Brainin v. Melikian

Irving Brainin (plaintiff) loaned K. Cyrus Melikian and Lloyd K. Rudd (defendants) $10,000 through a note that had an annual interest rate of 8 percent. Before Melikian and Rudd made any payments on the note, their business went bankrupt and the note came due. Brainin filed a lawsuit in federal district court against Melikian and Rudd seeking $10,324.44, the principal amount of the note plus interest. Brainin believed the court had diversity jurisdiction over the case, asserting that the parties held diverse citizenship and that the amount in controversy exceeded the $10,000 statutory requirement. Melikian failed to answer the complaint in the required time, and a default judgment was entered against him. Melikian moved to vacate the default judgment, arguing that the federal district court did not have diversity jurisdiction over the case because the amount-in-controversy requirement was not met. Melikian pointed to 28 U.S.C. § 1332(a), which explained that the amount in controversy in a diversity case must exceed $10,000, exclusive of interest and costs. Melikian reasoned that without the 8 percent interest added onto the note’s principal amount, the amount in controversy in Brainin’s case did not exceed $10,000. To support his argument, Melikian cited cases holding that interest accrued through a delay in payment could not be used to meet an amount-in-controversy requirement. The district court denied Melikian’s motion, holding that interest on a loan may be included in a plaintiff’s amount in controversy if the interest was part of the original note and an integral part of the amount sought by the plaintiff. The court of appeals affirmed the district court. Melikian petitioned the court of appeals for a rehearing.