Subject matter jurisdiction (as opposed to personal jurisdiction) refers to the question of whether a particular court has the power or competence to decide the kind of controversy that is involved.  (Friedenthal § 2.1)  Note that subject matter jurisdiction is not an alternative to personal jurisdiction (the court's authority to enter a judgment binding on the particular defendant involved) but rather is an additional hurdle to be cleared.

Each state has its own judicial or court system within which there is a trial court of general jurisdiction.  Additionally there is a federal judicial system.  However, federal courts are courts of limited jurisdiction.

Federal Courts		California State Courts

Federal Question Jurisdiction Congress has conferred upon federal courts jurisdiction to decide federal questions i.e., cases or controversies arising under the Constitution and laws of the United States (28 U.S.C. § 1331) and cases or controversies between citizens of different states (diversity jurisdiction). (28 U.S.C. § 1332.) There is a presumption against federal jurisdiction.  The existence of subject matter jurisdiction generally must be demonstrated at the outset by the party seeking to invoke it.  (See FRCP 8) It cannot be conferred by consent of the parties, nor can its absence be waived.  (Friedenthal § 2.2)  The rule that a suit arises under the Constitution and laws of the United States only when the plaintiff's statement of his own cause of action so demonstrates is called the "well pleaded complaint rule."

Friedenthal, et al. Civil Procedure Hornbook

Diversity Jurisdiction

In diversity cases the subject matter jurisdiction of the federal courts is defined by who the parties to the lawsuit are rather than the subject matter of the underlying dispute.  Federal subject matter jurisdiction exists in cases where the opposing parties are citizens of different states and the amount in controversy exceeds $75,000 exclusive of interests and costs.  (28 U.S.C. § 1332)  "Citizenship" is synonymous with "domicile" and "domicile" means physical presence in the state coupled with the intent to reside there indefinitely. There must be complete diversity of citizenship between the parties on each side, i.e., all plaintiffs must be citizens of different states than all defendants.  The "rule of complete diversity" holds that there is no diversity jurisdiction when any party on one side of the dispute is a citizen of the same state as any party on the other side.  If any plaintiff shares a common citizenship with any defendant, then diversity is destroyed and along with it federal jurisdiction.   (Strawbridge v. Curtis, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806).)

Citizenship of Corporations  For diversity purposes, corporations have dual citizenship.  The state of incorporation and where they have their chief place of business.   E.g., If Stooge Corporation, incorporated in Delaware and with its principal place of business in California is a party to the suit, diversity is lacking if any adverse party is a citizen of either Delaware or of California.  (Wright, § 27)  It is generally accepted that a corporation can have only one principal place of business for purposes of diversity jurisdiction.

Amount in Controversy

Diversity jurisdiction can be invoked only if the amount in controversy exceeds the sum of $75,000 exclusive of interest and costs.  (See 28 U.S.C. § 1332)  The words are interpreted literally.  If the matter in controversy is precisely $75,000 or less, there is no jurisdiction.  (Friedenthal § 2.8)  Note, there is no amount in controversy requirement for federal question cases.  In determining whether the amount in controversy requirement has been met, the court looks to the sum demanded by the plaintiff in his complaint.  (Wright, § 33)

Aggregation of Claims  If a single plaintiff has two entirely unrelated claims against a single defendant, each for $40,000, he may sue in federal court since the aggregate of the claims exceeds $75,000.  If two plaintiffs each have a $40,000 claim against a single defendant, they may not aggregate their claims, and may not sue in federal court, no matter how similar the claims may be.  I.e., if a single plaintiff is suing a single defendant, FRCP 18 permits the plaintiff to join as many claims as he may have against the defendant regardless of their nature, and the value of all the claims is added together in determining whether the jurisdictional amount is met.  (Wright, § 36)  Multiple plaintiffs with separate and distinct claims must each satisfy the jurisdictional amount requirement.  (Id.)

Counterclaims  A counterclaim is a claim that a defendant may have against a plaintiff.  It may or may not arise out of the same transaction that gave rise to the plaintiff's claim.  E.g., Moe backs his car into Curly while pulling out of the parking lot.  Curly sues Moe for his personal injuries.  After being served Moe decides to sue Curly for property damage to his car alleging that Curly was negligent in not turning on his headlights.  Moe may sue Curly in a separate lawsuit or he may raise his claim in Curly's lawsuit as a counterclaim.  Because it arises out of the same transaction as Curly's original claim it is called a compulsory counterclaim.  If Moe fails to sue on it now he loses his right to sue on it in the future.

Example 2.  Same facts as above except that Curly owes Moe money for some law school outlines that he sold him.  Moe may sue for this debt by making a counterclaim but since it does not arise out of the transaction which gave rise to the original lawsuit, the auto accident, the counterclaim is permissive, failure to assert the counterclaim at this time does not waive Moe's right to sue on it in the future.

If the counterclaim is compulsory, it falls within the ancillary jurisdiction of the court and may be heard regardless of the amount.  A permissive counterclaim on the other hand must have an independent jurisdictional basis and therefore meet the jurisdictional amount requirement.  (Wright, § 37)

E.g., If Moe's counterclaim for property damage is in the amount of $5,000 he may assert it even though it is below the minimum amount in controversy.  However, to be able to assert the unpaid debt as a counterclaim it must be in excess of $75,000.

Pendent and Ancillary Jurisdiction

Introduction  Subject matter jurisdiction in the federal courts is limited to that which is specifically conferred by the Constitution and which Congress has empowered the courts to exercise.  However, federal jurisdiction may be exercised over claims which fall outside these categories when those claims are joined in a single suit with a jurisdictionally sufficient claim.

Ancillary jurisdiction allows a federal court to assert jurisdiction over claims that are sufficiently related or subordinated to an action properly within the court's subject matter jurisdiction.  Usually, it is invoked to permit a federal court to adjudicate claims that technically are jurisdictionally defective because they involve non diverse parties or are less than the requisite jurisdictional amount.  Ancillary jurisdiction views matters from the defendant's perspective, i.e., may he file a cross-claim against a codefendant?  May he bring in a third party against whom he would have a right of indemnity?  E.g., Moe, a citizen of California sues Curly, a citizen of New York in Federal District Court for $100k in damages arising from an auto accident.  Curly wants to file a cross-claim (implead) against Larry, a citizen of California saying that if he (Curly) is liable then Larry is also liable and must indemnify Curly.  Although Moe could not have named Larry in his original complaint without destroying diversity, there is ancillary jurisdiction over the claim against Larry and the federal court may hear the entire case.

Pendent jurisdiction allows a plaintiff who has a jurisdictionally sufficient federal question claim to join, in the original complaint, related claims that otherwise are jurisdictionally defective.  Generally, it is invoked when a plaintiff brings a federal question claim against a nondiverse defendant and seeks to have a related state law claim against the same defendant adjudicated by the federal court as an incident to the federal claim. (Friedenthal § 2.12)  Pendent jurisdiction views matters from the plaintiff's perspective, i.e., may he join all his claims with the ones as to which the federal court has subject matter jurisdiction?

Removal

"Removal jurisdiction permits a defendant to force the plaintiff to litigate certain actions in federal court, rather than in the state forum, originally selected."  (Friedenthal § 2.11)  I.e., removal permits a defendant to "second-guess" the plaintiff's choice of a state court.

Restrictions on Removal

Only a defendant may remove a case. (28 U.S.C. § 1441(a))

All defendants must join in the petition for removal.

Diversity cases are removable only if none of the defendants is a citizen of the state in which the action is brought.  If jurisdiction is based on a federal question, even a resident defendant may remove.  E.g., is a citizen of Utah sues a citizen of Texas in the state court in Texas, defendant cannot remove, if diversity is the only basis for federal jurisdiction.  The defendant could remove if suit were brought in any other state.  (Wright, § 38)