If a case does not raise a federal question, the parties must be diverse in order to proceed in federal court. Diversity means that adverse parties are from different states. This is easy to see if there are only two parties involved (one plaintiff and one defendant). If the plaintiff is from Florida and the defendant is from Georgia, you have diversity. If the plaintiff is from Florida and the defendant is from Florida, you do not have diversity. However, what if their are multiple parties on one or both of the sides of the conflict?
Federal courts require that complete diversity exist in order to proceed in federal court. Complete diversity means that all of the plaintiffs must be diverse from all of the defendants. This is instead of minimal diversity where only one of the adverse parties would have to be diverse (i.e. two plaintiffs, one from Florida and one from Georgia v. one defendant, from Florida). The monumental case that recognized that complete diversity is required was Strawbridge v. Curtiss, 7 U.S. 267 (1806). In Strawbridge, the Court recognized that although the Constitution only requires minimum diversity, Congress (through 28 U.S.C. 1332(a)(1)) imposes a requirement of complete diversity.
Diversity of Citizenship
Now that complete diversity is required, how do you determine where a party is citizen. For individual persons, domicile and citizenship are identical for purposes of diversity jurisdiction, and require both presence and an intent to remain permanently or indefinitely. Sheehan v. Gustafson, 967 F.2d 1214 (1992). Some courts state the latter requirement as the lack of any definite intent to leave. Finally, it is important to understand that an individual can only be a citizen of one state at a time. In other words, you keep the citizenship you have until you establish a new one.
Conversely, a corporation can have more than one place of citizenship for the purpose of diversity jurisdiction. Corporations are citizens of both states that they are incorporated and their principal place of business. Hertz Corp v. Friend, 297 Fed. Appx. 690 (2010).
It is important to recognize that the standard of appellate review for diversity of citizenship is clearly erroneous because it is a mixed question of law and fact.
Amount in Controversy
In addition to diversity of citizenship the Federal courts require that the amount in controversy exceed $75,000. There are a few nuances to amount in controversy but for the most part it is straight forward because the goal is to make this an easy standard because we don’t want to litigate about the amount in controversy. In measuring whether the amount in controversy the standard is that the complaint will be dismissed if it “appears to a legal certainty that the claim is really for less than the jurisdictional amount.” St. Paul Mercury Indemnity Co. v. Red Cab Co. (1938).
- Injunctions – To determine the amount in controversy for an injunction, the court uses the “either viewpoint” approach. This means that the amount in controversy can be determined from either the plaintiff’s or the defendant’s viewpoint.
- A single plaintiff can aggregate related and unrelated claims and jurisdiction is determined by the total amount sought in the complaint. Courts allow unrelated claims to be aggregated because the courts do not want additional litigation about whether a claim is related or unrelated for purposes of satisfying the amount in controversy. Although this rule is a bit illogical, it is justified by the quest for efficiency.
- However, multiple plaintiffs cannot aggregate their individual claims to reach the jurisdictional amount. If there are multiple plaintiffs, at least one of them (standing alone) must be able to satisfy the amount in controversy. Once a single plaintiff satisfies this requirement, courts now allow other plaintiffs to “ride the coattails” and join in the diversity suit even if they do not meet the amount in controversy requirement.
- Anti-aggregation rule. This is a rare exception in cases where there is one res at issue (i.e. an estate) and there are several plaintiffs that have a claim to it. As long as the value of the res is at least $75,000, the amount in controversy requirement is satisfied (even if the plaintiff’s individual claims may not).
What prevents a plaintiff from claiming excessive punitive damages in order to meet the amount in controversy requirement? Because of this possibility courts scrutinize a claim for punitive damages more closely than a claim for actual damages. First, the court will ask that there is competent proof of the punitive damages. Ordinarily, punitive damages should not exceed the compensatory damages by a large multiple (e.g. few awards exceeding a single-digit ratio between punitive and compensatory damage will satisfy due process). Finally, Rule 11 (in theory) should limit excessive allegations of punitive damages.