Any court of general or appellate jurisdiction created under the authority of the U.S Constitution or by federal statute. Such courts include the U.S Tax Court, U.S district courts, Courts of Appeal, and the U.S Supreme Court.
Federal courts may hear cases originally or through appeal. In order for a federal court to hear a suit originally, the action must concern some federal law (federal question jurisdiction), or it must be between citizens of different states – with at least one plaintiff suing for $75,000 or more (diversity jurisdiction). Otherwise, cases may be reviewed by a U.S circuit court or by the U.S Supreme Court through appeal of a federal district court or state supreme court’s ruling.
Federal courts generally follow federal precedent when dealing with questions involving federal law. However, in cases where the dispute does not concern federal law, they are required (under the Erie Doctrine) to honor state precedent. The need to refer to state law usually arises in diversity jurisdiction suits or when a court adjudicates claims brought under supplemental jurisdiction.
It is very important for federal courts to have subject matter jurisdiction over a case, so that they do not disturb the balance of power maintained by the government’s federalist structure. If subject matter jurisdiction is found to be lacking at any time during a case, the action must be remanded to state court (if improperly removed to federal court) or dismissed (if filed originally in federal court).
[Last updated in July of 2020 by the Wex Definitions Team]