When Can I Sue in Federal Court?

Civil lawsuits are all based, at their core, on some type of dispute between the parties to the lawsuit. Business disputes are an excellent example of this basic concept. If you are involved in business litigation, one of the first decisions you will need to make, along with the advice and guidance of your Pennsylvania business litigation attorney, is where to file your lawsuit. Both state and federal courts hear civil lawsuits; however, some lawsuit must be initiated in state court while other must be filed in federal court and still others may begin in either state or federal court. Not surprisingly, there are both advantages and disadvantages to having your case heard in federal court. Before you can evaluate those advantages and disadvantages though you need to know when you can sue in federal court.

The United States operates under a federalist form of government. At its most basic, federalism means that there is a strong central government (the U.S. federal government) and numerous smaller autonomous governments (the individual state governments) operating simultaneously. The idea behind federalism is for the balance of power to be divided and balanced between the central government and the smaller state governments. Within our federalist government we also have two judicial systems –federal and state – with each having exclusive jurisdiction over some types of legal matters as well as sharing jurisdiction over other legal matters.

For your business dispute lawsuit to be filed in federal court the court must have what is known as “subject matter jurisdiction.” Jurisdictional issues can become complicated very quickly, depending on the facts and circumstances of the lawsuit. As a general rules, however, the vast majority of lawsuits originate in state courts because federal courts only have very limited subject matter jurisdiction. Federal subject matter jurisdiction includes:

• U.S. is a party – if the United States is named as a party to the lawsuit will be heard in federal court.
• Federal question – federal question subject matter jurisdiction means that there is a federal law question at issue, or a dispute arising out of federal law, within the lawsuit. Some examples of lawsuits that involve a federal question include:

• You own a patent and discover that someone has violated your patent rights. Because patents are created by federal law, and issued by the federal government, you must file the lawsuit in federal court.
• You believe that your employer is violating Title VII of the Civil Rights Act of 1964 by engaging in discriminatory hiring practices. You may sue the employer in federal court because the Civil Rights Act is a federal law.
• You are a small business owner who believes several large corporations are violating federal anti-trust laws. Because the anti-trust laws are federal laws you may sue in federal court.

• Diversity of citizenship – federal courts have subject matter jurisdiction when one party sues a citizen of a different state, or a foreign national, and the amount in controversy is at least $75,000 in money damages. In other words, the individual, or entity, with whom you have a dispute must be considered a “citizen” of another state or country and you must be asking for at least $75,000 in your lawsuit. For purposes of determining citizenship, and individual is usually considered a citizen of the state in which he/she maintains a principle residence. Determining citizenship of a business can be more complicated sometimes. A business can be a citizen of more than one state. For example, if a business is incorporated in Florida but has its home office in Pennsylvania it could be considered a citizen of either state.
• Bankruptcy, copyright, patent, and maritime law – federal law governs bankruptcy, copyright, patents, and maritime laws and regulations. Therefore, federal courts have jurisdiction.

If your case does not fit into one of the categories listed above it means that the federal court system does not have subject matter jurisdiction over the lawsuit. Consequently, it must be filed in state court.

Just to complicate matters a bit more though, cases that can be heard in federal court are not always required to be heard in federal court. Most cases in which a federal court has subject matter jurisdiction could also be heard in state court. Exceptions to the “dual jurisdiction” norm include federal question lawsuits involving issues surrounding bankruptcy, copyrights and patents, and tax claims, for example.

Whether or not your business litigation lawsuit can be filed in federal court therefore, depends on the answer to several questions, including:

• Is the U.S. a party to the lawsuit?
• Does the lawsuit arise out of a federal question?
• Does the claim involve bankruptcy, copyright or patent infringement, tax claims, or maritime law?
• Is the opposing party a citizen of another state or country?
• Is the amount in controversy at least $75,000?

If the answer to any of these question is “yes” you may be able to file your lawsuit in federal court; however, you may also have the option to remain in state court. Where you file your lawsuit may have a significant impact on the outcome of the case which is why you should consult with an experienced Conshohocken, Pennsylvania business litigation attorney as soon as possible to discuss your options. Contact the business litigation attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.