P (an Oregon resident) and S (a California resident) recently purchased a fast-food franchise in Oregon from Day, Inc. Day is incorporated in Delaware and has its principal place of business in Chicago. After P and S equipped the restaurant, hired the staff and began advertising their grand opening, Day backed out of the franchise agreement. Assuming that P and S claim more than $75,000 in a lawsuit against D for breach of contract, can they sue D in federal district court? Why or why not? State the legal rule fully before applying it to the facts to reach your conclusion.

Assume the same parties, except that Ds principal place of business is Los Angeles, not Chicago. Can P and S sue D in federal district court, based on diversity of citizenship? Why or why not?