Fundamentals of Business Law, 10E: Roger Leroy Miller

FUNDAMENTALS OF
BUSINESS LAW, 10E

ROGER LEROY MILLER
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
COURTS AND ALTERNATIVE
DISPUTE RESOLUTION
CHAPTER 2
LEARNING OBJECTIVES
1. What is judicial review?

2. Before a court can hear a case, it
must have jurisdiction. Over what
must it have jurisdiction? How are the
courts applying traditional
jurisdictional concepts to cases
involving Internet transactions?
LEARNING OBJECTIVES (CONT’D)
3. What is the difference between a trial

court and an appellate court?
4. What is discovery, and how does
electronic discovery differ from
traditional discovery?
5. What are three alternative methods
of resolving disputes?
INTRODUCTION
• Businesspersons need to have an

understanding of court systems in the
United States, as well as the various
methods of dispute resolution that
can be pursued outside the courts.
• In this chapter we clarify judicial
procedures, examine the court
systems of the United States, and
follow a hypothetical case.
THE JUDICIARY’S ROLE
• The role of the judiciary—the courts—in

the American governmental system is
to interpret and apply the law.
• Through the process of judicial
review—determining the
constitutionality of laws—the judicial
branch acts as a check on the
executive and legislative branches of
government.
BASIC JUDICIAL REQUIREMENTS
Before a court can hear a lawsuit,

certain requirements must first be met.
These requirements relate to:
• Jurisdiction
• Jurisdiction in Cyberspace
• Venue
• Standing to sue
• Before a court can have the authority

to hear a case, it must have jurisdiction
over:
• The person against whom the suit is
brought, or
• The property involved in the suit, or
• The subject matter
• Limited jurisdiction–specific subject

matter, such as divorce
• General jurisdiction–any kind of case
• Original jurisdiction–hear a case for
the first time (trial court)
• Appellate jurisdiction–does not have
original jurisdiction (court of appeals)
• Federal Jurisdiction
• Based, at least in part, on the U.S.
Constitution, a treaty, or a federal law, or
• Diversity of citizenship (e.g., citizens of
different states) and the amount in
controversy exceeds $75,000
• Concurrent jurisdiction–when two

different courts have authority to hear
the same case
• Exclusive jurisdiction–only state courts
or only federal courts have authority to
hear a case
EXHIBIT 2.1
© 2016 Cengage Learning, All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
• Jurisdiction in Cyberspace
• Because the Internet does not have
physical boundaries, courts are
developing standards to determine
personal jurisdiction based on Web
activities:
• Sliding-scale standard
• International jurisdictional issues
• Venue—the most appropriate physical

location for a trial
• Standing to sue—party must have a
sufficient “stake” in the matter to justify
seeking relief through the court system
THE STATE AND FEDERAL
COURT SYSTEMS
• There are 52 court systems—one for
each of the 50 states, the District of
Columbia, and a federal.
• Generally, any person who is a party to
a lawsuit has the opportunity to plead
the case before a trial court and if he
or she loses, before at least one level
of appellate court.
COURT SYSTEMS
• The State Court Systems
• State courts may include:
• Trial courts of limited jurisdiction
• Trial courts of general jurisdiction
• Appellate courts
• The state’s highest court (often called the state supreme
court)
EXHIBIT 2.2
COURT SYSTEMS
Trial courts
• Courts of original jurisdiction
• Legal actions are initiated
• Trials are held and testimony taken
• Also called county, district, superior, or
circuit courts
COURT SYSTEMS
Appellate courts
• Courts of appeals, or reviewing courts
• Generally do not have original
jurisdiction or conduct trials
• Focus on a question of law, not facts
COURT SYSTEMS
• The Federal Court System
• A three-tiered model:
• U.S. district courts (trial courts of general jurisdiction) and
various courts of limited jurisdiction
• U.S. courts of appeals (intermediate courts of appeals
• United States Supreme Court
EXHIBIT 2.3
FOLLOWING A STATE COURT CASE
• Pretrial Procedures
• Pleadings—issues in the case
• Summons—complaint served on the defendant
• Defendant’s answer—response to complaint
• Pretrial motions—include motion to dismiss,
judgment on the pleadings, summary judgment
• Discovery—gathering of information: e.g.,
witnesses, documents, records
• E-evidence can reveal significant facts that are not
discoverable by other means.
• E-discovery has significant advantages over paper discovery,
including smartphone texts and social media.
• The Trial
• Opening arguments
• Plaintiff’s case presented
• Defendant’s case presented
• Cross examination
• Closing arguments
• Verdict and awards
• Posttrial Motions
• Granted only if the judge considers the jury’s
verdict erroneous or unreasonable:
• Motion for judgment
• Motion for new trial
• The Appeal
• A party must have legitimate grounds to file an
appeal and must be able to claim that the lower
court committed an error.
THE COURTS ADAPT TO THE
ONLINE WORLD
• Electronic Filing
• Available in nearly all federal courts; most states
have some form of it
• Courts Online
• Most courts have Web sites; some decisions
posted online
• Cyber Courts and Proceedings
• Someday judicial proceeding may take place
only on the Internet.
ALTERNATIVE DISPUTE
RESOLUTION
Litigation is expensive and time
consuming, so many businesspersons
are turning to alternative dispute
resolution (ADR) as a means of settling
their disputes. Three forms of ADR:
• Negotiation
• Mediation
• Arbitration
ALTERNATIVE DISPUTE
RESOLUTION
• Negotiation
• In negotiation, the parties come together, with or
without attorneys to represent them, and try to
reach a settlement.
• Mediation
• In mediation, the parties themselves reach an
agreement with the help of a neutral third party,
called a mediator. The mediator may propose a
solution but does not make a decision resolving
the matter.
ALTERNATIVE DISPUTE
RESOLUTION
• Arbitration
• Arbitration is a more formal method in
which the parties submit their dispute to a
neutral third party, the arbitrator, who
renders a decision. The decision may or
may not be legally binding, depending
on the circumstances.
ALTERNATIVE DISPUTE
RESOLUTION
• Providers of ADR Services
• Provided by government agencies and
private organizations.
• Online Dispute Resolution
• The settlement of disputes by groups
offering dispute-resolution services online
are called online dispute resolution (ODR).
EXHIBIT 2.4

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FUNDAMENTALS OF

BUSINESS LAW, 10E

1. What is judicial review?

3. What is the difference between a trial

• Businesspersons need to have an

• The role of the judiciary—the courts—in

Before a court can hear a lawsuit,

• Before a court can have the authority

• Limited jurisdiction–specific subject

• Concurrent jurisdiction–when two

• Venue—the most appropriate physical

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