[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1875 Referred in Senate (RFS)]







106th CONGRESS
  1st Session
                                H. R. 1875


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 24, 1999

                                Received

                           November 19, 1999

       Read twice and referred to the Committee on the Judiciary

_______________________________________________________________________

                                 AN ACT


 



To amend title 28, United States Code, to allow the application of the 
   principles of Federal diversity jurisdiction to interstate 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 ``Interstate Class 
Action Jurisdiction Act of 1999''.
    (b) Reference.--Whenever in this Act reference is made to 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. FINDINGS.

    The Congress finds that--
            (1) as recently noted by the United States Court of Appeals 
        for the Third Circuit, interstate class actions are ``the 
        paradigm for Federal diversity jurisdiction because, in a 
        constitutional sense, they implicate interstate commerce, 
        invite discrimination by a local State, and tend to attract 
        bias against business enterprises'';
            (2) most such cases, however, fall outside the scope of 
        current Federal diversity jurisdiction statutes;
            (3) that exclusion is an unintended technicality, inasmuch 
        as those statutes were enacted by Congress before the rise of 
        the modern class action and therefore without recognition that 
        interstate class actions typically are substantial 
        controversies of the type for which diversity jurisdiction was 
        designed;
            (4) Congress is constitutionally empowered to amend the 
        current Federal diversity jurisdiction statutes to permit most 
        interstate class actions to be brought in or removed to Federal 
        district courts; and
            (5) in order to ensure that interstate class actions are 
        adjudicated in a fair, consistent, and efficient manner and to 
        correct the unintended, technical exclusion of such cases from 
        the scope of Federal diversity jurisdiction, it is appropriate 
        for Congress to amend the Federal diversity jurisdiction and 
        related statutes to allow more interstate class actions to be 
        brought in or removed to Federal court.

SEC. 3. 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 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 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) The district courts shall not exercise jurisdiction over a 
civil action described in paragraph (1) if the action is--
            ``(i) an intrastate case;
            ``(ii) a limited scope case; or
            ``(iii) a State action case.
    ``(B) For purposes of subparagraph (A)--
            ``(i) the term `intrastate case' means a class action in 
        which the record indicates that--
                    ``(I) the claims asserted therein will be governed 
                primarily by the laws of the State in which the action 
                was originally filed; and
                    ``(II) the substantial majority of the members of 
                all proposed plaintiff classes, and the primary 
                defendants, are citizens of the State in which the 
                action was originally filed;
            ``(ii) the term `limited scope case' means a class action 
        in which the record indicates that all matters in controversy 
        asserted by all members of all proposed plaintiff classes do 
        not in the aggregate exceed the sum or value of $1,000,000, 
        exclusive of interest and costs, or a class action in which the 
        number of members of all proposed plaintiff classes in the 
        aggregate is less than 100; and
            ``(iii) the term `State action case' means a class action 
        in which the primary defendants are States, State officials, or 
        other governmental entities against whom the district court may 
        be foreclosed from ordering relief.
    ``(3) Paragraph (1) shall not apply to any claim concerning a 
covered security as that term is defined in section 16(f)(3) of the 
Securities Act of 1933 and section 28(f)(5)(E) of the Securities 
Exchange Act of 1934.
    ``(4) Paragraph (1) shall not apply to any class action solely 
involving a claim that relates to--
            ``(A) the internal affairs or governance of a corporation 
        or other form of business enterprise and that arises under or 
        by virtue of the laws of the State in which such corporation or 
        business enterprise is incorporated or organized; or
            ``(B) the rights, duties (including fiduciary duties), and 
        obligations relating to or created by or pursuant to any 
        security (as defined under section 2(a)(1) of the Securities 
        Act of 1933 and the regulations issued thereunder).''.
    (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. 4. 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, but without 
regard to whether any defendant is a citizen of the State in which the 
action is brought, 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, except that 
a plaintiff class member who is not a named or representative class 
member of the action may not seek removal of the action before an order 
certifying a class of which the plaintiff is a class member has been 
entered.
    ``(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 no later than 30 days after receipt by 
such class member, through service or otherwise, of the initial written 
notice of the class action provided at the court's direction.
    ``(d) Exceptions.--
            ``(1) Covered securities.--This section shall not apply to 
        any claim concerning a covered security as that term is defined 
        in section 16(f)(3) of the Securities Act of 1933 and section 
        28(f)(5)(E) of the Securities Exchange Act of 1934.
            ``(2) Internal governance of business entities.--This 
        section shall not apply to any class action solely involving a 
        claim that relates to--
                    ``(A) the internal affairs or governance of a 
                corporation or other form of business enterprise and 
                that arises under or by virtue of the laws of the State 
                in which such corporation or business enterprise is 
                incorporated or organized; or
                    ``(B) the rights, duties (including fiduciary 
                duties), and obligations relating to or created by or 
                pursuant to any security (as defined under section 
                2(a)(1) of the Securities Act of 1933 and the 
                regulations issued thereunder).''.
    (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 3 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, it shall dismiss the action. An 
action dismissed pursuant to this subsection may be amended and filed 
again in a State court, but any such refiled action may be removed 
again if it is an action of which the district courts of the United 
States have original jurisdiction. In any action that is dismissed 
pursuant to this subsection and that is refiled by any of the named 
plaintiffs therein in the same State court venue in which the dismissed 
action was originally filed, the limitations periods on all reasserted 
claims shall be deemed tolled for the period during which the dismissed 
class action was pending. The limitations periods on any claims that 
were asserted in a class action dismissed pursuant to this subsection 
that are subsequently asserted in an individual action shall be deemed 
tolled for the period during which the dismissed class action was 
pending.''.

SEC. 5. 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. 6. 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.

            Passed the House of Representatives September 23, 1999.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.