Chapter 3 – Diversity Jurisdiction in Federal Courts

Notes and Questions: Applying the Test for State Citizenship1. Grey box question Susan Gordon, after growing up in Pennsylvania, goes to Ricks College, in Idaho, planning to get a two-year nursing degree and return to practice nursing in Pennsylvania. Two months after starting school, she files suit in a Pennsylvania federal district court against Dr. Rodriguez, a Pennsylvania citizen who treated her in Pennsylvania for an injury. She claims jurisdiction based on diversity. The court probablya. lacks diversity jurisdiction, because Gordon is still domiciled in Pennsylvania.b. lacks diversity jurisdiction, because the treatment took place in Pennsylvaniac. .has diversity jurisdiction, because she was living in Idaho when she filed the suit.d. would have diversity jurisdiction, if she brought the action in an Idaho federal court.

Grey box question consider where Susan Gordon would be domiciled in the following examples.2A. Susan Gordon goes to Ricks College, planning to get a two-year nursing degree and then move to California to work in a hospital there. Before leaving for Ricks College, she announces to her friends that she is never coming back to Pennsylvania. Two months after starting school, she sues the Pennsylvania doctors.2B. Susan Gordon goes from Pennsylvania to Ricks College, planning to get her degree and practice nursing in Idaho. After three months at college, she decides that she does not like Idaho and will return to Pennsylvania after she completes her degree. The next week she brings the suit.2C. Susan Gordon goes from Pennsylvania to Ricks College, planning to get her degree and practice nursing in California. After three months at college, she decides she likes Idaho and will stay and practice nursing there after she completes her degree. She brings suit a month after she makes that decision.2D. Susan Gordon goes from Pennsylvania to Ricks College, planning to practice nursing after she finishes her degree, but with no plan as to where she will do so. A month after starting school, she sues the Pennsylvania defendants.

3. In Holmes v. Sopuch, 639 F.2d 431 (8th Cir. 1981), the plaintiff, Holmes, had been living in Missouri and working for the federal Defense Mapping Agency. The DMA sent him to a one-year program at Ohio State University during the 1978-79 academic year. He and his wife moved to Ohio, where they leased an apartment for one year. In February 1979, while he was still living in Ohio, he brought a diversity action against two Missouri citizens.

Holmes testified that “after finishing his studies at Ohio State he would obtain the best position available with the DMA and that he never intended Ohio to be his permanent home. Moreover, there is no DMA facility in Ohio which Holmes might have chosen upon the completion of his studies. Holmes also testified that he might have chosen to return to the St. Louis DMA facility.” Did Holmes acquire domicile in Ohio?

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4. Gordon brought her suit in the Federal District Court for the Western District of Pennsylvania. Would the diversity analysis be different if she brought it in the Northern District of California? Or the Southern District of Texas?

5. Gordon, from Idaho, brings suit against the Pennsylvania doctors in a state court in Pennsylvania. Would the state court have subject matter jurisdiction over the case?

6. Originally from Massachusetts, Ruggles drifted from one New England state to another, staying for a while and then getting itchy feet and moving on. At one point, he drifted up to New Hampshire, where he took a job on a lobster boat for the summer season. He had a contract to work on the boat for six months. During this period, Ruggles was injured when he was hit by Quan’s car. May Ruggles sue Quan, a New Hampshire citizen, in federal court under the diversity jurisdiction?

Notes and Questions: The Complete Diversity Requirement7. Assume that Mr. and Mrs. Mas were both domiciled in Louisiana while in school, but after finishing their degrees they move to France, planning to live there indefinitely. After arriving in France, they bring suit on a state law claim against Perry in federal court in Louisiana.

A. The court lacks jurisdiction, because Mrs. Mas is not a citizen of a state or a foreign citizen.B. The court lacks jurisdiction, because Mrs. Mas remains a citizen of Louisiana.C. The court has jurisdiction, since neither Mr. Mas nor Mrs. Mas is domiciled in LouisianaD. The court has jurisdiction, because Mr. and Mrs. Mas have become foreign citizens. Thus, the case is between a state citizen, Mr. Perry, and citizens of a foreign state.

8. Where could the Mases sue Perry in the last example?

Notes and Questions on § 1332(c)(1)

Many corporations incorporated in Delaware for business reasons, although all their productive activity was conducted elsewhere. Silver Mining Company might incorporate in Delaware to take advantage of the Delaware incorporation laws, even though all of its mines are in Nevada. If so, the Marshall rule would treat Silver Mining as a citizen of Delaware, even though it has no employees, activities, or facilities in Delaware. Silver Mining would be diverse from a Nevada citizen, although in every practical sense it is “local” in Nevada if it is local anywhere.

9. Suppose that Nevada is Silver Mining’s principal place of business, but it also has a mine in Wyoming. Is it diverse from a Wyoming citizen?

10. Suppose that Silver Mining, which does no business in Delaware, is sued by a Delaware citizen. Is there diversity? Notes and Questions: Corporate Citizenship for Diversity11. Suppose that Hertz Corporation, intent on suing a New Jersey citizen in federal court, were to move its corporate headquarters to Wisconsin, to “create diversity.” Would the parties be diverse?

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12. Rota, a Pennsylvania citizen, sues Matthews, Bernstein, Rollins and Grey, a 120-person law firm with offices in New York City. Her claim is for fraud. Most of the partners live in New York, but ten live in New Jersey and one in Pennsylvania. Is this a diversity case?

13. Jiminez, a Colorado plaintiff, sues three defendants, Kramer and Jost (two individuals from Wyoming) and Delta Corporation, incorporated in Wyoming with a good deal of business in Wyoming and Colorado. Just before trial, Delta moves to dismiss, claiming that Colorado is its principal place of business. The court takes evidence and hears argument on the issue and concludes that Delta is right. Consequently, it is a citizen of both Wyoming (based on incorporation) and Colorado (based on its principal place of business). Must the court dismiss the case?

14. Grey box question You represent Corey in his bar fight case and would like to file the case in federal court based on diversity jurisdiction. Assume that Corey is a citizen of Massachusetts, based on his domicile there. Barristers is incorporated in Delaware. It owns and operates eight bars in Massachusetts. It also owns and operates one in Rhode Island (where it also has its corporate headquarters), two in Connecticut, and one in Maine.

A federal court would

A. have diversity jurisdiction, even if Barrister’s principal place of business is in Massachusetts, because Corey is a citizen of Massachusetts and Barristers is a citizen of DelawareB. have diversity jurisdiction, because Corey is a citizen of Massachusetts and Barristers is a citizen of Rhode Island and Delaware.C. lack diversity jurisdiction, because both Corey and Barristers are citizens of Massachusetts.D. lack diversity jurisdiction, if the suit is brought in Massachusetts, since Corey is domiciled there.

Notes and Questions: The Amount-in- Controversy Requirement15. Santini sues Chang for serious personal injuries that would support a damage award over the required amount. However, the jury finds that Chang was not negligent and renders a verdict for her. Should the court dismiss the case after trial for failure to meet the amount-in-controversy requirement?

16. In Kahn v. Hotel Ramada of Nevada, 799 F.2d 199 (5th Cir. 1986), the plaintiff left his suitcase for safekeeping at a hotel, and it was lost. Kahn, a jewelry broker, alleged that it contained some $50,000 in jewelry (the amount at the time had to exceed $10,000). A Nevada statute limited an innkeeper’s liability for lost property to $750. The hotel moved to dismiss Kahn’s suit for failure to meet the amount-in-controversy requirement. What should the court do?

Aggregating Claims to Meet the Amount Requirement17 A. P sues D for $20,000 for an accident claim, $30,000 for libel, and $40,000 for a contract breach.

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17 B. P sues D1 for $40,000 and D2 for $60,000, in a single action arising from a single business dispute.17 C. P sues D1 for $120,000 and D2 for $60,000, in a single action arising from a single business dispute.17 D. P1 sues D for $50,000. P2 joins as a coplaintiff, asserting a claim against D for $60,000 in the action, arising from the same business dispute.

Grey Box Question Notes and Questions: Aggregation of Claims18. In which of the following cases is the amount-in-controversy requirement met as to all claims?A. Adams sues Bickel for $40,000 for slander, and for $50,000 for an unrelated breach of contractB .Adams sues Bickel for $60,000 for injuries in an auto accident. Rajiv joins as a coplaintiff, claiming $50,000 from Bickel for his injuries in the same accident.C. Lopez sues Alou for $50,000 for losses he suffered in a business deal. He also sues Antoine, as a codefendant in the same action, for $60,000 in losses Antoine caused in the same deal.D. The amount requirement is not met in any of these cases.

19. Everett, a passenger in Lipmann’s car, is injured when Lipmann’s car collides with Ritter’s. She sustains $100,000 in injuries and sues both Lipmann and Ritter for negligence. Under applicable tort law, whichever defendant is found negligent would be fully liable for her injuries. If both are found negligent, both would be liable to pay her full damages. (Of course, if she collected $100,000 from Lipmann she could not then collect another $100,000 from Ritter, but she could demand payment of the full amount from either defendant.) Does she meet the amount-in-controversy requirement?

20. Jane buys a coat, allegedly mink, from Fuzzy’s Furs for $7,000. She later learns it is worthless muskrat fur. She sues Fuzzy’s for compensatory damages. In Count I of her complaint, she alleges that Fuzzy’s defrauded her, by deliberately selling her the muskrat coat as mink. In Count II, she alleges that Fuzzy’s was negligent in selling her the coat, since it should have realized that the coat was not really mink. Is the amount-in-controversy requirement met?

Notes and Questions Comparing the Constitutional and Statutory Scope of Diversity Jurisdiction21. Casey, a New Mexico citizen, sues Lopez, from Utah, for $20,000 for injuries suffered in an auto accident. The suit is for negligence, a state tort claim. Is this case within the Article III, Section 2 grant of diversity jurisdiction to the federal district courts? Can the federal district court hear it? 22. Suppose that Congress decided to allow all diversity cases to be heard in federal court. Could it eliminate the amount-in-controversy requirement, that is, amend § 1332(a) by striking out the language “where the amount in controversy exceeds the sum or value of $75,000" from the statute?

Grey Box Question 23. Congress, fed up with the crowded dockets of the federal district courts, decides to raise the amount-in-controversy requirement in diversity cases to $10 million. Could it do so?

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A. Yes, because Congress can make any changes it wants to the federal district courts’ subject matter jurisdiction.B. Yes, because Congress can limit the federal district courts’ exercise of jurisdiction over cases authorized in Article III, Section 2.C. No, because a $10 million requirement would leave too many people at risk of state court bias against outsiders.D. No, because Article III, Section 2 authorizes jurisdiction over diversity cases without regard to the amount in controversy between the parties.

24. Casey, a New Mexico citizen, wishes to sue Lopez, from Utah, and Ming, from New Mexico, for injuries suffered in an auto accident. Her claim is for more than $75,000. Which of the following statements is correct?A. A federal court has statutory, but not constitutional authority to hear the case.B. A federal court has constitutional, but not statutory authority to hear the case.C. A federal court has neither constitutional nor statutory authority to hear the case.D. A federal court has both constitutional and statutory authority to hear the case.

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Chapter 3 Answers

1. B is wrong because the court’s jurisdiction in a diversity case has nothing to do with where the claim arose, only with the state citizenship of the parties. If Kim, from Texas, has an accident with Olsen, from Michigan, in Tennessee, that’s a diversity case, since the parties are from different states. The federal court will have subject matter jurisdiction over it whether it is brought in a federal court in Texas or Tennessee or Alaska. D is also wrong because diversity does not have anything to do with which federal district court the suit is filed in, only whether the plaintiffs and defendants are from different states. C fails as well, because a person may be living in a state, but not be domiciled there under the test, if she plans to leave at a definite time. Based on the domicile test, the best answer is A. Since Gordon is in Idaho for a definite time only, she did not acquire a new domicile when she went to Ricks College. Thus we look back to her last domicile, Pennsylvania.

2A. Pennsylvania. She has not formed a new domicile in Idaho, since she is only in Idaho for a definite period. She hasn’t formed one in California either, because she hasn’t moved there yet. Ironically, though she swears she will never set foot in Pennsylvania again, she does not lose her Pennsylvania domicile until she forms a new one.

2B. Idaho. When Gordon arrived in Idaho planning to stay, she acquired domicile there. Although she now intends to leave Idaho, she won’t lose her Idaho domicile until she goes to another state with the intent to remain there indefinitely.

2C. Idaho. Gordon did not acquire domicile when she moved to Idaho but did when her intent changed while she was living there. The statement quoted in Gordon that “[i]t is the intention at the time of arrival which is important” is misleading. Even though Gordon did not form a domicile on the day she moved there, she does form it later when she is living there and decides to stay.

2D. Here, Gordon has no clear intent to leave Idaho. She might, but has no definite plan to do so or to do anything else. The better answer is that she acquires domicile in Idaho. This is close to the actual facts of the case.

3. The court held that Holmes did not acquire domicile in Ohio during his time there. Although he resided there, he was not there “indefinitely.” He intended to leave Ohio at a definite time, since he planned to resume his work for the DMA, and he could only do so by leaving Ohio. The result would likely have been different if the DMA had a facility in Ohio, and Holmes might have been hired there. In that case, he might have remained in Ohio after the one-year program. Even if there were more DMA offices in other states, it would not be clear that Holmes was going to leave Ohio at a definite time.

4. No, it wouldn’t. The diversity statute, 28 U.S.C. § 1332(a), provides that “the [federal] district courts” shall have jurisdiction over cases between citizens of different states. If the plaintiff and defendant are from different states, any federal district court will have diversity jurisdiction over the case. The particular federal district the plaintiff chooses matters in determining whether the court has personal jurisdiction over the defendant or is a proper venue, but is irrelevant in

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determining whether the court has subject matter jurisdiction over the case. The court has diversity jurisdiction as long as the plaintiff and defendant are citizens of different states (and the amount-in-controversy requirement is met, as we will see later).

5. Yes. Recall a crucial point made in Chapter 1. The fact that a case could be filed in federal court as a diversity case does not mean that it must be filed in federal court. As a general rule, the state courts also have jurisdiction over cases within federal subject matter jurisdiction. Even if Gordon is diverse from the defendants, state courts have broad jurisdiction to hear tort cases as well, and Gordon may have strategic reasons for preferring to sue in state court.

6. If a student wrote the following analysis of Ruggles’s domicile, she would do very well: “To invoke diversity jurisdiction Ruggles would have to be a citizen of a different state than Quan. This turns on where Ruggles is domiciled (that is, the last state he has resided in with the intent to reside indefinitely) on the day he files suit. If, as the question suggests, Ruggles brings suit while he is still working in New Hampshire, he will likely be found a citizen of New Hampshire. True, he is a ‘drifter,’ tends to move on after a while, and probably will leave New Hampshire at some point. But the question does not indicate that he has any specific plan to do so at a particular time. Although his contract is only for six months, the facts do not suggest that he has any plans as to what he will do at the end of the six months. Presumably, Ruggles’s only plan at that point is to see what turns up, and if nothing does, then perhaps he’ll move on. If this is so, Ruggles does not have a fixed future plan, is living in New Hampshire on an open-ended basis, and is domiciled in New Hampshire. Consequently, he cannot sue Quan in federal court based on diversity jurisdiction.”

7. D is wrong, because Mrs. Mas does not become a citizen of France just by moving there. She is still a U.S. citizen, unless she renounces that citizenship. So it is not a case of a state citizen (Perry) against two French citizens. C fails as well. To invoke diversity, it is not enough that the Mases are not from Louisiana. The case must fit into a category of jurisdiction in Article III, Section 2. Here, Mrs. Mas is not a citizen of any state, because she is not domiciled in any state (even though she is a U.S. citizen). Mr. Mas, as a foreign citizen, could sue Perry in federal court, but Mrs. Mas cannot join with him because she does not satisfy diversity jurisdiction. Nor is she a citizen of France, since she is still a U.S. citizen. B is wrong, because Mrs. Mas does not remain a citizen of Louisiana. To be a citizen of Louisiana, she must be a U.S. citizen domiciled in Louisiana. She remains a U.S. citizen after moving to France, but is now domiciled in France, since she is living there with no definite intent to leave. So A is right. Once she moves to France, Mrs. Mas loses her Louisiana citizenship. She remains a U.S. citizen, but she is not a citizen of any state since she is domiciled in France. See Twentieth Century-Fox Film Corp. v. Taylor, 239 F. Supp. 913 (S.D.N.Y. 1965) (no diversity jurisdiction in suit against Elizabeth Taylor, a U.S. citizen domiciled in England when suit was commenced, since she was not a state citizen).

8. They could sue him in state court in Louisiana. The subject matter jurisdiction of the state courts in every state is quite broad and would include tort claims such as the Mases’ claims against Perry. They could not sue in federal court, for lack of subject matter jurisdiction. They probably could not sue him in France, since he would not be subject to personal jurisdiction there for the Mases’ claims.

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9. Yes. Section 1332(c)(1) refers to “the State or foreign state” where the corporation has its principal place of business. (Emphasis supplied.) Courts have interpreted this to mean that a corporation can have only one principal place of business for diversity purposes. Even if a corporation does a great deal of business in other states, it will not be deemed a citizen of those other states. Silver Mining is a citizen of Nevada, but not of Wyoming.

10. No. Section 1332(c)(1) makes the corporation a citizen of both its state of incorporation and the state of its principal place of business. Thus, Silver Mining is a citizen of Nevada and of Delaware and is not diverse from either a Nevada or a Delaware citizen. Since Silver Mining has no physical presence or activity in Delaware, this seems anomalous; Delaware citizens will not think of Silver Mining as a local entity. However, incorporation—which for corporations is an act of creation— is such a profound connection to a state that the statute treats corporations as “local” in the state of incorporation as well as the state of their principal place of business.

11. Corporations have done this on occasion, and the Court has found diversity satisfied as long as the corporation really did change its citizenship. In Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U.S. 518 (1928), a Kentucky corporation dissolved itself and reincorporated in Tennessee to become diverse from a Kentucky corporation. The Supreme Court held that, since it had legally become a Tennessee corporation, it was diverse, and refused to entertain arguments about its motivation for doing so. Hertz might be criticized on the ground that it may lead to similar manipulation by small corporations. However, it would rarely make sense for a corporation to uproot its corporate offices and move to another state just to invoke federal jurisdiction in a particular case.

12. No. The law firm is considered to be a citizen of New York, New Jersey, and Pennsylvania. As a result, there is no complete diversity. Since the claim arises under state law, and there is no diversity jurisdiction, the case must be brought in state court.

13. The court cannot hear the case as originally framed because there is not complete diversity. However, it need not dismiss the entire suit; it can order Delta dropped as a defendant, thus “perfecting diversity,” and continue with the case against the two individual defendants.

14. D here is a real dog. It suggests that there is no diversity jurisdiction if the plaintiff is a citizen of the state in which she brings the suit. Not so; to determine diversity we compare the plaintiff’s citizenship to that of the defendant, not to the state in which she sues. A is also based on a misconception. Under § 1332(c)(1), the corporation is a citizen of both the state in which it is incorporated and the state of its principal place of business. Corey cannot argue that there is diversity here because he is from Massachusetts and Barristers is from Delaware. If Barristers has its principal place of business in Massachusetts, it is also a citizen of Massachusetts. The case would be between a citizen of Massachusetts and a citizen of Delaware and Massachusetts, so there would not be complete diversity. So the answer to this question turns on whether Barristers’s principal place of business is in Massachusetts or Rhode Island. Here’s the answer we wrote before Hertz was decided: If the court applies the “headquarters” test, Barristers’ principal place of business is Rhode Island, and B is the best answer. If it applies the daily activities test, the answer is less clear. Probably, for a business that runs local bars, and has most of them concentrated in one state, the court would focus on where it sells pints, rather than the

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corporate headquarters. Barristers exists to sell beer and sells considerably more of it in Massachusetts than other states. Thus, Barristers would have more interaction with the citizenry in Massachusetts and would be viewed as local by many more people in Massachusetts. Likely, a court would hold that its principal place of business is Massachusetts, making C the best answer. That answer is now obsolete. Under Hertz, Barristers’ principal place of business is determined by its headquarters. Since that is in Rhode Island, B is the right answer.

15. No. Santini did satisfy the amount requirement. He filed a case that plausibly alleged that Chang was liable for injuries that satisfied the amount requirement. Although he lost the case, it concerned a plausible claim for more than $75,000, so the amount-in-controversy requirement was met. The judge should enter judgment for Chang on the merits. If the judge dismissed the case for lack of subject matter jurisdiction, Santini could sue Chang again for the same claim: a dismissal for lack of jurisdiction would not bar him from suing again on the same claim. This case has been fully litigated and fairly tried. Santini lost because he couldn’t prove his case, not because he failed to allege a colorable claim for more than $75,000.

16. The court should dismiss the case for lack of subject matter jurisdiction, since the plaintiff cannot meet the amount-in-controversy requirement. Unless the plaintiff has an argument that the statute is somehow inapplicable, there is a legal certainty that the plaintiff cannot recover more than $750, well below the required amount.

17A. The amount requirement is met. A single plaintiff suing a single defendant may add together any claims she has against the defendant to meet the amount requirement, even if they are unrelated.17 B. The amount requirement is not met. A plaintiff may not add claims against different defendants to meet the amount requirement (absent a common and undivided interest—see note 3 on page 84).17 C. P meets the amount requirement against D1 but not against D2. She cannot add the two claims together. She is suing D1 for more than the jurisdictional amount, so that claim is proper. But her claim against D2 does not meet the amount requirement and cannot be aggregated with the claim against D1. D2 will have to be dropped from the suit.17D. No good. Neither plaintiff meets the amount requirement independently. The plaintiffs cannot add their claims together to reach the $75,000 plus threshold.

18A. The amount requirement is met in A, since a plaintiff may add her claims together to reach the $75,000 plus threshold, even if they are unrelated. But courts have not allowed separate plaintiffs, each with an insufficient claim, to join together in a single action and aggregate their claims to meet the requirement

18B. in B, neither Adams nor Rajiv meets the amount requirement.

18C. Nor have courts allowed a plaintiff to aggregate claims against separate defendants, as Lopez has tried to do in example C.

18D. AIC is met in A

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19. Here, either defendant may end up incurring a judgment for more than $75,000. If the jury finds that the accident was Lipmann’s fault, Lipmann will be liable for $100,000. If they find that it was Ritter’s fault, Ritter will be liable for $100,000. If they find it was due to the negligence of both defendants, they may (depending on local law) both be liable for $100,000. So either might be liable for more than $75,000 .Of course, either might escape liability entirely. Or, both might escape liability, if the jury finds that neither was negligent. But either might be liable for more than the jurisdictional amount, which is all that is required.

20. Jane has sought relief based on two legal theories, fraud and negligence. Presumably, she could not prove both; either Fuzzy’s intentionally defrauded her or negligently sold her muskrat for mink. Whichever theory she proves, the jury (absent a claim for punitive damages not given in the question) will be instructed to award her the damages she has suffered due to the tort. Her loss is one coat worth $7,000. This does not meet the amount requirement. The same would be true if she could recover on both theories. As long as she is seeking only compensatory damages, the amount will be determined by asking what loss Jane has suffered, not how many legal wrongs Jane’s lawyer chooses to call it. If her loss is $7,000, Jane does not meet the amount-in-controversy requirement in § 1332.

21. Casey’s case is a proper diversity case under Article III, Section 2, since the parties are from different states. So there is a constitutional basis for a federal court to hear Casey’s case. However, Article III, Section 2 does not directly grant diversity jurisdiction to the federal district court—Congress does, within the limits set by Article III. Congress has not authorized the federal district courts to hear diversity cases unless more than $75,000 is in controversy. The federal court cannot hear Casey’s case, even though it is, constitutionally speaking, a proper diversity case.

22. Certainly. Article III authorizes federal courts to hear all diversity cases, without regard to the amount in controversy. It is 28 U.S.C. § 1332(a) that limits diversity cases to those involving more than $75,000. If Congress struck the amount-in-controversy language from the statute, it would expand the statutory diversity jurisdiction, but the jurisdiction conferred would still be within the constitutional grant.

23. The correct answer is B. A is wrong because Congress cannot make any changes it wants in the subject matter jurisdiction of the federal district courts. Congress could not authorize jurisdiction over cases that are not within the constitutional grant in Article III, Section 2 (e.g., all divorce cases). That would grant jurisdiction beyond that authorized in the Constitution. However, Congress can limit the federal district courts’ jurisdiction more narrowly than the Framers did in Article III. It could grant no diversity jurisdiction if it wants. Thus C is wrong. D is wrong, too. The fact that there is no amount-in-controversy requirement in Article III, Section 2 does not mean that Congress cannot impose one.

24. There is no complete diversity here, since Casey is from the same state as one of the defendants. Since § 1332 is interpreted to require complete diversity, it does not authorize jurisdiction in this case. So A and D are wrong. However, the Strawbridge complete diversity rule is a statutory requirement only. Tashire holds that the phrase “between citizens of different states” in Article III, Section 2 only requires that one plaintiff be from a different state than one

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defendant. Thus, it would be constitutionally permissible for a federal court to hear cases like Casey’s case that involve minimal diversity. But there is no statutory authority to hear the case, due to the Strawbridge interpretation of § 1332(a). The correct answer is B.

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CHAPTER 4 Federal Question Jurisdiction – Questions

Notes and Questions: The Well-Pleaded Complaint Rule1. Grey Box QuestionThe Mottleys may not have realized that their case, which raised several novel questions of federal law, might fail to satisfy the statutory requirement for federal question jurisdiction. Suppose that after the Supreme Court’s decision the federal trial judge gave them the opportunity to amend their complaint to solve the problem. What should they plead to get into federal court?A. They could not amend the complaint in any way that would satisfy the statutory requirements for federal question jurisdiction.B. They should amend, stating with more specificity why they know the railroad would raise the federal statute as a defense.C. They should amend to allege that the railroad has deprived them of their constitutional rights under the Fifth Amendment.D. They should amend to allege a right to relief under the federal transportation statute itself, not just under the contract.

Notes and Questions: The Creation Test2. Zander holds a patent on inverse rototurnbuckles. Federal law provides that a patent holder enjoys the right to exclude others from manufacturing a patented device unless the patent holder grants a license to another to do so. Cassevites, without obtaining a license from Zander, begins to make rototurnbuckles. Zander sues to obtain an injunction barring Cassevites from doing so.

3. Bluestein, a fifty-five-year old employee of Concept Corp., is fired. He claims that he was fired based on his age and replaced by a younger worker. The federal Age Discrimination in Employment Act bars age discrimination in employment and allows actions for damages for it. Bluestein sues for damages under the Act.

4. Rosario sues Demerest in state court, claiming that Demerest fired him based on his age, a violation of the federal Age Discrimination in Employment Act. The state court shouldA. hear the suit.B. hear the case only if the parties are not diverse.C. dismiss the case, because it arises under federal law and must be filed in federal court.D. dismiss the case, unless Congress has expressly authorized bringing such federal claims in state court.

Notes and Questions on the “Smith Exception”5. Grey Box Question In Grable, the Court noted that “in certain cases federal question jurisdiction will lie over state-law claims that implicate significant federal issues.” 545 U.S. at 312. Suppose that, just after Grable and Gunn, the Mottleys sue to renew their passes. (Ignore the fact that they would be 150 years old, please.) The railroad raises the federal statute barring free passes as a defense to the claim. The Mottleys’ position (asserted in their complaint) is that the statute does not bar renewal of passes given before its enactment, and that, if it does, it is unconstitutional under the Fifth Amendment. Assume that these issues have never been resolved by the courts.Given the analysis in Grable and Gunn, the Mottleys

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A. could bring their action in federal court, because their well-pleaded complaint raises issues of federal law.B. could not bring their action in federal court, because their complaint does not assert a federal claim or require them to establish an important issue of federal law to recover.C. could not bring their action in federal court, unless the court finds that these are substantial issues of federal law, and entertaining the action will not disrupt the balance between state and federal courts.D. could bring their action in federal court, because the Mottleys have raised two substantial, unresolved issues of federal law.

6. Suppose that Congress passes a statute providing that no federally chartered bank may charge interest rates in excess of those authorized by the law of the state in which it is located. An Oregon federal bank charges Wellington 19 percent interest, which exceeds the 17 percent ceiling set by Oregon law. She sues the bank to enjoin them from charging 19 percent, claiming it exceeds the rate allowed by the federal statute. Does the case arise under federal law?7. In which of the following cases would the federal district court have subject matter jurisdiction over the case?A. Gupta, from Kentucky, sues Milinoski, also from Kentucky, claiming a violation of the federal Age Discrimination in Employment Act.B. Consolidated Widget Company sues Ruggiero for breach of an employment contract. Ruggiero, who is from the same state, counterclaims for damages under the Federal Age Discrimination in Employment Act.C. Erskine, a city councilor, sues the Times-Union, the local newspaper, for libel, based on a Times-Union story stating that he had fled the scene of an accident. The Times-Union claims a privilege under the First Amendment, which bars recovery for libel of a public figure unless the paper acted in reckless disregard of the truth in researching the allegations in the story. Erskine claims that the privilege does not apply because the story made no reference to his public office. Whether the privilege applies in such circumstances is an important, unresolved issue of federal law.D. Margolis threatens to sue her employer, Petrikas Publishers, claiming that it has failed to make its premises accessible to the disabled, as required by the Federal Americans with Disabilities Act. Petrikas brings suit in federal district court for a declaratory judgment that it is not subject to the requirements of the Act.

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Chapter 4 Answers

1. B is not going to do the trick. The Court says anticipating a defense by the railroad is not sufficient to make a case arise under federal law. So stating the expected defense more clearly, or alleging that you are really sure they will raise it, isn’t going to change the fact that you are just anticipating a defense. C is a loser too. The railroad hasn’t deprived the Mottleys of any constitutional rights; if anyone has it is Congress. The Fifth Amendment grants protection from governmental deprivations without due process, not railroad deprivations. Only their contract protects them from that. And D wouldn’t work unless the federal statute had created a right to train passes that the Mottleys could enforce. But the statute didn’t do that; it barred issuing the passes.So, it’s hard to see how fancy pleading could help the Mottleys. Contract cases just don’t arise under federal law (in the Mottley sense of that phrase). A is the best answer. The Mottleys could not manufacture federal question jurisdiction by clever pleading. Their only source of a right to relief against the railroad was the contract, so their counsel—even after reading the Supreme Court’s Mottley decision—would not be able to create federal jurisdiction by redrafting their complaint.

2. In the first example, it is the federal patent statute that gives the inventor the legal right to exclude others from manufacturing a patented invention and authorizes suits to enjoin others from doing so without permission. Because the federal patent statute “creates” Zander’s cause of action, the Holmes test is satisfied

3. Similarly, in Bluestein’s case, the federal age discrimination statute creates a substantive right not to be discriminated against in the workplace because of age and authorizes suits by those who are. Bluestein, as an older worker covered by the statute, demands relief for a violation of that federally created right

4. C implies that a state court cannot hear a case that arises under federal law. However, state courts usually may hear cases within the federal subject matter jurisdiction. They have “concurrent jurisdiction” over cases arising under federal law, unless Congress specifies that a particular type of federal claim must be brought in federal court. Claflin v. Houseman, 93 U.S. 130 (1876). See, e.g., 28 U.S.C. § 1338(a) (providing that “[n]o State court shall have jurisdiction” over patent cases). So C is wrong.D implies that state courts can only hear federal law claims if Congress specifically authorizes them to do so. That reverses the usual presumption, which is that the jurisdiction is concurrent (i.e., either system may entertain the case) unless Congress restricts a particular category of federal claims to the federal courts. B suggests that any case in which the parties are diverse must be heard in federal court. Not so; state courts may hear claims arising under federal law whether the parties are diverse or not. A is on the money; the state court can hear the case.

5. A is wrong here because the Mottleys’ well-pleaded complaint would still not raise any issue of federal law. The railroad will raise the first federal issue—that the statute bars renewing the passes—as a defense. And the Mottleys would raise the Fifth Amendment argument in rebuttal to that defense. D is wrong because, while the Mottleys raised these issues in their complaint, they would not be raised in a well-pleaded complaint for breach of contract, just as in the original case. And C is wrong because, even if these are substantial federal issues, they are not embedded

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in the plaintiff’s original case. B, then, is the correct answer. Just as in the original case, the Mottleys’ complaint raises only state law issues. After Grable and Gunn, it would not support jurisdiction under 28 U.S.C. § 1331, because the federal issues here do not have to be established to prove the plaintiff’s original claim.

6. The court would probably conclude that this case arises under federal law. Here, Congress has created a federal limit on the interest rate that banks may charge: No bank shall charge more than the legal rate of interest in the state where it is located. Congress might have said, “No bank may charge more than 18 percent.” Or, it might have said, “No bank may charge more than the Federal Reserve Bank charges.” Instead, it has chosen to define the limit by reference to state law. But it is still a limit established by federal law. Similarly, if a federal statute provided that no manufacturer may sell electrical components failing to meet the standards of Underwriters Laboratory, it would set a federal standard, although that federal standard incorporated private safety standards by reference.

7. A is a proper federal question case, since Gupta seeks relief under federal law. The fact that he and the defendant are from the same state is irrelevant. A case only needs to meet one category of federal subject matter jurisdiction to be brought in federal court, not two or more.

B is also straightforward. Federal question jurisdiction must be based on the plaintiff’s complaint, not an answer or counterclaim. There is no jurisdiction over this case, since Consolidated brings a breach of contract action, and the court cannot base federal question jurisdiction on a counterclaim.

C turns on a similar principle: The defendant cannot assert federal jurisdiction based on a federal defense, even if it has already been asserted at the time she invokes federal jurisdiction. Although the federal issue is important, this does not mean that the Smith/Grable exception applies. In those cases, the plaintiff had to establish an important federal issue to recover; federal issues raised by the defendant still don’t support federal question jurisdiction under 28 U.S.C. § 1331.

D is a little tricky. It involves a declaratory judgment action. In such actions, there is federal question jurisdiction if the case would have arisen under federal law if it had been brought as an ordinary action by the party seeking coercive relief. Here, the plaintiff in a “regular” suit would have been Margolis, seeking injunctive relief to make the property accessible. If Margolis had sued, her claim would have arisen under federal law—the federal Americans with Disabilities Act—so the declaratory judgment action does too.

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Chapter 5 Removal of Cases from State to Federal Court

Notes and Questions: Avitts v. Amoco Production Co.1. Which of the following cases may be removed to federal court?A. Martinez, from Texas, sues Murphy, from Utah, on a state law breach of contract claim, in a Utah state court, for $200,000B. Martinez, from Texas, sues Murphy, from Utah, and Mercer, from Nevada, on a state law breach of contract claim, in a Utah state court, for $200,000.Martinez, from Texas, sues Murphy, from Utah, on a claim arising under federal law. She brings the suit in a Utah state court.C. Martinez, from Texas, sues Hawkins, from Texas, on a state law claim for negligence. Hawkins counterclaims against Martinez for violation of a federal statute. (A counterclaim is a claim asserted by a defendant seeking relief from the plaintiff.)

Notes and Questions: Removal Procedure2. Able sues Baker in state court on a federal claim. Baker removes to federal court thirty-five days after being served with the summons and complaint in the action. Forty days later Able moves to remand based on untimely removal. What will the court do?

3. Grey Box Questions Cannavo, from Oregon, sues Singh, from Minnesota, after he is fired by Singh three months into a one-year contract as an office manager for Singh. He sues in an Oregon state court, seeking $200,000 for breach of contract. Three months later, Cannavo amends the complaint to add a claim under the Americans with Disabilities Act, a federal statute, claiming that Singh failed to make reasonable accommodations for a disability that interfered with his job performance. Two weeks after receiving the amended complaint, Singh removes the case to federal court. Which of the following is correct?A. Removal is proper under 28 U.S.C. § 1446(b)(3) after the amendment to add the federal claim.B. Removal is proper under the Mottley rule, because Cannavo seeks relief under federal law.C. Removal is not proper, because three months have gone by since the case was filed in state courtD. Removal is not proper, because the case could have been removed as originally filed.

4. Congress may make federal jurisdiction over particular claims exclusive. For example, 28 U.S.C. § 1338(a) provides that patent cases must be brought in federal court. Suppose a plaintiff files such a case in state court. May the defendant remove it to federal court?

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Chapter 5 Answers

1A. Section 1441(b)(2) bars removal of the case in A. Murphy is sued at home, so he is not at risk of prejudice as an out-of-state litigant and has no need of an alternative federal forum. Martinez, the plaintiff, is the out-of-stater. If he feared bias as an out-of-stater, he could have brought the case in federal court. Evidently, he isn’t concerned about that, since he chose the state court.

1B. In B, Mercer is an out-of-state litigant who might fear prejudice in the Utah state court. Yet, she cannot remove: Section 1441(b)(2) provides that diversity cases “may not be removed if any of the parties in interest properly joined and served is a citizen of the State in which such action is brought.” Here one of the defendants is local, so removal is barred. This doesn’t seem fair to Mercer. Isn’t it possible that a local jury will shift the blame from Murphy to Mercer? It is possible, but the case still cannot be removed.

1C. The case described in C is removable, even though there is an in-state defendant, because it arises under federal law. (Section 1441(a) authorizes removal, since the federal court would have original jurisdiction over the case, and the exception in § 1441(b)(2) does not apply.) This makes sense. Federal courts provide an experienced and hospitable forum for application and interpretation of federal law. If either party wants the federal court to hear a case arising under federal law, she should be able to invoke it.

1D. The last case is not removable. Although Hawkins has injected a federal claim into the case by bringing a federal counterclaim against Martinez, the Supreme Court has held that the “defendant or defendants” language in the removal statute only allows defendants to remove.

2. The court will deny the motion. Since removing late is not a jurisdictional defect, Able waives the objection under 28 U.S.C. § 1447(c) if he does not move to remand within thirty days after removal. Section 1447(c) forces Able to raise the problem right away or proceed in federal court. He waives all objections to removal other than a lack of subject matter jurisdiction if he fails to raise them within thirty days.

3. If you didn’t read § 1446(b)(3), you probably picked C, on the ground that a case must be removed within thirty days of receiving the initial pleading. But §1446(b)(3) is an exception to that, allowing later removal in some situations. If you read § 1446(b)(3) too quickly, you probably chose A, concluding that the case is now removable, since the amendment added a claim under federal law. Well, it did add a federal claim, but the case was also removable as originally filed, and Singh didn’t do so. Section 1446(b)(3) allows removal of cases that “become removable” later in the case. See 28 U.S.C. § 1446(b)(3) (“If the case stated by the initial pleading is not removable. …”). Because Singh could have removed the original case based on diversity, but did not, he waived his right to remove. D is right. Ironically, Singh may have been content to litigate a contract claim in state court, but strongly prefer a federal forum once a federal claim is added to the case. However, he will not get one in this case.

4. For many years, the answer to this question was “no.” The logic was that a federal court could not derive jurisdiction upon removal from a court that had no jurisdiction. See generally Wright

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& Miller § 3722 at n.101ff. The state court had to dismiss the case, leaving the plaintiff to file a new suit in federal court.Congress changed this “derivative jurisdiction” rule by enacting 28 U.S.C. § 1441(f), which sensibly provides that such an action may be removed to federal court even though the state court where it was filed lacked jurisdiction over it.

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