There are fifty-six separate legal systems in the United States: those of the fifty states, the federal government, the District of Columbia, the military, and three territorial systems. Within each legal system is a complex interplay among executive, legislative, and judicial branches of government. This division of authority between a central, federal government and state governments is known as federalism.
In the United States, the federal government only has the authority given to it by the states via the US Constitution. If a power is not granted to the federal government, the states retain the power. For example, the federal government cannot tax the exchange of goods between states as “exports.” The Constitution limits the power of the federal government, and the state constitutions limit the power of the state governments.
Figure 2.3 Federalism Between Federal and State Governments
Federalism is discussed in more detail in Chapter 5.
The authority of a court to hear a particular type of case is called jurisdiction. State and federal courts hear different types of cases, involving different laws, different law enforcement agencies, and different judicial systems. The rules governing the procedures used in these courts are known as civil procedure or criminal procedure.
The rules of subject matter jurisdiction dictate whether a case is heard in federal or state court. The vast majority of civil lawsuits are filed in state courts, including lawsuits involving state laws such as property, contracts, probate law, and torts. State laws also involve most criminal cases, and domestic issues such as divorce and child custody. Torts are any civil wrong other than a breach of contract and include a variety of situations in which people and businesses suffer legal injury. Some states are friendlier toward torts than others, and the resulting patchwork of tort laws means that companies that do business across the nation need to know the different standards they are held to based on the state their customers live in.
Given the wide array of subject areas regulated by state law, most businesses deal with state courts. Federal court subject matter jurisdiction is generally limited to federal question jurisdiction. In other words, federal courts hear cases involving the Constitution or a federal law. Cases involving the interpretation of treaties to which the United States is a party are also subject to federal court jurisdiction. Finally, lawsuits between states can be filed directly in the US Supreme Court.
Sometimes a federal court may hear a case involving state law. These cases are called diversity jurisdiction cases, and they arise when all plaintiffs in a civil case are from different states than all defendants, and the amount claimed by the plaintiffs exceeds seventy-five thousand dollars. For example, a citizen of New Jersey may sue a citizen of New York over a contract dispute in federal court. But if both were citizens of New York, the plaintiff would be limited to the state court of New York. Diversity jurisdiction cases allow one party who feels it may not receive a fair trial where its opponent has a “home court advantage” to seek a neutral forum to try the case.
|Type of Jurisdiction||Description||Minimum Dollar Requirement||Applicable Law|
|Federal Question||Cases involving the US Constitution, treaties, or federal laws & regulations||None||Federal law|
|Diversity of Citizenship||Cases brought between citizens of different states||$75,000||State law|