Federalism in US Courts

Anyone expecting to be involved with US courts, whether in filing or defending against a lawsuit, should be aware of the federal nature of the court system. Like the organization of the EU and of Germany, federalism in America involves a division of powers between two levels of government with equal status. This division between a central, federal government and state governments is what determines which court will hear a given case. This means that it also controls which law applies and which rules govern the proceeding.

State courts and federal courts in the US hear different types of cases. State courts are said to have broad jurisdiction, meaning they can hear a large variety of cases across many different areas of the law. Cases in state court may involve crimes arising from violations of state laws, family or contract disputes, trust and estates matters, or personal injury matters.

Federal courts, on the other hand, have limited jurisdiction. This means they're limited in the type of cases they can decide, and in fact they usually have jurisdiction only in two types of cases. Federal question jurisdiction involves claims arising under the U.S. Constitution or federal laws. For example, bankruptcy cases, immigration cases, maritime cases, patent and trademark cases, cases involving federal crimes or interstate commerce or international trade are all governed by federal laws. And cases involving violations of free speech or equal protection arise under the US Constitution. These examples would all be subject to federal question jurisdiction.

Diversity jurisdiction, the other time when federal courts can hear a case, requires two things. First, for diversity jurisdiction the amount in controversy has to be at least $75,000. Second, the parties have to be citizens of different states. The second requirement is obviously satisfied where the individual parties are citizens of different states, but if one of the parties is a corporation, then a court will consider both the state where the corporation is incorporated and the state where it has its principal place of business. Most important, diversity of citizenship is also satisfied where the case involves US citizens on one side and nonresident aliens on the other.

But which one is better for a non-US litigant?

Well, there may not be a choice. If the case involves a violation of federal law, then under federal question jurisdiction you'll most likely have to try your case in federal court.

 But say the case involves a breach of contract, which is typically governed by state law and would usually be filed in state court. Still, if the amount is over $75,000, non-US citizens could sue a US citizen or corporation in federal court under diversity jurisdiction.

So should they?

Many different considerations come into play in this decision, such as how state and federal courts interpret questions of state law, the possibility of moving your case to a different court elsewhere in the country, or different procedures and timelines that control in each system. These all have to be taken into account, but one key difference is the availability of interlocutory appeals in New York's state court. By allowing the appeal of an adverse order (for example, a ruling on the pleadings or a discovery matter) without having to wait until the very end of the case, interlocutory appeals can help steer the direction of a case. Of course, this comes at the expense of certain advantages one might find in federal court, such as speed and efficiency.

Litigants in the American court system should be aware of the choices and considerations that can affect their case.