THE ARTICLE III "PARTY" AND THE ORIGINALIST CASE AGAINST CORPORATE DIVERSITY JURISDICTION.

Date01 April 2023
AuthorMoller, Mark

TABLE OF CONTENTS INTRODUCTION 1349 I. ORIGINALIST METHODOLOGY 1353 II. THE ORIGINAL MEANINGS OF "CITIZENS" AND "CONTROVERSIES" 1357 III. THE ORIGINAL UNDERSTANDING OF ARTICLE III PARTIES 1361 A. The General Features of an Article III Party 1362 1. Party Composition Was a Technical Matter 1362 2. The Technical Meaning of "Parties" 1365 3. Usually, Parties Were Persons and Named As Such on the Record 1367 4. Exceptionally, Parties Included Unnamed Represented Persons 1370 5. Parties Were Individuals, Not Abstract Groups 1371 6. In Cases Involving Pleading "Fictions," Courts Looked Behind the Fiction to Recognize the "Real" or "Substantial" Parties 1375 B. Situating Corporations in the Original Law of Article III Parties 1381 1. Overview of the Evidence 1382 2. Indirect Evidence that Corporators Were Not Parties in Controversies Proceeding in the Corporate Name 1384 3. Direct Evidence that Corporators Were Not Parties 1390 a. The Seventeenth-Century Authorities Disagree About Corporators' Party Status 1391 b. The Nonparty Position Prevails in the Eighteenth- Century and Early Nineteenth-Century Authorities 1395 C. The Dissenting Authorities Considered 1405 1. The Fate of Massachusetts's Colonial Cases 1406 2. New York's Brief Experiment 1409 3. The Dissenting Federal Authorities 1418 IV. THE ORIGINALIST CASE AGAINST CORPORATE DIVERSITY JURISDICTION 1423 A. The Case Summarized 1424 B. Objections Considered 1428 C. Paths Forward for Defenders of Corporate Diversity Jurisdiction 1436 CONCLUSION 1445 INTRODUCTION

In the early decades of the twentieth century, progressives went to war against an unassuming foe: federal diversity jurisdiction. (1) Swift v. Tyson (2) had turned diversity jurisdiction from a level playing field for out-of-state defendants into a home field advantage for corporations. (3) Outraged, progressives not only mounted failed attempts to eliminate diversity jurisdiction outright in Congress, (4) but also attacked corporate diversity jurisdiction's very constitutionality. (5)

And certainly, the then-prevailing constitutional justification for diversity jurisdiction over corporations looked implausible on its face. At the start of the twentieth century, corporate diversity jurisdiction remained rooted in Chief Justice John Marshall's 1809 opinion in Bank of the United States v. Deveaux. (6) Article Ill's Diversity Clause grants federal jurisdiction over "Controversies... between Citizens of different States." (7) In Deveaux, Chief Justice Marshall held that corporate entities were not citizens within the meaning of the Diversity Clause because "citizen" is a term reserved for natural persons. (8)

But Chief Justice Marshall rescued corporate access to diversity jurisdiction by positing that the natural persons who compose a corporation are the real parties in controversies involving the corporate entity. (9) Thus, he reasoned, when a corporation is sued, there is in fact a controversy "between" citizens of different states so long as the humans who form the corporation are from states other than that of the corporation's litigation adversary. (10) The Taney Court later added that in corporate cases, members of corporations should be irrebuttably presumed to be citizens of the state of the company's incorporation. (11)

Could this convoluted justification of corporate diversity jurisdiction really be the right reading of Article Ill's text? Progressive scholars, like Dudley O. McGovney, argued that it was not. Diversity jurisdiction over suits against corporate entities was a "Supreme fiction," wrote McGovney--a constitutional usurpation by nineteenth-century federal courts in cahoots with corporate capital. (12)

Progressive scholars did not, however, methodically examine whether Deueaux was rightly decided as an original matter. And no one else has since. The existing scholarship that does examine corporate diversity jurisdiction either rejects an originalist framework or assumes that Deveaux was correctly decided as a matter of original meaning. (13) After Erie overturned Swift, (14) interest in curtailing diversity jurisdiction waned. In 1958, Congress ratified corporate diversity jurisdiction--by treating the corporate entity itself as a state "citizen." (15) Deveaux was forgotten.

All the while, originalists stayed silent about the bona fides of corporate access to diversity jurisdiction. But that's changing, in part out of a sense that the constitutional law of civil procedure is an area where originalism may lead to surprising (16)--and for some proponents of originalism, challenging--results.

Based on that hunch, we recently investigated whether corporations are citizens within the meaning of Article Ill's Diversity Clause. We found that the term "citizen" didn't encompass corporate entities during the framing period, just as Chief Justice Marshall concluded in Deveaux. (17) To the extent that Congress's grant of diversity jurisdiction over corporations is based on a corporate entity's "citizen" status, that grant is beyond the authority conferred in Article III. (18)

The next question that an originalist doctrine of diversity jurisdiction must address is whether Chief Justice Marshall was also right that members of corporations are the real "parties" to Article III controversies involving their corporation, making their citizenship status, not their entity's, the proper textual focus of the diversity jurisdiction inquiry. If the Chief Justice was right, it is possible that very broad corporate diversity jurisdiction might be reconciled with the original meaning of the Diversity Clause's text.

This Article turns to that more difficult question, which no one has analyzed using the methods of modern originalism. And while not free from all doubt, this Article's findings tend to vindicate the view of the Old Progressives. The evidence shows that cases and controversies were legal proceedings that subsisted "between" parties in the technical legal sense. (19) Legal authorities, in turn, generally classified corporators as nonparties in cases and controversies proceeding in the corporate name. (20) Deveaux was one of a few outliers and was perceived as such at the time. (21)

This evidence suggests diversity jurisdiction in corporate cases is a mistake. The entity is not a "citizen" of a state (or anywhere else) in the original sense of the term. And because controversies filed by or against corporations subsist "between" the entity, not its members, and the entity's opponent, members' citizenship is textually irrelevant to diversity jurisdiction. Justice William Johnson's overturned circuit ruling in Deveaux was right: corporate suits based exclusively on state law (22) belong, as an original matter, almost exclusively in the state court system. (23)

Corporate America thus has a significant stake in the ongoing debate over when and how the Supreme Court should correct its constitutional mistakes. (24) The Article ends by suggesting that corporate diversity jurisdiction might be an example of what we call an edge case of constitutional mistake. Edge cases are those in which claims that current law is mistaken satisfy a simple preponderance of the evidence standard but not more demanding burdens. We end by examining different approaches to correcting mistakes in edge cases and the implications of each approach for the future of corporate diversity jurisdiction.

  1. ORIGINALIST METHODOLOGY

    This Article investigates the original meaning of the Diversity Clause from the standpoint of public meaning originalism. Public meaning originalism is based on three claims: (1) that the meaning of the Constitution's text is its public or conventional meaning (the Public Meaning Thesis), (25) (2) that its meaning was fixed at the time of the Constitution's adoption (the Fixation Thesis), (26) and (3) that constitutional doctrine produced by courts must be consistent with this meaning (the Constraint Principle). (27) In other words, constitutional actors (including the Supreme Court) ought to regard the original public meaning of the constitutional text as binding.

    The conventional or popular meaning of the Constitution's text at the time of ratification (the fixation period) is a function of what the words in light of surrounding context communicated to the public, ordinary citizens who read and understood American English. (28) So research in the vein of public meaning originalism focuses on usage patterns in lay communities during the fixation period--evidenced not just by dictionaries, or statements by given Framers, but also by the more sophisticated techniques of corpus linguistics. (29)

    Some of the words and phrases in the constitutional text were, however, terms of art. (30) Terms of art communicate to ordinary readers via a "division of linguistic labor." (31) So while members of the public might not know the meaning of a technical term, they understand that the term has a meaning within a specialist community. (32) As a result, the "public" meaning of such a term is its conventional, specialist sense. (33) Solving the riddle of corporate diversity jurisdiction, we will see, requires an inquiry into terms of art and therefore an examination of technical rather than lay sources. (34)

    Most variants of originalism, including public meaning originalism, also accept what has come to be known as the interpretationconstruction distinction. (35) This distinction is primarily conceptual and only secondarily terminological. (36) The word "interpretation" represents the activity of determining the "meaning" (or, more precisely, "communicative content") of the text. (37) The word "construction" refers to the activity of determining the legal effect that constitutional actors (including judges) derive from the text. (38) This conceptual distinction could be expressed using different terminology. (39)

    Interpretation aims to recover "communicative content," the set of propositions and concepts (40)...

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