Diversity of citizenship is a legal principle in the US Constitution that allows citizens of different states to have their case heard in federal district court to ensure a fair trial. It also applies to corporations, state governments, and foreign governments, but the amount of money involved must exceed $75,000 USD. The principle was established to balance the power between states and the federal government and encourage business expansion.
Citizenship diversity is a legal principle that exists when a lawsuit involving citizens of different states requires the case to be heard in federal district court. This principle was established by the United States (US) Constitution to ensure that citizens of a state get a fair trial and are not at the mercy of the opposing party’s local court. Cases involving diversity jurisdiction may also include corporations, state governments, or individuals or foreign governments. The established residences of the different parties are the determining factor in establishing the diversity of citizenship, with respect to the location of the cause of the action. It is also necessary for the amount of money involved in the lawsuit to exceed a certain amount before the statute takes effect.
The Constitution established the principle of diversity of citizenship and the right of citizens of different states to have a case between them heard in federal district court. At the time of the enactment of the law, the balance of power between the rights of the states and the power of the federal government was still being defined. The diversity jurisdiction had the effect of spurring the expansion of business activity to other parts of the booming country by the industrial powers in the Northeast, as it gave them protection from any local court bias.
In addition to the most common example of lawsuits involving cases between citizens of different states, diversity of citizenship can exist in other cases as well. Citizens who bring a lawsuit against the government of a state other than their own, or against a foreign citizen or government, can also apply for diversity jurisdiction. A corporation is also eligible, although its established residence includes both the state, or states, in which it is incorporated, as well as the state in which it is located. This makes it more difficult for companies to establish diversity of citizenship.
For an individual, diversity of citizenship is determined by his or her domicile at the time the case is brought to court. A person must live in the state and demonstrate to the court an intent to remain there to be considered a resident of that state. The location of the cause of action at the center of the complaint is irrelevant when considering diversity jurisdiction.
Since federal district courts generally have busy schedules, the diversity of the citizenship provision only comes into play when the lawsuit can earn the plaintiff a predetermined amount of money. This amount, also known as the dispute amount, has increased over the years and, as of 2010, was set at $75,000 United States Dollars (USD). Even if the residences of the parties are different, cases of less than this amount are still within the jurisdiction of the local courts.
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