2.1 Subject Matter Jurisdiction, Supplemental Jurisdiction & Removal

2.1 Subject Matter Jurisdiction, Supplemental Jurisdiction & Removal

Federal courts are courts of limited jurisdiction. Unlike state courts of general jurisdiction—which possess presumptive constitutional authority to hear virtually any civil claim—federal district courts may only adjudicate civil disputes authorized by Article III, Section 2 of the United States Constitution and explicitly granted by statutory enactment of Congress.

Because subject matter jurisdiction (SMJ) defines the constitutional and statutory power of the federal court to act, its absence is a non-waivable structural defect. Under Federal Rule of Civil Procedure (FRCP) 12(h)(3), if the court determines at any time that it lacks subject matter jurisdiction, the court must dismiss the action (or remand if removed from state court). Parties cannot confer SMJ by consent, contract, stipulation, or procedural forfeiture.

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1. Article III Constitutional vs. Statutory Jurisdiction

The judicial power of the United States is bounded by two distinct layers:

1. The Article III Constitutional Ceiling: Article III, § 2 sets the outer boundary of federal judicial power, permitting jurisdiction over cases "arising under" the Constitution, federal laws, and treaties, as well as controversies between "Citizens of different States" (which the Supreme Court has interpreted as requiring only minimal diversity—where at least one plaintiff is diverse from at least one defendant).
2. Congressional Statutory Grants: Congress possesses the constitutional prerogative to vest all, some, or none of this Article III judicial power in the lower federal courts. For general civil litigation, Congress enacted 28 U.S.C. § 1331 (Federal Question) and 28 U.S.C. § 1332 (Diversity of Citizenship), both of which interpret statutory grants more narrowly than the constitutional ceiling.

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2. Federal Question Jurisdiction (28 U.S.C. § 1331)

Under 28 U.S.C. § 1331, federal district courts have original jurisdiction over all civil actions "arising under the Constitution, laws, or treaties of the United States." There is no amount in controversy requirement for federal question jurisdiction.

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|                   THE WELL-PLEADED COMPLAINT RULE (MOTTLEY)                 |
|                                                                             |
|   [ PLAINTIFF'S COMPLAINT ]                                                 |
|   - Must assert a right or remedy created by federal law.                   |
|   - Federal issue must be a necessary element of plaintiff's cause of action|
|                                                                             |
|   [ INSUFFICIENT FOR § 1331 JURISDICTION ]                                  |
|   [-] Anticipating that the defendant will raise a federal defense.         |
|   [-] Plaintiff asserting a state claim that raises a federal constitutional|
|       argument in anticipation of a state-law defense.                      |
|   [-] Defendant asserting a federal counterclaim under FRCP 13.             |
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The Well-Pleaded Complaint Rule

Under Louisville & Nashville R.R. Co. v. Mottley (1908), federal question jurisdiction exists only when the federal law issue is presented on the face of the plaintiff's properly pleaded complaint.

• Anticipated Defenses: A plaintiff cannot establish federal question jurisdiction by anticipating that the defendant will assert a defense grounded in federal law or the U.S. Constitution.
• Counterclaims: A defendant's counterclaim asserting a federal cause of action (even a compulsory counterclaim under Rule 13(a)) cannot create § 1331 jurisdiction (Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.).

Embedded Federal Issues (The Grable Doctrine)

Where a plaintiff pleads a state-law claim, § 1331 jurisdiction may still lie if the state claim necessarily raises a stated federal issue that is:

1. Necessarily raised by the plaintiff's claim;
2. Actually disputed;
3. Substantial to the federal system as a whole; and
4. Capable of resolution in federal court without disrupting the federal-state division of judicial responsibilities (Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg.).

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3. Diversity of Citizenship Jurisdiction (28 U.S.C. § 1332)

To establish subject matter jurisdiction under 28 U.S.C. § 1332(a)(1), two independent statutory elements must be met at the time the complaint is filed:

1. Complete Diversity of Citizenship between all adverse parties; and
2. An Amount in Controversy Exceeding $75,000, exclusive of interest and costs.

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|                      DIVERSITY CITIZENSHIP RULES MATRIX                     |
|                                                                             |
|   ENTITY TYPE                 LEGAL CITIZENSHIP TEST                        |
|   --------------------------  --------------------------------------------  |
|   Natural Person (Individual) Single Domicile: Physical presence + Intent to|
|                               remain indefinitely.                          |
|   Corporation                 Dual Citizenship: State of Incorporation AND  |
|                               State of Principal Place of Business ("Nerve  |
|                               Center" where officers direct/control corps). |
|   Unincorporated Entity       Citizenship of EVERY member, partner, or unit |
|   (LLC, Partnership, LLP)     holder. (No independent entity citizenship).  |
|   Permanent Resident Alien    Deemed citizen of the State of domicile, but  |
|   (Green Card Holder)         cannot sue another alien in diversity alone.  |
|   Legal Representative        Citizenship of the DECEDENT, INFANT, or       |
|   (Estate / Minor child)      INCOMPETENT (not the executor/guardian).      |
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Complete Diversity Rule (Strawbridge v. Curtiss)

Every plaintiff must be of diverse citizenship from every defendant. If even a single plaintiff shares state citizenship with a single defendant, complete diversity is destroyed, and the federal court lacks § 1332 jurisdiction.

Rules for Determining Citizenship

1. Natural Persons (Domicile): A human being is a citizen of the single U.S. state where they are domiciled. Domicile is established by: (a) physical presence in the state, coupled with (b) the subjective intent to remain indefinitely. A person retains their existing domicile until a new one is affirmatively acquired.
2. Corporations (28 U.S.C. § 1332(c)(1)): A corporation is a citizen of every state where it has been incorporated AND the one state where it has its principal place of business. Under Hertz Corp. v. Friend (2010), the principal place of business is the corporation's "nerve center"—the single place where the corporation's high-level officers direct, control, and coordinate the corporation's activities (almost always corporate headquarters).
3. Unincorporated Associations (LLCs, Partnerships, Joint Ventures): An unincorporated association does not have its own citizenship. Instead, it takes the citizenship of all of its members/partners. For an LLC, one must trace the citizenship of every single member (including upstream members if a member is itself an LLC or partnership).
4. Legal Representatives (28 U.S.C. § 1332(c)(2)): The legal representative of an estate, infant, or incompetent person is deemed to be a citizen only of the same state as the decedent, infant, or incompetent.

Amount in Controversy Mechanics

• Threshold: The amount must exceed $75,000.00 ($75,000.01 or higher), exclusive of interest and costs.
• Legal Certainty Test: The plaintiff's good-faith claim controls unless it appears to a legal certainty from the face of the pleadings that the plaintiff cannot recover the jurisdictional amount (St. Paul Mercury Indemnity Co. v. Red Cab Co.).
• Punitive Damages & Attorney's Fees: Punitive damages may be included if recoverable as a matter of substantive state law. Statutory or contractual attorney's fees may also be counted, but general costs of litigation and prejudgment interest are excluded.

Aggregation Rules

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|                        AMOUNT IN CONTROVERSY AGGREGATION                    |
|                                                                             |
|   PERMITTED AGGREGATION:                                                    |
|   [+] 1 Plaintiff vs. 1 Defendant: P may aggregate ALL claims (related or   |
|       completely unrelated) to exceed $75,000.                              |
|   [+] Multiple Plaintiffs vs. 1 Defendant: Permitted ONLY if plaintiffs are |
|       asserting a single, common, undivided right/title (e.g., joint owners).|
|                                                                             |
|   PROHIBITED AGGREGATION:                                                   |
|   [-] 1 Plaintiff vs. Multiple Defendants: Cannot aggregate claims against  |
|       separate defendants unless defendants are jointly and severally liable.|
|   [-] Multiple Plaintiffs with separate/distinct claims against 1 Defendant |
|       cannot aggregate (e.g., two accident victims in the same car).        |
+-----------------------------------------------------------------------------+

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4. Supplemental Jurisdiction (28 U.S.C. § 1367)

Where a federal district court has original jurisdiction over at least one claim (the "anchor claim"), 28 U.S.C. § 1367 allows the court to exercise supplemental jurisdiction over state-law claims that lack an independent basis of federal subject matter jurisdiction.

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|                 SUPPLEMENTAL JURISDICTION (§ 1367) THREE-STEP TEST          |
|                                                                             |
|   STEP 1: § 1367(a) Grant                                                   |
|   Is the state-law claim part of the same constitutional "case or           |
|   controversy" as the anchor claim?                                         |
|   -> Test: Do claims share a "common nucleus of operative fact" (Gibbs)?   |
|   -> If NO: No supplemental jurisdiction.                                   |
|   -> If YES: Proceed to Step 2.                                             |
|                                                                             |
|   STEP 2: § 1367(b) Diversity Carve-Out (Diversity-Only Anchor Cases)       |
|   Is the anchor claim based SOLELY on Diversity (§ 1332)?                   |
|   -> If NO (Federal Question anchor): § 1367(b) does NOT apply! (Proceed).  |
|   -> If YES: Does the claim involve a PLAINTIFF asserting a claim against   |
|      parties joined under Rule 14, 19, 20, or 24, OR a plaintiff joined     |
|      under Rule 19 or Rule 24?                                              |
|      * If YES: § 1367(b) STRIPS supplemental jurisdiction if complete       |
|        diversity would be contaminated.                                     |
|      * If NO (e.g., compulsory counterclaims by D): Proceed to Step 3.      |
|                                                                             |
|   STEP 3: § 1367(c) Discretionary Declination                               |
|   Should the court decline jurisdiction under the 4 statutory factors?      |
|   1. Novel or complex state law issue.                                      |
|   2. State claim substantially predominates over anchor federal claim.      |
|   3. District court has dismissed all claims over which it had original SMJ.|
|   4. Exceptional circumstances / compelling reasons.                        |
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The Gibbs Constitutional Standard (§ 1367(a))

Under United Mine Workers of America v. Gibbs (1966), federal courts possess constitutional power to adjudicate state claims if the state and federal claims derive from a "common nucleus of operative fact" such that a plaintiff would ordinarily be expected to try them all in one judicial proceeding.

Section 1367(b) Diversity Restrictions

In actions where original jurisdiction is founded solely on diversity (§ 1332), § 1367(b) prevents plaintiffs from using supplemental jurisdiction to circumvent the complete diversity rule.

• Supplemental jurisdiction is barred for:
  • Claims by plaintiffs against persons joined under Rule 14 (third-party practice), Rule 19 (required joinder), Rule 20 (permissive joinder), or Rule 24 (intervention).
  • Claims by persons proposed to be joined as plaintiffs under Rule 19 or seeking to intervene as plaintiffs under Rule 24 when exercising jurisdiction would destroy complete diversity.
• Crucial Exception (Exxon Mobil Corp. v. Allapattah Services): If at least one named plaintiff satisfies the amount in controversy in a diversity case, § 1367 allows supplemental jurisdiction over co-plaintiffs joined under Rule 20 or Rule 23 who assert the same transaction/occurrence claims but hold claims below $75,000, provided complete diversity of citizenship is preserved.

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5. Removal and Remand Procedure (28 U.S.C. §§ 1441, 1446, 1447)

Removal is a statutory mechanism that allows a defendant sued in state court to transfer the lawsuit to the federal district court embracing the place where the state action is pending.

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|                        REMOVAL STATUTORY REQUIREMENTS                       |
|                                                                             |
|   1. Original Jurisdiction Requirement (28 U.S.C. § 1441(a)):               |
|      The case could have originally been filed in federal court (SMJ exists).|
|                                                                             |
|   2. Exclusively Defendant's Right:                                         |
|      Only DEFENDANTS may remove. Plaintiffs (even counter-defendants) CANNOT.|
|                                                                             |
|   3. Rule of Unanimity (28 U.S.C. § 1446(b)(2)(A)):                         |
|      ALL defendants who have been properly joined and served must consent.  |
|                                                                             |
|   4. 30-Day Window (28 U.S.C. § 1446(b)(1)):                                |
|      Notice of removal must be filed within 30 days of formal service of the|
|      initial pleading or receipt of an amended pleading showing removability|
|                                                                             |
|   5. Forum Defendant Rule (28 U.S.C. § 1441(b)(2)):                         |
|      In DIVERSITY-ONLY actions, removal is barred if ANY properly joined and|
|      served defendant is a citizen of the State in which the suit is brought|
|                                                                             |
|   6. 1-Year Absolute Diversity Ceiling (28 U.S.C. § 1446(c)(1)):             |
|      A diversity case cannot be removed more than 1 year after commencement |
|      unless the district court finds that the plaintiff acted in BAD FAITH. |
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Remand Mechanics (28 U.S.C. § 1447(c))

• Procedural Defects: A motion to remand based on any defect other than lack of subject matter jurisdiction (e.g., failure of unanimity, violation of forum defendant rule, untimely removal) must be filed within 30 days after the filing of the notice of removal.
• Lack of Subject Matter Jurisdiction: A motion to remand for lack of SMJ may be raised by any party, or sua sponte by the court, at any time before final judgment.