Bar Exam — MBE (Multistate Bar Exam)Civil ProcedureMedium
A plaintiff, a citizen of State A, filed a lawsuit in federal court in State A against a defendant corporation, incorporated in State B with its principal place of business in State C. The lawsuit alleges a state-law claim for $100,000. Which of the following statements is true regarding the federal court's subject matter jurisdiction?
- AThe federal court lacks diversity jurisdiction because the plaintiff is a citizen of State A, and the defendant corporation is a citizen of State B and State C, which means there is no complete diversity with State A.
- BThe federal court has diversity jurisdiction because the plaintiff and defendant corporation are citizens of different states.
- CThe federal court lacks diversity jurisdiction because the plaintiff is a citizen of State A, and the defendant is a citizen of State B (incorporation) and State C (principal place of business), satisfying complete diversity.
- DThe federal court lacks diversity jurisdiction because the plaintiff is a citizen of State A, and the defendant is also a citizen of State A for jurisdictional purposes if its principal place of business is in State A.
Show answer & explanationAnswer & explanation
Correct answer: B. The federal court has diversity jurisdiction because the plaintiff and defendant corporation are citizens of different states.
For diversity jurisdiction, a corporation is a citizen of both its state of incorporation and the state of its principal place of business. Here, the plaintiff is from State A, and the defendant corporation is from State B and State C. Since State A is different from both State B and State C, there is complete diversity.
Why the other options are wrong
- A. The premise that the defendant corporation is a citizen of State B and State C is correct. However, this *establishes* complete diversity with a plaintiff from State A, as State A is different from both State B and State C. The conclusion that there is no complete diversity is incorrect.
- C. This statement correctly identifies the corporation's citizenship, but it incorrectly concludes that this *lacks* diversity. In fact, it *establishes* complete diversity with a plaintiff from State A.
- D. The defendant's principal place of business is in State C, not State A, so this statement is factually incorrect regarding the defendant's citizenship.
Corporate Citizenship for Diversity
For purposes of diversity jurisdiction, a corporation is deemed to be a citizen of both its state of incorporation AND the state where it has its principal place of business.
- Dual citizenship rule for corporations.
- Principal place of business is typically the 'nerve center' (where high-level officers direct, control, and coordinate activities).
- Complete diversity still required: no plaintiff can share citizenship with any defendant, considering both aspects of corporate citizenship.
Memory trick: A corporation's home is where it's BORN and where its BRAIN is.