In the last tutorial, we discussed the topic of personal jurisdiction--i.e. the power of the federal courts to exercise decisional authority over a particular person. In this tutorial, we'll discuss a different, yet arguably even more crucial type of jurisdiction, namely subject matter jurisdiction, which is the power of federal courts to hear certain kinds of cases, or to exercise authority over certain kinds of disputes. Stated differently, while "personal jurisdiction" involves power over the litigants, "subject matter jurisdiction" involves power over the case itself--power to adjudicate the legal and factual substance of the claims asserted.

I. Two sources of subject matter jurisdiction

Subject matter jurisdiction is crucially important, so much so that, if a federal court at any point during the case finds that it lacks subject matter jurisdiction (even on appeal to the Supreme Court), it must dismiss the case. The federal courts derive their subject matter jurisdiction from two basic sources: the Constitution, and congressional statutes. The Constitution provides for the broadest grant of subject matter jurisdiction: Congress cannot expand the subject matter jurisdiction of the federal courts beyond what the Constitution provides, but it can narrow or restrict the kinds of cases a federal court can hear, so that Congress can forbid federal courts from hearing certain disputes even if the Constitution would otherwise permit it.

II. Diversity jurisdiction

With that preface, let's talk about one of the more important grants of subject matter jurisdiction in the Constitution: Diversity jurisdiction. Article III, Section 2, Clause 1 of the Constitution provides that the judicial power of the United States (i.e. the subject matter jurisdiction of the federal courts, or their power to hear certain kinds of cases) shall extend to, among other things, controversies "between citizens of different states." The statutory grant of diversity jurisdiction is found in 28 U.S.C. 1332(a), which provides that the federal district courts shall have jurisdiction over, among other things, civil actions "between citizens of different states" where the amount in controversy exceeds the sum of $75,000. Here, we must make note of the fact that the statutory grant of diversity jurisdiction from Congress is substantially narrower than the constitutional grant of diversity jurisdiction in 2 important respects. First, the term "citizens of different states" as used in 28 U.S.C. 1332(a) does not mean the same thing as it does when used in Article III, Section 2, Clause 1 of the Constitution. The Constitution only requires "simple diversity," while the Supreme Court has construed the statute to require "complete diversity" (imparting a different meaning to the statute than to the Constitution, even though they use the same wording). State Farm Fire & Casualty co. v. Tashire, 386 U.S. 523, 530-531 (1967). "Simple diversity" is satisfied where one plaintiff is a citizen of a different state than at least one defendant; thus, the fact that one plaintiff is a citizen of the same state won't necessarily defeat simple diversity, so long as one plaintiff is diverse from one defendant. "Complete diversity" means that no plaintiff can be a citizen of the same state as any defendant. Ezekiel v. Jones Motor Co., 377 F.Supp. 273, 275 (D. Mass. 1974).

A. Differentiating between simple diversity and complete diversity

In order to understand the difference between simple diversity and complete diversity, it becomes helpful to imagine the "v." as a line of demarcation, separating all the plaintiffs from all the defendants; plaintiffs are on one side, and defendants are on the other side. The basic question is whether anybody on the plaintiffs' side of the "v." has the same state "citizenship" as anybody on the defendants' side of the "v.," and it does not matter whether one plaintiff shares the same state citizenship with another plaintiff, or whether one defendant has the same state citizenship as another defendant. Let's consider a hypothetical lawsuit, "Plaintiffs 1, 2, and 3 v. Defendants 1, 2, and 3." Suppose Plaintiffs 1 and 2 are both citizens of New York, and Plaintiff 3 is a citizen of Arkansas; further suppose that Defendant 1 is a citizen of Hawaii, Defendant 2 is a citizen of Kansas, and Defendant 3 is a citizen of Arkansas. Under this scenario, "simple diversity," or "constitutional diversity," is satisfied; Plaintiff 3 and Defendant 3 are both citizens of Arkansas, but that's okay, because Defendants 1 and 2 have different citizenship from Plaintiffs 1 and 2.

Remember, under "simple diversity," so long as one party on the plaintiffs' side of the "v." has different citizenship from one party on the defendants' side of the "v.", there is sufficient diversity of citizenship for constitutional purposes. However, our example fails the test for complete diversity, because in order for there to be complete diversity, no one on the plaintiffs' side of the "v." can have the same state citizenship as anybody on the defendants' side of the "v." Here, Plaintiff 3 is a citizen of Arkansas; Defendant 3 is also a citizen of Arkansas; therefore, complete diversity fails under the statute, and there is no federal subject matter jurisdiction unless the parties can establish a basis other than diversity jurisdiction (such as "federal question" jurisdiction, which we'll cover in the next clip).

B. Other considerations

One last point to bear in mind: The date to which courts will look in order to determine whether sufficient diversity exists is the date the lawsuit is commenced, not the date on which whatever even gave rise to the lawsuit actually occurred. Thus, if the parties were diverse on the day of the event, but a party's citizenship changes so that they are no longer diverse on the day of the lawsuit (because, for example, somebody moved), then there will be no diversity jurisdiction. Conversely, if the parties are sufficiently diverse on the day of the lawsuit, but cease to be afterwards due to a change in one party's state citizenship, then that will not destroy diversity jurisdiction. Nevertheless, while a change in a party's state-citizenship will not destroy diversity jurisdiction if it existed on the day the lawsuit was filed, the introduction of an additional party to the lawsuit after it is commenced, who has the same state citizenship as someone on the other side of the "v" will destroy diversity jurisdiction and thereby require the federal court to dismiss or otherwise give up the case (unless there is another basis for subject-matter jurisdiction).

C. Amount-in-controversy requirement

The need for "complete diversity" is one respect in which the statutory grant of diversity jurisdiction is narrower than the constitutional grant; still another is the "amount in controversy" requirement of more than $75,000, which is not mentioned anywhere in the Constitution but nevertheless appears in 28 U.S.C. 1332(a). When the statute says that the "matter in controversy must exceed the sum or value of $75,000," it means (put very simply) that the plaintiff(s) must actually sue the defendant(s) for an amount greater than $75,000, even if plaintiff ultimately recovers less than that or nothing at all. If the plaintiff sues the defendant for more than $75,000, he will almost always be taken at his word and the amount-in-controversy requirement will be satisfied, so long as it appears that the plaintiff claimed the amount in good faith, unless it appears to a legal certainty from the face of the complaint, etc. that there is no way the plaintiff can possibly recover more than $75,000.

D. Aggregation of claims

Now, having covered the basic concept of the amount-in-controversy requirement, let's delve into the issue of aggregation of claims. Sometimes one plaintiff sues multiple defendants, or asserts multiple claims against one defendant, or sometimes multiple plaintiffs join together and sue one or more defendants for one or more claims. Where multiple claims are asserted, it is often the case that one claim on its own does not meet the "more than $75,000" requirement, so that the only way that diversity jurisdiction will be met is if the plaintiff(s) is/are permitted to add claims together so that the total sum exceeds $75,000. The rules on aggregation of claims are a bit arcane, but we endeavor to set them forth here in a clear, concise way. First, where a plaintiff brings multiple claims against a single defendant in a single lawsuit, the amount-in-controversy requirement is met even if none of the individual claims exceeds $75,000, so long as all the claims add up to an amount greater than $75,000, whether they arise from the same incident or not--bearing in mind that each claim must be based on distinct harms or losses, and not alternative theories of liability made in order to recover the same "pot" of damages for essentially the same thing. However, matters get thornier where more than one party appears on either the plaintiffs' or the defendants' side of the "v." Where a single plaintiff sues multiple defendants in a single lawsuit, he cannot add the claims against Defendant 1 to the claims against Defendants 2, 3, and 4 in order to reach an amount greater than $75,000; the amount-in-controversy requirement must be met as to each respective defendant. Also, suppose that Plaintiffs 1, 2, and 3 join together for reasons of convenience to sue Defendant 1 only; generally, the 3 plaintiffs cannot add the amounts of their respective claims together in order to reach an amount greater than $75,000, unless the separate plaintiffs are joining together "to enforce a single title or right in which they have a common and undivided interest," such as a situation where all the plaintiffs are tenants in common with respect to a single piece of real property. See id. The upcoming quizzes and test will give you some examples which will help you to apply these strange rules.

E. Other bases for federal diversity jurisdiction

Besides controversies "between citizens of different states," the above-mentioned constitutional and statutory provisions also set forth other bases for federal diversity jurisdictions, besides matters "between citizens of different states." They include matters between: Citizens of a State and citizens or subjects of a foreign state; Citizens of different States and in which citizens or subjects of a foreign state are additional parties; A foreign state (as plaintiff) and citizens of a state or different states. 28 U.S.C. 1332(a)(1)-(3).

1. Citizenship: natural persons

There's one last issue we need to address before we leave the topic of diversity jurisdiction--namely, how do we determine the particular state of citizenship for any particular party? The rules that govern the citizenship determination differ depending on whether the particular party is a natural, flesh-and-blood person or an artificial entity like a corporation. First, we'll deal with natural persons. Usually, natural persons can have only one state of citizenship at a given time, and that state will be the state of their "domicile." "Domicile" here is a term of art that does not mean the same thing as "residence"; indeed, a natural person can have more than one "residence," but among those multiple residences, there can be only one domicile. See id; Miss. Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 48 (1989). "Domicile" in a particular state requires the convergence of 2 basic elements: (1) Objective physical presence in the state, and (2) subjective intention by the party to remain there indefinitely. Washington v. Hovensa LLC, 652 F.3d 340, 344 (3rd Cir. 2011).

Anytime these two elements coincide, domicile is established; once domicile is established, it is presumed to continue forward until somebody shows that the party acquired a new domicile, which change can be done instantly if the 2 elements coincide again in a different place than they did before; even so, this presumption generally makes it tougher to show a change in domicile than to show a continuation of domicile. Id. at 345. The "presence" element of domicile is easy, but the "intent to remain there indefinitely" is a tough one, because it involves evaluating a party's subjective state of mind; in determining "domicile," courts will usually look at all the facts and circumstances in order to ascertain "the center of [the party's] business, domestic, social, and civic life," which in turn will often be the best objective indicator of where the individual subjectively intends to remain indefinitely. See id. at 344.

2. Citizenship: artificial entities

Now that we've discussed "citizenship" as it applies to natural persons, let's talk about how we determine the states where an artificial entity (like a corporation) is a citizen. Note that I did not just misspeak--I said "states," plural, where an artificial entity is a citizen, and that is correct, because under 28 U.S.C. 1332(c)(1), a corporation is a citizen of two (yes, 2) states: (1) The state where it was incorporated; (2) The state where it has its "principal place of business." These can be the same state, but they often aren't, meaning that many corporations are in fact citizens of two states simultaneously for purposes of diversity jurisdiction. Number 1 (state of incorporation) is easy: Just look at the appropriate business and governmental records to find out where the corporation was incorporated. Number 2 (principal place of business) has proven to be infinitely more troubling for courts and litigants over the years; until very recently, the courts were badly divided over just what was the proper "test" for determining "principal place of business." Some courts held that the "principal place of business" was the place where (to oversimplify it drastically) the corporation carried on the majority of its most important business and other activities, or the "center of gravity" or the primary locus of its operations. Other courts adopted a "nerve center" test which simply asked where the corporation's activities were centrally directed by its officers, directors, and managers, with that place being the "principal place of business." In 2010, the Supreme Court (in an attempt to settle the decades of division in the courts) basically came down in favor of the "nerve center" test and decided that a corporation's "principal place of business" consisted of the place where the "corporation's officers direct, control, and coordinate the corporation's activities"; that place is usually the corporation's headquarters, "provided that the headquarters is the actual center of... control... and not simply an office [where board meetings are held]." Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010)

Up Next:

Okay, that does it for diversity jurisdiction; next up, we'll discuss another species of federal subject matter jurisdiction, namely "federal question" jurisdiction. But first, a short quiz.