More Diversity Jurisdiction Could Tax Stressed Judiciary

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By Melissa Heelan Stanzione

Sept. 14 — Advocates for expanded federal court access to combat the perceived problem of plaintiffs filing cases in friendly forums confront the realities of an understaffed federal judiciary during a House hearing.

The Sept. 13 hearing explored whether the principles behind the 2005 Class Action Fairness Act should apply more broadly to expand the definition of diversity jurisdiction, Rep. Bob Goodlatte (R-Va.) said in a statement.

Federal courts may hear purely state-law cases when there is complete diversity. Complete diversity exists when no plaintiff shares a state of citizenship with any defendant and the amount in controversy exceeds $75,000.

CAFA relaxed that standard for class actions, replacing it with a minimal standard requiring at least one diverse plaintiff and defendant.

Plaintiffs have used the requirement for complete diversity jurisdiction “to close the federal courts to the very types of interstate disputes for which the founders intended to provide a neutral federal forum,” witness Charles J. Cooper said.

But Rep. John Conyers Jr. (D-Mich.) saw the stakes differently.

Repealing the long-standing requirement of complete diversity for suits other than class actions “represents the latest attempt by corporate interests to deny state court plaintiffs access to justice,” he said in a statement.

The Fraudulent Joinder Prevention Act, H.R. 3624, would make it more difficult for plaintiffs who add in-state defendants to defeat federal diversity jurisdiction, but it has stalled in the Senate after passing the House in February (84 U.S.L.W. 1123, 2/11/16).

True Intent

Cooper argued for a minimal diversity standard and said “the statutory requirement of complete diversity of citizenship is not one that the First Congress truly intended to impose on federal jurisdiction in the first place.”

Cooper is chairman of Cooper & Kirk PLLC, Washington, a boutique trial and appellate law firm whose website says it has “successfully defended the vital business interests of our corporate clients and the sovereign rights of our state and local governmental clients.”

CAFA “significantly relaxed” the diversity requirements in class actions and “amended the diversity statute to extend original federal jurisdiction over certain large class actions,” Cooper said.

Federal jurisdiction should be available for other cases, such as mass torts, where plaintiffs' attorneys “abuse” diversity jurisdiction by forum shopping for state courts that are friendly to them, he said.

“Large interstate disputes with large interstate concerns” should be able to be removed to federal court to “frustrate” this kind of forum selection, Cooper said.

Beware of CAFA

Not all of the witnesses agreed that CAFA had been positive for the court system.

CAFA “is a cautionary tale,” Ronald Weich, dean of the University of Baltimore School of Law, Baltimore, said during his testimony.

Many “believe that the law has proved to be overbroad, resulting in a federal forum for cases that state courts would be perfectly well-equipped to handle,” Weich said.

Expanding diversity jurisdiction will increase the cost and complexity of civil litigation for a system that is already overburdened, he said.

Are State Courts Biased?

Another legal scholar was more pessimistic about state courts' ability to handle cases.

Article III of the U.S. Constitution requires only minimal diversity, Joanna M. Shepherd, a professor at Emory University School of Law School, Atlanta, said.

The founders envisioned a system where out-of-state residents could take their cases to federal court to avoid “potentially biased state courts,” Shepherd said.

“A substantial body of empirical research shows that state judicial elections influence judges to decide cases in ways that will get them reelected, by conforming to voter preferences, altering voting patterns and favoring campaign contributors in their decisions,” Shepherd, an economist, said.

Addressing the issue of state-court bias, Rep. Louie Gohmert (R-Tex.) talked about his time as a prosecutor.

“I’ve worked as a prosecutor in federal and state courts; I’ve been a state court judge. I found a tremendous amount of bias in federal courts,” he said.

According to a data compilation and coding study Shepherd conducted, 557,791 cases total would be removable under a minimal diversity standard.

The actual cases that would be removed, however, would increase the federal court system caseload by 7.7 percent, “a relatively small burden on the federal courts,” she said.

We “can only assume” these numbers because we don’t yet have minimal diversity, Weich said.

More Work for ‘Overstressed' Judiciary

“It’s a large increase for an already overstressed court system,” Weich said.

What effect would the elimination of complete diversity have on litigants, Conyers asked Weich.

It would increase the costs of filing, which is traditionally cheaper in state court, and litigation would become more inconvenient, Weich said.

Expanding federal jurisdiction by relaxing diversity requirements would be “unwise,” he said.

Rep. Steven Cohen (D-Tenn.) voiced concerns similar to Weich.

The minimal diversity plan would increase the workload of the federal judiciary, which is overworked and understaffed, Cohen said.

“We don’t have enough judges as it is,” Cohen said.

To help deal with the added caseload, existing judicial vacancies could be filled and the number of judgeships could be increased, Shepherd said.

Congressional Failures

The Senate has failed and disregarded its duty to timely confirm judges, Cohen said.

“Edward Stanton III has been waiting 11 months for confirmation,” Cohen said.

“I’m deeply disappointed we’re wasting the limited time we have on this hearing,” he said.

We should work on restoring voting rights, criminal reform and getting funding to fight the Zika virus, Cohen said.

“This subcommittee has so much to do and shouldn’t waste time” on this, he said.

The hearing, held by the House Subcommittee on the Constitution and Civil Justice, was called “Exploring Federal Diversity Jurisdiction.”

To contact the reporter on this story: Melissa Heelan Stanzione in Washington at mstanzione@bna.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com

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