Diversity Jurisdiction under ederal Courts
Diversity Jurisdiction under Federal Courts
1. What is Diversity Jurisdiction?
Diversity jurisdiction is a form of subject-matter jurisdiction in federal courts that allows them to hear lawsuits between:
Citizens of different states (i.e., “diverse” citizenship), or
Citizens of a U.S. state and citizens or subjects of a foreign country.
The purpose is to provide a neutral federal forum to prevent possible state court bias against out-of-state defendants.
2. Statutory Basis
The primary statutory provision is 28 U.S.C. § 1332.
Requirements for diversity jurisdiction under § 1332 include:
Complete diversity: No plaintiff shares state citizenship with any defendant.
Amount in controversy: The claim must exceed $75,000 (exclusive of interest and costs).
3. Elements Explained
Complete Diversity:
All plaintiffs must be citizens of states different from all defendants. If even one plaintiff shares state citizenship with one defendant, diversity jurisdiction does not exist.
Amount in Controversy:
The plaintiff’s good faith claim must exceed $75,000. The court generally accepts the plaintiff’s claim unless it appears to a legal certainty that the claim is for less.
4. Key Case Law
a) Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)
Facts:
Early case establishing the requirement of complete diversity. Multiple parties from different states sued, but some plaintiffs and defendants shared state citizenship.
Holding:
The Supreme Court held that for diversity jurisdiction to apply, complete diversity is required; that is, no plaintiff can be a citizen of the same state as any defendant.
Significance:
This case firmly established the “complete diversity” rule, which remains the foundational rule today.
b) Louisville, Cincinnati & Charleston Railroad Co. v. Letson, 43 U.S. (2 How.) 497 (1844)
Facts:
The Court addressed the question of how to determine citizenship for corporations for purposes of diversity jurisdiction.
Holding:
The Court held that a corporation is considered a citizen of the state where it is incorporated.
Significance:
This case laid the groundwork for determining corporate citizenship, an essential factor in diversity jurisdiction.
c) Hertz Corp. v. Friend, 559 U.S. 77 (2010)
Facts:
The Court considered how to determine a corporation’s “principal place of business” for diversity jurisdiction.
Holding:
The Court adopted the “nerve center” test, meaning a corporation’s principal place of business is the location of its headquarters, where the corporation’s high-level officers direct, control, and coordinate operations.
Significance:
This ruling clarified the standard for corporate citizenship beyond incorporation, making jurisdictional determinations more predictable.
d) Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996)
Facts:
The defendant removed a case to federal court based on diversity jurisdiction. However, after removal, a plaintiff voluntarily dismissed a non-diverse defendant, which could create complete diversity. The question was whether the federal court could continue to exercise jurisdiction.
Holding:
The Court held that federal courts can maintain jurisdiction if complete diversity exists at the time of the decision, even if it did not exist at the time of filing, as long as the jurisdictional defect is cured.
Significance:
This decision clarified that jurisdiction can be based on the state of diversity at the time of the federal court’s decision, not just the initial filing.
e) Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005)
Facts:
The case addressed whether federal courts have supplemental jurisdiction over claims that do not meet the amount-in-controversy requirement if at least one plaintiff meets the amount threshold.
Holding:
The Court ruled that when one plaintiff meets the amount-in-controversy requirement and there is complete diversity, federal courts may exercise supplemental jurisdiction over other claims by plaintiffs who do not meet the amount-in-controversy threshold.
Significance:
This decision allows federal courts to hear related claims that do not independently meet jurisdictional requirements, facilitating efficient case management.
f) Mas v. Perry, 489 F.2d 1396 (5th Cir. 1974)
Facts:
The court considered what constitutes citizenship for an individual, specifically residency versus domicile.
Holding:
The court explained that for diversity jurisdiction, citizenship is determined by domicile, not mere residence.
Significance:
This case is often cited for clarifying that domicile requires both physical presence and intent to remain indefinitely, which is critical in determining jurisdiction.
5. Summary
| Element | Description |
|---|---|
| Complete Diversity | No plaintiff shares citizenship with any defendant |
| Amount in Controversy | Claim exceeds $75,000 |
| Corporations | Citizenship: State of incorporation + principal place of business |
| Individuals | Citizenship based on domicile (physical presence + intent) |
| Removal & Timing | Diversity jurisdiction can be assessed at decision time (Caterpillar) |
6. Practical Notes
Diversity jurisdiction is designed to protect out-of-state defendants from possible bias in state courts.
The complete diversity rule is strict and can result in dismissal if not met.
The amount-in-controversy requirement prevents trivial claims from clogging federal courts.
Corporate citizenship can be complex but generally hinges on incorporation and principal place of business.
Federal courts have discretion to hear related claims under supplemental jurisdiction if diversity exists for at least one claim.
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