The Constitution of the United States of America: Analysis and Interpretation Part 104

For purposes of diversity jurisdiction State citizenship is determined by domicile or residence, for the determination of which various tests have been stated: removal to a State, acquiring real estate there, and paying taxes;[517] residence in a State for a considerable time;[518]

and removal to a State with the intent of making it one's home for an indefinite period of time.[519] Where citizenship is dependent on intention, acts may disclose it more satisfactorily than declarations.[520] The fact that removal to another State is motivated solely by a desire to acquire citizenship for diversity purposes does not oust the federal courts of jurisdiction so long as the new residence is indefinite or the intention to reside there indefinitely is shown.[521] But a mere temporary change of domicile for the purpose of suing in a federal court is not sufficient to effectuate a change in citizenship.[522] Exercise of the right of suffrage is a conclusive test of citizenship in a State, and the acquisition of the right to vote without exercising it is sufficient to establish citizenship.[523]

CITIZENSHIP, CORPORATIONS

In Bank of United States _v._ Deveaux,[524] Chief Justice Marshall declared: "That invisible, intangible, and artificial being, that mere legal ent.i.ty, a corporation aggregate, is certainly not a citizen; and consequently cannot sue or be sued in the courts of the United States, unless the rights of the members, in this respect, can be exercised in their corporate name." He proceeded then to look beyond the corporate ent.i.ty and hold that the bank could sue under the diversity provisions of the Const.i.tution and the Judiciary Act of 1789 because the members of the bank as a corporation were citizens of one State and Deveaux was a citizen of another. This holding was reaffirmed a generation later, in Commercial and Railroad Bank of Vicksburg _v._ Slocomb,[525] at a time when corporations were coming to play a more important role in the national economy. The same rule, combined with the rule that in a diversity proceeding all the persons on one side of a suit must be citizens of different States from all persons on the other side,[526]

could in the course of time have closed the federal courts in diversity cases to the larger corporations having stockholders in all or most of the States.

If such corporations were to have the benefits of diversity jurisdiction, either the Deveaux or the Strawbridge rule would have to yield. By 1844, only four years after the Slocomb Case, the interests of corporations in docketing cases in the federal courts as citizens of different States appeared more important to the Supreme Court than the weight to be attached to precedents, even those set by John Marshall, and in Louisville, Cincinnati, and Charleston R. Co. _v._ Letson,[527]

both the Deveaux and Slocomb cases were overruled. After elaborate arguments by counsel, the Court, speaking through Justice Wayne, held that "a corporation created by and doing business in a particular State, is to be deemed to all intents and purposes as a person, although an artificial person, an inhabitant of the same State, for the purposes of its incorporation, capable of being treated as a citizen of that State, as much as a natural person."[528]

In the Letson Case the emphasis is upon the place of incorporation of a joint stock company as something completely separate from the citizenship of its members. In succeeding cases, however, this fiction of corporate personality has undergone modifications so that a corporation, though still a citizen of the State where it is chartered, is such by virtue of the jurisdictional fiction that all the stockholders are citizens of the State which by its laws created the corporation.[529] This presumption is conclusive and irreb.u.t.table and resembles in many ways the English jurisdictional fiction that for providing remedies for wrongs done in the Mediterranean "the Island of Minorca was at London, in the Parish of St. Mary Le Bow in the Ward of Cheap."[530] This fiction creates a logical anomaly, which the Letson rule had avoided, in those cases in which a stockholder of one State sues a corporation chartered in another State. Although all stockholders are conclusively presumed to be citizens of the State where the corporation is chartered, an individual stockholder from a different State may nevertheless aver his actual citizenship so as to maintain a diversity suit against the corporation.[531] These rulings lead to some extraordinary results, as John Chipman Gray has indicated: "The Federal courts take cognizance of a suit by a stockholder who is a citizen, say, of Kentucky, against the corporation in which he owns stock, which has been incorporated, say, by Ohio. Since he is a stockholder of an Ohio corporation, the court conclusively presumes that he is a citizen of Ohio, but if he were a citizen of Ohio, he could not sue an Ohio corporation in the Federal courts. Therefore the court considers that he is and he is not at the same time a citizen of Ohio, and it would have no jurisdiction unless it considered that he both was and was not at the same time a citizen both of Ohio and Kentucky."[532]

The Black and White Taxicab Case

These fictions of corporate citizenship make it easy for corporations to go into the federal courts on matters of law that are purely local in nature, and they have availed themselves of the opportunity to the full.

For a time the Supreme Court tended to look askance at collusory incorporations and the creation of dummy corporations for purposes of getting cases into the federal courts,[533] but as a result of the Kentucky Taxicab Case,[534] decided in 1928, the limitation of collusion lost much of its force. Here the Black and White company, a Kentucky corporation, dissolved itself and obtained a charter as a Tennessee corporation in order to get the benefit of a federal rule which would condone an exclusive contract with a railroad to park its cabs in and around a station whereas the State rule forbade such contracts. The only change made was of the State of incorporation. The name of the company, its officers, and shareholders, and the location of its business all remained the same. Yet no collusion was found, and the company received the benefit of the federal rule--a measure of salvation by being born again in Tennessee. The odd result in the Taxicab Case, whereby citizens of Kentucky could conduct business there contrary to State law with the sanction of the Supreme Court of the United States, did not stem solely from the rule that the citizenship of a corporation is determined by the State of its incorporation, but also from this rule combined with the rule of Swift _v._ Tyson,[535] another by-product of diversity jurisdiction.

THE LAW APPLIED IN DIVERSITY CASES: SWIFT _v._ TYSON

Section 34 of the Judiciary Act of 1789 provided that in diversity cases at common law the laws of the several States should be the rules of decision in the United States courts. However, in Swift _v._ Tyson[536]

the Supreme Court refused to apply this section on the ground that it did not extend to contracts or instruments of a commercial nature, the interpretation of which therefore ought to be according to "the general principles and doctrines of jurisprudence"; and while the decisions of State courts on such subjects were ent.i.tled to and would receive attention and respect, they could not be conclusive or binding upon the federal courts.[537]

Extension of the Tyson Case

For ninety-six years the Court followed this opinion, which the other Justices saw only the evening before it was delivered, and which invoked a precedent of Lord Mansfield on the law of the sea and an epigram of Cicero on the law of nature.[538] Later decisions expanded the concept of matters of a commercial nature so that the scope of the Tyson rule was greatly extended.[539] In many instances the State courts followed their own rules of decision even when contrary to the federal rules, so that Justice Story's attempt at uniformity in matters of a commercial nature paradoxically led to a greater diversity and to the mischief in many instances of two conflicting rules of law in the same State, with the outcome of suits dependent upon whether the case was docketed in a State or a federal court. Simultaneously, the Supreme Court was holding under the Tyson rule that the federal courts were not bound by decisions of State courts interpreting State const.i.tutions[540] or State statutes.[541]

The Tyson Rule Protested

Moreover, decisions extending the scope of the Tyson rule were frequently rendered by a divided Court over the strong protests of dissenters.[542] In Baltimore and Ohio R. Co. _v._ Baugh,[543] which further projected the Tyson rule into the law of torts in disregard of State law, Justice Field wrote a sharp dissent in which he indicated an opinion that the Supreme Court's disregard of State court decisions was unconst.i.tutional. Such disregard, nevertheless, was further aggravated in Kuhn _v._ Fairmont Coal Co.,[544] where the Court held that in construing a contract in a case involving real estate and mining law a federal court was not bound by a West Virginia decision touching the same subject. This evoked a provocative dissent from Justice Holmes, who later wrote one of his more famous dissents in the Black and White Taxicab Company case,[545] in which he a.s.serted emphatically that the Court's extensions of the Tyson rule were unconst.i.tutional.[546]

ERIE RAILROAD CO. _v._ TOMPKINS; TYSON OVERRULED

Increasing criticism of the Tyson rule led to a restriction of it in Mutual Life Ins. Co. _v._ Johnson,[547] where the Court chose to apply Virginia decisions rather than exercise its independent judgment on the ground that the case was "balanced with doubt."[548] The federal judicial power was subordinated to what Justice Cardozo called "a benign and prudent comity."[549] Four years later, and without further preparation other than a change in two of the Justices, the Court overturned Swift _v._ Tyson and its judicial progeny in Erie Railroad Co. _v._ Tompkins,[550] in an opinion by Justice Brandeis which is remarkable in a number of ways. In the first place, it reversed a ninety-six year old precedent which counsel had not questioned; secondly, for the first and only time in American const.i.tutional history, it held action of the Supreme Court itself to have been unconst.i.tutional, to wit, action taken by it in reliance on its interpretation of the 34th section of the Judiciary Act of 1789, a question which also was not before the Court; and thirdly, it completely ignored the power of Congress under the commerce clause, as well as its power to prescribe rules of decision for the federal courts in the cases enumerated in article III.

Like the Fairmont Coal and Taxicab cases, the Tompkins Case presented the possibility of a head-on conflict between State and federal rules of decision. Tompkins was seriously injured by a pa.s.sing freight train while he was walking along the railroad's right of way in Pennsylvania.

As a citizen of Pennsylvania, Tompkins could have sued in that State, but he could also have sued in the federal district court in Pennsylvania, or in New York because the railroad was incorporated in the latter State. He elected to sue in the federal court for the southern district of New York, where he obtained a verdict for $30,000 after the trial judge had ruled that the applicable law did not preclude recovery. The circuit court of appeals affirmed the judgment because it thought it unnecessary to consider whether the law of Pennsylvania precluded recovery, inasmuch as the question was one of general law to be decided by the federal courts in the exercise of their independent judgment. Citing Warren's discovery that Swift _v._ Tyson was an erroneous interpretation of the Judiciary Act of 1789, criticism of the Tyson doctrine both on and off the bench, and the political and social defects of the rule in working discriminations against citizens of a State in favor of noncitizens and in producing injustice and confusion, Justice Brandeis declared: "If only a question of statutory construction were involved, we should not be prepared to abandon a doctrine so widely * * * [followed for] nearly a century. But the unconst.i.tutionality of the course pursued has now been made clear and compels us to do so.

* * * There is, [he continued], no federal general common law. Congress has no power to declare substantive rules of common law applicable in a State whether they be local in their nature or 'general,' be they commercial law or a part of the law of torts. And no clause in the Const.i.tution purports to confer such a power upon the federal courts."[551] After quoting Justice Field and Justice Holmes on the unconst.i.tutionality of the Tyson rule, Justice Brandeis made it clear that the Court was not invalidating -- 34 of the Federal Judiciary Act of 1789, but was merely declaring that the Supreme Court and the lower federal courts had, in their application of it, "invaded rights which * * * are reserved by the Const.i.tution to the several States."[552]

Justice Butler, joined by Justice McReynolds, concurred in the result, because in his view Tompkins was not ent.i.tled to damages under general law, but he deprecated the reversal of Swift _v._ Tyson. He also objected to the decision of the const.i.tutional issue as unnecessary.[553] Justice Reed likewise concurred, but thought it questionable to raise the const.i.tutional issue. "If the opinion, [said he], commits this Court to the position that the Congress is without power to declare what rules of substantive law shall govern the federal courts, that conclusion also seems questionable."[554]

Extension of the Tompkins Rule

Since 1938 the federal courts have been most a.s.siduous in following the decisions of the State courts in diversity cases. The decisions followed, moreover, include not only those of the highest State courts, but those also of intermediate courts. In West _v._ American Telephone and Telegraph Co.[555] the Supreme Court held that a decision of an Ohio county court of appeals which the Supreme Court of the State had declined to review was binding on the lower federal courts regardless of the desirability of the rule of the decision or of the belief that the highest court of the State might establish a different rule in future litigation. In Fidelity Union Trust Co. _v._ Field[556] the Court went even farther and ruled that the lower courts were bound to follow the decisions of two chancery courts in New Jersey although there had been no appeal to the highest State court, and obviously other New Jersey courts were not bound by the decisions of two vice-chancellors. The anomaly of this decision was partially removed in King _v._ Order of United Commercial Travelers,[557] where the Court held that the federal courts were not bound by the decision of a court of first instance of South Carolina, which was the only decision applicable to the interpretation of the insurance policy in dispute. Nor is this the whole story. In the event of a State Supreme Court's reversal of its earlier decisions the federal courts are bound by the latest decision. Hence a judgment of a federal district court, correctly applying State law as interpreted by the State's highest court, must be reversed on appeal if the State court in the meantime has reversed its earlier rulings and adopted a contrary interpretation. Though aware of possible complications from this rule, the Court insisted that "until such time as a case is no longer _sub judice_, the duty rests upon the federal courts to apply the Rules of Decision statute in accordance with the then controlling decision of the highest state court."[558]

Although the Rules of Decision Act[559] requires the federal courts to follow State decisions only in civil cases, the application of the Tompkins rule has been extended to suits in equity.[560] In Guaranty Trust Co. _v._ York,[561] the Court held that when a statute of limitations barred recovery in a State court, a federal court sitting in equity could not entertain the suit because of diversity of citizenship.

This ruling was based on the express premise that "a federal court adjudicating a State-created right solely because of the diversity of citizenship of the parties is for that purpose, in effect, only another court of the State, * * * "[562] It was held to be immaterial, therefore, whether statutes of limitations were designated as substantive or procedural. The Tompkins Case, it was said, was not an endeavor to formulate scientific legal terminology. "In essence, the intent of that decision was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court."[563]

Controversies Between Citizens of the Same State Claiming Lands Under Grants of Different States

This clause was not in the first draft of the Const.i.tution, but was added without objection.[564] Undoubtedly the motivation for this extension of the judicial power was the existence of boundary disputes affecting ten States at the time the Philadelphia Convention met. With the Northwest Ordinance of 1787, the ultimate settlement of boundary disputes between States, and the pa.s.sing of land grants by States, this clause, never productive of many cases, has become obsolete.[565]

Controversies Between a State, or the Citizens Thereof, and Foreign States, Citizens or Subjects

The scope of this jurisdiction has been limited both by judicial decisions and the Eleventh Amendment. By judicial application of the Law of Nations a foreign State is immune from suit in the federal courts without its consent,[566] an immunity which extends to suits brought by States of the American Union.[567] Conversely, the Eleventh Amendment has been construed to bar suits by foreign States against a State of the American Union.[568] Consequently, the jurisdiction conferred by this clause comprehends only suits brought by a State against citizens or subjects of foreign States, by foreign States against American citizens, citizens of a State against the citizens or subjects of a foreign State, and by aliens against citizens of a State.

SUITS BY FOREIGN STATES

The privilege of a recognized foreign State to sue in the courts of a foreign State upon the principle of comity is recognized by both International Law and American Const.i.tutional Law.[569] To deny a sovereign this privilege "would manifest a want of comity and friendly feeling."[570] Although national sovereignty is continuous, a suit in behalf of a national sovereign can be maintained in the courts of the United States only by a government which has been recognized by the political branches of our own government as the authorized government of the foreign State.[571] Once a foreign government avails itself of the privilege of suing in the courts of the United States, it subjects itself to the procedure and rules of decision governing those courts and accepts whatever liabilities the Court may decide to be a reasonable incident of bringing the suit.[572] Also, certain of the benefits extending to the domestic sovereign do not extend to a foreign sovereign suing in the courts of the United States. Thus a foreign sovereign does not receive the benefit of the rule which exempts the United States and its member States from the operation of the statute of limitations, because considerations of public policy back of the rule are regarded as absent.[573]

Indian Tribes

Within the terms of article III, an Indian tribe is not a foreign State and hence cannot sue in the courts of the United States. This rule was applied in the case of Cherokee Nation _v._ Georgia,[574] where Chief Justice Marshall conceded that the Cherokee Nation was a State, but not a foreign State, being a part of the United States and dependent upon it. Other pa.s.sages of the opinion specify the elements essential to a foreign State for purposes of jurisdiction, such as sovereignty and independence.

NARROW CONSTRUCTION OF THE JURISDICTION

As in cases of diversity jurisdiction, suits brought to the federal courts under this category must clearly state in the record the nature of the parties. As early as 1809 the Supreme Court ruled that a federal court could not take jurisdiction of a cause where the defendants were described in the record as "late of the district of Maryland," but were not designated as citizens of Maryland, and plaintiffs were described as aliens and subjects of the United Kingdom.[575] The meticulous care manifested in this case appeared twenty years later when the Court narrowly construed section 11 of the Judiciary Act of 1789, vesting the federal courts with jurisdiction where an alien was a party, in order to keep it within the limits of this clause. The judicial power was further held not to extend to private suits in which an alien is a party, unless a citizen is the adverse party.[576] This interpretation was extended in 1870 by a holding that if there is more than one plaintiff or defendant, each plaintiff or defendant must be competent to sue or liable to suit.[577] These rules, however, do not preclude a suit between citizens of the same State if the plaintiffs are merely nominal parties and are suing on behalf of an alien.[578]

Clause 2. In all Cases affecting Amba.s.sadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the Supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.

The Original Jurisdiction of the Supreme Court

AN AUTONOMOUS JURISDICTION

Acting on the a.s.sumption that its existence is derived directly from the Const.i.tution, the Supreme Court has held since 1792 that its original jurisdiction flows directly from the Const.i.tution and is therefore self-executing without further action by the Congress. In the famous case of Chisholm _v._ Georgia[579] the Supreme Court entertained an action of a.s.sumpsit against Georgia by a citizen of another State.

Although the 13th section of the Judiciary Act of 1789 invested the Supreme Court with original jurisdiction in suits between a State and citizens of another State, it did not authorize actions of a.s.sumpsit in such cases, nor did it prescribe forms of process for the Court in the exercise of original jurisdiction. Over the dissent of Justice Iredell, the Court in opinions by Chief Justice Jay and Justices Blair, Wilson, and Cushing, sustained its jurisdiction and its power, in the absence of Congressional enactments, to provide forms of process and rules of procedure. So strong were the States' rights sentiments of the times that Georgia refused to appear as a party litigant, and other States were so disturbed that the Eleventh Amendment was proposed forthwith and ratified. This amendment, however, did not affect the direct flow of original jurisdiction to the Court, which continued to take jurisdiction of cases to which a State was party plaintiff and of suits between States without specific provision by Congress for forms of process. By 1861 Chief Justice Taney could enunciate with confidence, after a review of the precedents, that in all cases where original jurisdiction is given by the Const.i.tution, the Supreme Court has authority "to exercise it without further act of Congress to regulate its powers or confer jurisdiction, and that the Court may regulate and mould the process it uses in such manner as in its judgment will best promote the purposes of justice."[580]

CANNOT BE ENLARGED; MARBURY _v._ MADISON

Since the original jurisdiction is derived directly from the Const.i.tution, it follows logically that Congress can neither restrict it nor, as was held in the great case of Marbury _v._ Madison,[581] enlarge it. In holding void the 13th section of the Judiciary Act of 1789, which was interpreted as giving the Court power to issue a writ of mandamus in an original proceeding, Chief Justice Marshall declared that "a negative or exclusive sense" had to be given to the affirmative enunciation of the cases to which original jurisdiction extends.[582] While the rule that the Supreme Court is vested with original jurisdiction by the Const.i.tution and that this jurisdiction cannot be extended or restricted deprives Congress of any power to define it, it allows a considerable lat.i.tude of interpretation to the Court itself. In some cases, as in Missouri _v._ Holland,[583] the Court has manifested a tendency toward a liberal construction of original jurisdiction; in others, as in Ma.s.sachusetts _v._ Mellon,[584] it has placed a narrow construction upon the grant through the device of a restrictive interpretation of cases and controversies; and in still other cases, as in California _v._ Southern Pacific Co.,[585] it has stated that its original jurisdiction "is limited and manifestly to be sparingly exercised, and should not be expanded by construction."

CONCURRENT JURISDICTION OF THE LOWER FEDERAL COURTS