The Diversity Statute

Diversity Jurisdiction in Federal Court

The Diversity Statute

Section 1332(a) of Title 28 puts diversity cases in the district courts. It gives them “original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between” parties in one of four listed alignments.¹ Original jurisdiction means the plaintiff may file in federal court in the first instance. That one sentence sets two requirements: an amount in controversy above $75,000, counted without interest and costs, and parties who stand in a listed alignment. A case needs both, and every later section of this chapter works out what one requirement or the other demands.

Two Requirements, Four Alignments

The amount requirement is a number. The citizenship requirement is a menu, and the case must fit one of its four entries:

1. Subsection (a)(1) covers actions between citizens of different States. This is the ordinary alignment and the one most of this chapter concerns.²
2. Subsection (a)(2) covers actions between citizens of a State and citizens or subjects of a foreign state. A proviso withholds jurisdiction when the foreign citizens are lawfully admitted for permanent residence in the United States and are domiciled in the same State as the state citizen.³
3. Subsection (a)(3) covers actions between citizens of different States in which citizens or subjects of a foreign state appear as additional parties.⁴
4. Subsection (a)(4) covers actions in which a foreign state, as defined in 28 U.S.C. § 1603(a), is the plaintiff and the defendants are citizens of a State or of different States.⁵

The statute defines “States” more broadly than the fifty. As used in § 1332, the word includes the Territories, the District of Columbia, and the Commonwealth of Puerto Rico, so a citizen of any of them counts as a state citizen under subsection (a)(1).⁶ Without that definition, a District of Columbia citizen would fit neither the state-citizen category nor the foreign-citizen category.

The two requirements work independently, and a case that fails either one cannot stay in federal court. A Missouri citizen who sues an Arkansas citizen on a $25,000 contract claim has diverse parties but falls below the dollar floor, so the claim belongs in state court.⁷ A California citizen who sues an Oregon citizen over a car accident and claims more than $75,000 clears both requirements, because the parties are citizens of different States and the amount exceeds the threshold.⁸

The Missouri-Arkansas claim and the Ohio lease fail for different reasons: one is too small, the other lacks diverse parties. A complete analysis therefore tests each requirement separately and names the one that fails.

The statute also stops short of everything the Constitution allows. Article III extends the federal judicial power to controversies between citizens of different States, and to controversies between a State or its citizens and foreign states, citizens, or subjects.⁹ That grant does not enact itself. Congress must pass a statute to exercise it, and Congress may grant less than the Constitution affords but not more.¹⁰ Section 1332(a) grants less in two ways. It adds a dollar floor, which Article III lacks, and under Strawbridge v. Curtiss it requires complete diversity: every plaintiff must be a citizen of a different State from every defendant when suit is brought. Article III itself is satisfied when only some opposing parties are diverse.¹¹ A case seeking diversity jurisdiction must therefore satisfy the statute as well as the constitutional standard, and the sections on complete diversity and minimal diversity take up that gap in detail.

Why the Grant Is Limited

The Framers evidently created diversity jurisdiction to give litigants a neutral forum where local bias is a risk.¹³ A party who must sue or defend in the other side's home courts may doubt that local judges, many of them elected, will treat an outsider fairly. The Framers, many of them men of means, also feared that state courts would not adequately protect out-of-state creditors trying to collect from local citizens. They expected more even-handed treatment from federal judges, who are appointed for life by a government with a national perspective.

Congress has always limited its grant of diversity jurisdiction, and the dollar floor is the plainest example.¹⁴ The floor assures that only the more significant diversity cases reach the federal courts, which controls the federal caseload, and it protects small litigants from what may be the increased costs of federal litigation.¹⁵ The limits matter in practice because about a third of the cases filed in federal court rest on diversity.¹⁶ A case that falls short is not lost. State courts are presumed capable of hearing all manner of claims, and the party who fails the federal test simply litigates there.¹⁷

Proving Jurisdiction, and When It Can Be Challenged

State courts are courts of general subject matter jurisdiction, presumed able to hear all manner of claims.¹⁸ Federal diversity jurisdiction runs the other way. It exists only because Congress wrote a statute conferring it, so the party who wants the federal forum must show that the statute is satisfied.¹⁹

The showing begins in the pleading. Rule 8(a)(1) requires a short and plain statement of the grounds on which the court's jurisdiction depends, and in a diversity case that means alleging the citizenship of each party. An allegation of residence will not do. A corporation is treated for jurisdictional purposes as a citizen of a State, so the pleading must say where it is incorporated and where it has its principal place of business.²⁰

The burden then extends to proof. In Mas v. Perry, the Fifth Circuit stated that the burden of pleading diverse citizenship rests on the party invoking federal jurisdiction and that, if jurisdiction is properly challenged, the same party must prove it.²¹ When a defendant mounts a factual challenge, the plaintiff must submit evidence and prove jurisdiction by a preponderance, and no presumption of truthfulness attaches to the complaint's allegations.²²

A jurisdictional defect cannot be waived or cured by consent. A party, or the court itself, may raise it at any time, even for the first time on appeal, and Rule 12(h)(3) codifies that norm.²³ The reason lies in what jurisdiction allocates. Questions of federal jurisdiction are questions of power as between the United States and the several States, so the parties cannot enlarge federal power by agreeing to it or by staying silent.²⁴

Belleville Catering Co. v. Champaign Market Place LLC shows how hard the rule falls on lawyers. Plaintiffs' counsel assumed that Belleville Catering was a Missouri corporation because the lease between the parties called it one, although the company had always been incorporated in Illinois.²⁵ The court of appeals held counsel on both sides to the same standard. A court lacks discretion to consider the merits of a case over which it has no jurisdiction, and lawyers for defendants as well as plaintiffs must investigate rather than assume jurisdiction, beginning with the legal rules that determine whose citizenship matters. The defendants' lawyers had failed to learn those rules too.²⁶

A dismissal for lack of jurisdiction ends only the federal filing. It is not a decision on the merits, and the plaintiff remains free to sue in a court that does have jurisdiction.²⁷ A plaintiff may also choose state court from the start, because diversity jurisdiction is concurrent with state-court jurisdiction and the plaintiff need not sue in federal court.²⁸