Federal subject matter jurisdiction involves a fundamental aspect of American constitutional governance – the federal government is a government of limited powers. Put differently, the federal government in the United States can only exercise those powers granted to it under the Constitution. While in many areas constitutional amendments such as the 14th Amendment and judicial interpretations have expanded federal power so as to make it seem almost unlimited, where federal courts are concerned the limitations on federal power remain very much alive.

     The U.S. Constitution sets forth the judicial function of the federal government in Article 3. Article 3, Section 2, lists the kinds of cases the federal government may entertain in its courts. No cases can be heard by federal courts that are not included in the categories identified in Article 3, Section 2.

     Unlike the Constitutional limitations on judicial power that we have looked at previously (personal jurisdiction and notice), subject matter jurisdiction is not waivable by the parties. The parties cannot consent to subject matter jurisdiction when it is absent or doubtful. Put differently, the interest here is in limiting the reach of the federal government to the Constitutional scope, and it is not within the power of any litigant, even the government, to extend that power through consent. If at any stage of litigation a lack of subject matter jurisdiction is recognized, the case must be dismissed.

     We will not examine every type of case that Section 2 authorizes for federal court. We will limit our review to federal question cases, and cases that involve diversity or alienage jurisdiction. In addition, we will look at supplemental jurisdiction, which is when the court hearing a case that has a basis for subject matter jurisdiction over some counts can exercise jurisdiction over aspects of the case or controversy that might not on their own qualify for federal jurisdiction, and removal processes, which allow cases to be moved from state courts to federal courts in certain situations.

     As we have seen before, subject matter jurisdiction involves Constitutional and statutory layers. In addition to the Constitutional grant, there must be an enabling statute which grants and sometimes limits the power of federal courts to hear cases that fall within the Article 3, Section 2 grant.

     One term that might prove confusing in this context is 'general jurisdiction.' You remember that term from our discussion of personal jurisdiction. Here, it means something very different. Just as federal courts are courts of 'limited jurisdiction,' state court systems are courts of 'general jurisdiction' in the sense that their reach is not limited by a Constitutional grant. Unless a statute or the Constitution takes a case away from a state court, the state courts have the power to resolve the case. 

     To further complicate things, while state court systems are courts of general jurisdiction, not every court in a state court system will be one of general jurisdiction. Some courts in the state system have a limited purpose - hearing divorce cases or traffic violations, for example. Often, the main state trial courts - sometimes called Circuit Courts or Superior Courts or Courts of Common Pleas, although to be extra confusing New York calls its trial courts Supreme Courts - are referred to as courts of general jurisdiction because they are empowered under state law to hear a full range of cases.

     Don't let the terms lead you astray. Keep in mind the basic principle - federal courts are limited in their power, and can only hear certain kinds of cases. State courts, on the other hand, can hear both federal and state cases. In fact, they can hear any case that is not reserved to the exclusive jurisdiction of the federal courts. There are a few such areas, but they are the exception. (Exclusive areas of federal jurisdiction are copyright cases, admiralty cases, lawsuits involving the military, immigration laws, and bankruptcy proceedings.)

     As a practical matter, this means that state and federal courts often have what is called concurrent jurisdiction. Their jurisdictions overlap, and many cases can be heard in either federal court or state court. State law cases, as we will see in this section, can be heard in federal court if diversity or alienage jurisdiction exists. In addition, even the claim on its own does not meet the requirements of diversity or alienage jurisdiction, so-called 'supplemental jurisdiction' allows claims that arise in the same case or controversy to be in federal court alongside claims for which there is a federal jurisdictional basis. In other cases, even though a federal jurisdictional basis exists, the parties may simply prefer for any number of reasons to proceed in state court on either state or federal claims.

     This means that litigants often have the ability to select a forum. Sometimes, pejoratively, this is called forum shopping. Whether you view it as a good thing, a bad thing, or just an inevitable thing in a system that allows multiple courts to hear the same case, it is a feature of the US system. Understanding federal subject matter jurisdiction in all its complexity is an essential step to knowing when and how forums can be selected.

     In the section that follows, we will explore all that in more detail. For the most part, you will find this complicated with lots of rules, but not hard to understand. Keep in mind that forum selection can be an important and sometimes outcome-determining tool in the litigator's toolbox, so this is worth understanding well.

The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority; to all Cases affecting Ambassadors, other public Ministers and Consuls; to all Cases of admiralty and maritime Jurisdiction; to Controversies to which the United States shall be a Party; to Controversies between two or more States; between a State and Citizens of another State; between Citizens of different States; between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

                                                          Feb Term 1804

                                                                Opinion

     A plaintiff may assign for error the want of jurisdiction in that court to which he has chosen to resort.

     A party may take advantage of an error in his favor, if it be an error of the Court.

     The Courts of the U.S. have not jurisdiction unless the record shews that the parties are citizens of different states, or that one is an alien, &c.

     Error to the Circuit Court of North Carolina. The proceedings stated Van Noorden to be late of Pitt county, but did not allege Capron, the plaintiff, to be an alien, nor a citizen of any state, nor the place of his residence.

     Upon the general issue, in an action of trespass on the case, a verdict was found for the defendant, Van Noorden, upon which judgment was rendered.

     The writ of Error was sued out by Capron, the plaintiff below, who assigned for error, among other things, first “That the circuit court aforesaid is a court of limited jurisdiction, and that by the record aforesaid it doth not appear, as it ought to have done, that either the said George Capron, or the said Hadrianus Van Noorden was an alien at the time of the commencement of said suit, or at any other time, or that one of the said parties was at that or any other time, a citizen of the state of North Carolina where the suit was brought, and the other a citizen of another state; or that they the said George and Hadrianus were for any cause whatever, persons within the jurisdiction of the said court, and capable of suing and being sued there.”

     And secondly, “That by the record aforesaid it manifestly appeareth that the said Circuit Court had not any jurisdiction of the cause aforesaid, nor ought to have held plea thereof, or given judgment therein, but ought to have dismissed the same, whereas the said Court hath proceeded to final judgment therein.”

     Harper, for the plaintiff in error, stated the only question to be whether the plaintiff had a right to assign for error, the want of jurisdiction in that Court to which he had chosen to resort.

     It is true, as a general rule, that a man cannot reverse a judgment for error in process or delay, unless he can shew that the error was to his disadvantage; but it is also a rule, that he may reverse a judgment for an error of the Court, even though it be for his advantage. As if a verdict be found for the debt, damages, and costs; and the judgment be only for the debt and damages, the defendant may assign for error that the judgment was not also for costs, although the error is for his advantage.

     Here it was the duty of the Court to see that they had jurisdiction, for the consent of parties could not give it.

     It is therefore an error of the Court, and the plaintiff has a right to take advantage of it. 2 Bac.Ab.Tit. Error. (K.4.)—8 Co. 59.(a) Beecher's case.—1 Roll.Ab. 759—Moor 692.—1 Lev. 289. Bernard v. Bernard.

     The defendant in error did not appear, but the citation having been duly served, the judgment was reversed.

     1. Capron v. Van Noorden. The antiquated language and differences in the judicial system in Capron v. Van Noorden can make it a bit difficult to get started with the case. The facts are quite simple, though: the plaintiff filed a case in federal court, making inadequate jurisdictional allegations; the trial court accepted the case and ruled for the defendant; the plaintiff then sought to have the suit dismissed on grounds that there was never federal subject matter jurisdiction. Even though the plaintiff contributed mightily to the situation, in the end it was the duty of the court to establish that federal subject matter jurisdiction existed. As the allegations were inadequate, there was no federal subject matter jurisdiction, and the case had to be dismissed. Because the court never had subject matter jurisdiction, the proceedings in the trial court were void and of no effect.

     2. Basic Principles.  Some very basic principles are present in Capron v. Van Noorden. First, a federal court must have subject matter jurisdiction or it cannot hear a case - even if the parties wish it to. Second, the basis for jurisdiction must appear in the pleadings or the record; the court cannot assume it or rely upon conclusory allegations. Third, it is the responsibility of the court to establish subject matter jurisdiction. It must, own its own, sua sponte, take the steps necessary to determine jurisdiction and to dismiss the case if jurisdiction is not shown. The parties can raise the issue at any time, and the court should address it on its own if the parties fail to note the problem.

     It should be clear from Capron that a lack of subject matter jurisdiction can be made at any time during the original litigation - even when the case is on appeal at the U.S. Supreme Court. Indeed, if no litigant raises the issue, the court can and should examine the issue on its own. As subject matter jurisdiction cannot be waived, there is no special procedure to avoid waiver. At any point in the litigation, the case must be dismissed if there is no subject matter jurisdiction. You will see examples of that as we go forward in this section.

     One might wonder if, on occasion, litigants might be tempted to trick the other side by litigating a case where they know that subject matter jurisdiction does not exist. If they win, and the other side does not recognize the jurisdictional defect, they stay silent and keep the benefit of the win; if they lose, they can assert the lack of subject matter jurisdiction, the case is dismissed, and they are free to try again. What if defendants wait until after a statute of limitations has passed before revealing the lack of subject matter jurisdiction?

     Something like this arose in Wojan v. General Motors Corp., 851 F.2d 969 (7th Cir.1988). In Wojan, the plaintiff, a resident of Michigan, filed suit in Illinois, stating in its jurisdictional statement that General Motors was incorporated in Delaware and licensed to do business as an out-of-state corporation in Illinois. It did not mention where General Motors had its principal place of business, which quite famously is in Michigan.  In its answer, General Motors admitted that it was incorporated in Delaware and expressed a lack of knowledge as to plaintiff's residence. Neither the judge nor the plaintiff apparently noticed that General Motors said nothing about its principal place of business, which as we will see shortly is relevant to establishing diversity jurisdiction for corporations. General Motors later, in its answer, admitted the existence of diversity jurisdiction, notwithstanding that few U.S. corporations are more firmly and widely associated with their principal place of business than General Motors is with Michigan and the automobile manufacturing center of Detroit, also known as Motor City or Motown.

     After five and a half years of litigation, and apparently having had a long-deferred moment of recognition when a new associate on the case asked why there was subject matter jurisdiction, General Motors finally asserted that there was no subject matter jurisdiction, and the case was dismissed without prejudice allowing, in theory, Wojan to refile in state court. Without researching what statute of limitations applied to such a case in Illinois in the 1980s, it seems highly likely that the applicable statute of limitations had passed when the jurisdictional defect was raised with the court almost eight years after the original accident, and so Wojan's litigation was likely at an end except for a possible malpractice claim against her lawyer.

     Wojan sought Rule 11 sanctions against General Motors for admitting subject matter jurisdiction when it should have denied jurisdiction. While the Seventh Circuit noted that the General Motors lawyers (and the trial judge) were not without fault, it held that it was the duty of the plaintiff to establish the basis for subject matter jurisdiction at the outset, and that awaiting General Motors' response on a jurisdictional allegation that a moment's thought would have shown defective was not reasonable. One can imagine situations where deliberate and cunning failure to alert the court to a lack of subject matter jurisdiction could lead to ethical concerns or sanctions (in Wojan the defense lawyers seem to have been more asleep than intentionally deceptive), but it is clear that in every case, notwithstanding the equities, if subject matter jurisdiction is lacking the court has no choice and has to dismiss the case.

     What happens after a case is over? Can an apparent lack of subject matter jurisdiction be used to set aside a judgment as void upon a collateral attack as can be done when personal jurisdiction is lacking?

     The answer turns out to be a bit complicated. When the case has been adversely litigated between the parties in federal court, it seems fairly clear that the judgment cannot be challenged collaterally on the grounds that there was no subject matter jurisdiction. In Chicot County Drainage Distr. v. Baxter State Bank, 308 U.S. 371 (1940), a federal statute apparently in effect at the time the case was tried provided a basis for federal subject matter jurisdiction. No one, therefore, questioned subject matter jurisdiction and judgment was entered. When that federal statute was found to be unconstitutional, removing the jurisdictional basis, an effort was made to collaterally attack the judgment. The Court held that the subject matter jurisdiction could not be collaterally attacked but should have been litigated in the first proceeding.

     The situation gets a bit murky when the first case involves a default judgment (and a bit murkier because people differ on whether to characterize Chicot as a default case, given that it was actively litigated but where the parties bringing the collateral challenge had not actually appeared in the first litigation). Remember that, whether anyone actively litigates the case or not, the federal court should always determine that it has subject matter jurisdiction, so in theory there should be a determination as to subject matter jurisdiction in every case. Perhaps as a result of this, while there is some academic support for being open to collateral attacks in some situations (see Restatement (Second) of Judgments § 65) courts in general do not set aside judgments based on collateral attacks on subject matter jurisdiction.

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—

     (1) citizens of different States;

     (2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State;

     (3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

     (4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.

(b) Except when express provision therefor is otherwise made in a statute of the United States, where the plaintiff who files the case originally in the Federal courts is finally adjudged to be entitled to recover less than the sum or value of $75,000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled, and exclusive of interest and costs, the district court may deny costs to the plaintiff and, in addition, may impose costs on the plaintiff.

(c) For the purposes of this section and section 1441 of this title—

     (1) a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business, except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of—

          (A) every State and foreign state of which the insured is a citizen;

          (B) every State and foreign state by which the insurer has been incorporated; and

          (C) the State or foreign state where the insurer has its principal place of business; and

     (2) the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent, and the legal representative of an infant or incompetent shall be deemed to be a citizen only of the same State as the infant or incompetent.

(d) [Omitted for Now]

     1.  Complete versus Minimal Diversity. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) announced a rule of complete diversity. At the time, it was unclear whether the rule was based on the Constitution or on the predecessor statute to Section 1332. It is now clear that the case is to be read as one of statutory interpretation, with the Constitution only requiring minimal diversity. See State Farm v. Tashire, 386 U.S. 523 (1967). You might ask: what is complete diversity and what is minimal diversity? Complete diversity requires that no defendant be from the same state as any plaintiff. For example, NY & NJ v. PA & DE satisfies complete diversity; NY & NJ v. PA & NJ does not. Minimal diversity merely requires that some defendant be from a different state from some plaintiff. NY & NJ v. NJ does satisfy minimal diversity. Later on in the course we will discuss a part of Section 1332 we are skipping over now, the Class Action Fairness Act. This statute allows certain types of class actions to be brought in federal court where there is only minimal diversity. For ordinary § 1332(a) diversity claims, however, full diversity is required.

     2.  Determining Domicile Generally.  The test for creating a new domicile for individuals has two elements: 1) residence in a state with 2) intent to remain 'indefinitely.' Indefinitely does not include an uncertain period of time but with a departure expected (for example, 'until I finish my degree'); it means an intent to remain perhaps permanently. Once fixed, it takes more than a change of residence to reset domicile. There must be an intention to stay indefinitely. Without that intent, domicile remains where it has been. What would have happened in Mas if the plaintiff had decided at any point while she was resident in Louisiana that she wanted to make Louisiana her permanent home? What would her domicile be if after the facts in this case she moved to, say, Ohio, but did not form an intent to remain indefinitely?

     3.  Determining Domicile for Corporations and Unincorporated Entities. As Judge Easterbrook reminds us, the test for determining domicile depends on the nature of the party. Individuals are treated differently from corporations, which are treated differently from partnerships, LLCs, and other unincorporated associations such as labor unions. For unincorporated associations, we look to the residence of each partner or member. As a practical matter, for some organizations such as national labor unions this makes bringing a diversity claim essentially impossible as there are likely to be members in every state. For corporations, the rule makes clear that there are possibly two domiciles, very similar to what we saw in Daimler - the state of incorporation and the principal place of business. In Hertz Corp. v. Friend, 559 U.S. 77 (2010), the Court made clear that the principal place of business is not where a corporation conducts the most business or makes the most sales, but where its 'nerve center' is. As a practical matter, in almost every case the nerve center will be the location of the corporate headquarters. 

     4.  Note on LLCs: You might not have covered Limited Liability Companies (LLCs) in Business Associations, which often focuses on corporations and partnerships. LLCs are a relatively recent innovation in company structure, having originated in the latter part of the 20th century in the US. They combine some aspects of partnerships that are often attractive to investors (such as tax pass-throughs so losses are deductible by investors) and aspects of corporations that are attractive as well (such as limited liability). They have become a very popular structure for smaller, privately held companies. Beyond LLCs, partnerships, and corporations, note that the variety of business organizations in the US can be bewildering. It is important to pay close attention to what the structure is. The situation gets more complicated, and beyond the scope of this course, when foreign business entities are involved. China has LLCs, for example. What would be the domicile of a Chinese LLC that has US domiciliaries and Chinese domiciliaries as members? So far as we know, no case to date has confronted that.

     5.  Time for determining domicile of parties. People and companies, including parties and potential parties to litigation, sometimes move. At what time do we assess domicile? At the time the action arose? At the time the lawsuit was filed? At the time the court is deciding the issue? The answer is simple - at the time the lawsuit is filed. Subsequent moves will not divest the court of jurisdiction. Moves that take place before filing, even if they have the effect of either creating or denying diversity, will not normally be questioned so long as the move is a real move in good faith and not a pretense. What would be the analysis if Mas had moved to Ohio, permanently and with an intention to stay, before filing suit? What would the analysis be if after the facts giving rise to the lawsuit but before filing she had decided to remain in Louisiana indefinitely?

     6.  Pleading Domicile. The party asserting a claim must plead those facts essential to establish subject matter jurisdiction. Because courts are not free to hear cases that fall outside the limited subject matter reach of the federal courts, this is not something federal judges will ignore. A litigant who makes conclusory or unclear allegations of subject matter jurisdiction may - and probably will - be allowed an opportunity to amend the complaint to make the allegations sufficient, but if the litigant fails to get the job done the case will be dismissed. This will happen even if the true, but unalleged facts, would support a finding of subject matter jurisdiction if the court knew about them. See Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, 2018 WL 3153475 (E.D.N.Y Apr. 2, 2018) (Dismissing for lack of subject matter jurisdiction where after three tries plaintiff's jurisdictional allegations of “subject matter jurisdiction exists in this case" were not enough even though Sienna Ventures, LLC is a New York Limited Liability Company and its sole member is a citizen and resident of New York, and Halley Equipment Leasing, LLC is a Texas Limited Liability Company.” The complaint failed to state the domiciles of all the LLC members, which if they had been alleged would have satisfied subject matter jurisdiction).

     7.  Proving Domicile. As both Mas and Sheehan v. Gustafson note, establishing domicile depends on a two part test - presence in a state and intent to remain. But how do we determine domicile when it is disputed? Do we just take a party's word at face value? Sheehan v. Gustafson makes several things clear. First, it is the burden of the claimant to establish subject matter jurisdiction. Second, we do not simply accept assertions at face value, but look to evidence such as where one votes or has a driver's license to inform the assessment. Third, while the burden is on the claimant, if the issue is disputed the court will normally allow discovery in order to establish the facts (with the costs and process of discovery something that should be taken into account before domicile is challenged). Finally, the determination is one within the discretion of the trial court, and reviewing courts will apply an abuse of discretion standard when reviewing the determination of the trial court. In some cases, and Sheehan v. Gustafson is an excellent example, determining residence can be far from straightforward.  You will note from Sheehan v. Gustafson that a number of documents can be used to show domicile, from passports to driver's licenses to voter registrations, and they may not be consistent. Compare that to China, where official residency is determined by a hukou document, with important consequences that flow from the official documentation.

     8.  U.S. Citizens Domiciled in No State: Can diversity or alienage jurisdiction be asserted over someone who is a U.S. citizen but not domiciled in any state in the U.S.? In the age of globalization, this has become not uncommon, as U.S. citizens establish residency in foreign countries and for tax or other reasons have no connection with any single US state. Are they citizens of a state? Are they subjects or citizens of a foreign country? If you think about it, you will see that they are neither - still US citizens but not resident in any state. Note what the court in Mas said when it considered what would be the impact of imputing her husband's residency to her: "She would not be a citizen of any State and could not sue in a federal court on that basis; nor could she invoke the alienage jurisdiction to bring her claim in federal court, since she is not an alien." 

     9.  Citizenship of Wife. Mas v. Perry discusses a rule where for US citizens the domicile of the wife was set conclusively as that of the husband. Like many other legal rules from earlier eras that assumed that wives were subordinate to husbands, that rule no longer applies. The established domicile of a spouse, either spouse, might be probative as a factual matter in a close factual case, but today there will be no conclusions reached based solely on the domicile of the husband.

     10.  Why Diversity?  Diversity jurisdiction has long been controversial. After all, in every case a state court could also resolve the dispute, and there are those who argue (mostly not experienced trial lawyers) that prejudice against out of state parties is a thing of the past. Maintaining diversity access has many costs. First, it complicates things procedurally. As you should have noticed over and over again in the progression of this course, battling over forum selection is something lawyers spend a lot of time engaged in, and diversity jurisdiction creates opportunities for extensive procedural battles related to such issues. It also imposes significant burdens on the federal courts. In 2019, of 286,289 total cases filed in district court that year 94,206 - or nearly 33 percent - were diversity cases. Arguments are also made that diversity cases are more time consuming than the average case, and more likely to go trial. Diversity cases also shift resolution of state law issues to the federal courts, whereas without diversity at least some of these state legal issues would be resolved within the state system whose law is involved. On the other hand, diversity jurisdiction allows national procedural tools such as multidistrict litigation to be employed on mass tort or other aggregate cases. Many lawyers and parties also passionately believe that the days of local prejudice against outsiders are not an artifact of history but remain a live concern. Then, there are those who appreciate and value the forum selection potential - they might prefer a federal jury venire, which tends to draw from a wider area than a state jury pool, or they may prefer federal judges, who tend to be highly capable. In any event, diversity jurisdiction abides, and you should not expect it to quickly or easily go away. 

     See if you can work through the following problems. Answers will eventually be provided, but you will be much better prepared for the exam (and life as a lawyer who must resolve such issues with no one giving you the answer) if you make the effort to solve problems like this on your own.

     Judy Moore was born and raised in the university town of Oxford, Mississippi, where both her parents were professors. At age 18 she enrolled in college in Wellesley, Massachusetts, and after graduation with a degree in economics began a graduate program in Cambridge, Massachusetts. Early on during her ten years in Massachusetts she learned that she didn't like snow, and hoped that when she graduated she could secure a teaching job in a warmer climate. Near the end of her doctoral studies, she traveled for a job interview to Athens, Georgia, where she was offered and quickly accepted a job as a university professor. She liked Athens, and hoped she could spend the rest of her life there. While in Athens, unfortunately, she was injured when a car owned by LaGlace Enterprises struck her. The car was driven by Justah Dope, a student at the University of Georgia. Dope was originally from Chattanooga, Tennessee, and planned to move to New York, New York, to pursue a career as an actor upon graduation, but he has little likelihood of actually securing a job offer there and may be forced to remain in Georgia indefinitely. LaGlace Enterprises is a limited liability company created under the laws of Mississippi and headquartered in Columbia, South Carolina. The members (owners) are Perry Miroir, a resident of Tuscaloosa, Alabama, and Edgar Espejo, a resident of Athens, Georgia. Once back in Massachusetts, Moore consulted with a lawyer, who advised her to bring a lawsuit. The lawsuit was filed in federal district court in Georgia shortly before Moore obtained her PH.D. degree against Dope and LaGlace Enterprises. Shortly after the lawsuit was filed but before the judge could hear a motion to dismiss for lack of subject matter jurisdiction, Moore moved to Georgia to start her new job. With regard only to the diversity of the parties, please analyze the issues.

     MuchoDinero, LLC, is a limited liability company created under the laws of Nevada and headquartered in Tucson, Arizona. It has members (owners) from Arizona, California, and Utah. LotsaMonie, LLC, is a limited liability company created under the laws of Washington state and headquartered in Portland, Oregon. It has members from Oregon, Washington state, and Idaho. MuchoDinero filed a suit against LotsaMonie in federal district court in Portland. The complaint alleged “subject matter jurisdiction exists in this case as MuchoDinero is a Nevada Limited Liability Company and LotsaMonie is a Washington state Limited Liability Company.” After giving MuchoDinero repeated opportunities to amend its complaint, the judge dismissed the lawsuit for lack of subject matter jurisdiction. Did the judge act properly?

MEMORANDUM & ORDER

JACK B. WEINSTEIN, Senior United States District Judge:

Table of Contents

I. Introduction...200

II. Facts...200

A. Transaction...200

B. Dispute...201

C. Motion to Realign and Dismiss...202

III. Law...202

A. Summary Judgment Standard of Review...202

B. Diversity Jurisdiction...203

C. Antagonism Doctrine...203

IV. Application of Law to Facts...204

A. Plaintiff's Showing of Antagonism...204

B. Importance of Alienage Jurisdiction...204

V. Conclusion...206

I. Introduction

This litigation arises from a transnational business transaction gone wrong. In 2017, Hebei Tiankai Wood & Land Construction Co. Ltd. (“Plaintiff”) and Kirin Transportation, Inc. (“Kirin”) agreed that Plaintiff would become majority shareholder of Kirin. At the time of the transaction, Frank Chen (“Chen”) was the sole owner of Kirin. Plaintiff alleges that Chen made false representations to induce Plaintiff to invest $300,000 in Kirin and then misused the money.

Chen moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. The court ordered the motion converted to one for summary judgement.

Plaintiff is a citizen of China, while Chen and Kirin, the nominal defendant, are citizens of New York. Chen argues that Plaintiff's fraudulent inducement and breach of fiduciary duty claims are derivative, properly belonging to Kirin, so Kirin should be aligned as a plaintiff. Realignment of Kirin as plaintiff would destroy diversity, requiring the case to be dismissed.

Plaintiff argues that the “doctrine of antagonism”—applicable between Kirin and Plaintiff—applies, so that realignment is not required.

Chen disagrees. He contends that Plaintiff is Kirin's majority shareholder so that there is no antagonism between these two.

Chen's argument is not persuasive. First, even if Plaintiff has de jure control of Kirin, Chen has de facto control. Chen is alleged to have forcefully rebuffed Plaintiff's attempts to take control of Kirin, even though Plaintiff is now majority shareholder of Kirin. The caselaw is clear that a court should ensure that the parties are aligned so that there is a real collision of interests.

The real collision of interests is between Plaintiff on one side and Chen and Kirin on the other. Second, at its core, this is a dispute between nationals of the United States and of China, making it desirable to try the case in federal court if subject matter jurisdiction exists.

Kirin should remain as a named defendant. This court has jurisdiction over Plaintiff's claims. Chen's motion is denied.

II. Facts

A. Transaction

Plaintiff is a construction company based in China. Compl. ¶ 4, ECF No. 1, *201 May 10, 2018; Answer Ex. C, ECF No. 9-3. Chinese nationals Qiuxiang Shi (“Shi”) and Yingjie Li (“Li”) are the sole owners, officers, and managers of Plaintiff. Compl. ¶¶ 8, 17. In November 2017, Shi and Li traveled to New York and were introduced to Chen, then the sole shareholder of Kirin. Id. ¶¶ 9–11; Answer ¶¶ 9–11, ECF No. 9, May 29, 2018. Chen is a resident of the State of New York; Kirin is a New York corporation. Compl. ¶¶ 5–6; Answer ¶¶ 5–6. Kirin is alleged to be only a nominal defendant. Compl. ¶ 6.

Chen invited Shi and Li to Kirin's headquarters in Queens, New York. Id. ¶ 12; Answer ¶ 12. He wanted the duo to invest in Kirin. Id. Plaintiff alleges that Chen represented that Kirin was a successful company looking to expand its business; he gave Shi and Li documents to “highlight the financial strength” of the company. Compl. ¶¶ 13–14. It is undisputed that Chen stated that if Shi and Li invested in Kirin, Kirin would sponsor Shi for an L-1 visa. Id. ¶ 18; Answer ¶ 18. Plaintiff alleges that the visa would have allowed Shi to travel to the United States to participate in the management of Kirin and monitor operations of the company. Compl. ¶ 18. Chen organized meetings with law firms specializing in immigration law to demonstrate his intent to help obtain the visa if Plaintiff invested in Kirin. Id. ¶ 19; Answer ¶ 19.

The parties agree that Chen offered Shi and Li 51% of the shares of Kirin for $300,000 in capital investment. Compl. ¶ 20; Answer ¶ 20. Plaintiff alleges that Chen also promised to pay Shi a substantial salary as a manager. Compl. ¶ 20. On November 28, 2017, Chen gave Shi and Li a contract memorializing the agreement; in exchange for $300,000, Kirin agreed to tender 51% of Kirin's shares to Plaintiff and to file an L-1 visa petition for Shi. Id. ¶¶ 20, 22; Answer Ex. E, ¶¶ 1–2, ECF No. 9-5. Chen signed an engagement letter with a lawyer to work with Kirin to obtain the visa. Compl. ¶ 26; Answer ¶ 26. On the same day, Plaintiff tendered a certified check to Kirin for $300,000. Compl. ¶ 28; Answer ¶ 28. A stock certificate in turn issued to Plaintiff was for 102 shares, a majority of those in the company. See Decl. Frank Chen Ex. B, ECF No. 18-4.

B. Dispute

What had seemed like a straightforward transaction then began to unravel. In January 2018, per Plaintiff's allegations, Chen contacted Shi and Li asking for additional funds to be invested in Kirin so that Kirin could help obtain a visa for Shi. Compl. ¶ 30. Allegedly, Chen represented that the funds already invested “had been used up.” Id. ¶ 31. Plaintiff became suspicious and asked Kirin for documents and records, which Chen refused to produce. Id. ¶ 32. The parties agree that in April 2018, Plaintiff discovered that it was not listed as a shareholder on Kirin's 2017 tax returns. Id. ¶ 35; Answer ¶ 35.

Plaintiff attempted to establish control of Kirin. Plaintiff alleges that it sent a representative to take over Kirin, but its employees (pursuant to Chen's instructions), refused the representative access to the premises and inspection of books and records. Compl. ¶ 33. Alleged is that Kirin's bank refused to make account records available, and that Chen had never told Kirin's employees of Plaintiff's investment, never informed the landlord of the property where Kirin operated of Plaintiff's investment, and never made Plaintiff an authorized signatory on any of Kirin's bank accounts. Id. ¶¶ 33–34.

Chen denies these allegations. Answer ¶¶ 33–34. But, based on the record, they appear to be true. See Hr'g Tr. 4:15–19, *202 5:1–3, Dec. 19, 2018 (parties agree no evidentiary hearing was required).

In April 2018, Shi, as chair and director of Kirin, removed Chen from all positions at Kirin and named Shi chief executive officer of Kirin. Decl. Frank Chen Ex. D, ECF No. 18-5. Shi also named an interim chief executive officer of Kirin, effective immediately. Decl. Frank Chen Ex. D, ECF No. 18-6.

Chen took steps to counter these moves. On April 17, 2018, his attorney Xiangan Gong (“Gong”) wrote to Plaintiff's counsel opposing the “attempted take-over of the business.” Decl. Jacob Chen Opp. Frank Chen’s Mot. Dismiss Ex. A, ECF No. 23-2 (“Pl. Ex. B”). Gong wrote:

The stock transfer agreement between the parties entered last November was never finalized: (1) Frank Chen was and still is the one who actually supervises and manages the company's daily business operation, Qiuxiang Shi had never participated into company's management or business operation; (2) the lease was signed by Frank Chen; (3) Frank Chen was the only authorized personnel for the company's bank account.

Id. (emphasis added). In the same email, Gong wrote, “[Chen] CANNOT LEAVE THE COMPANY AND LET YOUR CLIENT OPERATE THE BUSINESS WITH HIS LEASE, SUBJECT HIM TO VIOLATION OF THE LEASE.” Id. (capitalization in original).

On May 1, 2018, Gong repeated Chen's position that he properly maintained control of Kirin. Decl. Jacob Chen Opp. Frank Chen’s Mot. Dismiss Ex. B, ECF No. 23-3 (“Pl. Ex. B”). Gong wrote,

[Chen] prefers to do a clean-cut closing then your client takes full control of the corporation and its business operation.... [Chen] cannot gives [sic] up the management right when the lease agreement and most importantly the company's TLC license was under his name.

Id.

C. Motion to Realign and Dismiss

In May, Plaintiff brought three causes of action against Chen and Kirin: (1) fraudulent inducement; (2) breach of contract; and (3) breach of fiduciary duty. Compl. at 6–9. Alleged is that a demand for Kirin to institute suit against Chen would be futile. Id. ¶ 7. Chen and Kirin filed a joint answer in response to Plaintiff's complaint. Answer at 1. By August, Chen had hired new counsel for himself, but he declined to hire new counsel for Kirin. Minute Entry, ECF No. 25, Aug. 15, 2018.

Chen's new attorney filed a motion to dismiss for lack of subject matter jurisdiction, arguing that Kirin should be realigned as a plaintiff, thus destroying the complete diversity of citizenship required for this court to have subject matter jurisdiction. See Def. Chen's Notice Mot. & Mot. to Dismiss Under Rule 12(b)(1) for Lack of Subject Matter Jurisdiction at 4, ECF No. 18, Aug. 5, 2018.

This court converted Chen's motion to dismiss to a motion for summary judgment. Order, ECF No. 26, Aug. 27, 2018. A hearing on the motion was held on December 19, 2018. See Hr'g Tr., Dec. 19, 2018. The parties agreed that the motion could be decided without an evidentiary hearing. Id. 4:15–19, 5:1–3.

III. Law

A. Summary Judgment Standard of Review

12At the summary judgment stage, “the judge's function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” *203 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The movant must show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists for summary judgment purposes when, “the evidence, viewed in the light most favorable to the nonmoving party, is such that a reasonable jury could decide in that party's favor.” Chaohui Tang v. Wing Keung Enterprises, Inc., 210 F.Supp.3d 376, 388 (E.D.N.Y. 2016) (quotation marks and citation omitted).

B. Diversity Jurisdiction

3District courts have original jurisdiction of civil actions between a citizen of one state and a citizen of a foreign state when the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). Alienage jurisdiction is a subset of diversity jurisdiction.

456“[D]iversity jurisdiction is available only when all adverse parties to a litigation are completely diverse in their citizenships.” Herrick Co. v. SCS Communications, Inc., 251 F.3d 315, 321 (2d Cir. 2001). Federal diversity jurisdiction cannot be conferred by the parties' own determination of who should be plaintiffs and who should be defendants. Rather, “the federal courts are required to realign parties according to their real interests so as to produce an actual collision of interests.” Lewis v. Odell, 503 F.2d 445, 447 (2d Cir. 1974); see also City of Indianapolis v. Chase Nat. Bank of City of New York, 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941) (it is the court's duty to “look beyond the pleadings, and arrange the parties according to their sides in the dispute” (citation omitted)).

C. Antagonism Doctrine

78Generally, a shareholder has no individual cause of action for a wrong against a corporation. Abrams v. Donati, 66 N.Y.2d 951, 498 N.Y.S.2d 782, 489 N.E.2d 751, 751 (N.Y. 1985). This results in the corporation being aligned as the plaintiff in litigation brought to remedy harm to a corporation because the corporation is the real party in interest. See Liddy v. Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983).

91011When, however, “management is aligned against the stockholder and defends a course of conduct which [the stockholder] attacks,” there is “antagonism” and the corporation should be aligned as a defendant. Smith v. Sperling, 354 U.S. 91, 95, 77 S.Ct. 1112, 1 L.Ed.2d 1205 (1957). Fraud, breach of trust, and illegality on behalf of the management in control are strong indicators of antagonism. Id. (collecting cases); ZB Holdings, Inc. v. White, 144 F.R.D. 42, 46 (S.D.N.Y. 1992) (“[I]f the complaint in a derivative action alleges that the controlling shareholders or dominant officials of the corporation are guilty of fraud or malfeasance, then antagonism exists, and the corporation should be aligned as a defendant.”). Antagonism may also exist where management is hostile to the interests of shareholders. Smith, 354 U.S. at 97, 77 S.Ct. 1112; Rogers v. Valentine, 426 F.2d 1361, 1363 (2d Cir. 1970) (upholding the district court's decision that a corporation should be aligned as a defendant when management had refused to institute suit on behalf of the corporation and demand would be futile).

12Courts should normally determine the issue of antagonism without delving into the merits of the claims. See Smith, 354 U.S. at 95, 77 S.Ct. 1112 (“the instant case is a good illustration” of why not “to delve into the merits” “for it has been over *204 eight years in the courts on this question of jurisdiction”).

IV. Application of Law to Facts

A. Plaintiff's Showing of Antagonism

13It is assumed for purposes of this opinion that Plaintiff's claims are derivative and intended to remedy wrongs to the corporation. Nevertheless, Kirin remains properly aligned as a defendant because of antagonism.

First, though Plaintiff has de jure control of Kirin, Chen has de facto control. It is undisputed that Chen is managing Kirin and Plaintiff's attempts to obtain control have failed. Those attempts are alleged to have been forcefully rebuffed by Chen. At his direction, Kirin's employees denied Plaintiff access to Kirin's operating premises and books and records. Chen also denied Plaintiff access to Kirin's bank by failing to make Plaintiff a signatory on Kirin's bank account.

Chen has explicitly refused to cede control of Kirin to Plaintiff. In April 2018, Shi, chair and sole director of the corporation, “removed” Chen from all positions in Kirin and appointed a new chief executive officer of Kirin. But Chen refused to cede management of Kirin to Shi's appointee. See Pl. Ex. A (“Mr. Chen DOES oppose the attempted take-over of the business.” (emphasis in original) ); id. (“Frank Chen was and still is the one who actually supervises and manages the company's daily business operation”); Pl. Ex. B (“[Chen] cannot gives [sic] up the management right”).

In view of Chen's actual management of Kirin and Plaintiff's alleged inability to wrest control from him despite being majority shareholder, it is highly unlikely that Chen would institute either of Plaintiff's derivative claims against Kirin. Based on the facts alleged in the complaint, such a demand would be futile. In these circumstances, antagonism exists. See Rogers, 426 F.2d at 1363 (upholding the district court's decision that a corporation should be aligned as a defendant when management had refused to institute suit on behalf of the corporation and demand would be futile).

14Second, Plaintiff alleges that Chen has engaged in fraud by wasting the investment in Kirin by Plaintiff and by engaging in other acts of malfeasance, including failing to list Plaintiff as a shareholder on Kirin's 2017 tax returns. When the dominant official of the corporation is accused of fraud, the corporation is appropriately aligned as a defendant. See ZB Holdings, 144 F.R.D. at 46 (concluding that “the requisite antagonism” existed because plaintiff alleged that the corporation's directors—the “dominant officials”—had engaged in common law fraud and misrepresentation).

Chen argues that antagonism cannot be found because Plaintiff is the majority shareholder of Kirin. Majority “control” of a corporation, however, is only one “circumstance indicating a lack of antagonism.” Taylor v. Swirnow, 80 F.R.D. 79, 83 (D. Md. 1978) (concluding that the parties lacked antagonism when plaintiffs owned a majority share in the corporation, among other reasons).

The court's role is to determine where the real collision of interests lies. The pleadings show that collision between Plaintiff on one side and Chen and Kirin on the other.

B. Importance of Alienage Jurisdiction

This litigation, at its core, is a transnational business dispute between a Chinese corporation and a New York citizen. It is the transnational nature of the action—and the fact that all relevant activity took place *205 in the United States—that make it vital that the parties be able to litigate in a United States court. Reliability of the United States courts is apparent.

Alienage jurisdiction—the jurisdiction of the federal courts over suits between citizens of the United States and citizens of a foreign state—is guaranteed by the Constitution. U.S. Const. art III, § 2 (“The judicial Power shall extend ... to Controversies between ... a State, or the Citizens thereof, and foreign States, Citizens or Subjects.”). The primary motivation for establishment of alienage jurisdiction in the Constitution was the difficulty British creditors had collecting from American debtors in state court prior to the Constitutional Convention. JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., 536 U.S. 88, 94–95, 122 S.Ct. 2054, 153 L.Ed.2d 95 (2002) (“This penchant of the state courts to disrupt international relations and discourage foreign investment led directly to the alienage jurisdiction provided by Article III of the Constitution.”); see also Koehler v. Bank of Bermuda (New York) Ltd., 229 F.3d 187, 188 (2d Cir. 2000) (“the fundamental purpose of alienage jurisdiction—to void offense to foreign nations”); Kevin R. Johnson, Why Alienage Jurisdiction? Historical Foundations and Modern Justifications for Federal Jurisdiction over Disputes Involving Noncitizens, 21 Yale J. Int'l L. 1, 15 (1996) (describing the origins of the alienage clause of the Constitution); Wythe Holt, The Origins of Alienage Jurisdiction, 14 Okla. City U. L. Rev. 547, 564 (1989) (“Alienage jurisdiction, as embodied in the Constitution and as put into action in the Judiciary Act of 1789, was ... an attempted solution to a major political problem of international dimensions.”). The Founders concluded that the burgeoning American economy could grow only if foreign companies had the “proper security” provided by the federal government's regularized review of contract disputes. See JPMorgan Chase Bank, 536 U.S. at 95–96, 122 S.Ct. 2054 (relying on contemporaneous statements of James Wilson, James Madison, and Alexander Hamilton).

The First Congress, in its attempt to further the goals emanating from these motivations, gave the federal courts jurisdiction of cases in which “an alien is a party” to litigation. See id. (relying on Judiciary Act of 1789, ch. 20, § 11, 1 Stat. 78). The Supreme Court, however, concluded that this jurisdictional grant did not include suits solely between two aliens because it exceeded the constitutional jurisdictional grant. Mossman v. Higginson, 4 U.S. 12, 14, 4 Dall. 12, 1 L.Ed. 720, (1800). “[T]he legislative power of conferring jurisdiction on the federal Courts is, in this respect, confined to suits between citizens and foreigners.” Id. (emphasis omitted).

Congress has since excepted from federal jurisdiction categories of cases involving alien litigants. Though the Constitution requires only “minimal diversity” among parties, State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530–31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967), Congress has required complete diversity to support federal jurisdiction, Herrick, 251 F.3d at 322. Complete diversity requires that aliens be on both sides of the litigation along with fully diverse domestic opposing parties. Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (“[W]e do not have diversity jurisdiction over cases between aliens. More specifically, ‘diversity is lacking ... where the only parties are foreign entities, or where on one side there are citizens and aliens and on the opposite side there are only aliens.’ ” (citation omitted)). In other circuits, courts adhere to a more traditional view denying diversity jurisdiction when there are aliens on both sides of a controversy, regardless of the presence of opposing domestic *206 parties. See Actions Involving Aliens—General Principles, 14A Fed. Prac. & Proc. Juris. § 3661 (4th ed.) (collecting cases).

The design of federal practice to protect both aliens and American citizens remains today. Transnational commercial interactions have become more commonplace and more complex. Litigating in state court could be burdensome, since foreign parties might be subject to the civil procedures of more than one jurisdiction. By contrast, litigating in a foreign court might subject United States parties to a system of civil procedure not yet fully developed, and in which it might not be possible to obtain personal jurisdiction over all necessary parties. It could be argued that it would be most prudent for the federal courts to have diversity jurisdiction of all cases in which an alien is a party so long as a citizen of the United States is also a party.

The court has considered the pleadings and the record and finds an antagonistic relationship requiring Kirin to remain a nominal defendant. Since Kirin is properly aligned as a defendant, there is complete diversity among the parties.

V. Conclusion

Defendant's motion to dismiss is denied. Kirin is properly aligned as a nominal defendant here. Since Plaintiff is a citizen of China and defendants are citizens of New York, there is complete diversity among the parties. The court has subject matter jurisdiction of Plaintiff's claims.

The parties are ordered to expedite discovery.

SO ORDERED.

SIDEBAR ON JUDGE WEINSTEIN:

The judge in this case, Jack B. Weinstein, was one of the most consequential and influential federal district court judges ever to serve. He presided over many mass tort matters, and was noted for his creative approaches to such cases. He helped innovate many of the techniques that allow courts to dispose of controversies with both many claimants and substantial damages. Born in 1921, he took the bench in 1967, served as an active judge until 1993, and continued to hear cases on Senior status until 2020. At the time he issued the opinion in this case he was 97 years old. 

     1. Special Issues With Alienage Jurisdiction. Alienage jurisdiction often is lumped in with diversity jurisdiction without a detailed consideration of the differences, but in a transnational setting we think it is worth taking a bit more of a look.  The Constitution refers to suits "between a state, or the citizens thereof, and foreign states, citizens or subjects." Section 1332(a)(2) makes the grant parallel to the clause before, which allows jurisdiction for suits between citizens of different states, by allowing suits between "citizens of a State and citizens or subjects of a foreign state." As Judge Weinstein notes, this was originally adopted as a concession to foreign investors, who wanted access to a US forum. 

          Citizens vs. Subjects. One question that sometimes arises in the minds of students is what difference, if any, there between a citizen of a  foreign state and a subject of a foreign state? As a practical matter, there is no difference - in either case, someone is treated as belonging to a foreign country. Historically, the difference seems to be one between monarchies and empires - such as China was in 1789, where those living in the state are the subjects of the king or emperor - and republics, such as China is today, where the state is made of its citizens.

          Alien vs US State Citizen. The alienage clause allows lawsuits between a foreign national and a citizen of a state to go forward with federal subject matter jurisdiction. For example, if a person resident in Shenzhen who is a citizen of the People's Republic of China brings a lawsuit for more than $75,000 against a resident of California, the alienage clause as implemented by Section 1332 provides a basis for federal subject matter jurisdiction.

          Alien vs Alien.  Note that nowhere in the Constitution or Section 1332 is there a provision for suits exclusively between citizens of foreign nations, even if those are different nations. Put differently, if a citizen of China wants to sue a citizen of Japan in US federal court on a state law claim, there will be no federal subject matter jurisdiction.

          Aliens With US Permanent Residency. The second part of Section 1332 (a)(2) addresses the situation where a foreign national has acquired permanent residency status (but not citizenship) in the United States and is domiciled in a particular US state. This happens not infrequently in the United States, where at our last look there were somewhere above 13 million foreign citizens holding permanent resident 'green cards.' In such situations, the alien is treated effectively as both an alien and a resident of a state in terms of duplications that would defeat federal jurisdiction. Some examples may help make this clear. Assume that a citizen of China has acquired permanent residency in California. This person - let's call her Zhang - wants to bring a lawsuit against a citizen of Canada. She cannot establish federal subject matter jurisdiction, because the court would treat that a suit between aliens, for which there is no provision for subject matter jurisdiction. Now, let's assume that Zhang wants to sue Evil, a resident of California. Once again, she cannot, because even though this is a lawsuit between a citizen of a foreign state and a resident of a US state, the language in section 1332 makes clear that there is no federal subject matter jurisdiction between a permanent resident alien living in California and resident of California. What if Zhang wants to sue Evil's cousin, Wicked, a US citizen who lives in New York? In that case, on these facts, there would be alienage subject matter jurisdiction.

          Incomplete Alienage Diversity. What if alienage jurisdiction exists between an alien and a citizen of a state, but an additional alien is added to the side that did not previously have an alien? (For example, NY v. Alien becomes NY + Alien v. Alien). Or, what if a citizen of state appears on both sides of the litigation, as would have happened here if the parties were realigned (Alien v. NY + NY becomes Alien + NY v. NY).  Judge Weinstein indicates that would defeat the necessary complete diversity, but wonders if this is the right policy choice given the breadth of the Constitutional language and the difficulties that might arise in litigating abroad. While this is parallel to the normal diversity rule, and while we suspect Judge Weinstein is correct, this is not something the Supreme Court has ever ruled on.

          Diversity Between State Citizens With Additional Aliens. Section 1332 (a)(3) addresses a different situation, where a diversity suit exists between citizens of different states, to which suit aliens are added. According to Wright and Miller, the language of this statute allows aliens on both sides of the case so long as the required diversity between states exists. Wright & Miller, Federal Practice and Procedure: Jurisdiction 2d § 3661.

          One issue remains unclear, however. What if one of the aliens is a permanent resident from the same state as one of the parties on the other side of the case? For example, imagine a Texan and a California resident alien bring a lawsuit against a Californian. Would there be subject matter jurisdiction? Section 1332(a)(2) indicates not, but Section 1332(a)(3) suggests so. We don't know.

          Citizens of a Foreign State and Foreign Sovereign Entities. Another issue that arises, particularly with respect to China, is whether certain corporations are corporate citizens of a foreign state or branches of the foreign state itself. This issue is beyond the scope of this course but may arise in the course of US litigation involving Chinese state-owned enterprises. Some such enterprises have asserted sovereign immunity as a defense against civil claims. If they are branches of sovereign states, that would impact the basis for federal jurisdiction. Whether a party is private or a foreign state entity also will affect issues such as venue and whether, absent a waiver, liability can be established. Addressing these issues in depth is beyond the scope of this course, but might be relevant to some practice situations someday, so if you are representing a Chinese state-owned enterprise in litigation in the United States just be aware that this is an issue you should look into.

     2. Realignment. In both diversity and alienage situations, realignment can be an issue. In the Hebei case, there was a dispute about where one of the parties belonged with regard to being on the same or different sides of the V. The defendant argued that the company, a New York resident, should be aligned as a plaintiff since the derivative suit was technically on the company's behalf. If this had been accepted, there would have been New York residents on both sides of the V, defeating alienage. Judge Weinstein found the company was under the de facto control of the other defendant, making it antagonistic to the plaintiff, and positioned it as a defendant. As a result, alienage jurisdiction existed. It's not unusual for defendants to claim that plaintiffs have manipulated the positioning of parties to create or defeat federal jurisdiction, and seek to have the parties realigned. As Wright & Miller notes:

In determining whether diversity of citizenship jurisdiction exists, the federal court is not bound by the way the plaintiff formally aligns the parties in his or her original pleading. It is the district judge's duty to “look beyond the pleadings, and arrange the parties according to their sides in the dispute,” and that is precisely what federal courts do.

Federal Practice and Procedure, Section 3607, Realignment of Parties.

     Again, the answers will be provided but see if you can sort this out on your own.

     Wendy Wu is a citizen of the People's Republic of China, but she has permanent US residency in the state of California.  She enters into a contract with Xavier Xu, a US citizen resident in Massachusetts, and Yoshi Yang, a US citizen resident in California. Xu and Yang breach the contract, and Wu wishes to bring a lawsuit seeking $100,000 each from Xu and Yang in federal court. Please analyze.

     Wendy Wu is a citizen of the People's Republic of China, but she has permanent US residency in the state of California.  She enters into a contract with Sven Swedenborg, a Swedish resident who has permanent residence in the state of New York. Swedenborg breaches, and she wishes to bring a lawsuit for $100,000 in federal court. Please analyze.

     Wendy Wu and Yoshi Yang resolve their dispute and become partners . Wu is still a Chinese citizen resident in California and Yang is still a US citizen and California resident. They enter into a contract with Otis Olafson, who promptly breaches. Olafson is a US citizen resident in Virginia. Wu and Yang both have claims against Olafson in excess of $100,000, which they wish to bring jointly in federal court. Please analyze.

     Assume that before suit is filed, Yang settles with Olafson. Wu still wishes to pursue her claim in federal court. Please analyze.

     1.  Origins of Amount in Controversy. The Constitution contains no amount in controversy provision, but since the Judiciary Act of 1789 provided the first statutory grant for diversity jurisdiction there has been a threshold amount. In 1789, it was $500 (equivalent to about $14,000 in 2020 dollars). The nominal amount has increased steadily over time, as the chart following shows. As you will learn, at one time there was also an amount in controversy requirement for federal question claims, but at present there is no amount in controversy requirement for such claims. The minimum amount spares the federal courts of adjudicating certain very low-value state law claims.

     2.  Must Exceed. The statute states that diversity jurisdiction exists only when the claim "exceeds the sum or value of $75,000, exclusive of interest and costs." What happens to the careless plaintiff who asserts a claim for exactly $75,000? The claim must be dismissed for lack of subject matter jurisdiction, a fate that would not have happened had the claim been for $75,000.01.

     3.  Time for Assessing Sufficiency of Amount in Controversy.  What happens if a claim is made for more than $75,000 but as the case develops it becomes clear that the plaintiff will not recover that much? As a general rule, if the original claim was in good faith, the court retains jurisdiction of the case. If there is a situation where it is clear from the outset that the claim cannot amount to more than $75,000 - say, for example, the plaintiff is suing for twelve months of $5,000 a month rent, with no penalties or other damages, and makes a conclusory allegation that the amount exceeds $75,000 - the court will do the math and find the jurisdictional allegation insufficient. On the other hand, if the original claim was for sixteen months' rent at $5,000 per month, but the defendant conclusively establishes that it should not have to pay for one of the months because the apartment was uninhabitable, that development does not divest the court of jurisdiction. If you think about it, this is the way it has to be - otherwise, every time a defendant wins, the court would lose jurisdiction, making the defendant's win void.  

     4.  Aggregation of claims by the same plaintiff against the same defendant. JPH Tax involved a situation where the argument was made that the claim for damages fell below the statutory threshold. The court then looked at the second claim, which in this case involves injunctive relief, and found that if the two claims were added together they would clearly be above the statutory minimum. This illustrates an aspect of diversity jurisdiction – claims by the same plaintiff can be added together to reach the statutory minimum. In this case, the claims arose from the same facts and circumstances, but for the purposes of aggregation, there does not need to be any connection between the claims which are added so long as the claims are brought by the same plaintiff. A plaintiff can bring a contract claim and unrelated tort claim and the court will add them together without worrying about any relationship between the claims other than that they were brought by the same party.  One interesting twist involves a situation where a plaintiff is asserting diversity claims worth less than $75,000 alongside an unrelated federal question claim that would bring the total to above $75,000 - can the federal question claim be included in the aggregation? The answer appears to be yes. See generally, 14A Charles A. Wright, et al., Federal Practice and Procedure § 3704. 

     5.  Valuing injunctive claims. Another aspect of JPH Tax involved a claim for injunctive relief. Typically, claims for injunctive relief do not involve a fixed dollar figure, unlike claims for damages. How are such claims valued for the purposes of assessing the statutory threshold? There are three possible methods. The court can look at the cost to the defendant to comply with the injunction. The court can look at the benefit to the plaintiff if the defendant complies with the injunction. Taking into account the different perspective of removal, the court can look to the value with regard to the person asserting federal jurisdiction -  the defendant if the case is removed, and the plaintiff if it is initially filed in federal court. Finally, the court can look at both the defendant's and plaintiff's perspectives, choosing the one which is higher. While perhaps the most common approach is to look to the value to the plaintiff, different courts have taken different approaches to this. If this issue arises in practice, you will need to see what rule applies where the case is located. See generally Brittain Shaw, The $75,000 Question: What Is the Value of Injunctive Relief?, 6 Geo. Mason L. Rev. 1013 (1998);  Christopher A. Pinahs, Diversity Jurisdiction and Injunctive Relief: Using a "Moving-Party Approach" to Value the Amount in Controversy, 95 Minn.L.Rev. 1930 (2011); 14A Charles A. Wright, et al., Federal Practice and Procedure § 3703.

     6.  Aggregation of claims by or against different parties. What happens when two plaintiffs join together to bring a lawsuit against the same defendant – can their claims be joined together in order to meet the statutory? In general, the answer is no. Each plaintiff needs to stand on their own. There is an exception when multiple plaintiffs are jointly asserting a common indivisible claim. The same logic applies when one plaintiff brings claims against two or more defendants - the claims cannot be aggregated, but one common claim that exceeds $75,000 will stand even if there are two defendants facing that claim. Some examples might help explain. Donnie Driver is careless and hits Pamela Plaintiff and her brother Paul Plaintiff as he drives through a parking lot. Each claims $40,000 in personal injury damages, arising from the same event. The claims cannot be aggregated as each plaintiff's claims and injuries are unique and separate - Paul does not feel Pamela's pain. On the other hand, imagine that Carl Claimant claims that he is the true owner of Blackacre, a relatively modest estate worth only $80,000. At present, the owners are listed as Omar Owner and his wife Olga Owner, who hold title jointly and undivided. Even though the average claim against each is only $40,000, the threshold will be met. Carl really has one claim, worth $80,000, and it is not reduced because there are two joint owners.  Similarly, multiple plaintiffs can join together "to enforce a single title or right, in which they have a common or undivided interest." Zahn v. International Paper Co., 414 U.S. 291, 294, 94 S. Ct. 505, 508 (1973). See generally, 14A Charles A. Wright, et al., Federal Practice and Procedure § 3704.  

     7.  Exclusive of Interest and Costs. You will note that the amount in controversy is "exclusive of interest and costs." What does this mean? In some cases, post-judgment interest can be awarded. For example, under some applicable laws interest runs from the time of the judgment until collection. This kind of interest is excluded. On the other hand, sometimes interest is an essential part of the claim, and is included. For example, if a plaintiff sues on a bond and claims that interest payments were not made as scheduled, that kind of interest is not excluded. The lawsuit is about collecting the interest. Costs are those costs awarded as part of litigation. For example, costs of service of process might be awarded to the prevailing party. Usually, in the American system, these costs are not substantial relative to the claim on the merits, and in any event they don't count toward the amount in controversy. One issue that can get technical, and so is a bit beyond our scope, is the awarding of attorney's fees to the prevailing party. In some cases a statute will include an award of attorneys' fees, and in some cases a claim for those fees can be included in the amount in controversy. For the purposes of this course, be aware, but don't worry about it.

     Paula Plaintiff wishes to bring a federal lawsuit against her 'frenemy' Debbie Defendo. Plaintiff had signed a contract to do some work for Defendo, and when she was finished Defendo claimed the quality was no good and refused to pay her any of the $25,000 due under the terms of the contract. Plaintiff publicly maintains that her work was 'perfect' and that the full sum is owning, but has privately admitted that perhaps some small offset for deficiencies might be reasonable. While they were discussing the problem with the contract, Defendo physically pushed Plaintiff. Plaintiff was not physically injured but she was intimidated and scared. Her attorney has researched similar cases and feels a claim for $50,000 is the most that can be made in good faith for such an incident and intends to claim for exactly that amount in addition to the $25,000 due under the contract. Privately, he feels he would be extremely lucky to win $5,000 for an assault where there was no injury. Finally, Plaintiff has remembered that three years ago she loaned $1 to Defendo so she could buy a Coca-Cola from a vending machine. She intends to sue for that as well, even though it is totally unrelated. If asserted, the local statute of limitations would almost certainly bar this claim. Plaintiff wants to bring the three claims in federal court (she and Defendo are diverse). Please analyze the amount-in-controversy issues.

     Ima Claimant wishes to bring a lawsuit against Ben Sued. The first claim is for $50,000, and arises from a state law claim. The second claim is completely unrelated, and arises from a federal cause of action. This claim would be for $30,000. The parties are diverse. Please analyze the amount-in-controversy issues.

     Professor Evil has become quite old, and no long can ride or control his bicycle. Instead, he rides an adult tricycle around his retirement community in Florida, which he also has difficulty controlling. One day, two former students - Shiza Great and Summa Laudey - are coming to visit Evil when he comes suddenly around a corner and runs them down in the same accident at the exact same time. Reluctantly, they bring suit against their old professor in federal court. (Both are from New York). Each sues Evil for $50,000. Please analyze the amount-in-controversy issues.

     1.  Realignment. On occasion, it can be hard to tell whether a party should be considered a plaintiff or a defendant. We saw that in Hebei Tiankai Wood & Land Constr. Ltd. v. Chen, where there was some discussion about where a party should be aligned. On other occasions, parties may artfully plead someone as a plaintiff or a defendant despite their real interests in order to create or deny the appearance of diversity jurisdiction. As Hebei Tiankai Wood & Land Constr. Ltd. v. Chen indicates, courts can and will realign parties in line with their actual interests in determining jurisdiction.

     2. Collusive Joinder. Another issue that can arise is 'collusive joinder.' An example would be where one party assigns its claim to another party from a different jurisdiction so as to affect the existence of federal subject matter jurisdiction. This is addressed by 28 USC Section 1359 which provides that the federal court has no jurisdiction in cases “in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court.” Some assignments, of course, are legitimate and have nothing to do with invoking jurisdiction. The leading Supreme Court case to deal with Section 1359, Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969), instructs the court to look at the totality of the circumstances in deciding whether an assignment was improper or collusive. If it is, it is disregarded for the purpose of establishing or denying federal subject matter jurisdiction (although it may be a valid assignment for other purposes).

     3.  Judicially Created Exceptions to Diversity and Alienage Jurisdiction. As you have seen, Congress has narrowed the reach of both diversity and alienage jurisdiction relative to what is permitted in the Constitution. As it turns out, there are also some judicially created exceptions, even though neither the Constitution nor the enabling statutes require or even hint at these exceptions. One has to do with family law or 'domestic relations' as the exception is known. This does not mean that no matters involving families can invoke diversity. What it means is that family specific litigation such as divorce, alimony, and child custody cannot be heard pursuant to diversity or alienage jurisdiction. Ankenbrandt v. Richards, 504 U.S. 689, 704 (1992). Another exception is probate. Probate is the process through which a person's belongings are distributed upon his or her death through the execution of the person's will. This also has traditionally been an area of state jurisdiction that does not come into the federal courts through diversity.

     4.  Framework. By now you should have all the diversity and alienage issues crisply organized in your mind. Issues you will want to work through are:

• Where are the parties domiciled?
  • Individuals
  • Corporations
  • LLCs, Partnerships, and other joint non-incorporated entities
  • Aliens resident abroad
  • Aliens permanently resident in the United States
• What is the amount in controversy?
  • Single damage claims
  • Aggregated damage claims between one plaintiff and one defendant
  • Injunctive relief
  • Claims aggregated among multiple parties
  • Interest (distinguishing collecting missed interest payments which are the basis for the claim and interest added either prejudgment or post-judgment to a recovery based on other damages), costs (note the special case of awardable attorneys' fees), and other excludable damages
• Assessing sufficiency of jurisdiction
  • Time
  • Pleading
  • Burden of Proof
• Special Considerations
  • Realignment
  • Collusion
  • Domestic Relations
  • Probate

The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.

     1.  The Face of the Complaint or Well-Pleaded Complaint Rule. In the Mottley case, federal issues were certain to be important to the outcome.  The statute relied on by the railroad to cut off their free passes was a federal law; in return, the Mottleys were sure to cite to the Constitution's prohibition of taking away property, such as free passes, without due process of law.  No one seemed to dispute that absent the federal law the Mottleys' passes were valid and should be honored, making the state law right background to the real dispute in the case. Despite the likely centrality of federal issues to the case, the Court held that federal subject matter jurisdiction did not lie under Section 1331.

    The rule the Court announced has come to be known as the "face of the complaint" or the "well-pleaded complaint" rule. Put simply, the claim for relief has to be based on a federal question. In Mottley, the claim for relief was based on state contract law. The federal law came in as a defense, but the court held that federal questions that come in as defenses are not enough to invoke federal question jurisdiction. You will find that the same is true for counterclaims asserted by the defendant back against the plaintiff, or for cross-claims asserted between parties aligned on the same side of the case.

     One way to think about the Mottley rule has to do with the idea of critical path. A critical path is the steps that have to be taken in order for a given result to be reached. For a case to arise under the federal question statute, resolving the federal question has to be on the critical path. If there is a path to a plaintiff's recovery that does not require decision of the federal question, it fails the face of the complaint rule. In Mottley, recovery could have been obtained on the state law issue alone.

     2.  Constitutional Versus Statutory Standard for Sufficiency of Federal Questions.  Mottley involved an interpretation of Section 1331, not the Constitution. Interestingly, there was no federal question statute until after the Civil War, when the first version of Section 1331 was enacted, in part to give freedmen and former slaves access to federal courts if their federal rights were interfered with. As was true with diversity, the Constitutional standard is broader than the statutory standard. So far as the Constitution is concerned, a case or controversy meets the federal question standard if the federal issue appears likely to arise in the case. Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824).

     3.  Explicit and Implied Federal Causes of Action. Not all federal (or state) statutes create a right for private litigants to bring a lawsuit. Sometimes, for example, only an administrative or regulatory agency is empowered to enforce the law. The explicit creation (by Congress) or the implication from statutory silence (by courts) of a private right of action dramatically shifts the enforcement of the law from agencies to private litigants. While, in general, such rights of action are consistent with the US practice of ex-post regulation through litigation, the creation and existence of such rights of actions often is controversial. Implication is even more controversial than Congressional creation of private rights as it involves courts sometimes choosing to find implied a cause of action that Congress had chosen not to create explicitly. 

     4.  Exceptions to the Face of the Complaint Rule. In general, the face of the complaint rule is not elusive. If the case is filed pursuant to a federal law and a federal question must be resolved for the plaintiff to recover, the face of the complaint rule is satisfied. There are, however, some exceptions. Some won't concern us - for example, in Shoshone Mining Co. v. Rutter, 177 U.S. 505 (1900), a federal statute created a right for miners to file patents on claims and to settle conflicting claims, but left resolution of the claim to local customs and laws. The Court held that as federal law was not necessarily involved, the case was not one which "necessarily arises under the Constitution and law of the United States." Another exception, discussed in more detail below, involves the situation where a state statute references and incorporates federal law.

     What happens when a state statute references and thereby incorporates a federal law? Does federal question jurisdiction exist (albeit created by a state and imposed on the federal courts) or is it just a state statute providing no direct access to federal court (albeit one that will require courts to build precedent interpreting a federal statute)?

     In these cases, it can be argued, resolving the federal question is essential for imposing liability. At the same time, the law at base is a state law, created by a state government, and one may ask whether a state government should have the power to throw open the doors to federal courthouses. In addition, in some cases bringing such cases into federal court could federalize issues that traditionally have been resolved by state courts, potentially burdening the federal courts. We've run out of hands, but if we had one more we would note that in some cases the federal question involved is quite important, and perhaps one that deserves uniform federal resolution, rather than resolution by the various state courts. When can we say that such claims 'arise under' federal law so as to satisfy § 1331?

     One straightforward answer was given in a case authored by Justice Oliver Wendell Holmes in Americal Well Works Co. v. Layne & Bowler Co., 242 U.S. 257 (1916). American Well Works claimed that Layne & Bowler had interfered maliciously with their business by falsely claiming that their pump violated a patent held by Layne & Bowler. The trade libel statute was created under state law but the case would require a determination as to whether American Well Works' pump did in fact violate the patent held by Layne & Bowler, which would require interpreting federal law. (Can you see how this is different from Mottley? In Mottley, did the plaintiffs' theory of the case necessarily require an interpretation of federal law?). Justice Holmes wrote:

A suit arises under the law that creates the cause of action. The fact that the justification may involve the validity and infringement of a patent is no more material to the question under what law the suit is brought than it would be in an action of contract.

     Five years later, the Court went in a different direction. In Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (1921), the plaintiff claimed under a state law prohibiting corporations from investing in unlawfully issued investments that the corporation was buying bonds unconstitutionally issued under the Federal Farm Loan Act. In examining this seemingly similar case, the Court put forth a different standard:

The general rule is that, where it appears from the bill or statement of the plaintiff that the right to relief depends upon the construction or application of the Constitution or laws of the United States, and that such federal claim is not merely colorable, and rests upon a reasonable foundation, the District Court has jurisdiction under this provision.

    The Court zigged back 13 years later in deciding Moore v. Chesapeake & Ohio Railway, 291 U.S., 205 (1934). In that case the suit was brought under a state employer's liability law; because contributory negligence could not be asserted if the employer had violated a law enacted for "the safety of employees" the case would turn on whether the employer had violated the Federal Safety Appliance Act. The court held no federal jurisdiction existed.

     Similarly, in Gully v., First National Bank in Meridian, 299 U.S. 109 (1936), a state wanted to tax a national bank. While a federal statute ultimately controlled whether a national bank could be taxed, the Court rejected federal jurisdiction on the grounds that the federal issue was not central to the case but was only "lurking" and might not be reached.

     More recently, in Merrell Dow Pharmaceuticals, Inc., v. Thompson, 478 U.S. 804 (1986), the plaintiffs argued that a violation of the Federal Food, Drug, and Cosmetic Act established negligence under state law. The claim, similar to the cases above, was that even though the cause of action was created by a state the interpretation of federal law would prove essential to the relevant count of the complaint based on the FDCA violation. An important issue in the case was that Congress did not create an explicit private right of action under the FDCA, and the parties agreed that there was not an implied one. That means, if the case was treated as federal law, a federal forum for violations of the FDCA would be provided in federal court where Congress had not explicitly provided one and courts had not found one implied. The practical impact would be to open the federal courts to a large number of tort claims that otherwise would be in state court. Relying heavily on the lack of federal private right of action, the Court concluded, "We conclude that a complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim 'arising under the Constitution, laws, or treaties of the United States.'" A forceful dissent by Justice Brennan argued, in part, that it would be better to have federal courts engaged in defining and applying the important federal statute involved.

      This set the stage for the case that follows.

     1. The Grable Test.  Grable represents an effort to balance between federalizing what have been state issues and leaving it to the states to provide guidance on federal issues of national importance.

Grable sets forth a three part test:

Instead, the question is, does a state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.

     In the subsequent case of Gunn v. Minton, 568 U.S. 251 (2013), the Court tweaked the Grable test so that it clearly became a four part test:

That is, federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.

Where all four of these requirements are met, we held, jurisdiction is proper because there is a “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” which can be vindicated without disrupting Congress's intended division of labor between state and federal courts.

     The first two legs of the test are pretty straightforward.  Litigants will not be able to achieve federal jurisdiction if federal issues are simply stapled on the body of what remains a state law case, nor will they get into federal court if the federal issues are so readily resolved that there is no actual dispute over them. The 'substantial' leg is a bit more difficult but made clear by Gunn. In this element of the test, the court is looking for issues that matter not just to the litigants but to the system of justice as a whole. In Gunn, the plaintiff claimed that his former attorneys had committed malpractice by failing to make arguments in a case involving a patent he had filed but that was found invalid. The interpretation of patent law as it applied to the plaintiff's case was surely substantial with regard to the outcome of that case, but it was not substantial with regard to the system of patent law as a whole (as distinguished from the generally applicable IRS notice procedures at issue in Grable). Finding the federal issues to be actually disputed but not substantial, the Court held there was no federal question jurisdiction,  Finally, the last leg of the test deals with the issue that controlled in Merrell Dow. If Congress has chosen to not create a private right of action, or if an area of litigation has traditionally been resolved under state law, the fourth leg of the test will counsel against opening federal courts.

     If you look back at Article III, Section 2 you will note that it talks about a federal court having jurisdiction over a 'case' or over a 'controversy.' How exactly does a 'case or controversy' relate to a legal claim? More specifically, how does a court deal with a situation where federal subject matter jurisdiction exists for one legal claim but not for a different but closely related claim arising from the same set of facts?

     This is the issue that the Supreme Court faced in United Mine Workers v. Gibbs, 383 U.S. 715 (1966). In Gibbs,  a labor dispute arose between a union and the operators of a coal mine in the mountains of Tennessee. Gibbs, an employee of and contractor to the coal mining company, brought claims against the union. The claims included a federal law claim alleging violations of labor law, for which federal question jurisdiction existed, and state law claims alleging violation of Tennessee law, which did not have their own basis for federal jurisdiction.

     The question (well, at least the question we care about) before the Court was whether it could resolve the state law claims along with the federal law claim. They all arose from the same facts, and the proof would substantially overlap. Creating a doctrine that came to be known as pendent claim jurisdiction, the Court held that since the federal claim created a case or controversy that was properly before the trial court, it could hear the state law claims as well. The claims all had to arise from a "common nucleus of operative fact" and the relationship between the federal claims and the pendent claims had to be such that ordinarily a plaintiff would expect to try them all at the same time.

     The court took care to note that the doctrine was discretionary - that is, the trial could hear the state law claims but was not obligated to. Taking into account issues such as "judicial economy, convenience and fairness to litigants" the court could decide to exercise pendent jurisdiction or not.

     There was not, at this time, any federal statute creating pendent claim jurisdiction although there was, of course, a statute creating jurisdiction over the federal question claim. The extension of pendent jurisdiction to additional claims was an exercise of the Court's rulemaking power, but drew on the trial court's already being empowered to hear the core of the "case or controversy" with the rulemaking dealing with whether the whole case or controversy could be brought into federal court.

     Note that in Gibbs the parties were the same on all claims. No additional parties were added to the case. 

     The issue of pendent parties came up in later cases. In Aldinger v. Howard, 427 U.S. 1 (1976), the Court suggested in dicta that pendent party jurisdiction might be proper unless Congress passed a contrary statute.

     The next case to address pendent parties involved a case where the original basis for federal jurisdiction was based on diversity. The plaintiff then wanted to add a claim against a third party who had been added as a third party defendant by the original defendant. At the time the plaintiff added this defendant it appeared that this new defendant was from the same state as the original defendant; it later came to light that the added party was from the same state as the plaintiff. Because of the requirement of complete diversity, the case could not have been brought originally with this defendant as part of the original lineup. The plaintiff argued that since it was originally in court with proper subject matter jurisdiction, it could add claims against pendent parties for which there was no original subject matter jurisdiction. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978). The Court rejected the extension of pendent party jurisdiction in this setting, holding that it would conflict with 28 U.S.C. § 1332.

     In Finley v. United States, 490 U.S. 545 (1989), the court faced the issue of adding a pendent party when the original claim was a federal question claim. Following a plane crash, the widow of one of the decedents brought a claim against the United States government under the Federal Tort Claims Act, a federal statute providing federal jurisdiction but only against the federal government. She attempted to add to the same lawsuit a state law tort claim against a city government also involved in operating the same airfield. The Court, in an opinion by Justice Scalia, held that it was up to Congress, not the Court, to authorize such pendent party jurisdiction when it was not included in the FTCA. (Note how the prior dicta in Aldinger v. Howard, 427 U.S. 1 (1976), however clear or on point, was not controlling on a later court).

     Congress responded with 28 U.S.C. § 1367. Please be clear on one thing: setting aside the Constitutional concerns around what makes up a 'case or controversy,' and setting aside issues about whether courts have discretion beyond what is supplied in the statute, § 1367, and not the cases that led up to it, provides the governing law now on pendent jurisdiction, or as it has since been called, supplemental jurisdiction. To keep things somewhat simple (and they get complicated enough), we will focus on the statute and its requirements.

(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.

(b) In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.

(c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—

      (1) the claim raises a novel or complex issue of State law,

      (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,

      (3) the district court has dismissed all claims over which it has original jurisdiction, or

      (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.

(d) The period of limitations for any claim asserted under subsection (a), and for any other claim in the same action that is voluntarily dismissed at the same time as or after the dismissal of the claim under subsection (a), shall be tolled while the claim is pending and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.

(e) As used in this section, the term “State” includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States.

(Added Pub. L. 101–650, title III, § 310(a), Dec. 1, 1990, 104 Stat. 5113.)

     The first thing to note is that § 1367 overrules the result in Finley by allowing pendent parties to be added, but otherwise carries forward the law as developed by the Court before. The claim to be added must be closely related to the underlying federal claim - while the statute adopts the Constitutional standard of 'case or controversy' as a practical matter the inquiry into relatedness is pretty much the same. It must arise from the same cluster of operative facts. The doctrine remains discretionary - courts are not required to exercise supplemental jurisdiction. Parties who have one claim that has a basis for jurisdiction can add other claims against the same party. 

     Pendent parties may now be added. If the original claim is based only on diversity, and adding a new party would defeat complete diversity, § 1367(b) will prevent a plaintiff from adding that party, consistent with the result in Kroger. On the other hand, parties may be added to a diversity case if their addition does not destroy complete diversity or otherwise frustrate § 1332. Non-diverse parties may also be added outside the rather specific limitations of § 1367(b). If the original claim is a federal question claim, § 1367(b) will not apply, and the claim may be freely added subject to the discretionary takeback of § 1367(c).

     In terms of practical analysis, the place to start is with the claim that provides that original basis for federal subject matter jurisdiction. In order to sear this into your memory, I want you to take a moment to listen to one of the worst pieces of American pop music ever recorded, He Aint Heavy by The Hollies.  The song recounts what is said to be a true story. One cold, snowy night two young boys appeared at the door of an orphanage called Boys Town, with the older brother carrying the exhausted younger brother on his back. When asked if his brother was not too heavy for him to carry, the older brother is said to have replied, "He ain't heavy - he's my brother."

     Think of the original claim as the big brother. The big brother has to be a claim that can walk - that is, invoke federal subject matter jurisdiction - on its own. Otherwise, it cannot carry anything.

     The second claim has to be related. The older brother is not carrying some random child; he's carrying his closest relation, his brother. No claim comes in that is not related to the first claim.

     Finally, entry into the orphanage is discretionary. The guardian at the door has the power to exclude the younger brother. In most cases, though, the little waif riding on big brother's back will be allowed in.

     It doesn't fit into our family analogy, but you must also keep in mind the Kroger issue - if the supplemental claim would have destroyed complete diversity if brought by the claimant at the outset, it cannot be added under supplemental jurisdiction.

     An important thing to remember about supplemental jurisdiction is that it applies to all claims in the case, not just claims by the plaintiff. For example, imagine a lawsuit between Perry Plaintiff (NY) and Don Defendant (NJ). The original claim is for $100,000, and so full diversity is satisfied. Now, imagine that Don Defendant has a counterclaim arising from the same transaction as the original claim, but it is only for $50,000. The sum would be too low for diversity jurisdiction, and it cannot be aggregated to Plaintiff's claim. However, supplemental jurisdiction would allow it to be included. 

     Pay attention to Section 1367(b)'s takeback. Note that it only applies to claims by plaintiffs, and only to claims where the sole basis for federal subject matter jurisdiction is diversity. For our hypothetical above, further imagine that Defendant's counterclaim is not just against Plaintiff, but also against Tammy Third (NJ). Here, in addition to the amount in controversy problem there also is no diversity. No problem - the claim is not by the original plaintiff, and since it is sufficiently related to the original claim there is a basis for supplemental jurisdiction.

     Take a look at these hypotheticals and see if you can get to the correct response about whether there is supplemental jurisdiction:

     Pam Plaintiff (CA) brings a state law claim against Doris Defendo (NV).  The claim is for $80,000. She wishes to add a related a claim against Ima Sued (WA) for $30,000, arising from the same transaction. 

     Pam Plaintiff (CA) brings a federal law claim against Doris Defendo (NV). The claim is for $25,000. She wishes to add a related claim against Amy Adverse (CA), seeking $25,000.

     Pam Plaintiff (CA) brings a state law claim against Doris Defendo (NV). The claim is for $80,000. She wishes to add a related claim against Amy Adverse (CA), seeking $125,000.

     Pam Plaintiff (CA) brings a state law claim against Doris Defendo (NV). Defendo wishes to bring a counterclaim against Plaintiff for $25,000, arising from a different, unrelated transaction.

     Pam Plaintiff (CA) brings a state law claim against Doris Defendo (NV) seeking $50,000, and includes in the same lawsuit a federal law claim for $25,000.

     Pam Plaintiff (CA) brings a state law claim against Doris Defendo (NV) seeking $80,000 and includes in the same lawsuit a federal law claim for $25,000. She wishes to add to the lawsuit a state law claim against Ima Sued (CA), arising from the same facts, seeking $25,000.

     Remember that the court has discretion with regard to whether supplemental jurisdiction should be extended. The following case deals with that issue.

     Limited LLC was created under the laws of Delaware and is headquartered in New York. Its members (owners) are from New Jersey, Pennsylvania, and Connecticut. It wishes to bring a lawsuit against BigCo, Inc., a Delaware corporation headquartered in New York. The claim is a state law contract claim for $76,000. Limited LLC would like to add another state law claim - this one for fraud - against Dennis Defendo, a major shareholder of BigCo. The claim is related to the claim against BigCo, alleging that Defendo committed fraud in connection with the Limited - Defendo agreement. This claim is for $70,000.  Please analyze.

     Limited LLC was created under the laws of Delaware and is headquartered in New York. Its members (owners) are from New Jersey, Pennsylvania, and Connecticut.  It brings a federal law claim for $100,000 against Ima Sued, a resident of New Jersey. To the same litigation it adds a state law claim against Sued for $40,000. It then adds an additional state law claim against Sued's cousin and business partner, Bennie Sued, of Connecticut, and yet another claim against Ima Sued's friend, Denise Defendo, of New York. All of these claims arise from the same transaction as the original federal claim. Bennie Sued then brings two counterclaims arising under state law against Limited, both seeking $30,000. The first is related to the original federal claim and arises from the same transaction. The second is completely unrelated, arises from a separate business deal, and is for $50,000.  Denise Defendo also brings two state law claims against Limited. One is for $10,000, and is related to the original federal claim. One is for $70,000, and is completely unrelated to any of the other claims in the lawsuit. Please analyze the subject matter jurisdiction issues.

(a) Generally.—

Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

(b) Removal Based on Diversity of Citizenship.—

     (1) In determining whether a civil action is removable on the basis of the jurisdiction under section 1332(a) of this title, the citizenship of defendants sued under fictitious names shall be disregarded.

     (2) A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

(c) Joinder of Federal Law Claims and State Law Claims.—

     (1) If a civil action includes—

          (A) a claim arising under the Constitution, laws, or treaties of the United States (within the meaning of section 1331 of this title), and

          (B) a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute,

the entire action may be removed if the action would be removable without the inclusion of the claim described in subparagraph (B).

     (2) Upon removal of an action described in paragraph (1), the district court shall sever from the action all claims described in paragraph (1)(B) and shall remand the severed claims to the State court from which the action was removed. Only defendants against whom a claim described in paragraph (1)(A) has been asserted are required to join in or consent to the removal under paragraph (1).

(d) Actions Against Foreign States.—

Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district and division embracing the place where such action is pending. Upon removal the action shall be tried by the court without jury. Where removal is based upon this subsection, the time limitations of section 1446(b) of this chapter may be enlarged at any time for cause shown.

(e) Multiparty, Multiforum Jurisdiction.—

     (1) Notwithstanding the provisions of subsection (b) of this section, a defendant in a civil action in a State court may remove the action to the district court of the United States for the district and division embracing the place where the action is pending if—

          (A) the action could have been brought in a United States district court under section 1369 of this title; or

          (B) the defendant is a party to an action which is or could have been brought, in whole or in part, under section 1369 in a United States district court and arises from the same accident as the action in State court, even if the action to be removed could not have been brought in a district court as an original matter.

The removal of an action under this subsection shall be made in accordance with section 1446 of this title, except that a notice of removal may also be filed before trial of the action in State court within 30 days after the date on which the defendant first becomes a party to an action under section 1369 in a United States district court that arises from the same accident as the action in State court, or at a later time with leave of the district court.

     (2) Whenever an action is removed under this subsection and the district court to which it is removed or transferred under section 1407(j) [1] has made a liability determination requiring further proceedings as to damages, the district court shall remand the action to the State court from which it had been removed for the determination of damages, unless the court finds that, for the convenience of parties and witnesses and in the interest of justice, the action should be retained for the determination of damages.

     (3) Any remand under paragraph (2) shall not be effective until 60 days after the district court has issued an order determining liability and has certified its intention to remand the removed action for the determination of damages. An appeal with respect to the liability determination of the district court may be taken during that 60-day period to the court of appeals with appellate jurisdiction over the district court. In the event a party files such an appeal, the remand shall not be effective until the appeal has been finally disposed of. Once the remand has become effective, the liability determination shall not be subject to further review by appeal or otherwise.

     (4) Any decision under this subsection concerning remand for the determination of damages shall not be reviewable by appeal or otherwise.

     (5) An action removed under this subsection shall be deemed to be an action under section 1369 and an action in which jurisdiction is based on section 1369 of this title for purposes of this section and sections 1407, 1697, and 1785 of this title.

     (6) Nothing in this subsection shall restrict the authority of the district court to transfer or dismiss an action on the ground of inconvenient forum.

(f) Derivative Removal Jurisdiction.—

The court to which a civil action is removed under this section is not precluded from hearing and determining any claim in such civil action because the State court from which such civil action is removed did not have jurisdiction over that claim.

(a) Generally.--A defendant or defendants desiring to remove any civil action from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.
(b) Requirements; generally.--

     (1) The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within 30 days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
     (2)

           (A) When a civil action is removed solely under section 1441(a), all defendants who have been properly joined and served must join in or consent to the removal of the action.
           (B) Each defendant shall have 30 days after receipt by or service on that defendant of the initial pleading or summons described in paragraph (1) to file the notice of removal.
          (C) If defendants are served at different times, and a later-served defendant files a notice of removal, any earlier-served defendant may consent to the removal even though that earlier-served defendant did not previously initiate or consent to removal.
     (3) Except as provided in subsection (c), if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.
(c) Requirements; removal based on diversity of citizenship.--

     (1) A case may not be removed under subsection (b)(3) on the basis of jurisdiction conferred by section 1332 more than 1 year after commencement of the action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.
     (2) If removal of a civil action is sought on the basis of the jurisdiction conferred by section 1332(a), the sum demanded in good faith in the initial pleading shall be deemed to be the amount in controversy, except that--
          (A) the notice of removal may assert the amount in controversy if the initial pleading seeks--
               (i) nonmonetary relief; or
               (ii) a money judgment, but the State practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded; and
          (B) removal of the action is proper on the basis of an amount in controversy asserted under subparagraph (A) if the district court finds, by the preponderance of the evidence, that the amount in controversy exceeds the amount specified in section 1332(a).
     (3)

          (A) If the case stated by the initial pleading is not removable solely because the amount in controversy does not exceed the amount specified in section 1332(a), information relating to the amount in controversy in the record of the State proceeding, or in responses to discovery, shall be treated as an “other paper” under subsection (b)(3).
          (B) If the notice of removal is filed more than 1 year after commencement of the action and the district court finds that the plaintiff deliberately failed to disclose the actual amount in controversy to prevent removal, that finding shall be deemed bad faith under paragraph (1).
(d) Notice to adverse parties and State court.--Promptly after the filing of such notice of removal of a civil action the defendant or defendants shall give written notice thereof to all adverse parties and shall file a copy of the notice with the clerk of such State court, which shall effect the removal and the State court shall proceed no further unless and until the case is remanded.
(e) Counterclaim in 337 proceeding.--With respect to any counterclaim removed to a district court pursuant to section 337(c) of the Tariff Act of 1930, the district court shall resolve such counterclaim in the same manner as an original complaint under the Federal Rules of Civil Procedure, except that the payment of a filing fee shall not be required in such cases and the counterclaim shall relate back to the date of the original complaint in the proceeding before the International Trade Commission under section 337 of that Act.
[(f) Redesignated (e)]
(g) Where the civil action or criminal prosecution that is removable under section 1442(a) is a proceeding in which a judicial order for testimony or documents is sought or issued or sought to be enforced, the 30-day requirement of subsection (b) of this section and paragraph (1) of section 1455(b) is satisfied if the person or entity desiring to remove the proceeding files the notice of removal not later than 30 days after receiving, through service, notice of any such proceeding.

     In general, courts defer to a plaintiff’s choice of forum. One of the advantages that comes from being a plaintiff is that you get to choose the location and the court where you file, subject to limitations such as venue and personal jurisdiction, and courts consistently express a reluctance to disturb that choice. Because of concurrent jurisdiction, almost all cases that can be heard in federal court can also be heard in state court, and even if federal subject matter jurisdiction exists the choice in the first instance is the plaintiff’s to make.

     That said, there are occasions where the plaintiff’s choice is overruled, and removal is one of those situations. Removal provides a way for a defendant to remove a case for which federal subject matter jurisdiction exists to federal court. The Constitutional requirement that there be federal subject matter jurisdiction continues; in addition, the requirements of the removal statutes must be met.

     1. Federal Subject Matter Jurisdiction Must Exist. A necessary but not sufficient element for removal is that federal subject matter jurisdiction exists. If there is no federal subject matter jurisdiction, there can be no removal.

     2. All Defendants Must Join. In a multidefendant case, what happens when some defendants want to remove the case to federal court and some are happy to stay in state court? The case stays in state court. Removal only is allowed when all defendants served in the case join in the notice of removal. Chicago, Rock Island, & Pacific Railway Co. v. Martin, 178 U.S. 245 (1900).

     3. Diversity Cases Can Be Different. The statute treats differently cases whose only basis for federal subject matter jurisdiction is diversity. In such a case, if any of the defendants – just one out of a 1,000 will do – is from the forum state, the case is not removable. That said, courts have been known to look closely at defendants whose nominal inclusion seems to be solely for the purpose of frustrating removal, and responding appropriately.

     4. Procedure and Deadlines Matter.  To remove a case, a notice of removal is filed not with the state court, but with the federal district court in the location where the state court is located (you can’t pick a different geographic location; you must go to the nearest federal courthouse). The time to remove starts when the defendant is served in a case where federal subject matter jurisdiction could exist, and the defendant has only 30 days to file the notice. In some cases, as a case develops claims will be added or parties dropped in a way that creates federal subject matter jurisdiction, and in that case it may be possible to remove more than 30 days after filing – but in no case more than a year after the case begins. If a plaintiff voluntarily nonsuits a defendant from the forum state 13 months after filing, creating a case that would have been removable under the statute, tough beans – it’s too late.

     5. It Does Not Work in Reverse.  There is no procedure for sending a case from federal court to state court. If a case is filed in federal court but there is no federal subject matter jurisdiction, it must be dismissed and, if possible, refiled. 

     6. Plaintiffs May Not Remove. Imagine a situation in which a plaintiff files a case in state court for which there is no federal subject matter jurisdiction. The defendant counterclaims and asserts a claim for which there is federal subject matter jurisdiction. Can the plaintiff now remove? No. Even though effectively a defendant on this claim, the plaintiff does not satisfy the statute.

     7. Appeal from Removal Decisions By The Trial Court is Difficult At Best.  If a federal court chooses not to accept a case that has been noticed for removal (the technical term is to remand it), there is no case in federal court from which any kind of review can be had. If it accepts the case, that will not be a final decision, and, as you recall from our study of appeals, that means that the normal process of appeal is a ways off. 

     8. Plaintiffs Can Manipulate Removal But Within Limits.  A plaintiff can structure a case so as to reduce the chance of removal. For example, in a diversity case the plaintiff can join a defendant from the forum state or add a defendant that eliminates complete diversity (as you remember, WWVW was motivated in large part by whether defendants who would defeat diversity could stay in the case).  The amount sought in damages can also be kept below the jurisdictional limit. Certain claims can be held back and added later, if state law would permit such amendments. That said, judges are generally not fools, and will disregard fraudulent joinder or excessively ‘artful’ pleading in considering a removal petition.

     9. Other Removal Statutes. While Section 1441 is the main removal statute, there are others. Section 1442 deals with federal officers and agencies. The Class Action Fairness Act, which we will cover briefly when we get to class actions, provides a special method for removing certain kinds of class actions. Always remember that this course surveys U.S. Civil Procedure but we have neither the time nor the inclination to cover every single procedural device that might matter in practice.

     10. Remand By Defendant. Once having removed successfully, can a defendant move to remand? In Avitts v. Amoco Production Co., 53 F.3d 690 (1995) the defendant removed a somewhat vague complaint that only referred to 'federal law.' Plaintiff subsequently amended the complaint in federal court, asserting only state law claims. The federal court entered an order requiring the defendant to conduct an expensive environmental study, at which point the defendant moved to remand the case to state court. On interlocutory appeal, the Court of Appeals found that a federal question had never been successfully stated, and that so the case should be remanded, thereby vacating all relief entered by the federal court. Note that if a federal claim had been at some point successfully stated, the result might not have been the same, as federal jurisdiction would have attached.

     Perry Plaintiff (NJ) sues Donnie Defendant (NY)  and Ima Sued (CT) in New York state court. Plaintiff asserts a state law claim but, like the state law claim in Grable, it requires interpretation of a federal statute. This claim is for $50,000 against each defendant. There also is a pure state law claim, unrelated, for $50,000, again against each defendant. Sued and Defendant then quickly bring federal question counterclaims against Plaintiff for $150,000 each. Both defendants then join in a timely notice of removal. Please analyze the removal issues.

     Connie Claimant (AZ) brings a claim against Tommy Target (NY) and Bill Yuns (VT) in state court in New York. She asserts state law claims against each for $100,000 each. The state law claims require interpretation of a federal statute. Both defendants join in seeking removal. Please analyze. 

When faced with a complicated subject matter jurisdiction (and I promise you will be), remember that you need to establish subject matter jurisdiction for each count. Remember that subject matter jurisdiction alone does not guarantee removability. For each count this might be helpful:

·        Is there federal question jurisdiction?

·        If not, is there diversity/alienage jurisdiction?

·        If not, is there supplemental jurisdiction?  

·        If filed in state court, is the case removable?

     Perry Plaintiff (NY) has sued Don Defendant (NJ) and Denise Defendo (CT)  in state court in New York. Against Defendant, he brings a state law contract claim on which he seeks $30,000, a related federal claim on which he seeks $20,000, and a completely unrelated state law claim on which he seeks $30.000. Against Defendo, he brings a state law contract claim related to the state law contract claim against Defendant, on which he seeks $40,000. Both Defendant and Defendo file proper and timely notices of removal. Please analyze.,

     Perry Plaintiff (NY) files a state law claim against Don Defendant (NJ) in state court in Delaware, alleging breach of contract under which Defendants was supposed to make repairs on Plaintiff's home in New York. He seeks $100,000. Defendant files a notice of removal with the federal court  in New York. Please analyze.

     Perry Plaintiff (NY) files a federal law claim against Samuel Sued (NY) in federal court in New York. He asserts a federal law claim on which he seeks $50,000 and a state law claim arising from the same cluster of operative facts on which he seeks $50,000.  Sued counterclaims against Plaintiff for $50,000 on a state law claim, asserting claims that again arise from the same cluster of operative facts. He also brings another counterclaim against Plaintiff on a federal law claim on completely unrelated facts, seeking $30,000. On this claim he adds Terry Third  as another third party (counterclaim) defendant, seeking $30,000 on a state law claim arising from the same cluster of operative facts as his $30,000 federal law claim against Plaintiff. At the time of the incident, Third was a resident of Connecticut but moved to New York one day before Plaintiff filed his lawsuit.  He has kept his Connecticut driver's license, however, as well as his voter registration in Connecticut, and has told friends he is in New York indefinitely until he finishes a work assignment. Third adds two counterclaims of his own back against Sued, the first of which seeks $40,000 on state law claims arising from the same facts and circumstances as the claim on which Sued asserted against him. He adds a $40,000 counterclaim against Sued that arises from utterly unrelated facts. Please analyze.