Class Actions, Diversity, Federalism, the Administrative State: Let’s Rethink Everything

Today (Monday), the Supreme Court is hearing arguments in Standard Fire Insurance Co. v. Knowles,  its very first decision on the 2005 Class Action Fairness Act (CAFA). Beyond the intrinsic importance of the case, some amicus submissions suggest, or perhaps better partake of, a profound reorientation of conservative legal thought.

In a very small nutshell: CAFA was an attempt to check the abuse of class actions in state courts, under state law. Among other mechanisms, CAFA contains an amount-in-controversy requirement,  see 23 § U.S.C. 1332(d)(2): if the amount exceeds $5 million, the defendant can remove the case to federal court. That’s what the insurance company attempted in this case. However, the class action representative had entered a stipulation to the effect that  he would neither seek damages for any class member in excess of $75,000 nor seek damages for the class in excess of five million dollars, including costs and attorney’s fees. The federal district court credited that averment and remanded the case back to the Arkansas state court whence it had come. The Eighth Circuit denied Standard’s right to appeal. The company asked for certiorari, and the Supreme Court agreed to hear the case.

The case highlights several of the absurdities that characterize contemporary class action practice. For starters, it’s unclear (at least to me) how and why a purported class action representative can unilaterally stipulate away claims of members of a class that hasn’t even be certified yet. For another thing, I do not understand why “diversity” cases of this sort—that is, cases among parties from different states—over millions of dollars are decided even in federal court under state law, meaning to all intents the law of a state that was handpicked by roving plaintiffs’ lawyers.  Or rather I understand that all too well: it’s the holding and the result of Erie Railroad (1938)—the baseline of all modern Civil Procedure and a lodestar for many soi disant originalists, but arguably the Supreme Court’s worst case ever. In its wisdom, the Congress that enacted CAFA explicitly left the Erie framework in place: it permits (some) diverse class action defendants to escape the bias of the local (hellhole) forum, but the parochial bias of state law will still accompany the defendents into federal court. Oh, well.

For present purposes I’ll leave all that, plus CAFA’s intricacies, to CivPro experts. Allow me instead to call attention to a remarkable amicus brief  in support of the petitioner and on behalf of the Partnership for America. The brief goes to first principles. It traces the origin of diversity jurisdiction at the Constitutional Convention and ably explicates the purpose: protect out-of-state parties against bias in local courts. But the brief goes further. Article III Section 1, it observes, vests “the judicial Power of the United States”—all of the judicial power—“ in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” And Article III Section 2 says that “the judicial Power shall extend” to, among other matters, controversies “between Citizens of different States.” Given the mandatory language, the entire judicial power must be vested someplace, either in inferior courts or the Supreme Court, under appellate jurisdiction. No declining diversity jurisdiction—and leaving out-of-state parties to the tender mercies of state courts—where it plainly exists.

The argument (ConLaw mavens will recognize) is not novel. Justice Joseph Story rolled it out in Martin v. Hunter’s Lessee (1816). (Chief Justice John Marshall had recused himself . He had a financial interest in the underlying dispute and probably also wrote the briefs. A bit much, even in those days.) The general consensus is that Story’s position is over the top. It is hard—not impossible, but hard—to square with the fact that Congress doesn’t have to establish inferior courts; that it may under Article III make “regulations” and “exceptions” with respect to federal court jurisdiction; with the fact that the First Congress, in the 1789 Judiciary Act, enacted provisions that contravene Story’s position (Sections 11 and 12, if you must know); and with a slew of nineteenth century Supreme Court decisions that embrace a very latitudinarian understanding of Congress’s authority under Article III. The Partnership brief handles the difficulty deftly: whatever one may think about the authority of Congress, it says, there’s no warrant for the federal courts’ renunciation of diversity jurisdiction. Yet the courts often do so, often for no better reason than that they’re kind of busy with search-and-seizure cases or evolving standards of decency (my snark). Helpfully, the brief supplies an inventory of made-up doctrines that have no other purpose except to evade diversity jurisdiction. The Supreme Court has utilized its discretionary cert process to develop a finely wrought position on drug-sniffing dogs while letting the commerce of the United States go to pot. That pernicious sensibility is the target of the Partnership’s brief. Good. Nay, terrific.

More remarkable still, the brief was penned by none other than Charles J. Cooper of Cooper & Kirk. Mr. Cooper is a great lawyer and experienced Supreme Court advocate with impeccable conservative credentials: he clerked for Justice (later Chief Justice) William H. Rehnquist and then served the Reagan revolution in its infancy, first (beginning in 1981)at the Civil Rights Division and later as Assistant Attorney General at the Office of Legal Counsel. And then this: Charles Cooper is the one of the most vehement states’ rights guy I have ever known. That position is not inherently inconsistent with the Standard brief—au contraire:  diversity jurisdiction serves to protect states and their citizens from mutual horizontal aggression and exploitation, and it’s hard to see how making room for more such conduct could improve the position of states overall. It is, however, quite at odds with the conservative sensibilities at the time of the Reagan revolution. At the time, conservatives at DoJ and elsewhere noodled over abolishing diversity jurisdiction. Federal imposition! Federal courts on a rampage! Judicial imperialism! Let states be states! Etc.

While I have no idea whether Chuck Cooper shared those sentiments at the time, his brief surely signals a big change in orientation. A states’ rights conservative citing Joseph Story and Alexander Hamilton (and, throughout the brief, William Crosskey of all people), in defense of a brutally “nationalist,” pro-fed courts position: we’ve come a long way from old orthodoxy.

Nor—and this, for now, is the central point—is diversity the only constitutional issue on which conservative legal thought is experiencing a reexamination. As faithful readers know, little ole me has been trying to rethink our upside-down federalism and to talk conservatives out of a lingering infatuation with states’ rights, block grants, and the like; but that, too, is only a piece of the overall picture. Back in the Reagan days, conservatives preached judicial deference to administrative agencies; now, there’s a pervasive sense that those outfits are out of control and in need of a very hard judicial look at their output. Back then, Congress was the enemy and expert agencies, ideally underneath a “unitary” executive, were the good guys; now, conservatives are desperately trying to get an irresponsible, desultory Congress back into the regulatory game (for example, by requiring congressional approval for “major” agency rules). Back then, “originalism” meant the subjective intent of the Founders; now, it means “public meaning,” and it’s become less doctrinaire and more pragmatic. And so on. Heck, one of these days we may revisit Erie Railroad.

To an extent, of course, those currents reflect changed institutional conditions and political imperatives. To a far larger extent, however, they reflect a commendable willingness among conservative legal thinkers to reexamine dearly held positions in a rather fundamental way. On the downside, we don’t actually know where we stand or should stand now, on a slew of big issues. We will have to sort things out, and that will take time. On the upside, the picture isn’t one of dumb confusion but of intellectual ferment and candid debate. That spirit, it seems to me, is a refreshing contrast both to “it’s the culture” nostrums and to the depressing tactical maneuvering on the Hill—and, potentially, a source of great political strength. Kudos, Chuck. Let’s keep it up, guys.

Michael S. Greve is a professor at George Mason University School of Law. From 2000 to August, 2012, Professor Greve was the John G. Searle Scholar at the American Enterprise Institute, where he remains a visiting scholar. Before coming to AEI, Professor Greve cofounded and, from 1989 to 2000, directed the Center for Individual Rights, a public interest law firm. He holds a Ph.D. and M.A. in government from Cornell University, and completed his undergraduate studies at the University of Hamburg. Currently, Professor Greve also chairs the board of the Competitive Enterprise Institute and is a frequent contributor to the Liberty Law Blog. Professor Greve has written extensively on many aspects of the American legal system. His publications include numerous law review articles and books, including most recently The Upside-Down Constitution (Harvard University Press, 2012). He has also written The Demise of Environmentalism in American Law (1996); Real Federalism: Why It Matters, How It Could Happen (1999); and Harm-less Lawsuits? What's Wrong With Consumer Class Actions (2005). He is the coeditor, with Richard A. Epstein, of Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy (2004) and Federal Preemption: States' Powers, National Interests (2007); and, with Michael Zoeller, of Citizenship in America and Europe: Beyond the Nation-State? (2009).

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