The Debate Over § 1367: Defining the Power to Define Federal Judicial Power

ground that this was a change that needed to be made. And since it would be a mistake to join issue with any of these five (Professors Arthur, Burbank, Freer, Mengler, and Rowe) on the specifics of § 1367's operation, I will instead comment on the general questions raised by the very existence and intensityof their Debate. First, I will discuss the contemporary significance of the diversity docket. Second, I will raise some questions concerning the judiciary's inherent authority to define its jurisdiction and deal with cases that are not expressly controlled by the new statute. Finally, I will consider briefly what the § 1367 experience suggests about methods of statutory interpretation in an era of strict construction.

In a sense, this is the easy question since so much of the spade work has already been done. Thus, the claim of the Trio (Professors Burbank, Mengler, and Rowe) that § 1367 is not controversial rests on the notion that, at least since Judge Friendly's time, there is general agreement that the need for general diversity jurisdiction has subsided." State courts are no longer suspected of preferring in-state litigants, nor are federal tribunals necessary to attract foreign and domestic investors to participate in the nation's economic development. Since § 1367 limits the availability and utility of diversity jurisdiction, it seems to be a step in the right direction.

The only problem here is that this question appears to be well settled only in the eyes of academics. Despite the longstanding practice of civil procedure professors to stress the importance of dedicating the federal docket to issues of federal importance, students seem to join the vociferous pro-diversity lobby as soon as they enter into practice. 5 Many efforts have been made to abolish general diversity jurisdiction and they have all ended, as the Federal Courts Study Committee anticipated its recommendation would end, in failure. 6 Thus, a major part of the dissatisfaction of the Duo (Professors Arthur and Freer) with the statute is that it moves beyond the Finley problem, creating new limits on supplemental jurisdiction. Moreover, by codifying Owen Equipment & Erection Co. v. Kroger,' § 1367 prevents the lower courts from avoiding the limitations that Kroger placed on supplemental jurisdiction in diversity cases through analogy to Congress' rejection of the limits that Finley imposed on such jurisdiction in federal question cases.

Given the history of failed attempts to eliminate diversity jurisdiction, it is difficult to believe that the sheer joy of manipulating filings is all that sustains the bar's position. 8 Rather, the debate over § 1367 demonstrates that it is time to investigate seriously the enduring call for a federal pres-CASES AND MATERIALS at 237-45 (4th ed. 1985). Interestingly, the current edition retrenches, devoting only 31 pages to the issue. See id. at 260-64 (5th ed. 1989).

a See generally ERWIN CHEMERINSKY, FEDERAL JURISDICTION 243 (1989); REPORT OF THE FEDERAL COURTS STUDY COMMITTEE 39-42 (1990) [hereinafter FCSC REPORT] (recommending the elimination of general diversity jurisdiction, but providing, as a backup proposal, that in-state plaintiffs be prohibited from invoking diversity jurisdiction, that corporations be deemed citizens of every state in which they do business, that non-economic damages be excluded from calculating the jurisdictional amount, and that the jurisdictional amount be increased). 7 437 U.S. 365 (1978). The new limit is the retraction of supplemental jurisdiction over claims by intervenors as-of-right. [Vol. 41 ence in traditional state-law fields. Toward that end, it is helpful to couple the desire for federal articulation of state law with other moves to federally supervise the enforcement of law. In this category, I would include expanding the reach of the civil rights acts, 9 federal habeas jurisdiction, 10 Congress' creation of federal claims by reference to state-law predicates, 11 and its utilization of so-called protective jurisdiction. 2 What accounts for the persisting preference for federal justice? One possibility is that the federal system is valued now for many of the same reasons that it was valued by the original supporters of diversity, albeit on different facts. Thus, while out-of-staters may no longer fear hostility from state judges, the current emphasis on multiculturalism ("diversity") enhances the perceived benefits of Article III's antimajoritarian features and procedural protections. Similarly, local businesses facing increased competition from abroad and looking to the benefits of an emerging international marketplace may have a new appreciation for mechanisms that facilitate interstate transactions and for the broader perspective that federal courts bring to their problems. In addition, recent events in both Western and Eastern Europe have brought home the importanceand fragility -of federation.

Conversely, it may also be that the population's confidence in the states and in state courts has diminished. The intractability of problems traditionally handled by the statescrime, illiteracy, and unemployment - focuses attention on national intervention. Technical developments -nu- As in prior times, monopolization of the law by federal courts is not required to meet these needs. But a federal presence, in the form of concurrent jurisdiction over precisely the same claims as state courts entertain (as in diversity jurisdiction) or jurisdiction over actions aimed at redressing injuries similar to those presented in state fora (as often occurs in civil rights cases), can play an important role in placing the problems of individual states within a larger context and in keeping the state courts faithful to a national vision of justice. In addition, joint articulation of the same law by both federal and state tribunals creates a dialogue that improves the quality of decisionmaking within both systems.

Under this broad federalist perspective, diversity jurisdiction represents a benign approach relative to the alternative of enacting substantive federal law, especially governing law that preempts state legislation. Rather than see diversity as an interference by federal courts in state law, as an occasion for "mischievous results,"' 4 or as a costly exercise in requiring federal judges to figure out the laws of the states, diversity can be viewed as an opportunity for the federal system to contribute to the development of state law in precisely the situations in which federal capabilities are likely to exceed those of the statesin cases involving multistate and multinational elements. Moreover, for those who value the common law, a continued hand in adjudication through the mechanism of diversity jurisdiction is superior to chronic congressional intervention in the form of federalization of state law. And for those who prefer legislative solutions, federal judicial involvement in these multistate and multinational cases creates opportunities to signal Congress about problems that require its " See, e.g., National Org. of Women v. Operation Rescue, 914 F.2d 582 (4"th Cir. 1990), cert. [Vol. 41 attention.

The question then becomes how should the federal docket be structured to respond to these considerations and yet conserve judicial resources for the federal question cases that are, despite these remarks, surely the federal system's first priority. Not surprisingly, in light of the obstacles to a major revision of § 1332, the dominant strategy for distinguishing between diversity cases that receive federal attention and those that do not is to manipulate the federal court's supplemental jurisdiction. As Zahn v. International Paper Co., 15 Kroger, Aldinger v. Howard," 6 and Finley demonstrate, the Supreme Court's idea here is to make federal adjudication so unattractive that plaintiffs will take cases out of the federal courts and litigate them fully in state systems. This tactic has some merit. Cases requiring supplemental jurisdiction are those of greater complexity, so. that eliminating them from the federal docket is the most helpful in terms of resource conservation. And since plaintiffs can usually pursue the federal part of their cases in federal court, issues of genuine national significance are likely to remaifi within federal purview. At the same time, however, this approach is risky: plaintiffs may bifurcate their cases even when the federal issues are not of great importance. Indeed, as ih Finley, there are circumstances in which the plaintiff is required to do so. This multiplies the number of cases in the judicial system as a whole without producing any real benefit. Furthermore, the technique is sometimes counterproductive. Since it applies to both federal question and diversity cases, it tends to eliminate cases from federal court that involve federal issues; questions that all agree are especially worthy of federal involvement.

Section 1367 therefore adopts a somewhat different scheme. Because it relies heavily on Kroger, § 1367 also has a plaintiff orientation. It picks out those cases that do not merit federal attention according to whether the non-federal claims in the case are asserted by parties aligned as plaintiffs. But it differs from the Kroger Court's approach in important ways. By reversing the results in Finley and Aldinger, § 1367 retains all federal question cases and eliminates from the federal docket only diversity cases. Furthermore, the statute may be less risky than the Supreme Court's strategy because principles of issue and claim preclusion are more likely to prevent the plaintiff from bifurcating.foot_2 Finally, this regime can more easily be justified than Finley because, for the most part, its concern is with a kind of antisocial behavior, the evasion of the complete diversity rule through the subterfuge of withholding part of a case.

The scheme would thus seem perfect; it even has an impeccable pedigree.' But it has one difficulty. Differentiating on the basis of whether the claims are those of the plaintiff does not, in any interesting-or important sense, distinguish between the cases that should be in federal court from those that should not.' 9 Indeed, in light of the trends discussed above, one could easily argue that cases involving impleaded, intervening, and necessary parties are precisely the state-law cases that should be within federal reach, if diversity cases are going to remain on the docket at all. 20 They not only involve litigants from more than one state or nation; they also align the parties against each other in complicated ways. Admittedly, these are resource-intensive cases, but the complex alignment gives the federal court an especially rich opportunity to examine how state law works in the multistate and multinational context.

In addition to the role that these cases can play in giving a national and international perspective to the development of state law, the necessary party and impleader cases excluded by § 1367 also present questions of special interest to the federal system. Some of these cases contain jurisdictional issues involving the interaction between state long-arm statutes and constitutional limitations and raise federalism and comity concerns along with familiar due process issues. 21 Other cases require consideration of the special problems created when rules originally developed in the bipolar contextto play fair'between plaintiff and defendantare applied to interests aligned with neither the plaintiff nor defendant, or to parties whose presence affects the plaintiff and defendant asymmetrically. Because these cases hale into court entities whose presence is needed to provide others with an efficient and satisfactory means of dispute resolution, they present the most dramatic clash between the plaintiff's desire to vindicate an interest in court and the right of others to be sued at home. 22 Given the" broad reach of state long-arm statutes, these, again, are usually problems of constitutional interpretation rather than construction of state law.

Similar remarks can be made about choice of law issues. Rule 14, 19, and 2423 cases often involve parties from several states or countries. Since the parties' relationship to the transaction and each other is complex, the conflicts questions are likely to be especially difficult. Providing a federal voice in the debate over state choice of law rules makes sense because of the federalism and comity concerns raised. Indeed, loading the federal docket with diversity cases of this complexity may lead the federal courts or Congress to consider overruling Klaxon Co. v. Stentor Electric Manufacturing Co. 24 and utilizing Article IV powers to create federal choice of law rules binding on the states. Personal jurisdiction and choice of law rules present the system with two different tools for accommodating the various due process interests of participants in litigation. 2 5 Complex cases of the type at issue here offer the court an array of circumstances and therefore present a unique opportunity to shape these rules in a careful

There is a another set of reasons why the cases excluded by § 1367 are valuable to the federal docket. These stem from a notionpropounded by the Federal Courts Study Committee, the American Law Institute, as well as by both the Duo and the Triothat the federal and state courts are best viewed as two components in a unitary system of justice; that litigants whose cases are constitutionally capable of being heard in either tribunal should be encouraged to pursue their claims in the forum most able to adjudicate their disputes efficiently. Thus, it would be useful to know whether the ratio of bipolar to complex disputes is higher in state than in federal fora. If so, then despite the costs these complex cases impose on either tribunal, they would be best channelled to the federal system. And to the extent that it is true that litigants are especially interested in a federal articulation of the law, federal adjudication is likely to attract more intervenors than a similar action in state court. Federal jurisdiction would therefore carry the potential for resolving in a single forum disputes that might otherwise be litigated more than one time and in more than one place.

In many ways, the cases eliminated by § 1367 are similar to other categories of cases that have been placed on, or are proposed for, the federal docket by virtue of minimal diversity. Interpleader actions have long brought state-law cases to federal court on the theory that the multistate nature of these disputes makes them especially suitable to federal adjudication. 2 6 Other examples include the multistate, multiforum bill undergoing congressional scrutiny and the proposals of the American Law Institute's Complex Litigation Project. 2 " Granted, these provisions are usually accompanied by statutes providing for nationwide service of process and they also generally envision cases more complex than those discussed here. But these are not dispositive differences. As noted above, reliance on state [Vol. 41 bases of personal jurisdiction means that federalism issues are sometimes at stake in these disputes. Besides, revisions to Rule 4 are currently under discussion. Although it is not contemplated that nationwide jurisdiction would be provided for diversity cases, it could be considered for Rule 14, 19, and 24 parties. 2 8

The lesser complexity of these cases is also desirable. Because they would require the federal court to articulate state law in cases fairly similar to those adjudicated by the states, the benefits of concurrent jurisdiction may be more fully realized here than in the interpleader and multiparty, multiforum disputes. And if the benefits of diversity can be fully captured in these "simple complex cases," it may become politically feasible to relinquish other parts of the § 1332 docket. Instead of determining the worthiness of federal adjudication according to "the accident that one plaintiff happens to have a citizenship different from that of all the other parties," 2 9 or by who is asserting the claim, perhaps the time will come when the relationship between the national interest and the substance of the dispute will control the allocation of judicial resources. 30

One of the most interesting questions highlighted by the Debate concerns the role that the federal judiciary can play in determining the scope of its supplemental adjudicatory authority. Both sides seemingly agree that Congress has plenary control in this area, but then qualify their statements in ways indicating that they recognize certain areas as problematic.

). There may be some question as to the constitutionality of such a provision, but the same comment could be made about § 2361, which provides for nationwide service in interpleader cases.

"s Friendly, supra note 4, at 509. Thus, I would advocate retaining the complete diversity requirement of Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). I would deal with the plaintiff bent at evading this limitation by elaborating, either judicially or legislatively, on the anticollusion statute, 28 U.S.C. § 1359 (1988).

"0 The subject-matter approach is already utilized and its expansion is under further consideration. For example, routine insurance cases are now excluded from federal court through the device of defining the citizenship of an insurance company as the citizenship of the insured for purposes of direct actions on the policy. 28 U.S.C. § 1332(c)(1). Similarly, the Federal Courts Study Committee back-up proposal on diversity jurisdiction would eliminate routine corporate matters through its citizenship definition, and cases mainly directed at non-economic harms by virtue of its amount in controversy requirement. FCSC REPORT, supra note 6, at 42. Thus, Professor Freer initially raised the issue of authority over supplemental jurisdiction in an article written before Finley was decided, where he labelled the idea of a common law of supplemental jurisdiction as an "oxymoron." ' 31 Similarly, the Trio recognizes that the Supreme Court strictly construes jurisdictional statutes, making legislative action necessary to legitimate any exercise of supplemental adjudicatory power. 32 Both groups realize, however, that this creates a problem. Since § 1367 fails to address every possible permutation of the supplemental jurisdiction question, if federal courts lack all power in this area, all unaddressed variations must necessarily be decided against the assertion of federal authority. This would alter existing law and create substantial (or at least, unintended) difficulties for parties who find themselves in the situations that are omitted by the statute. For example, because the statute does not mention class actions under Rule 23, it could be viewed as overruling the law as it has been understood since Zahn was decided. Even unnamed class members would then have to meet both the diversity and amount in controversy requirements, instead of only the latter." 3 Both sides have a solution. According to Freer, the courts have a free hand here because Congress delegated to them the authority to construe the term "civil action" as it appears in the jurisdictional statutes. 3 4 In contrast, the Trio would rely on the final clause of § 1367(b) 35 and the legislative history they created. 36 But both solutions are flawed. The Finley majority, the supplemental jurisdiction statute, and the courts that have considered the issue do not view the term "civil action" as amenable [Vol. '41 to the Freer interpretation." 7 With respect to the Trio's solution, the last clause of § 1367 is one of the most confusing aspects of the statute and reliance on legislative history is under considerable attack."

If, as both sides seem to agree, jurisdiction over the cases omitted by § 1367 does remain open for judicial interpretation, then perhaps it is, in part, because the Finley, Aldinger, Zahn, and Kroger Courts overstated the extent to which supplemental jurisdiction should be considered solely a matter' of legislative grace. Thus, while it is indisputable that the Constitution delegates to Congress the authority to decide whether to establish lower federal courts, once these courts are created, it can be argued that they necessarily assume the power to be courtsto construe the rules of court and the definitions of operational terms such as "case," "controversy," and "civil action" to assure that justice is administered between the parties. 3 9 This is clearly not the place to consider the questions whether or how Congress can expressly limit federal court jurisdiction. 40 But it is important to see that such consideration is not required; that defining the scope of supplemental authority is a conceptually different matter. In supplemental jurisdiction cases, Congress has made the decision to place a dispute within the reach of the judiciary. In other words, the judiciary has already been given the power to decide the facts and determine what rights and liabilities arise out of them. The only remaining issue is whether it can resolve all the questions that the parties wish to have judicially determined. Since the judiciary has the expertise and information needed to assess the effect on the parties of deciding only parts of their dispute, it is in the best position to know what reach it needs in order to assure that justice is done. Since the judiciary also understands how the docket would suffer under a broad construction of jurisdiction, it is well positioned to weigh the costs and benefits of extending this authority. Not surprisingly, therefore, early Courts reasoned that a court obtaining proper authority over a question in a case had "the right to decide all the questions in the case." ' 41 Indeed, one might have expected the current Supreme Court to see this issue as little different from a decision to defer to the expertise that an administrative agency brings to the construction of legislation relevant to its responsibilities." 2 Furthermore, one of the more curious aspects of the supplemental jurisdiction cases, and of Finley in particular, is that they were decided at a time when doctrines of issue and claim preclusion were undergoing considerable common law expansion. 4 If the Court believes that the judiciary has the power to define operative wordssuch as "case," "controversy," and "transaction"for the purpose of determining res judicata law, it is odd that it cannot do the same in the context of joinder. After all, in some sense, res judicata law and supplemental jurisdiction rules are opposite sides of the same cointhe latter determine whether a court can judge a case; the former, whether it has prejudged it. Bifurcating responsibility can create nothing but mischief, for if conceptions of the adjudication's role in the dispute do not mesh, the parties' abilities to pursue their rights efficiently and effectively can be undermined. 4 Even Henry Hart, who [Vol. 41 regarded the general jurisdiction of the state courts as the ultimate guar-. antor of constitutional rights, conceded that federal courts may have some power to prevent Congress from manipulating judicial jurisdiction in a manner that impinges upon important interests. 5 Of course, this reasoning is-best directed at cases like Finley (where it is now unnecessary), in Which the value of a claim within the exclusive jurisdiction of the federal courts is diminished when the plaintiff is forced to pursue a remedy in two judicial systems. 46 But the argument may pertain to some of the situations omitted by § 1367. If, for example, it can be said that the class action rule represents a strong federal policy to allow litigants nationwide to pool their resources to vindicate their rights, then perhaps federal courts retain the power to hear diversity class actions even when unnamed class members share the citizenship of the class' adversary. 47 Furthermore, a federal court may reasonably be more generous to a plaintiff's nonfederal claims when the case was removed from state court by a defendant who then adds parties the plaintiff cannot reach. Or, the exercise of supplemental jurisdiction may be appropriate when issue or claim preclusion would distort later (state court) resolution of the claims that could not have been asserted in federal court by virtue of the express language of § 1367.

What Happens When Congress Doesn't Do Its Job, 40 EMORY L.J. 1007, 1010-11 (1991). But hypotheticals based on cases like Martin neatly illustrate my point: there is a paradox when a court lacks power to decide whether it can hear the claims of those in the position of the absentees, yet possesses the authority to decide whether these absentees can undermine the judgment.

It is also worth noting that in many instances the court deciding the res judicata effect of the judgment will be a state court. Federal res judicata law should probably control the decision (although there is nothing in the Full Faith and Credit Act, 28 U.S.C. § 1738 (1988), that so requires), but the content of the law will be determined by the second forum. That second court may fail to understand the nuances that arise where the plaintiff cannot assert a claim against a defendant, or it may decide that federal preclusion law should be construed to force the plaintiff into state court in the first place. The court's decision, although theoretically reviewable in the Supreme Court, is unlikely to be reexamined within the federal system. See Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518 (1986).

"' Henry H. Hart, Jr., The Power of Congress to Limit the Jurisdiction of Federal Courts: An Exercise in Dialectic, 66 HARV. L. REV. 1362 (1953).

4' This is the example given in FEDERAL COuRTS, supra note 41, at 1045-46. Aside from the cost of bifurcating, the plaintiff could lose both adjudications even though in each case the factfinder thought the party should be made wholebut by the defendant not before the court. 47 This would be an especially forceful argument in the event that the states in which plaintiffs can sue refuse to entertain nationwide class actions on the ground that these needs are being met by the federal courts.

The vision of diversity jurisdiction propounded here could not be easily legislated. For one, its definition of "simple complexity" is not carefully thought out. This is partly a function of timethis Essay had to be written in a single month and other matters intruded. But, of course, the drafters of § 1367 encountered a similar deadline, and they also faced the political reality that a major revision of § 1332 was not in the cards. Nevertheless, the Trio saw that Congress had grasped the importance of the Finley problem and was poised to overrule it. Anyone would be "insane" 4 to pass up this chance, and, along the way, to straighten out some convoluted law and rid the jurisdictional rules of an anomaly that was, if nothing else, embarrassing to teach. Given these-constraints, the statute is a fine effort and a valuable piece of legislation.

At the same time, however, it is hard to entirely disregard the problems of the omitted cases and, for those who did not like Kroger, rejoice in its codification and extension. After all, the fire that inspired Congress to act is quenched, making it unlikely that the diversity jurisdiction problem will be revisited any time soon. And so to the final question: is there a better way for the legislative and judicial branches to interact?

It is worth noting that this is an especially serious issue during times like the present, when the Congress differs politically and philosophically from both the Judiciary and the Executive. History has demonstrated that in such situations, the number of occasions for legislative overrule increases. As a result, the tension between the branches of government escalates, producing considerable fallouta politicized process of judicial selection, poorly considered legislative responses, and disrespect for court decisions. 49 (1991). The authors note that between 1982 and 1986 Congress overruled at least 23 Supreme Court decisions (half, as here, within two years of the date of decision), more than twice as many as in the decade preceding President Reagan's election. Id. at-748-49. Arguing that this creates tensions similar to those experienced during the time of the New Deal, they predict that similar political repercussions are likely to be felt. Of course, there are two important differences. First, during the [Vol. 41 with regard to a jurisdictional provision like § 1367 may be a matter of considerable national significance. 50 Several vehicles have been proposed to regularize the relationship between the Judiciary and Congress. The Federal Courts Study Committee is itself one model for this kind of interaction. However, this device did not prove to be an ideal solution because the flow of information from the Committee to Congress was discontinuous and one-sided. Since Congress could not return to the Committee for amplification and further suggestions, it could not easily utilize the Committee members' talents to conform legislative proposals to unaccounted for political realities.. Thus, it was unclear to Congress what the Committee's position on codifying Kroger would have been if its proposal to abolish diversity was rejected. 51 Yet, the formal participation of a principal draftsman of the Committee's Report was apparently reduced to letter writing. 52 Other proposals lack this defect. The Committee suggested that an Office of Judicial Impact Assessment be created as a standing body to forecast the resource needs of the Judiciary and to advise Congress on the impact of proposed legislation. 53 The Committee also recommended that bills be reviewed with an eye to the problems that tend to breed litigable issues. 5 4 Others argue that judicial mores should be reexamined so that judges can feel free to testify before Congress and engage in other forms of communication with legislators.1 5 Indeed, judges themselves are beginning to innovate. For example, the D.C. Circuit is engaged in an experiment to circulate statutory opinions to relevant congressional committees." 6 The Debate over § 1367 demonstrates why these alternatives should be considered with dispatch.

Additionally, perhaps more can be done within the context of decisionwriting. As noted above, one justification for retaining a federal role in state law adjudication is to provide a window on problems that may ultimately require federal legislative, solutions. Opening that window demands that courts pay some attention to the kinds of messages they are sending. Thus, while Finley called for legislative action, its invitation - "whatever we say regarding the scope of jurisdiction conferred by a particular statute can be changed by Congress" 51 -was entirely unfocused. Surely the Court has greater expertise than Congress about the docket. Even if it did lack power to determine jurisdiction, the Finley Court might have explained the pressures the judicial system is under and stressed the paradox of denying convenient access to a plaintiff with a federal question in order to accommodate diversity cases. Adding its voice to those of academics and the Federal Courts Study Committee may have persuaded Congress to take the time to examine the § 1332 caseload critically instead of applying a bandaid in the shape of § 1367.

There are other possibilities, but these are more controversial than simply suggesting that more time be devoted to dicta. In the last decade, considerable academic attention has been paid to public choice theory and the lawmaking process. As the Court engages in statutory interpretation, it could make better use of this knowledge. When determining the appropriate disposition, the Court could, at the very least, consider the speed with which Congress will be forced to take corrective action. Greater deliberation over § 1367 may have produced a more far-reaching solution to the diversity problem. Similarly, the Court could consider whether its disposition will impose the costs of error on the side best situated to mobilize a legislative effort and whether "quibbl[ing] with the language of Congress"" in a manner that increases the workload of the legislative branch is any different from Congress' failure to consider the impact of legislation on the Judiciary. 56 Id. at 47.

In any event, it will certainly be, if not delicious, then fascinating, to watch what happens to these omitted cases. Common law courts will be grappling with a problem in an area traditionally within their control and in which they have special expertise, but where the Supreme Court has announced, and Congress has seemingly codified, a ban on judge-made law.