Definition - What does Diversity Jurisdiction mean?
Diversity jurisdiction is a power granted to federal courts through a constitutional provision. It allows these courts to hear cases involving individuals from different states, and suits involving U.S. and foreign citizens as long as the amount being sought exceeds the minimum allowed by federal law.
It also allows these courts to hear cases involving corporations from different states, or U.S. and foreign companies.
Justipedia explains Diversity Jurisdiction
A federal court only has diversity jurisdiction in certain circumstances.
In order to preside in a case that would usually be addressed on the state level, all parties must be from different states. In other words, a federal court cannot hear a case in which the plaintiff(s) and one or more defendants are from the same state.
There are other circumstances under which diversity jurisdiction applies, but the court chooses not to employ it.