December 2011

Long-Awaited Act Clarifies Venue and Jurisdiction

After many years of study, the 112th Congress has passed legislation that will bring clarity to jurisdiction and venue issues, reducing wasteful litigation. The President signed the bill into law as Public Law 112-63.

In the 1990s, the Judicial Conference Committee on Federal-State Jurisdiction began to identify recurring problems encountered by litigants and judges in applying certain jurisdictional and venue statutes. In consultation with law professors, and after study of the American Law Institute's Federal Judicial Code Revision Project, the Committee proposed solutions to these areas of confusion. The Judicial Conference endorsed those solutions over the course of several Conference sessions.

H.R. 394, the Federal Courts Jurisdiction and Venue Clarification Act of 2011, had bipartisan support in both Houses. The House version of the bill was introduced by Judiciary Committee Chair Lamar Smith (R-TX), along with Representatives Howard Coble (R-NC), John Conyers, Jr. (D-MI), and Hank Johnson (D-GA). The Senate version was introduced by Senators Amy Klobuchar (D-MN), Patrick Leahy (D-VT), and Jeff Sessions (R-AL.) The House bill, H.R. 394, proceeding as the legislative vehicle, ultimately was cleared by unanimous consent by both chambers.

In the Act's jurisdictional section are provisions that will:

• Clarify that district courts do not have diversity jurisdiction over a claim between a citizen and a permanent resident alien living in that same state;
• More clearly define "citizenship" for foreign corporations and domestic corporations doing business abroad, as well as for direct actions against insurance companies;
• Codify current practice that all defendants must join in or consent to removal in order for the action to be removed to federal court;
• Clarify that each defendant has 30 days after service to remove a case to federal court, while allowing earlierserved defendants to consent to that removal; and
• Ensure that, when a federal question claim is removed along with state law claims that are not within the supplemental jurisdiction of the district court or are otherwise non-removable by statute, the federal question claim will proceed in federal court and such state law claims will be remanded to state court.

In the venue and transfer section, the Jurisdiction and Venue Clarification Act will:

• Define venue and codify the scope of venue provisions;
• Create a unified approach to venue in both diversity and federal question cases, while essentially maintaining current venue standards;
• Eliminate the outdated "local action" rule, which restricts where certain actions involving real property can be brought;
• Clarify "residence" for venue purposes;
• Provide that unincorporated associations are treated the same as corporations for venue purposes; and
• Clarify the application of venue for persons residing outside of the United States.