 1303 (articulating the principle: “a United States District Court has no authority to review final judgments of a state court in judicial proceedings. Review of such judgments may be had only in this Court” (emphasis added)). This action does not seek to review any state judgment; it seeks to obtain in federal court the same relief already obtained in state court. The fundamental purpose of the Rooker-Feldman doctrine — to prohibit appeals to federal court to review a state court judgment — cannot be fulfilled in an action, not seeking to review a state court judgment, but to reinforce it with a parallel federal judgment.
Recognizing the circumstances that undermine application of the Rooker-Feld-man doctrine — i.e., the plaintiff does not seek to review a state court judgment but rather to seek the same relief — the majority moves for cover, without explanation, to the doctrine of mootness. The majority opinion makes the transition as follows:
Friedman’s federal action seeks precisely the same relief that it sought — and received — in its motion to compel arbitration in the state court.
* * * * * *
Friedman’s has not identified any relief that an arbitration order from federal district court would afford him that the state court’s arbitration order does not. Indeed, there is no effective relief available in federal court that Friedman’s has not already received in state court.
The majority then concludes that this case is moot.
But the majority’s application of the doctrine of mootness is even more profoundly flawed than its application of the Rooker-Feldman doctrine. Mootness can apply only “when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969). The issue of whether the parties are required to arbitrate in this case is still “live” because the issue is still pending before the West Virginia Supreme Court of Appeals. Moreover, neither party has raised mootness as a defense and the record does not contain any evidence that supports mootness. As such, I respectfully submit that we cannot rely on that doctrine to dismiss the appeal.
But even if the West Virginia Supreme Court were to affirm the order to arbitrate this case, then the appropriate principle to apply would be either res judicata or full faith and credit, as provided for under 28 U.S.C. § 1738. As the record is now constituted, however, we can only conclude that a live controversy continues to exist between the parties.
Thus, the majority’s inappropriate application of two distinct doctrines does not somehow eliminate the deficiency in applying either doctrine. Neither the Rooker-Feldman doctrine nor the doctrine of *201mootness applies in this case, and there is no precedent to support application of either to the circumstances of this case.
Judicial restraint and wisdom urge that we address the issue raised on appeal and remand this case to the district court to consider and decide any other matter that the parties may raise. Any other course unnecessarily threatens our judicial system’s concept of dual sovereignty.
Because I would reverse the district court’s judgment on jurisdictional grounds and remand, I respectfully dissent.