CIVIL PROCEDURE II Holley-Walker Spring 2012

I. Constitutional Limits in Jurisdiction

A. Three parts of the Constitution bear on jurisdiction: 1. Article IIIauthorizes the establishment of the system of federal courts and in Section 2 sets the limits of federal judicial authority. 2. Article IV, Section 1requires that full faith and credit be given in each state to judicial proceedings of every other state. 3. 14th Amendment 1no state shall deprive any person of life, livery or property without due process of law. B. Choice of Law 1. Article VI (Supremacy Clause)state courts are required to enforce any federal law, regardless of whether there is a contrary state statute or state common law rule. 2. In the absence of a controlling federal statute, the federal court system is required to respect both the statutory and common law rules of the several states.

II. Where Can the Suit Be Brought?

A. Personal Jurisdiction 1. 14th AmendmentA court in the US cannot exercise power over a defendant if doing so would deprive any person of life, liberty, or property, without due process of law. i. A court cannot exercise power over unless the state in which that court sits has some connection with him or with the accident that gave rise to Peters claim. B. Subject Matter Jurisdiction 1. Courts of General Jurisdictioncan hear any kind of claim between any persons unless there is legal authority saying that it cannot hear a particular kind of case. i. All states have at least one court of general jurisdiction that would be competent to hear all claim (usually called Circuit Court) 2. Courts of Limited Jurisdictioncan only hear cases that are specifically authorized by the statutes that set up the particular court i. ALL Federal Courtsouter bounds set by Article III, Section 2 of US Constitution + Cases and Controversies between the States + Claims arising under the Constitution, laws, or treaties of the US + Diverse citizenship of parties to the suit ii. Probate Courts (wills, trusts, etc.) C. Hawkins v. Masters Farms, Inc. 1

1. FACTStraffic accident in which a tractor driven by Masters collided with Mr. Creals automobile, resulting in the death of Mr. Creal. is a citizen of Kansas, and the accident occurred in Kansas. had ties to Missouri and Kansas. 2. PROCEDURE filed this action in federal court alleging diversity jurisdiction under 28 USC 1332. s dispute that there is complete diversity among the parties. 3. ISSUEWhat state was a resident of at time of death? Should s motion to dismiss for lack of subject matter jurisdiction (diversity) be granted? (Rule 12b1) 4. RULE(1) Domicile is established by physical presence + intent to remain. (2) Burden of proof is on to show that complete diversity exists. 5. HOLDINGAt the time of s death, he was domiciled in the state of Kansas. failed to carry their burden of showing that complete diversity exists among the parties. 6. JUDGMENTCourt grants s motion to dismiss for lack of diversity/subject matter jurisdiction. D. Advantages of Filing in Federal Court 1. Speedfederal courts can have shorter waiting times 2. Picking/avoiding a trier of factjuries drawn from local county in state courts, which could result in bias. Federal courts draw juries from county of federal court. 3. Federal Judges are appointed for life and dont have to worry about reelection. E. Venue 1. Venue means place of trial, and venue rules are an attempt to allocate business among those courts that have subject matter and personal jurisdiction. 2. A suit lies open to a s challenge unless the court has subject matter jurisdiction, personal jurisdiction, AND venue. 3. Proper: i. In a district where any defendant resides, if all defendants live in the same state ii. In a district where a substantial part of the events or omissions giving rise to the claim occurred iii. In a district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no other district in which it can be brought F. Service of Process 1. Complaintnotifies that action has begun i. Rule 3copy of complaint must be filed with the court. 2. Rule 42 basic means of notice: i. Waiver of Serviceinformal and inexpensive; involves mailing the the complain and Forms 1A and 1B; if the mails back a signed copy of Form 1B, the suit can proceed. ii. Summonsif refuses to cooperate, draft summons and take it to clerk of court, who will sign and seal it (Rule 4a&b). The summons and complaint must then be served (Rule 4c).

III. Personal Jurisdiction

A. Case introducing personal jurisdiction to the ConstitutionPennoyer v. Neff i. Facts: Neff hired Attorney Mitchell to do some legal work, and failed to pay him. Mitchell sued Neff, a non-resident of the state, who was not personally served with process and did not appear (sued in state ct. in Oregon). Default judgment was entered against Neff. After the default was entered, Neff acquired 300 acres of land from the federal govt. Mitchell had the sheriff seize and sell the land to satisfy the judgment, and Pennoyer bought it, receiving a sheriffs deed as evidence of title. Mitchell received the proceeds. Neff reappeared, got mad, and sued Pennoyer in federal court to recover possession (quiet title/ejectment). a. First lawsuitMitchell (lawyer) v. Neff (client) breach of contract suit for legal fees in Oregon State Court, Neff not a citizen of Oregon, failed to address suit, default judgment against Neff. 1. Neff buys a piece of property in the state of Oregon worth ~$15,000. Now that Neff has land in Oregon, Mitchell can satisfy his judgment against Neff by claiming $ from the sale of Neffs land by the sheriff. b. Second lawsuitNeff v. Pennoyer (buyer of Neffs land), quiet title action 1. Neffs argument that he has better title to the land than Pennoyer land shouldve never been sold because default judgment in first lawsuit is faulty due to lack of proper service c. Oregon Statute for Resident Notice of Service: 1. Personal Service of Notice and Summons (actual notice, in person or via certified mail with a signature) 2. Seizure of the land by the Court (if its a suit over a piece of property) 3. Service by Publication (constructive noticewhen actual notice is not possible) 4. Appearance by (counts as notice) 5. Citizen of State (court has jurisdiction) d. What went wrong?Neff didnt own the land at the time the default judgment was entered (no seizure as notice), he wasnt found or served in state (no personal service), didnt appear, wasnt a resident of Oregon. *Only constructive notice via publication is left* e. Oregon Statute for Non-Resident Service: 1. If is traveling through statepersonal service 2. Constructive notice via publication (this is how Neff was served) f. Consequence of Failure of Proper Servicejudgment is null and void ii. Issue: Whether the first lawsuit and sheriffs sale had extinguished Neffs title. (Neff argues that the original judgment is void because Oregon state court did not have PJ over him). 1. The important question is whether there is power over the defendant within the state lines of Oregon iii. Holding: No, constructive notice by publication is not enough for personal jurisdiction in this suitpersonal service is needed. First judgment is void. No 3

personal jurisdiction exists unless the defendant is served while physically within the state. a. Judge Fields Due Process limitationnotice of service must be by: 1. Appearance 2. Personal Service (actual notice) b. How do you constitutionally serve non-residents according to Judge Fields? 1. Seize in-state property owned by the at the outset of the lawsuit (quasi-in-rem) 2. Personal service upon agent 3. Consent 4. CANNOT serve by publication!!unlikely would get actual notice; violation of Due Process **EXCEPTIONSdivorce action (state where marriage was created also must have the power to undo it) iv. IMPORTANT: CXNal discussion at the end of the casemany CXNal problems: a. Due Process Clause i. He was owed personal service defendants cant be bound by judgments unless they received actual notice of the proceedings against him b. Full Faith and Credit Clause i. Courts usually give credit to other courts judgments, EXCEPT when the court rendering the judgment doesnt have personal jurisdiction or subject matter jurisdiction over the defendant (respecting defendants due process rights) ii. The problem is that this Missouri court cant give Full Faith and Credit to Oregons judgment because that court didnt really have PJ over Neff B. Ways to Gain Jurisdiction: 1. In rem: action for property title (power over the thing) i. Solution to serving person outside the state: a court located in the same state as the property can enter a judgment disposing of that property by seizing it at the outset of the lawsuit (in rem jurisdiction) 2. Quasi in rem: power over the person through their land gain power over nonresidents whom you cannot personally serve, by attaching a piece of the property in the state to the lawsuit in order to give notice. i. In order for the trial court to have jurisdiction over the property, the property needed to be attached before entry of the judgment. Law assumes that property is always in possession of the owner, and therefore the owner knows what happens to his property, so attachment of the property before judicial proceedings are initiated makes constructive notice sufficient.. 3. In personam: power over the person directed toward a particular person who will be liable for personal judgment. If the suit is to determine title to property, the action must be filed where the property exists and is only enforceable there.

4. Hypothetical category: a divorce case. If a couple is married within a state and one moves away, and the mover is mailed service in their new state, personal jurisdiction is established. State has to have the power to declare the status of its own resident.

C. Jurisdictional Challenges: 1. Do nothing and dont show up, suffer default judgment, and collaterally attack that judgment when seeks to enforce it (very risky). 2. Raise challenge promptly in your first answer(but if you answer without raising the 12b2 challenge, then you waive the right to do so!) i. Also, if makes a pre-answer, he must raise challenge there or waives the right to do so. 3. Make a special appearanceusually an appearance means waiver of right to challenge jurisdiction, but a special appearance allows a to appear in order to challenge. **12b2 = SPECIAL APPEARANCE!** D. International Shoe Co. v. Washington (MINIMUM CONTACTS) 1. Pennoyer3 ways to gain personal jurisdiction: i. Resident of the state ii. Property in state iii. Quasi in remcourt seizes land unrelated to lawsuit in order to give owner notice of lawsuit a. Problemeasy for to avoid personal jurisdiction b. So, how can courts gain jurisdiction over a ?International Shoe redefines power 2. Themes of International Shoe i. Power ii. Consent a. Way to force consentsome states claim that if youre doing business within the state, you must have an agent within the state to accept service iii. Presence a. Non-resident how do we conceptualize a presence in a state of non-residents? 3. FACTSIntl Shoe had travelling salesmen go through Washington and set up temporary showrooms, but its a Delaware corporation w/ headquarters in St. Louis Intl Shoe was not paying unemployment taxes in Washington. 4. ISSUEDoes Washington have personal jurisdiction over Intl Shoe? i. How did Washington try to gain power over Intl Shoe?personal service of one of the travelling salesmen while in Washington, plus letter sent to St. Louis 5. Jurisdictional Challenge by Intl Shoe: 5

i. Made a special appearance to challenge PJ ii. Intl Shoe says they do not have the presence within Washington to be subject to personal jurisdiction there a. If temporary showrooms constitute a presence, then travelling salesmen can be sued anywhere iii. Personal Serviceargues service on salesman isnt enough notice iv. In remno real property within Washington v. Quasi in remsame 6. Washingtons Arugmentservice of a salesman (agent) within the state is valid personal service 7. HOLDINGSolicitation within a state by the agents of a foreign corporation (plus some additional activities) renders a foreign corporation open to suit within the forum state to enforce an obligation arising out of its activities within the forum state. i. In this case, Appellants activities within Washington were systematic and continuous within the years in question. These activities resulted in a large volume of business. Further, Appellant received the benefits and protections of the laws of Washington. As a result, the suit against Appellant within the state does not involve an unreasonable or undue procedure 8. WHAT DOES SUPREME COUT SAY CONSTITUTES ENOUGH PRESENCE IN A STATE TO BE SUBJECT TO PJ? i. More flexible test than 3 Pennoyer categories ii. MINIMUM CONTACTS TESTDue Process requires only that in order to subject a to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. a. Policy: To the extent that you conduct activity within a state, you enjoy the protection of that states law; therefore you should expect to be held accountable for your actions within that state (with privilege comes obligation) b. 2 Different Types of Contacts: 1. General JurisdictionContinuous and Systematic Contacts; can be sued for anything i. Length of time of presence ii. Has ever initiated lawsuits as a in that state? iii. Does enjoy advantages of that states laws and institutions? 2. Specific JurisdictionNature and quality of s contacts with the forum that gave rise to the COA; can be sued for that act) i. EXAMPLEIntl Shoe has salesmen traveling through state and gets into car wreck, wants to sue Intl Shoe for negligenceno continuous and systematic contacts, 6

but they can be sued only for claims arising out of this incident E. Applying Minimum Contacts 1. McGee v. International Life Insurance Co. i. Facts: Life Insurance contract, breach of contract by , in Texas, Insured in CA ii. Holding: There is personal jurisdiction chose to do business in CA and knew there would be a time when theyd have to pay to CA. This is SPECIFIC JURISDICTION and is enough for minimum contacts iii. Key Language: a. The K was delivered in CA, the premiums were mailed from there, and the insured was a resident of that state when he died. (look to quality and nature of contacts with state) b. CA has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant stat in order to hold it legally accountable 2. Hanson v. Denckla i. Facts: Trust created in DE, person who created the trust moved to FL, trustee () was in DE ii. Issue: Do FL courts have jurisdiction over the DE trustee? iii. Holding: NO personal jurisdiction, trustee in DE didnt choose to do business in FL and had no contacts there iv. Key Language: The unilateral activity of those who claim some relationship with a nonresident cannot satisfy the requirement of contact with the forum state. The application of that rule will vary with the quality and nature of the s activity, but its essential in each case that there be some act by which the purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. 3. Whats the Difference? i. s actions and choices a. Life Ins. Co. chose to do business in CA, Daughter did not choose for her mother to move to FL b. Businesses doing business with residents of other states need to get used to being sued in that state ii. benefitting from their actions in the forum state iii. Where was the contract created? iv. State of CA has an interest in protecting its residentFL does not have in interest in proceeds of trust 4. Does Quasi-in-Rem (Pennoyer) Still Allow a State to get Jurisdiction Over a ? i. Shaffer v. Heitner 7

a. FACTSHeitner, a shareholder of Greyhound (DE) and a nonresident of DE, sues 28 officials of Greyhound (who are not residents of DE) for breach of fiduciary duty to corporation. Suit is filed in DE. attempts to gain jurisdiction by having the 2 officials stocks sequestered in DE (Quasi-in-Rem). then gives constructive notice by publication and by certified mail. 28 officials make a special appearance. b. ISSUECan a state obtain personal jurisdiction over a party based on that partys ownership of property in the state? c. RULEWhether or not a State can assert jurisdiction over a nonresident must be evaluated according to the minimum-contacts standard of International Shoe Co. v. Washington. Where, as in this case, the property serving as the basis for jurisdiction is completely unrelated to the plaintiffs cause of action, the presence of the property alone (i.e., absent other ties among the defendant, the State, and the litigation) would not support the States jurisdiction d. HOLDINGIntl Shoe minimum contacts rule applies. Any assertion of personal jurisdiction must be considered under Intl Shoe. The s do NOT have minimum contacts with the state of DE. e. KEY POINT Under the line of Pennoyer, the presence of property in the forum state could be the basis for jurisdiction over claims of any sort. This case Put Pennoyer to restInternational Shoe takes over. There is no reason for the artifice of quasi in rem jurisdiction since Int'l Shoe does it much nicer. F. SPECIFIC JURISDICTION 1. Minimum Contacts=Umbrella Test for Specific Jurisdiction 2. Three different themes within specific jurisdiction: i. Stream of Commerce ii. Purposeful Availment (+ foreseeability) iii. Fair Play and Substantial Justice 3. World-Wide Volkswagen Corp. v. Woodson (1980)PURPOSEFUL AVAILMENT i. Facts: The Robinsons purchased an Audi in NY. A year later, they left NY for a new home in AZ. As they passed through OK, they were involved in an accident with another car, causing a severe fire which severely burned Mrs. Robinson and the kids. The Robinsons brought a PL action in OK, claiming defective design and placement of the Audis gas tank and fuel system. They joined as defendants the manufacturer, its importer, its regional distributor, and its retail dealer. The retail dealer (Seaway) and the regional distributor (World-Wide) claim that OK does not have PJ over them. ii. History: Oklahoma SupCt said there is jurisdiction over the defendants because it was foreseeable that this car would end up in the state. iii. Issue: Whether an Oklahoma court has in personam jurisdiction over a nonresident auto retailer and its wholesale distributor, when the only

connection is the fact that a car sold in NY to NY residents became involved in an accident in OK. iv. Holding: No. v. Reasoning: Defendants carry on no activity whatsoever in OK they close no sales and perform no services there, they do not take advantage of the benefits and privileges of OK law, they solicit no business there via salespersons or ads, and they do not regularly sell cars to OK residents or customers or seek to serve the OK market. Personal jurisdiction cannot be obtained by OK based on one isolated occurrence. a. Plaintiffs argue that because a car is mobile by its design and purpose, it is foreseeable that the car would cause injury in OK. 1. HAD NOT PURPOSELY AVAILED ITSELF OF THE OPPORTUNITY TO CONDUCT ACTIVITIES IN OK, although it could foresee that its buyers might take its cars there. 2. The court says the foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the DPC. vi. Dissent [Brennan]: The interest of the forum state and the connection to the litigation is strong. The state has a legit interest in enforcing its laws designed to keep its highway system safe, and the trial can proceed at least as efficiently in OK as anywhere else. Further, the goods were purposefully injected by the seller into the stream of commerce and they were predictably used in the forum state. vii. Rule: Minimum contacts must be based on an act of the DEFENDANT. A consumers unilateral act of bringing the defendants product into the forum state is a not a sufficient constitutional basis for PJ over the defendant. 3. Asahi Metal Industry Co. v. Superior Court (1987)STREAM OF COMMERCE [PLUS] i. Facts: Zurcher lost control of his motorcycle and the accident killed his wife. He filed a PL action alleging that the accident was caused by the defective tire, tube, and sealant. Zurcher named several defendants in his CA suit, included the tubes manufacturer Cheng Shin. All of Zurchers claims were settled, leaving only Cheng Shins 3rd party action for indemnity against Asahi, the manufacturer of the tubes valve assembly. Asahi claims that it is not subject to PJ because it never contemplated that sales of its product in Taiwan would subject it to suits in CA (no foreseeability). ii. Issue: Whether mere awareness on the part of a foreign defendant (Asahi) that the components it manufactured, sold, and delivered outside the US would reach the forum state in the stream of commerce constitutes minimum contacts between the defendant and the forum state. iii. Holding: No. iv. Reasoning: a. PART II. A STREAM OF COMMERCE 1. OConnor goes by purposeful availment theoryneed more than putting product into stream of commerce, look to whether marketed in forum state, designed product for the forum state, establishing channels for providing regular advice to customers in the forum state, etc. 9

i. STREAM OF COMMERCE PLUS must put the product into the stream of commerce, plus an action of the purposely directed towards the forum state 2. Brennan Plurality on Stream of Commerceinjecting products into stream of commerce is sufficient alone if that product ends up in the forum state ( friendly) b. PART II. B FAIR PLAY AND SUBSTANTIAL JUSTICE 1. Considerations: i. Burden on the defendant ii. Interests of the forum state iii. s interest in obtaining relief iv. Interstate judicial systems interest in obtaining the most efficient resolution of controversies v. Shared interest of the sever states in furthering fundamental substantive social policies 2. In this case, the burden in Asahi is severe (travel and defending in foreign legal system). Further, the interests of the plaintiff and the forum state are slight because all thats left is an indemnification claim, and the plaintiff is not a CA residentdo it in Taiwan or Japan. In regard to stream of commerce, all the manufacturer needs to do is inject their goods into the stream of commerce. [this test sets a lower bar] v. What we are left with: Broad International Shoe standard a. Specific Jurisdiction: Some contact with the forum that gave rise to the action 1. Ask about contacts of 2. Ask about fair play and substantial justice 4. Burger King Corp v. Rudzewicz (1985)FAIR PLAY AND SUBSTANTIAL JUSTICE** i. Facts: BKs headquarters are in Florida, but it has regional offices that supervise franchisees in their areas. Rudzewicz and MacShara entered into a joint venture as operators of a BK franchise in Michigan. They had some trouble getting started, which they negotiated with the Birmingham district office and the Miami HQ. When rent payments fell behind, BK negotiated then sued in federal district court in Fla. The franchisees challenge PJ in Fla. ii. Issue: Whether the franchisees have minimum contacts with Florida that would establish the states PJ over them. iii. Holding: Yes. iv. Reasoning: Minimal contracts test + fair play and substantial justice a. The two tests are meshed together by the court b. Start with minimal contacts and then look to FP and SJ c. Minimal contacts: 1. Do s have minimum contacts in Florida?YES i. Purposeful availments negotiated a contract with a FL corporation and voluntarily entered into the contract which subjected them to Florida law. 10

d. Fair play and substantial justice: 1. s could have reasonably anticipated being hauled into court in FL. 2. Choice of law clause (FL) in contract iv. Dissent (Justice Stevens)Florida should not have jurisdiction a. Unequal bargaining power in contract formation; boilerplate language so they didnt really contract for it. b. s didnt think their burgers and fries would be traveling down to Floridano reasonable anticipation of being sued there. 5. Pavlovich v. Superior Court (2002)SPECIFIC JURISDICTION & THE INTERENET i. Facts: Pavlovich, a resident of Texas, studied comp engineering at Purdue, where he was the founder and project leader of the LiVid video project, which had a website that provided only information. The project sought to defeat new technology and enable the decryption and copying of DVDs, so it posted DeCSS, a source code of a program, on its website that allows users to essentially override CSS technology, which is owned by DVD CCA. DVD CCA sues him for misappropriation of trade secrets for posing the program on his site. ii. Issue: Does California have personal jurisdiction over a defendant based on a posting on his website? iii. Holding: No. iv. Reasoning: a. Court looks to: 1. Statute- long arm statute (coextensive-legislature says if Constitution allows it, it can and enumerated-there jurisdiction is less than what is allowed in Constitution.) California is coextensive 2. Constitution- minimal contacts 3. Case law- Calder case (effects test) and internet cases i. Internet spectrum (solely internet use) a. Jurisdiction: Business 1. Middle: exchange b. No jurisdiction: posting only b. The Court uses the 3-part test for specific jurisdiction: (1) purposeful availment of defendant of forum benefits, (2) minimum contacts, and (3) fair play and substantial justice. Here, the website did not target CA, had no interactive features, and there is no evidence that residents of CA even visited the site. Thus, the act was not purposefully directed toward CA. Knowledge that his conduct may injure certain industries in CA is insufficient to establish express aiming at CA. A passive website that does little more than make information available to those who are interested in it is not grounds for the exercise of PJ. v. Dissent: Defendants intentional act was expressly aimed at CA he should reasonably anticipate being haled into court here. vi. Notes:

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a. The premise is that a state has jurisdiction over a defendant who acts in a way that he knows will cause harm in another state (ex. firing a bullet over a state line). b. This is the first state, rather than federal, court case weve looked at for PJ c. Jones v. Calder: tabloid writer slammed an actress who lived in CA. The state had jurisdiction over tabloid based on the effects of its FL conduct in CA wrote an article that they knew would damage Jones, and knew that it would be felt by her in the state in which she lives and works and where the tabloid has its largest circulation. d. Facts that can determine internet jurisdiction: 1. Usage info regarding residents 2. Interactivity of website 3. Commercial use? 4. Location of server G. GENERAL JURISDICTION 1. Under what circumstances will be subject to jurisdiction for all claimseven those without any connection to the forum state? (General Jurisdiction) i. Corporationsstate of incorporation and principal place of business ii. Individualsstate of domicile 2. Perkins v. Benguet Consolidated Mining Co. (1952) i. Facts: Perkins, a nonresident of Ohio, filed two suits in Ohio against the mining co. (in the Phillippine Islands), alleging that it owes her money as a result of its failure to issue stock certificates and dividends to her. ii. Issue: Whether the business done in Ohio by the company was sufficient to permit Ohio to entertain a cause of action against a foreign corp, where the cause of action arose from activities entirely different from its activities in Ohio (breach of K claim). iii. Holding: Yes. Ohio can take or decline jurisdiction. iv. Reasoning: Because the President of the corp returned to Ohio during a hiatus and kept his files there, had correspondence there, drew and distributed salary checks there, and maintained bank accounts there, he carried on in Ohio a continuous and systematic supervision of the necessarily limited activities of his company. v. Notes: a. Usually, if someone has systematic and continuous contacts with a state, they are a resident and there is no general jurisdiction problem. 3. Helicopteros Nacionales de Colombia, S.A. v. Hall (1983) i. Facts: Helicopteros (Helicol) is a Colombian corporation with its principal place of business in that country. A helicopter owned by them crashed in Peru, and four US citizens lost their lives. Plaintiffs are the survivors and executors of the decedents, who were employed by Consorcio, a Peruvian joint venture formed by Texans to enable them to enter into a deal to construct a Peruvian oil pipeline. The Consorcio contract for the job provided that controversies arising out of the contact would be submitted to the jurisdiction of Peruvian courts. Helico had contacts with Texas held negotiation sessions there, purchased copters and parts from there, send employees for training there. 12

ii. Issue: Whether the contacts of Helicopteros were sufficient to allow Texas to assert jurisdiction over the corporation. iii. Holding: No. iv. Reasoning: Mere purchases, even if occurring at regular intervals, are not sufficient to establish general jurisdiction where the COA is not related to the purchase transactions. 4. For exam i. Cause of action ii. How contacts do not fit into cause of action iii. The form iv. No there was not general jurisdiction- here is why 5. Notes: i. Systematic and continuous contacts is a VERY high bar to meet. ii. Its very rare to find a court that says that they have general jurisdiction over a non-resident defendant. 6. Burnham v. Superior Court (1990) i. Facts: Husband and wife married in 1976 in WV. In 1977, they moved to NJ, where two children were born. In 1987, they decided to separate. Wife moved to CA and they agreed to file for divorce on grounds of irreconcilable differences. Husband filed on grounds of desertion, but did not attempt to serve his wife. Wife brought suit for divorce in 1988. That year, husband visited CA on business, then visited his children and took them to San Fran for the weekend. When he returned to wifes house, he was served with a CA court summons. He then returned to NJ. [CA courts refuse to dismiss for PJ]. ii. Issue: Whether the DPC denies CA courts jurisdiction over a nonresident, who was personally served with process while temporarily in that state, in a suit unrelated to activities in this state. iii. Holding: No. The DPC does not prevent jurisdiction. iv. Reasoning *Scalia plurality+: The short of the matter is that jurisdiction based on physical presence alone constitutes due process because it is one of the continuing traditions of our legal system that define the due process standard of traditional notions of fair play and substantial justice. This is the time-honored approach. a. Traditional Basis Exam: can use traditional basis to get jurisdiction under Pennoyer; Shoe only applies where the defendant is not in the statecan give personal service to anyone in the state. b. Opposite of traditionaltag jurisdiction (personal service while passing through state) 1. After Intl Shoe, no need for tag jurisdictionjust argue minimum contacts c. The 3 traditional ways to gain jurisdiction: residence, consent, personal service v. Concurrence [Brennan plurality]: We must apply the minimum contacts test/Shoe in all cases. Using this test in this case, husband has minimum contacts because he used the laws, business, and protection of the state (fire, medical, roads, economy, etc.) (personal availment of state benefits). vi. Notes:

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a. There isnt general jurisdiction in this case because the husband did not have continuous and systematic contacts with CA. b. There isnt specific jurisdiction in this case because all of the facts that led to the divorce (marriage, etc.) occurred in NJ. c. This is a VOLUNTARY presence casedistinction. d. Limits of this case: it was a plurality opinion H. CONSENT AS A SUBSTITUTE FOR POWER 1. PennoyerEither power or consent can establish jurisdiction 2. A defendant may, either at the outset of the lawsuit itself or before it, consent to jurisdiction in a forum. 3. Intl Shoe recharacterized implied consent to include consent by minimum contacts. What constitutes consent? i. National Equipment Rental v. SzukhentSzukhents, MI farmers, leased farm equipment from a NY concern. On the back of the lease form was a clause saying that the Szukhents designate Florence Weinberg (NY) as agent for the purpose for accepting service of process. When the Szukhents defaulted on the lease, sued in NY, basing jurisdiction on service of Weinberg. The Supreme Court upheld this procedure, treating the quotes clause as consent to PJ and that the clause did not violate due process. 4. Carnival Cruise Lines v. Shute i. FACTSMrs. Shute, from Washington, bought cruise tickets from Carnival, which is a Florida Corporation. The face of each ticket contained the language SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES IMPORTANT! PLEASE READ CONTRACT. The contract contained a forum-selection clause indicating that any disputes would be settled in FLORIDA. Ms. Shute was injured when she slipped on a deck mat during a guided ship tour while over international waters. She filed a negligence suit in Washington. Respondents argue that the forumselection clause should not be enforced because, contrary to The Bremen case, the clause was not the result of negotiation, and enforcement effectively would deprive respondents of their day in court. ii. HOLDINGBecause of forum-selection clause (and therefore consent by Shute to bring all suits in FL), WA has no PJ over Carnival. As long as there was no fraud or bad faith in obtaining consent, then forum-selection clauses do not violate fundamental fairness and are valid. iii. REASONINGThree Points: a. The clause was reasonable. The cruise line has interest in limiting jurisdiction because it carries passengers from everywhere and has contacts everywhere, and the clause thus limits the confusion regarding where suits must be broughtand passengers also benefit from reduced prices allowed by limiting jurisdiction. b. Unequal bargaining power was fundamentally fair. Common sense dictates that the clause will not be negotiated because it was purely routine. 14

c. No bad faith motive. The cruise lines principal place of business was in FL and many cruises depart and return from FL. iv. DISSENTJustice Stevens: a. Courts traditionally have reviewed with heightened scrutiny the terms of contracts of adhesion, form contracts offered on a take-orleave basis by a party with stronger bargaining power to a party with weaker power. b. The traditional rule is that contractual provisions which seek to limit the place or court in which an action may be brought are invalid as contrary to public policy. 5. Consentual Ways to Adjust Procedure Law i. Choice-of-Law Clauses decide what forums (states) law will apply, but not where the suit will be brought a. The parties agree that any litigation arising out of this agreement shall be governed by the law of Florida (Burger King) ii. Consent-to-Jurisdiction Clauses parties consent to suit in particular place (waives challenges to PJ); however, only permit suit to be brought in consentedto place, do not require suit brought there a. John Rudsewics appoints X, residing in Miami, FL, as his agent for service of process (Natl Equipment Rental) iii. Forum-Selection Clauses Limit forum to specific location a. The parties agree that any litigation arising out of this agreement shall be brought out of Miami, FL b. Carnival Test: Was clause reasonable and fundamentally fair? c. Party against PJ will argue forum-selection clause not apply because plaintiff could not negotiate clause + unequal bargaining power iv. Arbitration Clauses remove courts and require arbitration I. THE CONSTITUTIONAL REQUIREMENT OF NOTICE 1. Notice is another requirement for personal jurisdiction. 2. Individuals being sued in personam must receive some form of notice. i. BUTPennoyer establishes a distinction between in personam and in rem jurisdiction a. Because it is perfectly permissible for a state to assume that people keep an eye on their property, a state could presume that the seizure of property (prerequisite to in rem jurisdiction) would also accomplish notice. 3. StandardNotice must be reasonably calculated under all the circumstances, to apprise interested parties of the action and give them an opportunity to object. (Mullane) 4. Mullane v. Central Hanover Bank & Trust Co. i. FACTSCentral Hanover Bank & Trust (Appellee) set up common fund pursuant to a New York statute allowing people to combine their small trusts 15

into one fund for investment purposes. There were 113 participating trusts. Appellee Bank petitioned for settlement of its first account as common trustee. Some of the beneficiaries were not residents of New York. Notice was by publication for four weeks in a local newspaper, which is all that was required by the NY statute for judicial settlement of the common trust fund. ii. ISSUES(1) Is notice by publication of a judicial settlement to unknown beneficiaries of a common trust reasonable notice under the due process requirements of the Fourteenth Amendment? (2) Is notice by publication to all of the beneficiaries of a common trust whose residences are known reasonable notice under the due process requirements of the Fourteenth Amendment? iii. RULES(1) Notice must be reasonably calculated under all the circumstances, to apprise interested parties of the action and give them an opportunity to object. (2) Resort to notice by publication is approved as a customary substitute where it is not reasonably possible or practicable to give more adequate warning. iv. HOLDING(1) Yes, notice by publication of a judicial settlement to unknown beneficiaries of a common trust is reasonable notice. (2) No, notice by publication to all the beneficiaries of a common trust whose residences are known is not reasonable notice. a. It would not be a burden to serve by mail those whose addresses are already known; however, a search is not required to find the addresses of the unknown. 5. FRCP Rule 4NOTICE i. Textbook pg. 149 examples J. SELF-IMPOSED RESTRAINTS ON JURISDICTIONAL POWER: LONG-ARM STATUTES, VENUE, AND DISCRETIONARY REFUSAL OF JURISDICTION 1. Long-Arm Statutes as a Restraint on Jurisdiction i. A court may exercise jurisdiction over a only when: a. The Constitution allows it (Due Process/Full Faith and Credit) b. State or Local Government authorizes it to do so ii. Statutes authorizing state courts to reach beyond their own borders came to be known as Long-Arm Statutes a. After Intl Shoe expanded the doctrine of PJ, states began to authorize service (often by mail) on beyond their borders. iii. Relationship between long-arm statutes and the DPC? a. The CXN sets the outer boundaries of PJ, but nothing requires that a state assert the entire jurisdiction permitted by the CXN. iv. First do the state Long-Arm Statute analysis to see if claim would be heard in state. If yes, then do Constitutional analysis to see if there is PJ. iv. Gibbons v. Brown (1998):

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a. Facts: Gibbons and Mr. and Mrs. Brown were driving together in Canada. Gibbons was giving directions to Mr. Brown, who turned the wrong way onto a one-way street and caused a head-on collision. Gibbons, a TX resident, sued Mr. Brown in FL, alleging his negligent driving caused the accident. Two years later, Mrs. Brown sued Gibbons in FL to recover for her own injuries, alleging that Gibbons gave bad directions that caused the crash. Mrs. Brown says that Gibbons is subject to the PJ of FL because she brought the prior suit. Gibbons says the complaint doesnt satisfy the long-arm requirements in FL of engaged in substantial and not isolated activity. b. Issue: Whether FL can assert PJ over Gibbons. c. Holding: No. Given the length of time between the 2 actions and the fact that the prior suit did not name Mrs. Brown as a party, the Court held that Mrs. Brown has not alleged a satisfactory ground for personal jurisdiction under the FL statute. d. Reasoning: Even if the court was to assume that bringing an action in a FL court can constitute substantial and not isolated activity in some instances, the court nevertheless notes that Mrs. Brown has not shown that Ms. Gibbons is engaged in any activity in FL whatsoever other than defending the present suit. 1. A current s prior decision to bring suit in FL should not act indefinitely as a sword of Damocles hanging perilously over the head of that if she later challenges jurisdiction in a separate suit (albeit arising from the same incident). 2. Thus, the FL long-arm statute requiring a person to be engaged in substantial and not isolated activity is not satisfied by the former suit filed two years ago. e. Notes: 1. FLs long-arm statutes are of a class that requires more activities or contacts to allow service of process than are currently required by the decisions of the US SupCt. 2. Relationship between long-arm statutes and the DPC? i. The CXN sets the outer boundaries of PJ, but nothing requires that a state assert the entire jurisdiction permitted by the CXN. 3. Why would FL impose a stricter long-arm statute requiring more contacts or activities? They already have the resources of their state courts taxed enough with the cases they feel already belong there. 4. Some states have enacted long-arm statutes that reach for as much jurisdiction as the CXN allows. i. Ex: California: A court of this state may exercise jurisdiction on any basis not inconsistent with the CXN of this state or of the US. 2. Venue as a Further Localizing Principle

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i. Venue, where litigation takes place, stems from statutory rather than constitutional sources. a. Federal Statute28 U.S.C. 1391 b. Venue locates litigation not just in a state but in a particular federal judicial district within that state. c. Once you figure out that a particular state has PJ, the next question is what is the proper district court which has jurisdiction over the ? ii. 28 U.S.C. 1391 a. Jurisdiction founded ONLY on Diversity of Citizenship1391(a) 1. Where ANY resides 2. Where substantial amount of events occur 3. Where any is subject to PJ (if it can be brought in no other district) b. Jurisdiction NOT founded solely on Diversity of Citizenship1391(b) 1. Where any resides 2. Where substantial amount of events occur 3. Where any may be found (if it can be brought no other district) c. 1391(c) 1. Corporationsdeemed to reside in any district in which it is subject to PJ i. More than one district in a statelook to Corporations most significant contacts within a particular district iii. Dee-K Enterprises, Inc. v. Heveafil Sdn. Bhd. a. Facts: Two American purchasers of extruded rubber thread, Dee-K (from VA) and Asheboro (from NC) bought the rubber thread from defendants to make bungee cords, among other things. Plaintiffs sued in an anti-trust claim many corps producing the thread, corps in Malaysia (Heveafil, Rubfil, and Rubberflex), Indonesia (Bakrie and Perkebunan) and in Thailand. Plaintiffs allege a broad conspiracy among defendants to fix prices and restrain competition in rubber thread. Sue in federal court in the Eastern District of VA. Defendants challenge jurisdiction and venue. b. Issues: 1. Whether there is PJ over an Indonesian manufacturer (Bakrie) that consummates its sales of thread in Indonesia, 2. Whether venue is proper in the EDVA. c. Holding: Yes to both. The foreign defendants can be sued in any district. The American defendants can only be sued where they can be found. d. Reasoning: 1. Venue Statute used Section 12 of Clayton Act i. Usually, State venue provisions trump 1391 18

ii. Section 12 finds venue (1) where is found or (2) where conducts business 2. Federal Statute 1391(d)An alien may be sued in any district i. Because the Clayton Act doesnt govern foreign s and 1391 does that, in this circumstance, 1391 trumps the Clayton Act ii. BUTClayton Act applies to the American s. 3. Under either Rule 4 or the Clayton Act, any challenge to PJ is governed by the cxnal test of fair play and substantial justice. (Shoe) so, plaintiff must show that he didnt offend the CXN with service. 4. HOWEVER, the SupCt has held that 1391, which provides that aliens may be sued in any district, overrides any special venue statute (such as the Clayton Act here). Thus, 1391(d) eliminates any venue impediment to suit in this district with respect to the foreign defendants because they, as aliens, may be sued in any federal district court. Dont want to hold up suits against foreign s and 1391d removes venue impediments. 5. Court applies 1391(b) to American defendants e. Notes: 1. Court says: prereqs for obtaining PJ: i. Statute (usually long-arm) or rule must authorize service of process over defendant. ii. Service of process pursuant to the statute or rule must comport with due process. 2. Federal long-arm statute FRCP 4(k)(2)- if not subject to PJ in any state, then you have service of process in any district. iv. **JUST BECAUSE A VENUE STATUTE TELLS US WE CAN SUE A IN A PARTICULAR DISTRICT DOES NOT MEAN THERE WILL BE PERSONAL JURISDICTION!!!** v. Declining Jurisdiction: Transfer and Forum Non Conveniens a. Forum Non Conveniens (Inconvenient Forum): plaintiff can ask the court to dismiss the case from the district for inconvenience, even though jurisdiction satisfies venue and due process. b. Many times, a court has the power to hear a case but, for reasons of justice or efficiency, should not do so c. Two rationales for declining to exercise jurisdiction: 1. Forum non conveniens (common law)affects both state and fed courts 2. Transfer among federal judicial districts under 1404 applies only to fed courts allowing them to move cases around the country for the convenience of parties and witnesses, in the interests of justice. d. Test under the trial courts discretion: 1. Does an alternative forum exist? 19

2. Would trial in this forum cause oppression and vexation to the defendant that is out of proportion to the plaintiffs convenience? 3. Does the difference in the law give a remedy so clearly inadequate or unsatisfactory that it is no remedy at all? 4. Is the forum inappropriate because of the courts administrative and legal problems? e. Piper Aircraft v. Reyno (1981) (history: at this time, the US was starting to become a popular place to file suits because it was favorable in many ways for plaintiffs): 1. Facts: A small commercial aircraft crashed in the Scottish highlands on a charter fight. The decedents were all Scottish subjects and residents, as are their heirs and kin. The plane was manufactured in Penn by Piper. The propellers were manufactured in Ohio by Hartzell. The plane was owned and maintained by Air Navigation, which was organized in the UK, and was operated my McDonald Aviation, a Scottish taxi service also organized in the UK. A British Dept. of Trade report found no evidence of defective equipment and indicated that pilot error may have contributed to the accident. A CA probate court appointed Reyno as administratrix over the estates (she is the legal secretary to the attorney who filed the suit in Scotland attorney wanted to chase these cases, so he appointed her). Reyno initiated suits against Piper and Hartzell for wrongful death. 2. Procedure: The defendants had the case removed to federal court in California, then transferred to the MD of Pennsylvania and finally tried to get a forum non conveniens dismissal. The federal district court granted the motion, but the Third Circuit reversed on the ground that forum non conveniens shouldnt be applied if it will cause the plaintiff to go to a forum with less favorable law for the plaintiff. Appeal to SupCt. 3. Issue: Is it permissible for the trial court to issue a forum non conveniens dismissal? 4. Holding: A change in forum to a less favorable court is permissible. Overturned Court of Appeals decision and reinstated District Courts decision. 5. Piper Aircraft v. Reyno i. Crash in Scotland; all decedents are Scottish ii. Why file in US (California)? a. Decedents survivors knew the Scottish law would not be favorable to them, and that US has strict liability in torts b. Find lawyer in CA, lawyer appoints his secretary as administratix of the decedents estates 20

iii. s move case to federal court, and then use 1404 to transfer to PA a. Piper is located in PA b. All Scottish parties are closer to PA than CA iv. s also move to dismiss based on (1) forum non conveniens, and (2) lack of PJ v. 1404 Transferfor the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. vi. Forum Non ConveniensTEST for whether to dismiss on the basis of Forum Non Conveniens: a. Gilbert & Koster Considerations: 1) Is there an alternative forum 2) Oppressiveness to v. s convenience 3) Courts interest 4) Private and public interests (p. 166 footnote #6) i. Privaterelative ease of access to sources of proof, availability of compulsory process for attendance f unwilling, and the cost of obtaining attendance of willing witnesses, possibility of view of premises, if view would be appropriate to the action, and all other practical problems that make trial of a case easy, expeditious and inexpensive ii. Publicadministrative difficulties flowing from court congestion, the local interest in having localized controversies decided at home the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action, the avoidance of unnecessary problems in conflict of laws, or 21

in the application of foreign law, and the unfairness of burdening citizens in an unrelated forum with jury duty. vii. HOLDINGCourt dismissed on the basis of Forum Non Conveniens a. If Court did not dismiss on the basis of Forum Non Conveniens, it would open the floodgates for foreign litigation in the US b. Choice of law (US v. Scottish) would confuse jury (public interest concern) c. Oppressiveness to v. s convenience generally tend to respect s choice of forum, but when is foreign, less deference is given to the s choice 1. Clearly is not choosing CA based on convenience because is foreign vii. IMPACT OF USS DISMISSAL OF S CASEcan refile in Scotland, but no lawyer would take it because its not a good case in Scotland (no strict products liability) 6. Notes: i. There is ordinarily a strong presumption in favor of the plaintiffs choice of forum, which may be overcome only when the private and public interest factors clearly point toward trial in the alternative forum. ii. When a home forum is chosen, it is reasonable to assume that the choice is convenient. However, when the plaintiff is foreign, this assumption is much less reasonable (assume all forums in US are inconvenient to foreigners) therefore, a foreign plaintiffs choice deserves less deference. f. Guidi v. Inter-Continental Hotels Corp. 1. is US Citizen 2. Shootings overseas in Egypt hotelmost evidence from overseas (like Piper) 3. HOLDINGCase is allowed in US, not dismissed by Forum Non Conveniens 4. Is the difference the fact that the is a US Citizen here? (unlike Piper) i. Yesmore deference is given to US Citizens choice of US forum g. Gonzales v. Chrysler Corp. 1. is Mexican citizen, car accident in Mexico, his son dies 22

2. Wrongful death suit in Mexico would cap wrongful death damages at $2,500. 3. files in Texas, claiming no alternative forum 4. HOLDINGThere is an alternative forum (Mexico) i. Just because its not economically viable doesnt make it not an alternative 5. Court is not going to get into judging alternative forums based on how reasonable their outcome would be.

IV. Subject Matter Jurisdiction

A. Because both state and federal governments have court systems, litigants/lawyers/judges need to know which kinds of cases belong in which courtsthis is referred to as SUBJECT MATTER JURISDICTION. B. Federal Subject Matter Jurisdiction 1. Constitutional SourceArticle III, 1 i. Limits the establishment of lower federal courtsdoesnt require them to be in existence, but allows Congress to establish them (ORDAIN AND ESTABLISH CLAUSE) a. Why would Congress choose to allow only 1 Federal Supreme Court? 1. Framers were fearful of power of federal government 2. Congress can strip jurisdiction from the Federal Courts b. How would cases be heard without lower federal courts? 1. State Courts could hear cases 2. Article III, 2 gives a list of types cases that the Supreme Court could hear: i. Arising under the constitution, laws of US, treaties (FEDERAL QUESTION) ii. Between Citizens of Different States iii. Admiralty and Maritime Jurisdiction iv. Controversies between the States v. Cases to which the US would be a party c. Who can hear cases of Federal Question Jurisdiction? 1. Federal Courts 2. State Courts (CONCURRENT JURISDICTION) *Can bring cases of federal question (ie. federal statute) in either federal or state forums 2. Statutory SourceFederal Jurisdictional Statutes i. 1331Federal Question ii. 1332Diversity of Citizenship; Amount in Controversy iii. 1333Admiralty, Maritime (Special Court) a. Exclusive jurisdictionstates do NOT have concurrent jurisdiction 23

iv. 1334Bankruptcy Cases (Special Court) a. Exclusive jurisdictionstates do NOT have concurrent jurisdiction v. 1338Patents, Copyrights (Special Court) a. Exclusive jurisdictionstates do NOT have concurrent jurisdiction 3. EffectLimits power of federal courts to certain kinds of cases (those involving federal claims, diverse parties, etc. C. Federal Courts are courts of limited jurisdictionso 2 questions arise: 1. Does the case fall within one of the enumerated categories of Article III, 2? 2. Has Congress further authorized the lower federal courts to assume that jurisdiction? D. FEDERAL QUESTION JURISDICTION 28 U.S.C. 1331 1. The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the US. i. No clear test has yet developed to determine which cases arise under the CXN ii. Case Law Tests1) Mottley Well-Pleaded Complaint Rule, 2) American Well Works Creation Test and 3) Modern Smith line of cases (with 3 factors to consider in Grable) 2. Louisville & Nashville Railroad v. Mottley i. FACTSs got free lifetime railway passes for being injured on railway. Congress subsequently banned lifetime railway passes and railroad refuses honor them. ii. s COAbreach of contract a. File in Federal Court because the claim arises under 1331. If it is deemed that RR need not honor the passes in the breach of contract action, it is a violation of Due Process (arising under Constitution) iii. ISSUE Whether Federal Question jurisdiction is established where the only reference to federal law in the complaint is the plaintiffs allegation of what he anticipates will be the defense to his cause of action. The COURT raises the Federal Question Challenge sua sponte Supreme Court says they have a duty to raise this issue because Federal Courts are courts of limited jurisdiction, and they do not have the power to hear cases that are not enumerated. If the Court hears a different kind of case, it is stepping on Congresss toes and the judgment wouldnt be binding. Rule 12 allows the Court to do this Subject matter jurisdiction 12(b)(1) is NOT waivable iv. RULE Well-Pleaded Complaint RuleFederal question arising under the Constitution must be evident on the face of the s complaint Here, the s Due Process issue and 1331 issue that they claim arises under the Constitution granting federal question are

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only answers in anticipation of the s defense, NOT the complaints COA The federal question must be in the s statement of his own COA v. HOLDINGs breach of contract complaint is a state claim that does not require any proposition of federal law. The fact that s defense is based on a federal law does not make it a part of s case in chief; and therefore, s complaint embodies no federal question. 3. American Well Works i. Creation TestJustice Holmes suggests that for determining when Mottleys Well-Pleaded Complaint rule is meta suit arises under the law that creates the COA a. Cause of action by federal lawfederal question b. Cause of action by state lawno federal question 1. Here, state contracts law created the COA c. The Creation testnarrower than Well-Pleaded Complaint Rule ii. T.B. Harms v. Eliscu a. Eliscu files suit in NY STATE Court against Harms 1. COAinterpretation of whether Eliscu owns the copyright of the songs under the agreement b. T.B. Harms files suit against Eliscu in NY FEDERAL Court 1. COAdeclaratory judgment as to who owns the copyrights 2. Believes this case belongs in federal court (federal question) because of the Federal Copyright Act 1338 3. s move to dismiss claimFederal Court grants dismissal for lack of federal jurisdiction c. HOLDINGCopyright is an issue, but the real question is who have these copyrights been assigned to? This issue is not enough to meet the arising under jurisdiction because this is actually a state contract issue. Its not really about interpreting the federal law. d. OsbornArticle III case about arising under 1. Osborn interprets arising under very broadly to hold that any claim that has any federal ingredient is seen as meeting the arising under language 2. Statutes interpret arising under much narrower, to include 1338 e. Eliscu TestCOA infused with national interest? 1. No, this case can be decided without consulting the Federal Copyright Statute 1338 5. Smith v. Kansas City Title & Trust Co. (MODERN LINE OF CASES)

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i. Despite Justice Holmes suggested test, federal courts have occasionally upheld arising-under jurisdiction where federal law does not create the COA, but the , in order to establish her state law claim, must PROVE a proposition of federal law. a. SUBSTANTIAL FEDERAL ISSUE APPROACH ii. FACTSs sued to enjoin from investing in certain bonds issued by federal banks under the authority of a federal statute. s claimed that investing in the bonds would exceed the companys corporate powers, since it was only authorized to invest in valid securities, and the bonds at issue in the case were invalid because the federal state authorizing them was unconstitutional. iii. s COABreach of Fiduciary Duty claim (STATE LAW) a. Does NOT satisfy the Creation Test for Federal Question Jurisdiction, since the COA was created under state corporation law. b. HOWEVERthe s here could not prove this state law claim without establishing a proposition of federal lawcant prove a breach of fiduciary duty unless can show that the federal statute under which the bonds were issued was unconstitutional iii. ISSUEIs there FEDERAL QUESTION JURISDICTION? (Does it arise under the Constitution?) a. Court says YES b. The general rule is that where the right to relief depends on the construction or application of the federal law/Constitution, it arises under the Constitution and is a Federal Question. iv. SMITH TESTthe files what looks like a state law COA, but to decide the state claim, the right to relief will depend on a constitutional question or on the construction of other federal law a. EXCEPTION TO MOTTLEY TEST v. DISSENTHolmes dissented, since there was no federal question jurisdiction under his Creation Test 6. Moore v. Chesapeake & Ohio Railway Co. i. COAKY Employers Liability Act ii. ISSUEDid employer violate federal law? a. Interpreting the federal law is relevant to employers liability b. Federal law used to determine whether employer can use Contributory Negligence (DEFENSE) iii. HOLDINGNOT a Federal Question a. Federal law is not central to the right to relief like it is in the Smith case; rather, the employer is just pointing to the Federal statute saying we abided by the rule, so we can claim CN. b. In Smith, if the prevailed, the Federal law would be deemed unconstitutionalthis obviously belongs in federal court

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1. But here in Moore, all the court has to do is figure out whether the employer followed federal law, but it is not a CHALLENGE to federal law iv. This is like Mottleyusing federal law as a defense is not enough 7. Merrel Dow Pharmaceuticals v. Thompson i. COAProducts Liability, Negligence Per Se a. Negligence theoryMerrell Dow gave inadequate warnings of the risks of Bendectin, because the warnings did not meet the labeling requirements of the FDCA b. THUSthe complaint alleged a state COA (negligence) but asserted that the s could PROVE this state COA by showing a violation of the standard governing warnings in the federal statute ii. District Court follows Smith line of casesright to relief depends upon the application of federal law (FDCA) a. However, theres a twist that led the Supreme Court to distinguish Smithall parties agreed that Congress did not intend to authorize parties who claimed injury from the failure to comply with the FDCA to sue for damages iii. HOLDINGNOT Federal Question Jurisdiction (reversed district court) a. Cant follow Smith line of cases b. Congress did NOT establish a private right of action for misbranding drugs under the FDCA 1. To allow s to turn negligence claim into one arising under federal law simply by alleging that the was negligent for failure to provide adequate warnings under the federal statute would fly in the face of Congresss decision NOT to create a federal right to sue for damages for FDCA violations. 2. So, under the Creation Test, the COA is not CREATED under federal law since there is no private right of action under the FDCA statute iv. DISSENT (Brennan) a. Smith is still alive, but this is an application of Smith b. Brennan feels that under Smith, there should be a federal COA here 1. Negligence per se claim depends on interpretation of the FDCA statute 2. Federal Courts should uniformly interpret the FDCA statute, rather than have states interpret it differently v. Speculation as to whether the Court was overruling Smiths Federal-IssueEmbodied-in-a-State-Claim exception to the Creation Test a. Courts decision in Grable & Sons put that speculation to rest 8. Grable & Sons v. Darue i. COAState law quiet title action 27

a. claims he was not properly notified by IRS that he owed in taxes, and he has superior title to the house than Darue, who bought the house at the IRS sale b. Darue removed case to federal court, arguing that the case arose under federal law because the nature of the notice required under the federal statute is a question of federal law. ii. Federal LawNotice Statute a. Title depends on whether the IRS sale was validDid the IRS give proper notice of service? iii. HOLDINGThere IS Federal Question Jurisdiction a. Supreme Court recognized that the s action arose under a state law (quiet title), but it also recognized that s could only establish its right o reclaim the property by proving a proposition of federal law. 1. A federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law. b. Smith line of casesstate law COA, but s right to relief depends on construction of federal law [SUBSTANTIAL FEDERAL ISSUE APPROACH] c. Is there a definitive Smith rule to be applied to cases? 1. No clear testbut Justice Sutter attempts to do this d. FACTORS TO CONSIDER IN SMITH LINE OF CASES: 1) Does the s state law COA necessarily raise an issue of federal law? 2) Is federal issue actually disputed AND substantial? 3) Does it disturb the balance of power between federal and state judicial responsibilities? 9. Empire Health Choice i. COAInsurance Contract Claim (State COA) ii. Federal PresenceWhether under FEHBA, McVeighs estate shouldve paid back the Federal Employee Benefits iii. HOLDINGNO Federal Question Jurisdiction a. Use Grable 3 Factors: 1) This is not a necessary issue of federal law. Federal statute is in the background of this case 2) Points of dispute are factualthe federal law is not actually in dispute 3) These are the kinds of cases that belong in state courtif federal court hears all cases where theres a dispute between employer and federal employee who is covered under the Federal Health Benefits law, this would federalize a LOT of cases.

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iv. Brennans Dissent in Merrill Dowthe federal employee benefits law needs to be applied uniformly, so all of these cases should be federalized rather than having state courts apply the federal statute un-uniformly. 10. Challenging Federal Subject Matter Jurisdiction i. What if thinks there is no basis for federal subject matter jurisdiction? **Obvious answermove for dismissal under Rule 12(b)(1). a. Diversity Casesthe obvious 12(b)(1) answer is the only method. b. Federal Question Cases2 options: 1. Move for 12(b)(6) dismissal i. Because arising under jurisdiction depends on the substance of the s claim, a party could argue that a complaint does not state a claim arising under federal law 2. Move for 12(b)(1) dismissal i. Based on lack of jurisdiction ii. When a challenges federal question jurisdiction in district court, one of 3 questions commonly arise: a. Is there a federal issue at all? 1. If the s claim is based on some federal statute or regulation, the problem consists in interpreting legislation. If the claims the right to relief under federal common law, the question is whether such federal common law exists. b. Assuming there is a federal issue, doe it give rise to s claim? (This the question in Mottley) c. If there is a federal issue that is not the basis for s claim, is it sufficiently important to federalize the case? 11. Group of Cases to Look Out For: i. Situations that appear to be a federal claim, but really at its essence is a state law claim ii. State law COA in which the federal court WILL find that there is arising under federal question jurisdiction E. DIVERSITY JURISDICTION 1. Article III, 2 of the Constitutionpermits but does not mandate Federal Court jurisdiction based on controversies between citizens of different States and between a State, or the citizens thereof, and foreign States, citizens, or subjects. i. Original jurisdiction over diversity cases ii. Includes jurisdiction in civil actions between citizens of different States 2. Federal Statute28 U.S.C 1332 i. Amount in controversy in diversity cases must exceed $75,000

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a. St. Paul Mercury Indemnity Co. v. Red Cab Co.If, from the face of the pleadings, it is apparent to a legal certainty that the cannot recover the amount claimed ($75,000+), the case will be dismissed. a. Otherwise, the claim in the pleading is all but controlling to consider the amount in controversy b. $75,000 must be in ACTUAL damages, not punitive c. If is asking for injunction rather than $ damages, consider: 1. the value of the injunction to the 2. the cost to the of complying 3. cost or value to the party invoking federal jurisdiction 4. allow jurisdiction if any of the tests above yield a figure of the statutory amount ($75,000+) d. Aggregation 1. A single with 2 or more unrelated claims against a single may aggregate claims to satisfy the statutory amount. 2. If 2 s each have claims against a single , they may not aggregate if their claims are regarded as separate and distinct i. Can aggregate if they are NOT separate and distinct claims 3. If one has a claim in excess of the statutory amount and another has the same claim against same for less than statutory amount, both can sue in federal court 4. If has claims against 2 s, may NOT aggregate them unless one claim is in excess of $75,000, and then you can supplement the other claim against the other ii. Citizens of Different States: a. (SC) v. (NC) 1. Strawbridge Casemust have COMPLETE diversity i. (SC) v. (NC) & (SC)NO DIVERSITY b. (SC) v. (England) c. (SC) & (Mexico) v. (NC) & (England) 1. Alien v. Alien jurisdiction is PROHIBITED as diversity jurisdiction i. (SC) & (Mexico) v. (England)NO d. (England) v. (SC) e. Partnershipslook at citizenship of each of the partners 1. Grupo Dataflux (Mexican Corp.) v. Atlas Global Group (TX, Mexico) i. At the time of filing, some Atlas partners () were from Texas, some were from Mexico; Grupo from Mexico

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ii. Grupo shouldve filed 12(b)(1) motion to dismiss for lack of jurisdiction since there is no diversity jurisdictionboth parties from Mexico (alien v. alien) iii. ONE foreign partner in an American corporation can ruin diversity citizenship when a foreign sues them (becomes alien v. alien) f. Corporationlook to: 1. State of Incorporation 2. Principle Place of Business i. Nerve Center Theorywhere is the headquarters/CEO/board meetings ii. Muscle Center Theorymajority of everyday activities iii. DEPENDS ON JURISDICTION WHICH TO USE g. TerritoriesCitizens of DC, Puerto Rico, Guam, and other territories are considered citizens of a state for diversity purposes1332(d) h. Ex-PatriotsUS Citizens residing aboard (and domiciled there) are not citizens of a stateno diversity jurisdiction!! 1. Would have to file in state court i. 1332(d)CAFA (Class Action Fairness Act) 1. Provides for federal diversity jurisdiction in class actions over amounts in excess of $5 million in which any member of the class possesses the requisite diversity based on state or foreign citizenship. i. Minimal diversity ii. Does not apply when parties are state officials 2. Congress was concerned that state courts were hearing and deciding class actions in which many or most members of the class came from other statesit reached for diversity jurisdiction as a way to address this problem. iii. Redner v. Sanders (2000): a. For purposes of determining whether diversity jurisdiction exists, a person is a citizen of the state in which he or she is domiciled. For adults, domicile is established by physical presence in a place in connection with a certain state of mind concerning ones intent to remain there. b. Facts: Plaintiff alleges in his complaint that he is a citizen of the US residing in France, and that the two defendants are residents of NY, and the corporate defendant has its principal place of business in NY. Plaintiff says diversity jurisdiction exists because he is a resident of a foreign state. c. Issue: Whether diversity jurisdiction exists under 1332(a)(2) 31

d. Holding: No. Dismissed. e. Reasoning: Plaintiffs complaint speaks of residence, while the statute speaks of citizenship. The two are not synonymous, and for jurisdiction to exist plaintiff would need to be a citizen of France. 1. Plaintiff also shifts the ground to a discussion of his connection with California which, if proven, would allow him to invoke diversity jurisdiction against NY citizens. Plaintiff says that he has a CA DL, is searching for jobs there, has a CA law license, etc. and considers CA his domicile. However, his factual submissions are insufficient to demonstrate a CA domicile. 2. Domicile = presence + intent to remain 3. Moreover, his brief does not actually assert the claim that there is jurisdiction on the basis of a CA domicile or make a request to amend the complaint to assert such a claim. f. Notes: 1. Test for state citizenship: i. Present domicile, and ii. Intent to remain indefinitely. 2. 1332: an alien admitted to the US for permanent resident shall be deemed a citizen of the state in which he is domiciled. 3. The time for measuring citizenship for diversity purposes is as of the date on which the complaint is filed in federal court. (this is true even if the plaintiff has moved to another state for the sole purpose of establishing diversity) 4. Complete diversity requirement: interpretation attached by the courts. Each plaintiff MUST be diverse from each defendant. (Strawbridge- limits the scope of 1332). s must be from different states than s 5. For partnership- need to know citizenship of each partner. Different than corporation. 6. Allapattah: the CXN, as opposed to 1332, requires only minimal diversity, that is, at least one claimant diverse in citizenship from another. iv. Saadeh v. Farouki (1997): a. KEY POINTDiversity is determined at the time the suit is filed for diversity jurisdiction purposes (doesnt matter if it changes during litigation). b. Facts: The plaintiff (Saadeh) is a Greek citizen and the defendant is a permanent resident of the US residing in Maryland, but whose citizenship is in Jordan. Plaintiff sued for breach of K in federal court, citing diversity jurisdiction.

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c. Issue: Does Farouki (defendant) qualify as a citizen of a state under the 1988 amendment to 1332? d. Holding: No; dismissed for lack of subject matter jurisdiction. e. Reasoning: The Court examines the legislative history behind the 1988 amendment in order to determine congressional intent. The Court discovers an intent to reduce diversity jurisdiction through the alienage provisions. The alienage amendment clearly appears to have been intended only to eliminate subject matter jurisdiction of cases between a citizen and an alien living in the same state. 1. Parties actions cannot cure subject matter jurisdiction- its all set at time of complaint f. Notes 1. Main justification for diversity jurisdiction in the first place is to eliminate prejudice in home state courts. i. So, logically, if were worried about prejudice, parties from the same state have nothing to worry about 2. Holley-Walker: the opposite side of the argument is that these two parties may still experience prejudice in state court based upon their home countries F. SUPPLEMENTAL JURISDICTION 1. Supplemental Jurisdiction broadens federal jurisdiction i. It originated in case law that stretched federal jurisdiction to cover parts of cases that, if brought independently, would not have fit within the district courts subject matter jurisdiction. ii. Congress then codified the case law results28 U.S.C. 1367 2. 28 U.S.C. 1367 (a) If federal district court has original jurisdiction, it has supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the Constitution. 1. This includes claims involving joinder or intervention of additional parties 2. APPLIES TO ALL FEDERAL CASES THAT ARE NOT DIVERSITY JURISDICTION ONLY (b) When original jurisdiction in federal court is based on diversity only, the court does NOT have supplemental jurisdiction over claims by against persons made parties under FRCP 14, 19, 20, or 24 1. FRCP 14if is liable to , is able to pass on liability to X. 1367(b) does not allow jurisdiction over any claims then has against X. (c) District Courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if: 33

1. The claim raises a novel or complex issue of State law 2. The claim substantially predominates over the claim or claims over which the district court has original jurisdiction 3. The district court has dismissed all claims over which it has original jurisdiction, or 4. In exceptional circumstances, there are other compelling reasons for declining jurisdiction. 3. Questions to ask in Supplemental Jurisdiction cases: i. Which joinder rule does this case involve? ii. Does 1367 allow claim to be filed? a. 1367(a)original jurisdiction not based solely on diversity jurisdiction 1. Same claim or controversy? iii. 1367(b)diversity jurisdiction alone b. claim against person made party under FRCP 14, 19, 20, or 24? 4. Constitutional Basis for Supplemental Jurisdiction i. Efficiency ii. Article III, 2Federal Courts hear both the initial claim and the additional claims because the Federal Court is hearing the entire case a. United Mine Workers v. Gibbs 5. In re Ameriquest Mortgage Co. (District Court, 2007): i. Facts: Skanes (plaintiff) consummated a mortgage transaction with Ameriquest. Ameriquest ordered an appraisal of Skanes future home from codefendant Homestead. Skanes alleges that Homesteads agent, Trevino (defendant) appraised the house at much higher than it was actually worth in order to increase the loan amount she could qualify for (and take out from them) and thereby increase Ameriquests profit. Skanes alleges a claim against Ameriquest under the Federal Truth in Lending Act (Count I), as well as a state fraud claim against all defendants (Counts II and III). ii. Issue: Whether the court has supplemental jurisdiction over the defendants for the state fraud claims (part of same case & controversy?) iii. Holding: Yes. iv. Reasoning: The court states that a loose factual connection may be sufficient to confer supplemental jurisdiction, so long as those facts are both common and operative. To determine whether the claims are connected by common and operative facts, the courts should compare the facts necessary to prove the elements of the federal claim with those necessary to the success of the state claim. The court may also ask whether the state claims can be resolved or dismissed without affecting the federal claims. a. The court holds that the state claim and the federal claim have common operative facts because both are based on intentional inflation

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of value, and both require the court to find fraud (basically, this is one story). b. Because we cannot conclude that the resolution of one of her state claims will have no effect on the resolution of her federal claims, we cannot deny our supplemental jurisdiction here. c. The court also finds that the discretionary factors set out in 1367(c) do not weigh in favor of a decision to decline to exercise supplemental jurisdiction. 1. 1367(c)DISCRETIONARY EXERCISE OF SUPPLEMENTAL JURISDICTION i. 1367(c)(2)state law claims do NOT substantially dominate over the federal claim 6. Szendrey-Ramos v. First Bancorp. (2007): i. Facts: Plaintiff Szendrey worked for the defendant bank in Puerto Rico as general counsel. She received information that bank officials may have been committing ethical or legal violations, and conducted an investigation in which she concluded that violations occurred. She reported her findings to outside counsel, bank officials, and the Board of Directors. She was then fired, and she sued, alleging violations of federal employment law (Title VII) and a number of claims under the laws of Puerto Rico (wrongful discharge, violations of the PR CXN, defamation, and tortuous interference with contracts). ii. Issue: Whether supplemental jurisdiction exists for the Puerto Rican law claims. iii. Rule: The federal court may decline to exercise supplemental jurisdiction for the presence of complex or novel issues of state law. iv. Holding: No; those claims are dismissed. The Title VII discrimination and retaliation claims survive. v. Reasoning: The court looks to 1367(c), which enumerates the courts discretionary reasons to refuse supplemental jurisdiction. The court finds that: a. The PR law claims raise complex or novel issues. 1. The PR claims require a much fuller look into the performance of plaintiff as general counsel. 2. Canon 21 of the PR legal ethics rules addresses the matter of lawyers conduct. (PR has not adopted the MRPC). Canon 21 does not say whether a lawyer can divulge client information in order to pursue a legal claim against the client. This is an issue of PR law that must be addressed by PR courts. b. The PR law claims substantially predominate over the federal claims. 1. Not only do the PR claims far outnumber the federal claims, but their scope also exceeds that of the federal claims

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2. The PR claims are all distinct and have their own elements of proof; which is not necessary to establish Title VII claims. vi. Notes: 1367(d) addresses the problem of plaintiffs being wrong about courts granting supplemental jurisdiction, and the SOL running out on their state claims after their federal claims are dismissed. Section(d) opens a 30-day window that tolls the SOL after the claim is dismissed. 7. CLAIMS BY THE DEFENDANT: COUNTERCLAIMS i. FRCP Rule 13permits s to assert counterclaims against s. ii. 1367grants supplemental jurisdiction based on three variables: a. Basis of the original jurisdiction over the case b. The identify of the partyplaintiff or defendantseeking to invoke supplemental jurisdiction c. The Rule authorizing the joinder of the party or claim over whom supplemental jurisdiction is sought. iii. Plant v. Blazer a. Do the joinder rules allow Blazer to bring this counterclaim against Plant? 1. Rule 13compulsory v. permissive counterclaim i. Compulsoryarises from same transaction/occurrence; must bring this counterclaim if you ever want to bring it at all a. Same transaction/occurrence TestLogical relationship between claim and counterclaim; arising from the same set of operative facts ii. Permissive may join any unrelated claim that he has against the b. wants to argue that unpaid balance claim is a compulsory counterclaim, because compulsory counterclaims are automatically within a courts supplemental jurisdiction, but permissive claims probably arent. c. HOLDING Counterclaim: Court uses logical relationship test (flexible) the debt counterclaim was compulsory because the subject of the case is the loan, which satisfies the same transaction test under 13(a). 1. Rule: a permissive counterclaim must have an independent jurisdictional basis, while it is generally accepted that a compulsory counterclaim falls within the ancillary jurisdiction of the federal courts even if it would ordinarily be a matter for state court consideration. 2. Rule 13(a): A counterclaim is compulsory if it arises out of the transaction or occurrence that is the subject matter of plaintiffs claim. 36

d. Reasoning: Purpose of compulsory counterclaim rule is to provide complete relief to the defendant who has been brought involuntarily into federal court. e. Notes: If the claim arises out of the same transaction or occurrence (13a), then it will automatically meet the requirements of 1367 same case or controversy. f. Same case/controversy v. same transaction/occurrence 1. Same case/controversy is at least as broad as same transaction/occurrence, probably broader i. This tells us that if you meet the standard of 13a, you also meet the supplemental jurisdiction standard of same case/controversy ii. Permissive Counterclaimmeets same case/controversy test but do not meet the same transaction/occurrence test for compulsory counterclaims. g. Do the supplemental jurisdiction rules allow federal court to hear this counterclaim? 1. Yes, court says this is a compulsory counterclaim, which falls within the supplemental jurisdiction test of same case/controversy iii. Great Lakes Rubber Corp. v. Herbert Cooper Co. a. Federal Court dismisses all of Great Lakes claims for lack of federal question jurisdiction, but will hear Herberts anti-trust counter claim b. Great Lakes then files all of its initial claims as counterclaimsCourt holds these are compulsory counter-claims and will hear them (13a same transaction/occurrence) 1. You can use compulsory counterclaim as a way of getting claims into federal court that wouldnt normally be heard there Lack of original jurisdiction doesnt stop a federal court from hearing a claim based on Rule 13a 8. JOINDER i. Kroger v. Omaha Public Power District a. Kroger sues OPPDemployer Paxton is insulted by workers comp.; diversity jurisdiction allows Kroger to sue OPPD in federal court; most likely to recover against OPPD (deepest pockets) 1. OPPD interpleads Owen Equipment under Rule 14 (we are not liable, but if we are found liable, Owen shares in that liability) 2. Kroger then files its own claim against Owen b. This case was before 1367 was written

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c. ISSUEDoes the federal court have jurisdiction over the claim by the against the 3rd party ? 1. Start with 1332no diversity jurisdiction 2. Krogers argumentancillary jurisdiction under Art. IIIsame case/controversy; s claim against 3rd party should be heard by Federal Court because the Federal Court is hearing the entire case 3. Owens argumentstrictly construe 1332, dont let in cases to federal court that could not be heard under traditional diversity statute d. How would this work under 1367? 1. 1367(b) does NOT allow supplemental jurisdiction over this claim 2. s are restricted from bringing claims against parties brought in under 14, 19, 20 & 24 e. HOLDINGstrictly construe 1332, dont let in cases to federal court that could not be heard under traditional diversity statute; S CLAIM WONT BE HEARD 1. How do we explain the fact that OPPD is allowed to interplead Owen into the federal case even though it violates diversity jurisdiction? i. OPPD is the dragged into courtonce theyre there, we should at least allow them to bring any parties in that they believe actually share in liability ii. Rule 14 allows for it, and 1367 now still allows for it a. 1367(b) only restricts supplemental jurisdiction over claims made by ii. Owen Equipment & Erection Co. v. Kroger a. FACTSThe Respondent-Plaintiff, Kroger (Plaintiff), a citizen of Iowa, filed suit against Omaha Public Power district, a Nebraska citizen, in federal district court. The basis of federal court jurisdiction was diversity. Respondent amended the complaint naming the PetitionerDefendant, Owen Equipment & Erection Co. (Defendant), an Iowa corporation, as an additional defendant. b. ISSUEWhether a federal court has jurisdiction over a third-party defendant named in an amended complaint in a suit in which complete diversity exists between the plaintiff and the original defendant, but where the newly named third-party defendant is a citizen of the same state that the plaintiff is (no diversity). c. RULEDiversity jurisdiction does not exist unless each defendant is a citizen of a different state from each plaintiff, even where the nondiverse defendant is impleaded through ancillary jurisdiction. d. HOLDINGNo. 28 U.S.C. 1332(a)(1) allows federal jurisdiction over civil actions where the matter in controversy exceeds $75,000 and is between citizens of different states. This statute and its predecessors 38

have consistently been held to require complete diversity of citizenship. That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different state from each plaintiff. When the Plaintiff amended her complaint to assert a claim against the Defendant, complete diversity was destroyed just as surely as if she had sued Defendant initially. e. DISSENTJustice White and Justice Brennan dissented. Their dissent viewed 1332 as only requiring complete diversity between the plaintiff and the parties he initially brings into the suit. Thus they held that in a diversity case a federal court has power to entertain all claims among the parties arising from the same nucleus of operative facts as the plaintiffs original claim against the defendant. G. REMOVAL 1. Jurisdictional statutes give s the initial choice of state or federal courts for cases in which federal and state court jurisdiction overlap. i. A(SC) v. B(NC)Negligence; $80,000 a. can file in state or federal court b. If filed in SC state court, can remove to federal district court in SC 2. Congress has also given s the power to second-guess s who choose a state court in cases that couldve been brought in federal court. 3. REMOVAL28 U.S.C. 1441 (a) Any civil action brought in State Court over which Federal Court would have original jurisdiction may be removed by the to the Federal District Court (b) Any civil action of which the federal court has FEDERAL QUESTION JURISDICTION shall be removable without regard to the citizenship or residence of the parties. i. Any other such action (diversity only cases) shall be removable only if none of the parties properly joined and served as s are a citizen of the state in which such action is brought. [HOMETOWN RULE] 1. A(SC) v. B(NC)if A brought suit in NC state court, may not remove to federal court (c) If a federal question is joined in state court with one or more otherwise nonremovable claims, the entire case may be removed and the federal court may determine all issues; or it may discretionarily remand all matters in which State law predominates. i. A(SC) v. B(NC)ADA claim and negligence state claim $75,000+ brought in NC state court 1. This case is removable by , since there is a Federal Question joined with an otherwise non-removable state negligence claim (due to Hometown Rule) brought in NC state court

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(d) Any civil action brought in a State Court against a foreign state may be removed by the foreign state to the Federal Court. (e) (1) Notwithstanding section (b), a in State Court may remove the action to Federal Court if: (A) The action couldve been brought in federal court under 1369, or (B) The is a party to an action which is or could have been brought under 1369 in a federal court and arises from the same accident as the action in State court, even if the original action to be removed couldnt have been brought in federal court as an original matter 4. THE PROCEDURE FOR REMOVAL28 U.S.C. 1446 (a) desiring to remove an action from a State Court shall file in the Federal District Court a notice of removal signed pursuant to FRCP 11 and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such . i. FRCP 11when you file a notice of removal as s attorney, you are signing it under Rule 11 (reasonable investigation as to whether there is a legitimate basis for removal, if not, attorney may be sanctioned) (b) The notice of removal shall be filed within 30 days after the receipt by the of a copy of the initial pleading setting forth the claim for relief, or within 30 days after the service of summons upon if such initial pleading has then been filed in court and is not required to be served upon , whichever period is shorter. i. If basis for removal exists when initially files complaint, has 30 days to file for removal ii. If basis for removal is NOT in existence at time of s initial complaint (ie., federal question complaint is filed in amended complaint), has 30 days after becoming aware of grounds for removal to file iii. If only basis for removal is diversity, there is a 1 year restriction on removal (c) Promptly after the filing of such notice of removal of a civil action the shall give written notice thereof to all adverse parties and shall file a copy of the notice with the clerk of the state court, which shall effect removal and the State court shall proceed no further unless and until the case is remanded. 5. CHALLENGING REMOVAL28 U.S.C. 1447 Motion to Remand to State Court i. 1447(c) contains a pair of provisions concerning remand to the state courts: a. A motion to remand on the basis of any defect other than lack of subject matter jurisdiction has a 30-day time limit. 1. If theres a lack of subject matter jurisdiction, the may at any time ask for case to be remanded to state court. 2. Example removes when suit was filed in s homestate has 30 days to file a motion for remand based on the Hometown Rule 40

b. Remand is required if the district court lacks subject matter jurisdiction. 1. This includes absence of diversity or a federal question 6. Caterpillar, Inc. v. Lewis (1996): i. Facts: Plaintiff Lewis is from Kentucky, and filed in KY state court against Caterpillar (incorporated in Delaware, and principal place of business in Illinois). Lewis sustained injuries while operating a bulldozer, and asserted state law claims against defendants Caterpillar and Whayne Supply Co. (KY corp). Liberty Mutual Insurance Group (Mass. Corp with principal place of business in Mass), the insurance carrier for Lewis employer, intervened in the lawsuit as a plaintiff. Lewis settled with Whayne, then Caterpillar filed a notice of removal in district court. Lewis files for remand to state court. At the time of removal, removal was improper because Liberty still had a claim against Whayne. However, by the time the trial came around, diversity was settled. The question becomes whether the district courts original jurisdiction is invalid because of removal, or was okay because diversity was proper by the time of trial. ii. Issue: Whether the absence of complete diversity at the time of removal is fatal to federal court adjudication. iii. Diversity at the time judgment is entered, rather than at the time the case is removed from state to federal court, is the appropriate time at which to examine whether complete diversity exists permitting federal court jurisdiction. iv. Holding: No. SupCt decided that it would not remand even though no diversity existed when removal was sought because it wanted to protect the efficiency of court resources (new trial would cost a lot for parties and court). v. Reasoning: Supreme Court believes that problem pointed to by plaintiffs is not too large because the problem requires that the defendant make two gambles: (1) that the case will become diverse, and (2) that the federal district court will miss the original diversity problem. vi. Notes: a. Unlike supplemental jurisdiction under 1367, remand rules under 1447 are required where the case was founded only on diversity because the federal courts have no power to hear the case. b. Courts will almost always remand cases that improperly use diversity jurisdiction. Caterpillar is an outlier. vii. Why did the Court get it wrong? a. Upholding jury verdict of bad actorCaterpillar shouldve never removed this case to federal court b. If Caterpillar had lost jury verdict, it then couldve claimed they made a mistake and there was no federal jurisdiction c. If case had been remanded to state court, couldve possibly won

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V. The Erie Problem

A. OBJECTIVES 1. Spot an Erie problem 2. What does Erie Doctrine do? 3. What are the more difficult questions about applying the Erie Doctrine? i. When is it an issue of substance, or a different issue of law that would require the application of state law or federal law? B. THE ISSUECHOICE OF LAW 1. When a federal court sits in diversity jurisdiction, which law does it apply? i. ExampleFederal Court has Diversity Jurisdiction over a state negligence claim a. Does it apply the state law? Or Federal Law? ii. When federal courts have jurisdiction by virtue of a federal question, it is clear that federal law applies. The federal law that is the source of the federal question is the law that applies. a. It is more difficult when actions are brought on the basis of diversity jurisdiction iii. When determining whether to apply Erie and its progeny, be sure that the case involves a federal court sitting in diversity jurisdiction 2.28 U.S.C. 1652Rules of Decision Act i. The laws of the several states, except where the Constitution or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the US, in cases where they apply. a. Courts struggle with this language 3. Swift v. Tyson i. Involved a bill of exchange, a halfway step between a promissory note and a modern check. With promissory notes, there are numerous defenses assertable by anyone sued for breach; with checks those defenses are much more limited ii. ISSUEWhich law applied to the substantive question of how many defenses may be asserted. a. Diversity case filed in a federal court in NY. b. Possible laws to derive the answer fromstate statutes, federal statutes (none exist on the issue here), precedent, regulations, Constitutions iii. Tysons argumenteven though the case is in Federal Court, the Court should apply NY state law because that is where the facts occurred. a. NY Courts had spoken on the substantive issue, ruling that bills were subject to a number of defenses. b. Were these NY cases part of the laws of that state and thus binding on the federal district court? c. HOLDINGNo, NY cases were not binding on federal court.

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1. Federal Court says it can look to general law and can declare what the best law is 2. Swift went on to reach a conclusion different from that reached by the NY courts on the issue iv. RULEThe Court held that the Rules of Decision Act did not include state common law precedent. The laws of the several states only included statutes and other forms of positive law. It does not include state courts interpretations of laws. Therefore, federal courts sitting in diversity did not have to apply precedent set forth by State courts; instead, the Rules of Decision Act only requires that federal courts apply state statutes. a. What does law mean? 1. Statutes, regulations, CXN (US and state), case law (Evidence of what the law means) v. After Swift, Federal Courts were basically free to ignore state case law. a. State case law just becomes one of the reference sources Federal Courts can look to in deciding what the Federal Law should be b. IF THERE IS A STATE STATUTE, STILL MUST FOLLOW THAT STATE STATUTE!! vi. KEY POINTWhen a Federal Court is sitting in Diversity, they need not follow state case law, but can look to federal common law/general law to declare what the best law is C. CONSTITUTIONALIZING THE ISSUE 1. Erie Railroad v. Tompkins (1938) i. Facts: Tompkins was walking home alongside the railroad tracks of the Erie Railroad. He kept several feet between him and the tracks. As a train passed, an open door struck him, knocked him down, and he severed his arm underneath the train. Tompkins brought suit against Erie Railroad in federal district court in New York based on diversity. Tompkins is a citizen of NY and the Railroad is a citizen of PA. The accident occurred in Pennsylvania. Pennsylvania law required that the railroad have committed wanton negligence since Tompkins was a trespasser (higher standard of negligence, federal law allowed ordinary negligence). However, the federal court instructed the jury on ordinary negligence; he did not apply Pennsylvania law based on Swift v. Tyson. (obviously Swift encourages forum shopping). Where would the court find the standard for negligence in PA? Case law ii. Issue: When a federal court is sitting in diversity, what law should apply in terms of the substance of the case? iii. Holding: The law to be applied in any case is the law of the state. There is no federal general common law. Erie requires that federal courts apply state common law when they are sitting in diversity. iv. Reasoning:

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a. First, the Court finds that the Swift court misinterpreted the Rules of Decision Act. The purpose of the Act was to include not just written statutes, but also the common law of the states. b. Policy concerns with Swift: 1. Swift encourages non-citizens to forum shop within the state to find favorable law. i. Black & White Taxicab Co. v. Brown & Yellow Taxicab Co. a. RR and taxi companies want to execute exclusivity agreement b. Kentucky (where both were from) does not allow these agreements c. One of the companies decides to reincorporate in Tennessee, so that any controversies can be settled by Diversity in Federal Court to take advantage of general law, which allows exclusivity agreements 2. Diversity jurisdiction was intended to provide a neutral forum for litigation between citizens of a state and non-citizens. However, Swift introduced a way for non-citizens to discriminate against citizens. 3. Lack of uniformity; the result of Swift meant that the laws of a state were applied differently depending on whether the action was brought in federal or state court. This denies state citizens the equal protection of the laws because non-citizens could bring the action in federal court to apply a different interpretation of state law c. Constitutional basis: 1. Swift could be in violation of the CXN; the Court also determined that there was no such thing as federal common law. This changes the analysis from simply a statutory construction case to a case with cxnal implications. 2. The argument is rooted in Art.III, which gave Congress the power to create lower federal courts of limited jurisdiction. 3. The Court also argues that the Swift decision created federalism concerns. 4. The Court also points out that Congress does not even have the power to legislate in the areas of general common law that is reserved to the states. 5. There is no Constitutional basis for holding a federal common law; takes away power that is given to the several states (federalism argument); equal protection concerns there may be 44

a discrimination against a particular state by those outside the state seems to favor those outside the state because they can remove it to federal court and receive lighter treatment; separation of powers concerns if you allow federal common law almost becomes like a legislature because it makes common law dealing with everything it hears. 6. Therefore, the Court holds that there is no federal common law; instead, the federal court sitting in diversity is bound to follow the law of that state, even if it is judge-made common law. d. KEY POINT: When a Federal Court is sitting in diversity, the statutes of the state and the common law of the state in which theyre sitting should be followedTHERE IS NO GENERAL FEDERAL LAW!! e. Notes: 1. This case overrules Swift v. Tyson, the leading pre-Erie case. 2. Conflicts question: which state law applies? D. THE LIMITS OF STATE POWER IN FEDERAL COURT 1. In the years since Erie, the Supreme Court has addressed questions in an effort to mediate between opposing principles: i. That Erie requires deference to State Courts as lawmaking bodies ii. That Federal Courts are an independent judicial system 2. QUESTION REMAININGWhen may Federal Courts use Federal Law instead of State law? 3. Guaranty Trust Co. v. York (1945): i. Facts: Plaintiff sued a bond trustee in a federal diversity action alleging misrepresentation and breach of trust. NY substantive law governed. Defendant invoked NY SOL. Plaintiff argued that the SOL did not bar the suit because it was on the equity side of federal court. Courts in equity did not traditionally consider themselves bound by SOLs. ii. Issue: Whether, when no recovery is possible in state court because the action is barred by the SOL, a federal court in equity can take cognizance of the suit because there is diversity of citizenship between the parties. iii. Manner /means (fed. Law) vs. substance (state law) iv. Holding: No. Action is barred. (no federal doctrine of laches) v. Would the law effect the outcome of the casesubstance vi. RULE: Outcome Determinative Rulecourts should insure that a case that could be filed in state would have the same outcome if it was filed in federal court. a. A state rule that was outcome-determinative was to be followed, no matter how it might be labeled. vii. Reasoning: Courts need to cut down on forum shopping. viii. Traditional Substance v. Procedure rule 45

a. Substance Questionapply state law b. Procedure Questionapply federal law ix. Court saysdont give too much weight to this substance v. procedure rule a. The question is whether such a statute concerns merely the manner and the means by which a right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance in the aspect that alone is relevant to our problem, namely, does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a state court? x. TESTMANNER & MEANS a. The way in which the goes about vindicating his rights b. If the law to be applied relates to the manner & meansAPPLY FEDERAL LAW xi. TESTOUTCOME DETERMINATIVE TEST a. If applying state law and applying federal law would give rise to different outcomes b. If the law to be applied significantly affects the result of a litigation APPLY STATE LAW 4. Ragan v. Merchants Transfer & Warehouse Co. i. ISSUEWhen does a lawsuit begin, for statute of limitations purposeswhen filed (Rule 3) or when served (KS practice)? ii. HOLDINGState law followed 5. Cohen v. Beneficial Indus. Loan Corp. i. ISSUENJ statute required small shareholder suing corporation to post bond for expenses; Rule 23.1 did not so require ii. HOLDINGState law followed 6. Bernhardt v. Polygraphic Co. of America i. ISSUEVT barred arbitration of employment practices; federal statute arguably required arbitration ii. HOLDINGState law followed 7. Woods v. Interstate Realty Co. i. ISSUEMS statute barred out-of-state corporations not paying MS taxes from suing in state courts; should federal diversity court do so? ii. HOLDINGState law followed (Court didnt consider possible effect of Rule 17(b): look to state of incorporation) 8. Byrd v. Blue Ridge Rural Electric Cooperative (SC- 1958): a. Facts: Plaintiff was injured while on a construction job for defendant; sued in tort. Although he was employed by an independent contractor, defendant contended plaintiff was doing the same work as defendants regular employees and, therefore, was a statutory employee whose exclusive remedy was under the SC Workmens Comp Act. The issue of 46

b.

c. d. e.

immunity came up, which is a matter for the judge under SC law, but a matter for a jury under federal law. Issue: Should the state policy of having the judge decide a particular issue of fact trump the federal rule of having a jury decide in the interest of uniformity of outcome? Holding: Federal law applies and the jury should decide in this case. Reversed. RULE: The federal practice will be used when it is not certain that using the federal rule will be outcome-determinative. Reasoning: 1. Questions Brennan asks: i. Whether the issue is bound up with state-created rights and obligations in such a way that its application in the federal court is required OR, ii. Is it an issue of form and mode + Outcome Determinative (if outcome determinative, then state law should apply) iii. Is there an affirmative countervailing consideration? 2. First look at SC Workmens Compensation ActErie requires that Federal Court sitting in diversity examine the substance of the state law i. Looking to see what kind of importance the state places on whether a judge or jury hears these cases in the statute ii. Is choice of judge/jury bound up with state-created rights and obligations? a. Justice Brennan find that it is NOT b. [If found that it washe would apply state law] iii. This is an issue of FORM & MODE a. Is this outcome determinative? 1. If yesapply state law 2. If noapply federal law b. Brennan finds that we dont know if its outcome determinative 1. In this case, looking to affirmative countervailing considerations 2. Here, 7th AmendmentAPPLY FEDERAL LAW

DECISION TREE:
(1) Bound up with rights and obligations? o If yes, apply state law. 47

o If no, it is a Form & Mode issue. (2) Form & Mode o Is this OUTCOME DETERMINATIVE? If yesapply state law If noapply federal law If unsurelook to affirmative countervailing considerations E. De-Constitutionalizing Erie 1. Under both Guaranty Trust and Byrd, Erie questions are constitutional matters; whether federal courts should follow the state practice is a constitutional question. i. That framing of the issue is consistent with Erie itself, which rejected the invitation to reach its decision as an interpretation of the Rule of Decision rather than the Constitution. 2. Hanna v. Plumer i. While purporting to overrule none of the cases in the Erie line, this case reframes the issue as one of statutory rather than constitutional interpretation. 3. FRCP v. State RCP conflict i. Article III, 1 power to create federal court also gives Congress power to write rules of Civil Procedure that govern federal courts ii. Questions to ask: a. Is this a rule of civil procedure? b. Would applying FRCP disturb purposes of Erie? ii. FRCP governs in Federal Court 4. Hanna v. Plumer (1965): i. Facts: This case arose out of a diversity suit for personal injuries where the defendant was the estate of one of the drivers involved. Mass. law required personal service of process on a defendant served as executor of an estate, but Rule 4, which plaintiff followed, allowed for the complaint to be left with a competent adult at the residence of any defendant. Plaintiff left the complaint with the defendants wife at his house. (This is outcome-determinative because the legitimacy of service depends on which one we use). ii. Defendant argues: Guaranty Trust (York) says that if the rule is outcomedeterminative, the state rule must be applied iii. Plaintiff says: FRPC are a special case when referring to Erie because theyve been around for a long time and we shouldnt just throw them out because of this concern iv. Issue: Whether, in a civil action where the jurisdiction of the US district court is based upon diversity of citizenship between the parties, service of process shall be made in the manner proscribed by state law or that set forth in Rule 4(e)(2)(B) of the FRCP. v. Holding: The Rule under the FRCP is the standard against which the district court should have measured the adequacy of the service. Reversed. a. Rules Enabling Act, 28 U.S.C. 2072: The SupCt has the power to prescribe, by general rules, the forms of process, writs, pleadings, and 48

motions, and the practice and procedure of the district courts of the US in civil action. Such rules shall not abridge, enlarge of modify any substantive right and shall preserve the right of trial by jury. (Through this Act, Congress gives the SupCt the power to make the federal rules, and the SupCt gives the power to the rules committee) b. The test must be whether a rule really regulates procedurethe judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard of infraction of them. vi. Reasoning: It is difficult to argue that permitting service of defendants wife to take the place of personal service on him alters the mode of enforcement of state-created rights in a fashion sufficiently substantial to raise the sort of equal protection problems to which Erie alluded. a.To hold that a FRCP must cease to function wherever it alters the mode of enforcing state-created rights would be to disembowel either the CXNs grant of power over fed. procedure or Congress attempt to exercise that power in the Enabling Act. 1. The Erie rule has never been invoked to void a federal rule. c. The outcome-determination test (from Guaranty Trust) cannot be read without reference to the twin aims of the Erie rule: discouragement of forum shopping and avoidance of inequitable administration of the laws. The court says this rule is not a talisman. 1. Were not worried about forum shopping because no one is going to choose fed or state court based on service of process rules. Were not worried about inequitable administration of laws because once this case is settled, no one will argue about this again. vii. RULE: If there is a conflict between a state law and federal rule of procedure, follow federal law if the rule is made pursuant to the REA and does not abridge, enlarge, or modify a substantive right. viii. Concur [Harlan]: The proper line of approach in determining whether to apply fed or state law, whether substantive or procedural, is to stay close to basic principles by inquiring if the choice of rule would substantially affect those primary decisions respecting human conduct which our cxnal system leaves to state regulation. If so, Erie and the CXN require that the state rule prevail, even in the face of a conflicting fed rule. a. Public uncertainty over which laws govern would be debilitating. ix. Notes: a. Summary: Outcome determinative judgments are important for deciding if a state or federal rule applies, but in this case, denying the federal rule would remove any power whatsoever that the fed courts have over their procedures. b. Hanna analysis (fed practice flowing from fed rule/statute): Do the rules conflict? If no, then use fed rule. If yes, go through this analysis: 1. Is the statute/rule constitutional? If yes, the court must follow the dictates of that statute. 2. Is the Rules Enabling Act constitutional?

49

3. Does the rule promulgated under the authority of the Rules Enabling Act in fact fit its description: rules of practice and procedure? (HW: this is kind of a false question. Theyre never ruled against a FRCP) i. IF the rule passes these tests, then it must be applied, even if it differs from the state practice in a significant way. F. DETERMINING THE SCOPE OF FEDERAL LAW: AVOIDING AND ACCOMMODATING ERIE 1. Under Hannas reading of Erie, many Erie questions will not require resort to the Constitution because Congress by statute will have told federal courts what to do in the situation. i. So long as the statute is constitutional and one knows what the statute requires, the choice of law problem is solved. ii. But not alwaysthe Federal Courts have encountered a few cases in which the federal interests overcame state practices 2. Burlington North R. v. Woods i. Practice at IssueIs who stays damage judgment but loses appeal liable for 10 percent penalty? ii. State PracticeYes: AL statute iii. Federal PracticeFRAP 38 (discretionary award of extra costs for frivolous appeal) iv. HoldingFederal Practice: NO PENALTY v. ExplanationThe Rules discretionary mode of operation unmistakably conflicts with the mandatory provisions of Alabamas affirmance penalty statute 3. Stewart Org. v. Ricoh i. Practice at IssueIs forum selection clause enforceable? ii. State PracticeNo: AL case law iii. Federal Practice28 U.S.C. 1404 iv. HoldingFederal Practice: ignore state case law, give substantial weight to clause v. ExplanationSection 1404 is intended to place discretion in the district court to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness and trumps states blanket rule 4. Gasperini v. Center for Humanities, Inc i. Practice at IssueMust federal circuit court decide if damages exceed reasonable compensation? ii. State PracticeYes: NY Statute requiring such review by state appellate courts iii. Federal PracticeReexamination clause of 7th Amendment iv. HoldingModify federal practiceby allowing district courts to examine verdicts for effectiveness v. ExplanationUnlike Byrd, where the court faced a one-or-the-other choice: trial by judge as in state court, or trial by jury according to the federal practice, 50

here the principal state and federal interests can be accommodated by district court review. 5. Semtek Intl. Inc. v. Lockheed Martin Corp.decides that a state practice overcomes both a Rule and what Byrd called affirmative countervailing considerations of the federal judicial system. i. FACTSPlaintiff filed a complaint in CA state court, alleging breach of K and other business torts. Defendant removed to fed district court in CA on diversity, and successfully moved to dismiss plaintiffs claims as barred by CAs 2 year SOL. The federal rule is that SOL dismissals operate on the merits with prejudice, but CA state practice says that a SOL dismissal is not with prejudice. This matters because plaintiff filed suit again in MD, alleging the same COA, under a longer SOL. MD state court looks to federal law (FRCP 41(b)). a. Plaintiff says that the case is controlled by Dupasseur v. Rochereau which held that the res judicata effect of federal diversity jurisdiction is such as would belong to the judgments of the state courts and may not be accorded any higher effect. So, under Dupasseur, judgments in CA fed courts would not be preclusive because CA state court practice states that SOL dismissals are without prejudice. 1. Court decides not to apply this rule because it was based off of law created before the FRCP (predates REA) b. Other rule: Involuntary Dismissal rule (41(b)) ii. ISSUEIs the claim preclusion an Erie Problem? a. Since the case is now in Maryland State Court, this is not a traditional Erie problem (not in federal court sitting in diversity) b. Question isWHAT LAW SHOULD A STATE COURT APPLY? c. Why is this in the Erie line of cases? 1. Example of when a state court would have to respect a Federal lawFederal Civil Procedure 41b dismissal with prejudice iii. CONFLICTFRCP 41 and 3 year SOL in Maryland a. FRCP 41ba dismissal under this subsection operates as an adjudication on the merits 1. This leads to claim preclusionsame parties, same claim or claims that were available at the time, fully litigated, decision on the merits b. Court rejects this FRCP 41 argument 1. Court says proper law for Maryland Courts to apply is CA state laws of claim preclusion (the law of the state where the federal court was sitting in diversity) to see what the effect of the first judgment is i. Court doesnt say whether claim would be precluded, just advises to look at the CA law to determine this. ii. Why do we look to CA law?

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a. Issue of SOL is outcome determinative (look to state law) b. The language of FRCP 41 says it wouldnt apply c. Erie purposes: apply substantive state law to avoid forum shopping and make sure there is an equitable administration of justice. iv. RULE: When a federal court decides a case in diversity, a subsequent state court should adopt the rule of the original state in which the district court sits. a. EXCEPTION: Dont follow state rule if it is incompatible with federal interests. b. Example: if state law does not preclude subsequent claim after dismissal for discovery abuse, fed court should not follow state rule because fed courts need to protect the integrity of their judicial process. v. Notes: a. Interpreting FRCP 41 to have a claim preclusive effect would conflict with the Rules Enabling Act because it would remove parties state substantive right to refile the suit. b. HW: why is this not an Erie case? 1. Its not a strict application of the Erie doctrine because this court isnt sitting strictly in diversity c. HW: not critical to our understanding of Erie 6. Shady Grove v. Allstate i. Lady hurt in car wreck, assigned rights to insurance to her doctor ii. Allstate paid the claim late but there was unpaid interest iii. Allstate then sued to get the unpaid interest and then it became a class action b/c Allstate had refused to pay those fees iv. Class action dismissed under NY law v. How do we know this is an Erie case? a. Diversity with conflict of federal and state law b. Fed and State statutes seems to address two different issues but there is a conflict because there is language in the NY statute thats not in the Fed. limitation on ability to file class action c. NY: class action, unless- non statutory penalty. vi. II AMajority a. Steps in a circumstance with conflicting laws b. Does the Federal rule answer the question? (rule 23) c. Does the rule exceed Congress rulemaking authority (not a rule or procedure)? 1. If no- dont go through Erie vii. II-Bplurality a. Dichotomy of substances vs. procedure b. Procedure regulates judicial process by enforcing rights and duties viii. Is rule 23 substantive or procedural? a. Procedural: all litigants have a right to sue , its just the manner in which they are suing (class action) Not the substance of the suit; substance is an expanding of rights- not here (majority) 52

b. Substantive: (dissent) changing it from a $500 case to a $5 million dollar casehuge shift in the rights. ix. Erie Issues- compared to Symtec a. Federalism concerns of Shady Grove 1. States could override Congress authority

VII. Class Actions

A. Objectives 1. Theoretical i. Purpose ii. Benefit to clients ( & ) iii. What do lawyers get from it (ethics) iv. Policy justificationsEfficiency/use of judicial resources/client v. attorney interests 2. Doctrinal i. Outlines of rule 23 ii. Working understanding of prerequisites iii. Categories of class actions B. Rule 23A class action permits one of more parties to sue or be sued as representative parties on behalf of all those similarly situated. (technically a joinder device) 1. Class action allows claimant representatives to get relief for all members of the class, whereas joinder would require participation of all people who want relief. C. When to use? When several parties are similarly situated and it is not physically possible to join them all 1. PROBLEM: The ability to aggregate large numbers of litigants tends to shift the focus from the client to the lawyer, from damages to attorneys fees, and from litigation to settlement, because the class members may have less interest in the suit (able to receive less money per person), but the attorneys fees comes from the entire amount received. D. Before a class is certified it is called a Putative Class Action E. CERTIFICATION 1. FRCP 23(a)to establish a case as a class action, the person seeking to represent the class must show that each of these requirements are satisfied: i. Numerosity a. Established if the class representative can show that enough persons are in the class to make joining them as individuals impractical b. Typically about 100 s ii. Commonality a. Class should consist of persons who share characteristics that matter in terms of the substantive law involved. 1. Common substantive law claimproducts liability, securities and exchange act violations, etc. 53

2. Common remedy 3. Common question of fact/injuryExxon spilled oil and all fisherman suffered injury b. Much litigated questionwhether the members of the class have enough in common to justify certification. iii. Typicality a. Requirement that class representatives stand, in significant respects, in the same shoes as the average class member. 1. Named representative must be typical of the class b. Class representative will be controlling the litigation, making the decisions that a client would be making in a one-client suit. c. In order to protect the interests of the absent class members, one would want the representative client to have the same incentives and motivations as the average class member. iv. Adequacy of Representation a. Class representative herself must have some stake in the litigation. b. Representatives relation to the lawyer should be straightforward. 1. Should not be an employee or a relative of the lawyer 2. Lawyer should have no conflicts that would cloud the representation. 3. Lawyer must be sufficiently skillful and equipped with sufficient support and resources to handle the case. 2. FRCP 23(b) i. After meeting the 23(a) prerequisites, the lawyer seeking class certification still has to show that the litigation fits within one of the three categories of Rule 23(b): a. Rule 23(b)(1) Similarly situated parties should be treated alike 1. Prevents varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class i. Inconsistent verdicts ii. Individual actions dispositive of others rights 2. ExampleShould environmental agencies allow permits for filling of wetlands for certain purposes? i. Classall property owners in a particular area who may be affected by the granting or denial of this particular permit b. Rule 23(b)(2)Where the party opposing the class has acted or refused to act on grounds that apply generally to the class 1. Limited to cases in which the s are primarily seeking injunctive or declaratory relief.

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2. EXAMPLEcivil rights cases where relief sought is an injunction requiring some actionvoter registration, school integrationby a . i. Communities for Equity c. Rule 23(b)(3)comprises all the class actions not captured in 23(b)(1)&(2) 1. All claims in which the s are seeking primarily money damages. i. Small Claims Lawsuitsactions in which many persons allege small amounts of damage ii Mass Tortan airplane crash, a fire, asbestos exposure 2. Common claims of class predominate over the individual questions 3. Class action is superior to allowing individual lawsuits 4. MUST DIRECT NOTICE TO THE CLASS![23(c)(2)(B)] i. Notice is optional in 23(b)(1&2) classes[23(c)(2)(A)] a. In 23(b)(1&2)once a class is certified, NO MEMBERS CAN OPT OUT! ii. Notice IS required in 23(b)(3) because 23(b)(3) has an opt-out procedure 3. FRCP 23(f) i. Takes class action certification into the realm of interlocutory appeal ii. Once a decision is made in terms of granting or denying class action certification, you can apply for an appeal immediately after decision 4. FRCP 23(g) i. Establishes both guidelines and a procedure for appointing class counsel. ii. Places substantial weight on the entrepreneurial activity of counsel in unearthing and investigating the claim, on experience in handling class actions, on knowledge of the applicable law, on the resources the lawyer can bring to bear on the case, and on the fee she proposes to seek if successful. 5. FRCP 23(e)SETTLEMENTS i. Class action claims may be settled or voluntarily dismissed only with COURT APPROVAL a. Prevents from making side-deals with the named s and leaving others with nothing b. EXAMPLEClass representatives say give us each $1 million and well voluntarily dismiss the class claim for $50 million 6. Flow: i. First, Rule 23(b)(3) requires the certifying judge to engage in a complicated weighing of advantages and disadvantagesas a result of which he may rule against certification. 55

ii. Second, Rule 23(c)(2)(B) requires individual notice to class members in all 23(b)(3) classes a. By contrast, 23(c)(2)(A) allows, but does not require, appropriate notice to the class in 23(b)(1) and (b)(2) cases. b. Because the Supreme Court has held that the representative must initially pay for such notice, inability to bear these costs may en the suit. 7. 1332(d)(2) statutory requirements for federal jurisdiction for class actions i. $5 million plus ii. Does not require complete diversityjust need one member of the class to be diverse from any 8. Communities for Equity v. Mich. High School Athletic Assn (1999): i. Facts: Plaintiffs bring suit against the athletic association, alleging that they were excluded from opportunities to participate in interscholastic athletic programs and have received unequal treatment and benefits in these programs due to gender discrimination. Plaintiffs wish to define the class as all present and future female students in enrolled in schools who participate in interscholastic athletics or who are deterred from participating in such because of defendants discriminatory conduct and who are adversely affected by that conduct. ii. Issue: Whether plaintiffs can be properly class certified. iii. Holding: Yes. iv. Reasoning: a. Numerosity exists because thousands of female high school athletes and would-be athletes are subject to the discrimination. b. Commonality satisfied because the common question is whether the defendant in fact acted through the illegal policy or procedure. 1. Where the nature of the legal claims are such that individuals would have to submit separate proofs to establish liability, class actions are disproved due to lack of commonality. 2. Once it is determined that there are common questions of law and fact as to a legal claim, differences in damages sustained by class members will usually not defeat certification. c. Typicality is satisfied and not precluded by the Falcon case. (most difficult hurdle here) 1. Falcon case: Mexican-American brought a discrimination in employment class action suit. Class included all MexicanAmerican employees and applicants for employment. SupCt denied class certification, stating that one allegation of specific discriminatory treatment is not enough to support an acrossthe-board attack. (SupCt requires a rigorous analysis on this issue) i. Falcon does not bar because: 56

a. An association is the class representative. b. There is proof of an underlying policy of discrimination here. d. Adequacy is satisfied. Quality of class counsel is good and the interests of those class members who do not consider themselves adversely affected will be adequately represented by defendants. v. Notes: a. An action seeking monetary damages cannot fall under (b)(2) unless the final injunctive relief or corresponding declaratory relief is the primary relief sought. b. The SupCt has held that the cost of individual notice must be borne by the plaintiff (probably his lawyer), thus increasing the expense of the suit. c. The decision to certify or refuse to certify a class action is often critical for the outcome gives class representive immense bargaining power if granted. 9. Heaven v. Trust Company Bank (1997): i. Facts: Plaintiff Heaven leased a car from Sun Trust, then brought an action alleging that it failed to comply with the disclosure requirements of the Consumer Leasing Act. She sought to certify a class action. Sun Trust counterclaimed, stating that the individual class members had defaulted on the terms of their lease agreements and/or made false statements in their lease applications. ii. Issue: Whether Heaven met the requirements of 23(b)(3) to certify a class action, and the trial court abused its discretion. (deferential standard of review b/c of efficiency and b/c its a fact intensive inquiry) iii. Holding: No. a. Presence of compulsory counterclaims can be a basis for denying class certification; b. Standard of review owes deference to lower courts denial of certification iv. Reasoning: The district court correctly concluded that Sun Trusts counterclaims were compulsory under 13(a). Thus, in this case, individual lessee counterclaim defendants would be compelled to come forward with individual defenses which would require the court to engage in multiple separate factual determinations. Moreover, the interests of some individual class members in controlling their own case would be compromised their exposure as counterclaim defendants could exceed the amount they might recover for statutory penalties as class members. Thus, the class would have to broken into subclasses to avoid these difficulties. v. Notes:

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a. Plant v. Blazer determined that defaults on loans were compulsory counterclaims. b. Distinguish from Michigan: in Michigan, plaintiffs needed to prove individual instances, whereas here, defendant needs to prove specific compulsory counterclaims. c. An adequately represented class is bound by a judgment or settlement 10. Walmart v. Dukes i. What is the impact of this case on class actions? a. Pattern of discrimination arising from discretion requires much more proof b. This may be the end of the nationwide class action certification 1. Instead, move down and file regional or statewide class action suitcommon managers or decision makers so you can run statistics related to those specific people c. Without overtly changing the abuse of discretion standard of review, the Court here suggests that Appellate Courts should also do a rigorous analysis of class certification ii. CLASScurrent and former female employees of Walmart a. 1.5 million femaleslargest class ever certified in US iii. Theory of s caseWalmart gives individual store managers the discretion over pay and promotion of employees, and this discretion is being exercised in a disproportionate way in favor of men and against women; Walmart is aware of this discrimination and hasnt done anything about it iv. Named s3 women a. Ms. Dukesseries of disciplinary actions, demoted to greeter; male greeters were paid more than her (retaliation and disparate pay) b. 2ndwas told to doll up and dress better (harassment) c. 3rdbrushed off when asked about applying for managerial position; eventually was fired (failure to promote) **Various claims of named s was clearly a way for s to address Falcon opinion v. MAJORITY OPINION (Scalia) a. No commonality of no common questions of law or fact 1. introduced lots of evidence on commonalitysociologist testimony on culture of Walmart, statistical evidence of pay discrepancies, anecdotal evidence b. Commonality requires class to show that they suffered the same injurythis does not mean merely that they have all suffered a violation of the same provision of law 1. Must be same contention (ex. One supervisor that was failing to promote) as well as common resolution across the class 58

c. When measuring commonality in this case, s are saying that the question of law is the discretion given to managers and that there is a pattern of managers using that discretion in a discriminatory way 1. Is this gender discrimination so common that its a pattern such that theres a common question of law/fact that 1.5 million women are suffering from gender discrimination?probably not 1. MUST BE A PATTERN TO HAVE A COMMON QUESTION OF LAW/FACT d. Falcon 1. HOLDINGan individuals claim of discrimination cannot be extrapolated into a class action 2. Two ways around this: i. One test used for all employees used to hire/promote that is discriminatory and is used systematically ii. Official company policy is discriminatory e. Disparate Impact Theorydiscretion given to manager results in disparate impact towards women 1. Not good enough hereScalia says that s werent able to prove that all 1.5 million women, having different managers, have a common question of law or fact relatedevery manager uses discretion in a different way and not all will cause disparate impact f. Not an appropriate 23(b)(2) classification23(b)(2) is for injunctive relief and s here are asking for back-pay vi. DISSENTthe rule does not require that ALL questions of law or fact in the litigation be common; even a single question of law or fact in common will satisfy the commonality requirement a. The majority doesnt ask the question of whether there is ANY question of law or fact, but instead asks whether there are questions of law or fact that predominate over individual questions of law/factthis is improper b. Appellate Courts Standard of Review for Class Certificationabuse of discretion 1. District Court did not abuse its discretionshouldve been left undisturbed F. THE CLASS ACTION AND THE CONSTITUTION 1. Representative Adequacy i. Fundamental to the class action is the idea that a suit, conducted by a representative on behalf of a number of persons who are not formal parties, may nevertheless bind the entire represented class.

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a. Departure from the ordinary proposition that one may be bound only by litigation to which one is a party b. DUE PROCESS CONCERN 2. Hansberry v. Lee (1940): i. Facts: The Hansberrys, a black family, bought a house in an area of Chicago allegedly covered by a racially restrictive covenant. The covenant did not take effect unless signed by owners of 95% of the frontage but the signers represented only 54%. Lee brought an action to enjoin breach of the covenant, naming as defendants the Hansberrys and the people from whom they bought the property. a. The Hansberrys said that the covenant was unenforceable because not enough owners signed it but but Lee refers to Burke v. Kleiman, an earlier suit to enforce the same covenant. In that case, a property owner in a class action sued those in violation of the covenant and the court upheld the covenant because the parties had stipulated (falsely) that the requisite 95% had signed. The court upheld the covenant in Burke. ii. Procedure: The SupCt of Illinois determined that Burke was a class action and that the Hansberrys and their vendors were members of the class of plaintiffs in Burke and were therefore bound by the findings in the previous action, even though those findings were factually erroneous. iii. Issue: Whether the Supreme Court of Illinois deprived plaintiffs of due process under 14A by binding them to a judgment rendered in earlier litigation to which they were not parties. iv. Holding: Yes. Denial of the Hansberrys right to litigate is a denial of due process. v. Reasoning: Those who sought to secure the covenants benefits in Burke cannot be said to be in the same class with or represent those whose interest was in resisting performance. A selection of representatives for the purposes of litigation, whose substantial interests are not necessarily or even probably the same as those whom they are deemed to represent, does not afford that protection to absent parties which due process requires. Neither the plaintiffs or defendants in the earlier action represented the Hansberrys plaintiff wanted an opposite effect, and defendants only purported to represent themselves (thus no class action that could bind people later). vi. RULE: Members of a class not present as parties to the litigation may be bound by the judgment when they are in fact adequately represented by parties who are present. vii. Notes: a. Hansberry rule: a judgment in a class action binds absentee members of a class only if they have been adequately represented.

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b. Problem with this case: The US SupCt doesnt have jurisdiction to correct confusion within states courts unless the confusion falls within its jurisdiction so it had to reach the IL judgment by finding a constitutional error. c. A person asserted to be bound by a former class litigation has the right collaterally to challenge the adequacy of representation in the class suit. d. HW: what makes this a real due process case is that its in the same line of cases as Pennoyer and the like e. Must be PRESENT to be bound for litigation exception is class actions f. KEY POINTRes Judicata may not bind a subsequent plaintiff who had no opportunity to be represented in the earlier civil action. What is needed for adequate representation? 1. Members of a class not present may be bound where they are adequately represented by the PARTIES present in the litigation (not limited to just s), 2. OR where they actually participate in the conduct of the litigation in which members of the class are present as parties, 3. OR where the interest of the members of the class, some of whom are present as parties, is joint, 4. OR where for any other reason the relationship between the parties present and those who are absent is such as legally to entitle the former to stand in judgment for the latter G. JURISDICTION 1. Phillips Petroleum v. Shutts (1985): i. Facts: Phillips produces and sells natural gas. Some of this gas came from land leased from others, such as Shutts. Phillips was selling gas at a higher price and then only paying royalties on a lower price. Shutts wants to recover interest on the money that was withheld. There are 33,00 people in Shutts position who get together to sue for the interest but none of these people have much interest, only a small amount. Shutts sues in Kansas state court and provides the best possible notice. The final class contains 28,100 members, and less than 1,000 of these are Kansas residents, while a negligible part of the oil and gas leases are in Kansas. Phillips makes a personal jurisdiction argument that only the KS plaintiffs can sue. ii. Issue: Whether Ks may exercise jurisdiction over absent plaintiffs in this class action suit. iii. Holding: Yes. iv. Reasoning: A forum state may exercise jurisdiction over the claim of an absent class-action plaintiff, even though that plaintiff may not possess the minimum contacts with the forum which would support PJ over a defendant. 61

The plaintiff must receive notice plus an opportunity to be heard and participate and the ability to opt out (this later gets built into Rule 23). a. REASONINGPersonal jurisdiction over absent class members in a class action is not evaluated under the minimum contacts test governing personal jurisdiction over absent class members. Absent class members in cases involving money judgment must be given notice. However, the decision is binding if the plaintiff is given adequate notice, is adequately represented and does not opt out. The choice of law governing a class action must not violate the full faith and credit clause or the due process clause of the Constitution. The state (not the parties) must have a connection to the litigation so as not to make applying its law unfair or arbitrary. a. Any state class action statute will need a NOTICE PROVISION: 1. Due Process must receive notice plus an opportunity to be heard and participate in the litigation, whether in person or through counsel. The notice must be the best practicable, reasonably calculated under all the circumstances to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. v. Notes: a. This concept that notice is a constitutional concept for plaintiffs in the class action realm plaintiffs do receive minimal due process protections, including the right to receive notice b. When you have nationwide class actions and state law applies, use the principles from the state where the case is filed, then use law based on where plaintiffs are from. c. This holding rests on the idea that the burdens are different on defendants than on class action plaintiffs defendants are hailed into court with certain burdens on them to defend a lawsuit, this is different from plaintiffs. H. CLASS ACTION FAIRNESS ACT OF 2005 1. When a class suit is based on a federal statute, jurisdiction will arise under federal law and 1331. i. But what about diversity cases? a. Supreme Tribe of Ben-Hur v. Caubleheld that for purposes of diversity, courts should look to the citizenship only of the class representatives and ignore the class members. 1. Supreme Tribe thus created an exception to the complete diversity rule for class actions, and to that extent lowered jurisdictional barriers to the multistate diversity-based class action. 62

b. 1966 Rules Revisions 1. Supreme Court held that both the named and each member of the class had to satisfy the amount in controversy requirement. c. Exxon Mobil Corp. v. Allapattah Services, Inc. 1. Court interpreted the supplemental jurisdiction statute (28 USC 1367) to allow such smaller-claims actions under the basic diversity statute, so long as the named party satisfied the amount in controversy requirement. 2. Class Action Fairness Act of 2005 i. Makes broad use of the principle that Article III requires only minimal diversity ii. Grants original jurisdiction to the federal courts in class actions in which any member of the class of s possesses the requisite diversity with respect to any . iii. Ability to aggregate claims of all class members to reach the $5 million amount in controversy requirement. iv. Such suits may be brought under original jurisdiction, or under the provisions of 1453, may be removed by any , whether or not a citizen of the state in which the action arose [GETS RID OF HOMETOWN RULE FOR CLASS ACTIONS!] v. The Act allows federal courts to remand actions in which state interests seem to predominate a. 1332(d)(3) defines the factors relevant to the discretionary power to decline federal jurisdiction 1. Relative size of the in-state and out-state class membership 2. Whether the claims asserted involve matters of national or interstate interest 3. What states law will apply to the claims 4. The connection of the forum to the class members, the harm, and the . b. 28 USC 1332(d)(4)circumstances in which a federal court MUST decline jurisdiction 1. if more than 2/3 of the class members are in state; 2. at least one significant defendant is in state; and 3. the injuries giving right to the claim occurred in state. vi. Makes broad use of the principle that Article III requires only minimal diversity. a. Grants original jurisdiction to the federal courts in class actions in which any member of the class of plaintiffs possesses the requisite diversity with respect to any defendant. b. Also allows aggregation of claims of all class members to reach the $5 million amount in controversy requirement. 63

c. CAFA both allows and commands federal courts to remand actions in which state interests seem to predominate. I. SETTLEMENTS OF CLASS ACTIONS A. Rule 23(e)Requires court approval of any settlement of a class action i. Rule 23(e)(1)To order such approval, the judge must first direct notice in a reasonable manner to all class members who would be bound by the proposal. a. Notice must occur without regard to what sort of class action is involved b. Does NOT require individual notice: 1. Can be newspaper ads, online postings, radio spots, etc. 2. Such notices include information about the terms of settlement and that those objecting to the terms of the settlement may do so. c. If the settlement involves a 23(b)(3) classmust offer a second chance for individual members to opt out of the class and settlement. d. 23(e)(5)to prevent objectors being bought off by the settling parties, objections may not be withdrawn without court approval ii. After NOTICEthe court conducts a hearing at which it hears argument from the settling parties about why the settlement is fair to the class members iii. Class Action Fairness Act of 2005 a. Requires that if the is subject to state or federal regulation, that the regulatory authorities be notified of the suit and a pending settlement (28 USC 1715) a. Idea is that a regulator could appear at a settlement hearing and offer an opinion about the appropriateness of the settlement B. FEES 1. In ordinary litigation, the client pays the lawyers fee because she agreed to do so, and the lawyer may not settle without the clients agreement i. Neither holds true for class actions 2. In class actions that recover money damages, courts apply the common fund doctrine: i. A whose efforts create a fund is entitled to have those who benefit contribute to his lawyers fee ii. In class actions that create funds for distribution to class memberscourts regularly award the class lawyer a fee taken directly from the fund created by the litigation a. How should the court calculate such a fee? 1. A simple percentage is appropriate, using the analogy of contingent fee arrangements. 2. The Lodestar Methodstart with the appropriate hourly rate of the lawyer taking into account factors such as special risk, novelty of the issues, etc. 64

3. Rule 23(e) i. Fee award is made in the context of a settlement approval hearing a. At that hearing, the representatives of the and , who will have agreed on an appropriate amount of fees, are unlikely to raise questions casting doubt on the agreed amount or on the vigorousness of the litigation leading the settlement ii. To prevent the s lawyer from being bought off *higher fees for lower relief settlement]: a. Rule 23(e) requires notice to the absent class members and a hearing and judicial finding that the proposed settlement is fair, reasonable, and adequate. b. Rule 23(h) creates a process the court must use to approve any feesincluding those embodied in a settlement: 1. Requires notice, hearing, findings, and opportunity to object to fees C. Settlement and Dismissal 1. Suppose a class with great potential liability could be certifiedand the claims then settled for far less than they were worth. i. Such a settlement would, through the doctrines of former adjudication, bar its members from individual suits. 2. Amchem Products, Inc. v. Windsor i. Just because its a settlement class DOES NOT MEAN you can over look 23(a)&(b) certification requirements!! ii. Facts: The volume and complexity of asbestos litigation led the Judicial Panel on Multi-District Litigation to transfer all asbestos claims filed in federal courts, but not yet on trial, to the Eastern District of Pennsylvania. After the cases were consolidated, counsel for the plaintiffs and defendant manufacturers reached a partial settlement: a class consisting of all individuals with potential asbestos claims who had not yet filed suit would be certified under 23(b)(3) for purposes of settlement only. The proposed settlement provided for set compensation for certain asbestos-related diseases. The district court approved the plan and certified the class. The 3rd Cir vacated the order and found that the requirements of class certification had not been met specifically, the court held that while a class may be certified for the sole purpose of settlement, the certification requirements of Rule 23 must still be met as though the case were going to trial. In this instance, the class failed to demonstrate that common issues predominated over other questions (23(b)(3)), or that the named plaintiffs would fairly and adequately protect the interests of the class. iii. Issue: May settlement play a role, under Rule 23, in determining the propriety of class certification? iv. Holding: Yes, but a limited role only.

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v. Reasoning: A court considering a class for settlement need not consider whether certification would present intractable management problems at the trial stage, but the remaining requirements of Rule 23 must be met. Here, the requirements were not fulfilled. a. Common issues did not predominate given that some of the class members had not yet manifested physical disease, and those that had injuries were not all the same (23(b)(3)). All lawyers represented different issues some plaintiffs have already filed claims and some havent filed. These groups have very different interests. b. Furthermore, the named parties would not adequately represent the class because those currently injured had different interests from those who had been exposed to asbestos but had not yet developed any symptoms. vi. Notes: a. Just because these cases are unmanageable and Congress hasnt dealt with the problem, doesnt mean its the role of the courts to step in. b. This case demonstrates the importance of subclasses cant have nine named plaintiffs representing everyone in a single class.

VIII. Appeals
A. The US litigation system operates with a heavy presumption that the trial court decision is correct (80-90% affirmance rate). B. Who can appeal? 1. To appeal, you need: i. Adversity (ruling must be something other than what was requested) a. This applies to a winning appealing for further reliefmust have adverse ruling to you b. If you have multiple COAs and you only win on one COA, we have to ask whether you received the type of remedy requested. c. Aetna: prevailed on contract theory but did not prevail on fraud theory. 1. What circumstances could appeal? i. Must show that lost in some waythere was something to gain on the fraud theory that they lost out on (punitive damages; ie.) 2. HOLDINGRuling for breach of contract but not fraud is adverse because relief would be different among the two COAs d. If s summary judgment is denied, can appeal this immediately? 1. NOgoes to trial on the issue and there will be a finding

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2. To preserve the issue for appeal later, must actually object at trial i. Pre-trial motion for SJ is not enough to preserve the issue ii. Can move for Rule 50 Motion for New Trial iii. Request in Jury Instructions 3. Plain Error Exceptionif forgets to object during trial, can still argue that the error has seriously affected the fairness, integrity or public reputation of the judiciary proceedings i. Dont want to punish the party for lawyers mistake (DUE PROCESS) ii. Finality (Must satisfy 1291, 1292(a), or (b), or Collateral Order Doctrine) Ripeness. a. Final Judgment Rulemay not appeal unless there is a final judgment [1291] b. Federal Appellate Court has jurisdiction over all final decisions of federal district courts [1291] 1. A final decision is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. (Catlin v. United States) c. 1291 has two functions: 1. Defines the moment at which appeal is proper, and 2. Grants jurisdictions for the appellate courts to hear that appeal. d. EXCEPTIONMay be appealed without a final judgment1292: INTERLOCUTORY APPEAL 1. 1292(a)(1)Injunctions; Appointing Receivers (bankruptcy); Admiralty i. Granting, refusing, modifying, granting continuing, or dissolving is immediately appealable 2. 1292(b)controlling question of law as to which there is substantial ground for difference of opinion, and that will materially affect the case. i. District Court must make all 3 of these findings to certify the interlocutory appeal ii. If so, party seeking appeal must appeal to Appellate Court within 10 days iii. Appellate Court can then either hear or refuse interlocutory appeal 3. What happens when interlocutory appeal is granted? i. District Court can STAY the case ii. Take other questions to trial if they can be separated 67

e. Federal appellate courts shall have jurisdiction over: 1) 1291: all final decisions of federal district courts 2) 1292(a)(1): District court interlocutory orders modifying, granting continuing, or dissolving injunctions (immediate appeal) 3) 1292(a)(2): District court interlocutory appointments (immediate appeal) 4) 1292(b): (immediate appeal) Order where: i. District court believes there is a controlling question of law with a substantial ground for difference of opinion, and a. Novel issue or significant circuit split ii. District court must believe immediate appeal may materially advance the end of litigation, and iii. Appellate court agrees. 2. Note: If issue not raised through JMOL/JNOV plain error review on appeal C. FRCP Rule 8 D. 54(b)if multiple causes of action, can get final judgment on one cause, and the other go to trial. Same for claim and countercan get a ruling on counter and claim go to trial. 1. Liberty Mutual Insurance Co. v. Wetzel (1976): i. Facts: Wetzel filed a complaint in district court asserting that Libertys employee insurance benefits and maternity leave regulations discriminated against women in violation of Title VII of the Civil Rights Act of 1964. The district court ruled in favor of respondents on the issue of petitioners liability under the Act, and petitioner appealed to the 3rd Circuit, which affirmed on the merits. a. Appellate Court raised the issue of Final Judgment Sua Sponte ii. Issue: Whether the district courts judgment was final, and thus appealable. iii. Holding: The district courts order was not appealable to the Court of Appeals. The district courts decision was not final because it did not grant any relief asked for by plaintiffs, even though the order said the policies violated Title VII. Liability ruling but no relief. a. Not certified as an interlocutory appealnow certification under 1292(b) and not a 1292(a) b/c there was no injunction. b. Not a proper interlocutory appeal iv. Reasoning: Under 54(b), a court may give partial final judgment where there are multiple claims for relief. Here, however, the plaintiffs only assert a single claim or legal theory, even though they brought multiple requests for relief thus, 54(b) does not apply and the decision was not final. Citing 54(b) and using the words final judgment in an order does not make an order a final judgment. a. Were we to sustain the procedure followed here, we would condone a practice whereby a district court in virtually any case before it might 68

render an interlocutory decision on the question of liability of the defendant, and the defendant would thereupon be permitted to appeal to the court of appeals without satisfying any of the requirements that Congress carefully set forth. v. Notes: a. 54(b) applies to single-claim actions, not multiple claim actions b. Appellate courts have the power and duty under 1291 to consider appealability even if neither party raises the issue c. Partial summary judgment: doesnt dispose of every issue in the case d. 1291 can be brought by the court sua sponte e. The basic argument for the final judgment rule involves a cost-benefit calculation f. Use of 54(b) will create a 1291 and 1292 issue. The use 1291, we must find a final judgment (possibly under 54(b)). If not a final judgment, we must use 1292. g. Final decision is jurisdictional 2. HW Appeals Check List i. Final judgment? a. 54(b) final judgment does not have to be case specific (finality for one claim or party is sufficient). ii. Statutory exception? a. 1292 b. 23F iii. Common law exception? a. Collateral order doctrine E. Exceptions to the Final Judgment Rule 1. Collateral Order Doctrine 2. Lauro Lines s.r.l. v. Chasser (1989): i. Facts: Respondents are or represent the estates of persons who were passengers aboard the cruise ship Achille Lauro when it was hijacked by terrorists on the ocean. Petitioner owns the ship. Respondents filed suits against Lauro Lines in the district court to recover damages for injuries sustained as the result of the hijacking and for the wrongful death of a passenger. Lauro moved to dismiss the actions, citing the forum-selection clause printed on each passenger ticket, which purported to obligate the passenger to institute any suit in connection with the contract in Italy. ii. Procedure: a. District court denied motion to dismiss, holding that ticket did not give reasonable notice of waiver. b. Without moving for certification for immediate appeal under 1292(b), Lauro sought to appeal to the 2nd Circuit.

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c. 2nd Circuit dismissed appeal on the ground that the district courts orders denying the motions to dismiss were interlocutory and not appealable under 1291. the orders did not fall within the exception to the rule of nonappealability carved out for collateral final orders. iii. Issue: Whether an interlocutory order of a district court denying a defendants motion to dismiss a damages action on the basis of a contractual forum-selection clause is immediately appealable under 1291 as a collateral final order. a. Is this a final judgment?No, doesnt end the litigation on the merits; litigation will continue even after the interlocutory decision b. Is this a 1292 interlocutory appeal exception? 1. 1292(a)doesnt fit these categories 2. 1292(b)no evidence that there is substantial ground for difference of opinion iv. Holding: No. v. Reasoning: An order denying a motion to dismiss a civil action on the ground that a contractual forum-selection clause requires that such suit be brought in another jurisdiction is not a decision on the merits that ends the litigation. On the contrary, such an order ensures the litigation will continue in the district court. a. Collateral Order Doctrine: an exception for a small class of prejudgment orders that finally determine claims of right separable from, and collateral to, rights asserted in the action, and that are too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated. 1. Three Conditions of Doctrine (from Cohen v. Beneficial Industrial Loan Corp): i. Must conclusively determine the disputed question, ii. Resolve an important issue completely separate from the merits of the action, and iii. Be effectively unreviewable on appeal from a final judgment. a. If you dont have the opportunity to raise this issue now, then youll lose your right forever. b. The Court holds that the district courts order is not effectively unreviewable. 1. An order is effectively unreviewable only where the order at issue involves an asserted right, the legal and practical value of which would be destroyed if it were not vindicated before trial. 2. Although Lauro argues that they will lose their contractual right not to stand trial in America, the case is not effectively 70

unreviewable because Lauro could still argue not to enforce in Italy. vi. Concur [Scalia]: In this case, the right is not sufficiently important to overcome the policies militating against interlocutory appeals. a. Critique of how test is applied b. Real question the case turned onHow important is the issue? 1. This should be element #4 of the Collateral Order Doctrine vii. Notes: a. HW: there are many reasons why this court would want this case to be heard in the states. b. Important exclusion to the final judgment rule: 1. 1292(a): allows appeals from interlocutory orders of the district courts Granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions. c. Immunity cases- protection from being sued anywhere- forum selection clause is not a protection from suit it just restricts where the suit can be filed. d. 1292(b)300 a year certified by district courts and only 100 a year accepted by courts of appeals (rare) 1. Collateral Order Doctrine should not be applied in many cases 3. Writ of Mandamus: i. A writ of mandamus, obtained in an original proceeding in the court that issues the writ, orders a public official to perform an act required by law. (may be a judge of a lower court) ( 1651) a. This is a rare and drastic issuance b. What do you have to argue to establish youre entitled to Writ of Mandamus? 1. High barshow that the lower court is abdicated its judicial role; refusing to fulfill its judicial obligations i. Case will be ordered to be dismissed if this is proven F. Scope of Review 1. Spectrum of Review (Holley-Walker): i. De novo (least deferential) ii. Abuse of discretion iii. No review (most deferential) 2. Anderson v. Bessemer City (1985): i. Facts: Anderson brings a gender discrimination in hiring case under Title VII; alleges that she was denied a position with the city due to her gender. She was the only woman who applied out of 5 other men. The district court made several findings supporting its holding that Anderson had been denied

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employment because of her sex. The 4th Cir reversed, and held that three of the findings were clearly erroneous. ii. Issue: Whether the district courts finding was actually clearly erroneous. iii. Rule: FRCP 52(a)findings of fact shall not be set aside unless clearly erroneous, and due deference should be given to trial court a. A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. (US v. US Gypsum Co.) iv. Holding: No. The Court of Appeals misapplied the clearly erroneous standard. v. Reasoning: The findings of the district court regarding Andersons qualifications, the conduct of her interview, and the bias of the male committee members were not clearly erroneous therefore the courts finding that Anderson was discriminated against on account of her sex was also not clearly erroneous. a. The Court of Appeals failed to give due regard to the ability of the district court to interpret and discern the credibility of oral testimony. b. Clearly erroneous means that although there is evidence to support a finding, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. v. Notes: a. Why is the standard of review clearly erroneous when reviewing the trial courts findings of fact? 1. Closer to the action 2. Better at determining credibility 3. With experience comes expertise 4. Efficiency b. Rule 52: findings of fact and findings of law have different standards of review on appeal. 1. Legal finding: de novo standard; least deferential; look anew to questions of law and dont have to defer at all to the district courts findings 2. Trial court judges become experts at making factual findings an expertise that he court of appeals doesnt have. 3. De novo review on the appellate level would also be very expensive and time consuming. 4. 56(a)(6): Findings of fact, whether based on oral or documentary evidence, must not be set aside unless clearly erroneous. c. Decisions about admissibility of evidence, class action certification and discovery are all reviewed under abuse of discretion standard

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d. In the area of punitive damage awards, the Court has not only permitted but required searching appellate review of facts and their application to law. This strips both jury and trial judge of the deference granted to such fact-finding and law-application. e. RULE: trial court conclusions of law are not entitled to any deference. 1. Erie: a court of appeals should review de novo a district courts determination of state law. f. Note: Harmless Error. 1. Federal courts are forbidden to reverse for errors or defects that do not affect the substantial rights of the parties. (courts typically do so by speculating about the likely outcome of the case in the absence of the error). 3. Harnden v. Jayco, Inc. (6th Cir, 2007): i. Facts: Harnden purchased a vehicle and returned it several times for repairs. When the repairs did not fix the vehicle, he sued Ford, which made the chassis and motor, Jayco, which made the body, and Bridges, the dealer who sold the vehicle, in Michigan state court. All claims against Ford and Bridges were either dropped or dismissed. Jayco moved for summary judgment on all claims against it, relying in part on an expert report prepared by Zonker, their employee. Zonkers report was allowed by the court as admissible evidence, even though it was not in the proper form of an affidavit or sworn statement, as required by Rule 56. Harnden appeals the courts order granting summary judgment on this basis. ii. Issue: Whether the district court erred in admitting the Zonker report into evidence. iii. Holding: No. Admission of the report was a harmless error. iv. Reasoning: An error is harmless if it does not affect any partys substantial rights. At trial, Jaycos counsel offered to submit the report in an admissible form, but the court did not take him up on it. The 6th Cir notes that sending this case back to the trial court will just result in the report being submitted in admissible form, which will grant the same outcome. Harnden knew of the report, admissible or not, well in advance, and had ample time to procure his own expert report. v. Notes: a. Some states have a rule that the failure of a judge to give a jury instruction that is a correct statement of law and relevant to the case is reversible error

IX. Respect For Judgments

A. CLAIM PRECLUSION (RES JUDICATA)

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1. Claim preclusion forbids a party from litigating a claim that was, or could and should have been raised, in former litigation. i. Elements: a. Between Same Parties 1. Exceptionparties in privity (consecutive ownership or contractual relationship) 2. Three Situations Resulting in Binding a Nonparty: i. Substantive Legal Relationships ii. Express Agreement to be Bound by a Decision to which One is not a Party iii. Instances of Procedural Representation b. Same Claimclaims arising out of the same transaction or occurrence (leading test; stated in Frier concurrence and Restatement) c. After Final Judgment d. Judgment on the Merits 1. Full Jury Trial 2. Judgment as a Matter of Law 3. Summary Judgment [if it is granted] 4. Dismissal for Failure to Prosecute [without good cause determined case by case] 5. NOT: i. Dismissal after Rule 12(b)(2) motion for want of personal jurisdiction 6. Dismissal after a Rule 12(b)(6) Motion for Failure to State a ClaimGOES EITHER WAY i. Why it should be a final judgment on the meritsif all claims in complaint are taken to be true, there are no grounds for relief (this is on the merits) ii. Why its not a final judgment on the meritsif it is a drafting mistake; should get at least 1 leave to amend ii. Goals: a. Efficiency 1. Argue all claims arising out of one occurrence between the same parties at one time 2. Preserve scarce resources 3. Frier v. City of Vandalia b. Finality 1. Court wants people to put the judgment behind them and move on, not drag out a resolution. Defendant doesnt have to worry that plaintiff will come back and sue 10 years from now c. Avoidance of Inconsistent Judgments

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1. Defendant can be liable in one proceeding, and the same defendant not liable in another proceeding arising from the same occurrencedoesnt make sense and lowers confidences in the courts 2. Respect for Rule of Law 3. Full Faith & Credit 4. Martino v. McDonalds System, Inc. iii. HypoCar accident. Plaintiff sues defendant for personal injury and jury finds defendant not liable for the accident. Plaintiff files a suit against defendant and seeks separate damages for the car. Defendant raises claim preclusion as a defense, and the claim will be precludedsame parties out of same transaction or occurrence. iv. Frier v. City of Vandalia (7th Cir, 1985): a. Facts: Several of Friers cars have been towed by the city, and he wants them returned to him (replevin COA). The state court found for the city, stating that the city had a right to take his cars for parking them in the street. He then filed a federal civil rights claim based on the Due Process clause in federal court. He stated that he was denied due process because the city did not give him a hearing before taking his cars (they waited a month). The city filed a motion to dismiss based on res judicata. 1. COA is different; remedy sought is different b. Issue: Whether Friers claim was precluded under the doctrine of res judicata. 1. HOW TO RAISE PRECLUSION: i. FRCP 8(c) must affirmatively raise defense in the answer ii. 12(b)(6)failure to state a claim upon which relief can be granted motion to dismiss on the basis of res judicata c. Holding: Yes. d. Reasoning: Court states that causes of action are identical where the evidence necessary to sustain a second verdict would sustain the first, i.e., where the causes of action are based upon a common core of operative facts. (IL law) 1. The Court uses Illinois law to decide even though the case is in federal court on the basis of a federal question, because 1738 Full Faith and Credit Act tells the court they it should give the same respect for the judgment that the lower court did (in this case, the IL state court). (NOT Erie doctrine because its not founded in diversity). 2. Under IL law, we get the SAME EVIDENCE STANDARD (minority standard): i. One suit precludes a second suit where the parties and the COAs are identical. COAs are identical where evidence necessary to sustain a second verdict would 75

sustain the first (i.e., where the COAs are based upon a common core of operative fact). Two suits my entail the same COA even though they present different legal theories and the first suit operates as an absolute bar to a subsequent action. 3. Majority of courts uses the SAME TRANSACTION STANDARD (adopted by the Restatement): i. A broader standardall claims arising from a single transaction broadly defined to include matters related in time, space, origin, and motivation must be litigated in a single initial lawsuit or be barred from being raised in subsequent litigation. e. Notes: 1. Friers law (generally accepted): in trying to decide the preclusive effect of a judgment, one should look to the jurisdiction rendering the judgment. v. Martino v. McDonalds System, Inc. (1979): a. Facts: Martino agreed with McDonalds that he would lease a local franchise the agreement provided that neither he nor anyone in his immediate family would acquire a financial interest in a competing restaurant without the consent of McDonalds. Six years later, Martinos son purchased a Burger Chef franchise. McDonalds brought a suit to enforce the no-relative clause, and the suit ended with a consent judgment agreeing that Martino would sell his franchise. Martino then brought a claim against McDonalds, claiming that it violated Section 1 of the Sherman Antitrust Act. The district court held that res judicata and the compulsory counterclaim rule of FRCP 13(a) barred Martino from suing. 1. Theory as to why 2nd lawsuit should be precluded: i. Martinos anti-trust claim was a compulsory counterclaim in the first action (same transaction or occurrence) ii. Res judicata claim preclusionsame COA b. Issue: Whether a consent judgment against Martino precludes the cause of action set forth in the complaint. c. Holding: Yes. Affirmed. d. Reasoning: The court says that Martino is correct Rule 13(a) has no effect because Martino never filed a pleading, However, the court says that McDonalds is correct to say that Martinos new claim is precluded by res judicata. If Martino wanted to bring up antitrust as a defense in the first suit, he had to use it or lose it at that point and he cant bring it up now. e. RULE: Once a judgment has been rendered on a claim, all possible issues related to that claim are considered settled even if they werent brought up in the first suit. f. Notes: 1. Parties can be in privity meaning that both parties are bound to one judgment. It is possible for someone not formally 76

named as a party to be so closely connected to a suit that it is appropriate to treat him as if he were named (because he essentially represents the same legal right). 2. The term merely expresses the conclusion that the person whose name was not on the caption of the first case should nevertheless be bound. vi. Searle Brothers v. Searle (Utah 1978): a. Facts: Edlean Searle sued Woodey Searle for a divorce. The court determined that a piece of property recorded in Woodeys name (Slaugh House) was part of the marital property. Woodey argued that he only had a half interest in the property and that the other half was owned by a partnership with his sons as partners. The court awarded the entire property to Edlean to even out the distribution of marital property. The sons brought suit against Edlean for their half interest because they said Slaugh House had been paid for with partnership funds. The trial court held that claim and issue preclusion barred this action. b. Issue: Should the Searle Brothers be bound by the final judgment of the divorce case as a matter of either issue preclusion or claim preclusion? (Were the sons in privity with the father?) c. Holding: No. Just because they couldve been a party to the prior action but failed to get involved doesnt bar them from litigating their own claim. d. Reasoning: The court states that in general, a divorce decree, like other final judgments, is conclusive as to parties and their privies and operates as a bar to any subsequent action. However, the sons were not in privity with their parents their interest was neither mutual nor successive. The partnership interest was not legally represented in the prior divorce suit because Woodey was acting as the husband of the plaintiff and was not acting in a representative capacity for the partnership. 1. General ruleAgents and principals do not have any mutual or successive relationship to rights of property and are not, as a consequence thereof, in privity with each other. e. Notes: 1. Rule from this case: A strong legal relationship is required to bind someone to a judgment in a case to which he was not a party. i. Courts will bind nonparties to judgments if: a. Substantive legal relationships b. Express agreement to be bound by a decision to which one is not a party c. Instances of procedural representation 2. The final judgment requirement for claim preclusion doesnt always receive a completely literal interpretation. 3. The usual rule is that a judgment is final even when an appeal is pending. vi. Gargallo v. Merrill Lynch (6th Cir, 1990): 77

1. Facts: Gargallo opened a brokerage account with Merrill Lynch and losses occurred. When he did not pay his debts, ML filed suit for collection in Ohio. Gargallo counterclaimed, alleging the ML lost his funds and that the firm had violated federal securities laws. The state court dismissed with prejudice because Gargallo failed to comply with discovery orders. Gargallo then filed a complaint in federal court, with the same charges against ML. The federal district court dismissed the suit against ML on res judicata grounds, for the same claims asserted. 2. Issue: (1) Whether the original dismissal was on the merits for purposes of claim preclusion. (2) How the jurisdictional defect in the first proceeding ought to affect claim preclusion a. Gargallos strongest argumentdismissal under FRCP 37 is not a judgment on the merits i. BUTCourt says it is a judgment on the merits b. Would Ohio treat this as claim preclusion? i. The federal courts are required under 28 USC 1738 to determine the preclusive effect of prior state court judgments, pursuant to the law of the state in which the judgment was entered, event as to claims within the exclusive jurisdiction of the federal courts ii. Ohio Claim Preclusion Lawa judgment rendered by a court lacking subject matter jurisdiction ought not to be given preclusive effect 3. Holding: No. The Ohio court judgment may not be given claim preclusive effect in a subsequent federal court action asserting those same claims because Ohio courts would not give claim preclusive effect to a prior final judgment upon a cause of action over which the OH court had no subject matter jurisdiction. 4. Reasoning: i. Ohio claim preclusion law ultimately determines the outcome of this case. In Ohio, the requirements for application of claim preclusion are the same as those applicable in a federal court. Thus, under Ohio law, the dismissal with prejudice in the first suit was a final judgment rendered on the merits. Thus, absent any regard for subject matter jurisdiction, Ohio claim preclusion law would bar the claim in an Ohio court. ii. However, the plaintiff brought his claim in a federal tribunal. The Full Faith and Credit Clause required the federal court to follow the preclusive effect that the state court would apply in this case, OH would have said that a judgment rendered by a court lacing SMJ ought not to be given preclusive effect. 5. Rule: A federal court must determine whether to give claim preclusive effect to a state court judgment upon a COA over which the state court had no SMJ by determining whether the state court would give preclusive effect to such a judgment. 6. Note: Rule 8(c): former adjudication is an affirmative defense. B. ISSUE PRECLUSION (COLLATERAL ESTOPPEL) 78

1. Claim preclusion bars all contentions of plaintiff (even those she did not advance). Issue preclusion bars from relitigation only those issues actually litigated and determined. But they will be barred from relitigation in all subsequent claims between the parties and in some claims that do not involve both parties. 2. Black letter law of issue preclusion [RESTATEMENT]: i. An issue of fact or law is ii. Actually litigated and determined by iii. A valid and final judgment iv. The determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim v. Case law adds a final requirementthat the party burdened with issue preclusion have had an adequate opportunity and incentive to litigate the issue in the earlier proceeding. 3. Illinois Central Gulf Railroad v. Parks (Ind. App. 1979): i. Facts: Jessie and Bertha Parks were injured when their car collided with an Illinois Central train. The Parks sued the railroad for personal injuries to Bertha and loss of consortium to Jessie. Bertha recovered a judgment, but Jessie got nothing because judgment was rendered for the railroad on his claim. Jessie then sued separately for his own injuries. The railroad moved for summary judgment, but the trial court held that his claim was not barred by claim preclusion or issue preclusion on the issue of contributory negligence. ii. Issue: Whether Jessies claim is actually precluded. iii. Holding: No. iv. Rule: Claim preclusion precludes the re-litigation of a COA for which there has been a final judgment. However, issue preclusion applies if the COAs are not the same but some of the issues raised in the second suit were actually litigated and determined in the first suit. v. Reasoning: The Court holds that claim preclusion doesnt apply because the railroad admits that the new suit is based on a different COA than the first suit (apply same evidence standard). The court says that issue preclusion may apply to the matter of Jessies contributory negligence. However, the court finds that the jury could have either found for the railroad based on a finding of contributory negligence or Jessies failure to meet the burden of proof. Since theres no way of knowing why the jury came to the conclusion they did, its okay to try the issue over again because the court thinks its wasnt really litigated and determined with finality. The opacity of the general verdict made it difficult to determine what the first judgment had decided. a. The party raising the claim has the BOP of demonstrating that issue preclusion applies vi. Notes: a. The doctrine of issue preclusion allows the judgment in the prior action to operate as an estoppel as to those facts or questions actually litigated and determined in the prior action. b. Purpose of issue preclusion: application of the doctrine of IP represents a decision that the needs of judicial finality and efficiency outweigh the possible gains of fairness or accuracy from continued

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litigation of an issue that previously has been considered by a competent tribunal. c. Mutuality: former and present lawsuits involve same parties. 1. At common law, mutuality was a requirement for both claim and issue preclusion. NOW, it continues to be a requirement for claim preclusion, but recently many courts have abandoned the requirement for issue preclusion. d. Default judgments: usually, issue preclusion is not a concern if the party doesnt answer the complaint doesnt make issues actually litigated. 1. Exception: a party who deliberately precludes resolution of factual issues through normal adjudicative procedures may be bound by a prior judicial determination reached without completion of the usual process of adjudication. e. Issue that is essential to the judgment 1. Ruhrgas case: defendant makes a pretrial motion seeking to dismiss a case, citing alternative grounds for its decision lack of federal SMJ and lack of PJ. vii. In a trial to the bench, Rule 52(a) requires the judge to set forth findings of fact and conclusions of law. a. Imagine that the trial in Parks had taken place before a judge, who had determined (1) that Illinois Central had not been negligent and (2) that Jessie Parks had been contributorily negligent. Under these circumstances should the court in a subsequent claim between the same parties hold Jessie precluded from relitigating both those issues? Or neither one? 1. The First Restatement of Judgments took the position that when alternative grounds for decision existed, BOTH should be precluded in subsequent litigation. 2. The Second Restatement on Judgments 27 Comment I opines that NEITHER determination should be binding in subsequent litigation. 4. Parklane Hosiery Co. v. Shore (1979): i. Facts: a. The Securities and Exchange Commission (SEC) filed suit against Parklane, alleging that the proxy statement issued by Parklane was materially false and misleading. District Court found that the statement was false and misleading and entered a declaratory judgment, which the 2nd Cir affirmed. b. Shore then brought this stockholders class action against Parklane in federal district court. The complaint alleged that Parklane had issued a materially false and misleading proxy statement which had violated regulations promulgated by the SEC. Shore then moved for partial summary judgment against Parklane, asserting that they were collaterally estopped (issue preclusion) from litigating the issues that had been resolved against them in the first action. District court denied the motion, and 2nd Cir reversed.

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ii. Issue: Whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a NEW party. (Whether a litigant may use a judgment offensively to prevent a defendant from relitigating an issue). iii. Holding: Yes, but trial courts should be granted broad discretion to determine when it should be applied. iv. Reasoning: The Court calls this offensive nonmutual collateral estoppel. It states that the general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel. a. Goals of issue preclusion: judicial efficiency, protects litigants from burden of relitigating an identical issue with the same party or his privy. b. Court notes risks posed by offensive use of estoppel: 1. Plaintiffs may adopt a wait and see approach and hold back from joining the first suit (which would increase volume of lawsuits and could reward a new plaintiff for not even taking a risk) 2. A party may not have litigated the issue aggressively in the first suit if the stakes were small or the forum inconvenient; 3. It may not have been possible for the losing party to litigate effectively in the first action if the procedural rules of the court that decided the first case were more restrictive than those of the court hearing the second; 4. One or more prior inconsistent judgments on the issue may suggest that it would be unfair to give conclusive effect to any of them. c. In this case, however, none of the risks exist. Shore could not have joined the previous SEC suit, Parklane had a full and fair hearing previously, there are no inconsistent rulings in this case, and there would be no different procedural opportunities available to Parklane in the second suit. d. The Court also holds that the use of offensive CE would not violate Parklanes 7A right to a jury trial (7A not a bar to successful assertion of issue preclusion). v. Notes: a. In this case, the Court does not categorically endorse or reject nonmutual collateral estoppel. Instead held that lower courts should exercise discretion in deciding whether to allow such offensive assertions of estoppel. b. Mutuality requirement was abandoned in Blonder-Tongue Laboratories v. University of Illinois Foundation. 1. Blonder-Tongue involved a defensive use of CE- a plaintiff was estopped from asserting a claim that the plaintiff had previously litigated and lost against another defendant.

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c. Defensive use of estoppel: occurs when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff has previously litigated and lost again another defendant. (More easily justified) 1. Gives plaintiff a strong incentive to join all potential defendants in the first action if possible. d. Offensive use of estoppel: occurs when a new plaintiff seeks to borrow a finding from a prior action to impose liability on a party who was a defendant in a prior action. 1. Wait and see mentalitydoesnt encourage judicial economy 2. Apply General Rule from Parklane i. Did have ability to join previous lawsuit? ii. Unfair to ? *opportunity to fully litigate, etc+ e. Note: the principles of Parklane do not apply to the United States US cannot be subjected to nonmutual-issue preclusion. 1. IF A sues the US and prevails, B may not in a later suit use against the US those issues determined in As favor 5. State Farm Fire & Casualty Co. v. Century Home Components i. Facts50 lawsuits surrounding a fire. Three in particular: a. Pacific N.W.Jury verdict for ; overturned +new trial for procedural error; judgment for b. SylvesterJudgment for c. NeeseVerdict for In the current case, the wants to conform pleadings to those in the first and third case and then argue that there is issue preclusion on s negligence. filed summary judgment. ii. IssueWhen you have multiple cases decided, some in favor of and some in favor of , can you use issue preclusion against the ? iii. RuleCurrieabsent mutuality, collateral estoppel should not be applied where a defendant potentially faces more than two successive actions. iv. HoldingCourt agrees to the extent at least that, where there are extant determinations that are inconsistent on the matter in issue, it is a strong indication that the application of collateral estoppel would work an injustice. There seems to be something fundamentally offensive about depriving a party of the opportunity to litigate the issue again when he has shown beyond a reasonable doubt that on another day he prevailed a. No blanket rule, look to whether it would be unfair 1. Special Verdict Formcan indicate that issue preclusion is fair because you can see whether a jury actually based its decision on a particular issue 2. Looking to be able to say there are not inconsistent findings on a particular issue (blame it on bad lawyering rather than merits; ie.) 6. Boundaries of Preclusion i. Claim Preclusion ii. Issue Preclusion 7. Kovach v. District of Columbia

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i. RULERes judicata can be applied when you have an admission of liability made by an administrative agency a. Res judicata applies not only to judicial adjudications, but also to determinations made by agencies other than courts, when such agencies are acting in a judicial capacity ii. HOLDINGHere, claim preclusion doesnt apply; but issue preclusion DOES apply a. Issue of whether Kovach actually ran the red light can be precluded 1. By paying the fine without contesting the ticket, he admitted that he actually ran the red light [CONSIDERED ACTUALLY LITIGATED] 8. Durfee v. Duke i. Full Faith and Credit as a bar to collateral attack ii. FACTSDurfee brought quiet title action in Nebraska over land situated on Nebraska/Missouri border. Nebraska State Court had jurisdiction over the subject matter controversy ONLY if the land in question was in Nebraska [found that it was]. Duke refiled in Missouri Federal District Court. District Court in Missouri found the land was in Missouri, not Nebraska, but the Federal Court still owes Full Faith and Credit to the Nebraska State Courts decision, even though it didnt have subject matter jurisdiction. All issues were fully litigated. iii. RULEThe court is stating the perplexing rule that even if it is later determined that a state court lacked subject matter jurisdiction or personal jurisdiction, so long as those jurisdictional issues were contested and ruled upon by the state court, the state courts judgment will stand. The court noted however, that this rule is subject to doctrines of federal pre-emption, or sovereign immunity. a. But subject matter jurisdiction cant be waiveda court must have subject matter jurisdiction to render a binding judgment. Oh well.

EXAM ISSUES: 1. If its a removal question, state removal rulesdont just jump to subject matter jurisdiction 2. Dont mix together personal jurisdiction concepts with subject matter jurisdiction 3. Make sure to follow issue through its full analysis i. EXAMPLEFederal Question Jurisdictionon the face of the complaint (Mottley) a. If not on face of the complaint, follow through with Smith and Grable with federalizing state law COA

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