From Smith v. Tele-Town Hall, LLC, 2011 U.S. Dist. LEXIS 76669 (E.D. Va. July 15, 2011):

This case presents the question, unresolved in this circuit, whether the jurisdictionally required amount in controversy with respect to a motion to confirm an arbitration award should be based solely on the original amount claimed in the arbitration demand or should instead be based only on the amount remaining in issue following the award.

For the reasons that follow, the amount demanded in the arbitration controls the determination of the amount in controversy in a motion to confirm an arbitration award. ***

Resolution of the parties' dispute over the manner in which the amount in controversy should be determined properly begins with the well settled principle that in a diversity action the amount in controversy must be determined by the plaintiff's good faith demand at the time of filing, unless it can be determined to a legal certainty that the value of the claim is less than the jurisdictional amount. And it is equally well settled that, because the amount in controversy in a diversity action is determined at the time of filing, jurisdiction over a case is not lost even if the ultimate judgment awarded is less than the jurisdictional minimum. These settled principles are not alone dispositive here because this case, unlike the cases embodying these principles, was commenced not by a complaint seeking damages or injunctive relief, but by a motion to confirm an arbitration award. Thus, the appropriate question here is therefore whether the jurisdictionally required amount in controversy is to be determined by reference to the original arbitration demand or by reference to the amount of the actual award or the relief sought by the parties, which in this case is confirmation without modification, vacation, or reopening of the arbitration. If the former is the correct rule, then the requisite $75,000 jurisdictional amount is plainly met here as the original arbitration demand sought $500,000. But it is equally plain that the requisite jurisdictional amount does not exist if the latter rule governs.

This question, as noted by the Fourth Circuit in Choice Hotels [v. Shiv Hospitality, LLC, 491 F.3d 171, 175 (4th Cir. 2007)], is one of first impression in this circuit. There, the Fourth Circuit, without resolving the issue, noted that courts have taken three approaches to determining the amount in controversy in an application to confirm, modify, or vacate an arbitration award. Under the "award" approach, courts determine the amount in controversy by reference to the amount of the award regardless of how much was originally demanded in the arbitration proceeding. See, e.g., Ford v. Hamilton Inv., 29 F.3d 255 (6th Cir. 1994); Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472 (11th Cir. 1997). By contrast, under the "demand" approach, courts equate the amount in controversy with the amount sought in the original complaint or arbitration demand, regardless of the amount ultimately awarded. See, e.g., Karsner v. Lothian, 532 F.3d 876, 879 (D.C. Cir. 2008); Theis Research, Inc. v. Brown & Bain, 400 F.3d 659, 664-65 (9th Cir. 2005). The final approach, known as the "remand" or "mixed" approach, takes a middle ground, namely that "the amount in controversy in a suit challenging an arbitration award includes the matter at stake in the arbitration, provided the plaintiff is seeking to reopen the arbitration." See Sirotzky v. N. Y. Stock Exchange, 347 F.3d 985, 989 (7th Cir. 2003) (emphasis added); accord Peebles v. Merrill Lynch, Pierce, Fenner & Smith Inc., 431 F.3d 1320, 1325 (11th Cir. 2005). That is, under the remand approach, if the parties do not seek to reopen arbitration, then, consistent with the award approach, the amount in controversy is the amount of the arbitration award; on the other hand, if they seek to reopen arbitration, the amount in controversy is the amount demanded in the arbitration, which would be consistent with the demand approach.

A careful consideration of each approach points persuasively to the conclusion that the demand approach is soundest because it avoids anomalous and unwarranted inconsistencies in a federal court's jurisdiction. In this regard, there are three distinct anomalies created by the award and remand approaches. First, under the FAA, a federal court determines diversity jurisdiction over a petition to compel arbitration by reference to the amount in controversy in the parties' underlying dispute. 9 U.S.C. § 4 (providing that a court has jurisdiction over a petition to compel arbitration if it "would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties."). Yet, under the award or remand approaches, a motion to confirm, vacate, or modify an arbitration award would be subject to a different jurisdictional rule based on the arbitration award and the relief sought by the parties' motion. As the D.C. Circuit recognized in Karsner, adopting a rule that allows a federal court to order arbitration, but disables the federal court from reviewing the resulting arbitration award creates an unwarranted inconsistency. Karsner, 532 F.3d at 883 (criticizing the award approach because it "would apply two different jurisdictional tests depending on the action the petitioner seeks, resulting in jurisdiction over a petition to compel arbitration of a claim but not necessarily over a petition to confirm/vacate an arbitration award arising from the same claim").

But the anomalies do not end there. Under the award and remand approaches, a federal court would not have jurisdiction in a case where, as here, the parties proceed directly to arbitration and then seek confirmation of an award that is below the jurisdictional amount required for diversity. But parties can perform an end-run around this limitation by bringing the claims to federal court first and then seeking an order staying the case and ordering the parties to proceed to arbitration. Under those circumstances, after the arbitration concludes and an award is issued, either party may return to the federal court to seek confirmation, vacation, or modification of the arbitration award. Because the motion would be filed in a stayed case, the federal court would continue to have jurisdiction over the motion regardless of the amount of the arbitration award, because jurisdiction is not affected by events that occur after the filing of the case. [This is the holding of Choice Hotels, 491 F.3d at 176.] Thus, parties would have an incentive to begin the journey to arbitration by filing first in federal court in the hope of preserving the option of federal review over any subsequent arbitration award. 9 Such superfluous filings would not only impose unwarranted burdens on courts, but the incentive created by such a framework runs counter to the well established policy favoring arbitration over traditional litigation. ***

The final anomaly is more fundamental. If parties forgo arbitration and litigate claims in federal court, the exercise of diversity jurisdiction would of course depend on the amount in controversy in the parties' claims. 28 U.S.C. § 1332(a). Yet, if the parties choose to arbitrate, then under the award or remand approaches, the parties may foreclose the possibility of federal review because the existence of jurisdiction will depend on the outcome of the arbitration. The demand approach, by contrast, removes this disincentive to arbitrate and "permits the district court to exercise jurisdiction coextensive with the diversity jurisdiction that would have otherwise been present if the case had been litigated rather than arbitrated." Karsner, 532 F.3d at 884.