JURISDICTION OF FEDERAL COURTS CONCERNING DIVERSITY OF CITIZENSHIP FRIDAY, JULY 12, 1957 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 3 OF THE The subcommittee met, pursuant to notice, at 10:30 a. m., in room 346, Old House Office Building, Hon. Edwin E. Willis (chairman) presiding. Present: Representatives Edwin E. Willis, Jack B. Brooks, William M. Tuck, and Arch A Moore, Jr. Also present: C. F. Brickfield, counsel. Mr. WILLIS. The subcommittee will come to order. We take up today bill H. R. 2516, introduced by a member of this subcommittee, former Governor Tuck, of Virginia; also a bill by another member of the subcommittee, Mr. Ashley, H. R. 4497. Both deal with jurisdiction of the Federal courts. Without objection, the bills will be included in the record at this point. (The bills referred to follow :) [H. R. 2516, 85th Cong., 1st sess.] A BILL To amend title 28, United States Code, to provide that the district courts shall have jurisdiction of certain civil actions only if the amount in controversy exceeds $10,000, and to provide that their jurisdiction based on diversity of citizenship shall not extend to actions in which corporations are parties Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That sections 1331 and 1332 of title 28, United States Code, are amended to read as follows: "8 1331. Federal question; amount in controversy "The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States. "81332. Diversity of citizenship; amount in controversy "(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between “(1) individuals who are citizens of different States; "(2) individuals who are citizens of a State, and foreign states or citizens or subjects thereof; and "(3) individuals who are citizens of different States and in which foreign states or citizens or subjects thereof are additional parties. "(b) The word 'States', as used in this section, includes the Territories and the District of Columbia." 1 F 出 لا RA RA [H. R. 4497, 85th Cong., 1st sess.] A BILL To amend sections 1331 and 1332 of title 28, United States Code, relating to the amount in controversy, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1331 of title 28 of the United States Code is amended to read as follows: "§ 1331. Federal question; amount in controversy "The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States." SEC. 2. That section 1332 of title 28 of the United States Code is amended to read as follows: "§ 1332. Diversity of citizenship; amount in controversy "(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between 66 "(1) citizens of different States; "(2) citizens of a State, and foreign states or citizens or subjects thereof; and "(3) citizens of different States and in which foreign states or citizens or subjects thereof are additional parties. "(b) The word 'States', as used in this section, includes the Territories and the District of Columbia. "(c) For the purposes of this section and section 1441 of this title, a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." SEC. 3. Subsection (c) of section 1332, title 28, United States Code, as amended by this Act, shall apply only in the case of actions commenced after the date of the enactment of this Act. Mr. WILLIS. We will be very delighted to hear from you, Governor. TESTIMONY OF HON. WILLIAM M. TUCK, A REPRESENTATIVE IN Mr. Tuck. Thank you, Mr. Chairman. I appreciate the opportunity to appear in support of my bill, H. R. 2516. I am somewhat embarrassed to appear in such illustrious company to discuss a matter of this kind. But, nevertheless, I appreciate this opportunity, and I would like to call particular attention to the bill because of the economy involved as well as the important bearing it has upon the administration of justice in the courts of the land. My bill raises no complex questions and is short and simple and easy to understand. The effect of this bill, if enacted into law, would be to increase the original jurisdictional amount in United States district courts from $3,000 to $10,000, exclusive of interest and costs, in matters of controversy arising under the Constitution, laws, and treaties of the United States, and in controversy between persons of diverse citizenship, and to confine jurisdiction in such cases to individuals who are citizens and to the exclusion of corporations except where Federal questions are raised. This bill is designed to relieve the Federal courts of litigation of a trifling or less substantial nature and to confer jurisdiction in such cases upon the State courts where it belongs. Under the Constitution of the United States the Congress has the power within certain limi tations to fix and determine the jurisdiction of the United States courts. It is my information that the jurisdictional amount was fixed originally in 1780 at $500. In 1801 it was reduced to $400, then in 1802 it was again fixed at $500. In 1887 the amount was increased to $2,000 and in 1911 it was increased to $3,000. Since 1911, when the jurisdictional amount in controversy was last increased, the value of the dollar has steadily declined and litigation has considerably multiplied, particularly in the field of damage suits. Few such suits are now brought for as small an amount as $3,000. Moreover, a greedy and Gargantuan Central Government in the last few years has usurped the powers of the States by expanding its activities into almost every phase of our existence, and we can feel its tentacles in all walks of life. This unwarranted invasion of the governmental functions and responsibilities of the States has been carried on under the guise of beneficence, but if continued unchecked will finally leave the government of the States and localities nothing more than the hollow shells of a lost liberty. Some of the States have succumbed to these spurious doctrines and have yielded to this usurpation of their powers either through a failure to understand the fundamental principles upon which our Government was established and is based, or have surrendered in the hope of receiving a liberal abundance and share of the governmental largess made available to them under many of these socialistic schemes. In the State from which I come, Mr. Chairman, we will be perfectly willing to be let alone, and we don't want anything that the Federal Government has to offer in the way of money. We believe that each State should be able to maintain itself without any aid from the Federal Government. My thoughts in respect to the increase in the jurisdictional amounts are not original with me, for it is my understanding that a committee of judges, comprising the senior United States circuit judges, has recognized the desirability of making this change, and several bills have been introduced in the House of Representatives in recent years to this effect, and at least 1 bill has passed this body raising the jurisdictional amount from $3,000 to $7,500. I want it distinctly understood, now, that I have unbounded confidence in the Federal judges presiding over the courts in which I have practiced. I am well acquainted with the United States district judges now in service in Virginia. I have the highest respect for all of them and they are, I believe, my warm personal friends. I have not discussed this subject with any of them; hence, I have no authority and do not undertake to speak for them. Knowing them as I do, however, I believe that they would welcome the changes herein proposed in the interest of economy and in the administration of justice by relieving them from the burden of hearing and trying cases of a frivolous or less substantial nature, thus enabling them to devote more of their valuable time to cases of greater importance. I do know that they are all men of the highest qualifications, fitness, and character, and who would not under any conditions covet 95145-57--2 influence or power. It is my desire to enhance, if practicable, the usefulness and the already high standing of these honorable courts in Virginia. Under the diversity-of-citizenship clause of the Constitution, the courts have from time to time over a period of some 70 or 80 years construed the word "citizen" or "citizens" as used in article III of the Constitution to embrace corporations also. Having enunciated this doctrine, they have found and held that the persons composing the corporation are presumed to be citizens of the State where the corporation was chartered and the courts have held that this presumption is irrebuttable. While there may be substantial basis for this theory and line of reasoning, I do think the time has come to curtail the jurisdiction of Federal courts based on the citizenship of corporations. This view likewise is not new or original with me, for attempts have been made repeatedly for the last 75 years to negate these rulings by congressional action. The House of Representatives, as far back as 1880, passed a bill, H. R. 4219, 46th Congress, one paragraph of which deprives Federal courts of jurisdiction based on diversity of citizenship in cases between a corporation and citizens of any State in which it does business other than patent and copyright cases. Other measures of a similar nature passed the House of Representatives from time to time thereafter but were lost in the Senate. As late as 1932, President Hoover in a special message to Congress on strengthening the judiciary system of the country recommended that jurisdiction of Federal courts be modified by— providing that where a corporation, organized under the laws of one State, carries on business in another State, it shall be treated as a citizen of the State wherein it carries on business as respects suits brought within that State between it and residents thereof and arising out of the business carried on in such State. The effect of the Supreme Court decisions hereinabove generally referred to construing the word "citizen" in article III is to confer fictitious citizenship upon corporations. The bill which I have introduced will, if passed, nullify these decisions and limit the jurisdiction to individual citizens and exclude jurisdiction where the citizens are corporate or fictitious. I am a firm believer in the principles of States rights, and particularly where these principles apply to litigation. These matters of dispute can be settled more expeditiously and with a closer approach to public justice in the localities where the cause of action has arisen. Our State judges as a whole are learned and able men. They are fair, impartial, and highly fitted to wear the judicial robes. For the most part they rank in fitness and ability on a plane equally as high as our United States district judges. Under the aegis of such a judicial system and with expansion and improvement of communications such as automobiles, airplanes, the press-including radio and television-as well as our modern and improved educational programs, I cannot believe that the people of the respective States would be so provincial in this enlightened era that they would refuse a fair trial because one of the litigants was a citizen of another State. More often than not, cases are moved from the State to the Federal courts for no purpose other than to delay the trial and administration of justice; and, as we all know, a delay in the trial of a case often thwarts public justice. The Congress is called upon repeatedly to create additional Federal judgeships to relieve the present judges of the existing workload which in some Federal jurisdictions is unbearable. These additional courts are created and established at great expense to the already overburdened American taxpayer and the principal parties continue to be subjected to the harassment, the inconvenience, the delay, and the expense of having their cases heard and tried in some instances of at least hundreds of miles away from the scene where the cause of action arose and where the litigants, attorneys, and witnesses reside. Briefly, the above are a few among many other good reasons why the original jurisdictional amount in controversy should be changed so as to curtail the jurisdiction of the United States district courts, thus leaving important legal rights of our citizens to be determined in a forum where public justice will be promoted, not retarded or denied. It is my fervent hope that the bill which I have introduced may have the active aid and support of the members of the Judiciary Committee not only, but of all those who are interested in economy at the Federal level where it is so sorely needed, and who are interested in the preservation of the rights of the citizens of our sovereign States as well as in the fair, impartial, and speedy administration of public justice. In closing. I should like to summarize briefly by making the following salient points: 1. Increase in number of district judgeships since World War II: 51. 2. Number of additional judgeships now recommended : 39. 3. What is the situation with respect to the dockets in various courts? The pending civil caseload has more than doubled in 16 years. Condition of civil dockets is generally unsatisfactory. There are shocking delays in some metropolitan areas, and it is, of course, against the national interest and reflects adversely upon the administration of public justice. The national average in months from filing to disposition has increased from 10.2 in 1941 to 15.4 in 1956. The national average interval in the months from the issue of the summons or papers to the trial has increased from 5.3 in 1941 to 10.3 in 1956. Further expansion in Federal question and diversity cases is predicated. Under the heading "Civil Cases Commenced in the District Courts" we find an increase from 5,547 in 1941 to 7,676 in 1956; and in diversity of citizenship cases, from 7,348 in 1941 to 20,525 in 1956. If you want to get at the core of this situation, as far as the amount is concerned, I think such a bill isn't worth the paper it is written on because litigants who wish to go to Federal court will allege the amount is $10,000 or over in order to get into the Federal courts. The real cure of this crowded condition of the dockets and delay of public justice is in the field of corporations. I would like to say, Mr. Chairman, that I have no prejudices against corporations. I think that they perform a useful purpose. Prior to my becoming a Member of Congress I was a member of the boards of directors of several of the larger corporations in this country, including one railroad company; and far be it from me to do anything |