Filed in Los Angeles County, a punitive class action against auto dealer CarMax Auto Superstores alleges the dealer owes unpaid wages to mechanics, dealers, and other employees. The “worth” of the case exceeds nearly $8 million, and Carmax claims that the case belongs in federal court because of its hefty price tag.
So what is the difference between state and district courts? The most obvious distinction are the laws that each abide by. State courts will uphold a state's constitution whereas federal court receives its power from Article III of the United States Constitution.
A case can be brought to federal court “based on ‘diversity of citizenship'” of the parties involved, such as out-of-state litigants or those abroad. Additionally, federal court will have jurisdiction in many cases where the potential damages exceeded $75,000. Both are necessary for complete “diversity.”
State court, however, has jurisdiction based on state laws and policies. For example, let's say a plaintiff brings a suit against a former employer for discrimination. The discrimination claim is alleged under California's Department of Fair Employment and Housing and the Fair Employment and Housing Act. This law is Californian. Both party members reside/operate in LA County in California. Therefore, it is completely appropriate for this case to be heard in the state court because both parties reside in the state and the claims are founded in California law.
There are many other jurisdictions that state courts have that federal courts lack and vice versa. Details can be read at www.uscourts.gov.