Understanding Diversity Jurisdiction: Residence Requirements Explained

Diversity jurisdiction is a form of subject-matter jurisdiction that gives federal courts in the United States 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 states than the defendants; second, the lawsuit's amount in controversy must be more than $75,000. In determining whether diversity jurisdiction exists, state citizenship is determined by the concept of domicile rather than residence. A person's domicile is where they have their true, fixed, and permanent home and where they intend to return when they are absent.

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Complete diversity of citizenship

Diversity jurisdiction is a form of subject-matter jurisdiction that gives federal courts in the United States 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. Firstly, there must be "diversity of citizenship" between the parties, meaning the plaintiffs must be citizens of different states than the defendants. This is known as complete diversity of citizenship.

In determining whether diversity jurisdiction exists, a corporation is considered a citizen of both its state of incorporation and its principal place of business. A partnership or limited liability company (LLC) is considered to have the citizenship of all its constituent partners or members. Thus, an LLC or partnership with one member or partner sharing citizenship with an opposing party will destroy diversity jurisdiction. Cities and towns (incorporated municipalities) are also treated as citizens of the states in which they are located, but states themselves are not considered citizens for the purpose of diversity.

The second condition for a federal court to have diversity jurisdiction over a lawsuit is that 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 a state court instead.

Domicile vs. residence

In the United States, diversity jurisdiction is a form of subject-matter jurisdiction that gives 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: there must be "diversity of citizenship" between the parties, and the lawsuit's "amount in controversy" must be more than $75,000. State citizenship is determined by the concept of domicile rather than residence.

Domicile and residence are two distinct concepts in law. Domicile refers to an individual's legal home, which is treated as their fixed, permanent, and principal establishment. It involves the intent of the individual to remain in that place indefinitely. On the other hand, residence is a more transient and flexible concept. It refers to an individual's present physical location or temporary place of abode, which may be one of several places where a person resides. Residence does not require permanency, and even a temporary dwelling can qualify as a residence. An individual can have multiple residences but only one domicile.

Factors that courts consider when determining an individual's domicile include residence at death, proclamation of domicile in legal documents such as wills and trusts, ownership of real estate, place of automobile registration, voting registration, tax filings, and various other factors such as the location of personal property, memberships, and subscriptions.

The distinction between domicile and residence is crucial in determining state citizenship for diversity jurisdiction. While residence may be a factor in determining domicile, it is not the sole determining factor. The court will consider an individual's domicile as their true, fixed, and permanent home, regardless of their current residence. This distinction ensures that federal courts can hear cases involving citizens of different states without bias towards a particular state.

Corporations and citizenship

Diversity jurisdiction is a form of subject-matter jurisdiction that gives federal courts in the United States the power to hear lawsuits that do not involve a federal question. For a federal court to have diversity jurisdiction, two conditions must be met: there must be "diversity of citizenship" between the parties, and the lawsuit's "amount in controversy" must be more than $75,000.

In the context of diversity jurisdiction, citizenship is determined by domicile rather than residence. A person is a citizen of the state in which they have their true, fixed, and permanent home and principal establishment and to which they intend to return whenever they are absent.

Before 1958, a corporation for the purpose of diversity jurisdiction was deemed to be a citizen only of the state in which it had been formally incorporated. However, this changed as corporations assumed a more prominent economic role, and the concept of corporate citizenship evolved.

Corporate citizenship refers to a company's commitment to social responsibility and its efforts to meet legal, ethical, and economic obligations to benefit society while maintaining profitability. It involves balancing the needs of shareholders with the needs of the community and the environment. Companies go through different stages during the process of developing corporate citizenship, from basic compliance with health, safety, and environmental laws to more comprehensive policies and innovative practices.

In the context of diversity jurisdiction, a corporation is treated as a citizen of the state in which it is incorporated and the state in which its principal place of business is located. This means that a corporation can have dual citizenship for the purposes of diversity jurisdiction.

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Minimal diversity

Diversity jurisdiction is a form of subject-matter jurisdiction that gives federal courts in the United States the authority 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. Firstly, there must be "diversity of citizenship" between the parties, meaning the plaintiffs must be citizens of different states than the defendants. Secondly, the lawsuit's "amount in controversy" must exceed $75,000.

The concept of domicile, rather than mere residence, determines state citizenship for the purposes of diversity jurisdiction. An individual is considered a citizen of the state in which they have their true, fixed, and permanent home, and to which they intend to return whenever they are absent. This is typically the last state in which they resided with the intention to remain indefinitely.

It is important to note that diversity jurisdiction is not applicable if a party is a citizen of the same state as an opposing party or a U.S. citizen domiciled outside the country. In such cases, the court deems the absent party "indispensable", and the case must be dismissed.

Amount in controversy

The amount in controversy requirement varies depending on the court and the nature of the case. For example, in the state of Virginia, the lowest level of court, the Virginia General District Court, has exclusive jurisdiction over cases where the amount in controversy is $4,500 or less. This court shares authority with the Virginia Circuit Court for cases involving sums between $4,500 and $25,000 for injury to property, and $4,500 and $50,000 for personal injury and wrongful death cases. The Virginia Circuit Court has exclusive jurisdiction for cases where the amount in controversy exceeds these sums.

In US federal courts, the amount in controversy requirement for diversity jurisdiction is currently set at more than $75,000. This means that the matter in controversy must exceed this sum for a federal court to have the authority to hear the case. This requirement was set by Congress in 28 U.S.C. § 1332(a) and has increased significantly over the years, from as low as $3,000 in 1958.

Additionally, in class action lawsuits, the claims of individual class members can be aggregated to meet the amount in controversy requirement. According to the Class Action Fairness Act, a district court only has jurisdiction over a class action if the amount in controversy exceeds $5,000,000, exclusive of interest and costs.

It is important to note that the aggregation of claims is not always allowed. In cases with multiple defendants, a plaintiff can only aggregate the amount claimed against multiple defendants if the defendants are jointly liable. If the defendants are severally liable, the plaintiff must meet the amount in controversy requirement against each individual defendant.

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