Supreme Court To Hear Jurisdiction Issue

Insurers and others in the business community have argued they are penalized by trial lawyers' ability to seek out friendly venues and bring cases in state courts where juries and jurists have consistently assessed defendant companies with heavy awards and penalties.

Appealed from the fourth Circuit Court of Appeals in Richmond, the case, Lincoln Property Co. Et Al. v. Christophe Roche, Et Ux, deals with whether Christophe and Juanita Roche, a Fairfax, Va. couple, can sue the Texas-based company in Virginia courts over exposure to toxic mold in their apartment. The building is operated by a Lincoln subsidiary.

The company argued that the case should be heard in federal court because it is headquartered in, and thus a citizen of, Texas. However, the Appellate Court ruled that the presence of a Lincoln subsidiary in Virginia was enough for the company to be considered a citizen of the state, and thus the case should be heard in state court.

In cases where there is diversity of state citizenship between the parties civil matters are decided in the federal courts.

"The only way they can get to federal court is to prove that they are Texas citizens," said Jeffrey White of the Association of Trial Lawyers of America. However, he noted that in the Roches' case, the court may be looking at the overall issue of state versus federal courts rather than the specific case itself. "The court may be looking at this as people playing games with the system," he said.

The Appellate Court, he noted, found that the case was essentially a landlord-tenant issue, which is typically dealt with locally in state court. However, the raising of the state versus federal court issue brings with it what Mr. White called an "underlying federalism theme" that he feels the court may be seeking to address.

"Why would the court take review of the case just to affirm it?" he asked. "They must have something they'd like to say on this issue."

Mark Behrens, a partner with the firm of Shook Hardy and Bacon, LLP in Washington, said that while a court ruling may make things easier for plaintiffs to keep their cases in state courts, it "isn't going to facilitate rampant forum shopping."

Effectively, he said, the Appellate Court ruling allowed courts to look beyond the named defendant in a complaint to determine who the actual "party in interest" is in a case, and whether that party is a resident of the state.

As an example, he suggested that a Virginia resident injured by a faulty medical device could keep a lawsuit against the Missouri-based parent company of the device manufacturer in Virginia state court, but only provided the device manufacturer was located in Virginia.

If the subsidiary of interest in the case, the device manufacturer, were located elsewhere, then the case could be removed to the federal court system. "The impact will be for companies that have many different subsidiaries or operating divisions," he said. "This case will decide whether plaintiffs in these cases will be able to have their cases heard in state court, or if holding companies can have the case removed to federal court."

Additionally, he noted that in most cases, plaintiffs also make sure to include local defendants anyway, killing any diversity arguments which require that all plaintiffs and defendants be from separate jurisdictions. Upholding the appellate decision, he said, "will allow some forum shopping, but not result in rampant forum shopping."

Although he said that no final decision had been made, Mr. White said that ATLA was considering filing a friend-of-the-court brief in the case on behalf of the Roches. He added, though, that even among trial attorneys, there are arguments for both sides of the issue.

"When you enlarge or subtract diversity jurisdiction," he said, "it generally cuts both ways." Some trial lawyers, he explained, favor bringing cases to the federal system, which has advantages such as increased discovery. However, Mr. White also noted that many trial attorneys prefer the state court system, which they feel has greater expertise in local issues.