Diversity of citizenship refers to when there is no common state citizenship between the plaintiffs and defendants in a suit. In other words, all parties on one side of the controversy are citizens of different states from all parties on the opposing side. When such diversity is present and the amount in controversy requirement is met, plaintiffs may bring their claim(s) originally into federal court rather than state court and defendants may remove suits from state court to federal court.
Diversity of citizenship is a requirement for diversity jurisdiction because the purpose of such jurisdiction is to provide out-of-state litigants with the opportunity to defend themselves in an unbiased court. When a plaintiff and defendant are both citizens of the same state, the threat of bias based on citizenship is assumed to be eliminated.
According to 28 U.S.C § 1332, a corporation is considered to be a citizen of both the state in which it is incorporated and the state where its principal place of business is located. Unincorporated associations, such as partnerships, are considered to be citizens of each state where at least one of its members is a citizen.
[Last updated in September of 2022 by the Wex Definitions Team]