Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
July 21, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 1174 words
HEADLINE:
TESTIMONY July 21, 1999 REP. BOB GOODLATTE (R-VA) HOUSE
JUDICIARY CLASS ACTION IN FEDERAL COURT AND PENDING BILLS
BODY:
STATEMENT OF REP. BOB GOODLATTE (R-VA) BEFORE
THE JUDICIARY COMMITTEE ON H.R. 1875, THE INTERSTATE CLASS ACTION JURISDICTION
ACT OF 1999 Wednesday, July 21, 1999 Mr. Chairman, I would like to thank you for
holding today's important hearing on the Interstate Class Action Jurisdiction
Act - legislation I have introduced along with fellow committee member, Rick
Boucher - to ensure that truly interstate class actions are heard in federal
court. This much-needed bipartisan legislation corrects a serious flaw in our
federal jurisdiction statutes. At present, those statutes forbid our federal
courts from hearing most interstate class actions - the lawsuits that involve
more money and touch more Americans than virtually any other litigation pending
in our legal system. The class action device is a necessary and important part
of our legal system. It promotes efficiency by allowing plaintiffs with similar
claims to adjudicate their cases in one proceeding. It also allows claims to be
heard in cases where there are small harms to a large number of people, which
would otherwise go unaddressed because the cost to the individuals suing would
far exceed any possible benefit to the individual. However, class actions have
been used with an increasing frequency and in ways that do not promote the
interests they were intended to serve. In recent years, state courts have been
flooded with class actions. As a result of the adoption of different class
action certification standards in the various states, the same class might be
certifiable in one state and not another, or certifiable in state court but not
in federal court. This creates the potential for abuse of the class action
device, particularly when the case involves parties from multiple states or
requires the application of the laws of many states. For example, some state
courts routinely certify classes before the defendant is even served with a
complaint and given a chance to defend itself. Other state courts employ very
lax class certification criteria, rendering virtually any controversy subject to
class action treatment. There are instances where a state court, in order to
certify a class, has determined that the law of that state applies to all
claims, including those of purported class members who live in other
jurisdictions. This has the effect of making the law of that state applicable
nationwide. The existence of state courts which broadly apply class
certification rules encourages plaintiffs to forum shop for the court which is
most likely to certify a purported class. In addition to forum-shopping, parties
frequently exploit major loopholes in federal jurisdiction statutes to block the
removal of class actions that belong in federal court. For example, plaintiffs'
counsel may name parties that are not really relevant to the class claims in an
effort to destroy diversity. In other cases, counsel may waive federal law
claims or shave the amount of damages claimed to ensure that the action will
remain in federal court. Another problem created by the ability of state courts
to certify class actions which adjudicate the rights of citizens of many states
is that often times more than one case involving the same class is certified at
the same time. In the federal court system, those cases involving common
questions of fact may be transferred to one district for coordinated or
consolidated pretrial proceedings. When these class actions are pending in state
courts, however, there is no corresponding mechanism for consolidating the
competing suits. Instead, a settlement or judgment in any of the cases makes the
other class actions moot. This creates an incentive for each class counsel to
obtain a quick settlement of the case, and an opportunity for the defendant to
play the various class counsel against each other and drive the settlement value
down. The loser in this system is the class member whose claim is extinguished
by the settlement, at the expense of counsel seeking to be the one entitled to
recovery of fees. Our bill is designed to prevent these abuses by allowing large
interstate class action cases to be heard in federal court. It would expand the
statutory diversity jurisdiction of the federal courts to allow
class action cases involving minimal diversity - that is, when any plaintiff and
any defendant are citizens of different states - to be brought in or removed to
federal court. Article III of the Constitution empowers Congress to establish
federal jurisdiction over diversity cases - cases "between citizens of different
States." The grant of federal diversity jurisdiction was
premised on concerns that state courts might discriminate against out of state
defendants. In a class action, only the citizenship of the named plaintiffs is
considered for determining diversity, which means that federal diversity
jurisdiction will not exist if the named plaintiff is a citizen of the
same state as the defendant, regardless of the citizenship of the rest of the
class. Congress also imposes a monetary threshold - now $75,000 - for federal
diversity claims. However, the amount in controversy requirement is satisfied in
a class action only if all of the class members are seeking damages in excess of
the statutory minimum. These jurisdictional statutes were originally enacted
years ago, well before the modern class action arose, and they now lead to
perverse results. For example, under current law, a citizen of one state may
bring in federal court a simple $75,001 slip-and- fall claim against a party
from another state. But if a class of 25 million product owners living in all 50
states brings claims collectively worth $15 billion against the manufacturer,
the lawsuit usually must be heard in state court. This result is certainly not
what the framers had in mind when they established federal diversity
jurisdiction. Our bill offers a solution by making it easier for
plaintiff class members and defendants to remove class actions to federal court,
where cases involving multiple state laws are more appropriately heard. Under
our bill, if a removed class action is found not to meet the requirements for
proceeding on a class basis, the federal court would dismiss the action without
prejudice and the action could be refiled in state court. This legislation does
not limit the ability of anyone to file a class action lawsuit. It does not
change anybody's rights to recovery. Our bill specifically provides that it will
not alter the substantive law governing any claims as to which jurisdiction is
conferred. Our legislation merely closes the loophole, allowing federal courts
to hear big lawsuits involving truly interstate issues, while ensuring that
purely local controversies remain in state courts. This is exactly what the
framers of the Constitution had in mind when they established federal
diversity jurisdiction. I urge each of my colleagues to support
this bipartisan legislation, and I look forward to hearing from the witnesses
who will testify before us today.
LOAD-DATE: July 26,
1999 
