Chapter 4
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SUBJECT MATTER JURISDICTION
[1] Defined
Subject matter jurisdiction refers to a court’s authority to decide a particular kind of controversy. Subject matter jurisdiction can be concurrent — shared between several different kinds of courts — or exclusive, restricted to a particular kind of court.
[2] Scope of Federal Subject Matter Jurisdiction
The United States Constitution sets out the permissible scope of the judicial power of federal courts in Article III, § 2. It lists the following types of federal subject matter jurisdiction:
- cases “arising under" this Constitution, laws of the United States, and treaties (federal question jurisdiction);
- cases affecting ambassadors and other official representatives of foreign sovereigns;
- admiralty and maritime cases;
- controversies to which the United States is a party;
- controversies between states and between a state and citizens of another state;
- cases between citizens of different states (diversity jurisdiction);
- cases between citizens of the same state claiming lands under grants of different states;
- cases between a state or its citizens and foreign states and their citizens or subjects (alienage jurisdiction).
Article III vests the Supreme Court with original jurisdiction of cases affecting ambassadors and other foreign officials and those to which a state is a party, and such appellate jurisdiction as Congress may create. Article III vests no jurisdiction directly in lower federal courts but authorizes Congress to create and endow them with subject matter jurisdiction. Congress has never vested lower federal courts with as much subject matter jurisdiction as Article III permits. Today, the main sources of federal jurisdiction are federal question jurisdiction and diversity jurisdiction, usually concurrent with state court jurisdiction.
In order to establish federal question jurisdiction, a “right or immunity created by the Constitution or the law of the United States must be an element, and an essential one, of the plaintiff’s cause of action” [Gully v. First National Bank, 299 U.S 109, 112 (1936)]. Even where a cause of action arises under state law, a federal court may have jurisdiction if it appears that the right to relief rests on the construction or application of a federal law [Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (1921)]. However, the mere presence of a federal issue in a state-created cause of action does not automatically confer federal question jurisdiction. Its availability depends in part on “an evaluation of the nature of the federal interest at stake”: whether it is sufficiently important to require a federal trial forum [Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 806 (1986)].
A plaintiff cannot invoke the original jurisdiction of the federal courts either by anticipating a federal defense or otherwise importing a federal question into his complaint that is not essential to his case.
[1] General Rule
Under the federal diversity jurisdiction statute, 28 U.S.C. § 1332, a federal court has subject matter jurisdiction over a matter where:
(1) there is complete diversity among the parties such that no plaintiff shares citizenship with any defendant; and
(2) the amount in controversy exceeds $75,000.
Limited exceptions to the complete diversity requirement apply where specifically created by Congress, e.g., in interpleader actions, only two adverse claimants need be of diverse citizenship. [28 U.S.C. § 1335(a)(1)]
[2] Limitations on Diversity Jurisdiction
Deferring to state courts, federal courts have traditionally declined to exercise jurisdiction in the following types of cases, even when the parties satisfy the requirements for diversity jurisdiction:
- certain in rem cases.
- probate cases.
- domestic relations cases.
Additionally, courts are obliged by statute to deny jurisdiction which has been “improperly or collusively made.”
[3] Citizenship
Citizenship for diversity purposes requires a party to be a citizen of both the United States and of a state.
Individuals – The courts have equated the state citizenship of natural persons with domicile in a state. Domicile is created by the concurrent establishment of physical residence in a state and an intent to remain there indefinitely. Although a person can have more than one residence at one time, he can have only one domicile at a time.
Corporations – The diversity statute deems a corporation to be the citizen of “any State by which it has been incorporated and of the state where it has its principal place of business.”
Unincorporated associations – Unincorporated associations, such as partnerships and labor unions, take the citizenship of each member.
[4] Amount in Controversy
[a] “Legal Certainty Test”
The present amount in controversy is $75,000, exclusive of interest and costs. Jurisdictional amount is ordinarily computed from the plaintiff’s viewpoint without regard to possible defenses, and plaintiff’s good faith pleading controls unless the court concludes to “a legal certainty” that he cannot recover the pleaded amount.
[b] Aggregating Multiple Claims
Individual claims that do not alone satisfy the jurisdictional amount may be aggregated in the following circumstances:
- plaintiff asserts multiple claims against a single defendant, whether or not they are transactionally related.
- plaintiff joins several defendants to the same claim pursuant to FRCP 20 if the several defendants have a common undivided interest or title in the claim.
- several plaintiffs join in the same claim against one or more defendants pursuant to FRCP 20 when the several plaintiffs have a common undivided interest or title in the claim.
A defendant may, pursuant to 28 U.S.C. § 1441, remove a civil action pending in a state court to a federal court if the federal would have had original jurisdiction over the plaintiff’s claim. The assertion of a defense or counter-claim based on federal law does not convert a non-federal case into a federal one.
Diversity cases are removable only if none of the defendants is a citizen of the state in which the action is pending. [28 U.S.C. § 1441(b)]
When a federal court already has jurisdiction over a claim based on a federal question, it has discretion to remove separate and independent state-law claims in order adjudicate the entire case if the state law claim is part of the same constitutional case or controversy as the federal question claim. [28 U.S.C. § 1441(c)] If such test is met, the state law claim falls within the supplemental jurisdiction of the federal court and can thus be removed.
[1] General Rule and its Antecedents
When a federal court possesses subject matter jurisdiction over a matter, it may exercise supplemental jurisdiction over one or more related claims that would not independently satisfy subject matter jurisdictional requirements. Supplemental jurisdiction, a legislative creation since 1990 [28 U.S.C. § 1367], supplants two related judicial doctrines – pendentand ancillary jurisdiction.
[2] Pendent Jurisdiction
Pendent jurisdiction refers to the courts’ extension of jurisdiction from a freestanding (usually federal question) claim to an otherwise jurisdictionally insufficient pendent (usually state law) claim by a plaintiff or plaintiffs.
[a] Pendent Claim Jurisdiction
In United Mine Workers v. Gibbs [383 U.S. 715 (1966)] Supreme Court was presented the question whether the federal courts had jurisdiction over the state claim in the absence of diversity. The Court held that constitutional power exists to decide the nonfederal claim whenever it is so related to the federal claim that they comprise “but one constitutional ‘case.’ ” It suggested a three-part test for constitutional case:
(1) plaintiff must assert a federal claim that has “substance sufficient to confer subject matter jurisdiction on the court.”
(2) freestanding and pendent claims “must derive from a common nucleus of operative fact.”
(3) the federal and nonfederal claims must be such that the plaintiff “would ordinarily be expected to try them all in one judicial proceeding.”
[b] Pendent Party Jurisdiction
Pendent party jurisdiction was also relied upon to assert claims against new parties over whom independent federal subject matter jurisdiction was unavailable. In Zahn v. International Paper Co., 414 U.S. 291 (1973), pendent party jurisdiction was invoked in a diversity action to add a defendant against whom the value of the claim was less than the jurisdictional amount. The Court found the exercise of pendent party jurisdiction to be improper, suggesting that pendent party jurisdiction could not be used to avoid the rule against aggregation.
Pendent party jurisdiction was also invoked in federal question cases to add non-diverse parties to state law claims. In Finley v. United State, 490 U.S. 45 (1989), the plaintiff asserted a freestanding claim within the exclusive jurisdiction of the federal courts and sought to join transactionally-related state law claims against non-diverse defendants. Absent pendent party jurisdiction, plaintiff would have had to forego her state law claims against the non-diverse parties or to bring separate actions in federal and state court. The Court acknowledged the inefficiency and inconvenience of this result, yet denied pendent party jurisdiction, because the underlying jurisdictional statute contained no “affirmative grant of pendent-party jurisdiction.”
[3] Ancillary Jurisdiction
Ancillary jurisdiction extended jurisdiction from the freestanding (often diversity) claim to an otherwise jurisdictionally insufficient claim by the defendant(s) or similarly situated parties such as intervenors as of right. E.g., in a diversity action, ancillary jurisdiction supported a compulsory counterclaim or cross-claim for less than the jurisdictional amount or impleader of a non-diverse party.
Ancillary jurisdiction originally developed independently of pendent jurisdiction. The Supreme Court recognized ancillary jurisdiction of claims:
- “ancillary and dependent, supplementary merely to the original suit, out of which it had arisen.” [Freeman v. Howe, 65 U.S. 45 (1860)]
- transactionally-related state law counter-claims. [Moore v. New York Cotton Exchange, 270 U.S. 593 (1926)]
- in diversity cases where there existed constitutional power to hear the jurisdictionally insufficient claims and where Congress had neither expressly nor impliedly negated the exercise of jurisdiction. [Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978)]
Nevertheless, following Finley (regarding pendent party jurisdiction), some lower federal courts extended to ancillary jurisdiction Finley’s insistence on affirmative evidence of Congressional approval for such exercise of jurisdiction by federal courts.
[4] Supplemental Jurisdiction
In 1990, Congress responded to Finley by enacting the supplemental jurisdiction statute, essentially over-ruling the case. [28 U.S.C. § 1367]
[a] Qualifying Under Section 1367(a)
Subsection 1367[a] expressly extends federal jurisdiction from freestanding claims within the original jurisdiction of the federal court to supplemental claims that are “so related [to the freestanding claims . . . that they form part of the same case or controversy under Article III of the United States Constitution.”
Subsection 1367(a) overrules Finley by expressly providing that “supplemental jurisdiction shall include claims that involve joinder or intervention of parties,” thereby authorizing jurisdiction over what were formerly called pendent party claims. Most courts have found that claims which satisfy the same transaction or occurrence standard for joinder under FRCP 13(a) (compulsory counterclaim), 13(g) (crossclaim), or 20 (joinder of parties) also qualify for supplemental jurisdiction.
[b] Disqualifying Under § 1367(b)
Subsection 1367(b) provides that in diversity-only cases the courts do not have supplemental jurisdiction over claims by plaintiffs against persons made parties by FRCP 14 (impleader), 19 (compulsory joinder of parties), 20 (permissive joinder of parties) or 24 (intervention), when exercising such jurisdiction would be inconsistent with the jurisdictional requirements of the diversity statute. Thus, a plaintiff may not assert claims against parties in a diversity action if supplemental jurisdiction would negate complete diversity.
[c] Discretion Under § 1367(c)
Subsection 1367(c) gives courts discretion to refuse jurisdiction when it believes, in the interests of judicial economy, convenience, fairness, and comity, that the supplemental claims would more appropriately be decided by state courts.
[d] 100-mile Bulge Rule
When supplemental jurisdiction is asserted over third-party defendants and indispensable parties, service may be effectuated by the 100-mile bulge rule, if such parties cannot be served within the state in which the federal court sits. The rule allows service on such added parties anywhere within 100 miles of the federal courthouse in which the action is pending. [FRCP 4(K)(1)(B)]
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Chapter 4
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