[Congressional Record Volume 162, Number 30 (Thursday, February 25, 2016)]
[House]
[Pages H907-H915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FRAUDULENT JOINDER PREVENTION ACT OF 2016
General Leave
Mr. GOODLATTE. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days within which to revise and extend their
remarks and include extraneous materials on H.R. 3624.
The SPEAKER pro tempore (Mr. WITTMAN). Is there objection to the
request of the gentleman from Virginia?
=========================== NOTE ===========================
February 25, 2016, on page H907, the following appeared: The
SPEAKER pro tempore. Is there
The online version should be corrected to read: The SPEAKER pro
tempore (Mr. WITTMAN). Is there
========================= END NOTE =========================
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 618 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 3624.
The Chair appoints the gentleman from Louisiana (Mr. Graves) to
preside over the Committee of the Whole.
{time} 1254
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 3624) to amend title 28, United States Code, to prevent
fraudulent joinder, with Mr. Graves of Louisiana in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
The gentleman from Virginia (Mr. Goodlatte) and the gentleman from
Michigan (Mr. Conyers) each will control 30 minutes.
The Chair recognizes the gentleman from Virginia.
{time} 1300
Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may
consume.
Hardworking Americans are some of the leading victims of frivolous
lawsuits and the extraordinary costs that our legal system imposes.
Every day, local businessowners routinely have lawsuits filed against
them, based on claims they have no substantive connection to, as a
means of forum shopping on the part of the lawyers filing the case.
These lawsuits impose a tremendous burden on small businesses and their
employees. The Fraudulent Joinder Prevention Act, introduced by
Judiciary Committee Member Ken Buck from Colorado, will help reduce the
litigation abuse that regularly drags small businesses into court for
no other reason than as part of a lawyer's forum shopping strategy.
In order to avoid the jurisdiction of the Federal courts, plaintiffs'
attorneys regularly join instate defendants to the lawsuits they file
in State court, even if the instate defendants' connections to the
controversy are minimal or nonexistent.
Typically, the innocent but fraudulently joined instate defendant is
a small business or the owner or employee of a small business. Even
though these innocent instate defendants ultimately don't face any
liability as a result of being named as a defendant, they nevertheless
have to spend money to hire a lawyer and take valuable time away from
running their businesses or spending time with their families to deal
with matters related to a lawsuit to which they have no real
connection.
To take just a couple of examples, in Bendy v. C.B. Fleet Company,
the plaintiff brought product liability claims against a national
company for its allegedly defective medicinal drink. The plaintiff also
joined a resident local defendant health clinic alleging it negligently
instructed the plaintiff to ingest the drink. The national company
removed the case to Federal Court and argued that the small local
defendant was fraudulently joined because the plaintiff's claims
against the clinic were time-barred by the statute of limitations,
showing ``no possibility'' of recovery.
Despite finding the possibility of relief against the local defendant
``remote,'' the court remanded the case after emphasizing how hard it
is to demonstrate fraudulent joinder under the current rules. The court
practically apologized publicly to the joined party, stating: ``The
fact that Maryland courts are likely to dismiss Bendy's claims against
the local defendant is not sufficient for jurisdiction, given the
Fourth Circuit's strict standard for fraudulent joinder.''
Shortly after remand, all claims against the local defendant were
dismissed, of course, after its presence in the lawsuit served the
trial lawyer's tactical purpose of keeping the case in their preferred
State court. When courts themselves complain about the unfairness of
current court rules, Congress should take notice.
In Baumeister v. Home Depot, Home Depot removed a slip-and-fall case
to Federal Court. The day after removal and before conducting any
discovery, the plaintiff amended the complaint to name a local
business, which it alleged failed to maintain the store's parking lot.
The court found the timing of the amended complaint was ``suspect,''
noting the possibility ``that the sole reason for amending the
complaint to add the local defendant as a defendant . . . could have
been to defeat diversity jurisdiction.''
Nevertheless, the court held Home Depot had not met its ``heavy
burden'' of showing fraudulent joinder under current law because the
court found it was ``possible,'' even if it were just a tenth of a
percent possible, that ``the newly added defendant could potentially be
held liable,'' and remanded the case back to State court. Once back in
State court, the plaintiff stipulated to dismiss the innocent local
defendant from the lawsuit, but only after it had been successfully
used as a forum shopping pawn.
Trial lawyers join these unconnected instate defendants to their
lawsuits because today a case can be kept in State court by simply
joining as a defendant a local party that shares the same local
residence as the person bringing the lawsuit. When the primary
defendant moves to remove the case to Federal Court, the addition of
that local defendant will generally defeat removal under a variety of
approaches judges currently take to determine whether the joined
defendant prevents removal to Federal Court.
One approach judges take is to require a showing that there is ``no
possibility of recovery'' against the local defendant before a case can
be removed to Federal Court, or some practically equivalent standard.
Others require the judge to resolve any doubts regarding removal in
favor of the person bringing the lawsuit. Still, others require the
judge to find that the local defendant was added in bad faith before
they allow the case to be removed to Federal Court.
The current law is so unfairly heavyhanded against innocent local
parties joined to lawsuits that Federal Appeals Court Judge J. Harvie
Wilkinson of the Fourth Circuit Court of Appeals has publicly supported
congressional action to change the standards for joinder, saying:
``That's exactly the kind of approach to Federal jurisdiction reform
that I like because it's targeted. And there is a problem with
fraudulent jurisdiction law as it exists today, I think, and that is
that you have to establish that the joinder of a nondiverse defendant
is totally ridiculous and that there's no possibility of ever
recovering . . . That's very hard to do. So I think making the
fraudulent joinder law a little bit more realistic . . . appeals to me
because it seems to me the kind of intermediate step that addresses
some real problems.''
The bill before us today addresses those real problems in two main
ways:
First, the bill allows judges greater discretion to free an innocent
local party from a case where the judge finds there is no plausible
case against that party. That plausibility standard is the same
standard the Supreme Court has said should be used to dismiss pleadings
for failing to state a valid legal
[[Page H908]]
claim, and the same standard should apply to release innocent parties
from lawsuits.
Second, the bill allows judges to look at evidence that the trial
lawyers aren't acting in good faith in adding local defendants. This is
a standard some lower courts already use to determine whether a trial
lawyer really intends to pursue claims against the local defendant or
is just using them as part of their forum shopping strategy.
This bill is strongly supported by the National Federation of
Independent Business, representing America's small businesses, and the
U.S. Chamber of Commerce, among other legal reform groups.
Please join me in supporting this vital legislation to reduce
litigation abuse and forum shopping and to protect innocent parties
from costly, extended, and unnecessary litigation.
Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Members of the House, H.R. 3624, the so-called Fraudulent Joinder
Prevention Act, is not really about fraud. Rather, this measure is just
the latest attempt to tilt the civil justice system in favor of
corporate defendants by making it more difficult for plaintiffs
to pursue State law claims in State courts.
Here is why I say that. To begin with, H.R. 3624 addresses a
nonexistent problem. Under current law, a defendant may remove a case
alleging solely State law claims to a Federal court only if there is
complete diversity of citizenship between all plaintiffs and all
defendants, with an exception. If the plaintiff adds an instate
defendant to the case to defeat diversity jurisdiction, this
constitutes fraudulent joinder and, in such circumstance, the case may
be removed to Federal court.
In determining whether a joinder was fraudulent, the court must
consider only whether there was any basis for a claim against the
nondiverse defendant. For the case to remain in Federal Court, the
defendant must show that there was no possibility of recovery or no
reasonable basis for adding the nondiverse defendant.
This very high standard has ignited our Federal Courts for more than
a century, and it has functioned well. H.R. 3624 would replace this
time-honored standard with a thoroughly ambiguous one. The measure
would require a remand motion to be denied unless the court finds,
among other things, that it is ``plausible to conclude that the
applicable State law would impose liability'' on an instate defendant;
that the plaintiff had a ``good faith intention to prosecute the action
against each'' instate defendant or to seek a joint judgment; and that
there was no ``actual fraud in the pleading of jurisdictional facts.''
Additionally, H.R. 3624 would effectively overturn the local
defendant exception, which prohibits removal to Federal Court even if
complete diversity of citizenship exists when the defendant is a
citizen of the State where the suit was filed.
The bill's radical changes to longstanding jurisdictional practice
reveal the true purpose of this measure. It is simply intended to
stifle the ability of plaintiffs to have their choice of forum and,
possibly, even their day in court.
In addition, H.R. 3624 would sharply increase the cost of litigation
for plaintiffs and further burden the Federal court system. For
example, terms like ``plausible'' and ``good faith intention'' are not
defined in the bill. This ambiguity will lead to greater uncertainty
for both courts and litigants and will spawn substantial litigation
over their meaning and application, further delaying many decisions in
many cases.
Additionally, these standards require a court to engage in a
minitrial during an early procedural stage of a case, without an
opportunity for the full development of evidence. Thus, the bill would
sharply increase the burdens and costs of litigation for plaintiffs and
make it more likely that they would be prevented from choosing the
forum for their claims.
{time} 1315
Finally, the amendments made by this bill raise fundamental
federalism concerns. Subject to certain exceptions as set forth in our
Constitution, matters of State law should be decided by State courts.
The removal of a State court case to Federal court always implicates
federalism concerns, which is why the Federal courts generally disfavor
Federal jurisdiction and read removal statutes narrowly.
H.R. 3624, however, ignores these federalism concerns. By applying
sweeping and vaguely worded new standards to the determination of when
a State case must be remanded to a State court, the bill denies State
courts the ability to decide and ultimately to shape State law. H.R.
3624 not only violates State sovereignty, but it also violates our
fundamental constitutional structure.
Accordingly, I sincerely urge my colleagues to join me in opposing
this problematic legislation.
Mr. Chairman, I reserve the balance of my time.
Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may
consume to respond to some of the points raised by the gentleman from
Michigan (Mr. Conyers), the ranking member.
First of all, it is not this bill that removes cases from State
courts to Federal courts. It is the United States Constitution and the
Federal laws that have been passed by this Congress for over 200 years
that recognize the importance of the principle of diversity
jurisdiction and of having parties from different States in cases in
controversy able to remove those cases to the Federal system, which
represents all citizens, not just the citizens of one State, as State
courts are sometimes perceived as doing.
Secondly, it is not this legislation that creates the kind of
circumstance that the gentleman from Michigan claims it does of denying
access to the courts. Rather, it is the purpose of this legislation to
treat people fairly who have been treated unfairly in the process. If
you have no liability in a case, you should not be sued in the first
place.
If you are sued by a lawyer who is trying to manipulate the rules in
order to keep a case in a court that he has forum-shopped--in other
words, he has picked the court that he prefers it to be in--that
individual or business, as quickly as possible, should be able to seek
redress from the Federal court so as to have a determination made about
whether or not it is indeed a party that is ``plausibly liable,'' which
is a Supreme Court standard to be held in the case.
If it is not a party, then the rules of Federal procedure would allow
for the removal of that case to Federal court. So we should not be
blaming innocent parties for spoiling the plans of trial lawyers to try
to forum-shop into a favorable jurisdiction.
Let me make a few other quick points about federalism.
Some of the rhetoric on the other side suggests that it is somehow
strange for Federal courts to be deciding State law claims, but as a
matter of history, that is totally inaccurate. State law claims are
heard by Federal courts whenever the Federal courts have the diversity
jurisdiction that is outlined in the Constitution.
That has been a major part of the Federal trial court's work for far
longer than Federal claims have existed, and out-of-State defendants
have been able to remove civil cases from State courts since the
beginning of the Federal judicial system created by the very first
Congress of which James Madison and many other Founders were members.
All the bill before us today does is protect the right of removal
from being subverted by blatant gamesmanship on the part of trial
lawyers. H.R. 3624 also protects in-State individuals and small
businesses from being dragged into litigation just so the plaintiff can
keep the case in State court when the plaintiff's primary target is an
out-of-State corporation.
Is it really unfair to say to the trial lawyer, ``when your real
target is an out-of-State corporation but you want to keep the case in
State court, you have to come up with a claim against the local in-
State individual or small business that is at least plausible''?
That is the simple, fair, and modest demand that this bill makes on
trial lawyers.
Is it fair to the local individual or small business that it is
required to bear the costs and other burdens of litigation when the
claim against it isn't even plausible?
No, it is not, but that is what is allowed under current law, and
that is what H.R. 3624 will correct.
[[Page H909]]
I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Somehow the gentleman from Virginia has misunderstood what I said or
has mischaracterized what I said.
This bill makes it too difficult to remand cases back to State courts
to the point at which federalism concerns are raised and plaintiffs are
frequently harmed.
Mr. Chairman, I yield 3 minutes to the gentleman from Tennessee (Mr.
Cohen), a distinguished member of the Judiciary Committee.
Mr. COHEN. I thank the ranking member.
Mr. Chairman, this bill which has come before our committee is one
that the President has said he will veto because the President says
that it is a ``solution that is looking for a problem'' or something to
that effect.
This bill will make it more difficult for plaintiffs--people who have
been harmed--to get relief because their cases in State courts can more
easily be removed to Federal courts.
Now, the gentleman from Virginia is exactly right in that it has
always been permitted. You can remove a case to Federal court if you
can show that the plaintiff in the State court is not a proper
plaintiff, if you can show that there is diversity of citizenship and
not complete diversity.
The problem is that this has always been the rule, and it is the way
the rule is now; but the courts have not come to us and said this is a
problem and have asked us to correct it. We are correcting this because
the corporate defendants want to make it easier for them to remove
these cases to courts at which they will get better results. It will
make it more difficult for plaintiffs to get judgments in State courts,
which have historically been a bit healthier. This makes it almost
impossible.
It increases litigation. It makes you, on the front end, have to show
your case. It increases the cost to the courts and the burden on the
courts. It will make the government larger because there will be more
activity in Federal court if this becomes law. It will take from the
States the right to determine their own State laws, which is generally
the position of my friends on the other side--being for states' rights.
In certain parts of our country, including in my part of the country,
they have been known to sometimes talk poorly about the Federal courts.
This gives the Federal courts more power.
It is an aberrant position that this side has taken, kind of like
they took when we had reciprocity on gun permits. Rather than having
States' laws be paramount, they thought the Federal law should
superimpose it. We have got a situation by which the idea of States'
laws being sovereign and States having more authority and giving more
power to the States falls second to being for things that corporations
and the NRA desire. In those cases, states' rights come second, and
that is an unusual aberration.
This bill will probably not pass the Senate, but if it does, it will
be vetoed, and it won't be overridden.
The CHAIR. The time of the gentleman has expired.
Mr. CONYERS. I yield the gentleman an additional 1 minute.
Mr. COHEN. Yesterday we had a program at which we honored the foot
soldiers of the civil rights movement. One of the Republican Senators
confessed: ``I should have done more.'' I hear that from a lot of folks
from the South. They go to Selma and they march and they say they
should have done more.
Meanwhile, one can do something today because there is a Voting
Rights Act that needs to be extended or amended and approved to give
people the ultimate thing that America is most well-known for, which is
the right to vote in a democracy.
Voting rights are in peril in our country, income inequality
continues, and millions of Americans of both parties are voting for
candidates who appeal to those folks. Race relations between police and
minority communities are fraught, young people have tremendous burdens
of student loan debt, and our infrastructure is in danger.
Let's deal with those issues and let's make Congress great again.
Mr. GOODLATTE. Mr. Chairman, I yield such time as he may consume to
the gentleman from Colorado (Mr. Buck), the chief sponsor of this
legislation and a member of the House Judiciary Committee.
Mr. BUCK. I thank the gentleman.
Mr. Chairman, in many cases a trial lawyer's main target is a
national business, but if the only defendant in the case is an out-of-
State business, the case can be heard in Federal court rather than in a
local State court, which trial lawyers often prefer.
By also suing a local defendant in addition to the national
defendant, who are the true targets of the lawsuits, trial lawyers can
keep their cases in the preferred State courts.
Trial lawyers who sue innocent local people and small businesses
simply to keep the lawsuits in their preferred State courts usually
drop their cases against these innocent local parties but only after
their cases are safely back in State courts and only after the innocent
local parties have had to spend time and money in dealing with the
lawsuits. That is not right. Trial lawyers shouldn't be able to subject
innocent local people and small businesses to costly and time-consuming
lawsuits just to rig the places in which their lawsuits will be heard.
This unfairness led respected Federal appeals court Judge J. Harvie
Wilkinson of the Fourth Circuit Court of Appeals to publicly support
congressional action to change the standards for joinder to allow
judges greater flexibility in making the right decisions on questions
of removal to Federal court and to give Federal judges greater
discretion to determine earlier in the case whether a local party
joined to the lawsuit is there for a good reason or for fraudulent
reasons.
H.R. 3624 is precisely the kind of remedy urged by Judge Wilkinson,
who has said:
That is exactly the kind of approach . . . that I like
because it is targeted; and there is a problem with
fraudulent jurisdiction laws as it exists today, I think, and
that is that you have to establish that the joinder of a non-
diverse local defendant is totally ridiculous and that there
is no possibility of ever recovering. . . . That is very hard
to do. So I think making the fraudulent joinder law a little
bit more realistic . . . appeals to me because it seems to me
the kind of intermediate step that addresses some real
problems.
H.R. 3624 would protect innocent local defendants in two main ways.
First, the bill allows Federal judges greater discretion to release
local defendants from a case where it is not plausible to conclude, as
a legal matter, that applicable State law would impose liability on the
local defendant. The term ``plausible'' is taken from the Supreme
Court's jurisprudence that interprets rule 8 of the Federal Rules of
Civil Procedure, and the Court's decisions provide substantial guidance
as to the meaning of the term.
Initially, in Bell Atlantic Corp. v. Twombly, the Court distinguished
between plausible claims and claims that are speculative:
Factual allegations must be enough to raise a right to
relief above the speculative level.
Later, in Ashcroft v. Iqbal, the Court stated:
The plausibility standard . . . asks for more than a sheer
possibility that a defendant has acted unlawfully. This
standard demands more than an unadorned, `the defendant
unlawfully harmed me' accusation or threadbare recitals of
the elements of a cause of action, supported by mere
conclusory statements.
Professor Martin H. Redish, one of the Nation's foremost scholars of
Federal court jurisdiction, has written:
The Twombly/Iqbal plausibility standard represents the
fairest and most efficient resolution of the conflicting
interests in the context of pleading.
It will similarly provide a fair and efficient approach in the
context of fraudulent joinder.
Second, the bill codifies a proposition that the Supreme Court has
long recognized: that in deciding whether joinder is fraudulent, courts
may consider whether the plaintiff has a good faith intention of
seeking a judgment against the local defendant.
Consistent with Supreme Court precedent, courts continue to find
fraudulent joinder when objective evidence clearly demonstrates there
is no good faith intention to prosecute the action against all
defendants.
As the Federal court in Faulk v. Husqvarna Consumer Outdoor Products
N.A., Inc., said:
Where the plaintiff's collective litigation actions, viewed
objectively, clearly demonstrate a lack of good faith
intention to
[[Page H910]]
pursue a claim to judgment against a nondiverse local
defendant, the court should dismiss the nondiverse defendant
and retain jurisdiction over the case.
{time} 1330
The language of this provision is taken almost verbatim from an
often-cited decision in the Third Circuit, In re Briscoe: ``The court
said that joinder is fraudulent if `there is . . . no real intention in
good faith to prosecute the action against the defendant or seek a
joint judgment.' ''
I urge all my colleagues to support this simple, commonsense bill
that will protect innocent local parties from being dragged into
expensive and time-consuming lawsuits for the sole reason of furthering
a trial lawyer's forum shopping strategy.
Mr. CONYERS. Mr. Chairman, I yield 3 minutes to the gentleman from
New York (Mr. Nadler), a veteran member of the House Judiciary
Committee.
Mr. NADLER. Mr. Chairman, I rise in opposition to the so-called
Fraudulent Joinder Prevention Act.
The main purpose of the bill is to make it easier to remove State
cases to Federal courts where large corporate defendants have numerous
advantages over consumers, patients, and injured workers.
This bill is yet another attempt by the Republicans to tilt the legal
playing field in favor of large corporations. It will clog the Federal
courts, drain judicial resources, upset well-established law, and delay
justice for plaintiffs seeking to hold corporations accountable for
harming consumers or injuring workers.
This bill is part of a general effort by the Republicans to close off
access to the courts to ordinary Americans. With every step the
Republicans take, whether it be to put forward bills to make class
action suits more difficult, to remove more local cases to Federal
courts, to reclassify more lawsuits as frivolous and subject to
mandatory sanctions, or to oppose legislative attempts to limit
mandatory arbitration clauses, they are transforming our system of
justice.
Our courts are being turned into a forum where only very rich people
can get justice, where corporations can easily escape liability, and
where consumers and the injured can get no relief, and it is all tilted
one way.
There is nothing in this bill or in any other bill put forward by the
other side that will help ordinary consumers hold big corporations
responsible for actions that harm the little guy.
Under this so-called Fraudulent Joinder Prevention Act, anytime there
is a case with at least one instate, nondiverse, and out-of-state,
diverse, defendant, the defendants will use this forum shopping bill
law to delay justice.
These attempted removals will result in contentious disputes over
whether the court has jurisdiction. It will drain court time, as the
courts will have to engage in almost a minitrial, reviewing pleadings,
affidavits, and other evidence submitted by the parties since this bill
turns a simple procedural determination into a merits determination.
At a minimum, the bill will allow corporate defendants to
successfully force the plaintiff to expend their limited resources on
what should be a simple procedural matter.
Under this bill, this preliminary decision would become a baseless,
time-consuming merits inquiry of the case before a second time-
consuming merits inquiry on the substance. While large corporations can
easily accommodate such cost, injured workers, consumers, and patients
cannot.
I am amazed by some of my colleagues who, with this bill, will bring
even more cases to our Federal courts. I don't need to remind you that
our Federal courts are facing an enormous number of judicial vacancies
with no end in sight due to delays in confirmations in the other body.
Yet, this bill would increase the workload of the Federal courts with
cases based on the flimsiest of Federal jurisdiction. It makes no
sense. This bill will take up valuable Federal court time with State
claims based on State law, preventing the Federal courts from hearing
and managing cases that are properly before them.
Finally, despite its name, this bill is not about fraud. Indeed, the
proponents cite no example that alleges actual fraud.
I would say this is a bill in search of a problem. I would say that,
if I didn't understand, the true purpose of the bill is not to stop
fraud, but to further tilt the scales of justice in favor of big
corporations over the needs of ordinary Americans.
For these reasons, I oppose it. I urge all of my colleagues to oppose
this bill as well.
We should defeat this bill and start making Congress great again.
Mr. GOODLATTE. Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield 3\1/2\ minutes to the
distinguished gentlewoman from Texas (Ms. Jackson Lee).
Ms. JACKSON LEE. Mr. Chairman, just a few minutes ago the Judiciary
Committee ranking and chairman were in a hearing that exuded bipartisan
expressions for fixing the challenges that we have, with the location
of data and international requests for data being held by America's
technology companies. It was an interesting and open discussion, which
I want to evidence on the Record.
The Judiciary Committee is continuing and has had over the years
bipartisan approaches to a number of difficult questions, which we have
solved, including our approach to criminal justice reform. I thank the
chairman and ranking member for that.
I also want to acknowledge that we have some challenges, as was
evidenced by comments from the gentleman from Tennessee, on the
restoration of the Voting Rights Act. We find ourselves again in a
challenge that I hope can be fixed.
First, I want to make it very clear that I practiced law for a number
of years and served as an associate municipal court judge and as well
was a quasi-prosecutor on the Select Committee on Assassinations which,
I allow, this body did research when that select committee was in place
the issues of the investigations of Dr. Martin Luther King's
assassination and John F. Kennedy.
So I know the importance of lawyers, of which I have the greatest
respect and of which I am one. I understand that trial lawyers are
representing both defendants and plaintiffs and corporations come into
the court with trial lawyers. So I am a little taken aback by any
suggestion that the words ``trial lawyers'' have a negative
connotation.
Anyone who wants to win a case in a courtroom must have a lawyer, and
you would want to make sure that they are a trial lawyer. As well, you
want to make sure that you have the rights of due process.
So I would make the argument that trial lawyers go into court,
whether they are representing corporations or plaintiffs. Corporations
in many instances may be defendants.
In that case, I will tell you you are making it far more difficult by
pushing cases into the Federal court under H.R. 3624. It is more
expensive and they take longer, making it difficult for workers,
consumers, and patients generally to have their cases closer to home in
State courts.
However, there may be an instance where a corporation is a plaintiff
and you will have the same blocking of that corporation by this bill.
If this bill was enacted, it would tip the scales of justice in favor
of corporate defendants or others that make it more difficult for
injured plaintiffs. It would effectively eliminate the local defendant
exception by diversity jurisdiction. I heard someone say--and it bears
repeating--it is a solution looking for a problem.
The current standard used by the courts to determine whether the
joinder of a nondiverse defendant is improper, however, has been in
place for a century. We have no evidence that this has put anyone in a
position of not getting due process. That is our goal in the court
system.
The fraudulent joinder doctrine is well established and, in fact,
will only be found if the defendant establishes that the joinder of the
diversity-destroying party in the State court was made without a
reasonable basis. We have a system, but this particular bill reverses
this longstanding policy by imposing new requirements.
Finally, Mr. Chairman, if I might, further taking away a defendant's
responsibility to prove that Federal jurisdiction over State cases is
improper
[[Page H911]]
alters the fundamental precept of a party seeking removal.
I ask my colleagues to recognize that we have bipartisanship on this
committee.
I oppose this legislation and ask my colleagues to oppose it.
I thank the gentleman for yielding and rise in strong opposition to
H.R. 3624, the ``Fraudulent Joinder Prevention Act of 2016.''
H.R. 3624 is the latest effort to deny plaintiffs access to the forum
of their choice and, possibly, to their day in court.
H.R. 3624 seeks to overturn longstanding precedent in favor of a
vague and unnecessary test that forces state cases into federal court
when they don't belong there, and gives large corporate defendants an
unfair advantage to pick and choose their forum without the normal
burden of proving proper jurisdiction.
If enacted this bill would tip the scales of justice in favor of
corporate defendants and make it more difficult for injured plaintiffs
to bring their state claims in state court.
H.R. 3624 would effectively eliminate the local defendant exception
to diversity jurisdiction under 28 U.S.C. 1441(b)(2), which currently
prohibits removal to federal court even when there is complete
diversity when a defendant is a citizen of the state in which the
action is brought.
The current standard used by courts to determine whether the joinder
of a non-diverse defendant is improper, however, has been in place for
a century, and no evidence has been put forth demonstrating that this
standard is not working.
Rather, the ``Fraudulent Joinder Doctrine,'' is a well-established
legal doctrine providing that: fraudulent joinder will only be found if
the defendant establishes that the joinder of the diversity-destroying
party in the state court action was made without a reasonable basis of
proving any liability against that party.
H.R. 3624 reverses this longstanding policy by imposing new
requirements on federal courts considering remand motions where a case
is before the court solely on diversity grounds.
Specifically, it changes the test for showing improper joinder from a
one-part test (``no possibility of a claim against a nondiverse
defendant'') to a complicated four-part test, requiring the court to
find fraudulent joinder if: There is not a ``plausible'' claim for
relief against each nondiverse defendant; There is ``objective
evidence'' that ``clearly demonstrates'' no good faith intention to
prosecute the action against each defendant or intention to seek a
joint judgment; There is federal or state law that clearly bars claims
against the nondiverse defendants; or There is actual fraud in the
pleading of jurisdictional facts.
What should be a simple procedural question for the courts, now
becomes a protracted mini-trial, giving an unfair advantage to the
defendants (not available under current law) by allowing defendants to
engage the court on the merits of their position.
By requiring litigation on the merits at a nascent jurisdictional
stage of litigation based on vague, undefined, and subjective standards
like ``plausibility'' and ``good faith intention,'' and by potentially
placing the burden of proof on the plaintiff, this bill will increase
the complexity and costs surrounding litigation of state law claims in
federal court and potentially dissuade plaintiffs from pursuing
otherwise meritorious claims.
Further, taking away a defendant's responsibility to prove that
federal jurisdiction over a state case is indeed proper alters the
fundamental precept that a party seeking removal should bear the heavy
burden of establishing federal court jurisdiction.
The bill is a win-win for corporate defendants.
At its most harmful, it will cause non-diverse defendants to be
improperly dismissed from the lawsuit.
At its least harmful, it will cause an expensive, time-consuming
detour through federal courts for plaintiffs.
Wrongdoers would not be held accountable for the harm they cause,
while the taxpayers ultimately foot the bill.
For example: large corporate defendants (i.e. typically the diverse
defendants) would be favored by the bill because, if the nondiverse
defendant is dismissed, they can blame the now-absent in-state
defendant for the plaintiff's injuries.
Smaller, nondiverse defendants would also be favored because the
diverse defendant does all the work for them.
The diverse defendant removes the case to federal court and then
argues that the nondiverse defendant is improperly joined.
If the federal court retains jurisdiction, the nondiverse defendant
must be dismissed from the case.
If one or more defendants are dismissed from the case, it is easy for
the remaining defendant to finger point and blame the absent defendant
for the plaintiff's injuries.
Even if a federal court remands the case to state court under the
bill, the defendants have successfully forced the plaintiff to expend
their limited resources on a baseless, time-consuming motion on a
preliminary matter.
While large corporate defendants can easily accommodate such costs,
plaintiffs (i.e. injured consumers, patients and workers) cannot.
Regardless of whether the case is remanded to state court or stays in
federal court, this new, mandated inquiry will be a drain on the
limited resources of federal courts.
By mandating a full merits-inquiry on a procedural motion, H.R. 3624
is expensive, time-consuming, and wasteful use of judicial resources.
Lastly, by seeking to favor federal courts over state courts as
forums for deciding state law claims, this bill offends principles of
federalism.
The ability of state courts to function independently of federal
courts' procedural analysis is a necessary function of the success of
the American judiciary branch.
For these, reasons I urge my colleagues to join me in opposing H.R.
3624, the Fraudulent Joinder Prevention Act.
Mr. GOODLATTE. Mr. Chairman, I continue to reserve the balance of my
time.
Mr. CONYERS. Mr. Chairman, I yield 2 minutes to the gentleman from
Georgia (Mr. Johnson), another distinguished member of the House
Judiciary Committee.
Mr. JOHNSON of Georgia. Mr. Chairman, I return to the floor today for
the second time in as many months to speak against another crony-
capitalist, Republican-led bill to benefit big business.
H.R. 3624, the Fraudulent Joinder Protection Act, as it is so called,
is a solution in search of a problem.
Current Federal law already provides Federal courts with ample tools
to address possible forum shopping. This crony-capitalist legislation
would add needless complications for civil litigants seeking redress
for violent claims in the State courts.
Two, it further stretches the already limited resources Federal
courts are experiencing due to Republican-passed, budget-cutting
sequestration measures.
Currently America is burdened with a Republican Party-caused judicial
vacancy crisis in this Nation's Federal courts, where there are over 81
Federal court judicial vacancies around the country, including the one
left vacant by the passing of Justice Scalia.
Republicans--who control the Senate and who, in the press conferences
and meetings they have held this week, have fully exposed their plot to
add to this judicial crisis--are refusing to fill that vacancy on the
country's highest Court, and they have an ulterior purpose for doing
so.
That purpose, ladies and gentlemen, is because they know that justice
delayed is justice denied. They want to gum up the works of the Federal
courts by defunding the Federal courts while at the same time bogging
them down with State court matters that should be left to the States,
and then what it results in is crony capitalists being able to avoid
being held accountable in the State or Federal courts.
So this Congress should not further burden the Federal courts, which
are already strapped for time and resources, when State courts are more
suited and capable of hearing State--not Federal, but State--law claims
as State courts have been empowered to do since this country was
formed.
The Acting CHAIR (Mr. Walker). The time of the gentleman has expired.
Mr. CONYERS. Mr. Chairman, I yield an additional 1 minute to the
gentleman from Georgia.
Mr. JOHNSON of Georgia. The 10th Amendment in this country means
something. It means something to Republicans, and it means something to
Democrats. Sometimes we disagree on what it means and what impacts it
should have.
But there is no doubt that the Federal court system has its body of
law and the citizens should be able to bring their claim into their
State courts, as they have been doing since this country's foundation.
They use the 10th Amendment when it is convenient to them, and then
they violate it when it is not convenient. That is not the way that
conscientious Republicans should operate. I challenge them to stop this
encroachment on states' rights.
This legislation presumes that Federal courts are not currently
preventing forum shopping in civil suits,
[[Page H912]]
but there is absolutely no credible evidence that Federal courts are
failing to do their duty.
I ask my colleagues to oppose this crony-capitalist legislation.
Mr. GOODLATTE. Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself 1 minute.
I thought you might be interested in knowing that 21 different
organizations strongly oppose H.R. 3624, the Fraudulent Joinder
Prevention Act, including: the American Association for Justice, the
Center for Effective Government, the Center for Justice and Democracy,
the Consumer Federation of America, the D.C. Consumer Rights Coalition,
Main Street Alliance, the National Association of Consumer Advocates,
the National Disability Rights Network's lawyers, the National
Employment Lawyers Association.
I include in the Record the letter containing the list of groups that
strongly oppose H.R. 3624.
February 23, 2016.
Re Groups Strongly Oppose H.R. 3624, ``The Fraudulent Joinder
Prevention Act''.
Hon. Paul Ryan,
Speaker, House of Representatives,
Washington, DC.
Hon. Nancy Pelosi,
Minority Leader, House of Representatives,
Washington, DC.
Dear Speaker Ryan and Leader Pelosi: The House will soon be
voting on H.R. 3624, the ``Fraudulent Joinder Prevention
Act.'' This bill would upend long established law in the area
of federal court jurisdiction, place unreasonable burdens on
the federal judiciary, and make it more difficult for
Americans to enforce their rights in state courts. The
undersigned organizations strongly oppose the bill as harmful
and unnecessary.
Under our system of government, federal court jurisdiction
is supposed to be very limited. State courts should not be
deprived of jurisdiction over a claim they should properly
hear, so the burden is always on the party trying to get into
federal court to show why it should be there. When a case is
properly in state court, only complete ``diversity'' can
support removing it to federal court, meaning that no
plaintiff in a case may come from the same state as any
defendant.
H.R. 3624 would undermine this fundamental precept and
force state cases into federal court when they don't belong
there. The bill would do this by transforming the centuries-
old concept called ``fraudulent joinder,'' which is a way to
defeat complete diversity; i.e., when non-diverse defendants
are in case. Despite its name, joining such defendants is
rarely ``fraudulent'' and has been accepted practice for over
a century. As Lonny Hoffman, Law Foundation Professor of Law
at the University of Houston Law Center, explained in
testimony to this committee, under current, ``well-settled
law, fraudulent joinder will only be found if the defendant
establishes that the joinder of the diversity-destroying
party in the state court action was made without a reasonable
basis of proving any liability against that party.'' Current
law ``strikes an appropriate balance among competing policies
in how it evaluates the joinder of non-diverse defendants.''
However, H.R. 3624 would dramatically change this
longstanding, efficient and well-functioning law. The bill
alters the fundamental precept that a party seeking removal
has a very heavy burden to establish federal court
jurisdiction. At a preliminary stage, the court is required
to engage in exhaustive fact finding on the merits even
before summary judgment. The bill instructs the court to use
subjective and vague criteria, like ``objective evidence
clearly demonstrates that there is no good faith intention''
or ``based on the complaint . . . it is not plausible to
conclude,'' creating uncertainty as courts struggle with how
to interpret and apply this new standard. The bill provides
no evidentiary standards to help courts make such a complex
decision. And requiring the court to engage in extensive
factual adjudication at this early stage raises significant
7th Amendment ``right to jury trial'' constitutional
concerns. As Professor Hoffman put it in testimony to this
committee, although the bill is short in length, its
provisions are ``anything but modest; if enacted, they would
dramatically alter existing jurisdictional law.''
The process contemplated by this bill would be not only
unfair to and incredibly expensive for the plaintiff, but
also an enormous waste of judicial resources. There is no
reason for these state based claims to be heard in federal
court other than corporations' desire to engage in forum
shopping. Yet, there is no evidence whatsoever that national
corporations, who choose to avail themselves of the
marketplaces in states across the country, complying with
multiple state laws in the process, should then have a
problem appearing in state court.
H.R. 3624 will have a destructive impact on our state and
federal judiciary. Professor Hoffman said in his testimony,
``Finally, by divesting state courts of jurisdiction and
deciding merits questions that state courts now routinely
resolve, proponents appear deaf to the serious federalism
concerns that the bill raises.'' We urge you to oppose this
legislation.
Thank you.
Very sincerely,
Alliance for Justice, American Association of Justice,
Americans for Financial Reform, Asbestos Disease Awareness
Organization, Center for Effective Government, Center for
Justice & Democracy, Consumer Federation of America, Consumer
Action, Consumer Watchdog, Consumers for Auto Reliability and
Safety, D.C. Consumer Rights Coalition, Essential
Information, Homeowners Against Deficient Dwellings.
Main Street Alliance, National Association of Consumer
Advocates, National Consumer Law Center (on behalf of its low
income clients), National Consumer Voice for Quality Long-
Term Care, National Consumers League, National Disability
Rights Network, National Employment Lawyers Association,
Protect All Children's Environment, SC Appleseed Legal
Justice Center, Texas Watch, The Impact Fund, Woodstock
Institute, Workplace Fairness.
____
Public Citizen,
Washington, DC, February 18, 2016.
Re Opposition to H.R. 3624, The Fraudulent Joinder Prevention
Act of 2015.
House of Representatives,
Washington, DC.
Dear Representative: I am writing on behalf of Public
Citizen, a non-profit membership organization with more than
400,000 members and supporters nationwide, to express
opposition to H.R. 3624, the Fraudulent Joinder Prevention
Act of 2015. This bill is an unnecessary intrusion into the
province of the federal courts.
H.R. 3624 addresses a federal district court's
consideration of a plaintiff's motion to remand a case to
state court, after a defendant has removed the case from the
state court in which it was filed to federal district court
on the theory that the plaintiff had fraudulently joined a
non-diverse defendant for the purpose of defeating federal-
court jurisdiction. The purpose of the bill, as made clear in
the September 29, 2015, hearing, is to assist defendants in
keeping cases in federal court after removal. The bill
purports to effectuate this purpose by specifying that the
federal court consider evidence, such as affidavits, and by
specifying four findings that would require a federal
district court to deny a plaintiff's motion to remand.
Congress should not get into the business of micro-managing
the motion practice of the federal courts without strong
evidence that current court procedures are not serving their
purpose: facilitating justice. In this case, however, the
hearing provided no support for the assumption that the
district courts are not denying motions to remand in
appropriate cases. Witness testimony that different courts
state different standards for reviewing such motions does not
support a call for congressional action, unless the existence
of different standards is leading to unjust results. The
testimony, however, did not demonstrate that the courts'
current approach results in injustice, and it did not explain
how results would differ under the standard proposed in the
bill and why any difference would be an improvement. Simply
put, the bill is a supposed fix for an imagined problem. The
House should hesitate before taking the step into
micromanagement of the federal courts' consideration of one
specific type of motion, where that motion has existed for
more than a century and evidence of a problem is so flimsy.
Thank you for consideration of our views.
Sincerely,
Robert Weissman,
President, Public Citizen.
____
Executive Office of the President, Office of Management
and Budget,
Washington, DC, February 24, 2016.
Statement of Administration Policy
H.R. 3624--Fraudulent Joinder Prevention Act of 2016 (Rep. Buck, R-CO)
The Administration strongly opposes H.R. 3624 because it is
a solution in search of a problem and makes it more difficult
for individuals to vindicate their rights in State courts.
Federal law currently permits defendants to remove to
Federal court a civil case initially filed in State court
where the plaintiffs and defendants are citizens of different
States and the case's value exceeds a certain monetary
threshold. H.R. 3624 purports to address a problem called
fraudulent joinder, where plaintiffs fraudulently raise
claims against a same-state defendant in order to defeat the
Federal court's ability to hear the case.
Existing Federal law already provides Federal courts with
ample tools to address this problem, and the proponents of
H.R. 3624 have offered no credible evidence that the Federal
courts are failing to carry out their responsibility to
prevent fraudulent joinder. The bill would therefore add
needless complexity to civil litigation and potentially
prevent plaintiffs from raising valid claims in State court.
If the President were presented with H.R. 3624, his senior
advisors would recommend that he veto the bill.
Mr. CONYERS. Mr. Chairman, I yield back the balance of my time.
{time} 1345
Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may
consume.
[[Page H913]]
Mr. Chairman, it is not often that the House has the opportunity to
protect innocent local people and businesses from costly and meritless
lawsuits and holding them to a good faith standard in litigation all by
passing a bill that is just a few pages long, but that is the
opportunity the House has today.
I thank the gentleman from Colorado (Mr. Buck), a member of the
Committee on the Judiciary, for introducing this vital measure, and I
urge all my colleagues to join me in supporting it.
Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule.
It shall be in order to consider as an original bill for the purpose
of amendment under the 5-minute rule the amendment in the nature of a
substitute recommended by the Committee on the Judiciary printed in the
bill. The committee amendment in the nature of a substitute shall be
considered as read.
The text of the committee amendment in the nature of a substitute is
as follows:
H.R. 3624
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fraudulent Joinder
Prevention Act of 2016''.
SEC. 2. PREVENTION OF FRAUDULENT JOINDER.
Section 1447 of title 28, United States Code, is amended by
adding at the end the following:
``(f) Fraudulent Joinder.--
``(1) This subsection shall apply to any case in which--
``(A) a civil action is removed solely on the basis of the
jurisdiction conferred by section 1332(a);
``(B) a motion to remand is made on the ground that--
``(i) one or more defendants are citizens of the same State
as one or more plaintiffs; or
``(ii) one or more defendants properly joined and served
are citizens of the State in which the action was brought;
and
``(C) the motion is opposed on the ground that the joinder
of the defendant or defendants described in subparagraph (B)
is fraudulent.
``(2) The joinder of the defendant or defendants described
in paragraph (1) (B) is fraudulent if the court finds that--
``(A) there is actual fraud in the pleading of
jurisdictional facts;
``(B) based on the complaint and the materials submitted
under paragraph (3), it is not plausible to conclude that
applicable State law would impose liability on each defendant
described in paragraph (1)(B);
``(C) State or Federal law clearly bars all claims in the
complaint against all defendants described in paragraph
(1)(B); or
``(D) objective evidence clearly demonstrates that there is
no good faith intention to prosecute the action against all
defendants described in paragraph (1)(B) or to seek a joint
judgment.
``(3) In determining whether to grant or deny a motion
under paragraph (1)(B), the court may permit the pleadings to
be amended, and shall consider the pleadings, affidavits, and
other evidence submitted by the parties.
``(4) If the court finds fraudulent joinder under paragraph
(2), it shall dismiss without prejudice the claims against
the defendant or defendants found to have been fraudulently
joined and shall deny the motion described in paragraph
(1)(B).''.
The Acting CHAIR. No amendment to the committee amendment in the
nature of a substitute shall be in order except those printed in House
Report 114-428. Each such amendment may be offered only in the order
printed in the report, by a Member designated in the report, shall be
considered read, shall be debatable for the time specified in the
report, equally divided and controlled by the proponent and an
opponent, shall not be subject to amendment, and shall not be subject
to a demand for division of the question.
Amendment No. 1 Offered by Mr. Buck
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in House Report 114-428.
Mr. BUCK. Mr. Chairman, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 4, line 1, strike ``the defendant or defendants'' and
insert ``a defendant''.
Page 4, line 5, after ``facts'' insert ``with respect to
that defendant''.
Page 4 beginning in line 9 and ending in line 10, strike
``each defendant described in paragraph (1)(B)'' and insert
``that defendant''.
Page 4, beginning in line 12 and ending in line 13, strike
``all defendants described in paragraph (1)(B)'' and insert
``that defendant''.
Page 4, beginning in line 16 and ending in line 17, strike
``all defendants described in paragraph (1)(B)'' and insert
``that defendant''.
Page 4, line 17, after ``joint judgment'' insert
``including that defendant''.
Page 4, line 23, strike ``fraudulent joinder'' and insert
``that all defendants described in paragraph (1)(B) have been
fraudulently joined''.
Page 4, beginning in line 25 and ending in line 1 of page 5
strike ``the defendant or defendants found to have been
fraudulently joined'' and insert ``those defendants''.
The Acting CHAIR. Pursuant to House Resolution 618, the gentleman
from Colorado (Mr. Buck) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Colorado.
Mr. BUCK. Mr. Chairman, this manager's amendment simply makes a few
technical changes to the bill; namely, striking references to multiple
defendants and replacing them with references to single defendants to
make clear that even if one instate defendant has a legitimate
connection to the case, the case can remain in State court.
I urge my colleagues to support this technical and clarifying
amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. CONYERS. Mr. Chairman, I rise in opposition to the amendment.
The Acting CHAIR. The gentleman from Michigan is recognized for 5
minutes.
Mr. CONYERS. Members of the House, I oppose the manager's amendment,
something I rarely ever do. While I don't take issue with the changes
to the bill that the manager's amendment makes, this amendment fails to
address any of the concerns that I raised about the underlying bill
because the bill is flawed in its very conception.
There is no real problem that this bill addresses. Existing
fraudulent joinder law adequately addresses the improper joinder of
instate defendants, and the bill's proponents have offered no evidence
to the contrary.
This unnecessary bill instead creates great uncertainty and delay in
the consideration of State law claims with its ambiguous new
requirements. It will also spawn much litigation, leading to increased
costs that will be borne disproportionately by plaintiffs.
This bill, in addition, violates State sovereignty by significantly
diminishing the ability of State courts to decide and shape State law
matters.
Those are my objections to the manager's amendment. I hope it will be
voted down.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Colorado (Mr. Buck).
The amendment was agreed to.
Amendment No. 2 Offered by Mr. Cartwright
The Acting CHAIR. It is now in order to consider amendment No. 2
printed in House Report 114-428.
Mr. CARTWRIGHT. Mr. Chairman, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 5, line 2, strike the close quotation mark and the
period which follows.
Page 5, after line 2, insert the following:
``(5) This subsection shall not apply to a case in which
the plaintiff seeks compensation resulting from the bad faith
of an insurer.''.
The Acting CHAIR. Pursuant to House Resolution 618, the gentleman
from Pennsylvania (Mr. Cartwright) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentleman from Pennsylvania.
Mr. CARTWRIGHT. I yield myself such time as I may consume.
Mr. Chairman, I also oppose the underlying bill, which I call the
wrongdoers protection act for multistate and multinational
corporations, and for that purpose I add this amendment.
It is no coincidence that these corporate wrongdoers want to force
consumers to fight them in the Federal court. That is the effect of
this bill, to enlarge Federal court diversity jurisdiction.
It is no coincidence that the corporate wrongdoers want to fight
there. It is not because they think the Federal judges are better
looking or that
[[Page H914]]
the Federal judges are more polite or that the decor is nicer in
Federal court. No. They want to go there because they are more likely
to beat consumers in Federal court cases.
After a generation of bad decisions by the Supreme Court of the
United States, Federal court has become candy land for corporate
wrongdoers, generations of bad decisions that invite and exhort
district judges to forget about the 7th Amendment in the Bill of
Rights. You remember what that says. It was written by James Madison.
It was announced as approved by Secretary of State Thomas Jefferson,
whose statue stands right outside this Chamber. It says this: ``In
suits at common law, where the value in controversy shall exceed twenty
dollars, the right of trial by jury shall be preserved.''
There is nothing ambiguous about that. But since the 1980s, there has
been this steady drumbeat of Supreme Court of the United States
decisions encouraging and emboldening Federal court judges to decide
and dismiss cases without the trouble of a jury trial.
Their toolkit is enormous: motions to dismiss, motions for judgment
on the pleadings, motions for summary judgment, motions for directed
verdict, motions for judgment as a matter of law.
Cases do get thrown out every day without the trouble of jury trials,
and the Seventh Amendment right to jury trial is not preserved. That is
why wrongdoer corporations prefer to be in Federal court. So that is
the backdrop, Mr. Chairman.
On top of that, I want to give you some very strong reasons why this
underlying bill is bad. Number one, it is discriminatory. Unless you
are a multistate or multinational corporation, this bill doesn't help
you. If you are an individual sued in State court, you get no help. If
you are a small-business owner only doing work in your State, you are
out of luck. This doesn't provide you any help. Only multistate,
multinational corporations get help, and that is why I call this the
wrongdoers protection act for multistate and multinational
corporations.
Number two, it is burdensome. Representative Johnson from Georgia
already made this point. The Federal courts are already overworked and
understaffed. The civil caseload already is growing at 12 percent a
year--much of that, by the way, contract cases filed by corporations.
There are currently 81 vacancies in the Federal judiciary. There is no
reason to add to this burden.
Number three, this bill is ironic. We have a crowd in this House that
constantly preaches about states' rights and the need to cut back on
the Federal Government. But a bill like this comes along, and they drop
that states' rights banner like it is a hot potato and pick up the coat
of arms of the multistate, multinational corporations.
Number four, and maybe most importantly, the underlying bill is
wrongheaded because these cases, called diversity cases, are filed in
State court under State law; and ever since the 1930s in the Erie
Railroad case, if you take these cases and handle them in Federal
court, the Federal judges have to follow State law, not Federal law.
Mr. Chairman, there is nobody better at interpreting State law than
State court judges. It stands to reason.
I offer this amendment that is on the desk to exempt consumer cases
against insurance companies for bad faith in insurance practices. If
the majority is going to persist and present this gift, this enormous
gift to the multistate and multinational corporate wrongdoers, at least
include this amendment and give a couple of crumbs to the average
American consumer trying to defend himself or herself in court.
Mr. Chairman, I reserve the balance of my time.
Mr. BUCK. Mr. Chairman, I rise in opposition to the amendment.
The Acting CHAIR. The gentleman from Colorado is recognized for 5
minutes.
Mr. BUCK. I yield myself such time as I may consume.
Mr. Chairman, this amendment should be roundly opposed for the simple
reason that not only does it not protect any victims, but it also
victimizes innocent local parties in the types of cases covered by the
amendment.
The purpose of this bill is to allow judges greater discretion to
free innocent local parties--that is, innocent people and innocent
small businesses--from lawsuits when those innocent local parties are
dragged into a case for no other reason than to further a trial
lawyer's forum-shopping strategy.
These innocent local parties have, at most, an attenuated connection
to the claims by the trial lawyer against some national company a
thousand miles away, and these innocent local parties shouldn't have to
suffer the time, expense, and emotional drain of a lawsuit when the
plaintiff cannot even come up with a plausible claim against it. The
base bill protects those innocent local parties from being dragged into
a lawsuit brought against some other party for no other reason than to
keep the case in a State court the trial lawyer prefers.
Now, enter this amendment, which denies the bill's protections to
innocent local parties joined to a lawsuit simply because the legal
allegations in the case fall into one arbitrary category rather than
another. That is terribly unfair.
If this were any other kind of bill designed to protect innocent
people, no one would argue that it shouldn't apply when the lawsuit
relates to a bad faith suit against an insurance company. Innocent
people are innocent people, and they should be protected from being
dragged into lawsuits, regardless of the nature of the case.
Now, let me say a little something about this amendment based on my
career as a prosecutor.
As a prosecutor, I deeply respected all the rules we have developed
in this country to protect the innocent. These are rules of general
application, such as rules protecting people's rights to have their
side of the story told and rules protecting people from biased or
inaccurate testimony. I would have been appalled if anyone ever
suggested that these general protections designed to protect innocent
people from criminal liability should be suspended because the case was
one of assault or battery or murder or somehow related to insurance.
Our country is rightfully proud of its principles providing due
process and equal protection, but those concepts are meaningless if
they are only selectively applied to some cases but not others. For the
same reason, we should all be outraged at the suggestion that rules of
fairness designed to protect the innocent should be suspended in civil
law because the case involves one particular subject or another. But
that is exactly what this misguided amendment does.
Further, courts could read this amendment as not even allowing them
to consider the fraudulent joinder argument for cases within its
coverage, no matter how clear it was that there was no valid claim
against the local defendant under State law.
This bill defines and limits fraudulent joinder. It does not license
courts to make up their own fraudulent joinder doctrines for cases not
within its coverage. Under that reading, claims could be made against
local insurance agents with no factual basis supporting the lawsuit.
The amendment would also allow a plaintiff's lawyer to drag an
individual insurance adjuster into a lawsuit even when the applicable
State law makes absolutely clear that only insurers, not individual
people, are subject to bad faith claims.
How does a sponsor explain to a person like Jack Stout why a lawyer
pulled him into a bad faith lawsuit targeting State Farm? Mr. Stout was
a local insurance agent who merely sold a policy to the plaintiff, met
and spoke with the plaintiff once, and had nothing to do with
processing the plaintiff's homeowner insurance claim.
A Federal district court in Oklahoma found he was fraudulently joined
and dismissed the claim against him. But under this amendment, this
innocent person could be struck back into the lawsuit.
How does the sponsor explain to a person like Douglas Bradley why a
plaintiff's lawyer named him as a defendant in a bad faith lawsuit
against an insurer? In that case, the complaint included Mr. Bradley,
an insurance agent, as a defendant in the caption referred to as
defendant, singular, not defendants throughout, and did not even
mention Mr. Bradley in the body of the complaint.
[[Page H915]]
A Federal district court in Indiana dismissed the claim against him
as fraudulently joined, but under this amendment, this innocent person
could be sucked back into the lawsuit, and that is not fair.
For all these reasons, this amendment should be soundly rejected.
Mr. Chairman, I reserve the balance of my time.
{time} 1400
Mr. CARTWRIGHT. Mr. Chairman, to respond to my colleague from
Colorado who has just cited two cases where, under existing law and
procedure, fraudulent joinder of bad faith insurance claims was claimed
and actually succeeded, the proof is right there.
The statute does not need to be amended. It is working already. That
is why we don't need to include bad faith insurance cases in the
Wrongdoers Protection Act for multistate and multinational
corporations.
I yield back the balance of my time.
Mr. BUCK. Mr. Chairman, I urge my colleagues to oppose this
amendment.
I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Pennsylvania (Mr. Cartwright).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. CARTWRIGHT. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Pennsylvania
will be postponed.
Mr. BUCK. Mr. Chairman, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Latta) having assumed the chair, Mr. Walker, Acting Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 3624) to
amend title 28, United States Code, to prevent fraudulent joinder, had
come to no resolution thereon.
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