Diversity jurisdiction
From Biocrawler, 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 jurisidction in the Judiciary Act of 1789. Diversity jurisdiction is presently codified at 28 U.S.C. § 1332.
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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. An alien who has been granted the status of permanent resident is treated as a citizen of the state where the alien resides.
If the case requires the presence of a party who is from the same state as an opposing party, 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.
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, the amount is $75,000, and it 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 only obtain 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.
Removal
If a case is originally filed in state court, and the diversity and amount in controversy requirements are met, either party may remove the case to the federal court, by filing 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 transfered. Because plaintiffs have the power to decide which court they will initially file in, it is usually defendants who remove a case. A party opposing removal of a case may request a remand, asking the federal court to send it 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.
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 the action was filed in. This decision overturned precedents, which 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.
