The Changing Face of Diversity Jurisdiction
Volume 82, No. 3, Fall 2009
By The Honorable Diane P. Wood [PDF]

In the beginning, there was diversity jurisdiction. This is certainly not news to any lawyer. To the contrary: this fact is assiduously drilled into the head of every beginning law student. Not only did the Framers of the 1787 Constitution see fit to provide for “Controversies . . . between Citizens of different States . . . [and] between . . . the Citizens [of a State] and foreign States, Citizens or Subjects”; in addition, of all the major branches of jurisdiction that Article III of the new Constitution made available, it was diversity jurisdiction—not federal question jurisdiction—that the First Congress immediately implemented in the Judiciary Act of 1789.

The reasons why the Framers chose to include diversity jurisdiction, and why the First Congress jumped at the chance to breathe life into it, are less clear. Many scholars, including for example Wright, Miller, and Cooper, have noted that “[n]either the debates of the Constitutional Convention nor the records of the First Congress shed [much] light” on the question. Apparently the Anti-Federalists were quite opposed to this branch of jurisdiction. This fact is worth exploring. In my view, it sheds light on the hopes (or fears) that our eighteenth-century forebears had for diversity jurisdiction and on the way that they expected the federal courts to exercise this judicial authority: as a tool of national unification and as a way of providing a neutral forum for citizens from different states. Madison mentioned the latter purpose, which is still accepted today, when he speculated that there might be prejudice in some states against the citizens of others who had claims against the in-state parties. But it is the former purpose that I would like to scrutinize in this Lecture.

Even at the time the Constitution was written, some people were already focusing on the question of whether the federal courts would, in any sense, have some implicit lawmaking role, and if so, to what extent. This is reflected in their suggestions that the real problem faced by the new nation might lie in laws passed by state legislatures that would provide some relief to in-state debtors. National courts offered one possible way to overcome that type of parochialism. This idea is one illustration of the broader concept that the federal courts were, in a Hamiltonian sense, designed to foster the commercial soundness of the country, both through a neutral set of tribunals and through their ability to create what later came to be known, during the Swift v. Tyson era, as federal common law. This function or rationale for diversity jurisdiction, however, seems to have drifted to the sidelines over the years.

My thesis, briefly put, is that the Anti-Federalists were right: diversity jurisdiction was—and remains—a potentially powerful tool to be used in the grand project of national unification. It served that purpose during the heyday of federal common law by opening the doors of the federal courts to private law litigation that otherwise would have stayed in the state courts. Beginning in the late nineteenth century, however, two developments came along that caused diversity jurisdiction to ebb in importance for a time. The first was part of the broader story of expansion of federal powers in the wake of the Civil War. It was the passage, in 1875, of another Judiciary Act—one that for the first time (with a minor exception) conferred general federal question jurisdiction on the federal courts. The other was the Supreme Court’s 1938 decision in Erie Railroad Co. v. Tompkins, which abolished general federal common law and reined in the federal courts’ substantive use of their diversity jurisdiction.

Lately, however, there has been a resurgence of the use of diversity jurisdiction, coming more or less from left field. This has come about through a modern revival of what is called “minimal diversity.”

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