[Congressional Record Volume 162, Number 30 (Thursday, February 25, 2016)]
[House]
[Pages H907-H915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               FRAUDULENT JOINDER PREVENTION ACT OF 2016


                             General Leave

  Mr. GOODLATTE. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks and include extraneous materials on H.R. 3624.
  The SPEAKER pro tempore (Mr. WITTMAN). Is there objection to the 
request of the gentleman from Virginia?


 =========================== NOTE =========================== 

  
  February 25, 2016, on page H907, the following appeared: The 
SPEAKER pro tempore. Is there
  
  The online version should be corrected to read: The SPEAKER pro 
tempore (Mr. WITTMAN). Is there


 ========================= END NOTE ========================= 

  There was no objection.
  The SPEAKER pro tempore. Pursuant to House Resolution 618 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the state of the Union for the consideration of the bill, H.R. 3624.
  The Chair appoints the gentleman from Louisiana (Mr. Graves) to 
preside over the Committee of the Whole.

                              {time}  1254


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the state of the Union for the consideration of the bill 
(H.R. 3624) to amend title 28, United States Code, to prevent 
fraudulent joinder, with Mr. Graves of Louisiana in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time.
  The gentleman from Virginia (Mr. Goodlatte) and the gentleman from 
Michigan (Mr. Conyers) each will control 30 minutes.
  The Chair recognizes the gentleman from Virginia.

                              {time}  1300

  Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may 
consume.
  Hardworking Americans are some of the leading victims of frivolous 
lawsuits and the extraordinary costs that our legal system imposes. 
Every day, local businessowners routinely have lawsuits filed against 
them, based on claims they have no substantive connection to, as a 
means of forum shopping on the part of the lawyers filing the case. 
These lawsuits impose a tremendous burden on small businesses and their 
employees. The Fraudulent Joinder Prevention Act, introduced by 
Judiciary Committee Member Ken Buck from Colorado, will help reduce the 
litigation abuse that regularly drags small businesses into court for 
no other reason than as part of a lawyer's forum shopping strategy.
  In order to avoid the jurisdiction of the Federal courts, plaintiffs' 
attorneys regularly join instate defendants to the lawsuits they file 
in State court, even if the instate defendants' connections to the 
controversy are minimal or nonexistent.
  Typically, the innocent but fraudulently joined instate defendant is 
a small business or the owner or employee of a small business. Even 
though these innocent instate defendants ultimately don't face any 
liability as a result of being named as a defendant, they nevertheless 
have to spend money to hire a lawyer and take valuable time away from 
running their businesses or spending time with their families to deal 
with matters related to a lawsuit to which they have no real 
connection.
  To take just a couple of examples, in Bendy v. C.B. Fleet Company, 
the plaintiff brought product liability claims against a national 
company for its allegedly defective medicinal drink. The plaintiff also 
joined a resident local defendant health clinic alleging it negligently 
instructed the plaintiff to ingest the drink. The national company 
removed the case to Federal Court and argued that the small local 
defendant was fraudulently joined because the plaintiff's claims 
against the clinic were time-barred by the statute of limitations, 
showing ``no possibility'' of recovery.
  Despite finding the possibility of relief against the local defendant 
``remote,'' the court remanded the case after emphasizing how hard it 
is to demonstrate fraudulent joinder under the current rules. The court 
practically apologized publicly to the joined party, stating: ``The 
fact that Maryland courts are likely to dismiss Bendy's claims against 
the local defendant is not sufficient for jurisdiction, given the 
Fourth Circuit's strict standard for fraudulent joinder.''
  Shortly after remand, all claims against the local defendant were 
dismissed, of course, after its presence in the lawsuit served the 
trial lawyer's tactical purpose of keeping the case in their preferred 
State court. When courts themselves complain about the unfairness of 
current court rules, Congress should take notice.
  In Baumeister v. Home Depot, Home Depot removed a slip-and-fall case 
to Federal Court. The day after removal and before conducting any 
discovery, the plaintiff amended the complaint to name a local 
business, which it alleged failed to maintain the store's parking lot. 
The court found the timing of the amended complaint was ``suspect,'' 
noting the possibility ``that the sole reason for amending the 
complaint to add the local defendant as a defendant . . . could have 
been to defeat diversity jurisdiction.''
  Nevertheless, the court held Home Depot had not met its ``heavy 
burden'' of showing fraudulent joinder under current law because the 
court found it was ``possible,'' even if it were just a tenth of a 
percent possible, that ``the newly added defendant could potentially be 
held liable,'' and remanded the case back to State court. Once back in 
State court, the plaintiff stipulated to dismiss the innocent local 
defendant from the lawsuit, but only after it had been successfully 
used as a forum shopping pawn.
  Trial lawyers join these unconnected instate defendants to their 
lawsuits because today a case can be kept in State court by simply 
joining as a defendant a local party that shares the same local 
residence as the person bringing the lawsuit. When the primary 
defendant moves to remove the case to Federal Court, the addition of 
that local defendant will generally defeat removal under a variety of 
approaches judges currently take to determine whether the joined 
defendant prevents removal to Federal Court.
  One approach judges take is to require a showing that there is ``no 
possibility of recovery'' against the local defendant before a case can 
be removed to Federal Court, or some practically equivalent standard. 
Others require the judge to resolve any doubts regarding removal in 
favor of the person bringing the lawsuit. Still, others require the 
judge to find that the local defendant was added in bad faith before 
they allow the case to be removed to Federal Court.
  The current law is so unfairly heavyhanded against innocent local 
parties joined to lawsuits that Federal Appeals Court Judge J. Harvie 
Wilkinson of the Fourth Circuit Court of Appeals has publicly supported 
congressional action to change the standards for joinder, saying: 
``That's exactly the kind of approach to Federal jurisdiction reform 
that I like because it's targeted. And there is a problem with 
fraudulent jurisdiction law as it exists today, I think, and that is 
that you have to establish that the joinder of a nondiverse defendant 
is totally ridiculous and that there's no possibility of ever 
recovering . . . That's very hard to do. So I think making the 
fraudulent joinder law a little bit more realistic . . . appeals to me 
because it seems to me the kind of intermediate step that addresses 
some real problems.''
  The bill before us today addresses those real problems in two main 
ways:
  First, the bill allows judges greater discretion to free an innocent 
local party from a case where the judge finds there is no plausible 
case against that party. That plausibility standard is the same 
standard the Supreme Court has said should be used to dismiss pleadings 
for failing to state a valid legal

[[Page H908]]

claim, and the same standard should apply to release innocent parties 
from lawsuits.
  Second, the bill allows judges to look at evidence that the trial 
lawyers aren't acting in good faith in adding local defendants. This is 
a standard some lower courts already use to determine whether a trial 
lawyer really intends to pursue claims against the local defendant or 
is just using them as part of their forum shopping strategy.
  This bill is strongly supported by the National Federation of 
Independent Business, representing America's small businesses, and the 
U.S. Chamber of Commerce, among other legal reform groups.
  Please join me in supporting this vital legislation to reduce 
litigation abuse and forum shopping and to protect innocent parties 
from costly, extended, and unnecessary litigation.
  Mr. Chairman, I reserve the balance of my time.
  Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
  Members of the House, H.R. 3624, the so-called Fraudulent Joinder 
Prevention Act, is not really about fraud. Rather, this measure is just 
the latest attempt to tilt the civil justice system in favor of 
corporate defendants by making it more difficult for plaintiffs 
to pursue State law claims in State courts.

  Here is why I say that. To begin with, H.R. 3624 addresses a 
nonexistent problem. Under current law, a defendant may remove a case 
alleging solely State law claims to a Federal court only if there is 
complete diversity of citizenship between all plaintiffs and all 
defendants, with an exception. If the plaintiff adds an instate 
defendant to the case to defeat diversity jurisdiction, this 
constitutes fraudulent joinder and, in such circumstance, the case may 
be removed to Federal court.
  In determining whether a joinder was fraudulent, the court must 
consider only whether there was any basis for a claim against the 
nondiverse defendant. For the case to remain in Federal Court, the 
defendant must show that there was no possibility of recovery or no 
reasonable basis for adding the nondiverse defendant.
  This very high standard has ignited our Federal Courts for more than 
a century, and it has functioned well. H.R. 3624 would replace this 
time-honored standard with a thoroughly ambiguous one. The measure 
would require a remand motion to be denied unless the court finds, 
among other things, that it is ``plausible to conclude that the 
applicable State law would impose liability'' on an instate defendant; 
that the plaintiff had a ``good faith intention to prosecute the action 
against each'' instate defendant or to seek a joint judgment; and that 
there was no ``actual fraud in the pleading of jurisdictional facts.''
  Additionally, H.R. 3624 would effectively overturn the local 
defendant exception, which prohibits removal to Federal Court even if 
complete diversity of citizenship exists when the defendant is a 
citizen of the State where the suit was filed.
  The bill's radical changes to longstanding jurisdictional practice 
reveal the true purpose of this measure. It is simply intended to 
stifle the ability of plaintiffs to have their choice of forum and, 
possibly, even their day in court.
  In addition, H.R. 3624 would sharply increase the cost of litigation 
for plaintiffs and further burden the Federal court system. For 
example, terms like ``plausible'' and ``good faith intention'' are not 
defined in the bill. This ambiguity will lead to greater uncertainty 
for both courts and litigants and will spawn substantial litigation 
over their meaning and application, further delaying many decisions in 
many cases.
  Additionally, these standards require a court to engage in a 
minitrial during an early procedural stage of a case, without an 
opportunity for the full development of evidence. Thus, the bill would 
sharply increase the burdens and costs of litigation for plaintiffs and 
make it more likely that they would be prevented from choosing the 
forum for their claims.

                              {time}  1315

  Finally, the amendments made by this bill raise fundamental 
federalism concerns. Subject to certain exceptions as set forth in our 
Constitution, matters of State law should be decided by State courts. 
The removal of a State court case to Federal court always implicates 
federalism concerns, which is why the Federal courts generally disfavor 
Federal jurisdiction and read removal statutes narrowly.
  H.R. 3624, however, ignores these federalism concerns. By applying 
sweeping and vaguely worded new standards to the determination of when 
a State case must be remanded to a State court, the bill denies State 
courts the ability to decide and ultimately to shape State law. H.R. 
3624 not only violates State sovereignty, but it also violates our 
fundamental constitutional structure.
  Accordingly, I sincerely urge my colleagues to join me in opposing 
this problematic legislation.
  Mr. Chairman, I reserve the balance of my time.
  Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may 
consume to respond to some of the points raised by the gentleman from 
Michigan (Mr. Conyers), the ranking member.
  First of all, it is not this bill that removes cases from State 
courts to Federal courts. It is the United States Constitution and the 
Federal laws that have been passed by this Congress for over 200 years 
that recognize the importance of the principle of diversity 
jurisdiction and of having parties from different States in cases in 
controversy able to remove those cases to the Federal system, which 
represents all citizens, not just the citizens of one State, as State 
courts are sometimes perceived as doing.
  Secondly, it is not this legislation that creates the kind of 
circumstance that the gentleman from Michigan claims it does of denying 
access to the courts. Rather, it is the purpose of this legislation to 
treat people fairly who have been treated unfairly in the process. If 
you have no liability in a case, you should not be sued in the first 
place.
  If you are sued by a lawyer who is trying to manipulate the rules in 
order to keep a case in a court that he has forum-shopped--in other 
words, he has picked the court that he prefers it to be in--that 
individual or business, as quickly as possible, should be able to seek 
redress from the Federal court so as to have a determination made about 
whether or not it is indeed a party that is ``plausibly liable,'' which 
is a Supreme Court standard to be held in the case.
  If it is not a party, then the rules of Federal procedure would allow 
for the removal of that case to Federal court. So we should not be 
blaming innocent parties for spoiling the plans of trial lawyers to try 
to forum-shop into a favorable jurisdiction.
  Let me make a few other quick points about federalism.
  Some of the rhetoric on the other side suggests that it is somehow 
strange for Federal courts to be deciding State law claims, but as a 
matter of history, that is totally inaccurate. State law claims are 
heard by Federal courts whenever the Federal courts have the diversity 
jurisdiction that is outlined in the Constitution.
  That has been a major part of the Federal trial court's work for far 
longer than Federal claims have existed, and out-of-State defendants 
have been able to remove civil cases from State courts since the 
beginning of the Federal judicial system created by the very first 
Congress of which James Madison and many other Founders were members.
  All the bill before us today does is protect the right of removal 
from being subverted by blatant gamesmanship on the part of trial 
lawyers. H.R. 3624 also protects in-State individuals and small 
businesses from being dragged into litigation just so the plaintiff can 
keep the case in State court when the plaintiff's primary target is an 
out-of-State corporation.
  Is it really unfair to say to the trial lawyer, ``when your real 
target is an out-of-State corporation but you want to keep the case in 
State court, you have to come up with a claim against the local in-
State individual or small business that is at least plausible''?
  That is the simple, fair, and modest demand that this bill makes on 
trial lawyers.
  Is it fair to the local individual or small business that it is 
required to bear the costs and other burdens of litigation when the 
claim against it isn't even plausible?
  No, it is not, but that is what is allowed under current law, and 
that is what H.R. 3624 will correct.

[[Page H909]]

  I reserve the balance of my time.
  Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
  Somehow the gentleman from Virginia has misunderstood what I said or 
has mischaracterized what I said.
  This bill makes it too difficult to remand cases back to State courts 
to the point at which federalism concerns are raised and plaintiffs are 
frequently harmed.
  Mr. Chairman, I yield 3 minutes to the gentleman from Tennessee (Mr. 
Cohen), a distinguished member of the Judiciary Committee.
  Mr. COHEN. I thank the ranking member.
  Mr. Chairman, this bill which has come before our committee is one 
that the President has said he will veto because the President says 
that it is a ``solution that is looking for a problem'' or something to 
that effect.
  This bill will make it more difficult for plaintiffs--people who have 
been harmed--to get relief because their cases in State courts can more 
easily be removed to Federal courts.
  Now, the gentleman from Virginia is exactly right in that it has 
always been permitted. You can remove a case to Federal court if you 
can show that the plaintiff in the State court is not a proper 
plaintiff, if you can show that there is diversity of citizenship and 
not complete diversity.
  The problem is that this has always been the rule, and it is the way 
the rule is now; but the courts have not come to us and said this is a 
problem and have asked us to correct it. We are correcting this because 
the corporate defendants want to make it easier for them to remove 
these cases to courts at which they will get better results. It will 
make it more difficult for plaintiffs to get judgments in State courts, 
which have historically been a bit healthier. This makes it almost 
impossible.
  It increases litigation. It makes you, on the front end, have to show 
your case. It increases the cost to the courts and the burden on the 
courts. It will make the government larger because there will be more 
activity in Federal court if this becomes law. It will take from the 
States the right to determine their own State laws, which is generally 
the position of my friends on the other side--being for states' rights. 
In certain parts of our country, including in my part of the country, 
they have been known to sometimes talk poorly about the Federal courts. 
This gives the Federal courts more power.
  It is an aberrant position that this side has taken, kind of like 
they took when we had reciprocity on gun permits. Rather than having 
States' laws be paramount, they thought the Federal law should 
superimpose it. We have got a situation by which the idea of States' 
laws being sovereign and States having more authority and giving more 
power to the States falls second to being for things that corporations 
and the NRA desire. In those cases, states' rights come second, and 
that is an unusual aberration.

  This bill will probably not pass the Senate, but if it does, it will 
be vetoed, and it won't be overridden.
  The CHAIR. The time of the gentleman has expired.
  Mr. CONYERS. I yield the gentleman an additional 1 minute.
  Mr. COHEN. Yesterday we had a program at which we honored the foot 
soldiers of the civil rights movement. One of the Republican Senators 
confessed: ``I should have done more.'' I hear that from a lot of folks 
from the South. They go to Selma and they march and they say they 
should have done more.
  Meanwhile, one can do something today because there is a Voting 
Rights Act that needs to be extended or amended and approved to give 
people the ultimate thing that America is most well-known for, which is 
the right to vote in a democracy.
  Voting rights are in peril in our country, income inequality 
continues, and millions of Americans of both parties are voting for 
candidates who appeal to those folks. Race relations between police and 
minority communities are fraught, young people have tremendous burdens 
of student loan debt, and our infrastructure is in danger.
  Let's deal with those issues and let's make Congress great again.
  Mr. GOODLATTE. Mr. Chairman, I yield such time as he may consume to 
the gentleman from Colorado (Mr. Buck), the chief sponsor of this 
legislation and a member of the House Judiciary Committee.
  Mr. BUCK. I thank the gentleman.
  Mr. Chairman, in many cases a trial lawyer's main target is a 
national business, but if the only defendant in the case is an out-of-
State business, the case can be heard in Federal court rather than in a 
local State court, which trial lawyers often prefer.
  By also suing a local defendant in addition to the national 
defendant, who are the true targets of the lawsuits, trial lawyers can 
keep their cases in the preferred State courts.
  Trial lawyers who sue innocent local people and small businesses 
simply to keep the lawsuits in their preferred State courts usually 
drop their cases against these innocent local parties but only after 
their cases are safely back in State courts and only after the innocent 
local parties have had to spend time and money in dealing with the 
lawsuits. That is not right. Trial lawyers shouldn't be able to subject 
innocent local people and small businesses to costly and time-consuming 
lawsuits just to rig the places in which their lawsuits will be heard.
  This unfairness led respected Federal appeals court Judge J. Harvie 
Wilkinson of the Fourth Circuit Court of Appeals to publicly support 
congressional action to change the standards for joinder to allow 
judges greater flexibility in making the right decisions on questions 
of removal to Federal court and to give Federal judges greater 
discretion to determine earlier in the case whether a local party 
joined to the lawsuit is there for a good reason or for fraudulent 
reasons.
  H.R. 3624 is precisely the kind of remedy urged by Judge Wilkinson, 
who has said:

       That is exactly the kind of approach . . . that I like 
     because it is targeted; and there is a problem with 
     fraudulent jurisdiction laws as it exists today, I think, and 
     that is that you have to establish that the joinder of a non-
     diverse local defendant is totally ridiculous and that there 
     is no possibility of ever recovering. . . . That is very hard 
     to do. So I think making the fraudulent joinder law a little 
     bit more realistic . . . appeals to me because it seems to me 
     the kind of intermediate step that addresses some real 
     problems.

  H.R. 3624 would protect innocent local defendants in two main ways.
  First, the bill allows Federal judges greater discretion to release 
local defendants from a case where it is not plausible to conclude, as 
a legal matter, that applicable State law would impose liability on the 
local defendant. The term ``plausible'' is taken from the Supreme 
Court's jurisprudence that interprets rule 8 of the Federal Rules of 
Civil Procedure, and the Court's decisions provide substantial guidance 
as to the meaning of the term.
  Initially, in Bell Atlantic Corp. v. Twombly, the Court distinguished 
between plausible claims and claims that are speculative:

       Factual allegations must be enough to raise a right to 
     relief above the speculative level.

  Later, in Ashcroft v. Iqbal, the Court stated:

       The plausibility standard . . . asks for more than a sheer 
     possibility that a defendant has acted unlawfully. This 
     standard demands more than an unadorned, `the defendant 
     unlawfully harmed me' accusation or threadbare recitals of 
     the elements of a cause of action, supported by mere 
     conclusory statements.

  Professor Martin H. Redish, one of the Nation's foremost scholars of 
Federal court jurisdiction, has written:

       The Twombly/Iqbal plausibility standard represents the 
     fairest and most efficient resolution of the conflicting 
     interests in the context of pleading.

  It will similarly provide a fair and efficient approach in the 
context of fraudulent joinder.
  Second, the bill codifies a proposition that the Supreme Court has 
long recognized: that in deciding whether joinder is fraudulent, courts 
may consider whether the plaintiff has a good faith intention of 
seeking a judgment against the local defendant.
  Consistent with Supreme Court precedent, courts continue to find 
fraudulent joinder when objective evidence clearly demonstrates there 
is no good faith intention to prosecute the action against all 
defendants.
  As the Federal court in Faulk v. Husqvarna Consumer Outdoor Products 
N.A., Inc., said:

       Where the plaintiff's collective litigation actions, viewed 
     objectively, clearly demonstrate a lack of good faith 
     intention to

[[Page H910]]

     pursue a claim to judgment against a nondiverse local 
     defendant, the court should dismiss the nondiverse defendant 
     and retain jurisdiction over the case.

                              {time}  1330

  The language of this provision is taken almost verbatim from an 
often-cited decision in the Third Circuit, In re Briscoe: ``The court 
said that joinder is fraudulent if `there is . . . no real intention in 
good faith to prosecute the action against the defendant or seek a 
joint judgment.' ''
  I urge all my colleagues to support this simple, commonsense bill 
that will protect innocent local parties from being dragged into 
expensive and time-consuming lawsuits for the sole reason of furthering 
a trial lawyer's forum shopping strategy.
  Mr. CONYERS. Mr. Chairman, I yield 3 minutes to the gentleman from 
New York (Mr. Nadler), a veteran member of the House Judiciary 
Committee.
  Mr. NADLER. Mr. Chairman, I rise in opposition to the so-called 
Fraudulent Joinder Prevention Act.
  The main purpose of the bill is to make it easier to remove State 
cases to Federal courts where large corporate defendants have numerous 
advantages over consumers, patients, and injured workers.
  This bill is yet another attempt by the Republicans to tilt the legal 
playing field in favor of large corporations. It will clog the Federal 
courts, drain judicial resources, upset well-established law, and delay 
justice for plaintiffs seeking to hold corporations accountable for 
harming consumers or injuring workers.
  This bill is part of a general effort by the Republicans to close off 
access to the courts to ordinary Americans. With every step the 
Republicans take, whether it be to put forward bills to make class 
action suits more difficult, to remove more local cases to Federal 
courts, to reclassify more lawsuits as frivolous and subject to 
mandatory sanctions, or to oppose legislative attempts to limit 
mandatory arbitration clauses, they are transforming our system of 
justice.
  Our courts are being turned into a forum where only very rich people 
can get justice, where corporations can easily escape liability, and 
where consumers and the injured can get no relief, and it is all tilted 
one way.
  There is nothing in this bill or in any other bill put forward by the 
other side that will help ordinary consumers hold big corporations 
responsible for actions that harm the little guy.
  Under this so-called Fraudulent Joinder Prevention Act, anytime there 
is a case with at least one instate, nondiverse, and out-of-state, 
diverse, defendant, the defendants will use this forum shopping bill 
law to delay justice.
  These attempted removals will result in contentious disputes over 
whether the court has jurisdiction. It will drain court time, as the 
courts will have to engage in almost a minitrial, reviewing pleadings, 
affidavits, and other evidence submitted by the parties since this bill 
turns a simple procedural determination into a merits determination.
  At a minimum, the bill will allow corporate defendants to 
successfully force the plaintiff to expend their limited resources on 
what should be a simple procedural matter.
  Under this bill, this preliminary decision would become a baseless, 
time-consuming merits inquiry of the case before a second time-
consuming merits inquiry on the substance. While large corporations can 
easily accommodate such cost, injured workers, consumers, and patients 
cannot.
  I am amazed by some of my colleagues who, with this bill, will bring 
even more cases to our Federal courts. I don't need to remind you that 
our Federal courts are facing an enormous number of judicial vacancies 
with no end in sight due to delays in confirmations in the other body.
  Yet, this bill would increase the workload of the Federal courts with 
cases based on the flimsiest of Federal jurisdiction. It makes no 
sense. This bill will take up valuable Federal court time with State 
claims based on State law, preventing the Federal courts from hearing 
and managing cases that are properly before them.
  Finally, despite its name, this bill is not about fraud. Indeed, the 
proponents cite no example that alleges actual fraud.
  I would say this is a bill in search of a problem. I would say that, 
if I didn't understand, the true purpose of the bill is not to stop 
fraud, but to further tilt the scales of justice in favor of big 
corporations over the needs of ordinary Americans.
  For these reasons, I oppose it. I urge all of my colleagues to oppose 
this bill as well.
  We should defeat this bill and start making Congress great again.
  Mr. GOODLATTE. Mr. Chairman, I reserve the balance of my time.
  Mr. CONYERS. Mr. Chairman, I yield 3\1/2\ minutes to the 
distinguished gentlewoman from Texas (Ms. Jackson Lee).
  Ms. JACKSON LEE. Mr. Chairman, just a few minutes ago the Judiciary 
Committee ranking and chairman were in a hearing that exuded bipartisan 
expressions for fixing the challenges that we have, with the location 
of data and international requests for data being held by America's 
technology companies. It was an interesting and open discussion, which 
I want to evidence on the Record.
  The Judiciary Committee is continuing and has had over the years 
bipartisan approaches to a number of difficult questions, which we have 
solved, including our approach to criminal justice reform. I thank the 
chairman and ranking member for that.
  I also want to acknowledge that we have some challenges, as was 
evidenced by comments from the gentleman from Tennessee, on the 
restoration of the Voting Rights Act. We find ourselves again in a 
challenge that I hope can be fixed.
  First, I want to make it very clear that I practiced law for a number 
of years and served as an associate municipal court judge and as well 
was a quasi-prosecutor on the Select Committee on Assassinations which, 
I allow, this body did research when that select committee was in place 
the issues of the investigations of Dr. Martin Luther King's 
assassination and John F. Kennedy.
  So I know the importance of lawyers, of which I have the greatest 
respect and of which I am one. I understand that trial lawyers are 
representing both defendants and plaintiffs and corporations come into 
the court with trial lawyers. So I am a little taken aback by any 
suggestion that the words ``trial lawyers'' have a negative 
connotation.
  Anyone who wants to win a case in a courtroom must have a lawyer, and 
you would want to make sure that they are a trial lawyer. As well, you 
want to make sure that you have the rights of due process.
  So I would make the argument that trial lawyers go into court, 
whether they are representing corporations or plaintiffs. Corporations 
in many instances may be defendants.
  In that case, I will tell you you are making it far more difficult by 
pushing cases into the Federal court under H.R. 3624. It is more 
expensive and they take longer, making it difficult for workers, 
consumers, and patients generally to have their cases closer to home in 
State courts.
  However, there may be an instance where a corporation is a plaintiff 
and you will have the same blocking of that corporation by this bill.
  If this bill was enacted, it would tip the scales of justice in favor 
of corporate defendants or others that make it more difficult for 
injured plaintiffs. It would effectively eliminate the local defendant 
exception by diversity jurisdiction. I heard someone say--and it bears 
repeating--it is a solution looking for a problem.
  The current standard used by the courts to determine whether the 
joinder of a nondiverse defendant is improper, however, has been in 
place for a century. We have no evidence that this has put anyone in a 
position of not getting due process. That is our goal in the court 
system.
  The fraudulent joinder doctrine is well established and, in fact, 
will only be found if the defendant establishes that the joinder of the 
diversity-destroying party in the State court was made without a 
reasonable basis. We have a system, but this particular bill reverses 
this longstanding policy by imposing new requirements.
  Finally, Mr. Chairman, if I might, further taking away a defendant's 
responsibility to prove that Federal jurisdiction over State cases is 
improper

[[Page H911]]

alters the fundamental precept of a party seeking removal.
  I ask my colleagues to recognize that we have bipartisanship on this 
committee.
  I oppose this legislation and ask my colleagues to oppose it.
  I thank the gentleman for yielding and rise in strong opposition to 
H.R. 3624, the ``Fraudulent Joinder Prevention Act of 2016.''
  H.R. 3624 is the latest effort to deny plaintiffs access to the forum 
of their choice and, possibly, to their day in court.
  H.R. 3624 seeks to overturn longstanding precedent in favor of a 
vague and unnecessary test that forces state cases into federal court 
when they don't belong there, and gives large corporate defendants an 
unfair advantage to pick and choose their forum without the normal 
burden of proving proper jurisdiction.
  If enacted this bill would tip the scales of justice in favor of 
corporate defendants and make it more difficult for injured plaintiffs 
to bring their state claims in state court.
  H.R. 3624 would effectively eliminate the local defendant exception 
to diversity jurisdiction under 28 U.S.C. 1441(b)(2), which currently 
prohibits removal to federal court even when there is complete 
diversity when a defendant is a citizen of the state in which the 
action is brought.
  The current standard used by courts to determine whether the joinder 
of a non-diverse defendant is improper, however, has been in place for 
a century, and no evidence has been put forth demonstrating that this 
standard is not working.
  Rather, the ``Fraudulent Joinder Doctrine,'' is a well-established 
legal doctrine providing that: fraudulent joinder will only be found if 
the defendant establishes that the joinder of the diversity-destroying 
party in the state court action was made without a reasonable basis of 
proving any liability against that party.
  H.R. 3624 reverses this longstanding policy by imposing new 
requirements on federal courts considering remand motions where a case 
is before the court solely on diversity grounds.
  Specifically, it changes the test for showing improper joinder from a 
one-part test (``no possibility of a claim against a nondiverse 
defendant'') to a complicated four-part test, requiring the court to 
find fraudulent joinder if: There is not a ``plausible'' claim for 
relief against each nondiverse defendant; There is ``objective 
evidence'' that ``clearly demonstrates'' no good faith intention to 
prosecute the action against each defendant or intention to seek a 
joint judgment; There is federal or state law that clearly bars claims 
against the nondiverse defendants; or There is actual fraud in the 
pleading of jurisdictional facts.
  What should be a simple procedural question for the courts, now 
becomes a protracted mini-trial, giving an unfair advantage to the 
defendants (not available under current law) by allowing defendants to 
engage the court on the merits of their position.
  By requiring litigation on the merits at a nascent jurisdictional 
stage of litigation based on vague, undefined, and subjective standards 
like ``plausibility'' and ``good faith intention,'' and by potentially 
placing the burden of proof on the plaintiff, this bill will increase 
the complexity and costs surrounding litigation of state law claims in 
federal court and potentially dissuade plaintiffs from pursuing 
otherwise meritorious claims.
  Further, taking away a defendant's responsibility to prove that 
federal jurisdiction over a state case is indeed proper alters the 
fundamental precept that a party seeking removal should bear the heavy 
burden of establishing federal court jurisdiction.
  The bill is a win-win for corporate defendants.
  At its most harmful, it will cause non-diverse defendants to be 
improperly dismissed from the lawsuit.
  At its least harmful, it will cause an expensive, time-consuming 
detour through federal courts for plaintiffs.
  Wrongdoers would not be held accountable for the harm they cause, 
while the taxpayers ultimately foot the bill.
  For example: large corporate defendants (i.e. typically the diverse 
defendants) would be favored by the bill because, if the nondiverse 
defendant is dismissed, they can blame the now-absent in-state 
defendant for the plaintiff's injuries.
  Smaller, nondiverse defendants would also be favored because the 
diverse defendant does all the work for them.
  The diverse defendant removes the case to federal court and then 
argues that the nondiverse defendant is improperly joined.
  If the federal court retains jurisdiction, the nondiverse defendant 
must be dismissed from the case.
  If one or more defendants are dismissed from the case, it is easy for 
the remaining defendant to finger point and blame the absent defendant 
for the plaintiff's injuries.
  Even if a federal court remands the case to state court under the 
bill, the defendants have successfully forced the plaintiff to expend 
their limited resources on a baseless, time-consuming motion on a 
preliminary matter.
  While large corporate defendants can easily accommodate such costs, 
plaintiffs (i.e. injured consumers, patients and workers) cannot.
  Regardless of whether the case is remanded to state court or stays in 
federal court, this new, mandated inquiry will be a drain on the 
limited resources of federal courts.
  By mandating a full merits-inquiry on a procedural motion, H.R. 3624 
is expensive, time-consuming, and wasteful use of judicial resources.
  Lastly, by seeking to favor federal courts over state courts as 
forums for deciding state law claims, this bill offends principles of 
federalism.
  The ability of state courts to function independently of federal 
courts' procedural analysis is a necessary function of the success of 
the American judiciary branch.
  For these, reasons I urge my colleagues to join me in opposing H.R. 
3624, the Fraudulent Joinder Prevention Act.
  Mr. GOODLATTE. Mr. Chairman, I continue to reserve the balance of my 
time.
  Mr. CONYERS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Georgia (Mr. Johnson), another distinguished member of the House 
Judiciary Committee.
  Mr. JOHNSON of Georgia. Mr. Chairman, I return to the floor today for 
the second time in as many months to speak against another crony-
capitalist, Republican-led bill to benefit big business.
  H.R. 3624, the Fraudulent Joinder Protection Act, as it is so called, 
is a solution in search of a problem.
  Current Federal law already provides Federal courts with ample tools 
to address possible forum shopping. This crony-capitalist legislation 
would add needless complications for civil litigants seeking redress 
for violent claims in the State courts.
  Two, it further stretches the already limited resources Federal 
courts are experiencing due to Republican-passed, budget-cutting 
sequestration measures.
  Currently America is burdened with a Republican Party-caused judicial 
vacancy crisis in this Nation's Federal courts, where there are over 81 
Federal court judicial vacancies around the country, including the one 
left vacant by the passing of Justice Scalia.
  Republicans--who control the Senate and who, in the press conferences 
and meetings they have held this week, have fully exposed their plot to 
add to this judicial crisis--are refusing to fill that vacancy on the 
country's highest Court, and they have an ulterior purpose for doing 
so.
  That purpose, ladies and gentlemen, is because they know that justice 
delayed is justice denied. They want to gum up the works of the Federal 
courts by defunding the Federal courts while at the same time bogging 
them down with State court matters that should be left to the States, 
and then what it results in is crony capitalists being able to avoid 
being held accountable in the State or Federal courts.
  So this Congress should not further burden the Federal courts, which 
are already strapped for time and resources, when State courts are more 
suited and capable of hearing State--not Federal, but State--law claims 
as State courts have been empowered to do since this country was 
formed.
  The Acting CHAIR (Mr. Walker). The time of the gentleman has expired.
  Mr. CONYERS. Mr. Chairman, I yield an additional 1 minute to the 
gentleman from Georgia.
  Mr. JOHNSON of Georgia. The 10th Amendment in this country means 
something. It means something to Republicans, and it means something to 
Democrats. Sometimes we disagree on what it means and what impacts it 
should have.
  But there is no doubt that the Federal court system has its body of 
law and the citizens should be able to bring their claim into their 
State courts, as they have been doing since this country's foundation.
  They use the 10th Amendment when it is convenient to them, and then 
they violate it when it is not convenient. That is not the way that 
conscientious Republicans should operate. I challenge them to stop this 
encroachment on states' rights.
  This legislation presumes that Federal courts are not currently 
preventing forum shopping in civil suits,

[[Page H912]]

but there is absolutely no credible evidence that Federal courts are 
failing to do their duty.
  I ask my colleagues to oppose this crony-capitalist legislation.
  Mr. GOODLATTE. Mr. Chairman, I reserve the balance of my time.
  Mr. CONYERS. Mr. Chairman, I yield myself 1 minute.
  I thought you might be interested in knowing that 21 different 
organizations strongly oppose H.R. 3624, the Fraudulent Joinder 
Prevention Act, including: the American Association for Justice, the 
Center for Effective Government, the Center for Justice and Democracy, 
the Consumer Federation of America, the D.C. Consumer Rights Coalition, 
Main Street Alliance, the National Association of Consumer Advocates, 
the National Disability Rights Network's lawyers, the National 
Employment Lawyers Association.
  I include in the Record the letter containing the list of groups that 
strongly oppose H.R. 3624.

                                                February 23, 2016.
     Re Groups Strongly Oppose H.R. 3624, ``The Fraudulent Joinder 
         Prevention Act''.

     Hon. Paul Ryan,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Speaker Ryan and Leader Pelosi: The House will soon be 
     voting on H.R. 3624, the ``Fraudulent Joinder Prevention 
     Act.'' This bill would upend long established law in the area 
     of federal court jurisdiction, place unreasonable burdens on 
     the federal judiciary, and make it more difficult for 
     Americans to enforce their rights in state courts. The 
     undersigned organizations strongly oppose the bill as harmful 
     and unnecessary.
       Under our system of government, federal court jurisdiction 
     is supposed to be very limited. State courts should not be 
     deprived of jurisdiction over a claim they should properly 
     hear, so the burden is always on the party trying to get into 
     federal court to show why it should be there. When a case is 
     properly in state court, only complete ``diversity'' can 
     support removing it to federal court, meaning that no 
     plaintiff in a case may come from the same state as any 
     defendant.
       H.R. 3624 would undermine this fundamental precept and 
     force state cases into federal court when they don't belong 
     there. The bill would do this by transforming the centuries-
     old concept called ``fraudulent joinder,'' which is a way to 
     defeat complete diversity; i.e., when non-diverse defendants 
     are in case. Despite its name, joining such defendants is 
     rarely ``fraudulent'' and has been accepted practice for over 
     a century. As Lonny Hoffman, Law Foundation Professor of Law 
     at the University of Houston Law Center, explained in 
     testimony to this committee, under current, ``well-settled 
     law, fraudulent joinder will only be found if the defendant 
     establishes that the joinder of the diversity-destroying 
     party in the state court action was made without a reasonable 
     basis of proving any liability against that party.'' Current 
     law ``strikes an appropriate balance among competing policies 
     in how it evaluates the joinder of non-diverse defendants.''
       However, H.R. 3624 would dramatically change this 
     longstanding, efficient and well-functioning law. The bill 
     alters the fundamental precept that a party seeking removal 
     has a very heavy burden to establish federal court 
     jurisdiction. At a preliminary stage, the court is required 
     to engage in exhaustive fact finding on the merits even 
     before summary judgment. The bill instructs the court to use 
     subjective and vague criteria, like ``objective evidence 
     clearly demonstrates that there is no good faith intention'' 
     or ``based on the complaint . . . it is not plausible to 
     conclude,'' creating uncertainty as courts struggle with how 
     to interpret and apply this new standard. The bill provides 
     no evidentiary standards to help courts make such a complex 
     decision. And requiring the court to engage in extensive 
     factual adjudication at this early stage raises significant 
     7th Amendment ``right to jury trial'' constitutional 
     concerns. As Professor Hoffman put it in testimony to this 
     committee, although the bill is short in length, its 
     provisions are ``anything but modest; if enacted, they would 
     dramatically alter existing jurisdictional law.''
       The process contemplated by this bill would be not only 
     unfair to and incredibly expensive for the plaintiff, but 
     also an enormous waste of judicial resources. There is no 
     reason for these state based claims to be heard in federal 
     court other than corporations' desire to engage in forum 
     shopping. Yet, there is no evidence whatsoever that national 
     corporations, who choose to avail themselves of the 
     marketplaces in states across the country, complying with 
     multiple state laws in the process, should then have a 
     problem appearing in state court.
       H.R. 3624 will have a destructive impact on our state and 
     federal judiciary. Professor Hoffman said in his testimony, 
     ``Finally, by divesting state courts of jurisdiction and 
     deciding merits questions that state courts now routinely 
     resolve, proponents appear deaf to the serious federalism 
     concerns that the bill raises.'' We urge you to oppose this 
     legislation.
       Thank you.
           Very sincerely,
       Alliance for Justice, American Association of Justice, 
     Americans for Financial Reform, Asbestos Disease Awareness 
     Organization, Center for Effective Government, Center for 
     Justice & Democracy, Consumer Federation of America, Consumer 
     Action, Consumer Watchdog, Consumers for Auto Reliability and 
     Safety, D.C. Consumer Rights Coalition, Essential 
     Information, Homeowners Against Deficient Dwellings.
       Main Street Alliance, National Association of Consumer 
     Advocates, National Consumer Law Center (on behalf of its low 
     income clients), National Consumer Voice for Quality Long-
     Term Care, National Consumers League, National Disability 
     Rights Network, National Employment Lawyers Association, 
     Protect All Children's Environment, SC Appleseed Legal 
     Justice Center, Texas Watch, The Impact Fund, Woodstock 
     Institute, Workplace Fairness.
                                  ____



                                               Public Citizen,

                                Washington, DC, February 18, 2016.
     Re Opposition to H.R. 3624, The Fraudulent Joinder Prevention 
         Act of 2015.

     House of Representatives,
     Washington, DC.
       Dear Representative: I am writing on behalf of Public 
     Citizen, a non-profit membership organization with more than 
     400,000 members and supporters nationwide, to express 
     opposition to H.R. 3624, the Fraudulent Joinder Prevention 
     Act of 2015. This bill is an unnecessary intrusion into the 
     province of the federal courts.
       H.R. 3624 addresses a federal district court's 
     consideration of a plaintiff's motion to remand a case to 
     state court, after a defendant has removed the case from the 
     state court in which it was filed to federal district court 
     on the theory that the plaintiff had fraudulently joined a 
     non-diverse defendant for the purpose of defeating federal-
     court jurisdiction. The purpose of the bill, as made clear in 
     the September 29, 2015, hearing, is to assist defendants in 
     keeping cases in federal court after removal. The bill 
     purports to effectuate this purpose by specifying that the 
     federal court consider evidence, such as affidavits, and by 
     specifying four findings that would require a federal 
     district court to deny a plaintiff's motion to remand.
       Congress should not get into the business of micro-managing 
     the motion practice of the federal courts without strong 
     evidence that current court procedures are not serving their 
     purpose: facilitating justice. In this case, however, the 
     hearing provided no support for the assumption that the 
     district courts are not denying motions to remand in 
     appropriate cases. Witness testimony that different courts 
     state different standards for reviewing such motions does not 
     support a call for congressional action, unless the existence 
     of different standards is leading to unjust results. The 
     testimony, however, did not demonstrate that the courts' 
     current approach results in injustice, and it did not explain 
     how results would differ under the standard proposed in the 
     bill and why any difference would be an improvement. Simply 
     put, the bill is a supposed fix for an imagined problem. The 
     House should hesitate before taking the step into 
     micromanagement of the federal courts' consideration of one 
     specific type of motion, where that motion has existed for 
     more than a century and evidence of a problem is so flimsy.
       Thank you for consideration of our views.
           Sincerely,
                                                  Robert Weissman,
     President, Public Citizen.
                                  ____

         Executive Office of the President, Office of Management 
           and Budget,
                                Washington, DC, February 24, 2016.

                   Statement of Administration Policy


 H.R. 3624--Fraudulent Joinder Prevention Act of 2016 (Rep. Buck, R-CO)

       The Administration strongly opposes H.R. 3624 because it is 
     a solution in search of a problem and makes it more difficult 
     for individuals to vindicate their rights in State courts.
       Federal law currently permits defendants to remove to 
     Federal court a civil case initially filed in State court 
     where the plaintiffs and defendants are citizens of different 
     States and the case's value exceeds a certain monetary 
     threshold. H.R. 3624 purports to address a problem called 
     fraudulent joinder, where plaintiffs fraudulently raise 
     claims against a same-state defendant in order to defeat the 
     Federal court's ability to hear the case.
       Existing Federal law already provides Federal courts with 
     ample tools to address this problem, and the proponents of 
     H.R. 3624 have offered no credible evidence that the Federal 
     courts are failing to carry out their responsibility to 
     prevent fraudulent joinder. The bill would therefore add 
     needless complexity to civil litigation and potentially 
     prevent plaintiffs from raising valid claims in State court.
       If the President were presented with H.R. 3624, his senior 
     advisors would recommend that he veto the bill.

  Mr. CONYERS. Mr. Chairman, I yield back the balance of my time.

                              {time}  1345

  Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may 
consume.

[[Page H913]]

  Mr. Chairman, it is not often that the House has the opportunity to 
protect innocent local people and businesses from costly and meritless 
lawsuits and holding them to a good faith standard in litigation all by 
passing a bill that is just a few pages long, but that is the 
opportunity the House has today.
  I thank the gentleman from Colorado (Mr. Buck), a member of the 
Committee on the Judiciary, for introducing this vital measure, and I 
urge all my colleagues to join me in supporting it.
  Mr. Chair, I yield back the balance of my time.
  The Acting CHAIR. All time for general debate has expired.
  Pursuant to the rule, the bill shall be considered for amendment 
under the 5-minute rule.
  It shall be in order to consider as an original bill for the purpose 
of amendment under the 5-minute rule the amendment in the nature of a 
substitute recommended by the Committee on the Judiciary printed in the 
bill. The committee amendment in the nature of a substitute shall be 
considered as read.
  The text of the committee amendment in the nature of a substitute is 
as follows:

                               H.R. 3624

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fraudulent Joinder 
     Prevention Act of 2016''.

     SEC. 2. PREVENTION OF FRAUDULENT JOINDER.

       Section 1447 of title 28, United States Code, is amended by 
     adding at the end the following:
       ``(f) Fraudulent Joinder.--
       ``(1) This subsection shall apply to any case in which--
       ``(A) a civil action is removed solely on the basis of the 
     jurisdiction conferred by section 1332(a);
       ``(B) a motion to remand is made on the ground that--
       ``(i) one or more defendants are citizens of the same State 
     as one or more plaintiffs; or
       ``(ii) one or more defendants properly joined and served 
     are citizens of the State in which the action was brought; 
     and
       ``(C) the motion is opposed on the ground that the joinder 
     of the defendant or defendants described in subparagraph (B) 
     is fraudulent.
       ``(2) The joinder of the defendant or defendants described 
     in paragraph (1) (B) is fraudulent if the court finds that--
       ``(A) there is actual fraud in the pleading of 
     jurisdictional facts;
       ``(B) based on the complaint and the materials submitted 
     under paragraph (3), it is not plausible to conclude that 
     applicable State law would impose liability on each defendant 
     described in paragraph (1)(B);
       ``(C) State or Federal law clearly bars all claims in the 
     complaint against all defendants described in paragraph 
     (1)(B); or
       ``(D) objective evidence clearly demonstrates that there is 
     no good faith intention to prosecute the action against all 
     defendants described in paragraph (1)(B) or to seek a joint 
     judgment.
       ``(3) In determining whether to grant or deny a motion 
     under paragraph (1)(B), the court may permit the pleadings to 
     be amended, and shall consider the pleadings, affidavits, and 
     other evidence submitted by the parties.
       ``(4) If the court finds fraudulent joinder under paragraph 
     (2), it shall dismiss without prejudice the claims against 
     the defendant or defendants found to have been fraudulently 
     joined and shall deny the motion described in paragraph 
     (1)(B).''.

  The Acting CHAIR. No amendment to the committee amendment in the 
nature of a substitute shall be in order except those printed in House 
Report 114-428. Each such amendment may be offered only in the order 
printed in the report, by a Member designated in the report, shall be 
considered read, shall be debatable for the time specified in the 
report, equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be subject 
to a demand for division of the question.


                  Amendment No. 1 Offered by Mr. Buck

  The Acting CHAIR. It is now in order to consider amendment No. 1 
printed in House Report 114-428.
  Mr. BUCK. Mr. Chairman, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 4, line 1, strike ``the defendant or defendants'' and 
     insert ``a defendant''.
       Page 4, line 5, after ``facts'' insert ``with respect to 
     that defendant''.
       Page 4 beginning in line 9 and ending in line 10, strike 
     ``each defendant described in paragraph (1)(B)'' and insert 
     ``that defendant''.
       Page 4, beginning in line 12 and ending in line 13, strike 
     ``all defendants described in paragraph (1)(B)'' and insert 
     ``that defendant''.
       Page 4, beginning in line 16 and ending in line 17, strike 
     ``all defendants described in paragraph (1)(B)'' and insert 
     ``that defendant''.
       Page 4, line 17, after ``joint judgment'' insert 
     ``including that defendant''.
       Page 4, line 23, strike ``fraudulent joinder'' and insert 
     ``that all defendants described in paragraph (1)(B) have been 
     fraudulently joined''.
       Page 4, beginning in line 25 and ending in line 1 of page 5 
     strike ``the defendant or defendants found to have been 
     fraudulently joined'' and insert ``those defendants''.

  The Acting CHAIR. Pursuant to House Resolution 618, the gentleman 
from Colorado (Mr. Buck) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Colorado.
  Mr. BUCK. Mr. Chairman, this manager's amendment simply makes a few 
technical changes to the bill; namely, striking references to multiple 
defendants and replacing them with references to single defendants to 
make clear that even if one instate defendant has a legitimate 
connection to the case, the case can remain in State court.
  I urge my colleagues to support this technical and clarifying 
amendment.
  Mr. Chairman, I yield back the balance of my time.
  Mr. CONYERS. Mr. Chairman, I rise in opposition to the amendment.
  The Acting CHAIR. The gentleman from Michigan is recognized for 5 
minutes.
  Mr. CONYERS. Members of the House, I oppose the manager's amendment, 
something I rarely ever do. While I don't take issue with the changes 
to the bill that the manager's amendment makes, this amendment fails to 
address any of the concerns that I raised about the underlying bill 
because the bill is flawed in its very conception.
  There is no real problem that this bill addresses. Existing 
fraudulent joinder law adequately addresses the improper joinder of 
instate defendants, and the bill's proponents have offered no evidence 
to the contrary.
  This unnecessary bill instead creates great uncertainty and delay in 
the consideration of State law claims with its ambiguous new 
requirements. It will also spawn much litigation, leading to increased 
costs that will be borne disproportionately by plaintiffs.
  This bill, in addition, violates State sovereignty by significantly 
diminishing the ability of State courts to decide and shape State law 
matters.
  Those are my objections to the manager's amendment. I hope it will be 
voted down.
  Mr. Chairman, I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Colorado (Mr. Buck).
  The amendment was agreed to.


               Amendment No. 2 Offered by Mr. Cartwright

  The Acting CHAIR. It is now in order to consider amendment No. 2 
printed in House Report 114-428.
  Mr. CARTWRIGHT. Mr. Chairman, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 5, line 2, strike the close quotation mark and the 
     period which follows.
       Page 5, after line 2, insert the following:
       ``(5) This subsection shall not apply to a case in which 
     the plaintiff seeks compensation resulting from the bad faith 
     of an insurer.''.

  The Acting CHAIR. Pursuant to House Resolution 618, the gentleman 
from Pennsylvania (Mr. Cartwright) and a Member opposed each will 
control 5 minutes.
  The Chair recognizes the gentleman from Pennsylvania.
  Mr. CARTWRIGHT. I yield myself such time as I may consume.
  Mr. Chairman, I also oppose the underlying bill, which I call the 
wrongdoers protection act for multistate and multinational 
corporations, and for that purpose I add this amendment.
  It is no coincidence that these corporate wrongdoers want to force 
consumers to fight them in the Federal court. That is the effect of 
this bill, to enlarge Federal court diversity jurisdiction.
  It is no coincidence that the corporate wrongdoers want to fight 
there. It is not because they think the Federal judges are better 
looking or that

[[Page H914]]

the Federal judges are more polite or that the decor is nicer in 
Federal court. No. They want to go there because they are more likely 
to beat consumers in Federal court cases.
  After a generation of bad decisions by the Supreme Court of the 
United States, Federal court has become candy land for corporate 
wrongdoers, generations of bad decisions that invite and exhort 
district judges to forget about the 7th Amendment in the Bill of 
Rights. You remember what that says. It was written by James Madison. 
It was announced as approved by Secretary of State Thomas Jefferson, 
whose statue stands right outside this Chamber. It says this: ``In 
suits at common law, where the value in controversy shall exceed twenty 
dollars, the right of trial by jury shall be preserved.''
  There is nothing ambiguous about that. But since the 1980s, there has 
been this steady drumbeat of Supreme Court of the United States 
decisions encouraging and emboldening Federal court judges to decide 
and dismiss cases without the trouble of a jury trial.
  Their toolkit is enormous: motions to dismiss, motions for judgment 
on the pleadings, motions for summary judgment, motions for directed 
verdict, motions for judgment as a matter of law.
  Cases do get thrown out every day without the trouble of jury trials, 
and the Seventh Amendment right to jury trial is not preserved. That is 
why wrongdoer corporations prefer to be in Federal court. So that is 
the backdrop, Mr. Chairman.
  On top of that, I want to give you some very strong reasons why this 
underlying bill is bad. Number one, it is discriminatory. Unless you 
are a multistate or multinational corporation, this bill doesn't help 
you. If you are an individual sued in State court, you get no help. If 
you are a small-business owner only doing work in your State, you are 
out of luck. This doesn't provide you any help. Only multistate, 
multinational corporations get help, and that is why I call this the 
wrongdoers protection act for multistate and multinational 
corporations.
  Number two, it is burdensome. Representative Johnson from Georgia 
already made this point. The Federal courts are already overworked and 
understaffed. The civil caseload already is growing at 12 percent a 
year--much of that, by the way, contract cases filed by corporations. 
There are currently 81 vacancies in the Federal judiciary. There is no 
reason to add to this burden.
  Number three, this bill is ironic. We have a crowd in this House that 
constantly preaches about states' rights and the need to cut back on 
the Federal Government. But a bill like this comes along, and they drop 
that states' rights banner like it is a hot potato and pick up the coat 
of arms of the multistate, multinational corporations.
  Number four, and maybe most importantly, the underlying bill is 
wrongheaded because these cases, called diversity cases, are filed in 
State court under State law; and ever since the 1930s in the Erie 
Railroad case, if you take these cases and handle them in Federal 
court, the Federal judges have to follow State law, not Federal law. 
Mr. Chairman, there is nobody better at interpreting State law than 
State court judges. It stands to reason.
  I offer this amendment that is on the desk to exempt consumer cases 
against insurance companies for bad faith in insurance practices. If 
the majority is going to persist and present this gift, this enormous 
gift to the multistate and multinational corporate wrongdoers, at least 
include this amendment and give a couple of crumbs to the average 
American consumer trying to defend himself or herself in court.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BUCK. Mr. Chairman, I rise in opposition to the amendment.
  The Acting CHAIR. The gentleman from Colorado is recognized for 5 
minutes.
  Mr. BUCK. I yield myself such time as I may consume.
  Mr. Chairman, this amendment should be roundly opposed for the simple 
reason that not only does it not protect any victims, but it also 
victimizes innocent local parties in the types of cases covered by the 
amendment.
  The purpose of this bill is to allow judges greater discretion to 
free innocent local parties--that is, innocent people and innocent 
small businesses--from lawsuits when those innocent local parties are 
dragged into a case for no other reason than to further a trial 
lawyer's forum-shopping strategy.
  These innocent local parties have, at most, an attenuated connection 
to the claims by the trial lawyer against some national company a 
thousand miles away, and these innocent local parties shouldn't have to 
suffer the time, expense, and emotional drain of a lawsuit when the 
plaintiff cannot even come up with a plausible claim against it. The 
base bill protects those innocent local parties from being dragged into 
a lawsuit brought against some other party for no other reason than to 
keep the case in a State court the trial lawyer prefers.
  Now, enter this amendment, which denies the bill's protections to 
innocent local parties joined to a lawsuit simply because the legal 
allegations in the case fall into one arbitrary category rather than 
another. That is terribly unfair.
  If this were any other kind of bill designed to protect innocent 
people, no one would argue that it shouldn't apply when the lawsuit 
relates to a bad faith suit against an insurance company. Innocent 
people are innocent people, and they should be protected from being 
dragged into lawsuits, regardless of the nature of the case.
  Now, let me say a little something about this amendment based on my 
career as a prosecutor.
  As a prosecutor, I deeply respected all the rules we have developed 
in this country to protect the innocent. These are rules of general 
application, such as rules protecting people's rights to have their 
side of the story told and rules protecting people from biased or 
inaccurate testimony. I would have been appalled if anyone ever 
suggested that these general protections designed to protect innocent 
people from criminal liability should be suspended because the case was 
one of assault or battery or murder or somehow related to insurance.
  Our country is rightfully proud of its principles providing due 
process and equal protection, but those concepts are meaningless if 
they are only selectively applied to some cases but not others. For the 
same reason, we should all be outraged at the suggestion that rules of 
fairness designed to protect the innocent should be suspended in civil 
law because the case involves one particular subject or another. But 
that is exactly what this misguided amendment does.
  Further, courts could read this amendment as not even allowing them 
to consider the fraudulent joinder argument for cases within its 
coverage, no matter how clear it was that there was no valid claim 
against the local defendant under State law.
  This bill defines and limits fraudulent joinder. It does not license 
courts to make up their own fraudulent joinder doctrines for cases not 
within its coverage. Under that reading, claims could be made against 
local insurance agents with no factual basis supporting the lawsuit.
  The amendment would also allow a plaintiff's lawyer to drag an 
individual insurance adjuster into a lawsuit even when the applicable 
State law makes absolutely clear that only insurers, not individual 
people, are subject to bad faith claims.
  How does a sponsor explain to a person like Jack Stout why a lawyer 
pulled him into a bad faith lawsuit targeting State Farm? Mr. Stout was 
a local insurance agent who merely sold a policy to the plaintiff, met 
and spoke with the plaintiff once, and had nothing to do with 
processing the plaintiff's homeowner insurance claim.
  A Federal district court in Oklahoma found he was fraudulently joined 
and dismissed the claim against him. But under this amendment, this 
innocent person could be struck back into the lawsuit.
  How does the sponsor explain to a person like Douglas Bradley why a 
plaintiff's lawyer named him as a defendant in a bad faith lawsuit 
against an insurer? In that case, the complaint included Mr. Bradley, 
an insurance agent, as a defendant in the caption referred to as 
defendant, singular, not defendants throughout, and did not even 
mention Mr. Bradley in the body of the complaint.

[[Page H915]]

  A Federal district court in Indiana dismissed the claim against him 
as fraudulently joined, but under this amendment, this innocent person 
could be sucked back into the lawsuit, and that is not fair.
  For all these reasons, this amendment should be soundly rejected.
  Mr. Chairman, I reserve the balance of my time.

                              {time}  1400

  Mr. CARTWRIGHT. Mr. Chairman, to respond to my colleague from 
Colorado who has just cited two cases where, under existing law and 
procedure, fraudulent joinder of bad faith insurance claims was claimed 
and actually succeeded, the proof is right there.
  The statute does not need to be amended. It is working already. That 
is why we don't need to include bad faith insurance cases in the 
Wrongdoers Protection Act for multistate and multinational 
corporations.
  I yield back the balance of my time.
  Mr. BUCK. Mr. Chairman, I urge my colleagues to oppose this 
amendment.
  I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Pennsylvania (Mr. Cartwright).
  The question was taken; and the Acting Chair announced that the noes 
appeared to have it.
  Mr. CARTWRIGHT. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Pennsylvania 
will be postponed.
  Mr. BUCK. Mr. Chairman, I move that the Committee do now rise.
  The motion was agreed to.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Latta) having assumed the chair, Mr. Walker, Acting Chair of the 
Committee of the Whole House on the state of the Union, reported that 
that Committee, having had under consideration the bill (H.R. 3624) to 
amend title 28, United States Code, to prevent fraudulent joinder, had 
come to no resolution thereon.

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