Protective jurisdiction, aggregate litigation, and the limits of article III

California Law Review

Volumn 95, Issue SPEC. ISS., 2007, Pages 1423-1472

  Pfander, James E ^a  

^a NORTHWESTERN UNIVERSITY   (United States)

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EID: 38949197376     PISSN: 00081221     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (332)

1. Classic early accounts by Herbert Wechsler, Federal Jurisdiction and the Revision of the Judicial Code, 13 LAW & CONTEMP. PROB. 216 (1948)
2. and Paul Mishkin, The Federal "Question" in the District Courts, 53 COLUM. L. REV. 157 (1953) [hereinafter Mishkin, The Federal "Question"], have been explored and extended in subsequent work.
3. See Carole E. Goldberg, The Protective Jurisdiction of the Federal Courts, 30 UCLA L. REV. 542 (1983).
4. For a summary and critique, see RICHARD H. FALLON, JR., DANIEL J. MELTZER & DAVID L. SHAPIRO, HART & WECHSLER'S THE FEDERAL COURTS AND THE FEDERAL SYSTEM 846-55 (5th ed. 2003);
5. MARTIN H. REDISH, FEDERAL J URISDICTION: TENSIONS IN THE ALLOCATION OF FEDERAL POWER 90-95 (2d ed. 1990).
6. Article III extends the judicial power of the United States to cases arising under the Constitution, laws, and treaties of the United States. See U.S. CONST., art. III, § 2. 28 U.S.C. § 1331 gives the federal district courts original jurisdiction of all such "civil actions." Scholars conventionally refer to these proceedings as "federal question" cases and conventionally note that the grant of power in Article HI extends more broadly than the general grant of federal question jurisdiction in § 1331.
7. See, e.g., Mishkin, The Federal "Question", supra note 1, at 160-63. Issues of protective jurisdiction typically arise from the interpretation of other jurisdictional statutes; § 1331 has been interpreted to require the existence of a substantial federal question on the face of the well-pleaded complaint. Id. at 164. According to one prominent account, Congress may regulate as it usually does by adopting rules of or it may simply transfer the responsibility for applying state law from the state to the federal courts.
8. See Wechsler, supra note 1, at 224-25;
9. see also Eric J. Segall, Article III as a Grant of Power: Protective Jurisdiction, Federalism, and the Federal Courts, 54 FLA. L. REV. 361, 365-66, 377-78 (2002) (approving of the exercise of jurisdiction where Congress simply confers jurisdiction on the federal courts to hear state law claims in an area that it could substantively regulate under its Article I powers). Professor Wechsler's support for a broad conception of protective jurisdiction comports with his view that the political safeguards of federalism adequately protect the interests of the states from congressional encroachments.
10. See Herbert Wechsler, The Political Safeguards of Federalism: The Role of the States in the Composition and Selection of the National Government, 54 COLUM. L. REV. 543 (1954);
11. cf. JESSE J. CHOPER, JUDICIAL REVIEW AND THE NATIONAL POLITICAL PROCESS: A FUNCTIONAL RECONSIDERATION OF THE ROLE OF THE SUPREME COURT (1980).
12. Protective jurisdiction provided an early predicate for some complex litigation proposals. For an account, see Linda S Mullenix, Complex Litigation Reform and Article III Jurisdiction, 59 FORDHAM L. REV. 169, 178-91 (1990) (describing ABA task force on mass torts and ALI Project on Complex Litigation as relying upon theories of protective jurisdiction to support jurisdictional expansion). Some have tried to solve the jurisdictional puzzles implicit in the Alien Tort Statute from a protective jurisdiction perspective.
13. See William Casto, The Federal Courts ' Protective Jurisdiction Over Torts Committed in Violation of the Law of Nations, 18 CONN. L. REV. 467 (1986).
14. See National Mut. Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 586-88 (1949).
15. See Tidewater, 337 U.S. at 617-18 (Rutledge, J., concurring);
16. id. at 647, 652 (Frankfurter, J., dissenting);
17. id. at 628-29 (Vinson, CJ., dissenting).
18. For a critique of, and alternative to, Justice Jackson's suggested approach to the Tidewater problem, see James E. Pfander, The Tidewater Problem: Article III and Constitutional Change, 79 NOTRE DAME L. REV. 1925-1980 (2004).
19. See Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 460 (1957) (Frankfurter, J., dissenting).
20. In Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983), the Court found that the claim in question arose under the federal law of foreign sovereign immunity and saw no reason to reach the issue of protective jurisdiction. Still later, in Mesa v. California, the Court pointedly declined the federal government's invitation to adopt protective jurisdiction as the basis for district courts to exercise removal jurisdiction over state law claims brought against federal officials.
21. See Brief for Petitioners at 43, Mesa v. California, 489 U.S. 121 (1989) (No. 87-1206) (describing the federal officer removal statute as meant to protect federal officers from hostile state courts by providing for a trial on the merits of state-law questions free from local interests or prejudice). Instead, the Court chose to limit officer removal jurisdiction to cases in which the federal officers tender substantial defenses grounded in federal law.
22. See, e.g., Exxon Mobil Co. v. Allapattah Servs. Inc., 545 U.S. 546 (2005) (relaxing the amount-in-controversy rule but preserving the complete diversity rule); Owen Equipment & Erect. Co. v. Kroger, 437 U.S. 365 (1978) (expanding the scope of ancillary jurisdiction but preserving the complete diversity rule).
23. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (1967).
24. Two statutes in particular illustrate the trend. The Multi-party, Multiforum Trial Jurisdiction Act of 2002 (MMTJA) seeks to sweep into federal court all claims arising from any single disaster at a discrete location (such as a fire or plane crash) that results in the death of more than seventy-five individuals. Pub. L. No. 107-273, 116 Stat. 1758 (codified as amended in 28 U.S.C). More significantly, the Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat. 4 (codified in 28 U.S.C.), empowers the district courts to hear many state law class actions in which the aggregate value of the claims exceeds $5 million and diversity of citizenship exists between any member of the class and any defendant.
25. See 28 U.S.C. § 1332(d)(2). Parts II and IV analyze the MMTJA and CAFA in some detail.
26. Pub. L. No. 109-2, 119 Stat. 4 (codified in 28 U.S.C.).
27. See, e.g., Stephen C. Yeazell, Overhearing Part of a Conversation: Shutts as a Moment in a Long Dialogue, 7A U.M.K.C. L. REV. 779, 784 n.29 (2006).
28. See generally CHARLES ALAN WRIGHT & MARY KAY KANE, THE LAW OF FEDERAL COURTS 159 (6th ed. 2002) (applauding the advent of minimal diversity in Tashire);
29. Erwin Chemerinsky, Federal Jurisdiction 295 (4th ed. 2003) (supporting the use of minimal diversity to overcome the "pernicious" effects of the complete diversity rule). For a more skeptical view of minimal diversity, see C. Douglas Floyd, The Limits of Minimal Diversity, 65 HASTINGS L.J. 613 (2004).
30. United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966).
31. See, e.g., Owen Equipment & Erect. Co. v. Kroger, 437 U.S. 365 (1978). The complete diversity rule holds that none of the properly joined plaintiffs may share a state of citizenship with any properly joined defendant.
32. See Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546 (2005).
33. U.S. CONST., art. III, § 2, cl. 1.
34. Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 823 (1824).
35. See generally Anthony J. Bellia, Jr., Article III and the Cause of Action, 89 IOWA L. REV. 777 (2004) (exploring the Osborn ingredient rule from the perspective of pleading rules and concluding that then-existing rules of pleading would have required corporate entities to plead their capacity to sue). Today, in a world that treats the general principles of contract law to which Marshall referred as matters of state law, the Osborn decision enables Congress to extend federal question jurisdiction to state law claims brought by and against federal instrumentalities or entities. Perhaps the most expansive application of the Osborn rule came in the Pacific Railroad Removal Cases, 115 U.S. 1 (1885), which authorized federal question removal of common law claims against privately owned but federally chartered railroads. For doubts about the continuing viability of those decisions,
36. see Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 470-72 (1957) (Frankfurter, J., dissenting). Congress has limited the application of the instrumentality rule to claims by and against corporations in which the federal government owns a 50% stake.
37. See 28 U.S.C. 1349. Osborn-style ingredient jurisdiction thus helps to explain both the power of the FDIC to sue in federal court as the representative of a failed bank on state causes of action,
38. see D 'Oench Duhme v. FDIC, 315 U.S. 447, 455 (1942) (treating suits by and against the FDIC as suits arising under federal law to which federal common law would apply) and the power of the federal bankruptcy trustee to bring suit in federal court on state law claims against the estate's debtors.
39. See Ralph Brubaker, On the Nature of Federal Bankruptcy Jurisdiction: A General Statutory and Constitutional Theory, 41 WM & MARY L. REV. 743 (2000) (treating the federal bankruptcy estate as a federal entity under Osborn with power to bring and defend the estate's state law claims in federal court).
40. At the time of the Osborn decision, the Court viewed issues of contact and tort law in the bank litigation as matters of general law that it was competent to shape and interpret in light of federal interests. See Osborn, 22 U.S. at 838-46 (rejecting Ohio's contention that equity would not restrain a trespass by drawing on general principles and without treating state court decisions as controlling authority);
41. see also Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842)
42. (applying general common law principles to a dispute over commercial law and rejecting the proposed reliance on state rules of decision). A finding of federal jurisdiction thus entailed the power to fashion controlling rules of common law. Today, jurisdiction no longer implies lawmaking authority. The decision in Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), proclaims the end of general federal common law and requires federal courts to treat state judicial decisions as controlling on the substantive issues to which they apply. Lacking power to fashion general common law as an incident of jurisdiction, federal courts may fashion specific common law but only where they identify an authoritative source of positive federal law or an overriding federal interest that empowers them to do so.
43. See Paul J. Mishkin, The Variousness of "Federal Law ": Competence and Discretion in the Choice of National and State Rules of Decision, 105 U. PA. L. REV. 797 (1957).
44. See generally Jay Tidmarsh & Brian J. Murray, A Theory of Federal Common Law, 100 NW. L. REV. 585 (2006). Eric's conception of the constitutional underpinnings of the state court role in fashioning state law lies at the heart of the Court's suspicion of jurisdictional grants that simply transfer state law matters to federal court; federal courts can resolve disputes over state law, but cannot shape its content as they do with federal law.
45. See Pacific Railroad Removal Cases, 115 U.S. 1 (1885) (upholding removal jurisdiction over common law claim on the theory that the defendant railroad was a federally-chartered corporation under Osborn).
46. Justice Frankfurter described situations in which the federal issue had receded into the remote background of litigation and thus raised doubts about its substantiality. See Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 470-71 (1957).
47. Professor Mishkin persuasively criticizes any jurisdictional test that would make original, as opposed to appellate, federal question jurisdiction turn on an estimation as to whether the federal legal issues were substantially contested or disputed. While the parties can identify contested issues of federal law on appeal, original jurisdiction depends on the state of things as of the time of the complaint's initial filing. See Mishkin, The Federal "Question'', supra note 1, at 169-170.
48. Cf. Grable & Sons Metal Products Inc. v. Darue Engineering & Mfg., 545 U.S. 308 (2005) (describing the test for original federal question jurisdiction as depending on the existence of a substantial and disputed issue of federal law).
49. Wechsler, supra note 1, at 224-25.
50. Id. at 225.
51. See Alexander Bickel & Harry Wellington, Legislative Purpose and the Judicial Process: The Lincoln Mills Case, 71 HARV. L. REV. 1, 20 (1957).
52. Thus, in commenting on the Tidewater decision, Professor Mishkin observed that those who viewed Article III as limiting Congress's power to expand the jurisdiction of the federal courts had the better of the argument on grounds of doctrine, history and authority. See Mishkin, The Federal "Question", supra note 1, at 191-92.
53. See Mishkin, The Federal "Question", supra note 1, at 192.
54. Cf. Goldberg, supra note 1, at 587-89 (questioning Mishkin's use of the limits of diversity jurisdiction as an argument for curtailing reliance on protective jurisdiction). Party alignment jurisdiction refers to diversity of citizenship and other provisions of Article III that confer jurisdiction on the basis of the configuration of the parties.
55. Id.
56. Id. at 189.
57. See Goldberg, supra note 1, at 546-50.
58. Id. at 547-48.
59. In rejecting Wechsler's analysis in Lincoln Mills, Justice Frankfurter stated that the restrictions of Article III were not "met or respected by a beguiling phrase that the greater includes the lesser." Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 474 (1957) (Frankfurter, J. dissenting).
60. Goldberg, supra note 1, at 576-83.
61. Id. at 576-83, 593.
62. In recognizing the difficulty that regulation can pose for a Congress divided on matters of substance and in identifying the federal interest in procedural coordination as one that might justify a grant of federal jurisdiction, Goldberg anticipated issues close to the heart of Congress's decision to use minimal diversity as the tool of federal jurisdictional expansion in CAFA. See id. at 577-78 (describing the Consumer Class Action Act of 1969 as having relied on state law in part to avoid the necessity of legislating into place a detailed consumer protection code).
63. Id. at 595-601 (citing National League of Cities v. Usery, 426 U.S. 833 (1976)). On the refinement and expansion of the state autonomy rule in later cases, see infra notes 67-68.
64. Professor Goldberg's embrace of a balancing test to determine when Congressional expansion of protective jurisdiction invades state autonomy does not fit especially well with the Rehnquist Court's emphasis in formalistic rules of federal-state relations. See infra notes 67-68 and accompanying text.
65. See 29 U.S.C. §§ 185 (2000). For an account of the passage of the labor contract provisions of the LMRA,
66. see James E. Pfander, Judicial Purpose and the Scholarly Process: The Lincoln Mills Case, 69 WASH. U.L.Q 243 (1991).
67. See Goldberg, supra note 1, at 562.
68. Id. at 565 (discussing federal incorporation of state consumer protection law).
69. Id. at 562. I agree with this aspect of Goldberg's analysis, but disagree with its application to the labor contract arena. As a general matter, federal incorporation of state law should not suffice to make that law federal for purposes of establishing the federal substance needed to support a grant of federal question jurisdiction. Such incorporation has a bootstrapping quality, transforming otherwise applicable state law into federal law solely for the purpose of facilitating federal jurisdiction but not altering in any respect the nature of the underlying substantive obligations. But if the statute contemplates a change in the substantive law, then incorporation of some state content should present no problem. In the labor contract arena, Congress actually created a uniform federal rule entitling unions to sue and be sued as juristic entities without regard to the rules that would obtain under state law. So while this federal entity status may have paralleled the juristic status that unions would enjoy in some states, the federal entity rule would not depend on incorporated state law and would not vary from state to state.
70. Id. at 604-05, 609-14
71. Id. at 613.
72. See Textile Workers Union v. Lincoln Mills, 353 U.S. U.S. 448, 457 (1957).
73. Justices Burton and Harlan concurred, expressing the view that the statute did not authorize the federal courts to fashion federal common law but could nonetheless be upheld as a grant of protective jurisdiction. See Lincoln Mills, 353 U.S. at 459-60 (Burton, J., concurring) (citing Int'l Bro. of Teamsters v. W.L. Mead, Inc., 230 F.2d 576 (1956)).
74. Elsewhere, I have questioned Justice Frankfurter's conclusion as a matter of statutory interpretation. See Pfander, supra note 38, at 298-304 (collecting evidence that supports the majority's conclusion that Congress viewed claims for breach of the labor contract as arising under federal, not state, substantive law).
75. Lincoln Mills, 353 U.S. at 484.
76. See id. at 470-72 (citing Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824) and Pacific Railroad Removal Cases, 115 U.S. 1 (1885)).
77. Frankfurter regarded those decisions as having pressed Article III to its very limits, and perhaps beyond. Id. at 470-72. He therefore sought to confine the scope of the jurisdiction to matters involving some substantial federal interest. Bankruptcy matters implicated such an interest as did the desire of Congress to protect the Bank as an instrument of federal policy.
78. Id. at 481-83. But Frankfurter viewed the interests at stake in Lincoln Mills as less significant. Congress had acted to ensure that unions would be treated as a juristic entity for purposes of enforcing their legal obligations, including their collective bargaining agreements.
79. Id. at 480-81. While one might treat this congressional grant of legal personality as an original ingredient in every action the union might bring, comparable to the situation in Osborn, Frankfurter saw an important difference. The Bank was more entirely the creature of its act of incorporation than were the unions covered by section 301. In any case, times had changed: Other modes of invoking federal jurisdiction, including removal by defendants, made the exercise of original jurisdiction on the basis of remote federal ingredients more difficult to defend.
80. Id. at 481-82.
81. Lincoln Mills, 353 U.S. at 474 (Frankfurter, J. dissenting).
82. Id.
83. Id. at 474-76.
84. Id. at 476 (quoting Mishkin, The Federal "Question ", supra note 1, at 192).
85. 90 Stat. 2891-98 (codified at 28 U.S.C. §§ 1330 and elsewhere).
86. For accounts of the operation of the FSIA and a review of its jurisdictional puzzles, see Mary Kay Kane, Suing Foreign Sovereigns: A Procedural Compass, 34 STAN. L. REV. 385 (1982); Note, The Theory of Protective Jurisdiction, 57 N.Y.U.L. REV. 933 (1982).
87. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983).
88. Id. at 491.
89. Id. at n. 17.
90. Id. at 496-97.
91. 28 U.S.C. § 2674.
92. Verlinden B.V., 486 U.S. at 492. Critics of the Verlinden decision have portrayed it as purely jurisdictional, questioning the Court's conclusion that substantive liability turned on federal law.
93. See, e.g., Segall, supra note 2, at 380-81. But even as the statute's exception to foreign sovereign immunity keys the exercise of federal subject matter jurisdiction and personal jurisdiction, it also provides a crucial trigger for substantive liability. If a plaintiff cannot find a statutory exception to immunity, the foreign sovereign would enjoy a federal immunity from suit that would control even in a state or federal court that otherwise enjoyed subject matter and personal jurisdiction over the cause.
94. Mesa v. California, 489 U.S. 121 (1989).
95. Id. at 136.
96. Mesa, 489 U.S. at 121-22.
97. Justices Brennan and Marshall joined the majority opinion but concurred to address the separate issue that would arise if the government employees had based removal on a well-founded claim of state court bias or hostility.
98. The Court's most recent analysis of the Westfall Act concludes that state-law claims against federal employees arise under federal law for Article III purposes, so long as the Attorney General of the United States certifies that the claims arose from actions taken within the scope of employment. See Osborn v. Haley, 127 S. Ct. 881 (2007).
99. For the Court, certification as to the scope of employment (which in turn bears on federal law issues of immunity and indemnity) provides a federal ingredient sufficient to ground the assertion of federal jurisdiction, even in the unusual case in which the federal court were ultimately to conclude that the certification was unwarranted and state law continued to control liability. As the Court saw matters, certification sets the stage for potential changes in the substantive law: it provides for the substitution of the United States as a defendant, it transforms applicable law by making the Federal Tort Claims Act applicable, and it introduces the possibility of a substantive federal defense of official immunity from suit. Cf. Gutierrez de Martinez v. Lamagno, 515 U.S. 417 (1995) (dissenting opinion) (raising doubts about the constitutionality of Westfall Act under Article III on the basis that its provision for judicial review of a threshold scope-of-employment issue was merely jurisdictional and could not provide the substantial federal ingredient needed to open federal courts to claims otherwise governed by state law). Neither case discussed the possibility of protective jurisdiction.
100. See United States v. Lopez, 514 U.S. 549 (1996) (invalidating federal law that criminalized drug possession as having exceeded congressional power to regulate commerce); United States v. Morrison, 529 U.S. 598 (2000) (invalidating federal statute creating a private right of action for genderbased violence as exceeding the scope of the congressional power over commerce);
101. cf. Gonzales v. Raich, 545 U.S. 1 (2005) (upholding federal power to criminalize private cultivation and use of marijuana for medicinal purposes).
102. See also New York v. United States, 505 U.S. 144 (1992) (invalidating federal statute that commandeered state legislatures into adopting state law that incorporated federal standards);
103. Printz v. United States, 521 U.S. 898 (1997) (extending anti-commandeering principle to federal laws aimed at securing state administrative enforcement of federal statutes).
104. See Alden v. Maine, 527 U.S. 706 (1999) (invalidating federal statute adopted under the commerce clause to the extent that it authorized individuals to sue a state for damages in state court);
105. Seminole Tribe v. Florida, 517 U.S. 44 (1996) (holding that the Eleventh Amendment bars Congress from authorizing individuals to sue states in federal court to enforce a federal commerce statute);
106. cf. Fitzpatrick v. Bitzer, 427 U.S. 445 (1976) (upholding congressional power to abrogate state sovereign immunity through legislation enacted pursuant to the Fourteenth Amendment);
107. Central Virginia Community College v. Katz, 126 S.Ct. 990 (2006) (concluding that the constitutional grant of plenary power enables Congress to subject states to suit in bankruptcy proceedings).
108. See Mesa v. California, 489 U.S. 121, 136 (1989);
109. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 496 (1983).
110. The Court's handling of the alien tort statute reveals the limits of the federal common law solution. See Sosa v. Alvarez-Machain, 542 U.S. 692 (2004) (concluding that the alien tort statute lawfully conferred jurisdiction on the federal courts to entertain suits for torts in violation of the law of nations on the theory that such actions would implicate federal common law, but articulating a restrictive view of the torts that would qualify under such an approach).
111. See Am. Nat'l Red Cross v. S.G., 505 U.S. 247 (1992) (upholding federal jurisdiction over a state law tort claim brought against the Red Cross, a federally-chartered charitable organization).
112. See Lincoln Mills, 353 U.S. at 472-73 (Frankfurter, J. dissenting). Part IV.C below more closely examines the incorporation of state law.
113. 383 U.S. 715 (1966).
114. Id.
115. Id. at 725. In Gibbs, the Court permitted a plaintiff to join a federal question claim for a secondary boycott with a business tort claim under state law. Both claims arose from the same labor dispute, and easily satisfied the common nucleus test, even though they did not meet the more demanding same cause of action standard of earlier cases.
116. 427 U.S. 1 (1976).
117. 490 U.S. 545 (1989).
118. James E. Pfander, Supplemental Jurisdiction and Section 1367: The Case for a Sympathetic Textualism, 148 U. PA. L. REV. 109 (1999)
119. [hereinafter Pfander, Sympathetic Textualism].
120. Id.
121. Strawbridge v. Curtiss, 1 U.S. (3 Cranch) 267 (1806) (articulating the complete diversity rule).
122. Pfander, Sympathetic Textualism, supra note 78.
123. See WRIGHT & KANE, supra note 12, at 34.
124. See, e.g., Freeman v. Howe, 65 U.S. (24 How.) 450 (1861).
125. On the evolution of ancillary jurisdiction after Freeman, see Richard A. Matasar, Rediscovering "One Constitutional Case ": Procedural Rules and the Rejection of the Gibbs Test for Supplemental Jurisdiction, 11 CALIF. L. REV. 1399, 1463-66 (1983).
126. For background on the equity receivership, see ROSENBERG, SWAINE & WALKER, CORPORATE REORGANIZATION AND THE FEDERAL COURT (1924);
127. David McC Wright, Jurisdiction and Venue in Federal Equity Receivership of Corporations, 24 VA. L. REV. 29 (1937-38).
128. In such a proceeding, a creditor would bring suit in equity against a corporation (often a railroad company) setting up an unpaid debt and the company's inability to pay. Once the federal court was satisfied that the creditor's claims were sound, it could appoint a receiver to take over the operation of the assets (often real property) of the company. Once appointed, the receiver would often pursue claims in federal court against the company's debtors, acting in some respects like a trustee in bankruptcy. The Court held that these receiver suits were ancillary to the initial bill in equity that led to the appointment of the receiver. For a sense of the power of the receivership as a vehicle of jurisdictional expansion, see White v. Ewing, 159 U.S. 36 (1895) (jurisdiction acquired over action in equity on the basis of diversity to secure the appointment of receiver; once receiver was appointed and assets of the firm were brought before the court, ancillary jurisdiction extended to claims by against the corporation in receivership without regard to diversity). The Court commented in passing that the jurisdiction in an equity receivership, based on diversity, "does not differ materially from that of the district court in bankruptcy."
129. Ewing, 159 U.S. at 40.
130. See, e.g., Moore v. New York Cotton Exchange, 270 U.S. 593 (1926) (ancillary jurisdiction extended to a state common law claim asserted by defendant as a compulsory counterclaim to a federal antitrust action).
131. See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978). Kroger brought a diversity action against the Omaha Power District (OPPD) seeking damages for the wrongful death of her husband. The power company initiated a third-party impleader claim for contribution or indemnity, alleging that Owen Equipment bore responsibility for any damages that might be awarded against the power company. Kroger amended her complaint to assert a direct claim against Owen, despite the fact that the two parties were not diverse.
132. See id. at 376 n.18 (approving of prior decisions that exercised ancillary jurisdiction over compulsory counterclaims, interpleader claims, cross claims, and claims seeking intervention of right).
133. Id. at 376.
134. Id. at 376 (noting the availability of the state court as a forum in which the plaintiff's claims could be heard).
135. Id. at 374 n. 13 (describing as scattled the conclusion that the complete diversity rule is not a constitutional requirement).
136. Pfander, Sympathetic Textualism, supra note 78.
137. 545 U.S. 546 (2005).
138. Pfander, Sympathetic Textualism, supra note 78.
139. Rosario-Ortega v. Starkist Foods, Inc., 545 U.S. 546 (2005).
140. U.S. CONST., art. III, § 2.
141. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) (articulating the complete diversity rule).
142. 386 U.S. 523 (1967).
143. There, State Farm brought an interpleader action in federal court, seeking to compel all interested parties to join in litigation over a truck-bus collision in California that killed or injured nearly forty individuals from five different states and Canada. State Farm insured the truck driver, under a policy that limited its liability to $20,000 and obliged the firm to pay defense costs. State Farm hoped to discharge its obligation by paying the policy limits into the court and disclaiming any further duty to defend. Meanwhile, the bus company sought to piggyback on State Farm's interpleader action; it sought to require all potential victims to prosecute their tort claims against the bus company and its driver in the interpleader proceeding. Ultimately, the district court agreed to expand the proceeding as requested and granted injunctive relief that barred the injured parties from pursuing their tort claims in other forums.
144. Store Farm, 386 U.S. at 533-37. Interpleader was not to serve as an all-purpose bill of peace in which a single accident would give rise to litigation in a single forum with all parties required to participate. Rather, interpleader came into play only when one party could point to a stake or limited fund and a risk of excessive or duplicative liability. That threat existed in the case of State Farm; if litigation were permitted to go forward in a variety of forums, the insurance company might face indemnification obligations that exceeded its policy limits or, more likely, some victims of its insured's negligence might find themselves incapable of sharing in the proceeds of the policy. But the other party in the interpleader proceeding, the bus company, could not claim any similar threat of inconsistent or excessive liability. Though potentially quite substantial, the many personal injury claims against the bus company were not limited or capped as were the claims against State Farm. In the end, State Farm was entitled to limited relief-an order restraining parties from enforcing claims against it except in the context of the interpleader action-and the bus company was denied interpleader relief altogether.
145. The statute itself authorizes jurisdiction whenever a stakeholder brings an action in the nature of interpleader involving assets or property worth at least $500 that may be claimed by two or more adverse claimants of diverse citizenship. See 28 U.S.C. § 1335. The jurisdiction thus depends on the existence of diversity between any two adverse claimants to a fund or property, a requirement that was satisfied in the State Farm case by the potential claims of injured passengers from California, Oregon, and Canada.
146. See State Farm, 386 U.S. at 530-31 (citing federal circuit court authority, its earlier decision in Barney v. Latham, 103 U.S. 205 (1880)). The Court also relied on a draft analysis of the constitutionality of minimal diversity that later appeared as an appendix to the final report.
147. See AMERICAN LAW INSTITUTE, STUDY OF THE DIVISION OF JURISDICTION BETWEEN STATE AND FEDERAL COURTS, REPORTER'S MEMORANDUM A 431 (1969).
148. See 28 U.S.C. §§ 1369, 1441(e). The idea of multi-party joinder in complex litigation arose with the publication of the ALI Study in 1969, and gained strength in the ALI's study on complex litigation in 1994.
149. For background, see Thomas D. Rowe, Jr. & Kenneth Sibley, Beyond Diversity: Federal Multi-party, Multiforum Jurisdiction, 135 U. PA. L. REV. 7 (1986). The Act seeks to provide for coordinated treatment of litigation that stems from a single accident at a discrete location that claims the lives of at least seventy-five persons. Where the requisite triggering event has occurred, the statute authorizes the district courts to exercise original and removal jurisdiction on the basis of minimal diversity between adverse claimants. Such a jurisdictional grant would surely encompass all airplane accidents and the Kansas City skywalk disaster, given the likely dispersion of citizenship among claimants. The Act assumes that jurisdictional coordination will occur following the invocation of federal jurisdiction through the offices of the Judicial Panel on Multidistrict Litigation (JPML). The JPML may order the transfer of actions for coordinated or consolidated pre-trial proceedings any time civil actions pending in different districts involve one or more common questions of law or fact. The transferee court, sometimes known as a multidistrict litigation or MDL court, then oversees discovery on a coordinated basis. (A drafting glitch resulted in the omission of language from section 1407 that would have authorized the MDL court to retain the cases for trial.)
150. A few years before adopting the MMTJA, Congress adopted the Y2K Act, imposing notice and heightened pleading requirements on class actions brought to secure damages resulting from computer glitches traceable to the Y2K bug. See Pub. L. No. 106-37, 113 Stat. 185 (1999) (codified at 15 U.S.C.) For
151. See Pub. L. No. 109-2, 119 Stat. 4 (codified at 28 U.S.C. §§ 1332(c)-(d), 1453, 1711-15).
152. For background on the statute, and recognition that it proceeds on the basis of minimal diversity, see Edward F. Sherman, Class Actions After the Class Action Fairness Act of 2005, 80 TULANE L. REV.1593, 1595-96 (2006).
153. For a review and critique of CAFA's apparent assumption that federal courts would decline to apply state choice-of-law rules in deciding whether to certify class actions, see Patrick Woolley, Erie and Choice of Law After the Class Action Fairness Act, 80 TULANE L. REV. 1723 (2006).
154. CAFA imposes limits on coupon settlements, attorney's fees, and settlements that entail a loss by class members. See 28 U.S.C. §§ 1712-13. But these provisions apply only to class actions that were brought in or removed to federal court.
155. See 28 U.S.C. § 1711(2). They do not apparently apply to class actions terminated in state court.
156. See Woolley, supra note 103, at 1751 n.141.
157. See Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356, 366-67 (1921). Part IV explains that the citizenship rule in Cauble applies to true class actions but does not necessarily apply to Rule 23(b)(3) class actions.
158. See Snyder v. Harris, 394 U.S. 332 (1969);
159. Zahn v. International Paper Co., 414 U.S. 291 (1973);
160. cf. Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546 (2005) (interpreting supplemental jurisdiction statute as abrogating Zahn but not Snyder).
161. The major exceptions are for small-value class actions (worth less than the $5 million value specified in the statute); class actions brought against States or state officials; and class actions involving fewer than 100 members. See 28 U.S.C. § 1332(c)(2), 1332(c)(5). In addition, the Act authorizes the district court to decline jurisdiction where many class members and the primary defendants are citizens of single state.
162. See 28 U.S.C. § 1332(c)(3)-(4). But a class action made up entirely of plaintiffs from a single state would be subject to federal jurisdiction on the basis of diversity of citizenship between any plaintiff and any "primary" defendant, even if the remaining primary defendants were from the same state as the plaintiffs.
163. By authorizing state courts to entertain nationwide class actions on the basis of the class members' decision, however well considered, to decline to opt out, see Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), the Shutts decision led to a number of perceived problems. For one thing, Shutts opened the doors of every state court to the assertion of nationwide class actions, a form of universal venue that led to forum-shopping by well-informed class action lawyers. Particular state courts gained reputations for their willingness to certify class actions and for awarding damages at trial that threatened the financial health of corporate defendants.
164. See Senate Judiciary Committee Report on Class Action Fairness Act, S. REP. NO. 109-14 at 13-27 (2005) reprinted in 2005 U.S.C.C.A.N. 3, 16-30 (describing a series of state class action abuses, including excessive fees for lawyers, inadequate relief for class members, forum shopping that leads to the growth of cases in class action friendly forums like Madison County, Illinois, overlapping and duplicative actions, and nationwide actions in which small, rural counties propose to dictate the regulatory terms that will govern commercial activities in other states, sometimes ignoring the conflicting state laws in those other states). In these bet-your-company situations, defendants could face considerable pressure to settle following a state court certification decision that confronted the defendant with the prospect of significant potential liability to the class as a whole.
165. See Victor E. Schwartz, Federal Courts Should Decide Interstate Class Actions: A Call for Federal Class Action Diversity Reform, 37 HARV. J. ON LEGIS. 483, 499-501 (2000) (describing class certification problems in Alabama);
166. John H. Beisner & Jessica Davidson Miller, They're Making a Federal Case Out of It. . . In State Court, 25 HARV. J.L. POL'Y 143 (2001) (offering a catalog of the problems with state court handling of multi-state class actions).
167. See Robert H. Klonoff, Introduction to the Symposium, 74 U.M.K.C. L. REV. 487, 490 (2006);
168. Edward F. Sherman, Class Actions After the Class Action Fairness Act of 2005, 80 TULANE L. REV. 1593, 1595 (2006).
169. MDL courts view the certification issue as one that they may address in class actions transferred for coordinated treatment under 28 U.S.C. § 1407. See In re Tyco Int'l, Ltd., 236 F.R.D. 62 (D.N.H. 2006) By shifting the class certification decision to federal court, the legislation may make it more difficult to certify nationwide class actions involving claims governed by state law. Unlike some of their state counterparts, federal courts have expressed doubts about the certification of nationwide state law classes under Rule 23(b)(3). For cases on the federal side that take a somewhat dim view of nationwide class actions due in part to conflicting bodies of state law,
170. see In re Am. Med. Sys. Inc., 75 F.3d 1069, 1085 (6th Cir. 1996);
171. In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1300-01 (7th Cir. 1995). For evidence that Congress understood that a shift of class actions to federal court would trigger this more restrictive approach,
172. see S. REP. NO. 109-14, supra note 108, at 14 (noting that many state court judges are "lax about following the strict requirements of Rule 23" but that federal judges "pay closer attention to the procedural requirements for certifying" a class action). As a result, CAFA may reduce the number of nationwide class actions and lead to more state-wide consumer class actions instead.
173. See Edward H. Cooper, Rewriting Shutts for Fun, Not to Profit, 74 U.M.K.C. L. REV. 569, 581 (2006).
174. But this result depends on the willingness of federal courts to ignore state choice-of-law rules in certifying nationwide classes. See generally Richard A. Nagareda, Bootstrapping in Choice of Law After the Class Action Fairness Act, 74 U.M.K.C. L. REV. 661, (2006) (exploring the choice of law rules for class actions and expressing skepticism about the capacity of the class action to achieve law reform goals in the absence of substantive legislation).
175. An early draft of the legislation provided simply that the "district court shall have original jurisdiction, regardless of the amount in controversy or the citizenship of the parties, of civil class actions brought by one or more consumers . . . where (1) the action involves the violation of consumers' rights under State or Federal statutory or decisional law." S. 1980, 91st Cong., 1st Sess. § 2(b), reprinted in 115 CONG. REC. 10460-61 ( 1969). Later versions of the legislation expressly declared unlawful an "act in defraud of consumers which affects commerce" and conferred original jurisdiction on the district courts to "entertain civil class actions for redress."
176. See H.R. 14585, 91st Cong., 1st Sess. § 4 (1969), reprinted in Class Action and Other Consumer Protection Proceedings, Hearings Before the Subcommittee on Commerce and Finance of the Committee on Interstate and Foreign Commerce, 91st Cong., 2d Sess. at 5 ( 1970) [hereinafter Consumer Hearings]. This later bill expressly included any "act which gives rise to a civil action by a consumer or consumers under State statutory or decisional law." Id. The bill thus proceeded by adopting or incorporating state law as a federal standard and making it clear that the law to be applied would be determined "as if the jurisdiction of the Federal court were based on diversity of citizenship." Id. at 6. For an evaluation of the constitutionality of the Tydings legislation,
177. see Note, Federal Jurisdiction-Protective Jurisdiction and Adoption as Alternative Techniques for Conferring Jurisdiction on Federal Courts in Consumer Class Actions, 69 MICH. L. REV. 710, 711-13 (1971).
178. See Statement of Sen. Joseph Tydings, Consumer Hearings, supra note 111, at 37 (noting that the bill would secure the application of the "liberal machinery" of Rule 23); Statement of Rep. Bob Eckhart, id. at 10 (discussing the House companion to the Tydings bill and emphasizing the importance of securing the application of the "liberal" provisions of Rule 23); cf. Statement of Richard McClaren, US Antitrust Division, reprinted in id. at 200, 206 (commenting that the principal justification for the legislation was the inadequacy of state class action procedures).
179. See Statement of Rep. Eckhart, Consumer Hearings, supra note 111, at 19-20 (describing use of the multi-district litigation machinery for cases involving class actions in more than one district).
180. For an analysis of the Consumer Class Action Act under a protective jurisdictional framework, see Goldberg, supra note 1, at 565, 577-78.
181. For a summary of the Act's two jurisdictional approaches, see note supra. Interestingly, the decision to rely upon a protective jurisdiction/federal question approach resulted from disappointment with the Court's decisions narrowing the availability of diversity jurisdiction.
182. See Statement of Sen Joseph Tydings, Consumer Hearings, supra note 111, at 37 (expressing concern with the Court's restrictive decision in Snyder v. Harris, 394 U.S. 332 (1969)). Today, the push to rely upon minimal diversity stems in part from doubts about the availability of protective jurisdiction. See Richard A. Epstein, The Consolidation of Complex Litigation: A Critical Evaluation of the ALI Proposal, 10 J. L. & COM. 1, 35 (1990-91) (recounting that the ALI complex litigation project shifted from reliance on federal question/protective jurisdiction to minimal diversity jurisdiction as the basis for federal jurisdiction over complex, multi-state litigation).
183. See Statement of Charles Black, Consumer Hearings, supra note 111, at 21 (opining that the early version of the statute would pass constitutional muster as a grant of protective jurisdiction and that the later version would even more clearly do so in light of its incorporation or adoption of state law as a federal rule of decision).
184. For doubts on this score, see Goldberg, supra note 1, at 555-56, 565 n.144;
185. Note, supra note 111, at 729-31.
186. See Consumer Hearings, supra note 111, at 261, 418-19 (testimony by representatives of the American Retail Federation and the Chamber of Commerce in opposition to the legislation).
187. Some might question the power of Congress to re-define the citizenship of parties for purposes of expanding diversity jurisdiction. After all, corporations have long been treated as citizens of their state of incorporation and principal place of business. See 28 U.S.C. § 1332(c)(1) (deeming a corporation to be a citizen of its state of incorporation and its principal place of business). On the origins of this deeming provision in 1958,
188. see WRIGHT & KANE, supra note 12, at 165-68. But at the time of the Osborn decision, the Court had taken a different view. The corporation itself was not a citizen of any state within the meaning of Article III. Instead, the Court looked to the citizenship of the shareholders or owners of the corporation in determining the existence of diversity, much the way the Court today deems the citizenship of unincorporated associations and partnerships to be that of their members.
189. See Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 67-70 (1809).
190. Only later did the Court establish a conclusive, if fictional, presumption that corporations were citizens of their state of incorporation. See Marshall v. Bait. & Ohio R.R., 57 U.S. (16 How.) 314, 328 (1855);
191. Louisville R.R. Co. v. Letson, 43 U.S. (2 How.) 497, 552-56 (1844).
192. For an account of these developments, see James W. Moore & Donald T. Weckstein, Corporations and Diversity of Citizenship Jurisdiction: A Supreme Court Fiction Revisited, 11 HARV. L. REV. 1426 (1964);
193. Dudley O. McGovney, A Supreme Court Fiction: Corporations in the Diverse Citizenship Jurisdiction of the Federal Courts, 56 HARV. L. REV. 853 (1943). Later still, Congress added the corporation's principal place of business as an additional state of citizenship. With this history of evolving meaning and congressional involvement, it seems unlikely that a decision by Congress to return to the Court's own original definition of corporate citizenship would raise constitutional eyebrows.
194. See Textile Workers Union v. Lincoln Mills, 353 U.S. 448 (1957).
195. See United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145 (1965) (treating the citizenship of unions organized as unincorporated associations as defined by the citizenship of their members).
196. A growing body of scholarship suggests that "cases" differ from "controversies" in Article III. See, e.g., Robert J. Pushaw, Jr., Article III's Case/Controversy Distinction and the Dual Functions of Federal Courts, 69 NOTRE DAME L. REV. 447, 450 (1994) (cases involve the federal courts primarily as expositors of federal law, whereas controversies involve a "bilateral dispute wherein a judge served primarily as a neutral umpire whose decision bound only the immediate parties");
197. William A. Fletcher, The "Case or Controversy " Requirement in State Court Adjudication of Federal Questions, 78 CALIF. L. REV. 263, 266-67 (1990) (collecting evidence that cases include both civil and criminal proceedings, whereas controversies may include only civil matters);
198. James E. Pfander, Rethinking the Supreme Court's Original Jurisdiction in State-Party Cases, 82 CALIF. L. REV. 555 (1994) (same).
199. On the meaning of the word "between" in the framers' lexicon, see WILLIAM WINSLOW CROSSKEY, I POLITICS AND THE CONSTITUTION IN THE HISTORY OF THE UNITED STATES 78-82 (1953) (collecting evidence from the founding era that the term "between" connotes a bilateral relationship and narrows the scope of diversity jurisdiction). See also Pushaw, supra note 120, at 450 (drawing on rich collection of historic materials in defining a controversy as a "bilateral dispute" in which the judge serves as a neutral umpire).
200. See Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 378 (1821). Consider, for example, the distinctive approach to aggregation of claims that developed on the diversity side of the federal docket. Rules of aggregation permit an individual plaintiff to add together two unrelated claims against a diverse defendant to satisfy the statutory amount-in-controversy requirement; it's not the subject matter relationship between such claims that justifies their aggregation but the simple fact that a controversy between diverse citizens meets the statutory threshold.
201. See Pfander, Sympathetic Textualism, supra note 78, at 130 & n.85. By contrast, the joinder of claims on the federal question side of the docket depends on the existence of a transactional relationship between the claims.
202. See text accompanying notes 74-75 (discussing the Gibbs rule authorizing the exercise of pendent jurisdiction over a federal question claim and a state law claim that share the same "common nucleus of operative fact").
203. In Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267-78 (1806), the Court indicated that all parties who join together in asserting a joint interest must satisfy the diversity requirement.
204. See Henry Friendly, Historic Basis of Diversity Jurisdiction, 41 HARV. L. REV. 483, 509 (1928) (reaching the same conclusion);
205. ALI Study, supra note 101, at 433 (same conclusion).
206. See Matasar, supra note 83, at 1448-54 (criticizing as too narrow the common nucleus test of Gibbs and suggesting the need for greater deference to modern procedural rules in defining the scope of a case under Article III).
207. Troy Bank v. G.A. Whitehead & Co., 222 U.S. 39, 40 (1922) (addressing the separate and distinct issue as it relates to the determination of the amount in controversy).
208. See also Johnson v. Manhattan Railway Co., 289 U.S. 479, 496-97 (1933) (noting that consolidation "is permitted as a matter of convenience and economy in administration, but does not merge the suits into a single cause, or change the rights of the parties, or make those who are parties in one suit parties in another").
209. Well developed in the context of the joinder of claims, see Clark v. Paul Gray, Inc., 306 U.S. 583 (1939) (plaintiffs who sue on separate claims must each satisfy the amount-in-controversy requirement), this rule was extended to class actions proposed for certification under Rule 23(b)(3). Thus, the Court held that the members of a (b)(3) class action were asserting separate and distinct claims.
210. See Snyder v. Harris, 394 U.S. 332, 334 (1969). The Court's subsequent decision in Zahn v. International Paper Co., 414 U.S. 1, 15-16(1973), applied the same ruleto class members, even where the named class representative asserted claims in excess of the statutory value. The Court later found that the supplemental jurisdiction statute overruled this aspect of the Zahn decision.
211. See Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546 (2005).
212. See Barney v. Latham, 103 U.S. 205 (1880) (upholding removal jurisdiction under the precursor to 28 U.S.C. § 1441(c) which now authorizes a defendant to remove the entire action when the plaintiff joins a federal question claim within the district court's original jurisdiction and a separate and distinct state law claim). The statute remains as a vestige from the nineteenth century, when separate claim removal arose on the diversity side of the federal docket. See Edward Hartnett, A New Trick From an Old and Abused Dog: Section 1441(c) Lives and Now Permits the Remand of Federal Question Cases, 63 FORDHAM L. REV. 1099, 1106-29 (1994-95).
213. Critics of the statute abound, many of whom point out that the exercise of jurisdiction over a separate and independent claim could exceed the Gibbs definition of Article Ill's limits. See, e.g., LARRY L. TEPLEY & RALPH U. WHITTEN, CIVIL PROCEDURE (2d ed. 2000);
214. Robert Casad, Personal Jurisdiction in Federal Question Cases, 70 TEX. L. REV. 1589, 1618 (1992).
215. Cf. WRIGHT & KANE, supra note 12, at 235 (concluding that the statute no longer serves a useful purpose and ought to be repealed). As Professor Hartnett notes, however, the exercise of removal jurisdiction over a non-federal state law claim does not necessarily violate constitutional limits.
216. Hartnett, supra, at 1153-56 (noting that a court may exercise removal jurisdiction over non-federal claims, and then remand those that exceed the court's jurisdiction to avoid any difficulties).
217. Barney, 103 U.S. at 206.
218. See Judiciary Act of 1875, § 5, 18 Stat. 470, 472 (providing that if it shall appear to the federal court, in a suit brought originally in or removed to federal court, "that such suit does not really and substantially involve a dispute or controversy" within the court's jurisdiction, the court shall proceed no further but shall dismiss the suit or remand it to state court).
219. Barney, 103 U.S. at 216. Earlier removal statutes called for the state court to consider whether the action was subject to removal. The 1875 Act's provision for the federal court to exercise removal jurisdiction over the entire proceeding, subject to the possible dismissal or remand of claims that exceeded federal jurisdiction, may have reflected a desire to broaden federal judicial control of the removal determination.
220. Practice in the federal courts in the wake of Barney confirmed that the issue of jurisdiction was to remain open throughout the litigation and could result in a remand of the non-diverse proceedings at a later stage. See Texas Transp. Co. v. Seeligson, 122 U.S. 519, 522 (1887) (following the settlement and dismissal of the separable controversy, circuit court was obliged to remand the remainder of the action to state court);
221. Torrence v. Shedd, 144 U.S. 527, 533 (1892) (explaining that after a separable controversy has been resolved through settlement, "the suit no longer really involved a dispute or controversy properly within the jurisdiction of the circuit court, and should therefore have been remanded to the state court");
222. Prince v. Illinois C. R. Co., 98 F. 1, 3 (C.C.D. Ky. 1899) (indicating that the whole case would be removed, the separable controversy "fully determined" and the action "returned to the state court to be there disposed of as to the other parties);
223. Bane v. Keefer, 66 F. 610, 612 (C.C. D. Ind. 1895) (ordering remand of case following plaintiffs decision to discontinue his claims against the diverse defendant on which removal had been predicated);
224. cf. Robinson v. Anderson, 121 U.S. 522 (1887) (ordering remand after subsequent developments revealed that a federal anchor claim lacked substance and would not support the exercise of jurisdiction).
225. See generally JOHN F. DILLON, REMOVAL OF CAUSES FROM STATE TO FEDERAL COURTS (H. Black ed., 5th ed. 1889).
226. But cf. Connell v. Smiley, 156 U.S. 335 (1895) (in action removed on the basis of a separable controversy, upholding entry of judgment in favor of plaintiff against non-diverse defendant without reaching the issue of jurisdiction).
227. See Edward Hartnett, supra note 128 (recounting the history of section 1441(c) and the dismissal or remand option).
228. See State Farm Mutual Ins. Co. v. Tashire, 386 U.S. 523 (1967).
229. See note supra.
230. Treinies v. Sunshine Mining Co., 308 U.S. 66 (1940). In focusing on the citizenship of the adverse parties, the Court followed the lead of the statute. It thus dismissed the significance of the stakeholder's citizenship, treating the stakeholder as a disinterested party as between the adverse claimants and the property in dispute.
231. See Treinies, 308 U.S. at 72. While this characterization of the stakeholder may have been accurate as to Sunshine, it was not universally true. In many cases, the stakeholder has an interest adverse to the claimants, either because they oppose interpleader or because they wish to impose liability on the stakeholder free from the demands of interpleader, or because the stakeholder denies all liability as an alternative ground.
232. See Zechariah Chafee, Jr., Interpleader in the United States Courts, 41 YALE L.J. 1134, 1141-43 (1931) (discussing the alignment of opposing interests at the first and second stages of interpleader and discussing the implications of such alignments for the existence of diversity and ancillary jurisdiction).
233. 255 U.S. 356 (1921). The lower courts have interpreted Cauble to mean that only the citizenship of the named representative of a class counts for purposes of determining the citizenship of the class for diversity purposes.
234. See, e.g., Aetna Cas. & Surety Co. v. Iso-Tex, Inc., 75 F.3d 216 (5th Cir. 1996);
235. In re Agent Orange Product Liability Litigation, 818 F.2d 145, 162 (2d Cir. 1987);
236. In re School Asbestos Litigation, 921 F.2d 1310, 1317 (3d Cir. 1990).
237. See, e.g., Aetna Cas. & Surety Co. v. Iso-Tex, Inc., 75 F.3d 216 (5th Cir. 1996);
238. In re Agent Orange Product Liability Litigation, 818 F.2d 145, 162 (2d Cir. 1987);
239. In re School Asbestos Litigation, 921 F.2d 1310, 1317 (3d Cir. 1990).
240. Ancillary jurisdiction is discussed supra at pages 16-17. Ancillary jurisdiction extends to claims that bear such a relationship to a controversy properly before the court that they cannot, in fairness to an interested party, be excluded from the litigation unit.
241. See FED. R. CIV. P. 23. Rule 23 was amended in 1966, to create the familiar (b)(1), (b)(2), and (b)(3) categories that it now contains. Before that, Rule 23 provided for the certification of true, hybrid and spurious class actions, actions that roughly mapped onto the new categories. For an account of the 1966 amendments, and the concerns with the old categories that led to the change,
242. see Robert G. Bone, Personal and Impersonal Litigative Forms: Reconceiving the History of Adjudicative Representation, 70 B.U. L. REV. 213, 291-304 (1990).
243. On the history of the class action as an equitable device, see STEPHEN C. YEAZELL, FROM MEDIEVAL GROUP LITIGATION TO THE MODERN CLASS ACTION (1987).
244. The class litigation began when one Balme, a citizen of Kentucky and a member of a beneficial insurance society, brought suit in federal district court against the society and its officers (all Indiana citizens) to enjoin the implementation of a new set of rules that were to alter the members' insurance benefits. The plaintiffs proceeded on behalf of a class of several thousand beneficiaries who were located around the country, but made no effort to notify or include the various members from Indiana. The district court entered judgment in favor of the society, thus rejecting the challenge to the new rules. Later, citizens of Indiana brought similar suits against the society in Indiana state court, mounting essentially the same challenge. The society returned to federal court for an injunction against the prosecution of these state court actions, contending that all members of the society had been members of the class and were precluded by the prior litigation. The issue of preclusion depended on whether the federal court had adjudicated the claims of the absentee Indiana class members in the first proceeding. The Indiana class members argued that, as citizens of the same state as the defendants, the district court's diversity jurisdiction did not extend to their claims.
245. In doing so, the Cauble Court relied on its earlier decision in Stewart v. Dunham, 115 U.S. 61 (1885) There, a creditor initiated an equitable proceeding to set aside a fraudulent transfer. Following removal on the basis of diversity, additional plaintiffs joined the proceeding. While their citizenship would have destroyed diversity, the Court concluded that their claims were "ancillary to the jurisdiction acquired between the original parties." Id. at 64. This ancillary jurisdiction was said to extend to the claims of any creditors who were entitled to benefit from a decree setting aside the fraudulent transfer. As the Stewart Court explained, once the decree issued in a diverse proceeding, a special master would have had authority to administer the decree by allowing proof of claims against the assets fraudulently transferred. Id.
246. Balme, the Kentucky citizen, was said to have a right to pursue claims against the society and its officers in federal court on the basis of diversity, much the way a diverse shareholder could bring a derivative action on behalf of a class of shareholders against the corporation in which she owned stock. Once Balme's claim was properly before the federal court, the court was said to enjoy ancillary jurisdiction over the claims of all the members of the same class. Otherwise, the society would face the risk of conflicting or inconsistent judgments, some of which might uphold the rule changes while others invalidated them. Since the members were all in the same position, their "rights and liabilities [were all] before the court," especially where the subject matter of the suit was "common to all." Cauble, 255 U.S. at 363. This was not a case, in short, of separate and distinct claims, joined for convenience or on the basis of transactional relationship, but was a true class action that brought into play principles of ancillary jurisdiction.
247. Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356, 366-67 (1921).
248. See Steel v. Guaranty Trust Co., 164 F.2d 387, 388 (2d Cir. 1947) (describing the spurious class action as "in effect, but a congeries of separate suits so that each claimant must, as to his own claim, meet the jurisdictional requirement");
249. see also Hackner v. Guaranty Trust Co., 117 F.2d 95 (2d Cir. 1941).
250. Lower court decisions understood the ancillary nature of the jurisdiction at issue in Cauble and the inapplicability of that basis for jurisdiction in cases involving separate claims joined in a spurious class action. Thus, lower courts were willing, in true class actions to exercise ancillary jurisdiction over unnamed class members and to aggregate class claims to satisfy the amount-in-controversy threshold.
251. See Calagaz v. Calhoun, 309 F.2d 248 (5th Cir. 1962) (citizenship of the named representative controls the citizenship inquiry in a true class action);
252. Rosenberg v. Chicago Title & Trust Co., 128 F.2d 245 (7th Cir. 1942) (true class action puts into issue the entire value of the trust or fund, without any need to aggregate separate claims). But the lower courts were unwilling to permit aggregation in spurious class actions.
253. See, e.g., Troup v. McCart, 238 F.2d 289 (5th Cir. 1957); Giordano v. Radio Corp. of America, 183 F.2d 558 (3d Cir. 1950);
254. see also Zahn v. International Paper Co., 414 U.S. 291, 297 n.7 (collecting lower court authority).
255. In Snyder v. Harris, the Court expressed concern that an aggregation approach might seriously undercut the congressional policy of using a statutory amount to restrict access to the diversity dockets of the federal courts. As part of its expression of policy concerns, the majority opinion of Justice Black described the docket-expanding potential of the Cauble rule as if it applied to all class actions; the opinion failed to distinguish between the spurious or (b)(3) actions at issue in Snyder and the true class action that, in Cauble itself, had been seen as justifying the exercise of ancillary jurisdiction.
256. See Snyder v. Harris, 394 U.S. 332, 340 (1969)
257. (citing Cauble for the proposition that "[u]nder current doctrine, if one member of a class if of diverse citizenship from the class' opponent, and no nondiverse members are named parties, the suit may be brought in federal court even though all other members of the class are citizens of the same State as the defendant and have nothing to fear from ... the courts of their own State.") Lower court opinions seized upon the Snyder dicta in applying the Cauble rule to (b)(3) class actions, apparently failing to recognize Justice Black's error.
258. See In re Agent Orange Product Liability Litigation, 818 F.2d 145, 162 (2d Cir. 1987) (citing Justice Black's dictum in Snyder to justify application of the Cauble rule to (b)(3) class action);
259. see also In re School Asbestos Litigation, 921 F.2d 1310, 1317 (3d Cir. 1990) (same).
260. Although a few lower court judges have leaned against the trend, see Rosmer v. Pfizer, Inc., 272 F.3d 243, 251 n.2 (4th Cir. 2001) (Niemeyer, J.) (dissenting from denial of rehearing en banc; arguing that the Cauble rule should not apply to (b)(3) class actions);
261. see also Dudley O. McGovney, A Supreme Court Fiction II, 56 HARV. L. REV. 1090, 1103-15 (1943), most observers simply accept the dominant view as to the breadth of the Cauble rule.
262. See WRIGHT & KANE, supra note 12, at 187.
263. Zahn v. International Paper Co., 414 U.S. 291 (1973). Zahn refused to permit the assertion of supplemental jurisdiction over the members of a plaintiff class whose claims failed to meet the amount in controversy.
264. Exxon Mobil Co. v. Allapattah Servs. Inc. 545 U.S. 546, 558 (2005) ("The single question before us, therefore, is whether a diversity case in which the claims of some plaintiffs satisfy the amount-in-controversy requirement, but the claims of other plaintiffs do not, presents a 'civil action of which the district courts have original jurisdiction.'").
265. See Id. at 549, 559, 562 (assuming the existence of diversity of citizenship and focusing entirely on the application of the amount-in- controversy requirement; noting that the complete diversity rule would foreclose original jurisdiction if non-diverse parties appeared on both sides of the action even in the face of language in the supplemental jurisdiction statute that could be literally read to the contrary). Both Justice Ginsburg and academic commentators have questioned the majority's decision to treat the complete diversity and amount-in-controversy rules differently for jurisdictional purposes.
266. See Id. at 558 (Ginsburg, J., dissenting); Adam N. Steinman, Sausage-Making, Pigs Ears, and Congressional Expansion of Federal Jurisdiction: Exxon Mobil v. Allapattah and its Lessons for the Class Action Fairness Act, 81 WASH. L. REV. 279 (2006).
267. Neither the district court nor the appellate court opinion expressly relies on Cauble. But the principal defendant at the time of the suit's initiation, Exxon Corporation, was a citizen of New Jersey, its state of incorporation, and of Texas, its principal place of business. See Allapattah Servs. Inc. v. Exxon Corp., 333 F.3d 1248 (11th Cir. 2003), aff'd, 545 U.S. 546 (2005). The class included 10,000 dealers, some of whom were located in
268. Writing for the majority, Justice Kennedy assumed that the claims of the absent class members form a part of the same "case or controversy" as the claims of the named representatives. Exxon Mobil, 545 U.S. at 558. At another point, he observed that the single issue before the Court "is whether a diversity case in which the claims of some of the plaintiffs satisfy the amount-in-controversy requirement, but the claims of other plaintiffs do not, presents a 'civil action of which the district courts have original jurisdiction.'"
269. Id. at 556. The decision thus consciously avoids the issue of diversity of citizenship and the proper breadth of an Article III controversy, and focuses instead on the statutory amount-in-controversy requirement. Indeed, at one point, the Court indicated that the absence of complete diversity operates as a more potent bar to jurisdiction than the absence of the requisite amount in controversy.
270. Id. at 562. This defense of the complete diversity rule looks a bit odd when juxtaposed against its refusal to look beneath the lower court's application of the Cauble rule.
271. ALI Study, supra note 101, at § 2371(a).
272. See Floyd, supra note 12, at 655
273. (quoting ALI Study, supra note 101, at § 2371(a)). Section 2371(b) went on to define necessary parties in terms of parties needed for a "just adjudication". This would have permitted the assertion of jurisdiction over indispensable parties, but not over joint tortfeasors or others on whom the plaintiff sought to impose joint and several liability.
274. See ALI Study supra note 101, at 68.
275. See Floyd, supra note 12, at 655
276. (quoting id. at 385).
277. See also ALI Study, supra note 101, at 431 n.14 (observing that the ALI multi-party provision could be "fully supported on an ancillary jurisdiction theory").
278. Thus, the reporter's memorandum in support of the availability of minimal diversity identifies ancillary jurisdiction as a decisive argument against the complete diversity rule of Strawbridge v. Curtiss. See Floyd, supra note 12, at 659 n.200
279. (quoting ALI Study, supra note 101, at 434, which concluded, after an analysis of Strawbridge, that the "concepts underlying ancillary jurisdiction would authorize Congress to confer jurisdiction with less than total diversity"). For the ALI, at least in the 1960s, the justification for minimal diversity lies not in the efficiency and economy associated with jurisdiction over related but separate claims but in avoiding the "extra burdens" that litigation of a diverse-party controversy would impose on those needed for the just adjudication of a controversy that has already been brought within federal jurisdiction.
280. See ALI Study, supra note 101, at 434.
281. At least since the Erie decision, state courts and legislatures have borne primary responsibility for the development of state law, even as federal courts occasionally hear state law questions in the exercise of diversity or supplemental jurisdiction. By the same token, the primary responsibility for creating and applying federal substantive law falls to Congress and the federal courts, respectively, with the ultimate interpretive authority lodged in the Supreme Court. Federal procedural rules play a supporting role in the enforcement of rights grounded in state and federal substantive law, operating to facilitate the fair and efficient resolution of claims before the federal courts. Under the Rules Enabling Act, such procedural rules may not abridge, modify, or enlarge substantive rights, see 28 U.S.C. § 2072, and the Court has strained in recent years to narrow the operation of the Federal Rules to prevent their interfering with substantive interests, both state and federal.
282. See infra notes 160.
283. CAFA does include a modest collection of rules to govern the class certification and settlement process, but these do not differ in the main from Rule 23's approach and do not apply in state court.
284. See Edward H. Cooper, Rule 23: Challenges to the Rulemaking Process, 71 N.Y.U.L. REV. 13 (1996) (noting that Rule 23's nominally procedural approach to aggregation had nonetheless made an important change in the nature of the underlying rights, transforming low or negative value claims into claims worth pursuing, and reflecting on the challenges such developments pose to ongoing procedural reform);
285. David L. Shapiro, Class Actions: The Class as Party and Client, 73 NOTRE DAME L. REV. 913 (1997) (adopting the view that class actions, especially those involving the aggregation of low-value claims, may be best regarded as an entity and exploring the implications of such a view).
286. Federal courts apply federal procedural rules in disputes over both state and federal law, but the rules shall not be construed to "extend the jurisdiction" of the district courts. FED. R. CIV. P. 82. Moreover, under the Rules Enabling Act, any rules promulgated by the Court shall not "abridge, enlarge, or modify any substantive right." 28 U.S.C. § 2072(b). Views differ as to the purpose of this restriction on the Court's rulemaking authority. Compare Stephen B. Burbank, The Rules Enabling Act of 1934, 130 U. PA. L. REV. 215 (1982) (portraying the limitations in the Act as aimed at preserving Congress's control)
287. with John Hart Ely, The Irrepressible Myth of Erie, 87 HARV. L. REV. 693 (1974) (exploring the Act's restrictions as protecting the state law from displacement by rules of federal procedure). But whatever one's view, the Act plainly forecloses an exercise of rulemaking authority that would create a federal substantive right to aggregation under which state law claims could arise for jurisdictional purposes.
288. See Shapiro, supra note 159, at 949-54 (concluding that the adoption of an entity theory of the class action would implicate matters of substance that defy reliance on federal common law solutions and supporting the development of the necessary rules by act of Congress rather than by rulemaking). One can certainly imagine an argument that the federal courts should decline to apply Rule 23 standards under CAFA in deference to state rules that point to a different decision about the propriety of aggregate litigation. Imagine a state law that forbids the aggregation of certain kinds of claims, or permits their aggregate treatment in circumstances in which Rule 23 would not. Such differences in approach have already created forum shopping pressures, with outcomes turning on what aggregation standard applies.
289. See S. REP. NO. 109-14, supra note 108, at 26 (noting the tendency of defendants to remove actions to federal court where the threat of prejudice "is significantly lower"). When facing such a conflict, the federal courts may consider a narrowing interpretation of Rule 23 that prevents the federal aggregation rule from overriding state rules with substantive overtones, at least as to claims based upon state law. See Gasperini v. Center for Humanities, Inc., 518 U.S. 415 (1996) (adopting a narrow interpretation of federal procedural rules to avoid a conflict that would have otherwise displaced the applicability of a more search state law standard for the review of jury verdicts);
290. see also Walker v. Armco Steel Corp., 446 U.S. 740 (1980) (adopting a narrow interpretation of the federal commencement rule to prevent a displacing conflict with state rules governing the tolling of the limitations period). For a criticism of this trend toward selective narrowing of the federal rules,
291. see Earl C. Dudley, Jr. & George Rutherglen, Deforming the Federal Rules: An Essay on What's Wrong with the Recent Erie Decisions, 92 VA. L. REV. 707 (2006). If such narrowing occurred, it would seemingly undermine the congressional goal of securing the application of Rule 23 standards to all multi-state class actions and would substitute a patchwork quilt of certification standards. Even if such narrowing were avoided, the price of shifting to a federal Rule 23 standard would be the displacement of state rules with partially substantive features.
292. When they do, supplemental jurisdiction over related claims may attach under the Exxon Mobil Court's interpretation of section 1367, thereby moderating the amount-in-controversy but not the complete diversity requirement.
293. See supra notes 103-110 and accompanying text.
294. See Shapiro, supra note 159.
295. See Samuel Issacharoff, Preclusion, Due Process, and the Right to Opt Out of Class Actions, 77 NOTRE DAME L. REV. 1057 (2002).
296. See Martin H. Redish & Nathan D, Larsen, Class Actions, Litigant Autonomy, and the Foundations of Procedural Due Process, 95 CALIF. L. REV. 1587-1600 (2007) (criticizing entity theories on the ground that they accord too little weight to the individual's interest in controlling his or her own legal claims).
297. One can usefully contrast CAFA with Congress's earlier efforts to expand jurisdiction over juristic entities. As Congress saw the problem that led it to adopt the Labor Management Relations Act of 1947, unions escaped liability for the breach of their labor contracts due in part to the absence of any federal duty to observe them and in part to the failure of state courts to develop the rules of aggregate litigation necessary to enforce such promises against the union. Many states viewed the union as an unincorporated association, incapable of entering into contractual obligations as an entity and suable only through the joinder of its members. State court suits to remedy strikes in breach of a labor contract presented both of these aggregation problems. Congress addressed the problem by creating certain federal substantive rights and securing their enforcement through rules that conferred entity status on the union. In section 301(a) of the LMRA, it provided for the federal courts to assert jurisdiction over suits for violation of collective bargaining agreements. (Other provisions of the new law imposed liability on unions for secondary boycotts.) In section 301(b), Congress established rules of litigation capacity. In brief, those rules make the union an entity for purposes of enforcing the union's obligations under federal law, giving the union capacity to sue and be sued in its own name. To secure this new entity status, the union was made responsible for actions taken on its behalf by its officers, but the officers and members were freed from any personal liability for the obligations of the union (thus providing something analogous to the corporation's limited liability). Actions brought against the union under federal law could name the union itself, without the cumbersome necessity of joining the members through some form of aggregate litigation. On the operation of 301(b), and its tendency to confirm Congress's intent to create a federal duty to honor collective bargaining agreements, see Pfander, supra note 38, at 292-98.
298. Apart from litigation to enforce federal substantive rights, unions may sue and be sued in federal diversity proceedings to enforce garden-variety state law tort and contract claims. Rule 23.2 sets forth a special class action rule that empowers an officer of the union to pursue state law claims on the union's behalf in federal court, so long as the representative party and the defendant are citizens of different states. This approach to defining the citizenship of the union as a class flows from the Cauble decision and its emphasis on the citizenship of the representative plaintiff in determining the citizenship of a true class. This true class characterization seem quite apt in the case of a labor organization: Perhaps to a greater extent than in the case of the shareholders of a corporation, the members of a labor organization share a community of interest as a result of their membership status. Conflicts may ensue, especially among the union's leaders and their political opponents. But the members share a common interest in securing compensation for the union from any outside entity that breached its contract with the union. In this sense, the union's contract claims represent a common and undivided interest of all the members, rather than separate and independent claims. The rules of ancillary jurisdiction permit litigation through a class action and the selection of a single diverse member as the representative of all. It might make more sense if Congress were to abandon the Rule 23.2 approach and draw the analogy to the corporation more explicitly. It could so by defining the labor organization, and other unincorporated associations, as citizens of their place of organization and perhaps their principal place of business. The advantage of such an approach would be that it would fix in advance the citizenship of the labor union, rather than permitting the union or its opponent to manipulate its citizenship through the selection of a representative member whose citizenship differs from that of the adverse party. Such an approach would also help to assure adequacy of representation in litigation on behalf of the union by making clear that the union itself would control litigation decisions through its duly elected officers. Rule 23.2 class actions might remain for use in a member's derivative action, something comparable to the shareholder's derivative action envisioned in Rule 23.1.
299. These observations should not be taken as rejecting the entity model of class litigation that some scholars have proposed. Rather, the point is to recognize that the adoption of an entity model will require Congress to adopt a law that defines the rules of entity creation that it envisions as necessary to protect the interests of class members and perhaps specify internal rules of governance to address potential conflicts of interest.
300. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 460 (1957) (Frankfurter, J., dissenting) Congress, perhaps as early as 1947 and certainly by 1959, had transformed the labor union from a voluntary organization under state law to the functional equivalent of a corporate entity, governed by a federal law of internal affairs that resembles the Delaware corporation code. Having created in some respects a federal entity, Congress would seemingly have had the power under Osborn v. Bank of the United States to confer jurisdiction on the federal courts to entertain claims by and against the labor union as claims arising under federal law. Justice Frankfurter expressed doubt on this point in his Lincoln Mills dissent, characterizing the rules of entity treatment and union capacity as simple matters of procedure that could not provide the sort of federal substance necessary to supply an original ingredient in any action the union might bring. But the passage of the LMRDA unquestionably constitutes substantive federal regulation of internal affairs that makes it impossible to sustain Justice Frankfurter's procedural characterization of the union's status as a federal entity. Even in 1947, there were rules of substance lurking in the details of the entity status of labor unions that Justice Frankfurter characterized as merely procedural.
301. See Pfander, supra note 38, at 292-98.
302. Federal law protects the right of employees to refrain from formal union membership, if they choose, even as it permits the union to charge such objectors a ratable share of the union's costs in representing the bargaining unit. Ultimately, objectors may leave the unionized workplace and take up work in the non-union sector.
303. See Amchem Prods. Inc. v. Windsor, 521 U.S. 591 (1997);
304. Ortiz v. Fibreboard, 527 U.S. 815 (1999) (invaliding settlement class actions that failed to give adequate attention to the conflicting interests of the many claimants encompassed within the settlement; expressing skepticism about the use of the class action as a device to alter the substantive rights of individual litigants in pursuit of the goal of convenience and efficiency).
305. See also Paul D. Carrington & Derke P. Apanovitch, The Constitutional Limits of Judicial Rulemaking: The Illegitimacy of Mass-Tort Settlements Negotiated Under Federal Rule 23, 39 ARIZ. L. REV. 461 (1997) (expressing skepticism about class action settlements that subordinate individual rights to collective interests in efficient disposition); Nagareda, supra note 110, at 677 (arguing that class actions settlements cannot provide a national solution to mass litigation and cannot substitute for "national lawmaking").
306. See Redish & Larsen, supra note 165, at 1600-1612;
307. Susan P. Koniak & George M. Cohen, Under Cloak of Settlement, 82 VA. L. REV. 1051 (1996).
308. See Alison v. Citgo Petroleum Corp., 151 F.3d 402, 411 (5th Cir. 1998) (limiting use of a (b)(2) class action when individual claims for money damages predominate);
309. Jefferson v. Ingersoll Int'l, 195 F. 3d 894, 898 (7th Cir. 1999);
310. but cf. Robinson v. Metro North R. Co., 267 F. 3d 147, 165 (2d. Cir. 2001).
311. See Verlinden B. V. v. Central Bank of Nigeria, 461 U.S. 480, 496-97 (1983).
312. Pub. L. No. 107-42, 115 Stat. 230 (2001).
313. By adopting such a personal jurisdiction approach, Congress could address any perceived pathologies of state court class action litigation to which the expansive jurisdictional ruling of Shutts gave rise. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985). The Shutts decision upheld the power of the Kansas state court to entertain claims of class members from outside the state who lacked any affiliating connection to the state; the Court found that the failure of the class members to opt out of the litigation provided a sufficient basis for the state court to hear their claims.
314. Id. at 811-12. As for the power of the state court to apply its own law to the claims of the non-resident class members, particularly those with no affiliating connection to the state, the Court applied established doctrine in holding that the state court may apply its law only to disputes with which the state has a significant contact or aggregation of contacts, creating state interests, such that the choice of law is neither arbitrary nor fundamentally unfair.
315. Id. at 821-22 (citing Allstate Ins. Co. v. Hague, 449 302, 312-13 (1981)).
316. See id.
317. See AMERICAN LAW INSTITUTE, COMPLEX LITIGATION PROJECT 375 (1993) (acknowledging that "national standards" would simplify the resolution of complex litigation but doubting that the political process will yield the necessary consensus).
318. See Goldberg, supra note 1, at 576-77.
319. See 28 U.S.C. § 1346(b) (establishing liability of the United States for the torts of its agents and employees and basing such liability on the law of the place where the act or omission occurred); 28 U.S.C. § 1606 (making a foreign state that has engaged in commercial activity liable in the same manner and to the same extent as a private individual under like circumstances.
320. Professor Black reached a contrary conclusion, testifying that Congress could overcome any Article III problems with the consumer class action legislation of 1969 simply by incorporating state law standards of consumer protection into federal law. See Consumer Hearings, supra note 111, at 21, 25-27. Professor Black based the conclusion in part on a broad view of the scope of protective jurisdiction and in part on decisions that had upheld the power of Congress to incorporate state law as the standard of federal criminal liability in federal enclaves.
321. See id. at 26 (citing US v. Sharpnack, 355 U.S. 286 (1958)). But the analogy does not persuade. State law does not apply of its own force within federal enclaves; incorporation of state law thus effects a substantive change in legal relations that differs from the federal incorporation of state consumer protection law to govern matters to which it already applies.
322. Cf. Goldberg, supra note 1, at 555-56.
323. Pub. L. No. 106-37, 106 Stat. 185 (1999) (codified at 15 U.S.C. §§ 6601-6617).
324. See 15 U.S.C. § 6606 (providing for pre-litigation notice and use of alternative dispute resolution techniques);
325. Id. at § 6607 (specifying rules of particularity that govern the pleading of claims under the statute).
326. See 15 U.S.C. § 6604 (requiring proof in support of a punitive damages claim by clear and convincing evidence and limiting punitive damages to the lesser of three times compensatory damages or $250,000);
327. Id. at § 6605 (imposing a rule of proportionate liability for cases not involving contract claims and specifying rules to govern its determination);
328. Id. at § 6608 (imposing a duty on victims to mitigate damages);
329. Id. at § 6611 (barring recovery of damages for economic loss in tort actions, except in the case of intentional torts and those that result in tangible injury to property).
330. See 15 U.S.C. § 6614 (providing for the assertion of original jurisdiction over any Y2K action brought as a class action). The structure of the Y2K Act assumes that state law will continue to provide the vehicle for suits brought to recover tort and contract damages for Y2K failures. Thus, § 6603(b) provides that the Act creates no new cause of action and § 6615 expressly preserves state law to the extent that it provides "stricter limits on damages and liabilities" that the Act itself. Yet despite the continuing relevance of state law in creating the cause of action, federal law will inevitably determine the viability of such claims and the extent of available damages. Such issues may or may not appear on the face of well-pleaded complaints under the Y2K Act, but inhere in the resolution of such claims.
331. The Court in Verlinden made clear that issues of federal substantive law, even though nominally arising as defenses to liability created by state law, would nonetheless make the action one arising under federal law within the meaning of Article III.
332. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983).