Federal courts have limited jurisdiction and can only hear cases listed in the Constitution. They can have jurisdiction through original or diversity jurisdiction. Diversity jurisdiction allows federal courts to hear cases between parties from different states with a dispute over $10,000. This is to prevent bias in state courts. Parties can choose to take the case to federal court, and forum shopping may occur.
Diversity jurisdiction refers to a situation in which the United States federal court has the right to decide a case that would normally be heard in state court. Courts cannot simply determine the fate of every potential person, and courts cannot rule or decide on every single case. For a court to have the authority to decide a case, that court must have the right to do so based on the jurisdiction.
Under the United States Constitution, the federal government, including the federal judiciary, has authority only over those matters listed in the Constitution. All other powers are left to the states. Therefore, the federal courts are courts of limited jurisdiction.
There are two ways a federal court can have the authority to hear a case. The first type is through original jurisdiction. The second type is through diversity jurisdiction.
The federal court has primary or original jurisdiction if the case arises under federal law. In other words, if a person sues under the United States Constitution or under federal legislation such as Title VII of the Civil Rights Act of 1964, then the federal court has jurisdiction because a federal issue is being raised. Sometimes, federal court has concurrent jurisdiction with the state in these types of cases, which means a state court or federal court could decide the matter. Other times, such as constitutional matters or tax or bankruptcy cases, the exclusive jurisdiction lies with the federal court.
Diversity jurisdiction, on the other hand, allows a federal court to hear a case that would normally be heard in state court. Diversity jurisdiction exists when parties from two different states are having a dispute in court. Also, the dispute must be over $10,000 US Dollars (USD) or more. This monetary threshold is referred to as the disputed amount.
Federal rules of civil procedure allow for diversity jurisdiction based on the belief that a state court would be biased against its own citizens. Diversity jurisdiction applies not only between citizens of different states, but also between citizens of the same state in which one individual is a resident and the other is a foreigner. The same amount in dispute applies.
When diversity jurisdiction exists, the plaintiff may, but is not obligated to, take the case to federal court. The defendant can also request that the case be transferred to federal court if the plaintiff takes it to state court, but is not obligated to do so. The term “forum shopping” can sometimes come into play when one or the other party specifically decides to take a case to court that they believe is more favorable to their position.
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