Federal Court Subject Matter Jurisdiction

Question 1

Federal Court Subject Matter Jurisdiction

Answer 1

Federal courts are courts of limited jurisdiction. This means they are limited in the type of cases they are allowed to hear.

Question 2

Subject Matter Jurisdiction

Answer 2

Federal courts are courts of limited jurisdiction. This means they are limited in the type of cases they are allowed to hear. In most cases, a federal court may properly exercise jurisdiction in diversity actions and claims involving a federal question. Subject matter jurisdiction cannot be waived and may be raised at any time, even on appeal

Question 3

Diversity Jurisdiction

Answer 3

Diversity jurisdiction requires that 1) every plaintiff be completely diverse from every defendant AND 2) the amount in controversy must exceed $75,000, exclusive of interest and costs. The rationale for creating diversity jurisdiction is to afford an alternative forum to out of state litigants who might be victims of local prejudice.

Question 4

Diversity Jurisdiction - Complete Diversity

Answer 4

Complete diversity means that no plaintiff is a citizen of the same state as any defendant. If any defendant is a citizen of the same state as any plaintiff, complete diversity does NOT exist. In deciding diversity jurisdiction, courts look at the citizenship of the parties at the time the complaint was filed.

Question 5

Diversity Jurisdiction - Complete Diversity - Domicile of an Individual

Answer 5

1) Domicile of an Individual: For diversity purposes, the citizenship of a person is based on domicile – the place where the person lives with the intent to remain. Domicile is a matter of intent. In order to change domicile, the person must be: 1) physically present in the new state AND 2) have the intent to permanently remain there. A person can only have one domicile at a time.

Question 6

Diversity Jurisdiction - Complete Diversity - Corporations

Answer 6

2) Corporations: As for a corporation, it is deemed to be a citizen of every state in which it has been incorporated and the one place where it has its principal place of business. Principal place of business refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities i.e. its nerve center, which will typically be found at its corporate headquarters.

Question 7

Diversity Jurisdiction - Complete Diversity - Alienage Jurisdiction

Answer 7

3) Alienage Jurisdiction: Under the complete diversity requirement of alienage jurisdiction, diversity jurisdiction does not encompass suits by foreign plaintiffs against foreign defendants. This exclusion extends to cases involving an alien on one side and an alien plus a U.S. Citizen on the other.
1) In sum, where there are foreigners on both sides, there must be US citizens on both sides as well. Diversity is lacking when there is an alien on side and a US citizen and an alien on the other.

Question 8

Diversity Jurisdiction - Amount in Controversy

Answer 8

In addition to complete diversity, the amount in controversy must exceed $75,000, exclusive of interest and costs. The sum claimed by the plaintiff controls if made in good faith.

Question 9

ESSAY TIP

Answer 9

ESSAY TIP: Issues concerning the amount in controversy are heavily tested.

Question 10

Diversity Jurisdiction - Amount in Controversy - The Legal Certainty Test

Answer 10

The amount in controversy is determined by what is claimed in the plaintiff’s complaint. The plaintiff’s good faith allegations will suffice UNLESS it appears to a legal certainty that the jurisdictional amount cannot be recovered. This is known as the legal certainty test. Thus, there need only be some legal possibility that the plaintiff will recover in excess of $75,000.

Question 11

Diversity Jurisdiction - Amount in Controversy - No Retroactive Application

Answer 11

Subject matter jurisdiction is NOT retroactively defeated by the act that judgment is ultimately entered for less than the jurisdictional amount. Thus, the fact that the plaintiff’s actual recovery is less than $75,000 does NOT retroactively affect the jurisdiction of the court. The rationale is if the existence of subject matter jurisdiction were to depend on the amount the plaintiff ultimately recovers, a number of cases would be thrown out after a lengthy trial.

Question 12

Diversity Jurisdiction - Amount in Controversy - Value of an Injunction

Answer 12

When the plaintiff seeks an injunction, the plaintiff may add the value of the injunction to her claim to satisfy the amount in controversy. Most courts calculate the amount of the injunction by determining the value to the plaintiff. Other courts look at the cost to the defendant.

Question 13

ESSAY TIP

Answer 13

ESSAY TIP: The examiners often test on whether the value of an injunction meets the jurisdiction amount.

Question 14

Diversity Jurisdiction - Amount in Controversy - Aggregation of Claims

Answer 14

In certain situations, a plaintiff may aggregate (add together) multiple claims to satisfy the amount in controversy. Thus, for purposes of meeting the jurisdictional amount a plaintiff may aggregate all the claims she has against the same defendant.
1) When a plaintiff sues multiple defendants, each each claim against each defendant must satisfy the jurisdictional amount. Aggregation is permitted only if the defendants are jointly liable.

Question 15

Diversity Jurisdiction - Amount in Controversy - Defendant’s Counterclaim May NOT be Added

Answer 15

A defendant’s counterclaim cannot be combined with the plaintiff’s cause of action to reach the jurisdictional amount.

Question 16

Federal Question Jurisdiction

Answer 16

A federal court has subject matter jurisdiction to hearsay any case arising under federal law or the US constitution. The federal claim must appear on the fact of the plaintiff’s well pleaded complaint.

1) Federal question raised by the defendant’s answer or in a counterclaim are irrelevant. Moreover, the plaintiff’s anticipation of a defense based on federal law is NOT sufficient to establish federal question jurisdiction.
2) When federal question jurisdiction exists, the parties’ citizenship and the amount in controversy are irrelevant. Thus, a plaintiff from California can sue a defendant from California in federal court for $35,000 for violation of federal law.
3) Federal Preemption: When Congress has entirely preempted state law on a matter, the plaintiff may not elude federal jurisdiction by electing not to plead the federal claim. Thus, if federal law “completely preempts” state law, the case may be removed by the defendant on federal question grounds because the only possible claim is federal.

Question 17

ESSAY TIP

Answer 17

ESSAY TIP: Unless the state claim is entirely preempted by federal law, only focus on the plaintiff’s complaint in attempting to determine whether a federal question is present. A defendant may NOT remove the case to federal court by alleging a federal defense.

Question 18

ESSAY TIP

Answer 18

A federal court must have both personal and subject matter jurisdiction to hear a case.

Question 19

Subject Matter Jurisdiction Flowchart

Answer 19

1) Federal Question: any claim under federal law
2) Diversity: complete diversity AND amount in controversy must exceed $75,000 – the legal certainty test
1) Complete Diversity
1) Person – place of domicile
2) Corporation: state of corporation and principal place of business
3) No diversity if aliens on both sides without US constitution on both sides
2) Amount in Controversy – must exceed $75,000 – the legal certainty test
1) Value of the injunction
2) Aggregation of claims
3) No retroactive application

Question 20

California Subject Matter Jurisdiction

Answer 20

California state superior courts are courts of general jurisdiction. This means they can hear pretty much any case. California classifies cases in three ways: 1) unlimited 2) limited AND 3) small claims. In an unlimited civil case, the amount in controversy must exceed $25,000. In a limited civil case, the amount in controversy must be $25,000 or less. And for small claims, the amount in controversy varies but is generally $10,000 or less.

1) If the defendant files a cross-complaint (a claim against the plaintiff) in a limited civil case that exceeds $25,000, the case will be reclassified as an unlimited civil case.
1) Unlimited Civil Case: the amount in controversy exceeds $25,000
2) Limited Civil Case: the amount in controversy is $25,000 or less
3) Small Claims: the amount in controversy is generally $10,000 or less

Question 21

Supplemental Jurisdiction

Answer 21

When a federal court possesses subject matter jurisdiction over a claim, it may exercise supplemental jurisdiction over a “related” claim that would NOT independently satisfy subject matter jurisdiction if it arises from a common nucleus of operative fact as the claim that invoked subject matter jurisdiction. Essentially, the supplemental claim must be part of the same transaction or occurrence as the plaintiff’s claim. The rationale for supplemental jurisdiction is to promote judicial economy and the efficient administration of justice by having all related claims decided in one proceeding.
1) The terms “common nucleus of operative fact” and “same transaction or occurrence” can be used interchangeably.

Question 22

Supplemental Jurisdiction - Federal Question Cases

Answer 22

Federal Question Cases: When a plaintiff asserts both a federal claim and state law claim, a federal court has discretion to exercise supplemental jurisdiction over the state law claim if the two claims are related and are such that a plaintiff would ordinarily be expected to try them in one proceeding.

Question 23

Supplemental Jurisdiction - Diversity Cases

Answer 23

In diversity cases, a claim that does not meet the amount in controversy requirement may invoke supplemental jurisdiction if it arises from a common nucleus of operative fact. Keep in mind that the court cannot exercise jurisdiction over a claim that would defeat the complete diversity requirement.

Question 24

Supplemental Jurisdiction - Diversity Cases

Answer 24

For example, a driver sued a defendant for negligence claiming $100,000 worth of damages from a car accident. The driver is from California and the defendant is a resident of Nevada. After the case is filed, the passenger of the driver’s car wishes to assert a claim against the defendant for $20,000 for injuries suffered in the accident. The passenger is a resident of Pennsylvanie. In this case, the passenger’s claim does not satisfy the subject matter jurisdiction because it is not a federal question and does not independently meet the amount in controversy. However, the passenger’s claim invokes supplemental jurisdiction because it is part of the same transaction or occurrence.

Question 25

Supplemental Jurisdiction - Diversity Cases - Compare

Answer 25

Compare: If the passenger was a reside of Nevada (the same citizenship of the defendant), the claim cannot be heard. The reason is because the court cannot exercise supplemental jurisdiction over a claim that would defeat the complete diversity requirement.

Question 26

Supplemental Jurisdiction - Diversity Cases - Compulsory Counterclaims

Answer 26

3) Compulsory Counterclaims: A compulsory counterclaim is a claim by the defendant against the plaintiff that arises out of the same transaction or occurrence as the plaintiff’s claim. It is compulsory because the defendant must bring it or it will be barred. A compulsory counterclaim does NOT need an independent basis for subject matter jurisdiction because the court will have supplemental jurisdiction over it.

Question 27

Supplement Jurisdiction - Diversity Cases - Compulsory Counterclaims

CALIFORNIA

Answer 27

CALIFORNIA: It’s called a compulsory cross complaint.

Question 28

Supplemental Jurisdiction - Diversity Cases - Permissive Counterclaims

Answer 28

A permissive counterclaims, one that arises out of an unrelate transaction, must have an independent basis for subject matter jurisdiction. Thus, supplemental jurisdiction does NOT apply to permissive counterclaims.

Question 29

ESSAY TIP

Answer 29

Supplemental jurisdiction deals with whether a claim that cannot independently satisfy subject matter jurisdiction may be joined with another claim that has already satisfied federal subject matter jurisdiction.

1) Federal Question: A federal court will have supplemental jurisdiction over state law claims that arise from nuclear of operative fact.
2) Diversity Jurisdiction: A federal court will have supplement jurisdiction over claims that don’t meet the amount in controversy if they are part of the same transaction or occurrence and so long as complete diversity still exists.

Question 30

Removal (From State to Federal Court)

Answer 30

A defendant may remove a case from state court to federal court if the plaintiff could have originally filed the case in federal court. Thus, subject matter jurisdiction is at the core of removal.

1) Only defendants may remove. When there is more than one defendant, all defendants must join in the notice of removal. The purpose of removal is that defendants, as well as plaintiffs, should have the option to choose federal court for cases the fall within the court’s original jurisdiction.
2) The defendant has 30 days (usually after receiving the complaint) to file notice of removal in the federal court embracing the place where the action is pending. Removal is measured at the time the defendant files the notice. Thus, subject matter jurisdiction must exist at that time. The plaintiff may oppose removal by filing a motion to remand. An improperly removed case will be sent back to state court.
3) An action brought into state court may NOT removed under diversity jurisdiction, if any defendant its citizen of the state where the action is brought, removal is NOT allowed. The rationale is that diversity jurisdiction was created to provide an alternative forum to out of state litigants who might be the victim of local prejudice. If one of the defendants is a citizen of the state where the case is filed, there is no prejudice to protect against.
4) When subject matter jurisdiction is based on federal question, the defendants can remove without regard to citizenship.
5) If the plaintiff amends the complaint to add a federal claim or to dismiss a non-diverse defendant, the defendant can then remove the case to federal court. But when the defendant asserts a defense or counterclaim based on federal law, the case is NOT removable. The plaintiff’s well pleaded complaint controls.

Question 31

ESSAY TIP

Answer 31

Removal is keyed to subject matter jurisdiction. Whenever you get an essay on removal, you will need to discuss subject matter jurisdiction. The reason is anytime a case is removed to federal court, subject matter jurisdiction must be satisfied. Thus, a discussion is imminent.

Question 32

Remand (Back Down to State Court)

Answer 32

Remand occurs when federal court sends the case back to state court. If, at any time, the federal courts lacks subject matter jurisdiction, the case must be remanded and sent back to state court.

1) ESSAY TIP: Removal and remand go together.
2) Removal: When the defendant takes the case from state court to federal court.
3) Remand: When the federal court sends the case back to state court because it lacks subject matter jurisdiction.

Question 33

Difference Between Personal Jurisdiction, Subject Matter Jurisdiction, and Venue

Answer 33

1) Personal Jurisdiction Denotes: the court’s power over the defendant
2) Subject matter jurisdiction relates: the court’s ability to hear the case
3) Venue refers to: the proper geographic location to bring suit

Note: Remember all three are needed in order to have a case heard in federal court.