Concept
Complete Diversity
Diversity jurisdiction
Complete Diversity
Section 1332(a)(1) gives the district courts original jurisdiction over civil actions between “citizens of different States.”1 With one plaintiff and one defendant, those words pose a single question: are the two citizens of different States? Real captions carry several parties on each side, and the statute does not say how to compare them. The complete-diversity requirement answers that question, and in doing so it makes the lineup of parties as important as the dollar amount. Each added party raises the chance that some plaintiff and some defendant share a State, so a case that looks diverse at first glance can fail on a single pair.
Three questions organize this unit. The first is what complete diversity requires and how to apply it to a crowded caption. The second is whether the Constitution or the statute imposes the requirement, a question that decides whether Congress may loosen it, and in some settings Congress has. The third is how a court decides which side a party stands on when the caption and the real dispute disagree.
The Strawbridge Rule
Strawbridge v. Curtiss (1806) supplied the rule. Plaintiffs from Massachusetts sued jointly, in a Massachusetts federal court, defendants from Massachusetts and Vermont, and Chief Justice Marshall held that this partial diversity would not suffice: every plaintiff must be a citizen of a State different from that of every defendant.2 The Vermont defendant was a stranger to the plaintiffs, yet that one diverse pairing could not carry a caption that also set Massachusetts citizens against one another.
In Exxon Mobil Corp. v. Allapattah Services, Inc., the Supreme Court put the rule in modern terms: in a case with multiple plaintiffs and multiple defendants, a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action.3 That sentence holds two commands. No plaintiff may share a State with any defendant, and one violation removes the whole action from the court’s original jurisdiction, including claims between parties who are fully diverse. A New York plaintiff who sues one Virginia defendant and one New York defendant shows the point: the shared State of New York defeats jurisdiction even though the Virginian is a stranger to the plaintiff.4
A six-party caption tests the rule. The comparison runs across the “v.”: every plaintiff must differ in State citizenship from every defendant, and the quickest check is to list the States on each side and look for an overlap.
That caption meets the weaker standard of minimal diversity, which asks only whether at least one plaintiff differs in citizenship from at least one defendant; adding parties from any State would not change the result.5 The statute demands more, because the Strawbridge holding still governs cases under § 1332(a).6 The next subsection explains why the Constitution tolerates that gap. For now, note that counting diverse pairings answers nothing, because one overlapping State on opposite sides ends the inquiry.
Parties on the same side face no such test. A Texan and an Oklahoman may join as plaintiffs against a New Yorker, because neither the statute nor the Constitution requires the parties on one side to share a State of citizenship.7 Nor does it matter if they do share one.
The place where the plaintiff files does not enter the comparison. A California plaintiff who sues a California defendant in a federal court in Illinois gains nothing from the Illinois forum, because the crucial question is where the opposing parties live, not where they sue.8 Students who carry the habits of personal jurisdiction into this analysis will misread captions. The State where the dispute arose is equally irrelevant.
The rule takes this shape because of what diversity jurisdiction is for. The grant supplies a federal forum for important disputes in which state courts might favor, or appear to favor, home-state litigants.9 When citizens of the same State stand on both sides of a case, that worry loses its force, and with it a principal reason for hearing any of the claims in federal court. Strawbridge itself offers little analysis, but it may reflect this concern: with Massachusetts citizens on both sides, a Massachusetts court would have had little reason to discriminate against the Vermonter on the basis of state citizenship, at least where the Vermonter’s legal interests matched those of the Massachusetts parties.10 The rule also has a structural logic. A New York plaintiff could not sue a New York defendant alone in federal court, and joining diverse co-defendants would let the drafting of the caption accomplish what the parties’ citizenship cannot.11 Marshall is reported to have regretted the decision, yet with two important exceptions the rule has been followed consistently ever since.12
Because the defect lies in the lineup of the whole case, the court cannot keep the diverse portion and discard the rest. Supplemental jurisdiction, which has its own reading, can attach additional claims only to an action that already falls within original jurisdiction. Incomplete diversity destroys original jurisdiction over every claim, so supplemental jurisdiction has nothing to attach to.13 Plaintiffs facing a defective lineup may sometimes repair it, a point taken up later in this chapter under curing defects by dropping parties.
The third step does the real work. Co-citizens on the same side drop out, and so does the number of diverse pairings; a long caption with one overlapping State fails, while a short caption with no overlap succeeds.
Minimal Diversity and Article III
Article III extends the federal judicial power to controversies “between Citizens of different States,” and the Supreme Court has read that phrase to demand no more than minimal diversity: so long as one party on the plaintiffs’ side and one on the defendants’ side are citizens of different States, Congress may authorize the federal courts to hear the case.15 The Court settled the point in State Farm Fire & Casualty Co. v. Tashire, an interpleader action, which is a proceeding that makes rival claimants to a limited fund present their claims in one case so that inconsistent judgments become less likely.16 Tashire observed that Chief Justice Marshall had purported to construe only the words of the act of Congress and not the Constitution itself, and it added that Article III poses no obstacle to extending diversity jurisdiction “so long as any two adverse parties are not co-citizens.”17
That holding separates two questions that students often run together. Article III does not itself give the district courts their jurisdiction. As Kline v. Burke Construction Co. put it, the Constitution marks the boundary of what Congress may confer on the lower courts, and within that boundary Congress may give, withhold, or restrict jurisdiction at its discretion.18 A district court therefore needs both a case within the constitutional grant and a statute that actually conveys jurisdiction over it.19
A case can clear the first hurdle and fail the second. Tashire held only that the Constitution does not require complete diversity; it left the general diversity statute untouched, so § 1332(a) still carries Strawbridge’s reading except where Congress has authorized something less.20 The statute repeats the constitutional phrase, but identical words need not mean identical things, and statutory language lifted from Article III has received a narrower reading than the constitutional text in other settings too.21 Lodging the limit in the statute has a practical payoff. Congress can lift it for one device by passing a new statute, whereas a constitutional rule would have weakened statutory interpleader.22
Two minimally diverse lineups show how the outcome turns on the statute. Adams, a Massachusetts citizen, sues Madison of Virginia and Gerry of Massachusetts. The case is “between citizens of different states” within Article III, because Adams and Madison are adverse and diverse. It cannot be brought in federal court under § 1332(a), however, because Gerry shares Adams’s citizenship and the statute still demands complete diversity.23 Now suppose a stakeholder files statutory interpleader against one New York claimant and four Minnesota claimants. That case reaches federal court even though most of the claimants share a State, because § 1335 asks only that the stakeholder hold money or property worth more than $500, that two or more claimants be diverse, and that the stakeholder deposit the property with the court or give a bond.24 Both lineups lie inside the Article III grant, so the fact that moves the answer is the statute under which the plaintiff sues. The money requirement works the same way, since each statute sets its own: interpleader asks for more than $500 in value, not $75,000. The common error is to spot one diverse plaintiff-defendant pair, call the case diverse, and skip the statutory question.
Congress has used minimal diversity elsewhere. In 2002 it enacted the Multiparty, Multiforum Trial Jurisdiction Act, which gives the district courts jurisdiction over claims arising from mass torts that cause the deaths of more than seventy-five people.25 The Class Action Fairness Act of 2005 confers jurisdiction over qualifying class actions where “any member of a class of plaintiffs is a citizen of a State different from any defendant.”26 Congress passed CAFA because corporate defendants and others feared that state courts were not treating class action defendants fairly and that strict jurisdictional rules left major class actions in state court.27 CAFA’s rule sits in § 1332 beside subsection (a) but states a different lineup rule, so the section number alone does not tell a student which rule applies; the subsection does. The class action section later in this chapter develops CAFA’s other requirements.
The dollar floor in § 1332(a) is likewise a purely statutory choice. Article III contains no amount-in-controversy limit,28 so a $35,000 dispute between an Oregon citizen and an Idaho citizen lies within the constitutional grant but outside what Congress has authorized. Congress could raise the threshold to $10 million, or strike the figure from § 1332(a) entirely, by ordinary legislation, because Article III permits diversity jurisdiction without regard to the sum in dispute and Congress may confer less than the whole.29
A case in which no plaintiff differs in citizenship from any defendant fails at the first step, and no statute can rescue it, because Congress cannot extend jurisdiction beyond the boundaries Article III fixes.30 The third step is where most multi-party cases are decided, since a lineup that satisfies Article III must still satisfy the narrower words of the statute under which it is filed.
Realignment of Parties
The complete-diversity comparison runs across the “v.,” so the side a party stands on decides whom it is compared with. The plaintiff writes the caption, though, and the pleadings do not settle who is truly adverse. The court looks past them and arranges the parties according to their real interests in the litigation.32 That rearrangement is called realignment, and it can create complete diversity where the caption showed none or destroy it where the caption appeared to show it.
Jurisdiction cannot be allowed to depend on drafting. If the caption controlled, whoever wrote it could pick the forum, and complete diversity would become a matter of choosing words. A party therefore cannot create diversity that would not otherwise exist by aligning the parties in the pleadings contrary to their real interests; the court realigns them before it answers the jurisdictional question.33 The limit follows from what jurisdiction is: a question of power as between the United States and the several States, which a pleader’s labels have no authority to enlarge.34
The inquiry asks which side of the actual controversy each party’s stake puts it on. The position a party takes as the litigation proceeds may be considered in deciding how that party should have been aligned in the first place.35 Realignment differs from ignoring a party. A merely nominal or formal party, one with no real interest in the controversy, drops out of the count, so its citizenship neither helps nor hurts, and the fraudulent joinder of a defendant who shares the plaintiff’s citizenship likewise does not defeat removal.36 A realigned party has a genuine stake, so its citizenship still counts, but it counts on the side where its interest lies.
A shareholder derivative action shows realignment at work. The shareholder sues on behalf of a corporation to redress a wrong done to the company, and the corporation is named because the claim belongs to it. The complaint may list the corporation as a plaintiff, yet when its management is antagonistic to the shareholder’s claim, the corporation’s real interest lies with the defendants, and the court treats it as one.37 That is why a derivative suit can proceed in federal court when the plaintiff shareholder is not a citizen of the same State as the corporation or the other named defendants: the shareholder is compared with all of them.38
A caption can mislead in the other direction, which is why reading it alone fails in both lineups.
The outcome rests on real interest. A corporation whose management joins in pressing the claim has no reason to be moved from the plaintiffs’ side, and the labels in the pleadings are only a starting point.
Omitting a party does not escape the rule either. A plaintiff cannot avoid complete diversity by leaving out a party whose citizenship would destroy it if that party is indispensable to the litigation. If Rule 19 does not require joinder, however, the plaintiff may leave the party out and obtain federal jurisdiction.39
The second step does the real work in a derivative suit, where the corporation’s label and its interest point in opposite directions, and a student who skips it will count the wrong parties on the wrong sides.