Most lawyers learn in law school that plaintiffs prefer to litigate in state court, and defendants prefer to litigate in federal court. The reality is a little less simple. It is more accurate to say that plaintiffs prefer to litigate in certain state courts where they stand an unreasonably high chance of winning a claim, while defendants wish they could remove cases to a neutral federal court to avoid getting “hometowned.”
The framers of the Constitution knew that even the appearance of hometown judicial bias would be corrosive to the American legal system. To ensure all citizens could be heard in a fair forum, they provided for access to federal courts in cases where at least one party is from a different state—a concept known as diversity jurisdiction. In 1806, however, the Supreme Court narrowed this protection by holding that diversity jurisdiction required each defendant, no matter how many are involved, to be from a different state than every plaintiff.
It is easy to see how this narrow “complete diversity” test lends itself to abuse. As long as plaintiffs name one in-state defendant, they can keep a lawsuit in the court of their choosing. The impact can be striking. Some state courts attract a disproportionate amount of tort claims—often brought by out-of-state plaintiffs—simply because those courts are known to hand out major awards for certain claims.
That is why the National Association of Manufacturers applauds Sen. Mike Lee (R-UT) for introducing S. 3249, the Federal Courts Access Act of 2018. Sen. Lee thinks that the overly narrow diversity jurisdiction standard is a bug in the judicial system, not a feature, and we agree. His bill would allow defendants to remove their case to a fair federal court to counter abusive forum shopping, and it would also end the perverse incentive for plaintiffs’ attorneys to sue harmless in-state companies simply to prevent defendants from accessing a federal court. And yes, that happens more often than you might think.
Diversity jurisdiction has become an increasingly important tool to balance out the interests of plaintiffs and defendants without putting a thumb on the scale for either side. Federal jurisdiction is a complex subject, but the ongoing abuse of state courts makes it clear that the issue is ripe for revisiting. This reform is about ensuring that all parties have access to justice and a fair hearing. Reinforcing the original framework for diversity jurisdiction would go a long way to restoring the balance that the framers of the Constitution intended.
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