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When a party seeks to reopen stayed court proceedings to confirm an award, the amount in controversy requirement for federal diversity jurisdiction is determined not by the amount of the award, but by the amount alleged in the complaint, according to the Fourth Circuit Court of Appeals.
In Choice Hotels Intern., Inc. v. Shiv Hospitality, L.L.C., Nos. 05-2201, 06-1043, 2007 WL 1763536 (4th Cir. June 20, 2007), Shiv challenged the federal district court's award confirmation in favor of Choice Hotels. Shiv argued that the district court lacked diversity jurisdiction because the award amount fell below $75,000, and, in the alternative, the award should be vacated because the arbitrator exceeded his authority in disregarding prior precedents.
The Court rejected Shiv's argument that jurisdiction was lacking. While the Court acknowledged that courts have differed on their methods of determining amounts in controversy for jurisdiction over award confirmations, it distinguished awards made after a court stayed proceedings and compelled arbitration from awards made without prior court proceedings and brought to the court merely for confirmation.
The Court was required to look to the complaint, when one has been filed, to "decide what the amount in controversy is from the complaint itself" and held, [b]ecause the district court simply stayed [Choice's] action, and then reopened it to confirm the award, we must determine the amount in controversy from the complaint itself."
Shiv also alleged that the arbitrator exceeded his authority in applying the relevant law, but the Court rejected the challenge on FAA procedural grounds. "Notice of motion to vacate, modify, or correct an award," noted the Court, "must be served upon the adverse party or his attorney within three months after the award is filed or delivered." Since "Shiv missed the deadline by approximately six months," the Court found the challenge to be time-barred.
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