Diversity jurisdiction refers to one way a federal court can obtain subject matter jurisdiction over a given case (the other method being federal question jurisdiction). Diversity jurisdiction is codified in Title 28, Section 1332 of the United States Code (28 U.S.C. § 1332(a)).
For a court to exercise diversity jurisdiction, the amount in controversy must exceed $75,000 and complete diversity of citizenship must exist. Complete diversity of citizenship occurs when no plaintiff and defendant are domiciled in the same state.
In determining whether diversity jurisdiction exists, a corporation is considered to be a citizen of both its state of incorporation and its principal place of business.
Diversity jurisdiction is somewhat modified in class action lawsuits. Specifically, the Class Action Fairness Act of 2005 (CAFA) modified the complete diversity requirement. For a federal court to obtain subject-matter jurisdiction over a class action, the parties need only to satisfy minimal diversity. Minimal diversity occurs when at least one plaintiff is a resident from a state that is different from at least one defendant.
Because diversity jurisdiction is a form of concurrent jurisdiction, parties can choose to bring their case in state court even if the requirements for diversity jurisdiction are met. That said, if diversity jurisdiction is available, a defendant in a state court case can unilaterally choose to move the case to federal court through the process of removal.
A court exercising diversity jurisdiction is subject to the Erie doctrine, which states that federal courts must follow the substantive law of the state in which they reside. This doctrine limits the ability of plaintiffs and defendants to obtain an advantage through the use/decision not to use diversity jurisdiction. The Erie doctrine takes its name from the seminal case Erie Railroad Co. v. Tompkins.
[Last updated in September of 2022 by the Wex Definitions Team]