Federal question and diversity jurisdiction

Federal Question on the Complaint Face: The Pleaded Claim Controls

Federal-question jurisdiction asks whether the plaintiff’s properly pleaded complaint presents a claim arising under the Constitution, federal law, or a treaty. The governing statute is 28 U.S.C. § 1331, but “arising under” is narrower than “the dispute has some connection to federal law.”

Apply the well-pleaded complaint rule first. Look only at the plaintiff’s own statement of the cause of action. A federal issue must appear on the face of that complaint. The plaintiff generally cannot create federal-question jurisdiction by anticipating an ordinary federal defense, such as ordinary preemption, federal immunity, or compliance with federal law. Complete preemption is a limited exception that can support federal-question jurisdiction. A federal counterclaim also does not create jurisdiction over the plaintiff’s original complaint.

Federal law ordinarily creates the cause of action. A claim expressly based on a federal statute, treaty, or constitutional provision ordinarily arises under federal law, provided the law supplies a legally cognizable claim.

A more difficult route is the embedded-federal-issue doctrine. A claim created by state law can arise under federal law only when all four requirements are satisfied:

The state-law claim necessarily raises a federal issue.
The federal issue is actually disputed by the parties.
The federal issue is substantial to the federal system as a whole, not merely important to the individual litigants.
Exercising federal jurisdiction is consistent with the congressionally approved balance between federal and state judicial responsibilities.

The first requirement is often decisive. If the plaintiff can win on a state-law theory without resolving the federal question, the federal issue is not necessarily raised. A complaint that merely mentions federal standards, incorporates federal facts, or uses federal law as evidence of negligence does not automatically qualify. The issue must be an unavoidable ingredient of the state claim.

The third requirement also prevents overreading “substantial.” A federal issue may matter greatly to the parties yet still be too fact-bound or routine to warrant federal jurisdiction. Federal courts are especially cautious when accepting a state-law claim would draw a large category of ordinary state disputes into federal court.

Unlike diversity jurisdiction, § 1331 has no amount-in-controversy requirement. Citizenship is irrelevant to federal-question jurisdiction. A complaint may therefore present a federal question even when every party is from the same state and the damages are small.

The near-miss to remember is federal claim versus federal defense: a federal claim pleaded by the plaintiff can satisfy § 1331; an ordinary federal defense supplied by the defendant cannot satisfy the well-pleaded complaint rule, although complete preemption is a limited exception. This chapter is not starred: legal resources may be supplied when it is tested, and where they are not, you need only demonstrate recognition that the topic is at issue. This is closed-book: you must be able to state these requirements from memory.

Citizenship and Amount: Complete Diversity at the Filing Line

Diversity jurisdiction under 28 U.S.C. § 1332 requires both the correct parties and the required amount in controversy.

Citizenship means legal citizenship, not residence. For an individual, citizenship is the person’s domicile, which requires both physical presence in a place and intent to remain there indefinitely. A person can have several residences but only one domicile. A person’s old domicile continues until the person is physically present in a new state and intends to remain there indefinitely. Moving after the action begins generally does not cure a defect or destroy diversity because citizenship is measured when the action is filed.

Party or status	Citizenship question	Near-miss consequence
Individual	Where is the person domiciled?	Residence or mailing address alone is insufficient
Corporation	State of incorporation and principal place of business	A corporation has both citizenships, not just its headquarters
LLC or partnership	Citizenship of every member or partner	Formation state and principal office do not control
Traditional trust	If the trustee(s) are the real parties in interest, use the trustee(s)’ citizenship; if the trust itself is the party, use the citizenship of all of its members, generally its beneficiaries	Do not automatically use the trust’s name or business office
Estate, infant or incompetent	Citizenship of the represented person under 28 U.S.C. § 1332(c)(2)	The representative’s own citizenship does not control
Alien	Foreign citizenship, unless a permanent-resident rule applies	Two foreign parties alone generally do not create diversity

A corporation is a citizen of every state and foreign state by which it is incorporated and of the state or foreign state where it has its principal place of business. The principal place of business is ordinarily the corporation’s nerve center, where its officers direct, control, and coordinate the corporation’s activities.

An LLC, general partnership, limited partnership, and other unincorporated association is a citizen of every state of which any member or partner is a citizen. Trace citizenship through every layer. If an LLC member is another LLC, determine the citizenship of that second LLC’s members. Do not substitute the entity’s state of formation or principal office.

A traditional trust is commonly analyzed through its trustee or trustees, while a business trust is treated as an unincorporated entity and takes the citizenship of its members. A legal representative of the estate of a decedent, or of an infant or incompetent, is deemed to be a citizen only of the same state as the decedent, infant, or incompetent; the representative’s own citizenship does not control.

Complete diversity means no plaintiff shares a state of citizenship with any defendant. It is not enough that most parties are diverse. One shared state destroys diversity jurisdiction for the action. For example, a New York plaintiff cannot invoke diversity against an LLC whose members include a New York citizen, even if all the LLC’s other members are citizens of different states.

The foreign-party rules create additional near misses. A citizen of a state may sue a citizen of a foreign country. Citizens of different states may sue when foreign citizens are also parties. But a dispute solely between two foreign citizens does not qualify merely because both parties are aliens. A United States citizen domiciled abroad is not a citizen of any state for § 1332 purposes and ordinarily cannot use diversity jurisdiction as a state citizen. A permanent-resident alien is treated as a citizen of the state where domiciled for diversity purposes; if that state matches the opposing party’s citizenship, complete diversity fails.

The amount in controversy must exceed $75,000. Exactly $75,000 is not enough. The amount is measured from the claims asserted in good faith when the action begins, excluding statutory interest and costs. The plaintiff’s demand generally controls unless it is legally certain that the plaintiff cannot recover more than $75,000. Potentially recoverable compensatory damages, punitive damages, attorney’s fees authorized by statute or contract, and the value of injunctive or declaratory relief may count.

Aggregation depends on the parties and the relationship among the claims:

One plaintiff may aggregate all claims against one defendant, even unrelated claims.
A plaintiff ordinarily may not aggregate separate claims against separate defendants. Claims against multiple defendants may be aggregated when the defendants are jointly liable on the same obligation.
Multiple plaintiffs may not aggregate separate and distinct claims merely because they arise from related events.
Multiple plaintiffs may aggregate when they assert a common, undivided interest in one right or piece of property.

The near-miss is therefore same defendant versus separate defendants. Two $40,000 claims against one defendant can total $80,000. A $40,000 claim against Defendant One and a separate $40,000 claim against Defendant Two ordinarily remain two claims below the threshold.

The Jurisdiction Fork: Stop at the First Satisfied Door

Federal-question and diversity jurisdiction are alternative bases. A case may satisfy both, but it needs only one basis for original federal jurisdiction. Run the federal-question analysis from the complaint first; if it fails, test complete diversity and amount.

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The chart’s federal-question node includes both routes: a federal cause of action and a state-law claim satisfying all four embedded-federal-issue requirements. The diversity branch does not ask whether the parties are merely residents of different places; it asks whether any plaintiff shares citizenship with any defendant. Only after complete diversity exists does the amount question matter.

One Six-Choice Item: Separate Claims and the Federal Defense Trap

A New York plaintiff sues Corporation One and LLC Two in federal court. The complaint pleads only New York negligence law. Corporation One is incorporated in Delaware and has its principal place of business in California. LLC Two has two members, one domiciled in Texas and one domiciled in New York. The plaintiff seeks $40,000 from Corporation One and a separate $40,000 from LLC Two; neither defendant is alleged to be jointly liable with the other. Corporation One plans to assert federal preemption as a defense.

Practice

Which TWO statements are correct?

	(A) Federal-question jurisdiction exists because Corporation One plans to raise federal preemption.	(B) Federal-question jurisdiction is absent because the federal issue appears only in an anticipated defense.	(C) Diversity jurisdiction exists because Corporation One is diverse from the plaintiff and the two claims total $80,000.	(D) LLC Two is a citizen only of Texas because an LLC’s citizenship is based on its organization or principal office.	(E) The plaintiff may aggregate the two $40,000 claims because their combined value exceeds $75,000.	(F) Diversity jurisdiction is unavailable because LLC Two shares New York citizenship with the plaintiff.
Your answers

Three Jurisdiction Drills: Complaint Face, Entity Citizenship and Aggregation

Practice

A plaintiff’s complaint alleges breach of a state contract and the defendant’s violation of a federal statute only as an anticipated defense. The plaintiff and defendant are citizens of the same state. Which statement is correct?

A Texas plaintiff sues an LLC whose members are citizens of New York and Texas. The complaint seeks $100,000 under state law and alleges no federal claim. What is the result?

A plaintiff asserts two separate claims for $45,000 and $35,000 against the same defendant. Neither claim includes interest or costs, and the defendant is liable on both. What is the result?

High-Yield Points - ⚡ Biggest Takeaways

Read the plaintiff’s claim, not the anticipated defense, for federal-question jurisdiction. Diversity requires complete citizenship separation and more than $75,000, not residence and exactly $75,000. Trace unincorporated entities through every member, then apply the correct aggregation rule.

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Practice Questions: Federal question and diversity jurisdiction

1. Using only the supplied file and legal resources, prepare an objective memorandum to the supervising attorney assessing Park's jury-demand deadline, the effect of the proposed new claim on jury rights, the likely amendment ruling, and the improvements needed in the motion.

2. A patient sued a physician in federal court based on diversity jurisdiction, seeking $300,000 for alleged medical negligence. The forum state's statute requires a medical-negligence plaintiff to file an expert affidavit with the complaint. Failure to do so requires dismissal without prejudice. The patient did not file an affidavit. The physician moved to dismiss, arguing that the state requirement applies under Erie. The patient responded that Federal Rules of Civil Procedure 8 and 12 comprehensively govern the sufficiency of a federal complaint and do not require an expert affidavit. No party disputes that Rules 8 and 12 are valid under the Rules Enabling Act and constitutional. Which of the following best states the rule the federal court should apply?

A. Apply the state requirement because it is outcome determinative and therefore necessarily substantive under Erie.
B. Apply the state requirement because federal courts must use state pleading rules for state-law claims.
C. Apply the Federal Rules because they directly govern pleading requirements and are valid under the Rules Enabling Act.
D. Apply the Federal Rules only if the plaintiff could not reasonably obtain the required affidavit before filing.

Show answer

Answer: C. Apply the Federal Rules because they directly govern pleading requirements and are valid under the Rules Enabling Act.

Apply the Federal Rules because they directly govern pleading requirements and are valid under the Rules Enabling Act. - Rules 8 and 12 govern the sufficiency of the patient’s federal complaint and, as the question specifies, are valid under the Rules Enabling Act. - Because those rules control the conflicting pleading requirement, the court should not dismiss the complaint solely for lack of the state-required expert affidavit. Apply the state requirement because it is outcome determinative and therefore necessarily substantive under Erie. - The affidavit requirement affects the outcome because noncompliance requires dismissal without prejudice, but that effect does not necessarily make it controlling under Erie. - Outcome determination does not displace valid Federal Rules that directly govern the disputed pleading requirement. Apply the state requirement because federal courts must use state pleading rules for state-law claims. - Diversity jurisdiction permits the patient’s state-law negligence claim in federal court, but it does not require use of state pleading rules. - The court applies valid federal procedural rules governing the complaint, including Rules 8 and 12. Apply the Federal Rules only if the plaintiff could not reasonably obtain the required affidavit before filing. - Whether this patient could obtain an expert affidavit before filing is not a condition for applying Rules 8 and 12. - The choice between a controlling Federal Rule and a conflicting state filing requirement does not turn on the plaintiff’s circumstances.

4. Using only the supplied file and legal resources, prepare a persuasive memorandum assessing whether Harbor Medical Supply LLC should move to remand the removed action to state court. Address federal-question jurisdiction, diversity citizenship, the amount in controversy, removal procedure, the strongest defense arguments, and the factual investigation that should occur before filing.

5. Using only the supplied file and legal resources, prepare a persuasive memorandum supporting Greenway Analytics's motion for leave to amend its complaint to add a fraudulent-inducement claim against DataForge, Inc.

8. A citizen of State A sued a corporation incorporated and headquartered in State B in federal court under diversity jurisdiction, seeking $500,000 for injuries caused by an allegedly defective product. State A law permits compensatory damages but provides that punitive damages are unavailable in product-liability actions. No federal statute or Federal Rule addresses the availability of punitive damages. The plaintiff nevertheless requested punitive damages, arguing that federal courts traditionally exercise discretion over remedies and that allowing punitive damages would encourage careful manufacturing. The corporation moved to strike the punitive-damages request. Which of the following is the strongest argument supporting the corporation's motion?

A. The state restriction governs because it defines the available remedy and disregarding it could produce materially different outcomes in state and federal court.
B. The state restriction governs because federal courts must apply every state rule whenever jurisdiction is based solely on diversity of citizenship.
C. Federal law governs because the requested relief appears in a pleading, and pleading matters are necessarily procedural under federal law.
D. Federal law governs because a federal court may disregard state law when the court believes a different remedy would advance deterrence.

Show answer

Answer: A. The state restriction governs because it defines the available remedy and disregarding it could produce materially different outcomes in state and federal court.

The state restriction governs because it defines the available remedy and disregarding it could produce materially different outcomes in state and federal court. - State A’s bar on punitive damages in product-liability actions limits the available remedy, and no federal statute or Federal Rule conflicts with it. - Allowing the plaintiff to seek punitive damages only in federal court could materially change the outcome and encourage forum shopping, contrary to Erie principles. The state restriction governs because federal courts must apply every state rule whenever jurisdiction is based solely on diversity of citizenship. - Diversity jurisdiction does not require federal courts to apply every state rule; federal procedural law still governs procedural matters. - State A’s restriction applies because it limits damages in this product-liability action, not simply because the parties are citizens of different states. Federal law governs because the requested relief appears in a pleading, and pleading matters are necessarily procedural under federal law. - Federal rules may govern how the plaintiff pleads a request for relief, but they do not create an entitlement to punitive damages. - The motion concerns whether State A permits punitive damages for this product-liability claim, not how the request appears in the complaint. Federal law governs because a federal court may disregard state law when the court believes a different remedy would advance deterrence. - A federal court’s preference for stronger deterrence does not override State A’s substantive limit on damages. - Because no federal statute or Federal Rule addresses punitive-damages availability, the court cannot supply a different remedy merely as a policy choice.

Flashcards: Federal question and diversity jurisdiction

1. What is the well-pleaded complaint rule for federal-question jurisdiction?

Show answer

Federal-question jurisdiction exists only when a federal issue appears on the face of the plaintiff’s properly pleaded complaint. A federal defense or anticipated federal counterclaim ordinarily does not create jurisdiction.

2. Explain why a federal defense generally cannot establish federal-question jurisdiction and how aggregation rules apply to separate claims against separate defendants in diversity jurisdiction.

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A federal defense, such as preemption, does not appear on the face of the plaintiff's properly pleaded complaint and thus cannot create federal-question jurisdiction under the well-pleaded complaint rule. For diversity jurisdiction, a plaintiff generally cannot aggregate separate claims against separate defendants to meet the amount-in-controversy requirement, unless the defendants are jointly liable on the same obligation.

3. What is required for federal diversity jurisdiction?

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There must be complete diversity of citizenship between all plaintiffs and all defendants, and the amount in controversy must exceed $75,000, exclusive of interest and costs. Complete diversity generally requires that no plaintiff share state citizenship with any defendant.

4. When does a contract with a forum resident, or a website accessible in the forum, fail by itself to establish purposeful availment for specific personal jurisdiction?

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Neither fact alone is sufficient. A contract with a forum resident does not establish purposeful availment when the defendant did not deliberately target the forum or create continuing forum-related obligations; the court examines the parties’ actual relationship and conduct. Mere accessibility of a website is insufficient when the site is passive and not directed at or used to serve forum residents. Purposeful availment generally requires conduct deliberately directed toward the forum.

5. What is the constitutional standard for notice before judgment?

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Due process requires notice reasonably calculated, under all the circumstances, to inform interested persons of the action and give them an opportunity to respond.

6. What are the three elements of the Calder effects test for purposeful direction in intentional tort cases?

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1. An intentional act by the defendant; 2. Conduct expressly aimed at the forum state; and 3. Harm that the defendant knows is likely to be suffered in the forum state (the brunt of the harm is felt there).

7. Under the Federal Rules of Civil Procedure, how can a defendant waive the defense of lack of personal jurisdiction?

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The defense of lack of personal jurisdiction (Rule 12(b)(2)) is waived if omitted from the defendant's first Rule 12 motion, or, if no such motion is made, omitted from the responsive pleading or an amendment permitted as of right under Rule 15(a)(1).

8. What are the two stages of analysis for personal jurisdiction over a nonresident defendant in federal court, and which stage comes first?

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First, statutory authorization: Does the forum state’s long-arm statute reach the defendant? Second, constitutional authorization: Does the Constitution permit jurisdiction? The long-arm statute must be satisfied first; if it is narrower than the Constitution, jurisdiction is lacking even if constitutional contacts exist.

9. Under the Hanna doctrine, when does a federal court apply a Federal Rule of Civil Procedure instead of state law in a diversity case?

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If a valid Federal Rule directly conflicts with or covers the issue, the court applies the Rule unless it violates the Rules Enabling Act or the Constitution; otherwise, the court applies Erie, generally using state substantive law and federal procedural law.