A federal court must determine that it has subject matter jurisdiction and personal jurisdiction and that venue is proper before it can adjudicate a matter. If it lacks any one of the three, the court will not proceed, and it need not examine whether the other two requirements are met. In diversity actions, subject matter jurisdiction is appropriate where the amount in controversy exceeds $75,000 and the dispute is between citizens of different states. In Liberty Mutual v. KB Home, the Newport News Division of the Eastern District of Virginia found that a plaintiff need not show with legal certainty that the amount-in-controversy requirement is met, but must allege the citizenship of all individual members of a defendant limited liability company to establish the citizenship of the LLC.
Liberty Mutual Fire Insurance Company filed a complaint against KB Home, KB Home Raleigh-Durham, Inc. and Stock Building Supply, LLC–a subcontractor for KB Home Raleigh-Durham–seeking a declaratory judgment that it had discharged its duties as defendants’ insurer in a North Carolina state court action. The KB Home defendants moved to dismiss for lack of subject matter jurisdiction, personal jurisdiction and improper venue.
To determine whether the amount in controversy requirement for subject matter jurisdiction is met, courts rely on the sum claimed by the plaintiff in good faith. A defendant contesting the amount in controversy must show that it is legally impossible for the plaintiff to recover the amount sought. Liberty Mutual’s complaint alleged in a simple and conclusory fashion that the amount in controversy exceeded the sum or value of $75,000. The defendants pointed out that the complaint also alleged that the insurance policy between the parties was exhausted such that the sum at stake could not exceed $75,000. Liberty Mutual responded that legal defense costs totaling $82,314.74 were at issue as evidenced by a legal billing invoice.