Today the Supreme Court holds oral arguments in Standard Fire v. Knowles, a Class Action Fairness Act (CAFA) case. According to the defendant, an insurance company, the case involves plaintiffs’ attorneys “manipulating their complaints to evade federal diversity jurisdiction” by stipulating to the class recovering less than $5,000,000, the CAFA threshold that allows defendants to remove class actions from state court to federal court. According to the plaintiff, an Arkansas homeowner who alleges the insurance company routinely failed to pay for general contractors’ bills in home repairs, the issue here is just another example of the 70-year-old rule that a plaintiff can stay out of federal court by stipulating to recovering only damages below the jurisdictional amount.
I don’t want to discuss the case in detail (many others have; e.g., Alison Frankel has covered it a couple times, and Kevin Walsh discussed an amicus brief filed by a manufacturers’ association, and the lawyers who filed the brief responded), but to address the broader issue raised by the case. Like many plaintiff’s lawyers, I’ve longed been dismayed at the efforts of insurance companies and large corporations to force more and more civil lawsuits into federal court. Nearly three years ago, I summarized some of the supposed reasons why defendants prefer to be in federal court (while discussing the Hertz v. Friend case on diversity jurisdiction):
- federal juries, by virtue of their larger geographic range, include fewer urban jurors and more rural jurors, and thus (according to lawyers’ lore) will award lower verdicts;
- the Federal Rules of Civil Procedure place express limits on the amount of discovery available;
- federal courts are (and were even before Ashcroft v. Iqbal) more prone to grant motions to dismiss (and motions for summary judgment) than state courts.
Is any of that true? Does it make a difference to the bottom line when all is said and done? Who knows, but it’s lawyer’s lore that federal courts are better for defendants while state courts are better for plaintiffs. A lawyer wouldn’t disregard the lore about federal court, much like how a sailor wouldn’t leave port on Friday or a driver wouldn’t race in a green car. For what it’s worth, though, state courts are typically the home of large personal injury verdicts — because the vast majority of wrongful death cases are there — federal juries do indeed award large damages in many cases. In 2012, for example, the second largest non-patent verdict nationwide was $167 million from a federal jury in an employment / sexual harassment case.
But lately the rush to put purely state law cases (like Standard Fire v. Knowles and Hertz v. Friend) in federal court seems to come from a different motivation: to get lawsuits out of fast-moving state courts and into federal courts hobbled by judicial vacancies.
As the Congressional Research Service has explained numerous times, since 2009 we’ve had historically high vacancy rates in the District Courts, with more than 10% of the seats vacant. More than thirty seats are now deemed a judicial emergency. I’m not the first to complain about judicial vacancies on the rise, but I do want to point out that the effect of judicial vacancies often hits civil plaintiffs the hardest, for two reasons.
First, the Speedy Trial Act forces District Courts to prioritize criminal trials over civil trials. That’s not a bad thing — criminal defendants, particularly those being detained prior to trial, should have their cases heard as soon as they’re ready to defend them — but it means that, when there’s a crunch at the federal courthouse, the civil cases are put on hold. I remember the triage order back when I was clerking in the Eastern District of Pennsylvania: criminal first (to comply with Speedy Trial), habeas corpus petitions second (because, if not dealt with, the volume quickly became overwhelming), and, third, civil cases when you could get to them.
Second, thanks to de facto rules in some federal courts, civil cases are routinely held up awaiting a judicial ruling. In many districts, including some of the busiest districts, no discovery is permitted while a motion to dismiss is pending. That’s not required by the Federal Rules of Civil Procedure (courts force the delay by not setting up a scheduling conference, thus short-circuiting the requirement to begin discovery under Fed.R.Civ.P. 26(a)(1)(C) and 26(f)), but the practice is becoming even more common after Twombly and Iqbal).
Thus, civil plaintiffs in federal court get used to watching a defendant file a motion or pleading — perhaps a motion to dismiss, or removal to the federal court, or a motion for a protective order — and then sitting and waiting. And waiting. And waiting. Two months ago I argued a motion for remand in E.D.Pa., and the judge said the court was “as busy as I’ve ever seen it,” and thus there wasn’t any clear timeline for a decision. That case sits. A month before that, a routine discovery conference I had in the Middle District of Pennsylvania (which has a judicial emergency) was cancelled because the judge had to preside over criminal arraignments, which is normally the role of the magistrate judges, but the magistrate judges were caught in other matters, dealing with the judicial emergency. That case sits, too.
And so in many ways it doesn’t matter if the judges or juries or law in federal court is more favorable to corporate defendants: if their allies in the Senate can keep the federal courts understaffed and thus overwhelmed, they can score a victory anyway, and maybe grind plaintiffs and their attorneys down in the wait. Justice delayed is justice denied.