Thursday, February 25, 2016

Floor Statement of the Honorable John Conyers, Jr., Ranking Member of the Committee on the Judiciary, Regarding H.R. 3624, the “Fraudulent Joinder Prevention Act of 2016"

Dean of the U.S. House
of Representatives
John Conyers, Jr.
“H.R. 3624, the so-called “Fraudulent Joinder Prevention Act of 2016,” 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. 

“I say this for several reasons. 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 in-state 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 non-diverse 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 non-diverse defendant. 

“This very high standard has guided our federal courts for more than a century and it has functioned well. 

“But, 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 applicable State law would impose liability” an in-state defendant,

•That the plaintiff had a “good faith intention to prosecute the action against each” in-state 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 decisions in many cases. 

“Additionally, these standards require a court to engage in a mini-trial during an early procedural stage of a case, without any 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.
“Finally, the amendments made by this bill raise fundamental federalism concerns.

“Matters of state law should be decided by state courts, subject to certain exceptions as set forth in the Constitution. 

“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 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 also violates our fundamental constitutional structure.

“Accordingly, I urge my colleagues to join me in opposing this problematic legislation.”

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