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What is Diversity Jurisdiction?

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Diversity Jurisdiction: When Can You Sue Across State Lines in Federal Court?

Diversity jurisdiction allows federal courts to hear civil cases involving parties from different states or countries, provided the amount in dispute exceeds a certain threshold. This ensures a neutral forum for out-of-state litigants, minimizing potential local bias.

Constitutional and Statutory Basis:

  • The U.S. Constitution grants federal courts jurisdiction over controversies "between Citizens of different States" (Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005)).
  • The primary statute governing diversity jurisdiction is 28 U.S.C.A. § 1332. This statute provides that federal district courts have original jurisdiction over civil actions where:
    • The amount in controversy exceeds $75,000 (excluding interest and costs).
    • The parties are:
      • Citizens of different states.
      • Citizens of a state and citizens or subjects of a foreign state.
      • A foreign state as plaintiff and citizens of a state or different states.

"Complete Diversity" Requirement:

  • Diversity jurisdiction requires "complete diversity," meaning no plaintiff can be a citizen of the same state as any defendant (Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978); Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996)).
  • This "complete diversity" rule is a statutory requirement, not a constitutional one (Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978)).

Citizenship of Corporations:

  • For corporations, citizenship is determined by both the state(s) of incorporation and the state where the corporation's principal place of business is located (28 U.S.C.A. § 1332).

Purpose of Diversity Jurisdiction:

  • The purpose of diversity jurisdiction is to provide a neutral federal forum to protect out-of-state litigants from potential local bias (Lumbermen's Mut. Cas. Co. v. Elbert, 348 U.S. 48 (1954)).

Special Provisions:

  • 28 U.S.C.A. § 1332 also includes provisions for class action and mass action suits, outlining the specific conditions under which federal courts can exercise jurisdiction over those cases.

In Summary:

Diversity jurisdiction allows federal courts to hear cases where the parties are from different states or countries, and the amount in controversy exceeds $75,000. It requires complete diversity between the parties and aims to provide a neutral forum for out-of-state litigants.