STEELWORKERS v. BOULIGNY, INC.
Legal provision: Article 3, Section 2: Extent of Judicial Power
Argument of Michael H. Gottesman
Chief Justice Earl Warren: No 19. United Steelworkers of America AFLCIO, petitioner versus R. H. Bouligny, Incorporated.
Mr. Michael H. Gottesman: Mr. Chief Justice, may it please the Court.
This case which is here on writ of certiorari to the Fourth Circuit, raises an unsettled question of federal jurisdiction.
How are the district courts to determine, whether diversity of citizenship exists, when one of the parties to the case is a labor union.
Now this case was instituted in the State Courts of North Carolina, the County Court of Mecklenburg County.
The respondent here, the company filed a complaint against the union, alleging that it had been libel by a pamphlet distributed by the union.
It sought as damages $100,000 actual damages and $100,000 punitive damages.
The only parties to the action were the company which was the plaintiff and the union which was the defendant.
The union removed the case to the Federal District Court, alleging the diversity of citizenship existed.
It asserted in its removal papers that the plaintiff company was a citizen of North Carolina, because incorporated there and having its principal place of business there, and that the defendant union was a citizen of Pennsylvania, because they were not incorporated that was the state of its principal place of business.
The company moved that the case be remanded to the state court.
It acknowledged that it was a citizen of North Carolina.
It did not dispute the union's contention that Pennsylvania was its principal place of business.
But it asserted that notwithstanding those facts diversity of citizenship did not exist because it said a union has no citizenship for diversity purposes, and that the courts must treat it when it's a party, as though it were a citizen of every state in which it has a member.
Since this union, the United Steelworkers has a member in each of the 50 states, including of course North Carolina, this meant on the company's theory that no diversity of citizenship existed.
The district judge refused to remand the case.
He held as the union had urged that it was a citizen of its principal place of business, Pennsylvania and that this was therefore a suit between a North Carolina plaintiff and a Pennsylvania defendant.
The company sought and obtained interlocutory review and the Court of Appeals reversed.
It held as the company urged, that a union has no citizenship of its own and that the district court must look to the citizenship of each of its members and that therefore a union such as this one with members in each of the 50 states, is to be treated as though it were a citizen of each of the 50 states and therefore incapable of removing cases to the federal courts on the ground of diversity of citizenship.
The question before this Court therefore, is whether labor union shall be treated as corporations have since 1844, as having a citizenship distinct from that of their members or in the corporate case their shareholders, or whether they are to have as the Court below held no citizenship and therefore be deemed citizens of every state in which they have a member.
Now of course the governing standard is Article III, Section 2, of the Constitution which creates the diversity ground and 28 U.S.C., Section 1332 (a), which confers that grant upon the lower District Courts and both speak in identical words.
The Constitution provides that the judicial power, the federal judicial power, shall extend to controversies between citizens of different states and the statute provides that the District Courts shall have original jurisdiction.
Of all civil actions where the matter in controversy exceeds the sum value of $10,000 as it does here, and is between, in the words of the Constitution, citizens of different states.
The question therefore is whether under these provisions the union like the corporation is a citizen, and in our view the beginning of that inquiry is to look to the purpose of the diversity jurisdiction, and to see whether it applies to unions as to corporations, so as to warrant their being treated as a single entity.
Now there have been historically great debates about what the purpose of the diversity jurisdiction is, and what it was when it was originally conferred.
But from the time of Alexander Hamilton's statements in Federalist Number 80, down through the legislative history of the Congressional amendments in 1958, one overriding purpose has been consistently expressed and we think must be accepted as the governing justification for the diversity jurisdiction.
And that purpose is that a neutral forum, a federal forum be provided, when an outsider is forced to litigate in the courts of its adversary or in the geographic region of his adversary.
The theory was as Alexander Hamilton put it in the Federalist, that in such cases the state tribunals cannot be supposed to be impartial.
And as concluded by the Judicial Conference in the 1950's and adopted in the Congressional reports in 1958, there is a great bulk of expert opinion from those who litigate in the courts, that local prejudice continues to exist and that the federal courts are in truth a strong protection against it.
Now, we submit that the labor union today going into those states where it is not principally found, is subjected to and receives as much local prejudice as does a corporation, which though present in that state is not principally found there.
And that the purpose of the diversity grant under the statutory conferral of that grant is equally applicable to the union, as to the corporation.
To demonstrate that indeed we do encounter local prejudice we have appended to our brief just a few leaflets which were introduced at one Congressional hearing, to show the kinds of local appeals which are made to persuade people to reject unions, when they are running labor board elections.
Now, these were submitted by one union and they refer to one area of the country.
That these leaflets are encountered by unions and these appeals to local prejudice are encountered by unions, all unions not just this one, in many sections of the country, indeed in all of those where they are not -- what might be described as the non-industrial states, those where the unions are not commonly found and principally found and very much at home.
And the common theme of all of these leaflets is that the union is the outsider, don't let this outsider into our community, let's not bring this outsider into our community and they reflect what really is today an economic conflict between the states.
We have today a great battle to attract industry between the states.
We have some states trying to keep it and others trying to attract it and all of them very busily engaged in what is this form of economic competition.
And some of those states have sought industry and advertised for it, on the ground that labor standards are a less expensive here and that this is an attraction, which you should look at when deciding to come here.
As a result of this conflict people in those states which are seeking business on this basis are constantly urged, as they are in some of these leaflets and editorial, constantly urged to reject the unions, let's not let them in here, because once they come in this great argument that we have to attract business to this region will disappear.
So that when a union is sued in the State Courts of such a state, where such appeals have been made, and where such local prejudice against them does indeed exist, it faces a mighty burden and a mighty danger.
In this case for example, a prominent local corporation is seeking damages to the tune of $200,000 against a union which has come to that state and sought to organize its employees.
Now, to be sure this union does have a few more members in that state, they constitute less, considerably less than one-tenth of 1% of its membership, but there --
Justice William J. Brennan: [Inaudible]
Mr. Michael H. Gottesman: It has -- , well this union, the Steelworkers sets up a local whenever it organizes a plant.
It has, I understand a couple of plants in North Carolina and therefore couple of locals.
It had no local at the situs of this plant, because it doesn't create one until after it's organized the employees and they've elected it and of course in this case as it happened, the union was not elected, so no local was ever created.
But it does have a couple of locals in the state of North Carolina and it may be that even on their theory those locals which are independent entities, independent legal entities, might be citizens of North Carolina.
Justice John M. Harlan: [Inaudible]
Mr. Michael H. Gottesman: Pardon me.
Justice John M. Harlan: [Inaudible]
Mr. Michael H. Gottesman: Yes, they may well be on our theory, but of course they are not sued here.
Justice Byron R. White: No one is sued?
Mr. Michael H. Gottesman: No one is seeking that they pay the liability which might be awarded in this case, the international is sued here.
And the jury will well know that if it awards a verdict of $200,000 it is not going to be paid by our few members there nor by these locals who are not parties, but it's going to be paid from the treasury of this union, which is in a bank in Pittsburgh, Pennsylvania.
Justice John M. Harlan: [Inaudible] holding in your favor, do you realize that is not ordinary business partnership [Inaudible]
Mr. Michael H. Gottesman: Well we think and I hope that will develop in my argument, that the standard which ought to be used in determining, whether an unincorporated association is a citizen, is not a broad one which says that every unincorporated association is a citizen, but one which looks to the legal characteristics of the association to determine whether in fact it is so viewed as an entity distinct from it's members, that it is likely to be subjected to the prejudice of an entity or whether in fact it is primarily a loose group of people associated together which perhaps has a few characteristics of a legal entity, but not very many.
We think indeed that this Court has already said that in Puerto Rico versus Russell which I'll come to.
Now it may well be that in the common partnership the two men who bound together, the characteristics of legal entity, which have been assigned to that partnership, are considerably less, indeed I am sure they are, then that which is assigned to the labor union today.
For many more purposes the partnership is not an entity but two men joined together, who are treated as two individuals for numerous purposes in the law.
For many less purposes as I'll show is a labor union so treated as a group of members.
Indeed it is now I think safely to be said treated as much an entity as is a corporation and we will show this I hope in the course of the argument.
Now to be sure we have spelled out the prejudice which we, the labor union fear, the local prejudice which we fear in certain states, but this is not a one sided matter.
There are those who must sue the union where it can be found in its states, who feel that in such states they are the outsider and it's they who want the protection of the diversity jurisdiction.
Indeed this is I think the first case ever to reach an appellate court in which it's been the labor union asserting that diversity exists.
There have been only a few cases in the appellate court that those that have gotten there with the exception of this one, have been cases when the labor union is adversary in the proceeding, usually an individuals, sometimes a corporation, is alleging and asserting that diversity exists and that therefore they are entitled to the protections of the federal courts.
This is very much as is I suppose every diversity consideration a two-way street.
You are an outsider somewhere and you are insider somewhere and whichever side you are on, someone would like to be in federal courts for its protections, where indeed you have citizens of different states.
Now the plaintiff, the person who wishes to sue the union has gotten rather sympathetic treatment from some of the Courts of Appeals including the Court below.
They recognize, indeed they say it would be a failure of justice if one could not bring the labor union into the federal courts on diversity grounds and they have therefore approved the procedure of suing union in a class action, not naming the union, but naming certain representatives of the union as the defendants, being careful to select only representatives who's citizenship is distinct from the plaintiffs.
And then under the prevailing doctrines of this Court, since you look only to the representatives of the class to determine diversity, then finding that there is here diversity of jurisdiction because the plaintiff is a citizen of state A and the particular of representatives of the labor union named are not citizens of state A.
And they have said that this procedure allowing this class action was essential to bring the labor unions into the federal courts on diversity grounds and essential to prevent the failure of justice.
We submit however that while that decision and the desire to bring the federal court -- the labor unions into the federal courts as defendants is entire sound.
That it's grossly unfair to say that the labor union likewise doesn't have the opportunity to remove it's case to the federal courts on diversity grounds, because the consequence is that the plaintiff is given the absolute option.
This North Carolina citizen who wants to sue what really is a Pennsylvania corporation can choose which court we will be in, if it wants to sue us in federal court it sue as a class and it will have diversity under the decisions of the court below.
But if it wants to prevent us access to the federal courts, it may only sue us in our common name as an entity and under the decision of the court below we are forbidden to remove this case to the federal court.
This we think a far greater of failure of justice than one which would keep both parties out of the federal court.
And so we submit that if this question were one of first impression and for reasons which I'll get into, we don't think it is, that looking to the purpose of the diversity jurisdiction, looking to the fact that this Court has since 1844 concluded that, that purpose warrants treating a corporation as a citizen, that likewise a labor union should be treated as a citizen for diversity purposes.
But we think it's not a case of first impression.
Indeed, we think this case is governed by this Court's decision in 1933, in Puerto Rico versus Russell.
We've said --
Justice Hugo L. Black: In what case did you say?
Mr. Michael H. Gottesman: Puerto Rico versus Russell.
It appears at pages 22 through 25 of our brief, which is the light gray brief and in that case the Court had before it an unincorporated association entitled “Sociedad en comandita,” a Puerto Rican unincorporated association and the question was, was it a citizen of Puerto Rico, which is where it was chartered and setup or was it as the sociedad contended not a citizen of Puerto Rico because all of its members were citizens of another state.
And the Supreme Court first took a broad look at its decisions dealing with corporations and it said, we have said that a corporation is a citizen or treated as a citizen, not because of any magic surrounding the act of incorporation, but because the corporation is a complete legal personality, is endowed with a complete legal personality and therefore it is convenient to treat it so as a legal personality for purposes of diversity jurisdiction as well.
And it said the question we must decide with respect to this unincorporated association is whether it too has been endowed with a complete legal personality for other purposes.
Such that it can be conveniently treated as such a legal personality for diversity -- for citizenship purposes as well.
Justice Byron R. White: [Inaudible] if the union – you know if a plaintiff picks out a couple of union members and sues them a as -- in a class action in the federal court as you suggested could be done and judgment is obtained against the -- to -- from whom can you collect the judgment?
Let's not say whether the union would paid it or not, but who could you force to pay it?
Mr. Michael H. Gottesman: The prevailing rule, as I understand it and there is First Circuit decision which had some trouble with this, but the prevailing rule is that if you sue these representatives in their capacity as representatives of the class, normally some sort of officer or and it's not just any member, you've got to find someone who has some sort of representative.
Justice Byron R. White: Well what kind of class -- you mean as representative -- you are suing him as representing the union?
Mr. Michael H. Gottesman: That's right as representing --
Justice Byron R. White: As representing class of individuals?
Mr. Michael H. Gottesman: As representing the class which consists of all the members of the union.
The prevailing rule and it's not the exclusive rule, is that you can collect your judgment out of the union's treasury.
Justice Byron R. White: Out of the union treasury?
Mr. Michael H. Gottesman: Yes.
Justice Byron R. White: What does that rule obtain?
Mr. Michael H. Gottesman: It obtains in those decisions which have held, that they are cited in our case that --
Justice Byron R. White: Is there some citations to the contrary?
Mr. Michael H. Gottesman: There is a First Circuit case which has held expressly to contrary, and said that if you sue the representatives as representatives of the class, you can only collect from each of the members of the union individually, but not from the treasury of the union which in our judgment would be far worse result.
Justice Byron R. White: Well how about converse?
Can -- do you of any cases in which individual union members have sued as -- brought a class action against somebody in the federal court?
Mr. Michael H. Gottesman: On behalf of the union as an entity?
Justice Byron R. White: Well on behalf of the class?
Mr. Michael H. Gottesman: I am not aware of any of the purpose in which --
Justice Byron R. White: I don't know why it wouldn't be as permissible as being sued that way?
Mr. Michael H. Gottesman: Well it would.
As a practical matter it never arises though, because it's just -- a peculiarity since federal law governs so much of the conduct of a labor union, virtually any suit which a labor union would want to bring is one which is not --
Justice Byron R. White: But what if you wanted to bring the libel action?
Mr. Michael H. Gottesman: Well assuming that the states are now holding that a labor union can be libel as an entity.
Justice Byron R. White: Yes.
Mr. Michael H. Gottesman: Yes I suppose that under these decisions the representatives of the union could bring such a class action.
Justice Byron R. White: In a federal court?
Mr. Michael H. Gottesman: Pardon me?
Justice Byron R. White: In a federal court?
Mr. Michael H. Gottesman: In a federal court alleging diversity and if the decision of the court below on that question, the representative question is correct, then they could create diversity jurisdiction in that manner.
The much more common case however is when the union is the defendant, in that very narrow area of cases which are not governed by federal law, because of course to the extent that unions activities are governed by federal law, the removal of law on federal question ground and --
Justice Tom C. Clark: What is [Inaudible]
Mr. Michael H. Gottesman: I'm sorry?
Justice Tom C. Clark: [Inaudible]
Mr. Michael H. Gottesman: Held that he could not collect from the entity's class.
It's a First Circuit case and it's not cited in our brief, I don't recall whether it's cited in the respondent's brief or not.
But it is -- and I'm afraid it's not and I don't recall the name of hand, but we would if the Court desires.
It's I believe Oscuel versus someone and we would if the Court desires submit the name of the case after the argument.
Predominantly however the Labor Union's activities are governed by Federal Law and are removable on Federal question grounds.
We are dealing with a very narrow area.
We are dealing with the area which is neither contract actions, they are covered by 301 or internal matters, which are governed by Landrum-Griffin, nor preempted matters.
We are dealing in other words with violent torts and possibly with libel actions because this Court is to sit this term to decide whether or not they are preempted and in this narrow area the union is rarely the plaintiff, you can't be -- a union can hardly be injured by a violent tort as an entity.
It's almost always the defendant.
This is the area where the removal question is going to be raised.
Justice John M. Harlan: [Inaudible]
Mr. Michael H. Gottesman: The language of the statute is 28 U.S.C. Section 1332(a).
Justice John M. Harlan: [Inaudible]
Mr. Michael H. Gottesman: Subsection (1) which says that there is jurisdiction when the controversy is between one, citizens of different states.
This is at page two of our brief.
Those are of course the same words which appear in the Constitution.
Now we believe that what the Supreme Court said in 1933 in Russell is that when an entity has acquired all of the characteristics of legal personality as a corporation has, it is entitled like a corporation to be treated as a citizen for the purposes of Federal Jurisdiction and that we think is the governing case here because as we've set out in our brief, pages 32 through 35, the Labor Union today is for all virtually all purposes the same legal entity that a corporation is, it's far more a legal entity than the sociedad involved in the Puerto Rico versus Russell case.
Justice Abe Fortas: Mr. Gottesman what do you have say about the point made in your opponent's brief that Puerto Rico against Russell really turned on the question of domicile not citizenship and that, that is an important difference for the purposes of your case?
Mr. Michael H. Gottesman: Well Puerto Rico versus Russell arose under the Organic Act as we say in our brief, not under the diversity statute as such, but the Organic Act provides that there will be jurisdiction in the Federal District Court if either of the parties to the action is not a citizen of Puerto Rico.
And there was the other -- pardon?
Unknown Speaker: [Inaudible]
Mr. Michael H. Gottesman: I believe it says not a citizen of Puerto Rico domiciled in that state are the exact words.
Unknown Speaker: [Inaudible]
Mr. Michael H. Gottesman: It says when --
Unknown Speaker: [Inaudible]
Mr. Michael H. Gottesman: Where all of the parties on either side of the controversy are citizens of a foreign state or states, or citizens of a state territory, District of the United States and not domiciled in Puerto Rico.
Unknown Speaker: [Inaudible]
Mr. Michael H. Gottesman: That's right, but I don't think you can read the decision to say that.
If you read the Puerto Rico versus Russell decision, the Court from the beginning to end says the question we have before us is whether for the purposes of Federal Jurisdiction this sociedad shall be treated like a corporation as a citizen for purposes of Federal Jurisdiction.
And what the Court does is to analyze and exclusively those cases in which it has dealt with the question of diversity of citizenship and it's entire analysis and it's entire rationale is structured on a comparison of the sociedad to a corporation in light of its decisions according citizenship to a corporation for diversity purposes.
Now we don't deny that this was not a diversity case, but the decision of the Court reflects the Court's judgment.
You cannot read it I think and come to another conclusion, that if an unincorporated association has the same legal characteristics as a corporation, it should be treated the same for the purpose of diversity jurisdiction, of all kinds of Federal Jurisdiction, including diversity jurisdiction.
Now one more thing I'd like to point to, corporation is not a citizen for all purposes under the Constitution.
That word appears in a number of places.
Corporation is not a citizen for the purpose of privileges and immunities, it has been held such.
It is a citizen for the purposes of diversity jurisdiction.
Likewise it is not a person for some purposes, but it is for others and the case we would like to call to Your Honor's attention which appears at pages 34 and 35 of our brief, is United States versus White.
That involved the question is a Labor Union entitled to treatment as a person with the privilege against self incrimination and the Court had already found that a corporation is not and the question was is the decision with respect to corporations equally applicable to Labor Unions and what the Supreme Court said was we've looked to the purpose of this Constitutional Clause, we've already said that it is not applicable to corporations and we find that Labor Unions are so much like corporations today that the same purpose and the same justifications require that they be treated the same way.
Since a corporation does not have the privilege neither does a Labor Union.
We submit that here in Russell the reverse is true, since the Court -- Russell in this case, since the corporation is a citizen for a diversity purposes, so should be the Labor Union, which is precisely like it in all legal respects and I should like to reserve the remainder of my time if I may.
Chief Justice Earl Warren: Mr. Grier.
Argument of Joseph W. Grier, Jr
Mr. Joseph W. Grier, Jr: Mr. Chief Justice may it please the Court.
On this appeal the union is faced is with an adverse opinion on the law, an experienced Circuit Court composed of Chief Justice Sobeloff and Circuit Judges Bowman and Bail.
A record which does not contain the proof that would be required for the union's standard and by actual facts which would show that the union has a greater political strength in the area, does then does -- then does respondent Bouligny.
In the oral argument if I may, I would like to try to make these five points.
One, the record does not establish the facts required for diversity jurisdiction, applying the test suggested by the union.
Second when the action was filed, the law was clear that the union had no right to remove from the state to the Federal Court on the grounds of diversity.
Third the existing law as established by this Court, has the advantages of simplicity and of certainty, important on jurisdictional questions and the rule suggested by the union is difficult to apply and uncertain.
Four the classic reasons for diversity that is prejudice against litigants from outside the state is unlikely as against a union with a local establishment.
We finally fear if the long settled law is to be changed, the change should be accomplished by legislation after completion of a careful study now being made by the American Law Institute at the request of the Chief Justice of this Court.
Now on the first point the record consists only of the complaint, the summons, the notice, the motion to remove, the fallable bond, the motion to remand, an affidavit which we filed by a plaintiff in a companion suit Mr. N.F. White as the union's local membership.
The District Court's memorandum opinion was rendered after an informal hearing in chambers at which no evidence was taken.
There are no findings of fact apart from the memorandum opinion.
The record as such contains no evidence as to how the union in fact is organized, how the union in fact operates, that in fact its principal place of businesses is in Pennsylvania or is the union as thrown in its brief that Bouligny is a prominent local corporation.
Now the point is that when the jurisdiction on diversity grounds is put in issue, the burden of supporting its jurisdiction allegations falls to the union by competent proof.
There is a case which we cite of Thompson against Gaskill decided by this Court in 1942 in which Mr. Justice Frankfurter for the Court said the policy of the statute conferring jurisdiction upon the district courts calls for strict construction.
Accordingly if a plaintiff's allegation of jurisdictional facts are challenged by the defendant, the plaintiff bears the burden of supporting the allegations of complaint by -- allegations by competent proof, the bill must be dismissed, if the evidence in the record does not support the allegations.
Now broadly the union contends in this case that you should adopt the rule that because they say and because the district judge said and because certain court actually assumed that a modern labor union has these corporate characteristics, that the same rule should be applied to it as has been applied first by the Court and now by Congressional legislation in 1958 to corporations.
And we suggest to you that there is nothing in the record about this particular corporation, about this particular defendant that would enable a court to find any facts and that under the law, it was up to the union to put into the record those facts.
Second point, when the action was filed in May of 1963, the law was perfectly clear that the union had no right to remove from the state to federal court on grounds of diversity jurisdiction.
This Court had so held in Chapman against Barney, cited in our brief, in Great Southern Hotel Corporation against Jones.
Seven of the ten circuit Courts of Appeals had so held.
In three of those cases this Court had denied certiorari.
Those cases are cited on page 19 of our brief.
The study being made currently by the American Law Institute states under existing law the actual citizenship of each member apparently has to be taken into account in determining whether diversity exists, I'm quoting the American Law Institute study.
About five years ago, Chief Justice of this Court requested the American Law Institute to make the study.
I'm quoting from the 1965 proposed final draft on page 61.
I will read the language again. “Under existing law the actual citizenship of each member apparently has to be taken into account in determining whether diversity exists.”
Justice William J. Brennan: [Inaudible]
Mr. Joseph W. Grier, Jr: Yes, sir and I would like under my fifth point to come to that if I may.
In this case, removal on the grounds of diversity jurisdiction could haven been prevented by the class action by naming defendant union members as defendants to residents in North Carolina.
Now again if I might make reference to the American Law Institute report, on page 61 of that report, the law on that point is thus summarized.
“Under present law it is possible to create or avoid federal jurisdiction by bringing suit on behalf of or against some or all members of the association with an eye to their citizenship and without regard to the principal place of business of the association itself.”
See discussion in International Allied Printing Trades Association versus Master Printers, 34 Federal Supplement, 178 a district court in New Jersey in 1940.
There also on the same point is a Fourth Circuit opinion, the Judge Parker I think name of the case is Thompson but I do not have the citation to the particular case.
I emphasize this point for this reason.
When we brought the suit in the state court, the law was clear that the union had no right to remove on diversity grounds.
It may have had a right to remove on federal question grounds but not on diversity grounds.
If we thought that was any doubt about the law, we could have brought a class suit and foreclosed the thing once and for all and I suggest that in this particular suit as a matter equity as between the parties, the law --
Justice Byron R. White: [Inaudible]
Mr. Joseph W. Grier, Jr: Sir?
Justice Byron R. White: [Inaudible]
Mr. Joseph W. Grier, Jr: As I understand the rule Your Honor, Bouligny being a North Carolina corporation could have named the local agent and some other local members.
Justice Byron R. White: [Inaudible]
Mr. Joseph W. Grier, Jr: No, we wish to stay in state court.
Justice Byron R. White: [Inaudible]
Mr. Joseph W. Grier, Jr: Yes we brought the suit in the state court, it was the union that wished to go to the federal court.
Justice William J. Brennan: Naming the defendant as a union, is it?
Mr. Joseph W. Grier, Jr: Yes, sir.
Justice William J. Brennan: As you may under North Carolina practice I gather?
Mr. Joseph W. Grier, Jr: Under North Carolina practice there are two sections of our law.
One is GS1-97, passed about 1939, which first provided for serving an unincorporated association with summons.
And there was some question as to whether that accomplished the whole of making the union suiable, so that in 1955, there was an additional provision added that's GS1-69, which specifically says, that a suit may be brought.
Justice Byron R. White: We just may -- we might have trouble questioning your judgment?
Mr. Joseph W. Grier, Jr: Yes.
Point three, the existing law has the advantage of simplicity and of certainty.
The important considerations on jurisdictional questions and the rule that has been suggested by the union, would be difficult to apply and would be uncertain.
It has been two-and-a-half years since this action was filed and as yet the union has not filed an answer to the complaint.
Indeed the union says to us in its brief that it's not exhausted its motions on the question of jurisdiction.
If the established rule had been applied by the district judge, his memorandum opinion said that he didn't, he was not satisfied about the law and he would like to know what the law was and therefore on his motion certified to the circuit court, it was case the circuit ought to take.
If he had sent the case back to the trial court in Mecklenburg County for trial it would have been long ago disposed of.
The courts in that county and indeed in most of North Carolina current.
They are trying cases there, on the facts that arouse within this year, some within six months.
And the case could have been long ago disposed of and I think of course equity be disposed of had not this point been raised.
If the rule were to be followed which has been suggested by the union and that is the rule that the union says was announced by this Court in Russell, it would require an inquiry by the district court in each particular case, in order to verify what the facts in that particular case might be.
In other words, it's a rule that depends on the facts of the case and not on the simple fact as in corporations of one particular thing that can usually be easily ascertained from the record.
Justice Byron R. White: You mean one labor union might be different than another?
Mr. Joseph W. Grier, Jr: One labor union might be different from another.
Justice William J. Brennan: Or even the same one, I gather, your position might be -- in different cases it might require factual inquiries in each instance, even against the Steelworkers?
Mr. Joseph W. Grier, Jr: Yes sir.
Justice William J. Brennan: Is that it?
Mr. Joseph W. Grier, Jr: Yes sir.
And each such inquiry would require time and expense and delay, which would further add to one of the objections trials from the federal court and that is the time consumed and expense involved in litigating what are normally relatively simple matters.
If the union rule is adopted in this case, it would yet leave to plaintiffs, the device of class action that might be brought, so that it would not really catch anyone except the party is not yet aware of the opportunity of bringing the class action.
And it might take from the state courts determination of matters that really should belong in the state courts for determination.
Except to the extent that Congress by the National Labor Relations Act may have preempted the field or given some directions, if affect of the law of libel is a matter that's to be determined in accordance with North Carolina law, if the case is tried in the district court, it will of course be the duty under Erie against Tompkins for the district judge to apply the North Carolina law of libel to this case.
He would be in the situation of applying the law of North Carolina where there would not be a direct appeal to the highest court of the state of North Carolina, which is I understand it is not thought by authorities to be a desirable situation.
I suggest to you under the fourth point that the classic reason for diversity, that is prejudice against litigants from out of the state is unlikely against a union with a local establishment.
I might suggest to you that, that is not prejudiced in North Carolina as I suppose elsewhere, that the country clubs against labor unions.
As I think it would be recognized, that they are many social and economic groups in which corporations and corporate officers are not particularly popular.
But the point is that the Federal Courts in diversity matters do not sit for the purpose of affording jurisdiction in every matter of prejudice, but sit only for the purpose of protecting litigants against prejudice which arises against them because they happen to reside outside the state.
I suggest to the Court that if any prejudice would exist against the union in this case it would not be helped by the suggestion that this union happen to have its headquarters in Greensboro, North Carolina or some other place in North Carolina.
In other words, if there is any prejudice that would apply against this union it does not arise because it is not a North Carolina union, it arises out of economic reasons that have nothing to do with briefs.
Now finally, the last point that I wish to make, If the long settled law is to be changed, the change should be accomplished by a legislation, after completion of the careful study that's now being made by the American Law Institute at the request of Chief Justice of this Court.
About five years ago Chief Justice made that request.
Mr. Richard Field of the Harvard Law School was named as the reporter of that study.
Beginning at least in 1962, perhaps in 1961, but I believe I'm certain as to 1962 and each year since then at the annual meeting of the association, Mr. Field and the distinguished group of scholars that he has associated with him, have submitted to the annual meeting of the American Law Institute proposed recommendations in regard to the division of jurisdiction between the state and the Federal Courts.
At the meeting in 1965 there was submitted a proposed final draft number one, which completed the study on the general head of diversity jurisdiction.
Now the reports that have been submitted contains some recommendations in regard to the matter that's at issue in this case.
The reporters recommend some changes.
They do not recommend the changes that have been suggested by the union.
What does now 1332 having to do with diversity jurisdiction?
Well under the numbering section of proposed legislation be numbered as Section 133.
That would provide that except as provided in this section and Section 1302 of this title, that district courts shall have jurisdiction originally or on removal of any civil action between citizens of different states, citizens of a state or foreign states or citizens of the subject thereof, citizens of different states in which foreign states or citizens are subject thereof additional bodies, wherein the matter in controversy exceeds the sum or value of $10,000 exclusive of interest or cost.
In Section (b) for the purposes of this section and Section 1302 of this title, one a corporation shall be deemed a citizen of every state or foreign state by which it has been incorporated and of the state or foreign state where it has its principal place of business.
That follows Section (c) of the passed law except that it adds the language a foreign state which is thought to be in doubt under the present law but which is not material here.
It then adds another section that's directly in point as to this case.
A partnership or other unincorporated association capable of suing or being sued as an entity in the state in which an action is brought shall be deemed a citizen of the state or foreign state where it has its principal place of business.
Whether such action is brought by or against such partnership or other unincorporated association or by or against any person as an agent or representative thereof.
Justice William J. Brennan: Well that means that if that had been in effect when you brought your action against the Steelworkers, it wouldn't be removable, isn't that right?
Mr. Joseph W. Grier, Jr: It would be removable if this was the end of the recommendations.
Justice William J. Brennan: Oh I see.
Mr. Joseph W. Grier, Jr: But there is a Section 1302 that says provided however and it's that section that I would like to come to, but before I do it, I would like to make a couple of comments about this section.
That is that the test of looking to the characteristics of the union which is the Russel suggestion, is not here adopted, but rather the suggestion is made that the entity be recognized if under the law of the state it has the capacity to sue or be sued, which is a relatively simple test, though it would vary from place to place, it's a rule of Section 17(b) I believe --
Justice William J. Brennan: And under the law of North Carolina –-
Mr. Joseph W. Grier, Jr: A Union --
Justice William J. Brennan: Steelworker could –-
Mr. Joseph W. Grier, Jr: Yes.
Justice William J. Brennan: [Inaudible] suit.
Mr. Joseph W. Grier, Jr: Yes, that's correct.
It also you will notice abolishes this device of the class suit, because it provides that the entity theory is applied even though the action is brought against representatives of the union.
Now in Section 3 just for sake of clarity and completeness, there is a section added that it would reenact the 1964 amendment arising out the Louisiana situation in which a direct suit against an insurance company was authorized, and that language is repeated.
And then Section 4 is language which would avoid the device of appointing an executor, citizen of another state of the purpose of creating jurisdiction.
The executor is also to be deemed a citizen of the state of the deceased.
Now Section 1302 says, general diversity of citizenship jurisdiction exceptions, the jurisdiction of district courts under Section 1301 of this title shall be subject to the following exceptions.
(A) no person can invoke that jurisdiction either originally or on removable in any district in a state of which he is a citizen, that's the most profound of the changes that's being suggested.
The statistics indicates that something like 45% of present original diversity jurisdiction would be eliminated and taken from the Federal Courts as result of this provision denying to the plaintiff a Federal Court in his own state.
Justice Byron R. White: Well what would that do to you?
Mr. Joseph W. Grier, Jr: That would have no application to this case.
(B) no corporation incorporated or having its principal place of business in the United States and no partnership unincorporated association or sole proprietorship having it's principal place of business in the United States, which has and for a period of more than two years maintained a local establishment in the state, can invoke that jurisdiction either originally or on removal.
In any district in that state in any action arising out of the activities of that establishment.
Justice William J. Brennan: Well your thought would be that if Steelworkers has local unions in the state that takes them out of Landrum-Griffin?
Mr. Joseph W. Grier, Jr: Yes sir.
Justice William J. Brennan: That would depend I suppose whether a local union is a local establishment, would it?
Mr. Joseph W. Grier, Jr: Well the definition of a local establishment is defined as follows.
The term local establishment as used in this subdivision means a fixed place of business where or in connection with which is regular part of such business services are rendered or accommodations furnished to persons within the state, sales, delivery or distribution of goods are made to persons within the state by one regular maintaining a stock of goods or showroom for the display of samples and three; sales of insurance, certificates of other intangibles or real property or interest therein are made to persons in the state; Four, production or processing takes place.
Now as this section establishing the additional limitation on Federal Jurisdiction of the local establishment which in the first draft was --
Justice William J. Brennan: But you read that definition of local establishment, that doesn't seem to me that was federal labors --
Mr. Joseph W. Grier, Jr: Well it may not if Your Honor please.
As a matter of fact there is another provision that says that this would not, which is a point of controversy within ALI at this point or was at the annual meeting.
Justice Byron R. White: Now whether it's a matter of structuring diversity jurisdiction the union would or wouldn't be within that exception nevertheless the ALI recommendation is that the union be treated as an entity and as a citizen and it's just that some citizen may have some activities in the state which may borrow from the Federal Court, but on the issue we're talking about the ALI seems to have gone along the Russell way.
Mr. Joseph W. Grier, Jr: No sir, the Russell way is to look at particular facts of the entity, all the facts.
The ALI test is to look only at the question of whether under state law it's capable of suing or being sued, it adopts the simple test.
Justice Byron R. White: Now you are just saying -- all your are saying is they get at it in a different way.
Mr. Joseph W. Grier, Jr: Well, they go at it in a different way, but I am suggesting to you --
Justice Byron R. White: They arrive at the result of the union being as a -- qualified to be in court as an entity.
Mr. Joseph W. Grier, Jr: I suggest to you though it's vastly superior way to that of having to make an inquiry into each particular case.
Justice William J. Brennan: And I suppose it's true is it, still that in many, many states, perhaps in most unions are not suiable?
Mr. Joseph W. Grier, Jr: One of the things we say about this particular unit – union that claims to have all the authority is in its own state of Pennsylvania, it may sue only in the name of trustees.
Justice William J. Brennan: Yeah.
Mr. Joseph W. Grier, Jr: Which we say is a fairly serious limitation.
Justice William J. Brennan: Well it's a long time since I've to think about this, but it used to be I know that you couldn't sue in most states.
Mr. Joseph W. Grier, Jr: I going to make this point about the local statute rule, it applies to corporations as well as to unincorporated association and represents an effort on the part of ALI people to contract Federal Jurisdiction and perhaps the basic issue here is the question of how far should Federal Jurisdiction go that may cut across what the union regards as the trend to treat any of these in a different way from what they were formally treated.
In any event when first draft of this came in, the local establishment rule had no application to unincorporated associations.
The floor of ALI insisted that it ought to, so in 1964 they voted to include it.
In the 1965 draft it was so included as I have read it to you except that a provision then appeared to this effect, the provisions of this subsection shall apply only to entities organized or operated primarily for the purpose of conducting a trade investment or other business enterprises, thought by the reporters to exclude religious, charitable, paternal organizations and labor unions and the suggestion was made that it seems to me to be entirely erroneous that the reason for excluding such organizations was that they could not acquire a local personality as could a business organization.
I would think that if any group could acquire a local personality it would be a local church for instance or some other eleemosynary institution.
Well, to summarize then let me say that we think that the law is well settled in our favor.
We think that the law as it exists is simple.
We think if the law is to be changed it ought not be changed along the lines of Russell, which would be complex, but that it would be better as a matter of working all of these things out if the report of the American Law Institute could be completed and if the Congress could then have appropriate hearings about it and if these things that affect venue, affects labor relations and a great many other things could all be considered at one time and the thing brought about in an orderly fashion.
Thank you very much.
Chief Justice Earl Warren: Mr. Gottesman.
Rebuttal of Michael H. Gottesman
Mr. Michael H. Gottesman: May it please the Court.
I should like to devote the reminder of my time to two points raised by counsel for respondent.
The first is as to the entity status of a union vis-a-via a corporation and specifically in response to Mr. Justice Brennan's question.
A labor union now to our knowledge is suiable as an entity virtually in every state of the union.
In the last ten years the state courts by statute and by modification of their common law have made a union an entity not only in that respect, but they have made a union such an entity that it may sue for libel of the entity as such, something which was not --
Justice William J. Brennan: [Inaudible]
Mr. Michael H. Gottesman: And it marches on because the union has become an entity and recognized as such.
And the clearest indication of this is the Landrum-Griffin Act in 1959, which really is a corporate charter for labor unions.
You've got to have a Constitution and bylaws, you must file in as public records.
You must have elections at periodic times.
You must not have certain kinds of trusteeship and so on.
The entire structure of a union is regulated precisely as is a corporation and Congress said that the reason for that was, it said in the legislative report, that unions have now become like corporations to be entities distinct from their members and must be regulated as such.
So we think insofar as the entity question is concerned, the union is like the corporation an entity.
More on that Mr. Grier said that the problem will be in every case you'll have to try the facts of the labor union's entity.
But these are not questions of fact, but of law.
The law makes the labor union an entity.
Federal law primarily Landrum- Griffin and so on and virtually unanimous state law as a result to these amendments over the last ten years.
The second point I'd like to reach is the suggestion let's leave it to Congress.
A very appealing suggestion I suppose, although the Court has to decide the case one way or another, in whichever way it decides it of course it will ultimately do what the Congress which has the right to amend this Court's decisions on the question of jurisdiction.
But we suggest that Congress has already exercised the full scope of it's constitutional jurisdiction, for it has written a diversity section of the statute in precisely the words of the Constitution.
If, and this has been true in 1875 Congress almost wrote the Constitution into the statute, not only for diversity grounds, but for all jurisdictional ground.
It has then over the years written exceptions in to be sure there is a $10,000 jurisdictional amount, there are a number of exceptions.
There is non saying labor unions are not to be treated as citizens, and so we have a statute in the words of the Constitution saying there is jurisdiction between citizens of different states.
If Congress has the constitutional power to allow a labor union to remove the case on diversity grounds, then presumably it has done so by writing the statute in the words of the Constitution.
Justice Hugo L. Black: Why is that followed?
Mr. Michael H. Gottesman: It doesn't necessarily follow.
Congress could use the constitutional words and intend to mean something less, but the history of 1875 Act is that Congress intended to adopt the constitution.
Justice Hugo L. Black: It doesn't define the word suit?
Mr. Michael H. Gottesman: Well, that's right it may not be constitutional to make a labor union a citizen, but if it is constitutional we say Congress has already done it.
So it maybe unconstitutional, but if it's constitutional, it cannot be left to Congress because Congress has done it already, that is our point.
Chief Justice Earl Warren: Thank you.