SMJ

Question 1

What is the basic idea of subject matter jurisdiction?

Answer 1

Subject matter jurisdiction (“SMJ”) is about the court’s power over the case, and not over the parties. Federal courts have limited subject matter jurisdiction, so they can only hear certain kinds of cases. What about state courts? As a general rule, state courts can hear any kind of case. They have general subject matter jurisdiction. Within a state court system, there will be some type of court that can hear a case.

Question 2

What cases can the state courts cannot hear?

Answer 2

There are a few federal cases that state courts cannot hear, such as patent infringement, bankruptcy, some federal securities, and antitrust claims. But most cases arising under federal law can be heard by state courts.

Question 3

What federal courts have limited subject matter jurisdiction?

Answer 3

The two main types of cases that can be heard in federal court are federal question (“FQ”) jurisdiction and diversity of citizenship jurisdiction, which includes the so-called “alienage” jurisdiction.
A lack of SMJ (unlike a lack of PJ) cannot be waived. If a case does not invoke federal SMJ, the federal court cannot hear the case. If it does, the judgment is void.

Question 4

What is diversity of citizenship?

Answer 4

There are two requirements for diversity of citizenship(or alienage) cases:
• The case is either (a) between citizens of different U.S. states (diversity); or
(b) between a citizen of a U.S. state and a citizen of a foreign country (alienage); and
• The amount in controversy exceeds $75,000.

Question 5

Who are the right kinds of litigants?

Answer 5

Diversity of citizenship jurisdiction does not exist if any plaintiff is a citizen of the same state as any defendant; this is the complete diversity rule. Whether there is diversity is determined when the case is filed.

Question 6

What is the citizenship of a natural person?

Answer 6

The citizenship of a person who is a U.S. citizen is the one U.S. state in which she is domiciled; a person can have only one domicile. There is no such thing as a person without a domicile; everyone has a domicile. That domicile is retained until it is changed. How do you establish a new domicile? It takes two things: (1) physical presence in the new domicile and (2) the intent to make that place your home for the indefinite future. For intent, courts look to all relevant factors—like taking a job, buying a house, joining civic organizations, registering to vote, qualifying for in-state tuition, etc.

Question 7

What is the citizenship of a corporation?

Answer 7

A corporation is a citizen of any state or country in which it is incorporated and of the one state or country in which it has its principal place of business (“PPB”). Although a corporation can be incorporated in more than one place, it is incredibly rare in real life and on the exam. So, there is usually one place of incorporation. Where is the corporation’s PPB? It is the state from which the corporation’s managers direct, coordinate, and control business activities. We also call this the “nerve center.” It is usually the site of the corporate headquarters.

Question 8

What is the citizenship of an unicorporated association?

Answer 8

An unincorporated association takes on the citizenships of all of its members. If it’s a limited partnership, you include the citizenships of general and limited partners.

Question 9

What is the citizenship of decedents, minors, and incompetents?

Answer 9

Decedents, minors, and incompetent persons must sue or be sued through a representative. The representative’s citizenship is irrelevant. You use the citizenship of the decedent, minor, or incompetent.

Question 10

What are class actions?

Answer 10

For class actions, the citizenship of the named representative(s) of the class is used

Question 11

How much is the amount in controversy required for diversity of citizenship?

Answer 11

In addition to complete diversity or alienage, the plaintiff’s claim(s) must exceed $75,000.

Question 12

How is the amount in controversy calculated?

Answer 12

Only the claim itself is considered. Litigation costs or interest on the claim are not included. Interest can be a little tricky. What is meant here is prejudgment interest that results from delay of payment due to the litigation. Interest that is, for example, part of the loan agreement or contract is included because it is part of the claim itself.
So, the claim itself must exceed $75,000. Whatever the plaintiff claims in good faith is OK unless it is clear to a legal certainty that she cannot recover more than $75,000.

Question 13

What is the aggregation of claims?

Answer 13

Aggregation means adding two or more claims to meet the amount in controversy requirement. For purposes of meeting the jurisdictional amount, any single plaintiff may aggregate all of her claims against a single defendant. Is there a limit to the number of claims a single plaintiff may aggregate against a single defendant? No. Must the claims be related to each other? No.

Question 14

How are joint claims handled?

Answer 14

There is a special rule for joint claims: You use the total value of the claim. With joint claims, the number of parties is irrelevant.

Question 15

What is equitable relief?

Answer 15

Equitable relief includes the issuance of an injunction, specific performance, rescission of a contract, etc. How do we determine if the amount in controversy has been satisfied? There are two tests; if either is met, most courts find
that the amount in controversy is satisfied.
• One test looks at the plaintiff’s viewpoint. If granted, does the relief requested have a value of more than $75,000 to the plaintiff?
• The other test looks at the defendant’s viewpoint. If granted, will the relief requested by the plaintiff cost the defendant more than $75,000?

Question 16

What are the exclusions for diversity jurisdiction?

Answer 16

Even if the requirements for diversity or alienage jurisdiction are met, federal courts decline to hear actions for divorce, alimony, child custody, and actions to probate an estate. These can be called “excluded” cases.

Question 17

What is collusive creation of diversity?

Answer 17

If a party attempts to create diversity by a sham transaction, such as assigning a claim for collection purposes merely to create diversity SMJ, the courts ignore the transaction and declare that diversity does not exist.
a. Voluntary Changes of Citizenship
A plaintiff can also create diversity by changing her state citizenship after the cause of action accrued but before suit is commenced. If it is a genuine change of citizenship, diversity is OK.

Question 18

What are federal question cases?

Answer 18

For there to be federal question (“FQ”) jurisdiction, the claim the plaintiff’s claim must “arise under” federal law (for example, the claim must arise under the federal constitution or federal legislation). For FQ cases:
• The citizenship of the parties is not relevant;
• The amount in controversy is not relevant; and
• The pleader must follow the “well pleaded complaint” rule. That is, it is not enough that some federal issue is raised by the complaint. The plaintiff’s claim itself must “arise under” federal law. So we look at the claim and ignore other material that the plaintiff may have included in the complaint.
• Ask if the plaintiff is enforcing a federal right.
• If the answer to that question is yes, the case can go to federal court under FQ jurisdiction.
• If the answer to that question is no, the case cannot go to federal court under FQ jurisdiction.
Unless the exam question says the claim is based on a federal law, regular tort, contract, and property claims not federal. They are created (and arise under) state law, not federal law.

Question 19

What is removal?

Answer 19

Assume that a plaintiff sues a defendant in state court, but that defendant would prefer to litigate in federal court. The defendant might be able to “remove” the case to federal court. Removal transfers the case from a state trial court to a federal trial court. If removal was improper, the federal court can “remand” the case to state court.

Question 20

Is federal subject matter jurisdiction necessary for removal?

Answer 20

Generally, an action originally filed in a state court may be removed by a defendant to federal court when the case could have been filed in a federal court (that is, federal question or diversity jurisdiction exists).
a. State Court Need Not Have Had Jurisdiction
Even when the state court has no jurisdiction because the action is exclusively federal, the federal court may hear and decide the case under its removal jurisdiction.

Question 21

How is a case removed?

Answer 21

The defendant files “notice of removal” in federal court, stating grounds of removal, which means federal SMJ (diversity or FQ). Permission of the state or federal court is not required. The defendant attaches all documents that were served on her in the state action. The defendant then “promptly” serves a copy of the “notice of removal” on adverse parties and files a copy of the “notice of removal” in state court.

Question 22

What is the timing of removal?

Answer 22

The defendant must remove no later than 30 days after service (not filing) of the first paper that shows the case is removable. Usually, that means no later than 30 days of service of process.

Question 23

What is the timing of removal?

Answer 23

The defendant must remove no later than 30 days after service (not filing) of the first paper that shows the case is removable. Usually, that means no later than 30 days of service of process.

Question 24

Who must join in the removal?

Answer 24

All defendants who have been served with process must join in removal. They need not join in the same document; they can file separate notices of removal. If defendants are served at different times, and a later served defendant initiates timely removal, the earlier served defendant may join in the removal even though her 30-day period for initiating removal may have expired.

Question 25

Who can move for removal?

Answer 25

Plaintiffs can never, never ever, remove. This is true even if the defendant files a counterclaim against the plaintiff that, by itself, could be heard in federal court.

Question 26

What cases may be removed?

Answer 26

The starting point is always: The defendant can remove a case that meets the requirements for diversity of citizenship (including alienage) or FQ jurisdiction.
There are two limitations, though, to removing a case based solely on diversity of citizenship:
• The case should not be removed if any defendant is a citizen of the forum state (the “in-state defendant rule”); and
• The case should not be removed more than one year after the case was filed in state court.
a. One-Year Limitation
A diversity case with an in-state defendant (or with a non-diverse defendant) can become removable later. How? The case becomes removable when the claim against the in-state defendant (or the non-diverse defendant) is voluntarily dismissed from the case.

Question 27

What is the removal venue?

Answer 27

The defendant removes to the federal district court “embracing” the state court where the case was filed. It does not matter if this venue would have been proper under the venue statutes.

Question 28

When is a case remanded back to state court?

Answer 28

If the plaintiff thinks the case should not have been removed, she moves to remand to state court. If the motion to remand is based on a reason other than lack of SMJ (for example, the one-year limitation on the removal of a diversity case), she must move to remand no later than 30 days after the filing of the notice of removal. If the plaintiff fails to do so, she waives the right to have the case remanded to state court and the case will stay in federal court.
On the other hand, if removal was improper because the federal court lacked SMJ, there is no time limit on ordering remand. Remember, an objection to SMJ is never waived, and a court without SMJ is powerless to act on the case.

Question 29

What us the basic idea about supplemental jurisdiction?

Answer 29

Supplemental jurisdiction is a form of federal SMJ. But it is fundamentally different from diversity and FQ. Diversity and FQ SMJ get cases into federal court. Supplemental jurisdiction does not. Instead, it gets claims into a federal case, even though the claims cannot use diversity of citizenship or FQ SMJ.

Question 30

What is the starting point for supplemental jurisdiction?

Answer 30

We must have a case that is already in federal court based on diversity or FQ question. So the case invoked diversity or FQ and is pending in federal court. In other words, there must be something to “supplement.”

Question 31

What are additional claims under supplemental jurisdiction?

Answer 31

In any case in federal court, additional claims might be asserted. Maybe the plaintiff has additional claims or maybe there are counterclaims or crossclaims, etc. The important takeaway is that the federal court must have SMJ over every single claim in a case.

Question 32

What happens under step 1 for supplemental jurisdiction?

Answer 32

If there is no federal SMJ over that claim, it cannot be asserted in the pending case in federal court. That means that each additional claim is first tested to see if it invokes diversity or FQ SMJ. If an additional claim satisfies either diversity or FQ SMJ, it can be heard in the federal court case.

Question 33

What happens under step 2 of supplemental jurisdiction?

Answer 33

But what if the additional claim does not satisfy the requirements for diversity or FQ SMJ? The federal court can still hear the claim if it can invoke supplemental jurisdiction. So supplemental jurisdiction gets claims into a federal court case, even though the claims do not meet the requirements for diversity or FQ SMJ.

Question 34

How does supplemental jurisdiction work?

Answer 34

Now we have a claim that does not invoke diversity or FQ jurisdiction. We want to join it in the case that is properly in federal court. We want to get that claim into the case through supplemental jurisdiction. To do this, there are two steps:

Question 35

What is the common nucleus test?

Answer 35

The claim that we want to get into federal court must share a “common nucleus of operative fact” with the claim that satisfied federal SMJ (the claim that got the case into federal court). When is this test always met? When a claim arises from the same transaction or occurrence (“T/O”) as the underlying case. However, the test is broader than T/O.

Question 36

What is the limitation on the use of supplemental jurisdiction in diversity cases?

Answer 36

The supplemental jurisdiction statute excludes certain claims even though they meet the common nucleus test. But this limitation applies only in cases that got into federal court through diversity jurisdiction. The limitation does not apply to cases that got into federal court through FQ.
a. What Is the Limitation?
In diversity cases, claims by plaintiffs generally cannot invoke supplemental jurisdiction.
b. Exception to the Limitation
But there is one exception to the limitation on the use of supplemental jurisdiction by plaintiffs in diversity cases. The exception to the limitation applies when there are multiple plaintiffs, and the claim by one of them does not meet the amount in controversy requirement. Here it is:
Any other time a plaintiff has an additional claim in a diversity case, it cannot invoke supplemental jurisdiction. So the claim must satisfy diversity of citizenship or FQ SMJ.

Question 37

What is the summary of supplemental jurisdiction?

Answer 37

Here are the steps to follow on a question asking about supplemental jurisdiction.
• Assess whether the claim to be joined satisfies the common nucleus test.
• If so, ask whether the case got into federal court under diversity or FQ. If FQ, the limitation does not apply., so supplemental jurisdiction is OK.
• If the case got into federal court through diversity, then apply the limitation. The limitation is as follows. There is no supplemental jurisdiction if the claim:
• Is asserted by a plaintiff; and
• It’s not like the fact pattern in Hypo 5D.
Note what this means. Defendants and other non-plaintiffs generally may use supplemental jurisdiction. The limitation does not apply to them!