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106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-320

======================================================================



 
            INTERSTATE CLASS ACTION JURISDICTION ACT OF 1999

                                _______
                                

 September 14, 1999.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

               DISSENTING AND ADDITIONAL DISSENTING VIEWS

                        [To accompany H.R. 1875]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1875) to amend title 28, United States Code, to 
allow the application of the principles of Federal diversity 
jurisdiction to interstate class actions, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           2
Purpose and Summary........................................           4
Background and Need for the Legislation....................           4
Hearings...................................................          12
Committee Consideration....................................          12
Vote of the Committee......................................          12
Committee Oversight Findings...............................          19
Committee on Government Reform Findings....................          19
New Budget Authority and Tax Expenditures..................          19
Congressional Budget Office Cost Estimate..................          19
Constitutional Authority Statement.........................          20
Section-by-Section Analysis and Discussion.................          21
Changes in Existing Law Made by the Bill, as Reported......          26
Dissenting Views...........................................          31
Additional Dissenting Views................................          43

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE AND REFERENCE.

    (a) Short Title.--This Act may be cited as the ``Interstate Class 
Action Jurisdiction Act of 1999''.
    (b) Reference.--Whenever in this Act reference is made to an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of title 
28, United States Code.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) as recently noted by the United States Court of Appeals 
        for the Third Circuit, interstate class actions are ``the 
        paradigm for Federal diversity jurisdiction because, in a 
        constitutional sense, they implicate interstate commerce, 
        invite discrimination by a local State, and tend to attract 
        bias against business enterprises'';
            (2) most such cases, however, fall outside the scope of 
        current Federal diversity jurisdiction statutes;
            (3) that exclusion is an unintended technicality, inasmuch 
        as those statutes were enacted by Congress before the rise of 
        the modern class action and therefore without recognition that 
        interstate class actions typically are substantial 
        controversies of the type for which diversity jurisdiction was 
        designed;
            (4) Congress is constitutionally empowered to amend the 
        current Federal diversity jurisdiction statutes to permit most 
        interstate class actions to be brought in or removed to Federal 
        district courts; and
            (5) in order to ensure that interstate class actions are 
        adjudicated in a fair, consistent, and efficient manner and to 
        correct the unintended, technical exclusion of such cases from 
        the scope of Federal diversity jurisdiction, it is appropriate 
        for Congress to amend the Federal diversity jurisdiction and 
        related statutes to allow more interstate class actions to be 
        brought in or removed to Federal court.

SEC. 3. JURISDICTION OF DISTRICT COURTS.

    (a) Expansion of Federal Jurisdiction.--Section 1332 is amended by 
redesignating subsections (b), (c), and (d) as subsections (c), (d), 
and (e), respectively, and by inserting after subsection (a) the 
following:
    ``(b)(1) The district courts shall have original jurisdiction of 
any civil action which is brought as a class action and in which--
            ``(A) any member of a proposed plaintiff class is a citizen 
        of a State different from any defendant;
            ``(B) any member of a proposed plaintiff class is a foreign 
        state and any defendant is a citizen of a State; or
            ``(C) any member of a proposed plaintiff class is a citizen 
        of a State and any defendant is a citizen or subject of a 
        foreign state.
As used in this paragraph, the term `foreign state' has the meaning 
given that term in section 1603(a).
    ``(2)(A) The district courts shall not exercise jurisdiction over a 
civil action described in paragraph (1) if the action is--
            ``(i) an intrastate case,
            ``(ii) a limited scope case, or
            ``(iii) a State action case.
    ``(B) For purposes of subparagraph (A)--
            ``(i) the term `intrastate case' means a class action in 
        which the record indicates that--
                    ``(I) the claims asserted therein will be governed 
                primarily by the laws of the State in which the action 
                was originally filed; and
                    ``(II) the substantial majority of the members of 
                all proposed plaintiff classes, and the primary 
                defendants, are citizens of the State in which the 
                action was originally filed;
            ``(ii) the term `limited scope case' means a class action 
        in which the record indicates that all matters in controversy 
        asserted by all members of all proposed plaintiff classes do 
        not in the aggregate exceed the sum or value of $1,000,000, 
        exclusive of interest and costs, or a class action in which the 
        number of members of all proposed plaintiff classes in the 
        aggregate is less than 100; and
            ``(iii) the term `State action case' means a class action 
        in which the primary defendants are States, State officials, or 
        other governmental entities against whom the district court may 
        be foreclosed from ordering relief.
    ``(3) Paragraph (1) shall not apply to any claim concerning a 
covered security as that term is defined in section 16(f)(3) of the 
Securities Act of 1933 and section 28(f)(5)(E) of the Securities 
Exchange Act of 1934.
    ``(4) Paragraph (1) shall not apply to any class action solely 
involving a claim that relates to--
            ``(A) the internal affairs or governance of a corporation 
        or other form of business enterprise and that arises under or 
        by virtue of the laws of the State in which such corporation or 
        business enterprise is incorporated or organized; or
            ``(B) the rights, duties (including fiduciary duties), and 
        obligations relating to or created by or pursuant to any 
        security (as defined under section 2(a)(1) of the Securities 
        Act of 1933 and the regulations issued thereunder).''.
    (b) Conforming Amendment.--Section 1332(c) (as redesignated by this 
section) is amended by inserting after ``Federal courts'' the 
following: ``pursuant to subsection (a) of this section''.
    (c) Determination of Diversity.--Section 1332, as amended by this 
section, is further amended by adding at the end the following:
    ``(f) For purposes of subsection (b), a member of a proposed class 
shall be deemed to be a citizen of a State different from a defendant 
corporation only if that member is a citizen of a State different from 
all States of which the defendant corporation is deemed a citizen.''.

SEC. 4. REMOVAL OF CLASS ACTIONS.

    (a) In General.--Chapter 89 is amended by adding after section 1452 
the following:

``Sec. 1453. Removal of class actions

    ``(a) In General.--A class action may be removed to a district 
court of the United States in accordance with this chapter, but without 
regard to whether any defendant is a citizen of the State in which the 
action is brought, except that such action may be removed--
            ``(1) by any defendant without the consent of all 
        defendants; or
            ``(2) by any plaintiff class member who is not a named or 
        representative class member of the action for which removal is 
        sought, without the consent of all members of such class.
    ``(b) When Removable.--This section shall apply to any class action 
before or after the entry of any order certifying a class.
    ``(c) Procedure for Removal.--The provisions of section 1446(a) 
relating to a defendant removing a case shall apply to a plaintiff 
removing a case under this section. With respect to the application of 
subsection (b) of such section, the requirement relating to the 30-day 
filing period shall be met if a plaintiff class member who is not a 
named or representative class member of the action for which removal is 
sought files notice of removal no later than 30 days after receipt by 
such class member, through service or otherwise, of the initial written 
notice of the class action provided at the court's direction.
    ``(d) Exceptions.--
            ``(1) Covered securities.--This section shall not apply to 
        any claim concerning a covered security as that term is defined 
        in section 16(f)(3) of the Securities Act of 1933 and section 
        28(f)(5)(E) of the Securities Exchange Act of 1934.
            ``(2) Internal governance of business entities.--This 
        section shall not apply to any class action solely involving a 
        claim that relates to--
                    ``(A) the internal affairs or governance of a 
                corporation or other form of business enterprise and 
                that arises under or by virtue of the laws of the State 
                in which such corporation or business enterprise is 
                incorporated or organized; or
                    ``(B) the rights, duties (including fiduciary 
                duties), and obligations relating to or created by or 
                pursuant to any security (as defined under section 
                2(a)(1) of the Securities Act of 1933 and the 
                regulations issued thereunder).''.
    (b) Removal Limitations.--Section 1446(b) is amended in the second 
sentence--
            (1) by inserting ``, by exercising due diligence,'' after 
        ``ascertained''; and
            (2) by inserting ``(a)'' after ``section 1332''.
    (c) Technical and Conforming Amendments.--The table of sections for 
chapter 89 is amended by adding after the item relating to section 1452 
the following:

``1453. Removal of class actions.''.
    (d) Application of Substantive State Law.--Nothing in this section 
or the amendments made by this section shall alter the substantive law 
applicable to an action to which the amendments made by section 3 of 
this Act apply.
    (e) Procedure After Removal.--Section 1447 is amended by adding at 
the end the following new subsection:
    ``(f) If, after removal, the court determines that no aspect of an 
action that is subject to its jurisdiction solely under the provisions 
of section 1332(b) may be maintained as a class action under Rule 23 of 
the Federal Rules of Civil Procedure, it shall dismiss the action. An 
action dismissed pursuant to this subsection may be amended and filed 
again in a State court, but any such refiled action may be removed 
again if it is an action of which the district courts of the United 
States have original jurisdiction. In any action that is dismissed 
pursuant to this subsection and that is refiled by any of the named 
plaintiffs therein in the same State court venue in which the dismissed 
action was originally filed, the limitations periods on all reasserted 
claims shall be deemed tolled for the period during which the dismissed 
class action was pending. The limitations periods on any claims that 
were asserted in a class action dismissed pursuant to this subsection 
that are subsequently asserted in an individual action shall be deemed 
tolled for the period during which the dismissed class action was 
pending.''.

SEC. 5. APPLICABILITY.

    The amendments made by this Act shall apply to any action commenced 
on or after the date of the enactment of this Act.

SEC. 6. GAO STUDY.

    The Comptroller General of the United States shall, by not later 
than 1 year after the date of the enactment of this Act, conduct a 
study of the impact of the amendments made by this Act on the workload 
of the Federal courts and report to the Congress on the results of the 
study.

                          Purpose and Summary

    H.R. 1875 is intended to correct a technical flaw in the 
current Federal diversity-of-citizenship jurisdiction statute 
(28 U.S.C. Sec. 1332)--the tendency of that statute to prevent 
interstate class actions from being adjudicated in Federal 
courts. These types of cases deserve Federal court access 
because they typically affect more citizens, involve more 
money, and implicate more interstate commerce issues than any 
other type of lawsuit. The bill amends section 1332 to expand 
Federal court diversity jurisdiction over such cases, and 
modifies existing removal statutes to ensure that interstate 
class actions initially brought in State courts may be heard by 
Federal courts if any of the real parties in interest (the 
unnamed class members or the defendants) so desire.

                Background and Need for the Legislation

    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 leads to the adjudication of homogeneous 
groups of smaller claims alleging harms to a large number of 
people, which would otherwise go unaddressed because the cost 
to individuals of suing would far exceed any possible benefit 
to the individual. However, in recent years class actions have 
been used with an increasing frequency and in ways that do not 
promote the interests they were intended to serve.
Class action certification standards
    Class actions were initially created in State courts of law 
and equity, and in 1849 became statutory with the advent of the 
Field Code, which several States adopted.\1\ In 1938, a Federal 
class action rule was first enacted in the form of Federal Rule 
of Civil Procedure 23.\2\ Rule 23 was substantially amended in 
1966, and granted courts more flexibility in certifying class 
actions.\3\
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    \1\ The Field Code required numerous parties and a common interest 
in law or fact. It reads, in part: ``[W]hen the question is one of a 
common or general interest of many persons, or when the parties are 
very numerous and it may be impracticable to bring them all before the 
court, one or more may sue or defend for the benefit of the whole.'' 
See Newberg on Class Actions 3d Sec. 13-14 to 13-17 (1997).
    \2\ The original Rule 23 recognized three types of class actions: 
the ``true'' class action involving joint rights in which a class 
decision was res judicata; the hybrid category involving several rights 
relating to specific property; and the ``spurious'' class action 
involving several rights affected by common questions, as to which the 
result was res judicata only as to the parties actually joined. 
Testimony of John P. Frank, Senate Committee on the Judiciary, May 4, 
1999.
    \3\ Current Rule 23 allows a matter to be brought as a class action 
in Federal court if (1) the class is so numerous that joinder of all 
members is impracticable; (2) there are questions of law or fact common 
to the class; (3) the claims or defenses of the representative parties 
are typical of those of the class; and (4) the representative parties 
will fairly and adequately protect the interests of the class. In 
addition, one of the following must be shown: (1) the prosecution of 
separate actions by or against individual members of the class would 
create a risk of either inconsistent or varying adjudications which 
would establish incompatible standards of conduct for the party 
opposing the class, or adjudications which, as a practical matter, 
would be dispositive of the interests of the other members not parties 
to the adjudications or which would substantially impair or impede 
their ability to protect their interests; (2) the party opposing the 
class has acted or refused to act on grounds generally applicable to 
the class, thereby making appropriate final injunctive relief or 
corresponding declaratory relief with respect to the class as a whole; 
or (3) the court finds that a class action is superior to other 
available methods for the fair and efficient adjudication of the 
controversy.
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    The Field Code, the original Federal Rule 23 and amended 
Federal Rule 23 remain the three models for present-day State 
class action rules: 38 States have adopted amended Federal Rule 
23 (sometimes with minor modifications); five still use rules 
modeled on the original Federal Rule 23; \4\ and four still use 
Field Code-based class rules.\5\ Three States still permit 
class actions at common law and have no formal class rules.\6\
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    \4\ Alaska, Georgia, New Mexico, North Carolina, and Rhode Island.
    \5\ California, Nebraska, South Carolina, and Wisconsin.
    \6\ Mississippi, New Hampshire, and Virginia.
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Federal Diversity Jurisdiction
    Article III of the Constitution empowers Congress to 
establish Federal jurisdiction over diversity cases--cases 
``between citizens of different States.'' \7\ The grant of 
diversity jurisdiction was premised on concerns that State 
courts might discriminate against out-of-State defendants, 
particularly out-of-State corporate defendants.\8\ It was 
feared that such discrimination would hinder the development 
and maintenance of effective interstate commerce. Since 1806, 
with some exceptions, the Federal courts have followed the rule 
of Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806), which 
states that Federal jurisdiction lies only where all plaintiffs 
are citizens of States different than all defendants. This is 
known as the ``complete diversity'' rule.\9\ 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. See Snyder v. Harris, 394 
U.S. 332 (1969). Congress has also historically imposed a 
monetary threshold--now $75,000--for Federal diversity claims. 
See 28 U.S.C. Sec. 1332(a). However, the amount in controversy 
requirement normally is satisfied in a class action only if 
each of the class members individually seeks damages in excess 
of the statutory minimum. See Zahn v. International Paper Co., 
414 U.S. 291 (1973).\10\
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    \7\ Article III, section 2, states that ``The judicial Power shall 
extend to all Cases, in Law and Equity, arising under this 
Constitution, the Laws of the United States, and Treaties made, or 
which shall be made, under their Authority; . . . to controversies . . 
. between citizens of different States. . . .''
    \8\ See, e.g., Pease v. Peck, 59 U.S.(18 How.) 518, 520 (1856) 
(``The theory upon which jurisdiction in conferred on the court of the 
United States, in controversies between citizens of different States, 
has its foundation in the supposition that, possibly, the State 
tribunal might not be impartial between their own citizens and 
foreigners.''); Bank of United States v. Deveaux, 9 U.S. (5 Cranch) 61, 
87 (1809).
    \9\ The Strawbridge decision construes the language of the 1789 
Judiciary Act, not the limits of Article III diversity jurisdiction. 
The Supreme Court has regularly recognized that the decision to require 
complete diversity, and to set a minimum amount in controversy, are 
political decisions not mandated by the Constitution. See, e.g., 
Newman-Green, Inc. v. Alfonzo-Larrian, 490 U.S. 826, 829 n.1 (1989). It 
is therefore the prerogative of the Congress to broaden the scope of 
diversity jurisdiction to any extent it sees fit, as long as any two 
adverse parties to a lawsuit are citizens of different States. See 
State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31 (1967).
    \10\ Federal appellate courts are divided about Zahn's breadth and 
current vitality. For example, appellate courts do not agree about the 
extent to which punitive damages and other sorts of relief sought by 
all putative class members may be aggregated in order to satisfy the 
$75,000 jurisdictional amount requirement. Compare Allen v. R. & H. Oil 
& Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995) (where multiple 
plaintiffs file a joint claim for punitive damages, the total sum 
claimed should be attributed to each individual plaintiff in 
determining whether each has satisfied the jurisdictional amount 
requirement); Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1359 
(11th Cir. 1996) (same) with Gilman v. BHC Securities, Inc., 104 F.3d 
1418, 1428-1432 (2d Cir. 1997). Even more fundamentally, several 
Federal courts have ruled that Congress overruled Zahn by enacting the 
Judicial Improvements Act of 1990. See In re Abbott Laboratories, Inc., 
51 F.3d 524, 527-29 (5th Cir. 1995); Stromberg Metal Works, Inc. v. 
Press Mechanical, Inc., 77 F.3d 928, 932 (7th Cir. 1996). Other Federal 
appellate courts have disagreed with these holdings. See Leonhardt v. 
Western Sugar Co., 160 F.3d 631 (10th Cir. 1998); Meritcare Inc. v. St. 
Paul Mercury Ins. Co., 166 F.3d 214, 220-22 (3d Cir. 1999). The 
enactment of this bill will resolve these serious divisions among our 
Federal appellate courts about the state of the law in this arena and 
eliminate any ambiguities about congressional intent regarding the 
scope of Federal diversity jurisdiction over interstate class actions.
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Standards for Removal of Cases from State Courts
    The general removal statute provides, inter alia, that any 
civil action brought in a State court of which U.S. district 
courts have original jurisdiction, may be removed by the 
defendant(s) to the appropriate Federal court. See 28 U.S.C. 
Sec. 1441(a). Removal is based on the same general assumption 
as is diversity jurisdiction that an out-of-State defendant may 
become a victim of local prejudice in State court.\11\
---------------------------------------------------------------------------
    \11\ See David P. Currie, Federal Jurisdiction at 140 (3rd ed. 
1990).
---------------------------------------------------------------------------
    A defendant must file for removal to Federal court within 
30 days after receipt of a copy of the initial pleading (or 
service of summons if a pleading has been filed in court and is 
not required to be served on the defendant). See 28 U.S.C. 
Sec. 1446(b). An exception exists beyond the 30-day deadline 
when the case stated by the initial pleading is not removable. 
If so, a notice of removal must be filed within 30 days of 
receipt by the defendant of ``a copy of an amended pleading, 
motion, order, or other paper from which it may first be 
ascertained that the case [is removable].'' In no event may a 
case where Federal jurisdiction is based on diversity be 
removed more than one year from commencement of the action. Id.
Implications of jurisdictional requirements on interstate class actions
    These jurisdictional statutes were originally enacted years 
ago, well before the modern class action arose. Their 
application in the class action context leads to perverse 
results. For example, under current law a citizen of one State 
may bring a diversity action in Federal court alleging 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, 
because each class plaintiff's claim does not satisfy the 
jurisdictional amount requirement and there is not complete 
diversity of citizenship. As several witnesses noted during the 
Committee's hearings on this legislation, if Congress were to 
enact an entirely new Federal diversity jurisdiction statute 
and consider anew which kinds of cases most warrant access to 
Federal courts, there would be little legitimate debate that 
interstate class actions would be at or near the top of the 
list. Those cases typically put the most money in controversy, 
involve the most people, and have the most interstate commerce 
ramifications. In short, they are the types of cases that most 
clearly fit the historic rationale for Federal diversity 
jurisdiction. Thus, it is an extreme anomaly that current law 
essentially excludes these cases from our Federal courts while 
allowing access to others.
    These current rules can be used to game the system and keep 
interstate class actions out of Federal court. The Committee 
heard that attorneys often name irrelevant parties to class 
actions filed in State court in an effort to ``destroy 
diversity'' and keep the case from qualifying for Federal 
diversity jurisdiction. For example, a common practice by 
plaintiffs' attorneys is to recruit a plaintiff from the same 
State in which a corporate defendant is headquartered to serve 
as a named representative member of the class (even though the 
bulk of class members are from another State), thereby 
eliminating diversity between the litigants. Similarly, if in-
State plaintiffs are listed on the pleadings, plaintiff 
attorneys will often sue a local manager, agent, or retailer of 
an out-of-State corporation to avoid complete diversity. 
Further, counsel make other statements about the case to keep 
the defendant from removing the case to Federal court (e.g., 
``plaintiffs seek only a very small amount of money in this 
case ''). After one year, however, the attorneys recant those 
statements or drop diverse parties, since at that point, 
current statutes bar removal of the case to Federal court.
    The consequence of these jurisdictional limitations is not 
merely to eliminate the Federal forum for adjudication of 
interstate class actions. Because the alternative Federal forum 
is not available, considerable abuse of the class action device 
is occurring in many State courts. Some State courts are not 
properly supervising class settlements. The result is that 
class counsel become the primary beneficiaries of those 
settlements; the class members (the persons on whose behalf the 
actions were brought) get little or nothing--or in some cases, 
even worse. For example, the record contains testimony about 
one case in which class members had money deducted from their 
mortgage accounts in order to pay several million dollars to 
the class counsel.\12\ In short, the lawsuit that was supposed 
to vindicate the class members' rights resulted in their losing 
money. To make matters worse, when one class member tried to 
complain, the class counsel sued her for $25 million.\13\
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    \12\ Prepared Statement of Ralph G. Wellington, Esq., Hearing 
before the Subcomm. on Courts and Intellectual Property of the House 
Comm. on the Judiciary, ``Mass Torts and Class Action Lawsuits'' (March 
9, 1998).
    \13\ Oral Statement of Sen. Herb Kohl, S. 353: ``The Class Action 
Fairness Act of 1999,'' S. Hrg. No. J-106-22 (May 4, 1999).
---------------------------------------------------------------------------
    Although class certification standards do not differ 
radically among Federal and State courts, some State courts 
have shown very lax attitudes toward class certification. The 
record indicates that some State court judges have certified 
classes before the defendant was even served with the complaint 
and given an opportunity to defend itself. Other State court 
judges simply do not rigorously apply the appropriate class 
certification prerequisites, such that they will afford class 
treatment to virtually any kind of case, even though doing so 
will trample the due process rights of the unnamed class 
members and/or defendants. Indeed, the record contains examples 
of cases in which Federal courts denied class certification 
based on due process concerns, but State courts subsequently 
certified classes anyway.\14\
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    \14\ Prepared Statement of John W. Martin, Jr., Hearing before the 
Subcomm. on Courts and Intellectual Property of the House Comm. on the 
Judiciary, ``Mass Torts and Class Action Lawsuits'' (March 9, 1998).
---------------------------------------------------------------------------
    Some State courts fail to recognize the power of the class 
device and the need to carefully control its usage. One witness 
at a Committee hearing noted that where class actions are not 
properly controlled by the courts handling them (as is often 
the case with State courts), there can be ``the perverse result 
that companies that have committed no wrong find it necessary 
to pay ransom to plaintiffs' lawyers because the risk of 
attempting to vindicate their rights through trial simply 
cannot be justified to their shareholders. Too frequently, 
corporate decisionmakers are confronted with the implacable 
arithmetic of the class action: even a meritless case with only 
a 5% chance of success at trial must be settled if the 
complaint claims hundreds of millions of dollars in damages.'' 
\15\ And as another witness noted, ``where businesses may be 
legitimately at fault, injured consumers receive little, while 
the plaintiffs' attorneys are enriched.''
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    \15\ Prepared Statement of John L. McGoldrick, Esq., Senior Vice 
President and General Counsel, Bristol-Myers Squibb Company, Hearing 
before the Subcomm. on Courts and Intellectual Property of the House 
Comm. on the Judiciary, ``Mass Torts and Class Action Lawsuits'' (March 
9, 1998).
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    Because of the way in which they have overreached in the 
use of the class device, some State courts have effectively 
made themselves the arbiters of the laws of other States, 
raising serious federalism concerns. To facilitate the 
certification of nationwide or multi-State classes, some State 
courts have declared the laws of their forum to apply to all 
claims in the action, even where that home State law is 
inconsistent with the laws of other jurisdictions that should 
be applied.\16\ Some years ago, the U.S. Supreme Court has 
declared this practice to constitute a denial of due 
process,\17\ but it continues. In other nationwide or multi-
State class actions, a single State court decides the law of 
many other jurisdictions, effectively telling other States what 
their laws are with no input from the judiciaries of those 
other jurisdictions. Again, this practice means that a State 
court, which has no accountability to the residents of any 
other State, is dictating applicable laws to out-of-State 
residents.
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    \16\ See the examples in the Prepared Statement of Hon. Walter E. 
Dellinger, III, Esq., Hearing before the House Comm. on the Judiciary, 
``H.R. 1875: The Interstate Class Action Jurisdiction Act of 1999'' 
(July 21, 1999).
    \17\ Shutts v. Phillips Petroleum Co., 472 U.S. 797 (1985).
---------------------------------------------------------------------------
    Some State courts have effectively federalized procedural 
class action law as well. As Congressman James Moran testified 
at one Committee hearing, ``[o]pportunistic lawyers have 
identified those States and particular judges where the class 
action device can be exploited.'' Essentially, there is a race 
to the bottom--class action lawyers find the State courts with 
the most lax attitude toward class actions and file their cases 
there. As a result, certain State courts hear a highly 
disproportionate amount of nationwide or multi-State class 
actions and thereby effectively dictate Federal class action 
policy (even though they have no charter to do so).
    The current concentration of class actions in State courts 
is resulting in enormous waste and is putting class members' 
interests at risk. For example, with increasing frequency, 
counsel are filing overlapping or ``copycat'' class actions--
cases that assert basically the same claims on behalf of 
basically the same class members. When such ``copycat'' cases 
are filed in various Federal courts, they may be consolidated 
before a single Federal judge through the multidistrict 
litigation provisions of 28 U.S.C. Sec. 1407, thereby assuring 
consistent treatment of legal issues and uniform management of 
the cases. But when ``copycat'' class actions are filed in 
multiple State courts in multiple jurisdictions, they must be 
litigated separately--there is no consolidation mechanism. As a 
result, State courts and the counsel involved ``compete'' to 
control the cases, often to the detriment of the unnamed class 
members and defendants.\18\ Counsel also use these ``copycat'' 
cases to ``forum shop,'' presenting the same class 
certification and other issues to different courts, always 
trying to obtain better results than they achieved in another 
``copycat'' case.
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    \18\ Working Papers of the Advisory Committee on Civil Rules on 
Proposed Amendments to Civil Rule 23, Vol 3, at 32 (May 1, 1997) 
(``Advisory Committee Working Papers'') (statement of Prof. Samuel 
Isaacaroff, University of Texas Law School) (noting that ``rival state 
court proceedings'' in class actions are ``emerging as real problem 
spots''); id., Vol. 4, at 88 (comments of consumer advocate Stephen 
Gardner) (describing the duplication of rival state class action 
proceedings in state and federal courts).
---------------------------------------------------------------------------
    The lax attitudes of some State courts and those courts' 
ineffectiveness in managing class litigation has, not 
surprisingly, resulted in dramatic increases in the number of 
purported class actions being filed in State courts, according 
to data supplied to the Committee.\19\ And also not 
surprisingly, the record suggests that many of those numerous 
new cases are of questionable merit. In interviews conducted 
for a study on class actions by the RAND Corporation's 
Institute for Civil Justice, many attorneys (including some 
plaintiffs' counsel) observed that ``too many non-meritorious 
[class action lawsuits] are [being] filed and certified'' for 
class treatment.\20\
---------------------------------------------------------------------------
    \19\ See Advisory Committee Working Papers, Vol. 1, at ix-x (May 1, 
1997) (memorandum of Judge Paul V. Niemeyer to members of the Advisory 
Committee on Civil Rules); Deborah Hensler, et al. (Institute for Civil 
Justice), Preliminary Results of the RAND Study of Class Action 
Litigation, at 15 (``ICJ Report'') (observing that the ``doubling or 
tripling of the number of putative class actions'' has been 
``concentrated in the state courts'').
    \20\ Id.
---------------------------------------------------------------------------
    Certification of interstate class actions under these 
circumstances is inconsistent with the constitutional theory of 
providing Federal diversity jurisdiction where there is the 
potential for discrimination against an out-of-State defendant. 
Yet, without the ability to remove these cases to Federal 
court, a defendant has no realistic opportunity to challenge 
the propriety of class certification. In many instances, the 
mere fact that a class is certified will determine the outcome 
of the case. Because the cases are brought on behalf of 
thousands (and sometimes millions) of claimants, the potential 
exposure for a defendant is enormous. As noted above, 
plaintiffs' counsel can use this potential exposure to coerce 
settlements that offer minimal benefits to the class members, 
but which result in hefty attorneys' fees. When a class action 
is heard in Federal court, an interlocutory appeal may be taken 
to challenge an order granting or denying class certification. 
See Fed.R.Civ.P. 23(f). This is not the case in many State 
courts; in those jurisdictions, a defendant who believes that 
class certification was improper in a case may not challenge 
the certification until having fully litigated the class action 
on its merits. When faced with the option of settling a case 
soon after certification or litigating a case to its 
conclusion, many times the economics of the situation leads 
defendants no logical choice but to settle non-meritorious 
claims.
    The issues presented by the application of the current 
Federal jurisdiction rules in the class action context have 
been increasingly identified and criticized by the courts. For 
example, in Davis v. Cannon Chevrolet-Olds, Inc., 1999 U.S. 
App. LEXIS 17040 (11th Cir. July 26, 1999), the Eleventh 
Circuit reluctantly remanded a large interstate class action in 
which counsel sued General Motors Acceptance Corp., alleging on 
behalf of a proposed nationwide class of thousands of vehicle 
owners that GMAC conspired to conceal the fact that when GM 
dealers sell extended vehicle warranties, they get part of the 
profit. The court concluded that since counsel had expressly 
limited each class member's damages demand to less than the 
$75,000 jurisdictional amount prerequisite, there was no basis 
for Federal diversity jurisdiction over the case. In so ruling, 
however, the appellate court noted that, as observed by the 
leading Federal civil procedure treatise (Wright & Miller), 
``[t]he traditional principles [regarding class action 
jurisdiction] have evolved haphazardly and with little 
reasoning'' and ``serve no apparent policy.'' The court 
therefore offered the following ``apologia:''

        We acknowledge that this case and its kin present an 
        anomaly in our law. An important historical 
        justification for diversity jurisdiction is the 
        reassurance of fairness and competence that a Federal 
        court can supply to an out-of-State defendant facing 
        suit in State court. GMAC is an out-of-State corporate 
        defendant facing a multimillion-dollar judgment--
        possibly tens or hundreds of millions, once the 
        plaintiffs have waited out the one-year removal window 
        and amend their complaint to seek punitive damages 
        explicitly--in a State court system that has on 
        occasion produced gigantic awards against out-of-State 
        corporate defendants. One would think that this case is 
        exactly what those who espouse the historical 
        justification for section 1332 would have had in mind, 
        and that this fact would somehow color the statute's 
        interpretation. Id. at *14-*15 (citations omitted).

    Judge John Nangle, who chairs the Judicial Panel on 
Multidistrict Litigation, concurred, echoing criticisms about 
the way current jurisdictional statutes are applied to class 
actions:

        The case at hand is but one example of a growing trend 
        in class action litigation in this country. Plaintiffs' 
        attorneys are increasingly filing nationwide class 
        actions in various State courts, carefully crafting 
        language in the petitions or complaints in order to 
        avoid the amount in controversy requirement of the 
        Federal courts. Existing Federal precedent . . . 
        mandates that this practice be permitted, although most 
        of these cases in actuality will be disposed of through 
        ``coupon'' or ``paper'' settlements. Actual monetary 
        compensation rarely reaches the class members. 
        Concurrently, and perhaps coincidentally, such 
        settlements are virtually always accompanied by 
        munificent grants of or requests for attorneys' fees 
        for class counsel. . . . [T]his judge is of the opinion 
        that the present case law does not accommodate the 
        reality of modern class action litigation and 
        settlements. Id. at *18-*19 (citations omitted).

    Within the past year, another Federal appellate court 
highlighted this problem. In an opinion by Judge Anthony 
Scirica (who chairs the Judicial Conference's Standing 
Committee on Rules and Procedure), the U.S. Court of Appeals 
for the Third Circuit observed that although ``national 
(interstate) class actions are the paradigm for Federal 
diversity jurisdiction because, in a constitutional sense, they 
implicate interstate commerce, foreclose discrimination by a 
local State, and tend to guard against any bias against 
interstate enterprises. . . . Yet . . . at least under the 
current jurisdictional statutes, such class actions may be 
beyond the reach of the Federal courts.'' In re Prudential Ins. 
Co. America Sales Practice Litig., 148 F.3d 283, 305 (3d Cir. 
1998).
Effect of H.R. 1875 on Existing Law
    H.R. 1875 would amend the diversity jurisdiction and 
removal statutes applicable to class actions where there is a 
substantial risk of discrimination against out-of-State 
defendants. It amends 28 U.S.C. Sec. 1332 to grant original 
jurisdiction in the Federal courts to hear interstate class 
actions where any member of the proposed class is a citizen of 
a State different from any defendant. (A change from ``complete 
diversity'' to ``minimal diversity.'') However, to ensure that 
cases that are truly local in nature are not swept into the 
Federal courts, the bill would exempt from its reach (1) 
intrastate cases--cases in which a ``substantial majority'' of 
the class members and defendants are citizens of the same State 
and the claims will be governed primarily by that State's law; 
(2) limited scope cases--cases involving fewer than 100 class 
members or where the aggregate amount in controversy is less 
than $1 million; and (3) State action cases--cases where the 
primary defendants are States or State officials, or other 
governmental entities against whom the district court may be 
foreclosed from ordering relief.
    H.R. 1875 would also establish new rules governing the 
removal of class actions filed in State court. Existing removal 
procedures would apply, with four new features: (1) Unnamed 
class members (plaintiffs) would be allowed to remove to 
Federal court class actions in which their claims are being 
asserted. Under current rules, only defendants are allowed to 
remove. (2) Parties could remove without the consent of any 
other party. Current removal rules--which apply only to 
defendants--require the consent of all defendants. (3) Removal 
to Federal court would be available to any defendant, 
regardless of whether any defendant is a citizen of the State 
in which the action was brought. (4) The current bar to removal 
of class actions after one year would be eliminated, although 
the requirement that removal occur within 30 days of notice of 
grounds for removal would be retained.
    Under H.R. 1875, 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. 
Plaintiffs would then be permitted to refile their claims in 
State court, presumably in a form amended either to fall within 
one of the types of class actions over which the district court 
is not to exercise jurisdiction, or one which could be 
maintained as a class action under Federal Rule 23. The refiled 
case would once again be eligible for removal if original 
Federal jurisdiction exists. The statute of limitations on 
individual class members' claims in such a dismissed class 
action would not run during the period the action was pending 
in Federal court, nor would that of claims in new class actions 
filed by the same named plaintiffs in the same State venue.

                                Hearings

    The Committee held a hearing on H.R. 1875 on July 21, 1999. 
Testimony was received from eight witnesses, including a 
representative of the Department of Justice. In addition, the 
Subcommittee on Courts and Intellectual Property held an 
oversight hearing on the subject of mass torts and class 
actions on March 5, 1998, and a legislative hearing on 
legislation similar to H.R. 1875 (H.R. 3789, 105th Congress), 
on June 18, 1998.

                        Committee Consideration

    On July 27 and August 3, 1999, the Committee met in open 
session and ordered favorably reported the bill H.R. 1875, with 
an amendment, by a recorded vote of 15 to 12, a quorum being 
present.

                         Vote of the Committee

    The following roll call votes occurred during Committee 
deliberation on H.R. 1875:
    An amendment by Mr. Watt to the Goodlatte/Boucher amendment 
in the nature of a substitute to H.R. 1875 to eliminate all new 
removal authority for interstate class actions. The Watt 
amendment was defeated by a roll call vote of 11 to 15.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............  ..............  ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............              X   ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............  ..............  ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............              X   ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............  ..............  ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................              X   ..............  ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................              X   ..............  ..............
Ms. Jackson Lee.................................................  ..............  ..............  ..............
Ms. Waters......................................................  ..............  ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................             11              15   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Mr. Conyers, Mr. Berman, and Mr. Meehan to 
the Goodlatte/Boucher amendment in the nature of a substitute 
to H.R. 1875 to remand actions not certified as a class by a 
Federal court to State court, allow the State court to certify 
them, and prohibit removal to Federal court. The amendment was 
defeated by a roll call vote of 14 to 15.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............  ..............  ..............
Mr. Gallegly....................................................  ..............  ..............  ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............              X   ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............  ..............  ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............              X   ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................              X   ..............  ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................              X   ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................  ..............  ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................              X   ..............  ..............
Mr. Wexler......................................................              X   ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................             14              15   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Mr. Watt to the Goodlatte/Boucher amendment 
in the nature of a substitute to H.R. 1875 to require removal 
to occur within the time provided by State law. The Watt 
amendment was defeated by a roll call vote of 5 to 12.

                                                   ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............              X   ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............  ..............  ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............  ..............  ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............  ..............  ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............  ..............  ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................  ..............  ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................  ..............  ..............  ..............
Mr. Meehan......................................................  ..............  ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................  ..............  ..............  ..............
Ms. Baldwin.....................................................  ..............  ..............  ..............
Mr. Weiner......................................................  ..............  ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              5              12   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Ms. Jackson Lee to the Goodlatte/Boucher 
amendment in the nature of a substitute to H.R. 1875 to strike 
the text of the bill and instead authorize a study of class 
action cases to be conducted within 12 months after the date of 
enactment. The Jackson Lee amendment was defeated by a roll 
call vote of 8 to 14.

                                                   ROLLCALL NO. 4
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............              X   ..............
Mr. Gekas.......................................................  ..............  ..............  ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............  ..............  ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................  ..............  ..............  ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................  ..............  ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................  ..............  ..............  ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................  ..............  ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................              X   ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              8              14   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Mr. Nadler to the Goodlatte/Boucher 
amendment in the nature of a substitute to H.R. 1875 to carve 
out cases involving harm caused by a firearm or ammunition. The 
Nadler amendment was defeated by a roll call vote of 6 to 16.

                                                   ROLLCALL NO. 5
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............  ..............  ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................  ..............  ..............  ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................  ..............  ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................  ..............              X   ..............
Mr. Watt........................................................  ..............              X   ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................  ..............  ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................              X   ..............  ..............
Mr. Rothman.....................................................  ..............  ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              6              16   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Mr. Nadler to the Goodlatte/Boucher 
amendment in the nature of a substitute to H.R. 1875 to carve 
out cases involving health care providers. The Nadler amendment 
was defeated by a roll call vote of 7 to 16.

                                                   ROLLCALL NO. 6
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............  ..............  ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................  ..............  ..............  ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................  ..............  ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................  ..............              X   ..............
Mr. Watt........................................................  ..............              X   ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              7              16   ..............
----------------------------------------------------------------------------------------------------------------


    An amendment by Ms. Waters to the Goodlatte/Boucher 
amendment in the nature of a substitute to H.R. 1875 to delay 
the effective date of the bill until the Judicial Conference 
certifies in writing to Congress that vacancies of Federal 
judgeships have fallen to less than 3 percent. The Waters 
amendment was defeated by a roll call vote of 10 to 13.

                                                   ROLLCALL NO. 7
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............  ..............  ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............  ..............  ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................  ..............  ..............  ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............              X   ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................              X   ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................  ..............  ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................             10              13   ..............
----------------------------------------------------------------------------------------------------------------


    Motion to report H.R. 1875 as amended by the amendment in 
the nature of a substitute, as amended. By a roll call vote of 
15 yeas to 12 nays, the motion to report favorably was agreed 
to.

                                                   ROLLCALL NO. 8
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............  ..............  ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............  ..............  ..............
Mr. Coble.......................................................              X   ..............  ..............
Mr. Smith (TX)..................................................              X   ..............  ..............
Mr. Gallegly....................................................              X   ..............  ..............
Mr. Canady......................................................              X   ..............  ..............
Mr. Goodlatte...................................................  ..............  ..............  ..............
Mr. Chabot......................................................              X   ..............  ..............
Mr. Barr........................................................  ..............  ..............  ..............
Mr. Jenkins.....................................................              X   ..............  ..............
Mr. Hutchinson..................................................              X   ..............  ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................              X   ..............  ..............
Mr. Rogan.......................................................              X   ..............  ..............
Mr. Graham......................................................              X   ..............  ..............
Ms. Bono........................................................              X   ..............  ..............
Mr. Bachus......................................................              X   ..............  ..............
Mr. Scarborough.................................................  ..............  ..............  ..............
Mr. Vitter......................................................              X   ..............  ..............
Mr. Conyers.....................................................  ..............              X   ..............
Mr. Frank.......................................................  ..............  ..............  ..............
Mr. Berman......................................................  ..............              X   ..............
Mr. Boucher.....................................................              X   ..............  ..............
Mr. Nadler......................................................  ..............              X   ..............
Mr. Scott.......................................................  ..............              X   ..............
Mr. Watt........................................................  ..............              X   ..............
Ms. Lofgren.....................................................  ..............              X   ..............
Ms. Jackson Lee.................................................  ..............              X   ..............
Ms. Waters......................................................  ..............              X   ..............
Mr. Meehan......................................................  ..............              X   ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................  ..............              X   ..............
Mr. Rothman.....................................................  ..............              X   ..............
Ms. Baldwin.....................................................  ..............              X   ..............
Mr. Weiner......................................................  ..............  ..............  ..............
Mr. Hyde, Chairman..............................................              X   ..............  ..............
                                                                 -----------------------------------------------
    Total.......................................................             15              12   ..............
----------------------------------------------------------------------------------------------------------------


                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of Rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of Rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                Committee on Government Reform Findings

    No findings or recommendations of the Committee on 
Government Reform were received as referred to in clause 
3(c)(4) of Rule XIII of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of Rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1875, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 18, 1999.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1875, the 
Interstate Class Action Jurisdiction Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman, who can be reached at 226-2860.
            Sincerely,
                                  Dan L. Crippen, Director.
H.R. 1875--Interstate Class Action Jurisdiction Act of 1999.
    H.R. 1875 would expand the types of class-action lawsuits 
that would be heard initially in Federal district court. As a 
result, most class-action lawsuits would be heard in Federal 
district court rather than State court, and the bill would 
impose additional costs on the U.S. court system. While the 
number of cases that would be filed in Federal court under this 
bill is highly uncertain, CBO expects that at least a few 
hundred additional cases would be heard in Federal court each 
year. According to the Administrative Office of the United 
States Courts, class-action lawsuits tried in Federal court 
cost, on average, about $17,000. This estimate includes 
discretionary costs for salaries and benefits for clerks, rent, 
utilities, and associated overhead expenses, and excludes the 
costs for the salaries and benefits of judges. Thus, CBO 
estimates that enacting H.R. 1875 could affect the courts' 
workload at a cost of about $5 million annually.
    H.R. 1875 also would require the General Accounting Office 
to study the impact of the bill on the workload of the Federal 
court system and to report to the Congress no later than one 
year after the bill's enactment. CBO estimates that this 
provision would cost less than $500,000 over the 2000-2001 
period, subject to the availability of appropriated funds.
    CBO also estimates that enacting this bill could increase 
the need for additional judges. Because the salaries and 
benefits of district court judges are considered mandatory, 
adding more judges would increase direct spending. But H.R. 
1875 would not--by itself--affect direct spending because 
separate legislation would be necessary to increase the number 
of judges. In any event, CBO expects that enacting the bill 
would not require any significant increase in the number of 
Federal judges, so that any potential increase in direct 
spending from subsequent legislation would probably be less 
than $500,000 a year.
    Because H.R. 1875 would not affect direct spending or 
receipts, pay-as-you-go procedures would not apply to this 
bill. H.R. 1875 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on State, local, or tribal governments.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman, who can be reached at 226-2860. This estimate was 
approved by Robert A. Sunshine, Deputy Assistant Director for 
Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article III, section one of the 
Constitution.

               Section-by-Section Analysis and Discussion

    Section 1--Section 1 sets forth the short title of the 
bill--the ``Interstate Class Action Jurisdiction Act of 
1999''--and specifies that any reference to an amendment or 
repeal of existing law shall be a reference to a portion of 
Title 28 of the United States Code.
    Section 2--Section 2 contains the findings of the Congress 
in support of the bill.
    Section 3--Section 3 amends 28 U.S.C. Sec. 1332 to create a 
new subsection 1332(b), granting original jurisdiction in the 
Federal courts over class action lawsuits in which (a) any 
member of the plaintiff class is a citizen of a State different 
than any defendant; (b) any member of the plaintiff class is a 
foreign state and any defendant is a citizen of a State; or (c) 
any member of the plaintiff class is a citizen of a State and 
any defendant is a citizen or subject of a foreign state. For 
purposes of this new section, the term ``foreign state'' is 
defined as in 28 U.S.C. Sec. 1603(a).
    Pursuant to new subsection 1332(b)(2)(A), the district 
courts are directed not to exercise this jurisdiction if the 
action is an intrastate case, a limited scope case, or a State 
action case. An intrastate case is defined as a class action in 
which the record indicates that the claims will be governed 
primarily by the law of the State in which it was originally 
filed, and the substantial majority of the plaintiff class 
members and the primary defendants are all citizens of that 
same State. A limited scope case is defined as a class action 
involving fewer than 100 class members or where the aggregate 
amount in controversy is less than $1 million (exclusive of 
interest and costs). A State action case is defined as a class 
action in which the primary defendants are States, State 
officials, or other governmental entities against whom the 
district court may be foreclosed from ordering relief.
    Overall, the new section 1332(b) is intended to expand 
substantially Federal court jurisdiction over class actions. 
For that reason, its provisions should be read expansively; 
they should be read as stating a strong preference that 
interstate class actions be heard in a Federal court if so 
desired by any purported class member or any defendant.
    Consistent with this overriding intent, the provisions of 
the new subsection 1332(b)(2)(A) should be read narrowly. A 
purported class action should be deemed an ``intrastate case'' 
that falls outside Federal jurisdiction only if virtually all 
members of all proposed classes are residents of a single State 
of which all ``primary defendants'' are also citizens. For 
example, a case in which a proposed class of 1000 persons sues 
a North Carolina citizen corporation presumably would fit the 
``intrastate case'' definition if 997 of those persons were 
North Carolina citizens. (Of course, under the ``intrastate 
case'' definition, North Carolina law would have to govern 
virtually all claims and issues in the case as well.)
    For purposes of the ``intrastate case'' carve out, the only 
parties that should be considered ``primary defendants'' are 
those who are the real ``targets'' of the suit; that is, the 
parties that would be expected to incur most of the loss if 
liability is found. For example, an executive of a corporate 
defendant who, in the interest of completeness, is named as a 
co-defendant in a class action against his employer normally 
should not be deemed a ``primary defendant.'' In most 
instances, the executive would not be the real ``target'' of 
the purported class action; his employer company would be. 
Moreover, no defendant should be considered a ``primary 
defendant'' for purposes of this analysis unless it is the 
subject of legitimate claims by all class members. To 
illustrate, if named as a defendant, a dealer, agent, or sales 
representative of a corporate defendant should not be deemed a 
``primary defendant'' unless that dealer, agent, or sales 
representative is alleged to have actually participated in the 
purported wrongdoing with respect to all class members (e.g., 
the defendant is alleged to have sold a purportedly defective 
product to all class members). Normally, merely alleging that a 
defendant conspired with other class members to commit 
wrongdoing will not, without more, be sufficient to cause a 
person to be a ``primary defendant.''
    Similarly, the ``limited scope case'' definition also 
should be interpreted narrowly. For example, if a court is 
uncertain as to whether ``all matters in controversy'' in a 
purported class action ``do not in the aggregate exceed the sum 
or value of $1,000,000,'' the court should err in favor of 
exercising jurisdiction over the matter. The same is true in 
cases in which it is unclear whether ``the number of members of 
all proposed plaintiff classes in the aggregate is less than 
100.'' Further, Federal courts should be cautious to decline 
Federal jurisdiction under the ``State action case'' definition 
only where it is relatively clear that ``States, State 
officials, or other governmental entities'' are ``primary 
defendants'' against whom the ``court may be foreclosed from 
ordering relief.''
    As to each of these definitions, it is the Committee's 
intention that the party opposing Federal jurisdiction shall 
have the burden of demonstrating the applicability of a carve 
out. For example, if a plaintiff seeks to have a purported 
class action remanded for lack of Federal diversity 
jurisdiction under the ``limited scope case'' provision, that 
plaintiff should have the burden of demonstrating that ``all 
matters in controversy'' do not ``in the aggregate exceed the 
sum or value of $1,000,000, exclusive of interest and costs'' 
or that ``the number of all proposed plaintiff classes in the 
aggregate is less than 100.''
    The act provides two exceptions to the grant of original 
jurisdiction over cases described in new subsection 1332(b). 
The first excepts from its reach any claims concerning a 
covered security as that term is defined in section 16(f)(3) of 
the Securities Act of 1933 or section 28(f)(5)(E) of the 
Securities Exchange Act of 1934. These claims are essentially 
claims against the officers of a corporation for a precipitous 
drop in the value of its stock, based on fraud. The Committee 
recognizes that Congress has previously enacted legislation 
governing the adjudication of these claims. See P.L. 104-67, 
the ``Private Securities Litigation Reform Act of 1995,'' and 
P.L. 105-353, the ``Securities Litigation Uniform Standards Act 
of 1998.'' So as not to disturb the carefully crafted framework 
for litigating in this context, claims involving covered 
securities are not included in the new section 1332(b) 
jurisdiction.
    The second exception to the new section 1332(b) 
jurisdiction is for class actions solely involving claims that 
relate to matters of corporate governance arising out of State 
law. This exclusion recognizes the peculiar advantages of the 
State courts in the adjudication of corporate governance cases, 
such as judicial expertise, a coherent body of well-developed 
case law, the ability of State courts to resolve these disputes 
expeditiously, and the resulting predictability of corporate 
transactions.
    However, the Committee intends that this exception be 
narrowly construed. By corporate governance litigation, the 
Committee means litigation based solely on (a) State statutory 
law regulating the organization and governance of business 
enterprises such as corporations, partnerships, limited 
partnerships, limited liability companies, limited liability 
partnerships, and business trusts; (b) State common law of the 
duties owed between and among owners and managers of business 
enterprises; and (c) the rights arising out of the terms of the 
securities issued by business enterprises.
    This exemption would apply to a class action relating to a 
corporate governance claim filed in the court of any State. 
That is, it will apply to a corporate governance class action 
regardless of the forum in which it may be filed, and 
regardless of whether the law to be applied is that of the 
State in which the claim is filed.
    For purposes of this exception, the phrase ``the internal 
affairs or governance of a corporation or other form of 
business enterprise'' is intended to refer to the internal 
affairs doctrine which the United States Supreme Court has 
defined as ``matters peculiar to the relationships among or 
between the corporation and its current officers, directors and 
shareholders. . . .'' Edgar v. Mite Corp., 457 U.S. 624, 645 
(1982). See also Ellis v. Mutual Life Ins. Co., 187 So. 434 
(Ala. 1939); McDermott v. Lewis, 531 A.2d 206, 214-15 (Del. 
1987); Draper v. Paul N. Gardner Defined Plan Trust, 625 A.2d 
859, 865-66 (Del. 1993); NAACP v. Golding, 679 A.2d 554, 559 
(Ct. App. Md. 1996); Hart v. General Motors Corporation, 517 
N.Y.S.2d 490, 493 (App. Div. 1987); Amberjack, Ltd., Inc. v. 
Thompson, 1997 WL 613676 (Tenn. App. 1997). The phrase ``other 
form of business enterprise'' in intended to include forms of 
business entities other than corporations, including, but not 
limited to, limited liability companies, limited liability 
partnerships, business trusts, partnerships and limited 
partnerships.
    The exception to section 1332(b) jurisdiction created by 
the Act is also intended to cover disputes over the meaning of 
the terms of a security, which is generally spelled out in some 
formative document of the business enterprise, such as a 
certificate of incorporation or a certificate of designations. 
The reference to the Securities Act of 1933 contained in new 
section 1332(b)(4)(B) is for definitional purposes only. Since 
the law contains an already well-defined concept of a security, 
this provision simply imports the definition contained in the 
Securities Act.
    Section 3(c) of the Act creates a rule of construction for 
determining under new section 1332(b) whether diversity of 
citizenship exists as to a corporate defendant. Current section 
1332(c) provides that for purposes of diversity jurisdiction, a 
corporation is deemed to be a citizen of any State in which it 
is incorporated and of the State where it has its principal 
place of business. Thus, in many instances, the corporation is 
a citizen of more than one State. When applying new subsection 
(b), a plaintiff class member will be deemed a citizen of a 
State different from a defendant corporation only if that 
member is a citizen of a State different from all States of 
which the defendant corporation is deemed a citizen.
    Section 4--Section 4 of the Act governs the procedures for 
removal from State court of interstate class actions over which 
the Federal court is granted original jurisdiction by section 
3. The general removal provisions currently contained in 
Chapter 89 of Title 28 would continue to apply to such class 
actions, except where inconsistent with the provisions of the 
Act. For example, the general requirement contained in section 
1441(b) that an action be removable only if none of the 
defendants is a citizen of the State in which the action is 
brought would not apply to the removal of class actions. 
Imposing such a restriction on removal jurisdiction would 
subvert the intent of the Act by allowing a plaintiff to defeat 
removal jurisdiction by suing both in-State and out-of-State 
defendants. This would essentially perpetuate the current 
``complete diversity'' rule in class actions that the new 
section 1332(b) rejects. The Act does not, however, disturb the 
general rule that a case may only be removed to the district 
court of the United States for the district and division 
embracing the place where the action is pending. See 28 U.S.C. 
Sec. 1441(a).
    New section 1453(a)(2) would permit removal by any 
plaintiff class member who is not a named or representative 
class member of the action for which removal is sought. 
Generally, removal by the plaintiff is not permissible, under 
the theory that as the instigator of the suit the plaintiff had 
the choice of forum from the outset. When a class action is 
filed, however, only the named plaintiffs and their counsel 
have control over the choice of forum; the vast majority of the 
real parties in interest--the unnamed class members on whose 
behalf the action is brought and the defendants--have no voice 
in that decision. This provision thus extends to those unnamed 
class members the same flexibility to choose the forum as 
offered to the defendant, by specifying that the provisions of 
section 1446(a) governing the removal of a case by a defendant 
shall apply equally to those plaintiffs. Also, by operation of 
new section 1453(a), removal may occur without the consent of 
any other party. This revision will combat collusiveness 
between a corporate defendant and a plaintiffs' attorney who 
may attempt to settle on the cheap in a State court at the 
expense of the plaintiff class members. Similarly, it will 
prevent a plaintiffs' attorney from recruiting a ``friendly'' 
defendant (a local retailer, for example) who has no interest 
in joining a removal action and may therefore thwart the 
legitimate efforts of the primary corporate defendant in 
seeking removal.
    In order to be consistent with the exceptions to Federal 
diversity jurisdiction granted under new section 1332(b), 
section 1453(d) provides that the new removal provisions shall 
not apply to claims involving covered securities, or corporate 
governance litigation. The parameters of this section and that 
of 1332(b)(3) and (4) are intended to be coterminus.
    Section 4(b) amends current section 1446(b) to clarify that 
the one-year limit otherwise imposed on removal of suits filed 
pursuant to section 1332 has no application to class actions; 
that is, the bill permits a defendant to remove to Federal 
court more than one year after commencement of a suit in State 
court. This change to present law is intended to prevent gaming 
of the current class action system by a plaintiffs' attorney. 
In the most extreme example, under current law a plaintiffs' 
attorney could file suit against a friendly defendant, and the 
one-year limit after which no removal may be sought under any 
condition would commence. On the 366th day from filing suit, 
the plaintiff's attorney serves an additional defendant. It is 
now too late for the new defendant to remove, regardless of 
whether diversity jurisdiction exists, and irrespective of the 
practical merits of the case. Similarly, after the expiration 
of the current one-year period, amendments could be made to 
dismiss diverse parties, increase the amount of the damages 
pled, or otherwise change the case so that it would then fall 
within the jurisdiction of the Federal courts. Under new 
section 1446(b) these cases could be removed when changes to 
the pleadings are made which bring the case within Federal 
court jurisdiction.
    Section 4(b) makes an additional change to section 1446(b), 
which requires that removal occur within 30 days of receipt of 
``paper'' (e.g., a pleading, motion, order, or other paper 
source) from which it may be ascertained that the case is 
removable. Under the current statute a corporate defendant may 
remove beyond the 30-day limit if it can prove that prior to 
that time it had not received paper from which it could be 
ascertained that the case was removable. Section 4(b) 
strengthens this provision by requiring the party attempting to 
remove to Federal court to use ``due diligence'' when 
ascertaining whether the papers indicate that the case is 
removable. This will, among other things, prevent a disgruntled 
unnamed plaintiff from removing at the eleventh hour and 
interrupting a trial or undoing a legitimate (non-collusive) 
settlement.
    Section 4(d) of the Act makes clear that nothing in the 
removal section of the bill changes the application of the Erie 
Doctrine to actions arising under diversity jurisdiction; that 
is, the standard rule in which a Federal court applies the 
substantive law dictated by applicable choice-of-law principles 
still holds. See Erie Railroad Co. v. Tompkins, 304 U.S. 64 
(1938).
    Section 4(e) amends 28 U.S.C. Sec. 1447 to create a 
subsection (f) detailing the procedures governing cases removed 
to Federal court on the sole basis of section 1332(b) diversity 
jurisdiction. If the Federal court to which a case is removed 
determines that the case cannot be maintained as a class action 
under Rule 23 of the Federal Rules of Civil Procedures, it is 
to dismiss the action. The action may be amended and refiled in 
Federal or State court, but if filed in a new State court it 
would be removable again if it falls within the original 
jurisdiction of the Federal court. The Committee has concluded 
that the alternative--forbidding re-removal--would be bad 
policy. That approach would allow counsel effectively to ask a 
State court to review and overrule the class certification 
decision of a Federal court. Federal and State court class 
certification standards typically do not differ radically. 
Thus, this approach would set a troubling (if not 
constitutionally suspect) precedent for allowing State courts 
to serve as points of appellate review of Federal court 
decisions. Further, since Federal court denials of class 
certification typically involve explicit or implied 
determinations that allowing a case to be litigated on a class 
basis would likely result in the denial of some or all parties' 
due process rights, there should be no room constitutionally 
for a State court to reach a different result on class 
certification issues. If a dismissed case is refiled by any of 
the same named plaintiffs in the same State court venue in 
which it was originally filed, the statute of limitations on 
the claims therein will be deemed tolled during the pendency of 
the dismissed case. A new class action filed either in a 
different venue or by different named plaintiffs would not 
enjoy the benefits of this provision. However, if an individual 
action is filed asserting claims that were asserted in a class 
action dismissed under this section, the statute of limitations 
will be deemed to have been tolled during the pendency of the 
dismissed class action, regardless of where it is filed.
    Section 5. Section 5 provides that the amendments made by 
the Act shall apply to actions commenced on or after the date 
of its enactment.
    Section 6. Mr. Delahunt offered an amendment, which the 
Committee approved by voice vote, to authorize the Comptroller 
General of the United States to conduct a study of the impact 
of the Act on the workload of the Federal courts. The 
Comptroller must submit his or her findings to Congress no 
later than one year after the date of enactment of the 
legislation.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *


PART IV--JURISDICTION AND VENUE

           *       *       *       *       *       *       *


CHAPTER 85--DISTRICT COURTS; JURISDICTION

           *       *       *       *       *       *       *


Sec. 1332. Diversity of citizenship; amount in controversy; costs

    (a)  * * *
    (b)(1) The district courts shall have original jurisdiction 
of any civil action which is brought as a class action and in 
which--
            (A) any member of a proposed plaintiff class is a 
        citizen of a State different from any defendant;
            (B) any member of a proposed plaintiff class is a 
        foreign state and any defendant is a citizen of a 
        State; or
            (C) any member of a proposed plaintiff class is a 
        citizen of a State and any defendant is a citizen or 
        subject of a foreign state.
As used in this paragraph, the term ``foreign state'' has the 
meaning given that term in section 1603(a).
    (2)(A) The district courts shall not exercise jurisdiction 
over a civil action described in paragraph (1) if the action 
is--
            (i) an intrastate case,
            (ii) a limited scope case, or
            (iii) a State action case.
    (B) For purposes of subparagraph (A)--
            (i) the term ``intrastate case'' means a class 
        action in which the record indicates that--
                    (I) the claims asserted therein will be 
                governed primarily by the laws of the State in 
                which the action was originally filed; and
                    (II) the substantial majority of the 
                members of all proposed plaintiff classes, and 
                the primary defendants, are citizens of the 
                State in which the action was originally filed;
            (ii) the term ``limited scope case'' means a class 
        action in which the record indicates that all matters 
        in controversy asserted by all members of all proposed 
        plaintiff classes do not in the aggregate exceed the 
        sum or value of $1,000,000, exclusive of interest and 
        costs, or a class action in which the number of members 
        of all proposed plaintiff classes in the aggregate is 
        less than 100; and
            (iii) the term ``State action case'' means a class 
        action in which the primary defendants are States, 
        State officials, or other governmental entities against 
        whom the district court may be foreclosed from ordering 
        relief.
    (3) Paragraph (1) shall not apply to any claim concerning a 
covered security as that term is defined in section 16(f)(3) of 
the Securities Act of 1933 and section 28(f)(5)(E) of the 
Securities Exchange Act of 1934.
    (4) Paragraph (1) shall not apply to any class action 
solely involving a claim that relates to--
            (A) the internal affairs or governance of a 
        corporation or other form of business enterprise and 
        that arises under or by virtue of the laws of the State 
        in which such corporation or business enterprise is 
        incorporated or organized; or
            (B) the rights, duties (including fiduciary 
        duties), and obligations relating to or created by or 
        pursuant to any security (as defined under section 
        2(a)(1) of the Securities Act of 1933 and the 
        regulations issued thereunder).
    [(b)] (c) Except when express provision therefor is 
otherwise made in a statute of the United States, where the 
plaintiff who files the case originally in the Federal courts 
pursuant to subsection (a) of this section is finally adjudged 
to be entitled to recover less than the sum or value of 
$75,000, computed without regard to any setoff or counterclaim 
to which the defendant may be adjudged to be entitled, and 
exclusive of interest and costs, the district court may deny 
costs to the plaintiff and, in addition, may impose costs on 
the plaintiff.
    [(c)] (d) For the purposes of this section and section 1441 
of this title--
            (1) a corporation shall be deemed to be a citizen 
        of any State by which it has been incorporated and of 
        the State where it has its principal place of business, 
        except that in any direct action against the insurer of 
        a policy or contract of liability insurance, whether 
        incorporated or unincorporated, to which action the 
        insured is not joined as a party-defendant, such 
        insurer shall be deemed a citizen of the State of which 
        the insured is a citizen, as well as of any State by 
        which the insurer has been incorporated and of the 
        State where it has its principal place of business; and
            (2) the legal representative of the estate of a 
        decedent shall be deemed to be a citizen only of the 
        same State as the decedent, and the legal 
        representative of an infant or incompetent shall be 
        deemed to be a citizen only of the same State as the 
        infant or incompetent.
    [(d)] (e) The word ``States'', as used in this section, 
includes the Territories, the District of Columbia, and the 
Commonwealth of Puerto Rico.
    (f) For purposes of subsection (b), a member of a proposed 
class shall be deemed to be a citizen of a State different from 
a defendant corporation only if that member is a citizen of a 
State different from all States of which the defendant 
corporation is deemed a citizen.

           *       *       *       *       *       *       *


    CHAPTER 89--DISTRICT COURTS; REMOVAL OF CASES FROM STATE COURTS

Sec.
1441. Actions removable generally
     * * * * * * *
1453. Removal of class actions.
     * * * * * * *

Sec. 1446. Procedure for removal

    (a)  * * *
    (b) The notice of removal of a civil action or proceeding 
shall be filed within thirty days after the receipt by the 
defendant, through service or otherwise, of a copy of the 
initial pleading setting forth the claim for relief upon which 
such action or proceeding is based, or within thirty days after 
the service of summons upon the defendant if such initial 
pleading has then been filed in court and is not required to be 
served on the defendant, whichever period is shorter.
If the case stated by the initial pleading is not removable, a 
notice of removal may be filed within thirty days after receipt 
by the defendant, through service or otherwise, of a copy of an 
amended pleading, motion, order or other paper from which it 
may first be ascertained, by exercising due diligence, that the 
case is one which is or has become removable, except that a 
case may not be removed on the basis of jurisdiction conferred 
by section 1332(a) of this title more than 1 year after 
commencement of the action.

Sec. 1447. Procedure after removal generally

    (a)  * * *

           *       *       *       *       *       *       *

    (f) If, after removal, the court determines that no aspect 
of an action that is subject to its jurisdiction solely under 
the provisions of section 1332(b) may be maintained as a class 
action under Rule 23 of the Federal Rules of Civil Procedure, 
it shall dismiss the action. An action dismissed pursuant to 
this subsection may be amended and filed again in a State 
court, but any such refiled action may be removed again if it 
is an action of which the district courts of the United States 
have original jurisdiction. In any action that is dismissed 
pursuant to this subsection and that is refiled by any of the 
named plaintiffs therein in the same State court venue in which 
the dismissed action was originally filed, the limitations 
periods on all reasserted claims shall be deemed tolled for the 
period during which the dismissed class action was pending. The 
limitations periods on any claims that were asserted in a class 
action dismissed pursuant to this subsection that are 
subsequently asserted in an individual action shall be deemed 
tolled for the period during which the dismissed class action 
was pending.

           *       *       *       *       *       *       *


Sec. 1453. Removal of class actions

    (a) In General.--A class action may be removed to a 
district court of the United States in accordance with this 
chapter, but without regard to whether any defendant is a 
citizen of the State in which the action is brought, except 
that such action may be removed--
            (1) by any defendant without the consent of all 
        defendants; or
            (2) by any plaintiff class member who is not a 
        named or representative class member of the action for 
        which removal is sought, without the consent of all 
        members of such class.
    (b) When Removable.--This section shall apply to any class 
action before or after the entry of any order certifying a 
class.
    (c) Procedure for Removal.--The provisions of section 
1446(a) relating to a defendant removing a case shall apply to 
a plaintiff removing a case under this section. With respect to 
the application of subsection (b) of such section, the 
requirement relating to the 30-day filing period shall be met 
if a plaintiff class member who is not a named or 
representative class member of the action for which removal is 
sought files notice of removal no later than 30 days after 
receipt by such class member, through service or otherwise, of 
the initial written notice of the class action provided at the 
court's direction.
    (d) Exceptions.--
            (1) Covered securities.--This section shall not 
        apply to any claim concerning a covered security as 
        that term is defined in section 16(f)(3) of the 
        Securities Act of 1933 and section 28(f)(5)(E) of the 
        Securities Exchange Act of 1934.
            (2) Internal governance of business entities.--This 
        section shall not apply to any class action solely 
        involving a claim that relates to--
                    (A) the internal affairs or governance of a 
                corporation or other form of business 
                enterprise and that arises under or by virtue 
                of the laws of the State in which such 
                corporation or business enterprise is 
                incorporated or organized; or
                    (B) the rights, duties (including fiduciary 
                duties), and obligations relating to or created 
                by or pursuant to any security (as defined 
                under section 2(a)(1) of the Securities Act of 
                1933 and the regulations issued thereunder).
                            Dissenting Views

    We strongly oppose H.R. 1875, the ``Class Action 
Jurisdiction Act of 1998.'' Although the legislation is 
described by its proponents as a simple procedural fix, in 
actuality it represents a major rewrite of the class action 
rules that would bar most forms of State class actions. H.R. 
1875 is opposed by the Justice Department,\1\ both the State 
\2\ and Federal \3\ judiciaries, as well as consumer and public 
interest groups, including Public Citizen.\4\
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    \1\ See Hearing on H.R. 1875 Before the House Comm. on the 
Judiciary, 106th Cong. (1999) (statement of Eleanor D. Acheson, 
Assistant Attorney General, United States Department of Justice) 
[hereinafter Acheson testimony] (stating that ``H.R. 1875 is ill-suited 
to serve its sponsors' purposes--solving problems with State court 
class action procedures. Instead, H.R. 1875's federalization of class 
actions would deny State residents a State forum . . . and overburden 
the Federal judiciary with class actions dealing solely with issues of 
State law. Because we disagree with a measure having these effects, the 
Department of Justice strongly opposes H.R. 1875.'').
    \2\ See Letter from David A. Brock, President, Conference of Chief 
Justices (July 19, 1999) (on file with the minority staff of the House 
Judiciary Committee) [hereinafter Conference of Chief Justices letter] 
(stating that ``H.R. 1875, in its present form, is an unwarranted 
incursion on the principles of judicial federalism.'').
    \3\ See Letters from Leonias Ralph Mecham, Secretary, Judicial 
Conference of the United States (July 26, 1999 & August 23, 1999) 
(letters on file with the minority staff of the House Judiciary 
Committee) [hereinafter Judicial Conference letter] (stating that on 
July 23, 1999, the Executive Committee of the Conference voted to 
express its opposition to the class action provisions in H.R. 1875).
    \4\ See Hearing on H.R. 1875 Before the House Comm. on the 
Judiciary, 106th Cong. (1999) (statement of Brian Wolfman, Staff 
Attorney, Public Citizen) [hereinafter Wolfman testimony] (stating 
``H.R. 1875 is an unwise and ill-considered incursion by the Federal 
Government on the jurisdiction of the State courts. It works a radical 
transformation of judicial authority between the State and Federal 
judiciaries that is not justified by any alleged `crisis' in State-
court class action litigation.'').
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    By providing plaintiffs access to the courts in cases where 
a defendant may have caused small injuries to a large number of 
persons, class action procedures have traditionally offered a 
valuable mechanism for aggregating small claims that otherwise 
might not warrant individual litigation. This legislation will 
undercut that important principle by making it far more 
burdensome, expensive, and time-consuming for groups of injured 
persons to obtain access to justice. In doing so, it will make 
it more difficult to protect our citizens against violations of 
the consumer health, safety and environmental laws, to name but 
a few important laws. The legislation goes so far as to prevent 
State courts from considering class action cases which involve 
solely violations of State laws, such as State consumer 
protection laws.
    H.R. 1875 provides for the removal of State class action 
claims to Federal court in cases involving violations of State 
law where any member of the plaintiff class is a citizen of a 
different State than any defendant.\5\ The only exceptions 
provided in H.R. 1875 are that Federal courts are directed to 
abstain from hearing a class action where (1) a ``substantial 
majority'' of the members of the proposed class are citizens of 
a single State of which the primary defendants are citizens and 
the claims asserted will be governed primarily by laws of that 
State (``an intrastate case''); (2) all matters in controversy 
do not exceed $1,000,000 or the membership of the proposed 
class is less than 100 (``a limited scope case''); or (3) the 
primary defendants are States, State officials, or other 
Government entities against whom the district court may be 
foreclosed from ordering relief (``a State action case'').\6\ 
In the event the district court determines that the action 
subject to its jurisdiction does not satisfy the requirements 
of Federal Rule of Procedure 23, under the bill the court must 
dismiss the action,\7\ which has the effect of striking the 
class action claim.\8\
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    \5\ H.R. 1875, Sec. 3(b)(1). Current law requires there to be 
complete diversity before a State law case is eligible for removal to 
Federal court, that is to say that all of the defendants must be 
citizens residing in different States than all of the defendants. See 
Stawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). In Snyder v. 
Harris, 394 U.S. 332 (1969), the Supreme Court held that the court 
should only consider the citizenship of named plaintiffs for diversity 
purposes, and not the citizenship of absent class members.
    \6\ H.R. 1875, Sec. 3(b)(2). The legislation also excludes 
securities-related and corporate governance class actions from coverage 
and makes a number of other procedural changes, such as easing the 
procedural requirements for removing a class action to Federal court 
(i.e., permitting removal to be sought by any plaintiff or defendant 
and eliminating the one-year deadline for filing removal actions) and 
tolling the statute of limitation periods for dismissed class actions.
    \7\ H.R. 1875 Sec. Sec. 4(e).
    \8\ While the class action may be refiled again, any such refiled 
action may be remanded again if the district court has original 
jurisdiction.
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    H.R. 1875 will damage both the Federal and State courts. As 
a result of Congress' increasing propensity to federalize State 
crimes and the Senate's unwillingness to confirm judges, the 
Federal courts are already facing a dangerous workload crisis. 
By forcing resource intensive class actions into Federal court, 
H.R. 1875 will further aggravate these problems and cause 
victims to wait in line for as much as three years or more to 
obtain a trial. Alternatively, to the extent class actions are 
remanded to State court, the legislation effectively only 
permits case-by-case adjudications, potentially draining away 
precious State court resources.
    We also object to the fact that the bill is written in a 
one-sided manner favoring corporate defendants at the expense 
of harmed victims. At previous hearings on this matter, the 
Committee received complaints that class action notices can be 
incomprehensible and that defendants offer ``sweetheart'' deals 
which payoff one class in order to eradicate future claims 
which were not even before the court. Yet H.R. 1875 does 
nothing to deal with these concerns.
    We would also note that before even considering H.R. 1875, 
Congress should insist on receiving objective and comprehensive 
data justifying such a dramatic intrusion into State court 
prerogatives, since nothing in the way of such information now 
exists.\9\ The results of a pending study by the Rand Institute 
is expected by the end of this year. Contrary to assertions by 
some proponents, a report by the Federal Judiciary Mass Torts 
Working Group did not address the issues raised by this 
legislation, nor did it suggest any solutions to problems in 
mass tort litigation.\10\
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    \9\ The most comprehensive study completed was the 1994/95 Judicial 
Center review of class actions which rebutted claims that class actions 
constituted frivolous ``strike'' suits and that attorneys were 
unreasonably benefitting from class action cases. See Willging, et al., 
Empirical Study of Class Actions in Four Federal District Courts--Final 
Report to the Advisory Committee on Civil Rules (Federal Judicial 
Center 1996). Another study made a single recommendation regarding 
interlocutory appeals which has already taken effect. See Working 
Papers of the Advisory Committee on Civil Rules on Proposed Amendments 
to Civil Rule 23, Compiled by the Judicial Conference Advisory 
Committee on Civil Rules (recommending the allowance of interlocutory 
appeals of class certifications). The study made no recommendation 
regarding federalizing class actions. The other studies cited by H.R. 
1875's supporters are incomplete and inconclusive. The so-called 
``Stateside'' study cited by John Hendricks (on behalf of the Chamber 
of Commerce) and John Martin (on behalf of Ford) in their testimony 
during the 105th Congress only covers six Alabama's counties, and the 
problems found in the study have already been resolved by the Alabama 
Supreme Court (see infra note 67).
    \10\ See Judicial Conference letters, supra note 3. In its letters 
to the Judiciary Committee expressing concern with H.R. 1875, the 
Judicial Conference suggested that further deliberate study of the 
complicated issues raised by class actions and mass tort litigation was 
needed. Although the Committee accepted an amendment offered by 
Representatives Waters and Delahunt authorizing a GAO study on the 
legislation's impact on the workload of the Federal courts, we were 
disappointed that the Committee rejected, on a largely partisan vote, 
an amendment by Representative Jackson-Lee which would have substituted 
the current language in H.R. 1875 with an in depth study of the current 
use of class actions.
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    For these and the other reasons set forth herein, we 
dissent from H.R. 1875.
I. H.R. 1875 Will Damage the Federal and State Court Systems
            A. Impact on Federal Courts
    Expanding Federal class action jurisdiction to include most 
State class actions, as H.R. 1875 does, will inevitably result 
in a significant increase in the Federal courts' workload. In 
its letter to the Judiciary Committee, the Judicial Conference 
warned that ``the effect of the class action provisions of 
[H.R. 1875] would be to move virtually all class action 
litigation into the Federal courts, thereby offending well-
established principles of federalism [and] . . . hold[ing] the 
potential for increasing significantly the number of [class 
action] cases currently being litigated in the Federal 
system.'' \11\
---------------------------------------------------------------------------
    \11\ See August 23, 1999 Judicial Conference letter, supra note 3.
---------------------------------------------------------------------------
    The workload problem in the Federal courts is already at an 
acute stage. In 1998, 69 judicial vacancies existed, or 
approximately 8 percent of the Federal judicial positions. At 
year end, on average, Federal district court judges had some 
400 civil filings backlogged on its docket.\12\ It is because 
of these and other workload problems that Chief Justice 
Rehnquist took the important step of criticizing Congress for 
taking actions which have exacerbated the courts' workload 
problem:
---------------------------------------------------------------------------
    \12\ See Admin. Office of the U.S. Courts, Annual Report of the 
Director of the Administrative Office of the United States Courts 
(1998).

        In my annual report for last year, I criticized the 
        Senate for moving too slowly in the filling of 
        vacancies on the Federal bench. This criticism received 
        considerable public attention. I also criticized 
        Congress and the president for their propensity to 
        enact more and more legislation which brings more and 
        more cases into the Federal court system. This 
        criticism received virtually no public attention. And 
        yet the two are closely related: We need vacancies 
        filled to deal with the cases arising under existing 
        laws, but if Congress enacts, and the president signs, 
        new laws allowing more cases to be brought into the 
        Federal courts, just filling the vacancies will not be 
        enough. We will need additional judgeships.\13\
---------------------------------------------------------------------------
    \13\ Chief Justice William Rehnquist, An Address to the American 
Law Institute, Rehnquist: Is Federalism Dead? (May 11, 1998), in Legal 
Times (May 18, 1998).

    Judge Ralph K. Winter, Chief Justice of the Second Circuit, 
echoed these concerns when he complained, ``[t]he political 
branches have steadily increased our Federal question 
jurisdiction, have maintained an unnecessarily broad definition 
of diversity jurisdiction, and have then denied us resources 
minimally proportionate to that jurisdiction . . . The result 
is that a court with proud traditions of craft in decision-
making and currency in its docket is now in danger of losing 
both.'' \14\ By federalizing State class actions, H.R. 1875 
runs precisely counter to Chief Justice Rehnquist's and Chief 
Judge Winters' admonition and risks severely aggravating the 
judicial workload crisis.
---------------------------------------------------------------------------
    \14\ Annual report to the 2nd Circuit Judicial Conference, 
presented June, 1998.
---------------------------------------------------------------------------
            B. Impact on the State Courts
    In addition to overwhelming the Federal courts with new 
time intensive class actions, the legislation will undermine 
State courts. This is because in cases where the Federal court 
chooses not to certify the State class action, H.R. 1875 
prohibits the States from using class actions to resolve the 
underlying State causes of action. It is important to recall 
the context in which this legislation arises--a class action 
has been filed in State court involving numerous State law 
claims, each of which if filed separately would not be subject 
to Federal jurisdiction (either because the parties are not 
considered to be diverse or the amount in controversy for each 
claim does not exceed $75,000). When these individual cases are 
returned to the State courts upon remand, thousands upon 
thousands of new cases may be unleashed on the State courts. It 
is because of concerns such as these that the Conference of 
Chief Justices has called H.R. 1875 an ``unwarranted incursion 
on the principles of judicial federalism.'' \15\
---------------------------------------------------------------------------
    \15\ See Conference of Chief Justices letter, supra note 2.
---------------------------------------------------------------------------
    In addition to these potential workload problems, the 
legislation raises serious constitutional issues. H.R. 1875 
does not merely operate to preempt an area of State law, rather 
it unilaterally strips the State courts of their ability to use 
the class action procedural device to resolve State law 
disputes. As the Conference of Chief Justices stated, the 
legislation in essence ``unilaterally transfer[s] jurisdiction 
of a significant category of cases from State to Federal 
courts'' and is a ``drastic'' distortion and disruption of 
traditional notions of judicial federalism.\16\
---------------------------------------------------------------------------
    \16\ See id.
---------------------------------------------------------------------------
    In this regard, the courts have previously found that 
efforts by Congress to dictate such State court procedures 
implicate important Tenth Amendment federalism issues and 
should be avoided. For example, in Felder v. Casey \17\ the 
Supreme Court observed that it is an ``unassailable 
proposition. . . . that States may establish the rules of 
procedure governing litigation in their own courts.'' Similarly 
in Johnson v. Fankell \18\ the Court reiterated what it termed 
``the general rule `bottomed deeply in belief in the importance 
of State control of State judicial procedure . . . that Federal 
law takes State courts as it finds them' '' \19\ and observed 
that judicial respect for the principal of federalism ``is at 
its apex when we confront a claim that Federal law requires a 
State to undertake something as fundamental as restructuring 
the operation of its courts'' and ``it is a matter for each 
State to decide how to structure its judicial system.'' \20\
---------------------------------------------------------------------------
    \17\ 487 U.S. 131, 138 (1988) (finding Wisconsin notice-of-claim 
statute to be preempted by 42 U.S.C. Sec. 1983, which holds anyone 
acting under color of law liable for violating constitutional rights of 
others).
    \18\ 520 U.S. 911 (1997) (holding that Idaho procedural rules 
concerning appealability of orders are not preempted by 42 U.S.C. 
Sec. 1983).
    \19\ Id. at 919 (quoting Henry M. Hart, Jr., The Relations Between 
State and Federal Law, 54 Colum. L. Rev. 489, 508 (1954)).
    \20\ Id. at 922. See also Howlett v. Rose, 496 U.S. 356, 372 (1990) 
(quoting Henry M. Hart, Jr., The Relations Between State and Federal 
Law, 54 Colum. L. Rev. 489, 508 (1954) for the proposition that Federal 
law should not alter the operation of the State courts); New York v. 
United States, 505 U.S. 144, 161 (1992) (stating that a law may be 
struck down on federalism grounds if it ``commandeer[s] the legislative 
processes of the States by directly compelling them to enact and 
enforce a Federal regulatory program''); Printz v. United States, 117 
S.Ct. 2365 (1997) (invalidating portions of the Brady Handgun Violence 
Protection Act requiring local law enforcement officials to conduct 
background checks on prospective gun purchasers).
---------------------------------------------------------------------------
    These same constitutional concerns were highlighted by 
Professor Laurence Tribe in his testimony regarding the 
constitutionality of a proposed Federal class action rule 
applicable to State courts included in tobacco legislation 
proposed during the 105th Congress. He observed, ``[f]or 
Congress directly to regulate the procedures used by State 
courts in adjudicating State-law tort claims--to forbid them, 
for example, from applying their generally applicable class 
action procedures in cases involving tobacco suits--would raise 
serious questions under the Tenth Amendment and principles of 
federalism.'' \21\
---------------------------------------------------------------------------
    \21\ The Global Tobacco Settlement: Hearings Before the Senate 
Comm. on the Judiciary, 105th Cong., (1997) (statement of Laurence H. 
Tribe, Tyler Professor of Law, Harvard Law School).
---------------------------------------------------------------------------
    Arguments that H.R. 1875 is nonetheless justified because 
State courts are ``biased'' against out-of-State defendants in 
class action suits are vastly overstated.\22\ First, the 
Supreme Court has already made clear that State courts are 
constitutionally required to provide due process and other 
fairness protections to the parties in class action cases. In 
Phillips Petroleum Co. v. Shutts,\23\ the Supreme Court held 
that in class action cases, State courts must assure that: (1) 
the defendant receives notice plus an opportunity to be heard 
and participate in the litigation; \24\ (2) an absent plaintiff 
must be provided with an opportunity to remove himself or 
herself from the class; (3) the named plaintiff must at all 
times adequately represent the interests of the absent class 
members; and (4) the forum State must have a significant 
relationship to the claims asserted by each member of the 
plaintiff class.\25\
---------------------------------------------------------------------------
    \22\ Of course the entire premise of the argument would need to be 
based on bias by the judges, since the juries would be derived from 
citizens of the State where the suit is brought, whether the case is 
considered in State or Federal court.
    \23\ 472 U.S. 797 (1985).
    \24\ See id. at 812 (stating that the notice must be the ``best 
practicable, reasonably calculated, under all the circumstances, to 
apprize interested parties of the pendency of the action and afford 
them an opportunity to present their objections.'') (quoting Mullane v. 
Central Hanover Bank & Trust Co., 339 U.S. 306, 314-315 (1950)).
    \25\ See id. at 806-810. These findings were reiterated by the 
Supreme Court in 1995 in Matshusita Elec. Indust. Co. v Epstein, 516 
U.S. 367 (1995) (holding that State class actions are entitled to full 
faith and credit so long as, inter alia: the settlement was fair, 
reasonable, and adequate and in the best interests of the settlement 
class; notice to the class was in full compliance with due process; and 
the class representatives fairly and adequately represented class 
interests).
---------------------------------------------------------------------------
    Secondly, it is important to note that as fears of local 
court prejudice have subsided and concerns about diverting 
Federal courts from their core responsibilities increased, the 
policy trend in recent years has been towards limiting Federal 
diversity jurisdiction.\26\ For example, Congress enacted the 
Federal Courts Improvement Act of 1996,\27\ which increased the 
amount in controversy requirement needed to remove a diversity 
case to Federal court from $50,000 to $75,000. This statutory 
change was based on the Judicial Conference's determination 
that fear of local prejudice by State courts was no longer 
relevant \28\ and that it was important to keep the Federal 
judiciary's efforts focused on Federal issues.\29\ The American 
Law Institute has also recently found ``there is no longer the 
kind of prejudice against citizens of other States that 
motivated the creation of diversity jurisdiction,'' \30\ and a 
Federal Courts Study Committee report concluded that local bias 
``is no longer a major threat to litigation fairness'' 
particularly when compared to other types of prejudice that 
litigants may face, such as on account of religion, race or 
economic status.\31\ Indeed, in 1978, the House twice passed 
legislation that would have completely abolished general 
diversity jurisdiction.\32\
---------------------------------------------------------------------------
    \26\ Ironically, during the 104th Congress the Republican Party was 
extolling the virtues of State courts in the context of their efforts 
to limit habeas corpus rights, which permit individuals to challenge 
unconstitutional State law convictions in Federal court. At that time 
Chairman Hyde stated:

      I simply say the State judge went to the same law school, 
      studied the same law and passed the same bar exam that the 
      Federal judge did. The only difference is the Federal judge 
      was better politically connected and became a Federal 
      judge. But I would suggest . . . when the judge raises his 
      hand, State court or Federal court, they swear to defend 
      the U.S. Constitution, and it is wrong, it is unfair to 
      assume, ipso facto, that a State judge is going to be less 
      sensitive to the law, less scholarly in his or her decision 
---------------------------------------------------------------------------
      than a Federal judge.

142 Cong. Rec. H3604. (daily ed. April 18, 1996).
---------------------------------------------------------------------------
    \27\ 28 U.S.C. Sec. 1332(a) (West Supp. 1998).
    \28\ See The Judicial Conference of the United States, Long Range 
Plan for the Federal Courts, Recommendation 7 at 30 (1995).
    \29\ See id.
    \30\ American Law Institute, Study of the Division of Jurisdiction 
Between State and Federal Courts 101, 106 (1996).
    \31\ See Federal Courts Study Committee, Report of the Federal 
Courts Study Committee 40 (April 2, 1990). See also, Ball, Revision of 
Federal Diversity Jurisdiction, 28 Ill. L. Rev. 356 (1988); Bork, 
Dealing with the Overload in Article III Courts, 1976, 70 F.R.D. 231, 
236-237 (1976); Butler & Eure, Diversity in the Court System: Let's 
Abolish It, 11 Va.B.J. 4, (1995); Coffin, Judicial Gridlock: The Case 
for Abolishing Diversity Jurisdiction, 10 Brookings Rev. 34 (1992); 
Currie, The Federal Courts and the American Law Institute, 36 U. Chi. 
L. Rev. 1, 1-49 (1968); Feinberg, Is Diversity Jurisdiction An Idea 
Whose Time Has Passed?, N. Y. St. B. J. 14 (1989); Frankfurter, 
Distribution of Judicial Power Between United States and State Courts, 
13 Corn. L. Q. 499 (1928); Frankfurter, A Note on Diversity 
Jurisdiction--In Reply to Professor Yntema, 79 U. Pa. L. Rev. 1097 
(1931); Haynsworth, Book Review, 87 Harv. L. Rev. 1082, 1089-1091 
(1974); Hunter, Federal Diversity Jurisdiction: The Unnecessary 
Precaution, 46 UMKC L. Rev. 347 (1978); Jackson, The Supreme Court in 
the American System of Government, 38 (1955); Sheran & Isaacman, State 
Cases Belong In State Courts, 12 Creighton L. Rev. 1 (1978).
    \32\ See 124 Cong. Rec. 5008 (1978); 124 Cong. Rec. 33, 546 (1978). 
The legislation was not considered in the Senate.
---------------------------------------------------------------------------
    Thirdly, as the legislation is currently written, it 
assumes a defendant will be automatically subject to prejudice 
in any State where the corporation is not formally incorporated 
(typically Delaware) or maintains its principal place of 
business. In so doing, H.R. 1875 ignores the fact that many 
large businesses have a substantial commercial presence in more 
than one State, through factories, business facilities or 
employees. For example, if General Motors or Ford were to be 
sued by a class of plaintiffs in Ohio, where they have numerous 
factories and tens of thousands of employees, it does not seem 
reasonable to expect the defendants to face any great risk of 
bias.\33\ Similarly, if the Disney Corporation, one of 
Florida's largest employers, were to face a class action 
brought by a class of plaintiffs in a Florida court, it would 
make little sense to involve the Federal courts of concern of 
local prejudice.\34\ Yet under H.R. 1875, both of these 
hypothetical cases would be subject to removal to Federal 
court.
---------------------------------------------------------------------------
    \33\ General Motors and Ford both have their principal place of 
business in Michigan and are incorporated in Delaware.
    \34\ Disney's corporate headquarters are located in Burbank, 
California, and it is incorporated in Delaware.
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II. H.R. 1875 Will Weaken Enforcement of Laws Concerning Consumer 
        Health and Safety, the Environment, and Civil Rights
    There can be little doubt that H.R. 1875 will have a 
serious adverse impact on the ability of consumers and other 
harmed individuals to obtain compensation in cases involving 
widespread harm. At a minimum, the legislation will force most 
State class action claims into Federal courts where it is 
likely to be far more expensive for plaintiffs to litigate 
cases and where defendants could force plaintiffs to travel 
long distances to attend proceedings.
    It is also likely to be far more difficult and time 
consuming to certify a class action in Federal court. Fourteen 
States, represent-

ing nearly one-third of the nation's population,\35\ have 
adopted different criteria for class action rules than Rule 23 
of the Federal Rules of Civil Procedure.\36\ In addition, with 
respect to those States which have enacted a counterpart to 
Rule 23, the Federal courts are likely to represent a far more 
difficult forum for class certification to occur. This is 
because in recent years a series of adverse Federal precedent, 
such as Castano v. American Tobacco Co.,\37\ In re Rhone-
Poulenc Rorer, Inc.,\38\ In re American Medical Systems, 
Inc.,\39\ Georgine v. Amchem Products, Inc.,\40\ and Broussard 
v.

Meineke Discount Mufflers,\41\ have made it more difficult to 
establish the ``predominance requirement'' necessary to 
establish a class action under the Federal rules. Just this 
June, in Ortiz v. Fibreboard,\42\ the Supreme Court again 
invalidated a so-called ``limited fund'' asbestos settlement 
agreement on technical grounds.\43\
---------------------------------------------------------------------------
    \35\ Three States still use their common law rules, rather than 
statutes, to permit class actions (Mississippi, New Hampshire, and 
Virginia); four States use Field Code based rules based on the 
``community of interest'' test (California, Nebraska, South Carolina, 
and Wisconsin); and seven States use class action rules modeled on the 
original Federal Rule 23 (1938) which creates a distinction among class 
members which depends on the substantive character of the right 
asserted (Alaska, Georgia, Louisiana, New Mexico, North Carolina, Rhode 
Island, and West Virginia). See 3 Herbert B. Newberg and Alba Conte, 
Newberg on Class Actions Sec. 13.04 (3d ed.1992 & Supp. 1997).
    \36\ Rule 23(a) states four factual prerequisites that must be met 
before a court will certify the lawsuit as a class action: (1) size--
the class must be so large that joinder of all of its members is not 
feasible; (2) common questions--there must be questions of law or fact 
common to the class; (3) typical claims--the claims or defenses of the 
representatives must be ``typical'' of those of the class; and (4) 
representation--the representatives must fairly and adequately 
represent the interests of the class.
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  After meeting the above prerequisites, the class action will not be 
certified unless it fits into one of three categories. Under 23(b)(1), 
a class action will be allowed if individual lawsuits by or against the 
members of the class would create the risk of inconsistent decisions, 
or the impairment of the interests of members of the class who are not 
a party to the suit. Rule 23(b)(2) certifies class actions for civil 
rights cases where the entire class is being discriminated against and 
an injunction or declaratory relief is sought. Under 23(b)(3), a class 
action will be certified if the common questions of fact and law to 
members of the class predominate over any questions that affect only 
individual members, and a class action suit is the superior model for 
fair and efficient adjudication. This is the most popular method of 
certification because the requirements imposed are the least 
restrictive.
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    \37\ 84 F.3d 734 (5th Cir. 1996) (preventing the certification of a 
nationwide class action brought by cigarette smokers and their families 
for nicotine addiction where there was found to be too wide a disparity 
between the various State tort and fraud laws for the class action 
vehicle to be superior to individual case adjudication).
    \38\ 51 F. 3d 1293 (7th Cir. 1995), cert denied, 116 S. Ct. 184 
(1995) (decertifying, under the Erie Doctrine, a nationwide negligence 
class action brought on behalf of hemophiliacs infected with the AIDS 
virus through use of defendants' blood clotting products because of 
diversity of State laws).
    \39\ 75 F.3d 1069 (6th Cir. 1996) (decertifying a proposed 
plaintiff settlement class comprised of all U.S. residents implanted 
with defective or malfunctioning inflatable penile prostheses that were 
manufactured, developed, or sold by defendant company because common 
questions of law or fact did not predominate the action to such an 
extent that warranted class certification).
    \40\ 521 U.S. 591 (1997) (overturning consensual settlement between 
a class of workers injured by asbestos and a coalition of former 
asbestos manufacturers because of disparate levels of the class 
members' knowledge of their injuries and class members' large amount at 
stake in the litigation).
    \41\ 155 F.3d 331 (4th Cir. Aug. 19, 1998) (rejecting class 
certification brought by Meineke franchisees alleging violations of 
franchise, tort, unfair trade and other laws).
    \42\ 119 S.Ct. 2295 (1999).
    \43\ The Court found that mandatory limited fund class treatment 
under Rule 23(b)(1)(B) is not appropriate unless the maximum funds 
available are clearly inadequate to pay all claims.
---------------------------------------------------------------------------
    Further, as noted above, H.R. 1875 will result in 
substantial delay before civil class action claimants are able 
to obtain a trial date in Federal court. Given the current 
backlog in the Federal courts \44\ and the fact that the 
Federal courts are obligated to resolve criminal matters on an 
expedited basis before civil matters,\45\ even where plaintiffs 
are able to successfully certify a class action in Federal 
court, it is likely to take longer to obtain a trial on the 
merits than it would in State court.
---------------------------------------------------------------------------
    \44\ See supra note 13 through 15 and accompanying text.
    \45\ Speedy Trial Act of 1974, 18 U.S.C. Sec. 3161-3174 (1994).
---------------------------------------------------------------------------
    H.R. 1875 also poses unique risks and obstacles for 
plaintiffs that they do not face under current law. Under H.R. 
1875, if the district court determines that the action subject 
to its jurisdiction does not satisfy the requirements of 
Federal Rule of Civil Procedure 23, the court must dismiss the 
action. This has the effect of striking the class action claim 
and forcing all States to conform to Federal class actions 
standards.\46\ While the class action may be refiled again, any 
such refiled action may be removed again to Federal court. 
Therefore, even if a State court would subsequently certify the 
class, it could be removed again, creating a revolving door 
between Federal and State court--hardly a desirable result.
---------------------------------------------------------------------------
    \46\ In this regard, it is unfortunate the Majority rejected an 
amendment offered by Representatives Conyers, Berman and Meehan which 
would have largely eliminated the federalism problem by amending the 
bill to simply allow the Federal courts the first opportunity of 
certifying a class action, but not to deny State court jurisdiction 
over the class action if the court determined it did not meet Federal 
requirements. This would have responded to the most serious complaint 
leveled by corporate defendants, that class actions encourage a race to 
the court house by permitting the Federal courts to use their powers to 
consolidate class actions into a single forum in the appropriate 
circumstances.
---------------------------------------------------------------------------
    Consumers will also be disadvantaged by the vague terms 
used in the legislation. The terms ``substantial majority'' of 
plaintiffs, ``primary defendants,'' and claims ``primarily'' 
governed by a State's laws \47\ are new and undefined phrases 
with no antecedent in the United States Code or the case law. 
It will take many years and conflicting decisions before these 
critical terms can begin to be sorted out. Moreover, since H.R. 
1875 fails to provide for any interlocutory appeal, it will be 
impossible for litigants to obtain any meaningful guidance from 
the Federal appellate courts regarding these terms.
---------------------------------------------------------------------------
    \47\ H.R. 1875, Sec. 2(b)(2).
---------------------------------------------------------------------------
    The net result is that under the legislation it will be far 
more difficult for consumers and other harmed individuals to 
obtain justice in class action cases at the State or Federal 
level. The types of cases affected by this legislation range 
from consumer fraud and health and safety to environmental and 
civil rights actions. The following are examples of important 
class actions previously brought at the State level, but which 
could have been forced into Federal court under H.R. 1875, 
where the actions may be delayed or rejected:

         LFoodmaker Inc., a Delaware corporation and 
        the parent company of Jack-in-the-Box restaurants, 
        agreed to pay $14 million in a State class-action 
        settlement involving a violation of Washington's 
        negligence law. The class included 500 people, mostly 
        children and Washington residents, who became sick in 
        early 1993 after eating undercooked hamburgers tainted 
        with E. coli 0157:H7 bacteria. The victims suffered 
        from a wide range of illnesses, from more benign 
        sicknesses to those that required kidney dialysis. 
        Three children died.\48\
---------------------------------------------------------------------------
    \48\  The settlement was approved on 25 September 1996 in King 
County, Washington Superior Court. ``Last Jack in the Box Suit 
Settled,'' Seattle Times, October 30, 1997 at B3.

         LEquitable Life Assurance Company, an Iowa 
        corporation, agreed to a $20 million settlement of two 
        class-action lawsuits involving 130,000 persons filed 
        in Pennsylvania and Arizona State courts. The class 
        action alleged that Equitable misled consumers, in 
        violation of State insurance fraud law, when trying to 
        sell ``vanishing premium'' life insurance policies in 
        the 1980s. Equitable sold the policies when interest 
        rates were high, informing potential customers that 
        after a few years, once the interest generated by their 
        premiums was sufficiently high, their premium 
        obligations would be terminated. However, when interest 
        rates dropped, customers ended up having to continue to 
        pay the premium in full.\49\
---------------------------------------------------------------------------
    \49\ See David Elbert, ``Lawsuits to Cost Equitable $20 Mill,'' Des 
Moines Register, July 19, 1997 at 12 and ``Cost of Settling Lawsuits 
Pulls Equitable Earnings Down,'' Des Moines Register, August 6, 1997 at 
10.

         LOn July 26, 1993, a California plant operated 
        by General Chemical, a Delaware corporation with 
        offices in New Jersey, erupted leading to a hazardous 
        pollution cloud when a valve malfunctioned during the 
        unloading of a railroad tank car filled with Oleum, a 
        sulfuric acid compound. The cloud settled directly over 
        North Richmond, California, a heavily-populated 
        community, resulting in over 24,000 residents needing 
        medical attention. General Chemical entered into a 
        settlement for violation of California negligence law 
        with 60,000 North Richmond residents who were injured 
        or sought treatment for the effects of the cloud, or 
        were forced to evacuate their homes. Individual 
        plaintiffs received up to $3,500 in compensation.\50\
---------------------------------------------------------------------------
    \50\ See Mealey's Litigation Reports: Toxic Torts, $180 Million 
Settlement of Toxic Cloud Claims Wins Judges O.K., November 17, 1995 at 
8.

         LOn April 21 of this year, Nationwide entered 
        into a State class action settlement concerning a 
        redlining discrimination claim with the Toledo, Ohio 
        Fair Housing Center. The lawsuit had been brought in 
        Ohio State court by residents living in Toledo's 
        predominately black neighborhoods, and charged that 
        Nationwide redlined African-American neighborhoods by 
        discouraging homeowners in minority neighborhoods from 
        buying insurance and by denying coverage to houses 
        under a certain value or a certain age. As a result of 
        the settlement, Nationwide agreed to modify its 
        underwriting criteria, increase its agency presence, 
        step up its marketing in Toledo's black neighborhoods. 
        Nationwide also agreed to place up to $2 million in an 
        interest-bearing account to provide compensation to 
        qualified class members, and agreed to deposit $500,000 
        with a bank willing to offer low-interest loans to 
        residents buying homes in Toledo's black 
        neighborhoods.\51\
---------------------------------------------------------------------------
    \51\ See Toledo Fair Hous. Ctr. v. Nationwide Mut. Ins. Co., No 
CI93-1685, Ohio Comm. Pls, Lucas County; see also ``Nationwide and Ohio 
Fairhousing Announce Attempt to Settle Class Action,'' Mealey's 
Insurance Law Weekly, April 27, 1998 at 3.
---------------------------------------------------------------------------
III. H.R. 1875 Fails to Address Defendant and Other Abuses in Class 
        Action Cases
    Rather than responding in an even-handed manner to the 
various concerns raised at the hearings by plaintiffs and 
defendants alike, H.R. 1875 solely benefits defendants. H.R. 
1875 does nothing to deal with the problem of poorly written 
class action notices which cannot be understood, and it does 
nothing to deal with collusive settlements which protect 
defendants from future liability and coupon settlements which 
provide no tangible benefits to plaintiffs.
    Numerous concerns were voiced at the hearings that class 
action notices can be incomprehensible to potential plaintiffs 
with opt-out rights. In previous testimony, Public Citizen 
observed that the notice in the John Hancock deceptive sales 
practice class action \59\ was ``impenetrable [and] would make 
it much less likely that deserving claimants would, in fact, 
pursue their claims for redress.'' \60\ Similarly, class action 
expert Ralph Wellington testified that ``class notices should 
be written in plain language. It is possible to tell how much 
money class counsel will receive, and where that money will 
come from.'' \61\ Unfortunately, H.R. 1875 completely ignores 
this problem, since changing the forum will not in any way 
improve the treatment of out-of-State or out-of-district class 
members.\62\
---------------------------------------------------------------------------
    \59\ Oversight Hearing on Mass Torts and Class Action Lawsuits: 
Hearing Before the Subcomm. On Courts and Intellectual Property of the 
House Comm. On the Judiciary, 105th Cong. (1998) (statement of Brian 
Wolfman, Staff Attorney, Public Citizen).
    \60\ Id.
    \61\ Id. (statement of Ralph Wellington).
    \62\ See Acheson testimony, supra note 1, at 6. A related case was 
settled in early 1998 after two years of litigation in State court 
between Nationwide and the Lexington, Kentucky Fair Housing Council. 
See Lexington Fair Hous. Council, Inc. v. Nationwide Mut. Ins. Co., No. 
96-365, E.D. Ky, Lexington Div.
---------------------------------------------------------------------------
    Serious concerns have also been raised concerning abusive 
settlements. These include collusive settlements, in which the 
parties agree to a far broader settlement than was originally 
sought in order to insulate defendants from future liability, 
and coupon and other deficient settlements which provide little 
in the way of real relief to plaintiffs. For example, In re 
Prudential Insurance Company of America Sales Practice 
Litigation \63\ involved a class action case which as filed was 
based only on misrepresentations to customers regarding future 
premiums, but as settled, released defendants from all claims 
concerning abusive sales practices.\64\ These cases reflect 
specific problems with individual judges rather than systemic 
problems with the States' handling of class actions, and any 
serious effort to reform class actions should address these 
issues, whether they arise at the Federal or State level.\65\
---------------------------------------------------------------------------
    \63\ 962 F. Supp. 450 (D. N.J. 1997) (class action based on 
misrepresentations to customers regarding future premiums for which 
settlement was approved releasing defendant from any abusive sales 
practice).
    \64\ See also Matsushita Elec. Indust. Co. v. Epstein, 516 U.S. 367 
(1995); Grimes v. Vitalink Communications Corp, 17 F. 3d 1553, 1563-64 
(3d Cir.), cert denied, 115 S. Ct. 480 (1994) (holding that a State 
court has the power to allow parties to comprehensive class action 
settlement to release exclusive Federal securities claims). But see 
Nat'l Super Spuds v. New York Mercantile Exchange 660 F. 2d 9, 17-18 
(2d Cir. 1981) (rejecting potato futures class action settlement in 
which parties sought to release claims for which they were not 
authorized to represent class members).
    \65\ See In re General Motors Corporation Pick-up Truck Fuel Tank 
Products Liability Litigation, 55 F. 3d 768 (3d Cir. 1995) (overturning 
a lower Federal court's approval of a settlement awarding class members 
a $1,000 coupon toward future purchases of the defendant's cars); In re 
Ford Motor Co. Bronco II Products Liability Litigation, 1995 U.S. Dist. 
Lexis 3507 (E.D. La. 1995) (awarding plaintiffs only a package of 
videos, stickers, and flashlights); and Hanlon v. Chrysler Corp., 1998 
WL 296890 (9th Cir. June 9, 1998) (awarding plaintiffs no monetary 
compensation and essentially no more than Chrysler's promise to conform 
with its obligation to the Federal regulators).
---------------------------------------------------------------------------

                               Conclusion

    H.R. 1875 will remove class actions involving State law 
issues from State courts--the forum most convenient for victims 
of wrongdoing to litigate and most familiar with the 
substantive law involved--to the Federal courts--where the 
class is less likely to be certified and the case will take 
longer to resolve. In our view, this incursion into State court 
prerogatives is no less dangerous to the public than many of 
the radical forms of ``tort reform'' and ``court stripping'' 
legislation previously rejected by the Congress and the 
Administration.
    Contrary to supporters' assertions, H.R. 1875 will not 
serve to prevent State courts from unfairly certifying class 
actions without granting defendants an opportunity to respond. 
This is already barred by the Constitution,\66\ and the few 
State court trial court decisions to the contrary have been 
overturned.\67\ H.R. 1875 also cannot be seen as merely 
prohibiting nationwide class actions filed in State court. The 
legislation goes much further and bars State class actions 
filed solely on behalf of residents of a single State, which 
solely involve matters of that State's law, so long as one 
plaintiff resides in a different State than one defendant--an 
extreme and distorted definition of diversity which does not 
apply in any other legal proceeding.
---------------------------------------------------------------------------
    \66\ See supra notes 24-26 and accompanying text.
    \67\ See Ex Parte State Mut. Ins. Co., 715 So.2d 207 (Ala. 1997); 
Ex Parte Am. Bankers Life Assurance Co. of Florida, 715 So.2d 207 (Ala. 
1997) (holding that classes may not be certified without notice and a 
full opportunity for defendants to respond and that the class 
certification criteria must be rigorously applied).
---------------------------------------------------------------------------
    This legislation would seriously undermine the delicate 
balance between our Federal and State courts. At the same time 
it would threaten to overwhelm Federal courts by causing the 
removal of resource intensive State class action cases to 
Federal district courts, it also will increase the burdens on 
State courts as class actions rejected by Federal courts 
metamorphasize into numerous additional individual State 
actions. We urge H.R. 1875's rejection.
                                   John Conyers, Jr.
                                   Howard L. Berman.
                                   Jerrold Nadler.
                                   Melvin L. Watt.
                                   Sheila Jackson Lee.
                                   Martin T. Meehan.
                                   Robert Wexler.
                                   Tammy Baldwin.
                                   Barney Frank.
                                   Robert C. Scott.
                                   Zoe Lofgren.
                                   Maxine Waters.
                                   William D. Delahunt.
                                   Steven R. Rothman.
                                   Anthony D. Weiner.
                      Additional Dissenting Views

    In addition to the general policy concerns we have with 
H.R. 1875, as reflected in the dissenting views signed by the 
other Members of the Minority, we also oppose this legislation 
because of the specific adverse impact it would have on the 
ability of injured persons to obtain redress for harms caused 
by the tobacco industry, the gun industry, and the managed care 
industry. All three of these industries are in the initial 
stages of being brought to justice pursuant to a series of 
State class action suits, which would become far more 
difficult, if not impossible, to bring under H.R. 1875. In 
addition, all three industries face serious legislative 
challenges at the Federal and State level, and we believe it is 
inappropriate for Congress to provide them with unilateral new 
legal entitlements in the class action area.
    Unfortunately, when Democrats offered three separate 
amendments which would have carved out the tobacco, gun, and 
managed care industries from the legal protections provided 
under H.R. 1875, each was rejected by the Republican Majority. 
Although the Majority claimed it was inequitable to carve out 
any particular industry from the scope of the bill, there is 
ample precedent for excluding particular industry segments from 
liability legislation,\1\ and there is no reason not to permit 
comparable exclusions in this legislation. For these and the 
other reasons set forth herein, we offer these additional 
dissenting views.
---------------------------------------------------------------------------
    \1\ Examples of other Republican-supported carve-outs include: (1) 
H.R. 1875, itself, which carves out an exception for lawsuits brought 
under the Securities Act of 1933 and 1934 and claims relating to 
internal governance of business entities (see H.R. 1875, Sec. 4); (2) 
the Y2K bill recently signed by the President excludes any losses for 
personal injury or death from the bill's provisions and excludes large 
businesses from the punitive damage caps (see Pub. L. 106-32); (3) 
``The Biomaterials Access Assurance Act of 1998,'' which carves out 
exceptions for breast implant lawsuits and lawsuits by health care 
providers (see Pub. L. 105-230, Sec. 3); (4) the 104th Congress' 
conference report on H.R. 956, the ``Common Sense Product Liability 
Legal Reform Act of 1996,'' which carves out an exception from the 
bill's provisions for lawsuits for ``commercial losses'' (see H.R. 
Conf. Rep. No. 481, 104th Cong., 2d Sess. 3, 6 (1996), Sec. 101); and 
(5) the most recent product liability bill brought to the floor by the 
Senate Republican leadership, which contains specific exemptions for 
tobacco lawsuits, negligence actions involving firearms or ammunition, 
and negligent entrustment actions (see Sec. Sec. 101 & 102 of S. 2236 
as introduced by Senator Gorton on June 26, 1998, and brought to the 
Senate floor on June 25, 1998, and on July 9, 1998 where the Senate 
failed to invoke cloture).
---------------------------------------------------------------------------
I. Impact on the Tobacco Industry
    H.R. 1875 would allow tobacco companies to remove State 
class actions involving State causes of action to Federal 
court. In fact, since the major tobacco companies are all 
domiciled in States where class actions are not being brought, 
``minimal diversity'' as defined by this bill will always exist 
between the plaintiffs and the tobacco companies. H.R. 1875, 
therefore, effectively grants the tobacco industry a free pass 
to Federal court where it will be much more difficult for 
plaintiffs to prevail in class action cases. This is why it is 
strongly opposed by over 70 consumer and public health groups 
including the Tobacco Products Liability Project,\2\ the 
Coalition for Workers Health Care Funds,\3\ and Save Lives, Not 
Tobacco (a coalition which includes the American Lung 
Association and the American Medical Woman's Association).\4\ 
We believe there is no justification in offering additional 
legal protections for an industry which has been shown to 
market addictive and lethal products and which has been shown 
to intentionally market these products to minors.
---------------------------------------------------------------------------
    \2\ See Hearing on H.R. 1875 Before the House Comm. on the 
Judiciary, 106th Cong. (1999) (statement by Richard A. Daynard, 
Professor of Law and Chairman, Tobacco Products Liability Project, 
Northeastern University Law School) [hereinafter Daynard testimony].
    \3\ See Letter from David Mallino, Legislative Director, Coalition 
for Workers Health Care Funds, to John Conyers, Ranking Member, House 
Judiciary Committee (July 22, 1999) (on file with minority staff of 
House Judiciary Committee). The coalition represents 2500 multi-
employer health and welfare funds, which are non-profit trust funds 
established jointly by labor and management to provide medical care to 
approximately 30 million workers, retirees, and their families.
    \4\ See Letter from Cassandra Weich, American Lung Association; Tom 
Bantle, Public Citizen; William Godshall, Smoke-Free Pennsylvania; Co-
Chairs of Save Lives, Not Tobacco to House Judiciary Committee Members 
(July 22, 1999) (on file with minority staff of House Judiciary 
Committee).
---------------------------------------------------------------------------
    According to Save Lives, Not Tobacco, ``by permitting the 
transfer from State courts to Federal courts, this legislation 
will cause interminable delay for class action cases against 
the tobacco industry, both increasing the costs of suing the 
industry and delaying justice. [The bill] would make it much 
harder for injured consumers to take on the tobacco industry in 
court.'' \5\ Furthermore, it allows the tobacco industry 
``backdoor'' immunity from State class actions.\6\ Similarly, 
one of the nation's foremost tobacco liability experts, 
Professor Richard Daynard has testified, ``[F]ederal courts are 
hostile to tobacco class actions and have never permitted any 
to proceed'' and H.R. 1875 ``would have the practical effect of 
ending most class actions against the tobacco companies.'' \7\
---------------------------------------------------------------------------
    \5\ Id.
    \6\ See id.
    \7\ Daynard testimony, supra note 2.
---------------------------------------------------------------------------
    Had this bill previously been enacted into law it would 
have threatened all of the key tobacco class action suits 
already brought or being considered. Among other things, the 
bill would have undermined classes of plaintiffs in Engle v. 
R.J. Reynolds Tobacco Co.,\8\ a successful class action filed 
on behalf of Florida citizens who have become wrongfully 
addicted to tobacco, and Broin v. Phillip Morris \9\ which 
considered the claims of some 60,000 flight attendants harmed 
by second hand smoke. In addition, the bill would have impacted 
additional class actions filed on behalf of individuals 
currently pending in State courts for smoking-related claims 
\10\ and could have affected additional State class actions 
being brought on behalf of multi- employer Health and Welfare 
funds, which provide medical care for approximately 30 million 
workers, retirees, and their families.\11\
---------------------------------------------------------------------------
    \8\ 672 So. 2d 39 (Fla. 3d. Dist. Ct. App. 1996).
    \9\ 641 So.2d 888 (Fla. 3d Dist. Ct. App. 1994).
    \10\ A number of smaller class actions were filed subsequent to the 
Fifth Circuit's failure to certify a nationwide class of smokers for 
addiction and other claims in Castano v. American Tobacco Co., 84 F.3d 
734 (5th Cir. 1996). Additionally, other non-Castano class actions 
involving tobacco liability are also pending in State courts.
    \11\ While defendants in many of these instances sought to remove 
the cases to Federal court under Federal question jurisdiction based on 
ERISA, the majority of Federal courts rejected this claim, and have 
remanded the cases to State courts. In the districts which held for the 
defendants, plaintiffs have appealed the decision. Numerous additional 
health and welfare actions are expected to be filed in the future 
against the tobacco industry.
---------------------------------------------------------------------------
    To the extent there is any single event which has brought 
the tobacco industry to the negotiating table with policy 
makers, it is their fear of private liability in general and 
class actions in particular. That is why the tobacco industry 
sought a complete ban on class actions in the now aborted 
settlement presented to Congress two years ago by the tobacco 
industry and various State attorneys general.\12\ By severely 
limiting State class actions, H.R. 1875 would provide the 
tobacco industry indirectly what Congress was unwilling to give 
them directly--protection from liability.
---------------------------------------------------------------------------
    \12\ See Proposed Tobacco Industry Settlement, 12.3 TPLR 3.203 
(June 20, 1997). In a recent editorial, the New York Times agreed that 
class actions were important to controlling the tobacco companies: 
``The industry is eager to ban class-action lawsuits because of the 
threat they pose to its reprehensible behavior. But shielding the 
industry from future class-actions would practically invite more 
abuses.'' ``No Immunity for Tobacco,'' N.Y. Times, February 24, 1998, 
at A20.
---------------------------------------------------------------------------
II. Impact on Gun Liability
    We also oppose H.R. 1875 because it benefits companies 
marketing gun products which are dangerous and defective and 
have no reasonable use as self defense. It is for these reasons 
that the bill is strongly opposed by groups such as Handgun 
Control,\13\ the Coalition to Stop Gun Violence,\14\ and the 
Violence Policy Center, which has written, ``citizen lawsuits--
including class actions--serve as the only safety `regulation' 
of the firearms industry . . . lawsuits are the only method to 
force manufacturers of defectively manufactured or designed 
firearms to make their guns safer.''\15\ Increasingly, the 
value of that mechanism will depend upon the openness of our 
class action rules.
---------------------------------------------------------------------------
    \13\ See Letter from Robert J. Walker, President, Handgun Control, 
to John Conyers, Ranking Member, House Judiciary Committee (July 19, 
1999) [hereinafter Walker letter] (on file with minority staff of House 
Judiciary Committee).
    \14\ See Letter from Michael K. Beard, President, Coalition to Stop 
Gun Violence, to John Conyers, Ranking Member, House Judiciary 
Committee (July 27, 1999) (on file with minority staff of House 
Judiciary Committee).
    \15\ See Letter from M. Kristen Rand, Director of Federal Policy, 
Violence Policy Center, to John Conyers, Ranking Member, House 
Judiciary Committee (July 27, 1999) (on file with minority staff of 
House Judiciary Committee).
---------------------------------------------------------------------------
    The victims of gun violence are beginning to sue gun 
manufacturers for their injuries. They are particularly 
interested in pursuing manufacturers whose guns are clearly 
ill-suited for hunting or self defense. In addition, over 20 
American cities as well as the NAACP have filed lawsuits 
against gun manufacturers to hold them accountable for the 
millions of dollars that the public sector must spend coping 
with the consequences of gun violence. At the same time, 
several of these lawsuits raise important class action issues. 
For example, a liability action is pending in Illinois brought 
by the families of three young children who were killed by 
juveniles illegally carrying handguns alleged to be marketed to 
gang members, and the plaintiffs are trying to recast this case 
as a class action.\16\
---------------------------------------------------------------------------
    \16\ See Young v. Bryco Arms, No. 98106684 (Cook Co. Ill. Cir. Ct. 
1998).
---------------------------------------------------------------------------
    We should not handicap these important civil suits before 
they have even begun. Gun plaintiffs, like tobacco plaintiffs, 
prefer to sue gun manufacturers as part of a class action, 
because suing as single plaintiffs is often prohibitively 
expensive. In addition, gun plaintiffs prefer to sue in State 
courts, because Federal courts are far less likely to extend 
the forum State's laws to cover the plaintiffs' claims. Handgun 
Control explains that ``Federal courts tend to be very 
reluctant to extend State law or apply it to new situations. 
With gun litigation, however, many cases require courts to 
extend the laws, or to apply established law to a new 
situation.'' \17\
---------------------------------------------------------------------------
    \17\ Walker letter, supra note 13.
---------------------------------------------------------------------------
III. Impact on Managed Care Liability
    Finally, H.R. 1875 would undermine a series of recent class 
action suits against health maintenance organizations resulting 
from their alleged fraud, overbilling and failure to provide 
coverage. It is for these reasons H.R. 1875 is opposed by AIDS 
Action Council, Families USA, and the Center on Disability and 
Health.\18\ Under current law, class action claims against 
managed care must often distinguish between ERISA and non-ERISA 
patients. Non-ERISA patients have a full range of remedies 
available to them under State law. On the other hand, ERISA 
patients have a very limited set of remedies--the cost of the 
benefit denied, which in most cases is woefully inadequate.
---------------------------------------------------------------------------
    \18\ See Letter from AIDS Action Council, Families USA, the Center 
on Disability and Health, and eight other public health advocacy groups 
(July 9, 1999) (on file with the minority staff of the House Judiciary 
Committee) (stating that ``H.R. 1875 would undermine the few grounds on 
which patient and consumer State class actions have been filed 
successfully--fraud, overbilling, and medical malpractice.'')
---------------------------------------------------------------------------
    The current managed care reform debate in Congress includes 
the elimination of the ERISA preemption which would allow 
patients who receive their health care from their employer to 
hold their HMO accountable if it denies care. Congress should 
not move in the opposite direction by enacting legislation such 
as H.R. 1875 which would deny more patients access to justice 
in State court. The following are just two examples of class 
actions in State courts which could be preempted and possibly 
terminated by Federal courts under the legislation:

         LOn June 23, 1997, Harold Katlin filed a class 
        action in Pennsylvania State court against his 
        psychiatrist, David Tremoglie, and Keystone Health Plan 
        East Inc., his HMO, alleging that the psychiatrist had 
        treated hundreds of patients without a medical 
        license.\19\ The case was filed on behalf of himself 
        and all other patients treated by Tremoglie at the 
        Bustleton Guidance Center. The suit alleges that the 
        class was treated by an unlicenced and fraudulent 
        psychiatrist who unlawfully prescribed powerful 
        medications not suitable for their illness and that the 
        HMO failed to verify that Tremoglie was a licensed 
        psychiatrist, failed to supervise him, and referred 
        patients to him.\20\ On June 29, 1999, a Pennsylvania 
        State court granted class certification.\21\
---------------------------------------------------------------------------
    \19\ Kaitlin v. Tremoglie, et al., No. 002703 (Pa. Comm. Pls., 
Philadelphia Co. 1997).
    \20\ One of the female patients in the class was treated by the 
psychiatrist for depression. While under the influence of medication, 
the psychiatrist allegedly took her out for drinks and dinner and had 
sex with her. After this patient terminated the contract, the 
psychiatrist allegedly harassed her and threatened to harm her and her 
children if she reported him.
    \21\ See Mealey's Litigation Reports: Pennsylvania Court Certifies 
Class Action Against Keystone for Unlicensed Physician, July 14, 1999 
at 1.

         LAnna Kaplan, a New York patient who was 
        charged by a North Shore University Hospital for 
        portions of a bill for covered services left unpaid by 
        Oxford, her HMO, sought class-action status in a 
        lawsuit against both Oxford and North Shore. The class 
        included all Oxford members who were referred to North 
        Shore by Oxford for covered services, but whose bills 
        had not been paid or had only been partially paid by 
        Oxford. Oxford had allegedly failed to pay North Shore 
        for covered services totaling $10 million. In Kaplan's 
        case, when North Shore failed to receive the full 
        amount of the bill from Oxford, the hospital began to 
        bill Kaplan directly for the unpaid amount. Oxford 
        personnel had reportedly privately admitted to Kaplan 
        that she should have no liability for the bill, and 
        North Shore personnel had also apparently admitted 
        privately that they were billing Oxford plan members to 
        pressure Oxford to pay for claims. Kaplan claimed her 
        credit has been ruined by her unpaid bill and she has 
        been harassed by a collection agency. A settlement was 
        reached on September 30, 1997, and the parties agreed 
        that the action would be certified as a class action 
---------------------------------------------------------------------------
        for purposes of the settlement.\22\

    \22\ See Mealey's Litigation Reports: New York Class Action Over 
Direct Billing to Members After Oxford Failed to Pay Settles, November 
20, 1997 at 1.
---------------------------------------------------------------------------
                                   John Conyers, Jr.
                                   Jerrold Nadler.
                                   Sheila Jackson Lee.
                                   Martin T. Meehan.
                                   Barney Frank.
                                   Zoe Lofgren.
                                   Anthony D. Weiner.