A.F.A. Tours, Inc. v. Whitchurch

United States Court of Appeals for the Second Circuit · 1991 · Civil Procedure

937 F.2d 82 (2d Cir. 1991)

Updated July 29, 2026

Civil ProcedureDiversity JurisdictionAmount in ControversySummary JudgmentTrade Secrets28 U.S.C. § 1332legal certainty testSt. Paul Mercury

Facts

AFA operated deluxe overseas tours and alleged that it spent substantial sums and effort developing a confidential customer list and related marketing and tour information. Whitchurch had served as AFA's exclusive tour escort in the relevant regions from 1972 to 1989, then allegedly resigned, used AFA's confidential information, and attempted to solicit former AFA tour participants for his own competing tour business. AFA alleged its customer list was not publicly available and that it took steps to protect confidentiality, including restricted computer access and limited disclosures marked confidential. Whitchurch disputed confidentiality, asserted AFA had widely disseminated customer names, and noted that his first solicitation effort to 100-200 former participants produced only two reservations and a canceled tour.

Issue

Whether the district court properly dismissed the diversity action for lack of subject matter jurisdiction on the ground that AFA could not recover more than $50,000. Also, if the dismissal is treated as one on the merits, whether summary judgment against AFA on its trade secret claim was proper on this record.

Rule

In a diversity case, the sum claimed by the plaintiff controls if apparently made in good faith, and dismissal for want of jurisdiction is proper only if it appears to a legal certainty that the claim is really for less than the jurisdictional amount. Before such a determination is made, the plaintiff must be afforded an appropriate and reasonable opportunity to show good-faith grounds for believing recovery above the jurisdictional minimum is reasonably possible. In valuing the amount in controversy, the court may consider compensatory damages, punitive damages if available under controlling law, and the value of requested injunctive relief measured by the right to be protected and the impairment to be prevented, including potential future harm.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeshore Event Design, a Wisconsin company, sued its former sales director in federal court in Chicago under diversity jurisdiction, alleging misuse of a confidential client database. The complaint sought an injunction and alleged damages exceeding the jurisdictional minimum, but the evidence so far showed only $4,000 in lost bookings.

If the defendant moves to dismiss for lack of subject matter jurisdiction solely because the plaintiff has not yet proved large actual losses, how should the court rule?

Explanation. In a diversity case, the sum claimed by the plaintiff controls if apparently made in good faith. Dismissal is proper only when it appears to a legal certainty that the claim is really for less than the jurisdictional amount. The majority rejected dismissal merely because present proof of actual loss was limited or future loss was uncertain.