111 510 510 libonline@riphah.edu.pk Contact

On diversity jurisdiction under US Civil Procedure’s Law

United States has a dual court system for proceeding under the civil procedure laws. There are federal courts and there are state courts. The system accordingly presents complications for understanding and comprehending it. For example one has to understand the principles of subject matter jurisdiction, venue-based jurisdiction and ascertainment of applicable law. The subject matter jurisdiction of state courts and that of federal courts gives rise to the question of diversity jurisdiction.

Article III, section 2 of the United States Constitution extends the judicial power of the United States to controversies between citizens of different states and between a state or the citizen thereof and foreign states citizen or subject. The current scope of the diversity jurisdiction that US parliament has granted to the federal court is set out in 28 USC §1332. The practical implications of diversity jurisdiction are significant.

Diversity jurisdiction allows the federal court to hear cases in which the claims arise only under state law, so long as constitutional and statutory requirements are satisfied. Diversity jurisdiction thus raises important theoretical questions about federalism and the appropriate relations between judiciary and the state. For example, there is no diversity jurisdiction if any plaintiff is a citizen of the same state as any defendant, no matter how many parties are involved in the litigation.

The phrase diversity of jurisdiction is used with reference to the jurisdiction of the federal courts, which under US Constitution Art. III, § 2, extends to cases between citizens of different states, designating the condition existing when the party on one side of a lawsuit is a citizen of one state, and the party on the other side is a citizen of another state, or between a citizen of a state and an alien. The requisite jurisdictional amount of $75,000 must, in addition, is required.

Where the contesting parties belong to different states, under diversity jurisdiction Federal District Court can take cognisance of the matter subject to the fulfilment of conditions laid down in the law, see 28 USC 1332 and 1367. Where the parties belong to same state, there is no diversity jurisdiction. Diversity jurisdiction protects out of state litigants against local prejudices and is used as a tool for economic development.

There have been for and against argument in respect of diversity jurisdiction. Some critics recommended limiting this jurisdiction. For example citizens of same state be prohibited to opt for diversity jurisdiction or the corporations be treated citizens of every state or the grant of non-economic damages be excluded from the purview of diversity jurisdiction or the existing monetary limit be raised and indexed with inflation (Ref: Report of the US Federal Court Study Committee).

On the other hand the supporters of diversity jurisdiction argue that:

(i) It is an important institutional tool for solving problems of national significance;

(ii) It safeguards citizens from prejudice against out of state parties;

(iii) It implements the constitutional guarantees of equality to citizens of all states;

(iv) Federal Courts, as an institution, are far superior than the State Courts;

(v) The existing element of competition among the two systems spurs higher standard of justice;

(vi) It provides confidence to investors.

The critics of the system propose that:

(a) Congestion has been caused in Federal Courts by diversity cases;

(b) Since the disputes involve state laws, hence handling of such cases by Federal Court is unnecessary;

(c) Cognisance of Federal Courts of state law cases is an undesirable interference in the state autonomy;

(d) It may retard the state law system;

(e) It diminished the incentive for state court reforms agenda.

Recently some new developments have taken place like the enactment of Class Action Fairness Act of 2005 ie; 28 USC 1332(d) § 1369, § 1441(f)(5). The reform allows consolidation of mass accident cases in order to reduce costs and to avoid inconsistent judgements on the same issue.

The new law has given the district court a discretion, in the interests of justice and looking at the totality of the circumstances, to decline jurisdiction over any lawsuit in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes and the primary defendants are citizens of the State in which the action was originally filed, based on a consideration of given factors, such as the national importance of the asserted claims and the “distinct nexus” between the forum and the parties or injuries.

Hence the diversity jurisdiction can be supported for the following reasons:

A. Consistent with the constitutional provisions and the system provides an institution for equality of citizens.

B. Competing jurisdictions between state and federal courts creates competition and usher improvement in application and interpretation of laws and procedure.

C. It broadens the experience of federal judges.

D. Limits the local prejudice against out of state citizen.

E. Provides confidence to the investors.

F. The system provides statutory inter-pleader and alien age as widely accepted use of the Federal Court’s Article III judicial power over controversies between citizens of different state and between state and citizens thereof and it provides a forum for citizenship-based federal jurisdiction.

While explaining the rationale for diversity jurisdiction one of the distinguished Chief Justices of United States, Justice Marshall observed as under:

“However true the fact may be, that the tribunals of the states will administer justice as impartially as those of the nation, it is not less true that the constitution itself either entertains apprehensions on this subject, or views with such indulgence the possible fears and apprehensions of suitors, that it has established national tribunals for the decision of controversies between citizens of different states.”

Nevertheless, the question of diversity jurisdiction is a burning issue and has raised many questions. For example, how much weight should be given to federalism? What role should the federal courts have in the process? To what extent should the judiciary retain discretion to interpret jurisdictional provisions in the light of changing conditions and evolving social needs.

(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi. To see author’s other areas of interest visit Zafars Blog on International Studies http://blogoninternationalstudy.blogspot.com/)

Zafar Azeem, "On diversity jurisdiction under US Civil Procedure’s Law," Business recorder. 2013-08-22.
Keywords: Social sciences , Social issues , Social needs , Social problems , Social development , Social Crimes , Social justice , Social laws , Judicial system , Judicial issues , Constitution-United States , Jurisdiction , United States