TESTIMONY OF JONATHAN C. ROSE, ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGAL POLICY Mr. Chairman and Members of the Committee: I appreciate the opportunity to appear before this Subcommittee in support of H.R. 6691 which would eliminate general diversity of citizenship jurisdiction in the federal courts. Nearly two hundred years ago, the Judiciary Act of 1789 granted the federal trial courts original jurisdiction in cases between citizens of different states. The major historical justification for this jurisdictional allotment was the apprehension that state courts would be prejudiced against out-of-state litigants to the detriment of interstate travel and commerce and national expansion. Whether diversity jurisdiction remains a necessity has been the subject of debate for decades. In recent years, there has been a renewed effort to amend or repeal the diversity jurisdiction statutes, an effort that has won broad support within most segments of the legal community. As our testimony before your Subcommittee in the 95th and 96th Congresses indicate, the Department of Justice has consistently endorsed these efforts. The Department continues to believe that the abolition of diversity jurisdiction is an important court administration reform measure that deserves our support. In a recent speech before the American College of Trial Lawyers, the Attorney General expressed the hope that "the elimination of diversity is a proposal whose time has finally arrived." As you know, the principles of federalism are a cornerstone of this Administration's legal philosophy. In pursuit of these principles, the Department of Justice is committed to support legislative initiatives designed to restore the power of the states to make the fundamental choices affecting the lives of their citizens. To this end, the Department firmly believes that state courts should have the paramount role in resolving disputes concerning matters of local interest involving issues of state law. We also believe that the abolition of diversity jurisdiction would promote judicial efficiency by eliminating a considerable amount of procedural litigation associated with establishing diversity of citizenship, and by clarifying one or the most obscure areas of federal practice. As Professor Thomas D. Rowe, Jr. of the Duke Law School noted in a study of the non-obvious effects of diversity cases, federal judges must spend considerable time determining the actual state citizenship of the parties, attempting to identify manipulation or collusion designed to invoke or defeat federal diversity jurisdiction, determining the proper alignments of parties, sorting out the jurisdictional problems encountered by joinder and intervention, and dealing with the troublesome separate-claim removal provision (28 U.S.C. § 144 (c)).1 These issues would disappear entirely from the federal judicial system if diversity jurisdiction were abolished. Another drawback of diversity stems from the rule of Erie R.R. v. Tompkins, 304 U.S. 64 (1938). Under Erie, federal judges are required to apply state law in diversity cases which can in fact be interpreted definitively only by state judges. Forcing federal courts to guess at the state law diverts precious judicial resources and generates needless uncertainty in the adjudication of cases. As Judge Friendly of the United States Court of Appeals for the Second Circuit has said: in [diversity] cases federal courts cannot discharge the important objective of making law. When the state law is plain, the federal judge is reduced to a 'ventriloquist's dummy to the courts of some particular state' In other cases what passes as an attempt of prediction is mere guess or fiat without any basis in state precedents at all.2 The abolition of diversity jurisdiction would also reduce the caseload of the federal courts. This in turn would result in a significant cost savings as well as a substantial reduction in administrative burdens currently placed on the federal courts. Diversity cases typically represent about one-quarter of the civil caseload of the federal district courts. According to statistics compiled by the Administrative Office of the United States Courts on the federal judicial workload, diversity cases represented approximately 25 percent of the civil cases commenced for the 12 month period ended September 30, 1981. Diversity cases, as opposed to civil cases in general, are likely to remain in the system for longer periods of time, to require more pretrial proceedings, to go to trial rather than to be settled, and by an overwhelming number to require a jury trial. For example, according to the 1981 Annual Report of the Director, published by the Administrative Office of the United States Courts, for the twelve month period ended June 30, 1981, nearly 23 percent of the civil cases 1 T. Rowe, Jr., Abolishing Diversity Jurisdiction: Positive Side Effects and Potential for Further Reforms, 92 Harv. L. Rev. 963, 980-81 (1979). terminated in the district courts were diversity cases. Yet diversity cases accounted for only 14 percent of the civil cases terminated before pretrial. On the other hand, 39 percent of the cases that went to trial and 60 percent of the civil jury trials were diversity cases. Moreover, 11.3 percent of all diversity cases were terminated by trial-a rate nearly twice that for all other civil cases. Based on these statistics, it seems clear that diversity of citizenship cases occupy the time and resources of the federal judiciary out of the proportion to their numbers. In addition, a 1979 study on the Budgetary Impact of Diversity Cases prepared by the Financial Management of the Administrative Office of United States Courts determined that abolition of diversity jurisdiction would result in total annual savings of $8.8 million. State judges have said that they can accommodate the added burden that abolition of diversity jurisdiction would place on state courts. A resolution adopted by the Conference of Chief Justices in August, 1977, noted that the state courts "are able and willing . . [to assume] all or part of the diversity jurisdiction presently exercised by the federal courts." This conclusion was echoed in a 1978 article in the State Court Journal by Victor Flango and Nora Blair, entitled "The Relative Impact of Diversity Cases on State Trial Courts." The authors concluded that the states would experience an average increase in civil filings of only 1.03 percent if federal diversity jurisdiction were abolished and diversity cases distributed evenly among the states. While some states would obviously be affected more than others, the article determined that the overall impact of abolishing diversity jurisdiction could fairly easily be absorbed by the state courts.* Finally, diversity jurisdiction is based on the belief that an out-of-state litigant would be treated more fairly by a federal than a state court. This rationale arose in a time when the nation was not so bound together by communication and transportation ties and when regional biases were stronger. The Department firmly believes that the long-held fear that state court judges will be biased against out-of-state litigants cannot be seriously held today. Professor Charles A. Wright noted in his testimony before this Subcommittee in 1978 that it is "doubtful in the extreme that prejudice against a person because he is from another state is any longer a significant factor." 5 Judge Henry Friendly of the Second Circuit agrees that this bias argument is outmoded. That is particularly true with the growing practice of selecting jurors for both state and federal courts from the same pools. Further, in any given state, judges of the state courts and of the federal district courts have typically been the product of the same state law system. In any event, the Justice Department is confident that state judges can fairly and equitably decide controversies that come before them-whether they are between citizens of the same or different states. The Department also believes that regional bias is probably less a factor in the adjudication of cases than the risk of prejudice based upon a litigant's race, religion, physical appearance or corporate status. Yet no federal forum exists to protect against these biases. Certainly the risk of regional prejudice is not high enough to justify a special category of jurisdiction amounting to nearly 40,000 cases a year in the federal district courts. Finally, possibility of local prejudice against non-residents has no application to a suit by a plaintiff in his home state. Yet federal law would permit an in-state plaintiff to institute a diversity suit against an out-of-state defendant. In addition to supporting the abolition of general diversity jurisdiction, the Department of Justice also agrees with the retention of statutory interpleader based on diversity. In statutory interpleader, the federal courts, with authority for nationwide service of process, fulfill a function that is made necessary by the federal nature of our union and which state courts cannot adequately perform. For the same reason, the Department would support a measure that would permit certain multi-party injury actions to be brought in federal courts. The creation of such a limited new form of diversity jurisdiction would provide a single forum for situations where all parties whose presence is necessary to achieve the just adjudication of a case are so dispersed that they cannot be gathered into a single state court. CONCLUSION Enactment of a bill eliminating the general diversity jurisdiction in the federal courts will be a significant step toward relieving federal courts of their burgeoning 3 Flango and Blair, The Relative Impact of Diversity Cases on State Trial Courts, State Court Journal 20, 22-23 (Summer 1978). * Id., at 24. 5 Federal Diversity of Citizenship Jurisdiction: Hearings Before Subcomm. on Improvements in Judicial Machinery of the Senate Comm. on Judiciary, 95th Cong., 2d Sess., 45 (1978). caseloads. In addition, enactment of such a bill would improve access to an appropriate judicial forum for civil litigants, both state and federal. Accordingly, the Department of Justice urges prompt action by Congress on this legislation. Mr. KASTENMEIER. Thank you very much, Mr. Rose, for that excellent statement, so expeditiously delivered. Mr. Rose. I know you might have a vote in 5 minutes. Do you agree with the opinion of the Office of Legal Counsel submitted in 1979, that the abolition of diversity jurisdiction is consistent with the requirements of article III of the Constitution? Or, put another way, that is to say, there is no constitutional bar or problem with this legislation, referring to article III, section 2, judicial power in the Federal system between citizens of different States, where therein it so provides? Mr. ROSE. Yes; we certainly adhere to that opinion. I believe it was Mary Lawton's opinion when she was Deputy Assistant Attorney General in the Office of Legal Counsel. We share her view that there is no requirement that the Congress extend jurisdiction to the full scope permitted by article III, and that the abolition of the diversity jurisdiction would, in fact, be constitutional. Mr. KASTENMEIER. Thank you. On page 7 at the end of your statement-and you orally suggested it-that the Department of Justice would support an amendment to title 28 to provide Federal jurisdiction over multiparty injury claims, I guess this is a typical, classical air crash, a multiparty suit. Do you not believe that such legislation should proceed from a separate bill, as I believe there have been separate bills provided for that. I know a former member of this subcommittee, who chaired his own subcommittee, Mr. Danielson, was very interested in that Federal jurisdictional question. I believe he had the legislation in his own subcommittee. Well, I guess my question is, Do you think we ought to burden this legislation with that particular question? Mr. ROSE. I would be fully prepared to defer to the judgment of the subcommittee. I take it the judgment of the subcommittee is that this legislation, which I believe is urgent and important, would proceed more expeditiously without this kind of an amendment attached to it. I have not had an opportunity to study in depth Congressman Danielson's bill, but I know it was his concern that provoked my predecessor to submit an amendment to title 28 at your last hearings on this subject in 1979. I have no reason to believe that we would not support an amendment of the type that Dan Meador submitted and testified in support of. We have not had a chance to do our own technical review of it, but we would certainly support the concept and would be prepared to respond to any questions the committee might have about specific language. But we would have no objection to that proceeding with separate legislation. Mr. KASTENMEIER. There is a letter of March 31, 1982, from Assistant Attorney General Robert A. McConnell expressing some reservations about that particular bill. I don't know how consistent or inconsistent your comments may be with that. But it may be Mr. Rose. I think that is correct, and I would like to have an opportunity to review that whole matter so that we can be consistent on it. Mr. KASTENMEIER. During the subcommittee hearings in 1979 the Department of Justice provided us with detailed information about the projected effect of abolishing diversity jurisdiction on the Federal caseload and budget. I wonder if you could provide us an update of that data. At this moment I don't know that you have it available, but it is at pages 339 to 344 of the 1979 hearing record. I assume the Department would be able to review that and determine whether they can promptly update that and provide us detailed information which would be current and usable. Mr. Rose. We certainly would be willing to work with the Administrative Office to provide that for you; yes, sir. [Subsequent to the hearing the following documents were submit ted for the record:] This is in response to questions raised by members of your subcommittee during my testimony on July 14, 1982. Question Number 1. Could you provide an update of the information on the budgetary impact of diversity cases on the federal courts provided by the Financial Management Division of the Administrative Office of the United States Courts in 1979? 1/ Response. In 1979, the Administrative Office provided budgetary data on the impact of diversity cases pursuant to special request. It is our understanding that your Subcommittee has requested the Administrative Office to update this information. The Department has no other source or means to obtain this information than the Administrative Office. Question Number 2. What is the frequency with which common jury pools are used for federal and state courts? Response. Under the Jury Selection and Service Act, $ 1861 et seq. (1980), federal juries are now drawn from the same registration or voter lists as state jurors. The only difference between state and federal juries is that federal juries are chosen from a wider area within the state. See R. Sheran and B. Isaacman, State Cases Belong in State Courts, 12 Creighton L. Rev. 1, 39 and n.200 (1978), reprinted at Diversity of Citizenship Jurisdiction/Magistrates Reform: Hearings before Subcomm. on Courts, Civil Liberties, and the Administration of Justice of the House Comm. on the Judiciary, 96th Cong., 1st Sess., 305 (1979). Question Number 3. What is the incidence of removal of state cases to federal court by the Department? 1/ Administrative Office of the United States Courts, Financial Management Division, Budgetary Impact of Diversity Cases Report |