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FEDERAL COURTS JURISDICTION

CLARIFICATION ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

NOVEMBER 15, 2005

Serial No. 109–67

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://judiciary.house.gov 

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

CHRIS VAN HOLLEN, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida

PHILIP G. KIKO, General Counsel-Chief of Staff 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

RIC KELLER, Florida 

DARRELL ISSA, California 

CHRIS CANNON, Utah 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

BLAINE MERRITT, Chief Counsel 

DAVID WHITNEY, Counsel 

JOE KEELEY, Counsel 

RYAN VISCO, Counsel 

SHANNA WINTERS, Minority Counsel 

(III)

C O N T E N T S 

NOVEMBER 15, 2005

OPENING STATEMENT 

Page 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property .................................................................................................... 1

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Ranking Member, Subcommittee on Courts, the 

Internet, and Intellectual Property .................................................................... 2

The Honorable Darrell Issa, a Representative in Congress from the State 

of California, and Member, Subcommittee on Courts, the Internet, and 

Intellectual Property ............................................................................................ 3

WITNESSES 

The Honorable Janet C. Hall, Judge, United States District Court for the 

District of Connecticut, on behalf of the Judicial Conference Committee 

on Federal-State Jurisdiction 

Oral Testimony ..................................................................................................... 4

Prepared Statement ............................................................................................. 6

Mr. Arthur D. Hellman, Professor, University of Pittsburgh School of Law 

Oral Testimony ..................................................................................................... 15

Prepared Statement ............................................................................................. 18

Mr. Richard A. Samp, Chief Counsel, Washington Legal Foundation 

Oral Testimony ..................................................................................................... 50

Prepared Statement ............................................................................................. 52

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Howard L. Berman, a Representative 

in Congress from the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 69

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Member, Subcommittee on 

Courts, the Internet, and Intellectual Property ................................................ 69

Supplementary Prepared Statement of Arthur D. Hellman, Professor, University of Pittsburgh School of Law ......................................................................... 70

Proposed Draft of the ‘‘Federal Jurisdiction Clarification Act’’ by the Administrative Office of the Courts .................................................................................. 72

(1)

FEDERAL COURTS JURISDICTION 

CLARIFICATION ACT 

TUESDAY, NOVEMBER 15, 2005

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

The Subcommittee met, pursuant to notice, at 4:12 p.m., in Room 

2141, Rayburn House Office Building, the Honorable Lamar Smith 

(Chairman of the Subcommittee) presiding. 

Mr. SMITH. The Subcommittee on Courts, the Internet, and Intellectual Property will come to order. 

Looking out at the audience today, I have to comment, I’ve never 

seen such a sparsely attended hearing. And before I get to my prepared remarks, I want to acknowledge that that’s not to say we’re 

not talking about substantive subjects; it’s only to say that we’re 

talking about very arcane subjects that may or may not be of interest to, or understandable by, the typical person who might be in 

town visiting and wanting to sit in on typical Judiciary or other 

Committee hearings. But that doesn’t mean we don’t appreciate the 

attendance of our three witnesses today and what advice they will 

give us in just a few minutes. 

I’m going to recognize myself—oh, and I’m glad to see another 

Member, the gentleman from California, here as well. And that 

means there’s as many Members as there are witnesses; which is 

always a good sign. And I’m going to recognize myself for an opening statement, and then the others. 

In recent years, Congress has focused its attention on Federal jurisdiction over major cases. For example, in 2002, at the initiative 

of this Subcommittee, Congress passed the Multiparty, Multiforum 

Trial Jurisdiction Act. Earlier this year, Congress passed the Class 

Action Fairness Act. 

In this hearing, we turn to some of the jurisdictional problems 

raised by ordinary civil litigation. These cases may not have the 

high profile of class action or airline disaster litigation, which are 

more numerous. But the legislative proposals we’re considering 

today would have a wide impact on ordinary private litigation in 

the Federal courts. 

And it’s not only Federal courts that would be affected. Many of 

these proposals deal with the removal of cases to Federal court 

from State courts. As lawyers know, removal is one of the most 

contentious aspects of civil litigation. 

2

Plaintiffs’ lawyers try to keep cases in State court; defendants 

counter with their own efforts to remove to Federal court. Our job 

is not to favor plaintiffs or defendants, but to make sure that the 

jurisdictional arrangements are both fair and efficient for all litigants. 

Some may view removal as an intrusion on State prerogatives. 

But removal has been part of the Federal Judicial Code since the 

first Judiciary Act. And under the Constitution, Congress has 

broad authority to define the circumstances under which a defendant should be able to claim the protection of a neutral Federal 

forum. 

The proposals we’re considering here today run the gamut from 

the very technical to those that aim at litigation tactics that have 

been described as ‘‘gamesmanship,’’ such as using the rigid 1-year 

rule for removal to run the clock on defendants and deprive them 

of their opportunity to remove their case to Federal court. 

Now, we look forward to discussing these and other issues with 

our panelists here today. And I’ll now recognize the gentleman 

from California, Mr. Berman, for his opening statement. 

Mr. BERMAN. Well, thank you very much, Mr. Chairman. The 

topic here today is diversity jurisdiction and civil procedure. As you 

pointed out, it’s opaque, and any illumination will be helpful; bring 

us back to the courses many, many years ago that we used to have. 

The only modification I make of your general principle is plaintiffs who sue in State courts try to keep their cases in State courts. 

The ones who sue in Federal court stay. 

But the hearing today concerns the complexities of diversity jurisdiction, the concept of federalism, which holds an assurance of 

an impartial forum for parties in lawsuits filed in courts in States 

other than their own, and facilitates a continued open dialogue between the Federal and State systems. 

Some of the amendments in the Committee print appear to be 

technical in nature; others address some of the core policy considerations behind Federal diversity jurisdiction. Because application of 

diversity jurisdiction is complicated and greatly affects an already 

over-burdened Federal court, it is important that we consider the 

impact of these provisions. 

Reducing redundant or unnecessary litigation is a laudable goal. 

We should clarify when Federal diversity jurisdiction exists, and 

help those who appear before courts understand where the bright 

lines of diversity jurisdiction exist. 

Furthermore, it’s my understanding that specific provisions of 

the proposed legislation will achieve the original intention of Congress when passing, I guess, the most recent diversity jurisdiction 

legislation. 

These witnesses who are here today will help outline how this 

legislation will do that, and explain the advantages of passing the 

proposed text in the Federal Courts Jurisdiction Clarification Act. 

Thank you, Mr. Chairman. I yield back. 

Mr. SMITH. Thank you, Mr. Berman. The gentleman from California, Mr. Issa, is recognized for an opening statement. 

3

1The prepared statement of Mr. Issa was not available for insertion in this hearing at the 

time it was submitted for publishing. 

Mr. ISSA. Thank you, Mr. Chairman. I would ask that my entire 

opening statement be placed in the record.1

Mr. SMITH. Without objection, it will be. 

Mr. ISSA. And very briefly, Mr. Chairman, I want to thank you 

for holding this hearing. And I know you said it’s arcane, but as 

somebody who has seen the gamesmanship lawyers play, either to 

get something in or keep something from going into Federal jurisdiction, depending upon their goals, I’m keenly interested in hearing how current legislation, and potentially even future legislation, 

can be catered to create what the Chairman—rightfully so—has 

said should be a neutral situation; one in which it is not we in Congress trying to determine that something must go for an advantage 

to a plaintiff or a defendant. 

And your view, particularly, Your Honor, on what we’ve done so 

far and what gamesmanship you see being played to get in—to manipulate, to get into the Federal court for an advantage of one side 

over the other, would be very insightful. Because ultimately, we do 

not—well, I believe that this Committee in its entirety does not 

want to be encouraging the Federal Government to take on burdens that are inappropriate or unnecessary; that the courts belong 

to the States, with rare exceptions, and we should try to keep those 

as rare as absolutely necessary. 

So I look forward to the testimony. As Chairman, I think you hit 

it right on, by saying that this is all about us not favoring one side 

or the other, but providing an appropriate path. And with that, I 

yield back. 

Mr. SMITH. Thank you, Mr. Issa. Before I introduce the witnesses, I’d like to invite you to stand and be sworn in. 

[Witnesses sworn.] 

Mr. SMITH. Our first witness is Judge Janet C. Hall, of the 

United States District Court for the District of Connecticut. She is 

here today on behalf of the Judicial Conference. Judge Hall was appointed to the bench in 1997. She graduated from Mount Holyoke 

College, magna cum laude, and also received her JD from the New 

York University School of Law, where she was a Ruth Tilden scholar. 

Our next witness is Professor Arthur Hellman. Professor 

Hellman is a professor of law at the University of Pittsburgh Law 

School. His areas of specialization are civil procedure, Federal 

courts, constitutional law. Professor Hellman received a BA from 

Harvard, and a JD from Yale Law School. 

Finally, our last witness is Mr. Richard Samp, Chief Counsel 

from the Washington Legal Foundation, where the majority of his 

practice focuses on Federal court litigation. Mr. Samp is a graduate 

of Harvard College and the University of Michigan Law School. 

Welcome to you all. Without objection, your entire statements 

will be made a part of the record. And we ask, of course, that you 

all limit your comments to 5 minutes. 

I suspect that Mr. Berman and I will have sort of extended questions, and we’ll be able to elicit further responses when we get to 

that point. 

4

Thank you all again for being here. And Judge Hall, we’ll begin 

with you. 

TESTIMONY OF THE HONORABLE JANET C. HALL, JUDGE, 

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF 

CONNECTICUT, ON BEHALF OF THE JUDICIAL CONFERENCE 

COMMITTEE ON FEDERAL-STATE JURISDICTION 

Judge HALL. Good afternoon, and thank you, Mr. Chairman, 

Congressman Berman, and Congressman Issa. My name is Janet 

Hall, and I’m a United States District Court Judge and a member 

of the Judicial Conference Committee on Federal-State Jurisdiction. 

I’m pleased to testify here today on behalf of the Judicial Conference—which is, of course, the policy-making body for the Federal 

Judiciary—regarding the Federal Courts Jurisdiction Clarification 

Act of 2005. 

This bill was initiated by the Judicial Conference, and we greatly 

appreciate your holding this hearing on it. We believe that the proposals contained there in the act will clarify jurisdictional issues 

that have arisen in Federal court litigation, and thus help the parties avoid expense and delay. 

The Federal Courts Jurisdiction Clarification Act is intended to 

do exactly what its title says. It primarily clarifies Federal statutes 

as to when claims may be asserted in Federal court. It is not intended to change policies about who can proceed in Federal court; 

but rather, to resolve some interpretational issues with which 

courts have struggled. 

Uncertainty is costly. If plaintiffs and defendants do not know 

where they can pursue a claim or have it considered, then judicial 

proceedings are wasted. Parties end up in needless litigation over 

procedural issues, which only delays the ultimate resolution of the 

case. We would like to bring more certainty to the litigation process, and we believe that we have submitted proposals to you which 

can do just that. 

Provisions in the bill are primarily focused on diversity of citizenship jurisdiction, which limits jurisdiction to cases in which no 

plaintiff is from the same State as any defendant, and the amount 

in controversy exceeds $75,000. I could just briefly highlight a few 

of the provisions. 

Section 2 resolves the problem created by the addition in 1988 

of a sentence to the diversity jurisdiction statute that was intended 

to prevent aliens residing in a State from suing a U.S. citizen residing in the same State. This proviso, which was written in a 

‘‘deems’’ fashion, does deem an alien admitted for permanent resident [sic] to be a citizen of the State in which the alien is domiciled. 

However, some litigants have sought to give it a more expansive 

effect. And courts have disagreed on how to interpret it. Section 2 

will resolve this ambiguity by restoring what we believe Congress 

intended when it initially enacted this language, so as to preclude 

diversity jurisdiction when a lawsuit is between a U.S. citizen and 

a permanent resident alien who are both domiciled in the same 

State. 

5

Section 3 updates and clarifies the definition of citizenship for 

corporations as well as insurance companies that are involved in 

direct action litigation, where those entities have foreign business 

connections. In 1958, Congress enacted a statute that provided for 

purposes of diversity of citizenship jurisdiction that a corporation 

is deemed to have two citizenships, in effect: of the State by which 

it’s incorporated, and of the State where its principle place of business is. 

Because of the use in the statute of a capital ‘‘S’’ in ‘‘States,’’ conflicting interpretations have arisen in the courts over whether foreign states are included in the definition. Section 3 seeks to resolve 

this ambiguity by adding specific reference to foreign states, so that 

a company who is incorporated abroad or who has its principal 

place of business abroad would be deemed to be a citizen of those 

two places. 

Section 4 solves several problems that have arisen with removal 

and remand procedures. It first addresses the problem created 

when State law claims that otherwise are not removable are joined 

with a Federal case or claim and the removal is sought. Courts 

have reached different conclusions as to whether the statute permits them to hear these cases at all. 

This proposal solves that problem by allowing removal, requiring 

the district court to keep the Federal claim and to hear it, but to 

remand the otherwise unrelated non-removable State claim back to 

State court. 

Section 4 also addresses timing of removal in multiple-defendant 

situations. The proposed changes essentially solve the problem created when defendants are served over an extended period of time, 

and the latest-served defendant seeks to remove. In these situations, because the statute currently is written only in the singular, 

‘‘the defendant may remove,’’ courts have disagreed on the right of 

the later-served defendant to remove. 

Section 5 of the Act would index the monetary threshold for diversity jurisdiction. In ’97, Congress increased the amount—the 

threshold—from in excess of 50,000 to the current amount of 

75,000. But since the real value of any amount specified would decrease over time and inflationary periods, this proposal would seek 

to index the amount using a consumer price index; allowing it to 

change, in effect, with the value of the dollar, and thereby keeping 

the jurisdictional limit as a meaningful threshold; without requiring review constantly by Congress. 

Lastly, I want to describe a new provision that the Congress recently endorsed and transmitted to the House Monday, to facilitate 

the use of declarations to specify the amount of damages being 

sought. This proposal makes it easier for litigants to indicate that 

they don’t seek, and will not accept, more than the $75,000 in damage; and in turn, will enable a defendant to determine if removal 

would be a fruitless step in the courts if it is removed to determine 

that diversity jurisdiction doesn’t exist. 

Mr. Chairman, in closing, I want to thank you again for holding 

this hearing, inviting the Judicial Conference to testify on these 

proposals that we believe will help litigants and the courts. 

Again, uncertainty is costly and leads to delay. And the judiciary 

believes it’s identified several statutory changes that will add cerVerDate 0ct 09 2002 11:37 Feb 07, 2006 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\111505\24607.000 HJUD1 PsN: 24607
6

tainty to the process and improve the administration of justice. 

Thank you, sir. 

[The prepared statement of Judge Hall follows:]

PREPARED STATEMENT OF THE HONORABLE JANET C. HALL

Mr. Chairman and Members of the Subcommittee, my name is Janet Hall. I am 

a United States District Judge in the District of Connecticut and a member of the 

Judicial Conference Committee on Federal-State Jurisdiction. I have been asked to 

testify today on behalf of the Judicial Conference of the United States regarding the 

‘‘Federal Courts Jurisdiction Clarification Act of 2005.’’ We greatly appreciate your 

holding a hearing on legislation that the Judicial Conference has proposed. Thank 

you for the opportunity afforded the federal judiciary to testify today, and I would 

ask that my statement be included in the record. 

For several years, the Judicial Conference of the United States has been seeking 

to identify problems that litigants and judges have repeatedly encountered in interpreting certain jurisdictional statutes in title 28, United States Code. This effort, 

which has been carried out by the Conference‘s Committee on Federal-State Jurisdiction, has been referred to as the ‘‘jurisdictional improvements project.’’ The 

project provides a means by which the federal courts can identify recurring problems and suggest clarifications to particular statutes. The goal is simply to help 

both litigants and judges by eliminating needless litigation and wasteful judicial 

proceedings. 

Through the jurisdictional improvements project, the Judicial Conference has approved several proposals to correct identified problems. Each one has been the result 

of much study and consultation with legal experts. This collection of proposals has 

now been folded into one proposed legislative package called the ‘‘Federal Courts Jurisdiction Clarification Act of 2005.’’

Much of this proposal focuses on diversity of citizenship jurisdiction. The Constitution provides the basis for federal court jurisdiction over disputes between citizens of different states (diversity jurisdiction) and over disputes involving citizens 

of the United States and citizens or subjects of foreign states (alienage jurisdiction). 

As currently codified, diversity jurisdiction exists whenever the matter in controversy exceeds $75,000 and is between citizens of different states. See 28 U.S.C. 

§ 1332(a)(1). Under the long-standing complete diversity requirement, no plaintiff 

can be from the same state as any defendant for diversity jurisdiction to be available. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). The traditional reason given for providing for diversity jurisdiction is ‘‘a fear that state courts would 

be prejudiced against those litigants from out of state.’’ C. Wright & M. Kane, The 

Law of Federal Courts 144 (6th ed. 2002). 

RESIDENT ALIEN PROVISO (SEC. 2)

Although the Constitution permits the assertion of federal jurisdiction over disputes involving aliens, established law bars the assertion of jurisdiction over a dispute that involves only aliens. Alienage jurisdiction exceeds the limits of Article III 

unless a citizen of the United States also appears as a party. See Hodgson v. 

Bowerbank, 9 U.S. (5 Cranch) 303 (1809). Cognizant of this long-standing constitutional limitation, section 1332 allows for jurisdiction over aliens in two situations, 

both of which involve U.S. citizens. First, section 1332(a)(2) applies to disputes between citizens of a state and citizens or subjects of a foreign state. Second, section 

1332(a)(3) applies to disputes between citizens of different states and in which citizens or subjects of a foreign state are additional parties. Jurisdiction based on section 1332(a)(2) or (3) is still subject to the minimum amount-in-controversy requirement. 

In general, the federal courts have taken a fairly narrow view of the scope of section 1332(a)(2) jurisdiction, declining on statutory grounds to assert jurisdiction over 

disputes in which aliens appear on both sides of the litigation. See, e.g., Ed & Fred, 

Inc. v. Puritan Marine Ins. Underwriters Corp., 506 F.2d 757 (5th Cir. 1975). Even 

though U.S. citizens may appear on one side of the litigation, the presence of aliens 

as opposing parties (even aliens from different foreign countries) has proven fatal 

to the assertion of jurisdiction. See generally Allendale Mutual Ins. Co. v. Bull Data 

Systems, Inc., 10 F.3d 425, 428 (7th Cir. 1993); 15 Moore’s Federal Practice § 102.77 

(3d ed. 2001). In actions proceeding under section 1332(a)(3), this rule has not been 

applied with the same rigor. More specifically, when a claim between diverse U.S. 

citizens grounds the jurisdiction and aliens appear as additional parties on both 

sides of the litigation, jurisdiction has been upheld. See Transure, Inc. v. Marsh & 

McLennan, Inc., 766 F.2d 1297, 1298–99 (9th Cir. 1985) (upholding jurisdiction 

7

under section 1332(a)(3)); Dresser Industries, Inc. v. Underwriters at Lloyds of London, 106 F.3d 494, 500 (3d Cir. 1997) (same). 

In 1988, Congress added the ‘‘resident alien proviso’’ to section 1332(a) through 

enactment of the Judicial Improvements and Access to Justice Act (Pub. L. No. 100– 702). The proviso states that ‘‘an alien admitted to the United States for permanent 

residence shall be deemed a citizen of the State in which such alien is domiciled.’’ 28 U.S.C. § 1332(a). The purpose of that change was to preclude federal alienage jurisdiction under section 1332(a)(2) in suits between a citizen of a State and an alien 

permanently residing in the same state. See, e.g., China Nuclear Energy Industry 

Corp. v. Anderson, LLP, 11 F. Supp. 2d 1256, 1258 (D. Co. 1998). In such situations, 

the permanent resident alien has appreciable connections to the state, and there 

was perceived to be no need to provide for a federal forum to protect the alien 

against possible bias in state court. 

While the 1988 amendment curtailed alienage jurisdiction as intended, the ‘‘deeming’’ feature created an arguable basis for expansion of alienage jurisdiction in other 

settings—an interpretational problem with which the courts have struggled. See, 

e.g., Arai v. Tachibana, 778 F. Supp. 1535, 1538–40 (D. Haw. 1991), and Saadeh 

v. Farouki, 107 F.3d 52, 57–61 (D.C. Cir. 1997). Under section 1332(a)(1), for example, two resident aliens from different states might each be deemed to be a citizen 

only of his or her respective state of domicile and claim access to federal diversity 

jurisdiction in circumstances that would appear to violate the long-standing rule of 

Hodgson v. Bowerbank (described supra). Under sections 1332(a)(2)–(3), additional 

possibilities emerge for litigants involved in litigation with resident aliens to seek 

to expand their access to federal court beyond what was available before the deeming proviso took effect in 1988. 

For example, in Singh v. Daimler-Benz AG, 9 F.3d 303 (3rd Cir. 1993), the court 

allowed a permanent resident alien in one state to proceed against a U.S. citizen 

in another state and a non-resident alien, even though the configuration of parties 

would have apparently failed to support a finding of jurisdiction under either section 

1332(a)(2) or (a)(3) in the absence of the deeming provision. 

To correct the problem, section 2 of the proposed bill eliminates the resident alien 

proviso and its deeming feature altogether, along with its potential for jurisdictional 

expansion. By eliminating the proviso, resident aliens would no longer be treated 

as U.S. citizens for purposes of jurisdiction, thereby avoiding the possibly anomalous 

results under section 1332(a)(1)–(3). In place of the proviso, section 2 would provide 

specifically that the district courts shall not have diversity of citizenship jurisdiction 

under section 1332(a)(2) of a claim between a citizen of a state and a citizen or subject of a foreign state admitted to the United States for permanent residence and 

domiciled in the same state. This provision expressly restricts the exercise of jurisdiction over disputes between citizens of a state and citizens or subjects of a foreign 

state admitted to the United States for permanent residence and domiciled in the 

same state. 

Section 2 would thus achieve the goal of modestly restricting jurisdiction, which 

we believe Congress sought to accomplish when it first enacted the resident alien 

proviso, and it would avoid the threat of jurisdictional expansion now posed by the 

proviso. By attaching this modest restriction only to section 1332(a)(2), the provision 

would permit resident aliens to appear as additional parties to disputes under section 1332(a)(3), without their status as deemed U.S. citizens of their state of residence being treated as a basis for either establishing or defeating the diversity of 

U.S. citizenship that grounds jurisdiction under this provision. 

CITIZENSHIP OF CORPORATIONS AND INSURANCE COMPANIES

WITH FOREIGN CONTACTS (SEC. 3)

Section 3 amends section 1332(c)(1) of title 28, United States Code, to specify the 

treatment of citizenship in diversity actions involving corporations, as well as insurance companies involved in direct action litigation. The purpose is to clarify how foreign business contacts should affect the determination of whether diversity of citizenship is present for these entities when a case is filed in or removed to federal 

court. 

The changes made in this section also update the definition of corporate citizenship to resemble that used by Congress in the Multiparty, Multiforum Trial Jurisdiction Act of 2002 (Pub. L. No. 107–273; see 28 U.S.C. § 1369(c)(2).) 

Actions involving corporations 

When one of the parties to a civil action is a corporation, section 1332(c) deems 

that corporation to be a citizen of any ‘‘State’’ in which it has been incorporated ‘‘and 

of the State where it has its principal place of business.’’ The quoted phrase was 

added to section 1332(c)(1) in 1958 to give essentially multiple citizenship to corVerDate 0ct 09 2002 11:37 Feb 07, 2006 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\111505\24607.000 HJUD1 PsN: 24607
8

porations. The intent was to preclude diversity jurisdiction over a dispute between 

an in-state citizen and a corporation incorporated or doing business primarily in the 

same state. In such situations, the parties face no threat of bias if the action were 

to be resolved in state court. 

For example, today under section 1332(c), if a corporation incorporated in Delaware has its principal place of business in Florida, it is deemed to be a citizen of 

both Delaware and Florida. If a Florida citizen or a Delaware citizen sues that corporation, diversity jurisdiction would be defeated because both the plaintiff and defendant would be treated as citizens from the same State (Florida or Delaware). 

When an action involves a U.S. corporation with foreign contacts or foreign corporations that operate in the United States, federal courts have struggled in applying this statute. See C. Wright & M. Kane, supra, at 170. This difficulty occurs primarily because section 1332(c)(1) refers to a ‘‘State’’ and makes no reference to a 

corporation with either of these two types of foreign contacts (country of incorporation or principal place of doing business). Subsection (e) of section 1332 defines 

‘‘States’’ as including the Territories, the District of Columbia, and the Commonwealth of Puerto Rico. Some courts have noted that because the word ‘‘States’’ in 

the subsection begins with a capital ‘‘S,’’ it applies only to the fifty states and the 

other places specified in the definition and therefore does not apply to citizens of 

foreign states (or countries). See, e.g., Torres v. Southern Peru Copper Corp., 113 F. 

3d 540, 543 (5th Cir. 1997); Barrantes Calbaceta v. Standard Fruit Co., 883 F.2d 

1553, 1559 (5th Cir. 1989). Other courts applying section 1332(c)(1) have concluded 

that the word ‘‘States’’ should mean foreign states, as well as States of the Union. 

See, e.g., Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 

(9th Cir. 1994). 

Following are examples of how the courts have reached different conclusions in 

trying to apply the provision in the absence of specific references to ‘‘foreign states.’’ The Fifth Circuit has treated a U.S. corporation with its principal place of business 

abroad as a citizen only of the state where it is incorporated. See, e.g., Barrantes, 

supra (plaintiffs from Costa Rico (aliens) brought suit against Standard Fruit Company, a Delaware corporation with its principal place of business in Latin America); 

Torres, supra (alien plaintiffs brought suit against Delaware corporation with principal place of business in Peru). Such treatment of the corporations as citizens of 

Delaware while ignoring their foreign contacts resulted in decisions upholding the 

availability of federal alienage jurisdiction and allowing the actions to proceed in 

federal court. 

The Ninth Circuit, in contrast, has rejected any distinction between foreign and 

domestic corporations; each would be deemed a citizen of both its place of incorporation and its principal place of business. See Nike, Inc., supra, at 990. Although technically dicta as applied to U.S. corporations with business centers abroad, the Ninth 

Circuit’s approach has been applied to U.S. corporations in a number of district 

court decisions. See note, David A. Greher, The Application of 28 U.S.C. § 1332(c)(1) 

to Alien Corporations: A Dual Citizenship Analysis, 36 Va. J. Int’l L. 233, 251 n.92 

(1995) (collecting some cases). Such an approach would result in a denial of alienage 

jurisdiction over suits brought by aliens against U.S. corporations that have business centers abroad. 

The provision in section 3(a) would resolve this division of authority by implementing the dual-citizenship intent of this provision with regard to corporations 

with foreign activities. It would insert the words ‘‘foreign state’’ in two places in section 1332(c)(1) to make it clear that all corporations, foreign and domestic, would 

be regarded as citizens of both their place of incorporation and their principal place 

of business. The provision would result in a denial of diversity jurisdiction in two 

situations: (1) where a foreign corporation with its principal place of business in a 

state sues or is sued by a citizen of that same state, and (2) where a citizen of a 

foreign country (alien) sues a U.S. corporation with its principal place of business 

abroad. Such a change would bring a degree of clarity to an area of jurisdictional 

law now characterized by the conflicting approaches of the lower federal courts. By 

more clearly defining citizenship of corporations with foreign ties, the legislation 

would deny access to a federal court in a small range of cases for which a federal 

forum might be available today. 

For example, a company might have its principal place of business in a Brazil and 

nonetheless choose to incorporate in Texas. It becomes embroiled in a contract dispute with a citizen of Mexico residing in California. The incorporation in Texas 

would make the corporation a citizen of Texas. According to some lower courts, 

present law would enable the corporation to claim access to a federal court through 

diversity jurisdiction in a dispute with the Mexican living in California. Section 3(a) 

of this proposed bill would alter the jurisdictional analysis by deeming the corporation to be a citizen of both Texas (where incorporated) and Brazil (where it has its 

9

principal place of business). In this hypothetical, the case becomes one of an alien 

(the Brazilian company) suing an alien (the Mexican citizen). Federal jurisdiction 

presently precludes such disputes because suits between two aliens do not satisfy 

the jurisdictional requirements of section 1332(a). (It is noted that when such disputes arise from allegedly tortious conduct in another country, the federal courts 

will often assert jurisdiction only to dismiss the case under the doctrine of forum 

non conveniens.) 

The new provision would have no impact on the freedom of corporations to incorporate where they see fit, to do business in accordance with their own business plan, 

or to seek to utilize the state courts as they might today. It would simply treat them 

as citizens of their place of incorporation and principal place of business on a basis 

consistent with the treatment of U.S. corporations. 

Section 3(a) also revises the wording of section 1332(c)(1) so that a corporation 

shall be deemed a citizen of ‘‘every State and foreign state by which it has been incorporated,’’ instead of ‘‘any State. . . ..’’ (Emphasis added.) Although corporations 

can incorporate in more than one state, the practice is rare. In applying the present 

wording of the subsection, most courts have treated such multi-state corporations 

as citizens of every state by which they have been incorporated. Section 3 would codify the leading view as to congressional intent and treat corporations as citizens of 

every state of incorporation for diversity purposes. See C. Wright & M. Kane, supra,

at 167–68. 

Direct actions against insurance companies 

Subsection (b) of section 3 also amends section 1332(c)(1) to extend parallel language to insurance companies in direct action litigation. That subsection presently 

includes ‘‘deeming’’ language for determining the citizenship of an insurance company involved in direct action litigation, which was added by Congress in 1964 (Pub. 

L. 88–439, 78 Stat. 445). More specifically, the provision now reads as follows:

in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not 

joined as a party-defendant, such insurer shall be deemed a citizen of the State 

of which the insured is a citizen, as well as of any State by which the insurer 

has been incorporated and of the State where it has its principal place of business.

28 U.S.C. § 1331(c)(1). 

In a direct action case, the plaintiff sues the liability insurance company directly 

without naming as a defendant the insured party whose negligence or other wrongdoing gave rise to the claim. Section 1332(c) presently seeks to prevent such direct 

actions from qualifying for diversity jurisdiction by deeming the insurance company 

to be a citizen of the state of which the insured is a citizen, as well as of every state 

by which the insurer has been incorporated and of the state where it has its principal place of business. 

Congress enacted the provision primarily in response to a surge in diversity case 

filings against insurance companies in Louisiana federal court. Sen. Rep. No. 1308, 

88th Cong., 2d Sess. (1964), reprinted in 1964 U.S. Code Cong. & Admin. News, p. 

2778. That increase followed adoption of a state statute there in 1959 allowing direct actions against insurance companies. ‘‘Because of the broad review of jury verdicts that the Louisiana practice permits, lawyers for plaintiffs in that state greatly 

preferred to be in federal court rather than in state court. They were able to convert 

what otherwise would have been a routine automobile-accident case between two 

Louisiana citizens into a diversity action by taking advantage of the state statute 

permitting suit directly against the insurer without joinder of the insured.’’ C. 

Wright & M. Kane, supra, at 171. Wisconsin also had enacted a state statute permitting direct actions. Id.; see also Inman v. MFA Mutual Ins. Co., 264 F. Supp. 

727, 728 (E.D. Ark. 1967); Carvin v. Standard Accident Ins. Co., 253 F. Supp. 232, 

234 (E.D. Tenn. 1966). The statutory provision added by Congress in 1964 was successful at preventing such direct actions from proceeding in federal court under diversity jurisdiction. Northbrook National Ins. Co., v. Brewer, 493 U.S. 6 (1989) (in 

applying the provision, the Supreme Court set forth the legislative history). 

Today, direct actions continue to exist in some states through specific statutes 

(e.g., Louisiana, Wisconsin, and Puerto Rico) or through examination of the nature 

of certain causes of action authorized in that state (e.g., Texas, Florida, and North 

Carolina). See, e.g., Hernandez v. Travelers Ins. 489 F.2d 721 (5th Cir. 1974) (case 

from Texas), Shingleton v. Bussey, 223 So.2d 713 (Sup. Ct. Fla. 1969), and Corn v. 

Precision Contracting, Inc. 226 F. Supp. 2d 780 (W.D.N.C. 2002). Yet, for diversity 

purposes, the citizenship of the insurer in such actions should be no different than 

that provided for corporations in the rare instances when the insurance company 

10

has foreign contacts. As stated in the 1964 Senate Judiciary Committee Report accompanying passage of the earlier provision, the purpose was to eliminate diversity 

jurisdiction in such direct actions brought against a non-resident insurance carrier. 

Sen. Rep., supra. And at least one court has held that the 1964 provision should 

be applied to insurance companies incorporated abroad so as to carry out the intent 

of the statute and deny diversity jurisdiction. See Newsom v. Zurich Ins. Co., 397 

F.2d 280, 282 (5th Cir. 1968). 

Subsection (b) of section 3, therefore, amends section 1332(c)(1) to provide the 

same definition of citizenship for an insurance company engaged in direct action litigation as that proposed in subsection (a) for corporations with foreign contacts. It 

inserts references to ‘‘foreign states’’ so as to address situations where insurance 

companies are incorporated abroad or have their principal place of business abroad. 

As a practical matter, this provision would only affect the limited number of states 

where direct actions are permitted under state law or such actions are determined 

to exist. 

The American Law Institute also endorsed in 1969 the same legislative solution 

to this problem as that now before this Congress so as to allow courts and litigants 

to recognize foreign contacts in determining diversity of citizenship for corporations, 

as well as insurance companies involved in direct action litigation. 

REMOVAL AND REMAND PROCEDURES (SEC. 4)

Section 4 amends title 28, United States Code, to accomplish the following: (1) require district courts to retain a federal claim and remand joined state claims or 

causes of action that would otherwise be non-removable; (2) separate the removal 

provisions in section 1446 into two statutes, with one governing civil proceedings 

and the other criminal; (3) replace the specific reference to Rule 11 of the Federal 

Rules of Civil Procedure with a generic reference to the rules governing pleadings 

and motions in civil actions in federal court; (4) address multiple-defendant situations in three ways—by codifying the requirement that all defendants join in or consent to a notice of removal, by giving each defendant 30 days in which to have the 

opportunity to remove or consent to removal, and by permitting earlier-served defendants, who did not remove within their own 30-day period, to consent to a timely 

notice of removal by a later-served defendant; 

(5) authorize district courts to permit removal of diversity proceedings after the 

present one-year deadline when equitable considerations justify it; and (6) commence the 30-day period for removal when it becomes known, through responses to 

discovery or information that enters the record of the state proceeding, that the 

amount in controversy exceeds the statutory minimum figure, as well as create an 

exception to the one-year removal deadline upon a showing of plaintiff’s deliberate 

non-disclosure of the amount in controversy. This statement describes each provision more fully below. 

Joinder of federal law claims and state law claims 

Subsection (a) of section 4 amends section 1441(c) to clarify the right of access 

to federal court upon removal for the adjudication of separate federal law claims 

that are joined with (unrelated) state law claims. Section 1441(c) presently authorizes a defendant to remove the entire case whenever a ‘‘separate and independent’’

federal question claim is joined with one or more non-removable claims. That subsection also now states that, following removal, the district court may either retain 

the whole case, or remand all matters in which state law predominates. 

Some federal district courts have declared the provision unconstitutional or raised 

constitutional concerns because, on its face, section 1441(c) purports to give courts 

authority to decide state law claims for which the federal courts do not have original 

jurisdiction. See, e.g., Salei v. Boardwalk Regency Corp., 913 F. Supp. 993, 1007 

(E.D. Mich. 1996). Other courts have chosen simply to remand the entire case to 

state court, thereby defeating access to federal court. See, e.g., Moralez v. Meat Cutters Local 539, 778 F. Supp. 368, 371 (E.D. Mich. 1991). Many commentators have 

recognized the problem, and a leading treatise on the subject declares that ‘‘the 

present statute is useless and ought to have been repealed.’’ C. Wright & M. Kane, 

supra, at 235. 

Section 4(a) of this bill is intended to better serve the purpose for which the statute was originally designed, namely to provide a federal forum for the resolution of 

federal claims that fall within the original jurisdiction of the federal courts. The 

change to section 1441(c) would permit the removal of the case but require that a 

district court remand unrelated state law matters. This sever-and-remand approach 

is intended to cure any constitutional problems while preserving the defendant’s 

right to removal in claims arising under federal law. 

11

Separating the removal statute into civil and criminal statutes 

Sections 4(b)(1), (b)(2)(A), and (d) amend section 1446 to change the section title 

and strike certain references to ‘‘criminal prosecutions’’ so as to separate the removal provisions relating to civil and criminal proceedings into two statutes. Section 

1446 presently contains several subsections, some of which are applicable to removal of both civil and criminal cases, some applicable only to civil cases, and some 

pertaining only to criminal cases. Separating them into two statutes would assist 

litigants in knowing which provisions were applicable to their type of case. 

To complete the implementation of this change, section 4(e) codifies the new statute for criminal proceedings as section 1446a. The statute for civil proceedings 

would continue to be section 1446. To make conforming changes for this provision, 

current subsections (c)(1)–(5) and (e) of section 1446 would be deleted and re-codified in the new section 1446a. Also, current sections 1446(d) and (f) would be redesignated as subsections (c) and (d), respectively. 

Rule 11 reference 

Section 4(b)(2)(B) amends section 1446(a) to replace the specific reference to Rule 

11 of the Federal Rules of Civil Procedure with a generic reference to the rules governing pleadings and motions in civil actions in federal court. The statute now requires that the notice of removal be signed pursuant to Rule 11 of the Federal Rules 

of Civil Procedure. Rule 11 applies to ‘‘[e]very pleading, written motion, and other 

paper’’ filed in a civil action, but does not specifically refer to a notice of removal. 

The intent is to make clear that the requirements of Rule 11 (or other rules governing pleadings) apply to a ‘‘notice of removal’’ while avoiding any specific reference 

to that rule. This will prevent any confusion should the Federal Rules of Civil Procedure ever be revised or renumbered or additional rules applying to pleadings be 

added. 

Removal in multiple-defendant cases 

Section 4(b)(3) begins by amending section 1446(b) by re-formatting the subsection. It creates a new subsection (2) within section 1446(b) that codifies the 

present rule of unanimity regarding consent by all defendants to removal. See C. 

Wright & M. Kane, supra, at 244. It then addresses the main objective of this new 

subsection, namely to eliminate confusion surrounding the timing of removal when 

all of the defendants are not served at the outset of the case. 

Section 1446(b) currently specifies a 30-day period for ‘‘the defendant’’ to remove 

the action, but it does not address situations with multiple defendants, particularly 

where they are served over an extended period of time during and after the expiration of the first-served defendant’s 30-day period for removal. In those situations, 

federal courts have differed in determining the date on which the 30-day period begins to run. Compare Marano Enterprises v. Z-Teca Restaurants, LP, 254 F.3d 753, 

756–57 (8th Cir. 2001) (holding that each defendant has 30 days to effect removal, 

regardless of when or if other defendants had sought to remove) and Brierly v. 

Alusuisse Flexible Packaging, Inc., 184 F.3d 527, 532–33 (6th Cir. 1999) (holding 

that time for removal in case involving multiple defendants runs from the date of 

service on the last-served defendant, and permitting defendant who failed to remove 

within own 30-day period to join the timely removal petition of a later-served defendant) with Getty Oil Corp., v. Ins. Co. of North America, 841 F.2d 1254, 1262–

63 (5th Cir. 1988) (holding that the first-served defendant and all then-served defendants must join in the notice of removal within 30 days after service upon the 

first-served defendant); cf. McKinney v. Board of Trustees of Mayland Community 

College, 955 F.2d 924, 925–28 (4th Cir. 1992) (holding that each defendant may 

have 30 days to file notice of removal, and rejecting the Getty Oil argument that 

served defendants must join a petition for removal within the time specified for the 

first-served defendant). 

Section 4(b)(3) of this proposed bill addresses the present interpretational problem 

by affording a later-served defendant 30 days from his or her own date of service 

(or receipt of initial pleading) to seek removal. The change, which essentially embraces the Fourth Circuit’s view, would also allow earlier-served defendants to consent to removal during the 30-day removal period of a later-served defendant. Fairness to later-served defendants, whether they are brought in by the initial complaint or an amended complaint, necessitates that they be given their own opportunity to remove, even if the earlier-served defendants chose not to remove initially. 

Such an approach does not allow an indefinite period for removal; plaintiffs could 

still choose to serve all defendants at the outset of the case, thereby requiring all 

defendants to act within the initial 30-day period. 

In addition, the provision allows unserved defendants to join in a removal initiated by a served defendant. This new subsection clarifies the rule of timeliness and 

12

provides for equal treatment of all defendants in their ability to obtain federal jurisdiction over the case against them without undermining the federal interest in ensuring that defendants act with reasonable promptness in invoking federal jurisdiction. 

Authorizing removal after one year 

Section 4(b)(4) amends section 1446(b) to authorize district courts to permit removal after the one-year period specified in current law upon a finding that equitable considerations warrant removal. In 1988, Congress amended this statute to 

prohibit the removal of diversity cases more than one year after their commencement. This change encouraged prompt determination of issues of removal in diversity proceedings, and it sought to avoid the disruption of state court proceedings 

that might occur when changes in the case made it subject to removal. The change, 

however, led some plaintiffs to adopt removal-defeating strategies designed to keep 

the case in state court until after the one-year deadline passed. In those situations, 

some courts have viewed the one-year time limit as ‘‘jurisdictional’’ and therefore 

an absolute limit on the district court’s jurisdiction. Other courts have viewed the 

period as ‘‘procedural’’ and therefore subject to equitable tolling. See, e.g., Tedford 

v. Warner-Lambert Co., 327 F.3d 423, 426 (5th Cir. 2003). 

To resolve the conflict, section 4(b)(4) grants district court judges discretion to 

allow removal upon a finding that equitable considerations warrant it. In determining the equities, the district court will presumably consider such factors as 

whether the plaintiff had engaged in manipulative behavior, whether the defendant 

had acted diligently in seeking to remove the action, and whether the case had progressed in state court to a point where removal would be disruptive. 

Amount in controversy and removal timing 

Section 4(b)(5) amends section 1446(b) by inserting a new subsection (4) to address issues relating to uncertainty of the amount in controversy when removal is 

sought and state practice either does not require or permit the plaintiff to assert 

a sum claimed or allows the plaintiff to recover more than an amount asserted. 

While current practice allows defendants to claim that the jurisdictional amount is 

satisfied and remove, several issues complicate this practice. 

First, the circuits have adopted differing standards governing the burden of showing that the amount in controversy is satisfied. The ‘‘sum claimed’’ and ‘‘legal certainty’’ standards that govern the amount-in-controversy requirement when a plaintiff originally files in federal court have not translated well to removal, where the 

plaintiff often may not be permitted to assert a sum claimed or, if asserted, may 

not be bound by it. Second, many defendants faced with uncertainty regarding the 

amount in controversy feel compelled to remove immediately—rather than waiting 

until future developments provide needed clarification—for fear that waiting and removing later will be deemed untimely. In these cases, federal judges often have difficulty ascertaining the true amount in controversy, particularly when removal is 

sought before discovery occurs. As a result, judicial resources may be wasted and 

the proceedings delayed when little or no objective information accompanies the notice to remove. 

Section 4(b)(5) responds by amending section 1446(b) to allow a defendant to assert an amount in controversy different from that in the initial pleading if the complaint seeks non-monetary relief or a money judgment but the state practice either 

does not permit demand for a specific sum or permits recovery of damages in excess 

of the amount demanded. The removal will succeed if the district court finds by a 

preponderance of the evidence that the amount in controversy exceeds the amount 

specified in 28 U.S.C. § 1332(a), presently $75,000. If the defendant lacks information with which to remove within the 30 days after the commencement of the action, 

the defendant may take discovery in the state court with a view toward ascertaining 

the amount in controversy. If a statement appears in response to discovery or information appears in the record of the state proceeding indicating that the amount in 

controversy exceeds the threshold amount, then the new subsection deems it to be 

an ‘‘other paper’’ within the meaning of section 1446(b)(3), thereby triggering a 30-

day period in which to remove the action. The district court must still find by the 

preponderance of the evidence that the jurisdictional threshold has been met. However, if such an ‘‘other paper’’ appears in response to discovery or as part of the 

record and trial is underway or is to begin within 30 days, then the defendant must 

show, and the district court must find, that the plaintiff deliberately sought to conceal the true amount in controversy. 

In addition, if the removal notice has been filed more than one year after commencement of the action, such a finding is deemed to satisfy the equitable considerations in section 1446(b)(3) so as to permit removal. 

13

INDEXING THE AMOUNT IN CONTROVERSY (SEC. 5)

Section 5 amends section 1332 to enable the minimum amount in controversy for 

diversity of citizenship jurisdiction, which is presently $75,000, to be adjusted periodically in keeping with the rate of inflation. Such an automatic adjustment would 

avoid the need to periodically revisit the underlying amount specified in the statute 

and then to enact large increases. This change would also preserve the monetary 

amount as a meaningful threshold for diversity jurisdiction. 

Section 5(a) amends section 1332 to indicate that the present minimum amount 

in controversy, $75,000, is subject to adjustment as provided under a new subsection 

(f) of section 1332. Section 5(b) adds subsection (f), which would set forth the formula for adjusting the amount in controversy. 

The formula specifies that effective on January 1 of each year immediately following a year evenly divisible by 5, the jurisdictional amount shall be adjusted according to a formula tied to the Consumer Price Index for All Urban Consumers 

(CPI-U). The CPI-U, which measures the average change in the prices paid by 

urban consumers for a representative basket of goods and services, is the most widely used gauge of price changes as a means of adjusting dollar values. Under this 

section’s formula, the Director of the Administrative Office of the U.S. Courts would 

be required, before the end of each year that is evenly divisible by five, to compute 

the percentage increase in the CPI-U for September of such year in relation to the 

price index for September of the fifth year preceding such year. The percentage increase would be rounded up or down to the nearest $5,000 and then added to the 

amount in controversy then in effect. The new figure, as well as the percentage 

change and the resulting dollar amount, would be submitted for publication in the 

Federal Register by November 15 of the year in which it is computed. (It is anticipated that any new minimum amounts in controversy would be published within 

the notes following section 1332, after their publication in the Federal Register.) 

If this formula had been applicable beginning in 2000, the formula would have 

operated as follows. The change in the CPI-U for September 2000 as compared to 

1995 provided a cumulative CPI-U increase of 13%. Applying that increase to the 

amount in controversy (13% x $75,000) would yield $9,750, which figure, rounded 

to the nearest $5,000, would become $10,000. The resulting figure would be added 

to the amount in controversy ($75,000 + $10,000), resulting in a new amount in controversy of $85,000, effective January 1 of 2001. 

The next review if the formula had been in effect would have been in 2005 (the 

next year evenly divisible by 5). The change in the CPI-U for September 2005 as 

compared to 2000 would provide a cumulative CPI-U increase of 12.33% (assuming 

a 3% CPI increase for 2005). Applying that percentage to the amount in controversy 

($85,000) would yield $10,480, which, rounded to the nearest $5,000, would become 

$10,000. This figure would be added to the amount in controversy ($85,000 + 

$10,000) to make it $95,000, effective January 1 of 2006. (Note that the CPI-U as 

applied to the amount in controversy must yield at least $2,500, which would then 

be rounded to $5,000, so as to have any effect and generate a new amount in controversy.) 

Congress has previously enacted similar indexing provisions. For example, in the 

Bankruptcy Reform Act of 1994, Congress authorized adjustments every three years 

of certain dollar amounts applicable to bankruptcy actions so as to keep pace with 

inflation as reflected by changes in the CPI-U. See 11 U.S.C. § 104(b); 66 Fed. Reg. 

10910–02 (2001). In addition, in the Federal Civil Penalties Inflation Adjustment 

Act of 1990, Congress authorized executive agencies to adjust civil monetary penalties at least once every four years so as to ‘‘allow for regular adjustment for inflation,’’ which adjustment is also based on the Consumer Price Index. Pub. L. No. 

101–134 (codified as a note under 28 U.S.C. § 2461); see, e.g., FTC application at 16 

C.F.R. Pt. 1. 

The minimum amount in controversy for diversity jurisdiction was last increased 

in 1997 when Congress raised the amount from $50,000 to $75,000. (See Federal 

Courts Improvement Act of 1996, Pub. L. No. 104–317.) Prior to that, the minimum 

amount in controversy had been $10,000 until Congress raised it to $50,000 in 1988 

through enactment of the Judicial Improvements and Access to Justice Act (Pub. L. 

No. 100–702). However, the present $75,000 threshold amount has not been adjusted by Congress in eight years, while the true value of that amount has decreased significantly. This indexing provision will allow the dollar figure for the 

amount in controversy to keep pace in the future with inflation and to avoid the 

need for large increases after lengthy intervals. 

14

FACILITATING THE USE OF DECLARATIONS TO ASSERT DAMAGES IN CIVIL CASES

In September 2005, the Judicial Conference adopted another position that would 

clarify federal jurisdiction, and therefore, is being submitted for inclusion within the 

Federal Courts Jurisdiction Clarification Act. This proposal facilitates the use of 

declarations as to the dollar amount of damages being sought in a civil case. It 

amends 28 U.S.C. § 1441(a) to prevent removal to federal court of state cases in 

which plaintiffs declare that they will forgo recovery in excess of the current monetary threshold ($75,000) for diversity of citizenship jurisdiction. It also amends 28 

U.S.C. § 1447 to allow plaintiffs in cases that have been removed to federal court 

to submit a declaration indicating their willingness to forgo damages in excess of 

$75,000 and seek remand. This two-part declaration-remand proposal is intended to 

prevent cases in which the plaintiff agrees to forgo claims in excess of the threshold 

amount in controversy from being removed and, if removed, to allow federal judges 

to remand the action. In so doing, it is intended to facilitate the resolution of cases 

where the plaintiff is seeking an amount less than $75,000, and avoid needless litigation over the proper forum for the case. 

These provisions permit litigants to indicate, where possible, that a state court 

forum is appropriate when the plaintiff is willing to forgo damages in excess of 

$75,000. Some states do not require or allow the plaintiff to include a specific 

amount of damages in the complaint. Other states permit plaintiffs to allege a certain amount for the purpose of ensuring that the case is directed to the appropriate 

state trial court, without indicating the specific amount of damages being sought. 

The reason for such restrictions appears to be to prevent complaints from asserting 

figures that overstate the value of the case and pose a potential threat to the defendant’s reputation. Nevertheless, even if a state prohibits a plaintiff from alleging 

a specific damage amount, many states permit the use of a declaration or statement 

of damages to allow the plaintiff to indicate that he or she will not seek damages 

in excess of the threshold monetary amount that permits the defendant to remove 

the case to federal court. 

This proposal also responds to the limitation placed upon federal courts in determining whether a diversity case may be remanded. In St. Paul Mercury & Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288–89 (1938), the Supreme Court held that 

events occurring after diversity jurisdiction attaches that reduce the amount in controversy below the statutory limit do not divest the federal court of subject-matter 

jurisdiction. Thus, while a plaintiff may file a declaration in federal court (that he 

or she is neither seeking nor will accept more than $75,000 in relief) so as to obtain 

remand of the action, some courts hold that they are precluded by the holding in 

Red Cab from allowing a post-removal declaration to divest the federal court of jurisdiction. As a result, some federal courts proceed to hear the diversity suits to 

completion even though the plaintiffs would have waived recovery above $75,000 in 

order to return to state court. 

This proposal addresses these difficulties, with which judges and litigants have 

struggled, through two, related provisions. The first provision precludes removal of 

a case where the plaintiff has filed a declaration in state court, if permitted by state 

practice, that he or she will not seek or accept a recovery in excess of the $75,000 

federal jurisdictional threshold. More specifically, it provides that if the plaintiff has 

filed a declaration in State court, as part of or in addition to the initial pleading, 

to the effect that the plaintiff will neither seek nor accept an award of damages or 

entry of other relief exceeding the amount specified in section 1332(a) of this title, 

the case shall not be removed based on diversity jurisdiction so long as the plaintiff 

abides by the declaration and it remains binding under state practice. Such a declaration would establish, so long as the declaration would be treated as binding in 

accordance with state law, that the claim does not satisfy the requirements for federal jurisdiction. This provision is not intended to dictate or alter the extent to 

which state procedure allows the use of declarations. Instead, it is intended to clarify the legal implications of declarations when they are submitted in an effort to remain in state court. 

The second provision vests federal district courts with discretion to remand an action to state court on the basis of a declaration filed within 30 days of removal. 

These post-removal declarations would not deprive the district court of subject matter jurisdiction and thus inflexibly require dismissal of the action or remand to state 

court. Instead, the filing of a declaration would trigger a discretionary authority 

under which the district judge could remand the action or retain it ‘‘in the interest 

of justice.’’ Although most district courts would likely order a remand upon the filing 

of an effective declaration, the interest-of-justice standard would enable judges to 

consider equitable factors that bear on the fairness of returning the case to state 

15

court and allow the district court to retain it where special factors would make the 

remand unfair or oppressive. 

Following is an example of how this proposal might be applied. A plaintiff in 

Idaho files a tort claim against a defendant in Kansas. Idaho law provides that a 

plaintiff cannot assert in the complaint the actual amount in damages being sought. 

The defendant later learns during discovery that the case may be worth over 

$100,000 in damages. Two scenarios could then unfold. The plaintiff could file a declaration with the state trial court, if permitted, saying that she does not seek and 

will forgo any damages in excess of $75,000. This declaration would be intended to 

make the case non-removable, so long as the declaration is not circumvented and 

remains binding. If the defendant nevertheless were to file a notice of removal in 

federal court, the federal judge could easily cite to the new sentence in section 

1441(a) in ordering a remand. 

If the defendant instead removes the case to federal court before the plaintiff can 

file the declaration in state court, the plaintiff would have 30 days in which to file 

a declaration in the federal district court indicating that she will not seek or accept 

an award of damages above $75,000. If the plaintiff files such a declaration, the federal district judge could then remand the action. If the plaintiff returns to state 

court and learns of additional injuries and medical bills resulting from the tort and 

indicates a desire to seek damages for them, then the defendant might again remove 

the case. The federal district court could then decide that, in the interest of justice, 

it should keep the case (even though the declaration was filed earlier) because the 

amount in controversy then appears to exceed $75,000. 

CONCLUSION

In closing, I would like to say that, although much of this bill appears to address 

nuances of jurisdictional law, they are nuances that make a difference in the administration of justice. This package of proposals put forth by the Judicial Conference 

will solve interpretational problems surrounding certain statutes and will add certainty to the legal process. As a result, we hope that the 109th Congress will embrace these provisions and help us to avoid the wasteful litigation that has occurred. 

Thank you again, Mr. Chairman, for the opportunity to testify on behalf of the 

Judicial Conference in support of this necessary legislation. I would be pleased to 

answer any questions you or the other members of the Subcommittee may have.

Mr. SMITH. Thank you, Judge Hall. 

Professor Hellman. 

TESTIMONY OF ARTHUR D. HELLMAN, PROFESSOR, 

UNIVERSITY OF PITTSBURGH SCHOOL OF LAW 

Mr. HELLMAN. Thank you, Mr. Chairman. If there was ever a 

case that belonged in Federal court on the basis of diversity, it 

would seem to be the lawsuit that Carol Ernst brought against 

Merck and Co., alleging that her husband’s death was caused by 

the drug Vioxx, which Merck manufactured. 

The plaintiff was a grieving widow who was a citizen and resident of the State in which the suit was brought, which happened 

to be Texas. The defendant was not only a citizen of another State, 

it had its headquarters in a different region of the country. 

It’s not surprising that the plaintiff filed suit in State court in 

her home State. But you would expect that the defendant would remove the case to Federal court, because the suit seemed to meet 

the requirements for diversity jurisdiction removal: Mrs. Ernst was 

a citizen of Texas; Merck was incorporated in New Jersey. 

At the time the verdict was handed down, there were no other 

defendants in the case, so the familiar rule of complete diversity 

was satisfied. Obviously, the amount in controversy was well over 

$75,000. And because Merck was a citizen of New Jersey, the 

forum defendant rule had no applicability. 

Why, then, did Merck did not remove this suit on the basis of diversity? It did not because it could not. Although Merck was the 

16

only defendant in the case at the time of the verdict, that was not 

so at the time the plaintiff filed her suit in State court. In the initial complaint, Mrs. Ernst named several other defendants, all of 

whom were citizens of Texas. These included the doctor who prescribed Vioxx, and a doctor and research lab that took part in 

Vioxx experiments. 

But I’ve already said that by the time the case got to trial, there 

was only one defendant, and that was Merck. Why couldn’t Merck 

remove once the last Texas defendant had been dropped from the 

case? After all, section 1446(b) provides that if the case stated by 

an initial pleading is not removable, the defendant may file a notice of removal within 30 days after the case does become removable. That would seem to describe Merck’s situation precisely. 

Well, the answer to that puzzle lies in the last clause of section 

1446(b), a provision that the Judicial Conference now proposes to 

modify. Under that provision, which was added by Congress only 

in 1988, a diversity case may not be removed more than 1 year 

after the commencement of the action. By the time the last Texas 

defendant had been dropped from the Ernst case, more than 1 year 

had elapsed. 

Well, that was no accident. Mrs. Ernst’s lawyer wanted that lawsuit to stay in the State court, so he kept the Texas defendants— sometimes called the ‘‘spoilers’’—in the case for more than a year, 

and Merck never even attempted to remove. 

Well, the Ernst litigation is far from unique. Earlier this year, 

a district judge summed up what he called the procedural gamesmanship that the current law allows. And what he said was this, 

and I’ll quote it: ‘‘As numerous courts have acknowledged, many plaintiffs’ attorneys include in diversity cases a non-diverse defendant only to nonsuit that very defendant after 1 year has passed in order to avoid 

the Federal forum. The result is that diversity jurisdiction—a concept important enough to be included in article III of the Constitution, and given to courts by Congress—has become nothing more 

than a game. Defendants are deprived of the opportunity to exercise their right to removal and litigate in Federal court, not by a 

genuine lack of diversity in the case, but by means of clever pleading. No one can pretend otherwise.’’

That’s the end of the quote. 

Well, the Judicial Conference proposes to address this procedural 

gamesmanship by amending the statute to provide that the 1-year 

prohibition on diversity removal is subject to equitable tolling. That 

would be a modest improvement on current law, but I believe that 

it is unnecessarily grudging, and that it does not adequately address the abuses generated by existing law. 

The better solution, I suggest, is to simply eliminate the 1-year 

rule and restore the law to what it was before 1988, where it 

doesn’t seem to have caused any real problems. That’s exactly what 

Congress has already done in the Class Action Fairness Act, and 

there is every reason to extend that judgment to all diversity cases. 

Gamesmanship to prevent removal is not limited to naming cocitizens as defendants. We also see it in the context of disputes 

over the amount in controversy requirement of 1332. As Judge Hall 

has mentioned, the Judicial Conference, in a recent update, has 

17

proposed that the courts rely on stipulations—or declarations, as 

they call them. That’s an excellent idea; although implementation 

will require careful drafting. 

Well, my time is about up. In my statement, I’ve suggested several other possible amendments to the Judicial Code. These deal 

with appellate review of remand orders; the possibility of removal 

based on minimal diversity in specified kinds of cases; and the use 

of rulemaking to address technical aspects of removal procedure 

that have divided the courts. 

I hope we’ll have a chance to discuss these later in the hearing. 

And I appreciate the opportunity to share these views with the 

Subcommittee. Thank you. 

[The prepared statement of Mr. Hellman follows:]

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PREPARED STATEMENT OF ARTHUR D. HELLMAN


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Mr. SMITH. Okay. Professor Hellman, thank you. And thank you 

for citing that Texas case. 

Mr. HELLMAN. Not your district, though, I believe. 

Mr. SMITH. Very instructive. 

Mr. Samp. 

TESTIMONY OF RICHARD A. SAMP, CHIEF COUNSEL, 

WASHINGTON LEGAL FOUNDATION 

Mr. SAMP. Mr. Chairman and Ranking Member Berman, thank 

you for the opportunity to express my views at this hearing. I 

strongly support the thrust of this excellent set of proposed 

changes put together by the Judicial Conference. My testimony 

raises for the Subcommittee’s consideration several minor revisions 

to the Judicial Conference’s approach. 

I approach this bill, and any effort to revise Federal court jurisdiction, with three principal goals in mind. First, statutes ought to 

be clear. When clearly-defined jurisdictional limits are established, 

courts and litigants devote far less of their resources to disputes 

over whether a case belongs in Federal court. 

Second, the statutes ought to honor the Founders’ commitment 

to diversity jurisdiction as an essential feature of the Federal court 

system. Cases in which jurisdiction was based on diversity of citizenship, including cases originally filed in Federal court and those 

removed from State court to Federal court by defendants, have 

been a major staple of Federal court dockets since 1789. Indeed, for 

the first century of our history, virtually all Federal cases were diversity jurisdiction cases. 

Third, the statutes ought not to be written so as to allow one 

party to the litigation to manipulate the system to prevent the 

other party from exercising his or her right to invoke the Federal 

court’s diversity jurisdiction. Plaintiffs that wish to litigate their 

claims in the State court, as many do, often take steps designed to 

thwart defendants’ exercise of their removal rights. Accordingly, if 

those rights are to be protected, Congress needs to adopt statutes 

designed to prevent plaintiffs from inappropriately interfering with 

removal rights. 

The proposed legislation does an excellent job of addressing all 

three of those concerns. I wholeheartedly support sections 2, 3, 

4(a), 4(b)(1) and (2), 4(b)(3), and 4(e) of the bill, having to do with 

such subjects as what to do when a defendant seeks to remove a 

Federal law claim that is joined with a separate and independent 

claim, and how to handle removal petitions when there is more 

than one defendant. I won’t discuss those provisions further, except 

to say that in my written testimony, I have proposed several minor 

changes in wording. 

I want to focus my testimony today on two provisions: section 

4(b)(4), which addresses removal more than 1 year after commencement of the action; and section 4(b)(5), which addresses how courts 

should determine whether the amount in controversy exceeds the 

$75,000 minimum necessary to establish jurisdiction in diversity 

cases. 

Since 1988, Federal law has barred defendants from filing removal petitions more than 1 year after commencement of the action, even if the defendant had no way of ascertaining that the case 

51

was removable until after that 1-year period has expired. As the 

bill recognizes, this provision has led to abuses by plaintiffs, who 

employ a variety of tactics to make it impossible for defendants to 

remove cases during the 1-year period. 

The bill proposes to address that problem by allowing cases to be 

removed even after the 1-year period, when ‘‘equitable considerations warrant removal.’’ I respectfully suggest that that provision 

will lead to innumerable fights over what constitutes equitable considerations. 

A better solution would be to abolish the 1-year time limit altogether. In 1988, when it adopted the provision, Congress was apparently concerned that late removals would disrupt ongoing proceedings in which a State court judge had already invested substantial resources. But even without the 1-year limitation period, 

there are still substantial restrictions on a defendant who seeks to 

remove a case that has been pending for a considerable period of 

time. In particular, the defendant may only remove within 30 days 

of the date on which the case’s removability was first ascertainable. 

It will generally be the plaintiff’s fault if information permitting 

removal is not provided until more than a year following commencement of the action, so he or she has little cause to complain 

about a late removal. 

If Congress does decide to adopt the Judicial Conference’s ‘‘equitable considerations’’ language, I suggest that the bill be amended 

to spell out as precisely as possible just what the relevant considerations are. 

With respect to section 4(b)(5), the provision addressing the 

amount in controversy requirement, I support the Judicial Conference’s recognition of the need to allow removal petitions to be 

filed where the complaint does not specify an amount in controversy, or where the plaintiff has purposely low-balled the damage figure in an effort to defeat removal, knowing that State courts 

will not deem them bound at trial by that low figure. 

If removal is to be allowed in those instances based on the defendant’s independent estimate of the amount in controversy, it is 

critical that the statutes include detailed provisions regarding 

when the 30-day removal period begins to run. Otherwise, the Federal courts can expect numerous battles over whether defendants 

met the 30-day limitation period. 

Plaintiffs will argue that the defendant should have known immediately—based, for example, on the availability of punitive damages—that the case was removable, and should not have waited to 

obtain the plaintiffs’ corroborating statement before filing the removal petition. 

I ask the Committee to consider one change in this area: doing 

away with the jurisdictional amount requirements in those diversity cases in which the amount of damages is inherently 

unquantifiable. 

Most tort cases fit that category, particularly if the plaintiff 

claims to have suffered personal injury. In such cases, the plaintiff 

can claim, in addition to any medical expenses, lost income, and 

loss of bodily function, both pain and suffering damages and punitive damages. Such damages are taken into account in determining 

whether the minimum jurisdictional amount has been reached. 

52

I find it hard to believe that any district court judge, after conducting a mini-trial in connection with a motion to remand a personal injury case, could honestly determine by a preponderance of 

the evidence that no reasonable jury could award the plaintiff at 

least $75,000 in pain and suffering and punitive damages. Because 

virtually all plaintiffs bringing personal injury claims seek damages in excess of $75,000, the elimination of the minimal jurisdictional amount for such claims is unlikely to have any measurable 

effect on Federal court case loads. Doing so would actually conserve 

judicial resources by reducing the number of fights over whether 

the jurisdictional amount has been met. 

Thank you for the opportunity to testify today. 

[The prepared statement of Mr. Samp follows:]

PREPARED STATEMENT OF RICHARD A. SAMP

Mr. Chairman, Ranking Member Berman, and Members of the Subcommittee: 

Thank you for the opportunity to express my views at this hearing on the Federal 

Courts Jurisdiction Clarification Act of 2005, proposed legislation to clarify and improve statutes governing the subject matter jurisdiction of the federal courts. The 

Judicial Conference of the United States is to be commended for having put together 

an excellent set of proposed revisions that address many of the jurisdictional issues 

that have caused difficulties for the federal courts in recent years. I strongly support 

virtually all of the proposed changes. My testimony raises for the Subcommittee’s 

consideration several minor revisions to the Judicial Conference’s proposed approach, but I can say unhesitatingly that the proposed legislation as written represents a significant improvement over current law. 

MY BACKGROUND

Since 1989, I have served as Chief Counsel of the Washington Legal Foundation, 

a non-profit public interest law firm located in Washington, D.C. I am a graduate 

of Harvard College and the University of Michigan Law School. My interest in 

issues concerning federal court jurisdiction was piqued by the two years I spent as 

a clerk for a federal judge and has continued during my 25 years as a litigating attorney. Most of my practice focuses on federal court litigation, so I am very familiar 

with current statutes governing federal court jurisdiction and many of the issues 

that typically arise regarding the proper scope of that jurisdiction. 

The Washington Legal Foundation regularly participates in appellate cases that 

address the circumstances under which parties sued in State court should be permitted to remove the case to federal court. See, e.g., Lincoln Property Co. v. Roche,

No. 04–712 (U.S., dec. pending); Collins v. American Home Products Corp., 343 F.3d 

765 (5th Cir. 2003), cert. denied, 125 S. Ct. 1823 (2005). WLF strongly believes that 

when residents of a State are engaged in litigation with nonresidents of the State, 

the right of the nonresidents to have their claims heard in a federal court needs 

to be protected, in order to protect them from the home-team biases sometimes displayed by State courts. 

MAJOR OBJECTIVES THAT SHOULD DRIVE ANY REVISIONS

When one evaluates current statutes governing federal court jurisdiction, three 

principal goals ought to be borne in mind. First, the statutes ought to be clear. 

When clearly defined jurisdictional limits are established, courts and litigants devote far less of their resources to disputes over whether a case belongs in federal 

court. When the federal circuit courts are divided over the meaning of a jurisdictional statute, that is prima facie evidence that the statute is not sufficiently clear, 

and that Congress should step in to clear up the confusion—given that the Supreme 

Court lacks the docket space to address more than a small fraction of circuit splits. 

When Congress does step in, it is important that the new rule be both easy to understand and easy to enforce; otherwise, parties inevitably will devote considerable 

resources to contests over the meaning of any new potential ambiguities. 

Second, the statutes ought to honor the Founders’ commitment to diversity jurisdiction as an essential feature of the federal court system. Both James Madison and 

Alexander Hamilton viewed diversity jurisdiction as an important safeguard against 

local prejudices directed at nonresident litigants. The Judiciary Act of 1789 granted 

diversity jurisdiction to the federal courts; indeed, until the creation of federal quesVerDate 0ct 09 2002 11:37 Feb 07, 2006 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\111505\24607.000 HJUD1 PsN: 24607
53

tion jurisdiction a century later, diversity jurisdiction cases were the prime staple 

of federal court dockets. The rationale underlying diversity jurisdiction—protection 

against local prejudice—also caused the drafters of the Judiciary Act of 1789 to 

grant nonresident defendants the right to remove diversity cases from State court 

to federal court. While limitations on resources necessitate placing reasonable limits 

on federal court jurisdiction, those limitations should not be invoked as justification 

for ignoring the important role that diversity jurisdiction and removal jurisdiction 

have played for the past 216 years in protecting nonresident litigants from local 

prejudice. 

Third, the statutes ought not to be written so as to allow one party to litigation 

to manipulate the system to prevent the other party from exercising his or her right 

to invoke the federal court’s diversity jurisdiction. When complete diversity of citizenship exists among plaintiffs and defendants and the amount in controversy is 

sufficiently large, plaintiffs are entitled to file their lawsuit in federal court. If they 

choose instead to file their suit in a State’s court and the defendants are not citizens 

of that State, the Defendants are entitled to remove the case to federal court, even 

if the suit does not raise any issues of federal law. As Justice Story explained nearly 

200 years ago, a plaintiff does not enjoy any preference when it comes to choosing 

whether his suit is to be heard in a federal court or a State court; rather, federal 

law traditionally has afforded a defendant the same rights as a plaintiff to decide 

to litigate their case in the federal courts. Martin v. Hunter’s Lessee, 1 Wheat (14 

U.S.) 304, 348 (1816). Nonetheless, plaintiffs that wish to litigate their clams in 

State court (as many do) often take steps designed to thwart defendants’ exercise 

of their removal rights. Accordingly, if those rights are to be protected, Congress 

needs to adopt statutes designed to prevent plaintiffs from inappropriately interfering with removal rights. 

I address the provisions of the proposed legislation with each of those three goals 

in mind. 

SECTION 2. RESIDENT ALIEN PROVISION

Section 2 of the proposed legislation addresses ambiguities regarding alienage jurisdiction created in 1988 when Congress amended 28 U.S.C. § 1332(a) to provide 

that permanent resident aliens should be deemed, for purposes of determining federal court jurisdiction, to be citizens of the State in which they permanently reside. 

Section 2 eliminates those ambiguities while retaining the purpose of the 1988 

amendment: to preclude jurisdiction under § 1332(a)(2) over suits between a citizen 

of a State and a permanent resident alien residing in the same State. I fully support 

the proposed change. 

SECTION 3. CITIZENSHIP OF CORPORATIONS AND INSURANCE COMPANIES

WITH FOREIGN CONTACTS

Section 3 addresses the issue of which States’ citizenship(s) ought to be attributed 

to a corporation that either: (1) is incorporated in the United States but has a principal place of business overseas; or (2) is incorporated abroad but has a principal 

place of business in the United States. Federal courts have been badly split on this 

issue, in light of ambiguities in the current version of 8 U.S.C. § 1332(c)(1). I support 

the proposed change because it provides a clear rule of decision and because it does 

not deny federal court access to corporations in situations in which they have reason 

to fear local prejudice. 

SECTION 4(A). JOINDER OF FEDERAL LAW CLAIMS WITH CLAIMS THAT WOULD NOT BE

REMOVABLE IF FILED SEPARATELY

The current version of 28 U.S.C. § 1441(c) authorizes a State-court defendant to 

remove the entire suit to federal court if at least one of the claims raises a federal 

question, even if the suit also contains other claims that are ‘‘separate and independent’’ from the federal claim and could not otherwise be removed. This provision 

has led to enormous difficulties, with some courts going so far as to declare the provision unconstitutional—because it purports to grant federal courts jurisdiction over 

matters outside their constitutionally delegated original jurisdiction (e.g., State-law 

claims involving citizens of a single State). Section 4(a) provides an admirable solution: it would continue to permit removal of the entire case but then require remand 

of the claims that are ‘‘separate and independent’’ of the federal claim(s). This solution eliminates all the difficulties in the current law identified by federal courts but 

still retains a federal forum for federal claims. 

I have one minor editorial suggestion. Section 4(a) refers (in a proposed 28 U.S.C. 

§ 1441(c)(i)(B)) to ‘‘a non-removable claim that is not part of the same case or controversy (within the meaning of Article III of the Constitution) as the [federal] 

54

claim.’’ I would change the first part of that clause to read, ‘‘a claim that could not 

be removed if filed as a separate action and that is not part...’’ I fear that the 

word ‘‘non-removable’’ might be subject to misinterpretation because it has a acquired a generally accepted meaning in other contexts; it refers to causes of action 

that could never be removed under any circumstances. See, e.g., 28 U.S.C. § 1445 

(listing ‘‘nonremovable actions’’ that may never be removed to federal court). I assume that the intent of Section 4(a) is to operate more broadly than that. For example, if the ‘‘separate and independent claim’’ is a State-law cause of action between 

citizens of different States but seeks damages of less than $75,000, I assume that 

Section 4(a) was intended to be applicable. But some courts might not view such 

a claim as a ‘‘non-removable claim,’’ and thus might deem proposed § 1441(c)(i)(B) 

to be inapplicable. The alternative language I have suggested might eliminate the 

potential confusion. 

SECTIONS 4(B)(1), (B)(2)(A), & (E). SEPARATING THE REMOVAL STATUTE

INTO CIVIL AND CRIMINAL STATUTES

Sections 4(b) and 4(e) of the proposed legislation would divide the rules governing 

removal of civil and criminal cases into separate sections. Currently, both sets of 

rules are included in 28 U.S.C. § 1446. The proposed legislation would move the 

rules governing removal of criminal cases into a new section, to be designated 

§ 1446a. The Judicial Conference explains that its proposal is designed to make the 

provisions more readily understandable. I have not noticed that the current inclusion of both sets of rules in § 1446 has led to any confusion, but I am certainly not 

opposed to the proposal (which includes no changes in the substance of the rules). 

SECTION 4(B)(3). REMOVAL IN MULTIPLE-DEFENDANT CASES

Most of the procedures for removing a civil case from State court to federal court 

are set forth in 28 U.S.C. § 1446(b). A major deficiency in § 1446(b) is that it speaks 

of removal by ‘‘the defendant’’ and does not explicitly address what procedures 

should be followed when (as often is true) there is more than one defendant in the 

case. That deficiency has led to enormous confusion in the federal courts when removal is sought in a multiple-defendant case. Section 4(b)(3) does an excellent job 

of clearing up that confusion. In particular, it addresses when the 30-day removal 

period begins to run when defendants are not served on the same day. The proposed 

rule prevents plaintiffs from using scattered service dates to obstruct removal, by 

providing: (1) each defendant is provided 30 days after it has been served, to file 

or join in a removal petition; and (2) an earlier-served defendant may consent to 

a subsequent removal during the 30-day period following service on a later-served 

defendant, even though the earlier served defendant failed to file a timely removal 

petition of its own. These provisions, which have already been adopted by case law 

in a number of circuits, greatly facilitate coordination among defendants and prevent a later-served defendant from being denied access to a federal forum simply 

because an earlier-served defendant may not have been sophisticated enough to 

have been aware of removal rights. 

I have one suggested edit. The first sentence in proposed § 1446(b)(2) reads, ‘‘In 

actions involving two or more defendants, all defendants must join in or consent to 

the removal of the action.’’ I would add, following the words ‘‘all defendants,’’ the 

following clause: ‘‘who have been properly joined and served.’’ The proposed language is borrowed from 28 U.S.C. § 1441(b) (which addresses which defendants 

should be taken into account in determining whether any of the defendants is a citizen of the forum state). Not infrequently, a plaintiff will never serve one or more 

of the plaintiffs. Without the proposed language, a plaintiff could argue that the failure of unserved defendants (whose location may be unknown to the other defendants) to join in or consent to the removal petition defeats removal. Defendants 

should not be placed in the position of having to track down unserved defendants 

to obtain their consent to removal and to complete the search within a 30-day period, or else forfeit their right to a federal forum. By adding the ‘‘properly joined’’ language, Congress would make clear that, as federal courts have made clear for 

more than a century, a fraudulently joined defendant need not be considered for 

purposes of determining diversity of citizenship, nor consent to removal. 

SECTION 4(B)(4). AUTHORIZING REMOVAL AFTER ONE YEAR. 

It has long been true that a defendant seeking to remove a case to federal court 

must do so within 30 days of service; or, if the case stated by the initial pleading 

was not removable, within 30 days of the date on which ‘‘it may first be ascertained 

that the case is one which is or has become removable.’’ 28 U.S.C. § 1446(b). In 1988, 

Congress imposed a significant new limitation on the timing of removal petitions: 

55

1This language seems out of place in proposed § 1446(b)(4) (which deals with jurisdictional 

amount issues) and much more naturally fits within proposed § 1446(b)(3) (which deals with timing issues).

they may never be removed more than one year ‘‘after commencement of the action.’’ That limitation applies even if the defendant seeking removal was not served until 

well after the action was commenced, and even if the case did not become removable 

until after the one-year limitation period has expired. 

The Judicial Conference correctly recognizes that the one-year limitation period 

causes considerable hardship for defendants, and that plaintiffs often seek to manipulate the rule to their advantage—by waiting until after the period has expired either to: (1) dismiss a defendant whose citizenship destroyed diversity and thereby 

prevented removal, even though the plaintiff never had any intention of proceeding 

to trial with that defendant; or (2) reveal for the first time that he seeks damages 

in excess of the minimum jurisdictional amount. The Judicial Conference proposes 

to address that concern by amending § 1446(b) to provide that the one-year limitation period is inapplicable when ‘‘equitable considerations warrant removal.’’ I agree with the Judicial Conference that the one-year limitation period has become a major problem, but I respectfully disagree with its solution. I agree with Professor Heller that a better solution would be to do away with the one-year limitation 

period altogether. In 1988 when it adopted the provision, Congress was apparently 

concerned that late removals would disrupt on-going proceedings in which a State 

court judge had already invested substantial resources. But even without the oneyear limitation period, there are still substantial restraints on a defendant who 

seeks to remove a case that has been pending for a considerable period of time. In 

particular, the defendant may only remove within 30 days of the date on which the 

case’s removability was first ascertainable. Proposed § 1446(b)(5) does a good job of 

spelling out when removability should be deemed first ascertainable (‘‘Information 

in the record of the state proceeding, or in response to discovery, shall be treated 

as an ‘‘’other paper’’’); that provision makes clear that a removal petition would be 

untimely if a defendant failed to ascertain that a suit was removable because he 

was delinquent in undertaking discovery. I note that before the one-year limitation 

period was adopted in 1988, the federal courts were not flooded with late-filed removal petitions, so deletion of the limitation period is unlikely to have any significant impact on federal court case loads. 

Moreover, the only way that it can ever take more than a year for removability 

to become ascertainable is for a plaintiff to delay in providing the pertinent information. It may be that the plaintiff delayed in providing the information to gain a tactical advantage, or it may simply be that the plaintiff only discovered the information (or made a decision to switch litigation tactics) well after the suit was filed. 

Either way, the plaintiff can rightly be held accountable for any adverse consequences (caused by removal) brought about by his inaction or change in tactics. 

Doing away with the one-year rule will eliminate any incentive plaintiffs may have 

to employ strategies to stall the case in hopes of delaying the ascertainment of facts 

that would render the case removable. 

A principal flaw in the proposed legislation is that it would encourage endless litigation over what is meant by the phrase, ‘‘unless equitable considerations warrant 

removal.’’ The proposed legislation is virtually silent on that point. It should be a 

principal aim of Congress when ‘‘clarifying’’ jurisdictional statutes to adopt provisions that provide clarity, not ones that invite new litigation. 

If the Committee decides to follow the basic approach of the proposed legislation, 

I would amend proposed § 1446(b)(3) to provide as much detail as possible regarding 

what sort of ‘‘equitable considerations’’ warrant removal after expiration of the oneyear limitation period. I would begin by moving the following language from proposed § 1446(b)(4) to proposed § 1446(b)(3):

If the notice has been filed more than 1 year after commencement of the action, 

such a finding [that the plaintiff deliberately failed to disclose the actual 

amount in controversy to prevent removal] shall be deemed to satisfy the equitable considerations...1

I would also include the language that the Judicial Conference included in its Section-by-Section analysis of the proposed legislation:

In determining the equities, the district court will . . . consider such factors as 

whether the plaintiff had engaged in manipulative behavior, whether the defendant had acted diligently in seeking to remove the action, and whether the 

case had progressed in state court to a point where removal would be disruptive.

56

2Proposed § 1446(b)(5) allows the defendant to remove and assert his own amount in controversy if:

[T]he initial pleading seeks (i) non-monetary relief; or (ii) a money judgment but the 

State practice either does not permit demand for a specific sum or permits recovery of 

damages in excess of the amount demanded.

My understanding of State court practices is that virtually all States permit recovery of damages in excess of the amount demanded. Thus, the proposed rule would permit removal of any

diversity case, so long as the defendant believes in good faith that the jurisdictional amount exceeds $75,000.

Another possible equitable consideration: whether the defendants first contemplated seeking removal only after the State judge gave an indication that he was 

likely to rule for the plaintiff. The more such equitable considerations that are 

spelled out explicitly in § 1446(b)(3), the less likely it is that courts will reach conflicting results regarding the relevant equitable factors and regarding what quantum of equitable factors would ‘‘warrant’’ removal. 

SECTION 4(B)(4). AMOUNT IN CONTROVERSY. 

Current law bars the removal of diversity cases unless the amount in controversy is at least $75,000. As the Judicial Conference notes, the amount-in-controversy requirement can complicate removal issues because frequently the complaint will not 

list damages sought, or the plaintiff will purposely ‘‘low ball’’ the damage figure, 

knowing that State courts will not deem him bound by that removal-defeating figure. The proposed legislation would allow removal of virtually any diversity case, regardless of the amount listed in the complaint.2 At that point, the propriety of removal will depend on whether ‘‘the district court finds by the preponderance of the 

evidence that the amount in controversy exceeds’’ the jurisdictional amount. The 

proposed change would unquestionably help to counteract the efforts of some plaintiffs to obstruct removal by specifying a low-ball damage figure or no damage figure 

at all. I have two concerns, however. First, if Congress adopts this proposal, it will 

need to provide additional guidance regarding when removability should first be 

deemed ascertainable by defendants. This proposed provision suggests that a defendant should be permitted to remove a case based on his independent knowledge 

of the plaintiff’s injuries, without regard to what the plaintiff may have claimed. If 

that is so, one can expect that numerous plaintiffs will challenge removal on the 

basis that the defendant fail to meet the 30-day removal deadline; they will argue 

that the defendant should have known immediately, based (for example) on the 

availability of pain-and-suffering and punitive damages, that the case was removable, and should not have waited to obtain the plaintiff’s corroborating statement 

before filing the removal petition. Second, federal judges may be asked to conduct 

time-consuming mini-trials soon after the removal petitions have been filed, in order 

to determine whether the jurisdictional amount has been met; and, of course, the 

parties’ roles will be reversed at any such mini-trial, with the plaintiff bad-mouthing 

his or her own claim.

I ask the Committee to consider an alternative: doing away with jurisdictional 

amount requirements in those diversity cases in which the amount of damages is 

inherently unquantifiable. Most tort cases fit into that category, particularly if the 

plaintiff claims to have suffered personal injury. In such cases, the plaintiff can 

claim—in addition to any medical expenses, lost income, and loss of bodily function—both pain-and-suffering damages and punitive damages. Such damages are 

taken into account in determining whether the minimum jurisdictional amount has 

been reached. See, e.g., Bell v. Preferred Life Assurance Society, 320 U.S. 238 (1943). 

I find it hard to believe that any district court judge, after conducting a mini-trial 

in connection with a motion to remand a personal injury case, could honestly determine by a preponderance of the evidence that no reasonable jury could award the 

plaintiff at least $75,000 in pain-and-suffering and punitive damages. Accordingly, 

I recommend that the Committee consider amending 28 U.S.C. § 1332 by eliminating the minimum jurisdictional amount in all tort cases, or at least in some significant subset of tort cases—such as personal injury claims. I note that H.R. 420, 

recently adopted by the House of Representatives, provides a definition of ‘‘personal 

injury claims’’ (for purposes of defining the types of claims subject to an anti-‘‘forum 

shopping’’ provision). The Committee may want to adopt that same definition of ‘‘personal injury claim’’ here. 

Because virtually all plaintiffs bringing personal injury claims seek damages in excess of $75,000, the elimination of the minimum jurisdictional amount for such 

claims is unlikely to have any measurable effect on federal court case loads. Probably the only cases that will be added to federal court dockets that are not there 

57

now will be cases in which the defendant filed in state court with every intention 

of recovering in excess of $75,000 and then successively defeated removal by hiding 

for more than a year the full extent of damages sought. 

Indeed, there is little evidence that the minimum jurisdictional amount requirement has any appreciable effect on federal court case loads. It serves primarily as 

an additional weapon for parties seeking to defeat federal court jurisdiction, with 

the result that federal judges need to devote resources to refereeing such disputes. 

When I was clerking for a federal judge in 1980–1982, the jurisdictional amount for 

both diversity and federal question cases was $10,000. The subsequent elimination 

of the jurisdictional amount in federal question cases did not result in significant 

increases in the number of cases filed in federal court, nor did the more-than-sevenfold increase in the jurisdictional amount in diversity cases lead to a significant decrease. 

SECTION 5. INDEXING THE AMOUNT IN CONTROVERSY. 

The proposed legislation would amend 28 U.S.C. § 1332(a) to require the indexing 

of the minimum jurisdictional amount requirement in diversity cases, so that the 

amount would keep pace with inflation. In general, Congress over the past century 

has been increasing the jurisdictional amount in diversity cases far faster than the 

rate of inflation. The Judicial Conference’s rationale is that an indexing provision 

would save Congress the trouble of having to tinker periodically with the jurisdictional amount. 

I do not feel strongly one way or the other about this proposal, but in general I 

oppose it. Changing the jurisdictional amount every eight to ten years has not proven particularly burdensome to Congress. To the contrary, I think it is a good thing 

to provide Congress on a periodic basis with a good rationale to revisit jurisdictional 

amount issues. Indeed, over the years Congress has regularly engaged in major revisions of its philosophy on minimum jurisdictional amount requirements. They did 

not exist at all for most of the 19th century, a time when federal question jurisdiction did not exist and most of the federal court docket consisted of cases based on 

diversity jurisdiction. Over the next 100 years, jurisdictional amounts were gradually increased in lock-step for both diversity and federal question cases. Later, the 

jurisdictional amount was eliminated entirely in federal question cases, while Congress continued the gradual increase in the jurisdictional amount for diversity cases. 

The attitude of future Congresses may change as the size of federal court dockets 

change and as preserving diversity jurisdiction in federal court is deemed either 

more or less important by Congress. I see little reason to lock in today the size of 

future increases in the jurisdictional amount. 

SEPT. 2005 PROPOSAL—FACILITATING USE OF DECLARATIONS TO SPECIFY DAMAGES

In September 2005, the Judicial Conference proposed an additional amendment 

to 28 U.S.C. § 1441(a) and 1447, to ‘‘facilitate use of declarations to specify damages.’’ The idea behind the legislation is to allow plaintiffs to keep their cases out 

of federal court if they agree to be bound by a declaration that they will forgo any 

damages in excess of the jurisdictional amount in diversity cases (currently 

$75,000). In general, I support the use of such declarations, as a way to minimize 

fights over the amount in controversy. A defendant has little basis for complaint if 

there is no possibility that they could be held liable in State court for more than 

$75,000. Federal court is not intended to serve as a small claims court; and while 

out-of-state defendants may face prejudice in State courts even in small cases, at 

least their potential exposure is much smaller. 

My only reservation is that any legislation needs to have numerous protections 

to ensure that a plaintiff will remain bound by any declaration of intent to forgo 

damages in excess of $75,000. Those protections should include a provision that will 

allow the defendant to return to federal court (or go there for the first time) if the 

defendant reneges on his promise. Federal courts would likely be much more willing 

to enforce this federal provision than would State courts. The provision should also 

be made explicitly inapplicable to class actions.

Mr. SMITH. Thank you, Mr. Samp. You are really warming to the 

subject matter, and it’s nice to see. 

What I did was to come up with a chart that breaks down the 

legislation to the nine components, just to see where there is general agreement and to see where there might be some disagreement. 

58

I think three sections, there is agreement across the board. These 

would be section 2, resident alien provision; section 3, citizenship 

for corporations and insurance companies; and section 2005, Judicial Conference proposal use of declaration to specify damages. 

You all support those provisions. There’s four other provisions 

that there are just minor disagreement; and there’s two provisions 

where I think there’s more significant disagreement. And let me 

get to those as quickly as we can. But I would like to, as much as 

possible, come to some kind of an understanding or agreement 

today, so that we can produce a good work product and move it 

along. 

On section 4(a), the joinder of Federal law claims with claims 

that would not be removable if filed separately, the only suggestion 

there was by Mr. Samp, who said—and I was going to ask Judge 

Hall and Professor Hellman if you all see any problems with this—

would strike the word ‘‘non-removable’’ in the draft, and change it 

to ‘‘a claim that could not be removed.’’ He believes the word ‘‘nonremovable’’ may be subject to misinterpretation. Might be no problem there, particularly. 

Judge HALL. I would certainly like to work with the Committee. 

Mr. SMITH. Okay. So that is resolvable in any case, I think. 

Okay. 

Section 4(b)(1), separating the removal statute into civil and 

criminal penalties, Professor Hellman there—and I’d like to ask 

Judge Hall and Mr. Samp if they agree—supports; but believes 

that the current draft will cause confusion. He believes a better solution is to add a new section, numbered 1444 and 1445, instead 

of the draft’s suggestion of using 1446 and 1446(a). That’s no problem, I don’t think. Okay, these are maybe—these are even technical 

within the technical. 

Judge HALL. I think so. 

Mr. SMITH. So I’m going to check those off. I think we’re okay 

on those. 

Let’s see, one other one would be section 5, indexing the amount. 

You’ve got a little bit, Mr. Samp just—you all support the indexing. 

Mr. Samp, you say, probably should not do indexing, but let Congress retain the authority to revisit; and if we don’t index, then we 

have an excuse to go back and take a look at it periodically. 

I have to confess to you, I think you have more faith in Congress 

than we do. And for that reason, I’d probably favor the indexing. 

And then otherwise, we may get behind the ball and it may 

never—may not be revisited as often as you and I would like. So 

I probably will go with the indexing on that. 

That leaves three other issues. Let’s go to section 4(b)(3), removal 

in multi-defendant cases. Judge Hall, Professor Hellman, support 

it as it is. Okay, Mr. Samp, here you say, support but would suggest—and I was going to ask the other witnesses what they think—

that the draft be changed to state ‘‘who have been properly joined 

and served.’’

He believes the draft as currently written would allow a plaintiff 

to argue that the failure of unserved defendants to join in or consent to the removal petition defeats removal. Defendants should be 

placed in the position of having to—should not be placed in the poVerDate 0ct 09 2002 11:37 Feb 07, 2006 Jkt 000000 PO 00000 Frm 00062 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\111505\24607.000 HJUD1 PsN: 24607
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sition of having to track down unserved defendants to obtain consent for removal. 

Judge HALL. If I have the right section, this is a comment by Mr. 

Samp——

Mr. SMITH. Yes. 

Judge HALL [continuing]. On the rule of unanimity codification. 

Is that correct? And I think that his suggestion certainly deserves 

looking at. I think it’s a positive suggestion that would be helpful. 

Mr. SMITH. Okay. Very good. ‘‘Deserves looking at,’’ and ‘‘positive.’’ Does that mean you’re signing off on it, or not quite yet? 

Judge HALL. I don’t know if I have authority for the Judicial 

Conference. 

Mr. SMITH. Oh, okay. 

Judge HALL. But I think that it certainly is consistent with what 

we’re attempting to do in our proposal. 

Mr. SMITH. Okay. Get back to us. Just know that this is the direction we’re going in, unless we hear otherwise. 

Judge HALL. I understand. Okay. 

Mr. SMITH. Okay. Now we’re down to two sections left, section 

4(b)(4), the 1-year rule for removal, and section 4(b)(4), the amount 

in controversy. 

On the 1-year rule for removal, Judge Hall supports keeping the 

1-year rule, but allowing limited exceptions. And then both, as I recall, Professor Hellman and Mr. Samp, you want complete elimination of the 1-year rule. 

I don’t know that there is any reconciliation of that, but Judge 

Hall, tell us why you feel strongly about that, and why you feel the 

way you do. 

Judge HALL. Certainly. Thank you, Mr. Chairman. The Judicial 

Conference came at this from the point of view that there had been 

an amendment in 1988 which was enacted by Congress to address 

a problem I believe they saw; which is the sort of slow removal and 

the last-minute pre-trial—or in the middle of trial—attempts to remove that were very disruptive and costly. So it enacted this section that we’re talking about amending in 1988. 

I think, unfortunately, no one anticipated that the rule would be 

used by plaintiffs as a means to seek to prevent removal where in 

fact a defendant was entitled to remove. 

As I said at the beginning, our goal in making these proposals 

was to amend or to correct current law, to clarify, and to improve 

certainty among parties so they would know where jurisdiction lies. 

I think that our proposal of allowing equitable considerations to toll 

the 1 year, in effect, or to allow removal after the 1 year, will address the problems that have arisen, but will keep in place, in my 

view, what was a good idea of Congress; which is the idea that we 

ought to have timely removal, and not have removal when the case 

is well underway and it would be disruptive. 

The proposal to do away with the year completely, in my mind, 

raises more problems, or some other problems, perhaps. For example, a defendant in one of the Texas cases—it was a tobacco case. 

There was a joinder of a defendant who was really a non-party, but 

they added the convenience store seller of the cigarettes. It destroyed diversity. So the tobacco company was kept in State court. 

60

Now, I don’t know in Texas if you have a lot of summary judgments, but in Connecticut we don’t in State court. So that case 

would go to trial. And at the end of the plaintiff’s case, the defendant would stand up and say, ‘‘I move to dismiss, direct the verdict, 

because you don’t have a cause of action against the seller of the 

tobacco product.’’ And the judge would grant that, under the newly 

developed Texas law that came out in some of these cases. 

At that point, under the removal of the 1-year limit, the defendant could stand up and say, ‘‘All right, I’m going to remove to Federal court,’’ because there would be no limit, and the event of diversity jurisdiction just arose. 

Now, I mean, I’m all for giving every defendant who’s entitled to 

their diversity jurisdiction and the right to remove the right to remove, but I’m not in favor of that happening, say, after the plaintiff 

has put their whole case on and rested. 

And so I guess I can understand the reasons articulated by the 

other speakers, but my view is that what the Congress did in ’88 

was a good policy, and that our proposed amendment deals with 

the problems that have arisen, the manipulation of that idea, and 

takes that away so that it can’t be manipulated any more. And obviously, if it’s not going to be manipulated, and I assume in most 

cases—in fact, I would dare say, close to every case—service will 

be made, the diversity issue will arise, and there will be removal 

in less than the 1 year. 

Mr. SMITH. Okay. Professor Hellman and Mr. Samp, real briefly, 

now that you’ve heard Judge Hall’s explanation, are you ready to 

reconsider your position? Or do you still feel it ought to be eliminated? 

Mr. HELLMAN. Well, first, I think there are other middle 

grounds. But I do think it’s important generally to look at rules, 

as economists would say, ex ante: what sort of incentives do they 

create? And if you eliminate the 1-year rule, or narrow it to a very, 

very limited class of circumstances, you reinforce the incentives 

that already exist for a plaintiff to do what he can to move his case 

along. And I think we do want to do this and, of course, we do want 

to know at the earliest possible time. 

My problem with the Judicial Conference proposal is that when 

you recognize an equitable exception, whichever party has the burden of persuasion, you’re providing the occasion for satellite litigation. And for every one or two cases like the one that Judge Hall 

describes that gets a more just result, you may have litigation in 

ten or 20. I entirely agree with Mr. Samp, that in the jurisdictional 

threshold issues there’s as value on having bright-line rules. 

Now, in my statement, I do suggest a much more limited exception to the 1-year rule that would say if, after 1 year and after the 

trial has begun, or within 30 days of the scheduled trial, then 

there’s no removal. That’s a bright-line rule, and it avoids the kind 

of situation that Judge Hall has described. 

So I think something like that would address Judge Hall’s concerns, but would also avoid the kind of manipulation. 

Mr. SMITH. Okay. Mr. Samp, real quickly, what do you think of 

that idea? 

Mr. SAMP. I think that having a bright line somewhere near trial 

would certainly be very reasonable. But I definitely support the 

61

idea of bright lines. And I’m just afraid that saying equitable considerations can be considered is going to lead to an awful lot of litigation, and I would therefore—and there are obviously lots of constraints already on the defendant because of the 30-day rule, so 

that, except in the case of the last-minute dismissal of a plaintiff, 

he’s never going to be able to remove in any event. 

Mr. SMITH. Okay. Thank you all. I’m going to have one more 

question after Mr. Berman asks his questions on 4(b)(4), the 

amount in controversy. I want to get to that. But Mr. Berman is 

recognized for his questions. 

Mr. BERMAN. Mr. Samp, if you were told you had two choices, the 

1-year rule or an ability of a judge to look at equitable concerns, 

which one would you take? 

Mr. SAMP. There’s no question that the rule proposed here is a 

big improvement over the current rule, so I would take——

Mr. BERMAN. So a rule that promotes Federal litigation is okay 

in situations where it helps corporate defendants? 

Mr. SAMP. No, any sort of defendants. A rule that allows the jurisdiction, diversity jurisdiction, that we’ve historically had not to 

be defeated would be a good thing. I don’t believe it’s an ideal solution. 

Mr. BERMAN. Well, I think eliminating the 1 year for some of the 

same reasons that Judge Hall mentioned allows defendants who 

want to be spoilers, people who perhaps aren’t sure where they 

want that case tried—they have one interest, and that is avoiding 

losing; and are playing the system as long as they can, until they 

conclude that, ‘‘Let’s get it out of State court; now it makes sense 

to get into the Federal court,’’ because that will result in further 

delays. 

So the 30 days before trial—they do it on the 31st day before 

trial. They do it after all the depositions. They do it after that State 

judge ruled against them on a bunch of preliminary motions. They 

do it after the depositions are revealed. They do it because they 

think, if they can delay longer, a key witness for the plaintiff will 

die. 

In other words, I can create as many hypothetical manipulative 

reasons for defendants to game the system as plaintiffs. And that’s 

why there seems to me a little bit of logic in this ‘‘equitable considerations’’ sort of out to the flat 1-year bar. 

But anyway, I have a few more questions. I want to talk about 

1441(c), on removal. As I understand now—well, two questions. 

First, a person who files in Federal court, he has Federal causes 

of action, and there are also attendant with the right—it’s been a 

very long time——

Judge HALL. Well, it’s supplemental jurisdiction over States——

Mr. BERMAN. There’s State——

Judge HALL. That are related. 

Mr. BERMAN. Yes. The district judge has the ability to hear them 

all, or to abstain and defer—hold onto jurisdiction, but defer the 

State claims to a State court action. Isn’t that right? 

Judge HALL. Under certain circumstances, if the Federal claim 

goes away. Is that what you mean? 

Mr. BERMAN. No, I’d rather have—let’s say the Federal claim is 

a constitutional claim. I’d like to see this issue—see if it can be deVerDate 0ct 09 2002 11:37 Feb 07, 2006 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\111505\24607.000 HJUD1 PsN: 24607
62

cided without reaching the constitutional questions. I’m going to 

abstain and essentially remand, in effect, or tell a party to litigate 

the State case issues first; I’ll hold onto jurisdiction of the constitutional case till we see what happens. Maybe the issue goes away. 

Isn’t that—I mean, I know that’s done in Federal court because— he did it. 

Mr. SAMP. Yes, if there are separate cases, you are permitted, if 

you are the Federal judge, to slow down the Federal case to allow 

the State case to go forward. I don’t think that’s an issue of removal, though, generally. 

Mr. BERMAN. Right. But I guess what I’m saying is, what’s the 

basis for saying that a Federal judge should not have the authority, 

once a case is removed—— Judge HALL. Oh, okay. 

Mr. BERMAN [continuing]. Then to force him to sever and remand, rather than give him the discretion to. 

Judge HALL. The ‘‘shall remand’’ language, you’re talking about? 

Mr. BERMAN. Yes. 

Judge HALL. That’s because what’s being described there is a situation where what’s been removed is a Federal cause of action. 

And with it, in the same case in State court, is an unrelated State 

cause of action; doesn’t rely on the same set of facts; doesn’t really 

arise out of the same controversy. So I could give you——

Mr. BERMAN. Well, what if it does. 

Judge HALL. If it does, then we would keep the jurisdiction. We 

would not remand the State claim. The only time is when there is 

a State claim that’s unrelated which would not have Federal jurisdiction even as a supplement to a Federal question jurisdiction. 

There was—I’m trying to think of an example for you. There is 

a case in which a defendant removed a lawsuit against it by a 

plaintiff who claimed a violation of the Fair Debt Collection Act 

practices—clearly, Federal jurisdiction; clear right to remove by 

that defendant. 

However, the plaintiff had also sued that same defendant for contempt of court; a cause of action that arose under a State statute 

having to do with the collection action. The facts to support the 

contempt of court cause of action were entirely unrelated to the fair 

debt collection violation. That’s an unrelated case that doesn’t have 

Federal jurisdiction. And that’s why this proposal would send that 

piece of the legislation back. They’re really two separate cases. It’s 

that situation. 

Mr. BERMAN. This says ‘‘and remand—’’ ‘‘—mandates remanding 

of non-removable claims.’’

Judge HALL. Correct. 

Mr. BERMAN. But it could be about the same——

Judge HALL. No, then it would be removable, and it wouldn’t be 

remanded. 

Mr. BERMAN. Well——

Judge HALL. A situation where I sue someone for antitrust violation as well as a violation of the State unfair trade practices law, 

because of how they conducted their business, a defendant would 

remove that under Federal question jurisdiction, and would keep 

the State claim. 

Mr. BERMAN. Well, I could give you a real case——

63

Judge HALL. Okay. 

Mr. BERMAN [continuing]. That I was very interested in, that I 

followed very closely, to raise this issue. But let me ask a question 

that I did want to ask you. Under existing removal statute, if a 

plaintiff pleads only a State law claim, and defendant asserts a 

counterclaim for patent or copyright infringement, the case cannot 

be removed to Federal court. 

Judge HALL. Under current law. 

Mr. BERMAN. Yes. In June of this year, legislation was introduced, the Intellectual Property Jurisdiction Clarification Act, 

which provided a removal statute specific to patents, plant variety 

protection, and copyrights. You could call this the IP removal statute. 

Judge HALL. Uh-huh. 

Mr. BERMAN. Here, unlike the existing law on removal, a patent 

or a copyright counterclaim is grounds for removal of jurisdiction 

to Federal district court. What if we pass that, so we have this removal statute and we have that? Do we need to change that in 

some way, or will that prevail in those situations? 

Judge HALL. I believe that will prevail. But that’s a good example of what our proposal is trying to address. In that situation, let’s 

say that the ‘‘ABC’’ company sued the ‘‘D’’ company for a breach 

of contract, failure to deliver goods. And the ‘‘D’’ company counterclaims and said, ‘‘Oh, by the way, you’ve also violated my patent. 

Here’s my counterclaim against you.’’ It’s got nothing to do with the 

contract that the original suit is on. 

Under that proposed legislation, that could be removed to Federal court, because the patent case belongs in Federal court; at 

least Congress makes that judgment. But once it got here, this proposal would then have the court look at whether that original contract claim really belongs in Federal court or not. But it wouldn’t 

affect the removal of the patent case, and the patent case would 

stay in Federal court. Our proposal would have no effect on that. 

Mr. SMITH. Okay. Thank you, Mr. Berman. The gentleman from 

California, Mr. Issa, is recognized for his questions. 

Mr. ISSA. Thank you, Mr. Chairman. And I’d like to follow right 

on. Mr. Berman is insightful beyond all possible mortal capabilities, because he hit on the area that I’m concerned about. 

Mr. SMITH. Did the gentleman from California say what I 

thought he said? [Laughter.] 

Mr. BERMAN. If I said something that he liked. 

Mr. ISSA. Howard, you said something I like. 

But, no, Mr. Berman really did hit on something, Your Honor. 

This language says ‘‘shall.’’ And you know, we love saying ‘‘shall’’; 

and you love hearing ‘‘may.’’ And oddly enough, you’re now coming 

to us with ‘‘shall,’’ and we’re—Mr. Berman and I, I think, are questioning why it shouldn’t be ‘‘may.’’

The discretion of whether something is related normally—correct 

me if I’m wrong—goes beyond a question of: is it actually a Federal 

issue? For example, if the patent case were to go away, does the 

other case go away? Or does it become so de minimis that parties 

will probably settle? That’s a decision that is a ‘‘may’’ decision of 

a district court all the time. 

64

Additionally, by serendipity or something, to my particular copy 

of today, I had a Senate bill that, of all things, tried to clarify our 

famous old vessel hull design protection amendments, which is the 

old plug mold. And being a Californian, we know about the plug 

mold cases. 

There are lots of State cases in which you can allege unfair competition. Now, your understanding, I think, is that that would be 

related. 

Judge HALL. Yes, I would think so, if it’s related to the same conduct that underlies the antitrust claim, yes. 

Mr. ISSA. Okay. But when we put in ‘‘shall’’ language, don’t we 

take away your ability not to have to fight for what is related-unrelated? You become somebody who, because we’ve said ‘‘shall,’’ then 

whether your ‘‘shall’’ applies becomes an obligation for which they 

can go over your head to, in my case, the Ninth/Twelfth Circuit. 

To me, it would seem like having language which makes it something we believe should be done, but at the same time making it 

a ‘‘may.’’ And a decision clearly within the purview of the district 

judge seems to be in your best interests. Why would it not be? 

Judge HALL. Because I believe it may raise some constitutional 

issues. There is a case which really is one of the reasons the Judicial Conference began to address this question and makes this proposal to you. It’s called the Morales case. I think it’s out of Michigan. And in that case, an employee sued his employer under the 

collective bargaining agreement—Federal question; should have 

been removable by the employer. He also sued a co-worker for hitting him—assault and battery. 

Mr. ISSA. You can make a Federal issue out of anything; can’t 

you? 

Judge HALL. Well, in that case, the Morales court said, ‘‘We don’t 

have jurisdiction over this case, because we don’t have jurisdiction 

over the assault and battery,’’ and sent it all back to State court; 

in our view, frustrating the right of the defendant to remove the 

labor question to the Federal court. 

Now, to get to your question, the use of the word ‘‘shall’’ depends 

upon—only if implemented—if the court has determined it’s not a 

related case under the article III case——

Mr. ISSA. Okay, but let’s go back to the original question just a 

little further back. 

Judge HALL. Yes. 

Mr. ISSA. Today, you have a lot more ability to include all the 

counterclaims. If you are sitting there through the discovery process, hopefully, settlement conferences and the like, you have the 

ability to hold onto these. And by holding onto them, often you can 

save the State court. 

Judge HALL. That’s correct. 

Mr. ISSA. So if we give you the ‘‘may’’ send all or part that are 

not Federal questions back to the State courts—which I think is an 

appropriate power—but we don’t force you to take it back—even if 

it’s unrelated and yet, for example, de minimis—isn’t that a power 

that is in your best interests; since your job is not just to try the 

Federal issue; your job, I believe, is not to send frivolous subparts 

back to the State? 

65

Now, having said that, I understand you would choose to bifurcate the case. You would choose to say, ‘‘Look, we’re not going to 

try—’’

Judge HALL. The assault and battery. 

Mr. ISSA. ‘‘—the assault. On the other hand, unless the plaintiff 

wants to move to split that case and send that part back, we’re 

going to let it just sit there.’’ Now, presently, I think you have that 

authority. Why would you want to lose it? 

Judge HALL. I hate to disagree with a Congressman who wants 

to give me discretion. I find myself in a really awkward situation. 

Mr. ISSA. It’s shocking. It’s shocking here. 

Judge HALL. I always think discretion is a fine thing for judges. 

But in this instance, I think it’s problematic. Because I think, were 

we to have discretion, that infers we have the power to keep it. 

And the situations we’re trying to address with this legislative fix, 

in effect, are situations where we don’t believe the court has the 

power to hear that case. 

In other words, it’s not that—we’re not sending back any related 

case controversy, or anything that’s a part of a case in a controversy that’s wrapped up in the Federal piece of the case. All 

we’re talking about is situations where a completely unrelated 

claim—lots of State courts allow you to pull together all kinds of 

unrelated controversies into one action. And so when those kinds 

of cases get removed, we have no authority, we would suggest, effectively under the Constitution; that there’s no basis in jurisdiction to hear that. 

Mr. ISSA. If I could, Mr. Chairman, I think I have one more comment here. 

Go ahead. 

Mr. HELLMAN. Oh, thank you. Yes, just to supplement what 

Judge Hall has said, there are two statutes that govern the presentation of claims joined to Federal claims. The other statute, which 

we really haven’t talked about very much here, is section 1367. 

That makes clear that the district court, that Judge Hall, would 

have the authority to keep and decide all related claims. 

So the proposed 1441(c) deals only with those statutes that are 

not only outside original grants of jurisdiction, like 1332 or 1331, 

but are also outside supplemental. And the supplemental jurisdiction statute, I think it’s important to emphasize, does grant precisely the kind of discretion, in section 1367(c), that you describe. 

So 1367(c) gives that discretion; does it for all the cases that are 

within the scope of judicial power; 1441(c) addresses those that are 

outside the scope of the judicial power. Thank you. 

Mr. ISSA. So essentially, as long as our report language makes 

clear that ‘‘C’’ still applies, you don’t see a conflict in putting 

‘‘shall’’? 

Mr. HELLMAN. That’s right. It’s only the cases that are outside 

judicial power altogether. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. SMITH. All right, thank you, Mr. Issa. The gentleman from 

California, Mr. Schiff, is recognized for his questions, with a caveat 

that he has a high standard to meet. Mr. Issa referred a few minutes ago to Mr. Berman as being inspired beyond mere mortals—

66

or something along those lines. And I just hope you can rise to the 

challenge and try to equal that standard. 

Mr. SCHIFF. I don’t think I can. But in fairness, the reason that 

my colleague, Mr. Issa, made that observation was because Mr. 

Berman was in agreement with him. Which might in his view 

mean that Mr. Berman is brilliant. In my view, it calls into serious 

question Mr. Berman’s judgment. [Laughter.] 

Mr. BERMAN. Would the gentleman yield? 

Mr. SCHIFF. I would be happy to yield. 

Mr. BERMAN. There are other issues where Mr. Issa has said I 

have been sort of below mortals. [Laughter.] 

Mr. SMITH. Mr. Berman told me a while ago that I should hear 

what you had to say, Mr. Issa, about him when you disagree with 

him. 

The gentleman from California, Mr. Schiff, is recognized. 

Mr. SCHIFF. Thank you, Mr. Chairman. I just have a couple of 

questions. And I apologize if you already covered this before I had 

a chance to get here. 

In looking at the amount that would be now indexed to inflation 

of 75,000, Judge, I wanted to ask you, I see from your analysis that 

had this formula been applicable beginning in 2000, you’d already 

be at 95,000. And I guess if this formula had been applicable back 

in 1997 or 1998, when you last adjusted the amount, you’d probably be at 100,000. 

And I guess the question is, the proposal suggests that we start 

at 75 and now index going forward. Has thought been given to raising the amount to 100,000, and indexing it forward? And what 

would your thoughts be on that? 

Judge HALL. My thoughts are that’s for Congress to address, as 

to whether the threshold is still a meaningful one, in light of inflation. Our proposal is really designed, as most of the others are, to 

carry forward Congress’ intention. In establishing 75,000, that was 

meant to be a meaningful threshold for diversity jurisdiction. And 

unfortunately, in our inflationary economy, that becomes eroded 

over time. 

So the idea of indexing is to at least keep pace with the value 

of the dollar, vis-a ́-vis that threshold amount. And Congress is, of 

course, always free to revisit whether that base amount—now 

75,000, or whatever it might become if indexed—continues to be 

the appropriate level of, shall we say, entry into diversity jurisdiction. 

I mean, the levels have been—I think, as Mr. Samp points out 

in his testimony, they’ve been sort of all over the place historically. 

But I think, as I say, our goal is here both to clarify and in this 

instance to give meaning to that threshold. And should Congress 

wish to address and consider and take up the question of changing 

the base amount, that’s, I guess I’d say, for you to decide. 

Mr. SCHIFF. Well, would, you know, the other two witnesses 

think this was inappropriate or inequitable, to begin at 100,000 

and index to inflation? 

Mr. HELLMAN. Well, I agree it’s a policy judgment. I’m not sure 

that the difference between 75,000 and 100,000 these days is huge. 

But if you’re going to move it up at all, that probably makes some 

sense. 

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Mr. SAMP. I agree that it probably doesn’t make a whole lot of 

difference what amount you choose. One of the things that I mentioned earlier was that, at least in personal injury cases where you 

can sue for punitive damages and pain and suffering, the plaintiff 

can choose to call their claim for more than 100,000 if they want, 

or less than 100,000. So that my suggestion is, if you’re really trying to cut down on Federal court caseloads, that the jurisdictional 

amount is probably not a major issue one way or the other. 

Mr. SCHIFF. Okay. Under one of the sections, the proposal would 

allow the latest-served defendant in a multiple-defendant case 30 

days after service to file a removal petition in order to be fair to 

late-served defendants. How would this, though, affect the trial 

date, if a defendant were purposely evading service? And how do 

you deal with those circumstances? 

Judge HALL. Well, the current legislation of course has the 1-

year limit. But working back from that, I’m not sure there’s many 

cases that get to trial in less than 1 year. Certainly, a defendant 

who’s brought in very late always is in a good position to suggest 

trial ought not to proceed immediately, because they haven’t had 

the benefit of discovery. 

I think that one thing that we should remember about this particular section or proposal is not just that it gives fairness to the 

last-served defendant, but the plaintiff can control this in many respects. They can choose to serve everyone right away, and then 

there will be just a very short period for removal. 

This provision is designed when, as you say, someone is deliberately not served, to not take away from them their right to remove. 

Mr. SCHIFF. Is there any ground in between the kind of broad 

discretion and potential satellite legislation that equitable consideration would give, and a bright line on the other hand? Is there 

any—Judge, any contours you could define a little more narrowly 

than ‘‘equitable discretion’’? 

Judge HALL. Well, ‘‘equitable considerations’’ has meaning in the 

case law. It’s sort of the concept used in tolling situations when 

statutes of limitations are suspended. 

Mr. SCHIFF. Is that less than ‘‘good cause’’? 

Judge HALL. It’s different than ‘‘good cause.’’ Because ‘‘good 

cause’’ only really looks at one side of the equation. The ‘‘equitable 

considerations’’ is looking at both parties’ conduct, I think. That’s 

how I would view the different standards. 

The danger I see in trying to codify or legislate the particular 

things that would be considered, one, I don’t have the same confidence that the others have that this would minimize litigation. 

There’s often a lot of litigation over iterations of considerations. 

What do they mean? Do they mean others can’t be considered? You 

know, the old ‘‘one thing is included; others are excluded’’ doctrine. 

So I’m not sure it would minimize litigation. 

And second, unfortunately, as humans, I think we’re limited in 

our capacity to imagine all of the factors that would be appropriate 

to consider. 

Mr. SCHIFF. But some of us are not human. We are beyond the 

comprehension of mere mortals—like Mr. Berman. [Laughter.] 

So we’re not limited in those ways that most people are. 

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Judge HALL. Well, then perhaps that person could write the list 

of what you should say. [Laughter.] 

Mr. SCHIFF. Well, Mr. Chairman, on that, I’ll yield back. 

Mr. SMITH. Thank you, Mr. Schiff. 

That concludes our questions. Thank you all for your expert testimony today. It’s much appreciated. And oftentimes—or it’s not that 

often, I should say, that witnesses testify and soon thereafter see 

the result of their testimony reflected in legislation that we’ll be 

drafting and, hopefully, marking up. But this is one of those rare 

instances, if that is a source of some satisfaction to you all. 

Judge HALL. It is. Thank you very much. 

Mr. SMITH. So thank you again for being here. And we will look 

forward to proceeding on the legislation. 

Judge HALL. Thank you, Mr. Chairman. 

Mr. HELLMAN. Thank you. 

Mr. SAMP. Thank you. 

[Whereupon, at 5:12 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Mr. Chairman, thank you for scheduling this hearing on a committee print designed to clarify elements of federal court jurisdiction. The topic of diversity jurisdiction and civil procedure is opaque and any illumination is helpful. Therefore, I am 

looking forward to our witnesses’ testimony. 

This hearing concerns the complexities of diversity jurisdiction, and the concept 

of federalism, which holds an assurance of an impartial forum for parties in lawsuits filed in courts in states other than their own, and facilitates a continued open 

dialogue between the federal and state systems. Some of the amendments in the 

committee print appear to be technical in nature, while others address some of the 

core policy considerations behind federal diversity jurisdiction. Because application 

of diversity jurisdiction is complicated, and greatly affects an already overburdened 

federal court, it is important that we consider the impact of these provisions. 

Reducing redundant or unnecessary litigation is a laudable goal. We should clarify 

when federal diversity jurisdiction exists and help those who appear before courts 

understand where the bright lines of diversity jurisdiction exist. Furthermore, it is 

my understanding that specific provisions of the proposed legislation will achieve 

the original intention of Congress when passing the underlying legislation. These 

witnesses who are here today will help outline how this legislation will do that, and 

explain the advantages of passing the proposed text in the Federal Courts Jurisdiction Clarification Act. 

Thank you Mr. Chairman. I yield back the balance of my time. 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, AND MEMBER, COMMITTEE ON THE

JUDICIARY

I am pleased that we are considering a largely non-controversial bill that clarifies 

the jurisdiction of the federal courts. There are, however, minor issues that I hope 

to resolve with the Chairman and Ranking Member as we move forward. 

Section two first clarifies that a citizen of a state and a lawful permanent resident 

alien living in that state do not have diversity jurisdiction for purposes of federal 

law. 

Section three of the legislation states that corporations would be citizens of the 

states where they are incorporated and where they have their principal place of 

business. The purpose is to remove federal court jurisdiction in situations where a 

foreign corporation is sued by a citizen of a state where it has its principal place 

of business and where a citizen of a foreign country sues a U.S. corporation that 

has an overseas location as its principal place of business. 

Finally, the bill suggests changes to the federal removal and remand statutes. For 

instance, it would permit an extension of the one-year removal deadline for laterserved defendants, who would not have time to prepare the necessary filings. At the 

same time, we must ensure that defendants who avoid service cannot game the system. Plaintiffs who make reasonable but unsuccessful efforts to serve defendants 

should be able to rely on the deadline. 

This section also seems to imply that injunctive relief would need to be converted 

into damages to determine whether the ‘‘amount in controversy’’ threshold is met 

for federal court. This would require careful consideration prior to passage.

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SUPPLEMENTARY PREPARED STATEMENT OF ARTHUR D. HELLMAN, PROFESSOR, 

UNIVERSITY OF PITTSBURGH SCHOOL OF LAW


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