Article III, Section 2, Clause 1:

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.

Historically, regardless of the parties’ diverse citizenship, the Supreme Court has recognized two substantive exceptions to diversity jurisdiction: the domestic relations exception1 —which precludes federal courts from issuing divorce, alimony, or child custody decrees—and the probate exception—which precludes federal courts from probating a will or administering an estate.2 In Ankenbrandt v. Richards, the Court clarified that the domestic relations exception exists as a matter of statutory interpretation, and that Article III, Section 2 “does not mandate the exclusion of domestic relations from federal-court jurisdiction.” 3 In Marshall v. Marshall, the Court similarly interpreted the probate exception as a matter of statutory construction, confirming its narrow scope as “reser[ving] to state probate courts the probate or annulment of a will and the administration of a decedent’s estate,” and “preclud[ing] federal courts from endeavoring to dispose of property that is in the custody of a state probate court.” 4

A litigant who, because of diversity of citizenship, has the option to sue in state or federal court, will generally consider the relative advantages and disadvantages of each forum in deciding where to pursue litigation. Where diversity is lacking, a litigant who perceives an advantage in the federal forum will sometimes attempt to create diversity. In the Judiciary Act of 1789, Congress exempted from diversity jurisdiction suits on choses of action in favor of an assignee unless the suit could have been brought in federal court if no assignment had been made.5 Nevertheless, a person could create diversity by a bona fide change of domicile even if that is the sole motive of creating domicile.6

Similarly, one could create diversity, or defeat it, by choosing a personal representative of the requisite citizenship.7 Most attempts to manufacture or create diversity have involved corporations. A corporation cannot get into federal court by transferring its claim to a subsidiary incorporated in another state.8 For a time, the Supreme Court tended to look disapprovingly at collusory incorporations and the creation of dummy corporations for purposes of creating diversity.9 As discussed further in the next essay, however, the Court, in Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co.,10 upheld diversity in a case in which the plaintiff-corporation, a Kentucky corporation, dissolved itself and obtained a charter as a Tennessee corporation in order to file the action in federal court. At the time, federal courts applied federal common law rules that, compared to relevant state laws, were more favorable to the plaintiff.11

Footnotes

1

See Barber v. Barber, 62 U.S. (21 How.) 582 (1858); Ex parte Burrus, 136 U.S. 586 (1890); Ankenbrandt v. Richards, 504 U.S. 689, 695–97 (1992).

2

See In re Broderick’s Will, 88 U.S. (21 Wall.) 503 (1875); Marshall v. Marshall, 547 U.S. 293, 299–31 (2006).

3

Ankenbrandt, 504 U.S. at 695–97.

4

Marshall, 547 U.S. at 331.

5

Judiciary Act of 1789, ch. XIX, § 11, 1 Stat. 73, 78; see also Turner v. Bank of N. Am., 4 U.S. (4 Dall.) 8 (1799); Sheldon v. Sill, 49 U.S. (8 How.) 441 (1850). The present statute, 28 U.S.C. § 1359, provides that no jurisdiction exists in a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke such court’s jurisdiction of. See Kramer v. Caribbean Mills, 394 U.S. 823 (1969).

6

Williamson v. Osenton, 232 U.S. 619 (1914); Morris v. Gilmer, 129 U.S. 315 (1889).

7

Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183 (1931).

8

Miller & Lux v. E. Side Canal & Irrigation Co., 211 U.S. 293 (1908).

9

E.g., S. Realty Co. v. Walker, 211 U.S. 603 (1909).

10

276 U.S. 518 (1928).

11

Id. at 528–29.