House Diversity Bill Would Create Fair Treatment for All

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September 12, 2018

The Judiciary Committee of the U.S. House of Representatives has the chance to close a loophole in our court system on a favored tactic of plaintiffs’ lawyers: forum shopping. This allows plaintiffs’ lawyers to “shop” their lawsuits around to different states in search of a friendly court that will award big settlements. Often, the lawsuits have no ties to the state where the case is eventually filed.

Limits on federal diversity jurisdiction have helped enable forum shopping by plaintiffs’ lawyers. Diversity jurisdiction is as old as the U.S. Constitution. The Framers created diversity jurisdiction to ensure that when there is a dispute between citizens of different states involving state law-based claims, the matter can be heard by a neutral federal court. This promotes fairness in our legal system.

But over time, the federal courts have has made it harder for lawsuits filed in state courts to be moved into the federal court system thanks to laws that limit the availability of federal diversity jurisdiction to only cases that meet the “complete diversity” requirement.

A lawsuit meets the “complete diversity” requirement if all plaintiffs and all defendants are from different states. In other words, if one plaintiff is from the same state as any defendant, the lawsuit does not have “complete diversity” and cannot be heard in federal court.

This hurdle created the forum shopping loophole, giving plaintiffs’ lawyers a way to keep lawsuits in friendly state courts and out of neutral federal courts. Plaintiffs’ lawyers will even add extra defendants—who are usually dropped from a lawsuit before it goes to trial—so their cases do not meet “complete diversity” and therefore cannot be removed to federal courts.

H.R. 3487 offers a straightforward fix to this problem by simply changing the “complete diversity” requirement to a “minimal diversity” requirement. Under that change, the diversity requirement would be met if only one citizen of a state sues a citizen of a different state. The bill would effectively put a stop to plaintiffs’ lawyers adding extra defendants just to keep their cases out of federal court.

The Framers of the Constitution envisioned a court system where citizens of different states have access to a neutral federal court to resolve disputes. Congress already replaced the “complete diversity” requirement with “minimal diversity” in large interstate class actions when it enacted the Class Action Fairness Act of 2005.

H.R. 3487 ensures this same fair treatment of all cases that otherwise meet federal diversity requirements. The Judiciary Committee should approve and vote out this bill, and bring it to a vote before the full House of Representatives.