Complete Diversity Rule

Complete Diversity Rule

The first requirement the statute adds beyond Article III concerns how the parties line up. Section 1332(a)(1) gives the district courts jurisdiction over civil actions between citizens of different States,¹ but when several parties appear on each side of the caption, the phrase raises a question the words alone do not answer. It could mean that one plaintiff and one defendant must be from different states, or that every plaintiff must differ from every defendant. Since Strawbridge v. Curtiss, the statute has been read the second way. 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.²

The reason for reading the statute this strictly comes from the purpose diversity jurisdiction serves. The federal forum exists to give an out-of-state litigant protection against a state court that might favor, or be perceived as favoring, a home-state party. When citizens of the same State sit on opposite sides of the case, that concern no longer applies to the dispute as a whole, so the Court has treated the loss of the principal reason for jurisdiction as a reason to withhold it from every claim in the action.³ The consequence is all-or-nothing. Incomplete diversity destroys original jurisdiction over all claims, so no remaining claim is left for supplemental jurisdiction to attach to.⁴ Carden v. Arkoma Associates later restated the same rule as the settled construction of the diversity statute,⁵ and the discussion below turns to how to apply it.

Applying the Cross-Party Test

Co-plaintiffs may share a state with each other, and so may co-defendants, because those pairings never appear in step three. A Texan and an Oklahoman who join as plaintiffs against a New York defendant satisfy the rule, since neither the statute nor the Constitution requires the parties on one side to come from the same state.⁶ Imagine two Missouri plaintiffs suing three Kansas defendants. The plaintiffs are co-citizens and so are the defendants, but no plaintiff shares a state with any defendant, and diversity is complete.

Changing one fact reverses the answer. If the Texan and the Oklahoman sue two defendants, one from New York and one from Texas (or Oklahoma), jurisdiction fails, because one plaintiff-defendant pairing shares a state.⁷ The same happens when a New York plaintiff sues a Virginia defendant and a New York defendant together: the Virginian is diverse from the plaintiff, but the New Yorker is not, and the case fails.⁸ Now take six parties. Plaintiffs from New York, New York, and Texas sue defendants from Florida, Florida, and Texas. Most pairings are diverse, but the Texas plaintiff and the Texas defendant destroy the rule for the whole suit, and the court cannot keep the diverse claims while dropping the others.

A jurisdictional defect of this kind can sometimes be repaired. Under Rule 21, a court may preserve complete diversity by dismissing a nondiverse party, so long as that party is not indispensable under Rule 19.⁹ The repair is available because a party who is merely proper, such as a joint tortfeasor, has a citizenship that counts once the party is joined, but the plaintiff may choose to drop that party. A party who is indispensable cannot be dropped, so the dismissal route is closed.¹⁰

Statute, Not Constitution

Because the complete diversity requirement is a construction of the statute, it does not mark the limit of the constitutional grant. Article III requires only minimal diversity, meaning that one party on the plaintiffs' side and one on the defendants' side are citizens of different states.¹¹ State Farm Fire & Casualty Co. v. Tashire confirmed that Chief Justice Marshall in Strawbridge construed only the words of the act of Congress and not the Constitution, so Congress may authorize jurisdiction on less than complete diversity.¹² Take a New Mexico plaintiff who sues a Utah defendant and a New Mexico defendant. Minimal diversity exists, so Article III permits the case, but § 1332(a) as construed requires complete diversity, and the federal court therefore has constitutional but not statutory authority.¹³

That gap explains why the rule bends only where Congress has said so. The interpleader statute, 28 U.S.C. § 1335, requires only two adverse claimants of diverse citizenship. A Minnesota stakeholder holding a fund can therefore sue in federal court when one claimant is from New York and four are from Minnesota.¹⁴ Congress also relaxed the rule in the Class Action Fairness Act of 2005, which reaches certain class actions over $5 million when diversity exists between any plaintiff class member and any defendant, and it has done the same for certain mass-disaster cases.¹⁵ The class-action details come later in the chapter. The relaxation is limited to the statutes that provide it, and the general diversity statute continues to require complete diversity.¹⁶

Supplemental jurisdiction cannot be used to get around the requirement. A Nebraska plaintiff who sues an Iowa defendant on a state-law theory cannot add a claim against a second, Nebraska defendant and then rely on supplemental jurisdiction, because that would turn full diversity into minimal diversity.¹⁷ The supplemental jurisdiction statute is written so that it cannot be used to thwart complete diversity.¹⁸