Jurisdiction
The legal authority of a court to hear and decide a case — based on the type of claim (subject matter) and the parties' connections to the court's geographic area (personal).
Jurisdiction determines which court has the legal power to hear and decide a dispute. Subject matter jurisdiction is the authority to hear a particular type of case — federal courts have jurisdiction over federal law claims, diversity cases over $75,000 between citizens of different states, and bankruptcy; state courts handle most civil disputes, family law, probate, and state criminal law. Filing in the wrong court results in dismissal.
Personal jurisdiction requires the defendant to have sufficient connections to the state (called "minimum contacts") for the court to exercise authority over them. A business that actively sells to customers in a state, has employees there, or is incorporated there is subject to personal jurisdiction in that state's courts. A defendant who is personally served with process while physically present in a state is also subject to jurisdiction there.
Venue is a related but distinct concept — it refers to the proper geographic location within a jurisdiction to file suit. Even if a state court has jurisdiction, a case should be filed in the county where the defendant resides, where the events occurred, or where the contract was to be performed. Venue can be transferred for convenience or fairness.
Real-World Example
The online seller incorporated in Delaware with no employees or property in California argued a California court lacked personal jurisdiction; the court disagreed, finding that targeted advertising to California consumers and $2M in California sales established sufficient minimum contacts.