MAXWELL v. KAYLOR (2021)

United States Court of Appeals, Ninth Circuit.2021-06-25No. No. 19-16258

Summary · law.co

Holding. The district court's judgment dismissing for lack of subject matter jurisdiction was reversed and remanded because the court applied an incorrect standard when evaluating the amount in controversy required for diversity jurisdiction; on remand, the district court must reapply the correct legal certainty test and also consider the effect of the parties' subsequent release agreement.

Michael Terry Maxwell, representing himself, appealed the dismissal of his lawsuit involving a property dispute in California. The district court had thrown out the case because it found that Maxwell had not demonstrated the amount in controversy necessary to establish diversity jurisdiction in federal court. However, the appellate court determined that the district court had used the wrong test when evaluating whether the claimed amount met the jurisdictional threshold.

Under the correct legal standard—known as the "legal certainty" test—a federal court must accept the plaintiff's claimed amount in controversy unless it is obvious from the complaint itself that the case cannot possibly be worth the required sum. The appellate court concluded the district court had applied an incorrect approach and therefore reversed the dismissal. The case was sent back for the district court to reconsider the amount in controversy using the proper legal framework. Additionally, since the parties had entered into a settlement agreement in a separate state court proceeding after the appeal was filed, the district court was instructed to address whether this release agreement affects Maxwell's claims in the federal action.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Correct standard for evaluating amount in controversy in diversity jurisdiction cases
Application of the legal certainty test
Effect of a settlement agreement executed after federal case filing on pending claims

Procedural posture

The appellant appealed pro se from a district court judgment dismissing his state law property dispute claim for lack of subject matter jurisdiction based on insufficient amount in controversy.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

MEMORANDUM *

Michael Terry Maxwell appeals pro se from the district courts judgment dismissing for lack of subject matter jurisdiction his action alleging state law claims arising out of a dispute regarding an interest in real property in California. We have jurisdiction under 28 U.S.C. § 1291. We review de novo. Naffe v. Frey, 789 F.3d 1030, 1035 (9th Cir. 2015). We reverse and remand.

The district court dismissed Maxwells action because it determined that Maxwell failed to establish the amount in controversy required for diversity jurisdiction. However, the district court applied an incorrect standard to evaluate the amount in controversy. See 28 U.S.C. § 1332(a); Naffe, 789 F.3d at 1039-40 (setting forth elements of diversity jurisdiction and explaining that the “legal certainty” test requires a “district court [to] accept the amount in controversy claimed by the plaintiff unless it can declare to a legal certainty that the case is worth less”); Geographic Expeditions, Inc. v. Estate of Lhotka ex rel. Lhotka, 599 F.3d 1102, 1106 (9th Cir. 2010) (under the legal certainty test, “a federal court has subject matter jurisdiction unless upon the face of the complaint, it is obvious that the suit cannot involve the necessary amount” (citation and internal quotation marks omitted)). We reverse the judgment, and remand for the district court to reevaluate the amount in controversy under the correct legal standard.

After this appeal was filed, the parties entered into a release agreement in a separate state court case between the parties relating to the subject real property. See Docket Entry No. 53. Kaylor argues that this release agreement has settled all claims in this action. The district court did not have the benefit of this release agreement when dismissing the case. On remand, the district court should consider in the first instance the effect of the release agreement on Maxwells claims in this action.

We do not consider arguments and allegations raised for the first time on appeal. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009).

Kaylors motion to take judicial notice (Docket Entry No. 53) is granted. All other pending motions are denied as unnecessary.

REVERSED and REMANDED.