The vast majority of litigation which occurs in the U.S. occurs in State courts. The reason for this is that while State courts have inherent authority to hear all disputes, federal jurisdiction is limited. Just as the federal congress’ powers are few and defined (in theory), the federal judiciary’s jurisdiction is specifically enumerated. Although there are separate ways to land yourself in federal court, federal courts can generally only hear cases in which (1) diversity jurisdiction exists or when the claim presents a (2) federal question.
Diversity jurisdiction is straightforward. A plaintiff may properly invoke diversity jurisdiction if the amount being sought is in excess of seventy-five thousand dollars ($75,000) and there is complete diversity in residency between the litigants at the time the action is filed. For purposes of diversity jurisdiction, residency is discussed in the context of State residents. Potential hiccups can occur with diversity jurisdiction when the complaint is vague as to whether the amount in controversy is over $75,000 or when residency is in dispute (particularly with corporations).
Federal question jurisdiction (aka arising under jurisdiction) is more nuanced. Federal question jurisdiction may be established in one of two ways. First, through the “well-pleaded complaint rule,” which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Alternatively, federal question jurisdiction will lie over state law claims that implicate “significant federal issues.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005).
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