Multistate Litigation in State Courts: Consolidation and Federal Jurisdiction, Study notes of Law

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The Consolidation of Multistate

Litigation in State Courts

George T. Conway IM

In recent years, multistate litigation^1 has grown spectacularly in both

cost and complexity. In particular, the expense of mass tort litigation,

which commonly involves dozens of closely related lawsuits brought by

citizens of many states, has reached staggering levels.' The cost of litigat-

ing these claims often exceeds the sums that are ultimately paid to plain-

tiffs.' Inefficiencies and costs associated with such multistate, multiparty

litigation have inspired proposals for legislative and judicial reforms rang-

ing from suggested changes in the substantive law^4 to calls for more exten-

sive use of joinder or consolidation devices.'

1. In this Note, "multistate (^) litigation" refers to litigation involving civil actions that (1) share (^) at least one common issue of fact, and (2) have (^) been filed in more than one court, state or federal. This definition thus includes related (^) civil actions filed in more than one judicial district (state or federal) within (^) a single state, even though such litigation would, strictly speaking, (^) be "multidistrict," not ,'multistate." 2. See, e.g., (^) Rosenberg, The Causal Connection in Mass Exposure Cases: A "Public (^) Law" Vision of the Tort (^) System, 97 HARV. L. REV. 851, 852 (1984) (individual trials of mass (^) tort cases would cost hundreds (^) of millions of dollars); Transgrud, Joinder Alternatives in Mass (^) Tort Litigation, 70 COR- NELL L. REV. 779, 781 (1985) (same).

3. This has been particularly evident with tort claims involving (^) asbestos exposure. One study of asbestos litigation found that, on average, the net compensation (^) received by plaintiffs, after deducting plaintiffs' litigation expenses, (^) constituted 37% of the sum of defense litigation costs and the total com-

pensation paid to plaintiffs by defendants and insurers. J. KAKALIK, P. EBENER, W. FELSTINER &

M. SHANLEY, COSTS OF ASBESTOS LITIGATION vii (1983) [hereinafter (^) CosTs OF ASBESTOS LnIGA- TION]. Estimates (^) of the liabilities and costs of asbestos litigation range in the billions (^) of dollars. See, e.g., P. MAcAvoY, THE ECONOMIC (^) CONSEQUENCES OF ASBESTos-RELATED DISEASE 69 (Yale School (^) of Organization and Management Working Paper No. 27, 1982) (present (^) value in 1980 dol- lars of future (^) asbestos-related liability and defense costs estimated at $38.2 billion).

4. See, e.g., (^) S. 100, 99th Cong., 2d Sess., 132 CONG. REC. S5106-07 (1986) (Reagan (^) administra- tion proposal to establish fault-based (^) national products liability law); Tydings, Air Crash Litigation: A Judicial (^) Problem and a CongressionalSolution, 18 AM. U.L. REV. 299, 311-12 (^) (1969) (urging passage of federal legislation (^) governing liability and jurisdiction in aviation and space accidents); Comment, Relieffor Asbestos Victims: (^) A LegislativeAnalysis, 20 HARV. J. ON LEGIS. 179, 191- (1983) (advocating federal legislation (^) creating administrative compensation system for victims of as- bestos exposure); Note, The (^) Case for a Federal Common Law of Aircraft Disaster Litigation: A Judicial (^) Solution to a National Problem, 51 N.Y.U. L. REV. 231 (1976); (^) Note, Mass Tort Litiga- tion: A Statutory Solution (^) to the Choice of Law Impasse, 96 YALE L.J. 1077 (1987) (proposing federal choice of (^) law statute governing mass tort cases). 5. See, e.g., Miller & Crump,Jurisdictionand Choice of Law in Multistate Class Actions After Phillips Petroleum Co. v. Shutts, (^) 96 YALE L.J. 1, 75-78 (1986) (advocating legislation providing for multiparty, multistate federal jurisdiction, mandatory joinder, (^) and nationwide service of process); Mullenix, Class Resolution of the Mass-Tort (^) Case: A Proposed Federal ProcedureAct, 64 TEx. L. REV. 1039, 1060-99 (1986) (presenting draft statute requiring (^) federal class action treatment of mass injury litigation involving 1000 or more potential claimants); Transgrud, (^) supra note 2, at 831- (arguing for more extensive use of joinder to facilitate discovery, encourage settlements, and produce

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One product of reform that has proven particularly successful is the Judicial Panel on Multidistrict Litigation. Empowered by 28 U.S.C. § 1407 to transfer (^) related civil actions filed in federal courts to a single district for (^) consolidated proceedings, 6 the Judicial Panel has used its au- thority (^) both to conserve federal judicial resources and to reduce the danger

of unfairly inconsistent adjudication in related multistate, multiparty cases. The ability of the Judicial Panel to foster efficiency and fairness in multistate, multiparty litigation remains limited, however, (^) because the Panel currently lacks the power to remove cases from, (^) and to transfer cases to, state courts. To remove this limitation, (^) this Note proposes that Congress confer upon the Panel discretionary authority to direct litigation to and from state courts. The Note suggests factors that the Panel should consider before ordering consolidation (^) in state courts, and argues that a necessary factor should be a likelihood that, after transfer, the substantive law of the transferee jurisdiction will govern much of the litigation. The Note concludes that a grant to the Panel of power over litigation in state courts would be constitutionally permissible.

I. THE PROBLEM: MULTISTATE CASES IN STATE COURTS

A. Efficiency and Fairness in Multistate Cases

When properly (^) used, joinder or consolidation devices 7 can make mul- tiparty, multistate litigation both fairer and more efficient. Joinder or con-

solidation can promote efficiency by reducing or eliminating the duplica- tion of effort that inheres in the independent prosecution of parallel claims. For example, both can vastly reduce the cost of litigation by elimi- nating duplicative discovery and trials, which not only waste scarce judi- cial resources but also inflict unnecessary inconvenience upon witnesses

fairer trials of punitive damages claims); Williams, Mass Tort Class Actions: Going, Going, Gone?, 98 F.R.D. 323, 325-36 (1983) (advocating greater use of class actions in adjudicating mass tort claims); Comment, FederalMass Tort Class Actions: A Step Toward Equity and (^) Efficiency, 47 ALB. L. REv. 1180 (1983) (same).

6. 28 U.S.C. § 1407 (1982). 7. Although "consolidation of cases under FED. R. Civ. P. 42(a) is functionally equivalent to joinder of the claims for most purposes," Transgrud, supra note 2, at 785 n.25, consolidation and joinder are distinct concepts. "[Clonsolidation is permitted as a (^) matter of convenience and economy in administration, but [unlike joinder] does not merge the suits into a single cause, or change the rights of the parties, or (^) make those who are parties in one suit parties in another." Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496-97 (1933) (footnote omitted). Nonetheless, in consolidated mass tort cases, trial courts "often allow litigants to proceed in most significant respects as if the claims were joined." Transgrud, supra note 2, at 785 n.25. Federal trial courts handling (^) consolidated mass tort litigation often permit joint discovery and joint trials of common issues, and may even appoint "lead" counsel to

represent groups of claimants. Id.; see also MANUAL FOR COMPLEX LITIGATION, SECOND § 20.

(1985) (recommending that courts handling complex cases "select and empower, by court (^) order if necessary, one or more attorneys to act on behalf of other counsel and parties").

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Multistate (^) Litigation in State Courts

and parties. 8 In addition, joinder or consolidation may reduce the expense

of litigation by fostering settlements.'

Joinder of related claims or consolidation of related actions promotes

fair adjudication by reducing the potential for both conflicting pretrial rul-

ings and inconsistent judgments.1 0^ The danger of inconsistent adjudication

is particularly compelling when plaintiff class actions involving similar or

identical claims are brought in different courts. Because such parallel class

actions can produce conflicting or overlapping class definitions by courts

of different jurisdictions, an individual can become a member of two or

more class actions that present identical claims. 11 When such an overlap

occurs, the individual's claims become subject to an "irrational resolution

by a race to judgment." 1 2^ Even if absent class members are permitted to "opt out" of any or all of the parallel (^) lawsuits, no (^) guarantee exists that

the actions of many individual class members choosing to opt out will

resolve the conflict or eliminate the overlap. 3 The problems resulting from competing class actions may best be solved by consolidation of the

actions in^ one^ court.

B. The Judicial Panel on Multidistrict Litigation

Within the federal court system, the problems of duplicative litigation can be mitigated by the transfer of related lawsuits under 28 U.S.C. § 1407 by the Judicial Panel on Multidistrict Litigation. 5 Created by Con-

8. See, e.g., Cahn, A Look at the Judicial Panel on Multidistrict Litigation, 72 F.R.D. 211, 221 (1977); Note, Class Certification in Mass Accident Cases Under Rule 23(bXl), 96 HARV. L. REV. 1143, 1144 (1983). 9. See, e.g., W. TURLEY, AVIATION LITIGATION § 12.04, at 429-30 (1986).

10. See, e.g., Note, supra note 8, at 1144; see also infra note 12.
11. "Among the hypothetical parade of horribles which can be projected is the scenario in which 50 competing, national, multistate opt-out class actions are brought on the same claims and all mem- bers remain silent in response to the fifty notices." Kennedy, ClassActions: The Right To Opt Out, 25 ARIZ. L. REv. 3, 81 (1983).
12. Miller & Crump, supra note 5, at 70. Professors Miller and Crump observe that a race to judgment among competing class actions would encourage litigants to engage in unseemly tactical behavior. "For example, defendants could forum-shop by delaying or accelerating particular actions. Plaintiffs could collude with similarly aligned parties in 'stalking horse litigation,' diverting their opponents' attention or seeking collateral advantages such as the cumulative benefits of inconsistent discovery rulings." Id. at 24 (footnotes omitted).
13. See MANUAL FOR CoMPLEX LITIGATION § 5.40 (5th ed. 1982) (conflict may "in theory" be resolved by choices of potential plaintiffs); Miller & Crump, supra note 5, at 23-24 (discussing possi- bility of competing actions with "passive classles] virtually intact in each").
14. See, e.g., MANUAL FOR COMPLEX LITIGATION § 5.40 (5th ed. 1982) (recommending transfer of related class actions to single district to avoid conflict); Comment, The Experience of Transferee Courts Under the Multidistrict LitigationAct, 39 U. CHI. L. REV. 588, 604 (1972) (same); cf.In re Plumbing Fixture Cases, 298 F. Supp. 484, 493 (J.P.M.D.L. 1968) (multidistrict transfer intended by Congress to eliminate "chaos" (^) of conflicting class action determinations).
15. For a comprehensive overview of the work of the Judicial Panel, see 15 C. WRIGHT, A.

MILLER & E. COOPER, FEDERAL PRACTICE AND PROCEDURE §§ 3861-3868 (1986) [hereinafter 15

WRIGHT & MILLER]. Other helpful discussions about the Judicial Panel include D. HERR, MUL-

TIDISTRICT LITIGATION (1986); Cahn, supra note 8; Herndon & Higginbotham, Complex Multidis-

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gress in 1968,1" the Panel consists of seven federal district^ and^ circuit

judges who are selected by the Chief Justice of the United States.^

(^7) The

Panel is authorized by section 1407 to^ transfer^ civil^ actions^ that^ are^ pend- ing in different federal district courts^ to^ a^ single^ district^ for^ coordinated pretrial proceedings. 8 Transfer of^ civil^ actions^ may^ be^ ordered^ by^ the Panel either sua sponte or on the motion of any party, and is permitted

when (1) "actions involving common^ questions^ of^ fact^ are^ pending^ in^ dif- ferent districts"; (2) the transfer "will be for the convenience of parties and witnesses"; and (3) the transfer "will promote the just and efficient conduct" of the litigation. 9 In creating the Panel and setting forth these standards for transfer, Congress sought to promote judicial economy and to minimize the "possibility for conflict and^ duplication^ in^ discovery^ and other pretrial procedures in related cases."^

The work of the Judicial Panel has been widely hailed for its success in

accomplishing these^ goals."^ Multidistrict^ transfer under^ section 1407^ has promoted judicial economy by facilitating the termination of^ litigation^ in transferee courts through settlements and summary judgments.

(^22) Addi-

tionally, the Judicial Panel and transferee courts have used section^1407 in conjunction^ with^ statutory^ provisions on change of^ venue^ to^ consolidate lawsuits for^ trial^ as^ well^ as^ for^ pretrial^ proceedings.

(^23) Although consolida-

trict Litigation-An Overview of 28 U.S.C.A. § 1407, 31 BAYLOR L. REV. 33 (1979); Howard,^ A Guide to Multidistrict Litigation,^75 F.R.D.^577 (1977);^ Weigel,^ The^ Judicial^ Panel^ on^ Multidis- trict Litigation, Transferor Courts, and Transferee Courts, 78 F.R.D. 575 (1978);^ Note,^ The^ Judi- cial Panel and the Conduct of Multidistrict Litigation, 87 HARV. L. REV. 1001 (1974).

16. Section 1407 was enacted at least in part as the result of the experiences of the federal courts during the 1960's in handling the electrical equipment antitrust cases, which involved more than 1800 separate but^ closely^ related^ civil^ damage^ actions^ filed^ in^^33 courts.^ See^^15 WRIGHT^ &^ MILLER,^ supra note 15, § 3861; Note, supra note 15, at 1001 &^ n.1. 17. 28 U.S.C. § 1407(d) (1982).

18. Id. § 1407(a).
19. Id.
20. H.R. REP.^ No.^ 1130,^ 90th^ Cong.,^ 2d^ Sess.^ 2,^ reprinted^ in^^1968 U.S.^ CODE CONG.^ &^ ADMIN. NEWS 1898, 1899-1900.
21. See, e.g., D. HERR, supra note 15, at xix ("The result of the Panel's activities has been litigation that is both more manageable by^ the^ courts^ and^ more^ expeditiously^ resolved^ for^ the^ liti- gants."); Cahn, supra note 8, at 221 (noting "salutary" effects of multidistrict transfer); Herndon, Section 1407 and Antitrust Multidistrict Litigation-The First Decade, 47 ANTITRUST L.J. 1161, 1179 (1979) ("[Slection 1407 has a decade of^ success^ on^ which^ can be^ built^ techniques^ to^ cope^ with the problems to be raised by multidistrict antitrust litigation in the next decade."); Weigel, supra note 15, at 585 (multidistrict transfer has "contributed immeasurably to the public welfare and to the capacity of the federal judiciary to carry out its ever increasing burden of litigation"); Comment, supra note 14, at 588, 611 (calling multidistrict transfer "a valuable but incomplete^ device"^ and urging that Congress expand Panel's authority by allowing transfer "for purposes of^ trial.^..^ with- out regard to^ venue").

22. See D. HERR, supra note 15, § 9.9.1; 15 WRIGHT & MILLER, supra note 15, § 3866.

23. See, e.g., Transgrud, supra note 2, at 804-09; Note, supra note 15, at 1017. Courts^ have consistently held^ that^ a^ §^1407 transferee court^ may^ transfer^ multidistrict^ litigation^ to^ itself^ for^ trial under 28 U.S.C. §^ 1404(a).^ See,^ e.g.,^ In^ re^ Fine Paper^ Antitrust^ Litig.,^685 F.2d^ 810,^ 819-20^ (3d Cir. 1982), cert. denied, 459 U.S. 1156 (1983). This practice has also been approved by the Judicial Panel. See R.P.J.P.M.D.L. 11(b); infra note 59 and accompanying text.

Multistate Litigation in State Courts

tion for trial almost certainly defies both the letter of section 140724 and the intent of its drafters,^2 the practice fosters fairness (^) in adjudication by promoting consistent results (^) in related cases.^2 " Consolidation for trial also enhances judicial (^) economy by eliminating the delay and duplication of ef- fort that would result if (^) each transferred case were remanded to its origi- nal district for trial. (^27) In addition, the transferee judge can take advantage of the expertise she (^) develops in managing the pretrial proceedings to try the transferred (^) cases quickly and effectively. 8

C. Multistate Litigation in State (^) Courts

The Judicial Panel has no power (^) over litigation in state courts, which today manage and adjudicate a (^) large and ever-increasing number of mass tort and other complex, multiparty cases.^29 Many (^) of these cases neither

24. "Each action so transferred shall be remanded (^) by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred (^) unless it shall have been previously terminated... ." 28 U.S.C. § 1407(a) (^) (1982).
25. See, e.g., Transgrud, supra note 2, at 806-08 (^) (reviewing legislative history of § 1407); see also H.R. REP. No. 1130, supra note 20, at 4; (^) Levy, Complex Multidistrict Litigation and the Federal Courts, 40 FORDHAM (^) L. REV. 41, 64 & n.142 (1971). 26. See, e.g., In re Multidistrict Civil (^) Actions Involving the Aircrash near Duarte, Cal., on June 6, 1971, 357 F. Supp. 1013, 1016 (C.D. Cal. 1973) (ordering (^) § 1404(a) transfer to avoid "different results in different districts").
26. See Note, supra note 15, at 1036 (noting that "trial of complex (^) common issues in one court is frequently practical and efficient," and advocating revision of § (^1407) to allow transfer for trial); Comment, supra (^) note 14, at 588, 611 (same). 28. A particularly dramatic recognition of the importance of this consideration came in Pfizer, Inc. v. Lord, 447 F.2d (^122) (2d Cir. 1971). Pfizer involved 31 civil antitrust actioris for which (^) pretrial proceedings under § 1407(a) were conducted in the Southern District (^) of New York by a district judge who had been (^) sitting by designation under 28 U.S.C. § 292. Because the judge found (^) that he could not remain (^) in New York for the duration of the subsequent trials, he transferred (^) the actions under § 1404(a) to his home district, the District of Minnesota, (^) for trial. Defendants opposing the transfer were denied a writ of mandamus by the Second Circuit, which held that (^) the district judge's action was "fully justified under the circumstances." 447 F.2d at 125. In emphasizing (^) the "unusual circum- stances (^) of this case," the appeals court relied upon the district judge's belief "that (^) because of the complexity of these cases (^) the interests of judicial efficiency made it highly desirable that the judge who conducted the pretrial proceedings continue as the trial judge (^)... ." Id.
27. State courts, for example, have played (^) a significant role in adjudicating asbestos-related tort claims. Of the (^) 17,120 asbestos exposure cases pending against Johns-Manville at the time of its bank- ruptcy (^) filing, 11,143-nearly two-thirds-had been brought in state courts. Parrish, (^) Asbestos Litiga- tion-Dimensions (^) of the Problem, STATE CT. J., Winter 1984, at 5. One (^) study has shown that, of asbestos-related (^) lawsuits terminated before 1982, nearly half had been brought in state courts. (^) COSTS OF AsBEsTos LITIGATION, supra (^) note 3, at 13. In California, Pennsylvania, and South Carolina, over two-thirds (^) of such cases had been filed in state courts. Id. A notable example of the successful handling of complex, multiparty cases by a state court is the settlement of the litigation spawned by the (^) tragic collapse in July 1981 of the "skywalks" at the Hyatt Regency Hotel (^) in Kansas City, Missouri. Because the certification of a mandatory class (^) action in federal court was overturned by the (^) Eighth Circuit, see In re Federal Skywalk Cases, 680 F.2d 1175 (8th Cir.), vacating 93 F.R.D. 415 (W.D. Mo.), (^) cert. denied, 459 U.S. 988 (1982), "the full respon- sibility of mass tort management" (^) was "effectively placed" on the state trial court. Wright & Colussi, The Successful Use of the ClassAction Device in the Management (^) of the Skywalks Mass Tort Litiga- tion, 52 UMKC L. REv. 141, (^143) (1984). By certifying a voluntary class action, the state court facilitated a settlement of much of the state court litigation. See Student Project, A Case Study in Mass DisasterLitigation, 52 UMKC L. REv. 151, 171-72 (1984). The state (^) court settlement provided the

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involve questions of federal law nor meet the statutory criteria for federal diversity jurisdiction, and thus cannot be heard in a federal court. 3 " Ac- cordingly, related cases filed in courts of different states often cannot be consolidated in any court for either pretrial proceedings or trial, 31 result- ing in both waste of judicial resources and potentially inconsistent adjudication. The inefficiency and inequity of such duplicative litigation in state courts has taken on increased significance in light (^) of the Supreme Court's recent holding in Phillips Petroleum Co. (^) v. Shutts,"^2 a decision that is likely to increase the amount of multistate, (^) multiparty litigation brought in state courts. Shutts held that in a class action, state courts may assert personal jurisdiction over absent (^) plaintiffs who lack "minimum contacts" with the forum state."^3 "[To bind an absent plaintiff," ruled the Court, (^) a state court need only afford the absent plaintiff "notice," "an opportunity to be heard and participate in the litigation, whether in person or through counsel," "an opportunity to remove himself from the class," and ade- quate representation. 3 ' By holding that the judgments of state courts may bind class members who lack contacts with the forum, Shutts has removed a substantial barrier to the litigation of nationwide class actions in (^) state courts. 5 As a result, it is quite possible that litigants and courts (^) will more frequently face situations in which related class actions (^) generate conflicts

between state courts or between state and federal courts.

To reduce the likelihood that such conflicts will (^) occur, and to extend

the benefits of multidistrict transfer to cases brought in state court, some

commentators have suggested that Congress grant the federal district

basis for a "companion" settlement of related claims in federal court. Morris & See, The Hyatt Skywalks Litigation: The Plaintiffs' Perspective, 52 UMKC L. REv. 246, 270 (1984).

30. See 28 U.S.C. § 1332 (1982); cf. MANUAL FOR COMPLEX LITIGATION § 1.94 (^) (5th ed. 1982) (noting that statutory requirement of complete diversity often presents jurisdictional bar to air disaster claims in federal court, and results in parallel litigation in state and federal courts). 31. For example, in the Skywalks litigation, "[t]he overwhelming majority of victims lacked the diversity of citizenship necessary for federal court jurisdiction (^) because they were either residents of Missouri or Kansas, and both Missouri and Kansas corporations were potential defendants." Morris & See, supra (^) note 29, at 254 (footnote omitted). 32. 472 U.S. 797 (1985). For thorough analyses of the implications (^) of the Shutts decision, see generally Kennedy, The Supreme Court Meets the Bride of Frankenstein: Phillips Petroleum Co. v. Shutts and the State Multistate Class Action, 34 U. (^) KAN. L. REV. 255 (1985); Miller & Crump, supra note 5. 33. 472 U.S. at 806-14; see World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980); International Shoe Co. v. Washington, 326 U.S. 310 (1945).

34. 472 U.S. at 811-12. 35. Comment, Choice of Law and the Multistate Class: Forum Interests in Matters Distant, 134 U. PA. L. REv. 913, 924 & n.67 (1986) (" 'If [Shutts] had gone the other way, it would have largely closed the door to nationwide class actions in state courts by undercutting the ability of plaintiffs' attorneys to put together large classes.' ") (quoting Professor Lea Brilmayer of Yale Law School); see also Kennedy, supra note 32, (^) at 301 (suggesting that Shutts' personal jurisdiction holding was in part intended to "keep small claim consumer cases out of the federal courts" by eliminating "constitutional barriers to the unrestricted maintenance of multistate (^) class actions in state courts").

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courts original and removal jurisdiction over multistate, multiparty

cases.^3 " Although such an expansion of federal jurisdiction could promote efficient and consistent adjudication, it could nonetheless produce the un- desirable effect of "federalizing" virtually all multistate litigation.^37 State

courts can sometimes provide more appropriate and attractive forums for

multistate cases than federal courts. For example, a majority of states "now offer class (^) action procedures (^) that, in terms of (^) efficiency and conve-

nience for the class, may equal or excel those... available in federal court." 38 '^ Moreover, litigation in a state forum is particularly desirable in lawsuits, such as tort cases, that concern fields of law with which state courts are most familiar.3 9 Litigation in a state court provides additional advantages when the court will be applying its own law. Litigation in a court of the jurisdiction whose law will be applied promotes fairness by eliminating the possibility that a federal court or a court of another state will misapply or misinter- pret the controlling law; 40 a plaintiff should not, for example, be left with

36. See, e.g., AMERICAN LAW INSTITUTE, STUDY OF THE DIVISION OF JURISDICTION BETWEEN STATE AND FEDERAL COURTS 67-76, 375-410 (1969) [hereinafter ALl STUDY]; Kamp, The Shrink- ing Forum: The Supreme Court's Limitation ofJurisdiction-An Argumentfor a FederalForum in Multi-Party, Multi-State Litigation, 21 WM. & MARY L. REV. 161, 182-88 (1979) (endorsing pro- posal of American Law Institute); Rowe & Sibley, Beyond Diversity: Federal Multiparty, Mul- tiforum Jurisdiction, 135 U. PA. L. REV. 7 (1986).

37. Cf. Miller & Crump, supra note 5, at 76 ("[any expansion of federal jurisdiction ... should be carefully limited, so that it does not result in the federalizing of all class action practice"). 38. Note, Multistate PlaintiffClass Actions: Jurisdiction and Certification, 92 HARV. L. REV. 718, 718-19 & nn.7-9; see also Comment, (^) supra note 35, at 924 & n.66. For example, some states have rejected the strict individual notice requirement of FED. R. Civ. P. 23(c)(2). Compare Cartt v. Superior Court, 50 Cal. App. 3d 960, 124 Cal. Rptr. 376 (1975) (trial court erred in requiring individual notice by mail in consumer class action) and Hoover v. May Dep't Stores Co., 62 I11. App. 3d 106, 120, 378 N.E.2d 762, 774 (1978) ("not error to render a judgment without prior notice (^) to the absent [class] members") with Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) (individual notice must be provided to all reasonably identifiable members of federal class action). See generally 3 H. NEWBERG, NEWBERG ON CLASS ACTIONS § 13.20 (2d ed. 1985) (comparing federal and state ap- proaches to notice in class actions). In addition, some states have allowed cy-pres or "fluid recovery" distributions of damages, by which funds are distributed to a class of present or future class members who possess characteristics similar to those of the individuals actually victimized. See, e.g., Daar v. Yellow Cab Co., 67 Cal. 2d 695, 433 P.2d 732, 63 Cal. Rptr. 724 (1967); N.D.R. Civ. P. 23(o)(3)(E) (Uniform Class Action Rule) (per- mitting courts to distribute unclaimed funds to states in which class members reside); N.J.R. Civ. P. 4:32-2(c). In contrast, a number of federal courts have rejected fluid recovery. See, e.g., Abrams v. Interco, Inc., 719 F.2d 23, 31 (2d Cir. 1983) (Friendly, J.); In re Hotel Tel. Charges, 500 F.2d 86, 89-90 (9th Cir. 1974). Finally, the amount-in-controversy requirement for federal diversity jurisdiction may bar some class actions from federal court. See Zahn v. International Paper Co., 414 U.S. 291 (1973) (each individual claim in federal diversity class action must meet jurisdictional amount-in-controversy requirement).
38. See Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 483-84 (1981) ("[s]tate judges have greater expertise" in handling personal injury claims governed by "rules... borrowed from state law"); Sheran & Isaacman, State Cases Belong in State Courts, 12 CREIGHTON L. REV. 1, 61 & n.306 (1978) (familiarity of state courts with issues commonly presented in diversity cases supports elimination of diversity jurisdiction).
39. See Thomas, The Erosion of Erie in the Federal Courts: (^) Is State Law Losing Ground?, 1977 B.Y.U. L. REV. 1 (study of appellate opinions demonstrates tendency of federal courts to decide diver-

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the suspicion that (^) he might have recovered but for one court's error in

guessing at how another would have ruled. In addition, efficiency is fos- tered because the courts that are best able (^) to determine a particular state's law quickly and efficiently are the courts of that state. In a few (^) cases, litigation in a state court applying its own law obviates the need (^) to engage in the expensive and time-consuming process of certifying legal (^) questions from a court of another jurisdiction to the highest court of (^) the state pro- viding the governing law.4 1^ Finally, litigation in the (^) courts of the state

sity cases without resorting to state law); see also Texaco, Inc. v. Pennzoil Co., 626 F. Supp. (^) 250, 254-56 (S.D.N.Y.) (state (^) trial court in Texas incorrectly applied New York law on compensatory and punitive damages in entering $11.12 billion judgment for tortious interference with contractual rela- tions), affd (^) in part and rev'd in part on other grounds, 784 F.2d 1133 (2d Cir.), rev'd on other grounds, No. 85-1798 (U.S. Apr. 6, 1987) (LEXIS, Genfed library, U.S. file). The danger of error is perhaps greatest in cases of first impression. For example, in Gold v. Johns- Manville Sales Corp., 553 F. Supp. 482 (D.N.J. 1982), the court predicted that, under New Jersey law, punitive damages were unavailable (^) in an action based upon a theory of strict liability. Subse- quently, however, a New Jersey court rejected this view, deeming it both "unpersuasive" and "errone- ous." Fischer v. Johns-Manville Corp., 193 N.J. Super. (^) 113, 123-24, 472 A.2d 577, 583 (App. Div. 1984). Fischer was later followed by a federal court in Gogol v. Johns-Manville Sales Corp., 595 F. Supp. 971 (D.N.J. 1984).

41. Even Chief Justice Rehnquist, an ardent (^) advocate of deference to state courts, has cautioned against excessive use of certification procedures by federal courts, and has noted that "[wihile certifi- cation may engender less delay and create fewer additional expenses for (^) litigants than would absten- tion, it [nonetheless] entails more delay and expense than would an ordinary decision of the state question on the merits by the federal court." Lehman (^) Bros. v. Schein, 416 U.S. 386, 394 (1974) (concurring opinion). Indeed, one writer has calculated that "it has taken an average of fifteen months from federal certification (^) to federal application of the state response." Shapiro, Federal Diversity Jurisdiction: A Survey and a Proposal, 91 HARv. L. REv. 317, (^) 326-27 & n.52 (1977) (relying on data in Note, Civil Procedure-Scopeof Certification in DiversityJurisdiction, 29 RUTGERS L. REV. 1155 (1976)). Another study, however, puts this figure at 9.56 months. C. SERON, CERTIFYING QUESTIONS OF STATE LAW: EXPERIENCE OF FEDERAL JUDGES 16 (1983) (Table 4). Although certification occurs (^) only infrequently, a state supreme court's response to certified ques- tions can be of great importance. It can be crucial to the resolution (^) of many cases in addition to the one certified. A sorry example of a state court abdicating its responsibility to answer certified (^) ques- tions is provided by Jackson v. Johns-Manville (^) Sales Corp., 727 F.2d 506 (5th Cir.), reinstated in part (^) and superseded in part on reh'g en bane, 750 F.2d 1314 (5th Cir.), questions certified, 757 F.2d 614 (5th Cir. 1984), certification declined, 469 So. 2d 99 (Miss. (^) 1985), on reh'g en bane, 781 F.2d 394 (5th Cir.), cert. denied, 106 S. Ct. 3339 (1986). In Jackson, "an appeal of the first 'asbestos case' tried in Mississippi," 757 F.2d at 616, the Fifth Circuit certified controlling questions (^) of tort law to the Supreme Court of Mississippi, "which alone [could] furnish... an authoritative (^) state-law decision on issues involved in hundreds of cases pending in the federal (^) district courts." 750 F.2d at 1329 (Rubin, (^) J., concurring). The Supreme Court of Mississippi, without explanation, chose not to address the certified issues, 469 So. 2d at 99, and left the Fifth Circuit to divine Mississippi (^) law by its own devices. Interstate certification-from a court of one state to a court of another-is theoretically possible, yet "no case has ever been certified from one state court to another." Reply Brief of Appellant (^) Texaco,

Inc. at 119, Texaco, Inc. v. Pennzoil Co., No. 01-86-0216-CV (Tex. Ct. App. Feb. 12, 1987). None-

theless, a number (^) of states have adopted interstate certification procedures. See 17 C. WRIGHT, A. MILLER & E. COOPER, FEDERAL PRACTICE AND PROCEDURE § 4248 (1978). In its appeal of the widely publicized $11.12 billion tortious interference judgment entered against it, Texaco urged (^) an intermediate appellate court in Texas to request that the Supreme Court of Texas certify controlling issues of New York law to the Court of Appeals of New York. (^) Brief of Appellant Texaco, Inc. at 116, Texaco, Inc. (^) v. Pennzoil Co., No. 01-86-0216-CV (Tex. Ct. App. Feb. 12, 1987). Texaco's request was denied. Texaco, Inc. v. Pennzoil (^) Co., No. 01-86-0216-CV, slip op. at 161 (Tex. Ct. App. Feb. 12, 1987).

Multistate Litigation in State Courts

providing the controlling law reduces uncertainty about legal standards for future behavior by providing a direct opportunity for definitive appel-

late review. Furthermore, an expansion (^) of federal jurisdiction to embrace all multi- state, multiparty cases involving state law would aggravate the already overburdened condition of the federal courts, a condition that for many years has led prominent jurists to call for the curtailment or elimination (^) of diversity jurisdiction.^42 In addition, the introduction of more questions (^) of state law into federal court could only serve to distract the federal judici- ary from the achievement (^) of its central purpose-the interpretation and enforcement of federal (^) law.^4 To maintain a proper balance of authority

between the federal and state judiciaries, and to make beneficial use of state judicial procedures and resources, any attempt to expand the availa- bility of consolidated adjudication should seek to strengthen the role of state courts in resolving multistate disputes. Ideally, provisions should be made to permit and encourage consolidation in state courts.

II. CONSOLIDATION IN STATE COURTS: A PROPOSAL

The need to promote consolidation of multistate litigation (^) must be rec- onciled with the need to preserve the authority of state courts. Striking this balance is indeed difficult, and requires both centralized, federal decisionmaking (to promote consolidation) and federal deference (to allow adjudication in state courts). Congress should provide for consolidated ad-

judication of multistate cases in state courts by amending 28 U.S.C. §

1407 to allow the Judicial Panel on Multidistrict Litigation to transfer cases both to and from state courts in much the same manner that the Panel today transfers cases to and from federal courts.^44 To maximize the

42. See, e.g., H. FRIENDLY, FEDERAL JURISDICTION: A GENERAL VIEW 141 (1973); Bork, Deal- ing with the Overload in Article III Courts, 70 F.R.D. 231, 236-37 (1976); Frankfurter, Distribution ofJudicial (^) PowerBetween United States and State Courts, 13 CORNELL L. Q. 499 (1928); Friendly, The Historic Basis of Diversity Jurisdiction, 41 HARV. L. REV. 483 (1928); Hazard, Interstate Venue, 74 Nw. U.L. REV. 711, 713 (1979); (^) Letter from Chief Justice Warren E. Burger to Senator Roman L. Hruska (May 29, 1975), reprinted in Commission on the Revision of the Federal Court Appellate System, Structure and Internal Procedures: Recommendations for Change, 67 F.R.D. 195, 398 (1975).
43. See, e.g., Amar, A Neo-Federalist View of Article (^) III: Separating the Two Tiers of Federal Jurisdiction, 65 B.U.L. REV. 205, 269 (1985); Rowe, Abolishing DiversityJurisdiction:PositiveSide Effects and Potentialfor Further Reforms, 92 HARV. L. REv. 963, 1011 (1979). Although the technical competence of the federal courts might seem generally to support (^) expanded federal jurisdiction, it must be recognized that this competence stems, (^) in part, from the "relatively small" size of the federal bench. Neuborne, The Myth of Parity, 90 HARV. L. REV. 1105, 1121 (1977). Indeed, some judges (^) have suggested that overexpansion of the federal judiciary would lead to a decline in its quality, and that its special skills should be reserved for the articulation of federal law. See, e.g., Lumbermen's Mut. Casualty Co. v. Elbert, 348 U.S. 48, 59 (1954) (Frankfurter, J., concur- ring); H. FRIENDLY, supra note 42, at 29-30; Frankfurter, supra note 42, at 515-16.
44. Professor Elinor Schroeder has (^) suggested that a system of interstate transfer patterned after

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benefits of consolidation, Congress (^) should expressly grant the Judicial Panel the authority to transfer cases to state or federal courts (^) for trial as well as for pretrial proceedings. (^45) Given this authority, the Panel could

order the transfer of cases initially filed in state courts to a single federal district court for consolidation (^) with federal actions. 4 " Under appropriate

circumstances, the Panel would have the additional option to transfer law- suits, regardless of origin, (^) to a single state court for consolidated adjudica- tion. Consolidation in state court would, as (^) noted above, be especially de- sirable in cases that require the transferee state court to interpret (^) and

apply local substantive law.

§ 1407 should be created (^) by interstate compact. Schroeder, Relitigation of Common Issues: The Fail- ure of Nonparty (^) Preclusion and an Alternative Proposal, 67 IOWA L. REv. 917, 963-79 (1982). Under Schroeder's (^) proposal, civil actions presenting common issues of fact pending in more than one state could be transferred to a (^) single state court for consolidated pretrial proceedings. The panel authorized to order such transfers would consist of a judge from each of the states that join the compact. Id. at 965. This proposal, however, faces several drawbacks. First, its effectiveness could be (^) severely limited by the refusal of even a small number of states to join the compact. Second, the (^) proposal contemplates that transferred cases would "always" be remanded to their original (^) courts for trial, id. at 979, and thus would not capitalize on (^) the potential benefits of consolidation for trial. See supra notes 27- and accompanying text. Third, Schroeder's multistate panel would be hindered by her proposed re- quirement that it secure the consent of the state to which cases would be transferred before it could order transfer. See id. at 966. Fourth, under Schroeder's proposal, no device would exist for the consolidation of related actions filed in both state and federal court.

45. According to the House report on § 1407, Congress (^) refused to authorize consolidation for trial for four reasons. First, in the electrical equipment antitrust cases, the federal courts (^) had experi- ence only in arranging coordinated pretrial proceedings, and Congress "consider[ed] (^) it desirable to keep [the] legislative proposal within the confines of [this] experience." H.R. REP. No. 1130, (^) supra note 20, at 4. Second, the statute's (^) drafters felt that "it may be impracticable to have all cases in mass litigation tried in one district." Id. Third, the House report noted that parties and witnesses generally preferred trial in the original district. Id. Fourth, the legislators believed (^) that there would be "a need for local discovery proceedings (^) to supplement coordinated discovery proceedings," making remand "desirable." Id. As one commentator has observed, "the importance of these considerations (^) was probably overesti- mated by the drafters." Note, supra note 15, at 1036. Experience has shown that "trial of complex issues in one court is frequently practical and efficient." Id.; see also Weigel, (^) supra note 15, at 581-85. (^) Moreover, local discovery has often been unnecessary because multidistrict cases have tended to settle either during pretrial or after trial of common issues. Note, (^) supra note 15, at 1037. Finally, because 28 U.S.C. § 1404(a) has been used to consolidate litigation for trial, see supra note (^) 23, plaintiffs' forum choice has in fact not received the protection anticipated by the drafters of § 1407, and thus would not be greatly affected by an amendment of § 1407 to allow consolidation for trial. Such an amendment would allow (^) the Judicial Panel and transferee courts efficiently to perform in one (^) step what in effect is already done in two.
46. Theoretically, consolidation in federal courts of cases initially filed in state courts may occur today in a limited number of cases (^) for which federal removal jurisdiction already exists. The proposal set forth in this Note, however, would greatly expand the potential for such (^) consolidated adjudication in federal court by creating general federal jurisdiction over multistate, multiparty cases that may be exercised (^) by federal courts at the discretion of the Judicial Panel. See infra notes 68-106 and accom- panying text. For the Panel to enforce its orders, Congress (^) must "expressly authorize[l" the Panel to "grant... injunction[s] to stay (^) proceedings in [sltate court[s]." Anti-Injunction (^) Act, 28 U.S.C. §

2283 (1982).

Multistate Litigation in State Courts

A. Standardsfor Removal

In setting standards for the removal of cases from state courts for trans- fer elsewhere, Congress should instruct the Judicial Panel to weigh the same factors that the Panel considers today in transferring cases among

the federal district (^) courts. These factors include the extent to which the

various lawsuits share factual 47 and legal"' questions; the location of wit- nesses and parties; 4 '^9 the extent to which any of the actions have reached advanced (^) stages of pretrial; 50 the potential for detriment, financial or oth-

erwise, to a party as a result of transfer; 51 and the danger that inconsistent rulings may^ result^ if^ transfer^ and^ consolidation^ are^ not ordered.^

B. Consolidation and the Selection of the Transferee Forum

Unlike the removal of litigation from state courts, which occurs thousands of times each year (^) under ordinary removal statutes, 53 the trans- fer to state courts of litigation originating in federal courts or in the (^) courts of another state could (^) generate friction and conflict between the federal

Judicial Panel and transferee state courts. Consolidated multistate litiga-

tion can place great burdens on transferee courts, despite (^) the overall sav- ings in time and energy that consolidation may bring. (^5) Moreover, state

47. See, e.g., In re Washington Pub. Power Supply Sys. Sec. Litig., 568 F. Supp. 1250, (^1251) (J.P.M.D.L. 1983) (transfer (^) of "thirteen actions involv[ing] common questions of fact"); 28 U.S.C. § 1407(a) (1982) (authorizing transfer of "civil actions involving one or more common issues of fact").
48. Although the existence of common legal questions is relevant to the decision on whether or not to order transfer, see, e.g., In re Mutual Fund Sales Antitrust Litig., 361 F. Supp. 638, 640 (J.P.M.D.L. (^) 1973) (question as to exemption from antitrust laws "common to all actions in this litigation"), common legal questions alone will not satisfy the requirements of § 1407. See, e.g., In re Airline "Age of Employee" Employment Practices Litig., 483 F. (^) Supp. 814, 817 (J.P.M.D.L. 1980) (transfer held inappropriate because "common questions... will be mainly legal").
49. See, e.g., In re Union Carbide Corp. Gas Plant Disaster at Bhopal, India in Dec., 1984, (^601) F. Supp. 1035, 1036 (J.P.M.D.L. 1985) (noting proximity of defendant's corporate (^) headquarters, where "relevant witnesses and documents may be located," to transferee district).
50. See, e.g., In re Upjohn Co. Antibiotic "Cleocin" Prods. Liab. Litig., 450 F. Supp. 1168, 1170 (J.P.M.D.L. 1978) (order transferring twelve related actions against common defendant to single district, but excluding lawsuits for which discovery had been completed).
51. Although transfer must serve the "convenience of parties and witnesses," 28 U.S.C. § 1407(a) (1982), objections to transfer on grounds of inconvenience are usually overruled by the Panel, which invariably asserts that inconveniences may be outweighed and overcome by efficient management of

the litigation. 15 WRIGHT & MILLER, supra note 15, § 3863; see, e.g., In re Air Crash Disaster near

Chicago, Ill., on May 25, 1979, 476 F. Supp. 445, 447-48 (J.P.M.D.L. 1979).

52. See, e.g., In re "Agent Orange" Prod. Liab. Litig., 597 F. Supp. 740, 752 (E.D.N.Y. 1984); In re LTV Corp. (^) Sec. Litig., 470 F. Supp. 859, 862 (J.P.M.D.L. 1979).

53. From June (^) 30, 1984 to June 30, 1985, for example, 17,439 cases were removed from state courts (^) to federal district courts, accounting for 6.4% of the total number of civil cases filed in the federal district courts that year. ADMIN. OFFICE OF (^) THE U.S. COURTS, AN ANALYSIS OF THE WORK- LOAD OF THE FEDERAL COURTS FOR THE TWELVE MONTH PERIOD ENDED JUNE 30, 1985, re- printed in ANNUAL REPORT OF THE DIRECTOR OF THE ADMINISTRATIVE OFFICE (^) OF THE UNITED STATES COURTS 1985, at 136 (1985) [hereinafter ANNUAL (^) REPORT 1985].
54. For example, in In re Multidistrict Civil Antitrust (^) Actions Involving Antibiotic Drugs, 320 F. Supp. 586, 588 (J.P.M.D.L. 1970), the Judicial Panel, "recognizling] that this litigation has become

The Yale Law Journal (^) Vol. 96: 1099, 1987

courts may vary tremendously in their ability to handle complex cases. 5 Because consolidated (^) multistate litigation might "overload" some state

courts, Congress should carefully define and circumscribe the Judicial Panel's (^) authority to order the transfer of litigation to state courts.

Specifically, transfer to a state court should only occur when it is clearly demonstrated that litigation before the state tribunal would (^) be as fair and efficient (^) as litigation in federal court. The Panel should, for ex- ample, be required to give great weight to the state court's (^) caseload.^5 " The Panel should also be required to examine carefully the ability, as demon- strated by past experience 57 or by the existence (^) or absence of efficient state

procedural rules,^58 of the state court to handle the litigation. The Panel should also carefully determine the extent to (^) which state rules of venue, and legislative and constitutional limitations on the exer- cise of personal jurisdiction by potential transferee state courts, might pre- clude the consolidation of all related litigation in one state court. The ex- perience of the Panel in ordering transfer among federal trial courts, however, suggests that these limitations will not unduly restrict the power of the Panel (^) to consolidate litigation in state courts. The Panel has shown

a strong tendency to transfer litigation under section 1407 to federal dis- tricts (^) in which venue and personal jurisdiction requirements are met, so that the transferee district, in turn, may properly (^) use statutory provisions on change of venue to transfer the litigation (^) to itself for trial.5 9^ Because the applicability of rules of venue and personal jurisdiction have not pre-

too large and too complex to be processed by a single judge," temporarily assigned (^) a second judge from (^) a distant district court to the transferee district in order to handle some of the cases in the litigation.

55. Cf. Rowe, supra note 43, at 983-84 (noting that although some state court systems lag behind others in matching "interstate and international capability" of (^) federal courts, state courts "could ap- proach" federal court competence through enactment of appropriate legislation). 56. The Judicial Panel currently considers the relative conditions of court dockets in selecting federal transferee courts under § 1407. See, e.g., In re Corn Derivatives Antitrust Litig., 486 F. Supp. 929, 932 (J.P.M.D.L. 1980) (^) (selecting district having fewer pending class actions and "drasti- cally fewer multi-district litigations than... other suggested transferee districts"). 57. "[T]he panel has demonstrated a propensity for assigning consolidated cases to judges who have some experience with the general problems inherent in complex and multidistrict litigation (^) [and has] on a number of occasions... assigned cases to one of its own members." 15 WRIGHT & MILLER, supra note 15, § 3864, at 572. The Panel could similarly rely upon the expertise of state courts. For example, a number of state courts have developed extensive experience with asbestos- related lawsuits. See Parrish, supra note 29, at 6. 58. See supra notes 38, 55 and accompanying text. 59. See 15 WRIGHT & MILLER, supra note 15, § 3864, at 560; In re Multidistrict Civil Actions Involving the Air Crash Disaster near Hanover, N.H., on Oct. 25, 1968, 314 F. Supp. 62, 63 (J.P.M.D.L. 1970) (ordering transfer to "the only district in which all defendants can be sued by any plaintiff"). Section 1404(a) provides that "a district court may transfer any civil action to any other district... where it might have been brought." 28 U.S.C. § 1404(a) (1982) (emphasis added). Accordingly, § 1404(a) transfer is proper (^) if, "at the time of the commencement of the action[,]... venue [was] proper in (^) the transferee district and the transferee court... had power to command jurisdiction over all of the defendants." Shutte v. Armco Steel Corp., 431 F.2d 22, 24 (3d Cir. 1970).

Multistate Litigation in State Courts

vented the Judicial Panel from facilitating transfer for (^) trial under existing

federal procedures, 60 it is unlikely that such rules would significantly hin- der consolidation in state court. 6 ' In any event, if complete consolidation (^) in state court is not possible, the Panel may instead order (^) the transfer of all the litigation to an appropriate federal district court. Alternatively, the Panel could transfer as many of the cases as possible to the state court and send the remainder to the fed- eral district court in the district in which the state court sits.^6 " Such a transfer in tandem would allow the state and federal judges informally to coordinate the litigation through, for example, joint pretrial conferences, which state and federal judges^ have^ found^ to^ be^ extremely^ worthwhile.^

Finally, and perhaps most importantly, the Judicial Panel should be permitted to order the transfer of multistate litigation to state courts only in those cases in which liability after transfer is expected to depend largely, if not wholly, upon the law of the transferee jurisdiction." Such a

60. See 15 WRIGHT & MILLER, supra note 15, § 3864, at 560 n.14 (listing examples).

61. The difficulties posed by state venue requirements would vary from state to state. Neverthe- less, to the extent that states rely on commonly used venue criteria such as those permitting suits "[wlhere the 'cause of action' 'arose'" or "[wihere the defendant has a place of business or may be

'found,"' D. LOUISELL, G. HAZARD & C. TAIT, CASES AND MATERIALS ON PLEADING AND PRO-

CEDURE 460 (5th ed. 1983), consolidation in one court will often be possible. Cf. 28 U.S.C. § 1391(a) (1982) (diversity actions may be brought in district where "all defendants reside, or in which the claim arose"). In addition, several (^) states have established internal mechanisms for the transfer and

consolidation of related cases filed in different state courts. W. TURLEY, supra note 9, § 12.04, at 433

& nn.72-80; see, e.g., CAL. CIV. PROC. CODE §§ 404, 404.1-.8 (West 1973 & Supp. 1986) (authoriz- ing state Judicial Council to order interdistrict transfer and "coordinated" (^) trials before a single judge);

MASS. GEN. LAWS ANN. ch. 223, §§ 2A, 2B (West 1985) (authorizing, inter alia, interdistrict trans-

fer and consolidated trial of actions "arising out of or connected with the same accident, event, or transaction"); N.Y. CiV. PRAC. L. & R. § 602(b) (Consol. 1978) (authorizing supreme court to "re- move to itself an action pending in another court and consolidate it or have (^) it tried together with that [sic] in the supreme court"). The creation of a system of interstate transfer might encourage other states to establish mechanisms for intrastate transfer and consolidation.

62. Cf. In re Oil Spill by the "Amoco Cadiz", 471 F. Supp. 473, 479 (J.P.M.D.L. 1979) (selec- tion of transferee district guided by possibility that "related actions... in ... Illinois state courts can be coordinated with the federal proceedings (^) there").

63. See MANUAL FOR COMPLEX LITIGATION, SECOND § 31.31 (1985). Although the Manualfor Complex Litigation, Second suggests that "consideration... be given to a joint trial, at which sepa- rate state and federal juries would sit... and hear common evidence," id. § 31.31, at (^261) n. (emphasis added), such a suggestion was rejected in the Skywalks litigation, see supra note 29, by the federal district court, which deemed the idea "wholly unworkable, unmanageable, and unsatisfactory." Student Project, supra note 29, (^) at 170 & n.146. Nevertheless, the two courts cooperated extensively to facilitate "a massive [joint] discovery effort." Morris & See, supra note 29, at 254.
64. Federal transferee courts under § 1407 are required to apply the choice of law rule that would have been applied by the transferor court. See, e.g., In re "Agent Orange" Prod. Liab. Litig., 580 F. Supp. 690, 692-93, 695 (E.D.N.Y. 1984); cf. Van Dusen v. Barrack, 376 U.S. 612 (1964) (transferee court (^) under 28 U.S.C. § 1404(a) must follow law that transferor court would have applied). This Note assumes, however, that a transferee state court under an amended § 1407 would remain free to apply its own choice of law rule, and that transfer to the state court will be favored when this choice of law rule dictates that the substantive law of the forum will dominate the litigation after transfer. To the extent that the choice of law in the transferee court differs from the law that would be applied in the transferor court, a change in the outcome of a particular case may be (^) compelled as

The Yale Law Journal Vol.^ 96:^ 1099, 1987

rule would help to prevent the overburdening of state trial courts by limit- ing transfer to the cases most appropriately handled by those courts.6 5 Conflict between state courts and the Judicial Panel would be minimized by this rule because state courts would not have cases based on federal law or the law of another state "forced" upon them by the Panel. 6 Indeed, an option to consolidate in state court would promote cooperation between the federal and state judiciaries6 7^ by (^) giving state courts greater opportu-

nity to refine and apply their own law.

III. CONSTITUTIONAL ISSUES

Although this Note's proposal to extend the authority of the Judicial Panel on Multidistrict Litigation might seem to defy traditional notions of American constitutional federalism, the (^) constitutionality of the proposal

can be wholly supported by existing precedent. Indeed, the proposal serves to promote federalistic values by (^) giving state courts an opportunity to re- main active in a field that could be wholly preempted by federal law.

A. The Scope of Article III Subject-Matter (^) Jurisdiction

In order for the Judicial Panel to remove multistate, multiparty litiga- tion from state courts, the statutory limits of federal court subject-matter jurisdiction must be expanded to (^) encompass these cases. Legislation broadening the statutory limits of federal jurisdiction has been proposed and considered in the past by scholars,"^8 the Justice Department,^69 and

the result of transfer. Considerations of efficiency and fairness may nevertheless override any hesi- tancy of the Panel to order transfer that might exist because of any such potential effect on outcome. Under the doctrine of forum non conveniens, for example, similar concerns dictate that "Itihe possi- bility of a change in substantive law should ordinarily not be given conclusive or even (^) substantial weight... ." Piper Aircraft Co. v. Reyno, 454 U.S. 235, 247 (1981); see also In re Union Carbide Corp. Gas Plant Disaster at Bhopal, India in Dec., (^) 1984, 809 F.2d 195 (2d Cir. 1987) (allowing forum non conveniens dismissal in favor of litigation before Indian court).

65. See supra notes 39-43 and accompanying text. 66. Nevertheless, a state tribunal is bound by the supremacy clause, U.S. CONsT. art. VI, to entertain most federal causes of action, see infra notes 113-29 and accompanying text, and is prohib- ited by the due process clause of the Fourteenth Amendment, id. amend. XIV, § 1, and by the full faith and credit clause, id. art. IV, § 1, from arbitrarily applying the law of the forum state to a controversy before it. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985) ("[Flor a State's substantive law to be selected (^) in a constitutionally permissible manner, that State must have a signifi- cant contact or significant aggregation of contacts [with the litigation], creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.") (quoting (^) Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13 (1981)).
66. Cf Lehman Bros. v. Schein, 416 U.S. 386, 391 (1974) (certification procedures "help[] build a cooperative judicial federalism").
67. See sources cited supra note 36.
68. See Letter from Assistant Attorney General Daniel J. Meador to Representative Robert W. Kastenmeier (June 25, 1979) (Appendix A), reprinted (^) in Diversity of CitizenshipJurisdictionliMag- istrates Reform-1979: HearingsBefore the Subcomm. on Courts, Civil Liberties, and the Adminis- tration ofJustice of the House Comm. on the Judiciary, 96th Cong., 1st Sess. 158-62 (1979) [herein- after Diversity Hearings].

Multistate Litigation in State Courts

members of Congress, 70 and could be based (^) either upon diversity of citi-

zenship or upon the power of Congress to regulate interstate and foreign commerce.

1

1. Diversity Jurisdiction

Specifically, article III of the Constitution extends the "judicial Power [of the United States]... to Controversies.. between Citizens of dif- ferent States... and between a State, or the Citizens thereof, and foreign

States, Citizens or Subjects."7 2^ Although the statute conferring diversity jurisdiction^7 has long been held to require "complete diversity," 74 mean- ing that "where co-citizens appeared on both sides of a dispute, jurisdic- tion was lost,"^1 5 the Supreme Court has interpreted the diversity clause of article III as requiring only "minimal diversity."1^7 6 In State Farm Fire & Casualty Co. v. Tashire,^77 the Court held that article III "poses no obsta- cle to the legislative extension of federal jurisdiction, founded on diversity, so long as any two adverse parties are not co-citizens." '7'^ Congress could

thus extend federal jurisdiction over a large number of multistate cases by providing for federal subject-matter jurisdiction in cases of minimal diver- sity in which a threshold number of (^) claimants alleges damages exceeding

certain monetary amounts.^

2. "Federal Question" Jurisdiction

Alternatively, the federal courts could be given "federal question" juris- diction over multistate, multiparty cases. Article III extends federal judi- cial power "to all Cases, in Law and Equity, arising under... the Laws of the United States." 80 The words "arising under," and the scope of fed-

70. See, e.g., H.R. 4315, 99th Cong., 2d Sess., 132 CONG. REC. H827 (1986) (proposal (^) of Repre- sentative (^) Robert W. Kastenmeier); H.R. 3690, 98th Cong., 1st Sess., 129 CONG. REC. 5918 (1983) (same); cf. Tydings, supra note 4, at 310-11 (proposal of Senator Joseph D. Tydings to establish exclusive federal jurisdiction over suits arising from aviation disasters).

71. The ALI based its proposal solely on the diversity clause, U.S. CoNsT. art. III, § (^) 2; see ALI STUDY, supra note 36, at 426-36 (Supporting Memorandum A), as does Professor Rowe, see Rowe & Sibley, supra note 36. One proposal to create federal jurisdiction (^) over consumer class actions, S. 1980, 91st Cong., 1st Sess., 115 CONG. REc. 10,460-61 (1969), relied on a theory of protective juris- diction. See Note, ProtectiveJurisdiction and Adoption as Alternative Techniques for Conferring Jurisdictionon Federal Courts in Consumer Class Actions, 69 MICH. L. REV. 710, 724-31 (^) (1971). 72. U. S. CoNsT. art. III, § 2.
72. 28 U.S.C. § 1332 (1982).
73. See, e.g., Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) (Marshall, C.J.).
74. State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530-31 (1967).
75. Id.
76. 386 U.S. 523 (1967).
77. Id. at 531. 79. See Rowe & Sibley, supra note 36, at 49-54 (proposed 28 U.S.C. § 1367); see also ALI STUDY, supra note 36, at 426. 80. U.S. CONsT. art. III, § 2.

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eral question jurisdiction, have traditionally been interpreted very broadly. Indeed, so potentially expansive is federal question jurisdiction that the Court has not yet ruled out the validity of theories of "protective jurisdic- tion.""' These theories, in various forms, assert that the applicable federal law under which a case "arises" could be a purely jurisdictional statute

providing a federal forum for the application of state law in a field in which Congress could (but does not) enact preemptive substantive legisla- tion.^8 2 The Supreme Court's approval of laws granting bankruptcy trust-

ees the right to sue on state claims in federal district courts8 3^ suggests that the federal courts could, given the proper statutory authority, assert fed- eral question jurisdiction over multistate, multiparty cases (^) based on the commerce power and an assertion of (^) protective jurisdiction. 4

Federal jurisdiction over multistate cases need not, however, be pre- mised on protective jurisdiction, the constitutionality of which has long stimulated sharp disagreement among both judges and scholars.8 5^ Current interpretation of the "arising under" clause amply supports the validity of the proposed legislation. Under the Supreme Court's most recent pro- nouncement on the issue, Verlinden B.V. v. Central Bank of Nigeria,^8 federal question jurisdiction may constitutionally be asserted over any lawsuit involving a federal law that does more than regulate access to the federal courts.^8 7 Because an amended section 1407 would require the Ju-

81. See, e.g., Verlinden B.V. v. Central Bank of Nig., 461 U.S. 480, 491 n.17 (1983) (declining to address constitutionality of "protective jurisdiction").
82. See Note, The Theory of Protective Jurisdiction, 57 N.Y.U. L. REv. 933, 936 (1982) (describ- ing protective jurisdiction as that exercised "over cases (1) in federal court (2) between nondiverse parties (3) governed (^) by nonfederal rules of decision") (citations omitted). The concept of protective jurisdiction was originally introduced by Professors Paul Mishkin and Herbert Wechsler, see Mishkin, The Federal (^) "Question" in the District Courts, 53 COLUM. L. REV. 157, 184-96 (1953); Wechsler, FederalJurisdictionand the Revision of the Judicial Code, 13 LAW & CONTEMP. PROBS. 216, 224-25 (1948), and received the implicit endorsement of Justices Jackson, Black, and Burton in National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 599 (1949), as well as the explicit approval of Justices Burton and Harlan in Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 460 (1957) (Burton, J., concurring). 83. See, e.g., Schumacher v. Beeler, 293 U.S. 367 (1934); Sherman v. Bingham, 21 F. Cas. 1270, 1272 (C.C.D. Mass. 1872) (No. 12,762). 84. See Mishkin, supra note 82, at 189-90 & n.141, 193-94; Note, supra note 82, at 974-83; cf. Tidewater Transfer, 337 U.S. at 599 (Jackson, J., announcing judgment of Court) ("The fact (^) that the congressional power over bankruptcy granted by Art. I could open the court to the trustee does not mean that such suits arise under the laws of the (^) United States; but it does mean that Art. I can supply a source of judicial power for their adjudication."). 85. Among the harshest critics of protective jurisdiction was Justice Frankfurter. See Lincoln Mills, 353 U.S. at 473-77 (Frankfurter, J., dissenting). Other critical views include ALI STUDY, supra note 36, at 483-84 (Appendix C); M. REDISH, FEDERAL JURISDICTION: TENSIONS IN THE ALLOCATION OF JUDICIAL POWER 62-63 (1980); Currie, The Federal Courts and the American Law Institute, 36 U. Cm. L. REv. 1, 14-15 (1968).
83. 461 U.S. 480 (1983).
84. See id. at 496 ("The [Foreign Sovereign Immunities] Act does not merely concern access to the federal courts."); The Supreme Court, 1982 Term, 97 HARV. L. REv. 70, 214 (1983) [hereinafter 1982 Term].

Multistate Litigation in State Courts

dicial Panel not only to assert jurisdiction, but also to apply federal stan- dards governing the selection of transferee courts, federal question juris- diction could constitutionally be asserted over the multistate (^) cases that

would be removed from state courts.^88 Verlinden concerned the question of whether the Foreign Sovereign Immunities Act of 1976"' (FSIA) could constitutionally authorize a for- eign plaintiff to sue a foreign state in federal court on a nonfederal cause of action. Specifically, the litigation arose from a contract for the purchase of cement between the Federal Republic of Nigeria and Verlinden B.V., a Dutch corporation with its principal offices in Amsterdam.9 0^ After the Central Bank of Nigeria, an instrumentality of the Federal Republic, uni- laterally directed its banks to amend the letter of credit issued in connec-

tion with the contract, Verlinden brought suit in the United States Dis- trict Court for the Southern District of New York, alleging that the Bank's actions constituted an anticipatory breach of the letter of credit. 91

In support of its claim, Verlinden argued that subject-matter jurisdic- tion existed under the Foreign Sovereign Immunities Act, which governs assertions of sovereign immunity by foreign states, 9 and which provides that "[tihe district courts shall have original jurisdiction... of any non-

jury civil action against a foreign state.. .[that] is not entitled to immu-

nity either under [the FSIA] or under any applicable international agree- ment." 93 The district court dismissed Verlinden's complaint, and held that the Bank was entitled to sovereign immunity. 4 The Second Circuit af- firmed on different grounds, however, and without addressing (^) the ques- tion of whether sovereign immunity (^) existed under the statute, 5 held that neither the diversity clause 98 nor the "arising under" clause of article III

was broad enough to authorize jurisdiction over an action brought by a foreign plaintiff against a foreign state when no federal rule of decision governed the^ claim.

9 7

88. See infra notes 102-03 and accompanying text.

89. Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1602-1611 (1982).
90. 461 U.S. at 482.

91. Id. at 483.

92. See 28 U.S.C. §§ 1602-1611 (1982).

93. 28 U.S.C. § 1330 (1982).
94. Verlinden B.V. v. Central Bank of Nig., 488 F. Supp. 1284 (S.D.N.Y. 1980).
95. The court noted only that 28 U.S.C § 1330 did not, on its face, limit the scope of jurisdiction over actions against foreign states only to those brought by American citizens. Verlinden B.V. v. Central Bank of Nig., 647 F.2d 320, 324 (2d Cir. 1981).
96. Although article IIIprovides for subject-matter jurisdiction over suits "between a State, the Citizens thereof, and foreign States, Citizens, or Subjects," U.S. CONST. art. III, § 2, it "nowhere mentions a case between two aliens." 647 F.2d at 325.
97. 647 F.2d at 325-30. The Second Circuit noted that the parties had agreed that Verlinden's claim for the breach of the letter of credit was governed by either the Uniform Customs and Practice

for Documentary Credits of the International Chamber of Commerce, or the law of New York. Id. at

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The Supreme Court unanimously reversed, (^) holding that "a suit against a foreign state under [the FSIA] necessarily raises questions of substantive federal law at the very outset" of (^) the litigation, and "hence clearly 'arises

under' federal law, as that term is used in Art[icle] III.""^9 The Court distinguished language in prior cases suggesting that a jurisdictional stat- ute could never constitute the federal law under (^) which a case "arises," noting that "the statutes at issue in these... cases sought to do nothing

more than grant jurisdiction over a particular class of cases." 99 The Court emphasized that the FSIA, in contrast, not only conferred jurisdiction, but also, by "comprehensively regulating the amenability (^) of foreign nations to

suit in the United States,"1 00^ constituted an exercise of article I powers over foreign commerce and foreign affairs.' 0 1 Like the FSIA, the (^) proposal set forth in this Note would require a federal court to apply "substantive federal law"-specifically, (^) the stan-

dards for transfer and consolidation set forth by an amended section 1407 and by interpretive case law. Legislation expanding the authority of the Judicial Panel would (^) act as far more than a jurisdictional grant;"0 2^ it

would, like the FSIA, constitute an exercise of article I power through a scheme of regulation as "detailed" and "comprehensive[]' 0 3^ as the in- quiry governing (^) sovereign immunity. An amended section 1407, moreover,

could not seriously be challenged on the ground that it exceeds the dele- gated powers of Congress under article I. It is well-settled law that Con- gress may regulate (^) any activity, however local in nature, if it rationally

finds that the activity affects interstate or foreign commerce in any dis- cernible way.' 0 4 The extraordinary expense of multistate (^) litigation to- day "0 5^ would amply justify a finding by Congress that such (^) litigation af-

98. 461 U.S. at 493.
99. Id. at 496. 100. Id. at 493.
100. Id. at 496.
101. In fact, an amended § 1407 would be less "jurisdictional" in nature than the FSIA because it would require (^) the application of legal standards that are unrelated to any jurisdictional inquiry; the Panel's jurisdiction over multistate litigation would not depend upon the Panel's choice of transferee forum. In contrast, the Court in Verlinden conceded not only that the issue of sovereign immunity was the only issue of federal law in (^) the case, but that the issues of subject-matter jurisdicion and sovereign immunity (^) were inextricably linked; under the FSIA, subject-matter jurisdiction existed if and only if sovereign immunity were found not to exist. See (^) 461 U.S. at 485 n.5, 489, 493-94. One analysis of Verlinden, while generally approving of the decision, notes that "[t]he characterization of sovereign immunity as a substantive issue is dubious enough to call into question the usefulness of the substance/jurisdiction (^) distinction as a limiting principle." 1982 Term, supra note 87, at 213.
102. 461 U.S. at 493, 494.
103. See, e.g., Garcia v. San (^) Antonio Metro. Transit Auth., 469 U.S. 528, 537 (1985); Hodel v. Virginia Surface Mining (^) & Reclamation Ass'n, 452 U.S. 264, 275-77 (1981); Perez v. United States, 402 U.S. 146 (1971); Katzenbach v. McClung, 379 U.S. 294 (1964); Wickard v. Filburn, 317 U.S. 111 (1942); United States v. Darby, 312 U.S. 100 (1941).
104. See supra notes 2-3 and accompanying text.

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Multistate Litigation in State (^) Courts

fects interstate commerce.^1 0 6^ Federal legislation designed to curtail the waste (^) resulting from duplicative litigation in state and federal courts would thus fall within the constitutional (^) scope of the commerce power. Thus, under Verlinden, the application (^) of an amended section 1407 would constitutionally suffice to support the exercise of federal question jurisdiction.

B. The Tenth Amendment (^) and Federal Structure

The legislative proposal set forth in this Note would (^) not violate any constitutional limitations that the Tenth Amendment (^) or federal structure may impose upon the power of the national government. (^) The Supreme Court has recently abandoned the short-lived doctrine (^) of National League of Cities v. Usery,10 7^ under which the (^) Tenth Amendment had been inter- preted as prohibiting (^) Congress from exercising its power over commerce in a fashion that would "directly (^) impair" a state's ability to "structure integral operations in areas of (^) traditional governmental functions."'^8 In

Garcia v. San Antonio Metropolitan Transit Authority, °9^ the Court overruled National League (^) of Cities and held that Congress could consti- tutionally impose the requirements of the Fair (^) Labor Standards Act upon state and local governments. Observing (^) that the "principal and basic limit[s] on the federal commerce power... [are] the built-in (^) restraints that our system provides through state participation in federal (^) governmen- tal action,"1 10^ the Court rejected the "judicially created (^) limitations on fed- eral power"' adopted in National League of Cities. (^) The Court con- cluded that "[a]ny substantive restraint on the exercise (^) of Commerce Clause (^) powers must find its justification in the procedural nature of this

basic limitation, and... must (^) be tailored to compensate for possible fail- ings in the national (^) political process." ' 2^ Should Garcia remain the law, 1 ' any grant (^) to the Judicial Panel of authority over state courts

would not implicate this federalistic limitation (^) on congressional power, be-

106. Similarly, President Reagan has called for the passage of a national products liability law that would be based upon (^) findings that "the free flow of products in commerce has been increasingly burdened by product liability law" and that "the unacceptably high transactions costs (^) of the product liability system... is a burden on (^) the consumer and American industry which can no longer be

tolerated .... ." S. 100, supra note 4, §§ 2(a)(1), (a)(7).

107. 426 U.S. 833 (1976).

108. Id. at 852.
109. 469 U.S. 528 (1985).
110. Id. at 556.
111. Id. at 552.
112. Id. at 554.
113. In his dissent, Justice (now Chief Justice) (^) Rehnquist "confident[ly]" expressed the view that the principles of National League of Cities would "in time again (^) command the support of a majority

of this Court." Id. at 580. Justice O'Connor, joined by Justice Powell, also predicted that National

League of Cities would someday be resurrected. Id. at 589 (dissenting (^) opinion).

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cause such a grant would affect only state judiciaries, and would not in any way impair the ability of the states to influence (^) the national political

process.

1 1 4

Furthermore, the constitutionality of transfer to state courts is all but compelled by a line of cases holding that under the supremacy clause,'^1 a state court may be required by federal law to hear a federal (^) cause of action if the court is empowered to entertain analogous (^) claims based upon state law."1 6^ In Testa v. Katt,"1^7 the Supreme (^) Court unanimously held that a state court could not refuse to (^) entertain a treble damages action brought under federal wartime price control legislation. Under the supremacy clause, stated the Court, "a state court cannot 'refuse to en- force the right arising from the law of the United States because of con- ceptions of impolicy or want of wisdom on the part of Congress in having called into play its lawful powers.' "118 Because the Rhode Island court in Testa had the jurisdiction to adjudicate "this same type of claim [had it] aris[en] under Rhode Island law,"' 19 the state court was obliged to hear claims under the federal price control law. 20 Similarly, a state court could not constitutionally refuse to hear a state law claim transferred to it by the

Judicial Panel because such a claim could be viewed as a federal claim

that is analogous to, and involves the application of, state law. 1 The Court's decision in Testa recently received an expansive affirma- tion in FERC v. Mississippi, 22 in which the Court rejected an attack on what it conceded to be an "intrusive" legislative scheme designed to enable

114. Cf Rapaczynski, From Sovereignty to Process: The Jurisprudenceof FederalismAfter Gar- cia, 1985 Sup. CT. REV. 341, 364-66, 414-19 (arguing that Garcia leaves room for judicial invalida- tion of federal actions that would undermine role of states in national political process).
115. U.S. CONST. art. VI.
116. (^) FERC v. Mississippi, 456 U.S. 742, 760-61 (1982); Testa v. Katt, 330 U.S. 386, 393- (1947); see Redish & Muench, Adjudication of Federal Causes of Action in State Court, 75 MICH. L. REV. 311, 340-46 (1976).
117. 330 U.S. 386 (1947).
118. Id. at 393 (quoting Minneapolis & St. Louis R.R. v. Bombolis, 241 U.S. 211, 222 (1916)).
119. Id. at 394.
120. Id. ("Under these circumstances the State courts are not free to refuse enforcement of peti- tioners' claim.").
121. It would not be unprecedented for a state court to hear a federal claim based upon state law. Under the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. §§ 1330-1356 (1982 & Supp. II 1985), "the civil and criminal laws of each adjacent State... are declared to be the law of the United States for that portion of the subsoil and seabed of the outer Continental Shelf... which would be within the area of the State if its boundaries were extended seaward to the outer margin of the... Shelf .... " 43 U.S.C. § 1333(a)(2)(A) (1982). Thus, in personal injury actions arising from events above the seabed of the Continental Shelf, OCSLA "incorporates as federal law... the laws of the State adjacent to the scene." Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477 (1981). Because the Supreme Court has held that state and federal courts have concurrent jurisdiction over OCSLA claims, id. at 484, it would appear that under Testa (which also involved a federal cause of action over which state and federal courts had concurrent jurisdiction), state courts cannot refuse to adjudicate OCSLA disputes.
122. 456 U.S. 742 (1981).

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Multistate (^) Litigation in State Courts

"the Federal Government... to use state regulatory machinery to ad-

vance federal goals." 2 3a^ FERC involved a constitutional challenge brought

by Mississippi authorities to provisions of the Public Utility Regulatory Policies Act of 1978124 (PURPA), through which Congress sought to en-

courage the conservation of oil and natural gas (^) by electric utilities. Rely-

ing on Testa, the Court in FERC upheld (^) a provision of PURPA requir- ing certain quasi-judicial state regulatory (^) agencies to adjudicate disputes arising under the Act or under implementing regulations promulgated by

the Federal Energy Regulatory Commission. 125 In addition, the Court up-

held provisions of PURPA that required state regulatory commissions (^) to

consider, under federally prescribed procedures, the adoption of (^) an exten-

sive array of regulatory (^) standards set forth in the statute and designed to

promote the efficient use of energy resources. 2 ' (^) Interpreting the Testa

decision as "reveal[ing] that the Federal Government (^) has some" power to

enlist a branch of state government-there the judiciary-to further fed-

eral ends,"' 2 7^ the Court held that PURPA's requirement that states con-

sider the adoption (^) of federal standards did not violate the Constitution

because the federal (^) law did not "'directly compelfl' the States to enact a

legislative program.""' (^) The Court emphasized that PURPA neither

"threaten[ed] the States' 'separate and independent existence' ",129 nor

"impair[ed] the ability of the States 'to (^) function effectively in a federal

system,' "130 but instead "offered the States a vehicle for remaining ac-

tive"'' in an area that could be (^) wholly preempted by federal law.

FERC strongly supports (^) the constitutionality of a system of federally

coordinated transfers of multistate litigation to state courts, and suggests

that (^) such a system would even survive an attack under National League

of Cities.^3 2 Like (^) PURPA, this Note's proposal would not "directly com-

pel" states to enact legislation of any sort. The proposal set forth in this

123. Id. at 759.
124. Pub. L. No. 95-617, 92 Stat. 3117 (1978) (codified in scattered sections (^) of 15 and 16 U.S.C.).
125. 456 U.S. at 758-61. All members of the Court concurred on this point. See id. at 775 (Pow- ell, J., concurring in part), 775-76 n.1 (O'Connor, J., concurring in judgment in part and dissenting in part).

126. Id. at 761-70. Only five justices voted to uphold these provisions.

127. Id. at 762 (footnote omitted).

128. Id. at 765.

129. Id. (quoting Lane County v. Oregon, 74 U.S. (7 Wall.) 71, 76 (1869)).

130. Id. at 765-66 (quoting National League of Cities v. Usery, 426 U.S. 833, 852 (1976)).

131. Id. at 766. 132. See supra note 113. (^) Nevertheless, because the majority in FERC later became the majority in Garcia v. San Antonio (^) Metropolitan Transit Authority, 469 U.S. 528 (1985), any future abandon- ment of Garcia (^) would cast doubt upon the precedential value of FERC's approval of the provisions in PURPA governing mandatory consideration of regulatory standards by the states. In any event, the demise of Garcia would not likely disturb Testa, see supra note 125, and would thus leave (^) an ample basis for the constitutional defense of the proposal set forth in this Note. See supra notes 115-21 and accompanying text.

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Note would neither threaten "the States' 'separate and independent exis- tence'" nor in any way "directly impair" the ability of states to "structure integral operations in areas of traditional governmental functions."^1 ' In particular, the Judicial Panel would be required to refrain from exercis- ing its authority in a fashion that would unduly burden individual state courts."" Moreover, in the aggregate, the proposal would not unduly bur- den state judiciaries because the number of cases that would be assigned to state courts by the Judicial Panel would represent only a tiny fraction of the overall workload of state judiciaries. Indeed, it is widely believed that even a substantial curtailment of diversity jurisdiction would only mini- mally enlarge state court caseloads.^13 5 Because complex multidistrict liti- gation accounts for only a small portion of diversity cases,^136 consolidation of such litigation in state courts could not on the whole greatly burden state judiciaries.

1 3 7

The proposal set forth in this Note would enhance rather than impair the authority of the states. By guaranteeing state courts a role in the adju- dication of multistate, multiparty disputes, the proposal would "offer the States a vehicle for remaining active (^) in an area of overriding concern." ' Indeed, the policies reflected in the proposal resemble the values motivat- ing the judicially created abstention doctrines, which have become an im- portant part of the legal (^) landscape of federalism. For example, under the abstention doctrine set forth in Colorado River Water Conservation Dis- trict v. United States, 3 9^ the Supreme Court has permitted federal district

133. National League of Cities, 426 U.S. at 852.
134. See supra notes 53-67 and accompanying text.
135. See, e.g., Diversity Hearings,supra note 69, at 203-04 (statement of Professor Charles Alan Wright); ALI STUDY, supra note 36, at 473-74; R. POSNER, THE FEDERAL CouRTS 134, 181 & n.17 (1985); Bork, supra note 42, at 237 ("abolition of diversity jurisdiction... would increase [state court] dockets apparently only by about 1.5 percent"); Burdick, Diversity Jurisdiction Under the American Law Institute Proposals:Its Purpose and Its Effect (^) on State Courts, 48 N.D.L. REV. 1, 18 (1971) (shifting approximately half of all diversity litigation to state courts "would only slightly increase the number of cases per state trial judge"); Flango & Blair, The Relative Impact of Diversity Cases on State Trial Courts, STATE CT. J., Summer 1978, at 20, 24 (elimination of diversity juris- diction and transfer of diversity cases to state courts "would be handled in most instances without major additions to state judicial resources" but "would impose (^) a disproportionate hardship on some states"); Sheran & Isaacman, (^) supra note 39, at 61-68.
136. In 1983, for example, the Panel ordered the transfer of 687 civil actions for consolidated proceedings with 528 actions already pending in transferee (^) districts. ANNUAL REPORT 1985, supra note 53, at 168.
137. In assessing the burden that this Note's proposal would place on state courts, it must also be remembered that not all complex multistate litigation would be consolidated in state courts. See supra notes 54-65 and accompanying text.
138. FERC v. Mississippi, 456 U.S. 742, 766 (1982).
139. 424 U.S. 800 (1976). Although the Supreme Court has not referred to (^) the rule of Colorado River as an "abstention" doctrine, see Moses H. Cone Hosp. (^) v. Mercury Constr. Corp., 460 U.S. 1, 14 (1982), commentators have labeled (^) it as such. See, e.g., C. WRIGHT, FEDERAL COURTS § 52, at 317-19 (4th ed. 1983); Redish, Abstention, Separation of Powers, and the Limits of the Judicial Function, 94 YALE L.J. 71, 96 (1984).

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Multistate Litigation in State Courts

courts to dismiss federal suits in deference to state proceedings when such a dismissal would promote judicial economy. Specifically, the (^) Court in Colorado (^) River, affirming the dismissal of a lawsuit brought by the United States against more than 1,000 defendants, (^) stated that considera- tions of "wise judicial administration, giving regard (^) to conservation of ju- dicial resources and comprehensive disposition of litigation," could, (^) under some circumstances, "permit[] the dismissal of a federal suit (^) due to the presence of a concurrent state proceeding." 14 '^ In determining (^) whether dis- missal (^) is warranted, a district court may consider "such factors as the inconvenience of the federal (^) forum,.. the desirability of avoiding piece-

meal litigation,"14 1^ and the involvement of rights determined (^) by state law.

Colorado River reflects a recognition by the (^) Supreme Court that, in cases in which rights (^) determined by state law are at stake, consolidated

adjudication in state court may be preferable to parallel litigation in state and federal courts. The Court's (^) willingness in Colorado River to allow in effect a substantial transfer of litigation from a (^) federal to a state court-without any mention of possible administrative burdens that the state court might suffer as (^) the result of abstention-suggests that the Court assumed that the federalistic benefits of having a state court adjudi- cate state-created rights outweighed any such administrative (^) burdens. Similarly, (^) any burden that might result from the proposal set forth in this

Note would be justified by the fact that (^) the added burden faced by state

courts would be that of interpreting and administering their own law.

IV. CONCLUSION

By expanding the power of the Judicial Panel on Multidistrict Litiga- tion to permit (^) the Panel to transfer cases both to and from state courts,

Congress could substantially limit the potential for inefficient and (^) incon- sistent adjudication in complex (^) multistate litigation. Moreover, through

the selective use of the power to direct the consolidation of multistate liti-

gation in state courts, the Panel could foster the growth and development

of state law, while enabling (^) more federal judicial resources to be devoted

to the articulation and (^) enforcement of federal law. Extension of the Judi-

cial Panel's authority would thus promote (^) the development of a more effi-

cient and more specialized judicial structure (^) that would be better suited to

meet the nation's needs.

140. 424 U.S. at 817-18 (^) (citations omitted).
141. Id. at 818 (citations omitted).
142. Id. at 819. The federal and state suits primarily concerned water (^) rights governed by Colo-

rado law. Id. at 804-05.