Diversity of Citizenship

Diversity of Citizenship

A phrase used with reference to the jurisdiction of the federal courts which, under the U.S. Constitution, Art. III, § 2, extends to cases between citizens of different states designating the condition existing when the party on one side of a lawsuit is a citizen of one state and the party on the other side is a citizen of another state, or between a citizen of a state and an alien. The requisite jurisdictional amount must, in addition, be met.

Diversity of citizenship is one of the factors that will allow a federal district court to exercise its authority to hear a lawsuit. This authority is called diversity jurisdiction. It means that a case involving questions that must be answered according to state laws may be heard in federal court if the parties on the two sides of the case are from different states. No matter how many parties are involved in a lawsuit, there must be complete diversity in order for the federal court to exercise this type of authority. If a single plaintiff is a citizen of the same state as any defendant, there is no diversity and the case must be pursued in a state court.

Being a citizen of a state is something more than simply owning property or being physically present within the state. Citizenship means that the individual has a residence in the state and intends to have that residence as his or her present home. Residence plus this intent makes that place the individual's domicile, and a party can have only one domicile at a time. Citizenship does not mean that the individual must swear that he or she never intends to move, but the residence and the intent to consider it home are essential. Students, prisoners, and service personnel can establish a domicile in a state even though they are living in it involuntarily or temporarily.

Corporations are citizens of the state in which they are incorporated and also of the state where they maintain their principal place of business. This citizenship in two places has the effect of narrowing the number of cases that qualify for a federal court's diversity jurisdiction because a corporation's citizenship is not diverse from the citizenship of anyone else in either of those two states.

The citizenship of each party must be determined as of the time the lawsuit is commenced. A party's domicile at the time of the events that give rise to the Cause of Action or a change of domicile during the course of proceedings does not affect the court's jurisdiction. This rule, of course, gives a person contemplating a lawsuit the opportunity to change his or her domicile just before serving legal papers that start an action. This tactic has been challenged on a few occasions on the ground that it violates another federal law that prohibits collusion to create federal jurisdiction. Generally, the courts have ruled that a plaintiff's motives in moving to a new state are not determinative, and the only question is whether in fact the plaintiff's domicile is different from that of the defendants at the time the lawsuit begins.

The right of an individual to take his or her case into a federal court is assured by Article III, § 2 of the U.S. Constitution. This provision extends the federal judicial power to controversies between the citizen of a state and the government of a different state, citizens of a different state, or between a state or its citizens and a foreign government or its citizens. It is put into effect by a statute that limits federal diversity jurisdiction to cases involving a dispute worth more than $10,000. This minimum is intended to keep small cases from clogging the calendars of federal courts. Cases worth less than $10,000 must be brought in a state court even though diversity of the parties' citizenship otherwise would entitle them to be brought in federal court.

The origin and purposes of federal diversity jurisdiction have long been debated. It was created when the Constitution was first adopted, a time when loyalty to one's state was usually stronger than feelings for the United States. It was undoubtedly intended to balance national purposes with the independence of the states. Chief Justice John Marshall of the Supreme Court wrote in Bank of United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87, 3 L. Ed. 38 (1809):

However true the fact may be, that the tribunals of the states will administer justice as impartially as those of the nation, … it is not less true that the constitution itself either entertains apprehensions on this subject, or views with such indulgence the possible fears and apprehensions of suitors, that it has established national tribunals for the decision of controversies … between citizens of different states.

Some scholars believe that the opportunity to take business and commercial disputes into an impartial federal court helped to encourage investment in the developing South and West. People from the industrialized Northeast felt more secure when their financial transactions in other states were not necessarily at the mercy of local prejudices.

Even if diversity jurisdiction did help the economic growth of the United States, many people question whether it continues to be useful. Because these cases require substantial investments of time and energy by the federal judiciary in cases that arise under state law, proposals to curtail or abolish diversity jurisdiction have been introduced repeatedly in Congress since the 1920s. None of the proposals have been adopted, however.

Further readings

Freer, Richard D. 1998. "Toward a Principled Statutory Approach to Supplemental Jurisdiction in Diversity of Citizenship Cases." Indiana Law Journal 74 (winter): 5–23.

Jacobsohn, Gary Jeffrey, and Susan Dunn, ed. 1996. Diversity and Citizenship: Rediscovering American Nationhood. Lanham, Md.: Rowman & Littlefield.

Pickus, Noah M.J. 1998. Immigration and Citizenship in the Twenty-First Century. Lanham, Md.: Rowman & Little-field.

diversity of citizenship

n. when opposing parties in a lawsuit are citizens of different states (including corporations incorporated or doing business in different states) or a citizen of a foreign country, which places the case under federal court jurisdiction, pursuant to Article 3, section 2 of the U. S. Constitution, and the federal Judicial Code, if the amount in controversy exceeds $75,000.

References in periodicals archive ?
The case was in federal court based on the diversity of citizenship between Pennsylvania-based Erie Insurance Co.
and NASCAR filed a notice of removal, contending that diversity of citizenship granted this court jurisdiction pursuant to 28 U.S.C.
Subjects covered include diversity of citizenship, jurisdictional amount, supplemental jurisdiction, removal law, and venue.
The suit was filed in federal court due to diversity of citizenship.<br />During pretrial discovery Goodyear objected to producing certain material relating to the tire's design and chemical composition.
1332(d), because the proposed class contains at least 0 members, the amount in controversy exceeds $5 million, and minimal diversity of citizenship exists.
If, on the other hand, a party contests the jurisdictional facts or those facts reveal diversity of citizenship did not exist at the time the case was filed in or removed to federal court, it could lead to a severe penalty: re-litigating a case you already won in the alternative forum of a state court.
(15) However, the constitutional grant of diversity of citizenship jurisdiction "was tepidly supported and vigorously opposed during the debates over the ratification of the United States Constitution." (16) Neither the debates during the Constitutional Convention "nor the records of the First Congress shed any substantial light on why diversity jurisdiction was granted to the federal courts by the Constitution or why the First Congress exercised its option to vest that jurisdiction in the federal courts." (17)
"With the DTSA, federal jurisdiction in civil trade secret cases no longer will be dependent on diversity of citizenship or other federal jurisdictional Cyhooks' (like a parallel patent claim)," he explained.
Now, under the DTSA, an aggrieved party will have access to federal court for trade secret misappropriation claims, without having to first establish independent federal jurisdiction by tacking on an additional federal claim or showing diversity of citizenship. A private civil action for trade secret misappropriation under the DTSA must be commenced within 3 years after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered.
Strawbridge recognized a statutory requirement of complete diversity of citizenship, which Congress has not seen fit to supersede for more than two hundred years.
For a case to be heard before SCOTUS, one or more of the following conditions must be met: (1) diversity of citizenship among the parties to the case (parties are citizens of different states or countries and the amount in controversy exceeds $75,000); (2) the case involves a question or issue of federal law (arises under the Constitution, laws, or treaties of the United States); and/ or (3) one of the parties is the US government (or agency, including the US Post Office).
(2) A federal court has original subject matter jurisdiction over an action that either arises under federal law, or when there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000.

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