united-states contract-law federal-courts arbitration
Diversity of Citizenship in Federal Court Jurisdiction?
<p>According to <a href="https://law.stackexchange.com/q/87382/36096">this thread</a>, one of the three criteria in filing suit to compel arbitration in federal court is <strong>diversity of citizenship</strong>.</p>
<p>Suppose Party A enters into a business contract with Party B. Party B sells the business to Party C in such a way that Party C inherits any previous contractual agreements signed by Party B.</p>
<p>Party A and Party C now dispute the interpretation of the contract signed between Party A and Party B. Party A and Party C live in one state. Party B lives in another state.</p>
<p>While Party B is no longer directly liable for the contract, he is able to provide testimony (if subpoenaed) regarding the interpretation of the contract that would be helpful to Party A.</p>
<p>Does any of this constitute <strong>diversity of citizenship</strong> in regards to federal jurisdiction? Or once Party B sells the business the fact that he signed the agreement with Party A and/or can testify as to the intent of the lease is meaningless?</p>

<p>Diversity of citizenship concerns parties to an action.  In the given circumstances, Party B is a witness, not a party.  That is, whether A sues C or vice versa, neither would name B as a defendant.</p>
<p>The determination of diversity jurisdiction occurs in the initial stages of the suit.  Because A and C are citizens of the same state, there is no diversity of citizenship.  Similarly, if Bob and Alice sign a contract when they live in different states, but then one moves to the other's state, and then a controversy arises under the contract, there is no diversity of citizenship.</p>
<p>For reference, <a href="https://www.law.cornell.edu/uscode/text/28/1332" rel="nofollow noreferrer">28 USC 1332(a)</a>:</p>
<blockquote>
<p>(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—</p>
<p>(1) citizens of different States;</p>
<p>(2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State;</p>
<p>(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and</p>
<p>(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.</p>
</blockquote>
