A. Constitutional provision: The constitutional grant of jurisdiction based on diversity of citizenship extends to “Controversies…between Citizens of different states… and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.” (Art. III, §2.) This grant is repeated in a statute, 28 U.S.C. §1332.
Example: P, a citizen of New York, sues D, a citizen of California, in a cause of action arising out of an automobile accident. P claims damages of $100,000. Even though this suit does not involve any federal question, and P’s right to recover will be determined exclusively by reference to state law, the case may be heard in federal court. This is because P and D are citizens of different states.
1. Rationale for diversity: The rationale for the existence of diversity jurisdiction has traditionally been that it offers a federal forum for an out-of-state litigant who would be exposed to local prejudice if suit was held in state court.
a. Criticism: But if local prejudice is really the reason for the existence of diversity jurisdiction, it is hard to see why a plaintiff who is a citizen of the forum state is able to choose to sue in federal court, even if the out-of-state defendant does not wish a federal forum.
2. Possible abolition of diversity: The constitutional grant of diversity jurisdiction is permissive, rather than mandatory, in nature. Therefore, Congress is free to redraft the federal jurisdiction statutes to curtail or abolish diversity. Several recent sessions of Congress have seen attempts to do this. There appears to be substantial Congressional support for either a complete abolition of diversity jurisdiction or a substantial curtailment of it (e.g., a limitation to cases where the plaintiff is a non-resident of the state where the district court sits).
3. Amount in controversy: In all cases in which diversity is the sole basis for jurisdiction, the amount in controversy must exceed $75,000. See the section on Jurisdictional Amount, infra, p. 138.
B. Complete diversity required: In order to invoke diversity, it must be the case that no plaintiff is a citizen of the same state as any defendant. (This does not prevent a pair of plaintiffs, or a pair of defendants, from being co-citizens.) This is the rule of “complete diversity,” and is probably the single most important thing to remember about diversity jurisdiction.
Example: P1, P2 and P3 are all citizens of Michigan. P4 is a citizen of Ohio. D1, D2 and D3 are all citizens of California. D4 is a citizen of Ohio. These plaintiffs cannot bring a joint diversity suit against these defendants, because P4 and D4 are citizens of the same state. Because it is not the case that no plaintiff is a citizen of the same state as any defendant, the required “complete diversity” is absent.