⚡ 10-Second Rule
A federal court can hear a state-law case only if no plaintiff shares a state with any defendant and more than $75,000 is at stake.
🧒 ELI-10 Scene
Coach Rivera referees the big regional kickball tournament. Her rule book is strict. She only takes a match if the two teams come from completely different towns. If even one kid on the Red team lives in the same town as one kid on the Blue team, she sends everyone to their local referee instead. She also checks the prize. The prize must be worth more than 75 tickets. Exactly 75? Not enough. She sends them home. One shared hometown or one ticket short, and Coach Rivera won't blow the whistle.
⚖️ Actual Rule
28 U.S.C. § 1332(a) grants district courts original jurisdiction over civil actions "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs," and is between, among other combinations, "citizens of different States." Since Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806), this requires complete diversity: no plaintiff may be a citizen of the same state as any defendant, measured when the suit is filed. An individual is a citizen of the state of domicile — physical presence plus intent to remain indefinitely; the old domicile persists until a new one is established. Under § 1332(c)(1), a corporation is "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" — its nerve center, the headquarters where officers direct the company's activities, per Hertz Corp. v. Friend, 559 U.S. 77 (2010). An unincorporated association (partnership, LLC, union) takes the citizenship of every member. Carden v. Arkoma Associates, 494 U.S. 185 (1990). The amount pleaded in good faith controls unless it appears to a legal certainty that the plaintiff cannot recover more than $75,000. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (1938). One plaintiff may aggregate all claims against one defendant, even unrelated ones; multiple plaintiffs may not aggregate separate claims, and claims against multiple defendants aggregate only if the defendants are jointly liable.
ELI-10 translation: every plaintiff must be from a different state than every defendant, and the fight must be worth over $75,000.
🔍 Ask These Questions
- Find the citizenship of every plaintiff and every defendant at the time of filing. (List each person's home state on the day the case starts.)
- For a person, citizenship means domicile — living there plus intending to stay. (Home is where you live and plan to keep living.)
- For a corporation, count both the state of incorporation and the nerve-center headquarters. (A company can have two home states at once.)
- For a partnership or LLC, count every member's citizenship. (The club is from every town where any member lives.)
- Is diversity complete — no overlap between any plaintiff and any defendant? (No one on the left side shares a state with anyone on the right.)
- Does the amount in controversy exceed $75,000, not counting interest and costs? (More than 75,000 — exactly 75,000 loses.)
- If a single claim is too small, can the plaintiff aggregate under the rules above? (One kid can stack all her own claims against one opponent.)
⚠️ Bar Trap
Exam language: Examiners describe a corporation incorporated in Delaware, then bury its headquarters in the plaintiff's home state — or plead damages of "exactly $75,000" — and offer an answer choice upholding jurisdiction. Dual corporate citizenship destroys complete diversity if either state overlaps with an opposing party, and § 1332 requires the amount to exceed $75,000. A companion trap swaps in an LLC and tests whether you know it carries every member's citizenship, not a nerve center.
ELI-10: A company has two homes — check both against the other side. And 75,000 even is a losing number; the case needs at least one dollar more.
🧪 Question
A caterer domiciled in Ohio sued an oven manufacturer in federal district court, asserting a state-law product defect claim for $200,000 after a commercial oven fire destroyed her kitchen. The manufacturer is incorporated in Delaware. Its board of directors, chief executive, and corporate offices — from which all company operations are directed — are located in Columbus, Ohio, though its only factory is in Kentucky. The manufacturer moves to dismiss for lack of subject matter jurisdiction.
Should the court grant the motion?
(A) No, because the manufacturer is incorporated in Delaware and the caterer is a citizen of Ohio. (B) No, because the amount in controversy exceeds $75,000. (C) Yes, because the manufacturer's principal place of business makes it an Ohio citizen, defeating complete diversity. (D) Yes, because a corporation may be sued only in its state of incorporation.
Answer: (C). Under § 1332(c)(1) and Hertz, the manufacturer is a citizen of both Delaware and Ohio, where its nerve center sits — not Kentucky, the mere site of physical operations. An Ohio plaintiff against an Ohio-citizen defendant destroys complete diversity regardless of the amount at stake.
💡 Why the Wrong Answers Are Wrong
- (A) counts only one of the corporation's two citizenships; incorporation in Delaware does not erase Ohio citizenship from the principal place of business.
- (B) treats the amount in controversy as sufficient by itself; both diversity and amount must be satisfied, and diversity fails here.
- (D) invents a rule that does not exist; corporate citizenship limits diversity jurisdiction, not where a corporation can be sued at all.
- ELI-10: The misconception is giving a company only one home state. It has two, and either one can sink the case.
