The Judiciary Act of 1789 established a three-tiered hierarchy of federal courts. Article III of the U.S. Constitution provides that the judicial power "shall be vested in one supreme Court and such inferior [federal] Courts as the Congress may from time to time ordain and establish," but the number and nature of those courts is not specified. At the top of the structure established by the 1789 Act was the Supreme Court, with five associate justices and one chief justice. Down one level were the circuit courts, composed of two itinerant U.S. Supreme Court justices for each of the three geographical "Circuits," who would sit with local district court judges. At the base were the one-judge district courts, one each for eleven of the original thirteen states and two in Massachusetts and Virginia. The act gave the district courts jurisdiction in matters of admiralty and revenue collection, while it gave the circuit courts jurisdiction over other commercial cases and jurisdiction over "all crimes and offenses cognizable under the authority of the United States." Article III gave the Supreme Court original jurisdiction in cases "affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be a party" and appellate jurisdiction in all other federal cases.
Some opponents of the proposed Constitution of 1787 had argued that federal courts were unnecessary and might usurp the jurisdiction of the state courts. Because of this fear, complete jurisdiction over cases "arising under the laws and Constitution" of the United States was not given to the lower federal courts. Further, section 29 of the act required that the federal District Courts follow the trial procedures in use in their particular states, and section 34 provided "that the laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States in cases where they apply."
Nevertheless, one purpose of the federal courts was to ensure that cases that arose between citizens of different states would be decided without prejudice, and since it was assumed that state courts might tend to favor citizens of their own states, the 1789 act gave circuit courts jurisdiction over disputes between citizens of different states or between a citizen of the United States and an alien, as long as the amount in controversy was more than five hundred dollars. The system of having Supreme Court justices "ride circuit" to sit with the district court judges was designed to keep those justices in touch with the needs of the American people, but circuit riding proved to be a difficult hardship for the justices. It was abolished by the Judiciary Act of 1801, but reinstated by the Judiciary Act of 1802 and not permanently ended until after the Civil War, when full jurisdiction over matters of interpretation of federal law was also extended to the inferior federal courts.