Diversity jurisdiction and the Supreme Court
Diversity jurisdiction refers to the authority of federal courts to hear cases involving parties from different states or between a citizen and an alien, as established by Article III, section 2, of the U.S. Constitution. This legal principle was further defined in the Judiciary Act of 1789, which created a framework for these cases to ensure that litigants would have access to a neutral forum, reducing potential biases in state courts. Although there is no constitutional minimum for the amount in controversy, Congress has set a threshold—currently seventy-five thousand dollars—that must be exceeded for diversity jurisdiction to apply.
The concept of "complete diversity" is crucial; all plaintiffs must be from different states than all defendants, a standard clarified by the Supreme Court in the 1806 case, Strawbridge v. Curtiss. Additionally, the determination of an individual's citizenship is based on their domicile at the time of filing, while corporations are considered citizens of their state of incorporation and principal business location. The Supreme Court has also established that the sum claimed by the plaintiff, as long as it is made in good faith, dictates whether the jurisdictional amount requirement is satisfied, as seen in St. Paul Mercury Indemnity Co. v. Red Cab Co. (1938). Overall, diversity jurisdiction plays a significant role in federal court operations, aiming to ensure fairness in legal proceedings across state lines.
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Diversity jurisdiction and the Supreme Court
Definition: The authority of the federal courts to resolve disputes between citizens of different states or between a citizen and an alien when the total amount of damages in controversy exceeds seventy-five thousand dollars.
Significance: Diversity jurisdiction, the requirements for which are clarified by the Supreme Court, accounts for a significant portion of the cases heard by the federal courts and was included in the Constitution to provide a forum in which litigants from different states could be assured of fairness.
Article III, section 2, of the U.S. Constitution grants authority to the federal courts to resolve disputes among citizens of different states. In the Judiciary Act of 1789, Congress provided that the federal courts had jurisdiction over cases between citizens of different states or between a citizen and an alien. Although the Constitution imposes no requirement as to a minimum amount of damages that must be involved in order to invoke diversity jurisdiction, Congress imposed a requirement that the amount in controversy, exclusive of interest and costs, must exceed a stated sum of damages. The requisite amount has increased over time and was set at seventy-five thousand dollars in the 1990s.
All cases brought under diversity jurisdiction can also be brought in a state court in which one of the litigants is situated. However, the framers of the Constitution created diversity jurisdiction out of a concern that state courts would be prejudiced against litigants from out of state. They believed that federal courts would serve as neutral forums in which citizens of one state would not be favored over those from another state. As Chief Justice John Marshall explained in Bank of the United States v. Deveaux (1809), “However true the fact may be, that the tribunals of the states will administer justice as impartially as those of the nation, to parties of every description, 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.”
The Supreme Court has clarified the two requirements for diversity jurisdiction. The Court has strictly interpreted the requirement that the case involve citizens from different states, holding in the case of Strawbridge v. Curtiss (1806) that there has to be “complete diversity” so that all the plaintiffs must be citizens of different states than all the defendants. In addition, the Court has held that the citizenship of an individual is determined by the state of his or her domicile at the time the case is filed, while a corporation is considered to be a citizen of its state of incorporation and the state where it has its principal place of business. In determining the required jurisdictional amount, the Court held in St. Paul Mercury Indemnity Co. v. Red Cab Co. (1938) that the sum claimed by the plaintiff controls whether the requirement is met, as long as it is made in good faith.
Bibliography
James, Fleming, et al. Civil Procedure. 5th ed. Foundation Press, 2001.
Noonan, John Thomas. Narrowing the Nation’s Power: The Supreme Court Sides with the States. University of California Press, 2003.
Wright, Charles A. Law of Federal Courts. 8th ed. West Publishing, 2017.