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Federal or State Court: Subject Matter Jurisdiction

Federal or State Court Subject Matter Jurisdiction

This article aims to give you the information you need to figure out whether you should file your case in federal or state court.

Jurisdiction, put simply, is a fancy word that encompasses a court's power or authority to hear a case. Both federal and state laws, as well as the constitutions of the United States and every single state, have rules concerning the power of federal and state courts to hear cases. These laws and constitutions also limit those courts' power to hear cases.

Jurisdiction is important because if a court does not have jurisdiction over a case, it does not have the legal authority to pass judgment on the case. In order for a court to make a binding judgment on a case, it must have both subject matter jurisdiction (the power to hear the type of case) as well as personal jurisdiction (the power over the parties to the case).

What happens if you file in the wrong court

If you end up filing your case in the wrong court, the defendant may get the case removed from the court you choose to a proper court. This court may be in a place that is less favorable to the outcome you desire, or it may be so far away that it becomes inconvenient for you to litigate. In addition, the defendant, instead of just moving the case, may end up getting the case dismissed altogether.

Although changing courts may only mean another 15 minute drive for you on the way to trial, you still must keep in mind that you have to refile your case in the proper court. If you filed your initial case well within the statue of limitations (the time limit you have in which to file a case), then you should have no problems filing your case in the proper court. If the statute of limitations ends before you have a chance to refile your case in the proper court, however, the defendant may be able to get your case dismissed before you ever have the chance to argue your side.

Jurisdiction of the Federal Courts

In almost all situations, if you have a lawsuit to file, you will likely be filing your case in a state court close to you. Federal courts have subject matter jurisdiction over only two types of cases.

Federal Question cases Cases that arise under a federal law

Federal courts have original subject matter jurisdiction over all cases that arise under (are based upon) any federal law. Here are some examples to clarify:

  • Filing a lawsuit against a police officer and a police department for violating a federal civil rights law that allows citizens that have been wrongfully arrested to collect civil damages.
  • You file a lawsuit alleging that a competing company has made a product that infringes upon your patent. Patents are a creation of federal law, so you may file your suit in federal court.
  • A growing small business sues a large company for engaging in unfair and anti-competitive business practices under federal antitrust laws.
  • An organization devoted to handicapped individuals sues a public establishment for failing to have any handicap accessible entrances under the Americans with Disabilities Act.

Diverse Citizenship of the Parties

Federal courts also have subject matter jurisdiction over cases in which the parties to the lawsuit are citizens of different states, either foreign or domestic, and there is greater than $75,000 at stake in the lawsuit. If the parties to the lawsuit are diverse in their citizenship, and the amount in controversy is satisfied, then the actual subject matter of the case does not matter. Here are some examples in which a federal court could hear a case based upon diversity of citizenship:

  • A citizen of California is injured in an automobile accident by a man who is a citizen of Utah. In his complaint, the California man asks for $100,000 in money damages. This case could be filed in federal court in either California or Utah.
  • A business owner in Texas files a breach of contract suit against another business owner in Minnesota for failing to perform on the contract which caused $250,000 in damages.
  • A Washington state man files a defamation suit against an Alaskan citizen for printing defamatory statements that ruined the Washington state man's career, causing him $375,000 in damages.

There must be complete diversity.

In order for a party to file a lawsuit under diversity of citizenship subject matter jurisdiction in federal court, complete diversity must exist between all parties. This means that no two plaintiffs or defendants can be citizens of the same state.

If complete diversity does not exist, then the case cannot be filed in federal court under diversity subject matter jurisdiction. For the purposes of determining citizenship, an individual is a citizen of the state in which they maintain a primary residence, and an individual can only be a citizen of one state at a time.

The rules of citizenship are different for businesses and corporations. A corporation can be a citizen of two states simultaneously. A corporation is considered to be a citizen of the state in which it is incorporated, as well as the state in which it has its primary place of business.

Here are some examples to help clarify what is meant by complete diversity:

  • Adam is a citizen of Alabama and wants to sue Grassland Corp. Grassland is incorporated in New York and has its primary place of business selling grass seed in Alabama. Adam cannot use diversity jurisdiction to get into federal court because both he and Grassland Corp. are citizens of Alabama.
  • Carl, a California citizen, was injured in a car accident that was caused by two other drivers, Doug, a Delaware citizen, and Catherine, a California citizen. Carl cannot sue in federal court because complete diversity does not exist among all the parties to the lawsuit.
    Carl can sue in state court for his injuries, however. State courts almost always have the power and authority to hear cases that revolve around events that occurred within its borders. In addition, state courts generally have subject matter jurisdiction in cases where the defendants are served or reside within the state's borders.
    Unless your case deals with one of the limited federal question cases, you will most likely be litigating in state court. State courts, in general, hear many more cases per year that similarly situated federal courts. State courts hear the cases that are most frequently filed, like personal injury, insurance, landlord/tenant, adoption and more.
  • Mary, a Minnesota citizen, is injured by a faulty piece of equipment that was made by FixItUp Corp, a corporation that is incorporated in Delaware and has its principal place of business in Oklahoma. Because all parties to the lawsuit are diverse, Mary can file in federal court under diversity jurisdiction so long as she is suing for more than $75,000.

Filing in either State or Federal Court: When you can choose

Most lawsuits that can be filed in federal court can also be filed in state court. There are only a few types of cases that federal courts have exclusive subject matter jurisdiction over, such as patent infringement and federal tax cases.

Because of this, plaintiffs that have the option of suing in federal court by taking advantage of diversity jurisdiction also have the option of filing in state court. Attorneys and lawyers often take advantage of this system and select the most favorable court for the lawsuit, a practice known as"forum shopping."

Lawyers for plaintiffs often consider many factors when choosing which court to file their client's case in. Attorneys will consider the geographic location of the court, and may file lawsuits in a state court simply because it is much closer than the nearest federal courthouse.

Additionally, attorneys will look at the difference in statutes of limitations. If a plaintiff has missed a filing deadline in state court, the case will be filed in federal court so long as the statute of limitations is longer there. This will only be the case for federal question cases, however, because the federal court must use the state court's statue of limitations for all cases brought under diversity jurisdiction.

In addition, lawyers and attorneys are most often very well versed in the different types of judges and juries that can be found in state and federal courts. Oftentimes, attorneys may think that federal judges may be more forgiving of a plaintiff than a state court judge, or vice-versa. Jury panels can also differ in their views dramatically based upon whether it is a state or federal court. This occurs because federal jury panels are selected from a much wider geographic area than are state court jury panels.

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