On April 6, 2016, in Pershing, L.L.C. v. Kiebach, the US Court of Appeals for the Fifth Circuit joined the First and Ninth Circuits in adopting the "demand" approach for the amount in controversy when establishing diversity jurisdiction over a motion to confirm an arbitration award. In determining the amount in controversy, the courts in this circuit will look to the amount demanded in the underlying arbitration rather than the amount the arbitration panel ultimately awarded. ( (April 6, 2016).)

Appellants are investors who suffered financial loss as a result of R. Allen Stanford's infamous Ponzi scheme. They pursued arbitration at the Financial Industry Regulatory Authority (FINRA), seeking damages of $80 million against Pershing, L.L.C. (Pershing), a financial services company that acted as a broker for Stanford's investing company. A FINRA panel rejected Appellants' claims but awarded them $10,000 in expenses.

On November 7, 2014, Pershing moved to confirm the arbitration award pursuant to the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1-16). Appellants sought to dismiss the motion for lack of jurisdiction under FRCP 12(b)(1), claiming that the $10,000 arbitration award was below the $75,000 amount in controversy threshold required for federal diversity jurisdiction. The district court denied Appellants' motion, but certified the issue for appeal because of disagreement among federal courts as to the proper standard for determining the amount in controversy in the context of confirming an arbitration award. Appellants appealed the denial of the motion to dismiss.

The Fifth Circuit agreed with the district court and adopted the demand approach for determining the amount in controversy in this context. Applying this approach, Appellants' $80 million arbitration demand met the amount in controversy requirement for purposes of diversity jurisdiction, despite the ultimate award of only $10,000. The court joined the First and Ninth Circuits in preferring the demand approach (Bull HN Info Sys., Inc. v. Hutson, 229 F.3d 321, 329 (1st Cir. 2000); Am. Guar. Co. v. Caldwell, 72 F.2d 209, 211 (9th Cir. 1934), while noting that the 6th and 11th Circuits have adopted the "award" approach to the same issue.

The Fifth Circuit explained that the demand approach is preferable because it:

Judge Mills, concurring only in the result, agreed that the demand is most relevant, but only based on the facts of this case. Pershing, Judge Mills, wrote, "is only too happy to pay the $10,000 arbitration award entered against it" because the arbitrator's award represents the lower, not the upper, range of possible results from litigation relating to the award. In a case where an award creditor was seeking to enforce an award (with no upward modification) that was less than the $75,000 amount in controversy threshold, the court would lack jurisdiction. Judge Mills, therefore, would not impose a one-size-fits-all rule but would rather look to what is actually in controversy at the time a party seeks to enforce an arbitral award.

Litigants in the Fifth Circuit should be aware that when ruling on a motion to confirm an arbitration award, the courts will determine whether the amount of controversy meets the $75,000 diversity jurisdiction threshold by looking to the amount sought in the arbitration demand, rather than the amount ultimately awarded.