Subject-Matter Jurisdiction — Diversity

MBEMax wiki article — paired with the Civil Procedure question set on mbemax.com.

One-line summary

Under 28 U.S.C. § 1332, federal courts have diversity jurisdiction when the parties are citizens of different states (or a foreign state) AND the amount in controversy exceeds $75,000, exclusive of interest and costs — with complete diversity required at the time the complaint is filed.

Mnemonic

C-D-A — Complete Diversity + Amount over $75,000.

Add T-I-M-E: diversity is tested at The Initial Moment (filing date) for Everybody. Change after filing doesn't destroy jurisdiction (except removal removal removal — no twist during the case).

Complete diversity — Strawbridge v. Curtiss

• No plaintiff and no defendant may be citizens of the same state.
• One nominal alignment trap: align parties by real interests, not pleadings.

Citizenship rules

• Natural persons — citizenship = domicile (physical presence + intent to remain indefinitely). Must be U.S. citizen or lawful permanent resident (complicated history with "stateless" persons).
• Corporations — every state of incorporation AND state of principal place of business ("nerve center" — Hertz v. Friend, 559 U.S. 77 (2010)). So a corporation can be a citizen of up to two states.
• Unincorporated entities (LLCs, partnerships) — citizen of every state of which each member is a citizen. Destroys diversity easily.
• Representatives (decedent, minor, incompetent) — citizenship of the person represented, not the executor (§ 1332(c)(2)).
• Class actions — only the named plaintiffs matter for traditional diversity; Class Action Fairness Act (CAFA) relaxes rules for large multistate class actions.

Amount in controversy

• Must exceed $75,000 (more than, not equal to).
• Good-faith estimate by plaintiff controls unless legal certainty the plaintiff cannot recover more than $75,000 (St. Paul Mercury Indemnity).
• Aggregation rules:
  • Single plaintiff vs. single defendant — aggregate all claims, related or not.
  • Multiple plaintiffs vs. single defendant — generally no aggregation, unless common and undivided interest.
  • Single plaintiff vs. multiple defendants — no aggregation unless joint liability.
• Injunctive relief — value to plaintiff OR cost to defendant; split of authority.

Supplemental jurisdiction (§ 1367)

• § 1367(a) — jurisdiction over claims forming part of the same case or controversy.
• § 1367(b) — plaintiffs in diversity cannot use supplemental jurisdiction to circumvent complete-diversity / amount requirements. Key: claims by plaintiffs against persons made parties under FRCP 14 (impleader), 19 (required), 20 (permissive), 24 (intervention) — not allowed.
• Exxon Mobil Corp. v. Allapattah Services (545 U.S. 546 (2005)) — additional plaintiffs in a diversity case may ride the coattails on amount-in-controversy if at least one named plaintiff independently satisfies § 1332; but complete diversity still required.

Removal

• Defendants may remove from state to federal court if case could have been brought originally.
• § 1441(b)(2) forum-defendant rule — in diversity, cannot remove if any properly joined and served defendant is a citizen of the forum state.
• § 1446(c) one-year limit — in diversity only, removal must occur within one year of commencement unless bad-faith concealment.
• CAFA — removal rules relaxed for qualifying class actions.

NCBE loves to test

• Corporate PPB. "Nerve center" = headquarters (Hertz). Often singular. Not "principal place of operations."
• LLC citizenship. LLCs inherit citizenship from every member — even one out-of-state member can save or kill diversity.
• Amount aggregation. Single plaintiff can aggregate claims, but multiple plaintiffs typically cannot.
• Post-filing events. Change of domicile after filing doesn't defeat jurisdiction; but dismissal of a non-diverse, dispensable party to cure is permitted.
• Alienage (§ 1332(a)(2)). Suit between U.S. citizen and citizen of a foreign state — diversity exists. Alien vs. alien — no diversity (no "complete" alignment).
• Remand. If diversity turns out to be absent, court must remand (§ 1447(c)). Plaintiff may file a post-removal amendment eliminating federal claim; court may remand state claims.
• One-year cap. Limited to diversity removals. No cap on federal-question removals, but still a 30-day post-amendment window.

Fast hypos

Hypo 1. P (NY) sues D1 (CA), D2 (DE corp, PPB NY) for $80,000. No diversity — D2's PPB in NY destroys complete diversity with P.

Hypo 2. P (VT) sues D-LLC for $100,000. D-LLC has three members, two from MA and one from VT. No diversity — LLC is citizen of every member's state, including VT.

Hypo 3. P1 (CA) and P2 (CA) sue D (NY) for $60,000 and $40,000 respectively arising from same accident. Aggregation? No — separate plaintiffs. Neither meets $75,000.

Hypo 4. P (TX) sues D (NY) in TX state court for $250,000 diversity claim. Two weeks after complaint filed, D tries to remove. Forum-defendant rule doesn't apply (D is not a citizen of TX). Diversity removal proper if within 30 days and under one-year cap.

Case anchors

• Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) — complete diversity rule.
• Hertz Corp. v. Friend, 559 U.S. 77 (2010) — nerve-center test for corporate PPB.
• Carden v. Arkoma Associates, 494 U.S. 185 (1990) — citizenship of unincorporated entities.
• Exxon Mobil Corp. v. Allapattah Services, 545 U.S. 546 (2005) — supplemental jurisdiction for amount-in-controversy.
• Grupo Dataflux v. Atlas Global Group, 541 U.S. 567 (2004) — diversity tested at filing.
• Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996) — post-judgment cure of pre-judgment defect.

See also

• Subject-Matter Jurisdiction — Federal Question
• Venue
• Erie Doctrine
• Personal Jurisdiction

Sources

U.S. Const. art. III; 28 U.S.C. §§ 1332, 1367, 1441–1447, 1453; Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806); Hertz Corp. v. Friend, 559 U.S. 77 (2010); Carden v. Arkoma Associates, 494 U.S. 185 (1990); Exxon Mobil v. Allapattah Services, 545 U.S. 546 (2005); Grupo Dataflux v. Atlas Global Group, 541 U.S. 567 (2004).