Diversity jurisdiction allows federal courts to hear cases between citizens of different states, ensuring fair resolution of interstate disputes. It stems from the Constitution and aims to protect out-of-state parties from potential bias in state courts.
To qualify for diversity jurisdiction, cases must meet specific requirements. These include complete diversity between parties and a minimum amount in controversy. Special rules determine citizenship for individuals and businesses in these cases.
Diversity Jurisdiction: Purpose and Basis
Constitutional Foundation and Objectives
Top images from around the web for Constitutional Foundation and Objectives
The Dual Court System | American Government View original
Is this image relevant?
Free of Charge Creative Commons jurisdiction Image - Legal 1 View original
Is this image relevant?
U S Courts: Due Process and Equality Under the Law | United States Government View original
Is this image relevant?
The Dual Court System | American Government View original
Is this image relevant?
Free of Charge Creative Commons jurisdiction Image - Legal 1 View original
Is this image relevant?
1 of 3
Top images from around the web for Constitutional Foundation and Objectives
The Dual Court System | American Government View original
Is this image relevant?
Free of Charge Creative Commons jurisdiction Image - Legal 1 View original
Is this image relevant?
U S Courts: Due Process and Equality Under the Law | United States Government View original
Is this image relevant?
The Dual Court System | American Government View original
Is this image relevant?
Free of Charge Creative Commons jurisdiction Image - Legal 1 View original
Is this image relevant?
1 of 3
- Article III, Section 2 of the U.S. Constitution extends federal judicial power to controversies between citizens of different states
- Diversity jurisdiction allows federal courts to hear cases between citizens of different states promotes impartial resolution of interstate disputes
- Protects out-of-state litigants from potential bias in state courts ensures fair adjudication of disputes across state lines
- Reflects the Framers' intent to provide a neutral federal forum for resolving interstate conflicts promotes national unity
- Complements federal question jurisdiction expands federal court authority beyond cases involving federal law to include certain state law disputes
Historical Context and Evolution
- Concept of diversity jurisdiction dates back to the Judiciary Act of 1789
- Initially implemented to address concerns about state court bias against out-of-state parties
- Evolved over time through judicial interpretation and statutory amendments
- Supreme Court has repeatedly affirmed the importance of diversity jurisdiction (Bank of the United States v. Deveaux, 1809)
- Modern debates focus on the continued necessity and scope of diversity jurisdiction in the federal court system
Diversity Jurisdiction: Statutory Requirements
28 U.S.C. § 1332 Provisions
- Codifies statutory requirements for diversity jurisdiction expands on constitutional foundation
- Mandates complete diversity no plaintiff can be a citizen of the same state as any defendant (Strawbridge v. Curtiss, 1806)
- Sets amount in controversy threshold dispute value must exceed $75,000, exclusive of interest and costs
- Applies to cases between citizens of different states, citizens of a state and foreign citizens, and citizens of different states with foreign citizens as additional parties
- Provides for diversity jurisdiction in cases between citizens of a state and foreign states or their citizens
Supplemental Jurisdiction and Exceptions
- 28 U.S.C. § 1367 allows federal courts to hear related claims that do not independently meet diversity requirements
- Supplemental jurisdiction extends to claims forming part of the same case or controversy
- Exceptions to supplemental jurisdiction exist for certain types of claims and parties (28 U.S.C. § 1367(b))
- Class Action Fairness Act of 2005 (CAFA) modified diversity requirements for certain class actions
- Some statutory exceptions limit diversity jurisdiction (28 U.S.C. § 1359 prohibits improper or collusive joinder to create diversity)
Citizenship for Diversity Jurisdiction
Individual Citizenship Determination
- Citizenship for individuals determined by domicile requires physical presence in a state and intent to remain indefinitely
- Domicile factors include voter registration, driver's license, tax filings, and location of personal property
- U.S. citizens domiciled abroad cannot invoke diversity jurisdiction (Newman-Green, Inc. v. Alfonzo-Larrain, 1989)
- Permanent resident aliens deemed citizens of their state of domicile for diversity purposes
- Non-resident aliens considered citizens of their home countries in diversity cases
- Special rules apply to determining citizenship of estates (citizenship of decedent), infants (citizenship of parents), and incompetents (citizenship of legal representative)
Business Entity Citizenship Rules
- Corporations deemed citizens of both their state of incorporation and principal place of business
- "Nerve center" test determines principal place of business (Hertz Corp. v. Friend, 2010)
- Unincorporated associations (partnerships, LLCs) take on citizenship of each member
- Citizenship of trusts depends on classification as traditional or business trust
- Traditional trusts consider citizenship of trustees, while business trusts treated like corporations
- Class actions under CAFA consider only citizenship of named representatives for diversity purposes
Amount in Controversy: Rules and Application
Determining the Jurisdictional Amount
- Amount in controversy based on plaintiff's good faith claim at time of filing not amount ultimately recovered
- Legal certainty test allows dismissal only if it appears to a legal certainty that claim is below jurisdictional amount
- Punitive damages and attorney's fees may be included if available under applicable law
- Future damages can be considered if they are not speculative
- Value of injunctive relief determined by either cost to defendant or value to plaintiff
Aggregation and Non-Aggregation Principles
- Single plaintiff suing single defendant on multiple claims may aggregate claims to meet amount in controversy
- Non-aggregation principle prohibits multiple plaintiffs from combining separate and distinct claims to reach threshold
- Exception to non-aggregation when multiple plaintiffs assert a "common and undivided interest" in a single claim
- Class actions under CAFA allow aggregation of class members' claims if total exceeds $5 million
- Counterclaims and cross-claims generally do not count towards amount in controversy
- Compulsory counterclaims may be considered in determining amount in controversy (some circuits)
- Supplemental claims related to the main action do not need to independently satisfy the amount in controversy requirement
Key Terms to Review (20)
Judiciary Act of 1789: The Judiciary Act of 1789 was a landmark piece of legislation that established the federal judiciary system in the United States. It created the structure and jurisdiction of the federal courts, including the Supreme Court, and laid the groundwork for the functioning of the judicial branch within the framework of the Constitution, particularly regarding diversity jurisdiction and federal court authority.
Nerve Center Test: The nerve center test is a legal standard used to determine a corporation's principal place of business for jurisdictional purposes, specifically in diversity cases. This test identifies the location where the corporation's high-level officers direct, control, and coordinate the corporation's activities, essentially serving as the corporation's 'nerve center.' This is crucial for assessing where a corporation can be sued and whether diversity jurisdiction exists, as it affects the analysis of citizenship under the law.
Local Defendant Rule: The local defendant rule is a principle in federal diversity jurisdiction that prevents a plaintiff from removing a case from state court to federal court if any of the defendants are citizens of the state in which the action was brought. This rule aims to preserve the integrity of state courts and prevent defendants from using federal courts to escape local biases.
Legal Certainty Test: The legal certainty test is a judicial standard used to assess the legitimacy of a claim for jurisdiction, particularly in cases involving diversity jurisdiction. This test ensures that the amount in controversy exceeds a certain threshold, providing a clear and reliable measure for courts to determine if they can hear a case based on the parties' diverse citizenship. The focus is on establishing a reasonable expectation that the claim meets the jurisdictional requirements, thus promoting fairness and efficiency in the legal process.
Class Action Fairness Act of 2005: The Class Action Fairness Act of 2005 (CAFA) is a federal law that aimed to address concerns regarding abuses in class action lawsuits by expanding federal jurisdiction over these cases. The act allows federal courts to hear class action cases if the amount in controversy exceeds $5 million, and if there is minimal diversity among the parties involved, meaning at least one plaintiff and one defendant are from different states. CAFA was designed to curb perceived forum shopping and prevent state courts from being overwhelmed with large class action suits.
Forum defendant rule: The forum defendant rule is a legal principle that prevents a defendant from removing a case to federal court if they are a citizen of the state in which the lawsuit was filed. This rule is aimed at protecting plaintiffs from being forced to litigate in a federal court that may be more favorable to the defendant, thus promoting fairness in the judicial process. It plays a significant role in cases involving diversity jurisdiction and affects the removal of cases from state to federal courts.
Alienage Jurisdiction: Alienage jurisdiction refers to the ability of federal courts to hear cases where the parties involved are from different countries or where one party is a citizen of a foreign nation. This type of jurisdiction is a subset of diversity jurisdiction, which generally allows federal courts to resolve disputes between parties from different states, and aims to provide a neutral forum for litigants who may be wary of local biases.
Newman-Green, Inc. v. Alfonzo-Larrain: Newman-Green, Inc. v. Alfonzo-Larrain is a Supreme Court case that addressed the issue of diversity jurisdiction and the permissibility of dismissing a party from a case to maintain federal jurisdiction. The decision underscored how federal courts handle claims involving parties from different states and established important precedents regarding supplemental jurisdiction.
Hertz Corp. v. Friend: Hertz Corp. v. Friend is a pivotal Supreme Court case that clarified the standards for determining a corporation's principal place of business, which is essential for assessing diversity jurisdiction in federal court. This case established that a corporation's principal place of business is typically where its high-level officers direct, control, and coordinate its activities, often referred to as the 'nerve center.' Understanding this case helps in grasping how federal courts establish jurisdiction based on parties' citizenship and the implications for businesses operating across state lines.
Corporate Citizenship: Corporate citizenship refers to the role that a corporation plays in society, emphasizing its responsibilities towards stakeholders, the community, and the environment. This concept encompasses a company’s ethical behavior, contributions to social and economic development, and engagement in sustainable practices. Understanding corporate citizenship helps illuminate how businesses can positively impact their communities while maintaining profitability.
Domicile: Domicile refers to the legal residence of an individual, which determines their legal rights and obligations in various jurisdictions. It's where a person has established a fixed, permanent home and intends to return, even if they are currently residing elsewhere. Understanding domicile is crucial for establishing jurisdiction, particularly in cases involving diversity jurisdiction, as it can affect where a lawsuit can be filed and which laws apply.
28 U.S.C. § 1359: 28 U.S.C. § 1359 is a statute that prevents federal courts from exercising jurisdiction based on diversity of citizenship if any party has been improperly joined to create such jurisdiction. This section aims to uphold the integrity of the federal court system by ensuring that cases are not brought in federal court merely to take advantage of its perceived advantages over state courts, particularly when parties are manipulated for jurisdictional purposes.
Strawbridge v. Curtiss: Strawbridge v. Curtiss is a pivotal case that clarified the requirements for diversity jurisdiction in federal courts. The case established that complete diversity must exist between all plaintiffs and all defendants in a lawsuit, meaning no plaintiff can share a state of citizenship with any defendant. This ruling underscored the principle of federalism and how it shapes the jurisdictional boundaries within the legal system.
Bank of the United States v. Deveaux: Bank of the United States v. Deveaux is a landmark case from 1819 that clarified the requirements for diversity jurisdiction in federal courts, specifically addressing the citizenship of parties involved in a lawsuit. This case established that a corporation is considered a citizen of the state where it was incorporated and the state where it has its principal place of business, influencing how federal jurisdiction is determined when parties are from different states.
28 U.S.C. § 1367: 28 U.S.C. § 1367 is a statute that provides federal courts with supplemental jurisdiction over additional claims that are related to a case already under their jurisdiction. This means that if a federal court has original jurisdiction, it can also hear related state law claims, even if those claims would not independently qualify for federal jurisdiction. This provision is crucial for allowing more comprehensive handling of cases and promoting judicial efficiency by preventing the need for separate state court litigation.
Complete diversity: Complete diversity refers to the requirement in federal diversity jurisdiction that all plaintiffs must be citizens of different states than all defendants in a lawsuit. This concept is essential because it ensures that federal courts only hear cases involving parties from different states, thereby avoiding any potential bias that may arise from state courts favoring their own citizens. Understanding complete diversity is crucial for determining the appropriate court for a case and how parties can navigate issues related to jurisdiction.
28 U.S.C. § 1332: 28 U.S.C. § 1332 establishes the federal court's jurisdiction over civil cases involving parties from different states, known as diversity jurisdiction. This statute allows for cases to be heard in federal court when the parties are citizens of different states and the amount in controversy exceeds $75,000. This provision aims to provide an impartial forum for litigants from different jurisdictions, thus reducing potential bias that might arise in state courts.
Amount in controversy: Amount in controversy refers to the monetary value of the claims or demands made by a party in a lawsuit. It is crucial for determining whether a case can be heard in federal court, particularly in diversity jurisdiction, where the amount must exceed a specific threshold. This concept also plays a vital role in removal and remand processes as well as in interpleader cases, influencing the jurisdictional reach of courts and the rights of parties involved.
Supplemental jurisdiction: Supplemental jurisdiction allows federal courts to hear additional claims that are related to the original claims being brought before them, even if those additional claims do not independently meet the requirements for federal jurisdiction. This mechanism ensures that cases can be resolved efficiently in one judicial forum, rather than splitting them up between different courts and systems, which could lead to inconsistent results.
Diversity Jurisdiction: Diversity jurisdiction is a form of subject matter jurisdiction that allows federal courts to hear cases where the parties are from different states or countries and the amount in controversy exceeds $75,000. This type of jurisdiction is designed to provide a neutral forum for parties who may not receive an unbiased trial in their own state courts.