Federal Question Jurisdiction

In order to establish Federal Subject Matter Jurisdiction, a case must satisfy diversity jurisdiction or federal question jurisdiction.

The Well-Pleaded Complaint

It is extremely important to recognize that the federal question must arise out of the complaint. The seminal case deciding this was Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149 (1908), where the plaintiff did not assert a federal question but the defendant answered with a federal question and both parties agreed that the federal question is the only disputed issue in the case. This means that a case that raises a federal defense but no federal claim cannot be brought in federal district court.

The concept of the well-pleaded complaint was developed which required a court to evaluate whether a federal question exists based solely on examining everything that is necessary for the plaintiff’s claim (but nothing beyond that). The reason for this is that courts want to determine if a federal question exists at the outset so that time is not wasted in the wrong forum.

When is a federal question enough to justify federal question jurisdiction?

In many complaints, a plaintiff will assert that the defendant violated both state and federal law. Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804 (1986) determined that federal question jurisdiction would exist only if plaintiffs’ right to relief “depended necessarily on a substantial question of federal law.” To help determine this the court will weigh the centrality of the federal question and the importance of the federal question.

When a federal question is embedded in a state-law claim

What if the claim is based on state law but a federal question also exists in the claim? Here, a case can be within federal question jurisdiction if federal law is a “necessary element” of the claim for relief. Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 125 S. Ct. 2363¬† (2005). The “necessary element” test from Grable should only be applied in cases in which the federal question is embedded in a state-law claim.

Diversity Jurisdiction

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.
  • Aggregation Rules
  1. 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.
  2. 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.
  3. 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).
  • Punitive damages

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.



Federal Subject Matter Jurisdiction

Federal courts have limited jurisdiction (as opposed to the general jurisdiction of state courts)*. Limited jurisdiction means that the federal courts only have the jurisdiction affirmatively granted to them. Who grants this jurisdiction? Well, federal subject matter jurisdiction requires two things: constitutional authority and congressional authorization to use that authority. Specifically, the constitutional authority comes from Article III of the United States Constitution and the congressional authorization comes from statutes that are passed by Congress. In order to have original subject matter jurisdiction, a federal district court must meet BOTH requirements.

Federal courts hear two types of cases:

1) Federal question cases or cases that “arise under” some federal law and

2) Diversity cases where the parties are from different states and the case in controversy exceeds $75,000.

*Note: Because state courts have general jurisdiction they are presumed to have jurisdiction over all subjects unless some statutory or constitutional provision deprives them of jurisdiction