Diversity jurisdiction

In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction that gives United States federal courts the power to hear lawsuits that do not involve a federal question. For a federal court to have diversity jurisdiction over a lawsuit, two conditions must be met. First, there must be "diversity of citizenship" between the parties, meaning the plaintiffs must be citizens of different U.S. states than the defendants. Second, the lawsuit's "amount in controversy" must be more than $75,000. If a lawsuit does not meet these two conditions, federal courts will normally lack the jurisdiction to hear it unless it involves a federal question, and the lawsuit would need to be heard in state court instead.

The United States Constitution, in Article III, Section 2, grants Congress the power to permit federal courts to hear diversity cases through legislation authorizing such jurisdiction. The provision was included because the Framers of the Constitution were concerned that when a case is filed in one state, and it involves parties from that state and another state, the state court might be biased toward the party from that state.^[1] Congress first exercised that power and granted federal trial circuit courts diversity jurisdiction in the Judiciary Act of 1789. Diversity jurisdiction is currently codified at 28 U.S.C. § 1332.

In 1969, the American Law Institute explained in a 587-page analysis of the subject that diversity is the "most controversial" type of federal jurisdiction, because it "lays bare fundamental issues regarding the nature and operation of our federal union."^[2]

^ Guaranty Trust Co. v. York, 326 U.S. 99 (1945). In this decision, Justice Felix Frankfurter explained: "Diversity jurisdiction is founded on assurance to non-resident litigants of courts free from susceptibility to potential local bias. The Framers of the Constitution . . . entertained 'apprehensions' lest distant suitors be subjected to local bias in State courts, or, at least, viewed with 'indulgence the possible fears and apprehensions' of such suitors. [Citation.] And so Congress afforded out-of-State litigants another tribunal, not another body of law."
^ American Law Institute (1969). Study of the Division of Jurisdiction between State and Federal Courts. Washington, D.C.: American Law Institute. p. 1.

[1] Guaranty Trust Co. v. York, 326 U.S. 99 (1945). In this decision, Justice Felix Frankfurter explained: "Diversity jurisdiction is founded on assurance to non-resident litigants of courts free from susceptibility to potential local bias. The Framers of the Constitution . . . entertained 'apprehensions' lest distant suitors be subjected to local bias in State courts, or, at least, viewed with 'indulgence the possible fears and apprehensions' of such suitors. [Citation.] And so Congress afforded out-of-State litigants another tribunal, not another body of law."

[2] American Law Institute (1969). Study of the Division of Jurisdiction between State and Federal Courts. Washington, D.C.: American Law Institute. p. 1.

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