28 USC 1332: Diversity Jurisdiction and the $75,000 Threshold

Under 28 U.S.C. § 1332, diversity jurisdiction lets a federal court hear a civil lawsuit between citizens of different states when the amount in dispute exceeds $75,000.¹ The rule is meant to protect out-of-state parties from possible home-court bias in state courts. Two conditions have to hold at the same time: every plaintiff must be a citizen of a different state from every defendant, and the claimed damages must clear the dollar floor. Both conditions carry more nuance than they appear to.

Complete Diversity Between the Sides

Complete diversity is the core rule. No plaintiff can share state citizenship with any defendant at the moment the complaint is filed.¹ The Supreme Court set this reading in Strawbridge v. Curtiss (1806). One shared citizenship between any plaintiff-defendant pair defeats jurisdiction over the entire case, no matter how many other parties are properly diverse.

Courts also look past the caption. Under the realignment doctrine, a court can move a party from one side to the other based on where their actual interests lie in the dispute. If that reshuffling puts a plaintiff and a defendant in the same state, diversity collapses.

Who Counts as a Citizen of Which State

Individuals

For a person, citizenship means domicile, not just where you happen to live. Domicile is the state where you physically reside and intend to stay indefinitely. Courts weigh practical markers: voter registration, property ownership, employment, tax filings. A person can keep several residences but has only one domicile at a time. Citizenship is measured at the time of filing, so a move afterward does not change the analysis.

Corporations

A corporation is a citizen of every state where it is incorporated and the state of its principal place of business.¹ Any plaintiff who shares citizenship with either of those states destroys diversity. In Hertz Corp. v. Friend (2010), the Supreme Court adopted the “nerve center” test: the principal place of business is the single location where the corporation’s top officers direct and coordinate its activities, typically the corporate headquarters.

Direct-action lawsuits against insurers get a special rule. When an injured party sues an insurer directly without joining the insured, the insurer is treated as a citizen of every state where the insured is a citizen, in addition to its own incorporation and headquarters states.¹

LLCs, Partnerships, and Other Unincorporated Entities

An LLC or partnership has no citizenship of its own. It carries the citizenship of every member or partner, a rule the Supreme Court confirmed in Carden v. Arkoma Associates (1990). A multi-member LLC with members spread across several states is often difficult to sue or be sued in federal court on diversity grounds, because a single overlap breaks jurisdiction. When an LLC’s members include other LLCs, courts trace citizenship down through each layer until they reach individuals or corporations.

Estates, Minors, and Incompetent Persons

A legal representative takes on the citizenship of the person they represent, not their own. The executor of an estate is treated as a citizen of the decedent’s state; the guardian of a minor or incompetent person is treated as a citizen of that person’s state.² The rule blocks the tactic of appointing an out-of-state representative to manufacture diversity.

Foreign Citizens

Section 1332 also reaches disputes between a U.S. state citizen and a citizen of a foreign country, as long as the $75,000 threshold is met. Two limits matter. A lawsuit only between citizens of two foreign countries does not qualify; at least one party has to be a U.S. state citizen. And a lawful permanent resident (a green-card holder) who is domiciled in the same state as the opposing U.S. citizen cannot invoke alienage jurisdiction against that party.² For diversity purposes, “States” includes the District of Columbia, U.S. territories, and Puerto Rico.

The $75,000 Amount in Controversy

The claimed amount must exceed $75,000, exclusive of interest and costs.¹ What matters is what the plaintiff claims in good faith, not what a jury eventually awards. Courts accept the plaintiff’s number unless it is legally certain the claim cannot reach that amount, the standard the Supreme Court articulated in St. Paul Mercury Indemnity Co. v. Red Cab Co. (1938). Compensatory damages, punitive damages where available, and recoverable attorney’s fees all count toward the total.

Removal and the Defendant’s Burden

When a defendant removes a case from state court, the defendant carries the burden on the dollar amount. If the complaint does not specify a figure, or state law forbids one, the defendant must show by a preponderance of the evidence that more than $75,000 is at stake.³ Once that burden is met, the plaintiff can defeat jurisdiction only by showing to a legal certainty that the claim is worth less.

What Happens if the Verdict Comes in Lower

A jury award below $75,000 does not retroactively strip the court of jurisdiction. Jurisdiction is fixed at the time of filing. The statute does let the court deny costs to the plaintiff or even shift costs onto the plaintiff, which discourages inflated claims without unwinding the judgment.¹

Injunctions and Declaratory Relief

When the plaintiff asks for an injunction or a court declaration rather than money, the court has to put a dollar value on that relief. Some circuits look only at the benefit to the plaintiff. Others measure from either party’s viewpoint, using whichever stake is larger. The circuit rule can decide whether the case belongs in federal court.

Combining Claims to Reach the Threshold

A single plaintiff can aggregate all claims against a single defendant, related or not, to clear $75,000.⁴ A $50,000 contract claim and a $30,000 property-damage claim against the same defendant together satisfy the threshold.

The rules are tighter with multiple plaintiffs or defendants. Multiple plaintiffs can aggregate only if they share a common and undivided interest, such as co-owners suing for the full value of shared property.⁴ Separate injuries with separate damages cannot be pooled; each plaintiff’s claim has to clear the threshold independently. Claims against multiple defendants can be combined only where they are jointly liable; several liability means each defendant’s exposure is measured on its own.

Supplemental Jurisdiction for Smaller Co-Plaintiff Claims

Section 1367 provides some flexibility. If at least one plaintiff in a diversity case meets the $75,000 threshold, the court can exercise supplemental jurisdiction over co-plaintiffs in the same dispute whose claims fall below that amount, as the Supreme Court held in Exxon Mobil Corp. v. Allapattah Services (2005).⁵ Section 1367(b) still bars using supplemental jurisdiction to add parties whose presence would destroy complete diversity, closing off an obvious workaround.⁶

Moving a Case from State to Federal Court

A defendant sued in state court can remove a diversity case to federal court, but the deadlines are unforgiving. The notice of removal must be filed within 30 days of service.³ Where defendants are served on different dates, each has 30 days from its own service. If the original complaint does not show grounds for removal but a later paper does, such as an amended complaint or a discovery response, a fresh 30-day window runs from that later document.

Diversity cases carry an outer deadline as well: no removal more than one year after the state action began.³ The one exception is bad faith by the plaintiff, such as deliberately delaying service or manipulating the amount in controversy to run out the clock.

The Forum Defendant Rule

Even with complete diversity, a diversity case cannot be removed if any properly served defendant is a citizen of the state where the suit was filed.⁷ A defendant sued at home does not need protection from home-court bias. Fictitious “John Doe” defendants are disregarded for removal purposes, so a placeholder alone does not block removal.

Cases §1332 Will Not Take

Divorce, Custody, and Support

Federal courts will not hear divorce, alimony, or child custody cases, a limit the Supreme Court reaffirmed in Ankenbrandt v. Richards (1992).⁸ Tort claims between former spouses can still qualify for diversity jurisdiction, because they do not ask the federal court to grant a divorce or change custody.

Probate

Federal courts also stay out of estate administration: they will not probate wills, appoint executors, or distribute estate assets. In Marshall v. Marshall (2006), the Supreme Court narrowed the exception, holding that claims merely touching on probate can proceed in federal court so long as the court is not being asked to take control of the estate or interfere with a state probate proceeding.

Class Actions Under CAFA

The Class Action Fairness Act of 2005 relaxes the rules for large class actions. Under CAFA, a class action can be heard in federal court on minimal diversity, meaning at least one class member is a citizen of a different state from at least one defendant.¹ CAFA sets its own amount-in-controversy floor: the aggregate claims of the class must exceed $5,000,000, and the proposed class must have at least 100 members. Complete diversity, the rule for ordinary lawsuits, does not apply.

Pleading Diversity Correctly

Every federal complaint has to include a short jurisdictional statement.⁹ For a diversity case, that means identifying each party’s citizenship and alleging that more than $75,000 is in controversy. “The parties are diverse” is not enough. A proper statement names each individual’s state of domicile, both the state of incorporation and principal place of business for each corporation, and every member’s citizenship for each LLC.

Subject-matter jurisdiction cannot be waived. A federal court can raise the issue on its own at any stage and must dismiss if jurisdiction is missing.¹⁰ Cases have been dismissed on appeal, years in, once someone noticed that two parties actually shared a state. Filing jurisdictional allegations without a reasonable factual basis can trigger sanctions under Rule 11, including payment of the other side’s fees.¹¹ If jurisdiction turns out to be absent, every order the court entered is void, and the parties start over in state court with the time and money already spent gone.

1
Office of the Law Revision Counsel. 28 USC 1332 – Diversity of Citizenship; Amount in Controversy; Costs
2
Office of the Law Revision Counsel. 28 US Code 1332 – Diversity of Citizenship; Amount in Controversy; Costs
3
Office of the Law Revision Counsel. 28 US Code 1446 – Procedure for Removal of Civil Actions
4
Legal Information Institute. Aggregation of Jurisdictional Amount
5
LII Supreme Court. Exxon Mobil Corp v Allapattah Services, Inc
6
Office of the Law Revision Counsel. 28 US Code 1367 – Supplemental Jurisdiction
7
Office of the Law Revision Counsel. 28 USC 1441 – Removal of Civil Actions
8
Justia. Ankenbrandt v Richards, 504 US 689 (1992)
9
Legal Information Institute. Federal Rules of Civil Procedure Rule 8 – General Rules of Pleading
10
Legal Information Institute. Federal Rules of Civil Procedure Rule 12 – Defenses and Objections
11
Legal Information Institute. Federal Rules of Civil Procedure Rule 11 – Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions