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CRS Annotated Constitution

CRS Annotated Constitution

Article III -- Table of ContentsPrev | Next

The Meaning of “State” and the District of Columbia Problem.— In Hepburn v. Ellzey,953 Chief Justice Marshall for the Court confined the meaning of the word “State” as used in the Constitution to “the members of the American confederacy” and ruled that a citizen of the District of Columbia could not sue a citizen of Virginia on the basis of diversity of citizenship. Marshall noted[p.763]that it was “extraordinary that the courts of the United States, which are open to aliens, and to the citizens of every state in the union, should be closed upon them. But this is a subject for legislative, not for judicial consideration.”954 The same rule was subsequently applied to citizens of the territories of the United States.955

Whether the Chief Justice had in mind a constitutional amendment or a statute when he spoke of legislative consideration remains unclear. Not until 1940, however, did Congress attempt to meet the problem by statutorily conferring on federal district courts jurisdiction of civil actions, not involving federal questions, “between citizens of different States, or citizens of the District of Columbia, the Territory of Hawaii, or Alaska and any State or Territory.”956 In National Mutual Ins. Co. v. Tidewater Transfer Co.,957 this act was upheld in a five–to–four decision but for widely divergent reasons by a coalition of Justices. Two Justices thought that Chief Justice Marshall’s 1804 decision should be overruled, but the other seven Justices disagreed; however, three of the seven thought the statute could be sustained under Congress’ power to enact legislation for the inhabitants of the District of Columbia, but the remaining four plus the other two rejected this theory. The statute was upheld because a total of five Justices voted to sustain it, although of the two theories relied on, seven Justices rejected one and six the other. The result, attributable to “conflicting minorities in combination,”958 means that Hepburn v. Ellzey is still good law insofar as it holds that the District of Columbia is not a State, but is overruled insofar as it holds that District citizens may not utilize federal diversity jurisdiction.959

Citizenship of Natural Persons.—For purposes of diversity jurisdiction, state citizenship is determined by the concept of domicile960 rather than of mere residence.961 That is, while the Court’s definition has varied throughout the cases,962 a person is a citizen of the State in which he has his true, fixed, and permanent home[p.764]and principal establishment and to which he intends to return whenever he is absent from it.963 Acts may disclose intention more clearly and decisively than declarations.964 One may change his domicile in an instant by taking up residence in the new place and by intending to remain there indefinitely and one may obtain the benefit of diversity jurisdiction by so changing for that reason alone,965 provided the change is more than a temporary expedient.966

If the plaintiff and the defendant are citizens of different States, diversity jurisdiction exists regardless of the State in which suit is brought.967 Chief Justice Marshall early established that in multiparty litigation, there must be complete diversity, that is, that no party on one side could be a citizen of any State of which any party on the other side was a citizen.968 It has now apparently been decided that this requirement flows from the statute on diversity rather than from the constitutional grant and that therefore minimal diversity is sufficient.969 The Court has also placed some issues beyond litigation in federal courts in diversity cases, apparently solely on policy grounds.970

Citizenship of Corporations.—In Bank of the United States v. Deveaux,971 Chief Justice Marshall declared: “That invisible, intangible, and artificial being, that mere legal entity, a corporation aggregate, is certainly not a citizen; and consequently cannot sue or be sued in the courts of the United States, unless the rights of[p.765]the members, in this respect, can be exercised in their corporate name.” The Court upheld diversity jurisdiction because the members of the bank as a corporation were citizens of one State and Deveaux was a citizen of another. The holding was reaffirmed a generation later,972 but the pressures were building for change, because of the increased economic role of the corporation and because the Strawbridge rule973 would have soon closed the doors of the federal courts to the larger corporations with stockholders in many States.

Deveaux was overruled in 1844, when after elaborate argument a divided Court held that “a corporation created by and doing business in a particular State, is to be deemed to all intents and purposes as a person, although an artificial person, an inhabitant of the same State, for the purposes of its incorporation, capable of being treated as a citizen of that State, as much as a natural person.”974 Ten years later, the Court abandoned this rationale, but it achieved the same result by creating a conclusive presumption that all of the stockholders of a corporation are citizens of the State of incorporation.975 Through this fiction, substantially unchanged today,976 the Court was able to hold that a corporation cannot be a citizen for diversity purposes and that the citizenship of its stockholders controls but to provide corporations access to federal courts in diversity in every State except the one in which it is incorporated.977 The right of foreign corporations to resort to federal courts in diversity is not one which the States may condition as a qualification for doing business in the State.978

Unincorporated associations, such as partnerships, joint stock companies, labor unions, governing boards of institutions, and the like, do not enjoy the same privilege as a corporation; the actual[p.766]citizenship of each of its members must be considered in determining whether diversity exists.979

Footnotes
953 2 Cr. (6 U.S.) 445 (1805).
954 Id., 453.
955 City of New Orleans v. Winter, 1 Wheat. (14 U.S.) 91 (1816).
956 54 Stat. 143 (1940), as revised, 28 U.S.C. Sec. 1332 (d).
957 337 U.S. 582 (1948).
958 Id., 655 (Justice Frankfurter dissenting).
959 The statute’s provision allowing citizens of Puerto Rico to sue in diversity was sustained in Americana of Puerto Rico v. Kaplus, 368 F. 2d 431 (3d Cir., 1966), cert. den., 386 U.S. 943 (1967), under Congress’ power to make rules and regulations for United States territories. Cf. Examining Board v. Flores de Otero, 426 U.S. 572, 580– 597 (1976) (discussing congressional acts with respect to Puerto Rico).
960 Chicago & N.W.R. Co. v. Ohle, 117 U.S. 123 (1886).
961 Sun Printing & Pub. Assn. v. Edwards, 194 U.S. 377 (1904).
962 Knox v. Greenleaf, 4 Dall. (4 U.S.) 360 (1802); Shelton v. Tiffin, 6 How. (47 U.S.) 163 (1848); Williamson v. Osenton, 232 U.S. 619 (1914).
963 Stine v. Moore, 213 F. 2d 446, 448 (5th Cir. 1954).
964 Shelton v. Tiffin, 6 How. (47 U.S.) 163 (1848).
965 Williamson v. Osenton, 232 U.S. 619 (1914).
966 Jones v. League, 18 How. (59 U.S.) 76 (1855).
967 28 U.S.C. Sec. 1332 (a)(1).
968 Strawbridge v. Curtiss, 3 Cr. (7 U.S.) 267 (1806).
969 In State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530–531 (1967), holding that congressional provision in the interpleader statute of minimal diversity, 28 U.S.C. Sec. 1335 (a)(1), was valid, the Court said of Strawbridge. “Chief Justice Marshall there purported to construe only “The words of the act of Congress,’ not the Constitution itself. And in a variety of contexts this Court and the lower courts have concluded that Article III poses no obstacle to the legislative extension of federal jurisdiction, founded on diversity, so long as any two adverse parties are not co–citizens.” Of course, the diversity jurisdictional statute not having been changed, complete diversity of citizenship, outside the interpleader situation, is still required. In class actions, only the citizenship of the named representatives is considered and other members of the class can be citizens of the same State as one or more of the parties on the other side. Supreme Tribe of Ben–Hur v. Cauble, 255 U.S. 356 (1921); Snyder v. Harris, 394 U.S. 332, 340 (1969).
970 In domestic relations cases and probate matters, the federal courts will not act, though diversity exists. Barber v. Barber, 21 How. (62 U.S.) 582 (1858); Ex parte Burrus, 136 U.S. 586 (1890); In re Broderick’s Will, 21 Wall. (88 U.S.) 503 (1875). These cases merely enunciated the rule, without justifying it; when the Court squarely faced the issue quite recently, it adhered to the rule, citing justifications. Ankenbrandt v. Richards, 112Ct.2206 (1992).
971 5 Cr. (9 U.S.) 61, 86 (1809).
972 Commercial & Railroad Bank v. Slocomb, 14 Pet. (39 U.S.) 60 (1840).
973 Strawbridge v. Curtiss, 3 Cr. (7 U.S.) 267 (1806).
974 Louisville, C. & C.R. Co. v. Letson, 2 How. (43 U.S.) 497, 558 (1844).
975 Marshall v. Baltimore & Ohio R. Co., 16 How, (57 U.S.) 314 (1854). See Muller v. Dows, 94 U.S. 444 (1877); St. Louis & S.F. Ry. Co. v. James, 161 U.S. 545 (1896). The Court has more than once pronounced that the Marshall position is settled. E.g., United Steelworkers of America v. R. H. Bouligny, Inc., 382 U.S. 272, 273 (1965); Carden v. Arkoma Associates, 494 U.S. 185, 189 (1990).
976 Sec. 2, 72 Stat. 415 (1958), amending 28 U.S.C. Sec. 1332 (c), provided that a corporation is to be deemed a citizen of any State in which it has been incorporated and of the State in which it has its principal place of business. 78 Stat. 445 (1964), amending 28 U.S.C. Sec. 1332 (c), was enacted to correct the problem revealed by Lumbermen’s Mutual Casualty Co. v. Elbert, 348 U.S. 48 (1954).
977 See United Steelworkers v. R.H. Bouligny, 382 U.S. 145, 148 (1965).
978 In Terral v. Burke Construction Co., 257 U.S. 529 (1922), the Court resolved two conflicting lines of cases and voided a state statute which required the cancellation of the license of a foreign corporation to do business in the State upon notice that the corporation had removed a case to a federal court.
979 Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449 (1900); Chapman v. Barney, 129 U.S. 677 (1889); Thomas v. Board of Trustees, 195 U.S. 207 (1904); United Steelworkers v. R.H. Bouligny, 382 U.S. 145 (1965); Carden v. Arkoma Associates, 494 U.S. 185 (1990). But compare Navarro Savings Assn. v. Lee, 446 U.S. 458 (1980), distinguished in Carden, supra, 195–197.
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