Federal or State Court: Subject Matter Jurisdiction

This article will provide you with the information you need to decide whether to file your civil action in federal or state court.

Jurisdiction, put simply, is a fancy word encompassing 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.

If a court determines it has a lack of subject matter jurisdiction, it has no legal authority to pass judgment on the case. The court must have both subject matter jurisdiction (the power to hear the type of case) and personal jurisdiction (the power over the parties to the case).

What Happens if You File in the Wrong Court

If you file your case in the wrong court, the defendant may request to transfer it to a proper court. This could affect your desired outcome. It could also move the case so far away that it becomes inconvenient for you to litigate. Alternatively, the defendant may request that the court dismiss the case altogether.

If the court transfers your case, you likely must refile it in the proper court. This could potentially affect your case significantly. For example, if you filed your initial case within the statute of limitations (the time limit you have in which to file a case), you should have no problems filing your case in the proper court. But suppose the statute of limitations runs before you refile the case. The defendant may then request to dismiss your case before you can argue your side.

Any party can challenge whether a court has jurisdiction over a lawsuit. In fact, the court must always ensure it has proper jurisdiction over a dispute and the parties. If it determines it does not, the court will dismiss the case on its own (sua sponte).

FindLaw's Court Directories article provides more information about our court system. Specifically, it explains the U.S. Supreme Court, appellate courts, and district courts. It also explains how cases generally start in the trial court, how the court of appeals generally hears the first appeal, and how either the state supreme court or the U.S. Supreme Court hears final appeals.

Jurisdiction of the Federal Courts

In almost all situations, if you have a civil case, you will likely file it in a state court close to you. Federal courts are courts of limited jurisdiction. This means they can only hear certain types of cases. Congress has the power to set each court's jurisdiction. Per Article III of the U.S. Constitution and the Federal Rules of Civil Procedure, federal subject matter jurisdiction covers two types of cases, as explained below.

Federal Question Cases: Cases That Arise Under a Federal Law

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

• A person files a lawsuit against a police officer and a police department for violating a federal civil rights law that allows citizens to challenge an arrest and claim civil damages.
• You file a lawsuit alleging that a competing company has made a product infringing upon your patent. Federal law governs patents, so you may file 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 helping disabled people sues a public establishment for failing to have handicap-accessible entrances that comply with the Americans with Disabilities Act.

This type of jurisdiction is also known as federal question jurisdiction.

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, and the amount in dispute is greater than $75,000. 

A federal court could hear a case based on diversity of citizenship in the following examples:

• A Florida citizen causes an automobile accident, injuring a California citizen. In his complaint, the California man asks for $100,000 in damages. A federal court in California or Florida could hear the plaintiff's claim.
• 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.

So, if the plaintiff and defendant reside in different states, and the plaintiff's claim exceeds $75,000, they can file it in federal court. This is the case even if the case doesn't involve a federal statute.

There Must Be Complete Diversity

Complete diversity must exist between all parties for a party to file a lawsuit under diversity of citizenship subject matter jurisdiction in federal court. This means that no two plaintiffs or defendants may domicile in the same state.

If complete diversity does not exist, then the plaintiff cannot file their case in federal court under diversity subject matter jurisdiction. For the purposes of determining citizenship, a person is a citizen of the state in which they maintain a primary residence. A person is only a domicile of one state.

The rules of citizenship are different for businesses and corporations. A corporation can reside in two states simultaneously. The law considers a corporation as a citizen in the state where it incorporates and has its primary place of business.

The following examples help clarify the concept of complete diversity:

• Adam is an Alabama citizen who wants to sue Grassland Corp. Grassland is incorporated in New York but has its primary place of business in Alabama. Adam can't invoke diversity jurisdiction to go to federal court because both he and Grassland Corp. are Alabama citizens.
• Doug, a Delaware citizen, and Catherine, a California citizen, caused a car accident. Carl, a California citizen, sustained injuries due to the accident. Carl can't sue in federal court because complete diversity doesn't exist among all the parties to the lawsuit.
• FixItUp Corporation manufactured a faulty piece of equipment that injured Mary, a Minnesota citizen. FixItUp 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 district court under diversity jurisdiction so long as she is suing for more than $75,000.

In the above example involving Carl, although he could not sue in federal court for his injuries, he could sue in state court. State courts almost always have the power and authority to hear cases that revolve around events that occurred within their borders. In addition, state courts generally have personal jurisdiction in cases where the defendants live or work within the state's borders.

Unless your case deals with one of the limited federal question cases, you will most likely file in state court. State courts generally hear many more cases per year than similarly situated federal courts.

Filing in either State or Federal Court: When You Can Choose

Most lawsuits filed in federal court can also be filed in state court. There are only a few types of cases over which federal courts have exclusive subject matter jurisdiction, such as patent infringement and federal tax cases. State courts are generally courts of general jurisdiction. This means they can hear most disputes and causes of action.

Because of this, plaintiffs who can sue in federal court by taking advantage of diversity jurisdiction also usually 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 the court in which to file their client's case. They may consider the geographic location of the court. They may file lawsuits in a state court simply because it's much closer than the nearest federal courthouse.

Attorneys will also look at the difference in statutes of limitations. If a plaintiff has missed a filing deadline in state court, they may file the case in federal court so long as the statute of limitations has not run. But this is only applicable in federal question cases. The federal court must use the state law's statute of limitations for all cases brought under diversity jurisdiction.

In addition, lawyers are usually well-versed in the different types of judges and juries in state and federal courts. Often, attorneys may think that federal judges are more forgiving of a plaintiff than a state court judge or vice versa.

Jury panels can also differ dramatically based on whether it is a state or federal court. This occurs because federal jury panels are selected from a much wider geographic area than state court jury panels.

Contact an Attorney for Help

Filing your case in an appropriate venue is essential. Contact a civil litigation attorney today for help with jurisdiction questions and where to file a case. An experienced attorney can provide helpful legal advice regarding the following:

• Deciding the best court to file a family law, probate, or tort case
• Guiding you through your state's court system, as each state court system varies
• Determining whether a party to a case has had minimum contact with the state such that the state has personal jurisdiction over them

Civil litigation involves complex rules of procedure and evidence. Contact an attorney today for help with your civil action.