While one may assume that most corporations would rather not be in court at all, if they must be involved in litigation they seem to greatly prefer that it be in the federal court system. That's why business lawyers are fighting hard to block a proposal that would push many of the suits against them into state courts.
Of course, if a company is accused of violating the Sherman Act or the Clean Water Act, that case will be in federal court. But a lot of state lawsuits against corporations, -- notably product liability cases, also end up in federal courts. That's because when a citizen of one state sues a citizen of another state, that case can be moved to a federal court.
The federal judges in such "diversity jurisdiction" cases apply state law -- or what their crystal balls tell them state law would be had the state supreme court ruled on the issue at hand -- but the procedures and rules are those of the federal system.
That means, for instance, that a New York corporate lawyer who has never set foot in Alabama can feel comfortable that key strategic decisions on what evidence is admissible or what motions are likely to be granted will be similar to those he knows on his home turf.
But it's more than consistency that makes companies prefer the federal courts. Corporate lawyers are convinced that the juries are better in federal court. In state courts the juries are usually drawn from only one county, while in federal courts they will come from all over the state or at least a broad geographic region.
Thus, there is less chance that the jurors will be what the companies would consider unduly sympathetic to the plaintiff. If a Colorado wheat farmer sued a maker of farm equipment, most of the jurors in state court are likely to be other farmers or persons whose livelihood is closely tied to the farm economy; in federal courts, there's a good chance to get some Denver residents on the jury.
In addition, although lawyers are hesitant to say so for the record, companies think they get smarter, better prepared and all-around better judges in federal courts.
The American Corporate Counsel Association (ACCA) was unusually frank when it noted that "federal judges, appointed by the president and confirmed by the Senate with lifetime appointments, are likely to be less parochial in the judgments and less beholden to local pressures than are state judges, many of whom are subject to local elections."
The ACCA is a group of almost 8,000 lawyers who work for major corporations. It is worried that Congress may rewrite the laws of federal court jurisdiction to curb -- or end entirely -- diversity jurisdiction.
That was the recommendation of a special study committee on federal court problems mandated by Congress and selected by Chief Justice William Rehnquist. Only when one of the parties is not a citizen or when the case involves plaintiffs from a number of cases should claims arising under state laws be tried in federal courts, the 15-member panel recommended.
The rising case load means there's an "impending crisis" in federal courts, the committee found, and the members -- over dissents from the two representatives of lawyers in private practice -- thought that cases involving state laws had little real claim to increasingly scarce federal resources.
The committee recommended that if Congress isn't willing to drop entirely diversity jurisdiction, the lawmakers should at least change the rules.
Two years ago, the minimum claim needed to make a case subject to diversity jurisdiction was raised from $10,000 to $50,000, but the committee says that is too low and it should be $75,000.
Moreover, in a tort action, they want to count only the amount the plaintiff is asking for reimbursement for medical bills and lost wages, not the claims for pain and suffering or for punitive damages.
The biggest blow to business is the suggestion that in deciding whether the controversy is between citizens of two states, corporations should be considered citizens of every state in which they can legally do business. Congress will be looking at the committee suggestions this fall, but the real clash is likely to come next year.
Daniel B. Moskowitz is a Washington editor for Business Week newsletters.