The United States Constitution, in Article III, Section 2, grants Congress the power to permit federal courts to hear diversity cases through legislation authorizing such jurisdiction.
[1] Congress first exercised that power and granted federal trial circuit courts diversity jurisdiction in the Judiciary Act of 1789.
[5] Thus, an LLC or partnership with one member or partner sharing citizenship with an opposing party will destroy diversity of jurisdiction.
[7] In 2006, the Supreme Court rejected an approach that would have interpreted the term "located" to mean that a national bank is a citizen of every state in which it maintains a branch.
[8] The Supreme Court concluded that "a national bank ... is a citizen of the State in which its main office, as set forth in its articles of association, is located".
[8] The Supreme Court, however, left open the possibility that a national bank may also be a citizen of the state in which it has its principal place of business, thus putting it on an equal footing with a state-formed corporation.
This was originally not a problem when a corporation could be chartered only by the enacting of a private bill by the state legislature (either with the consent of the governor or over his veto).
Therefore, during the 1950s, various proposals were introduced to broaden the citizenship of corporations in order to reduce their access to federal courts.
In 1957, conservative Southern Democrats, as part of their larger agenda to protect racial segregation and states' rights by greatly reducing the power of the federal judiciary, introduced a bill to limit diversity jurisdiction to natural citizens.
[12] Liberals in Congress recognized this was actually a form of retaliation by conservative Southerners against the Warren Court, and prevailed in 1958 with the passage of a relatively narrow bill which deemed corporations to be citizens of both their states of incorporation and principal place of business.
[13] The question of what that phrase meant became hotly disputed during the late 20th century as many areas of the American economy came under the control of large national corporations.
[13] The United States Congress has placed an additional barrier to diversity jurisdiction: the amount in controversy requirement.
§1332(a) has provided that a claim for relief must exceed the sum or value of $75,000, exclusive of interest and costs and without considering counterclaims.
Under this test, the court will accept the pled amount unless it is legally certain that the pleading party cannot recover more than $75,000.
However, federal courts are not limited in their ability to hear tort cases arising out of domestic situations by the doctrine.
If a defendant later moves to the same state as the plaintiff while the action is pending, the federal court will still have jurisdiction.
1652, known as the Rules of Decision Act, to mean not just statutes enacted by the legislature but also the common law created by state courts.
Because the RDA provides for exceptions and modifications by Congress, it is important to note the effect of the Rules Enabling Act (REA), 28 U.S.C.