Diversity jurisdiction is one of the two main bases—alongside federal-question jurisdiction—on which U.S. federal district courts may hear civil cases. It is grounded in Article III, Section 2 of the U.S. Constitution, which extends the federal judicial power to controversies "between Citizens of different States" and between a state or its citizens and "foreign States, Citizens or Subjects." The statutory implementation is 28 U.S.C. § 1332, which currently sets the amount-in-controversy threshold at more than $75,000, exclusive of interest and costs.
The doctrine's central rule is complete diversity, articulated by Chief Justice John Marshall in Strawbridge v. Curtiss (1806): no plaintiff may share state citizenship with any defendant. For natural persons, citizenship is determined by domicile—physical presence plus intent to remain. Corporations, under § 1332(c), are citizens of both their state of incorporation and the state of their principal place of business, a term the Supreme Court defined as the corporate "nerve center" in Hertz Corp. v. Friend (2010).
The historical rationale, articulated in The Federalist No. 80 (Hamilton), was to provide an impartial forum where out-of-state litigants might fear local prejudice in state courts. Critics argue the rationale has eroded and that diversity cases consume disproportionate federal docket space; periodic proposals to abolish or restrict the jurisdiction have not passed Congress.
A defendant sued in state court may remove a diversity case to federal court under 28 U.S.C. § 1441, subject to the "forum defendant rule" barring removal where any defendant is a citizen of the forum state. Once in federal court, the Erie doctrine (Erie Railroad Co. v. Tompkins, 1938) requires application of state substantive law and federal procedural law.
Diversity jurisdiction also supports interpleader and class actions; the Class Action Fairness Act of 2005 expanded federal reach by permitting minimal diversity and a $5 million aggregate threshold for qualifying class suits.
Example
In *Hertz Corp. v. Friend* (2010), the Supreme Court unanimously held that Hertz's "principal place of business" for diversity purposes was New Jersey—its corporate headquarters—not California, allowing the case to proceed in federal court.
Frequently asked questions
Under 28 U.S.C. § 1332, the amount in controversy must exceed $75,000, exclusive of interest and costs. The threshold was last raised from $50,000 in 1996.
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