The Political Economy of Judicial Federalism by Michael E. Solimine

Professor Diego Zambrano’s recent article in the University of Chicago Law Review, Federal Expansion and the Decay of State Courts, is an institutional and comparative examination of federal and state courts as it pertains to judicial federalism. While judicial federalism has a long and complicated history, by most accounts, in the past several decades, both Congress and federal courts have generally sought to limit the number and types of federal-question and diversity cases that can be filed in federal courts (either originally or by removal from state courts). Similarly, judge-created abstention doctrines in the latter part of the twentieth century have required federal courts to frequently defer to parallel civil or criminal litigation in state courts. On this account, the authority and powers of federal courts have been limited in favor of routing legal controversies that could constitutionally be vested in federal courts into state courts in the first, and often last, instance.

Zambrano argues that this is no longer true. He finds that, mainly through federal legislation and aided by federal court decisions, many cases applying state law that otherwise would be litigated in state court have been funneled into federal court. In turn, he asserts that this development has been associated with and has contributed to the decay of state courts. The latter includes inadequate funding of state courts, delays in the adjudication of civil cases in those courts, and the widespread ceding of the development of important issues of state law to federal courts. Drawing on various sources of empirical work (including his own) and both political-science and political-economy scholarship, he weighs the pros and cons of these developments and suggests some ways state courts can be reinvigorated.

Zambrano’s article is a careful look at institutional issues of both federal and state courts, considering the actions and interactions of Congress, courts, litigants and their attorneys, and interest groups. It follows in the footsteps, and frequently draws on, the similar older work of no less than Felix Frankfurter, as well as more recent scholars such as Judith Resnik. But as the article correctly observes, most of the recent scholarship says little about parallel developments in state courts, like this one does. It relies on and skillfully applies data from, among other sources, the Federal Judicial Center and the National Center for State Courts. It also does a convincing job of setting out the complicated history of judicial federalism (along the way discussing the underappreciated influence of the American Law Institute’s Study of the Division of Jurisdiction Between Federal and State Courts (1969)), and provocatively and persuasively argues that, in recent decades, the federal courts have captured a flow of cases that otherwise would be litigated in state court. Among the statutes that have led to this diversion of state-law based cases to federal court are the Supplemental Jurisdiction Act of 1990 (codifying and in some ways broadening pendent and ancillary jurisdiction), and the Class Action Fairness Act of 2005 (making it easier to remove to federal court, on the basis of diversity jurisdiction, state-law based class actions).

Despite its many virtues, I have three main concerns with the article: it (1) overstates the “decay” of state courts; (2) is not clear on the causal link between federal aggrandizement and the decay of state courts; and (3) overstates the scope of the aggrandizement.

Are (All) State Courts in Decay?

Taking the last part of the title first, Zambrano discusses recent funding problems facing state courts, namely for court operations and judicial salaries, at length. While some of those problems can be attributable to state legislatures seeking to undermine the independence of state courts for various reasons, much of that could simply be due to states decreasing such funding during the Great Recession.

A related problem, as the article concedes, is that it discusses all state courts in a mostly homogeneous way, and surely there are different stories (and lines of causation, if any) in each of the states. Zambrano acknowledges that state courts of Delaware, renowned for their corporate law jurisprudence, are an exception. The courts of that state are generally praised for their perceived fairness and expertise, especially on corporate litigation that affects the entire country due to the large number of businesses incorporated there. Delaware judges are appointed, not elected, and the Delaware Constitution mandates political balance among the appointees. (That provision, however, was recently struck down as violating the First Amendment.)

Nor are the Delaware courts alone in this regard. The American Tort Reform Association (ATRA) has famously published and annually updated a list of what it calls “judicial hellholes.” These are state courts that, in the ATRA’s view, render unfair, excessively pro-plaintiff holdings on procedural and substantive issues in tort cases. Yet the ATRA’s most recent (2018–2019) update only lists eight such jurisdictions, though it also has more on a “watch list” and “dishonorable mentions” (along with “points of light’). While CAFA cases frequently deal with torts, on its own terms the ATRA list does not concern the vast numbers of non-tort cases adjudicated in state courts. Perhaps it’s surprising that the list from the ATRA, hardly an unbiased source, is so short, since most states elect some or all of their judges, a fact federal courts scholars frequently cite to as evidence of the desirability of adjudication by Article III, life-tenured jurists.

Is Correlation Causation?

Conceding that state courts as a whole have been subject to some decay, is that decay necessarily caused by federal aggrandizement? Of course, correlation is not causation. The article treads lightly on the question, typically using words like “coincided” or “contributed to.” Yes, the federalization in recent decades coincides with certain aspects of state court decay, but it’s a stretch to say one caused the other in any strong sense.

The article has interesting discussions of possible causal mechanisms, such as fewer institutional litigants in state courts, since they are more prone to sue in, or remove cases for example, using CAFA) to federal court. Those litigants may have greater incentive to improve conditions in state courts. Even state attorneys general have seemed enamored with federal courts, in recent years, and have frequently (alone or in combination) sued public and private parties and filed amicus curiae briefs in that forum, even though state courts would seem like the natural home for such litigation.

Running against this trend is that the Supreme Court has long held that there is a presumption of concurrent jurisdictionfor such frequently litigated causes of action like Section 1983, or Title VII of the 1964 Civil Rights Act. Nonetheless, as the article observes, despite this option to forum shop, most lawyers and litigants choose to file such actions in federal court, and defendants frequently remove cases (when the removal statutes permit it) to federal court. So ultimately there is not much explication of federal legal issues in state court, or at least not much that has important consequences for the development of federal law (an important exception, recognized by Zambrano, is the frequent litigation of federal constitutional issues in criminal cases).

Despite this apparent shunning of state courts, the article concedes that “business continues to invest heavily in state judicial elections or tort reform statutes.” For example, prominent pro-business (usually meaning pro-defendant) groups, such as the United States Chamber of Commerce and the American Legislative Exchange Council, are active in lobbying state legislatures for products-liability reform and related measures. The same interest groups are active in filing amicus curiae briefs in the US Supreme Court, but do the same in state supreme courts. The upshot is that even while taking steps to increasingly route legal controversies into federal court, active stakeholders are simultaneously paying attention to, and seeking to influence the substance of, state law and the decisions of state courts. In this environment, it’s hard to draw a strict causal arrow from federal aggrandizement to the purported decay of state courts. Instead, litigants and interest groups, perhaps not surprisingly, seek to influence developments in both fora to their advantage.

How Aggrandized Is Federal Law?

On the first part of the title, I’m not sure state courts, taken individually or as a whole, are in quite the sorry position Zambrano describes in the article. The article has interesting discussion of the purported “decay,” but I think it’s mostly on the margins. Turning to the purported federal aggrandizement, yes, the continued existence of diversity jurisdiction and statutes like CAFA means that the majority of class actions are litigated in federal courts, and federal courts undertake a surprisingly large role in developing state law. This appears true even outside of CAFA. For example, Samuel Issacharoff and Florencia Marotta-Wurgler have recently documented that almost all court decisions regarding the legality of shrink-, browse-, and click-wrap, online-consumer contracts, surely an important issue for states and indeed one largely governed by state law, have been issued by federal courts in diversity. One might think that state courts would and should be the natural fora for the resolution of such issues.

No doubt that CAFA has had the described effect, which is consistent with the intent of the statute’s framers, who feared the purported pro-plaintiff bias of at least some state courts where class actions were frequently brought. Justice Samuel Alito emphasized the last point in his dissent this past term in Home Depot USA v Jackson. That case involved an apparent frequent tactic by plaintiffs to avoid the relaxed removal provisions of CAFA, with a consumer, sued in state court by a lending institution on credit card debt relating to the purchase of a product, filing in response a counterclaim, and third-party class actions against the manufacturer and the retailer of the product. A five-to-four majority of the Supreme Court held that, despite the intent of the framers to make removal of class actions easier, neither the removal statutes nor the CAFA provisions permit third-party defendants to remove in these circumstances. Home Depot might be but a modest break on the robust effect of CAFA, but it emphasizes that not all class actions will devolve to federal courts and suggests that the Supreme Court decisions do not inevitably lead to federal aggrandizement.

Likewise, the assertion that many areas of state common law are devoured by federal courts, while having elements of truth, also seems overstated. Federal courts frequently certify unsettled issues of state law to state supreme courts (though perhaps not often enough), and while some important issues of state law are resolved in federal court, surely the great mass of state law issues—such as those involving property, probate, and domestic relations—are still developed by state courts. Indeed, the entire notion of state courts developing state common law seems itself increasingly anachronistic. Rather, developments and changes in large areas of state tort, contract, and property law are increasingly dominated by state statutes. So it seems that even as federal courts decide significant issues of state law, they will be guided by both common law decisions and statutes from states.

Zambrano focuses on civil litigation, but his focus is mostly on private, state-law-based litigation (that is, diversity cases), and less so on federal-question based litigation. In that regard, it’s doubtful that recent Congressional statutes or Supreme Court decisions have drawn into federal court much federal question litigation that would otherwise go into state court. Take, for example, the Court’s 2013 decision in Gunn v Minton. There the plaintiff had lost, as a defendant, a previous patent-law case in federal court. It blamed the loss on the alleged malpractice of its attorneys, and sued them in state court for legal malpractice. The issue was whether the second case arose under the patent laws and thus had to be litigated in federal court as a federal question case. Despite the fact that patent cases are in the exclusive jurisdiction of federal courts, the Court unanimously held the malpractice case didn’t arise under federal law. It noted that legal malpractice actions are largely governed by state law (there is no private right of action under federal law for legal malpractice in federal suits), dismissed concerns about an asserted need for uniformity for patent law, and concluded that it could potentially review state court cases on a federal legal issue. Legal malpractice is not a trivial area of state-law litigation, and much less so is products liability, which the Court had similarly held in 1986 did not arise under federal law, even when a state-law cause of action might include federal issues. These decisions suggest the breadth of the Court’s concern with federalizing large swaths of state law, even when federal issues are adjudicated as part of state-law based causes of action, and even acknowledging the reality that the Court reviews only a very small number of cases (civil and criminal) raising federal issues from state courts.

This is not to say that the Court always bows to state interests in deciding whether state-law causes of action can be converted into federal question cases. In 2005 the Court unanimously held in Grable & Sons Metal Products, Inc v DaRue Engineering & Manufacturing that a state-law based quiet-title action arose under federal law, because the action turned on whether a property owner had been properly informed of a land seizure under Internal Revenue Code provisions. But the Court itself limited the scope of the holding by observing that an important issue of federal law was involved, but not one that would be at issue in the vast majority of quiet title actions in state court. Similarly, this past term, the Court in Knick v Township of Scott held that in a Section 1983 action in federal court based on a Takings Clause claim against a local government, a plaintiff did not first have to seek just compensation in state court under state law. Justice Elena Kagan in dissent was concerned that “the majority’s ruling channels to federal courts a (potentially massive) set of cases that more properly belongs, at least in the first instance, in state courts.” Her concerns about federal aggrandizement on this particular issue might prove to be well-founded, but ultimately takings litigation does not seem a candidate for a large influx of cases into federal court.

Echoing Justice Kagan’s concerns, Zambrano’s article rightly points to some exceptions to the general observation that federal substantive law is not squeezing out state law. One exception is that federal (and state) courts are increasingly finding greater preemption of state tort law claims by federal law. On the preemption theme, Zambrano also contends that many state courts have departed from federal civil-litigation practice, by making it easier for plaintiffs to sue (and win) in state court. On his account, federal aggrandizement curtails federalism by undermining these laboratories of state experimentation on civil practice. There’s something to that, but most scholars find the opposite problem—that most state courts rather slavishly follow federal practice on procedural issues by, for example, frequently adopting versions of the Federal Rules of Civil Procedure or Evidence. Likewise, on the substantive-law side, it is well-documented that most state courts apply their own constitutions in lockstep with U.S. Supreme Court decisions interpreting the parallel provisions of the U.S. Constitution, and most states follow federal employment-discrimination law when interpreting their own parallel employment statutes.

Conclusion

Recently, Judith Resnik, like Zambrano addressing judicial federalism from an institutionalist perspective, lamented that the federal “judiciary’s leadership [has become] insistent that federal courts should be asked to do less, rather than more.” This is reflective of the conventional wisdom summarized at the outset of this Essay. Zambrano’s article provocatively turns much of this narrative on its head. He sees too many cases, especially those involving state law, sent for final resolution into the federal courts, and sees deleterious consequences flowing from that shift.

To argue that Zambrano to some degree overstates the shift does not undermine his insights and their implications. As befits a work of political economy, Zambrano attributes the shift to the influence of interest groups, members of Congress, and federal judges who, for various reasons, wish to limit the authority of state courts over institutional, frequently sued defendants. A principled application of judicial federalism usually relies on the notion that lawsuits involving federal or state law should normally be allocated to federal and state courts, respectively, with the caveat that deference to state courts deciding federal issues can be appropriate in some instances (for example, state criminal cases), and usually the allocative choices made by Congress in statutes is paramount.

The shift to a largely results-oriented, federal-aggrandizement regime does pay deference to Congress (see, for example, CAFA), but otherwise doesn’t bear much resemblance to the traditional picture of judicial federalism. Perhaps this shouldn’t surprise us. In other contexts, Congress, state officials, and other policymakers frequently pay only lip service to federalism and insist that the federal and state governments stay in their lanes. Rather, these policymakers often seem to focus on desirous policy outcomes, and will inconsistently support or limit federal authority to do so. Zambrano’s account will add another, perhaps unexpected, chapter to the history of judicial federalism.

 

Michael E. Solimine is the Donald P. Klekamp Professor of Law, University of Cincinnati College of Law. An earlier version of this Essay was presented to and benefitted from the comments at a faculty workshop at the University of Cincinnati College of Law.

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