Legislation memorandum, October 5, 1998

LEGISLA TION MEMORANDUM TO: RLE, SLK FROM: JMM RE: H.R. 3789, CLASS ACTION JURISDICTION OF 1998 DATE: 10/5/98 BACKGROUND: Currently, diversity jurisdiction for federal courts requires: (1) complete diversity on both sides of the lawsuit for all parties involved, and (2) the controversy must exceed $75,000. Removal of a case from state to federal court that has original jurisdiction may be accomplished by the defendant if done within 30 days of receipt of the initial pleading, but not after 1 year. H.R. 3789 will expand a federal court’s original jurisdiction to hear a multi-state class action suit. The bill purports to curb plaintiffs’ attorney abuses that: (a) harm defendant corporations by forcing them to settle rather than proceed with a trial held in “plaintiff-friendly” state courts, and (b) harm plaintiffs by realizing very little compensation for their claims. A vote is expected on Tuesday, October 6. LEGISLATION: H.R. 3789, sponsored by Rep. Henry Hyde, amends federal law, to facilitate original jurisdiction in federal district court for large, interstate class action suits, if: ► Any plaintiff’s citizenship is different from that of any defendant and from all states of which the defendant is deemed a citizen. ► No minimum claim amount. The bill also allows a class action to be removed to federal district court by any: ► Defendant w/o the consent of all defendants at any time. ► Unnamed plaintiff or one not representative of the class w/o consent of all plaintiffs at any time. ► If removal commences beyond 30-days of receipt of “paper, "the removing party must exercise "due diligence. " Federal judges are given the discretion to hear a class action suit in the following circumstances: 1 . If a substantial majority of plaintiffs are citizens of a single state where the primary defendants are also citizens AND that state’s laws govern. (It is not clear how "substantial majority " is defined. “A primary defendant ” is defined as the real target of the suit, the defendant who participated in the wrongdoing, or those expected to incur most of the liability and loss). 2. If the sum of all the claims is less than one million dollars, and the number of all aggregate plaintiffs is less than 100, OR the primary defendants involve the state. If a federal judge does not find a sufficient interstate component to the claim or does not certify the class, then the case is remanded to the state court for the plaintiff to amend the complaint and the time limitation is tolled.