Diversity jurisdiction
From Wikipedia, the free encyclopedia
Diversity jurisdiction is a term used in civil procedure to refer to the situation in which a United States district court has subject matter jurisdiction to hear a civil case because the parties are "diverse," meaning that they come from different states.
Article III, § 2 of the United States Constitution gives the U.S. Congress the power to permit federal courts to hear such cases. The provision was included because the writers 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 .
Contents |
[edit] Diversity of parties
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 corporation 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 are also treated as citizens of their states, but states themselves are not considered citizens for the purpose of diversity. An alien who has been granted the status of 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 on one side of the case, opposed by nonresident aliens.
- Complete diversity exists as to the U.S.-based parties, and nonresident aliens are additional parties.
- A foreign state is the plaintiff, and the defendants are citizens of one or more U.S. states.
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.
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.
[edit] Amount in controversy
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. Currently, under 28 U.S.C. §1332(a), civil actions must exceed the sum or value of $75,000; the amount has been regularly increased over the past two centuries. A federal court will usually take the plaintiff's word as to the amount being contested, unless it is clear from all the pleadings that the plaintiff could obtain only a lesser amount. 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.
[edit] Removal as distinguished from Remand
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), only the defendant may remove the case to federal court. (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 has been filed, and the federal court to which it will be transferred (other procedural requirements must be met).
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.
[edit] Law applied
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 federal common law, instead of applying the law of any particular state. The holding in Erie dicourages 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.
