Jurisdiction and venue - Federal subject-matter jurisdiction (federal question, diversity, supplemental, and removal)

Learning Outcomes

After reading this article, you will be able to identify when federal courts have subject-matter jurisdiction, distinguish between diversity and federal question jurisdiction, apply the rules for supplemental jurisdiction, and determine when removal from state to federal court is proper. You will be able to answer MBE questions on these topics with confidence and avoid common exam pitfalls.

MBE Syllabus

For MBE, you are required to understand the principles governing federal subject-matter jurisdiction. This article covers:

• The distinction between federal question and diversity jurisdiction.
• The requirements for diversity jurisdiction, including complete diversity and amount in controversy.
• The scope and limits of supplemental jurisdiction.
• The rules and restrictions for removal from state to federal court.
• The effect of lack of subject-matter jurisdiction and the ability to raise it at any stage.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is required for federal diversity jurisdiction?
   1. At least one plaintiff and one defendant are from different states.
   2. All plaintiffs are citizens of different states than all defendants, and the amount in controversy exceeds $75,000.
   3. The claim arises under federal law.
   4. The parties consent to federal court.
2. A plaintiff sues in state court on a state-law claim for $50,000. The defendant, a citizen of another state, wants to remove to federal court. Is removal proper?
   1. Yes, because the parties are diverse.
   2. Yes, because the defendant prefers federal court.
   3. No, because the amount in controversy requirement is not met.
   4. No, because only the plaintiff can remove.
3. Which of the following is true about supplemental jurisdiction?
   1. It allows federal courts to hear unrelated state-law claims.
   2. It can cure lack of complete diversity in all cases.
   3. It allows federal courts to hear additional claims that form part of the same case or controversy.
   4. It applies only to federal question cases.

Introduction

Federal courts are courts of limited jurisdiction. They may only hear cases authorized by the Constitution and federal statutes. The main types of subject-matter jurisdiction are federal question and diversity. Understanding the requirements and limits of each is essential for MBE success.

Key Term: Subject-Matter Jurisdiction The court's power to hear a particular type of case, determined by the nature of the claim or the parties, and not waivable by consent.

Federal Question Jurisdiction

Federal question jurisdiction exists when a plaintiff’s claim arises under the Constitution, federal statutes, or treaties. The federal issue must appear on the face of the plaintiff’s well-pleaded complaint.

Key Term: Federal Question Jurisdiction Jurisdiction based on a claim arising under federal law, as stated in 28 U.S.C. § 1331.

Diversity Jurisdiction

Diversity jurisdiction requires two elements:

1. Complete diversity—no plaintiff may be a citizen of the same state as any defendant.
2. The amount in controversy must exceed $75,000, exclusive of interest and costs.

Key Term: Diversity Jurisdiction Jurisdiction based on all plaintiffs being citizens of different states than all defendants, with an amount in controversy over $75,000.

Determining Citizenship

• Individuals: Citizenship is determined by domicile (true home with intent to remain).
• Corporations: A corporation is a citizen of both its state of incorporation and its principal place of business (nerve center).
• Unincorporated associations: Citizenship of every member counts.

Amount in Controversy

• The plaintiff’s good-faith claim controls unless it is legally certain they cannot recover more than $75,000.
• A single plaintiff may aggregate all claims against a single defendant.
• Multiple plaintiffs may not aggregate claims unless enforcing a single title or right.

Supplemental Jurisdiction

Supplemental jurisdiction allows federal courts to hear additional state-law claims that are so related to the original federal claim that they form part of the same case or controversy (same transaction or occurrence).

Key Term: Supplemental Jurisdiction The court’s authority to hear additional claims closely related to those with an independent basis for federal jurisdiction.

• In diversity cases, supplemental jurisdiction cannot be used to override the complete diversity requirement for claims by plaintiffs against parties joined under certain rules (e.g., Rules 14, 19, 20, or 24).
• Supplemental jurisdiction can cure the amount in controversy requirement for additional plaintiffs in some diversity cases.

Removal Jurisdiction

Removal allows a defendant to transfer a case from state court to federal court if the case could have been filed in federal court originally.

Key Term: Removal Jurisdiction The right of a defendant to move a case from state to federal court if federal subject-matter jurisdiction exists.

• Only defendants may remove; plaintiffs cannot.
• All defendants who have been properly joined and served must consent to removal.
• Removal must be to the federal district covering the place where the state action is pending.
• In diversity cases, removal is not permitted if any defendant is a citizen of the forum state.
• Removal must be sought within 30 days of service of the initial pleading or summons.

Worked Example 1.1

A citizen of State A sues a citizen of State B in federal court for breach of contract, seeking $80,000. The defendant counterclaims for$10,000. Is subject-matter jurisdiction proper over both claims?

Answer: Yes. The court has diversity jurisdiction over the plaintiff’s claim. The defendant’s compulsory counterclaim does not need to meet the amount in controversy requirement because the court has supplemental jurisdiction over it.

Worked Example 1.2

A plaintiff sues a defendant in state court for $100,000 on a state-law claim. The defendant, a citizen of the same state as the plaintiff, removes to federal court. What should the federal court do?

Answer: The federal court must remand the case. There is no diversity, so there is no subject-matter jurisdiction. Removal was improper.

Worked Example 1.3

A plaintiff sues a defendant in state court for $150,000, alleging only state-law claims. The defendant is a citizen of a different state and removes to federal court. The plaintiff then adds a non-diverse defendant. What happens?

Answer: The court must remand the case. Complete diversity is destroyed by the addition of a non-diverse defendant, so the federal court loses subject-matter jurisdiction.

Exam Warning

On the MBE, be alert for removal by a defendant who is a citizen of the forum state—removal is not allowed in diversity cases if any defendant is a citizen of the state where the action was filed.

Revision Tip

Always check both the citizenship of all parties and the amount in controversy before concluding that diversity jurisdiction exists.

Key Point Checklist

This article has covered the following key knowledge points:

• Federal courts have limited subject-matter jurisdiction: federal question and diversity.
• Diversity jurisdiction requires complete diversity and an amount in controversy exceeding $75,000.
• Federal question jurisdiction requires the claim to arise under federal law on the face of the complaint.
• Supplemental jurisdiction allows related state-law claims to be heard but cannot cure lack of complete diversity for certain joined parties.
• Only defendants may remove; removal is not allowed if any defendant is a citizen of the forum state in diversity cases.
• Lack of subject-matter jurisdiction can be raised at any time and cannot be waived.

Key Terms and Concepts

• Subject-Matter Jurisdiction
• Federal Question Jurisdiction
• Diversity Jurisdiction
• Supplemental Jurisdiction
• Removal Jurisdiction