Congress has conferred upon federal courts
jurisdiction to decide federal
questions i.e., cases or controversies arising under the Constitution
and laws of the United States (28
U.S.C. § 1331) and cases or controversies between citizens of
different states (diversity jurisdiction). (28
U.S.C. § 1332.) There is a presumption against federal jurisdiction.
The existence of subject matter jurisdiction generally must be demonstrated
at the outset by the party seeking to invoke it. (See FRCP
8) It cannot be conferred by consent of the parties, nor can its absence
be waived. (Friedenthal § 2.2) The rule that a suit arises
under the Constitution and laws of the United States only when the plaintiff's
statement of his own cause of action so demonstrates is called the "well
pleaded complaint rule."
Diversity Jurisdiction
In diversity cases the subject matter jurisdiction
of the federal courts is defined by who the parties to the lawsuit are
rather than the subject matter of the underlying dispute. Federal
subject matter jurisdiction exists in cases where the opposing parties
are citizens of different states and the amount in controversy exceeds
$75,000 exclusive of interests and costs. (28
U.S.C. § 1332) "Citizenship" is synonymous with "domicile"
and "domicile" means physical presence in the state coupled with the intent
to reside there indefinitely. There must be complete diversity of citizenship
between the parties on each side, i.e., all plaintiffs must be citizens
of different states than all defendants. The "rule of complete diversity"
holds that there is no diversity jurisdiction when any party on one side
of the dispute is a citizen of the same state as any party on the other
side. If any plaintiff shares a common citizenship with any defendant,
then diversity is destroyed and along with it federal jurisdiction.
(Strawbridge
v. Curtis, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806).)
Diversity Jurisdiction
Citizenship of Plaintiffs  Citizenship
of Defendants
and
Amount in Controversy > $75,000
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Citizenship of Corporations For
diversity purposes, corporations have dual citizenship. The state
of incorporation and where they have their chief place of business.
E.g., If Stooge Corporation, incorporated in Delaware and with its principal
place of business in California is a party to the suit, diversity is lacking
if any adverse party is a citizen of either Delaware or of California.
(Wright, § 27) It is generally accepted that a corporation can
have only one principal place of business for purposes of diversity jurisdiction.
Amount in Controversy
Diversity jurisdiction can be invoked only
if the amount in controversy exceeds the sum of $75,000 exclusive of interest
and costs. (See 28
U.S.C. § 1332) The words are interpreted literally.
If the matter in controversy is precisely $75,000 or less, there is no
jurisdiction. (Friedenthal § 2.8) Note, there is no amount
in controversy requirement for federal question cases. In determining
whether the amount in controversy requirement has been met, the court looks
to the sum demanded by the plaintiff in his complaint. (Wright, §
33)
Aggregation of Claims If a single
plaintiff has two entirely unrelated claims against a single defendant,
each for $40,000, he may sue in federal court since the aggregate of the
claims exceeds $75,000. If two plaintiffs each have a $40,000 claim
against a single defendant, they may not aggregate their claims, and may
not sue in federal court, no matter how similar the claims may be.
I.e., if a single plaintiff is suing a single defendant, FRCP
18 permits the plaintiff to join as many claims as he may have against
the defendant regardless of their nature, and the value of all the claims
is added together in determining whether the jurisdictional amount is met.
(Wright, § 36) Multiple plaintiffs with separate and distinct
claims must each satisfy the jurisdictional amount requirement. (Id.)
Counterclaims A counterclaim
is a claim that a defendant may have against a plaintiff. It may
or may not arise out of the same transaction that gave rise to the plaintiff's
claim. E.g., Moe backs his car into Curly while pulling out of the
parking lot. Curly sues Moe for his personal injuries. After
being served Moe decides to sue Curly for property damage to his car alleging
that Curly was negligent in not turning on his headlights. Moe may
sue Curly in a separate lawsuit or he may raise his claim in Curly's lawsuit
as a counterclaim. Because it arises out of the same transaction
as Curly's original claim it is called a compulsory counterclaim.
If Moe fails to sue on it now he loses his right to sue on it in the future.
Example 2. Same facts as above except
that Curly owes Moe money for some law school outlines that he sold him.
Moe may sue for this debt by making a counterclaim but since it does not
arise out of the transaction which gave rise to the original lawsuit, the
auto accident, the counterclaim is permissive, failure to assert the counterclaim
at this time does not waive Moe's right to sue on it in the future.
If the counterclaim is compulsory, it falls
within the ancillary jurisdiction of the court and may be heard regardless
of the amount. A permissive counterclaim on the other hand must have
an independent jurisdictional basis and therefore meet the jurisdictional
amount requirement. (Wright, § 37)
E.g., If Moe's counterclaim for property damage
is in the amount of $5,000 he may assert it even though it is below the
minimum amount in controversy. However, to be able to assert the
unpaid debt as a counterclaim it must be in excess of $75,000.
Supplemental Jurisdiction
Introduction Subject matter jurisdiction
in the federal courts is limited to that which is specifically conferred
by the Constitution and which Congress has empowered the courts to exercise.
However, federal jurisdiction may be exercised over claims which fall outside
these categories when those claims are joined in a single suit with a jurisdictionally
sufficient claim.
Supplemental jurisdiction allows a federal court to assert jurisdiction over claims that are sufficiently related or subordinated to an action properly within the court's subject
matter jurisdiction. Usually, it is invoked to permit a federal court
to adjudicate claims that technically are jurisdictionally defective because
they involve non diverse parties or are less than the requisite jurisdictional
amount. Under the unified umbrella of "supplemental jurisdiction," as long as there is one federal claim against one defendant, related state law claims against additional parties (whether added by plaintiff or defendant) may be adjudicated in federal court. 28 U.S.C.§1367 provides that in any action in which the federal court has jurisdiction over a federal claim, the federal court also has supplemental jurisdiction over state claims "that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the Constitution."
Removal
"Removal jurisdiction permits a defendant
to force the plaintiff to litigate certain actions in federal court, rather
than in the state forum, originally selected." (Friedenthal §
2.11) I.e., removal permits a defendant to "second-guess" the plaintiff's
choice of a state court.
Restrictions on Removal
All defendants must join in the petition for
removal.
Diversity cases are removable only if none
of the defendants is a citizen of the state in which the action is brought. (28 U.S.C. § 1441(b).)
For example, if a citizen of Utah sues a citizen of Texas in
the state court in Texas, defendant cannot remove if diversity is the
only basis for federal jurisdiction. The defendant could remove if
suit were brought in any other state. However, if jurisdiction is based on a federal question, even a resident defendant
may remove.
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