The federal court system has three levels. The first level is the federal district courts. Most lawsuits brought in the federal system start in the district court (although some go directly from state courts to the U.S. Supreme Court). There are several hundred district courts spread among 94 districts. In general, the case must be brought in the district court that is geographically related to the defendant or where the incident occurred. The choice of court is not a neutral decision. Districts differ in the way the judges apply the law and the willingness of their juries to award damages.

The second level is the federal courts of appeals. As the name suggests, those who believe that the district court has misapplied the law or abused its discretion in the handling of their case appeal to these courts. District courts are grouped together into 13 circuits, each with several judges who sit in panels of three, or en banc (all together) to hear the cases appealed from the district courts within the circuit. The appeals courts within a circuit attempt to apply the law consistently within their circuit. Although they try to maintain consistency with the other circuits, they are bound only by the Congress and by the U.S. Supreme Court, not the holding of the other circuits.

The third level is the U.S. Supreme Court. Some types of cases may be brought directly in the Supreme Court, but most travel from the federal district court through a circuit court of appeals, to the Supreme Court or from a state supreme court to the U.S. Supreme Court. The Supreme Court has four primary roles: determining if acts of the U.S. Congress are constitutional; reviewing state laws and court decisions for conflicts with the Constitution and acts of Congress; adjudicating conflicts between the states; and resolving conflicts between the federal circuit courts of appeals. The Supreme Court reviews only laws or court decisions that are contested in a court. It does not provide advisory opinions on the constitutionality of proposed state or federal laws. Even with this limited scope of review, the Supreme Court can decide only a small percentage of the cases that are presented to it each year. Its decision not to review a case, which allows the lower court’s decision to stand, influences precedent nearly as much as the cases in which it issues an opinion. For this reason, the Supreme Court devotes substantial resources to sorting through the thousands of appeals cases presented each year.

Not every case may be brought in federal court. The case must involve federal statutes or regulations, constitutional rights, suits between states, or suits between citizens of different states. Medical malpractice cases are usually tried in state court unless one of the defendants is an employee of the federal government or the parties live in different states. Cases involving constitutional issues such as the right of privacy are brought in the federal courts. Cases involving antitrust law, racketeering law, and Medicare/Medicaid laws are brought in the federal courts because these are federal laws. A case originally brought in federal court may be sent back to the state court if the judge determines that it does not involve a federal issue. Alternatively, a case filed in state court may be sent (removed) to federal court if substantial federal questions arise as the case proceeds.