CIVIL PROCEDURE OUTLINE

 

I.  INTRODUCTION

 

Constitution only requires Supreme Court.  All other federal courts created by statutes.

 

28 USC 1331 - fed district court jurisdiction with federal question

 

28 USC 1332 - diversity of citizens & amount in question over $50,000; complete diversity = no plaintiff is a citizen of the same state as any defendant - STRAWBRIDGE v. CURTIS (1806).

 

            Rule 19 - necessary, Rule 20 - permissive joinder requires diversity.

 

            Rule 14 Impleader - no diversity.  But P may not assert claim against 3P D if not diverse.

 

28 USC 1738 - Full Faith and Credit.  If you have valid judgement for payment of money, then good against any property owned by D in any state.  Judgment good against any asset has now or will acquire/inherit, subject to state exemptions.

 

original jurisdiction 1 concurrent jurisdiction 2 exclusive jurisdiction

 

Strategy for using federal court:  1) may get higher award (find in published legal newspaper)    2) faster adjudication    3) outsider might avoid forum with local prejudices.

 

Any individual can have only one domicile even though more than one citizenship:  look to voter registration, driver's license, expressed intention, where go to church, domicile of spouse and family.  "domicile" in personal jurisdiction = "citizenship" in subject matter jurisdiction

 

animo manendi - intent to remain

 

Requirements for Diversity of Citizenship Test.  GORDON v. STEELE (W.D. PA 1974)

Idaho student girl files malpractice claim against PA. doctors.

            1.  Citizenship at the time of filing suit which controls.

 

            2.  Where plaintiff is challenged on her claim of diversity, she has burden to show evidence that diversity jurisdiction exists.

 

            3.  The fact of residency must be coupled with a finding of (subjective) intent to remain indefinitely to establish citizenship.

 

            4.  The fact that Plaintiff may leave Idaho after graduation and relocate to another state or country does not negate her claim to Idaho citizenship.  Plain­tiff's indefinite plans do not set a period of time around her intention to live in Idaho:  P has no definite plans to leave Idaho.

 

            Comment:  The court does not need to view facts in a light most favorable to the party opposing the motion.

 

age of majority - able to enter into legal contracts and deprived of the defense of minority age.

 

FRCP 11 - provides for award of attorney fees for defending a frivolous complaint.  Complaint must be ground in fact or warranted by existing law or a good faith argument for extension of the law.  Form 9 provides some guidance as to what must be included in a Complaint.

 

Bell v. Novick Transfer (D Md 1955)

Rule 8 only require "a short and plain statement of the claim showing the pleader is entitled to relief."  Maryland may require a more detailed statement, i.e., the FRCP are more liberal than state procedures.  By informing Ds of the nature of P's legal theory, Ds could frame a response.  Instead of Rule 12(e) motion, the better rule of law is that such information (clarifying the complaint) be obtained by Interrogatories under Rule 33, or other discovery procedure, unless it is really necessary to enable the party to frame his responsive pleading.

 

Process:  summons & complaint

 

 

II.  JURISDICTION

 

PENNOYER v. NEFF (U.S. 1877)

1.  The common law rule for in personam jurisdiction has two requirements:  all Ds, whether residents or nonresidents, must be personally served with process; and all nonresident Ds must be physically present within the forum state when such service is made.

 

2.  The first requirement ensures Ds have definite notice of the lawsuit.  The second requirement limits the power of a state over persons and property and businesses within its borders and no power over those parties outside its borders.  The second part establishes the Pennoyer "borders test" that would be overruled in favor a "fairness test" in Shaffer v. Heitner, (1977), and International Shoe (1945).

 

3.  The state court's exercise of in rem jurisdiction was defective, because the court did not first seize, or attach, Plaintiff's property.  If Mitchell had first obtained in rem jurisdiction by seizing the property at the time suit was commenced, the eventual land sale probably would have been upheld.  But Neff did not own Oregon land at time suit was filed.

 

4.  A state court cannot bring a person or property outside of the state into its jurisdiction simply by using substituted services.  States do have the power to regulate the transfer of property within their borders.

 

5. The presence of property could be the basis for jurisdiction over claims of any sort. (mere ownership of land confers in rem jurisdiction.)  For out of state non-resident, "the jurisdiction of the court extends only over such property (within the state)."

 

6.  Substitute service, by newspaper publication, is allowed for proceeding in rem. 

 

7.  Jurisdiction can also conferred by "voluntary appearance."  Leads to controversies where states try to imply consent for suits of corporations doing business in their states.

 

NOTE:  Although Court mentions the Due Process Clause of the 14th Amendment and "Full Faith and Credit" Clauses of 28 USC 1738, the Court uses common law reasoning rather than reliance on the Fourteenth Amendment to define requirements for in personam jurisdiction.  There would be constitutional violations in service in this case.  By invoking the 14th Amendment, the Supreme Court's ruling on service of process becomes binding on state courts even in cases where all the parties reside in that state.

 

2.  Pennoyer conceptual scheme appears to have three elements:  power, consent, and notice.  Power in Harris v. Balk, 198 U.S. 215, (1905).  Harris owed Balk money.  Balk owed Epstein money.  When Harris traveled from North Carolina to Maryland, Epstein had him served with process, and Maryland court entered judgment against him saying Harris should pay the money he owed Balk to Epstein instead.  A state could acquire jurisdiction over person whenever their debtors were present in that state by attaching the debts.  The result was to make creditors liable (to the extent of amounts owed them) in any state in which their debtors set foot.

 

3.  Consent - nonresidents who had no property in a state were nevertheless subject to its jurisdiction if they had consented to its exercise - e.g., by designating an agent in the state who would accept service of process on their behalf.  The state might require persons and organizations to appoint such agents (and thereby "consent" to jurisdiction).  Could a state require someone to "consent" to jurisdiction as the price of doing something he had a constitutional right to do in any case? 

 

            If consent implied, then it was limited to suits arising from the transaction of business in their state.  Then defining the term "presence," the Court held a corporation was subject to general jurisdiction (for all claims).

 

            In Hess v. Pawloski, 1927, U.S. Supreme Court sustained right of Massachusetts to assert jurisdiction over out-of-state motorist involved in a traffic accident.  Later doctrine applied to securities selling.  "Implied consent" fiction.

 

 

The PENNOYER REGIME  Pennoyer's rule for in personam jurisdiction proved difficult for courts to follow.  New modes of transportation and communications caused courts to create exceptions to Pennoyer's border test.  In personam jurisdiction over nonresidents was asserted based on D's prior consent to jurisdiction and based on a host of legal fictions -- "implied consent," "corporate presence," "doing business," etc.  There was a need for a comprehensive rule for in personam jurisdiction; one that could reconcile Pennoyer's rule with its exceptions and comply with Due Process.  International Shoe eliminates these legal fictions.

 

Writ of Execution - order from the court authorizing sheriff to seize land.  We deduct execution costs from proceeds of sale of property.  After satisfying judgment, we give the remainder to the landowner.  Post notice on title - size or attachment.  Seizure conveys notice and gives jurisdiction under Pennoyer.

 

**Difference between personal and property judgment:  you can register personal judgment in another state.  If only property jurisdiction, judgment only relevant on property attached.**

 

 

B.  CHALLENGING JURISDICTION.  JURISDICTION (Validity of Judgment), BUT ONLY Validity of judgment, is open to COLLATERAL ATTACK.  (Direct attack - challenge jurisdictional ruling on appeal)

 

            Default judgment can only be challenged on validity issue.  The merit of the judgment is not considered.  If sued in state system, must raise jurisdiction question in state court system (where judgment is trying to be enforced).  Due Process of 14th requires the state to give a party the opportunity to challenge jurisdiction.

 

            Some state courts require defendants to enter a "special appearance" to argue jurisdictional claim.  In some cases, if defendant does not accept default judgment and argue jurisdiction on appeal, then the act of litigating on the merits changes to a "general appearance" and a waiver of the jurisdictional defense.

 

Under the FRCP, defendant must raise objection to personal jurisdiction in a pre-answer Motion.  Rule 12(b)(2).  And otherwise must include it in her answer.  Failure to do so results in a waiver of the territorial jurisdictional defense.  If B raises the objection at the proper time, B does not waive it by joining it with other defenses or objections.  Also, if B's jurisdictional motion is overruled and B litigates on the merits and loses, she can continue to press the jurisdictional objection on appeal.  Anytime you make a Rule 12 motion, must include 12(b)(1) - 12(b)(5) objections, or you waive them.

 

            Rule 12(b)(6) - motion to dismiss for failure to state a claim upon which relief can be granted; usually dismissed with leave to amend the complaint.

 

            Rule 12(g) - requires that party must consolidate all pre-answer motions to dismiss in a single motion.  Cannot file 12(b) motions sequentially.  Must include all Rule 12 motions.

 

            Rule 12(h)(1) provides that objections to the court's jurisdiction are waived unless they are made by motion or by answer and are waived if a 12(b) motion is made raising other issues but not raising the territorial jurisdictional issue, even though it is put in the answer.  If you do not file motion 12(b)(2), then must include 12(b)(2) objection to jurisdiction in answer.  Courts want objections in first pleading.

 

            At least one court has ruled that asserting a permissive counterclaim Rule 13(b) constitutes a waiver of jurisdictional objections.  On the other hand, asserting compulsory counterclaims under Rule 13(a) has not been held to constitute a waiver of jurisdictional objections.

 

            A "limited appearance" is an appearance limited to the value of the res that has been seized by attachment jurisdiction.  Rule 13(a) indicates that if the only basis for jurisdiction is attachment, the defendant need not make what would otherwise be a compulsory counterclaim (thereby making a general appearance).  Shaffer v. Heitner diminishes the importance of "limited appearance" in cases where D can have the quasi in rem or in rem action dismissed for lack of minimum contacts.

 

Fourteenth Amendment's Due Process Clause - limits jurisdiction of states.

 

Supremacy Clause - allows federal law to prevail over state law, and federal constitution to prevail.

 

Milliken v. Meyer (U.S. 1940).  SC held domicile in the state is alone sufficient to bring absent D within the reach of the state's jurisdiction.

 

 

 

C.  THE MODERN CONSTITUTIONAL FORMULATION OF POWER

 

Whether in personam, in rem, or quasi in rem, the exercise of valid state court jurisdiction today must comport with the Due Process of the 14th Amendment, which means it must comport with "fair play and substantial justice."  This requirement (i) places constitutional constraints on the exercise of state power over the individual, (ii) extends constitutional considerations to the defendant's act of consenting to jurisdiction, and (iii) raises the requirement of notice from a formulation regulating state power to a constitutional imperative.

 

1.  Redefining constitutional power.  A state statute must first authorize a court to exercise power over a defendant before one can even consider the constitutional issue.  The state jurisdictional statute is called a long arm statute.  If it meets the long arm test, then it must be determined whether the assertion of state power over the defendant is constitutional, i.e., comports with "fair play and substantial justice."  This is a "fairness test," as distinguished from Pennoyer's "border test" or "physical power test " which governs all forms of territorial jurisdiction - in personam, in rem, quasi in rem.  Int'l Shoe expands Pennoyer by considering fairness & reasonableness even when Ds are outside of the forum.

 

a)  Elements of the fairness test.  The fairness test has two elements or subtests:  minimum contacts (what some might call the "power test" or "purposeful act requirement") and other factors (or the "reasonableness test").  First a court must find MINIMUM CONTACTS SUCH THAT FAIR AND REASONABLE ****.

 

b)  INTERNATIONAL SHOE CO. v. WASHINGTON, (U.S. 1945).

            1. The 14th Amendment's Due Process Clause gives a court authority to exercise in personam jurisdiction only if minimum contacts, ties, or relations exist between D and the forum state.

 

            2.  Such minimum contacts exist in this case because D's in-state activities "were neither irregular nor casual.  They were systematic and continuous throughout the years in question" and accorded D "the benefits and protection of the laws of the state, including the right to resort to the courts for enforcement of rights."

 

            3.  D was "doing business" in Washington, was present in Washington on a continuous basis, and thus the court's jurisdiction met "traditional notions of fair play and substantial justice."

 

            4.  COMMENT:  Minimum contacts - decided on facts of case-by-case.  Note that because P's claim arise out of, or is related to, D's in-state activities, this is a case of specific jurisdiction.  But because D's in-state activities are found to be substantial (i.e., "systematic and continuous"), the court could have asserted general jurisdiction, which would not have been limited to claims concerning D's in-state activities.

 

 

2.   ABSORBING IN REM AND QUASI IN REM JURISDICTION  The modern constitutional formulation of state power (International Shoe's fairness test) absorbed in rem and quasi in rem jurisdiction in SHAFFER v. HEITNER (U.S. 1977).  (Corporation would not sue, because officers would not authorize suit.  Heitner wants officers to pay for fine in Oregon).

 

            1. Henceforth, all assertions of state court jurisdiction must meet International Shoe's constitutional test.  The test has expanded in personam jurisdiction, will have little effect on in rem jurisdiction, and will greatly affect the type of quasi in rem jurisdiction represented in Harris v. Balk.

 

            2.  Ds' only contact with Delaware is their stock in Greyhound Corporation which, because Greyhound is incorporated in Delaware, is deemed to be present in Delaware.  The presence of such stock in Delaware is the sole basis for the court's exercise of jurisdiction, but the stock is totally unrelated to P's underlying cause of action.  There are not enough contacts among Ds, the forum state, and the underlying litigation to satisfy the requirements of minimum contacts and reasonableness for general jurisdiction.

 

            COMMENT:  This case settled that the constitutional test ("fair play and substantial justice") and analysis are exactly the same for all types of territorial jurisdiction cases.  This case (Shaffer) overrules Harris v. Balk, 198 U.S. 215 (1906), where Epstein asks Court to have Harris pay loan to Epstein rather than to Balk, even though Epstein's underlying claim of $300 against Balk was unrelated to the Balk-to-Harris loan.  Replaces "patchwork of legal and factual fictions" created by Pennoyer.

 

            3.  After Shaffer, presence of property is sufficient to assert jurisdiction if cause of action is related to the property****:  1) ownership dispute,  2) use of property dispute, duty as owner.  Nature of the property does not matter; relation of property to the claim matters.

 

3.  Requirements:  systematic and continuous, isolated

 

            General Jurisdiction - can sue D on any claim if business in forum is big enough, continuous and systematic, even if unrelated claims to forum activities.

 

            If either (1) casual, isolated, irregular but claims related to forum activities, then maybe court has territorial jurisdiction depending on other factors; (2) systematic and continuous but unrelated - then sometimes court has territorial jurisdiction, depending on the scale of activities.

 

            If casual and unrelated - court does not have jurisdiction.  Pennoyer would have given jurisdiction (based on presence).

 

            Outside motorist involved in accident in foreign state - court has jurisdiction.  Reason:  state has the right to regulate its own highways.  State can fairly insist that you come back and answer questions about your driving behavior.  HESS v. PALOWSKI (U.S. 1927)  Isolated physical presence - gives rise to jurisdiction.

 

            CONTACT - any circumstance (physical or non-physical) to link Ds to forum state.   MINIMUM CONTACTS - not "best" forum, just an "acceptable" forum (as distinguished from maximum contacts).  Critical:  whose activities (P's or D's) establishes contact with the forum state.  D must establish contact with forum state for minimum contacts. 

 

            Foreseeability - circular argument.

 

 

4.  DEFINING SUBSTANTIAL JUSTICE

 

A)  Product in "stream of commerce."  WORLD-WIDE VOLKSWAGEN CORP. V. WOODSON, 444 U.S. 286 (1980).  Ds were never physically present like in Shaffer.  Specific jurisdiction - isolated and related contact.  Interlocutory appeal (before final judgment) - would not occur in federal court or most jurisdictions.  Writ of prohibition against Judge Woodson.  Emphasized unfair treatment to Ds.  contacts with forum not fairly attributable to Ds.  Burden on Ds.  State interest.

 

            1.  A court may exercise in personam jurisdiction over a defendant only if the defendant has purposefully availed itself of the forum state's benefits and protections.  Since Ds in this case "have no `contacts, ties, or relation'" with Oklahoma, it cannot be said that they have purposefully sought to avail themselves of Oklahoma's benefits and protections.  Ds intended to accept the benefits and protections of only those states within their sales territory - New York, New Jersey, and Connecticut.

 

            2.  A product must leave the stream of commerce within the forum state before it can be said that the forum state accords benefits and protections to the product.  The product in this case, the Audi, never left the stream of commerce in Oklahoma.  "A state does not violate due process if it asserts jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state."

 

            3.  The purposeful act requirement does not mean foreseeability in the sense of the "mere likelihood that a product will find its way into the forum state."  Rather, it means foreseeability in the sense "that the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there."  This case reveals no facts suggesting that Ds should reasonably anticipate being haled into an Oklahoma court.

 

            4.  Financial benefits are not critical for jurisdiction. Must have some other basis for jurisdiction.  In Woodson, relationship to Oklahoma established not by Ds but by P.  For minimum contacts, D must establish contact with forum state.

 

            5.  Seaway would lose no $ if Oklahoma dropped off the globe.  If seaway advertises in a state, it avails itself of pecuniary benefits there.  Jurisdiction is then fair if it advertises.

 

            DISSENT IMPORTANT (Brennan, J):  1. By focusing solely on the existence of contacts between the forum state and the defendant, the Court applies the minimum contacts rule too narrowly.  "The clear focus in International Shoe was on fairness and reasonableness."  Thus, International Shoe teaches us that in addition to minimum contacts, the Court must look at the reasonableness of the assertion of jurisdiction.

 

            2.  The existence of defendant ties to the forum state is only one way of determining fairness and reasonableness.  "The interests of the State and other parties in proceeding with the case in a particular forum are ... [other relevant] considerations."

 

            3.  The forum state has a strong interest in the litigation because the accident occurred in Oklahoma, Ps were hospitalized in Oklahoma when they brought the lawsuit, essential witnesses and evidence were in Oklahoma, and the state has a legitimate interest in enforcing its "substantial benefits" from a nationwide network of highways, of which Oklahoma's highways are a part.

 

            4.  As to minimum contacts, Ds have ties to the forum state because an "automobile is intended to be moved around" and because each D "sold the automobile which in fact was driven to Oklahoma where it was involved in an accident....The sale of an automobile does purposefully inject the vehicle into the stream of commerce..."

 

            COMMENT:  Burger King and Asahi, infra, suggest that Justice Brennan's understanding of the constitutional test is correct.  Although the majority also believes that the forum state's interest must be taken into account, it does not seem to view that interest as separate from the minimum contacts requirement, as does Brennan.  Significantly, Brennan wrote the decision in Burger King.

 

B)  Defendants reaching out into Plaintiff's forum state

 

CALDER v. JONES  Supreme Court unanimously upheld territorial jurisdiction in California arguing that Enquirer reporter and editor new they would be defaming Shirley Jones in California, which is also one of their biggest markets.  Shirley Jones is the classic "sitting at home" Plaintiff.  "Not untargeted negligence"

 

KEETON (NY) v. HUSTLER (Ohio/Cal).  Cathy Keeton filed libel suit in New Hampshire, because statute of limitations had run in every other state.  Supreme Court said Hustler can be sued in NH.  Does not matter that P does not live there.  NH has interest in opening court to injuries in NH.  But she could, by the single publication rule, sue for damages sustained outside of state.  Hustler could foresee being haled into court in every state in which it sold magazine.

 

MCGEE CASE  Texas insurer had one customer in Cal.  Supreme Court upheld personal jurisdiction in Cal.  CRITICAL:  intentionally reach into state to establish business relationship.  Just getting revenue from out of state citizens not enough to give the court jurisdiction.   Insurance company (1) received benefits from Cal.  (2) engaged in conduct that Cal. treats to special legislation.  ONE OF THE FEW TIMES THE COURT HAS TALKED ABOUT BURDEN ON PLAINTIFF

 

 

Territorial Jurisdiction after Woodson:  1) fairness to D/convenience - burden of inconvenient forum;    2) federalism, state interest - state must have reason to open up its courts.   HOWEVER, even if a forum is the most convenient for litigation and D is not inconvenienced at all, due process clause may still limit territorial jurisdiction.  ??Ask Sobieski for example:

 

Fed. Court Jurisdictions:  1) Fed. Rule of Civil Procedure 4:  fed ct same within limits of state where they sit.   2) unless other provisions of the rules - authorize long-arm statutes    3) unless fed. statute allows jurisdiction beyond state - federal interpleader, securities fraud.  "nationwide service of process" 3 "nationwide territorial jurisdiction"  constitutional because domiciled in the U.S.  Sovereign can always compel its own citizens to defend in its courts.  Some jurisdictions, therefore, can impose more burden than others.

 

 

3.  Balancing conflicting interests -- BURGER KING CORP v. RUDZEWICZ, 471 U.S. 462 (1985).  1.  The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful contacts, ties, or relations.  Thus, D must purposefully establish minimum contacts within the forum state.

 

            2.  Applying the minimum contacts test to the facts in this case, Ds have had no physical ties to Florida, save for a brief training course in Miami.  Yet this franchise dispute grew directly out of a contract that had a substantial and continuing connection with the state.  Ds reached out to negotiate with a Florida corporation and agreed by long-term contract to be regulated from Florida, to make franchise payments to Florida, and to have disputes about the contracts governed by the laws of Florida. (Does not mean suits have to be in Florida)

 

            3.  If D purposefully established minimum contacts within the forum state, then move on to considered if fair and reasonable.  Thus courts in "appropriate cases" may evaluate the burden on the defendant, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the several states in furthering fundamental substantive social policies.  These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required.

                        On the other hand, where D, who purposefully directs his activities at forum residents, seeks to defeat jurisdiction, he must present a compelling case that other considerations render jurisdiction unreasonable.  Most such considerations usually may be accommodated through means short of finding jurisdiction unconstitutional.  For example, the potential clash of the forum's law with the fundamental substantive social policies of another state may be accommodated through application of the forum's choice-of-law rules.  Similarly, a defendant claiming substantial inconvenience may seek a change of venue.  Nevertheless, minimum requirements inherent in the concept of "fair play and substantial justice" may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities.

 

            4.  Applying the reasonableness test to the facts of this case, there is no danger that allowing a franchisor to sue its franchisees in the former's home state will "sow the seeds of default judgments against franchisees owing smaller debts."  And there is no other evidence to suggest that the exercise of jurisdiction in this case would otherwise be unfair.

 

            COMMENT:  Prior to Burger King, it was generally believed that the term "minimum contacts" was a proxy for "substantial justice and fair play."  Now it appears that minimum contacts - the notion that D must purposefully establish meaningful contacts, ties, or relations with the forum state - and a balancing of other factors probative of the reasonableness of jurisdiction - such as the state's and P's interest in the litigation - are components of the inquiry into substantial justice and fair play, and that this inquiry is the essence of the constitutional test.  Whatever name is given to the constitutional test, it is clear that the jurisdictional inquiry must focus on a fair balance of P's, D's, and the state's ties to the litigation and forum state.

 

            Difference between Burger King and L.L. Bean:  1) franchise vs. sales contract;  2) 20 year duration vs. one-shot deal;    3) Rudewicz solicited Burger King franchises combined with profit motive;   4) negotiated contract over long period and represented by counsel.

 

 

 

4.  Jurisdiction unreasonable despite minimum contacts - ASAHI METAL INDUSTRY CO. v. SUPERIOR COURT, 480 U.S. 102 (1987).  SUMMARY:  Five justices suggested that minimum contacts would exist over D, which put its goods into the stream of commerce flowing into the forum state.  Eight justices held that exercising jurisdiction would be unreasonable, considering the severe burdens on D of defending in a foreign legal system, the slight interests of P and California in the exercise of jurisdiction, and the international interests in not subjecting this alien corporation to an indemnification offshoot of a product liability action in an American court.

 

            BREAKDOWN:  (O'Connor, Rehnquist, Powell, Scalia)  No minimum contacts can be found here, because D did not intentionally or purposefully market its product in the forum state.  Also exercise of personal jurisdiction over D is unreasonable.  (Scalia no opinion on reasonableness test).  Japanese Co. did not decide where to send product.  No different from Seaway and World-Wide in Woodson.  If American corp. rather than jap, O'Connor's group would say no min. contacts but at least fair.

 

            (Brennan, White, Marshall, Blackmun).  Minimum contacts exist, because D was aware that its product was regularly sold in the forum state.  Also, jurisdiction was unreasonable.

 

            (Stevens, White, Blackmun).  Minimum contacts exist, because D purposefully marketed its product and was aware of the sale of its product in the forum state.  Also, jurisdiction is unreasonable.

 

            COMMENT:  As Justice Brennan observed, Asahi is one of those rare cases in which personal jurisdiction is held unconstitutional because, even though it passes the minimum contacts test, it fails the reasonableness test.  Personal jurisdiction was unreasonable primarily because P settled the main lawsuit and has an obvious alternative forum for its second lawsuit against D - namely, Taiwan or Japan, where both P and D have more substantial contacts than in California.

 

            Impleader or Third-party action:  FRCP 14.

 

            Reasons Taiwan corp wants to get it resolved in California:  1) convenience - already in court once;   2) favorable law - California permits indemnity or contribution;   3) proof available here, not in Taiwan;    4) could get two different decisions and not be able to establish claim in two separate cases.  Taiwan corp. will likely say to suppliers "show up in Cal. ct. or agree to accept judgment" - indemnification would require them to appear.  (??? Sobieski)

 

 

 

 

FACTORS AFFECT SPECIFIC JURISDICTION (claim related to contacts):  1) purpose­fully (D knew it would harm her and knew at time it would be suffered in Cal. Calder v. Jones);  2) profit-making (McGee, Woodson);   3) state's interest in opening up its courts  (P domiciled, event occurred, nature of the claim);    4) governing law;   5) characteristics of litigants;    6) D's convenience;    7) international vs. domestic;   8) availability and ease of access to another forum.  Kulko    9) comparative responsibility for establishing contact.

 

 

 

KULKO v. SUPERIOR COURT (1978).  SC held divorced father had not engaged in "purposeful act" by sending his daughter to California for the school year.

 

            (1)  The purposeful act requirement means that D must be purposely availed himself of the forum state's benefits and protections.  By acquiescing to his child's desire to live with her mother, D did not purposefully seek any benefits or protections from California.

 

            (2)  As to the reasonableness test, Cal. may have conferred benefits and protections on his child, but this is not the same as conferring benefits and protections on D.  D must receive direct benefits and protections from the forum state to assert territorial jurisdiction; vicarious benefits are not enough.

 

            (3) wife is comparatively responsible for contacts with forum state.  For public policy purposes, SC did not want to discourage parents from entering into reasonable visitation agreements.

 

            Differences with McGee:  1) no profit motive;  2) not corporate D, noncommercial actor;   3) not receiving economic benefit from Cal. (pecuniary benefit results from child not being in NY, not necessarily being in Cal.);   4) alternative forum more convenient using ERISA;   5) domestic relations

 

 

5.  Transient Jurisdiction -- BURNHAM v. SUPERIOR COURT, 495 U.S. 604 (1990).  She could have gotten divorce in Cal., but Cal state courts could not divide up property or give child support.  To alter legal status - can bring suit as long as either party is domiciliary.  Rule of Pennoyer is still constitutionally valid in this case.  Different from Kulko because D actually went to California. 

 

            1.  The Due Process Clause permits exercise territorial jurisdiction over a nonresident who was personally served with process while temporarily in that state, for a claim that is unrelated to his in-state activities.  Transient jurisdiction is constitutional.  Physical presence + service = suff. for juris.  At least physical presence test is clear.

 

            SUMMARY:  While the decision upholding transient jurisdiction was unanimous, the reasoning was not.  Four Justices believe that transient jurisdiction comports with traditional notions of fair play and substantial justice, simply because it has been consistently upheld since the 19th century and is supported by the consensus of state court judges today.  Four other justices believe transient jurisdiction passes the fairness test because it satisfies both the minimum contacts and reasonableness subtests.

 

            (Scalia, Rehnquist, White, Kennedy)  Jurisdiction based on physical presence alone constitutes due process, because it is one of the continuing traditions of our legal system.  Pennoyer is traditional; "it is unconstitutional to have an original thought."  Thinks Shaffer is wrong, but tries to distinguish it and makes a fool of himself.

 

            (Brennan, Marshall, Blackmun, O'Connor).  Setting foot avails yourself of police, fire, medical protection.  Therefore, state interest.  Open up suit to anyone who has been to California.

 

            (White)  Does not like treatment of Shaffer.  "Presence in the forum state is intentional" - worried about kidnap victim, military personnel, prisoners, flying somewhere.

 

            (Stevens)  Justices Scalia and Brennan's opinions are unnecessarily broad.  "For me, it is sufficient to note that the historical evidence and consensus identified by Justice Scalia, the considerations of fairness identified by Justice Brennan, and the common sense displayed by Justice White, all combine to demonstrate that this is, indeed, a very easy case."

 

            COMMENT:  It could be said that the major difference between Scalia and Brennan is that Brennan would subject each assertion of transient jurisdiction to a case-by-case fairness scrutiny whereas Scalia would not.  However, it could also be argued that the major difference goes much deeper than that:  for Scalia any assertion of territorial jurisdiction is backed by tradition and current consensus is constitutional; for Brennan even tradition and consensus do not escape the fairness scrutiny.  This, of course, would suggest that Scalia is offering an alternative analytical framework that - at least for transient jurisdiction - would supply the Burger King fairness test.  If that is the argument, then Brennan wins because Scalia's opinion is only a plurality opinion.  Thus it Scalia's opinion cannot be read as "law" that alters the Burger King analytical framework.

 

 

 

WHAT DO WE KNOW AT THIS POINT ABOUT JURISDICTION:  1) Can assert jurisdiction based on physical presence;   2) Shaffer still good law (in rem jurisdiction of Pennoyer is dead);    3) for out-of-state service, Int'l Shoe's minimum contacts such that fair and reasonable.

 

 

E.  THREE CASES PERTAINING TO GENERAL JURISDICTION

 

1.  Last case in which general jurisdiction upheld.  PERKINS.  Shareholder v. Philippine Corp. based in Ohio due to Japanese occupation of Philippines.  Court could assert general jurisdiction over the corporate D:  (1) forum had become principal place of business; and (2) no alternative forum or more convenient forum.  "Jurisdiction by necessity." ** Where else could the suit be brought? **

 

2.  KEETON (NY) v. HUSTLER (Ohio/Cal).  Cathy Keeton filed libel suit in New Hampshire, because statute of limitations had run in every other state.  Supreme Court said Hustler can be sued in NH.  Does not matter that P does not live there.  NH has interest in opening court to injuries in NH.  But she could, by the single publication rule, sue for damages sustained outside of state.

 

3.  HELICOPTEROS (U.S. 1984).  Cause of action - crash of helicopter in Peru.  Can decedents' relatives sue in Texas due to forum activities unrelated to claim, i.e., general jurisdiction.  1.  Forum is not principal place of business.   2. Forum available in Columbia or Peru.

 

            Insufficient Contact:  single negotiating trip - not continuous and systematic; checks drawn on a Texas bank - can't support with contract, under control of person writing check, not D, "unilateral activity of another";  purchases of equipment and services - mere purchases, even if continuous and systematic, are not enough to support general jurisdiction.

 

            Test for general jurisdiction:  "substantial" contacts - continuous and systematic.  Phrase "sufficient contacts" is meaningless.  Place of incorporation and principal place of business.  Where else? - unresolved.  Practical effect: always assert claim arises under both general and specific jurisdiction.

 

            Unresolved:  1. If purchases are not enough, why aren't multi-million $ sales of services enough?   2.  Helicol had signed indemnification agreement, and they reasonably could believe to be haled into Texas courts.   3. Ps cannot be subjected to severe burden of suing in a foreign legal system.  If D in Asahi is great, even greater for individual Ps.   4. Supreme Court bias in favor of big business.   5. State had an interest (workman's compensation) and burden not so severe on D (already had Texas lawyers negotiate contract).  Therefore, should have been allowed suit in Texas.  6. How do I tell if contacts are related?

 

 

F.  The outer limits of jurisdictional power:  Jurisdiction to determine jurisdiction.  Discovery sanctions.  If a party disobeys a court's discovery order, the FRCP allow the court to impose sanctions against that party.  One severe sanction is provided in Rule 37(b), which basically says that the facts that were the subject matter of an attempted discovery will be presumed to be contrary to the interests of the party who disobeyed the discovery order.  Rule 37(b) raises the question of whether a "court can say to the party disobeying a discovery order (on the ground that there is no authority for the order because minimum contacts are lacking) that minimum contacts will be presumed."

 

            INSURANCE CORP. OF IRELAND v. COMPAGNIE DES BAUXITES DE GUINEE, (1982).  FACTS:  A group of foreign insurance companies refused to comply with court-backed discovery requests designed to ascertain jurisdictional facts on the ground that the requests were too burdensome.  A court has right to information to determine whether the defense raised is valid.   Courts, in other words, have jurisdiction to determine jurisdiction.

 

            2.  Because territorial jurisdiction is subject to involuntary waiver, a sanction under Rule 37(b)(2)(A) is no more of a due process problem than a Rule 12(b) waiver (failure to raise objection in first pleading).

 

            3. Ds' silence constitutes an admission of the want of merit in Ds' defense of lack of minimum contacts.

 

 

G.  FORUM SELECTION CLAUSES.  CARNIVAL CRUISE (1991).  Background:  If freely negotiated, court looked at forum selection clause and would enforce if reasonable.  Generally when confronted with adhesion contracts, these selection clauses were not upheld.  Effect of exclusive forum clause:  oust cases from jurisdiction otherwise might be. 

 

            Sobieski arguments for forum selection clause:  1) Int'l waters might mean numerous unforeseen int'l forums;   2) Shute's benefitted by lower ticket price; w/o forum selection more expensive ticket;   3) big expensive personal injury tort claims (Carnival) vs. small contracts claims (LL Bean),  admiralty tort claims much larger sums of money;   4) still have incentive to sue in Florida due to $200,000 claim plus attorneys taking on contingency fee vs. Sobieski's cost of going to Maine on such a small claim;   5) physical contact with property.

 

            Arises from admiralty law and therefore not binding on states and state law cases.

 

 

III.  THE CONSTITUTIONAL REQUIREMENT OF NOTICE

 

1.  Background.  Notice required by Due Process Clause of the 14th Amendment.  Under the Pennoyer regime, personal service was required for in personam; quasi in rem and in rem lawsuits required publication in a local newspaper, and in some jurisdictions attachment was deemed to provide notice.  Mullane eliminated these categories.

 

Elements of validity of judgement:  1) territorial jurisdiction,   2) NOTICE (contents, reasonable time - 20 days for federal ct, 30 days for most courts; how we give notice)

 

 

2.         The Constitutional Rule for how we give notice -- MULLANE v. CENTRAL HANOVER BANK (U.S. 1950).   

 

            1.  Notice must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections."

 

            2.  Publication falls short of this goal with respect to "known beneficiaries," i.e., beneficiaries whose names and addresses are known, or are ascertainable with due diligence, and most of whom are residents of the forum state.  Notification by mail is the best means possible for such beneficiaries.

 

            3.  Publication is not only the best but also the only means possible of notifying the "unknown beneficiaries," i.e., beneficiaries whose interests in the trust are remote or whose names or whereabouts cannot be ascertained through reasonable efforts.

 

            4.  Those who step forward will represent the (same) interests as those absent.

 

            5.  If D never receives notice, court can still enter valid judgment.  Due Process DOES NOT REQUIRE ACTUAL NOTICE.  Newspaper publication meets due process requirement.  But D will have the right to challenge.  FRCP 60(b) - D can seek to vacate judgment due to lack of notice.  IMPORTANT THAT D ACTS PROMPTLY.

 

            6. If only one D, Mullane still applies, though SC never answers.

 

            7.  Even if in rem attachment, still must notify by mail if address known, and publish in newspaper if unknown.

 

            8.  New York court had territorial jurisdiction in this case (1) because property in NY, and claim is related to property;  (2) jurisdiction by necessity.  Perkins.  Where else could suit be brought?

 

3.  The Mechanics of Service of Process.  Generally, any person over the age of 18 and not a party to the action may serve process.  Service by mail is an acceptable method of serving process in most cases.  The mechanics of serving process in federal courts are governed by FRCP 4.  Not only are the federal and state mechanics similar, the Fed Rules allow P to use state mechanics.  Many states require more than minimum.  Important to know requirements.

 

            Federal courts require 1st class mail with enclosed acknowledgement to be sent back to P.  Also may ask to waive service.  If refuse to waive, then responsible for additional notice costs.  Rule 12(b)(4) and (5) - insufficient process and insufficient service of process -- but obviously must receive to be able to argue this motion; therefore, not useful.

 

            COGNOVIT CLAUSES - waive notice and right to argue defense on the merits.  Supreme Ct. held these clauses were enforceable if between sophisticated corporations.  Overmyer Co. v. Frick Co. (1972).

 

 

IV.  SELF-IMPOSED RESTRAINTS ON JUDICIAL POWER:  LONG ARM STATUTES, VENUE, AND DISCRETIONARY REFUSAL OF JURISDICTION

 

1.  Introduction.  Thus far, the discussion of personal jurisdiction has dealt only with the constitutional restraints on the exercise of state court power over the person or thing -- i.e., power and notice.  We now look at several procedural rules that place additional limitations on the exercise of state court power.  Both the constitutional and statutory rules must be considered when determining where the lawsuit can be brought.

 

2.  Long Arm Statutes as a Restraint on State Jurisdiction.  A state statute or rule must authorize a court to exercise power over the D.  Without such authorization, a state court cannot exercise power over the D, regardless of what the constitutional rule dictates.

 

3.  Federal Courts under FRCP 4(k):

 

            1.  Federal courts look to the law of the state on long arm statutes; they are authorized to assert territorial jurisdiction to the same extent as state court.  Thus, a federal court first looks to Long Arm Statute, then to the Due Process clause.

 

            2.  100 MILE BULGE - joinder of party under Rule 14 or 19.  Great for border courthouse.  Must be served in 100 radius, not reside.

 

            3.  Federal Interpleader:  Nationwide service of process and territorial jurisdiction under 28 U.S.C. ' 1335.  Anywhere in the U.S.  Also, exception to the complete diversity rule.  Only requires "minimal diversity" - diversity between two adverse claimants.

 

            4.  When authorized by statute of the U.S.

 

            5.  Rule 4(k)(2)  Insufficient contacts for any single state but in aggregate.  Can Congress authorize fed. distr. ct. to assert jurisdic. even if no state could?  No Supreme Court case on this subject yet.  Also matter of sovereignty and can assert jurisdiction broader than any state, at least in theory.

 

 

OMNI CAPITAL INTERNATIONAL v. WOLFF & CO. (U.S. 1987).  Louisiana investors sued broker, who impleaded London agent brokers.  (1) The federal district court cannot exercise personal jurisdiction over the third party Ds in the absence of a statute or rule authorizing such jurisdiction.  (2) Authorization found under neither Louisiana long arm statute, which applies in federal court by virtue of language in Fed Rule 4(e), nor the Commodities Exchange Act, which is silent on the issue.  (3) Courts should not and do not have the power to create common law rules authorizing service of process.

 

            Comment.  Omni evinces that in every case concerning personal jurisdiction, two questions arise:  (i) does a statute or rule based on a statute authorize a state or federal court to exercise power over the D, and (ii) if so, is the exercise of that power fair.  The first question raises a statutory issue, the second a constitutional issue. 

 

4.  VENUE as a Further Localizing Principle.  1) Venue is not an element of validity of judgment.   2) Waivable, just like territorial jurisdic, must put objection in pre-Answer motion or Answer.

 

a.  The venue concept.  "Venue" simply means the "place of trial."  Venue rules attempt to allocate cases within a judicial system, federal or state, in a manner that is convenient for the parties, witnesses, and the court.  Typically, question of personal and subject mater jurisdiction are decided in advance of venue.  Finally, venue rules are mainly statutory rather than judge-made.

 

            a) Collateral attack.  A D who fails to enter a plea and consequently defaults in the first action may attack the court's lack of personal jurisdiction is a sister court but cannot attack the court's lack of venue in this situation.  VENUE IS NOT AN ELEMENT OF VALIDITY OF JUDGMENT.  Objections to venue, just like objections to territorial jurisdiction, must be put in a pre-Answer motion or in the Answer.

 

            b)  Curing defects.  Generally, jurisdictional defects may not be cured by the court's transfer of the case to a court having valid personal jurisdiction, while venue defects can be cured by transfer to a court of proper venue.

 

            c)  Applicability of rules.  Personal jurisdiction, but not venue, must be established when a case is removed from state to federal court (called "removal jurisdiction") and with respect to Ds sued on cross-claims and third party claims.

 

b.  Federal venue rules.  The general venue rules for federal courts are set out in 28 U.S.C. ' 1391.  Special venue rules are set out in other section of the Judicial Code as well as in particular federal statutes conferring subject matter jurisdiction on the federal district courts.  There are four different types of general venue rules:  venue in diversity actions, venue in federal question actions, venue for corporations, and venue for aliens.  The first three are of major importance.

 

1)  VENUE in Diversity and Federal questions -- '' 1391(a),(b).  Venue is proper only in the judicial district where:

 

            a) Any D resides, provided that all Ds reside in the same state;

 

            b) Any substantial part of the events, omissions, or property concerning the controversy is situated; or

 

            c) If there is no district in which the action may otherwise be brought,

 

                        i) For diversity actions, a judicial district where the Ds are subject to personal jurisdiction at the time the lawsuit is commenced.

 

                        ii) For federal question and mixed federal/diversity actions, a judicial district where any D may be found.

 

2) Corporations -- ' 1391(c).

 

            a)  For purposes of applying ' 1391 (a) and (b), a corporation is deemed to reside in any judicial district where it is subject to personal jurisdiction.

 

            b)  If there is more than one judicial district in the state, then the corporation is deemed to reside in any judicial district in that state within which its contacts would be sufficient to subject it to personal jurisdiction if that judicial district were treated as an independent state.

 

                        (1)  if no such judicial district exists, then the corporation shall be deemed to reside in the judicial district within which it has the most significant contacts.

 

4)  Suits Against Aliens have venue in any location -- ' 1391(d)

 

5)  Officer of a corporation -- ' 1391(e)

 

6)  Venue in removal actions -- ' 1441(a).  When an action filed in state court is removed to federal court, venue is proper in the federal district from which the state action was removed.

 

 

 

 

C.  OTHER FEATURES OF VENUE.

 

1)  State venue rules.  State judicial systems have their own venue rules which have no applicability in federal court.  Venue in state court is fixed by one or more of many factors, including the same factors relevant to federal venue.  The most important factor is D's residence.

 

2)  Local action rule.  This is not a venue rule but has the effect of such a rule.  It provides that actions involving title to land shall be tried by courts of the state in which the land is located.  This rule has been modified by statute in most states and rejected by at least one court.

 

3)  The land rule.  This rule is closely related to the venue rules.  It provides that a decision by a court of one state shall not directly affect title to land located in another state.  Thus, a decision that purports to affect land located in another state, as opposed to simply determining a question relating to title, may be ignored by a court in the latter state as null and void.  Although this is a fundamental rule of law, it is not of major importance in the venue area.

 

 

4.  TRANSFER and Discretionary Refusal of Jurisdiction; '' 1404, 1406, and 1631 and Forum Non Conveniens.

 

a)  Territorial Juris. and Subj-Matter Juris. Proper but inconvenient venue.  When venue is proper but inconvenient, the correct response is a motion to transfer pursuant to ' 1404.  The court will transfer if the conditions of ' 1404(a) are satisfied--namely, transfer must be for the "convenience of parties and witnesses" and "in the interest of justice."  Also, the transferee forum, from the time the lawsuit was filed in the transferor forum, must have personal and subject matter jurisdiction as well as proper venue.  D's desire to waive personal jurisdiction in the transferor forum cannot be used to satisfy the requirement of personal jurisdiction in the transferee forum.  The law of the TRANSFEROR COURT applies in the transferee forum.  Hoffman v. Blaski 

 

b)  Improper venue.  When venue is improper, D may move to dismiss the action (usually not used) pursuant to Rule 12(b)(3) or Section 1406(a), or D may move to transfer pursuant to ' 1406(a).  Section 1406(a) allows transfer only if the transferee forum has personal and subject matter jurisdiction, as well as proper venue, from the time the lawsuit was filed in the transferor forum.  D's desire to waive personal jurisdiction in the transferor forum cannot be used to satisfy the requirement of personal jurisdiction in the transferee forum.  Section 1406 also applies only to federal courts.  Law of transferee court applies.

 

c)  Proper venue but improper jurisdiction.  Where venue is proper but the court lacks personal jurisdiction, ' 1631 allows the lawsuit to be transferred to a court of proper venue and personal jurisdiction.  Unlike ' 1404, section 1631 goes on to state that the lawsuit shall proceed as if it had been filed originally in the transferee court.  This means that the law of the transferee court applies, rather than the law of the transferor court.  This makes sense because, unlike ' 1404 transfer, ' 1631 transfer is based on the fact that the transferor court lacked power to hear the case.

 

 

d)  Forum non conveniens.  Forum non conveniens is a product of the common law and provides for dismissal of the action when venue is inconvenient.  Normally, a court looks at private and public factors in deciding a question of forum non conveniens.  The doctrine is mainly used in state courts where there is no right to transfer a case from one state to another.  The Supreme Court has ruled that the doctrine is applicable in federal courts.  However, since the passage of ' 1404 (sometimes called "federal forum non conveniens"), it is inappropriate to dismiss a federal case having proper venue, even though venue may be inconvenient.  Transfer is the appropriate response, if it can be done pursuant to ' 1404; otherwise, the case remains where it is.  There is one qualifi­cation to this rule:  if the convenient forum is a state forum, or a forum in another country, then dismissal is the correct response because a federal court has no authority to transfer outside the federal judicial system.

 

            Example:  Classic case of foreign P and foreign D and foreign cause of action:  forum non conveniens.  Rule of Burnham - nabbed him in a state, under the Pennoyer scheme.  Easier to transfer than to get dismissed.

 

            IN RE UNION CARBIDE CORP. GAS PLANT DISASTER, (2d Cir. 1987) Ds' motion to dismiss the actions brought in district court on grounds of forum non conveniens so that all the claims could be tried in India.  Dismissal, however, was subject to Union Carbide's consent to jurisdiction in India and continue to waive the defense of statute of limitations

 

            Forum non conveniens (which results in dismissal) is available in federal court only when the alternative forum is a nonfederal forum (e.g., a state or foreign court).  For, if the alternative forum is a federal forum, the lawsuit would be transferred under section 1404.  Usually, P would raise the issue of transfer in response to D's motion to dismiss on forum non conveniens grounds.

 

 

E)  Statute of Limitations.  Instituting lawsuit in wrong forum does not toll the statute of limitations.  With transfer, statute of limitations stops with filing of correct action.

 

F)  Court's Reluctance to Overrule P's Choice of Forum When Proper - Courts are reluctant to transfer, and most of the transfer motions are denied.  (1) Convenience of WITNESSES tends to be a deciding factor.  (2) Workload of transferee court.  (3)  Occasionally, a "jury view" of the transpired scene. 

 

 

III.  FEDERAL SUBJECT MATTER JURISDICTION

 

Federal Question Jurisdiction

 

The WELL-PLEADED COMPLAINT rule states that whether a case "arises under" a federal law (statutory or common law) is determined from P's Complaint.  RULE 8(A)(1).  requires the very first statement be the subject matter jurisdiction.  - purely a matter of wise judicial administration. 

 

            This rule important for REMOVAL JURISDICTION: a D may remove a case from state court to federal court only if P's complaint establishes that the case "arises under" federal law.  Cannot remove a case based on a federal issue defense, because could not have filed original case in federal court.

 

            Application:  LOUISVILLE & NASHVILLE RAILROAD v. MOTTLEY (U.S. 1908).  Free RR pass case.  A suit arises under the Constitution and laws of the United States only when P's complaint "shows that it is based upon those laws or that Constitution."  It is not enough that P alleges some anticipated defense to her lawsuit rests on federal statute.  This complaint raises breach of contract action - state law.

 

            Supreme Court review - notice that the jurisdiction issue was not raised below, that the Supreme Court raised it on its own.  sua sponte  As the Court notes, it is the duty of a federal court to raise the issue of subject matter jurisdiction at any time.  Indeed, unlike objections to personal jurisdiction, either party may raise an objection to subject matter jurisdiction at any time during the proceedings, even on appeal.  Federal Rule 12(h) exempts subject matter jurisdiction from its waiver provisions.  In reviewing a case, dispositive issue must be federal law, whether in complaint or defense for U.S. Supreme Court to review state cases. 

 

            Art. III, ' 2 applies to S.C. and federal district cts.  Why has Supreme Court interpreted ' 1331 more narrowly than Art. III, ' 2 ?  Why would Congress have this intent?  Sympathetic and expert forum on federal issues.  Cut down on unnecessary litigation.  Rule of judicial administration.  May not be a federal case if D never raises federal question in defense.

 

            The general federal question statute, ' 1331, has no jurisdictional amount requirement.  ($50,000 only applies to diversity jurisdiction).

 

 

IV.  DIVERSITY JURISDICTION

 

(1) citizens of different states;

(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different states and citizens of a foreign state are additional parties;

(4) a foreign state ... as plaintiff and citizens of a State or diff. states.

Note:  no provision to sue an American living abroad.

 

1.  What moment of time to determine diversity jurisdiction? - time lawsuit filed.  P can establish domicile in another state for purposes of filing suit, but must intend to remain there.

 

2.  In 1988, amount in controversy must be > $50,000.  ($50,000 does not meet the requirement).

 

3.  How do we ascertain if damage allegation is sufficient to sustain jurisdiction?  St. Paul Mercury (US 1938), p.210, must be apparent to a legal certainty that P can recover amount sufficient to meet the (now $50,000) threshold.  LEGAL CERTAINTY TEST.

 

            RULE 18 (p.47 Supp) - unlimited joinder of claims, as many as you want.  This Rule allows a given Plaintiff to aggregate claims to meet the $50,000 threshold.

 

            RULE 82 (p.159 Supp.) - these rules should not have any impact on ' 1331 and ' 1332.  Rule 18 does not extend jurisdiction.  Why have Rule 18? - judicial economy.  Just let judges add the numbers to determine if $50,000 threshold is met.

 

            RULE 20(a) - permissive joinder of Plaintiffs as long as (1) arising out of same transaction, and (2) some (not all) common question.

 

            If P1 has $100,000 claim and P2 has $40,000 claim, then P2 cannot join in case, because Rule 18 on aggregating claims only applies per Plaintiff.  Rule of aggregation does not apply across Plaintiffs.  Also covers class actions.  Each individually must sue for more than the jurisdictional amount.

 

4.  Diversity for CORPORATIONS.  28 U.S.C. ' 1332(c) defines the citizenship of a corporation as the state of incorporation and the state in which its principal place of business is located.  Many corporations are citizens of Delaware because they are incorporated there to take advantage of Delaware's "permissive" laws.  Question of where a corporation has substantial contacts besides state of incorporation and principal place of business is STILL OPEN.

 

5.  Can a U.S. citizen be stateless?  Yes, Elizabeth Taylor was a U.S. citizen living in Wales but not domiciled in any state.  Therefore, she could not bring diversity action under ' 1332.

 

6.  There must be complete diversity between P and D (i.e., opposing parties may not be citizens of the same state) at the time the complaint is filed.  Subsequent events do not destroy diversity.  STRAWBRIDGE v. CURTIS (1806).

 

7.  MAS v. PERRY (5th Cir. 1974).   While it is generally the case that a wife's domicile is deemed to be that of her husband's, the wife does not have her domicile (i.e., state citizenship) changed solely by reason of her marriage to an alien.

 

            a.  Section 1332(a)(2) gives federal courts diversity jurisdiction over disputes between a citizen of a foreign country (an alien) and a citizen of a state.

 

            b.  Neither P was a citizen of Louisiana at the time of the filing of the complaint since they were in Louisiana only as students and lacked the requisite intention to remain there.  Jean Paul was a citizen of France.  Judy remained a citizen of Mississippi, because her marriage to an alien did not change her domicile.  Because it is undisputed that D was a citizen of Louisiana, complete diversity existed when the complaint was filed.

 

8.  A union is a citizen of every state in which it has a member.

 

 

V.         COUNTERCLAIMS - Rule 13.  Rule 13(a) - compulsory, if arising out of the same transaction.  Does not have to reach the $50,000 threshold in diversity actions.   Rule 13(b) - permissive, if arising from different transaction.  Must meet the $50,000 threshold in diversity actions.

 

 

VI.  SUPPLEMENTAL JURISDICTION:  ' 1367 codifies common-law pendent and ancillary jurisdiction concepts.  Only worry about supplemental jurisdiction - state law claims against nondiverse citizens.  Although there may not be diversity, court has discretion to hear the state law case if "derives from the same nucleus of operative fact" such that a P "would ordinarily be expected to try them in one judicial proceeding."

 

            Pendent jurisdiction allows P to join a state claim with a federal question claim in her complaint.  Both claims are asserted against the same D.  The district court has pendent subject matter jurisdiction over the nonfederal claim.

 

                        Pendent jurisdiction is discretionary, requiring a balance of considerations of fairness to the parties, judicial economy, and convenience.  A district court may hear a state claim after the federal claim has been dismissed on the merits, because, as such dismissal was not on jurisdictional grounds, the court's power to hear the federal claim has not been challenged.  United Mine Workers v. Gibbs.

 

            Ancillary jurisdiction exists where P asserts a federal question or diversity claim in her complaint and another party (e.g., D) or nonparty (e.g., an intervening P) asserts a claim (e.g., a counterclaim) over which the district court lacks original federal question or diversity jurisdiction.  Ancillary jurisdiction gives the district court subject matter jurisdiction over the latter claim.

 

            General Rule codified in ' 1367(a):  OK to assert supplemental jurisdic. as long as constit. under Art. III, ' 2.  To find if constit., look at Gibbs and see that all claims must derive from "a common nucleus of operative fact" such that "ordinarily expected to adjudicate in single judicial hearing."  Codifies United Mine Workers v. Gibbs (US 1966). 

 

                        Pendent party jurisdiction allows P, who asserts a federal claim against D1, to join a state law claim arising from the same facts against D2.  A pendent party is one as to whom there is no claim satisfying a basis of federal subject matter jurisdiction.  If state law claim arose from diff. facts, could not join 4 common nucleus of facts. 

 

                        Pendent party jurisdiction contains aspects of pendent jurisdiction (P asserts both claims--the one that confers jurisdiction and the one that lacks jurisdiction) and ancillary jurisdiction (the party structure is more complex than the simple P v. D lawsuit).  In Finley v. United States (1989), the Supreme Court rejected pendent party jurisdiction.  However, section 1367(a) expressly allows for pendent party jurisdiction, thereby overruling Finley.  Go into court on federal claim.

 

            Section 1367(b):  maintains complete diversity from Strawbridge.  ONLY APPLIES WHEN DIVERSITY IS BASIS FOR SUBJ. MATTER JURISDIC.  Example: P1(X), P2(Y) v. D(Y).  Do not have supplemental juris. in this case.

 

            Example:  P(X) v. D(Y) v. 3P D(X) = OK.  But, P(X) v. [ D(Y) v. 3P D(X)] 5 OK, prohibited by lack of complete diversity.  The court cannot hear the P(X) v. 3P D(X) part; it must be pursued in state court.  OWEN EQUIP. v. KROGER (1978). 

            Section 1367(c):  gives court discretion on timing of dismissal for state law case. 

 

 

VII.  REMOVAL FROM STATE COURTS - DEFENDANT has the option of seeking removal pursuant to 28 U.S.C. ' 1441.  Must be on D's motion.  P cannot remove, even if counterclaim filed.  ALL Ds must FILE for REMOVAL.  The general requirements for removal are:

 

            1)  Removal is to the district in which the state action was filed.  The lawsuit must be removed to the district court of the district in which the state court is located. ['1441(a)].  For example, P sues D in a state court located in the same part of the state as the district court of the western district of the state.  The action can only be removed to that district court, not to the district court of the eastern district or any other district of the state.  (Can then transfer under ' 1404 for better venue.)

 

            2)  The district court must have original jurisdiction.  The lawsuit must be within the district court's diversity or federal question jurisdiction ['1441(a)].  Thus, if P could have filed the lawsuit in federal court, the lawsuit is removable.  This is another way of saying that the lawsuit must be within the federal court's concurrent jurisdiction.

 

Special requirements.

 

            1)  Removal in DIVERSITY cases.  If the state action is within the federal court's diversity jurisdiction, all Ds must be noncitizens of the state. [28 U.S.C. ' 1441(b)]  The reason has to do with the major purpose of diversity jurisdiction: to provide a neutral forum for out-of-state parties.  If a D is a citizen of the state in which the federal court sits, the purpose for providing a federal forum is no longer relevant.  ONLY APPLIES TO DIVERSITY CASES.

 

            2)  Removal in federal question cases.  If the lawsuit filed in state court arises under a federal statute or other federal law, removal is allowed only if such federal question appears in P's complaint.  The federal question may not arise from a defense D makes. [28 U.S.C. ' 1441(b)]  This rule follows from the "well-pleaded complaint" rule.

 

            3)  Removal jurisdiction not derivative of state court jurisdiction.  Since 1986, the federal court is permitted to retain an action removed from state court even though the state court lacked jurisdiction over the claim, e.g., trademark case.  [28 U.S.C. ' 1441(e)]

 

            4)  Removal when lawsuit involves multiple claims.  When a "separate and independent claim" that falls within federal question jurisdiction is joined with nonremovable claims, the entire case may be removed to federal court, and the judge may, in her discretion, remand all matters in which state law predominates.  [28 U.S.C. ' 1441(c)].

 

            5)  Foreign State - Caveat.  Section 1441(d) permits a foreign state (or agency thereof), if sued in state court, to remove the action to federal court.

 

 

EXAMPLES:  1.  P sues D for defamation in state court; D believes the statement she published is protected by the First Amendment:  Not removable.

 

2.  P sued D for copyright infringement in state court.  Removable under ' 1441(e).

 

3.  P, a citizen of FL, sues D, a citizen of NJ, on a personal injury claim in a Florida court.  Removable, if over $50,000.

 

4.  P, a citizen of FL, sues D, a citizen of NJ, on a personal injury claim in a Florida court.  Not removable, D resides in NJ.  Violates ' 1441(b).  Ironically, could have been originally filed in federal court in NJ.

 

5.  P, a citizen of FL, sues D, a citizen of NJ, on a personal injury claim in a Florida court.  P adds a civil rights claim.  Removable under ' 1441(c).  Now federal issue claim gives court juris. under ' 1331, then pendent/supplemental jurisdic.

 

6.  P, a citizen of FL, sues D, a citizen of NJ, and E, a citizen of NY, on a personal injury claim in NY state court.  Not removable, ' 1441(b).

 

7.  P, a citizen of CAL, sues D, a citizen of Cal, for violation of the federal antitrust laws.  P brings suit in Cal. state courts.  (Federal courts have exclusive jurisdic. over federal antitrust claims.)  Removable, ' 1441(e).

 

8.  Allegations in P's complaint must "arise under" federal law in federal question removal--WILLY v. COASTAL CORP.  (5th Cir. 1988).

 

 

VIII.  FORMER ADJUDICATION

 

Two procedural doctrines are designed to promote a policy of judicial finality or repose:  res judicata/claim preclusion and collateral estoppel/issue preclusion.  The policy of FINALITY of judgment promotes:  1) judicial efficiency or economy,  2) consistency,  3) avoidance of harassing or vexatious litigation. 

 

Precedent can always be distinguished or overruled, but not claim or issue preclusion.

Stipulations - only binding for case where raised.

 

Fundamental Difference:  CLAIM preclusion prevents actually litigated or what should have been litigated.  ISSUE PRECLUSION - only applies to issues actually litigated.

 

1.  RES JUDICATA/CLAIM PRECLUSION.  A party, whether P or D, may not sue the other party in a second lawsuit involving the SAME CLAIM if the first lawsuit was decided on the merits.   MERGER - prevents winner from refiling and BAR - prevents loser from refiling.

 

            A party who runs afoul of the merger prohibition is usually trying to "split a claim."  Three ways:  (1) legal theory of recovery, (2) arithmetic or "injuries splitting, e.g., injury to personal property then for personal injury,  (3) remedies - first injunctive relief then damages.

 

            REQUIREMENTS for Merger and Bar:  (1) previous judgment is final, (2) on the merits,  (3) same cause of action. 

 

            If subsequently learn injuries more serious - too bad.  MERGER precludes relitigation, as long as not arising from new facts.  MERGER does not apply to specific performance judgments.

 

A valid, final judgment on the merits constitutes an absolute bar to a subsequent action between the same parties, or those in privity with them, upon the same claim or demand.  Governs both issues/claims actually litigated and determined as well as issues/claims that SHOULD HAVE BEEN RAISED.  On the merits - this requirement must be considered in connection with RULE 41(b).

 

            a)  "Same claim - negligence - with two or more forms of damage" or "same transaction."  If the subsequent action involves a different claim that raises issues decided in the prior action, collateral estoppel/issue preclusion comes into play.  # wrongful acts 6 # transactions.  R2Judgments ' 24: time, space, origin, motivation for determining # of transactions.  A lawsuit based on a single transaction may give rise to several legal theories for causes of action.

 

            b) EACH PERSON = SEPARATE CLAIM, RIGHT TO HIS DAY IN COURT, even if arising from the same transaction, (e.g., bus accident).

 

 

2.  Collateral Estoppel/ISSUE PRECLUSION.  Issue preclusion prevents a loser, either P or D, against whom the issue is decided from relitigating that issue in a subsequent lawsuit.  Issue preclusion arises when the second lawsuit involves a different claim.

REQUIREMENTS:  Issues  1) actually litigated;  2) actually decided;  3) essential or support the judgment.

 

APPLIED IN TWO DIFFERENT FACT SITUATIONS:  (1) P and D in the first lawsuit are the very same P and D litigating the second lawsuit, and (2) Either P or D in the second lawsuit is a new party and not in privity with a prior suit party.

 

a.         Same parties.  Issues decided in the first lawsuit may not be decided again, or relitigated, in a second lawsuit.  Exactly when it can be said that an issue has been "decided" is not always clear.  Mutuality of estoppel applies to cases with same parties.

 

b.         A new party.  Doctrine of nonmutuality of estoppel prohibits a person not a party to or in privity with a party to the first lawsuit from relitigating a legal or factual issue resolved in the first lawsuit.

 

            Offensive use of ISSUE PRECLUSION - P seeks to estop D from relitigating issues that D previously litigated and lost against another P.  The person invoking collateral estoppel, the new P, was not a party to the first lawsuit.

 

            Defensive use of ISSUE PRECLUSION - P is estopped from raising an issue that P had previously litigated and lost against another D.  The person invoking collateral estoppel, the new D, was not a party to the first lawsuit.

 

 

3.  How to Differentiate Between CLAIM and ISSUE Preclusion --  RUSH v. CITY OF MAPLE HEIGHTS, 167 Ohio 221, cert denied 358 U.S. 814 (1958).   P's motorcycle accident did not give rise to two different claims (damages to property and damage to the person).  D's wrongful act is single, the cause of action must be single.  In this case, D's wrongful act was single - failure to repair the road; consequently, P's claim must be single - damages for failure to repair the road.  Therefore, Merger part of claim preclusion/res judicata required P's second lawsuit be dismissed.

 

 

HYPOTHETICAL 1

A-1                   P v. D              negligence, P winner, default judgment

A-2                   P v. D              enforce J. on prior case in another state

 

Claim preclusion:  D not allowed to raise defenses in 2nd case that were omitted in the first lawsuit.

 

 

HYPOTHETICAL 2

A-1                   P v. D & D v. P                        claim and counterclaim, D gets $10

 

Claim preclusion (MERGER) prohibits D from filing a new lawsuit for $100,000.  Asks 2 questions: 1) am I obligated to assert a counterclaim?   2) can I transfer to court with higher $ value jurisdiction?   Exception:  if court in which you are forced cannot give you the full relief to which you are entitled.  If D loses, BAR prevents him from refiling.

 

 

HYPOTHETICAL 3

A-1                   P v D                           No compulsory counterclaim rule.

A-2                   D v P                           Allowed.  Nothing prevents successive action with   separate claims.  Each party has his own claim.  Nothing prohibits simultaneous litigation of the same matter.

Issue Preclusion:  either BAR or SLAM DUNK } can lead to race to judgment.  Compulsory counterclaim:  judicial economy.  OTHER ACTION PENDING - discretionary doctrine that says "first in time, first in right."

 

 

HYPOTHETICAL 4

A-1                   P v. D              State A.  Court lack territorial jurisdiction.

A-2                   P v. D              State B.

 

BAR does NOT preclude claim; never argued on the merits.

 

 

HYPOTHETICAL 5

A-1                   P v. D              P refuses to submit to physical; court dismisses.

A-2                   P v. D              Rule 41 prevents P from refiling involuntary dismissals - operate as adjudication on the merits.

P should have appealed judgment.   Rule 12(b)(6) - failure to state a claim, usually dismissed with leave to amend Complaint.

 

 

"Same Parties or Their Privies."  Privity refers to one whose legal interest was adequately represented in the prior action - includes mutual or successive rights in property.   SEARLE BROS. v. SEARLE (Utah 1978).  Claim preclusion normally restricts parties from filing another suit.  Here sons could not control attorney, evidence brought forth, or appeal.  Conflict of interest:  Dad gets credit for owning all of house awarded to wife, and therefore gets to keep the Mercedes.  (Sons actually own 1/2 interest).

 

            With new fact of her only 1/2 interest, wife can file suit against husband and advise the court that she only received a 1/2 interest.

 

            New parties, except for privity, generally do not need to be concerned with prior litigation.  Exception: class actions.

 

 

Judgment "On the Merits"  -- SAYLOR v. LINDSLEY (2d Cir. 1968).  A shareholder brings derivative action suit but lacks the funds to post a security-for-costs bond.    Court dismissed complaint "with prejudice" pursuant to Rule 41(b).  (Court should have said 1st shareholder was an inadequate representative of his class.)  P1 should be excluded from class because his claim is extinguished.  A second shareholder brought an identical suit.  As a general rule suit allowed, because prior dismissal was not "on the merits."  However, Rule 41(b) is an exception where dismissal WITH PREJUDICE acts as if it were adjudication on the merits.  Shareholders still have a right to their day in court, because this dismissal occurred before court even considered substantive matters.

 

            Rule 41(b) provides that, unless the court's order for dismissal otherwise specifies, an involuntary dismissal for failure to prosecute, or for failure to comply with the rules or any order of the court, shall operate as an "adjudication upon the merits," even though the substantive issues of the case are never reached.  Exceptions apply to "favored dismissal" (jurisdiction, venue, party joinder under Rule 19).  The policy behind Rule 41(b) is to bar subsequent actions only in situations in which the D must incur the inconvenience of preparing to meet the merits because there is no initial bar to the court's reaching them.

 

            Ds make no claim that they were put to the inconvenience of preparing a defense to the first litigation.  Moreover, because the bond was not filed, the first court never considered its own power to assert territorial jurisdiction and determine the merits of his substantive claim, it would be wrong to say that the dismissal in the first action was res judicata as to the present action.

 

 

CLAIM PRECLUSION EXCEPTIONS

(1)  If P files two separate suits against D alleging one claim in each, D has affirmative defense to object.  If he does not object, then he acquiesces by failing to raise a claim.  (P can file separate claim without preclusion)

 

(2)  If case is dismissed without prejudice, then the P's right is preserved to maintain the action.  D, if not happy, must appeal decision and try to get it dismissed with prejudice.  If no appeal, he forfeits claim preclusion.

 

(3)  If the court where P filed cannot adjudicate all claims, cannot hear all theories of recovery, and cannot grant full relief; then no claim preclusion.

 

(4)  Pendent Jurisdiction - court has power to hear state claim as long as it bears a close nexus to federal issue claim.  But this jurisdiction is discretionary.  If court refuses to hear, by dismissing the claim, P can file subsequent suit alleging lack of subject matter jurisdiction.

 

 

5.  *** ISSUE PRECLUSION/COLLATERAL ESTOPPEL *** requires issue or fact  1) actually litigated;   2) actually determined; and   3) essential to the judgment of the prior action.

 

HYPOTHETICALS

A-1                   P v. D              P asserts negligence action, D assert contrib.

A-2                   D v. P              negligence.  Contrib. negligence, if found, is a

                                                complete bar to recovery.  No compulsory counterclaim rule.

 

Case 1:   D defaults.  No claim preclusion:  2 different parties.  No issue preclusion: no issues litigated.

 

Case 2:  Jury GENERAL VERDICT on contributory negligence - D is winner.

A-2                   D v. P  cannot ascertain from general verdict what issue is determinative, then none of the issues would be precluded.

 

Case 3:  P - wins, D - loses.  Therefore, we know that P was not negligent and D was.  Therefore, since we know why case was decided, each of the issues is precluded - actually litigated.  Therefore, A would win if B filed against A.

 

Case 4:  Jury special verdict - P contrib. negligent, D - negligent.  Judge enters verdict for D.  Two issues seem to be precluded in D v. P lawsuit.  But the D = negligent is nonessential finding.  Only essential issue: P's contrib. negligence.

 

Case 5:  Special verdict - P contrib. negligent, D - not negligent.  In the D v. P lawsuit, BOTH ISSUES support the result, both issues are essential to judgment because we don't know the order of the findings.  BOTH or NONE are precluded, depending on whether the TRADITIONAL, R1J (all,both) or R2Judg (none) is followed.  Halpern v. Schwartz follows the R2J position.

 

 

 

 

 

 

 

 

NEW HYPOTHETICAL:  P suing on interest on promissory note.  (1) P committed fraud (note is bad) and  (2) P signed release of obligation to pay interest.

 

A-1                   P v. D  D wins = P not entitled to interest.

A-2                   P v. D  for second installment of interest; separate claim.

 

Issue preclusion:  only 1 issue.  1st case decided P gets no interest.

 

Suppose instead,

A-2                   P v. D  principal.  Now we have two issues: (1) and (2).  Outcome depends on whether we are in a both or none jurisdic.

R2J with no appeal = If multiple issues determinative, none of issues precluded.  P can try to prove no fraud.    R1J = both issues precluded.  MOST JURISDIC. follow R1J - both precluded.

 

 

NEW HYPOTHETICAL:    MUTUALITY OF ESTOPPEL  ** MUTUALITY OF ESTOPPEL

A-1                   Passenger #1 v. Bus Co.                   Passenger - loser, Bus Co. - winner 

A-2                   Passenger #2 v. Bus Co.                   Passenger #2 never had day in court.  Can't use ISSUE PRECLUSION against Passenger #2 to stop his lawsuit.

 

 

NEW HYPOTHETICAL:  VICARIOUS LIABILITY

A-1                   Passenger #1 v. Bus driver    Passenger - loser, Bus driver - winner          

A-2                   Passenger #1 v. Bus Co.      

No claim preclusion due to different defendant.  Issue preclusion - Passenger #1 had his day in court?  Under old common law - no issue preclusion because of different parties.  EMERGING, MOST COURTS - bus company would use issue preclusion defensively to preclude their liability.  Nonmutual collateral estoppel.  Bus driver might raise different claim.

 

 

NEW HYPOTHETICAL:   INCONSISTENT JUDGMENTS

A-1                   Passenger #1 v. Bus Co.                   Passenger - wins, Bus Co. - loses

A-2                   Passenger #2 et seq.             Offensive use of nonmutual issue preclusion.

 

If Passenger #1 loses, #2 loses, #3 loses, and #4 wins, can't figure out if #4 comes 1st or 15th or last.  Courts reluctant to permit nonmutual issue preclusion - may have been a freak win or freak # in queue.

 

            State Farm Insurance case  Nonmutual issue preclusion must not be applied if it results in unfairness to D.  In this case, D is prejudiced by the application of this doctrine in a way that would deny it the benefit of a prior victory while penalizing it with the burden of prior losses.

 

            Tennessee requires mutuality for offensive issue preclusion, but permits nonmutality for defensive use.

 

 

 

 

 

IX.  VARIOUS CASES ON ISSUE PRECLUSION

 

1.  GENERAL VERDICT "Actually Litigated" and "Determined" -- ILLINOIS CENTRAL GULF RAILROAD v. PARKS (Ind. App. 1979).   The first suit sought recovery for Bertha's injuries, the present suit seeks recovery for P's personal injuries.  Impossible to know whether jury's general verdict in D's favor was based on a finding that P sustained no damages or that P was contributorily negligent =  the issue was NOT actually litigated and determined by the jury.  D in Parks is not precluded from raising the issue of contributory negligence as a defense in the second action.

 

 

2.  NONE of Issues Precluded, view of R2Judg.   HALPERN v. SCHWARTZ (2nd Cir. 1970).  None of issues precluded, unless there is an appeal.  If app. ct. reviews 1 issue, then it is precluded.  If both issues are reviewed and affirmed, both precluded.  Purpose:  (1) not certain if reviewed fully, given careful deliberation;  (2) losing party might not have incentive to appeal, because going to lose on one of the issues anyway.  Issue must be essential to judgment; not clear in this case which issue is basis for judgment.  (Limited to bankruptcy proceedings - weak).  Thus, the majority rule appears to bar relitigation of BOTH issues.

 

3.  BOTH ISSUES PRECLUDED.  WINTERS v. LAVINE (2d cir. 1978).  Where the judgment in the first action was based on issues litigated in the alternative, the judgment is determinative on both issues, "although either alone would have been sufficient to support the judgment."  Follows R Judgments ' 68.  TRADITIONAL VIEW.  MAJORITY VIEW.  PRECLUDE ALL ISSUES.

 

 

X.  MUTUALITY OF ESTOPPEL (OR PRECLUSION)

 

Common law limited both res judicata and collateral estoppel to same parties or those in privity:  MUTUALITY.  Reasonable for claim preclusion - different party has different claim.  Justification mutuality w/r/t issue preclusion - a nonparty would not have been bound by the issue had it been decided the other way.  Therefore, unfair to give him issue preclusion in prior case decided in his favor.

 

 

XI.  NONMUTUAL ISSUE PRECLUSION.  Parklane Hosiery is the major case in relaxing the mutuality requirement. 

 

            a)  Defensive use of nonmutual collateral estoppel.  Here, the Defendant in the (who was not a party in a prior action against the P) tries to prevent P from relitigating an issue P lost in prior action.  EXAMPLE:  A sues B for embezzling money from A.  Judgment for B.  A then sues B's bank.  The bank can use nonmutual issue preclusion defensively to bar A's suit.  RATIONALE: promotes judicial economy by preventing a P from relitigating identical issues by merely "switching adversaries."

 

            b)  Offensive use of nonmutual collateral estoppel.  P in the second action (who was not a party in case 1 against the D) tries to prevent the D from raising an issue that the D previously lost in case 1.  Example: SEC wins judgment against a corporation's officers and directors (Ds) for violation of federal law.  A stockholder of the corporation (P) then files a stockholders' derivative suit against Ds for injuries to the corporation based on violation of the same federal law.  P may be able to use issue preclusion offensively to preclude relitigation of Ds' violation of the applicable federal law.  RATIONALE:  avoids inconsistent judicial rulings.  PROBLEM:  it can increase, rather than decrease, litigation because it gives the nonparty plaintiff incentive to take a "wait and see" attitude in the hope that the first judgment will go against the D.  There is little incentive for the nonparty to join in the first action.  Thus, the courts exercise broad discretion to allow or disallow offensive use of nonmutual collateral estoppel.  The criteria are discussed in Parklane Hoisery.

 

PARKLANE HOSIERY CO. v. SHORE, (U.S. 1979).  General Rule:  No offensive issue preclusion where  (i) P could easily have joined in the earlier action or (ii) D had little incentive to defend the earlier action vigorously (due to the small or nominal damages involved in that action) or (iii) the second action affords the D procedural opportunities unavailable in the first action that could readily cause a different result.  None of these 3 criteria apply in the instant case.

 

 

In UNITED STATES v. MENDOZA (US 1984), the Supreme Court unanimously held that nonmutual (offensive) issue preclusion cannot be used against the U.S.  Government different from private litigant:  (1) geographical scope, (2) limited resources chooses not to appeal,  (3) could determine public policies based on unappealed cases.   (4) different political agendas.

 

UNITED STATES v. STAUFFER CHEMICAL CO. (U.S. 1984).  The government can be bound by mutual defensive issue preclusion.

 

 

NO CHALLENGE OF VALIDITY IF ENTER AN APPEARANCE. -- DURFEE v. DUKE. (US 1963).  The only way to attach the validity of a prior judgment is to (i) appear and appeal at the end of the prior trial (provided that the jurisdictional objection was timely made pursuant to Rules 12(b) and (h)), or  (ii) not appear, default, and raise the jurisdictional objection in a collateral proceeding (as when P seeks to enforce default judgment rendered in his favor in D's home state). 

 

            In Durfee, if D stayed away from the Nebraska proceeding and P stayed away from the Missouri state and federal proceedings, both the Nebraska state court and the Missouri federal court would have been free to render independent judgments.  Creates the possibility that inconsistent judgments could exist simultaneously.

 

QUICK TEST FOR WHEN ISSUE PRECLUSION APPLIED:

1.  Was issue decided in the 1st case identical to that in the 2nd case?

 

2.  Was there a final judgment on the merits?

 

3.  Did the party have a fair opportunity to be heard on the critical issue?

 

4.  Is the posture of the case such that it would not be unfair or inequitable to a party to apply issue preclusion?

 

If answer to all for is "yes," then issue preclusion most likely will be applied.  A court may find, however, that a party has not had a fair opportunity to be heard if the first case was insignificant (e.g., brought for $200), while the second is substantial (e.g., brought for $200,000).


XII.  THE ERIE DOCTRINE

 

1.  Background

 

A federal district court hearing diversity actions must apply the substantive law of the state where it is sitting, including that state's conflict of rules law (choice of law rules); however, it applies federal procedural law.

 

Prior to Erie, Plaintiffs had opportunity to "shop around" for best set of caselaw precedents (federal or state) to select the forum within a given state.  (For example, Tomkins wanted the federal "ordinary negligence" standard rather than the state "wanton and willful" standard.)

 

Give state residents equal protection problems - avoid vexing state procedures.  Generally, federal courts used federal common law and state procedural law.  A federal court had to respect the state constitution and state statutes, but not state caselaw - even from the state's highest court.  Law was thought to be "immutable."  Therefore, federal courts could do as good a job as state courts at finding "the law."

 

Also in 1938, the Federal Rules of Civil Procedure were adopted.

 

 

2.  ERIE RAILROAD v. TOMPKINS, 304 U.S. 64 (1938).  A federal district court presiding over a diversity suit must apply state common law in resolving the dispute.  Swift v. Tyson 1789 Judiciary Act (now codified at 28 U.S.C. ' 1652) construction applying only to state statutory law but not caselaw is overruled SUA SPONTE.  Federal law applies only when a specific federal statute governs the matter or where a federal question is before the court.

 

            The Court never explicitly says what constitutional provision Swift violated, but one may assume the it is the Tenth Amendment, which reserves all powers not granted to the federal gov't to the states.

 

            Since Erie filed in Southern District of New York, NY choice of law rule applies.  Erie eliminates intrastate forum shopping, but not interstate forum shopping.

 

            Erie requires a federal court in diversity action to consider the same substantive state law as would currently be applied by the highest state court.  This means the federal court should consider not only (outdated) lower court decisions from the state, but also decisions outside the state, to determine what positions the highest state court would adopt.

 

3.  Federal Common Law

 

Two considerations:  1) no power conferred on the federal government to make federal common law;  2) Congress, not the courts, must create this power.  Congress has pwer to state what duty a RR owes to passersby.  Federal courts cannot create law wholesale.

 

Erie's assertion that "there is no federal general common law" is not accurate; federal

courts do make caselaw.  Example fed. common law impermissible:  federal courts provide their own interpretation of state law (e.g., negligence standard) rather than merely ascertain state law.  Examples of permissible:  (i) lawmaking in admiralty and maritime cases;  (ii) important U.S. interest at stake [see, e.g., Clearfield Trust Co. v. U.S., (US 1943) - forgery of negotiable instruments issued by the U.S.]; and (iii) within the cracks of federal statutes (called "federal interstitial common law").

 

4.  The substantive/procedural distinction

 

Erie requires federal courts in diversity actions use state substantive law but federal procedural law.  Before federal court can decide whether to apply state or federal law, it has to determine whether it is dealing with a "substantive" or "procedural" matter.

 

Outcome/determinative test -- GUARANTY TRUST CO. v. YORK, (US 1945).  A federal court hearing a diversity suit must follow the state's statute of limitations.  The state statute of limitations substantially affects the outcome of the lawsuit.  Therefore, it was a "substantive" rule of law and district court had to follow it under Erie.  (Court was to cut back this test, because it would have allowed state rules of procedure rather than Federal Rules, Hanna v. Plumer; most procedures affect the outcome of a case.)

 

            The federal procedural law will not be applied in diversity cases when its effect would be to toll a state statute of limitations - Federal Rule 3 provides that an action is commenced when the complaint is filed with the clerk of the court; state law controls on the question of when and whether the statute of limitations is satisfied.  Walker v. Armco Steel, (US 1980).  Ragan v. Merchants Transfer, (US 1949).  The ruling that Rule 3 was not intended to serve as a tolling provision for the statute of limitations has been criticized as providing a narrow construction of Rule 3 simply to avoid the collision with state law.

 

            Wood (1949) Upheld that a Mississippi law preventing corporations who were not doing business in Mississippi from using MS state courts would apply to federal courts sitting in Mississippi.

 

            Cohen (1949), upheld state statute requiring the posting of a cost bond in a shareholder derivative action suit.  Compelling state interest to limit the number of thought to be easy to file suits against corporations that are costly to defend.

 

 

Strong federal policy test -- BYRD v. BLUE RIDGE RURAL ELECTRIC COOPERATIVE, INC. (U.S. 1958).  Even if a matter is outcome determinative, federal law must be applied if a strong federal policy is involved in the matter.  An employer would be immune from tort suit if worker covered by Workers' Compensation Act:  exclusive remedy.  There is a very strong policy against allowing state rules (judge determine status as employee or independent contractor) to disrupt the judge-jury relationship in federal courts (employee status is jury question).  Also federal right to jury trial.

 

            i) state rule was not bound up with any substantial state interest.

            ii) apply state procedural law is outcome-determinative.

            iii) federal courts are an independent system for administering justice.  Because we are the forum, we have a countervailing interest and concern to see that justice is given.

This case illustrates an example of federal judge-made procedural law.

 

The FRCP -- HANNA v. PLUMER (U.S. 1965).  A federal district court sitting in diversity must follow the Federal Rules in lieu of conflicting state law, even if it affects the outcome of the case.  Issue here - service on wife vs. state requirement for personal service on executor:  not an equal protection problem.  D wants to quash process, but the statute of limitations would bar the second attempt at service.

           

            Distinguish between cases that fall under (1) the Rules of Decision Act (28 U.S.C. ' 1652), and (2) the Rules Enabling Act (28 U.S.C. ' 2072, Supp. p.340).  Under the latter, Congress gave the U.S. Supreme Court power to decide federal procedural law (subject to limitation in part (b) - not abridge a substantive right).  Judicial conference formulates FRCP -> S.C. decides whether to adopt -> Congress for period of time to object, or become effective.  Very difficult to argue none of these were rational in deciding matter was procedural.

 

 

            Rule 4(d)(1) is clearly within the scope of the Rules Enabling Act.  Prescribing a manner in which the D is to be notified that a suit has been instituted against him, it relates to the practice and procedure of the district courts.

 

            York's test must be read with reference to the twin aims of the Erie rule:  discourage forum-shopping and avoid inequitable administra­tion of laws.  ! Rule 4(d)(1) does not promote forum shopping, because it is difficult to believe that P chose the federal forum solely on the basis that Rule 4(d)(1) allows a substitute form of service of process.

            ! Rule 4(d)(1) does not discriminate against residents of the forum state.  It is difficult to argue that permitting service of D's wife to take the place of in-hand service of D alters the mode of enforcing the state-created

 

            One of the shaping purposes of the Federal Rules is to bring about uniformity in the federal courts by getting away from local rules.

 

 

Transfer under ' 1404(a) -- STEWART ORGANIZ v. RICOH CORP (U.S. 1988).  A federal court sitting in diversity should apply federal law in deciding a motion to transfer a case to a venue provided in a contracting forum selection clause.  If a valid federal statute is on point, the district court must apply it.  Section 1404(a) is sufficiently broad to adjudicate motions to transfer on a case-by-case basis.  Federal procedural law applies to matters that fall within the uncertain areas between substance and procedure, but are rationally capable of classification as either.

 

            The majority frames the issue as a motion to transfer issue; the dissent (Scalia) as a forum selection clause validity issue.  Viewed from the majority's perspective, the forum selection clause is simply one of several factors the district court must consider in deciding the motion to transfer.  (Majority presumes clause is valid)

 

 

2.  The Determination of State Law

 

Ascertaining state law can be difficult for a number of reasons:  frequently state law, like federal law, is dynamic rather than static; also, state law can be unclear or nonexistent.

 

            (1)  Where a state statute or highest court ruling is directly on point.  Federal courts should follow the law declared by a state statute as interpreted by the highest state court and the decisional law of the highest state court.

 

Should a federal rule be formulated that differs from the state rule?  a) What federal policy is at stake?   b) What state policies are at stake?  If both, will fashioned rule encourage forum shopping or inequitable administration of justice?  How significant are the differences?  Look at the moment when the suit is commenced.

 

            (2)  Where no state statute or highest court ruling is directly on point. 

            a)  Relevant state precedents of lower courts.

 

            b)  Analogous rulings of the highest state court.

 

            c)  "Considered dicta by the state's highest court."

 

            d)  Scholarly works - e.g., treatises, the Restatements, and germane law reviews (particularly of schools located within the state.)

 

            e)  Any other "reliable data tending to convincingly to show how the highest court in the state would decide the issue at hand.

 

 

 

 

 

 


                                                       Questions for Prof. Sobieski

 

Monday, 12th, Room 104, at 1:00.

 

Territorial Jurisdiction after Woodson:  1) fairness to D/convenience - burden of inconvenient forum;    2) federalism, state interest - state must have reason to open up its courts.   HOWEVER, even if a forum is the most convenient for litigation and D is not inconvenienced at all, due process clause may still limit territorial jurisdiction.  ??Ask Sobieski for example:  border town?

 

proof available here, not in Taiwan;    4) could get two different decisions and not be able to establish claim in two separate cases.  Taiwan corp. will likely say to suppliers "show up in Cal. ct. or agree to accept judgment" - indemnification would require them to appear.  (??? Sobieski)

 

Default judgment - claim preclusion but not issue preclusion. ????

 

 

??  Federal district court subject matter jurisdiction exceptions:  domestic relations & probate proceedings (but will consider actions against fiduciaries concerning probate).

 

 

MERGER and BAR only apply to Plaintiff, i.e., when he wins and loses respectively.  The D has his own claim, absent a compulsory counterclaim rule, and can file against P in a second lawsuit regardless of the outcome of the first lawsuit.  ????

 



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Dr. MICHAEL A. S. GUTH
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Ph.D. (Economics), J.D. Univ. of Tenn.
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