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Federal Subject Matter Jurisdiction

5. What is the Federal Court’s Subject-Matter Jurisdiction?

As previously discussed, if a federal court has subject-matter jurisdiction over a case, it means that the court may hear the case. There are generally two methods of establishing federal subject-matter jurisdiction in a case:

Federal Question Jurisdiction

•    Federal-question jurisdiction is based upon, or arises out of, a federal law or the US Constitution. For a federal district court to have subject-matter jurisdiction, the parties must demonstrate that the case regards a dispute or charge based in federal law. For example, suing someone for trespass is a state-law tort generally tried in a state court. Suing someone under a federal law, such as discrimination under the Fair Housing Act, would be a federal court action. Special federal courts, such as legislative and administrative courts, have special subject-matter jurisdiction to the extent of the legislative or executive authority applicable to the court’s subject matter. The court cannot hear matters beyond the scope of that jurisdiction. For example, a bankruptcy court cannot adjudicate a securities law dispute.

Federal Jurisdiction when the US is a Party

•    Federal courts have exclusive subject-matter jurisdiction in civil or criminal lawsuits against the United States or its representatives. That is, any case in which the US Government is plaintiff or defendant, the matter can only be heard by a federal court. To illustrate, a federal district court would have subject-matter jurisdiction over a case in which a plaintiff sues the Federal Government for passing an allegedly discriminatory law. In such a action, the matter would also fall under federal-question jurisdiction, as the plaintiff is alleging that the action by the Federal Government is unconstitutional.

Suits Between States

•    Federal courts have exclusive subject-matter jurisdictions over civil or criminal allegations between state governments. This most often arises when one state sues to enjoin (stop) another state from taking actions that unduly discriminate against another state or its citizens. For example, State A may sue State B in federal court contesting State B’s higher sales tax rates on foreign citizens or businesses.

Diversity Suits between Citizens of Different States (Civil Cases)

•    Federal courts have non-exclusive subject-matter jurisdiction in civil lawsuits between citizens of different states, if certain conditions are met. In this situation, allowing for federal subject-matter jurisdiction prevents one party from having an unfair advantage by being subject to another state’s judiciary. It allows citizens of different states to go to trial in federal court, even if the claims are pursuant to state law. The special conditions for this type of jurisdiction are as follows:

⁃    Diversity of Citizenship – Parties must be from different states at the time of filing the action. Some federal diversity suits require “complete diversity,” while others require “minimum diversity”. In complete diversity cases, all plaintiffs must be citizens of different states from all defendants. In minimum diversity cases, only one plaintiff must be from a different state from one defendant. Minimum diversity is a common requirement in class actions.

⁃    Jurisdictional Amount – Diversity suits must involve a controversy between the plaintiff and defendant valued at $75,000 or more. In cases with multiple plaintiffs, all plaintiffs’ claims combined must amount to $75,000 or more. For example, the court may aggregate 3 plaintiffs with $25,000 claims to establish the $75,000 amount in controversy requirement. If the dispute is for less than this amount, the federal court cannot hear the suit.

•    Discussion: Do you think there is a valid justification for allowing individuals from different states to bring an action or remove an action to federal court? Does the federal court forum really mitigate any of the bias concerns with the jury? Do you think the amount in controversy of $75,000 is justified? Should plaintiffs be able to aggregate their claims to reach the $75,000 threshold? Does this create an issue if one of many plaintiffs happens to be located in the same state as the defendant?

•    Practice Question: Milton enters into a contract to Cara to purchase a private jet. The jet is valued at $7 million dollars in the contract. The terms of the contract state that Cara warrants that the aircraft meets all federal aviation standards. Two months after the sale of the aircraft, Milton learns that the inspections records and mechanical function tests prescribed by the Federal Aviation Administration have been falsified. Milton is exploring his options for suing Cara in state and federal court. Cara is from Florida and Milton is from Mississippi. What subject-matter jurisdiction considerations exist for bringing an action against Cara in state or federal court?

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