Law related to diversity jurisdiction in federal court

Factual Scenario:
Bill entered into a contract with Ron to build a house in Fresno. The total cost under the contract for Bill was $500,000, and Bill made an initial payment to Ron, upon signing, of $100,000. However, before construction began, Bill was unable to get certain permits issued by the City of Fresno and so decided not to move forward with construction. He notified Ron and then demanded the return of the $100,000. Ron refused, claiming the $100,000 payment was non-refundable under the contract. In response, Bill hired an attorney who filed a lawsuit against Ron in Fresno County Superior Court (the highest trial court in Fresno County, in the California court system) asking for damages of $100,000 due to the breach of the contract.
While Bill is a resident of Fresno, Ron's construction business and his residence are in Reno Nevada. Despite that, the contract was entered into in Fresno and states that California law would be applied in any dispute over the contract.
Ron hired an attorney in Fresno, and that attorney immediately sought an order from a federal judge to transfer the case from Fresno County Superior Court to the federal court in downtown Fresno. This was done through a procedure called a motion, and if Ron's attorney is successful the federal court would then handle the case from then on. In the motion, Ron's attorney argues that the legal basis for the transfer is an area of law called diversity jurisdiction.
You are the federal judge hearing this motion, and you must decide whether diversity jurisdiction applies, and therefore, whether the case should be transferred to the federal court in downtown Fresno.
Questions:

1. Fully summarize the law related to diversity jurisdiction in federal court (a review of diversity jurisdiction is located on page 45 of the e-textbook).
2. Analyze the facts in the factual scenario and decide if the requirements for diversity jurisdiction have been met. In your answer to this question, it is not enough to simply say whether they have been met or not. You must provide specific reasons based on the facts for your ruling. (For further help in answering this question, the video above reviews how to answer it.)