Learning Outcomes
This article explains federal subject-matter jurisdiction for MBE-style civil procedure questions, including:
- Determining when federal courts have original subject-matter jurisdiction based on federal question, diversity, or a mix of claims.
- Applying the well‑pleaded complaint rule to identify whether a claim truly “arises under” federal law rather than merely anticipating a federal defense.
- Evaluating complete diversity of citizenship, including domicile rules for individuals, corporations, and unincorporated associations, and spotting common exam traps involving aliens and U.S. citizens abroad.
- Calculating the amount in controversy, using aggregation and valuation rules to determine whether the jurisdictional threshold exceeding $75,000 is satisfied.
- Using supplemental jurisdiction under 28 U.S.C. § 1367 to add related state-law claims and additional parties that share a common nucleus of operative fact.
- Applying the statutory limits on supplemental jurisdiction in diversity cases, particularly § 1367(b)’s restrictions on claims by plaintiffs against certain joined parties.
- Analyzing when removal from state to federal court is permitted, time‑barred, or blocked by the forum‑defendant rule or other procedural defects.
- Distinguishing between curable procedural removal errors and non‑waivable defects in subject‑matter jurisdiction that require dismissal or remand at any stage of the case.
- Integrating these doctrines in multi‑party, multi‑claim fact patterns to map jurisdictional bases efficiently and predict likely MBE outcomes.
MBE Syllabus
For the MBE, you are required to understand federal subject-matter jurisdiction, with a focus on the following syllabus points:
- The distinction between federal question and diversity jurisdiction and when each applies.
- The requirements for diversity jurisdiction, including complete diversity and amount in controversy.
- The scope and limits of supplemental jurisdiction under 28 U.S.C. § 1367.
- The rules and restrictions for removal from state to federal court under 28 U.S.C. §§ 1441–1447.
- The effect of lack of subject-matter jurisdiction and the ability to raise it at any stage.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
-
Which of the following is required for federal diversity jurisdiction?
- At least one plaintiff and one defendant are from different states.
- All plaintiffs are citizens of different states than all defendants, and the amount in controversy exceeds $75,000.
- The claim arises under federal law.
- The parties consent to federal court.
-
A plaintiff sues in state court on a state-law claim for $50,000. The defendant, a citizen of another state, wants to remove to federal court. Is removal proper?
- Yes, because the parties are diverse.
- Yes, because the defendant prefers federal court.
- No, because the amount in controversy requirement is not met.
- No, because only the plaintiff can remove.
-
Which of the following is true about supplemental jurisdiction?
- It allows federal courts to hear unrelated state-law claims.
- It can cure lack of complete diversity in all cases.
- It allows federal courts to hear additional claims that form part of the same case or controversy.
- It applies only to federal question cases.
Introduction
Federal courts are courts of limited jurisdiction. They may only hear cases authorized by the Constitution and federal statutes. Unlike personal jurisdiction or venue, subject-matter jurisdiction cannot be created by consent, waiver, or estoppel.
Key Term: Subject-Matter Jurisdiction
The court’s power to hear a particular kind of case (e.g., federal questions, diversity cases). It is conferred by the Constitution and statutes, cannot be waived, and must exist for a valid judgment.
If a federal court lacks subject-matter jurisdiction, it must dismiss the case (or remand it, if removed from state court), even if no party objects and even if the case is at a very late stage.
On the MBE, most civil procedure fact patterns are set in federal court. Always ask first: “Is there subject-matter jurisdiction?” The main bases are:
- Federal question jurisdiction.
- Diversity of citizenship jurisdiction (including alienage).
- Supplemental jurisdiction (to bring in extra related claims).
- Removal jurisdiction (moving a case from state to federal court).
Federal Question Jurisdiction
Federal question jurisdiction exists when a plaintiff’s claim arises under the Constitution, federal statutes, or treaties. It is codified at 28 U.S.C. § 1331.
Key Term: Federal Question Jurisdiction
Jurisdiction based on a civil action “arising under” federal law—usually because the plaintiff’s cause of action is created by federal statute, the Constitution, or a treaty.
Two exam-tested points dominate this area:
- The well‑pleaded complaint rule.
- Areas of exclusive federal jurisdiction.
Key Term: Well‑Pleaded Complaint Rule
A federal question exists only if the federal issue appears on the face of the plaintiff’s properly pleaded complaint as part of the claim, not merely as an anticipated defense or reply.
A state-law claim does not “arise under” federal law just because:
- The defendant’s best defense is based on federal law, or
- The plaintiff anticipates needing to rebut a federal defense.
For example, a simple state‑law breach‑of‑contract claim where the defendant intends to rely on a federal statute as a defense does not satisfy § 1331.
Certain subject areas are within exclusive federal jurisdiction, meaning state courts cannot hear them at all. These include:
- Bankruptcy.
- Patent and copyright.
- Certain federal securities and antitrust actions.
If a plaintiff files such a claim in state court, the defendant can remove it to federal court, and the federal court will properly exercise jurisdiction.
Occasionally, a state-law claim may embed a substantial, actually disputed federal issue (e.g., a quiet‑title action turning entirely on the construction of a federal tax statute). Those “embedded federal issue” cases are rare on the MBE; focus first on whether the cause of action itself is federal.
Diversity Jurisdiction
Diversity jurisdiction under 28 U.S.C. § 1332 requires two elements:
- Complete diversity of citizenship.
- An amount in controversy exceeding $75,000, exclusive of interest and costs.
Key Term: Diversity Jurisdiction
Jurisdiction based on all plaintiffs being citizens of different states than all defendants, with an amount in controversy greater than $75,000.Key Term: Complete Diversity
The requirement that no plaintiff share state citizenship with any defendant on the claim that invokes diversity jurisdiction, measured at the time the action is filed.
Determining Citizenship
Citizenship for diversity is about domicile, not mere residence or where someone happens to be when served.
-
Individuals
- An individual is a citizen of the one state of his domicile.
- Domicile = physical presence plus intent to remain indefinitely.
- A new domicile is acquired when both elements change.
-
Corporations
- A corporation is a citizen of:
- Every state (and foreign country) in which it is incorporated, and
- The one state where it has its principal place of business.
- Principal place of business is the “nerve center” where the corporation’s officers direct and control corporate activities (typically headquarters).
- A corporation is a citizen of:
-
Unincorporated associations (partnerships, LLCs, unions)
- They are citizens of every state in which any partner or member is a citizen.
- This often destroys complete diversity when even one member matches an opposing party.
-
Aliens and U.S. citizens abroad
- Diversity includes “alienage”: citizen of a state v. citizen/subject of a foreign state.
- There is no diversity:
- Between two aliens alone, or
- Involving a U.S. citizen domiciled abroad (they are a U.S. citizen but a citizen of no state for § 1332).
Citizenship is tested at the time of filing, not when the cause of action arose and not as it changes during the litigation (except when parties are added or dropped).
Amount in Controversy
Key Term: Amount in Controversy
The monetary value of what the plaintiff seeks to recover or protect in the claim that invokes diversity jurisdiction, which must exceed $75,000, exclusive of interest and costs.
Key rules:
- The plaintiff’s good‑faith allegation controls unless it appears to a legal certainty that the claim is really for $75,000 or less.
- A single plaintiff may aggregate all claims against a single defendant, even if unrelated.
- A single plaintiff may also aggregate claims against multiple defendants only if they are jointly liable on an undivided claim.
- Multiple plaintiffs generally may not aggregate separate claims to reach $75,000 unless they share a common, undivided interest (e.g., co‑owners of a single property right).
Equitable relief is valued by either:
- The value of the right to the plaintiff, or
- The cost of compliance to the defendant.
If either valuation is more than $75,000, the amount‑in‑controversy requirement is satisfied.
Certain categories are effectively excluded from diversity jurisdiction despite satisfying these requirements, such as suits seeking divorce, alimony, child custody decrees, or to probate or annul a will. These fall within the domestic relations and probate exceptions.
Supplemental Jurisdiction
Supplemental jurisdiction allows a federal court that already has subject-matter jurisdiction over at least one claim (the “anchor” claim) to hear additional claims that are sufficiently related, even if those added claims could not independently be brought in federal court.
Key Term: Supplemental Jurisdiction
The court’s authority under 28 U.S.C. § 1367 to hear additional claims that form part of the same case or controversy as a claim within original federal jurisdiction.Key Term: Same Case or Controversy (Common Nucleus of Operative Fact)
Claims arise from the same case or controversy when they share a common nucleus of operative fact—roughly, when they arise from the same transaction, occurrence, or series of transactions.
Basic three‑step analysis:
- Is there at least one claim with an independent basis for federal jurisdiction (federal question or diversity)?
- Does the additional claim share a common nucleus of operative fact with that anchor claim?
- If the anchor is a diversity claim, do the § 1367(b) limitations apply?
In federal question cases, the analysis is straightforward: if the state-law claim forms part of the same case or controversy as the federal claim, supplemental jurisdiction is available.
In diversity cases, Congress imposed extra limits in § 1367(b). On the MBE, two patterns repeat:
- Supplemental jurisdiction cannot be used to:
- Circumvent complete diversity for claims by plaintiffs against certain parties joined under Rules 14, 19, 20, or 24.
- But supplemental jurisdiction can be used to:
- Allow additional plaintiffs whose claims share a common nucleus of operative fact but do not individually exceed $75,000 (so long as complete diversity remains).
Example from the syllabus: if P1 (diverse from D) sues D for $100,000 and P2 (also diverse from D) joins with a claim for $50,000 arising from the same accident, P2’s claim can come in via supplemental jurisdiction even though it does not meet $75,000.
Courts also have discretion to decline supplemental jurisdiction, particularly when:
- The state-law issue is novel or complex.
- The state-law claims substantially predominate.
- All federal claims have been dismissed early.
- Exceptional circumstances favor dismissal or remand.
Removal Jurisdiction
Removal allows a defendant to transfer a civil action filed in state court to federal court, but only if the case could have been filed in federal court originally.
Key Term: Removal Jurisdiction
The defendant’s statutory right to move a case from state court to the appropriate federal district court when the case falls within federal subject-matter jurisdiction.
Core rules:
- Only defendants may remove; plaintiffs may never remove, even if counterclaimed against.
- All defendants who have been properly joined and served must consent to removal.
- The case must be removed to the federal district court that embraces the state court where the action is pending.
- The notice of removal must generally be filed within 30 days after service of the initial pleading or other first “removable” paper.
Special restrictions apply in diversity cases:
Key Term: Forum‑Defendant Rule
A civil action otherwise removable solely on the basis of diversity may not be removed if any properly joined and served defendant is a citizen of the state in which the action is brought.
Additionally:
- Diversity‑based removal is barred more than one year after the case was commenced in state court, unless the plaintiff has acted in bad faith to prevent removal (e.g., keeping a non‑diverse defendant in the case solely to block removal).
Once removed:
- The plaintiff may move to remand the case back to state court.
- For procedural defects in removal (e.g., wrong district, missing consent), a remand motion must be made within 30 days after removal.
- For lack of subject‑matter jurisdiction, remand can be ordered at any time, and the defect cannot be waived.
If the federal court determines it lacks subject-matter jurisdiction, it must remand the case; it cannot keep the case merely because substantial federal resources have already been spent—though if the jurisdictional defect is cured before final judgment, an appellate court will not necessarily vacate the judgment.
Worked Example 1.1
A citizen of State A sues a citizen of State B in federal court for breach of contract, seeking $80,000. The defendant counterclaims for $10,000. Is subject-matter jurisdiction proper over both claims?
Answer:
Yes. The court has diversity jurisdiction over the plaintiff’s claim because the parties are citizens of different states and the amount in controversy exceeds $75,000. The defendant’s $10,000 counterclaim arises out of the same transaction and is a compulsory counterclaim; the court has supplemental jurisdiction over it and it does not need to satisfy the amount‑in‑controversy requirement independently.
Worked Example 1.2
A plaintiff sues a defendant in state court for $100,000 on a state-law claim. The defendant, a citizen of the same state as the plaintiff, removes to federal court. What should the federal court do?
Answer:
The federal court must remand the case. There is no diversity (plaintiff and defendant are citizens of the same state), and no federal question appears on the complaint. Because the federal court lacks subject-matter jurisdiction, removal was improper and remand is mandatory.
Worked Example 1.3
A plaintiff sues a defendant in state court for $150,000, alleging only state-law claims. The defendant is a citizen of a different state and removes to federal court. The plaintiff then amends to add a non‑diverse defendant. What happens?
Answer:
Adding a non‑diverse defendant destroys complete diversity. The federal court now lacks subject-matter jurisdiction over the action as configured. Unless the court denies joinder of the non‑diverse defendant, it must remand the case to state court.
Worked Example 1.4
Two unrelated passengers on a sightseeing plane sue the pilot in federal court for negligence arising from the same rough landing. Passenger 1, a citizen of State X, claims $95,000 in damages. Passenger 2, also a citizen of State X, claims $5,000. The pilot is a citizen of State Y. The pilot moves to dismiss Passenger 2’s claim for lack of subject-matter jurisdiction. How should the court rule?
Answer:
The motion should be denied. There is complete diversity (all plaintiffs are from State X, the defendant from State Y), and Passenger 1’s claim exceeds $75,000. Passenger 2’s claim arises from the same accident and shares a common nucleus of operative fact with Passenger 1’s claim. The court may thus exercise supplemental jurisdiction over Passenger 2’s $5,000 claim even though it does not independently meet the amount‑in‑controversy requirement.
Worked Example 1.5
P (citizen of State A) sues D (citizen of State B) in federal court for $100,000 arising from a car accident. P then amends the complaint to add P2 (citizen of State B) as a co‑plaintiff, asserting a $50,000 claim against D from the same accident. Is there supplemental jurisdiction over P2’s claim?
Answer:
No. P2 is a citizen of the same state as D (both State B), so complete diversity is lacking between P2 and D. Section 1367(b) prohibits using supplemental jurisdiction in a diversity case to override the complete‑diversity requirement for claims by plaintiffs joined under Rule 20 against existing defendants. P2’s claim must therefore be dismissed or brought in state court.
Worked Example 1.6
A plaintiff from State A sues two defendants in State B state court on state-law claims: D1 is a citizen of State B, and D2 is a citizen of State C. The complaint alleges $100,000 in damages from each defendant. Both defendants file a timely notice of removal to the federal district court encompassing the State B court. The plaintiff moves to remand. What is the most accurate basis for granting remand?
Answer:
Removal is improper because of the forum‑defendant rule. The case is removable only on the basis of diversity, but D1 is a citizen of the forum state (State B). Under § 1441(b)(2), a civil action otherwise removable solely on diversity grounds may not be removed if any properly joined and served defendant is a citizen of the forum state. The federal court must therefore remand the case.
Exam Warning
On the MBE, be alert for:
- A federal defense being described in detail—this does not create federal question jurisdiction.
- Removal by a defendant who is a citizen of the forum state—removal is not allowed in diversity cases if any defendant is a citizen of the state where the action was filed.
- Use of supplemental jurisdiction to “fix” a lack of complete diversity for a newly added plaintiff—§ 1367(b) often forbids this.
Revision Tip
When faced with multiple claims and parties, proceed systematically:
- Identify an anchor claim with independent federal jurisdiction.
- Ask whether each additional claim shares a common nucleus of operative fact.
- In diversity‑only cases, apply § 1367(b) and ask whether the extra claim is by a plaintiff in a prohibited category.
- In removal fact patterns, separately check subject-matter jurisdiction, the forum‑defendant rule, and all time limits.
Key Point Checklist
This article has covered the following key knowledge points:
- Federal courts have limited subject-matter jurisdiction; it cannot be waived and can be raised at any stage by any party or by the court.
- Federal question jurisdiction requires that the plaintiff’s well‑pleaded complaint itself arise under federal law.
- Diversity jurisdiction requires complete diversity and an amount in controversy exceeding $75,000, measured at the time of filing.
- Citizenship for individuals is based on domicile; corporations are citizens of each state of incorporation and their principal place of business; unincorporated entities take the citizenship of all members.
- Supplemental jurisdiction under § 1367 allows related state-law claims to be heard but, in diversity cases, cannot be used by plaintiffs to defeat the complete‑diversity rule for certain joined parties.
- Supplemental jurisdiction can allow additional plaintiffs with smaller claims to “tag along” on a diversity anchor claim that meets the amount‑in‑controversy requirement.
- Removal from state to federal court is available only to defendants and only if the federal court has original jurisdiction over the case.
- In diversity cases, the forum‑defendant rule and the one‑year limit on removal are common traps; both can defeat removal even where subject-matter jurisdiction exists.
- Procedural defects in removal must be challenged by remand motion within 30 days of removal, but lack of subject-matter jurisdiction can be raised at any time.
- Lack of subject-matter jurisdiction obliges the federal court to dismiss (or remand) the case; a judgment entered without it is vulnerable to being declared void.
Key Terms and Concepts
- Subject-Matter Jurisdiction
- Federal Question Jurisdiction
- Well‑Pleaded Complaint Rule
- Diversity Jurisdiction
- Complete Diversity
- Amount in Controversy
- Supplemental Jurisdiction
- Same Case or Controversy (Common Nucleus of Operative Fact)
- Removal Jurisdiction
- Forum‑Defendant Rule