Court Opinion

ID: 2963779
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:15:06.808028+00
Date Added: 2024-06-11T15:01:37.270168
License: Public Domain

USCA1 Opinion

	

          December 7, 1995
                            United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________

        No. 95-1410

                         COVENTRY SEWAGE ASSOCIATES, ET AL.,

                               Plaintiffs, Appellants,

                                          v.

                             DWORKIN REALTY CO., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                       [Hon. Mary J. Lisi, U.S. District Judge]
                                           ___________________

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________
                           Stahl and Lynch, Circuit Judges.
                                            ______________

                                 ____________________

                                     ERRATA SHEET
                                     ERRATA SHEET

            Please make  the  following  changes  to  the  opinion  issued  on
        November 22, 1995:

            Cover   sheet    -   delete   "Incorporation"    and   insert
            "Incorporated" for name of appellants' law firm

            Page 2, line 18 - change "appellants" to "appellees" 

                            United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________

        No. 95-1410

                         COVENTRY SEWAGE ASSOCIATES, ET AL.,

                               Plaintiffs, Appellants,

                                          v.

                             DWORKIN REALTY CO., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                       [Hon. Mary J. Lisi, U.S. District Judge]
                                           ___________________

                                 ____________________

                                        Before

                                Torruella, Chief Judge,
                                           ___________
                           Stahl and Lynch, Circuit Judges.
                                            ______________

                                 ____________________

            David A.  Wollin with whom Adler,  Pollock & Sheehan  Incorporated
            ________________           _______________________________________
        was on brief for appellants.
            Steven M. Richard with whom Tillinghast,  Collins & Graham was  on
            _________________           ______________________________
        brief for appellees.

                                 ____________________

                                  November 22, 1995
                                 ____________________

                      STAHL,  Circuit Judge.  Appellants, Coventry Sewage
                      STAHL,  Circuit Judge.
                              _____________

            Associates  ("Coventry")  and   Woodland  Manor   Improvement

            Association ("Woodland")  brought a diversity  action against

            appellees, Dworkin Realty Co. ("Dworkin") and The Stop & Shop

            Supermarket  Company  ("Stop &  Shop").    The United  States

            District Court  for the District  of Rhode Island  found that

            the amount-in-controversy requirement of  28 U.S.C.   1332(a)

            was  not met and  dismissed the case,  pursuant to appellees'

            motion  under Fed. R. Civ.  P. 12(b)(1), for  lack of subject

            matter  jurisdiction.   For  the  reasons  stated below,  and

            because of the unusual facts of this case, we reverse.

                                          I.
                                          I.
                                          __

                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
                       ________________________________________

                      Coventry  and Woodland  own and  operate a  private

            sewer  line  and  sewage  pumping  station  servicing,  among

            others, a supermarket run by Stop & Shop, located on property

            owned  by Dworkin, a  wholly-owned subsidiary of  Stop & Shop

            (hereinafter  appellees will  be referred to  collectively as

            "Stop  &  Shop").1    In  June 1992,  Coventry  and  Woodland

            (hereinafter, collectively "Coventry") entered into  a "Sewer

            Connection Agreement" with  Stop & Shop, whereby  Stop & Shop

            agreed  to pay  a  service fee  for  sewer-main usage.    The

            service fee was based, in part, upon the number of cubic feet

            of water consumed on  the property.  To determine  the amount

                                
            ____________________

            1.  The existence of diversity of citizenship is undisputed.

                                         -2-
                                          2

            of water  consumed, the parties' contract  relied on invoices

            from the Kent County Water Authority ("KCWA").  The KCWA sent

            these  invoices to  Stop  & Shop,  and Stop  &  Shop in  turn

            forwarded them to Coventry.

                      Because of a dispute  over the reasonableness of an

            increase  in the service fee --  an increase Coventry claimed

            was permitted by  the contract -- Stop &  Shop refused to pay

            Coventry's bills which  accumulated beginning in early  1994.

            In October 1994, Coventry  filed this action seeking recovery

            of $74,953.00, the  amount it  claimed to be  due based  upon

            water-usage numbers obtained from  the KCWA invoices and what

            Coventry  claimed  was  the  correct new  service  fee  rate.

            Coventry  also sought  contractual  attorneys' fees.   It  is

            undisputed that,  at the time Coventry  commenced the action,

            it  alleged the amount in  controversy in the  belief that it

            exceeded the  jurisdictional minimum,  and not  as a ruse  to

            invoke federal jurisdiction.

                      Shortly after the  complaint was filed,  but before

            Stop & Shop filed  its answer, Stop & Shop contacted the KCWA

            about  the invoices  underlying Coventry's  fee calculations.

            The KCWA then sent an employee to the property who discovered

            that  there  had been  a misreading  of  Stop &  Shop's water

            meters,  essentially caused by the adding of an extra zero to

            the  number of  cubic  meters actually  consumed.   By letter

            dated November 18, 1994,  the KCWA notified Stop &  Shop that

                                         -3-
                                          3

            it was correcting the  billing error by changing  the amounts

            of the invoices.

                      Based upon the  KCWA's corrected invoices, Coventry

            reduced  the  sum  of  its  bills  to  Shop  &  Stop to  only

            $18,667.88,  an  amount  that   included  the  disputed   fee

            increase.   Subsequently,  Stop  & Shop  paid the  undisputed

            portion  of the  fee, $10,182.48,  initially withholding  the

            disputed balance of $8,485.40.   Stop & Shop ultimately  paid

            this remaining sum as well, reserving the right to recoup the

            amount   should  it   prevail   in  its   challenge  to   the

            reasonableness of the  service fee.  Stop &  Shop, presumably

            doubting  the  existence  of  diversity  jurisdiction,  asked

            Coventry to voluntarily dismiss  the federal action; Coventry

            refused,  however, apparently  because  of  its intention  to

            pursue in federal court  its claim for contractual attorneys'

            fees.2

                                
            ____________________

            2.  We note  that although  attorneys' fees usually  will not
            constitute a portion  of the amount in  controversy, there is
            an  exception  where,  as  here, the  fees  are  contractual.
            Department of Recreation v. World Boxing Ass'n, 942 F.2d  84,
            ________________________    __________________
            89  (1st Cir.  1991).   In this  case, Coventry  cannot avail
            itself of this exception as  a basis for federal jurisdiction
            because, not only are there no specifics in  the record as to
            the amount of such fees, Coventry informed this court at oral
            argument  that its  estimation  of attorneys'  fees was  only
            $10,000.

                                         -4-
                                          4

                      Stop & Shop moved to dismiss  the action under Fed.

            R.   Civ.   P.   12(b)(1)   for  lack   of   subject   matter

            jurisdiction.3    The  district  court  granted  the  motion,

            finding  that,   "to  a  legal  certainty,"   the  amount  in

            controversy did not exceed $50,000 as required by 28 U.S.C.  

            1332(a).    Notwithstanding  the  small  amount  actually  in

            controversy, Coventry  appeals the  dismissal of  the action.

            At  oral argument  before  this court,  counsel for  Coventry

            stated  that  the  reason  for the  insistence  upon  federal

            jurisdiction  was that the case would get to an earlier trial

            in federal  court (including the appeal  proceedings) than if

            the case were pursued in state court.

                                         II.
                                         II.
                                         ___

                                      DISCUSSION
                                      DISCUSSION
                                      __________

            A.  Standard of Review
            ______________________

                      We  review de novo  the district  court's dismissal
                                 __ ____

            for lack of subject matter jurisdiction under Fed. R. Civ. P.

            12(b)(1).  Murphy  v. United  States, 45 F.3d  520, 522  (1st
                       ______     ______________

            Cir.),  cert. denied, 115 S.  Ct. 2581 (1995).   Although the
                    _____ ______

            facts  pertinent  to  this  appeal  are  undisputed,  we  are

            nonetheless "mindful that the party invoking the jurisdiction

            of  a  federal  court  carries  the  burden  of  proving  its

                                
            ____________________

            3.  Although  the KCWA notified Stop  & Shop of  the error in
            November 1994, Stop & Shop raised only a general, boilerplate
            amount-in-controversy  defense in  its December  1994 answer,
            and  did not formally  move to dismiss  on the jurisdictional
            basis until February 1995.

                                         -5-
                                          5

            existence."  Taber Partners,  I v. Merit Builders,  Inc., 987
                         __________________    _____________________

            F.2d 57, 60 (1st Cir.), cert. denied, 114 S. Ct. 82 (1993).
                                    _____ ______

            B.  Analysis
            ____________

                      Coventry  argues  that at  the  time  it filed  the

            action,  it claimed,  in  good faith,  damages  in excess  of

            $50,000;  thus, the  subsequent  reduction of  the amount  in

            controversy   did   not   divest  the   district   court   of

            jurisdiction.  Coventry contends that  the KCWA's post-filing

            discovery of  the billing error  and changing of  the invoice

            amounts was a "subsequent  event" that neither undermined its

            good faith in filing,  nor disturbed the court's jurisdiction

            once it attached.  Shop & Stop argues that  the billing error

            was a mere  "subsequent revelation" that  proved, to a  legal

            certainty,  that the  amount in  controversy had  always been

            below the jurisdictional minimum  and thus the court properly

            dismissed the case for lack of subject matter jurisdiction.

                      This  case illustrates the  competing policies that

            operate   when  a   court   makes  an   amount-in-controversy

            determination.    On the  one  hand, a  federal  court should

            rigorously  enforce the  jurisdictional limits  that Congress

            chooses  to set in diversity  cases.  See  Pratt Central Park
                                                  ___  __________________

            Ltd.  v. Dames  & Moore,  Inc., 60  F.3d 350,  352 (7th  Cir.
            ____     _____________________

            1995).    On  the  other  hand,   preliminary  jurisdictional

            determinations  should  neither  unduly delay,  nor  unfairly

            deprive a party from, determination of the controversy on the

                                         -6-
                                          6

            merits.  See id. at 351-52 (noting the undesirable  cost of a
                     ___ ___

            prolonged   jurisdictional  inquiry   that  only   serves  to

            determine  which court  will  hear the  case);  14A Wright  &

            Miller, Federal Practice and Procedure   3701 at 12-13 (1985)
                    ______________________________

            (noting competing policies).  As  a policy matter, the "which

            court" determination ought to  be made with relative dispatch

            so  that  the  parties  may  proceed  to  resolution  of  the

            dispute'smerits.  See Pratt Central ParkLtd., 60 F.3d at 352.
                              ___ ______________________

                      For   the   purpose   of   establishing   diversity

            jurisdiction,  the amount  in  controversy is  determined  by

            looking to  the circumstances  at the time  the complaint  is

            filed.  Thesleff v. Harvard Trust Co., 154 F.2d  732, 732 n.1
                    ________    _________________

            (1st Cir.  1946) (noting  that "federal  jurisdiction depends

            upon  the facts at the time suit is commenced, and subsequent

            changes . . . in the amount in controversy [will  not] devest

            [sic] it"); 14A Charles A. Wright & Arthur R. Miller, Federal
                                                                  _______

            Practice and Procedure   3702 at 28-29 n.31 (1985); Watson v.
            ______________________                              ______

            Blankinship, 20  F.3d 383, 387  (10th Cir. 1994);  Klepper v.
            ___________                                        _______

            First American Bank, 916  F.2d 337, 340 (6th Cir.  1990); see
            ___________________                                       ___

            Newman-Green,  Inc. v.  Alfonzo-Larrain,  490  U.S. 826,  830
            ___________________     _______________

            (1989) (noting that for determining diversity of citizenship,

            "[t]he existence of  federal jurisdiction ordinarily  depends

            on the facts  as they  exist when the  complaint is  filed").

            Moreover, it  has long been the rule that a court decides the

            amount in controversy from the face of the complaint, "unless

                                         -7-
                                          7

            it appears or is in some way shown that the  amount stated in

            the complaint is not  claimed `in good faith.'"   Horton, 367
                                                              ______

            U.S. at 353  (quoting St. Paul Mercury Indem. Co.  v. Red Cab
                                  ___________________________     _______

            Co., 303 U.S. 283,  288 (1938)).  When a  plaintiff initiates
            ___

            an action  in federal  court, the  plaintiff knows  or should

            know whether the claim  surpasses the jurisdictional minimum.

            St. Paul, 303 U.S. at 290.
            ________

                      [The plaintiff's] good faith  in choosing
                      the  federal forum  is open  to challenge
                      not  only by  resort to  the face  of the
                      complaint, but by the facts  disclosed at
                      trial, and  if from either  source it  is
                      clear  that his  claim  never could  have
                      amounted to  the  sum necessary  to  give
                      jurisdiction,  there  is no  injustice in
                      dismissing the suit.

            Id.
            ___

                      Coventry and  Stop &  Shop both cite  passages from

            the  seminal case of St.  Paul, 303 U.S.  283 (1938), without
                                 _________

            discussing its facts.   We pause to do so here.  In St. Paul,
                                                                ________

            the plaintiff-employer initiated a state-court action against

            the  defendant-insurer for  payment of  workers' compensation

            benefits.  Id. at 284-85.  The plaintiff alleged an amount of
                       ___

            damages sufficient to permit the defendant to remove the case

            to federal  court.  Id. at  285.  Once in  federal court, the
                                ___

            plaintiff  filed two  amended  complaints.   Attached to  the

            second amended  complaint, which  alleged the same  amount of

            damages as  originally claimed, was an  exhibit detailing the

            damages;  the exhibit revealed that  the total sum of damages

                                         -8-
                                          8

            was   no   more  than   $1,380.89,   an   amount  below   the

            jurisdictional  minimum (then  $3,000).   Id.   The  court of
                                                      ___

            appeals, sua sponte, took notice  of the exhibit and directed
                     ___ ______

            a  remand   of  the  case,  reasoning  that   the  amount  in

            controversy was less than the jurisdictional minimum and that

            "[t]he court cannot  close its  eyes to the  obvious, nor  go

            ahead  with  the  trial  of  a  cause  of  which  it  has  no

            jurisdiction."  90 F.2d 229, 230 (7th Cir. 1936).

                      The  Supreme Court reversed,  noting that there was

            no evidence that, at  the time the action was  commenced, the

            plaintiff  could  have  ascertained  the actual  sum  of  the

            damages, and  that the later  exhibit setting forth  this sum

            did not  undermine plaintiff's initial good faith.   303 U.S.

            at 295-96 (also observing that  the sum claimed was comprised

            of "numerous" items  that, in  turn, were each  the total  of

            several other items).4   Accordingly, the Court reasoned that

                                
            ____________________

            4.  The Court also noted that the removal posture of the case
            additionally bolstered the finding  of good faith in claiming
            damages.   St.  Paul,  303  U.S.  at  290-91.    Because  the
                       _________
            plaintiff  initially filed  in state  court, it  was unlikely
            that the amount claimed  was meant to somehow  confer federal
            jurisdiction.  Id. 
                           ___
            The Court reasoned that a defendant's right to remove was not
            to  be "subject  to  the plaintiff's  caprice" by  subsequent
            events --  whether or not  such events are  under plaintiff's
            control.    Id.  at 293-94;  see  also  Pro  Medica, Inc.  v.
                        ___              ___  ____  _________________
            Theradyne  Corp.,  331  F.   Supp.  231,  232  (D.P.R.  1971)
            ________________
            (refusing  to  allow   plaintiff's  amended  complaint,  that
            reduced amount of damages claimed to less than jurisdictional
            minimum,  to divest  federal court  of jurisdiction).   Thus,
            events   occurring  subsequent   to   removal,   such  as   a
            stipulation, an  affidavit, or an amendment  that reduces the
            claim below the jurisdictional minimum, would not deprive the

                                         -9-
                                          9

            the case  fell comfortably  within the rule  that "subsequent

            reduction  of the  amount  claimed cannot  oust the  district

            court's jurisdiction."  Id. at 295.
                                    ___

                      In  a portion  of St. Paul  crucial to  the instant
                                        ________

            case,  and  from which  the  parties  before us  parse  their

            favorite phrases, the Court wrote:

                           The  intent of  Congress drastically
                      to   restrict  federal   jurisdiction  in
                      controversies    between   citizens    of
                      different   states    has   always   been
                      rigorously enforced  by the courts.   The
                      rule  governing  dismissal  for  want  of
                      jurisdiction  in  cases  brought  in  the
                      federal  court is  that,  unless the  law
                      gives  a different rule,  the sum claimed
                      by the plaintiff controls 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.  The inability of plaintiff to
                      recover  an amount  adequate to  give the
                      court jurisdiction does  not show his bad
                      faith or oust the jurisdiction.  Nor does
                      the fact that the complaint discloses the
                      existence  of  a  valid  defense  to  the
                      claim.   But  if,  from the  face of  the
                      pleadings,  it  is apparent,  to  a legal
                      certainty,  that   the  plaintiff  cannot
                      recover  the amount  claimed or  if, from
                      the proofs, the court  is satisfied to  a
                      like certainty that  the plaintiff  never

                                
            ____________________

            court  of jurisdiction once it  has attached.   St. Paul, 303
                                                            ________
            U.S. at 292-93.
                      Despite  the  added  weight  the   removal  posture
            contributed to  the good faith finding, the  Court noted that
            dismissal  of the  case  would not  have  been warranted  had
            plaintiff originally brought the case  in federal court.  Id.
                                                                      ___
            at 290.  Therefore, we find the reasoning of St. Paul no less
                                                         ________
            applicable  to the  instant case,  where Coventry  originally
            filed in federal court,  and where there is no  dispute as to
            its good faith in its claimed amount in controversy.

                                         -10-
                                          10

                      was  entitled to recover that amount, and
                      that  his  claim was  therefore colorable
                      for    the    purpose    of    conferring
                      jurisdiction, the suit will be dismissed.
                      Events   occurring   subsequent  to   the
                      institution  of  suit  which  reduce  the
                      amount  recoverable  below the  statutory
                      limit do not oust jurisdiction.

            Id. at 288-89 (footnotes and citations omitted).
            ___

                      The rules gleaned from the foregoing passage may be

            summarized as follows.  First, federal courts must diligently

            enforce  the  rules   establishing  and  limiting   diversity

            jurisdiction.  Second, unless the law provides otherwise, the

            plaintiff's  damages   claim  will  control  the   amount  in

            controversy  for jurisdictional  purposes if  it is  made "in

            good faith."   If  the face of  the complaint  reveals, to  a

            legal  certainty, that  the  controversy cannot  involve  the

            requisite amount, jurisdiction will not attach.   Id. at 289,
                                                              ___

            291.     Moreover,  if  later  evidence  shows,  to  a  legal

            certainty,  that the  damages never  could have  exceeded the

            jurisdictional minimum  such that  the claim  was essentially
                                    ____ ____

            feigned  (colorable)  in order  to  confer  jurisdiction, the

            action must be  dismissed.  See also id. at  290 (noting that
                                        ___ ____ ___

            plaintiff's good  faith in  choosing a  federal forum may  be

            challenged  by trial  facts which  establish that  the "claim

            never  could  have  amounted to  the  sum  necessary  to give

            jurisdiction").      Finally,   if   events   subsequent   to

            commencement of  the action reduce the  amount in controversy

                                         -11-
                                          11

            below  the  statutory  minimum,  the  federal  court  is  not

            divested of jurisdiction.

                      A careful  review of  St. Paul evinces  its primary
                                            ________

            concern  for the  plaintiff's  "good faith"  in alleging  the

            amount in  controversy.   When discerning a  plaintiff's good

            faith, a court may  look to whether it "appear[s] to  a legal

            certainty  that  the  claim  is  really  for  less  than  the

            jurisdictional  amount."  St. Paul, 303 U.S. at 289; see also
                                      ________                   ___ ____

            Horton, 367 U.S. at 353;  Jones v. Landry, 387 F.2d 102,  104
            ______                    _____    ______

            (5th Cir. 1967) ("Thus, there is but one test; good faith and

            legal  certainty  are equivalents  rather  than two  separate

            tests.").   But see Local  Div. No. 714,  Amalgamated Transit
                        ___ ___ _________________________________________

            Union v. Greater Portland  Transit Dist., 589 F.2d 1,  9 (1st
            _____    _______________________________

            Cir. 1978) (apparently finding alternative tests, noting that

            where there is no evidence that the amount claimed was not in

            good  faith, it must appear  "to a legal  certainty" that the

            amount  in controversy  does  not exceed  the  jurisdictional

            minimum),  overruled  on other  grounds  by  Local Div.  589,
                       ________________________________  ________________

            Amalgamated Transit Union v. Massachusetts, 666 F.2d 618 (1st
            _________________________    _____________

            Cir.), cert. denied, 457 U.S. 1117 (1981).
                   _____ ______

                      The parties in the instant case spill much ink over

            the meaning of "good faith": whether it includes an objective

            as  well   as  subjective  component,  and   if  so,  whether

            "objective" good faith includes "objective facts" as  opposed

            to  "actual facts,"  etc.    Stop  &  Shop  argues  that  the

                                         -12-
                                          12

            "objective facts" were always the same: that it consumed much

            less water than originally shown on KCWA's invoices, and that

            although the  claimed amount in controversy  was over $50,000

            at the time of filing, the "actual" amount in controversy is,

            indisputably, less than the jurisdictional minimum.  Coventry

            counters  that not  only  did it  file  with subjective  good

            faith,  but,  because  a  wholly  independent  third  party's

            actions were relied  upon (indeed,  it was Stop  & Shop  that

            forwarded KCWA's  invoices to  Coventry), there is  no reason

            that Coventry  "should have known" about  the "actual" amount

            in  controversy   and  thus,   it  claimed  the   damages  in

            "objective" good faith as well.

                      This  court  has found  that  "good  faith" in  the

            amount-in-controversy   context   includes   an  element   of

            "objective"  good faith.  In Jimenez  Puig v. Avis Rent-A-Car
                                         _____________    _______________

            Sys.,  574  F.2d  37, 40  (1st  Cir.  1978),  we found  that,
            ____

            although  the  plaintiff had  not  acted  "in deliberate  bad

            faith" in filing his damages claim for mental anguish, "[t]he

            question,  however, is  whether to  anyone familiar  with the

            applicable law this claim  could objectively have been viewed

            as  worth  [the  jurisdictional   minimum]."    Id.  (viewing
                                                            ___

            evidence in  light most  favorable to plaintiff,  and finding

            that, from the outset, plaintiff  had no chance of recovering

            statutory minimum);  cf. Pratt Central  Park Ltd. v.  Dames &
                                 ___ ________________________     _______

            Moore,  60   F.3d  350,   353  (7th  Cir.   1995)  (upholding
            _____

                                         -13-
                                          13

            contractual  liability  cap of  $5,000,  then  dismissing for

            failure to meet amount-in-controversy requirement).   We find

            that here, there is  no dispute as to good  faith, subjective

            or objective.5   It is undisputed  that Coventry alleged  the

            amount  in controversy  believing its  accuracy at  the time.

            Furthermore, there is no  evidence, and Stop & Shop  does not

            argue otherwise, that  Coventry had any reason to believe, at

            the time  of  filing, that  KCWA's invoices,  upon which  the

            service  fee was  calculated, were  factually incorrect.   We

            find that, objectively  viewed, at  the time  of its  filing,

            Coventry's claim  was  worth  more  than  the  jurisdictional

            minimum.

                      This  case  fits well  within  the  rule that  once

            jurisdiction  attaches,  it is  not  ousted  by a  subsequent

            change of events.   See St.  Paul, 303 U.S. at  295; Klepper,
                                ___ _________                    _______

            916  F.2d at 340 (holding that summary judgment on one claim,

            that reduced  amount in controversy  below statutory minimum,

            did not divest court  of jurisdiction); 14A Wright &  Miller,

            supra,   3702 at  35 (noting same).   In Thesleff v.  Harvard
            _____                                    ________     _______

            Trust  Co., 154 F.2d  732, 732 n.1 (1st  Cir. 1946), we noted
            __________

            that although  plaintiff filed  remittiturs that  reduced the

            amount in controversy  below the jurisdictional minimum,  the

            facts  at  the  time   the  action  was  commenced  conferred

                                
            ____________________

            5.  We  decline,  at this  time, to  make  any sort  of legal
            distinction between "objective facts" and "actual facts"  for
            purposes of determining amount in controversy.

                                         -14-
                                          14

            jurisdiction which  subsequent events could not  divest.  See
                                                                      ___

            also Ford, Bacon & Davis, Inc. v. Volentine, 64 F.2d 800, 801
            ____ _________________________    _________

            (5th Cir. 1933) (refusing  remand where an amended complaint,

            removing co-plaintiff  who had  died after action  was filed,

            "merely  discloses a  fact  which arose  after  the suit  and

            recognizes  its  legal  consequences, without  impugning  the

            original  propriety  of  the   jurisdiction").    As  in  the

            amount-in-controversy context, the rule that  jurisdiction is

            not divested  by subsequent events  has also been  applied to

            the  diversity-of-citizenship  requirement.    See  Smith  v.
                                                           ___  _____

            Sperling,  354 U.S. 91, 93 n.1 (1957); Mollen v. Torrance, 22
            ________                               ______    ________

            U.S. 537, 539 (1824).

                      In the  instant case, Coventry filed  the complaint

            because  Stop  & Shop  refused  to  pay its  bills  totalling

            $74,953.00.   The  amount  in  controversy, at  the  time  of

            filing, exceeded  the  statutory minimum  regardless  of  the

            then-unknown   "actual  facts"   of   Stop  &   Shop's  water

            consumption.  It was not until Coventry filed the action that

            Stop  &   Shop  inquired  about  KCWA's   invoices  and  KCWA

            subsequently changed them to reflect accurately the amount of

            water usage.   Presumably, had  the billing error  never been

            detected,  the  action  would  have proceeded  on  Coventry's

            damages claim  of $74,953.00.   The fact that  an independent

            third  party's   error  initially  inflated   the  amount  in

            controversy above the jurisdictional minimum does not lead to

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                                          15

            the  inevitable  result that  the  third  party's correction,

            subsequent  to  the  filing  of the  complaint,  affects  the

            propriety of the jurisdiction once it attached.

                      Stop &  Shop insists that, in this  case, we should

            draw   a   distinction   between   "subsequent   events"  and

            "subsequent  revelations."    Stop  & Shop  argues  that  the

            subsequent revelation that the actual amount of damages never

            met the jurisdictional minimum -- as opposed  to a subsequent

            event  that  reduces  that amount  --  divests  the  court of

            jurisdiction, regardless  of what the parties  knew or should

            have known  at the time of  filing.  At oral  argument before

            this court,  counsel for  Stop &  Shop acknowledged  that the

            logical extension of  this argument is  that the court  would

            have been without  jurisdiction over the case  even if KCWA's

            error had not been discovered until trial.

                      To support  this argument, Stop &  Shop cites three

            cases  that are  factually  distinguishable from  the instant

            one,  and that, in any  event, are not  controlling upon this

            court.   First, in American Mutual Liab. Ins. Co. v. Campbell
                               ______________________________    ________

            Lumber Mfg. Corp., 329  F. Supp. 1283, 1284 (N.D.  Ga. 1971),
            _________________

            the plaintiff  filed an action  for amounts due  on insurance

            contracts.  The plaintiff was forced to estimate its  damages

            claim  because  certain  of  defendant's  records   were  not

            available to it.  Id. at 1285.  During post-filing discovery,
                              ___

            the plaintiff  learned that the actual  amount in controversy

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                                          16

            was  below the statutory minimum.   Id.  The court found that
                                                ___

            the maximum  amount  recoverable on  the  plaintiff's  theory

            never  varied,   and  noted   that  the  correct   amount  in

            controversy  was ascertainable  at  the time  the action  was

            filed.   Id. at  1286.  Thus,  in dismissing the  action, the
                     ___

            court  reasoned that  the  plaintiff's  realization that  its

            earlier  estimation  of  damages  was erroneous  was  not  an

            "event," under St. Paul, that reduced the amount recoverable.
                           ________

            Id. at 1286.
            ___

                      Second, in Jones v.  Knox Exploration Corp., 2 F.3d
                                 _____     ______________________

            181,  182 (6th Cir.  1993), the plaintiffs  revealed in their

            appellate brief that "it was not discovered until this appeal

            that  the  amount  in   controversy  is  actually  less  than

            $50,000."  The court acknowledged that subsequent events that

            reduce the amount in controversy, such as an amendment to the

            complaint  or  an  application  of  a   post-discovery  legal

            defense,  would not oust  federal jurisdiction.   Id. at 183.
                                                              ___

            The  court  reasoned  that  "[a] distinction  must  be  made,

            however, between subsequent events  that change the amount in

            controversy  and subsequent  revelations that,  in fact,  the

            required  amount  was  or  was  not  in  controversy  at  the

            commencement of  the action."  Id.  at 183.  The  court found
                                           ___

            that there  was no subsequent  event that occurred  to reduce

            the amount;  instead, there was only  a subsequent revelation

            that,  in fact, the required amount was not in controversy at

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                                          17

            the time the action was filed.  Id.  Thus,  the court ordered
                                            ___

            dismissal based on lack of subject matter jurisdiction.  Id.
                                                                     ___

                      Third,  in   Tongkook  America,  Inc.   v.  Shipton
                                   ________________________       _______

            Sportswear  Co.,  14 F.3d  781,  782-83 (2d  Cir.  1994), the
            _______________

            parties realized  during pre-trial  discovery that, one  year

            prior  to filing  suit,  the plaintiff  had  drawn a  certain

            amount  upon a letter of credit that was erroneously added to

            the damages  claim.  The court  rejected plaintiff's argument

            that  the  discovery  of the  failure  to  credit  the amount

            withdrawn was an "event subsequent to  the institution of the

            suit."   Id.  at 784-85.   The  court deemed  the plaintiff's
                     ___

            previous withdrawal upon the letter of credit an "event which

            preceded  the commencement  of  the  suit [that]  objectively

            altered  the amount  of [plaintiff's]  claim."   Id. at  786.
                                                             ___

            Thus,  the sum  certain  in controversy  was  lower than  the

            jurisdictional  minimum  and  the  court  ordered   the  case

            dismissed for lack of subject matter jurisdiction.

                      In  the instant  case,  Coventry did  not base  its

            damages   claim  on   a  faulty   estimation   that  required

            recalculation  during  discovery,  as  in   American  Mutual;
                                                        ________________

            rather, it  alleged the  amount in  controversy based  upon a

            third-party's information that  neither party had any  reason

            to know was erroneous.  Unlike the "mere revelation" in Jones
                                                                    _____

            that there was never the requisite amount in controversy, the

            reduction  in the  amount in  controversy here  occurred only

                                         -18-
                                          18

            after KCWA's  affirmative acts  of checking the  water meters

            and changing the invoice amounts.  Finally, although portions

            of the Tongkook court's reasoning are not entirely consistent
                   ________

            with our decision here, we distinguish that case narrowly  on

            the facts; in Tongkook, the parties themselves made the error
                          ________

            affecting the  amount in  controversy approximately  one year

            prior to commencement of the suit.  14 F.3d at 782-83.  Thus,

            it  appears that the plaintiff in that case should have known

            that  its claim  did not  exceed the  jurisdictional minimum.

            See  St.  Paul, 303  U.S. at  290  (stating that  a plaintiff
            ___  _________

            should know whether the claim meets the amount in controversy

            requirement).   In  the  instant case,  an independent  third

            party  with otherwise  no  connection  to  the case  made  an

            apparently  non-obvious   error   so  that   the   amount-in-

            controversy  at the  time  of filing,  in fact,  exceeded the

            jurisdictional minimum.   Coventry had no reason to know that

            its  claimed amount of damages  was in error.   Moreover, the

            reduction  of the  amount in  controversy resulted  from acts

            occurring wholly after the  action commenced.  We  hold that,

            under these extraordinary circumstances, the district court's

            jurisdiction was not disturbed by the subsequent reduction of

            the amount in controversy.6

                                
            ____________________

            6.  We note here  a paradox.   Under 28  U.S.C.   1332(b),  a
            plaintiff  who  files  a  claim  in federal  court  based  on
            diversity jurisdiction  is subject to the  court's imposition
            of costs if the plaintiff "is finally adjudged to be entitled
            to recover less than the sum or value of $50,000."  28 U.S.C.

                                         -19-
                                          19

                                         III.
                                         III.
                                         ____

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                      For the  foregoing reasons, we  vacate the judgment

            of  the district  court, and  remand for  further proceedings

            consistent  with this opinion.  Each party shall bear its own

            costs.

                                
            ____________________

            1332(b).  Assuming that Coventry will persist in pursuing the
            case  in  federal  court, it  seems  odd  that  while it  has
            technically  met the  requirements of    1332(a), it  may not
            avoid  potential liability  under   1332(b)'s  cost sanction.
            Cf.  Horton, 367 U.S. at 362 (noting the "strange result that
            ___  ______
            while respondent has met the requirements of   1332(a), . . .
            under    1332(b) it will be  liable for costs  for failing to
            meet  the same  requirements)  (Clark, J.  dissenting).   The
            determination of whether or not to impose such cost sanctions
            is,  of course, within  the sound discretion  of the district
            court.

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