[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3789 Reported in House (RH)]





                                                 Union Calendar No. 397

105th CONGRESS

  2d Session

                               H. R. 3789

                          [Report No. 105-702]

_______________________________________________________________________

                                 A BILL

    To amend title 28, United States Code, to enlarge Federal Court 
               jurisdiction over purported class actions.

_______________________________________________________________________

                           September 10, 1998

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed





                                                 Union Calendar No. 397
105th CONGRESS
  2d Session
                                H. R. 3789

                          [Report No. 105-702]

    To amend title 28, United States Code, to enlarge Federal Court 
               jurisdiction over purported class actions.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 5, 1998

Mr. Hyde (for himself, Mr. McCollum, Mr. Smith of Texas, Mr. Canady of 
 Florida, Mr. Bryant, Mr. Pease, and Mr. Moran of Virginia) introduced 
    the following bill; which was referred to the Committee on the 
                               Judiciary

                           September 10, 1998

 Additional sponsors: Mr. Frank of Massachusetts, Mr. Inglis of South 
               Carolina, Mr. Sensenbrenner, and Mr. Rogan

                           September 10, 1998

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on May 5, 
                                 1998]

_______________________________________________________________________

                                 A BILL


 
    To amend title 28, United States Code, to enlarge Federal Court 
               jurisdiction over purported class actions.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND REFERENCE.

    (a) Short Title.--This Act may be cited as the ``Class Action 
Jurisdiction Act of 1998''.
    (b) Reference.--Whenever in this Act an amendment or repeal is 
expressed in terms of an amendment to, or repeal of, a section or other 
provision, the reference shall be considered to be made to a section or 
other provision of title 28, United States Code.

SEC. 2. JURISDICTION OF DISTRICT COURTS.

    (a) Expansion of Federal Jurisdiction.--Section 1332 is amended by 
redesignating subsections (b), (c), and (d) as subsections (c), (d), 
and (e), respectively, and by inserting after subsection (a) the 
following:
    ``(b)(1) The district courts shall have original jurisdiction of 
any civil action, regardless of the sum or value of the matter in 
controversy therein, which is brought as a class action and in which--
            ``(A) any member of a proposed plaintiff class is a citizen 
        of a State different from any defendant;
            ``(B) any member of a proposed plaintiff class is a foreign 
        state or a citizen or subject of a foreign state and any 
        defendant is a citizen of a State; or
            ``(C) any member of a proposed plaintiff class is a citizen 
        of a State and any defendant is a citizen or subject of a 
        foreign state.
As used in this paragraph, the term `foreign state' has the meaning 
given that term in section 1603(a).
    ``(2)(A) In a civil action described in paragraph (1) in which--
            ``(i) the substantial majority of the members of all 
        proposed plaintiff classes are citizens of a single State of 
        which the primary defendants are also citizens, and
            ``(ii) the claims asserted will be governed primarily by 
        the laws of that State,
the district court should abstain from hearing such action.
    ``(B) In a civil action described in paragraph (1) in which--
            ``(i) all matters in controversy asserted by the individual 
        members of all proposed plaintiff classes in the aggregate do 
        not exceed the sum or value of $1,000,000, exclusive of 
        interest and costs,
            ``(ii) the number of members of all proposed plaintiff 
        classes in the aggregate is less than 100, or
            ``(iii) the primary defendants are States, State officials, 
        or other governmental entities against whom the district court 
        may be foreclosed from ordering relief,
the district court may, in its discretion, abstain from hearing such 
action.
    ``(3)(A) Paragraph (1) and section 1453 shall not apply to any 
class action that is brought under the Securities Act of 1933.
    ``(B) Paragraph (1) and section 1453 shall not apply to a class 
action described in subparagraph (C) that is based upon the statutory 
or common law of the State in which the issuer concerned is 
incorporated (in the case of a corporation) or organized (in the case 
of any other entity).
    ``(C) A class action is described in this subparagraph if it 
involves--
            ``(i) the purchase or sale of securities by an issuer or an 
        affiliate of an issuer exclusively from or to holders of equity 
        securities of the issuer; or
            ``(ii) any recommendation, position, or other communication 
        with respect to the sale of securities of an issuer that--
                    ``(I) is made by or on behalf of the issuer or an 
                affiliate of the issuer to holders of equity securities 
                of the issuer; and
                    ``(II) concerns decisions of those equity holders 
                with respect to voting their securities, acting in 
                response to a tender or exchange offer, or exercising 
                dissenters' or appraisal rights.
    ``(D) As used in this paragraph, the terms `issuer', `security', 
and `equity security' have the meanings given those terms in section 3 
of the Securities Exchange Act of 1934.''.
    (b) Conforming Amendment.--Section 1332(c) (as redesignated by this 
section) is amended by inserting after ``Federal courts'' the 
following: ``pursuant to subsection (a) of this section''.
    (c) Determination of Diversity.--Section 1332, as amended by this 
section, is further amended by adding at the end the following:
    ``(f) For purposes of subsection (b), a member of a proposed class 
shall be deemed to be a citizen of a State different from a defendant 
corporation only if that member is a citizen of a State different from 
all States of which the defendant corporation is deemed a citizen.''.

SEC. 3. REMOVAL OF CLASS ACTIONS.

    (a) In General.--Chapter 89 is amended by adding after section 1452 
the following:
``Sec. 1453. Removal of class actions
    ``(a) In General.--A class action may be removed to a district 
court of the United States in accordance with this chapter, except that 
such action may be removed--
            ``(1) by any defendant without the consent of all 
        defendants; or
            ``(2) by any plaintiff class member who is not a named or 
        representative class member of the action for which removal is 
        sought, without the consent of all members of such class.
    ``(b) When Removable.--This section shall apply to any class action 
before or after the entry of any order certifying a class.
    ``(c) Procedure for Removal.--The provisions of section 1446(a) 
relating to a defendant removing a case shall apply to a plaintiff 
removing a case under this section. With respect to the application of 
subsection (b) of such section, the requirement relating to the 30-day 
filing period shall be met if a plaintiff class member who is not a 
named or representative class member of the action for which removal is 
sought files notice of removal within 30 days after receipt by such 
class member, through service or otherwise, of the initial written 
notice of the class action provided at the district court's direction 
in accordance with Rule 23(c)(2) of the Federal Rules of Civil 
Procedure.''.
    (b) Removal Limitations.--Section 1446(b) is amended in the second 
sentence--
            (1) by inserting ``, by exercising due diligence,'' after 
        ``ascertained''; and
            (2) by inserting ``(a)'' after ``section 1332''.
    (c) Technical and Conforming Amendments.--The table of sections for 
chapter 89 is amended by adding after the item relating to section 1452 
the following:

``1453. Removal of class actions.''.
    (d) Application of Substantive State Law.--Nothing in this section 
or the amendments made by this section shall alter the substantive law 
applicable to an action to which the amendments made by section 2 of 
this Act apply.
    (e) Procedure After Removal.--Section 1447 is amended by adding at 
the end the following new subsection:
    ``(f) If, after removal, the court determines that no aspect of an 
action that is subject to its jurisdiction solely under the provisions 
of section 1332(b) may be maintained as a class action under Rule 23 of 
the Federal Rules of Civil Procedure, the court shall strike the class 
allegations from the action and remand the action to the State court. 
Upon remand of the action, the period of limitations for any claim that 
was asserted in the action on behalf of any named or unnamed member of 
any proposed class shall be deemed tolled to the full extent provided 
under Federal law.''.

SEC. 4. APPLICABILITY.

    The amendments made by this Act shall apply to any action commenced 
on or after the date of the enactment of this Act.

SEC. 5. GAO STUDY.

    The Comptroller General of the United States shall, by not later 
than 1 year after the date of the enactment of this Act, conduct a 
study of the impact of the amendments made by this Act on the workload 
of the Federal courts, and report to the Congress on the results of the 
study.