committee took notice of these rules, and he has followed their development. The CHAIRMAN. We will be glad to have Mr. Armstrong's letter go into the record here. (The letter is as follows:) ARMSTRONG, MCCADDEN, ALLEN, BRADEN & GOODMAN, Hon. WALTER CHANDLER, House Office Building, Washington, D. C. DEAR WALTER: I have your letter of January 20, enclosing copy of the "Rules of Civil Procedure." I have read the rules in the United States Law Week, but am delighted to have this copy as it is of much better format and also contains the letter from the Chief Justice to the Attorney General, and the letter from the Attorney General transmitting the rules. I did not know before receiving this copy that Mr. Justice Brandeis did not approve of the rules. I do not know whether you have followed the work of this advisory committee. I have followed it closely, as I had to while chairman for 2 years of the committee on jurisprudence and law reform. You will recall at the Boston meeting the American Bar Association, on recommendation of this committee, approved the rules and at Kansas City approved the draft. This is the third printed draft I have examined and the one transmitted to the Congress by the Attorney General is the most conservative of any. The first draft went quite far in allowing service of process by private persons and pretrial examination of parties and witnesses. The objectionable features as to these things have now been eliminated. My understanding of the statute is that if the Congress does not act, the rules will become automatically effective. I hope that this will be the case. I believe they are a distinct advance upon anything that has heretofore been done. Inci dentally, I believe they could be adapted with salutary effect by our Tennessee practice. It is my thought that if Congress should not allow the rules to become effective now it would be a great set-back to the work and it might be another 5 or 10 years before the rules were adopted. As I understand it, the only objection that has ever been made to the adoption of uniform rules of civil procedure for the Federal courts at law has been the fact that practitioners in the different States would have to learn these uniform rules whereas under the conformity act they would be familiar with the State practice. There might be something to this argument if separate rules of law and equity were adopted. However, as is now the case, when the rules are combined this objectionable feature is not tenable because practitioners in the Federal court necessarily have to learn the Federal rules in equity which are a basis for these new rules. Therefore, there is no additional burden placed upon them because the same rules which they are required to learn in connection with their equity practice apply in cases of law. I think, as a matter of fact, that the committee and court have done an admirable job. As you know, Dean Charles E. Clark, of Yale, was the reporter for the advisory committee, and did a great deal of work upon them. Incidentally, he and Arthur Vanderbilt were in Memphis last Wednesday night. They came in by plane from New Orleans at 7:30 p. m., and spent 3 hours with me at home before leaving on the 10:30 plane for Washington. We discussed the rules and were all in accord that they should be adopted. With regards, as ever, W. P. ARMSTRONG. The CHAIRMAN. The Association of Life Insurance Presidents filed with the subcommittee a statement which contains statistics of importance in this investigation, and I submit the statement for the record. (The statement is as follows:) GROUNDS OF OPPOSITION TO ENACTMENT OF PROVISION WHICH RELATES TO CITIZENSHIP OF CORPORATIONS IN DETERMINING THEIR CAPACITY TO SUE IN UNITED STATES DISTRICT COURTS H. R. 8892 proposed various amendments to the Judicial Code. One of these contained in a proposed new section 430c, would provide that the capacity of an individual to sue or to be sued in the United States district courts is to be determined by the law of his domicile, and would further provide that "for the purpose of determining citizenship under this section a corporation shall be deemed to be a citizen of the State in which it is sued, if the cause of action arose within said State and if such corporation is authorized to do and is doing business therein, irrespective of the State of its incorporation." The purpose of the new language is, apparently, to take away the jurisdiction of United States district courts in suits when jurisdiction depends upon diversity of citizenship, when the corporation is doing business in the State and when the cause of action arose therein. The arguments in opposition to such a limitation of the jurisdiction of Federal courts are discussed at length in a memorandum attached hereto which was prepared in connection with H. R. 4894 and H. R. 4895, pending bills dealing with this general subject. H. R. 4894 and 4895 are complementary measures which would amend sections 28 and 24, respectively, of the Judicial Code (secs. 71 and 41, title 28, U. S. C. A.) in effect by (a) preventing removal from a State court to a district court of the United States of, and (b) abolishing the jurisdiction of a district court of the United States as to, suits where jurisdiction depends upon diverse citizenship and such suits are (1) Between corporations authorized to do business in the same State pursuant to the laws thereof; or (2) Between a natural person and a corporation authorized to do business within the State of the residence of such natural person. Corporations for jurisdictional purposes would be classed as citizens of the States in which pursuant to law they are admitted to do business without reference to the State of their incorporation. The advisability of eliminating diversity of citizenship as a ground of jurisdiction for Federal courts has been the subject of Congressional consideration for a number of years. Its advocates contend (a) This restriction of jurisdiction is essential to reduce the number of cases in order that court calendars may be relieved of congestion and thus promote the more speedy and efficient administration of justice. (b) Federal jurisdiction by reason of diversity of citizesnip works a hardship on litigants and to a certain extent is used as an instrument of oppression if not actual fraud. (c) Principle and analogy require restriction of jurisdiction. (d) The historical reasons prompting Federal jurisdiction on the grounds of diverse citizenship no longer exist. Although it is felt that the reasons for the continued availability to foreign insurance companies of Federal jurisdiction based on diversity of citizenship outweighs these arguments for restricted jurisdiction, it may nevertheless be well to examine these reasons in light of existing conditions. (A) CONGESTED COURT CALENDARS In 1932 statistics disclosed that many Federal courts were far behind in their dockets. In 1930 Senator Norris compiled data showing that the total number of civil cases filed in 1929 was 34,774 and of this number 9,630 or 27.7 percent depended upon diverse citizenship as a ground of jurisdiction. Since 1929 the work of the Federal courts has been materially lessened— certainly in most jurisdictions-by the repeal of the Eighteenth Amendment and the resulting nullification of the National Prohibition Act. In addition, a number of Federal judgeships have been created. The result is that so far as dates are given in the reported cases showing time of submission and time of decision, little delay exists in the determination of litigation in district courts. Congestion, however, should be no valid ground for the restriction of jurisdic tion. A rather casual examination fails to disclose any instances where restricted jurisdiction has been used in the past as a means to facilitate the handling of litigation. Rather, the facilities have always been extended to meet the growing demands of the country. There is no assurance that restriction of Federal jurisdiction as now proposed would materially lessen the burden of the courts or hasten 60098-38-ser. 17-11 the dispatch of business. The fact that in 1929, 27.7 percent of the cases instituted in Federal courts involved diverse citizenship does not mean that 27.7 percent of the court's time was involved in this particular class of cases. Quite the contrary appears the case. It will be borne in mind that the above figures relate to "cases filed" and not to cases finally determined. In a memorandum Mr. Silas H. Strong, president of the United States Chamber of Commerce, filed with the chairman of this committee on May 2, 1932, in opposition to a similar measure- it was shown that of the 16,809 cases reported in the preceding 9 volumes of the Federal Reporter, in only about 3 percent did jurisdiction depend upon diversity of citizenship. An examination made by this association of the last four volumes of the Federal Supplement covering the period from February 1936 to January 1937 discloses that of the 892 cases reported therein, in only 46 was jurisdiction predicated upon diversity of citizenship. This would indicate a very wide variation between the number of cases "filed" with diverse citizenship as a ground of jurisdiction and those in which formal opinions were rendered and reported. (B) IMPROPER USE OF FEDERAL JURISDICTION The proponents point to the following as warranting restriction of the jurisdiction of the United States courts: (1) Costs of litigation in Federal courts as compared to State tribunals; (2) inconvenience to litigants in many cases through travel to remote points to attend Federal courts; (3) the practice of obtaining a corporate charter in a State other than the one or ones in which the corporate business is to be located or conducted so as to make available Federal jurisdiction on the ground of diverse citizenship. Again, it is submitted that these are considerations which do not demonstrate the necessity for restricted jurisdiction. All of these objections may be made the subject of remedial legislation without the least disturbance of jurisdiction. Cost may be fixed by statute. Terms and locations of Federal courts are readily adjustable to the needs of a particular State or locality. The ability through corporate organization to invoke Federal jurisdiction has its counterpart in the practice of natural persons who can, and often do, effect a change of citizenship in order to invoke Federal jurisdiction. But this memorandum is no defense of the right to jurisdiction in this manner. Manifestly, Congress may empower the courts to protect its own jurisdiction from fraud. It cannot be seriously questioned that Congress has a right to require that jurisdiction be bona fide acquired. These matters have no bearing upon the general question of jurisdiction. (C) PRINCIPLE AND ANALOGY 1. Controversies governed by State laws should be determined by State courts.-The proponents of the measure also stress the point that cases pending in Federal courts upon the grounds of diversity of citizenship involve rights covered by the laws of the States and that therefore they should be determined by State courts. It appears inconsistent to urge Congress to take this position in light of precedents, the most outstanding of which are Federal penal statutes punishing larceny of goods in interstate commerce and transportation of stolen property between States. Goods in the custody of a carrier in process of shipment from one State to another are made the subject of a Federal larceny statute even where taking is at a time when the goods are not in physical movement. The driving of a stolen automobile from one State to another is likewise punishable by Federal statute even though the actual taking and transportation be one continuous act. Both types of cases in most States would be covered by both common law and State penal statutes. The subject matter is fundamentally for State jurisdiction. It is true that Congress has such power through regulation of interstate commerce, but the fact remains that Congress has seen fit to expand its jurisdiction and take in acts already covered in State larceny statutes. Contrary to the theory advanced by the proponents, the tendency is to enlarge rather than expand the field and authority and jurisdiction of the Federal judiciary. 2. Removal of criminal cases from State to Federal courts. As a further indication that bias and prejudice are not of particular importance in the determination of jurisdiction for United States courts, it is pointed out that there is no provision for the removal of a criminal case from a State court to a Federal court. On this premise, it is asserted that Congress has thus given more importance to property than personal rights. The answer to this contention is that the framers of the Constitution realized that the States must have authority to preserve their own sovereignty. This required full authority restricted only by the provisions of the Federal Constitution to enforce their own criminal laws. It was for this reason that section 2 of article 3 of the Constitution doubtless was restricted to cases "in law and equity." This expression certainly excludes criminal prosecution. In addition, a criminal prosecution is not a suit between citizens. It is an action to which the State is a party and does not represent the type of controversy which might be involved in diverse citizenship. Further, from a practical standpoint the fundamental differences between civil and criminal law and procedure are such as more adequately to assure in State courts fair and impartial trial of criminal cases as compared with civil suits. For example, before a person can be charged with a serious offense in a State court, he must either be indicted or proceeded against by information. He is afforded the right to a change of venue. The jury is isolated. The jury must be convinced of guilt "beyond a reasonable doubt" whereas a verdict may be reached in a civil suit upon a preponderance of the evidence. On this question of the right of removal in a criminal case, the proponents apparently have not considered section 33 of the Judicial Code as amended (sec. 76, title 28, U. S. C. A.) which does give the right of removal of certain criminal cases from State to Federal courts. This significant statute is a plain indication that Congress has recognized the possible existence of prejudice in State courts in reference to criminal matters. It further discloses a clear-cut instance where Congress has reached out and brought into Federal court a question arising purely under State law and thus we have recognition of a theory directly contrary to that advocated by the sponsors of the present measures. (d) Historical reasons for Federal jurisdiction still applicable. Not only did the framers of the Constitution appreciate the necessity of according to the citizens of the United States the right to a fair and impartial trial but recognition of the same principle is seen in the constitutions and statutes of the States. As indicating the extent to which the States have dealt with this subject, & summary of the statutes is attached hereto as an appendix. The result is that all the jurisprudence of this country is thoroughly grounded upon the proposition that the conduct of litigation must be free from either favor or prejudice. No theory of expediency should be permitted to diminish this important right. The proponents also point out that Federal jurisdiction was provided in order to avoid prejudice between citizens of different States but that corporations now invoke such jurisdiction to escape such feeling against corporations generally instead of against corporations because they have been organized under the laws of other States. It is true that prejudice to a certain extent exists against all corporations. As a practical matter, however, it does exist to a greater extent against a corporation which has been incorporated under the laws of another State. It is also contended that in the growth of the country the prejudice prevailing between citizens of different States at the time of the adoption of the Constitution has disappeared and that it is now possible for a nonresident litigant to obtain a fair and impartial trial in any State court. With this proposition we are not in accord. Even if this theory be true as to natural persons, it is not true as to foreign corporations which are to be treated as citizens under the Federal Constitution and laws. EXISTING PREJUDICE Experience of legal reserve life insurance companies discloses that in the trial of pure questions of fact by far the greater percentage of adverse determinations result in State courts. This would indicate that in the State courts the companies have possibly unintentionally been affected by either prejudice against them or undue sympathy for their adversaries. As previously indicated, the proponents of the measure insist that this prejudice, if it does exist, is merely because the litigant is a corporation, rather than because it is a foreign corporation. Although we do not agree with this theory in its entirety, even assuming such reason for prejudice, a very valid reason for the continuance of Federal jurisdiction has been established when we consider the object which the framers of the Constitution had in mind in the adoption of section 2 of article III of the Constitution covering jurisdiction of United States courts. Monograph 80 of the Federalist very clearly enumerates the many cases wherein it is advisable to confer jurisdiction upon the courts of the United States. The last of the enumeration of such cases is "to all those in which the State tribunals cannot be supposed to be impartial and unbiased." All of these grounds enumerated in the Federalist were embodied in section 2 of article III of the Constitution in almost identical language with the exception of the one just quoted. In its stead provision was made for jurisdiction of suits between citizens of different States and between citizens of the same State in suits involving land grants of different States. Manifestly the purpose of the Constitution was to insure to every citizen of the United States a fair and impartial judicial determination of his disputes. As the Federalist states, it was intended that the Federal courts should have jurisdiction of all cases in which State tribunals cannot be expected to be fair and impartial. It would have been impractical to insert a constitutional provision embodied in such language because jurisdiction would have then depended upon the facts and circumstances of each particular case. Consequently an attempt was made to describe the classes that might be affected by prejudice and in such a description reference was made to citizens of different States but the fundamental intent was to extend jurisdiction of Federal courts to all cases where State courts cannot be supposed to be impartial and unbiased. Experience of companies has shown that State courts have not been impartial and unbiased but it must not be inferred that such position is intentional or malicious. It is more accurate to say that in the State courts unintentional but undue sympathy prevails in favor of the party who is the insurance company's adverse litigant. Whether the handicap which companies experience in State courts be due to prejudice against it or to undue sympathy for its adversary, the result is a denial of a fair and impartial trial. To remedy such situation, it was intended to extend Federal jurisdiction. The framers of the Constitution recognized the inclination of the States unduly to favor its own citizens to the prejudice of those of other States. Such a thought is quite apparent in sections 1 and 2 of article 4 of the Constitution of the United States, being the "full faith" and "credit" and the "privileges" and "immunities" sections. If such prejudice no longer exists, it is just as reasonable to repeal these provisions as it is to eliminate diverse citizenship as a ground of jusisdiction of United States courts. PRESERVATION OF PRESENT JURISDICTION IN CASES INVOLVING DIVERSE CITIZENSHIP Legal reserve life insurance companies from experience fully appreciate the necessity of the preservation of Federal jurisdiction in its present form, not for the purpose of the perpetuation of any fancied privilege or advantage, but to avoid a disadvantage in some instances through litigation in State courts. From this desire to preserve Federal jusisdiction it must not be inferred that insurance companies to any appreciable extent resort to litigation in the adjustment of claims or disputes. Data from the claim records of 48 legal reserve life insurance companies for the year 1934 covering 91 percent of the total death claims paid by all United States legal reserve companies shows that of 994,542 death claims, only fortyeight one hundredths of 1 percent were involved in litigation. In other words, out of every 10,000 claims only 48 were litigated. Nor can it be said that fear of litigation affects the settlement of claims since the records of these 48 companies show that 36 of them paid 87 percent of their claims within 1 day from the receipt of completed proof of death; 11 paid 77 percent of their claims within 2 days, while the other companies paid 95 percent of such claims within 3 days. Of this comparatively small number of litigated claims, only a very few are determined by Federal courts. In the separate memorandum accompanying this statement figures are given for a 5-year period (1927-31) from which it will be seen that the companies removed to the Federal court only 542 cases out of a total of 17,777, or 3 percent of the total. Four hundred and eighty-eight cases were instituted by the companies in Federal court but this figure included a large number in which the companies were not adverse litigants but were proceeding under the Federal Interpleader Act, wherein the proceeds were paid into court subject to an adjudication as to the rights of rival claimants. Although jurisdiction of the United States courts in civil matters has been only moderately used, it is nevertheless submitted that the preservation of such jurisdiction in its present form is essential to secure fair and impartial trials in certain particular cases. When the question of limiting the jurisdiction of the district courts of the United States was under consideration by the Judiciary Committees of the Senate and House during the Seventy-first Congress, a survey was made by this association to determine the extent to which this jurisdiction involving diversity of citizenship was invoked by legal reserve life insurance companies of the various States of the United States during the 5-year period from 1927 to 1931. Since the figures then obtained from 42 companies which had 79.1 percent of all legal reserve life insurance in force in United States companies as of December 31, 1930, still fairly reflect the extent to which Federal jurisdiction is now invoked by these companies, they |