Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
April 13, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 1845 words
HEADLINE:
TESTIMONY April 13, 1999 WALTER K. STAPLETON HOUSE JUDICIARY
YEAR 2000 COMPUTER PROBLEMS, LAWSUITS AND LIABILITY
BODY:
STATEMENT OF JUDGE WALTER K. STAPLETON ON
BEHALF OF THE JUDICIAL CONFERENCE OF THE UNITED STATES Mr. Chairman and members
of the committee, I am Walter K. Stapleton, Judge of the United States Court of
Appeals for the Third Circuit. I appear today on behalf of the Judicial
Conference of the United States, which is the policy-making body for the federal
courts. I chair the Judicial Conference Committee on Federal-State Jurisdiction,
which considers issues affecting the jurisdiction and structure of the federal
courts. I appreciate this opportunity to share with you the views of the federal
judiciary concerning two aspects of H.R. 775, the "Year 2000 Readiness and
Responsibility Act" now before this committee. H.R. 775, as well as similar
proposals in the Senate, seeks to promote the resolution of potentially large
numbers of Y2K disputes. The federal judiciary recognizes the commendable
efforts of Congress to resolve Y2K disputes short of full-scale litigation so as
to alleviate the burden of such litigation on private parties as well as on
federal and state courts. These are clearly laudable public policy objectives.
Some of the provisions, however, will affect and perhaps significantly disrupt
the administration of justice in the federal courts. On March 16, 1999, the
Judicial Conference, determined to oppose the provisions expanding federal court
jurisdiction over Y2K class actions in bills (H.R. 775, S. 96, and S. 461)
currently under consideration by the 106th Congress. In addition, because the
Y2K pleading requirements included in these bills circumvent the Rules Enabling
Act, among other reasons, the Conference also opposes these provisions. Class
Actions H.R. 775 creates no federal cause of action. The bill is premised on the
assumption that plaintiffs will rely on typical state causes of action to
provide relief in Y2K disputes. Under the bill, individual plaintiffs, as
opposed to class action plaintiffs, can bring their tort, contract, and fraud
suits in a state court where they will remain until resolved. While federal
defenses and liability limitations established in the legislation may be raised
in such litigation, the bill recognizes that state courts are fully capable of
applying these provisions and carrying out federal policy. This reliance on
state courts, which today handle 95 percent of the nation's judicial business,
follows the traditional allocation of work between the state and federal courts.
Section 404 of H.R. 775 takes a radically different approach to Y2K class
actions--one that would effect a major reallocation of class action workloads.
The bill creates original federal court jurisdiction over any Y2K class action
based on state law, regardless of the amount in controversy, where there is
minimal diversity of citizenship--that is, where any single member of the
proposed plaintiff class and any defendant are from different states. It also
provides for the removal of any such Y2K class action to federal court by any
single defendant or any single member of the plaintiff class who is not a
representative party. While the bill identifies limited circumstances in which a
federal district court may abstain from hearing a Y2K class action, it is
unlikely that many actions will meet the specified criteria. The net result of
these provisions will be that most Y2K class action cases will be litigated in
the federal courts. This assignment of the class action workload to the federal
courts is particularly troubling because the Y2K problem may possibly engender a
very large number of class action lawsuits. While no one knows how many cases
will be filed, Senator Robert Bennett, Chair of the Special Committee on the
Year 2000 Technology Problem, has predicted that there could be a "tidal wave"
of litigation resulting from Y2K problems. Given the nature of the Y2K problem,
it is reasonable to expect that similar claims will often arise in favor of
multiple plaintiffs against the same defendant or defendants. Thus, it can be
expected that a substantial portion of these cases will be brought as class
actions. Responding to class actions, regardless of where they are filed, will
likely be a monumental task. If the current class action provisions remain in
H.R. 775, however, the important contribution the state courts would otherwise
make to meeting this challenge will be lost, and the burden on the federal
system will be correspondingly increased. The transfer of this burden to the
federal courts holds the potential of overwhelming federal judicial resources
and the capacity of the federal courts to resolve effectively in a timely manner
not only Y2K cases, but other causes of action as well. Federal administration
of these state-law class action claims will impose other substantial burdens. By
shifting state-created claims into federal court, enactment of H.R. 775 into law
would confront the federal courts with the responsibility to engage in difficult
and time-consuming choice-of-law decisions. The Erie doctrine requires that
federal district courts, sitting in diversity, apply the law of the forum state
to determine which body of state law controls the existence of a right of
action. The wholesale shift of state-law class actions into federal court makes
this choice-of-law obligation all the more daunting as the sheer number of
possible subclasses and relevant bodies of state law multiplies. Some federal
courts have taken the position that such multiplicity of law itself stands as a
barrier to the certification of a nationwide class action. Even where a district
court agreed to certify a class, it would have to make choice of law and
substantive determinations that would have no binding force in subsequent Y2K
litigation in the states in question. In addition to the potential adverse
docket impact on the federal courts, H.R. 775 infringes upon the traditional
authority of the states to manage their own judicial business. State
legislatures and other rule-making bodies provide rules for the aggregation of
state-law claims into class-wide litigation in order to achieve certain
litigation economies of scale. By providing for class treatment, state
policymakers express the view that the state's own resources can be best
deployed not through repetitive and potentially duplicative individual
litigation, but through some form of class treatment. H.R. 775 could deprive the
state courts of the power to hear much of this class litigation and might well
create incentives for plaintiffs who prefer a state forum to bring a series of
individual claims. Such individual litigation might place a greater burden on
the state courts and thwart the states' policies of more efficient disposition.
Federal jurisdiction over class action litigation is an area where change should
be approached with caution and careful consideration of the underlying
relationship between state and federal courts. The Judicial Conference Advisory
Committee on Civil Rules has recently devoted several years of study to the
rules governing class action litigation. One outgrowth of that study was the
appointment by the Chief Justice of a "Working Group on Mass Torts." The working
group undertook a study and has recently issued a report that presents the
complexities of litigation that aggregates large numbers of claims and
illustrates the need for a deliberative review of the issues that must be
addressed in attempting to improve the process for resolution of such
litigation. Such issues involve not only procedural rules, but also the
jurisdiction of federal and state courts and the interaction between federal and
state law. Y2K class action litigation implicates some of the same complex and
fundamental issues that the working group identified. Even for familiar
categories of litigation, these issues can be satisfactorily resolved only by
further study. An attempt to address them in isolation, for an unfamiliar
category of cases that remains to be developed only in the future, is unwise.
Extending minimal diversity jurisdiction to mass torts may be
appropriate if it is accompanied with suitable restrictions. The Judicial
Conference has endorsed in principle the use of minimal diversity
jurisdiction in litigation involving single-event mass torts, such as
an airplane crash. There may be other situations in which the efficiencies to be
gained from consolidating mass tort litigation in federal courts are justified.
Expansion of class action jurisdiction over Y2K class actions in the manner
provided in H.R. 775, however, would be inconsistent with the objective of
preserving the federal courts as tribunals of limited jurisdiction and the
reality that the federal courts are staffed and supported to function as
tribunals of limited jurisdiction. Judicial federalism relies on the principle
that state and federal courts together comprise an integrated system for the
delivery of justice in the United States. There appears to be no substantial
justification for the potentially massive transfer of workload under H.R. 775,
and such a transfer would seem to be counterproductive. State courts provide
most of the nation's judicial capacity, and a decision to limit access to this
capacity in the face of the burden that Y2K litigation may impose could have
significant negative consequences for the efficient resolution of Y2K disputes.
Pleading Requirements Section 103 of H.R. 775 sets forth specific pleading
provisions in Y2K litigation that would require a plaintiff to state with
particularity certain matters in the complaint regarding the nature and amount
of damages, material defects, and the defendant's state of mind. These
requirements are inconsistent with the general notice pleading provisions found
in the Federal Rules of Civil Procedure (i.e., Rule 8), which apply to civil
cases. The bill's provisions bypass the rulemaking provisions in the Rules
Enabling Act (28 U.S.C. 2071-77). They have not been subjected to bench, bar,
and public scrutiny envisioned under that Act and are inconsistent with the
policies underlying the Act, which the Judicial Conference has long supported.
Not only do the statutory pleading requirements bypass the Rules Enabling Act,
they do so in a particularly objectionable way because they are contained in
stand-alone statutory provisions outside the federal rules. This will cause
confusion and traps for unwary lawyers who are accustomed to relying on the
Federal Rules of Civil Procedure for pleading requirements. It also would signal
yet another departure from uniform, national procedural rules, following closely
in the wake of similar pleading requirements contained in the Private Securities
Reform Litigation Act. Conclusion Mr. Chairman and members of the Judiciary
Committee, we appreciate the objective of H.R. 775 to limit wasteful litigation
but hope you will consider our concerns regarding the class action and pleading
requirements sections. Thank you again for this opportunity to present the views
of the Judicial Conference at today's hearing.
LOAD-DATE: April 14, 1999 
