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Diversity jurisdiction
From Wikipedia, the free encyclopedia
In United States law, diversity jurisdiction is a concept used in civil procedure to refer to the situation in which a U.S. (federal) district court has subject matter jurisdiction to hear a civil case due to the parties being "diverse" in citizenship, generally indicating that they are citizens of different states (corporate parties, and non-U.S. citizens can also be included). Diversity jurisdiction and federal question jurisdiction (i.e. jurisdiction over issues arising under federal law) constitute the two primary sources of subject matter jurisdiction in U.S. federal courts.
The United States Constitution, Article III, § 2 gives the U.S. Congress the power to permit federal courts to hear diversity cases through legislation authorizing such jurisdiction. The provision was included because the framers of the Constitution were concerned that, where a case was brought in one state involving parties from both that state and another, the state court might be biased towards the party from its own state. Congress first exercised that power and granted federal trial district courts diversity jurisdiction in the Judiciary Act of 1789. Diversity jurisdiction is presently codified at .
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Usually, in order for diversity jurisdiction to apply, none of the plaintiffs in a case can be from the same state as any of the defendants (complete diversity). A corporation is treated as a citizen of the state in which it is incorporated and the state in which its principal place of business is located, though a partnership or limited liability company is considered to have the citizenship of all of its constituent partners/members. Thus, a partnership with one partner sharing citizenship with an opposing party will destroy diversity of jurisdiction. Cities and towns (incorporated municipalities) are also treated as citizens of the states in which they are located, but states themselves are not considered citizens for the purpose of diversity. An alien (foreign national) who has been granted the status of U.S. permanent resident is treated as a citizen of the state where the alien resides.
The diversity jurisdiction statute also allows federal courts to hear cases in which:
- Citizens of a U.S. state are parties on one side of the case, with nonresident alien(s) as adverse parties;
- Complete diversity exists as to the U.S. parties, and nonresident aliens are additional parties;
- A foreign state (i.e. country) is the plaintiff, and the defendants are citizens of one or more U.S. states; or
- Under the Class Action Fairness Act of 2005, a class action can usually be brought in a federal court when there is just minimal diversity—i.e., any plaintiff is a citizen of a different state from any defendant. Class actions that do not meet the (not very stringent) requirements of the Class Action Fairness Act must have complete diversity between class representatives (not all class members) and the defendants.
A United States citizen who is domiciled outside the United States is not considered to be a citizen of any U.S. state, and cannot be considered an alien. The presence of such a person as a party completely destroys diversity jurisdiction, except for a class action or mass action in which minimal diversity exists with respect to other parties in the case.
If the case requires the presence of a party who is from the same state as an opposing party, or a party who is a U.S. citizen domiciled outside the country, the case must be dismissed, the absent party being deemed "indispensable". The determination of whether a party is indispensable is made by the court following the guidelines set forth in Rule 19 of the Federal Rules of Civil Procedure.
The United States Congress has placed an additional barrier to diversity jurisdiction, the amount in controversy requirement. This is a minimum amount of money which the parties must be contesting is owed to them. As of mid 2007, under 28 U.S.C. §1332(a), civil actions must exceed the sum or value of $75,000. The amount specified has been regularly increased over the past two centuries. Courts will use the "legal certainty" test to decide whether the dispute is over $75,000. Under the "legal certainty" test, the court will accept the pleaded amount unless it is legally certain that the pleading party cannot recover more than $75,000. For example, if the dispute is solely over the breach of a contract by which the defendant had agreed to pay the plaintiff $10,000, a federal court will dismiss the case for lack of subject matter jurisdiction, or remand the case to state court if it arrived via the removal process.
If a case is originally filed in state court, and the requirements for federal jurisdiction are met (diversity and amount in controversy requirements are met; or case involves a federal question; or supplemental jurisdiction exists), the defendant -- and only the defendant -- may remove the case to federal court. (Removal signifies transfer of forum.) There is no such thing as "removal" to a state court. To remove to a federal court, the defendant must file a notice of removal with both the state court in which the case was filed and the federal court to which it will be transferred (other procedural requirements must be met).
Whether or not diversity of citizenship exists for purposes of federal jurisdiction is determined at the time the case is filed. If, for example, the defendant later moves to the same state as the plaintiff while the action is pending, the federal court will still have jurisdiction. Note, however, that if any defendant is a citizen of the state where the action is first filed, the action cannot be removed to federal court. 28 U.S.C. §1441(b).
If a party (the plaintiff or another defendant) opposes removal, the party may request a remand, asking the federal court to send the case back to the state court. Remands are rarely granted if the diversity and amount in controversy requirements are met, but a remand may be granted if non-diverse parties are brought into the litigation, or if the parties settle some claims between them, leaving an amount in controversy below the jurisdictional amount.
The United States Supreme Court determined in Erie Railroad Co. v. Tompkins (1938) that the law to be applied in a diversity case would be the law of whatever state in which the action was filed. This decision overturned precedents that had held that federal courts could create a general federal common law, instead of applying the law of any particular state. The holding in Erie discourages litigants from forum shopping, going to federal courts instead of state courts to get a different result.
The Erie doctrine applies only to matters of substantive law, i.e., the law governing the claims at issue in the case. Matters of procedural law, such as evidence, motion practice, and discovery, are governed by the Federal Rules of Civil Procedure—the state of original filing, or state origin of parties, etc. , has no bearing on procedural issues.