Concept
Applying the Diversity Analysis
Diversity jurisdiction
Applying the Diversity Analysis
Every diversity problem asks two questions, and § 1332(a) requires a yes to both: does the matter in controversy exceed $75,000, exclusive of interest and costs, and do the parties fall within one of the listed alignments?1 The earlier sections of this chapter taught the tests that answer those questions one at a time: how to find the State of an individual, a corporation, an association, and a foreign national, how to compare the parties across the caption, and how to count the dollars. A fact pattern presents all of those tests at once. The order in which you run them decides whether your analysis is clean or tangled, because each test uses the result of the one before it.
The comparison across the caption has to wait until every party has a citizenship, and no party has a citizenship until you know which day to look at. Diversity must exist when the suit is instituted; it need not have existed when the cause of action arose, and a later change of domicile does not disturb jurisdiction once it has attached.2 A student who classifies the parties before fixing the date will test the wrong facts, such as a plaintiff's domicile on the day of the accident instead of the day of filing. The dollar test comes last because it depends on who the plaintiffs and defendants are: a plaintiff cannot aggregate claims against multiple defendants to reach $75,000, and plaintiffs cannot aggregate their separate claims with one another unless they share a single title or right.3
Steps three and four carry the most risk, because each kind of party has its own rule and each rule has a familiar wrong turn. Check these five errors against every caption, each corrected by a rule from earlier in the chapter:
- Treating an individual's residence, second home, or temporary posting as state citizenship, when the test is United States citizenship plus domicile, which requires presence in a State together with intent to remain there indefinitely.10
- Counting a legal representative's own State, when § 1332(c)(2) deems the representative a citizen only of the decedent's State or of the infant's or incompetent's State.11
- Giving a corporation a single State, whether its charter State or the State where it does the most business, when § 1332(c)(1) counts every State of incorporation and the State of its principal place of business.12
- Giving a partnership or limited liability company a corporation's citizenship by place of organization and headquarters, when the citizenship of each and every member controls.
- Treating a foreign national who lives in a State as a state citizen, when that person remains an alien until becoming a United States citizen.13
The Trucking Corp. Problem
The Trucking Corp. problem combines the filing-date rule with the principal-place-of-business test, and each has an instinctive answer that is wrong. Paula and Pete were hit by a truck driven on the job by an employee of Trucking Corp., a Delaware corporation in the trucking business. The accident happened in California, where Paula and Pete then lived. Trucking's top executives direct its operations from headquarters in Michigan, but most of its lower-level employees and customers are in or near Miami, Florida, and most of its routes run entirely within Florida. After the accident Paula and Pete moved to Miami, where they planned to retire. They sued Trucking in federal court for damages above $75,000, and Trucking moved to dismiss for lack of subject-matter jurisdiction.14
The steps resolve the problem in order. The complaint pleads no federal claim, so diversity has to carry the case, and the day that matters is the day Paula and Pete filed, not the day the truck struck them in California. On the filing date they lived in Miami and meant to retire there, so each is a Florida citizen. Trucking is a citizen of Delaware by incorporation. Its principal place of business is Michigan, the headquarters from which its top executives direct operations, so Trucking is a citizen of both Delaware and Michigan but not of Florida.15 Florida stands alone on the plaintiffs' side, Delaware and Michigan stand on the defendant's side, and the two sides do not overlap. Complete diversity exists, the amount requirement is met, and the motion to dismiss should be denied.16
Trucking's heavy Florida business is the fact that tempts students, and it carries no weight. What counts is where the executives direct the company. Move those executives to an office in Miami, leave every route, employee, and customer where they are, and Trucking becomes a citizen of Delaware and Florida. Paula and Pete would then share Florida with it, and the motion would be granted.17 Two other shortcuts fail in the same way. Testing the plaintiffs on the accident date yields California, which is not their State on the filing date. And an answer that notes only that the plaintiffs are not Delaware citizens reaches the right result by flawed logic, because the question is whether any plaintiff shares a State with the corporation, and that requires checking Michigan as well as Delaware.18
Ma and Pa's Condo
The Ma and Pa problem shows which step deserves the most space in an answer. Ma and Pa lived all their lives in New York and bought a condominium in Florida. They returned to New York within a month, where they work and volunteer, and they rent the condo to others each winter while keeping Florida bank accounts and licenses. When a collision destroyed their $80,000 vehicle, they sued the other driver, a New York citizen, in federal court, and the driver moved to dismiss for lack of diversity.19
The steps narrow the case quickly. The complaint pleads no federal claim, the filing date is the day Ma and Pa sued, and an $80,000 claim satisfies the amount requirement. If anyone asks whether two plaintiffs can reach $75,000 on one loss, the exception for plaintiffs who share a single title or right is the place to look.20 Because the defendant is a New York citizen, the case is diverse only if Ma and Pa were Florida citizens on the filing date. They must therefore show physical presence in Florida and an intent to remain there indefinitely, and a strong answer says so at the outset and spends its space on that one question.21
The contacts point both ways but not equally. The Florida side offers the condominium, the licenses, and the bank accounts. The New York side offers a return within a month, jobs and volunteer work there, a Florida property they rent to others, and Ma's own words: she would not live in Florida and wanted to go home to New York.22 The model answer reasons that Ma likely has no intent to leave New York and that Pa likely has no intent to leave Ma, so the couple are likely New York domiciliaries. That would put New York citizens on both sides and require dismissal, and the answer adds that the opposite result can be argued.23 The allocation of effort follows from the dependencies among the steps. The date, the defendant's citizenship, and the amount each take a sentence, while the classification of two individuals whose domicile is contested earns the full argument.
A Corporate Essay Problem
The third problem is an essay in which diversity is only a preliminary issue. Stilton, a citizen of Ames, was seriously injured and sues Muenster, a corporation incorporated in New Jersey with its principal place of business there, in the federal court for Ames, claiming $100,000 in damages. The model answer takes up the two subject-matter questions first and disposes of them briefly: is there diversity, and is the amount in controversy met? The harder questions in the problem concern jurisdiction over the parties.24
The classification needs one sentence. Muenster's State of incorporation and its principal-place-of-business State are the same State, so the two anchors of § 1332(c)(1) yield a single citizenship, New Jersey, and Stilton's citizenship in Ames leaves no overlap.25 The two anchors do not always coincide. A corporation chartered in New Jersey but directed from Ames would hold two citizenships, would share Ames with Stilton, and would defeat diversity. The amount takes a sentence more: Stilton claims $100,000, a good-faith figure well above $75,000 for a seriously injured plaintiff.26 Satisfying § 1332(a) answers only whether the court has power over the subject matter. Whether it has power over Muenster is a separate question that gets its own analysis.27
The same order governs two settings the problems above do not show. A defendant who removes a state-court case on diversity grounds must show complete diversity exactly as if the plaintiff had filed in federal court, so a corporate defendant begins with its own classification under § 1332(c)(1).28 And supplemental jurisdiction can relieve the other plaintiffs of the amount requirement once one plaintiff satisfies it, as Exxon Mobil v. Allapattah holds, but only after the citizenship steps have been satisfied.29