Complete diversity and the closing of the federal courts.

Author:Cooper, Charles J.

Article III of the Constitution was designed to establish a federal judiciary, in the words of Federalist No. 81, "competent to the determination of matters of national jurisdiction." (1) The Framers were unwilling to rely on the state courts for this purpose, as the Antifederalists preferred, largely because "the prevalency of a local spirit may be found to disqualify the local tribunals for the jurisdiction of national causes." (2) Indeed, the Framers were so apprehensive of state court bias, or the perception of bias, in favor of local interests that they considered a neutral federal tribunal necessary in some cases for the peace and harmony of the union. (3) They took care, accordingly, to extend federal jurisdiction to "cases in which the State tribunals cannot be supposed to be impartial." (4) In particular, Article III, Section 2 provides that "[t]he judicial Power shall extend to," among other things, "Controversies between two or more States;--between a State and Citizens of another State; between Citizens of different States;--between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects." (5)

Thus, although the Framers generally left undisturbed the exclusive jurisdiction of state courts over cases arising under state law, they established concurrent jurisdiction in federal courts over cases in which the impartiality of state courts would be tested most directly: those cases in which the interests of the state itself, or of its citizens, were adverse to the interests of other states, foreign countries, or their citizens. Of particular concern to the Framers in establishing federal jurisdiction over disputes "between citizens of different states" was the crippling effect that judicial bias favoring in-state interests, whether real or perceived, would have on interstate commerce. By ensuring that a neutral federal court--the "tribunal which, having no local attachments, will be likely to be impartial between the different states and their citizens" (6)--was available to adjudicate disputes between parties of diverse state citizenship, the Framers were animated by much the same spirit that resulted in the various substantive constitutional protections against state interference with interstate and foreign commerce. (7) As Justice Joseph Story explained in his classic Commentaries on the Constitution, the grant of federal jurisdiction over interstate disputes was intended "to increase the confidence and credit between the commercial and agricultural states," for "[n]o man can be insensible to the value, in promoting credit, of the belief of there being a prompt, efficient, and impartial administration of justice in enforcing contracts." (8)

The value of diversity jurisdiction in promoting interstate commerce, however, depends largely on the equal availability of the federal forum to both sides of an interstate dispute. It follows, as Justice Story explained for the Supreme Court in the landmark case of Martin v. Hunter's Lessee, (9) that diversity jurisdiction was not intended by the Framers "to be exercised exclusively for the benefit of parties who might be plaintiffs, and would elect the national forum, but also for the protection of defendants who might be entitled to try their rights, or assert their privileges, before the same forum." (10) The federal courts have nevertheless narrowed federal jurisdiction over cases involving citizens of different States by imposing a number of doctrines-including, most notably the requirement of complete diversity between all plaintiffs and all defendants--that restrict access to the federal courts, especially by defendants. After discussing these judicially imposed limitations on the diversity jurisdiction, we demonstrate in this Article: that the requirement of complete diversity is inconsistent with the history and purposes of the diversity clause of Article III; that it is not required by, and may well contravene, that provision of the Constitution; and that it rests on a construction of the diversity statute that the Supreme Court has acknowledged was erroneous.



Despite the even-handed access to the federal courts intended by the Framers, (11) in the modern era forum selection is controlled by plaintiffs. The plaintiffs' bar, of course, rationally will choose the forum in which the likelihood of success is greatest. It is no accident, then, that large mass tort suits and class actions cluster in certain notoriously plaintiff-friendly state jurisdictions. (12) The proliferation of such complex interstate disputes in state courts has imposed massive, often bankrupting, costs on major American manufacturing corporations and has placed great burdens on the national economy. (13) Not surprisingly, the emergence of plaintiff-friendly state courts has become a significant factor in the decision-making of interstate businesses. (14)

Congress recently addressed this problem in the class action context, as discussed more fully later in this Article, by providing for removal to federal district courts of large class action cases that previously had been concentrated in the courts of a few states. (15) Large mass tort cases likewise often are concentrated in select state court jurisdictions. Asbestos litigation is a well-known example. (16) According to one report, "Madison County[, Illinois] was and again has become the epicenter for national asbestos litigation." (17) It has "the largest asbestos docket of any state court in the nation," (18) even though "[o]nly about 1 in 10 asbestos claims [filed there has] any connection to the area." (19) California has also seen a disproportionately high volume of asbestos-related litigation. (20) Asbestos-related cases have imposed significant costs on the American economy. "Over the past 30 years, 56 asbestos personal injury trusts have been set up on behalf of companies that have filed for reorganization under U.S. bankruptcy law." (21)


Mass tort cases brought in state court invariably involve adverse parties of diverse citizenship, yet the out-of-state defendants are locked in state court, unable to remove the cases to federal court. The cases cannot be heard in federal court because the Supreme Court early on interpreted the diversity jurisdiction statute, now codified at 28 U.S.C. [section] 1332, (22) to require "complete" diversity of citizenship. That is, the state citizenship of every plaintiff in the case must be different from that of every defendant. (23) Thus, the plaintiffs in mass tort actions arising out of the same or related activity can keep their out-of-state defendants in state court by the simple expedient of naming at least one in-state defendant.

In addition to the judge-made complete diversity rule, the federal courts have developed an entire framework of doctrines that seem designed largely and systematically to limit or defeat the text and purposes of Article III's grant of diversity jurisdiction. Some prominent examples include the following:

  1. Relying on dicta in Shamrock Oil & Gas Corp. v. Sheets, (24) lower courts have applied a strong presumption against removal, some holding that "all doubts about jurisdiction should be resolved in favor of remand to state court." (25) The Shamrock Oil dicta, however, rested on inferences the Supreme Court drew from its contemporaneous understanding of the "Congressional purpose ... [and] policy" reflected in the removal statutes as they existed at that time. (26) And as the Supreme Court has subsequently recognized, "whatever apparent force this [reasoning] might have claimed when Shamrock was handed down has been qualified by later statutory development." (27) Although the Supreme Court has thus squarely rejected the Shamrock Oil dicta, holding instead that there is "no question that whenever the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find an express exception," (28) the lower courts have continued to rely on Shamrock Oil and apply a presumption against removal.

  2. Relying on the Supreme Court's decision in Whitcomb v. Smithson, (29) lower courts have applied the so-called "voluntary-involuntary rule," whereby an out-of-state defendant is prohibited from removing a case where complete diversity results from the dismissal of non-diverse defendants without the plaintiffs' assent. (30) This rule is based on the theory that, "in the absence of a fraudulent purpose to defeat removal, the plaintiff may by the allegations of his complaint determine the status with respect to removability of a case." (31) The Supreme Court, however, has made clear that:

    Federal courts should not sanction devices intended to prevent a removal to a Federal court where one has that right, and should be equally vigilant to protect the right to proceed in the Federal court as to permit the state courts, in proper cases, to retain their own jurisdiction. (32) Further, a presumption that plaintiffs are entitled to state court forums if they so choose is inconsistent not only with the removal statutes, but also with the diversity jurisdiction established by the Constitution. As the Committee on the Judiciary commented in passing the Class Action Fairness Act of 2005, "there is no such presumption. In fact, the whole purpose of diversity jurisdiction is to preclude any such presumption by allowing state-law based claims to be removed from local courts to federal courts, so as to ensure that all parties can litigate on a level playing field...." (33)

  3. Courts have properly recognized the fraudulent joinder doctrine as an exception to the voluntary-involuntary rule. (34) Under this doctrine, a case may be removed if the non-diverse defendant is dismissed because the plaintiff pleaded fraudulent jurisdictional facts or failed to state a case against the non-diverse defendant. (35) But courts have weakened this doctrine...

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