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 plaintiff may file in state court, but the defendant may argue that there is diversity of citizenship and move to transfer the case to federal court.
Amartya Sen, the Nobel laureate economist, has argued that we can learn to live with these multiple identities and even thrive with the diversity of citizenship and loyalties that they allow us.
argue that the text and original understanding of Article III require that federal courts be open, in some fashion, to cases in which even minimal diversity of citizenship exists.
This edition has new exercises and cases; updated references to the Federal Rules of Civil Procedure, Federal Rules of Criminal Procedure, and Federal Rules of Evidence (appendices containing sections of these have been deleted); more on personal and subject matter jurisdiction in civil cases, venue, and alternative dispute resolution; more on public records; more coverage and new examples for the Federal Rules of Evidence in connection with the hearsay rule and its exceptions; information on the revision of corporate citizenship for purposes of diversity of citizenship and the continuing impact of the plausibility standard in civil pleadings; revised and expanded material on discovery from an opponent's expert witnesses; and new developments in communication technology.
9) The representatives did not contest the diversity of citizenship allegations and the federal district court granted Northport's petition to order arbitration.
The Eleys claimed that the Federal Court in Georgia had jurisdiction based on the diversity of citizenship of the plaintiffs and defendants.
However, as our society becomes more and more mobile, more and more cases will be filed in Federal Courts based on the diversity of citizenship between patients and physicians.
Absent jurisdiction based upon a federal question, such as a violation of the United States securities laws, jurisdiction based on diversity of citizenship is destroyed.
A maelstrom of potential issues--from the mundane to the occasionally esoteric--await the practitioner who seeks to remove a lawsuit from a Florida court to a federal court based upon diversity of citizenship.
The case was tried in federal court under Nevada law because of diversity of citizenship between the parties.
But if the plaintiff's claim is consolidated--or if he or she is part of a class action--any defendant could remove the case to federal court without regard to diversity of citizenship or amount in controversy.
District Court for the Eastern District of Missouri alleging that diversity of citizenship existed between the plaintiffs and the defendant.

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