Diversity jurisdiction

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.

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 1789Judiciary 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 1990’s.

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[case]Bank of the United States v. Deveaux[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[case]Strawbridge v. Curtiss[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 made in good faith.

Diversity jurisdiction Summary