The Federal courts do have jurisdiction over the civil nature regarding parties that are from another state, but there are limits set by the federal law that have to be exceeded. It does not look like this would be the case for Mr. Jones. The main question would be does the Federal court have any reason to take jurisdiction for a real estate issue, and in this case, it would seem not. The State court does have jurisdiction over real estate problems, and they would more than likely over the Swiss citizen who owns the property. From all the readings, he would just need additional notification.
The issue about the citizenship of the landowner would not be an issue unless he or she is a diplomat. Being a Swiss citizen does not give him any federal court jurisdiction. He legally has the same rights as Mr. Jones. Note that the supremacy clause does not convey any rights; it simply sets out the principle that the federal constitution is the supreme law of the land, and that federal law trumps state law. (FindLaw).
It would seem that arbitration would be the best resolution in this matter, unless some sort of mutual mediation will be agreed on. The Swiss citizen has already expressed his intent on filing against Mr. Jones but there is no guarantee he will due to the applicable laws and what both parties may be willing to agree to on the matter.
Criminal action can be a means of settlement for some cases, with the outcome being either conviction or dismissal. A conviction would bring some sort of fine and possible imprisonment for the worst cases. Civil actions are brought to resolve disputes between the parties; this could be for something as simple as one party owing another for damages. From what the reading has stated, there has been no violation of any law by Mr. Jones since the City was the one who handed over the permits. How could the City hand over permits to Mr. Jones without noticing? The fraud charge would not stand since the City issued Mr. Jones...