Practice Quiz

Paralegal

Category - Legal System

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An investor sued a stock broker under federal law and alleged fraud in the broker’s marketing of various investments. The investor filed in the appropriate U.S. District Court. The court has subject matter jurisdiction because __________________.
  1. The investor’s claim arises under state law.
  2. The U.S. District Court is a court of limited jurisdiction.
  3. The investor’s claim arises under federal law.
  4. The investor and the broker both reside in the same state.
Explanation
Answer: C - The investor’s claim arises under federal law. A federal court has subject-matter jurisdiction if either federal question or diversity of citizenship jurisdiction exists. Federal-question jurisdiction exists if the plaintiff’s claim arises under federal law or the U.S. Constitution. Here, federal-question jurisdiction exists because the investor’s claim was asserted under federal law.
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