1976]

40

in which it has its principal place of business by another proposed change, so that neither can invoke diversity jurisdiction in a state in which it has a local establishment. This procedure, as well as the commuter provision, has been attacked as an unworkable rule that will breed threshold litigation," and it has been suggested that the impossibility of defining corporate citizenship is one more reason why diversity juirsdiction should be repealed entirely. Of the three, only the proposed personal representative rule has not been criticized and, in fact, has been regarded as an improvement over the existing rule.13

42

On the whole, the above proposals for restricting diversity jurisdiction are inadequate. Moreover, some proposed amendments" would enlarge the jurisdiction in some measure. Some proposed restrictions would be cumbersome, and one might be tempted to discount the whole set of proposals relating to diversity on this ground. However, that would only leave us with the present system, which is even less attractive.15

The American Law Institute proposals embodied in S. 187646 represent the only effort that has so far been made to remove from the federal courts business that belongs in the state courts. Even a partial measure is better than none at all. The overall effect of its adoption would be to substantially reduce the number of diversity of citizenship cases filed each year in federal courts. In 1971, S. 1876's prospects for adoption were not promising, particularly in regard to the diversity provisions." It is unlikely that the climate of opinion has changed

40 1971 Hearings at 8; OFFICIAL DRAFT at 10.

41 1971 Hearings at 247; Fraser, Proposed Revision of the Jurisdiction of the Federal District Courts, 8 VALPARAISO L. REV. 189, 193-95 (1974).

42 Currie, supra note 7, at 36-45.

43 Id. at 15-16.

44 See 1971 Hearings at 13, 58-68, 131, 147, 308-11; OFFICIAL DRAFT at 16-17, 67-76. 45 See Wright, supra note 11, at 186-92. Professor Wright grades the present allocation of jurisdiction between the state and federal courts in terms of rationality, clarity, efficiency, and the promotion of harmony between the two systems. He finds it irrational-jurisdiction is allocated on the basis that it has been done that way in the past. He believes that the present rules do not adequately apprise a lawyer of reasonable intelligence where he should bring his lawsuit and lead to extensive preliminary litigation to decide where the case should be heard or require wasteful duplication of proceedings. Finally while he believes that the present rules do fairly well in avoiding unnecessary friction between the two court systems, he points out that they could be better. With regard to diversity jurisdiction, he thinks that the A.L.I. proposal permitting removal at the outset of a case by a single defendant even though other defendants are of such citizenship that they cannot remove is an improvement, as is the A.L.I. proposal that the state court may complete the trial when the case becomes removable during the trial, so that, if the case is remanded, judgment can be entered. See OFFICIAL DRAFT at 357-60.

46 The Judicial Conference of the United States has taken the position that the proposals contained in S. 1876 were "well conceived, workable and based upon acceptable compromise" of the differing views of the bench and bar.

47 1971 Hearings, pt. 2, at 761.

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[Vol. 51:347 dramatically enough to permit complete abolition of diversity jurisdiction, but it is to be hoped that at least the American Law Institute proposal will soon be enacted into law.

If the preceding pages have served no other purpose, it is hoped they have shown that times and circumstances change and that what may have been responsive to the needs of the past is not likely to meet the needs of the present. Ultimately, there should be a fair and rational allocation of the nation's litigation based upon the principle that, since state courts are the authoritative expositors of state law under our system, they should be the courts where such issues are tried, and upon the principle that federal courts should be limited to their proper role as national courts dealing with litigation affecting federal rights. Until that time, the American Law Institute diversity jurisdiction proposals represent a step in the right direction.

PART VII

Diversity Jurisdiction

[From Henry J. Friendly, Federal Jurisdiction: A General View (1973) Copyright Columbia University Press]

UP TO THIS POINT, save for the brief excursion into motor vehicle accident litigation, I have been dealing entirely with categories where federal jurisdiction is predicated upon the federal nature of the claim. We come now to the one area where it rests upon the identity of the parties the long controverted subject of diversity jurisdiction. As Professor Wechsler wrote in 1948, diversity and alienage jurisdiction "pose the deepest issue of the uses of the federal courts. In these instances the jurisdiction is employed not to vindicate rights grounded in the national authority but solely to administer state law." Urging a thorough re-examination of the jurisdiction but recognizing the lack of political attractiveness in such an effort, he thought "[s]upport must come . . from the disinterested sources, the judiciary and the bar— including the law members of the Congress-content to view the issue in its right dimensions as a problem of the uses of the federal courts." The increase in "rights grounded in the national authority" during the last quarter-century has affected the issue of diversity jurisdiction in two ways: The new tasks given the federal courts have heightened the required showing of justification for retaining diversity; and many cases that could previously have come within federal cognizance only because of diversity are now subject to federal jurisdiction by virtue of this growth of federal law.3

1. Wechsler, Federal Jurisdiction and the Revision of the Judicial Code, 13 LAW & CONTEMP. PROB. 216, 235 (1948).

2. Id. at 240.

3. Professor Wechsler called attention to the possibility of this development, id. at 239. Judge J. Skelly Wright has recognized that "the prominence of diversity as a legal institution is dwindling today be. cause of the rapidly expanding coverage of federal law," The Federal Courts and the Nature and Quality of State Law, 13 WAYne L.

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140 Federal Jurisdiction: A General View

I am not certain that I qualify as "disinterested" on the issue of diversity jurisdiction; at the very least I would be subject to a peremptory challenge. My first signed piece of legal writing, nearly forty-five years ago, concluded by noting that the growth in the work of the federal courts in administering federal law would "not abate, since it is responsive to deep social and economic causes," that only diversity jurisdiction "is out of the current of these nationalizing forces," and that "[t]he unifying tendencies of America here make for a recession of jurisdiction to the states. . . ." Some might regard that statement as showing remarkable prescience, others as indicating that I never learn. Although I do not like to be cast in the role of a Cato, I cannot but affirm my deep conviction that these thoughts, believed to be true in 1928, are a multo fortiori so in 1972.

We may begin by considering the dimensions of the problem. Of the 96,173 civil cases filed in the district courts in 1972, 24,109 were predicated on diverse citizenship. Ten years ago they comprised 18,359 out of 61,836 civil filings. While their proportion and ratio of increase have thus been less than for civil filings as a whole, a head

REV. 317, 329-30 (1967), but curiously refuses to draw the conclusion that this substantially weakens the case for diversity jurisdiction. While he thinks that diversity jurisdiction will ultimately shrivel as a result of "the rapidly expanding coverage of federal law," id., there is no evidence that it will, in absolute as distinguished from relative terms. See pp. 140-41 infra. On grounds I am unable to comprehend, Professor Moore also considers the extension of federal law to be an argument in favor of retaining diversity, see Moore & Weckstein, Diversity Jurisdiction: Past, Present, and Future, 43 TEXAS L. REV. 1, 20 (1964).

4. Friendly, The Historic Basis of Diversity Jurisdiction, 41 HARV. L. REV. 483, 510 (1928). The article called attention to a 1914 report of a distinguished committee including such now legendary figures as Charles W. Eliot, Louis D. Brandeis and Roscoe Pound, which had stated that "the concurrent jurisdiction of state and federal courts on the ground of diversity of citizenship often causes much delay, expense and uncertainty." PRELIMINARY REPORT ON EFFICIENCY IN THE ADMINISTRATION OF JUSTICE 28 (1914). While one source of the "uncertainty" was removed by Erie R.R. v. Tompkins, 304 U.S. 64 (1938), another was substituted. See pp. 142-43 infra.

5. A.O. ANN. REP., Table C2 (1972). The largest categories are insurance, "other contract actions," motor vehicle personal injury, and "other personal injury." These comprise 82% of the total.

6. A.O. ANN. REP., Table C2, at 196 (1962). `

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of jurisdiction constituting 25% of the civil filings cannot be ignored as de minimis or as of sharply decreasing significance. Opponents of diversity are not required to shoulder the burden of showing it is "working badly" which some have tried to cast upon them. Rather the proponents have the burden of showing sufficient reasons for its retention at a time when the federal court system is severely pressed.

The first and greatest single objection to the federal courts entertaining these actions is the diversion of judge-power urgently needed for tasks which only federal courts can handle or which, because of their expertise, they can handle significantly better than the courts of a state. There is simply no analogy between today's situation and that existing in 1789 when, in the words of the ALI Study, "[s]ince diversity of citizenship was one of the major heads of federal judicial business, it contributed to the expansion of the federal courts throughout the nation" and thus "enhanced awareness in the people of the existence of the new and originally weak central government.' "8 Without diversity jurisdiction, the circuit courts created by the First Judiciary Act would have had very little to do. Perhaps this is as good an explanation as any why the statute made a broad grant of diversity jurisdiction, although this had been hotly contested and not very staunchly supported in the ratifying conventions, including the invocation of a jurisdiction supposedly based on prejudice against outof-staters by a citizen of the state where the suit was brought.

As indicated in an earlier portion of these lectures, the problem of the volume of cases filed is not simply in the district courts, where the addition of judges may afford opportunity for relief, but in the courts of appeals and the Supreme Court. In 1972 diversity accounted for 18% of civil appeals to the courts of appeals; if habeas corpus and other types of federal and state prisoner petitions were excluded from the "civil" category, the proportion would be 24%.10 A significant number of these cases must translate themselves into petitions for certiorari, although almost none are granted.11 For the moment I

7. J. P. Frank, For Maintaining Diversity Jurisdiction, 73 YALE L.J. 7, 8 (1963).

8. ALI STUDY 101.

9. Friendly, supra, 41 HARV. L. REV. at 487-99.

10. A.O. ANN. REP., Table B7 (1972).

11. Although the Supreme Court does not record the number of petitions