Goodlatte Statement at Subcommittee Hearing on “Exploring Federal Diversity Jurisdiction”

Chairman Goodlatte:  The topic of this hearing today, federal court diversity jurisdiction, might seem dry and technical at first blush, but it’s actually near the heart of the Founder’s vision of the body politic -- namely their understanding that federal courts should hear cases between citizens of different states, especially when those lawsuits involved commercial or other subjects integral to the national economy. Currently, when a citizen from one state sues a defendant from another state, the inter-state nature of that lawsuit gives federal courts jurisdiction over the case.  While the Constitution provides that Congress can grant federal courts jurisdiction over all such cases – cases involving what lawyers refer to as “minimal diversity” -- a glitch in current statutory law allows trial lawyers to forum shop, and keep their cases in the state courts they prefer, if they sue a defendant from another state and simply also sue an additional local defendant in the state in which they’re filing the case.  Not surprisingly, these rules have been abused by trial lawyers who sue local defendants -- even though the plaintiff’s claims against those defendants have little or no support in fact or law -- because suing those local defendants allows trial lawyers to keep their case in a preferred state court forum.  This committee reported out, and the House passed earlier this year, the Fraudulent Joinder Prevention Act, which would limit this abuse. And just over a decade ago, I was the chief sponsor of the Class Action Fairness Act, which was enacted into law in 2005. As many people have noted, including current Seventh Circuit Court of Appeals Judge Diane Wood, that legislation addressed the same problem in the context of class action lawsuits.  In the Conference Report on that law, Congress was explicit about its view of the purpose of diversity jurisdiction and the need, in multistate class actions, to close another aspect of this jurisdictional “loophole.” The Conference Report commented, for example, that “One of the primary historical reasons for diversity jurisdiction is the reassurance of fairness and competence that a federal court can supply to an out-of-state defendant facing suit in state court.” The Report went on to describe the many reasons the Constitution extends federal court jurisdiction to lawsuits involving citizens of different states, even when questions of state law are at issue.  Among these reasons are that citizens in one state might experience injustice if they were forced to litigate in out-of-state courts; that the availability of federal courts would “shore up confidence in the judicial system by preventing even the appearance of discrimination in favor of local residents;” and that the option of going to federal court would guard against the possibility that the state courts “might discriminate against interstate business and commercial activities” because diversity jurisdiction is itself “a means of ensuring the protection of interstate commerce.” The Conference Report’s section entitled “National Class Actions Belong in Federal Court Under Traditional Notions of Federalism” makes clear that it’s unfair to have “one state court ... dictat[ing] to 49 others what their laws should be,” that it’s unfair to maintain “a system that allows state court judges to dictate national policy,” and that the existing system often allowed one state court to issue rulings that flatly contradicted the law of another implicated state. The Committee Report on the Class Action Fairness Act concluded as follows: “The federal courts are the appropriate forum to decide most interstate class actions because these cases usually involve large amounts of money and many plaintiffs, and have significant implications for interstate commerce and national policy.  By enabling federal courts to hear more class actions, this bill will help minimize the class action abuses taking place in state courts and ensure that these cases can be litigated in a proper forum.” Today, this hearing will examine whether those same principles should apply more broadly, to provide for justice and fairness in even more contexts and situations involving multiple states and national interests. Click here to learn more about today’s hearing. ###