Subject-Matter Jurisdiction — Civil Procedure

Your client is a software company suing a former engineer in state court for breaking a non-compete. Pure state contract law. The company expects a defense built on a federal labor statute, so its complaint devotes two paragraphs to explaining why that statute does not apply. The engineer removes the case to federal court, pointing at those paragraphs. Was the removal proper?

No. And the reason decides half of this topic. Federal-question jurisdiction is measured only by the plaintiff's own claim, and the only claim this company must prove is a state contract claim. The federal issue belongs to the defense, so it does not count. By the end of this episode you will run any fact pattern through the same gate.

Here is the route. First the master rule, the one feature that makes subject-matter jurisdiction behave unlike anything else in civil procedure. Then the two doors into federal court, federal question and diversity. Then supplemental jurisdiction, the helper that lets extra claims ride along. And finally removal and remand, the machinery that moves a case between the two court systems.

Start with the shape of the problem. State trial courts are courts of general jurisdiction. They hear almost anything. Federal district courts are courts of limited jurisdiction. They hear only what Article III and Congress have authorized. So everything collapses into one question. Has Congress opened a door for this case?

But before you go looking for a door, the master rule. The parties have no power over subject-matter jurisdiction. They cannot consent, stipulate, or contract their way into federal court. A defendant who never objects has still preserved the point. Any party can raise it, the judge can raise it alone, even for the first time on appeal.

And if it is missing, the court must dismiss under Federal Rule of Civil Procedure 12(h)(3). No discretion. Compare personal jurisdiction and venue, which a party waives by not objecting in time. This one is different in kind, which is why an examiner can spring it after a verdict.

Door one. Federal question. Under § 1331 the district courts have original jurisdiction over every civil action arising under the Constitution, laws, or treaties of the United States. Now hear what it does not say. There is no minimum amount in controversy. None. The hard part was never the statute. It is working out whose federal issue counts.

That is the job of the well-pleaded complaint rule. To decide whether a case arises under federal law, you look only at the plaintiff's own claim, stripped of everything the plaintiff did not need to say. The federal ingredient must be part of what the plaintiff must prove to win.

Back to our software company. Strip the complaint down and one claim is left. Breach of a non-compete under state law. Those two paragraphs were never something the company had to prove. So four things never open this door. A federal defense, even a constitutional one. The plaintiff's pre-emptive reply to that defense. A federal counterclaim. And any federal issue living only in the answer.

Try one. A city sues a landowner in state court for $60,000 under a municipal ordinance, and the landowner answers that enforcement would violate the United States Constitution. Federal question, or not? Not. A defense is never the plaintiff's claim.

So what does open the door? One test decides the vast majority of cases. Federal law creates the cause of action the plaintiff is suing on. A federal civil-rights statute, a federal employment statute, a claim brought directly under the Constitution. A warehouse worker fired after reporting safety violations sues under a federal whistleblower statute for $42,000. Her employer says the sum is too small. It is not. § 1331 has no sum.

One narrow second category exists. A state-law claim can still arise under federal law when it turns on an embedded federal issue. Four conditions, all required. Necessarily raised, actually disputed, substantial to the federal system, and decidable without upsetting the federal and state balance. Small category. Default to the creation test.

Door two. Diversity of citizenship. The idea is old and a little cynical. When citizens of different states sue each other, a local court might favor the hometown party, so Congress offers a neutral forum. Under § 1332(a), two things must both be true. Complete diversity, and an amount in controversy exceeding $75,000. Miss either one and the door is shut.

Completely diverse means something strict. No plaintiff may be a citizen of the same state as any defendant. All or nothing. Ana is a Franklin citizen, Ben is a Columbia citizen, and together they sue Delta Corp., a citizen of both Columbia and Olympia. Ben and Delta share Columbia, so diversity fails for the whole case. And citizenship is fixed at the instant the complaint is filed.

So you need every party's citizenship. For a human being, citizenship means domicile, and domicile has two ingredients. Physical presence in a state, plus the intent to remain there indefinitely. Both, at the same time. Maria has lived her whole life in Franklin. She takes a permanent job in Columbia, signs a year lease, registers her car and to vote, and means to stay. How long before she is a Columbia citizen?

The moment she arrives with that intent. A few hours will do, because there is no waiting period. Had she gone for a temporary assignment meaning to return home, she would stay a Franklin citizen throughout, because you keep the old domicile until a new one is complete. And residence is not citizenship, so a vacation home proves nothing, and a party who moves after filing changes nothing.

One more person to watch for. An American citizen living permanently abroad, domiciled in no state, is stateless. Not a citizen of any state, and not of any foreign country. Put that person on either side and diversity dies. A foreign citizen, by contrast, counts as a citizen of their own country. But a lawful permanent resident is not diverse from a United States citizen domiciled in the same state.

Now the entities, where the exam does its best work. A corporation gets two citizenships. Under § 1332(c)(1) it is a citizen of every state where it is incorporated, and of the one state holding its principal place of business. That is the nerve center, where top officers direct and coordinate the company. Almost always the real headquarters. Not the state with the most factories or sales.

Unincorporated businesses run on the opposite logic, and this is a favorite trap. An LLC, a general or limited partnership, any unincorporated association, is a citizen of every state where any member or partner is a citizen. Riverside Trading LLC has three members, citizens of Franklin, Columbia, and Olympia. Riverside sues an Olympia defendant. Diverse, or not? Not. Riverside is itself an Olympia citizen.

Now the dollar test, a separate hurdle. The amount must exceed $75,000. Not meet it. Exceed it. The floor is $75,000.01, and interest and costs do not count toward it. Courts take the plaintiff's good-faith demand at face value, and dismiss only if it is legally certain the claim cannot be worth more. An honest demand of $80,000 survives a later award of $10,000.

Aggregation asks when claims may be added together, and the rules track the number of parties. One plaintiff against one defendant may pile up everything, even wholly unrelated claims. Nadia has a $50,000 claim and an unrelated $40,000 claim against Olsen, aggregates to $90,000, and she is in. But separate plaintiffs may not pool separate claims, and one plaintiff may not add up claims against several defendants.

Two carve-outs. Where parties share a single, common, and undivided interest, or defendants are jointly liable for one harm, the whole value counts once. And class actions under the Class Action Fairness Act are a separate regime, minimal diversity plus an aggregate amount over $5,000,000. For an injunction, courts value the stakes.

Third piece. Supplemental jurisdiction, the helper. Sometimes one claim clearly belongs in federal court and a second would not qualify alone. Under § 1367(a), once the court has original jurisdiction over an anchor claim, it also has jurisdiction over any claim forming part of the same case or controversy. In plain terms, they share a common nucleus of operative fact.

Then comes the limit that stops plaintiffs sneaking around complete diversity. Two things about § 1367(b) are essential. It applies only when the case is in federal court on diversity alone. And even then it restricts only claims brought by plaintiffs, against parties joined under Rules 14, 19, 20, or 24. A defendant's claims are untouched.

Watch it work. Pryor, a Franklin citizen, sues Delta Corp., a Columbia citizen, in a diversity case for $200,000. Delta impleads Tucker under Rule 14 for reimbursement, and Tucker is a Franklin citizen. Delta's claim rides along, because a defendant's claim is untouched. Now Pryor asserts a direct claim against Tucker. Blocked. Both are Franklin citizens, and § 1367(b) forbids that route.

Two footnotes. Section 1367(b) does not list co-plaintiffs joined under Rule 20. So a court can hear an extra plaintiff's related claim worth less than $75,000, provided complete diversity holds and one plaintiff clears the amount. And under § 1367(c) a court may decline, most often when the federal anchor falls early and only state claims are left. Then § 1367(d) pauses the state limitations clock, plus 30 days.

Last piece. Concurrent jurisdiction, and removal. Most claims can be filed in either system, and state courts are fully competent to decide federal-question claims. Only a small set is exclusively federal. Patent and copyright suits, bankruptcy, certain federal securities and antitrust claims. That sharing is the whole reason removal exists.

Removal runs one way, from state court to federal court, and only a defendant can drive. Not a plaintiff unhappy in the court it chose. Not a party defending a counterclaim. Not a third-party defendant. The core condition is simple. A case is removable only if the plaintiff could have filed it in federal court to begin with. Removal creates no new jurisdiction.

Then run the checklist. All properly joined and served defendants must join in or consent, and one holdout defeats the removal. The notice goes in within 30 days after service of the initial pleading, or within 30 days of the first paper showing the case has become removable. And it goes to the federal district court embracing the state courthouse.

Diversity-only removals carry two more limits, both examiner favorites. First, the forum-defendant rule in § 1441(b). A case removable solely on diversity may not be removed if any defendant properly joined and served is a citizen of the state where the action was filed. Second, no diversity removal more than a year after the case began, absent bad faith by the plaintiff.

Remand is the reverse gear, and it runs on two tracks. A procedural defect, a missed deadline or a missing consent, must be raised within 30 days of the notice of removal, or it is lost. A lack of subject-matter jurisdiction has no deadline. Under § 1447(c) the court must remand whenever it finds that defect, right up to final judgment.

Which is where our software company lands. The removal rested on a federal issue that was only ever a defense, so the federal court never had jurisdiction, and back it goes. Two paragraphs of clever pleading bought nothing.

A word on authorities, because this episode named no cases, and that was deliberate. NextGen questions hand you a fact pattern and ask what result the rule produces. They will not ask you for case names. Here the authorities are numbers, not names, from 28 U.S.C. and the Federal Rules of Civil Procedure.

If you keep only three numbers, keep these. § 1331, the federal-question door, and the one with no dollar threshold. § 1332(a), which needs complete diversity and more than $75,000, both. And § 1441, removal, where a qualifying case can still be blocked by the forum-defendant rule. Supplemental jurisdiction under § 1367 opens no door of its own.

Now the traps, straight from the examiners' favorites list. One. Scanning the whole file for anything federal. Look only at the plaintiff's well-pleaded claim. A federal ingredient sitting in a defense, an anticipated defense, or a counterclaim is a mirage. Two. Importing the $75,000 threshold into a federal-question case. That number belongs to diversity alone.

Three. Exactly $75,000. Not enough. Four. The word resident. Residence is not citizenship, so hunt for the domicile. Five. Treating an LLC like a corporation. Six. Forgetting that § 1367(b) bites only in diversity-only cases, and only against plaintiffs. Seven. Forgetting that the forum-defendant rule bars only diversity removal. A federal-question case can be removed even where a defendant is sued at home.

And one habit worth building. Subject-matter jurisdiction is a threshold issue, so ask about it first in any civil procedure fact pattern, then watch for it to surface late. Never assume it was settled because nobody mentioned it.

Time for the quick check, straight from the BARGO question bank. Two plaintiffs jointly sue one corporation in federal court for $500,000 over a business deal that collapsed. The first plaintiff is a Franklin citizen, the second a Columbia citizen. The corporation is incorporated in Olympia, with its headquarters and principal place of business in Columbia. Each claim easily exceeds $75,000.

The corporation moves to dismiss. Should the court dismiss for lack of diversity jurisdiction? Option one. No, because most of the parties are citizens of different states. Option two. Yes, because a plaintiff and the defendant are both citizens of Columbia. Option three. Yes, because the defendant is a citizen of two different states at once. Pause here if you want a moment.

The answer is option two. The corporation is a citizen of Olympia, where it is incorporated, and of Columbia, its principal place of business. One plaintiff is a Columbia citizen. Plaintiff and defendant share a state, so complete diversity fails and the whole case goes, however diverse the other parties are. Option one is the losing argument. Most is not the test.

Option three is the near miss. The corporation really does hold two citizenships, and that alone defeats nothing. A two-state defendant is fine unless one of those states matches a plaintiff, which is exactly what happened here. There are thirty plus more questions on this topic alone, each with every option explained like that.

Five things to take away. One. Subject-matter jurisdiction cannot be created by consent and cannot be waived, so it can surface at any moment, and a court that lacks it must dismiss. Two. Federal question is read off the plaintiff's well-pleaded claim alone, and carries no dollar threshold.

Three. Diversity needs both halves. Complete diversity, where no plaintiff shares a state with any defendant, and more than $75,000. Four. Citizenship by party type. Domicile for a person, incorporation plus nerve center for a corporation, every member for an LLC or partnership. Five. Only a defendant removes, only where the plaintiff could have filed in federal court, and a lack of jurisdiction sends a removed case back at any time.

And our software company loses its federal forum for one reason. Two paragraphs about a federal statute, written by the plaintiff, never made the case federal. Next time, Personal Jurisdiction.

Practice this topic with more than 2,900 exam-style questions, free to start, at nextgenbargo.com. This episode is for education and exam preparation only, not legal advice, and we are not affiliated with or endorsed by the NCBE or any bar examining authority.