Class Actions: H.R. 1875, 106th Congress, the "Interstate Class Action Jurisdiction Act of 1999"

Class Actions: H.R. 1875, 106th Congress, the "Interstate Class Action Jurisdiction Act of 1999"

Order Code RS20347
Update February 20, 2001
CRS Report for Congress
Received through the CRS Web
Class Actions: H.R. 1875, 106th Congress,
the "Interstate Class Action Jurisdiction Act
of 1999"
Paul Starett Wallace, Jr.1
Specialist in American Public Law
American Law Division
Summary
H.R. 1875, with some exceptions, reflects a preference for class actions to be
adjudicated in federal courts rather than state courts. This report, gives a brief sketch
of the proposal, the pros and cons that have been advanced concerning the bill as passed
by the House of Representatives,2 and summarizes the action the 106th Congress took on
this legislation. It will not be updated.
Class Actions
"One of the most controversial developments in the law of federal procedure is the
growth of the class action. ... " The class action ... has been described as everything
from "one of the most socially useful remedies in history" to "legalized blackmail." ...
"The class action was an invention of equity * * * mothered by the practical necessity
of providing a procedural device so that mere numbers would not disable large groups
of individuals, united in interest, from enforcing their equitable rights nor grant them
immunity from their equitable wrongs. * * * By Rule 23 [of the Federal Rules of Civil
Procedure, 28 Appendix, United States Code] the Supreme Court has extended the use
of the class action device to the entire field of federal civil litigation by making it
applicable to all civil actions." It provides a means by which, where a large group of
persons are interested in a matter, one or more may sue or be sued as representatives
of the class without needing to join every member of the class. This procedure is
available in federal courts, even in diversity actions in states that do not recognize the
1 This is an update of CRS Report RS20347, H.R. 1875, 106th Congress, the “Interstate Class
Action Jurisdiction Act of 1999" by P.L. Morgan.
2 145 Cong. Rec. H8595 (daily ed. Sept. 23, 1999). The 106th Congress adjourned without taking
further action. See also, CRS Report RS20667 for discussion of a similar Senate bill on class
action reform.
Congressional Research Service ˜ The Library of Congress

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class suit, though the state law will define the substantive interest of the members of the
class and the capacity to sue or be sued of the named representatives.3
The Legislation
Section 1. Short title. The Act may be cited as the "Interstate Class Action
Jurisdiction Act of 1999."
Section 2. Findings. Would provide that class actions implicate interstate
commerce, invite discrimination by a local State, and tend to attract bias against business
enterprises, but because of an unintended technicality most class actions fall outside of
federal diversity jurisdictional statutes. Would also provide that it is appropriate for
Congress to amend the federal diversity jurisdiction statutes to allow more such actions
to be brought in, or removed to, federal court to ensure that they are adjudicated in a fair,
consistent, and efficient manner.
Section 3. Jurisdiction of District Courts. Except in certain securities
transaction cases and cases involving the internal affairs or governance of some entities
under State business incorporation or organizational law, the Act would give federal
district courts original jurisdiction over civil suits brought as class actions where any
member of the proposed plaintiff class is: (1) a citizen of a State different from any
defendant; (2) a foreign state and any defendant is a citizen of a State; or (3) a citizen of
a State and any defendant is a citizen or subject of a foreign state. District courts would
not exercise jurisdiction in a class action which is: (1) an intrastate case, i.e., the claim
therein would be governed primarily by the law of the State in which the action was
originally filed, and the substantial majority of the members of all proposed plaintiff
classes, and the primary defendants, are citizens of the State in which the action was
originally filed; (2) a limited scope case, i.e., the record indicates that all matters in
controversy asserted by all members of all proposed plaintiff classes would not, in the
aggregate, exceed the sum or value of $1,000,000, exclusive of interest and costs, or in
which the number of members of all proposed plaintiff classes in the aggregate would be
less that 100; or (3) a State action case, i.e., where the primary defendants would be
States, State officials, or other governmental entities against whom the district court may
be foreclosed from ordering relief. A "member of a proposed class shall be deemed to be
a citizen of a State different from a defendant corporation only if that member is a citizen
of a State different from all States of which the defendant corporation is deemed a citizen."
Section 4. Removal of class actions. Would allow removal of a class action
to federal court: (1) without regard to whether any defendant is a citizen of the State in
which the action is brought; (2) by any defendant without the consent of all defendants;
or (3) by any plaintiff class member, without the consent of all members of such class, if
the removing plaintiff is not a named or representative class member of the action for
which removal is sought. Would allow removal before or after the entry of any order
certifying a class but removal may not be sought by a non-named, non-representative
plaintiff class member before entry of an order certifying a class of which the plaintiff is a
member. Would allow non-named, non-representative class member plaintiff to remove
action to federal court no later than 30 days after receipt of the initial written notice of the
3 Charles Alan Wright, Law of Federal Courts 507-08 (5th ed. 1994) (footnotes omitted).

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class action provided at the court's direction. Would provide that this section not apply
to certain securities transaction cases or cases involving the internal affairs or governance
of some entities under State business incorporation or organizational law. Would provide
that State substantive law not be changed by application of sections 3 or 4 of this Act.
Would authorize dismissal of removed actions not properly before the federal court and
allow the amendment of, and refiling of, the dismissed action in State court. Would
authorize removal again if the refiled action is one of which the federal courts have original
jurisdiction. Would authorize tolling of limitation periods for the time during which the
dismissed class actions were pending.
Section 5. Applicability. Amendments made by the Act would apply to any
action commenced on or after the date of the enactment.
Section 6. GAO study. Would require that the Comptroller General of the
United States conduct a study of the impact of this Act upon the workload of the federal
courts and report the results of the study to Congress not later than one year after the date
of enactment.
Pros and Cons of the Proposal4
Proponents argue that the legislation is needed for the following reasons:
(1) Class action cases should be heard in federal court as they typically affect more
citizens, involve more money and implicate more interstate commerce issues than any
other type of law suit.
(2) Present law allows counsel to "game" the system by recruiting irrelevant parties,
from the same state as the defendant, to class actions to destroy complete diversity5 and
keep the case in state court. Likewise, counsel may understate the amount in controversy6
to avoid removal to federal court. When the statutory time to remove the suit to federal
court has passed, the irrelevant parties may be dropped and the amount in controversy
restated upward.
(3) Abuse of the class action device occurs because some State courts are improperly
supervising settlements, e.g., some class claimants have won cases, recovered nothing,
and then been billed for attorneys fees.
(4) Some State courts are so lax in certifying classes that the due process rights of
unnamed class members and/or those of defendants are violated.
4 Arguments on the merits of the bill are set forth in greater detail in H.R. Rep. No. 106-320, at 4-
12 [need for legislation]; 31-47 [dissenting views] (1999). The arguments are generally repeated
in the floor debate prior to House passage of the bill at 145 Cong. Rec. H8568-H8592 (daily ed.
Sept. 23, 1999).
5 Under present law, there must be complete diversity of citizenship at the time of filing a class
action suit, i.e., all representatives of a class named as plaintiffs must be citizens of a state or states
different from the state of citizenship of the defendant. 28 U.S.C. § 1332. “H.R. 1875 would have
allowed the principles of Federal diversity jurisdiction to be applied to interstate class actions.”
6 The amount in controversy in a diversity case must exceed the sum or value of $75,000,
exclusive of interest and costs, before the issue may be tried in federal court. Id.. Generally, each
member of the class must individually seek damages of $75,000 to be allowed to remain in the
class. Zahn v. International Paper Co., 414 U.S. 291 (1973).

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(5) Lack of control of class actions in State courts can amount to extortion by
requiring innocent defendants to pay plaintiff's lawyers to avoid a costly trial and the slim
chance of having to pay millions of dollars in damages.
(6) Some State courts continue to misapply their own law and misinterpret the laws
of other states, a denial of due process.
(7) The legislation would eliminate a "race to file" in the State courts with the most
lax attitude toward class certification.
(8) Unlike the federal court system, which can consolidate overlapping or "copycat"
class action suits on behalf of the same members, the State courts have no such
mechanism. State courts and counsel may compete for control of the cases, often to the
detriment of the plaintiffs and defendants.
(9) Under the present law, and State court practice, many class actions of
questionable merit are being filed without the procedural protections available to
defendants in federal courts.
Opponents argue that the legislation should not be enacted because:
(1) This bill, which would bar most state class actions, is opposed by the Justice
Department, the Conference of [State] Chief Justices, and the Judicial Conference of the
United States, as well as consumer and public interest groups.
(2) Removal to federal court would make access to justice by groups of injured
persons burdensome, expensive and time-consuming.
(3) The workload of the federal courts would be increased, and the parties may be
forced to wait 3 years or more for trial. Also, state courts would have judicial resources
drained away by being forced to adjudicate the actions on a case-by-case basis.
(4) The bill has been written in a one-sided manner which favors defendants with no
attempt to deal with abuses of the system by that group.
(5) Inadequate study has been made of the effect this legislation would have on State
court prerogatives.
(6) There would be specific adverse impact upon the ability of plaintiffs to obtain
redress against the tobacco, gun, and managed care industries in federal courts.7
On May 19, 1999, H.R. was referred to the House Committee on the Judiciary8
where Committee hearings were held.9 On September 14, 1999, H.R. 1875 was reported,
as amended, by the House Judiciary Committee and placed on the Legislative Calendar.10
On September 23, 1999, H.R. 1875 passed the House by a recorded vote of 222-207.11
On September 24, 1999, it was received in the Senate12 and on November 19, 1999,
7 Arguments on this point are contained in "Additional Dissenting Views," H.R. Rep. No. 106-320,
at 43-47 (1999).
8 145 Cong. Rec. H3392 (daily ed. May 19, 1999).
9 Id. At D846 (daily ed. July 21, 1999).
10 H. Rept.106-320. 145 Cong. Rec. D981 (daily ed. September 14, 1999).
11 145 Cong. Rec. H.8594-95 (daily ed. September 23, 1999).
12 Id. at S11249 (daily ed. September 24, 1999).

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referred to the Senate Committee on the Judiciary.13 The 106th Congress adjourned
without taking further action.
13 Id. at S15086 (daily ed. November 19, 1999).

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