In the federal system, lawsuits usually begin in the federal district courts. As do state trial courts, the federal district courts determine both the facts and the law. The fact-finding function may be entrusted to either the judge or a jury, but determining the applicable law is the judge’s responsibility. Each state is designated as a separate district for purposes of the federal court system. Each district has at least one district court, and each district court has at least one judge.
There are various bases of federal district court civil jurisdiction. The two most important are diversity jurisdiction and federal question jurisdiction. One traditional justifi cation for diversity jurisdiction is that it may help protect out-ofstate defendants from potentially biased state courts. Diversity jurisdiction exists when (1) the case is between citizens of different states, and (2) the amount in controversy exceeds $75,000.
Diversity jurisdiction also exists in certain cases between citizens of a state and citizens or governments of foreign nations, if the amount in controversy exceeds $75,000. Under diversity jurisdiction, a corporation normally is a citizen of both the state where it has been incorporated and the state where it has its principal place of business. For an example of diversity jurisdiction and an explanation of how a corporation’s principal place of business is to be determined for diversity jurisdiction purposes, see the U.S. Supreme Court’s Hertz decision, which follows shortly.