Another thing to remember is that "citizenship" for diversity purposes doesn't necessarily mean the same thing as residence. The courts have interpreted it as referring to the location of one's "domicile," i.e., the place you have the intention of being indefinitely (not necessarily permanently, just for the foreseeable future), and to which you have the intention to return when/if you are ever away. For example, your "guys from NJ" might not have their domicile in NJ, if they don't intend to remain in NJ indefinitely; suppose they're 1st-year PhD candidates and will be living in NJ for 5-7 years. They still wouldn't be citizens for diversity purposes, if they intended to go to some other state once they were done with their studies.
Also remember that complete diversity of citizenship must exist on both sides, i.e., no party on one side can have the same state of citizenship as any party on the other side.