SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY

COMMITTEE ON THE JUDICIARY

U.S. HOUSE OF REPRESENTATIVES

OVERSIGHT HEARING ON

THE NEED FOR ADDITIONAL FEDERAL DISTRICT COURT JUDGES



Thursday, October 9, 1997

Room 2237 Rayburn Building, 10:00 AM



Dolin Testimony

Mr. Chairman and Members of the Subcommittee:
My name is Mitchell F. Dolin, and I am a practicing attorney with Covington & Burling in Washington, D.C. I am Co-Chair of the Task Force on the Judiciary of the American Bar Association's Litigation Section. I have been designated by the ABA's president, Jerome J. Shestack, to present the Association's position on certain aspects of H.R. 2294, the Federal Courts Improvement Act of 1997, and H.R. 2603, the Alternative Dispute Resolution and Settlement Encouragement Act. We at the ABA welcome these hearings as an opportunity to bring the expertise and experience of the organized bar to your consideration of this legislation.
The two bills under consideration contain numerous technical and substantive provisions. My testimony today will focus on those substantive areas where the ABA has adopted policy, principally those that would affect the scope of federal diversity jurisdiction.

H.R.2294 - FEDERAL COURTS IMPROVEMENTS ACT OF 1997

A. IN-STATE PLAINTIFF DIVERSITY JURISDICTION

Section 302 of H.R. 2294 seeks to limit the scope of diversity jurisdiction by prohibiting the invocation of this jurisdiction by in-state plaintiffs. This measure, identical in substance to proposed legislation repeatedly rejected by Congress in recent years, is unwise as a matter of policy and practice. Before turning to the specifics, a few general comments about diversity jurisdiction may be helpful in putting this proposal in perspective.
The Association's position on diversity jurisdiction is one of long standing. In June 1978, the ABA adopted its position opposing the elimination of diversity jurisdiction in general and the elimination of diversity jurisdiction for in-state plaintiffs in particular. This action was taken after the House of Delegates had rejected a resolution to abolish or curtail diversity jurisdiction. The ABA's policy opposing limitations on diversity jurisdiction was formally reaffirmed in August 1996.
For more than 200 years, diversity jurisdiction has well served the ends of justice in America. The system of coordinate jurisdiction, under which the federal and state courts are both empowered to resolve questions of state and federal law, has been a vital part of our federalism since 1789. While some may think it anomalous, it is an important part of our federal system and is not inconsistent with notions of sound judicial administration. Congress should not alter diversity jurisdiction in the absence of a compelling demonstration of a need for change. The ABA believes that the proponents of change have not made, and cannot make, that showing.
The arguments for and against legislative change are by now familiar to the members of this Subcommittee. Those who propose the total elimination of diversity jurisdiction rely most heavily on two arguments: (1) that the fear of local prejudice originally justifying diversity jurisdiction is a vestige of the past; and (2) that the elimination of diversity jurisdiction would relieve our overburdened federal courts. Those who favor retention of diversity jurisdiction dispute the premise that localized prejudices have disappeared and believe that there are better ways to lessen the burdens on our federal system than to shift that burden to our overtaxed state courts.
The oft-stated goal of the Judicial Conference of the United States has long been the abolition of diversity jurisdiction. Its endorsement of limitations such as eliminating in-state plaintiff suits and last year's increase of the amount-in-controversy threshold are interim steps toward that goal. Notwithstanding the Judicial Conference's position, few issues of concern to the legal profession have evoked the Bar's uniform, sustained, and strongly held opposition as this issue. The vast majority of the organized bar, including the American Trial Lawyers Association, the American Corporate Counsel Association, and all fifty state bars have steadfastly opposed such diversity "reforms."
The Judicial Conference recently took this opposition into account when it finalized the recommendations of its Proposed Long Range Plan for the Federal Courts relating to federal court jurisdiction. Earlier versions of the Plan called on Congress "to eliminate diversity," with narrow enumerated exceptions, or alternatively to reduce substantially the scope of diversity by eliminating in-state plaintiffs' jurisdiction and by raising the minimum amount-in-controversy requirement. The final approved Long Range Plan drops the call for eliminating diversity jurisdiction and instead urges Congress to "consider seeking to reduce the number of federal court proceedings" based on diversity jurisdiction. Section 302 of H.R. 2294 reflects the Judicial Conference's incremental approach. The ABA, however, believes that the in-state plaintiffs' proposal is as flawed as the older calls for complete elimination of diversity.
Section 302 of H.R. 2294 would bar plaintiffs from invoking diversity jurisdiction when they sue in their home states. Under this proposed legislation, however, an out-of-state defendant sued in state court by an in-state plaintiff would still have the right to remove to federal court.
The elimination of diversity jurisdiction for in-state plaintiffs obviously implicates different arguments from proposals to eliminate diversity jurisdiction entirely. Those who propose elimination of in-state plaintiffs' diversity jurisdiction tend to argue from narrower grounds; they argue: (1) that although local bias may persist, a plaintiff suing in his or her home state need not fear such bias; and (2) that elimination of diversity jurisdiction for resident plaintiffs is a moderate change that would alleviate the federal caseload burden without swamping the state courts.
The ABA submits that, while the pending bill appears to be less extreme than total elimination of diversity, it has the same basic defects and in some ways would have consequences even more untoward than total elimination.
The argument that in-state plaintiffs are not entitled to a federal forum in their home states because they need no protection against localized prejudices is both untrue and beside the point. The fact is that many in-state plaintiffs seek a federal forum in their home states to escape real or perceived state-court bias. For example, a local plaintiff suing an out-of-state corporation might nonetheless be the victim of local bias if the corporate defendant is the major employer in his or her small town. Similarly, some in-state plaintiffs may be much more out of step with local folkways and sympathies than the out-of-state defendant. Federal court would provide such plaintiffs access to a jury venire drawn from a broader geographical range, one that may be (or perceived to be) less beholden or sympathetic to the defendant. Thus, while we tend to assume that the non-resident defendant is the only party that needs protection from local prejudices, this is not always the case.
In any event, the argument that in-state plaintiffs need no refuge from local prejudice misses the mark for a more fundamental reason: It incorrectly assumes that avoidance of local prejudice is the only justification for diversity jurisdiction. In fact, quite little is known about why diversity jurisdiction was provided for in the Constitution and the Judiciary Act of 1789. If protection of non-resident defendants from geographical prejudices had been the main rationale for diversity jurisdiction, it would be difficult to explain why in-state plaintiffs have been permitted to invoke diversity jurisdiction since the enactment of the Judiciary Act of 1789.
The benefits of diversity jurisdiction are many and transcend concerns about geographical bias. Diversity jurisdiction brings to the federal courts questions of national importance; indeed, as one federal judge has observed, the "demonstrable need for a federal jurisdiction in major matters affecting interstate commerce . . . alone should justify its continued existence." Diversity jurisdiction also facilitates an important dialogue between the state and federal courts by which each system learns from the other in connection with procedural and evidentiary rules, as well as matters of substantive law. It also preserves a citizen's access to justice and provides an alternative forum well worth its cost. Aside from complaints about the burdens that diversity cases may impose on the federal courts, there appears to be general satisfaction with the manner in which the federal courts handle diversity cases.
Eliminating in-state plaintiffs' diversity jurisdiction would deprive litigants of important federal innovations. For instance, the machinery now available under Section 1407 of the Judicial Code (28 U.S.C.  1407) for pretrial consolidation of multi-district litigation ("MDL") involving mass disasters and mass-tort situations applies only to cases in federal court. Similar benefits, actual and potential, are facilitated by nationwide class actions in the federal courts. In addition, some very recent federal innovations, such as the December 1993 changes in the Federal Rules of Civil Procedure regarding pre-trial discovery and the plans of individual districts pursuant to the Civil Justice Reform Act of 1990, promise to streamline the pre-trial process for all civil cases in the federal district courts.
If congestion in the federal courts is the problem, the solution is not to limit the public's access to the system by reducing the scope of diversity jurisdiction, especially when that jurisdiction is serving a useful purpose in our society. Diversity jurisdiction should not be blamed for the fact that many federal courts are crowded.
In the recent past, diversity cases have tended to account for between twenty percent (20%) and twenty-three (23%) of the annual civil case filings in the federal courts. According to the statistics published by the Administrative Office of the United States Courts for the twelve-month period ending September 30, 1996, diversity cases accounted for just over twenty-two percent (22%) of civil filings. Prior to the 1989 effective date of the increase in the amount-in-controversy requirement from $10,000 to $50,000, diversity cases accounted for nearly twenty-nine percent (29%) of the federal civil docket. In terms of annual filings, diversity cases were down from nearly 70,000 in 1988 to approximately 60,000 in 1996. As a percentage of the federal civil docket, diversity filings are about as low as they have been in 45 years and down seven percentage points below where they were several years ago. And as a result of the recent increase in the diversity amount-in-controversy from $50,000 to $75,000, which became effective in January 1997, diversity cases can be expected to decline further in both numerical and percentage terms.
Diversity-related strains on the federal system have been significantly reduced during the past decade and will be further reduced once the January 1997 increase in the amount-in-controversy is felt. Congestion in the federal courts comes from many other sources, including the increased criminal caseload, the statutory creation of new federal causes of action and crimes, unfilled judicial vacancies, population growth, and the increasing litigiousness of the American public and its government. Curtailing diversity jurisdiction is no panacea if the problem at issue is federal court congestion.
Moreover, any perceived benefits of relieving federal burdens by eliminating federal jurisdiction for in-state plaintiffs would be more than offset by the burdens that would be imposed on our state judicial systems. The argument that diversity cases should be shifted from the federal courts, which are overburdened, to the state courts, which can easily absorb them because of the state system's collectively larger capacity, is an inaccurate over-simplification. Some federal districts are not overburdened, while some state courts are so overburdened that it takes several years to get a case to trial. Obviously, justice will not be served by "transferring cases from one logjam to another."
Since 1985, civil caseloads in the state courts have dramatically increased. In 1992, filings per federal judge totaled 1,238 while filings per state judge totaled 3,365; for civil and criminal cases, filings are increasing much more rapidly in the state courts. In many urban areas, including Houston, New York City, and Pittsburgh, the median time from filing to disposition has tended to be much higher in state court than in federal court.
Although we obviously cannot predict with certainty how many cases will be shifted from federal to state court as a result of the pending proposal, indications are that the numbers may be substantial and that those cases will impose a substantial burden on the state courts. The most recent quantitative study of this issue of which we are aware concludes that "barring in-state plaintiffs from filing diversity cases in federal court would impose a disproportionate burden on state courts" and "might be nearly as much of a burden on state court as would be total abolition of diversity jurisdiction." Since federal court diversity cases are on average more complex and time consuming than state court cases, transferring cases from the federal courts will impose burdens on state courts that they are not as well equipped to handle. For example, the transferred cases will involve high amounts in controversy, so they will be more complex and less susceptible to settlement. Furthermore, state courts would have to deal with additional complex multiparty litigation, but without access to federal procedural mechanisms. By combining the unprecedented burdens our state courts are facing today with the added burden of having to deal with complex new cases, enactment of Section 302 would greatly increase the problems faced by our state courts. I would also note that state courts are already facing an enormous challenge in the face of recently enacted laws shifting former federal functions to the states.
The pending bill would also have undesirable consequences for litigants and the federal courts. The practical effect in many cases would be to deprive an injured individual of access to the federal court in his home state even though his interest would be better served in federal court. The alternative of initiating litigation in an out-of-state federal court, which will be pursued by some plaintiffs, will be unavailable to poorer litigants. In cases where that step is taken, all that will be accomplished is to increase the cost of litigation and to inconvenience both the witnesses and the parties. Another consequence of eliminating in-state plaintiffs' diversity jurisdiction is that it would shift the forum-selection decision from the plaintiff to the defendant. Under the pending bill, the defendant sued by an in-state plaintiff would have the opportunity to choose between state and federal court, and it is possible that this option will be exercised by many defendants to place cases in the more heavily congested judicial system.
Finally, we note that the proponents of Section 302 can offer nothing new in support that should prompt Congress to enact a measure that it has considered and rejected year after year. Particularly in light of the fifty percent (50%) increase in the amount-in-controversy, which just became effective earlier this year, Section 302 is particularly ill timed. When Congress adopted the diversity amount-in-controversy increase last year, Congress specifically rejected abolition of ISP diversity and consciously determined "to leave the in-state plaintiff as is." We therefore urge Congress not to reconsider its earlier rejection of this measure.

B. JUDICIAL RETIREMENT MATTERS

Section 401 changes the "rule of 80" age and service requirements for retirement to senior status by justices and Article III judges under 28 U.S.C. 371(b).
The senior status system which originated in 1919 permits a federal judge to retire from regular active service, but retain the office and continue to perform such judicial duties as he or she is able and willing to undertake. In 1984, Congress amended the law to provide a more comprehensive and rational spectrum of age and years-of-service criteria for the retirement of federal judges. Presently under 28 U.S.C. 371, a judge between the ages of 65 and 70 whose age and years of service total 80 may elect either to retire on salary under subsection (a), or retire in senior status under subsection (b). Federal judges have life tenure under Article III of the Constitution and are not required to retire or to take senior status when they become eligible.
The most recent modification to the Rule of 80 in 1989 imposed a requirement that senior judges work a schedule that is at least 25 percent of the average active judge's schedule to be eligible for salary increases other than COLAs. The Judicial Conference must certify in each calendar year those senior judges who are meeting the 25 percent requirement.
Section 401 would only amend Section 371(b) to permit a federal judge to elect senior status between the ages of 60 and 64 if the judge's age and years of service equal 80. The Association has urged such an amendment since 1988, believing that a judge between the ages of 60 and 64 should also be permitted to retire in senior status if the judge's work years and age total 80. Section 401 does not allow, nor does the ABA policy support, amending subsection (a) to permit a judge between the ages of 60 and 64 to retire on salary.
This judicial retirement system has served our nation well, particularly during periods of reduced resources available to the federal judiciary. Senior judges have provided an essential service by helping to relieve staggering caseload pressures and by helping to compensate for lost resources due to judicial vacancies. Lowering the eligibility requirement for senior status to age 60 with a consequent increase in the years of service requirement, as proposed in Section 401, expands the number of judges available to hear cases at a minimal additional cost to the government.
The costs to the government associated with the amendment would not be substantial because a judge will continue to receive the same salary whether he or she elects senior status or not. There is, of course, the salary and related expenses associated with the appointment of a successor judge. However, such costs do not compare with the cost associated with the creation of a new judgeship. Indeed, some of the need for new judgeships is reduced by the earlier appointment of successor judges and the concomitant expansion of the pool of senior status judges. Allowing judges to assume senior status beginning at age 60 would generate an additional number of experienced judges for the pool of senior judges.
Statistics gathered by the Administrative Office of the United States Courts show that senior judges provide invaluable service to the courts, litigants, and taxpayers. Senior judges have become an indispensable resource in the efficient management of the caseload of the district courts, especially with regard to civil cases. On a day-to-day basis, senior judges are utilized to write opinions, decide motions, provide administrative services and participate in settlement efforts. They are assigned to complex litigation -- both civil and criminal, emergency hearings, and oral argument panels. Allowing judges between the ages of 60 and 64 who have the requisite years of experience would significantly enlarge the value of senior judges to our judicial system.
The ABA strongly urges the adoption of Section 401.

C. COMPENSATION FOR ATTORNEYS AND FOR SERVICES OTHER THAN COUNSEL

Sections 501 and 502 would amend the Criminal Justice Act to authorize increases in fees and the compensation paid assigned counsel. The ABA takes no position on the specific amounts recommended in Sections 501 and 502. Our policy, however, endorses compensation rates and case compensation maximum amounts, and fees that are appropriate to the type of cases and the location in which services are provided, and the administrative flexibility to adjust compensation rates to reflect changes in the costs of law practice. To that end, the Association has long endorsed an administrative mechanism for increasing case rates and compensation authorized under the Criminal Justice Act. The objective of our policy is to provide reasonable compensation in accordance with prevailing standards. (See attached policy adopted February, 1982.) Also, in addressing reasonable compensation, our standards urge that administrators of assigned counsel programs have the flexibility to develop criteria for compensation that take into consideration the number of hours reasonably expended in light of the complexity, duration and difficulty of the case. (See Standard 5-2.4. "Compensation and expenses." ABA Standards for Criminal Justice: Providing Defense Services, Third Edition.)
These policies reflect concern over the continued willingness of counsel to participate in the defense of indigent clients. Regardless of the method chosen by Congress to provide for compensation and fee adjustments under the Criminal Justice Act -- statutory or administrative -- we urge that periodic adjustments be made in a timely manner in order to preserve the integrity and purposes for which the Act was passed.



* * * H.R.2603 - THE ALTERNATIVE DISPUTE RESOLUTION AND SETTLEMENT ENCOURAGEMENT ACT

Turning now to H.R.2603 - the Alternative Dispute Resolution and Settlement Encouragement Act. While the American Bar Association has long supported voluntary arbitration in the federal courts, it strongly opposes mandatory arbitration programs, even if nonbinding, where involuntary participation is required before litigants are allowed a trial before a jury or federal judge. All Americans are guaranteed the right to a jury trial in suits at common law by the 7th Amendment to the U.S. Constitution. While arbitration can often be a useful, cost-effective way to resolve many legal disputes, it must be the parties' decision whether to waive their right to judicial fact finding and pursue this option.

A. ARBITRATION IN DISTRICT COURTS

Section 2 of H.R. 2603 would expand the use of both voluntary and mandatory arbitration in federal district courts. It would amend the Judicial Improvements and Access to Justice Act, which was signed into law in 1988, by requiring all federal district courts to authorize by local rule the use of arbitration in civil actions, including adversary proceedings in bankruptcy. The bill would also allow parties in any civil action to submit voluntarily to court-annexed arbitration, while at the same time granting federal district judges the power to force litigants to arbitrate certain cases involving less than $150,000. H.R. 2603 would leave intact the current procedure by which a party who is dissatisfied with the arbitration award may demand a trial de novo in the district court.
Under the 1988 Judicial Improvements and Access to Justice Act, federal judges in 10 judicial districts around the country were granted the power, on an experimental basis, to refer certain cases to mandatory arbitration so long as no federal constitutional questions are involved and so long as only monetary damages of $100,000 or less are being sought. H.R.2603 would greatly expand the use of mandatory arbitration by granting every federal district court the power to make such mandatory referrals and by increasing the maximum size of such cases to $150,000.
The ABA believes that both of these proposed changes are unwarranted and would result in even more parties being effectively denied their constitutional right to a trial by jury. Even though parties who are unsuccessful in arbitrations compelled by the court are permitted to seek a trial de novo and have the dispute heard again by the trial court, their right to have their disputes heard by a judge and jury in the first instance would be taken away. Perhaps more importantly, by requiring parties to initiate a separate court proceeding to reverse the arbitrator's award, parties will be forced to incur unnecessary additional attorneys' fees and court costs, as well as further delays in resolving their claims. As a result, the mandatory court-annexed arbitration programs such as those promoted by H.R.2603 would burden, abridge and often effectively deny the right of civil litigants to a due process evidentiary-based trial in federal court.
Although the ABA strongly objects to the mandatory arbitration provisions of H.R.2603, it does support that portion of the bill that requires each federal district court to authorize by local rule the use of voluntary arbitration in civil actions, including adversary proceedings in bankruptcy. Under the expanded pilot program created by the Judicial Improvements and Access to Justice Act, 20 federal district courts were authorized to refer cases to arbitration when all parties agree to arbitrate. This worthwhile experiment should be extended to all federal courts, and every federal district court judge should have the ability to refer appropriate cases to arbitration when the parties fully consent. To the extent that H.R.2603 would require the creation of such voluntary arbitration programs throughout the country, the bill serves the interests of justice by encouraging the prompt and efficient resolution of cases and by helping to reduce the caseloads of the overburdened federal courts.

B. AWARD OF REASONABLE COSTS AND ATTORNEY'S FEES IN FEDERAL CIVIL DIVERSITY LITIGATION AFTER AN OFFER OF SETTLEMENT

Section 3 of H.R.2603 would revise the federal rules of procedure and apply a modified "losers pay" or fee shifting rule in diversity jurisdiction cases brought in federal court. It would require that if either side rejected a settlement offer prior to trial, and did less well at the trial than the offer, that party would be responsible for a portion of the attorney's fees of the other party.
The American Bar Association opposes enactment of legislation such as Section 3 of H.R.2603 that would apply a concept of "losers pay" to all cases brought in the federal courts pursuant to the grant of diversity jurisdiction because (1) it is an ill-advised approach to limiting diversity jurisdiction, (2) it would encouraging forum shopping, (3) it would deter those who lack the financial wherewithal to absorb not only their own legal fees, but also those of their adversaries from filing meritorious claims or defending meritorious positions, and (4) it would undermine our country's concept of equal justice under the law.
Despite its ostensible purpose of facilitating meaningful settlement negotiations, Section 3 is fundamentally flawed. It is biased toward litigant with financial muscle and places an unfair burden on defendants with limited financial means. Its effect willl be to deter most claimants with limited financial means, and encourage settlement by gamesmanship rather than encouraging realistic appraisals. Consider the following examples of its potential negative impact.

* The proposal does not require that settlement offers be reasonable -- a defendant can trigger the fee-shifting rule by offering to settle for as little as one dollar -- forcing claimants or defendants either to accept an unfair settlement offer or run the risk of incurring the fees of the other side.
* It places an extra burden on the poor, the middle class and small businesses who are entitled by law to choose a federal forum. This extra burden is unrelated to the merits of their claims. Worse yet, its weight is involuntary when it falls on the poor, the middle class and small businesses when they are brought to the federal forum by a litigant much better able to bear the burden of possible fee-shifting.
* Claimants who are not required to pay their own attorney's fees unless they prevail will find themselves losing the entire benefit of that fee arrangement once the defendant makes any offer that triggers the fee provision. Only the wealthy claimant will be able to run the risk of incurring such fees, and in particular, the middle class claimant, who has some assets to lose, will be in the greatest jeopardy.
* In a clear case of liability, the advantage may lie with the plaintiff. That advantage may be partially alleviated by a counter offer or demand, but in all cases the risk of litigation is greater for someone believing their claim or defense is just.
* This proposal does not provide safeguards to allow reasonable access to the federal courts for all litigants and safeguards against an abusive misuse of the fee-shifting procedures. The exemption in Subsection (4) and the relief provided in Subsection (6) for manifest injustice do not begin to level the playing field.

Although the ABA does not support court rules or statutes that include fee-shifting based on rejection of settlement offers, it adopted policy in February 1996 suggesting that if such a statute or rule is being contemplated, certain safeguards outlined in an "offer of judgment procedure," included in the report be incorporated in such a statute or rule. That policy is attached.
The ABA does supports fee-shifting in certain instances when a private party prevails against the government. For example, it supports legislation to shift-- in certain types of administrative and judicial proceedings--the costs of legal representation from a prevailing party to the government to achieve a substantial public benefit or enforce important public rights if the economic interest of the party is small in comparison to the cost of effective participation, and if the prevailing party does not have sufficient resources to compensate counsel adequately.
The case, however, has not been made for abandoning the tradition in this country of requiring each party to bear its own attorneys' fees. While some fee-shifting occurs under some state or federal statutes and procedures, the heavy burden of persuasion must rest on the proposers of such variance from the American Rule.
Before denying access to the courts to those unable to afford the substantial litigation costs involved in this modified "loser pays" proposal, it should first be determined whether there are compelling reasons to change the current American Rule beyond the limited number of statutory exceptions now in effect, or to impose such arbitrary limits on all diversity jurisdiction cases. It has not been demonstrated that this modified "loser pays" procedure is the way to address the concerns it is claimed that the proposal would address.
The early disposition of litigation and the disincentive to filing frivolous claims are important considerations in any civil justice system. In fact, under the current system, the vast majority of cases settle before trial. There is no reason to assume this proposal would have the positive effect of increasing the percentage of cases that settle.
This is exactly why the ABA believes the procedures under the Rules Enabling Act should be the vehicle for considering whether suitable revisions of the federal rules of procedure will enhance early settlement and discourage frivolous litigation without aggravating the existing reality that an advantage in most civil litigation rests with those with the greatest financial resources.
The ABA fully supports the Rules Enabling Act processes which are based on the following three fundamental concepts: (1) the general principle of judicial rulemaking; (2) procedures that permit full public participation of the members of the legal profession, and (3) recognition of a Congressional review period.
The ABA does not question Congressional power to regulate the practices and procedures of federal courts. Congress exercised this power by delegating its rulemaking authority to the judiciary through the enactment of the Rules Enabling Act, while retaining the authority to review and amend rules prior to their taking effect. The ABA does, however, question the wisdom of circumventing the Rules Enabling Act, as is proposed in H.R.2603.
For the foregoing reasons, the ABA urges the rejection of H.R.2603.

* * * * *

In conclusion, I commend the Subcommittee for addressing these issues and appreciate the opportunity to contribute to the dialogue on these legislative proposals.

SUMMARY OF STATEMENT SUBMITTED BY
MITCHELL F. DOLIN ON BEHALF OF THE ABA

My name is Mitchell F. Dolin, and I am a practicing attorney with Covington & Burling in Washington, D.C. I am Co-Chair of the Task Force on the Judiciary of the American Bar Association's Litigation Section.

Diversity Jurisdiction. The ABA opposes those provisions of H.R.2294 which would eliminate diversity jurisdiction for an in-state plaintiff. For more than 200 years, since the ratification of the Constitution and the enactment of the Judiciary Act of 1789, diversity jurisdiction has well served the ends of justice in America. Congress should not alter that jurisdiction in the absence of a compelling demonstration of a need for change. The ABA believes that the proponents of change cannot make that showing.

The ABA believes that in-state plaintiffs, like out-of-state plaintiffs, are equally entitled to the benefits of diversity jurisdiction -- a proposition recognized by Congress in 1789. Diversity jurisdiction shields litigants from localized prejudices, places before the federal courts questions of national importance, and fosters an important dialogue between the state and federal systems. If jurisdiction is eliminated for in-state plaintiffs, the benefits of a federal forum will be denied to plaintiffs without the financial means to pursue litigation outside of their home states.

Diversity cases account for approximately 22 percent of the civil filings in the federal district courts. In total numbers, annual diversity filings have declined from 70,000 to 60,000 over the past decade, and a further decline is expected as a result of the January 1997 increase in the amount-in-controversy from $50,000 to $75,000. The leading causes of federal court congestion are the increased criminal caseload, unfilled judicial vacancies, and the creation of new federal causes of action and crimes. Curbing diversity jurisdiction is no panacea if the problem is federal court congestion.

Finally, the ABA is concerned that any new limitations on the scope of diversity jurisdiction would place undue strains on the state courts. The most recent quantitative study of which we are aware concludes that elimination of in-state plaintiffs' diversity might be as burdensome to the state courts as total elimination. Moving cases from a federal logjam, to a state logjam is no solution.

Rule of 80. The Association supports the proposed change in Section 401 of H.R.2294 that would amend 28 U.S.C. Sec. 371(b) to permit a federal judge to elect senior status between the ages of 60 and 64 if the judge's age and years of service equal 80. The Association has urged such an amendment since 1988, believing that a judge between the ages of 60 and 64 should also be permitted to retire in senior status if the judge's work years and age total 80. Section 401 does not allow, nor does the ABA policy support, amending subsection (a) to permit a judge between the ages of 60 and 64 to retire on salary.

Criminal Justice Amendments. Sections 501 and 502 of H.R.2294 would amend the Criminal Justice Act to authorize increases in fees and the compensation paid assigned counsel. The ABA takes no position on the specific amounts recommended; however, the Association endorses an administrative mechanism for increasing case rates and compensation authorized under the Criminal Justice Act so that adjustments can be made in a timely manner.

Mandatory Arbitration. The ABA strongly objects to the mandatory arbitration provisions of Sec. 2 of H.R.2603, but it does support those provisions that requires each federal district court to authorize by local rule the use of voluntary arbitration in civil actions, including adversary proceedings in bankruptcy.

"Loser Pay" requirement in diversity cases. The ABA opposes enactment of legislation such as Section 3 of H.R.2603 that would apply a concept of "losers pay" to all cases brought in the federal courts pursuant to the grant of diversity jurisdiction because (1) it is an ill-advised approach to limiting diversity jurisdiction, (2) it would encouraging forum shopping, (3) it would deter those who lack the financial wherewithal to absorb not only their own legal fees, but also those of their adversaries from filing meritorious claims or defending meritorious positions, and (4) it would undermine our country's concept of equal justice under the law.

In conclusion, I commend the Subcommittee for addressing these issues and appreciate the opportunity to contribute to the dialogue on these legislative proposals.

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