[Congressional Record Volume 163, Number 41 (Thursday, March 9, 2017)]
[House]
[Pages H1968-H1974]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INNOCENT PARTY PROTECTION ACT
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. 725.
The SPEAKER pro tempore (Mr. Emmer). Is there objection to the
request of the gentleman from Virginia?
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 175 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. 725.
The Chair appoints the gentleman from Georgia (Mr. Jody B. Hice) to
preside over the Committee of the Whole.
{time} 1455
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. 725) to amend title 28, United States Code, to prevent fraudulent
joinder, with Mr. Jody B. Hice of Georgia 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
Maryland (Mr. Raskin) each will control 30 minutes.
The Chair recognizes the gentleman from Virginia.
Mr. GOODLATTE. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, 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 that have no substantive connection to them as a
means of forum shopping on the part of the lawyers filing the case.
These lawsuits present a tremendous burden on small businesses and
their employees.
The Innocent Party Protection Act, introduced by Judiciary Committee
member Mr. Buck of 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 few examples, in Bendy v. C.B. Fleet Company, the
plaintiff brought a product liability claim 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
[[Page H1969]]
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 the draconian
burden on the national company to show 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 lawyers' tactical purpose of forum shopping. 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.
{time} 1500
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 used successfully 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 heavy-handed 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 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 is no possibility of ever recovering . . .
that's very hard to do,'' he says. ``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 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 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 and the U.S. Chamber of Commerce, among other
legal reform advocates. 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.
I reserve the balance of my time.
Mr. RASKIN. Mr. Chairman, I yield myself as much time as I may
consume.
Mr. Chairman, we have seen a number of bills this session which are
designed to shut the door on victims of corporate misfeasance and
negligence and to nail the door shut. H.R. 725 is part of this wave of
legislation.
Like most other bills we have seen this session with brazenly
Orwellian titles, the so-called Innocent Party Protection Act of 2017
has nothing to do with protecting innocent parties. Rather, it is just
the latest attempt to tilt the civil justice system dramatically in
favor of big corporate defendants by making it much more difficult for
plaintiffs to pursue State law claims in State courts under the system
of federalism designed by our Founders.
Again, this is a familiar experience because the bill addresses a
completely nonexistent problem. If there had been a real problem, the
Judiciary Committee might have held a hearing in which we could have
invited groups to come forward who support tort victims. They could
have come and testified about why it was so important for the interests
of civil justice for us to pass this legislation.
But there was no hearing at all. We didn't hear any witnesses, much
less the testimony of those groups that represent victims of mass toxic
torts, asbestos poisoning, lead poisoning, sex discrimination
lawsuits--none of it.
In fact, the groups that we would have called, if we were interested
in the testimony of victims and people seeking civil justice, oppose
this legislation overwhelmingly: the Alliance for Justice opposes it;
the Center for Justice and Democracy opposes it; the Consumer
Federation of America opposes it; the National Association of Consumer
Advocates opposes it; the National Consumer Law Center opposes it; the
Natural Resources Defense Council opposes it; Public Citizen opposes
it; the Sierra Club opposes it.
Under current law, a defendant may remove a case, alleging State law
claims, to a Federal court only if there is complete diversity of
citizenship between all plaintiffs and all defendants. If the plaintiff
adds an instate defendant to the case solely for the purpose of
defeating jurisdiction, this constitutes fraudulent joinder today; and
in such circumstances, the case may be removed directly to Federal
court.
In determining whether a joinder was fraudulent, the court considers
only whether there was any basis for a claim against the nondiverse
defendant. The defendant must show that there was no possibility of
recovery or no reasonable basis for adding the nondiverse defendant
to the suit.
This very high standard has guided our Federal courts for more than a
century and it has functioned well, and the bill's proponents offer no
objective evidence to the contrary. And again, we have had no hearing.
For a new Member of Congress like me, who comes from the Maryland State
Senate, I am absolutely astonished and amazed that we would think of
overturning a standard fixture in our civil justice system without so
much as a hearing as to what the problem is.
H.R. 725 would replace a time-honored standard with an ambiguous one
that would dramatically increase the costs and burdens of litigation on
plaintiffs in Federal courts. It would try to strip our State courts of
their basic powers to hear cases relating to their citizens. This is an
assault on federalism.
The measure would require a court to deny a motion remanding to the
State
[[Page H1970]]
courts unless the court finds, one, that it is ``plausible to conclude
that applicable State law would impose liability'' on an instate
defendant; two, that the plaintiff had a ``good faith intention to
prosecute the action against each'' instate defendant or to seek a
joint judgment; and three, that there was no ``actual fraud in the
pleading of jurisdictional facts.''
This gauntlet of hurdles suddenly shifts the burden and creates a
presumption that a Federal court should hear the case, making it far
more expensive and difficult for plaintiffs to have their cases heard
in State court.
H.R. 725 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 authentic purpose behind the 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. 725 would sharply increase the cost of litigation
for plaintiffs and further burden the Federal court system. For
example, the meanings of terms like ``plausible'' and ``good faith
intention'' are ambiguous and will spawn substantial litigation over
their proper interpretation and application, further postponing
decisions and justice.
Additionally, these standards would require a court to engage in a
mini-trial during the early procedural stages of the case without any
opportunity for the full development of evidence. Again, this would
sharply increase the burdens and costs of litigation for ordinary
citizens, for plaintiffs, which appears to be, to my mind, the only
possible contemplated result of this legislation.
Finally, we need to focus on the fact that this bill offered by the
majority raises profound federalism concerns, which I would have hoped
they would be attentive to. Matters of State law should be decided by
State courts, subject to certain exceptions as set forth in the
Constitution.
It was our constitutional design that matters of civil dispute and
conflict go to State courts, State judges, and State juries, all of
them closer to the people themselves, unless you have a Federal
question, a matter of Federal statutory law, a matter of Federal
constitutional law, or you have got diversity jurisdiction.
H.R. 725 bulldozes this key federalism constraint and casts a shadow,
unnecessarily and improperly, over State courts, the courts of the
people. By applying sweeping and vaguely worded new standards to the
determination of when a State case must be remanded to State court, the
bill denies State courts the ability to decide and, ultimately, to
shape the unfolding of State law. This is completely contrary to the
design of the Founders, many of them Virginians, like Thomas Jefferson
and James Madison and George Mason, who wanted the State courts to be
the central arena for the resolution of civil conflicts and tort
disputes.
Simply put, H.R. 725 tramples State sovereignty and our basic
constitutional structure. For these reasons and for the fact that
nobody has demonstrated there is a real problem, I urge the House to
resist this unnecessary and flawed legislation, and I reserve the
balance of my time.
Mr. FARENTHOLD. Mr. Chairman, I yield myself such time as I may
consume.
Since this bill was marked up in the last Congress, the very same
plausibility standard used in this bill was adopted by the Federal
Circuit Court of Appeals in which fraudulent joinder cases arise with
the greatest frequency.
Last Congress, Ranking Member Conyers said of the bill, it should
simply pick one of the existing articulations in the fraudulent joinder
standard and codify that into law. At the time, the plausibility
approach was applied by some district courts, but just last year, the
Fifth Circuit Court of Appeals adopted the same plausibility standard
this bill contains in a case called International Energy.
The Fifth Circuit stated: We must consider whether the plaintiff
pleaded ``enough facts to state a claim to relieve that is plausible on
its face.'' The plaintiff in that case petitioned for rehearing en
banc, but the rehearing was denied, with not a single judge on the
Fifth Circuit requesting a vote.
In just the last year, district courts in the Fifth Circuit have
issued more than 40 fraudulent joinder decisions without much
difficulty and with the results that indicate just the sort of
reasonable reform that would occur nationwide when we get this bill
passed into law.
So this is about making the system work and opening the door to the
Federal courts so companies from foreign states are not unfairly,
potentially disadvantaged.
The other piece of this that is easy to neglect is the local
defendant. I don't know if the gentleman across the aisle has ever been
sued. I have friends who have been sued. It is an emotionally and
financially devastating procedure. You have got to take time off from
your life and business to defend it. You have got to hire a lawyer,
which is incredibly expensive. This is to protect the innocent third
parties and open the doors to the Federal courts and just make it
fairer and easier.
Mr. Chairman, I reserve the balance of my time.
Mr. RASKIN. Mr. Chairman, I yield myself such time as I may consume.
I very much appreciate my colleague's remarks there. I want to make
one point before I yield to my distinguished colleague from New York.
Mr. Chairman, my colleague asked us to reckon with the fact that it
is emotionally devastating for people to be sued, and, undoubtedly, it
is in certain cases. But compare whatever it might feel like to be sued
in whatever case he might have in mind with the outrageous emotional
devastation caused by asbestos poisoning, by lead poisoning, by mass
sexual harassment, sex discrimination, race discrimination, all of the
torts that come to dominate what takes place in our courts. So if we
are going to have a new emotional devastation standard, I would put the
plaintiffs up against the large corporate defendants any day.
Mr. Chairman, I yield 3 minutes to my distinguished colleague from
New York (Mr. Nadler).
Mr. NADLER. Mr. Chairman, I rise in opposition to H.R. 725, the
misnamed Innocent Party Protection Act. The main purpose of this bill
is to make it easier to remove State cases to Federal courts, where
large corporate defendants have numerous advantages over consumers and
injured workers.
{time} 1515
Let's not talk about the emotional devastation. We are talking about
large, corporate defendants. We are not worried about their emotions.
Their litigation departments are quite capable of handling the
emotions.
This bill will clog the Federal courts, drain judicial resources,
upset well-established law, and delay justice for plaintiffs seeking to
hold businesses accountable for the injuries they cause. It is yet
another attempt by the Republican majority to stack the deck in favor
of large corporations.
This bill is the opening salvo of this week's series of bills by the
Republicans to close off access to the courts to ordinary Americans.
With every step they take, whether it be to remove more State cases to
Federal courts, to make class action suits more difficult to bring, or
to reclassify more lawsuits as frivolous and subject to mandatory
sanctions, they are limiting access to court help for ordinary
Americans.
The so-called Innocent Party Protection Act would upend the century-
old doctrine of fraudulent joinder, in which a defendant from the same
State as the plaintiff is improperly added to a case in order to defeat
diversity jurisdiction in Federal court, and, therefore, keep the case
in a State court. Under current law, a defendant claiming fraudulent
rejoinder has the burden of showing that there is ``no reasonable
basis'' for a claim against the instate defendant, and, therefore, the
case should remain in Federal court.
This bill would turn that process on its head by placing the burden
on the plaintiff to show that there is a ``plausible'' claim against
the instate defendant and that the plaintiff has a ``good faith
intention'' to pursue a claim against that defendant. Both standards
are undefined in the bill, but it is likely that many plaintiffs would
find these hurdles impossible to overcome at the initial stages of
litigation before discovery.
[[Page H1971]]
Furthermore, defendants will use this forum shopping bill to delay
justice by routinely challenging jurisdiction. It will drain court time
and allow corporate defendants to force plaintiffs to expend their
limited resources on what should be a simple procedural matter. Under
this bill, the preliminary determination of jurisdiction would become a
baseless, time-consuming mini-trial before a second time-consuming
trial on the merits. While large corporations could easily accommodate
such costs, injured workers, consumers, and patients cannot.
The practical effect of this bill is to force cases based on State
law, which should properly be heard in State courts, to be considered
in our overburdened Federal courts instead. Large corporations
generally believe that Federal courts are a friendlier forum,
especially since they are overburdened and they can afford to wait
whereas the plaintiffs cannot, and they believe that they have a better
chance of escaping liability for their actions in the Federal court.
There is no evidence of a systemic crisis of fraudulent joinder, nor
is there evidence that the courts cannot properly handle whatever
issues may arise under current law. There is certainly no evidence that
what wealthy corporations need are greater advantages in the courts.
Yet, this bill hands them yet another gift from the Republican
majority, and it is ordinary consumers and injured workers who will
suffer.
Mr. Chairman, I urge a ``no'' vote on this legislation.
Mr. FARENTHOLD. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, this bill is not about protecting big corporations.
This bill is about protecting the small-business owner or the employee
who is fraudulently joined into a case who has to go out and hire his
or her own lawyer.
I remember something my law school professor once told me back in the
day at St. Mary's University School of Law in San Antonio, Texas, and
it stuck in my mind ever since: When you get sued, you may be able to
beat the rap, but you can't beat the ride.
It is expensive, it is emotionally draining, and it is time
consuming.
I have no problem at all, and this bill is not designed to protect
corporations. It is designed to protect, just as its name states,
innocent parties. These are people who are joined solely to defeat
diversity jurisdiction. We are just changing the standard slightly to
one adopted by the Fifth Circuit Court of Appeals to make it much more
fair to these innocent parties.
Mr. Chairman, I reserve the balance of my time.
Mr. RASKIN. Mr. Chairman, I yield 3 minutes to the distinguished
gentleman from Georgia (Mr. Johnson).
Mr. JOHNSON of Georgia. Mr. Chairman, I thank the gentleman from
Maryland for yielding me the time.
Mr. Chairman, I rise in opposition to H.R. 725, the so-called
Innocent Party Protection Act of 2017. This cynically misnamed bill is
a Republican Party effort to coddle and protect their corporate
wrongdoing supporters by making it harder for injured victims to sue
the corporation in State court. A more accurate name for the Innocent
Party Protection Act actually would be the Corporate Wrongdoer
Protection Act.
Make no mistake about it, Mr. Chairman, this bill is my Republican
friends' attempt to--it is clear whom they are working for. They refer
to corporate wrongdoers as innocent parties. If some day you or your
loved one are injured or harmed due to the negligence or intentional
act of others, you have the option to sue in State or Federal court
based on the residence of the wrongdoers. However, if your case should
be removed to Federal court upon a motion by one of the defendants, as
a plaintiff, there are grounds upon which you could have the case
remanded back to the State court.
Republicans want to call this fraudulent joinder. However, a decision
to sue all of the wrongdoers in your State court is not fraud. Instead,
it is a legal practice dating back over 100 years which provides
balance and prevents more powerful interests from choosing which court
the case can be heard. They want to stack the deck.
For example, if it was your grandmother who was physically neglected
or sexually assaulted at a nursing home, you would not only seek
criminal charges against the wrongdoer, but you would want to file a
lawsuit against both the individual attacker and the company that
negligently hired, trained, or failed to adequately supervise the
perpetrator under their employ.
By the way, it is becoming increasingly common for nursing homes to
be owned by large conglomerates or out-of-State hedge funds. Under
current law, you have the right to sue in State court, but rather than
going all the way to Federal court in the State the corporation is
based, you have the option to stay near your home in State court. H.R.
725 would do away with that option by giving the corporate wrongdoer
the ability to keep the case in Federal court, thus unfairly increasing
the burden on innocent victims and making it less likely for the
smaller party to sue in the first place.
Mr. Chairman, I ask my colleagues to oppose this bill.
Mr. FARENTHOLD. Mr. Chairman, in the gentleman from Georgia's
example, this bill wouldn't apply at all. If my grandmother were
assaulted in a nursing home, I would certainly sue the nursing home
company. I would also join the person who actually did it who most
likely definitely will be a resident of the State that the lawsuit was
going in. There would clearly be a plausible cause of action against
that tortfeasor.
Mr. Chairman, I didn't practice personal injury law. I was an
agriculture lawyer. But this would be an easy case for me to prove in
his example. We are not trying to protect anybody who has done
something wrong. We are trying to protect people who are joined into a
lawsuit solely for the purpose of forum shopping.
Mr. Chairman, I reserve the balance of my time.
Mr. RASKIN. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I think that we are actually progressing in our
discussion of the issue because we presently have a law against
fraudulent joinder. They simply want to make it far more difficult for
plaintiffs to get justice in State courts. The law already makes it
impossible to fraudulently join someone.
So in the case offered by the distinguished gentleman from Georgia, I
could very much see an out-of-State corporate behemoth that owns
nursing homes across the country saying that all of this should be in
Federal court because the person who actually committed the sexual
assault instate is judgment-proof because they don't have any money and
that is not really a plausible opportunity to recover, and, therefore,
it should stay in Federal court.
The grand irony here, Mr. Chairman, is that the party which sings
lullabies about federalism and states' rights is in the business of
stripping our State courts and our people of the opportunity to get
into State court. All of this is about forcing everybody into Federal
court. I remember a President who recently said in his inaugural
address that the whole sum and substance of his administration is to
give power back to the States and back to the people, but this
legislation is designed to wreck federalism and to force everybody into
Federal court where the big corporate defendants and the fancy lawyers
have every conceivable advantage over people who are just trying to get
justice when they have been injured in their State.
Mr. Chairman, the substantive issues at stake here are obviously
complex, and I would invite all Americans to try to research what is
going on. But if you don't have the time to actually study the more
than a century in which we have had current fraudulent joinder rules
and you don't have time to go and examine the bill as submitted by the
majority, then just consider the procedure that has gotten us to this
point.
There has been no hearing on this bill, there has been no call for
this bill by anybody who has been injured in a civil tort case, and all
of the groups that try to stand up for citizens against the largest
corporations who are bankrolled by billions of dollars and are trying
to force everybody these days into arbitration and to shut the
courthouse door, all of those groups are opposed to the legislation
because they understand what it is going to do.
It is going to make it far more difficult for people to prosecute
civil
[[Page H1972]]
claims when they have been injured in something like a sexual
harassment case, a sexual violence case, a discrimination case, an
asbestos poisoning case, or a mass toxic tort. It is going to be far
more difficult for people to get justice in their State courts.
Apparently, the interests of the large corporate polluters and
inflictors of injuries--tortfeasors--are so important that we are
willing to trample the basic principles of our constitutional design
which is that these kinds of cases go into State court for State
resolution, we reserve the Federal courts for complicated questions of
Federal law and real cases of diversity jurisdiction, not phony cases
of diversity jurisdiction where they try to eliminate the instate
defendant, but real cases of diversity jurisdiction where nobody else
is involved.
Mr. Chairman, I yield back the balance of my time.
Mr. FARENTHOLD. Mr. Chairman, I yield myself the balance of my time.
Mr. Chairman, this really is about trying to stop bringing phony
cases in. You are bringing phony defendants in, and that is what we are
trying to stop. We have got to be fair about this.
It is not often that we have the opportunity to protect innocent
local folks and businesses from costly and meritless lawsuits. This is
an opportunity to rein in forum shopping and abuses by trial lawyers
and hold them to a good faith standard in litigation. We can do that by
passing a bill that is just a few pages long. That is the opportunity
we have today.
All this bill does--all this bill does--is say that innocent, local
parties--mostly small businesses--can't be added to a lawsuit for forum
shopping purposes, and it only prohibits this when there is no
plausible case against these small businesses or the case against them
isn't brought in good faith.
Who could argue with that?
Mr. Chairman, for that reason, I urge all my colleagues to support
this legislation, and I yield back the balance of my time.
The Acting CHAIR (Mr. Simpson). All time for general debate has
expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule, and shall be considered as read.
The text of the bill is as follow:
H.R. 725
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 ``Innocent Party Protection
Act''.
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 a defendant described in paragraph
(1)(B) is fraudulent if the court finds that--
``(A) there is actual fraud in the pleading of
jurisdictional facts with respect to that defendant;
``(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 that
defendant;
``(C) State or Federal law clearly bars all claims in the
complaint against that defendant; or
``(D) objective evidence clearly demonstrates that there is
no good faith intention to prosecute the action against that
defendant or to seek a joint judgment including that
defendant.
``(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 that all defendants described in
paragraph (1)(B) have been fraudulently joined under
paragraph (2), it shall dismiss without prejudice the claims
against those defendants and shall deny the motion described
in paragraph (1)(B).''.
The Acting CHAIR. No amendment to the bill shall be in order except
those printed in House Report 115-27. 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. Soto
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in House Report 115-27.
Mr. SOTO. Mr. Chair, 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 3, line 10, strike ``This'' and insert ``Except as
otherwise provided in this subsection, this''.
Page 5, line 4, strike the close quotation mark and the
period which follows.
Page 5, after line 4, insert the following:
``(5) This subsection does not apply with respect to a case
in which the plaintiff seeks compensation for public health
risks, including byproducts of hydraulic fracturing, well
stimulation, or any water contamination.''.
The Acting CHAIR. Pursuant to House Resolution 175, the gentleman
from Florida (Mr. Soto) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Florida.
Mr. SOTO. Mr. Chairman, my amendment would create an exception to
this bill for instances of public health risks, including byproducts of
hydraulic fracturing, well stimulation, or any water contamination.
Fracking, especially in my home State of Florida, is dangerous, and its
effects can be far-reaching. Just last week, a State senate committee
voted unanimously to ban the practice in our State, and the bill
continues to move through.
Pollution can reach our aquifers that provide drinking water to
millions. Sometimes concerned citizens must go to court to stop this.
Access to justice is a fundamental American right, and we must protect
it. Sometimes in Washington, up is down and right is wrong. This,
unfortunately, is the case with the so-called Innocent Party Protection
Act.
{time} 1530
This bill is incredibly harmful to those injured by corporate
wrongdoers. If someone drinks poisoned water as a result of fracking,
well stimulation, or general water contamination, this bill will make
it harder for them to get justice for their injuries. By restricting
access to State courts, the courts that are closest to the people, this
bill would deny justice.
The bill will deny plaintiffs their right to choose a State court
forum for their claims and will instead allow defendant companies that
negligently pollute water to drag a case out, which will drive up costs
and increase burdens for plaintiffs by removing it to Federal court.
Then, once a case is in Federal court, instead of litigating over the
merits of the case, the courts will argue over the various requirements
that this bill establishes. Placing a higher threshold that a plaintiff
must satisfy to get the case sent back to State court is unnecessary
and unduly burdensome.
The amendment I am offering would restore access to justice. It would
allow people whose water has been contaminated by fracking and related
activities to seek damages from corporate wrongdoers.
This amendment isn't just a hypothetical exercise. Here in my hand I
hold 18 cases involving fracking. They are 18 cases where fracking led
to injury. In 10 of these cases, plaintiffs sued in State court,
raising State claims, yet defendants removed the case to Federal court,
only to have the Federal court remand the cases back to the State due
to lack of diversity jurisdiction.
Thus, I hold here 10 cases where a remand back to State court would
be denied under this bill. If this bill had been enacted, I hold here
10 cases that would have been denied justice. Four of these 18
hydraulic fracturing cases are still pending. Will we deny justice for
these four cases?
For these plaintiffs and for future plaintiffs, I ask my colleagues
to vote in favor of this amendment and safeguard justice to all who
drink water.
Mr. Chair, I urge support of my amendment, and I reserve the balance
of my time.
[[Page H1973]]
Mr. FARENTHOLD. Mr. Chairman, I claim the time in opposition.
The Acting CHAIR. The gentleman from Texas is recognized for 5
minutes.
Mr. FARENTHOLD. Mr. Chairman, this amendment should be roundly
opposed for the simple reason it doesn't protect any victims, but it
also victimizes local parties in the types of cases covered by the
amendment.
The purpose of the underlying 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 solely because a plaintiff's attorney
wants to do some forum shopping.
These innocent local parties have, at most, an attenuated connection
to the claims made by the trial lawyer against some national company a
thousand miles away. These innocent local parties shouldn't have to
suffer the time, expense, and emotional drain of a lawsuit when the
plaintiff can't even come up with a plausible claim. The base bill
protects these innocent local parties from being dragged into a lawsuit
as a party just to keep the case in State court.
Now, let's bring in this amendment, which denies the bill's
protection to innocent local parties adjoined to a lawsuit simply
because the legal allegations in the case fall into one arbitrary
category and that one is in another. It is terribly unfair.
This amendment would allow these things to happen to innocent people
in the name of allowing trial lawyers to scuttle the hydraulic fracking
industry through lawsuits. Innocent people are innocent people, and
they should be protected against being dragged into lawsuits regardless
of the nature of the case.
This doesn't deny anybody access to the courts. It protects innocent
parties from being dragged into a case for forum shopping.
Every single one of the gentleman's cases will be heard in court.
They will have their day in court and they will have justice based on
the facts.
This bill does not protect wrongdoing corporations. This bill
protects people who are dragged into a lawsuit strictly for procedural
purposes.
Mr. Chairman, I reserve the balance of my time.
Mr. SOTO. Mr. Chairman, water is not arbitrary. The right to clean
water is not arbitrary. It is essential. Just ask the plaintiffs in
these cases. Just ask the people of Flint. Just ask victims of fracking
across our Nation, which is why we in Florida are looking to ban the
practice.
So this isn't just some arbitrary area. This is an essential area
that is affecting issues right now throughout the Nation.
Mr. Chairman, I yield to the gentleman from Maryland (Mr. Raskin).
Mr. RASKIN. Mr. Chairman, the Soto amendment is an excellent
amendment and I can't see why anybody would oppose it. I can't see, in
the first instance, why anyone would want to keep the people's cases
out of the people's courts in their own States.
It seems as if there is a move somewhere in this Congress that is so
intent on protecting polluters and the manufacturers of auto defects
that they are willing to trample our basic principles of federalism and
invade the proper province of the courts.
The Soto amendment would exempt from this bill all cases in which the
plaintiff seeks compensation for public health risks like fracking or
any other kind of water contamination. Water contamination is
devastating to our communities regardless of the source, as
demonstrated by the ongoing Flint water crisis in Michigan.
This bill makes it easier for large corporations to remove State law
claims to Federal court, where they think they have got a better chance
of beating the claims of the small guy. The Soto amendment at least
would carve out cases where there are public health risks at stake,
such as those caused by fracking, which has been proven to generate
earthquakes, well contamination, and the poisoning of local water
supplies.
Mr. SOTO. Mr. Chairman, I yield back the balance of my time.
Mr. FARENTHOLD. Mr. Chairman, I am not going to get sucked into a
debate of hydraulic fracking. Being from Texas, we might have a whole
difference of opinion on that.
But I do want to point out, with respect to this bill, it doesn't
deny anyone access to courts, it doesn't deny anyone access to justice
regardless of what claim. I don't think it is fair we take out one
particular claim or not one particular claim. That seems to go against
fundamental fairness as well.
This bill is all about fairness. It is about fairness to keep people
from being dragged into court solely because a plaintiff's attorney
needs a local defendant to avoid diversity jurisdiction.
I oppose this amendment. I urge my colleagues to support this
amendment and support the underlying bill.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Florida (Mr. Soto).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. RASKIN. 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 Florida will
be postponed.
Amendment No. 2 Offered by Mr. Cartwright
The Acting CHAIR. It is now in order to consider amendment No. 2
printed in House Report 115-27.
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 4, strike the close quotation mark and the
period which follows.
Page 5, after line 4, 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 175, the gentleman
from Pennsylvania (Mr. Cartwright) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentleman from Pennsylvania.
Mr. CARTWRIGHT. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, I also oppose this underlying bill, which is why I call
it, as others have, the wrongdoer 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 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 in
Federal court. It is not because they think the Federal judges are
better looking or the Federal judges are more polite or the decor in
the Federal courtrooms is nicer to look at. That is not it all. They
want to go there because they are more likely to prevail and to beat
consumers in Federal court. They know that.
They know that, after a generation of regrettable decisions across
the street by the Supreme Court of the United States, Federal court has
become very favorable turf for corporate wrongdoers--generations of bad
decisions that invite and exhort Federal judges to forget about the
Seventh Amendment in our Bill of Rights.
You remember the Seventh Amendment. 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 was an amendment
that says very simply: `` . . . in suits at common law, where the value
in controversy shall exceed $20, the right of trial by jury shall be
preserved. . . . `'
There is nothing ambiguous about that statement. It is not hard to
understand. It is about how important the right to trial by jury is to
us here in these United States.
But since the 1980s, there has been this steady drumbeat of decisions
from the United States Supreme Court encouraging and emboldening
Federal court judges to decide and dismiss cases without the trouble of
a jury trial. Their toolkit is enormous for doing that: 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.
[[Page H1974]]
Cases do get thrown out every day in this country without the trouble
of a jury trial, and the Seventh Amendment right to a jury trial is not
preserved. That is why wrongdoer corporations prefer to be in the
Federal court.
Federal court has become candy land for corporate wrongdoers in this
country, and this bill helps them stay there and fight consumers in
Federal court. It changes the law to allow corporate wrongdoers to do
that.
I want to give you some very strong reasons, Mr. Chairman, why this
bill is so 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, this bill does not help you. If you are
a small-business owner only doing work in your State, this bill does
not help you. Only multistate, multinational corporations get help from
this bill, and that is why I call it the wrongdoers protection act for
multistate and multinational corporations.
Number two, it is burdensome. The Federal courts are already
overworked and understaffed. The civil caseload is growing at 12
percent a year. There are currently 123 vacancies in our Federal
judiciary. There is no reason to add to this burden by changing the
law.
Number three, this bill forces State court cases into Federal court.
We have a crowd in this House that consistently preaches about states'
rights and the need to cut back on the Federal Government's reach, but
a bill like this comes along and they drop that state's rights banner
like it is a hot potato and pick up the coat of arms of the multistate,
multinational corporations.
If you really do care about states' rights, you should be voting
``no'' on this bill.
You see, these cases called diversity cases are filed in State court
under State law. Ever since the 1930s, in the Erie Railroad case, if
you take these cases and handle them in Federal court, the Federal
judges are bound by law to follow State law, not Federal law.
Mr. Chairman, there is nobody better at interpreting and following
State law than State court judges. It stands to reason.
I offer this amendment that is at 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 to multistate
and multinational corporations, at least include this amendment and
protect consumers trying to fight insurance companies.
Mr. Chairman, I yield back the balance of my time.
Mr. FARENTHOLD. Mr. Chair, I claim the time in opposition.
The Acting CHAIR. The gentleman from Texas is recognized for 5
minutes.
Mr. FARENTHOLD. Mr. Chairman, this amendment continues to victimize
innocent local parties just because they happen to be in an insurance
case.
The underlying bill is designed to protect folks from being dragged
into a lawsuit just to facilitate forum shopping by plaintiffs'
attorneys.
The purpose of this bill is to allow judges greater discretion to
free these innocent local parties. They are the ones that are suffering
as a result of this.
This amendment denies the bill's protection to innocent local parties
joined to a lawsuit simply because the legal allegations in the case
fall into one arbitrary category rather than another, just like the
previous amendment. It is terribly unfair. Innocent people are innocent
people, and they should be protected from being dragged into a lawsuit
regardless of the nature of the case.
The rules we have developed in this great country to protect the
innocent are rules of general application, such as the rules protecting
people's rights to have their side of the story told and the rules
protecting people from biased or inaccurate testimony.
We should all be appalled by the suggestion that these general
protections designed to protect innocent people from criminal liability
should be suspended because the case is one of assault and battery or
murder or somehow relates to insurance. It is the same kind of logic.
{time} 1545
Our country is rightfully proud of its principles providing due
process and equal protection, but these concepts are meaningless if
they are only selectively applied to some type of cases and not others.
And for the same reason, we should all be outraged at the suggestion
that the rules of fairness, designed to protect the innocent, should be
suspended in civil law cases because a case involves one particular
subject matter or another. But that is exactly what this misguided
amendment does.
This amendment would allow a plaintiff's lawyer to drag an individual
insurance adjuster into a lawsuit even when the applicable State law
makes it absolutely clear that only insurers, not individual people,
are subject to bad faith claims. How does the sponsor explain this 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's
insurance claim. A Federal District Court in Oklahoma found he was
fraudulently joined and dismissed the claim against him, but under this
amendment, the innocent person would have been stuck back in the
lawsuit.
What about a person like Douglas Bradley, where the 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 of the case. It referred to
defendant, singular, not defendants. Throughout the entire pleadings,
it didn't even mention his name. A Federal District Court in Indiana
dismissed this claim against him as fraudulently joined, but under this
amendment, this innocent person would have been stuck back in the
lawsuit. It is not fair, it is expensive, and it is emotionally
draining to these innocent parties.
For that reason, I urge opposition to the amendment and support of
the underlying bill.
Mr. Chairman, 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. FARENTHOLD. 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.
Nunes) having assumed the chair, Mr. Simpson, 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. 725) to
amend title 28, United States Code, to prevent fraudulent joinder, had
come to no resolution thereon.
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