Sections 1404 and 1406 of title 28, concerning change of venue and cure or waiver of defects respectively, would be amended by a cross reference to Chapter 84 (this is a new chapter which will incorporate the provisions of H.R. 5546 if passed) for special provisions relating to venue in diversity of citizenship jurisdiction cases. Finally, the bill provides for the Act to take effect 60 days after the date of enactment. We suggest that any potential problems concerning pending litigation might be avoided if, in a manner similar to H.R. 761 or H.R. 7243, the bill were made to apply "only to actions filed" or "only to actions commenced" 60 days after the date of enactment. V. Analysis of H.R. 761 H.R. 761 would abolish the diversity of citizenship jurisdiction of the Federal courts. The traditional explanation for diversity jurisdiction is the fear that State courts would be prejudiced against those litigants from out of State. However, the decision to retain or abolish such jurisdiction should depend on the utility of the jurisdiction in today's society. In this regard, Currie, "The Federal Courts and the American Law Institute," 36 U. Chic. L. Rev. 1 (1969), states that the ALI proposals (which are similar to H.R. 5546) are so complicated that they will invoke more jurisdiction litigation in an already over-complicated area. Moreover, the actual showing of local prejudice or local influence against the litigant from out of State has been nearly impossible to make. Further arguments against diversity jurisdiction are that (1) it congests the Federal courts, (2) it interferes with State autonomy since Federal courts have to decide cases arising under State law, and (3) it diminishes incentives and energies for State reform. (See Wright, "Law of Federal Courts" at 76.) Nevertheless, the basic issue in determining whether diversity jurisdiction should be abolished is whether, on balance, there is any real justification for retaining diversity jurisdiction, e.g., whether local prejudices against out-ofStaters are so significant as to be a danger, whether the existence of concurrent jurisdiction is necessary to spur higher standards when such jurisdiction exists anyway in Federal question cases and whether preventing plaintiffs from invoking jurisdiction of the Federal courts in their own districts could cause hardship or inconvenience for a plaintiff who for one reason or another cannot get jurisdiction over the defendant in the plaintiff's State court. Resolution of this issue is for the Congress. We hope this information will prove useful to you. MICHAEL REMINGTON, Esq., R. F. KELLER, Deputy Comptroller General of the United States. WILLIAM M. SHERNOFF, Claremont, Calif., August 29, 1977. House Judiciary Subcommittee on Court, Civil Liberties, and the Administration of Justice, Rayburn House Office Building, Washington, D.C. DEAR MR. REMINGTON: Our office specializes, among other things, in insurance litigation which brings us, in many of our cases, before the United States District Courts on the basis of diversity of citizenship jurisdiction. As such, we are interested in current proposals before Congress to amend or eliminate the diversity of citizenship jurisdiction of the Federal Courts. Congressman Don Edwards has supplied us with copies of Bills presently before the Subcommittee and suggested that we contact you concerning our thoughts about the pending legislation. I am taking this opportunity, at Congressman Edwards' suggestion, to acquaint you with our primary concerns and observations concerning diversity of citizenship jurisdiction. Initially, we seriously question whether there is any validity to the "local bias" concept underlying the diversity of citizenship jurisdiction, particularly with reference to large, national corporations. The place of incorporation of these companies is dictated either by historical circumstance or by a desire to take advantage of local corporations laws. The principal place of business is also usually a result of historical circumstance. Neither of the above criteria relating to citizenship of corporations is particularly logical and both certainly ignore the economic reality that many corporations do more business in states other than their state of incorporation or the state where their principal place of busi ness is located. A large national corporation doing a substantial business in the state should not be able to avoid litigation in the local courts by removal to Federal Court. These so called "out-of-state" defendants, in many cases, do more business in California than many local businesses. As such, there is nothing which casts them as "foreign" and so subject to any local bias against them. In addition, "local bias" as a rationale for diversity of citizenship jurisdiction fails when one remembers that the jury is made up of local people, the judge is usually appointed from the local area, and the Court is applying local law. Given the above, there is no reason to believe that the local courts will be any more biased against so called out-of-state defendants than the Federal Courts. It has been our observation that, at least in California, removal to Federal Court on the basis of diversity of citizenship jurisdiction is used primarily as a means of forum shopping. The national companies involved wish to take advantage of the much more restrictive procedures used in the Federal Courts which usually seem to work to the advantage of the defendants. In addition, diversity of citizenship cases clog the Federal Courts with local disputes which are to be resolved with reference to local law. In most cases, the state courts are much more suited to dealing with the issues involved. By contrast, the Federal Courts are required to "shift gears" and apply state, as opposed to Federal, law in diversity cases, and are also required to determine, in many cases, what a state court "would probably say" if confronted with a particular issue. This posture of second-guessing another jurisdiction is very uncomfortable, particularly where it can easily be avoided. The cases will, if they remain in the state courts, be spread amongst many different state courts, thus posing less of a burden to the state court system than it presently poses to the Federal Courts. Finally, it is our belief that merely raising the minimum amount in controversy required from $10,000 to some higher figure will, by itself, have little impact. As it presently stands, the Court looks to the allegations of the complaint to determine whether or not the $10,000 has been alleged. If the jurisdictional amount is raised to some other figure, the complaints will simply be altered to plead amounts sufficient to satisfy the jurisdictional requirements of the Court. HR5546, proposed section 1301, subparagraph (3) attempts to set up a proceeding whereby the trial court can preliminarily test the validity of the amount in controversy pled in the complaint. It is our belief that this procedure will simply further clog the processes of the Court and will, in fact, result in very few cases being dismissed for lack of jurisdiction. This position is based primarily on the fact that, at the preliminary stages, it is very difficult for counsel, or the Court, when dealing with damages for emotional distress and pain and suffering to predict what amount of damages a jury or judge hearing the case might award. Based on the above considerations, we support the position taken by Rowland F. Kirks, Director of the Administrative Office of the United States Courts in his letter of March 31, 1977, to the Honorable Thomas P. O'Neill, Jr., Speaker of the House of Representatives. We believe that the best solution of the problems presently posed by the diversity of citizenship jurisdiction is to entirely eliminate diversity of citizenship jurisdiction. However, we would, as a fall-back position, welcome the amendment to 28 U.S.C. § 1332 (a) (1), as proposed by HR7243. After giving careful review to HR5546, we believe that this attempt to comprehensively revamp the diversity of citizenship jurisdiction fails primarily because the system which it contemplates is as complicated and unwieldly as the present system which it proposes to replace. In addition, although the Bill ap pears to deny diversity of citizenship jurisdiction to corporations which have been engaged in business in the state for two years, it appears to dispense with the requirement of complete diversity of citizenship between all plaintiffs and all defendants. As such, it would appear that this proposal will not have the effect of reducing the number of cases in Federal District Court on the basis of diversity of citizenship jurisdiction by the significant amount needed. Also, as stated above, it is our belief that the proposal to raise the minimum amount in controversy from $10,000 to $25,000 will have little or no impact, at least in and of itself, on the number of cases before the United States District Courts on the basis of diversity of citizenship jurisdiction. I hope these observations will be of some assistance to you in determining the approach to the problem which should be taken by the Subcommittee. I hope that the experience and observations of the practicing Bar with respect to the solution of the Federal Court jurisdiction problem will be given some attention. If possible, at some point, I would welcome an opportunity to make a more formal presentation of these issues to the Subcommittee, and I would welcome an opportunity to provide some input in response to any questions concerning these issues which the members of the Committee might have. I look forward to hearing from you concerning these issues at your earliest convenience. Thank you for your courtesy and cooperation. Very truly yours, WILLIAM M. SHERNOFF. STATEMENT BY NAACP LEGAL DEFENSE AND EDUCATIONAL FUND, INC. The NAACP Legal Defense and Educational Fund, Inc. has a substantial interest in questions relating to the scope of jurisdiction of the Federal Court. The great majority of our work is as plaintiffs' counsel in actions brought pursuant to the various Civil Rights Acts and the Constitution of the United States. Of course, this litigation is brought in Federal Court, therefore, we have long been concerned with the effects which congestion of calendars in the Federal Courts have on their ability to fulfill what we believe to be a primary function, the enforcement of the constitutional and civil rights of American citizens. There are a variety of Bills pending in Congress this session which address issues relating to the jurisdiction of the Federal Courts and we either have or will make our views known as to the impact of these Bills on the enforcement of civil rights. Our interest in the present Bill, therefore, is not because it has a direct bearing on the enforcement of civil rights, but since it involves the overall caseload of the Federal Courts, it can have a significant impact on their ability to fulfill what we consider to be their most important function. In preparing our statement we have reviewed cases we have been involved in over the last ten or more years. As far as we can tell in the more than 2500 cases LDF has litigated during that period, there have been only one or two cases in which we have been able to use diversity jurisdiction as the basis for the protection of civil rights. In those cases we were able to remove actions from State Court into Federal Court under diversity jurisdiction which could not be removed under the restrictive provisions of the civil rights removal statute. To be perfectly frank, those few occasions in which we were able to use diversity jurisdictions were aberrations. We have therefore concluded that the abolition of diversity jurisdiction would not have any significant negative effect on the ability of the Federal Courts to enforce civil rights. To the contrary, the lifting of this considerable burden from the Federal Courts would allow them to direct their energies toward actions filed under the civil rights statutes or under general federal question jurisdiction by which constitutional and civil rights can also be enforced. We have reviewed with care the statements made both for and against the abolition of diversity jurisdiction submitted by other organizations and witnesses to the Subcommittee. In light of all these considerations, it is our view that H.R. 761 should be enacted and will be a positive contribution to the functioning of the Federal Court system. NATIONAL SENIOR CITIZENS LAW CENTER, Re Diversity of Citizenship Bills. DEAR MR. KASTEN MEIER: On behalf of the National Senior Citizens Law Center, I am pleased to respond to your request for the Center's comments concerning the bills pending before the Subcommittee on Courts, Civil Liberties and the Administration of Justice relating to diversity of citizenship jursdiction (H.R. 761, H.R. 5546, H.R. 7243 and the Justice Department bill) and proposed expansion of the jurisdiction of Federal magistrates. We have collaborated with Mr. Dennis Sweeney of the Baltimore Legal Aid Bureau in regard to the magistrates legislation. His response to you dated September 30, 1977 represents the views of this office concerning that legislation. Our remarks here will be limited to the bills relating to diversity jurisdiction. The National Senior Citizens Law Center is a national support center, with offices in Los Angeles and Washington, D.C. specializing in legal problems of the elderly poor. We are funded by the Legal Services Corporation and the Administration on Aging of the Department of Health, Education and Welfare. While the Center specializes in the legal problems of the elderly poor, we have also sought the views of other legal services attorneys with respect to diversity of citizenship legislation. Those persons contacted have expressed general agreement with the thoughts discussed here. COURT CONGESTION AND ACCESS As an organization dedicated to serving the legal needs of the elderly poor, we share this Subcommittee's concern about Federal court congestion, which poses a serious threat to the poor. Typically, poor persons are without extra resources to sustain them pending resolution of litigation. Much litigation brought by poor persons involves basic survival issues, dealing with the right of the person to essentials such as income, housing, health care or nutrition. Thus, poor persons are far more likely to be grievously harmed by delay caused by court congestion than are other litigants. In addition to the harmful delay visited upon those of our clients who are able to litigate in the Federal courts, we find that constantly increasing numbers of our clients are being deprived entirely of any opportunity to seek assistance in Federal courts. In recent years United States Supreme Court decisions have severely restricted the access and relief available to poor persons and public interest groups in the Federal courts. See, for example, Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26 (1976) (welfare rights organization held without "standing" to assert that IRS action violated tax law requirements that hospitals provide services for those not able to pay); Warth v. Seldin, 422 U.S.490 (1975) (plaintiffs lack standing to challenge zoning ordinance allegedly adopted for the purpose of excluding persons of law and moderate income from the community); Juidice v. Vail, U.S. 97 S.Ct. 1211, 51 L.Ed.2d 376 (March 22, 1977) (judgment debtor barred by abstention doctrine from raising Federal constitutional challenge to state court contempt proceedings under which the debtor could be imprisoned); Aldinger v Howard, 427 U.S.1 (1976) (pending jurisdiction unavailable to obtain Federal court jurisdiction over county for claim by former employee that her termination violated her Federal constitutional rights); Rizzo v. Goode, 423 U.S. 362 (1976) (Federal courts should abstain from enjoining city officials to take affirmative action to halt an allegedly pervasive pattern of unconstitutional police mistreatment of minority and other city residents); Weinberger v. Salfi, 422 U.S. 935 (1975) (Federal courts without Federal question jurisdiction to hear assertion of claimants that they are unconstitutionally prevented from receiving Social Security Act benefits); Califano v. Sanders, 430 U.S. 99 (1977) (Federal courts without jurisdiction to review decision of the Secretary of Health, Education and Welfare not to reopen adjudication of a claim for disability benefits under the Social Security Act): Alyeska Pipeline Service Co. v. The Wilderness Society, 421 U.S. 240 (1975) (attorneys fee awards may not be made to public interest groups on basis of equitable, private attorney general, theory); Edelman v. Jordan, 415 U.S. 651 (1974) (sovereign immunity under Eleventh Amendment bars Federal courts from ordering retroactive payments by States of wrongfully withheld aid to aged, blind, and disabled); Zahn v. International Paper Co., 414 U.S. 291 (1973) (each member in class action must satisfy $10,000 jurisdictional amount requirement). In recent years, Chief Justice Burger has spoken often of his concern about the heavy and increasing workload of the Federal courts. It seems not beyond the real of possibility that some of the court's restrictive decisions have been motivated at least in part by a desire to reduce the present court overload. Our clients have no desire to permit Federal court congestion to continue as an inducement to further restrictive decisions. In any event, it is our clients' desire that several of the lines of cases restricting their access to the courts be overruled by legislative action. They are realistic in this respect and are well aware that increased court access will come, if at all, only in conjunction with intelligent action aimed at reducing Federal court congestion. Diversity of citizenship jurisdiction no longer serves any important purpose. The historical justification, the fear that litigants from foreign states might be subjected to tribunals biased in favor of residents of that state, is not compelling today. In addition, limited Federal court resources should be marshalled, and concentrated upon issues where the Federal courts have special expertise and a unique role. Under this standard, questions of Federal statutory and constitutional law must take priority over those of contract and tort law, which are typically presented when diversity jurisdiction is invoked. We therefore support abolition of diversity jurisdiction as one important means of reducing congestion so that the Federal courts may be available to those persons with the greatest need. CONCLUSIONS Of the approaches offered in the legislation under consideration, we prefer H.R. 761, as the most complete, and technically sound, method of abolishing diversity of citizenship jurisdiction. We do wish to make a special point of our objection to the H.R. 5546 proposal for increasing jurisdictional amount from $10,000 to $25,000. Such a proposal impliedly assumes significant correlation between monetary amounts at issue, and the importance of these issues to litigants and society in general. Such an assumption can not withstand scrutiny. Obviously, litigation over a $500 claim asserted by or against a poor person could have a much greater impact upon that person (and could, for that matter, involve issues and principles affecting more persons) than might litigation in which $50,000 is at issue have upon General Motors Corp. The monetary amount distinction is, at its foundation, economically discriminatory, making the Federal courts more accessible to persons and entities who customarily handle larger amounts of money and property, and less accessible to those with fewer resources who at least arguably, have greater need for court protection. The monetary amount approach is outmoded, a product of earlier, property-oriented thinking. We hope that, instead of perpetuating the jurisdictional amount approach, this Subcommittee will marshal the limited resources of the Federal courts so that those resources may be concentrated upon "Federal question" and other litigation with respect to which Federal courts have a special role. The outright abolition of diversity of citizenship jurisdiction would be a laudable step in that direction. Mr. Dennis Sweeney of Baltimore Legal Aid has authorized us to advise you that he concurs, and joins in, these remarks. Thank you for granting us this opportunity to comment upon this legislation. Very truly yours, EDWARD C. KING. PUBLIC CITIZEN LITIGATION GROUP, Re: H.R. 9123. Hon. ROBERT W. KASTEN MEIER, Subcommittee on Courts, Civil Liberties, and the Administration of Justice, Committee on the Judiciary, House of Representatives, Washington, D.C. DEAR MR. KASTEN MEIER: This letter is to strongly endorse H.R. 9123 which is now pending before your Committee. This bill would place new limitations upon the availability of diversity of citizenship jurisdiction in the federal courts without at the same time eliminating it entirely. We believe that this is an appropriate balancing of the competing interests, and that the reduction in diversity jurisdiction should make the federal courts more available for their basic purpose the resolution of disputes of federal law. With respect to H.R. 9123, we specifically note that it has been modified from earlier drafts within the Justice Department, which would have had the effect of altering the definition of diversity of citizenship, and thereby unintentionally amending the jurisdictional basis for interpleader actions under section 1335. The bill as now written would not have that effect and hence interpleader actions |