OUTLINE FOR CIVIL PROCEDURE II: Prepared by J. William Snyder, Jr. Term: Spring 1993 Text: Yeazell, Landers, & Martin, Civil Procedure (3d ed. 1992). Instructor: Professor Gibson NOTE: This outline was originally prepared for my own private study, and it is based primarily on my own class notes, handouts, and excerpts from the textbook, either in paraphrase or direct quote. When possible, I tried to indicate material that has been directly quoted, but it is possible that some material from the textbook has been directly quoted without indication. I. Pretrial conference: Rule 16 A. Rule 16 - With the prodding of Congress, this rule expedites cases. - This rule also raises questions about how much of a role should the judge play in case management. Some judges take an active role in case management, but others do not. 1. Rule 16(a): The court has the discretion to require the attorneys for the parties and any unrepresented parties to appear before it for a conference or conferences prior to trial for one or more of the following purposes. (a) Expediting the disposition of the action (b) Establishing early and continuing control so that the case will not become protracted for want of management. (c) Discouraging wasteful pretrial activities (d) Improving the quality of trial through more thorough preparation, and (e) Facilitating settlement of the case. 2. Rule 16(b): The judge shall enter an order after a scheduling conference limiting the time for (a) Joinder of parties and amendments to the pleadings (b) To file and hear motions, and (c) To complete discovery The judge may also include in the order (d) Date or dates for pretrial conferences, the final pretrial conference, and trial, and (e) Any other matters appropriate to the circumstances of the case. 3. Rule 16(c): These subjects may be discussed at the pretrial conference: (a) The formulation and simplification of the issues, including the elimination of frivolous claims or defenses. (b) The necessity or desirability of amendments to the pleadings. (c) The possibility of obtaining admissions of fact and of documents which avoid unnecessary proof, stipulations of authenticity...and advance rulings on admissibility of evidence. (d) Identification of witnesses and documents, exchange of any pretrial briefs, and dates for further pretrial conferences. (e) The possibility of settlement or alternative dispute resolution. (f) The form and substance of the pretrial order. (g) The disposition of pending motions. (h) Special procedures for complex or unusual cases. (i) And other matters which may facilitate disposition of the action. 4. Rule 16(d): Final pretrial conference 5. Rule 16(e): Pretrial orders 6. Rule 16(f): Sanctions. If the party or party's attorney fails to obey a scheduling or pretrial order, fails to appear at a scheduling or pretrial conference, if the party or attorney is substantially unprepared to participate, or fails to participate in good faith, then the court may at its discretion impose sanctions as justice requires. B. Two goals of the pretrial conference: 1. Move the case to trial in an orderly and timely fashion 2. Trying to resolve the lawsuit without trial C. Main functions 1. Scheduling and deadlines for (a) Joinder of parties and amendments (b) Filing of other motions (c) Deadlines for discovery (d) In the E.D.N.C, the court set firm dates for trial. While this policy can help move things along to trial, is this policy too rigid? 2. Trying to settle the case: Should this function be left to the attorneys, or should the court take a more active role in settlement? This is a controversial area of the law. [Does the judge essentially prejudge the case by taking affirmative steps to settle it?] (a) Ways of encouraging settlement: Lockhart v. Patel (1) This case was a medical malpractice action by a teenager who lost sight in one eye as a result of the defendant doctor's negligence (allegedly). The court conducted a summary jury trial, and the jury returned a verdict for the plaintiff for $200K. After the SJT, the court held several formal and informal conferences with the parties and their attorneys. The attorney for the defendant doctor's insurance company indicated at one of these conferences that he had been authorized to settle for $125K, but the plaintiff continued to hold out for $175K. The judge then directed the attorney to attend a settlement conference and further ordered him to bring someone from the home office with authority to negotiate. On the appointed day, the company sent an adjuster from the local office who had been ordered to go no higher than $125K (and not to call back if he could not settle for that amount). The judge responded to this affront by striking the pleadings of the defendant and held him in default. The insurance company promptly settled for $175 and sent several officers from the home office to a subsequent hearing to apologize and explain their failure to appear was a result of a misunderstanding. They were absolved of the contempt charges. (2) Question: What authority does the court have to hold meaningful settlement conferences? (3) Clear authority of the court to hold conferences and compel the attendance of attorneys, parties, and their insurers [, but Rule 16(a) explicitly covers attorneys and unrepresented parties only]. Rule 16(f) would have no meaning if it was not read to include the parties' insurers. [A literal reading of Rule 16(f) indicates the judge had no authority to do what he did.] (4) Unless those with the power and authority to negotiate a settlement are present, the conference will not be productive. (5) References to the docket pressures on Federal District Courts. (6) "The exigencies of modern dockets demand the adoption of novel and imaginative means... [including] compulsory arbitration, summary jury trials, imposing reasonable limits on trial time, or, as here, the relatively innocuous device of requiring a settlement conference attended by clients as well as the attorneys." The court cannot order a settlement, but it can require the parties to use the good offices of the court to at least discuss settlement in good faith. (7) Pending amendments to Rule 16 would change the rule to include specific references to parties and their insurers. (8) This opinion was written after all action in the case had ceased. Accordingly, its status as precedent is dubious at best. 3. Hypothetical on page 686 1. No, she has not gone too far at that point. 2.- You risk angering the judge by refusing to settle for the suggested amount - Does the judge prejudice the case by expressing an opinion as to the worth of the case? 4. Preparing the case for trial a. Final pretrial conference and pretrial orders (1) Final pretrial conference (a) The court will require the presence of the lawyers who will try the suit (and any unrepresented parties). (b) Some courts will require them to make proposals at the conference, mapping out what evidence will be introduced at trial. The court may also require that certain motions be made at that time if they are to be made at all. (2) Pretrial order (1) After the pretrial conference, the court will promulgate a pretrial order prescribing the course of the trial (Factual disputes, legal theories, witnesses, evidence, etc). Deviation from this order is not permitted, and altering the order is rarely permitted. (2) The standard for modifying the pretrial order is "manifest injustice" unless the order is modified (Rule 16(e)). This is a much tougher standard than that for amendments to the pleadings. - McKey v. Fairburn (a) This case was an action for negligence against the plaintiff's landlord. Dampness on the floor from a roof leak resulted in the plaintiff's deceased slipping and falling on the floor, causing injury. The landlord had been notified of the dampness and had promised to correct the problem; they had not done so. (b) The plaintiff's first theory was simple negligence (duty of care under the lease, and a breach of that duty). At the pretrial conference, the plaintiff indicated this was her sole theory of negligence. At trial, plaintiff moved to amend the pretrial order to permit her to introduce sections from the DC Housing Regulations requiring landlords to repair leaky roofs (negligence per se). The judge denied the motion and directed a verdict for the defendants. (c) On appeal, the court noted that the pre-trial statement made no reference to the code. [So, the defendant would have been prejudiced at this late state in the case by having to defend against a novel legal theory.] [Since the standard for amending the pretrial order is "manifest injustice"], it was within the court's discretion to deny the motion for the amendment. (d) [The court also concluded that since the plaintiff's deceased knew the floor was wet when she walked on it, she was contributorily negligent as a matter of law and would have lost anyway.] (e) The dissenter would have cut the plaintiff a break for her attorney's inadvertence. A continuance could have been granted to permit the defendant to prepare a defense to the net legal theory. II. Trial process: The case has not settled or otherwise disposed of, so it goes to trial A. Determining the trier of fact: Judge or Jury? 1. U.S. Const Amend. 7 In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law. a. The 7th Amendment has not been incorporated and made applicable to the states via the DPC of the 14th Amendment. It applies only to the Federal government. b. For the most part, facts as found by a jury must be accepted. c. Suits at common law: This has been interpreted to mean legal actions and remedies as opposed to equitable actions and remedies. d. Preserved: The framers believed that a right to trial by jury existed in the common law courts prior to 1791, but not in courts of equity (Chancery). Accordingly, this amendment purports to "preserve" those rights they believed already existed at the time. This interpretation has spawned the Historical Test for determining whether or not the parties in an action are entitled to a jury trial. e. The Historical Test: What jury trial rights existed in 1791 with regards to this action? (1) If the action could have been brought and adjudicated in an English CL court, then the parties had a right to a jury trial. (2) If the action could only be brought in a court of equity (Chancery), then the parties had no right to a jury trial. f. The S.Ct. loves the 7th Amendment: they have upheld it in the face of recalcitrant Dst. Cts. g. Problems: Page 703 (1) Plaintiff and defendant sign a contract (a) Plaintiff sues for breach and asks for money damages: This is clearly an action at law, so parties are entitled to a jury trial. (b) Plaintiff sues for breach and asks for a decree of specific performance: Specific performance is an equitable remedy, so no right to a jury trial exists. (c) Plaintiff seeks to have the contract reformed to read "$200,000" instead of "$100,000": Reformation is an equitable remedy, so no right to a jury trial. (d) Plaintiff charges that defendant tricked her into signing by fraud, so she seeks to have the agreement rescinded: Rescission is an equitable remedy, so no jury trial rights. (2) Plaintiff and defendant own adjoining real property. Plaintiff charges that defendant is committing a nuisance on the defendant's land. (a) Plaintiff seeks damages caused by the nuisance: A legal remedy, so jury trial rights exist. (b) Plaintiff seeks an injunction against the defendant: Injunctions are a form of equitable relief, so no trial by jury exists. (3) Plaintiff alleges Defendant took his diamond ring. (a) Plaintiff seeks to recover its value: At CL, this action was known as "trover", and it had an accompanying writ. So, right to jury trial exists (b) Plaintiff seeks to have the ring returned: At CL, this action was known as "replevin", and it too had an accompanying writ. So, parties are entitled to a jury trial. (4) Plaintiff charges defendant wrongfully entered and occupied Blackacre. (a) Plaintiff seeks money damages: Legal remedy, so jury trial rights exist. (b) Plaintiff seeks to have the defendant ejected: This action had a corresponding writ known as a "writ of ejectment", making it a legal action, so jury trial rights exist. h. Chauffers v. Terry (1) Plaintiff workers had three grievances with their company over layoffs and loss of seniority. Their union (The Teamsters) prosecuted the first two grievances but refused to prosecute the third grievance. The workers the sued the company for breach of the collective bargaining agreement and the union for breach of its duty of fair representation. They sought relief in the form of backpay. The employer declared bankruptcy and the claim against it was dropped. (2) Plaintiffs demanded a jury trial, but the district court denied it. Terry respondents appealed. (3) The Historical test: To determine whether or not the parties are entitled to a jury trial, the court must examine both the (a) Nature of the issues raised, and (b) The remedy sought. The statutory action is compared to actions that could be brought in 1791 and adjudged either legal or equitable based on the closest analogy. The remedy is then compared to those available in the law and equity courts of 1791 and adjudged either legal or equitable. (4) Since collective bargaining was illegal at common law, and breach of the duty of fair representation did not exist at common law, an analogous action must be found. NO member of the court holds that the action had to have actually existed at common law in order to get a trial by jury- they refuse to read the 7th Amendment that narrowly. a. Defendant's arguments (1) Similar to an action to set aside an arbitration award, an equitable action. However, since no arbitration was effected in this case, this analogy does not apply. (2) Defendant also argues that this action is similar to an action by a trust beneficiary against the trustee for breach of fiduciary duty. The Marshall bloc is impressed with this analogy, since " a union, as the exclusive representative of the workers, must exercise its power to act on behalf of the employees in good faith." b. Plaintiff argues that the present action is more similar to an action for attorney malpractice, an action at law. However, the court believes that since clients retain a fair amount of power of their attorney's actions as well as the right to fire their attorney, the court feels this analogy does not quite capture the employee-union relationship as well as the beneficiary- trustee relationship does. c. However, the court still refuses to construe the action as wholly equitable. It chooses to examine the nature of the issues to be tried rather than the character of the overall suit. They hold that since Terry respondents must prove that the company violated 301 (breach of the collective bargaining agreement), that gives the action a legal character. Accordingly, the first prong is a wash as far is whether or not the action is legal or equitable. (5) The second (and more important) prong of the Historical Test calls for the court to examine the nature of the remedy sought. Respondents seek relief in the form or backpay (money damages), but not all awards of money damages are legal remedies. Monetary damages that are restitutionary in character are equitable remedies. But the backpay sought is not money wrongfully held by the union but money the respondents would have earned had their grievances been decided in their favor, so such an award could not be restitutionary. Monetary award coupled with injunctive relief may be equitable, but the respondents seek no injunctive relief. Petitioners argue that under Title VII backpay is deemed an equitable remedy. That may be so under Title VII, as the court has determined such an award of backpay to be restitutionary, but the award of backpay here is different than the award of backpay would be in this case. So, the nature of the remedy sought is essentially legal. (6) Accordingly the Historical Test indicates the nature of the case is legal, so plaintiffs have a right to a jury trial. (7) Brennan's concurrence: Junk the first prong of the Historical Test and look only at the nature of the remedy sought in making the determination of whether or not a right to a trial by jury exists. (8) Stevens's concurrence: Impressed with the attorney malpractice analogy and argues that it is closer to the worker-union relationship than the beneficiary-trustee relationship. (9) Kennedy's dissent: Since the nature of the action resembles an action by a beneficiary against a trustee, a historically equitable action, that determination is dispositive for the rest of the analysis; this action is equitable, so no right to trial by jury exists. i. No constitutional right to a bench trial exists under the 7th Amendment, even in equitable proceedings. 2. Congressional control over jury trial rights a. Augmenting jury trial rights (1) We can avoid 7th Amendment analysis when Congress by statute enacts a right to a trial by jury in certain actions. Congress is free to augment 7th Amendment rights by statute, but it is not free to derogate 7th Amendment rights in the same fashion. (2) Hypotheticals on page 714 (a) Congress authorizes a jury trial for injunctive relief: Yes, Congress is free to do this by statute. (b) No, Congress cannot derogate 7th Amendment jury rights. Such a law would be unconstitutional. (c) When a statute is silent, we must look to the 7th Amendment for guidance. b. Removing jury trial rights (1) Congress may only do so when public rights are being adjudicated. Congress may assign adjudication of claims involving these rights to an administrative agency whose tribunals sit without juries if a jury trial is incompatible with those proceedings. (2) Atlas Roofing v. OSHA (a) The Secretary of Labor cited Atlas for "a major violation" and fined it $600. Atlas challenged the ruling, and the case went before an OSHA ALJ (administrative law judge; a non-Article III judge) who upheld the fine. Atlas appealed to the full OSHA review board and into the Ct. of App. to no avail. Atlas finally demands a jury trial, but the demand is denied. Atlas then proceeds to challenge the statutory scheme on constitutional grounds as violative of the 7th Amendment. (b) The S.Ct. rules against Atlas and upholds the statutory scheme. Congress may create new "public rights" and assign their adjudication to administrative agencies and other non-Article III tribunals that need not respect the 7th Amendment. (c) Limits (1) Must be a "public right": Rights and obligations that "arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments." NOT: (A) Constitutional rights (B) Private rights (tort, contract, etc.) (d) Atlas test: is the government a party? Is this wise? The right to a jury trial was preserved to keep government from running roughshod over our rights. (e) ALJ's are not Article III judges - No lifetime tenure - No salary protection (3) Granfinanciera v. Nordberg (a) Nordberg is a bankruptcy trustee who brings an action to recover assets fraudulently conveyed to Granfinanciera from the debtor's estate. Prior to 1978, Nordberg would have had to bring this case in Federal District Court where a jury trial could be demanded, as this was a legal cause of action. After 1978, Congress placed this action under the jurisdiction of a Bankruptcy judge (another non-Article III judge who serves for 14 years and has no salary protection.) The implication was that no jury trial could then be given. The assumption was that jury trials were incompatible with Bankruptcy. (b) Drawing from Atlas, the court treats Bankruptcy court like an administrative agency that adjudicates public rights. However, they hold that since a private right is being adjudicated, a jury trial may be demanded. A jury trial, it decides, is not incompatible with the bankruptcy scheme. (c) The court focuses on private vs. public rights in determining whether or not there is a right to a jury trial. Outside the holding of Atlas Roofing, rights to a jury trial cannot be abrogated by statute. But, if the subject matter of the case is not intertwined with a federal public regulatory scheme, or the suit is not against the US government, then the controversy must be adjudicated by an Article III judge, and jury trial rights may not be denied. (For a public right to exist, the government need not always be a party. (4) Hypothetical: P v. D: considerations as to whether or not a right to a jury trial exists. (a) Statutory right to jury trial (b) Legal or equitable claim (7th Amendment as interpreted using the historical test). (1) Type of action (legal or equitable) (2) Remedy sought (legal or equitable) (c) Public or private tight determination is not necessary if Congress has not given jurisdiction over the claim to a non- Article III tribunal. (d) Administrative agency (forums in which jury trials are usually inconsistent with the underlying purpose of delegating responsibility to an administrative agency.) (1) Is the right to be adjudicated a private or public right? (in other words, did Congress have the authority to remove jurisdiction to a non-Article III tribunal?) (2) If the right is private, then is it a legal or equitable right? (e) Subpart of a Federal court presided over by a non-Article III judge (1) Bankruptcy judges (2) Magistrates 3. Mixed claims: Mixed COA's and mixed claims for relief- the Beacon problem a. Equity clean up rule: Beacon Theatres v. Westover (1) This is a mandamus action to order a Federal District judge to grant a party a jury trial. (Mandamus is an extraordinary remedy, but the Federal courts consider jury trial rights to be so fundamental as to warrant use of mandamus when the right must be granted.) (2) Fox sues Beacon Theatres, seeking a Dec. Judgment that what Beacon is doing to force Fox out of the market is in violation of Federal Antitrust laws. He also seeks injunctive relief against lawsuits by Beacon and threats by Beacon to buy them. Beacon counterclaims and sought treble damages. Beacon has demanded a jury trial. (3) The district court rules that the issues in the case are largely equitable (The common issue to both the claim and the counterclaim is the reasonableness of the clearances granting Beacon the sole right to show first run movies in the area.) The judge is to be the trier of fact for the equitable issues, and the equitable issues were to be tried first. Then a jury trial would follow if Fox loses. However, a jury would not be able to reconsider reasonableness issues on grounds of res judicata and collateral estoppel (4) Beacon is not happy and feels deprived of its right to a jury trial as to the issue of the reasonableness of the clearances. (5) Applying the Historical test, Fox would have had to go into a court of equity in order to obtain injunctive relief. Beacon would have had to have gone into a court of law and sought money damages. (6) Old Equity rule (Equity clean up rule): in 1791, equity would not have had to dismiss the case for lack of subject matter jurisdiction even though a legal remedy was available. Equity could enjoin the legal proceedings and decide the entire lawsuit itself, even if there was an overlap. The District Court was persuaded by this rule. (7) Procedure and rights have changed since the time when that old equity rule prevailed. (a) Dec. Judgment action was not available in 1791. (The DJA preserves jury trial rights for legal claims, but not for equitable claims). (b) The FRCP merged law and equity, and they expanded legal rights and their adequacy. (8) The S.Ct. grants mandamus (a) The court can grant a preliminary injunction against Beacon's harassment and threats of lawsuits as well as the bringing of other lawsuits. (b) There is no need for equity to go first. (c) The judge does have the power to structure trial and order of issue presentation, but where a litigant has a right to have a common issue tried to a jury, the judge's discretion is curtailed and jury trial must be held first. (1) Preliminary injunction pending the lawsuit (2) Jury trial is to be held first on the issue of reasonableness. (3) The judge will decide whatever is left. b. Problems on page 729. 2a. All equitable b. All equitable c. Beacon problem: If a common issues is at stake in both demands for legal and equitable relief, then a jury trial must be held first. d. Answer is not clear. c. The equity clean up rule is under attack and may be defunct under current S.Ct. rulings. (1) Dairy Queen v. Wood (a) Plaintiff was the owner of the Dairy Queen Trademark. Plaintiff licensed Defendant to use the trademark in exchange for payment. Defendant defaulted, so plaintiff terminated the contract and cancelled defendant's right to use the DQ name Plaintiff then sued seeking relief. (1) Temporary & permanent injunctions (2) Accounting to determine how much D owed P (3) Injunction preventing D from collecting money under the DQ name. (b) D demanded a jury trial, but the Dst. Ct. struck the demand, calling the action "purely equitable" and deeming the legal issues "incidental". (c) 7th Amendment analysis: P and Dst.Ct. argue that the character of the suit is entirely equitable. Accounting was an equitable remedy because it required inspection of the defendant's ledgers and books. Such a task was too much for the law courts. Now, the FRCP provides for the appointment of special masters to handle such tasks. The masters will investigate and assist the jury in the fact finding process. (this has the effect of turning a formerly equitable remedy into a legal remedy) Accordingly, P is really only after money damages. (d) Try the legal issues first (overlapping factual disputes) to a jury, then try the equitable issues to the court. 4. Rule 38: Jury trials of right a. Rule 38(a): Rehash of 7th Amendment plus a mention of statutory rights to jury trials. b. A party seeking a jury trial must demand one within ten (10) days after service of last pleading directed to such issue. - If defendant files a counterclaim, plaintiff may request as jury trial as to that issue in the reply, but only to that issue if the time for asking for a jury trial on other issues has run out. c. Safest route: Demand a jury trial in your complaint, answer, or reply d. The clock starts ticking after service of answer (10 days). After that, neither party can ask for a jury trial. Failure to request a jury trial in time is deemed a waiver. e. Amended pleadings (1) If you amend your pleadings to state a new claim, you may be able to request a jury trial as to that issue. f. Jury trials, once granted, can only be withdrawn by mutual consent. g. Rule 38(b): Court may order a jury trial upon a motion, but the matter is left to the court's discretion. h. Rule 39(c): Impanelling of advisory juries or jury trials by consent. i. Just because the court grants a jury trial, that does not mean that the case will go to the jury. (1) Dismissal of the case (2) Default judgment (3) Summary judgment 5. Assuming there is a trial, there is no guarantee that the court will send the case to the jury. a. Directed verdict/JML b. JNOV/JML - Touchstone for each: have the parties met their respective burdens of proof: (1) [Burden of pleading] (2) Burden of production (3) Burden of persuasion c. Initially, the plaintiff normally has the burden of production. The party who has the burden of production must produce enough evidence so that a reasonable jury could find in its behavior. This burden is critical in DV's and JNOV's Continuum: X Y P-----+--------------------+------D Between X and Y, a reasonable jury could find for either party. on either end of the continuum, no reasonable jury could find for the respective party. Plaintiff must present enough evidence to make it past X. If the quality of the evidence puts the case between X and Y, Defendant need not introduce any evidence at all. However, Defendant will almost always try to force the case back over across X so as to get a DV. If Plaintiff moves the case across Y, then Defendant must introduce evidence to push the case back over Y in order to avoid a DV. Likewise, if the case is between P and X, then a DV for the defendant is warranted. d. Burden of persuasion: This burden is significant for jury deliberations. When the evidence is equally balanced, the case must be resolved against the party with the burden of persuasion. e. Rule 50: Judgments as a matter of law: Merger of DV's and JNOV's as well as a simplification. (1) Rule 50(a): The rule for what used to be DV's. (2) Rule 50(b): If the motion for a JML is made and denied at the close of all evidence, it may be renewed after the jury returns. JML motions made at the close of all evidence may be renewed after the jury comes back. But, unless a party makes a timely motion for a JML, that party cannot move for a JML if the jury comes back with an adverse verdict. f. Reid v. San Pedro (cow case) (1) Plaintiff contends that his cow got onto the defendant's RR tracks through a hole in the fence and was killed by an oncoming train. The cow was killed apx 1 mile from the break in the fence, but only a few hundred yards from the open gate. The defendant contended that the cow got through a gate left open by the landowner. A state statute absolves an RR of liability for cows that wander onto tracks through open gates and get run over, but not for breaks in the fence. (Plaintiff charges that the train driver was negligent. The headlight on the train was also defective. - Subtle argument of statutory interpretation: The plaintiff in the case is not the "owner" of the land, so the statute may not technically apply. However, such an interp would tend to frustrate legislative intent. However, neither party addresses this argument. (2) Question: could a reasonable jury find that the cow came through the break in the fence? On the whole, no reasonable jury could find for the plaintiff, so a directed verdict for the defendant is warranted. (3) Can the jury base its decision in part on their personal experiences? RP vs. special experiences. Do we need to put expert witnesses on the stand? g. Problems: page 769 (1) B. P sues white cab company, who owns 75% of all cabs in town, claiming that a white cab hit her. Is this evidence enough to get to the jury? Is 95% enough? If based only on statistical evidence, the case should not go to the jury. (2) 4. Should the case go to the jury? Causation is the key. Contaminated water & air. Can res ipsa be used to smoke out D? Can damages be fashioned to reflect the % of liability? Overpunishment vs. underpunishment. h. How do we know when we have enough evidence to get to the jury? - RA RR v. Chamberlain (1) This was a wrongful death action in which the survivors of the plaintiff, a "RR car driver" was killed while directing cars onto their appropriate tracks. The survivors sue the RR co. for negligence, charging that the decedent was thrown onto the tracks when cars driven by other employees rammed into the decedent's car, knocking him onto the tracks to be run over and killed. Defendant produced several witnesses (company employees) who testified that there had been no collision. Plaintiff put on Bainbridge, who testified that he heard a loud "crash" and looked up to see that the decedent was no longer on his car. Bainbridge "viewed" all this from 900 hundred yards away at a 3 degree angle from the situs of the accident, and he saw no collision. The question is should the case go to the jury based on Bainbridge's testimony. (2) Can conflicting inferences be drawn from the evidence? Is Bainbridge's testimony literally "incredible"? (3) S.Ct. says that the case was properly kept from the jury. 3 reasons (a) Defendant could have gotten a DV at the close of the plaintiff's case since the plaintiff failed to put up enough proof, and thus, failed to meet the burden of production. (b) Even if P's evidence were enough to get past X, D's evidence pushed the case back over X, so a DV for D was proper. (4) The applicable test: The court must look at all the evidence in the light most favorable to P and decide if a reasonable jury could rule for P. (5) Bainbridge's testimony was circumstantial evidence, while D's testimony was direct evidence. (Was the evidence biased towards D?) (6) The court thinks the inference P wants the jury to draw is nor warranted based on the facts. Direct conflict plus credibility make jury questions, and the court thinks Bainbridge's testimony was simply not credible. (7) The burden's of production and persuasion rest on P, but in res ipsa, those burdens are shifted one plaintiff shows that the instrument of the injury was under D's exclusive control, and that the sort of injury normally does not occur in the absence of negligence. - RR co. v. Stout (1) Plaintiff Stout was a 6 year old boy who was injured on a RR turntable owned by the Defendant that was not secured. Plaintiff's foot was crushed while he and his friends were playing on it. Access to the turntable was not restricted, and the turntable lock was broken. In response to Plaintiff's negligence charge, it alleged that it was not negligent since it believed the injury was an accident. An instruction of attractive nuisances was given to the jury, and the jury awarded $7500 to plaintiff. Defendant appeals (2) There is no real question over the raw facts, but rather the controversy is over the application of the law to the facts. The dispute is whether or not defendant was negligent. Negligence is normally a jury question since it involves a determination of what an RPS would have done under the same circumstances. Only the jury is qualified to decide if the RR used the appropriate level of care. (3) 2 inferences are possible: D was negligent, or it was not negligent. (4) While judges decide questions on the law, this is a combined question of law and fact, which is within the province of the jury in this case. Accordingly, it was appropriate to send this question to the jury. However, in other circumstances, the judge should be the actor who applies the law to the facts. i. Other methods of jury control a. Instructions on the law/ Rule 51: The jury is not permitted to make up its own rules of law. The jury is charged with the applicable law and instructed to follow it. (1) Counsel for each party will propose jury instructions to the judge in a charge conference after the close of both cases and object to the proposed instructions of opposing counsel. (2) Counsel will also argue how the instructions should be applied to the facts. (3) Counsel must object to proposed instructions (or lack thereof) in order to appeal and adverse judgment on the grounds that the instructions were faulty. (4) The court has a duty to instruct properly, and the attorneys have a duty to propose jury instructions. (5) Plain error review: Under this doctrine, appellate courts may review jury instructions and reverse for plain error, even if no party objected to the instructions. The 9th Cir. rejects the plain error rule and reads Rule 51 literally (no objection when instruction is given, no right to appeal on grounds of a faulty instruction). However, The 2d Cir. permits plain error review of jury instructions. b. Jury experimentation limitations (1) In re Bev. Hills. Fire Litigation (a) A fire in the BH Supper Club killed 165 and injured many more. A class action suit was filed against BH based on diversity jurisdiction. The plaintiff put on evidence tending to show that defective installation of aluminum wiring was the CIF of the accident. One of the jurors was distressed to hear this line of argument since he had aluminum wiring in his own home. The juror went home, inspected his own wiring, and what he found directly contradicted plaintiff's theory. The juror reported his findings to the rest of the jury, and the jury returned a verdict for D. The juror send an anonymous letter to the paper explaining his experiment and its role in the jury's decision, and on the basis of the letter the plaintiff moved for a new trial. (b) Under Fed. R. Evidence Rule 606(b), the court may not inquire into the reasons for the jury's verdict in an effort to impeach the verdict, but the court may inquire into external influences. This rule facilitates open and frank discussion, and it forestalls endless review by giving some finality to the verdict. (c) Since the juror's evidence was untested and not cross examination, it flouted the Rules of Evidence. The court deemed the juror's acts an improper jury experiment and ordered a new trial. (d) However, jurors still may use their general experience and common knowledge in deciding a case. Voir dire can be used to exclude jurors who may be tempted to engage in such experimentation. c. Restriction on comments to the jury: When may judges permissible make comments to the jury? (1) Treza v. Dame (a) This was an automobile personal injury case involving a head on collision between P and D while D was attempting to pass an 18 wheeler. The particular controversy was over comments made by the judge to the jury and whether they were prejudicial or improper. Plaintiff testified, and T-T driver corroborated, that the defendant darted out from behind the T-T, giving no time to the plaintiff to avoid the collision. Defendant claimed that the T-T driver was playing games with her when she pulled out to pass. She saw the plaintiff coming, but T-T would not let her back over. The judge commented that he thought the defendant was negligent, but he also noted that they were free to disagree with him. (b) In Federal Ct., judges may comment on the evidence to the jury. The rationale is that the jury could benefit from the insights of the judge. However, many state courts forbid such commentary on the evidence. (c) The Ct. of App. is not thrilled with the comments, but it nevertheless denies the defendant a new trial. It labels the comments "dangerously close to usurping the function of the jury." But, the jury was told that it could disagree with the judge, and the weight of the evidence allowed a verdict against D. (d) Quercia v. US pg 792: consistent with Trezza (judge proposes a lie detector test) (Also, this was a criminal case, where judge's comments are more likely to be prejudicial in that they detract from the reasonable doubt test.) d. Controlling juries includes limiting extraneous influences (1) Instructions to ignore certain testimony. (2) Mistrial: Trial so infected with error that a new trial with a new jury is needed. (3) New trial motions (4) Ct of App finds error and orders a new trial on remand. B. New Trials 1. New trials: Some error that was so prejudicial that a new trial is needed. 2. Dst Cts are empowered to order new trials when there is a. Some serious error with the trial, or b. When the verdict is against the weight of the evidence. 3. Conditional rulings on new trials after grants of JNOV's: Lind v. Schenley Industries a. Question: was there a contract for a 1% commission on all of the plaintiff's sales? Defendant argues there was no such contract, but plaintiff argues that there was a contract. Plaintiff and another person testify to oral promises made by the defendant. Defendant argues that the commission would have been unreasonable in light of what the plaintiff's salary would have been, and plaintiff did not ask about it for several years. Defendant's motion for a DV was denied. Case goes to the jury, and it renders a verdict for plaintiff. Trial court granted a JNOV & conditionally grants a new trial. b. Under Rule 50, in order to make a JNOV motion, you must make a timely motion for a DV at the close of all evidence. c. Why rule on the new trial motion? Because if the App. Ct. reverses the JNOV, the new trial question will have been already decided while the case was still fresh in the judge's mind. (Rule 50(c)(1)). d. General issues (1) Can Plaintiff appeal the grant of a motion for a new trial to the defendant? General rule: plaintiff may only appeal from a final judgment, and since the grant of a new trial is not a final judgment, plaintiff must wait until a final judgment is rendered before she can appeal the grant of the new trial. (Likewise for defendant who wins a verdict but where the court grants a new trial.) (2) Suppose at Trial #2, the jury returns a verdict for Defendant. Plaintiff can appeal at this point, but any reversal of a new trial might be pyhrric. e. In this case, we have entry of JNOV for Defendant (final judgment), so plaintiff could appeal the grant of a new trial motion as well. f. Appealable vs. Reviewable (1) What is the scope of review? App. Ct.: most of the time, new trial motions are not reviewable. But the 3rd Cir. says that they are not unreviewable (under an abuse of discretion standard). (2) Applicable standard of review as to appeals of new trial motions. (a) Verdicts against the weight of the evidence: "Close scrutiny" required (b) Serious error with trial: Rational basis required (abuse of discretion standard. (3) Standard: is the material the kind that would be unfamiliar to laymen. If so, then the trial judge must exercise more exacting scrutiny when dealing with motions to set aside the verdict. If not, then the court must be more deferential to the jury's decision. Professor Moore's std: Did he jury reach a "seriously erroneous" result so that the judge must act to avoid a serious miscarriage of justice? g. Diagram: verdicts against the weight of the evidence. Here, the judge must weigh the evidence during a jury trial. I----------)----(-----)------------I A B C D A: Judge merely disagrees with the verdict and would have voted differently had he been on the jury. In these circumstances the judge should leave the verdict alone. (This area also represents the area encompassing the ordinary knowledge of jurors.). Otherwise, the role of he jury would have been subverted. C: This range represents the complex case. Here, a new trial is warranted because the verdict is against the weight of the evidence. This is the rare case when not to set aside the verdict would lead to a miscarriage of justice. D: This range represents the times when the evidence is incredible as a matter of law. Accordingly, a judgment as a matter of law is warranted, either in the form of a DV, or a JNOV. Granting either is a statement that "no reasonable jury could rule against the moving party when taking all the evidence in the light most favorable to the non-moving party. These operates as checks on the jury system. A JNOV essentially states that the case never should have gone to the jury. h. Was there legal error? On this question, the court has an active role since it is the higher authority on the law. (No deference to trial ct.) i. If there was error, was it harmless? This is evaluated according to the abuse of discretion std. (Lots of deference to the trial ct.) j. In dealing with grants of new trial motions based on insufficiency of the evidence for a verdict, the first question is legal: did the trial court understand the law on granting new trial (no deference to trial court). If the trial court did understand the law, did the trial court apply the proper standard? (Close scrutiny vs. Rational basis). This determination is based on whether the matters were within the knowledge of ordinary jurors (rational basis for the verdict) or if they were matters which ordinary jurors had no particular knowledge about (Close scrutiny). k. When a judge has denied a NTM, the Appellate court is unlikely to reverse, even if the aggrieved party can appeal it. 4. Partial retrials a. P sued D, and the jury returns a verdict for P. D moves for a new trial due to error Order of inquiry (1) Was there error? (2) If so, was the error a factor in the trial (harmless error?) (3) If there was an impact, was the error limited to a discrete issue or did it interfere with the entire process? (4) Would it be fair (or expedient) to have a retrial only on the discrete issue or should the new jury have the benefit of hearing the entire case. b. If the above circumstances indicate that a partial retrial is warranted, then the court may grant one upon a motion. C. Remittur/Additur 1. These two doctrine permit a judge to cure perceived jury error upon a motion for a new trial by a losing party by presenting a prevailing (losing) party with an ultimatum: The party can either face a new trial or accept a reduced (remittur) award (or agree to pay an increased award (additur)). 2. The S.Ct. has permitted remittur to be used in the Federal court system because the judge would be awarding an amount that the jury has already awarded. However, the S.Ct. has held additur a violation of the 7th Amendment since it awards an amount the jury never awarded. Additur is still available in may state court systems. 3. So long as an award is reasonable, the judge should not remit the award. 4. Some verdicts are so excessive or so paltry that a new trial is warranted because of some undetermined error. 5. Should not the judge have to award to upper amount in the original range since the jury awarded at least that amount? (Split of authority) 6. If P accepts remittur, P cannot appeal, though he might be able to cross appeal if D appeals the denial of the JNOV. D. Post trial motions: trying to undo what the jury has done. This is an intricate and technical procedure where the goals of finality and not usurping the role of the jury are intertwined. 1. Neely v. Martin a. The jury returns a verdict for P, and defendant moves for a JNOV or a NT in the alternative. Both are denied, and judgment is entered on the verdict. P wants to defend the integrity of the verdict and argue for the denial of the post trial motions. b. Defendant appeals the denial of the JNOV to the App. Ct., arguing that the JNOV should have been granted. The App. Ct. must make a dual inquiry: (1) Did the Dst.Ct. invoke the proper standard (DV standard)? (2) Did the Dst.Ct. apply the standard properly? Plaintiff continues to defend the integrity of the verdict by presenting evidence from the record, but does not argue for a new trial in the event the denial of the JNOV is reversed. c. The App.Ct. agrees with D that the JNOV should have been granted, and so it remands with an order for the entry of a judgment for D. P immediately petitions for cert., arguing that the App.Ct. had no authority to direct the entry of judgment of dismissal. The trial judge should be permitted to pass upon the motion for a new trial. d. By requiring P to argue both for preserving the integrity of the verdict and for a new trial, the plaintiff may be faced with a logical quandary at first glance (error & no error). But, this is not necessarily the case (error but harmless & not harmless). e. The S.Ct. declines to lay down an absolute rule that an App.Ct. can never direct the entry of judgment. (i.e. dismissal for lack of subject matter jurisdiction). The normal procedure would be for the App.Ct. to remand for consideration of a new trial motion, but the App.Ct. is not obligate to do so. The S.Ct. also notes that there were three possible opportunities for the plaintiff to move for a new trial (1) At the end of the trial court action. (2) In the appellate brief (3) In a petition for rehearing at the App.Ct. level. Also, the App.Ct. could have remanded for consideration of a new trial motion in its discretion. 2. Rule 50(b): if a timely motion for a JML is made at the close of ALL evidence (including P's rebuttal), the motion may be renewed within 10 days after the entry of judgment. 3. Problems: page 824. b. No, because D did not move at the close of all evidence for a JML. It is irrelevant that D moved for a JML at the close of P's evidence. c(1). It is not clear if D has moved for a new trial or a JNOV. c(2). D must file notice of renewal within ten days after entry of judgment, and the court cannot do this on its own motion (usually). 2. P v. D., verdict for P, D's JNOV is denied, but a NT is granted a. No b. No c. Yes (now you have a judgment from which you can appeal). d. No e. Technically, yes, but it would be a weak argument. E. Nonjury trials: the majority of trials in the Federal system. 1. Unlike jury trials, no one has the right to a bench trial, and neither party may demand one. 2. Bench trial: judge is the finder of fact as well as the interpreter of the law. Accordingly, the App.Ct. accords less deference to the judge's findings of fact. 3. Rule 52(a) a. Judge must specifically state the findings of fact and conclusions of law. b. The findings may be reversed only if "clearly erroneous". It's a deferential standard, but not as deferential as the standard accorded to findings of fact as made by juries. Jury findings have special protections not accorded to judge-made findings. 4. Tittle v. Aldacosta a. Woman slips while disembarking from the defendant's vessel and is injured. Owner sued for A DJ of non- liability and woman counterclaims for damages. b. App. Ct. believes that the Dst.Ct. was wrong in concluding that the owner was not negligent. (Has the App.Ct. adhered to the "clearly erroneous" standard? Did it have a "firm conviction" that the finding was erroneous? III. Appeals A. Threshold issues 1. Who can appeal? a. There is no constitutional right to appeal in civil cases. The right to appeal in civil cases is largely statutory. b. Under 18 U.S.C. 1291, the Cir. Ct. of Appeals have jurisdiction over the final judgments of the Dst. Cts. c. Standing (1) An appellant's standing to appeal depends on his status as an aggrieved party. (2) Generally speaking, only aggrieved parties have the right to appeal. (3) Aetna v. Cunningham (a) Defendant Cunningham defaulted on a building contract, for which Aetna was the surety agent ($32,000 surety bond). Aetna sued for indemnity from Cunningham under 2 theories (1) Contract calling for indemnity (2) Tort (fraud) claim (b) Aetna won on the contract claim, but the court found no fraud, and so refused to enter judgment based on the fraud claim. Aetna won a judgment for $32,000 + interest. (c) Though Aetna won, they want to appeal the denial of the tort judgment, even though they do not stand to collect any more than the $32,000 + interest awarded in the contract judgment. Aetna fears that Cunningham may seek bankruptcy protection, and a contract judgment would be dischargeable, and Aetna would only be entitled to a pro rata judgment under those circumstances. A judgment based on fraud would not be dischargeable. (d) The 5th Cir. rules that Aetna is an aggrieved party entitled to appeal denial of a judgment of the quality they originally sought. (Under the FRCP, you may plead in the alternative.) (e) This case does not stand for the proposition that you can appeal the denial of any alternative theory. You can only appeal an alternative theory upon which you lost if the quality of the judgment would have been higher had the court entered judgment on the favored theory. The aggrieved party has the burden of showing that there will be a practical or legal difference by reversal. (f) Ultimately, the court affirms the denial of the fraud claim. d. Losing parties who wish to appeal must file timely notice of appeal. 2. What can be discussed? Appellants may only bring up discuss on appeal issues which were raised in the trial court (unless extraordinary circumstances compel otherwise). The rationale is that you have to have given the trial court the chance to be right. a. Extraordinary circumstances, such as the existence of new case law on the subject, may justify discussion of the new material. Carson Products v. Califano (1) This case involved FDA denial of trade secret status to an ingredient in a men's depilatory product. (2) Initial challenges: (a) Wrong result: There was no substantial evidence to justify the agency's finding of presumption in favor of the FDA. (b) Arbitrary and capricious decision that was not based on reasonable decision making. The Dst. Ct. denied both claims, and Carson appeals. (3) In the interim, the Zotos decision is handed down, where another Dst. Ct. found that the FDA's procedure for determining whether or not an ingredient was a trade secret denied applicants due process. The FDA lost and declined to appeal, opting instead to overhaul their evaluation procedure. (4) Carson would like to raise the DPC issue, but he did not raise it at the Dst. Ct. level. Under normal circumstances, he would be precluded from raising that issue in the Ct. of App. (5) However, the court may in its discretion hear issues not raised below when it would not be just not to hear them. There is no jurisdictional bar to hearing issues not raised below. (6) App. Ct. has as part of the record what procedures were used, and since the FDA briefed the court on the issue, they would not be prejudiced. (7) Another pyhrric victory: The Ct. decides to hear the DPC issue, but ends up deciding there was no DPC violation. 3. Cross-appeals a. When should both parties take an appeal up to the Ct. of App.? Mass. Mutual Life Ins. Co v. Ludwig (1) Plaintiff's deceased and insured died while crossing some train tracks. Plaintiff administrator sued ins. co. for double indemnity. Under the policy, the ins. co. was bound to pay double indemnity if the insured died while on a common carrier. (2) The insured was not strictly speaking a passenger, as she was crossing the tracks at the time. Accordingly, the insurance company refused to pay double indemnity. (3) Issues (a) Whose law applies? IL or MI? IL was the situs of the accident, so its choice of laws applies. (1) Plaintiff asks for MI law. (2) Defendant asks for IL law. (4) The court rules that MI law applies and that the insured was not a passenger at the time, so the administrator is entitled only to single indemnity. (5) The administrator appeals. The ins. co, wants to argue that the court applied MI law correctly, but it also wants to argue that IL law applies, and under it the administrator is entitled only to single indemnity. (constructive dilemma). (6) The 7th Cir. rules that: (a) The Dst. Ct. misread MI law, so the insurer would be liable for double indemnity under MI law. (b) But, since the ins. co. did not cross appeal the judgment that MI law applied, it is barred from raising the issue. [Defendant wants to argue that under IL law, it is liable only for single indemnity.] (7) The S.Ct. holds that the ins. co. was not required to cross appeal to attack the Dst. Ct's ruling. The Ct. of App. reviews judgments only. Any party may use any ground brought up in the record to attack the Dst. Ct's reasoning and argue that the judgment should be affirmed. If the same result could have been reached on different grounds, then no cross appeal would be needed. The party is not asking for modification of the judgment or reversal of that judgment, so the party need not cross appeal. The S.Ct. kicks the case back down to the 7th Cir. with instructions to let the Defendant raise the IL law issue. (1. Does it apply? 2. If so, is the Defendant liable for double indemnity?) B. Finality 1. Normally, only "final decisions" of the Federal Dst. Cts are reviewable by the Cts. of App (28 U.S.C.  1291). Why? a. Efficiency & avoiding delay in the trial b. Avoidance of detracting from the judge's authority. If every ruling of the judge could be appealed immediately, his authority would be undercut dramatically. Problems c. Prejudicial harm/irreparable harm d. Close questions of law e. Efficiency may weigh in. 2. According to the S.Ct., "final decision" has a broad meaning: Collateral order doctrine- an exception to  1291. Cohen v. Beneficial a.- The ruling in question was final - Not tied up with the merits of the lawsuit. It was separable from the merits. - Too important to be denied review (now or never) b. This doctrine applies to a small class of cases, like double jeopardy rulings in criminal law. c. This doctrine does not apply to rulings on personal jurisdiction [and possible new trial rulings]. 3. Interlocutory appeals: 28 U.S.C.  1292 Grounds: a. Controlling questions of law to which there is substantial ground for difference of opinion. b. The Dst. Ct. must certify the question as such. c. Review by the Ct. of App. is discretionary - Under Rule 54(b), mandamus and contempt proceedings are reviewable under this procedure. - State ct. policies on interlocutory appeals differ. C. [Quick review] 1. Final decision 2. Aggrieved party 3. Issue raised below D. Scope of Review 1. As the appellant seeking a reversal, you must convince the Ct. of App. that: a. The Dst. Ct. did something wrong, and b. That the error was prejudicial and that the error could not have been harmless. 2. Standard of review: A critical determination on appeal a. Questions of law The Ct. of App. is the superior authority on the law, and the Ct. of App. gives no significant deference to the Dst. Ct. "We would have decided it differently." is enough for a reversal. De novo review permitted. b. Questions of fact These questions are reviewable only under the "clearly erroneous std." Much deferential weight is given to the trial court. De novo review is not permitted. c. Standards in general (1) Clearly erroneous (reserved for findings of fact made by Dst. Ct. judges). (2) Abuse of discretion (a deferential standard) (3) De novo (virtually no deference) 3. Review of findings of fact (FOF's) under the clearly erroneous (CE) standard: CE & Anderson v. Bessemer City a. This case involved a Title VII sex discrimination dispute. Bessimer City was looking for a Recreation director. Plaintiff was denied the job, and she believes she was denied the job because of her gender. (This was a bench trial, since Title VII relief is deemed to be "equitable" relief.) b. The Dst. Ct. found that (1) The plaintiff was the more qualified candidate. (2) She was asked several inappropriate questions (like, "Does your husband approve?") (3) Pretextual reasons for hiring Kinkaid (the other person hired). c. The 4th Cir. pays lip service to the clearly erroneous std., but instead finds that the Dst. Ct was completely wrong. The 4th Cir. declares that close scrutiny is required because the paries proposed FOF's to the court. d. The S.Ct. reverses. According to the S.Ct., all FOF's are reviewable under the clearly erroneous standard. e. The S.Ct. then reviews the FOF's under the CE standard. (1) If 2 inferences are permissible, the FOF is not clearly erroneous. (2) If the App. Ct. is left with the firm conviction that an error was made, in that only one inference is possible and the Dst. Ct. made the wrong inference, then the FOF is CE. (3) In this case, the S.Ct. thinks the Ct. of App. made a de novo review of the facts that is not permissible. The proper question was whether the Dst. Ct. did something wrong. f. In some instances, the Cts. of App. have said that when findings are based on inferences from documentary evidence and not on credibility then the standard of review is different. The S.Ct. has decried this practice. Even if an FOF is made from documentary evidence. g. CE is one step away from the almost absolute deference that is given to a jury verdict. 4. Harmless error a. Errors committed by the Dst. Ct. that were not prejudicial to the decision are not grounds for reversal. b. Gertz v. Bass (1) In this case, the jury asked the bailiff for a dictionary, and the bailiff gave them one. The dictionary had not been admitted into evidence, and the case turned on the legal definitions of several key terms. (Foreign materials are not permitted in the jury room.) The dictionary definitions were extremely unfavorable to the plaintiff. The jury returned a verdict in favor of the defendant. (2) The Court found that this was potentially prejudicial error since the decision turned on specialized legal definitions of key terms. V. Respect for judgments A. Three goals 1. Efficiency 2. Finality 3. Avoidance of inconsistent judgments B. Terminology: res judicata, collateral estoppel, etc. 1. Preclusive effect of judgments (final judgments on the merits) a. Claim preclusion (res judicata) (1) What does "claim" mean in this context? The definition is influenced by pleading and joinder rules. The meaning of "claim" has broadened as the law has broadened. (2) While there is no compulsory joinder of claims under the Federal Rules, compulsion to join all possible related claims comes from claim preclusion law. (2a) Overview: Goals and requirements for claim preclusion (a) Efficiency (b) Consistency in judgments (c) Identity of the parties (d) Final judgment on the merits (3) "Efficiency": Frier v. City of Vandalia: What is a "claim"? (a) Plaintiff is a man who likes to park his cars in the street. At one point, the city had two of his cars towed because they were blocking something. He first sued for replevin in state court against the city and the garage that was holding his car. The relief he was seeking was replevin of the cars, and the issue to be decided was the legality of the towing (the right to tow). The state ct. held that the city had the right to tow, and so it refused to grant replevin. (b) Plaintiff then files suit in Federal Court against the city under  1983 alleging that the city deprived him of property without due process (no notice or opportunity to be heard). He seeks actual and punitive damages. (c) The Dst. Ct. bounces the suit out on a 12(b)(6) (pseudo SJ for defendant). In the Dst. Ct's opinion, there was no DPC violation, and there was no claim preclusion. Frier appeals, but the city does not cross appeal (it may challenge anything in the record that supports the judgment). (d) The court avoids the constitutional question by dealing with the claim preclusion issue. The ct. applies IL claim preclusion law. Under  1738, Full faith and credit must be extended to the IL judgment, and accordingly, it must be evaluated under IL law. (e) The majority pays lip service to the IL "identical claim of action" standard, but it actually applies the more favored and newer "transaction standard", which embodies a broader notion of "claim". The transaction in this case was the towing of the cars. (f) IL "identical claim of action" standard: are the parties and the causes of action identical? (1) Each individual has his own separate claim. (2) The meaning of "COA" is unclear, but COA's are identical when evidence used to sustain the first verdict would sustain the 2d verdict. (3) It is not enough to look at the transaction and see if the legal theory was raided at the first trial. Even if the particular legal theory was not raised at trial, the claim may still be precluded. (g) The message is to come up will all claims you can and join them in the same lawsuit (Use 'em or lose 'em!) What Frier should have done was sue in Federal court under  1983 and joined the replevin claim by invoking pendent (supplemental) jurisdiction. (h) A concurring opinion points out that the majority is trying to force IL into the transactional standard. (i) Claim preclusion is independent of the outcome. The S.Ct. would have ruled the same in the Frier case had Frier won his replevin suit. (j) Hyp: His wife would not have been kept out on claim preclusion, but would she have been kept out of court on issue preclusion? NO: issue preclusion would not have kept her out of court because her legal rights were not and could not be affected by a suit to which she was not a party. However, her husband's replevin suit will have a stare decisis effect on her case. [Is she a necessary and indispensable party?] (4) Note 7: Splitting claim into 2 lawsuits (a) Separate theories (b) Arithmetical splitting (c) Split relief (Property damage divorced from personal injury damages, or injunction vs. money damages). (5) The Restatement (2d) of judgments prefers the transactional test over the identical cause of action test. (6) "Consistency: The logical implications of the former judgment" : Martino v. McDonald's Systems (a) 1st lawsuit: McD sued Martino and his brothers for breach of a franchise agreement, in particular a covenant not to compete (the son bought a Burger Chef franchise, and Martino financed the deal). (b) Judgment on a consent decree was entered. The consent decree was tagged with FOF's and conclusions of law. (1) Sale of the franchise back to FRIC for $140,000 (2) Acknowledgement that the covenant was breached. (c) 2d lawsuit: Martinos sued McD under Sherman Antitrust act, charging that the consent decree violated Federal antitrust laws. They asked for lost profits and they challenged the $140,000 figure as too low. They ask for the difference between FMV of the franchise and $140,000. The question is whether there is res judicata. (d) McD presents 2 theories in favor of res judicata determination. (1) 1st theory: The antitrust claim is properly a compulsory counterclaim since it arose out of the same transaction or occurrence, and therefore since Martino did not bring it, it is waived. The Ct. holds that since Martine never filed an answer, technically, Rule 13(a) does not apply, since the counterclaim according to the rule must be stated in the pleading. Though the time period for an answer had passed, Rule 13(a) still applies. Also, there is a default judgment rule for recalcitrant defendants who try to avoid compulsory counterclaims by not answering. (2) 2d theory: Res judicata. Since res judicata extends to different theories of recovery on the same case, it extends to defenses raised by the defendant as well. (a) Judgment precludes subsequent claims & defenses (b) Different individuals have distinct COA's. Absent Rule 13(a) (compulsory counterclaims), parties can litigate their claims against one another separately. (c) When Defendant's lawsuit would nullify rights established by the prior action, the claim is precluded. This avoids inconsistent judgments and accords a party the right to rely upon a judgment. (3) In the previous lawsuit, McD got the franchise back for $140,000, and it won a ruling that the covenant was valid. Martino's antitrust claim stood to undermine both points. (4) Claim preclusion circumscribes the wide sweep of Rule 18 (claim joinder), and Rule 13(a) takes care of counterclaims arising out of the same transaction or occurrences that Defendant could have raised but chose not to. (5) 7th Cir's holding: Claim preclusion is not a bar to subsequent claims that could have been brought as counterclaims in a previous action. Exceptions: (a) Rule 13(a) compulsory counterclaims. (b) Claims that would have served as defenses to the previous action. (7) Restatement  22 view: Hyp #1: Dr. sues patient for an unpaid fee, and Dr. wins a default judgment. Patient later sues Dr. for malpractice. NO CLAIM PRECLUSION. The malpractice claim is a separate claim that does not affect the doctor's rights in the first suit. Hyp #2: Driver 1 sues Driver 2 for negligence and takes a default judgment. Driver 2 then sues driver 1 for negligence. Driver 2's suit would prejudice rights obtained by Driver 1 in the 1st suit. However, the Restatement says that Driver 2 should be able to sue (a narrow view: it is not enough just to say the claim might have been a defense). Hyp #3: Seller sues buyer to recover an unpaid purchase price on a good, and he takes a default judgment. Buyer then sues Seller for rescission and restitution of the purchase price. Here, claim preclusion would operate to bar this collateral challenge to the 1st judgment. Allowing the Buyer to proceed with his claim would seriously prejudice the rights Seller obtained in his lawsuit. (This is the situation in Martino). [Remember: If you fail to answer all of the allegations of the complaint, those allegations which you did not answer are deemed admitted.] (8) "Identity of the parties": Who is bound? Parties to a lawsuit and their privies. Searle Brothers v. Searle (a) Question: to what extent are non-parties bound? (b) 1st lawsuit: Divorce action. A slaughterhouse was awarded to the wife. The court rejected the husband's claim that a partnership owned 1/2 of the slaughterhouse since it was in the husband's name only, and he controlled all the rents. (c) 2d lawsuit: Sons of Searle sue to assert their interest. They seek a DJ that their are entitled to a 1/2 interest in the slaughterhouse. The defendant claims that since they were intimately involved in the divorce action even though they were not parties, they are in privity with Searle. (A finding of privity is properly a conclusion). (d) Easy cases on these facts would be between the following parties: (1) Mr. & Mrs. Searle : clear claim preclusion (2) Subsequent purchasers, since they would have been in privity with the vendor. (e) In this case, though the Searle sons were intimately involved with the divorce action, none chose to intervene. There is also the lack of any mutual or successive relationship that would give rise to privity. (f) The court rules that they had their own interest and they had the right to assert it. Since they were not parties to the divorce action, their legal rights were not affected, though they will have to contend with the stare decisis effect of the divorce decree. (g) Mrs. Searle's remedy in retrospect would have been to join the sons under Rule 19 (compulsory joinder of necessary or indispensable parties) or Rule 20 (permissive joinder) in order to bind them to the determination of the court. (h) Themes in privity (1) Successive relationships (2) Control of litigation (life insurance company) (3) Person suing in a representative capacity, like class action representatives, guardians ad litem, executors, and trustees (4) Co owners are apparently not in privity with other co owners. (5) The Restatement bails out on a definition of privity. (6) Issue preclusion follows similar privity rules. (9) A judgment that is on appeal still has a preclusive effect until and unless it is reversed. (10) Final judgment on the merits: these are given preclusive effect through the doctrine of res judicata. (a) How far do you have to go to get a final judgment on the merits? (1) Page 919: a, b, c, d, g, e (maybe). A determination is a determination on the merits unless the judge indicates otherwise. (See Rule 41(b)) (b) Rule 41(b): declares certain dismissals to be adjudications on the merits (1) Failure to comply with rules or orders of the court, including discovery orders. (2) Failure to prosecute (This rule puts teeth in the dismissal power of the court). EXCEPTIONS- Dismissals for: (1) Lack of jurisdiction (2) Improper venue (3) Failure to join a Rule 19 party (c) Saylor v. Lindsay (1) 1st action: Hawkins' shareholder derivative suit. Hawkins sued the directors and officers for SEC violations and breach of fiduciary duties. He failed to post a required bond, so the court dismissed "with prejudice." (2) 2d action: Saylor sued the same defendants. Saylor is a member of a class of shareholders, so "new person, new claim" is inapposite in this circumstance. (3) Three reasons not to impose CP. (a) Not the same COA (b) No judgment on the merits (c) No notice of Hawkins's action (violation of due process rights). (4) Ct: failing to post a bond could not have been an adjudication on the merits. It accordingly refuses to apply Rule 41(b) literally. The other court did not reach the merits of the issue. (The court appears to look to the background justifications behind the rule and finds that they are not satisfied.) (The court appears to treat the dismissal as an effective dismissal for lack of jurisdiction (a bit of a stretch; even a 12(b)(6) dismissal is on the merits unless otherwise stated.)). (5) Default judgments are judgments on the merits. (Failure to deny is treated as a binding admission). (6) Consent judgments are judgments on the merits. b. Issue preclusion (collateral estoppel) (1) Preliminary inquiries (a) A different COA? (b) What issues were actually decided? (2) Overview: Requirements for issue preclusion (a) Issue was "actually litigated and determined" (b) Issue was "essential to the judgment" (c) Mutuality/identity of parties: Many courts have abandoned this requirement for issue preclusion. (3) "Actually litigated and determined": IL Central Gulf RR v. Parks (a) 1st lawsuit: B, a passenger in a car run over by an RR engine driven by RR's employee, sues for her injuries. J sues for loss of services and consortium [[This was the day when Scott indicated he did not know what "consortium" meant.]]. Judgment was entered for B, but not for J. (The two are trying to avoid a determination on the issue of Contrib negligence so that B will at least get something. (b) 2d lawsuit: J sues for his injuries. The Ind ct. applies the old res judicata test (are the parties and the COA the same? NO), and concludes the claim is not precluded (recall the new view is the transactional test). But the defendant has also plead issue preclusion, and it argues that the CN issue has already been decided. Does J get to relitigate the CN issue? (c) In the first lawsuit, the jury returned a general verdict for the B and for the defendant on J's claim. Unfortunately, it is not clear upon what grounds the jury found against J: CN or failure to prove damages. The RR claims that the evidence of damages was uncontroverted, so the jury had to have ruled on the basis of CN. (d) RR has the burden to prove the basis of the verdict. Ct finds that RR fails this burden, as it is unsure of the grounds of the verdict. (e) A new trial is ordered on the issues of CN and Prox cause. The RR is estopped from denying negligence or proximate cause on its part. (f) RR could have demanded a special verdict, but granting one is within the discretion of the court. (g) Note 5: A sues B for Negligence, and B counterclaims for CN. General verdict is rendered for B. Problem with the general verdict: Everything is fair game: B might not have been negligent, but A might have been CN. B sues A for negligence, and A counterclaims for CN. General verdict is rendered for A. Then A is not negligent, and wins summary judgment. (h) The burden is upon the party invoking IP to show that the issue was actually litigated and determined. (4) Alternative bases for the judgment (a) Halpern v. Schwartz (1) 1st lawsuit: Creditors v. Halpern to force her into bankruptcy. In order to do this, the creditors had to show some act of bankruptcy. The court approves 3 complained of acts: Transfer with intent to forestall creditors, transfer without consideration, preference payment of an earlier debt. The first act was the only one which required a showing of actual intent. (2) 2d lawsuit: Suit to deny Halpern a bankruptcy discharge. This requires a showing of intent to delay or defraud creditors. The trustee argues IP on the issue of intent, so he believes he is entitled to SJ. (3) 2d Cir. NO IP! (a) Each act would have justified the prior judgment. The intent issue may not have been "essential to the judgment". The court may not have given deep enough thought to it.] (b) Could not have been challenged on appeal, as such a challenge might have been deemed frivolous. (c) The winner probably would not have vigorously challenged it on appeal. Accordingly, there was no incentive to litigate fully the issue or appeal any adverse ruling on the issue. (4) Is there any value in finding all three acts of bankruptcy? Yes, it tends to strengthen the opinion. (b) 2d Cir. retreats: Winters v. Lavine (1) General rule: alternative grounds have a preclusive effect so long as each could sustain the judgment on its own. Ct limits Halpern to Bkrtcy. (2) 2d Cir: No preclusion (Halpern) ----- ----> Each ground precluded (Winters). (3) Restatement: 1st: each ground has a preclusive effect----------->2d: No preclusion of alternative ground issues. Comment 1: 2 different bases, either standing alone would substantiate the judgment: no preclusive effect to either. Hyp: A v. B to recover interest B argues: 1. Note -> fraud 2. A released obligation to pay interest. A v. B to recover principal 1. Note -> fraud The Restatement says no issue preclusion. Now, if A sues to recover more interest, B will again invoke the same 2 defenses. Since both were brought over, there will be a preclusive effect. Comment 0: If alt judgment has been appeals and the judgment is affirmed on either ground, then there is a preclusive effect for the grounds affirmed on. (Halpern did not give weight to the affirmation on appeal.). (5) Mutuality: Are the parties the same, and if not, can IP still be imposed? (a) CL: mutuality was a requirement. Identity between the parties was required. (Rationale: Judgments don't bind 3rd parties) (b) Mod Maj view: Mutuality requirement is rejected. (c) Offensive IP (OIP) vs. Defensive IP (DIP) (1) DIP: A sues B, and A is found to have been CN. If A now sues C on the same transaction, C may invoke IP and preclude A from relitigating the CN issue. (2) OIP: A sues B, and B is found to have been negligent. C now sues B and argues that B is precluded from denying negligence. Is B precluded from relitigating the issue of negligence? Cts are reluctant to allow OIP. Questions: (A) Is it fair to apply it? (Sideline sitting? Judicial economy?) (B) Was the first opportunity to litigate the issue fair? (C) Handicap to Defendant in the previous suit (like a distance venue?) The Dst. Cts. may use their discretion in permitting OIP or not. (3) Parklane Hosiery v. Shore (a) Question: Can a party who had issues of fact resolved against it by a judge during the bench trial of an equitable issue be estopped from relitigating the same issues before a jury in a subsequent legal action brought by different parties? Defendants had lost a DJ action brought against it by the SEC. The court found that several proxy statements were false and misleading. Plaintiffs in this shareholder's derivative suit now wish to invoke OIP and bar Parklane from relitigating that issue. (b) The Dst.Ct. weighs the following factors: (1) Incentive to fiercely litigate (foreseeability of subsequent actions). (2) Sideline sitting of their opponents (3) Procedural hangup on previous action. (4) Compromise verdict? (5) Jury trial rights (c) The S.Ct. holds that the 7th amendment does not bar issue preclusion in this case. (4) State Farm v. Century Home (a) When is it unfair to impose OIP? This case involved multiple lawsuits arising out of a fire started on the defendant's property that spread to a warehouse in which 50 plaintiffs lost goods. (b) 1st case: Jury verdict for Defendant, but reversed for failing to produce a document- new trial- verdict for plaintiff: affirmed 2d case: verdict for Defendant- no appeal 3d case: verdict for Plaintiff- affirmed on appeal. (c) The remaining 47 plaintiffs want to rely upon the verdict in the 3rd case and preclude defendant from relitigating the liability issue. (d) Oregon test for OIP: (1) Identity of the issue: Y (2) Full & fair opportunity to litigate: Y (3) No unfair results (the key determination in OIP cases): N (e) Defendant argues the multiple claimant anomaly, but the court rejects this argument (IP is usually deemed unfair in mass tort cases because the relied upon verdict might be a fluke.) (f) Defendant also argues the possibility of inconsistent judgments. If a case if tried 3 times fairly and the juries return 2 verdicts for plaintiff and one for defendant, it is not clear that a future jury will come back for either party. So, it would be unfair to impose CE. (g) Defendant can avoid inconsistent judgments by joining all parties or moving to consolidate or by litigating the hell out of the first case in order to get a favorable judgment. (Unfortunately, mass tort victims are not Rule 19 parties). Interpleader is also a possibility (d) Though the S.Ct. has rejected mutuality as a requirement for IP, state cts still might require mutuality. NC: No mutuality required for DIP, but its an open question as far as OIP. VI. Reopening judgments: Rule 60(b) A. A losing party can move to reopen a judgment within 1 year if one of the conditions in Rule 60(b) is met. Exception: a judgment procured through a fraud on the court is not subject to the 1 year limit (4,5,and 6) Grounds other than 1,2, or 3. B. Grounds for reopening a judgment 1. Mistake, inadvertence, surprise, or excusable neglect 2. Newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial. 3. Fraud, misrepresentation, or other misconduct of an adverse party. 4. The judgment is void 5. The judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based had been reversed or otherwise vacated, or 6. For any other reason justifying relief from the operation of the judgment. C. Rozier case: The court holds that the Dst. Ct. should have granted relief for the refusal to turn over the document. D. Movant must prove his ground for reopening the judgment by clear and convincing evidence. VII. Personal jurisdiction: A historical approach A. Personal jurisdiction refers to the court's power to render a binding judgment against a person and also to the person's amenability to SOP. B. Older view: State power- Pennoyer v. Neff 1. 1st lawsuit: Mitchell v. Neff for unpaid legal fees. Neff was a non-resident of OR who was living in CA. Notice (constructive notice) of the lawsuit was buried in the back pages of the newspaper where Neff would never see it. Default judgment against Neff was entered when he did not answer, and Mitchell was awarded $300 in damages. He then executed the judgment by having property owned by Neff he acquired after the lawsuit seized and sold at public auction. Pennoyer bought the property and was given a sheriff's deed. Mitchell then pockets the proceeds. Neff shows up and finds Pennoyer on his property and sues to eject Pennoyer. Each points to his respective deeds. [[Side point: Could Pennoyer have acquired AP under COT?]] 2. In order to examine the validity of the sheriff's deed, the court must examine the validity of the judgment obtained against Neff in the 1st suit (by examining the jurisdictional problems with that suit). Did the sheriff have the authority to sell the property? 3. The lower court finds that the constructive SOP was invalid in that the wrong signature on the affidavit was obtained, and so deems the sheriff's deed invalid on a technicality. Pennoyer appeals to the S.Ct. 4. S.Ct. a. The defective affidavit is not the sort of error that is subject to challenge by collateral attack. That error can only be challenged on direct appeal., BUT b. In order to acquire jurisdiction by attachment, Mitchell would have had to have seized the property prior to the commencement of the lawsuit concerning the land. (in rem jurisdiction) c. But, this action concerned the non-payment of legal fees, but in order to adjudicate the rights of a person, the court must have personal jurisdiction over that person. This could have been achieved by SOP on Neff when he came into OR. (The CL courts used to attach people and physically compel their presence in court. But now, we use SOP in lieu of personal attachment.) d. Since Mitchell did not properly attach the land or properly serve Neff with process, then the judgment is void for lack of jurisdiction. e. Reasoning: 2 established principles (1) States have "exclusive" jurisdiction over persons and property within the state. (2) States cannot exercise jurisdiction outside their boundaries (corollary to (1)). But, the court refuses to apply the rule rigidly (3) Non-resident property holders (4) Full faith and credit clause: Extraterritorial exception still intact. 5. Different rules for jurisdiction over persons and over property a. Jurisdiction in personam: Judgments affecting the defendant's rights. The winner of an in personam judgment can seize any property belonging to the defendant and have it sold to satisfy the judgment. The full faith and credit clause can be used to enforce the judgment in other states. b. Jurisdiction in rem: 2 types (1) In rem "proper": An action against property belonging to the defendant. The nature of the dispute concerns the property. (2) Quasi in rem/attachment jurisdiction: An in rem suit not over the actual property. The property is attached only to acquire jurisdiction. Under either, however, the plaintiff can satisfy the judgment from the property seized at the outset of the lawsuit and no other property belonging to the defendant. Seizure of the property constitutes constructive notice, since either you or your agent will know if your land has been seized. 6. Constructive notice is impermissible under the facts of this case to establish jurisdiction in personam. 7. Intangible personal property, like stocks and bank accounts, can also be seized. 8. Frequently, you had to go to the defendant's home jurisdiction in order to sue him. 9. Hypotheticals Mitchell v. Neff a. Neff visits friends in OR. Sheriff serves Neff with process while he is in OR. OR now has in personam jurisdiction over Neff. b. Neff takes a wrong turn into OR and is served with process. OR still would have in personam jurisdiction. c. Mitchell gets a judgment in personam. He can now collect the judgment from any property, even if acquired after the judgment. d. Mitchell can also go to CA to execute the judgment by getting a CA judgment based on the full faith and credit clause. e. Mitchell seizes 5 acres in OR by attachment and obtains a default judgment. Mitchell can satisfy the judgment only by looking to this property seized at the outset of the lawsuit. Res judicata does not apply to in rem suits. You can always attach more property and sue again so long as the SOL has not lapsed. 10. Going into another state to enforce the judgment: In order to do this, you must file an action in the state in which the property you would like to seize lies. In that action, the defendant cannot make defenses based on the merits if the original judgment is in personam. The full faith and credit clause keeps the CA judge from reopening the judgment. Congress has also enacted a full faith and credit statute (28 U.S.C.  1738). The statute specifies how to prove the previous judgment. The ONLY exception: no full faith and credit can be extended if the 1st state never had personal jurisdiction. 11. Prior to Pennoyer, courts borrowed international principles in restricting personal jurisdiction to the borders of the states (state territorial limits to jurisdiction). But Pennoyer adds to this body of law: the newly enacted DPC of the 14th Amendment. No longer are challenges limited to the situation where the judgment is taken from one state to another. 2 shifts a. Not just limited to collateral challenges in another state to the original state's jurisdiction/ b. Now, OR must accord due process, and failure to do so gives Neff a Federal claim, which he can conceivably appeal to the U.S. S.Ct. He need not only rely upon OR law. 12. A Federal constitutional jurisdictional challenge: the revolution of Pennoyer. The Constitution limits exercise of state sovereignty through the DPC. From here on out, what principles govern due process? Challenges to jurisdiction must be raised by pretrial motion or answer, or you waive the (FRCP Rule 12). 13. Exceptions specified in Pennoyer a. Status of citizens towards nonresidents. Dissolving marriages where 1 spouse has fled the state. b. State can require corporations or partnerships to submit to personal jurisdiction by designating a representative to receive SOP, or by requiring the officers of the corporation incorporated there to submit to personal jurisdiction. 14. Territorial limits: Pro-Defendant- defendant can enter the state, do damage, and leave, thereby escaping personal jurisdiction, and accordingly, liability for the damage she caused. 15. But as interstate commerce develops, the Pennoyer framework becomes unworkable. a. Domiciliary: By being a citizen of a state and enjoying its protection, you are always subject to jurisdiction of that state's courts. b. Consent: Consent of a corporation to SOP. (1) At first, such consent was voluntary (2) Then it was made a coercive condition for doing business in the state. (3) Implied consent by doing business in the state. The state will appoint a person to accept SOP if the corporation does not appoint someone., but do states have the power to do this under the Commerce Clause? c. Corporations are fictional persons (1) Present in the states in which they are incorporated, and (2) Present in those areas in which they do a significant amount of business, but if they leave, then they are no longer territorial present. B. "Minimum Contacts" and the departure from the Pennoyer framework: International Shoe v. Washington 1. The State of Washington sues IS in WA court for failure to pay unemployment insurance on several salesmen it employed in WA for a few years. They had long since discontinued activity in WA. IS was a DE corporation with its principal place of business in St. Louis, MO. WA served them with process by mail to their headquarters in MO. IS made a special appearance to challenge jurisdiction. 2. WA's arguments a. IS did a significant amount of business in the state, so they impliedly consented to jurisdiction. b. Coerced consent c. Salesmen in the state, so the corporation was present within the state. d. Property within the state (a pile of left shoes and debts owed them by customers). 3. The WA S.Ct. held that IS carried on enough activity in the state to make them subject to the state's jurisdiction. IS appeals to the U.S. S.Ct. 4. IS's arguments a. Not subject to the tax under the DPC b. No way under Pennoyer that WA could acquire personal jurisdiction. 5. The S.Ct. probably could have affirmed under existing precedents, but instead it chooses to use the case to revamp Pennoyer framework. and reconsider the role of the DPC in personal jurisdiction law. 6. The court holds that so long as the defendant has "minimum contacts" such that personal jurisdiction would not offend traditional notions of "fair play and substantial justice", the a state has jurisdiction over a defendant. By adopting this test, the Court moves away from the motif of territorial power that pervaded Pennoyer. 7. However, the court provides little guidance in applying this test, as Justice Black's separate opinion points out. 8. The Court argues that it is merely reforming the inquiry, not revolutionizing this field of the law. The result of most cases will be the same. The Court also talks up notions of reciprocity. 9. 2 part test a. What are the defendant's contacts with the forum? The defendant must have continuous and systematic contacts that could give rise to the lawsuit. b. What is the nature of the lawsuit and its relation to the activity? What is the relationship between the defendant, the forum, and the litigation/subject matter of the lawsuit? 10. The Court has shifted the focus from state power to notions of fairness and justice. 11. Middle ground cases: Extensive activities but lawsuit is unrelated to the forum, or some minor contact but the suit is directly related to that contact. The court has held that these sorts of cases must be decided on a case by case basis. 12. Types of cases: a. Zone I: Lots of contacts and lawsuit is directly related to those contacts: Clearly there is personal jurisdiction. b. Zone II: Few if any contacts and the lawsuit is not related to any of the contacts: Clearly no personal jurisdiction c. Zone III: Many contacts, but the lawsuit is not related to any of them: Some cases yes, some cases no. d. Zone IV: Few if any contacts, but the lawsuit is directly related to those contacts: This zone produces the most uncertainty. 13. General vs. specific jurisdiction a. General jurisdiction is the sort of jurisdiction you are under when you can be sued on any claim relating to any matter. A corporation may have enough contacts in a particular jurisdiction to render it susceptible to general jurisdiction. b. Specific jurisdiction is the sort of jurisdiction you are under is you are amenable to suits on particular subjects, but to others. 14. Hyp: An IS truck is involved in a wreck in WY while transporting shoes to WA. Should it be subject to jurisdiction in WY? This is a Zone IV case. Is it fair to make them defend a lawsuit in WY? 15. IS holding is broad enough to be applicable to individuals as well as corporations. But, its holding was limited to judgments in personam and was not broad enough to cover judgments in rem at that point. C. Bringing in rem jurisdiction into the IS framework (and abolishing it as a separate means of acquiring jurisdiction): Shaffer v. Heitner 1. This case was a shareholders derivative suit against corporate officers of Greyhound Corp., a DE Corp., for breach of fiduciary duty and antitrust violations and criminal contempt. Under DE law, the situs of all shares of stock of DE Corps. is DE. Additionally, DE had a "sequestration" statute that permitted the seizing of any property in the state in order to acquire jurisdiction. Plaintiff's invoked the sequestration statute and seized the stock belonging to the officers (quasi in rem jurisdiction). Defendants entered a special appearance to dismiss (quash the SOP) on DPC grounds. (If they lose, they are subject to in personam jurisdiction; the other choice would have been to take a default judgment and challenge it collaterally if the plaintiff's try to execute it.) 2. Defendants' arguments: a. DE stock situs law is invalid. b. Fuentes-type DPC argument: timely notice and a hearing are required. c. Even if we do have property, seizure of it is not enough. Unless the IS "minimum contacts" test is satisfied, there can be no personal jurisdiction. (and these officers have virtually no contact with DE.) 3. Question: Should the IS rule be applies to quasi in rem jurisdiction? 4. The Court reviews the Pennoyer distinction between in rem and in personam. Proceedings against property are mere legal fictions because the end result affects the legal rights of the target of the suit. Indeed, the avowed purpose of this sequestration statute is to "encourage" the owners to come to DE and submit to jurisdiction. 5. Will property ever be enough to get jurisdiction? Yes, so long as the property is related to the underlying COA. Here, the stock was not related to the source of the dispute. It was being used only to acquire jurisdiction. 6. Applying the IS test: These defendants had virtually nothing to do with DE other than the fact that by fiat DE had declared their stock to be present in DE and the fact that they were officers of a DE corporation, so the minimum contacts prong is not satisfied. Nor it there a strong relationship among the defendants, the forum, and the litigation. The state has made no compelling interest in asserting jurisdiction in these circumstances, so the Court reverses and holds that there is no jurisdiction. 7. Is in rem jurisdiction a dead letter in light of the minimum contacts test? If it is, it probably doesn't matter since attachment jurisdiction is not used much anymore. D. WW Volkswagen v. Woodson 1. The Robinsons bought an Audi from Defendant in NY. The Robinsons then moved to AZ. While driving though OK, they were involved in a wreck. They sued the mfr and others in a products liability action in OK alleging defective design and placement of the gas tank. They also joined the importer, the regional distributor, WW Volkswagen, and Seaway, the NY dealer from whom the Robinsons purchased the Audi. Seaway and WWV entered a special appearance to challenge jurisdiction on DPC grounds. 2. Seaway argues that it does no business in OK, ships no products there, has no agent to receive SOP in OK, produces no advertising calculated to reach OK, and that its only contact with OK is this one automobile which was involved in an accident in the state. 3. Dst.Ct: found personal jurisdiction, and defendant sought a writ of prohibition (mandamus) from the OK S.Ct., which was denied. The OK ct reasoned that the car was inherently mobile, that it was in fact used in the state, and Seaway derives income from the fact that the car can be used in OK. 4. The US S.Ct. reverses, holding that under the IS formula that is was unreasonable to haul defendant into OK ct and compel him to defend a lawsuit there. a. Has the defendant purposefully availed itself of the benefits of the jurisdiction? In this case, NO. 5. The WWV test: 1. Does the defendant has minimum contacts with the forum?? 2. If so, do the "5 VW considerations" revolving around notions of fair play and substantial justice militate in favor of finding jurisdiction? a. Burden of the defendant b. Interests of the forum state in having the litigation conducted there. c. Plaintiff's interest in obtaining relief. d. Interests of the interstate judicial system in obtaining efficient resolution e. Shared interests of the states in furthering substantive social policies. 6. Brennan's dissent: a. Other interests are at stake. The forum state's interests may be strong as well. Those interests should prevail unless the defendant can show inconvenience, even if defendant has no minimum contacts. b. It appears Brennan is not to keen on the minimum contacts prong of the IS test. c. Brennan believes the minimum contacts test is not necessary, and even if it was, he would be more quick to find them (the majority disagrees with him on this point). b. Is the IS test still workable? 7. No minimum contacts a. No calculated effort at advertising or marketing in OK b. The fact that one of the defendant's cars entered the jurisdiction was too fortuitous. Throwing a foreseeability test that wide open is not sensible and puts control of contacts into the hands of another. c. No calculated effort to avail itself of the benefits of the forum state. It is not foreseeable that the defendant might be hauled into court in that state. The Court looks in particular at the effort on defendant's part to conduct business in the state. * Despite the fact that other factors weigh in favor of finding jurisdiction, without minimum contacts, other factors are IRRELEVANT! (Brennan disagrees with the majority on this point.) 8. There is no doubt that Audi and VW are subject to jurisdiction in OK, since they made a calculated effort to sell cars in OK. Nor is it unfair to make them defend a suit there. 9. The legacy of Pennoyer and notions of federalism and state sovereignty: though it might be more convenient for a defendant to defend a suit in a court just across the border in another state which the defendant has no contacts with rather than defend a suit in a distant corner of his own state, principles of federalism and state sovereignty militate against finding that the court across the border has jurisdiction over the defendant. E. Burger King v. Rudewicz 1. BK sues Rudewicz, a citizen of MI, in FL Federal District court for breach of a franchise agreement and for back rent. Defendant challenged jurisdiction, but the Dst.Ct rejected the jurisdictional challenge and entered judgment for the plaintiff. The 11th Cir. reversed and found no jurisdiction (no reasonable notice, and defendant was financially unprepared to defend a suit in FL. 2. US S.Ct. reverses and finds jurisdiction. Brennan, writing for the majority, finds that there are minimum contacts between the defendant and the forum in FL. The contract existed under the laws of FL, but that is not enough by itself. Additionally, negotiations, future dealings, and the terms of the contract that disputes would be resolved according to FL law, all point towards contact with FL. The Court takes special notice of the fact that the defendant went outside his home jurisdiction to do business with a firm of national reputation. 3. Additionally, the Court considers other factors weighing in favor of finding jurisdiction. The Court thinks the forum has a strong interest in this case in having the dispute adjudicated in its forum. This part of the opinion indicates that more weight should be given to the forum's interest, and that less of a showing of minimum contacts should be required (This is where Brennan's views regarding "minimum contacts" starts to show through). The Court also believes he was under fair warning that he might be hauled into a FL court to defend a lawsuit. (This last test is neither helpful nor consistent.) 4. Though this suit was brought in Federal Dst.Ct., Rule 4(f), a Dst.Ct. can serve process anywhere within the state, and under Rule 4(e) can serve process in accordance with the state's long arm statute. 5. Counterargument: the suit could have been tried in MI, and FL law could have been applied. 6. The 11th Cir. found a disparity of bargaining power. This was an easy way to get default judgments against persons unable to defend in the forum state. The Court sympathizes, but decides that these cases should be decided on a case by case basis. F. Asahi v. Super. Ct. 1. This case involved the blowout of a tire on a Honda motorcycle. The plaintiff sued the tire mfr. (Taiwanese) in a products liability action in CA. The tire mfr. impleaded Asahi (Japanese), the valve mfr., for indemnification. Plaintiff settled, leaving only the 3rd party action. 2. The Superior Court found jurisdiction, Ct. of App. found no jurisdiction, CA. S.Ct. found jurisdiction, but the US. S.Ct. found no jurisdiction. 3. The CA S.Ct. argues that since Asahi had put these valves into the stream of commerce. Asahi could thus be SC that these valves would end up in CA. The CA S.Ct. may have relied upon language in WWVW concerning stream of commerce (page 107). 4. The Court agrees that there is no jurisdiction, but they disagree as to why. 5. II-A minority: Purposeful direction of action is required for a finding of minimum contacts. Accordingly, there are insufficient contacts. 6. Majority: The 5 VW factors militate against finding jurisdiction. 7. Brennan's bloc: Stream of commerce + awareness that the product would end up in the forum jurisdiction is enough to establish personal jurisdiction. 8. Stevens objects to a stark distinction between "mere awareness" and "purposeful availment". 9. Scoreboard a. Minimum contacts: Divided b. 5 VW factors: Do not work in favor of fair play & substantial justice. It would be unreasonable to make this Japanese corporation defend a lawsuit in CA. 10. Despite the wavering on the minimum contacts prong, the Court has yet to totally accept Brennan's WWVW dissent. G. "Hypothetical" case 1. Cigarette lighter malfunctions. Injured person wants to bring a products liability action against the manufacturer, a Japanese company. The mfr. sells lighters to Scripto, a US company, and only to Scripto. Scripto purchases several million lighters annually, but there is no way to know how many were sold in NC. 2. Plaintiff v. Japanese Company in NC. a. Pro-jurisdiction: distinguish Asahi. Since the Japanese company is selling only to a US company, it is substantially certain that all the lighters would end up in the US and that some lighters will end up in NC. It also injected the lighters into the stream of commerce and purposefully directed its activities towards the US. As for minimum contacts, they have sold product to a US distributor that has acted as its agent in the US. Also, the state may have a great interest in having the dispute adjudicated by one of its courts (5 VW factors). b. Con-jurisdiction: No purposeful direction of conduct towards the state of NC. No advertizing, marketing, regular advice to customers, tailoring of the product for sale in NC. Additionally, the burden on the defendant in having to defend a suit in NC would be great. 3. Distinguishing Asahi a. Can SC act as a proxy for purpose, as it can in tort law under the Garratt v. Daley articulation of SC? The Japanese corporation is selling to a company which it knows only does business in the US whereas Asahi marketed its product to a firm that did business all over the world. b. Only part of the product was involved in Asahi vs. the entire product in this case. 4. This was an actual case from the 5th Cir., and that court ruled that there was jurisdiction, but the decision was rendered before the Asahi decision. H. Burnham v. Super. Ct.: How far is the S.Ct. willing to retreat from Pennoyer? 1. This case involved an exercise of transient jurisdiction over a person who had entered the state in order to see his children. While in the state, he was served with process in an divorce action filed against him by his wife. The Court has to struggle with IS and its progeny in light of the traditional in-state service rule. 2. Transient jurisdiction: Personal jurisdiction by the simple fact that the individual happens to be within the borders of the state. 3. Burnham picks up on language in Shaffer and the implication that "all assertions of jurisdiction" must be evaluated under the IS test: Minimum contacts + 5 VW factors. The question would then be does transient jurisdiction violate the DPC in light of the IS test. 4. IS caveat: "If he be not present within the territory of the state." IS read in light of this statement only provided a new way of acquiring jurisdiction over a non-resident not present within the jurisdiction. 5. The Shaffer ct. dispenses with separate quasi in rem jurisdiction and subjects all assertions, in personam, in rem, or quasi in rem, to the IS test. (Recall the "perpetuation of ancient forms" language). 6. If mere presence of property within the state is insufficient to confer jurisdiction, what about the mere presence of the person within the jurisdiction? 7. The S.Ct. holds that there is jurisdiction, but they disagree as to the exact reasons. However, they agree that the DPC was not violated by the fact that he was served with process while temporarily in the state. 8. Split a. Scalia: The traditional in-state service rule is so ingrained in American law that unless this ancient form is patently unfair, it is constitutional. (The rule's pedigree). This is somewhat bolstered by the fact that the state's still use it. In 1868, the states believed that due process consisted of the rules that existed at the time of ratification. The traditional rule is firmly established and still favored by the states. [You can, however, add to the body of legal rules and have them comport with due process.] b. Brennan (4 votes): The traditional in-state service rule is outdated and defunct. But even so, it is not unfair to subject Burnham to jurisdiction. After all, he did enjoy the benefits and protections of CA's laws and services for 3 whole days. (1) Scalia relies only on the in-state service rule's pedigree to uphold its constitutionality. (2) Brennan concludes that the defendant benefitted from his presence in CA, so jurisdiction is not unfair. (3) He had fair notice and warning (4) Reciprocity (5) Transient jurisdiction is generally speaking fair. c. Stevens (1) Concurs in the judgment (2) Thinks this is an easy case, but (3) Joins in neither opinion, though he likes aspects of both. 9. Problems for the Court a. Shaffer language about the perpetuation of ancient forms that do not comport with due process. b. Scalia's attempt to cast the Shaffer language concerning "all assertions" of personal jurisdiction in its proper light of "in personam vs. in rem" is unsatisfying. c. [Though Gibson believes Scalia has rebuffed Shaffer, I believe he has not totally rejected that case, but instead he has offered a rather weak test of fairness. d. The Court leaves us with no definitive answer except that transient jurisdiction is generally speaking not unfair. I. The upholding of jurisdiction absent minimum contacts: Has Brennan finally won out? 1. Ins. Co. of Ireland v. Compagnie de Batista a. Plaintiff sues ins. co. in Federal District Court, and defendant makes a special appearance to challenge jurisdiction. Plaintiff then sought to take discovery of facts relating to jurisdiction, but defendant refused to cooperate with discovery, citing the court's alleged lack of personal jurisdiction. Defendant also objects that supplying the requested information is too burdensome. Plaintiff sought a discovery order compelling discover and got one. Defendant continues to stonewall. Finally, the judge threatens to find that jurisdiction has been admitted if the defendant does not comply. Defendant again balks, so the judge ruled that on the facts presented that jurisdiction had been established as a sanction for non-compliance with discovery. b. Defendant argues that the court cannot enforce discovery orders against parties who are not under the jurisdiction of the court. c. The S.Ct. rules that jurisdiction is based on due process principles (1) Waiver/consent: by entering a special appearance to challenge jurisdiction, a defendant agrees to be bound by the court's determination on the issue of jurisdiction. Accordingly, the defendant must comply with discovery on this issue of jurisdiction by consenting to abide by the court's determination on the issue of jurisdiction. The other option, however unappealing, is to take a default judgment and challenge jurisdiction if the plaintiff attempts to enforce the judgment in a forum that does have jurisdiction. (2) Fair play and substantial justice test. d. The Court also believes this is somewhat a question of necessity: the parties must cooperate in order to resolve the dispute. e. The defendants believe the discovery requests are too burdensome, they can always file a motion for a protective order under Rule 26(c). f. Powell's concurrence (1) He thinks the court has forsaken the minimum contacts test for personal jurisdiction and has moved decisively in favor of using only the FPSJ prong of the IS test. See page 148. (2) The Court seems to think that personal jurisdiction is a liberty right under the DPC (waivable) and not an exercise of the power of the court/state sovereignty (not waivable). g. Is the majority shifting gears in this area of the law? The Court is in a real box as to this problem. 2. Consent to personal jurisdiction by contract: National Eq. Rental v. Szukhent a. Defendants leased farm equipment from the plaintiff, a NY corporation with its principal place of business in NY, and signed contracts containing a provision that the defendant's "consented" to appoint one Florence Weinberg to be their agent to receive SOP in NY. Apparently, Weinberg was the wife on one of the company's officers. Defendants are domiciled in MI. (This is little is any warning of the potential of getting sued in NY.) Defendants defaulted on installment payments, and plaintiffs sued. SOP was made on Weinberg, and she promptly notified defendants of the suit via certified mail. b. The Court ultimately finds that since Weinberg promptly informed defendants of the lawsuit, finding personal jurisdiction was not unfair. c. Plaintiff relies on Rule 4(d) (predesignated agent rule), so the issue is statutory in the court's eyes. d. Defendants content that Weinberg had a conflict of interest and she was not personally known to the defendants, so she could not serve as their agent. Nor did the contract require her to give prompt notice of the lawsuit. Defendant argues that the court should look to NY law. This is a problem of diversity jurisdiction: state substantive law applies, but so does Federal procedural law. e. Justice Black argues that the defendants were denied due process. This provision was an obscure boilerplate provision that defendants probably did not understand might render them susceptible to being sued in NY. Accordingly, there was no real consent. Additionally, since the Federal court is sitting in diversity jurisdiction, it should look to NY law to see if she was his agent. f. Note 4: Cognovit, consent to the entry of a judgment and waiver of rights of appeal as well as defenses, is approved in narrow circumstances. g. Generally, a knowing and voluntary waiver is required for consent. J. Assuming there is power, what kind of notice must be given in order to satisfy the DPC? 1. Mullane v. CH B&T a. This case involved an action filed by CHB&T's trustee to settle all outstanding COA's regarding the supervision and administration of a common trust fund (fiduciary duties). The trustee wants the court to approve the handling of the trust fund. Approval cuts off any right to complain (res judicata). Also, trust funds are taken to pay attorney's fees. NY statutes on common trust fund administration requires that notice to the beneficiaries be given by publication in the newspaper for several weeks, and that the advertisement contain a list of the trusts involved, but not the beneficiaries. 2 guardians are appointed to represent the interests of the beneficiaries. b. The Court rules that (1) The statutory notice is inadequate for DPC purposes, and (2) There is no jurisdiction over absent non-resident trustees. (3) The trustee is seeking an in personam judgment, so personal, not constructive, SOP is required. c. The Court thinks this is a 1/2 // 1/2 in personam/in rem hybrid, but the distinction does not matter because both are subject to the DPC. d. The Court looks at the adequacy of the notice and the opportunity accorded the beneficiaries to be heard. It also looks to the state's interest in overseeing these trusts, therefore, there is no DPC violation for NY to exercise power. e. Problems that should be avoided (1) Conflicting judgments (2) Consuming all of the trust funds. f. NY has the most interest in hearing and deciding this lawsuit. So, there is jurisdiction provided the notice is adequate. g. ***The Court does not look to minimum contacts in finding jurisdiction. Instead, it appears to find jurisdiction by necessity. h. Notice: Notice must be reasonably calculated to give notice to as many affected persons as possible, and the notice must be reasonable under the circumstances. Personal SOP is not required in every case. g. The Court rules that the statutory publication notice does not satisfy the DPC to contact known beneficiaries, but it also says that publication notice is permissible for unknown trustees. Direct personal SOP is not necessary, but rather, notice through the mail may be used. i. Categories of beneficiaries (1) Known identity & known address: Notice by mail (2) Known identity & unknown address: Notice by publication (3) Unknown identity + contingent interest holders: Notice by publication 2. Hyp: Eminent domain proceeding- can constructive SOP by publication be used, and more importantly, will it comport with due process? a. Defendant: Since the identity of a landowner can be discovered from land and tax records, personal SOP is not unreasonable. If the owner is a non-resident with no known address, then seizure & publication may be enough to satisfy the DPC. b. State: Under Pennoyer, seizure + publication can be enough. c. Mullane: Tangible property may be a different case. d. Note 4, page 168 Mortgage example: US S.Ct. case: Notice by publication was insufficient to serve process since the owner of the property and his address could have been easily discovered through a search of the public records. The Dissenters talked up the ability of the mortgagee to protect itself. (462 U.S. 791). K. Service of Process 1. SOP is governed by the applicable statutes. Under the Federal Rules, SOP is governed by Rule 4 : READ IT NOW!!!! 2. Rule 4 a. Summons: Issuance: Plaintiff is responsible for making sure a defendant gets the SOP with a summons and a copy of the complaint issued by the clerk of the court. b. (See Form 1 Page 152 of the supplement) c. Who may serve process? (2)(A) Any person at least 18 years of age who is not a party to the suit (even an employee of the Plaintiff's attorney). (2)(B) Service by US Marshall by leave of court is available. (2)(C)(i) Pursuant to the law of the state in which the Dst.Ct. sits (2)(C)(ii) Mailing SOP to D, but D must return acknowledgement in time or the SOP is insufficient and other means may be used. As a sanction, D can be assessed costs for the more expensive forms of SOP used to serve process. Problem: The SOL in some jurisdictions is tolled not by the filing of the complaint but rather by SOP. A recalcitrant defendant can refuse to cooperate and thereby allow the SOL to lapse. d. Who may receive SOP? (1) Person other than an infant or incompetent by leaving it at the defendant's house or apartment with a person of suitable age or discretion. (2) According to state law is the defendant is an infant or incompetent. (3) Agent of defendant corporation (4) US Atty if the US is the defendant (5)&(6) See Rule 4(d) e. Where can you serve? Rule 4(f): Territorial scope: boundaries of the state or as authorized by Federal statute outside the state (like the Federal interpleader act). Or within 100 miles of the courthouse when serving Rule 14 or Rule 19 parties (bulge rule). Rule 4(e): Service on non-residents pursuant to the state's long arm statute, order of the court, or US statute or other rule. Rule 4(j): Service on defendants in foreign countries. f. How long can you wait before suing? Rule 4(j): 120 days, otherwise you face a dismissal without prejudice unless you can show good cause. 3. Hypotheticals: 2 issues: Personal jurisdiction & proper SOP? a. 2 corporations in a lawsuit. P v. D. D is a NM corp and does business in NM, AZ, and CO. P is a NJ corp but does business in NM. P sues D for breach of contract in SDNY. President of D corp comes to NY for a conference and is served with process. (1) Service is proper: Rule 4(d)(3) (2) But it seems there is no Personal jurisdiction since there are no minimum contacts and the 5 VW factors are not satisfied. Defendant should file a 12(b)(2): Just because the president happens to be in NY on a conference does not mean that the corporation is now present in NY. * If P had filed in NM, then there would have been personal jurisdiction. But if P served a salesman, he probably would not be deemed an authorized agent for Rule 4 purposes. The proper motion would be a Rule 12(b)(5) dismissal motion. ** Rule 12(b)(4) is a motion challenging the process itself for some defect, not its service. 4. Problems with mail service a. Plaintiffs don't realize that defendants can refuse to cooperate b. Cts. have barred plaintiffs from using a state's mail SOP procedure when doing so would circumvent the Federal mail SOP procedure. 5. Proposed rule changes: Rejected (?) a. Waiver of SOP (1) If D agrees to waive, D gets 60 days to file an answer (2) If D refuses, D has to pay costs of personal service and only gets 20 days to answer. Defendant is under a duty to minimize costs. L. Other limitations on personal jurisdiction other than the constitution: State long arm statutes and Federal law. 1. Long arm statutes a. States have the power and authority to enact so-called long arm statutes governing the circumstances when the state may exercise personal jurisdiction over a non- resident not present within the state. b. The DPC is a restriction on personal jurisdiction, whereas long arm statutes are authorizations of personal jurisdiction. c. Order of inquiry: (1) Does the defendant fall within the ambit of the state's long arm statute (should one even exist at all)? (2) If so, does the exercise of jurisdiction satisfy the DPC? (A related inquiry is whether the notice given to the defendant satisfied the DPC.) If the answer to both questions is not yes, then the court must dismiss. Moreover, just because jurisdiction may be constitutional does not mean that it is authorized by statute. d. Some long arm statutes make jurisdiction as wide as the DPC will permit (California, for example). In these circumstances, the 1st inquiry can be skipped. Other long arm only allow a subset of what is permissible under the DPC. e. Many times it is not clear what the DPC requires, so the long arm statutes that are more specific provide more certainty. However, the trend is towards broad reaching statutes. f. Omni Capital v. Wolff (1) This case involved a scheme to invest in futures in England through Wolff. The belief is that the investments would be tax deductible. The IRS disallowed the deductions, so several investors sued Omni in LA US Dst. Ct for fraud and CEA violations. Omni then attempted to implead Wolff and Goulay, claiming derivative liability. Both objected to jurisdiction under LA's long arm statute. (2) Omni tried to argue that Congress made an implied grant of nationwide SOP power on the Federal courts considering CEA claims. After reconsideration, the Dst.Ct. ruled that since the CEA does not talk about SOP, so the court must fall back upon the state's long arm statute. However, Omni all but concedes that W&G are not within the ambit of the long arm statute. (3) Omni's argument: (a) LAS is irrelevant. A US Dst.Ct. can exercise jurisdiction not inconsistent with the DPC. (b) CEA implies nationwide SOP. (c) Dissenters' argument: Court should fill in gaps in the law with judicial decisions when appropriate. (4) The court rules that in addition to the DPC hurdle, there are other prerequisites to jurisdiction. (a) Statutes, federal and state. (b) You must serve process upon the defendant for the court to have any chance at acquiring jurisdiction, and for that to happen, there must be authority to serve process. SOP is governed by the FRCP Rule 4(e) & Rule 4(f), Federal law, and state long arm statutes. (c) If you rely upon a state's LAS, then you must use state procedures for serving process. (5) Ct. rejects the argument that the CEA implicitly permits nationwide SOP. The court refuses to infer authorization from the statute's silence on the subject. (6) The ct. also declines to forge a rule to remedy gaps in the statutes and the rules. (a) No power to do so (b) Even if they had the power, they still would not exercise it since they believe the legislature is in the better position to make the call. To exercise the power would be circumscribing the jurisdiction of the legislature. (7) The Rules Advisory Cmte. took up the S.Ct.'s invitation to amend Rule 4 to address, among other things, serving aliens with process in federal question cases. The RAC took up the problem and proposed a remedial rule: Rule 4(f). (8) Omni all but conceded that W&G did not fall within the ambit of the LAS, but did they have to? After all, they could have argued that (under the LA LAS, there was "injury in the state by an act or omission outside the state," and that they regularly do business and solicit business in LA. However, the LA LAS was similar to the LAS rejected by the court in WWV. (9) Proposed Rule 4(k): Dst.Cts. can exercise jurisdiction consistent with (a) State LAS (b) 100 mile bulge rule (c) Federal Interpleader or other Federal statute authorizing nationwide SOP, and (d) Other statutory authorizations (10) The Omni invitation: if jurisdiction is consistent with the constitution, then in a Fed question case, aliens not subject to jurisdiction/SOP in the ct of general jurisdiction of any state may be served with process from a federal court. The test will be minimum contacts with the US as a whole. VIII. Venue A. Venue is a completely distinct concept from personal jurisdiction, but the mode of inquiries for both are remarkably similar. Venue is a statutory doctrine that attempts to direct lawsuits to their proper forums in light of the parties and the subject matter of the lawsuit. B. Hypothetical: P v. D. D does not want to defend in that particular forum. What can D do? 1. D can move to dismiss for lack of personal jurisdiction under 12(b)(2). a. No authorization from the state's LAS to SOP b. No Federal statute authorizing SOP. c. Not authorized under Rule 4 and the "bulge rule." d. Jurisdiction violates the DPC (1) No minimum contacts (2) 5 VW factors mitigate against finding jurisdiction 2. D can move to dismiss for improper or insufficient SOP under Rule 12(b)(5). Such a charge almost always points towards Rule 4. 3. D can move to dismiss for improper venue under Rule 12(b)(5). Assuming personal jurisdiction & adequate SOP & subject matter jurisdiction, this court is not the proper place in which the dispute should be adjudicated. C. Venue in the Federal Dst.Ct.'s is governed under 28 U.S.C.  1391. Its a VERY technical statute (READ IT!). a. Two key provisions: (a) & (b) (a) Applies to pure diversity jurisdiction only. (b) Applies to everything else, including federal question cases and cases involving federal questions as well as diversity. b. There are several option under each, but in addition to satisfying one of the options, you must make sure the forum the venue statute points towards also has personal and subject matter jurisdiction. c. Definition of "corporate residence" = any district in which the corporation is subject to personal jurisdiction. d. Aliens may be sued in any district. e. U.S. govt. as the defendant is covered in  1391(e) f. Foreign states:  1391(f). D. Problems 1. P v. D. Defendant is a resident of SDNY. Plaintiff wants to sue Defendant, and the lawsuit will have these characteristics. a. Patent infringement (federal question) b. Product assembled in NM c. Assembled in D. Ill. d. Parts from OH, CA, and PA. Under  1391(b): (1) SDNY (2) D. N.M. or D. Ill: "A substantial part", not "the most substantial part." (3) Does not apply since other possible forums exist. 2. [See notes from 30-MAR-93 for the rest of the problems.] 3. Under  1391(c): A defendant that is a corporation is deemed to reside in any judicial district in which it is subject to personal jurisdiction. The districts are treated as states for purposes of the minimum contacts test. E. Changing venue in the Federal system: 20 U.S.C. 1404 and the doctrine of forum non conveniens. 1. Doctrine of forum non conveniens a. Gulf oil v. Gilbert (1) Prior to this opinion, the Federal courts did not recognize the doctrine, although state court had recognized it for some time. The result of the application of the doctrine of FNC is a dismissal without prejudice even though jurisdiction and venue is proper because litigating in the present forum would be unduly burdensome or unfair to one or both of the parties. (2) The Plaintiff was VA, and defendant was Gulf oil. VA sued Gulf in SDNY seeking damages for a fire in Lynchburg, VA, claiming negligence. Defendant moved to dismiss under FNC. It argued that since the events in question took place in VA, and that was the situs of most of the evidence. Dst.Ct. applied state law and dismissed. The 2d Cir reversed, but the S.Ct. reversed the 2d Cir, holding that the dismissal on FNC grounds was not an abuse of discretion. In deciding the FNC issue, the Court assumes the Dst.Ct. had jurisdiction. (3) Venue statutes are rather broad, and the plaintiff may sue in the least convenient but permissible forum. (4) S.Ct. laid out the pertinent facts and weighed the private and public considerations of dismissing. (a) Private considerations (1) Relative ease of access to sources of proof. (2) Ability to compel attendance of witnesses. (3) Costs for willing witnesses. (4) Ability to view the damaged premises. (5) Other practical problems caused by having to litigate in a distant forum. (b) Public considerations (1) Administrative difficulties from Ct. congestion (2) Local interest in having local disputes decided locally. (3) Diversity suit in a state whose law will be applied is advantageous. (4) Avoiding conflicts of law (5) Avoiding foreign law problems (6) Unfairness of jury duty in a distant forum. (5) The only tie defendant had to NY was his lawyer. (6) The Court did reject the argument that a VA jury was not accustomed to dealing with large damage figures. b. In the wake of  1404(a), the need for the doctrine of FNC is greatly curtailed, but it does have uses in the international contexts: In re UCC (1) This litigation arises out of 145 class actions filed in the US against UCC for the Bhopal, India gas leak disaster. UCC moves to dismiss on grounds of FNC, and the claimants object. The Dst. Ct grants the dismissal on three conditions (a) UCC must waive defenses like SOL, pers jurisdiction, etc., once suit is filed in an Indian court (b) UCC must agree to satisfy any judgment rendered by an Indian court (c) UCC must submit to FRCP discovery. (2) UCC appeals the conditions on the dismissal. FNC dismissals are reviewable only for abuse of discretion. The court weighs the private and public factors.The App Ct. rules: (a) The 1st condition is standard for FNC dismissals, as it would not be fair for D to get a dismissal just to turn around and invoke the SOL. (b) 2d condition is inappropriate since NY law allows for the enforcement of foreign judgments obtained with minimum due process. UCC's argument that the Dst.Ct. should retain jurisdiction to oversee the Indian court is rejected as almost frivolous: once the case is dismiss, the court's jurisdiction terminates, and moreover, to retain such jurisdiction would infringe upon India's sovereignty. (c) It would be unfair to make UCC submit to FRCP without their opponents doing the same. The parties should be free to agree to jointly submit to FRCP discovery rather than India's more restrictive discovery procedures. 2. 28 U.S.C.  1404(a) and power to transfer a case to another Federal forum. a. The Dst.Ct. may transfer (without dismissal and the need to refile) a case to another Dst.Ct. "where the case might have been brought" for reasons of convenience and justice. b. Transfer is different from dismissal in 2 respects. (1) Dismissal leaves the decision as to where to file to the plaintiff, whereas in transfer, the court designates the proper forum and sends the case there. (2) Transfer avoids the SOL problems that can arise by dismissal and the need to refile c. The S.Ct. has ruled that a defendant cannot waive personal jurisdiction and venue in a transfer situation. The "where it might have been brought" language is to be read literally. d.  1406: Cure of waiver and defects (1) If the plaintiff gets venue wrong, the Dst.Ct. in its discretion can transfer if justice requires it. (2) You waive venue objections if you do not interpose them in a timely manner. e. Either party can make the motion for transfer under  1404. The motion can be made at any time, but the transfer does not affect the determination as to which state's law applies. f. Federal courts look to the SOL of the states they sit in, but if the case is transferred to a district in another state, the original states SOL applies. Only the place of the lawsuit is changed. However, you cannot file in the wrong district and hope to take advantage of that forum's law upon transfer. g. Error in the book. 28 U.S.C.  1631. Our authors believe that  1631 allows transfer for lack of personal jurisdiction. However, no case to date has applied this statute to personal jurisdiction. The legislative history of the statute indicates that Congress intended it to apply to subject matter jurisdiction only. The statute mainly deals with appeals in administrative matters. - In a case of P v. D where there was no personal jurisdiction or subject matter jurisdiction, D would move to dismiss for lack of both. The question now is can the ct. transfer the case to a Dst.Ct. where both would exist? The S.Ct. has said yes, reading the statute literally. The dissenters argued that such a result was an anomaly in the application of 1406. So, what happens if venue is proper, but no personal jurisdiction. Up to now, the only choice was dismissal. However, some lower courts have allowed transfer to cure defects with personal jurisdiction. Some courts have invoked  1406, others have invoked  1404, some have invoked both and still others have invoked neither. However, if a case is transferred to cure a defect in personal jurisdiction, the defendant must be reserved with process since he has never been properly served in the first place. But, then you start running into problems with the SOL. XI. Subject matter jurisdiction A. In a very real sense, this is the question you must answer before you turn to problems of personal jurisdiction: does the court in which I want to bring this lawsuit have subject matter jurisdiction over the dispute. B. Federal courts vs. State courts 1. Federal courts are courts of limited jurisdiction. Absent a specific grant of jurisdictional authority, the federal courts are not empowered to hear a case. 2. All states have at least one court of general jurisdiction that is empowered to hear all cases unless by state or federal law the matter must be brought somewhere else. C. Article III: The starting point of the inquiry.  1.- Expressly created Supreme Court - Congress is empowered to create lower courts and to define their jurisdiction.  2 Listing of subject matters cognizable in federal court. However, just because the constitution indicates that it would not be unconstitutional for a federal court to hear a case involving persons and matters described in  2, this is still not enough to establish subject matter jurisdiction. Congress has the power to limit subject matter jurisdiction by statute. D. Statutory limits on subject matter jurisdiction. 1. 28 U.S.C.  1331: Federal question jurisdiction. "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." a. "laws": To what does this refer? (1) Statutes (2) Case law/federal common law (3) Administrative regulations b. "arising under": What does this mean? This is admittedly is a tough question, for it has to do with the relation of federal law to the lawsuit and the overall case. c. States are not deprived of jurisdiction over federal questions absent an express limitation. The statute has an interpretive preference for concurrent jurisdiction. 2. 28 U.S.C.  1332: Diversity jurisdiction: (a) The District courts have original jurisdiction over all civil action where the amount in controversy exceeds $50,000 (in other words, do not sue for exactly $50,000) and the parties are (1) Citizens of different states (2) Citizens of a state and citizens of subjects of a foreign state (3) Citizens of different states and in which foreign states or citizens or subjects thereof are additional parties. (4) a foreign state as plaintiff and citizens of a state or of different states. An alien admitted to the US for permanent residence is deemed a citizen of the state in which the alien is domiciled for purposes of diversity jurisdiction. (c) Legal representatives of decedents, incompetents, and infants are deemed to be citizens of the states in which the decedent, incompetent, or infant is domiciles. This amendment closed a loophole people used to use to create diversity jurisdiction by appointing an out of state representative. (d) Citizenship of corporations: Corporations are deemed to have dual citizenship for diversity purposes. They are deemed citizens of their state of incorporation and of the state which is their principal place of business. (1) How do you determine what a corporation's principal place of business is? (a) Where does it do the most business? (b) Where is its corporate HQ? (c) Where does it have the most contact with the public? (2) Congress has yet to speak to the issue of citizenships of partnerships and other unincorporated entities. The S.Ct. has taken the approach of looking to the citizenship of the partnership's members. (e) Why have diversity jurisdiction? (1) Prejudice against outsiders (2) More objective judges (since federal judges have lifetime tenure) (3) Protection from out of state creditors. (4) It provides the parties with an alternative forum. (5) Regional prejudice (6) Belief that federal courts are better than state courts (7) Uniformity of procedure in federal courts (8) Gives plaintiff a choice of forum. (f) In recent years, there has been a move to totally eliminate diversity jurisdiction. Congress compromised by upping the amount in controversy jurisdictional floor to $50,000. Still, it is likely that diversity jurisdiction will be eliminated in out lifetimes. (g) How do you figure out if a case involves in excess of $50,000? (1) Let the jury decide: not practical in light of the goal of making the determination at the pleading stage. (2) Look to the complaint: still problematic because of good faith problems notwithstanding Rule 11. (3) Mini trials/hearings (4) The S.Ct. has said to look to the plaintiff's complaint and to dismiss it only if it is clear to a legal certainty that the plaintiff will not recover over $50,000. (5) Some courts have tightened up by applying remittur/additur principles: would the judge have to set aside the verdict if the jury came back with a damage award in excess of $50,000? (6) Discovery/affidavits (7)  1332(b): If plaintiff wins something less than $50,000, then the plaintiff has to pay statutory costs: its own costs and its opponents costs as well in extreme circumstances. However, this provision is rarely applied. (8) If plaintiff is seeking an injunction, the court will try to value the injunction to the plaintiff and/or evaluate the costs to the defendant. (9) Aggregation of claims of multiple plaintiffs to reach the jurisdictional floor is not permitted. 2 rules (a) When 1 plaintiff, 1 defendant, and multiple claims on separate transactions and occurrences are being decided, then aggregation is permitted. (b) When there are 2 plaintiffs, 1 defendant, and the claims are factually related, no aggregation is permitted. (10) Class actions: In diversity class actions, each member of the class must satisfy the jurisdictional floor. Accordingly, federal class actions are not useful for consumer claims. (h) Citizenship for diversity purposes is determined by domiciliary. (1) A person's domicile is a person's place of permanent residence where the person has a standing intention to remain or return to. You can have only one domicile, and you retain your old domicile until you change your domicile to a new one. (1a) To be a "citizen" within the meaning of  1332, you must be a US citizen and be domiciled in a state (at least for this case. Congress later amended the statute and declared aliens admitted for permanent residence to be citizens of the states in which they are domiciled.). (2) Mas v. Perry (a) Mr. & Mrs. Mas sued their landlord in federal court under diversity jurisdiction for viewing them through a 2 way mirror. Mr. Mas is a French national, so he is an alien for diversity purposes. Mr. Mas could not have been a citizen of LA for diversity purposes because he was a French national. LL is a citizen of LA, and Mrs. Mas's diversity citizenship is in question (MS, LA, France, or IL?) (b) Under the Strawbridge rule,  1332 requires complete diversity. No plaintiff and defendant can be from the same state. (c) IL citizenship is rejected since she moved to IL after she filed suit. Changes in domiciliary are not retroactive. (d) The court also refuses to apply the old CL rule that a wife adopts her husband's domicile and to deem her a citizen of France, since through a Catch-22 she would have no right to sue in Federal court. (not a citizen of any state, nor would she be an alien since she did not lose her US citizenship by marrying a French national). (e) In deciding that Mrs. Mas retained her domicile in MS (even though she expressed no intent to return to MS and indicates she probably would not return to MS), the court seems to beg the question. However, the court invokes the rule that your domicile follows you until you change it. Did she change her domicile to LA? The court thinks that since she was in LA only to get her education that was not enough to change her domicile. Furthermore, she indicated she had no idea what she would do after she got out of school. (f) Is this a result-oriented decision? Did she have the requisite subjective intent that usually goes along with domiciliary? But in addition to looking at subjective elements, you must also look to objective factors as well. (g) Under the amended  1332, Mr. Mas would have been deemed a citizen of LA for diversity purposes. 3. Pursuant to Rule 8(b), the burden is upon the plaintiff to establish federal jurisdiction in the complaint. 4. "Arising under" and the well-pleaded complaint rule: L&N RR v. Mottley a. A settlement for injuries sustained by the Mottley's aboard their RR, the RR settled by giving the Mottleys a lifetime pass for transportation on the RR. Several decades later Congress, believing free passes were tools of bribery, enacted a statute making the issuance or honoring of such passes a federal offense. The RR accordingly refused to honor the Mottley's pass. The Mottleys sued the RR in federal court for breach of contract seeking SP, and in their complaint they alleged that the statute did not apply to their situation, and even if it did, then they were being deprived of property without due process of law. b. Breach of contract and SP are state based COA's, although the need to interpret federal law will arise. c. The Dst.Ct. granted SP, and defendant appealed arguing 2 points based on the merits. d. The S.Ct. raised subject matter jurisdiction sui sponte and concludes: (1) No diversity exists (2) The case does not arise under Federal law. Well-pleaded complaint rule: The court must look to the plaintiff's complaint and see if the underlying COA arises under federal law. The fact that the plaintiff mentions possible federal law defenses is not sufficient to federalize the case. e. In this case, the Mottleys have stated a claim under state law and discussed possible federal law defenses the RR might raise. However, federal law was not an essential element of the COA. State contract law gave rise to this claim. Accordingly, the court directed dismissal. f. Prologue: The Mottley's go back and file in state court, win, only to have the S.Ct. rule against them again, this time on the merits. g. The S.Ct. if authorized by statute to hear cases from state courts of last resort that involve federal issues (28 U.S.C.  1257) [a la Martin v. Hunter's Lessee and Cohens v. Virginia]. A federal issue somewhere in the mix will permit jurisdiction. Under this jurisdictional formula, The S.Ct. can extract the issues of federal law from the state law issues, decide the federal law issues, and remand for consideration of the state law issues in light of the ruling on the federal law issues. h. Objections to subject matter jurisdiction are not waivable, nor can someone be estopped from denying subject matter jurisdiction. Under Rule 12(h)(3), if it becomes clear at any time that a federal court lacks subject matter jurisdiction, then the court must dismiss the case upon a motion. i. Why treat subject matter jurisdiction differently? It boils down to a jealous guarding of federal jurisdiction. However, the existence of subject matter jurisdiction is not so great at to permit a collateral attack on a federal judgment for want of subject matter jurisdiction. j. How does the Dec. Judgment Act (DJA) (28 U.S.C.  2201) play into this? A DJA has the effect of reversing the plaintiff and defendant. Suppose a "Defendant" files a DJA, seeking a declaration that under federal law he has done nothing wrong. "Plaintiff" answers with a state law claim. To whose pleading to we look to see if there is subject matter jurisdiction. If we follow Mottley, we look to the "Defendant's" complaint and we find that it tends to arise under federal law and does not merely discuss federal law defenses. However, the S.Ct. has said that such a case does not arise under federal law. In effect, in DJA's, the S.Ct. requires the court to look to the "plaintiff's" answer to determine if the case arises under federal law. The S.Ct. argued that Congress only intended to supply a new remedy for cases that could have already been brought in federal court, not to expand jurisdiction. The court must look to see how the action could have come up otherwise, and if it could not have come up in federal court under a different formula, then there is no federal subject matter jurisdiction under the DJA. 5. Supplemental jurisdiction: 28 U.S.C.  1367 (formerly pendent and ancillary jurisdiction) a. Often times persons with a federal claim as well as related state claims will want to sue a defendant in Federal court on all the claims. Additionally, someone who is sued on a federal claim in federal court by a citizen of the same state will have a state law counterclaim based on the same transaction or occurrences which the defendant must bring up or face losing. The court will permit the plaintiff to sue an in-state defendant on the state law claims in addition to the Federal claim or the defendant to bring the state law counterclaim so long as there is supplemental jurisdiction. b. Pendent jurisdiction: UMW v. Gibbs (1) Gibbs sues UMW in federal court for conducting a secondary boycott in violation of  303 (Federal law claim) and for tortious interference with execution of contracts, boycott, and conspiracy (state law claims). (Rule 18 allows joinder of all claims a party has against another party, even if unrelated). The question is whether the federal court has jurisdiction to hear the state law claims. (2) The S.Ct. rules that if the claims arise out of the same "common nucleus of operative fact" that the entire case can be said to arise under federal law, and the district court may hear the state law claims in its discretion under the doctrine of pendent jurisdiction. The claims arise out of the same common nucleus of operative fact if we would expect the claims to be tried together. If so, then the entire "case" can be said to have arisen under Federal law. (3) Exercise of pendent jurisdiction is a matter for the discretion of the Dst.Ct., and the court may refuse to exercise pendent jurisdiction in its sound discretion. Considerations (a) Judicial economy (b) Convenience/fairness (c) Complexity/jury confusion (d) Predominance of state issues (proof, scope, and remedy) (e) If 2 separate trials are needed, then one of them might as well be in state court. (f) Dismissal of federal claim warrants dismissal of pendent state claims as well. (4) Issue of preemption of state law claims for activities of this sort: Since Gibbs is seeking damages for intentional violence, harassment, and intimidation, the S.Ct. concludes that there was no intent on the part of Congress to preempt state CL COA's for malicious activities. Only claims of a compensatory nature are preempted. c. 1990: Supplemental jurisdiction  1367 (1) Could Gibbs have still brought his state law claims in Federal court in 1993? a. Yes: They formed part of the same care or controversy under  1367(a). The test articulated in that section is virtually the same as the Gibbs test: common nucleus of operative fact. In effect, the Gibbs test is codified. b.  1367(b) does not apply because there is no diversity jurisdiction in this case. c. None of the discretionary factors enumerated in  1367(c) weighs in favor of dismissal. So, the court would be able to hear Gibbs's state law claims. (2) Applying  1367 to the Owen v. Kroger problem: a. This case involved the electrocution of the plaintiff's husband by Omaha Pwr. Co., a citizen of NE. (Kroger was a citizen of IA). Power company impleads Owen under Rule 14, whom everyone thought was an NE citizen. Kroger then claimed against Owen. After the power company left the suit, it was discovered that Owen was actually a citizen of Iowa. With no diversity jurisdiction and no federal question jurisdiction, it appeared that the court was bound to dismiss Mrs. Kroger's claim. b. Under  1367(a), the third party claim does arise out of the same transaction or occurrences, to the Dst.Ct. is empowered to hear it. (ex-ancillary jurisdiction). c. However, the S.Ct. rejected ancillary jurisdiction over Plaintiff's state law claim against Owen.  1367(b) codifies Kroger by banning exercise of supplemental jurisdiction over claims by plaintiffs in federal court against persons made parties under Rules 14, 19, 20, or 24 when doing so would destroy diversity of citizenship under  1332. The apparent justification for this rule is that since plaintiff's have more control over a lawsuit, there should be restrictions on what claims the plaintiff should be able to bring. *** Now, if Kroger's claim against Owen were a federal claim, then the court would have had jurisdiction under  1331, and Kroger could have then joined any state law claim against Owen under  1367. *** Congress was attempting to overrule the Findley case under the principle that a federal forum should be available for federal claims. 6. Removal jurisdiction a. Under 28 U.S.C.  1441, a defendant sued in state court on a claim which would have originally been brought in Federal court may remove the case to a federal court which would have had original jurisdiction over the claim. (The well-pleaded complaint rule applies to determine if the case could have been originally brought in federal court.) b. Willy v. Coastal Corp (1) Willy was a lawyer who was employed by Coastal Corp. before it terminated his employment. Willy sued Coastal in Texas state court alleging that he was wrongfully discharged for refusing to violate several federal environmental laws. Defendant removed to the SDTX under federal question jurisdiction ( 1331). Willy's motion to remand was denied. He then moved for partial summary judgment, filing a 110 page brief along with a 1,200 page stack of papers. Coastal moved to dismiss under Rule 12(b)(6) and for Rule 11 sanctions. (2) Coastal argued that removal was proper under the doctrine of preemption (Avco). Congress from time to time will choose to pass extensive legislation in an area of federal concern and will, either completely or partially, expressly or impliedly, preempt any state law on the subject, making the federal remedies the only remedies available. Preemption is usually a federal defense (non- removable under Mottley). The court in this case rules that there was no intent on the part of Congress to preempt state law wrongful discharge actions by allowing so-called "whistleblowers" to file administrative actions against their former employers. (3) Coastal also argues that this case arises under Federal law since whether or not Willy was ordered to violate federal environmental statutes is central to the case. Interpretation and application of federal law will be required. (The test is the well-pleaded complaint rule.) The court rules that Willy pleaded a state law wrongful discharge claim based on Sabine Pilot. The court articulates 2 tests for "arising under" (a) Is the law that gives rise to the COA based in federal law? NO (b) Is the federal issue an "essential part" of the COA. The 5th Cir. looks to Federal law to see if a private right of action is accorded by these statutes. There is none, so the court concludes that Congress expressed no intent to allow federal court jurisdiction over this essentially state law claim. (c) Substantial question test: a narrow exception to the rule that an action "arises under the law that creates the cause of action." The claim is not substantial enough to confer federal subject matter jurisdiction as a federal question. (4) Accordingly, since this case involves a state law claim between citizens of the same state, there is no federal subject matter jurisdiction, and so the case must be remanded to state court. (5) However, the 5th Cir. upholds the imposition of Rule 11 sanctions against Willy, but the court remands for reconsideration of the amount. The 5th Cir.'s judgement on the Rule 11 sanctions was affirmed by the S.Ct. The Dst.Ct. has jurisdiction to impose Rule 11 sanctions so long as a case is in the court. (6) Hyp: if Gibbs had brought his claims in TN state court, UMW could have removed the entire to federal court. under  1441 (a) & (b). The proper procedure would be to remove to federal court under  1441(b) and then invoke supplemental jurisdiction under  1367 c.  1441(c) applies to separate and independent COA's, like a federal civil rights action joined with a personal injury action against the same defendant. Under subsection (c), the entire lawsuit is removable, and the Dst.Ct. has discretion to hear the entire case or to remand the state law issues to state court. (This last provision is constitutionally questionable, for it stands to give the Dst.Ct's the authority to hear state law claims between citizens of the same state, a clearly unconstitutional exercise of subject matter jurisdiction by the federal courts. d. Where the claims are related, the  1441 (a&b) + supplemental jurisdiction apply to fill out federal subject matter jurisdiction. e. Potential loophole closed. If you are sued in the state court of your home state, you may not remove to federal court, even if the federal court would have jurisdiction, if the only basis for jurisdiction is diversity of citizenship. Rationale: the goal of diversity is to prevent prejudice against outsiders hauled into another state's courts, so if you are hauled into the courts of your own state, that concern is not present. X. The Erie problem A. If we are in federal court based on diversity jurisdiction, what law applies? 1. General law? 2. State law? These sorts of questions are known as choice of law/conflict of law questions. 3. What law to apply 4. To what issues 5. How to figure out what the state law is B. Horizontal vs. Vertical questions of law 1. Horizontal: Do we apply State A's law or State B's law? 2. Vertical: Do we apply State or Federal law? C.  34 of the Judiciary Act of 1789: The Rules of Decision Act, now codified at 28 U.S.C.  1652. 1. In diversity suits, the "laws of the several States" applies except where Federal law applies: The statute is not clear on what it means by "laws". Does it mean only statutory law, or is state CL and ad law included? 2. Swift v. Tyson a. Swift sued Tyson to enforce a promissory note. Tyson had promised to pay a 3rd party, and the 3rd party had assigned the note to Swift. Tyson raised a defense based on a 3rd party's rights under NY case law. Swift argued that the Federal courts were not bound by NY case law. b. The S.Ct. ruled that the Federal courts may use federal general common law on matters of general law, and they need not apply state common law. Federal judges were deemed as competent if not more competent to rule on the same issues. The Court interpreted  1652 to mean statutory law only. The sole exception was for matters of purely local concern where the Federal courts were bound to apply local law, including local case law. c. This holding was a manifestation of the idea that law was a transcendental body outside the states, and that the job of judges was to find it. Federal judges, the S.Ct. believed, were just as capable as state judges of finding what the law was. It was hoped that this doctrine would result in a uniform body of common law in areas such as commerce, and that the state courts would quickly follow behind the federal courts. d. After Swift, the state courts did not follow along. The result was 2 different bodies of law depending upon which court you were in. Moreover, Federal judges were not bound to follow the reasoning of other federal judges, so the body of Federal common law was not even consistent. This confusion resulted in cases like Black & White v. Brown & Yellow, where the plaintiff manufactured subject matter jurisdiction in an effort to get his case into federal court to take advantage of Federal common law and avoid the adverse common law of his own state of KY. The S.Ct. cites that case as an example of the discrimination against state residents. A citizen could not invoke the protection of the law of his own state if he happened to be sued in federal court by an out of stater, and moreover, he is forced to conform to federal general common law. e. Non-residents had an almost absolute choice of forum, and through Swift, the choice of law based on the forum they chose. Accordingly, this led to "forum-shopping" for the forum with the most favorable law to the plaintiff. Nor could the defendant remove from one court to the other. 3. Erie RR v. Tompkins a. Tompkins was injured by an open refrigerator car door as he was walking along a footpath beside RR tracks owned by the defendant. Tompkins was a citizen of PA, and he was injured in PA. Under PA CL, the footpath exception did not apply in that state, so if he were to sue in state court, the RR would only be liable for wilful or wanton negligence. However, the footpath exception was recognized in federal common law, so if that rule were applied, Tompkins would have been owed a duty of reasonable care. Knowing this, his lawyers sued in the SDNY. The RR argued that this was a matter of local concern, and so state CL should be applied. The SDNY disagreed, decided to instruct the jury on federal common law, and the jury returned a verdict in favor of the plaintiff. b. The S.Ct. believes the question is whether Swift v. Tyson should be overruled, and it holds that it should be overruled. The RDA is interpreted as including state CL as well as statutory law. (1) The Court relies heavily upon research by Charles Warren into the legislative history of the RDA. Warren found an older draft which explicitly included state common law as well as statutory law. The language was truncated to the language that now appears in the RDA: "laws of the several states." From that, he concluded that Congress just adopted more concise language ( "law" + "law" = "laws"). But, this is by no means the only plausible interpretation, as they could have meant to exclude state CL by adopting the truncated language. (2) The Court then reaches the constitutional issue. (a) Swift was a constitutional departure. (b) A non-uniform body of law had developed (c) Having the 2 bodies of law existing beside each other tended to deny defendants equal protection of the laws. (d) It invited discrimination against defendants just because the plaintiff could sue in federal court based on diversity jurisdiction. This phenomenon of "forum shopping" was an unfair advantage to plaintiffs. (e) Since Congress has no power to legislate over matters reserved to the states, federal judges have no authority to say a state court is wrong on a matter of state law. Federal courts cannot assume the right to make and administer general law. (Such is the command of the 10th Amendment). c. Justice Reed concurs in the result, but he would have preferred the court stop at the level of statutory analysis. He saw no need to reach the constitutional issue, but moreover, he though the Congress might have the power to authorize the federal courts to make and administer general CL. 4. Even in the wake of Erie, there is still federal common law. a. Admiralty jurisdiction b. Rights and duties of the federal government 5. Applying Erie a. In most diversity situations, an Erie type analysis is not necessary since state law will apply. The real question will be which state's law applies. b. The difficult cases are the peripheral cases, like when it is unclear whether an issue is procedural or substantive. Must everything in federal court be governed by state law? (SOL, SOP, amendment of pleadings, etc.). 6. Scope of Erie a. Justice Brandeis's opinion was not all that clear. b. The same year as Erie (1938), the FRCP were first promulgated, and for the first time the federal courts asserted their right to prescribe what procedure they would follow themselves. Justice Reed's opinion is a little more clear ("federal power over procedure"). But basically, Erie applies to substantive law and not to procedural law. c. Substance vs. Procedure (1) First applied in horizontal choices of law (2) Adapted to Erie: vertical choice of law questions. 7. Guaranty Trust v. York and problems with applying the S/P test a. York was a noteholder who brings a diversity suit for breach of trust (an equity actions). b. Question: Does NY SOL bar this claim from being brought in Federal court sitting in equity? c. Defendant argues that the SOL is substantive law, and therefore it is binding upon the federal court. d. The 2d Cir ruled that federal courts need not follow the state SOL, as the SOL is a remedial right. Additionally, federal courts are not limited by equitable remedies available in state court. e. The S.Ct. reverses (1) No special rules just because the federal court is sitting in equity. (2) Addresses S/P distinction: The S/P test is not helpful primarily because S/P is a conclusion, not a starting point. (3) Instead, the proper test is whether or not the choice stands to create a "substantially different result." (Outcome test). The goal of the federal court is to reach a result that a state court hearing the same case would reach. Erie, when viewed in its proper light, concerns the lack of uniformity among state and federal common law and the resulting denial of EP of the laws to defendants as a result of forum shopping. f. This ruling reflects a shift from labeling (S/P) to policies by looking to the potential impact the choice stands to have on the outcome as contracted with "form and mode of enforcement." g. Is the analysis helpful? (1) What sort of impact must you find? (i.e. Paper size rules) (2) There is even some question if the courts can consistently apply the Frankfurter test. (3) Should the rule be applied on a case by case basis? Should the plaintiff's finances be taken into account? (4) Were the Federal rules put into jeopardy because of the Frankfurter outcome test? 8. Byrd v. Blue Ridge: backing away from the outcome test. a. In Byrd, the S.Ct. comes to the rescue of the FRCP and keeps them from being undermined by state procedures that might affect the outcome if applied in lieu of the FRCP. b. Plaintiff is injured on the defendant's construction site. Defendant is an independent contractor, but he pleads the exclusivity provision of SC's workers comp statute, arguing that he is a statutory employer for purposes of WC and so the plaintiff's exclusive remedy is in WC. c. The Erie issue: must the judge make the findings of fact regarding the immunity issue or may the issues be sent to the jury? Under SC case law (Adams), the judge must make the findings of fact. Byrd wants the jury to decide the issue, and he invokes his federal 7th amendment right to a jury trial. d. The court believes there are no substantive reasons for the rule/the rule is not a state created substantive right. Moreover, it believes the reasons for the rule are largely practical. The SC courts became used to having judges decide the immunity issue on their own, and so a rule was adopted to that effect. Normally, courts heard workers comp claims on appeal from the Commission, and of course on appeal the court does not make a de novo review of the facts. Nor are juries used at any level of the process. e. The court believes the state rule conflicts with the federal policy of sending questions of fact to juries. Outcome is not the only consideration at stake. "Affirmative countervailing considerations" are inherent in the federal system. Here, the outcome determinative test conflicts with Federal policy preference for jury trials. Outcome is not the only consideration at work. Federal court have an interest in applying their own rules. f. Nor is it clear that the outcome would be substantially different if the issue were put to the jury. g. Holding: "The policy of uniform enforcement of state created rights and obligations...cannot in every case exact compliance with the state rule." h. The court is fed up with the possibility that state rules will control how federal trials are to be conducted. The court moves away from a mechanical test towards a more flexible test (rule -> standard). i. Rehash of Byrd (1) SC bench trial rule is not wrapped up with the substantive rights of the state. (2) Countervailing Federal interest in putting questions of fact to juries. (3) The choice is not clearly outcome determinative. 9. Hanna v. Plumer: The S.Ct. rides to the rescue of the Federal Rules a. This case was a diversity suit concerning an auto accident that occurred in SC between plaintiff, a citizen of Ohio, and the defendant's executor, a citizen of MA, in the D. Mass. SOP was made according to FRCP Rule 4(d)(1), which permits leaving the summons and complaint at the defendant's house with a person of suitable age and responsibility; the summons and complaint were left with the defendant's wife, and defendant did receive the two documents. Defendant answered the complaint and moved to dismiss for improper SOP [Rule 12(b)(5)]. According to MA law, executors must receive SOP in hand within 1 year of the claim. SJ was granted for the defendant, and the judgment was affirmed on appeal. Unfortunately, the SOL had expired, so plaintiff did not have the choice of dismissing and refiling. Strictly speaking, the choice of law was outcome determinative. b. Question: Must the Federal Dst.Ct. apply the Federal SOP rule or the state SOP rule? c. The S.Ct. looks to the outcome determinative test. Defendant argues syllogistically since the choice is strictly speaking outcome determinative, Erie demands application of the state rule. The S.Ct believes this argument is too simplistic, for if the outcome determinative test were applied in this manner in every case every choice of conflicting procedural rules would be outcome determinative. d. The S.Ct. goes back to Erie and discovers the two aims behind the decision. (1) Curtail forum shopping. (2) Avoid inequitable administration of the laws and prejudice against in state defendants who are sued by out of state plaintiffs. e. Forum shopping: The Court thinks it unlikely that a plaintiff would choose Federal court over state court just to take advantage of a different SOP rule. Also, the policy of giving actual notice to defendants of the lawsuit was not frustrated in this case since the defendant received actual notice of the lawsuit. * Side note: FRCP discovery is a significant incentive for plaintiffs to choose federal court over state court. f. Inequitable administration of the laws: It was not unfair for the defendant to have received SOP according to the Federal Rules since he did get actual notice of the lawsuit. g. The Court also sees a more fundamental problem with the defendant's argument: The defendant assumes that Erie automatically applies to the federal rules. But, the Court remarks that Erie has never been invoked to invalidate a federal rule. Prior cases dealt with situations when the federal rule was as broad as one of the parties argued it was. (Default rule of  1652: in the absence of a federal rule on the subject, the state rule applies.) The Court accordingly proposes a new test for evaluating federal rules against the state rules. (1) 1st test: REA prong: The federal rule must be within the Congressional mandate of the REA: "practice and procedure" and no abridgment, modification or expansion of substantive rights. (2) 2d test: If the 1st test is satisfied, the rule and the REA must be within the bounds of the Congressional power under the Constitution. According to U.S. Const. Art. I sec. 8, Congress has the power to constitute "Tribunals inferior to the supreme court" and also to make all laws "necessary and proper" for carrying out its foregoing powers (elastic clause). If both of these tests are satisfied, then the federal rule is presumptively valid, and there is no need to look to the outcome determinative test. Apply the federal rule notwithstanding any state rule to the contrary. h. The test that the rule must be concerned with procedure is a generous test: So long as the rule can be rationally be called "procedural", Congress has the power to enact it. i. REA prong:  2072 (Page 320 supplement): The S.Ct. has the power to prescribe rules of general practice and procedure & evidence in the federal Dst.Cts., and the rule must not abridge, modify, or enlarge substantive rights. * The combined test is almost a presumption in favor of a procedural interpretation. Harlan may be right that the majority goes too far. The test may be a boldface threat to the federal Dst.Cts. to follow and apply the federal rules because the test for invalidity is extremely difficult to satisfy. j. RDA prong: is there a direct conflict between the Federal and state rule? (1) Direct conflict: Apply the new test/REA analysis (2) No direct conflict: Apply Erie, Guaranty Trust, and Byrd and the outcome determinative test. l. After this case, is there anything left of Byrd? The S.Ct. appears to ridicule the 1st Cir.'s opinion, but the 1st Cir. may have just been following Byrd. m. In his concurring opinion, Harlan distinguishes between primary and secondary activities (Much like H.L.A. Hart's distinction between Primary and Secondary rules in his book The Concept of Law.), and he would say that if the rule concerns secondary activities (procedure, etc.) instead of primary activities (substantive rules of law, like don't hit other people), then the Federal rule should apply. n. Professor Chemerinsky's test (page 265): Three question inquiry: (1) Is there a conflict between state and federal law? (a) No, then apply both. (b) Yes, then (1) Is there a valid Federal statute or Rule of Procedure on point? (A) If so, then apply the Federal rule or statute even if there is a conflicting state rule. (2) If not, then would the application of the state rule be outcome determinative? (A) If not, then the federal statute or rule is used. (3) If the state rule is outcome determinative, then is there an overriding federal interest in applying the federal rule. (A) If the state rule is outcome determinative and there is no countervailing federal interest, then the state rule is to be applied. (B) Otherwise, the Federal rule or statute applies. (2) In applying this test, the court must seek to uphold the Erie goals of preventing forum shopping and inequitable administration of the laws. 10. Burlington Northern RR v. Woods a. This case was a diversity suit concerning personal injuries. Defendant lost and appealed to the Cir. Ct. of App. A state statute required the posting of a bond a defendant against whom a money judgment is entered in order to appeal. Posting of the bond keeps the plaintiff from executing the judgment. Defendant loses the appeal, and plaintiff asks for the state statutory 10% penalty for pressing a losing appeal. Defendant objects. b. Question: Must the Ct. of App. apply the state statute mandating a penalty for unsuccessfully appealing a money judgment? c. 1st question: Is there a federal rule on point (direct collision)? If there is a clash, then the federal rule applies hands down. Plaintiff argued that FRAP Rule 38 (Ct. may award single or double costs to the appellee for a frivolous appeal.) was not in conflict with the state law. d. The S.Ct., under a strained interpretation of Rule 38, held that it did conflict with the state statutory rule, and therefore the federal rule applied under the Hanna test. e. However, the S.Ct. may be wrong: The AL statute applies even if the appeal was NOT frivolous. Also, the statute is phrased in mandatory language, whereas Rule 38 awards are discretionary. f. Conflict of 2 statutes addressing 2 separate situations? If you interpret FRAP Rule 38 to say additional costs should not be imposed on unsuccessful appellants who bring non-frivolous appeals, then there is a conflict. g. Would failure to apply the state rule lead to forum shopping and/or inequitable administration of the laws? h. The S.Ct. concludes this is a procedural issue, and so Congress has the power to prescribe rules for the App.Cts. 11. Ragan & Walker a. In Ragan, the question was whether the SOL was tolled upon filing of the complaint (FRCP Rule 3) or upon SOP (state rule). The S.Ct. held that the state tolling rule applied. This case was decided before Hanna. b. In Walker, the S.Ct. upheld Ragan. (The S.Ct. believes that the SOL is tied up with a state's substantive rights for Erie purposes.) As in Ragan, this case involved an action is commenced for SOL purposes under state law when the defendant is served, whereas under the Federal Rules an action is commenced when the complaint is filed with the clerk. (1) Is there a clash? YES. (2) However, the S.Ct. finds no clash. It gives the rule and the statute their plain meanings. The Court believes "commencement" can have two different meaning based on the situation in which the word is used. An action can be "commenced" for SOL purposes when the defendant is served, and "commencement" can also have a particular meaning within the universe of the FRCP. (3) There is no Federal Rule prescribing when an action commences for SOL purposes, so Erie analysis applies. Will the choice promote forum shopping or result in inequitable administration of the laws? (a) Forum shopping: Maybe, maybe not. (b) Inequitable administration of the laws: Not likely. (4) But, the Court talks about neither of the Erie considerations. The Court just designates the tolling rule as part of the SOL, and accordingly it is tied up with the substantive rights of the state. However, the Court does not cite Byrd. 12. Stewart Org. v. Ricoh a. Stewart was an AL corporation that had a contract with Ricoh, a NJ corporation to market copiers. Stewart sued Ricoh for breach of contract in federal district court in AL based on diversity of citizenship. Defendant moved to either dismiss for improper venue under  1404, or to transfer venue to the SDNY under  1406 pursuant to a forum selection clause designating any court in Manhattan as the venue for resolution of any dispute. Plaintiff responds that under AL law, forum selection clauses are disfavored. The Dst.Ct. refuses to dismiss. The 11th Cir., using Erie analysis, reverses in panel and en banc. b. According to the AL rule, the court should refuse to enforce a forum selection clause. According to  1404, the Dst.Ct. may transfer the case for convenience of the parties and witnesses and in the interests of justice. c. The S.Ct. focuses on  1404, and it opts for a strict statutory analysis. (1) Is  1404 on point? The S.Ct. thinks that it is. (2) Is there a conflict? Again, the S.Ct. thinks there is a conflict. The state rule is mandatory, but  1404 demands a weighing of several factors, including the convenience of the parties as reflected in the contract's forum selection clause. Additionally, the state's interest and the interests of the witnesses must also be considered. [Is the conflict manufactured?] d. Accordingly, the Court rules that the federal rule must be applied. (This case has some interesting subsequent history.) e. Hyp: Suppose the case is transferred to the SDNY, but AL law is still held to apply to the dispute. Now, suppose Stewart amends his complaint to include a claim for reformation of the contract on the grounds that under AL law, the forum selection clause is invalid. The court grants SJ on the reformation claim for the plaintiff. The plaintiff then moves for transfer back to AL under  1404, stating that the only reason the case is in NY is because of the now invalid forum selection clause, and additionally, that for convenience of all the parties and the witnesses and in the interest of justice, the case should be transferred back to AL. What result? (I think this approach might work well for the plaintiff.) 13. Final issue: How do we find out what state law applies once we decide that state law applies? a. Statutes b. Case law (of the highest court of the state), in our case, the NC S.Ct. (1) But suppose the pertinent case is very old, and further suppose N.C. App. has issued an opinion which is inconsistent with the older case. What should the Federal court do? (a) The court often will have to make a prediction of how the state S.Ct. would come out on the issue. (b) Certification (advisory opinions): Under this procedure, a federal court "certifies" a question of state law to the state's highest court. The state's highest court then decides the issue and sends its opinion to the federal court. (1) Certification must be authorized by the court or legislature. NC has no certification procedure. (2) Briefing and oral argument might be provided for, but some certification procedures do not provide for either. Accordingly, state supreme courts often have problems with hypothetical questions of state law. (c) Abstention: The federal court will refuse to decide the state issue while the parties are litigating in state court. (1) This doctrine is effective only if both federal and state issues are involved in the case. If the only basis for federal jurisdiction is diversity, then abstention would be an effective dismissal of the case. (2) The courts will avoid constitutional questions if at all possible, so the court can abstain from deciding a federal constitutional issue if it is possible the dispute can be resolved according to state law in state courts.