ABOLISHING DIVERSITY JURISDICTION: THE UNDEVELOPED ARGUMENTS, FROM THE ICE BOWL EFFECT TO THE LIVING ELVIS

David Crump, University of Houston Law Center

Abstract

ABSTRACT

The traditional arguments for and against diversity jurisdiction are well established. Abolitionists say that diversity elbows out federal claims, depends upon an enormous and wasteful body of purely procedural law, and is not needed in today’s world to prevent local prejudice. Proponents counter by arguing that diversity still is needed to counteract local prejudice, that claims about waste are exaggerated, and that providing some litigants with a choice of forum is a good thing.

But the traditional debate understates the arguments against diversity jurisdiction. There are two types of side effects of diversity that the usual arguments do not explore. First, diversity creates a series of perverse incentives. For example, the choice-is-good argument overlooks the motivation of adversary lawyers to win, rather than to select an abstractly fair forum; and thus, it fails to recognize that diversity precipitates a curious kind of race to the bottom, which this article refers to as the Ice Bowl Effect (a name borrowed from a famous football game). Furthermore, to counteract this effect, plaintiff’s lawyers defeat diversity by deliberately joining superfluous local defendants from whom they do not expect recovery, resulting in what this article calls Harassment of the Little Guy. Then, too, the cost of litigation increases dramatically upon removal to federal court, but the increased cost does not fall equally on the parties; and thus, in moderately-sized litigation, parties that might be described as Passive-Aggressive Litigants gain an advantage. Finally, the federal forum induces biases that are unrelated to the policies underlying diversity, and thus, some parties, particularly individual plaintiffs, face a Tilted Playing Field.

Second, diversity jurisdiction distorts the litigation in ways that the traditional debate does not explain. Removal, for example, adds more than complexity; it means that the processing of the litigation in two different courts creates a Twilight Zone Effect that changes outcomes. And in spite of the Erie doctrine, diversity still results in serious distortion of state laws. Today, as a result, the arguments against diversity are stronger than ever, and they far outweigh the arguments in favor of it.