H.R. 4113: Federal Courts Jurisdiction and Venue Clarification Act of 2009

H.R. 4113

Federal Courts Jurisdiction and Venue Clarification Act of 2009

Date
September 29, 2010 (111th Congress, 2nd Session)

Staff Contact
Sarah Makin

Floor Situation

H.R. 4113 is expected to be considered on the floor of the House on Wednesday, September 29, 2010, under a motion to suspend the rules, requiring a two-thirds majority vote for passage.  The legislation was introduced by Rep. Lamar Smith (R-TX) on November 19, 2009.

Bill Summary

TITLE I – JURISDICTIONAL IMPROVEMENTS

 

Section 101. Treatment of resident aliens.

Section 101 of the bill would deletes the alien provision text (ensuring that resident aliens cannot be treated as US citizens for purposes of jurisdiction) with language clarifying that diversity jurisdiction does not exist in suits between a citizen of a state and a permanent resident alien within that state.  This revision is consistent with the history of 28 USC §1332 (with the exception of the alien proviso language).

 

Section 102. Citizenship of corporations and insurance companies with foreign contacts.

Pursuant to current law, a corporation is deemed a citizen of any state in which it has been incorporated and of the state where it has its principal place of business.  Courts have struggled to apply section 1332(c) in actions involving a US corporation with foreign contacts or foreign corporations that operate in the United States. 

 

Section 102(a) would treat foreign corporations on a basis consistent with domestic corporations for purposes of diversity jurisdiction. The text clarifies that all corporations, foreign and domestic, are regarded as citizens of both their place of incorporation and their principal place of business. 

 

Section 103. Removal and remand provisions.

Section 103 would prescribe changes to the federal removal and remand procedures, especially those set forth in 28 USC §1441 (general venue) and section 1446 (venue procedures). 

 

Current law authorizes a defendant to remove the entire case whenever a “separate and independent” federal question claim is joined with one or more non-removable claims.  Following removal, the US district court may either retain the whole case or remand all matters in which state law predominates.  This has compelled some courts to question the constitutionality of how the statutes operate, since section 1441 purports to authorize federal courts to decide state law claims for which the federal courts do not have jurisdiction. According to the bill, the proposed section would permit removal of the case but requires that a district court remand any unrelated state law matters. 

 

Section 103 would also separate the removal provisions relating to civil and criminal proceedings into two statutes.  This will assist litigants in knowing which provisions are applicable to their cases. 

 

In addition, Section 103 would address removal in multiple-defendant cases and the propriety of removal after one year.  Section 103 would allow a later-served defendant to remove within 30 days of receipt of a summons or the initial pleading; an earlier-served defendant could also consent to removal at this time, provided he did not previously initiate or consent to removal.

 

Section 103 would permit removal after one year from the commencement of the action, but under limited circumstances, including actions in which the plaintiff has “acted in bad faith in order to prevent a defendant from removing the action.” 

 

TITLE II – VENUE AND TRANSFER IMPROVEMENTS

 

Section 201. Scope and definitions.

Section 201 would create a new section to Chapter 87 of the US Code to define “venue” and to specify two areas where the venue chapter would be inapplicable.

 

Proposed section 1390(a) would provide a general definition that distinguishes venue (a geographic specification of the appropriate forum for litigation) from other provisions of federal law that operate as restrictions on subject-matter jurisdiction.  These restrictions would differ from venue rules in that they may not be waived by the parties and will not be affected by changes in Chapter 87’s general venue rules.  The general rules also leave intact a variety of special provisions in various statutes that identify the proper forum for litigation under specific acts of Congress.

 

Section 1390(b) would clarify that the general venue provisions do not apply to proceedings in admiralty.  Section 1390(b) also codifies case law to ensure that admiralty disputes are subject to the general transfer provisions of 28 USC §§1404-1407.  

 

Finally, section 1390(c) would provide that the venue statutes do not determine the proper venue for a case removed from state court to a US district court.  Consistent with case law, the removal statute, 28 USC §1441(a), makes venue proper in the federal district court for the district in which the state action was pending. Section 1390(c) would also codify current practice by stipulating that   Chapter 87’s transfer provisions govern the transfer of a removed action between federal district courts once a case has been removed.  

 

Section 202. Venue generally.

Under H.R. 4113, section would 202 replace the first four subsections of the general venue statute, 28 USC §1391. 

 

Section 1391(a)(1) would follow current law in providing the general requirements for venue choices, but would not displace the special venue rules that govern under the more than 200 venue statutes codified outside of title 28.

 

Section 1391(a)(2) would end the use of the “local action” rule, which provides that certain real property actions may be brought only in the district in which the property is located. 

 

Section 1391(c) would prescribe residency rules for purposes of determining venue.  Under current law, venue in a suit against a natural person may lie in a district where the defendant “resides,” which most courts (but not all) interpret as a reference to the party’s domicile. 

 

Section 1392(c)(2) would address a division of authority as to the venue treatment of unincorporated associations, such as unions and partnerships. The provision embraces Supreme Court case law on the subject by establishing parity among entities that operate under a “common name.” It deems unincorporated associations, corporations, and any other party that has the right to sue and be sued in common name, if a defendant, to be a resident in any judicial district in which the defendant is subject to the court’s personal jurisdiction; and if a plaintiff, only in the judicial district in which it maintains its principal place of business.

 

Section 1393(c)(3) would clarify venue rules for aliens. Current law allows aliens to be sued in any district, thereby denying them the ability to raise venue as a defense to the location of litigation. This means the presence of an alien is disregarded in the application of the venue statutes to any co-defendants who are not aliens, a feature that is preserved in the statutory rewrite.      

 

Finally, section 1393(c)(3) would allow permanent resident aliens – persons who have been granted authorization to live and work in the United States on a permanent basis – to raise a venue defense.

 

Section 203. Repeal of section 1392.

28 USC §1392 provides that “[a]ny civil action, of a local nature, involving property located in different districts in the same state, may be brought in any of such districts.”  Because section 202 (proposed §1392(a)(2)) would abolishe the local-action rule, Section 203 repeals §1392.     

 

Section 204. Change of venue.

Section 1404(a) of title 28 would authorize the transfer of civil actions for the convenience of the parties and witnesses and in the interest of justice, but it limits the transfer of an action to those districts “where [the action] might have been brought.” The Supreme Court has interpreted this to require that the transferee district be one in which both venue and personal jurisdiction are proper. This interpretation, however, narrows the range of possible transferee districts and precludes a transfer of the case to a district where it might be more convenient to the litigants.    

 

Section 204 would respond to this problem by permitting a federal court to exercise broader discretion in transferring cases “to any district or division to which all parties have consented.” This change also incorporates technical amendments to ensure that the provision does apply to transfers from an Article III district court to any of the non-Article III territorial courts located in Guam, the Northern Mariana Islands, and the Virgin Islands. Such a transfer would be unconstitutional.

Cost

CBO has not produced a cost estimate for H.R. 4113.