The Demand Approach: Fifth Circuit Clarifies That Arbitration Demand, Not Award, Determines Amount In Controversy

In a case of first impression for the U.S. Court of Appeals for the Fifth Circuit, the court held that in a proceeding to confirm an arbitral award under the Federal Arbitration Act (FAA), the amount of the demand in arbitration determined whether the $75,000 amount-in-controversy threshold was met for diversity of citizenship jurisdiction. If the demand in arbitration was for more than $75,000, the amount-in-controversy requirement was met – even though the actual amount awarded by the arbitrator(s) could have been less than $75,000.

Other circuits, and courts within the Fifth Circuit, have taken differing approaches. The three approaches used are the demand approach, the award approach, and the remand approach. The demand approach looks to the amount sought in the arbitration demand (essentially the complaint in arbitration). The award approach looks to the actual amount awarded by the arbitrator or arbitration panel. The remand approach has been applied where the