Jurisdiction simply means a court's power to hear and decide a case. The U.S. and state constitutions, as well as federal and state laws, grant and limit courts' jurisdiction. To make a legally valid decision, a court must have both subject matter jurisdiction (power to hear the kind of case a lawsuit involves) and personal jurisdiction (power over the parties involved in the lawsuit).
If you file a case in the wrong court, a defendant may get the case moved to another court (perhaps to a court that's less convenient or favorable to you than if you had chosen the proper court), or even get the case dismissed altogether.
Dismissal for lack of jurisdiction may be only an inconvenience if you have time to refile the lawsuit in the proper court, but if the time limit to file your case (the statute of limitations) runs out before you can do this, your court-picking mistake may mean that the defendant can have your lawsuit thrown out permanently. (For more information, see Nolo's article Statutes of Limitations: Is It Too Late to Sue?)
If you are soon to be involved in a lawsuit, the odds are overwhelming that you'll be in state court (see below). Federal courts have subject matter jurisdiction in only two kinds of cases:
Cases that arise under a federal law (called "federal question" cases). Federal district courts have subject matter jurisdiction if your case is based on (arises under) any federal law. Examples include:
Diversity of citizenship cases. Federal district courts also have subject matter jurisdiction if you are suing a citizen of a different state (or a foreign national), and you are asking for at least $75,000 in money damages. (The minimum dollar amount may be responsible for the old saying, "Don't make a federal case out of it.") If a federal court has jurisdiction based on diversity of citizenship, the subject matter of the case doesn't matter. Examples of federal diversity jurisdiction include:
"Complete diversity" must exist. Federal courts have diversity jurisdiction only if there is "complete diversity" between plaintiffs and defendants. For diversity jurisdiction purposes, individuals are generally citizens of the state in which they maintain a principal residence, and they can be a citizen of only one state at a time. A corporation can be a citizen of two states, however: the state in which it is incorporated and the state in which it maintains its principal place of business.
Example: Cobb, a Georgia citizen, wants to sue Peachy Corp. Peachy Corp is a Delaware corporation with its principal place of business in Atlanta. Diversity jurisdiction does not exist, because Cobb and Peachy are both Georgia citizens.
Example: Cobb, a Georgia citizen, wants to sue Ruth (a Maryland citizen) and Wagner (a Georgia citizen). Diversity jurisdiction does not exist, because Cobb and one of the defendants are citizens of the same state.
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