Civil Procedure 2 Subject Matter Jurisdiction

Introduction Federal Diversity Jurisdiction Federal Question Jurisdiction Joinder o Joining Additional Claims o Joining Additional Parties o Impleader Adding a claim and a Party o Interpleader Federal Supplemental Jurisdiction Bringing in Another D Removal

Personal Jurisdiction and Venue

Traditional Bases for Personal Jurisdiction Modern Personal Jurisdiction Specific Personal Jurisdiction General Personal Jurisdiction Jurisdiction Based on Power Over Property Quasi In Rem Jurisdiction Based on Presence Tag Jurisdiction Jurisdiction Based on Consent Notice Venue Forum Non Conveniens

Governing Law Erie Issues

Before Erie Erie Evolution of the Erie Doctrine Modern Law Interstate Choice of Law

Prior Adjudication Basic Principles

Claim Preclusion Res Judicata Issue Preclusion Collateral Estoppel Privity and Non-Mutuality o Defensive non-mutual CE o Offensive non-mutual CE

Class Actions
Introduction Jurisdiction and Preclusive Effects of Judgments Mass Torts Issues, Including Settlement Issues

Subject Matter Jurisdiction Introduction

Back to Top SMJ is the authorization from a sovereign entity to adjudicate certain types of cases o The court a litigant chooses can seriously affect the outcome of a case Important Factors in SMJ Federal Court System Structure Types of Laws Applied Article III Subject-Matter Jurisdiction of Federal Courts o Article III Paraphrased Courts Must Lawfully Have Jurisdiction Consent of Parties is not Enough (Capron v. Van Noorden) o Person bringing the case into Fed Ct has the burden of pleading/showing Federal Jurisdiction o SMJ is not waivable almost everything in litigation is waivable but not this It must be established in accord w/the statutes and constitution Courts can raised the jurisdictional issue sua sponte as to whether there was SMJ in the case Marbury v. Madison (SC raised jurisdiction sua sponte) o In a civil setting, particularly if both parties have lawyers, the courts are typically very reluctant to raise issues sua sponte (somewhat different in criminal system) o Jurisdiction is different the one issue where the court will raise the issue on its own w/out reservation To properly ground jurisdiction in a federal case, it needs to be proper both under a statute and Article III of the constitution and the statute must be constitutional under Article III o Congress cannot give Federal jurisdiction to two people from IL who sue each other o No diversity and no authorization for this in the constitution o Many cases could get into Federal Court under the constitution but Congress hasnt passed statutes allowing it

Back to Top Important Factors in SMJ 1 Whether the court system you are dealing with has limited or general subject-matter jurisdiction o Federal Trial courts have limited subject-matter jurisdiction o General subject-matter jurisdiction where a court (typically a state court) is just the court They resolve almost all disputes 2 Original jurisdiction v. appellate jurisdiction o Cases are typically adjudicated in the first instance in a trial court

Vast majority of cases resolved here (in Fed Ct about 1.2% of cases per year go to trial many of those will not appeal) o To get into the Appellate court the case must be litigated to resolution in a separate forum 3 Exclusivity of Jurisdiction and Concurrent Jurisdiction o Often the legal authority behind an action only allows it to be brought in one place o Title VII suit Employment discrimination action can be filed in state or federal court The courts have concurrent jurisdiction over those cases o Special jurisdiction courts probate courts, family courts, traffic courts Often states divide their judicial authority between specialized courts o Also specialized courts at Federal Level Tax Court, Court of Claims, Bankruptcy Courts o Vast majority of cases are resolved in state courts Most claims a criminal D will raise are Federal Constitutional Claims (4th Amend, etc) But most of these Federal claims will be resolved in the state system

Back to Top Fed Court System Structure 90 District Court Systems in IL there is a Northern District, Central District and a Southern District o These districts and their judicial positions are created by Congress o Article III allows Congress to create additional courts but it is not compelled to do so If it wanted, the only court in the US could be the SC o Theoretically every federal issue could be litigated in the state courts except the SCs original jurisdiction 13 Circuit Courts 11 covering the states, the DC Circuit and the Federal Circuit dealing only with certain types of cases o Circuits cover various states these COAs hear appeals from Federal Trial Courts and from Federal Agencies (particularly the DC Circuit) SCOTUS Only Fed Ct in the constitution established by Article III o Has appellate review by Cert over Federal and State Courts (on Federal questions) o Used to be a direct appeal to the SC in some statutes Most have been repealed and the USSCs jurisdiction is almost entirely discretionary by Cert o Generally speaking lower federal courts cannot be used to function as de facto appellate tribunals over what happens in state court proceedings You cannot try to come into lower Fed Ct and have them review what the state court did (only SC can and then only on Federal issues) o Some Original jurisdiction

Eg. disputes between states, but most of its docket is appellate through Cert Two Other Federal Courts o Fed Magistrate Courts Exist in each district They can hear cases to judgment if parties consent They can also resolve any non-dispositive issues in the case (casemanagement issues) Very common in cities for resolving the non-central issues in a case o Bankruptcy Courts Extraordinary courts Bankruptcy cases are extremely complex

Back to Top Types of Laws Applied there will be application of both state and Federal law State Law typically governs in Fed Ct in a diversity case (or supplemental jurisdiction) so the Fed Ct will be trying its best to apply the state law o Ultimately what the Fed Ct says about state law doesnt matter o What the US SC says about what IL law means doesnt bind even a trial judge in IL SC is the final arbiter of any federal legal questions State SCs are the final arbiters of any state law questions Back to Top Subject-Matter jurisdiction of Federal Courts Article III Section 1 two important things o 1 There will be a USSC, inferior courts are optional o 2 FJs serve so long as they abide by good behavior Many believe that Federal Judges have a greater ability to be independent than their state counterparts Fed Judges are not elected, they are appointed Unless they do something crazy they will probably be able to continue serving even if a litigant thinks you are legally wrong or you are unpopular Section 2 Nine enumerated categories dealing with SM jurisdiction o Cases between citizens of different states gives us diversity jurisdiction Two Important Points about Fed SM Jurisdiction o 1 Fed Courts are courts of limited SM jurisdiction o 2 To get into Fed Court as a litigant, two things are required for SM jurisdiction 1 You have to be in there constitutionally Your invocation of SM jurisdiction must be consistent w/Article III 2 You must have a statutory/jurisdictional basis to get into court Eg. Congress has the power to restrict many diversity cases from coming into Federal Court

Amount in controversy (even if diversity is satisfied) must be over $75k for you to get into Federal Court Why limited SMJ for Fed Courts? o 1 Part of a bargain during the constitutional convention o 2 Separation of powers issues Prevents Fed Courts from exercising all the power of the Federal Government o 3 Helps control/funnel the use of limited Federal Judicial resources into worthy matters Having limited jurisdiction helps keep some sane limit on the number of cases in Federal Court Most Federal Courts have 200-300 cases constant tension between quality and speed Constitution and Statute o These are policy decisions Congress is making about how far they want Fed Ct jurisdiction to reach o They put the threshold at $75k as a policy decision that this is the appropriate amount to bar Federal jurisdiction This amount is highly contended

Back to Top Article III Text Paraphrased Section 1 Judicial Power is vested in one Supreme Court and such inferior courts as Congress may establish o Judges shall hold their offices during good behavior and shall receive compensation for their services which shall not be diminished while they are in office Section 2 Judicial power extends to all cases, in law and equity, arising under the constitution, US law, treaties o Also extends to To all cases affecting ambassadors, other public ministers and consuls To all cases of admiral and maritime jurisdiction To Controversies to which the US is a party Controversies between two or more states and between a state and citizens of another state (2nd part added by 11 Amendment) Between citizens of different states Between citizens of the same state claiming lands under grants of different states Between a state, or its citizens, and foreign states, citizens or subjects o The Supreme Court has original jurisdiction In cases affecting Ambassadors, public ministers/consuls and those in which a state is a party In all other cases SC has appellate jurisdiction both as to law and fact with such exceptions and under such regulations as congress makes o Trial of all crimes (except impeachment) shall be by jury

Such trial shall be held in the state where the crime was committed When not committed w/in any State, trial shall be at such place(s) as Congress by law has directed Section 3 Treason consists only in levying war against the US or in adhering to their enemies, giving them aid and comfort. o Conviction of treason only on testimony of two witnesses to the same overt act, or on confession in open court o Congress shall have power to declare the punishment of treason

Back to Top Capron v. Van Noorden (US 1804) Courts Must Lawfully Have Jurisdiction Trial proceedings showed D (VN) to be a resident of Pitt County, NC but did not allege P (C) to be an alien nor a citizen of any state. Verdict was found for D upon which judgment was rendered. This was sued out by P on a writ of error. The P (who had brought the original suit and filed the original pleadings) was arguing that there was nothing to show the court properly had jurisdiction over him (P is appealing on the argument that his own pleadings were inadequate). Court P sued for error arguing that the Circuit Court is one of limited jurisdiction and it the following were not established in the record o That either C or VN was an alien at the time of the suit o That one of the parties was at that or any other time a citizen of NC where the suit was brought and the other a citizen of another state o Or that C or VN were for any other reason persons within the jurisdiction of this court and capable of suing/being sued there By the record it does not appear that the circuit court had jurisdiction over the cause and should therefore have dismissed it without issuing a final judgment It was the duty of the court to see that they had jurisdiction, for the consent of the parties could not give it the judgment was reversed Additional Notes Initial proceeding occurred in the Circuit Court of NC o At the time that was a Federal Trial Court in NC o VN is from NC so perhaps C is in Fed Ct because he thinks its fairer In trial court Capron lost o C seeks a writ of error in the SC Historical equivalent to a Writ of Cert (was how people sought SC review) C argues the Court erred by allowing the case to proceed in Federal Court at all o He contends the Fed system doesnt have jurisdiction here o Cs argument is pretty audacious C picked the court and had a fair trial but is now asking for reversal because the court shouldnt have heard the case to begin with VN probably thought this was ridiculous

SC holds that even with a mistake in his favor the Fed Ct should never have taken the case o Throws out the verdict Person bringing the case into Fed Ct has the burden of pleading/showing Federal Jurisdiction o The citizenship of the parties here is not known so the burden is not met and the judgment is vacated SMJ is not waivable almost everything in litigation is waivable but not this o The parties cannot agree to adopt Federal jurisdiction They must establish it in accord w/the statutes and constitution o The judge is impartial and this duty is left to the litigants Why does SC allow this claim to be raised in an untimely manner? o They are worried about Federalism and separation of powers They dont want Fed Cts encroaching on the state judicial systems

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Diversity Jurisdiction
Back to Top Arguments for/against Diversity Jurisdiction Diversity Jurisdiction Law

DJ is good for four reasons A It helps eliminate the tendency/pressure in state courts against out of state litigants and in favor of in-state parties o Many state judges are now elected this costs lots of $$ and much of this comes from local attorneys and regular local litigants o Not saying there are actual bribes but there may be some impropriety Maybe judges wont be completely fair on discretionary calls to out of state parties B People may have a preference for federal rules relating to discovery, evidence, bringing 3rd parties into the case o If you are a practicing attorney this is a real plus o State courts often use their own states common law It is costly and difficult to learn the intricacies of each states procedural rules C You might be able to get to judgment faster in Fed Ct than in state court (sometimes true) D historical reason many suits then involved out of state lenders coming to enforce debts against debtors o Many local courts were very pro-debtor and the lenders wanted a forum less influenced by local pressures and Fed Cts with life tenure might be better Issues A and D People who believe they dont have to be objectively correct for those reasons to matter a lot o It doesnt have to be true/right that litigants wont get as fair a deal in state courts for this view to have real consequences in the country o People will not invest in a place/country if they think the courts are corrupt If people think the state system is unfair/corrupt then they wont do business (even if they are wrong) Very important in early America when people were trying to decide which states to invest in, etc. Anti-diversity jurisdiction folks A Idea about regional/geographic bias is crazy o People do not really have these regional biases any more B DJ is wasteful in how it affects Fed Cts these are usually around 20-25% of a district courts docket o There are many $76k-$100k commercial disputes between two relatively insignificant companies from different states, do these cases really all need to be in Federal Court?

o This could be addressed by just moving the dollar threshold higher C It is generally less ideal for Fed Cts to be widely applying and interpreting substantive state law o It makes no sense o It is affirmatively undesirable this feeds into the Erie section o It promotes Fed Cts taking the first cut at state legal issues which the state legal systems ought to resolve This is an interesting debate however it is not even a discussion typically among practicing lawyers o Lawyers almost uniformly like diversity jurisdiction and like to be able to remove to federal court (they almost always do, particularly if they have an out of state client) o It gives the client comfort you want to minimize client stress, you also dont want somebody in the clients legal division to point out something as an obvious mistake (if case goes poorly dont want people questioning your selection of state court)

Back to Top Diversity Jurisdiction Citizenship/Domicile Issues Back to Top Amount in Controversy Two Exceptions to Diversity Additional Parties Statutory Supplemental Jurisdiction Test (and Background) Must have complete diversity There is no DJ if any P is a citizen of the same state as any D no matter how many parties are involved in the litigation Strawbridge v. Curtis Notes Following o There can be tons of people from the same state on the same side of the v. but there can be nobody from that state on the other side o Congress could change this rule if they wanted so that minimal diversity would be sufficient to get into Federal Court Diversity does not exist if parties by assignment or otherwise, have been improperly or collusively made/joined to invoke jurisdiction of the court USC 1359 o People cannot collusively create diversity jurisdiction by assigning rights or otherwise Check on the ability of people to create federal diversity jurisdiction in Federal Court o In determining whether there is diversity of citizenship between the parties the court must disregard nominal or formal parties to the action and determine jurisdiction based solely on the citizenship of the real parties to the controversy Rose v. Giamatti (D. Ct. 1989)

A real party in interest is one who has the duty sought to be enforced or enjoined District Courts shall have original jurisdiction of all civil actions where the matter in controversy is more than $75,000 and is between citizens of different states (other categories also USC 1332 o For citizenship one must be 1) a permanent resident alien of the US and 2) a domiciliary of that state Citizenship means domicile, mere residence is insufficient In 1988 congress amended section 1332(a) so for purposes of diversity jurisdiction an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled. o Corporation is deemed a citizen of any state by which it has been incorporated and of the state where it has its principal place of business More Below on CORPORATE CITIZENSHIP Except w/an insurer You must be completely diverse with the company along both of these axes o Legal representative of a decedents estate is a citizen of only the same state as the decedent Legal representative of a child/incompetent is a citizen only of the same state as the infant/incompetent Prevents appointment of administrators to create or destroy diversity Diverse citizenship among adverse parties must be present at the time the complaint is filed Mas v. Perry Burden of pleading diversity is on the party invoking Federal Jurisdiction if it is challenged that party also bears the burden of proof Mas v. Perry Persons domicile (domicile + Permanent Res. Alien = state citizenship for 1332) is the place of his true, fixed and permanent home and principal establishment, and to which he has the intention of returning whenever he is absent therefrom. Mas v. Perry o Change of domicile may be effected only by a combo of two elements 1 Taking up residence in a different domicile 2 The intention to remain there Typically substantiated using proxies like drivers license or voter registration o Regardless of whether you plan to return, your prior domicile remains your domicile until you establishes a new one o The problem of proving domicile is most acutely felt in the removal setting when you have to show the other partys domicile Since the district court certainly had jurisdiction over husbands action sound judicial administration militates strongly in favor of Fed Jur in wifes claim Mas v. Perry Under 1332 a corporation can be a citizen of more than one state o 1 The state in which it is incorporated o 2 the state in which it has its principal place of business

Generally accepted that a corp. can only have one principal place of business for diversity jur. o You must be completely diverse with the company along both of these axes to bring a 1332 suit Three different tests to determine a corporations principal place of business o 1 Nerve center test the locus of corporate decision making authority and overall control constitutes a corporations principal place of business for diversity purposes o 2 Corporate activities or operating assets test greater weight is attached to the location of a corporations production or service activities in determining the principal place of business under this test o 3 Total activity test Hybrid of the other two tests considers all the circumstances surrounding a corporations business to discern its principal place of business Provides a realistic, flexible and non-formalistic approach o Things are moving inevitably into an all things considered test and total activity test is pretty much the approach used today o You just look at where its incorporated and what state has the most meaningful contact with the corporation (if it makes stuff, where?) what state does the corporate entity have the most connection with?

Courts have gone both ways on whether an alien person/corporation can sue a permanent resident alien in Federal Court by invoking 1332 Jurisdiction under 1332 was available to a permanent resident alien residing in VA filing a state-law action against a nonresident alien and citizen of a state other than VA Singh v. Daimler-Benz (3rd Cir 1993) o Congresss deeming provision falls within its power to invest federal courts with jurisdiction when there is minimal diversity o Potentially Unconstitutional Application Permanent resident alien sues as the sole D either a permanent resident alien domiciled in another state or a nonresident alien DC Circuit rejected this in Saadeh v. Farouki China Nuclear Energy Indus. Corp. v. Anderson (D Ct. 1998) Followed DC circuit and dismissed a Fed Ct action by an alien corporation against a partnership made up of both US citizens and permanent resident aliens Diversity jurisdiction is not destroyed by the presence of aliens on both sides who are from the same foreign nation Tango Music, LLC v. Deadquick Music, Inc. (Posner) If IN citizen wants to remove out of IL court because he is concerned about the latters prejudice, having Frenchmen on both sides of the dispute provides little comfort it would not affect IL court bias o It would make no difference to such a court if both were French or one was Italian in this scenario diversity is unaffected JP Morgan Chase Bank v. Traffic Stream (US 2002) Citizens of overseas territories of UK (BVIs) are citizens or subjects of a foreign state for purposes of Section 1332(a)(2)

o Alienage jurisdiction was enacted to deal with the penchant of state courts to disrupt international relations Back to Top USC 1332 (a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between o 1 citizens of different states o 2 Citizens of a state and citizens or subjects of a foreign state o 3 citizens of different states and in which citizens or subjects of a foreign state are additional parties; and o 4 a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a state or of different states o For the purposes of this section, section 1335 and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the state in which such alien is domiciled (b) Except when express provision therefor is otherwise made in a US statute where the P who files suit is entitled to recover below $75k (computed w/out regard for any setoff or counterclaim) the district court may deny costs to the P and, in addition, may impose costs on the P (c) For purposes of this and 1441 o 1 Corporation is deemed a citizen of any state by which it has been incorporated and of the state where it has its principal place of business Except w/an insurer (when the insured is not a party-defendant) where they are then citizens of the state where the insured is a citizen and as well as above two o 2 Legal representative of the estate of a decedent shall be deemed to be a citizen only of the same state as the decedent legal representative of a child/incompetent is a citizen only of the same state as the infant/incompetent Prevents appointment of administrators to create or destroy diversity Back to Top USC 1359 A D Ct shall not have jurisdiction in a civil action in which any party, by assignment [where you assign you legal rights to another party eg. Assigning to the insurance company] or otherwise, has been improperly or collusively made/joined to invoke the jurisdiction of the court. Back to Top Strawbridge v. Curtis (US 1806) Strawbridge v. Curtis SC case from 1806 There is no DJ if any P is a citizen of the same state as any D no matter how many parties are involved in the litigation

There can be tons of people from the same state on the same side of the v. but there can be nobody from that state on the other side That interpretation of 1332 is not mandated by the constitution o There is a Federal Statute (1335) known as the impleader statute o This is for actions where somebody owns property (eg. Pension fund, insurance policy) o Insurance company will interplead in a case where there is dispute over a life insurance policy they will interplead the money with the court to hold until the heirs sort it out o For this only one party needs to be from a different state than the others This statute has been upheld Strawbridge is a statutory presumption but not a constitutional mandate o This means Congress could change this rule if they wanted so that minimal diversity would be sufficient to get into Federal Court

Back to Top Mas v. Perry (5th Circuit 1974) JP Mas, a citizen of France, and J Mas were married at Js home in MS. Prior to their marriage they were both graduate students at LSU in Baton Rouge. After marriage the returned to BR to resume duties as graduate assistants the tort arose from two-way mirrors in the apartment they rented set up by the landlord. Remained there for 2 more years then moved to IL. At the time of trial, they intended to return to LA while JP finished his doctorate undecided where they would live after that. They sued Perry, a resident of LA for spying on them in a room they had leased from him. Perry challenged diversity of citizenship and insufficient amount in controversy COA ruled there was diversity Jury gave them $20k total (then the threshold was $10k) Court Under section 1332(a)(2) the Federal judicial power extends to husband citizen of France, against appellant, citizen of LA Complete diversity of citizenship is required no party on one side may be a citizen of the same state as any party on the other side Diverse citizenship among adverse parties must be present at the time the complaint is filed o Unaffected by subsequent changes in citizenship of the parties Burden of pleading diversity is on the party invoking Federal Jurisdiction if it is challenged that party also bears the burden of proof For citizenship one must be 1) a citizen of the US and 2) a domiciliary of that state citizenship means domicile, mere residence is insufficient Persons domicile is the place of his true, fixed and permanent home and principal establishment, and to which he has the intention of returning whenever he is absent therefrom. o Change of domicile may be effected only by a combo of two elements 1 Taking up residence in a different domicile

2 The intention to remain there Generally the case that the domicile of the wife is determined by that of her husband that fiction would be poorly extended to this case o This would make J (wife) a domicile of France she would not be able to sue as a citizen of any state nor would she be able to invoke alienage federal jurisdiction since she is not an alien o For diversity purposes a woman does not have her domicile or state citizenship changed solely by reason of her marriage to an alien Although J stated that after her marriage she had no intention to return to MI (her prior domicile) it remains her domicile until she establishes a new one LA does not count because she has no intention to remain there indefinitely Since the district court certainly had jurisdiction over husbands action, sound judicial administration militates strongly in favor of Fed Jur in wifes claim.

Additional Notes What does someone need to be a resident of a particular state? o You must be a US citizen and domiciled in the state o Domicile is different than residence requires two things (below) It is your principal home and establishment Intent to stay there (this is typically substantiated using proxies like drivers license or voter registration) o The problem of proving domicile is most acutely felt in the removal setting when you have to show the other partys domicile Alien stuff has changed somewhat since Mas o In 1988 congress amended section 1332(a) so for purposes of diversity jurisdiction an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled. o This might change the case Mr. Mas might have become a citizen of LA for diversity purposes Back to Top Amount in Controversy Back to Top Amount in controversy is just a gate-keeping mechanism set by Congress o It could be any figure they determine to be appropriate some want a higher number others want a lower one Applies to diversity jurisdiction and to federal claims that arise under a Federal statute expressly imposing such a jurisdictional requirement o It has been otherwise abolished by Congress Key Points o PD are included if they are legally viable o We try to monetize injunctive relief if it is sought o The amount in controversy must exceed the amount in controversy hurdle at the time of litigation (must be $75,010)

o Does NOT include COSTS or INTEREST USC 1332 Test for determining the amount sum claimed by the P controls if the claim appears to have been made in good faith AFA Tours, Inc. v. Whitechurch o It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify a dismissal If punitive damages are permitted by the controlling law, the demand for such damages may be included in determining whether the jurisdictional amount is met AFA Tours, Inc. v. Whitechurch o NY law allows recovery of punitive in a trade secrets case Where P seeks injunctive relief the value of his claim is generally assessed with reference to the right he seeks to protect and measured by the extent of the impairment to be prevented by the injunction AFA Tours, Inc. v. Whitechurch Three approaches to valuing injunctive relief Explained in McCarty v. Amoco Pipeline Co. (7th Cir. 1979) o 1 Plaintiff viewpoint rule Only the value to the P may be used to determine the jurisdictional amount Jurisdictional value could also be met the other way if the injunction was worth more than the amount to the D (rather than limiting consideration to value to the P) o 2 View the amount in controversy from the point of view of the party seeking to invoke Federal jurisdiction 1 problem Possibility of anomalous results if P brought case in Fed Ct and it was dismissed it could still end up in Fed Ct if P brought the case in state court and the D removed it to Federal Ct o 3 Either viewpoint rule look to the object sought to be accomplished by Ps complaint test for determining the amount in controversy is the pecuniary result to either party which the judgment would directly produce Before dismissing as below the amount court must allow the P an appropriate and reasonable opportunity to show good faith in believing that a recovery in excess of [jurisdictional amount] is reasonably possible AFA Tours, Inc. v. Whitechurch List of Reasons Why Dismissal of AFAs Claim was Inappropriate in Case The burden of proof is on the party who seeks to invoke the jurisdiction o Fair because the information is typically within the Ps control they know what they are seeking damages for and are in a better position to demonstrate that If the P wins less than $75k then the court can award cost shifting from the party who improperly invoked Federal Jurisdiction o Not attorney fees o But it is not meaningless (hundreds to several thousand dollars) but typically includes court reporters fees, etc. o In US awarding of legal fees typically does not happen cost shifting is not fee shifting If one P has two unrelated claims he can merge them for amount in controversy purposes

o They might get split into separate trials but for amount in controversy it will suffice o Single Ps can aggregate claims against single Ds (Eg. $50k for property damage, $25k for personal injury) Two Ps suing one D for the same tort cannot aggregate o At least one P must get to the $75k in order for amount in controversy to be satisfied then other P can get in through supplemental jurisdiction This does not mean you sue one D for $75+ and bring another against whom you have a smaller claim see supplemental jurisdiction o Two Ps also may not aggregate if they have separate and distinct claims P and D may not aggregate Ps claim w/Ds counter-claims Situation where it is clear to a legal certainty the P cannot meet the monetary requirement? o Perhaps a statutory cap on damages in their situation, PDs are statutorily barred o There are doctrines allowing courts to pierce factual allegations if they are delusional or fantastic o There is a crazy woman in Chicago who files suits against Burger King for $3 trillion over cold French fries all the time court can pierce these absurd factual allegations and dismiss the suit for being under the jurisdictional amount

Back to Top AFA Tours, Inc. v. Whitechurch (2nd Cir 1991) P sued D and claimed damages in an amount which is not presently ascertainable, but which is believed to exceed the sum of $50k. AFA sought an injunction preventing D from using the information in addition to compensatory damages up to $50k and punitive damages of $250k. Real damages claim which, on paper, is just over $50k along w/punitive damages and an injunction. District Court dismissed as not being proven to meet the $50k. Court (Kearse, J.) Test for determining the amount sum claimed by the P controls if the claim is apparently made in good faith o It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify a dismissal Amount of damages in trade secrets may be measured either by Ps losses or the profits unjustly received by the D If punitive damages are permitted by the controlling law, the demand for such damages may be included in determining whether the jurisdictional amount is met o NY law allows recovery of punitive in a trade secrets case Where a P seeks injunctive relief the value of his claim is generally assessed with reference to the right he seeks to protect and measured by the extent of the impairment to be prevented by the injunction

Before dismissing as below the amount court must allow the P an appropriate and reasonable opportunity to show good faith in believing that a recovery in excess of [jurisdictional amount] is reasonably possible although AFA has not yet suffered $50k of damages, several problems w/D Ct o First P was not given an opportunity to make their case The amount issue was raised sua sponte by the D Ct at the SJ argument and the decision made at the close of that argument o Second Despite Ps lack of opportunity to present evidence addressing the jurisdictional question, there was evidence in the record suggesting the matter could not be conclusively resolved against P o Further P also requested injunctive relief not just against Ds solicitation of customers but against any use of that information presumably would include a prohibition against Ds sale/disclosure of the information to other tour operators (better equipped than D to solicit their business) o Additionally Ps request for punitive damages might satisfy jurisdictional amount

Additional Notes D. Ct. raises sua sponte the issue of whether the case meets the amount in controversy and finds that it doesnt o It is not unorthodox for the court to raise an issue of SMJ like this You can look at PD unless there is a rule/statute against PD in that sort of controversy Back to Top Two areas where you see exceptions to diversity jurisdiction 1 Probate cases o These sorts of cases almost exclusively get litigated in state courts in the US o This flows from the diversity statutes grant of jurisdiction only for those cases in law or equity o These cases were historically viewed as ecclesiastical cases You went to the church courts for their resolution o As a consequence all the law applied in this area is state law this area is at the core of what states do 2 Domestic relations divorces, alimonies, child custody decrees o Fed Cts typically do not get involved with these types of issues o Has to do with not just historical practices but also Fed Cts are typically not equipped to deal with child custody issues There arent child guardians in the Fed Cts, etc Those sorts of support structures dont exist in Fed Ct Federal Courts typically dismiss these types of cases for lack of SMJ o Congress could change this if it passed a statute directing Fed Trial Cts to hear child custody cases then they would

Ankenbrandt v. Richards (US 1992) Found that a domestic-relations exception does exist but the exception reaches only cases involving issuances of a divorce, alimony or a child custody decree

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Federal Question Jurisdiction

Back to Top Rationale for Federal Jurisdiction in Federal Questions Federal Jurisdiction for Federal Questions Law

Rationales for Federal Jurisdiction in Federal Questions 1 Structural advantages for having Fed Ct system hear Fed questions easily o If Fed Qs can get into district court then you get a more uniform body of Fed law o COAs can quickly review Fed Dist Courts de novo then SC can resolve Cir splits This is more efficient than leaving Fed Qs to the state court system for ultimate review of state SC by the US SC o This is more of an argument for having lower Fed Courts than for having Fed Q jurisdiction o Until 1875 Fed Cts were not given initial competence on Fed Q cases generally 2 Theory of expertise Fed Judges are supposed to have greater expertise in Fed law because they decide Federal cases all the time o However state courts decide Fed law Qs all the time o State trial courts, for example, decide US Const claims in the criminal context all the time 3 Theory that Fed Cts have more sympathy for Federal Rights the main purpose of FQ jurisdiction was to avoid state courts misinterpreting Fed law in an effort to pander/cater to local constituencies o FQ jurisdiction in 1875 was seen as a way of opening Fed trial courts to parts of the country where there were substantial animosities to Fed rights and Fed law in the state courts o Post-Civil War need for judges to enforce the Federal law o Back in Osborn-era there were many conflicts not unlike that involving the bank and the State of Ohio Out west you had Fed tax collectors being tarred/feathered when they came to collect Fed taxes Shays rebellion, armed rebellions against taxes, etc. o Osborn allows Fed Gov to protect, in a fundamental way, Fed officers and institutions by putting them in Fed Court This is a big deal when you are on the frontier of the country and need the protection of the Federal Court System Note Except for a few special cases there is concurrent jurisdiction between State and Federal o Not unusual for Ps to file FQ in state court, the D to assent to litigating in state court and it is never removed Back to Top

Federal Jurisdiction in Federal Questions Law Back to Top US Const. Article 3 Section 2 [T]he judicial power shall extend to all cases, in law and equity, arising under this constitution, the laws of the United States, and Treaties made, or which shall be made under their Authority. USC 28 1331 Federal Question Jurisdiction The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the US Plausible invocation of a Federal Statute will typically be sufficient however if you get outlandish enough then it wont and your case will get tossed Cases Osborn Ingredient Test Applies when talking about Constitution Art 3 Section 2 arising under language Osborn v. Bank of the United States o Fed Q jurisdiction exists whenever there is a Fed Q lurking around in the background in a pretty attenuated way this is the way Article III power has been understood ever since Osborn o Gives Congress very broad power under the constitution to confer power on the Fed Courts o Osborn reflects a broad conception of arising under jurisdiction according to which Congress may confer federal jurisdiction over any case/controversy potentially calling for the application of federal law Verlinden BV v. Central Bank of Nigeria (US 1983) Suit arises under Federal Question per 28 USC 1331 only if it is BASED upon Federal law or the constitution Louisville & Nashville R.R. Co. v. Mottley o It is not enough that the P anticipates some defense to his cause of action and asserts that the defense is invalid under the US Const Mottley well-pleaded complaint rule Louisville & Nashville R.R. Co. v. Mottley Discussion of this rules merits following case o You look at the face of the complaint stating the cause of action without anticipating potential defenses o If there is a Federal Question on the face of the complaint then jurisdiction is appropriate o Sometimes lawyers try to do artful pleading and weave in FQs which are not really there o But this rule works well about 99% of the time Holmes Creation Test A suit arises under the law which creates the cause of action TB Harms Co. v. Eliscu o Generally if you are suing under a Fed Statute then it is almost always an FQ case but if you are suing under a state CL theory then it is almost always not an FQ case o If whether something is an injury or not depends on the law of the state where it was done, the suit does not arise under Federal law

Even though the claim is created by state law, a case may arise under a law of the US if the complaint discloses a need for determining the meaning/application of such a law TB Harms Co. v. Eliscu Action arises under the CR Act if and only if the complaint is for a remedy expressly granted by the Act o Or (more doubtfully) if it at least presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim o For CR cases the question is whether the suit involves allegations of CR infringement (under its more regular understanding) Declaratory Judgments Act 28 2201-02 Allows fed courts to issue a declaration of rights and other legal relations to an interested party in a case of actual controversy within its jurisdiction

Back to Top Osborn v. Bank of the United States (US 1824) Bank of the US sued the state auditor of Ohio to enjoin him from collecting a tax they believed was unconstitutional. He collected anyway, they sued in Federal Court and he moved to dismiss for lack of jurisdiction. Congressional Act chartering the bank authorized it to sue and be suedin any Circuit Court of the US. Court (Marshall, CJ.) The Federal Bank Act was a grant of jurisdiction by Congress to Fed Cts in all cases where the bank was a party This falls within the arising under language of Article III obvious in this case since the bank alleged a constitutional violation However the bank could still sue in Federal Court if it asserted a claim under state law arising out of a contract The question about whether the US Bank is a proper juridical entity turns on Federal law and exists as an analytical manner in any case involving the bank o Marshall says that Q about whether US Bank is properly constituted as an entity at all is always part of the cause of action it is an ingredient of the cause of action The P (bank) or conversely someone suing the bank has to show the US Bank is a real/appropriate legal entity in order to prevail on their K claim That proof depends on US law o The action still originates in, and is sustained by, that charter. Additional Notes Marshall didnt have to get into any of this because there was a constitutional claim in this case which clearly got this case under Article III o However in dictum he speaks to what he sees as a constitutional threshold question

Whenever US Bank is a party even if it involves a state law cause of action by the bank (eg, a contract with the bank) the threshold legal question is whether the bank is a legal entity with the right to sue anywhere and make an enforceable K o That question about whether the US Bank is a proper juridical entity turns on Federal law and exists as an analytical manner in any case involving the bank o Marshall says that Q about whether US Bank is properly constituted as an entity at all is always part of the cause of action it is an ingredient of the cause of action The P (bank) or conversely someone suing the bank has to show the US Bank is a real/appropriate legal entity in order to prevail on their K claim That proof depends on US law

Back to Top Louisville & Nashville R. Co. v. Mottley (US 1908) P obtained passes from D for lifetime transportation as settlement in a PI suit. D stopped renewing passes when Congress passed a law prohibiting RRs from issuing free passes. Congress passed this law prohibiting grants of free RR transportation because it was believed that these sorts of grants were being used to bribe public decision makers. P sued in Fed Circuit Court on grounds that this law does not merit the breach of their K and, if it does, it is unconstitutional because it violates their 5th Amendment due process property rights. US Circuit Court held for P, D appeals. Court (Moody) No jurisdiction suit arises under Federal Question only if it is based upon Federal law or the constitution o It is not enough that the P anticipates some D to his cause of action and asserts that defense is invalid under the US Const o This Ps original cause of action does not arise under the constitution The complainant in the first instance is confined to a statement of its cause of action o Conforming itself to that rule the P would not, in the assertion or proof of its cause of action, bring up a single Fed Q Additional Notes Here it is pretty clear that there is a breach of K dispute the K elements do not implicate the constitutionality of the statute under the well pleaded complaint it is just breach of K A lot of times you cannot tell up front whether an FQ is going to arise in the litigation and, if it does come up, how much focus there will be on it Mottley Rule is a statutory rule this is an interpretation of 1332 in which the court is construing the arising under language this is probably not that close to the truest meaning of the statute o Congress could change this tomorrow They could say that they are adopting the Osborn ingredient test and want all the cases excluded by Mottley to be brought into Fed Court

This hasnt happened probably because it would substantially geometrically expand the scope of Fed Court jurisdiction o Some people think this rule is not a good idea and that a more flexible approach is preferable You sort out which cases should come in and which should not This is problematic because it is not hugely workable for judges and it is sometimes difficult to anticipate all the FQs which might come up Back to Top TB Harms v. Eliscu (2nd Cir 1964) The facts of this case are a mess and they are not that important essentially a CR dispute about who will own some revenue streams from CR law. Court (Friendly) Supreme Court has long given a narrower meaning to the arising under language than that articulated in Osborn Holmes Creation Test A suit arises under the law which creates the cause of action o If whether something is an injury or not depends on the law of the state where it was done then the suit does not arise under Federal laws (in that case patent laws) o This is more useful for inclusion than exclusion Even though the claim is created by state law, a case may arise under a law of the US if the complaint discloses a need for determining the meaning/application of such a law Action arises under the CR Act if and only if the complaint is for a remedy expressly granted by the Act o Or (more doubtfully) if it at least presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim Back to Top

Joinder
Back to Top Joining Additional Claims Joining Additional Parties Five Ways o Federal Supplemental Jurisdiction Bringing in Another D Impleader Adding a claim and a Party o Someone who is a D in the original litigation wants to bring in a 3rd party whom the D thinks might be liable in the Ps claim in whole or in part Interpleader allows a plaintiff to initiate a lawsuit in order to compel two or more other parties to litigate a dispute These rules can be important they govern how cases are ultimately packaged together and affect your clients a great deal o They are typically clear enough that lawyers can agree on what the outcome should be One of the most substantial changes in modern civil process is the general trend toward allowing bigger cases with more parties o Good for efficiency reasons can collapse disputes into a single case General leaning of FRCP is toward allowing broad joinder o FRCP 42b allows trial courts to sever these aggregations which get unwieldy into separate trials (subject to the limits of the 7th Amendment) This is a pragmatic safety valve for judges to split cases up if necessary o Goal is to have something which gives both sides a fair chance to present their arguments and wont give a jury the unworkable/impossible task of parsing through impossibly complex/broad claims Rule 82 These rules shall not be construed to extend/limit the jurisdiction of Fed D Cts or the venue therein o These joinder rules do not create SMJ or personal jurisdiction over parties you must have jurisdiction over the litigant at issue Just because you can join somebody doesnt mean there is personal jurisdiction to do so

Back to Top Joining Additional Claims COMPULSORY Counterclaims Counterclaims MUST be stated if they arise out of the same transaction as the Ps original claim and do not involve other parties over whom the D. Ct. doesnt have jurisdiction FRCP 13(a) Compulsory Counterclaims o Not compulsory if 1 At the time the action was commenced the claim was the subject of another pending action

2 Opposing party brought suit by attachment or another process under which the court didnt obtain jurisdiction in personam o If you dont raise a compulsory counterclaim you have waived it (though this is not totally draconian) Permissive Counterclaims any claim against an opposing party which doesnt arise out of the same transaction that is the subject matter of the opposing partys claim FRCP 13(b) o Unlike compulsory counterclaims permissive counterclaims do not have to be raised no risk of forfeiture o Could potentially raise compulsory counterclaims from the original P on the newly interjected issue Amending Counterclaims If a counterclaim is not asserted through excusable neglect or as justice requires you may amend to add your counterclaim FRCP 13f o Depending on how good your reason is and how much time has gone by the judge may/may not allow you to amend your counterclaim Cross-Claims P sues two Ds. The Ds may be fighting about who is really liable and who did what this sort of dispute is called a cross-claim o A party may state as a cross-claim any claim against a co-party arising out of the subject matter of either the original suit or a counterclaim therein OR Relating to any property that is the subject matter of the original action Rule 13(g) o If Ps original suit says the two Ds are engaged in a conspiracy to restrain trade the two Ds cant fight about some real estate dispute they have completely outside the original claim (they can only bring in issues directly relevant to the Ps original claim) Joining Claims Anyone who asserts a claim against a party may join as many claims as they have against the opposing party even if the claims are unrelated FRCP 18 o This is very rarely asserted typically leads to severance (Rule 42b) o This rule, if applied mechanically, could lead to chaotic litigation it is, however, generally applied reasonably

Back to Top FRCP 13(a) Compulsory Counterclaims Pleading must state as a counterclaim any claim which that the time of serving the pleading the pleader has against any opposing party, if it arises out of the event that is the subject matter of the opposing partys claim and does not require the presence of third parties beyond the courts jurisdiction the claim need NOT be stated if o 1 At the time the action was commenced the claim was the subject of another pending action o 2 The opposing party brought suit upon the claim by attachment or another process through which the court didnt acquire jurisdiction to render a

personal judgment on that claim and the pleader isnt stating any counterclaim under this Rule If opposing party brought suit by attachment or another process under which the court didnt obtain jurisdiction in personam You see this in admiralty jurisdiction where someone brings in a ship Must arise out of the transaction that is the subject matter of the opposing partys claim and not involve parties over whom the D Ct doesnt have jurisdiction o Same transaction there must be a reasonable factual nexus between the original claim and the compulsory counterclaim If you are the holder of the compulsory counterclaim you want to err on the side of raising it for fear of waiving Eg. P is suing D over automobile injuries. D says not only did I not cause the car accident, but the P did. D is not only denying liability but taking the case and saying the P is actually responsible under the law. o Arises out of the same set of facts, no new Ds the law wants to settle that dispute in one unified proceeding o Saves systemic resources dont have the same dispute playing out over multiple trials o It appears unjust to have mutually irreconcilable answers to things if they can be avoided Awkward for the law when different outcomes come out of the same set of facts So the law tries to funnel things into the same trial for resolution so you dont get these inconsistencies Also because if you have one shot where everyone gets to fight for their interests that is the best shot at getting the truth If you dont raise a compulsory counterclaim you have waived it (not totally draconian) o If you are a practicing lawyer you dont want to be explaining why you are pretty sure you havent waived your valuable claim

Back to Top FRCP 13b Permissive Counterclaims Any claim against an opposing party which doesnt arise out of the same transaction that is the subject matter of the opposing partys claim o Unlike compulsory counterclaims permissive counterclaims do not have to be raised no risk of forfeiture o If that permissive counterclaim is added and it is in the jurisdiction of the trial court, it can raise compulsory counterclaims from the original P on the newly interjected issue Back to Top FRPC 18 Joinder of Claims and Remedies

Anyone who asserts a claim against a party may join as many claims as they have against the opposing party even if the claims are unrelated o This is very rarely asserted typically leads to severance (Rule 42b) This rule, if applied mechanically, could lead to chaotic litigation it is, however, generally applied reasonably o Just because something is ok under FRCP doesnt mean it is ok under the constitution and jurisdictional authorizations from Congress FRCP cannot create jurisdiction beyond what is permitted by the constitution or congress

Back to Top Five Ways to Potentially Join Parties 1 FRCP 19 Mandatory Joinder (a) Necessary A person subject to service who will not deprive the court of jurisdiction should be joined as a party in the action if Without them complete relief cannot be accorded among those already parties or Adjudication in their absence will practically impair or impede their ability to protect an interest, or Leave any of the persons already parties subject to a major risk of incurring double, multiple or otherwise inconsistent obligations Indispensable 19(b) if someone is necessary but cannot be made a party (Eg, They would deprive the court of jurisdiction, are not subject to service of process, etc.) the court must determine whether in good conscience the action should proceed w/the current parties or be dismissed because the party is indispensable several factors to consider 1 To w/extent a judgment rendered in the persons absence might be prejudicial to the person or the current parties 2 Extent to which by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened/avoided 3 W/t a judgment rendered in the persons absence will be enough to give the P relief 4 W/t the P will have an adequate remedy if the action is dismissed Court has independent obligation to determine whether going through this exercise will be meaningful o Default in Rule 19 is that it could only be litigated in state court or o You will litigate the case in a way which shapes the relief so it can go forward as the P prefers but peoples interests are protected well enough to respect Ps decision to be in federal court E.g. Rather than litigating shares of a company you turn it into money damages 2 Rule 20 Permissive Joinder FRCP 20 Examples in Rule People can join in an action as Ps if they assert a right of relief jointly, severally or some other way and have a claim arising out of the same factual nexus and have common question of fact/law

o Typically you would include these Ps at the beginning file lawsuit together Joinder of Ds People can be joined in the same action as Ds if they are jointly, severally or otherwise liable in the same factual nexus and have a common question of fact/law o Under Rule 42b Court can package the case to prevent injustice and promote pragmatic resolution of the case

3 Rule 24 Intervention Right FRCP 24 24a Intervention by right (no permission required) you must apply to intervene in the case in a timely fashion o Upon timely application anyone can intervene if 1) the statute gives the party an unconditional right to intervene or 2) 24a2 the intervener claims property involved in the transaction and is situated in such a way that the outcome of the action affects the putative interveners ability to protect their interest 24b Discretionary intervention upon timely application anyone may be permitted to intervene if o 1) statute has discretionary intervening provision or o 2) you have a common question of law/fact and want to come in to be heard on this issue o Basically a smell test whether that party will make the litigation more effective/better or will just drag it out 4 Rule 22 Interpleader Action Some third party has control of the assets but they dont care who gets them o This P puts the money with the court and sues all the potential claimants to have them demonstrate which of their claims ought to prevail 5 Rule 23 Class Action You have too many people to feasibly join them as Ps/Ds o General rule is anything over 20-30 is too many to proceed so the case must proceed under Rule 23 if it is to proceed at all You must have a common question of law/fact o Class actions are the exception in how cases typically proceed o SC has made it clear that class actions are the exception and if you are going to have them there must be a good reason Back to Top Rule 19 Mandatory Joinder A A person subject to service who will not deprive the court of jurisdiction must be joined as a party in the action if o 1 In the persons absence complete relief cannot be accorded among those already parties o 2 The person claims an interest relating to the subject of the action and is situated such that disposition of the action in their absence may

i practically impair or impede their ability to protect that interest ii leave any of the persons already parties subject to a major risk of incurring double, multiple or otherwise inconsistent obligations by reason of the claimed interest o If the person has not been joined the court will order them to be made a party o If the person should join as a P but refuses, that person may be made a D or, if necessary, an involuntary P o If the joined party objects to venue and their joinder would render the venue improper, that party shall be dismissed B If a person described in (a)(1)-(2) cannot be made a party (eg. If they would destroy diversity) the court shall determine whether in equity and good conscience the action should proceed among the parties already there or be dismissed factors to be considered include: o 1 To w/extent a judgment rendered in the persons absence might be prejudicial to the person or the current parties o 2 Extent to which by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened/avoided o 3 W/t a judgment rendered in the persons absence will be inadequate o 4 W/t the P will have an adequate remedy if the action is dismissed

Back to Top Rule 20 Permissive Joinder Can join Ps and Ds this way People can join in an action as Ps if they assert a right of relief jointly, severally or some other way and have a claim arising out of the same factual nexus o Ps can come in and litigate that case together o Typically you would include these Ps at the beginning file lawsuit together Joinder of Ds People can be joined in the same action as Ds if they are jointly, severally or otherwise liable in the same factual nexus and have common question of fact/law o Under Rule 42b Court can package the case to prevent injustice and promote pragmatic resolution of the case Examples One X is from Illinois and goes to Y to get a loan. o Y offices in Indianapolis. o X, leaving Ys office, falls and hurts himself. X also thinks the loan documents dont comply w/Federal statutes. o X brings suit against Y in Fed Ct on his Federal claim. X also wants to sue the owner of the building for his fall. o These two claims cannot be packaged there is not a common question of fact and law Two P is from TX and goes to D brokerage firm, asking them to manage $1 million.

o P alleges D then invests in ways inconsistent w/the contract they signed. o P also goes to L, gives them $1 million, has same K and alleges the same nonpermitted investment. o These cannot be joined even though you have a common question of fact and law (same K) you dont have a common factual nexus (different incidents) Three P hires D to paint her barn. o Barn catches fire right after D begins to paint. o X is sleeping in loft of barn, smells smoke, jumps out and is injured. Fire started due to cigarette butt in the hay. o P sues D for breach of K for burning her barn down (causing impossibility of performance) X can join this suit on a negligence claim for his injury under Rule 20. o There is one factual nexus the barn burning down and a similar question of fact/law who threw the cigarette in the barn?

Back to Top 5 Rule 24 Intervention Right 24a Intervention by right (no permission required) you must apply to intervene in the case in a timely fashion o Upon timely application anyone can intervene if 1) the statute gives the party an unconditional right to intervene or 2) 24a2 the intervener claims property involved in the transaction and is situated in such a way that the outcome of the action affects the putative interveners ability to protect their interest o If a business says that $100k belongs to one creditor rather than another o You are the other and arent sure if that business will be around long and you dont want the business to pay out that $100k which you are owed o You would have a strong intervention of right claim to get involved and claim that money 24b Discretionary intervention upon timely application anyone may be permitted to intervene if o 1) statute has discretionary intervening provision or o 2) you have a common question of law/fact and want to come in to be heard on this issue o Much of this is driven by practicalities about whether letting that intervener in will cause injustice Affected by concerns that this is a business trying to drag out a competitors litigation o Basically a smell test whether that party will make the litigation more effective/better or will just drag it out Back to Top Rule 14 Impleader Add a claim and a Party

Back to Top Someone who is a D in the original litigation wants to bring in a 3rd party whom the D thinks might be liable in the Ps claim in whole or in part o D doesnt need leave of the court as long as they serve the new party WITHIN 10 days of filing their answer o If it takes longer they must get leave of court almost uniformly granted Ex. P is a manufacturer and D is a supplier. o D says they didnt give P the titanium but not because they just didnt but because their supplier didnt give them the necessary materials. o The original D would implead their sub-supplier on this issue and make them part of the litigation For purposes of FRCP the impleaded D becomes part of the case and can assert claims against other parties o Generally the P can assert claims against the impleaded D (with some restriction Owens v. Kroger) Impleader must relate to the same transaction or occurrence Back to Top Interpleader Notes Know about possibility of Rule Interpleader and statutory Interpleader o Must know about the differences so you know what the options are if you go out and practice Interpleader allows a plaintiff to initiate a lawsuit in order to compel two or more other parties to litigate a dispute Statutory Interpleader Today o An interpleader action originates when the plaintiff holds property on behalf of another, but doesn't know to whom the property should be transferred. o It is often used to resolve disputes arising under insurance contracts. Rules about Interpleader in modern law have been expanded from strict limitations that existed in history o Now the interpleading party can say they think these three people have claims and if none do then they should have rights to the assets they have a contingent right to the property Example Man in will says that he wants his assets to go to his wife, kids and Don o The attorney helping him prepare the will wants to deal w/these people predeceasing him if there is nobody else Ill give it to the University of Illinois UIL has a contingent right to those assets o Historically if you interpleaded assets, once they passed to the court you gave up all rights to them this is not the case Benefits of Interpleader Designed to get one proceeding rather than multiple proceedings Promotes single unified outcomes Promotes equitable distribution of assets after the fight is over oftentimes more people have claims than recovered assets there are to go around

o Law tends to give pro rata distributions in this setting (everyone gets 15 cents on the dollar) o Interpleader facilitates these pro rata distributions Eliminates the problem of finding assets to collect upon oftentimes you can get a judgment but finding the assets to collect on is impossible/difficult o Interpleader takes this issue off the table

Statutory Interpleader Section 1335 Often gives you more flexibility as the party seeking to do an Interpleader action All you need is minimal diversity between any of the claimants o The citizenship of the $$ party is irrelevant o It must just be, eg. 2 claimants from NY and 1 from CT sufficient Only $500 needs to be at issue You get nationwide service of process Venue is ok where any of the claimants resides Generally speaking you use statutory Interpleader sometimes if the venue rules are helpful to you then you will use rule Interpleader Constitutionality of Section 1335 was challenged at the SC case said this statute was ok for Art III purposes o Literature had long argued that the rule about complete diversity was not a constitutional command o Tashire shows that so long as there is minimal diversity then Congress can put that case in Fed Ct o Complete diversity rule of Strawbridge is a statutory rather than constitutional command If Congress chose to they could make it a minimal diversity rule and modify the Strawbridge holding Rule 22 Interpleader Allows a party to initiate Interpleader when there is complete diversity between the stakeholder and the claimants Financial Institution (nominal P from NY) must have complete diversity with all the claimants none of them can have NY citizenship Must also be $75k (and one cent) to get federal jurisdiction Rule 4 Service of Process governs here you can serve w/in the jurisdiction the court is situated in and to w/e extent services is permitted by state law in that state Back to Top

Federal Supplemental Jurisdiction

Back to Top Arguments for/against allowing Federal Supplemental Jurisdiction Modern Test for Federal Supplemental Jurisdiction PRIMARY TEST Constitutional Test for Supplemental Jurisdiction 2nd Statutory Supplemental Jurisdiction Test (and Background) 3rd

Historically there were Two Ways Non-Federal SJ Issues get in Fed Ct 1 Ancillary jurisdiction Gives Fed Cts the power to hear claims brought by parties other than the initial P (who started the suit) that are related to the Ps opening claims o Compulsory counterclaims, cross-claims, claims by interveners o Useful to talk about this because these are generally seen as noncontroversial Law tends to give a lot of discretion to parties brought into litigation against their will to resolve their disputes 2 Pendent Jurisdiction When the original P appended a claim or included a party for which there was no independent basis for SMJ on that claim or that party Ancillary and pendent are now collapsed into supplemental jurisdiction discussion o Whether or not joinders are ok is evaluated against the statutes and the constitution Example. P has a Title VII suit this is a Fed Statute so it has Fed Question jurisdiction, but virtually every state also prohibits employment discrimination o Sometimes lawyers will include one of these state claims which basically tracks this same set of facts o Oftentimes you have a lack of complete diversity between the employee and their employer (they work at the principal place of business of their employer) o In what settings may those sorts of claims (without independent SMJ and outside diversity) be brought as part of the Federal Title VII claim or required to proceed in a different forum If law said there is no district court jurisdiction to hear the parallel track cause of action o The D. Ct. would still hear the federal case (the fed claim could also be filed in state court w/all causes of action included) o Issue will be whether the state causes of action will be allowed to be included Back to Top Reasons to Allow Federal Supplemental Jurisdiction 1 Efficiency/Convenience it is more efficient to try everything together o Consistency tends to avoidance of inconsistent judgments

o Issue Preclusion Avoids complex problem of potential collateral estoppel and issue preclusion (multiple suits between the same parties) o Convenience it is more convenient for the P to litigate everything coming out of the incident at once 2 Viability You protect the viability of the Fed forum hearing the Title VII claim fear that Ps will be reluctant to bring claims in Fed Cts provides a disincentive by forcing them to split the suit o Fear that if somebody is asked to bring two lawsuits then they will opt to bring the case in state court will tend to discourage the filing of Fed claims in Fed Cts o To the extent people file two suits there will be strategy and jockeying about which trial goes first, etc.

Counter-Arguments 1 Efficiency is nice/important but this is the jurisdiction of Fed Cts you can get efficiencies in state court just as easily as in Fed Ct o State Cts are contemplated in Const structure to be the front line trial cts in America 2 Many situations in the law designed to promote the vitality of state courts o Respect the limits on the jurisdiction of Fed Cts 3 Fed Cts are not well situated to deal with state law legal questions o They dont have authority to speak definitively on state law questions o Aggressive supplemental jurisdiction assertions sounds judicially imperious flavor influencing this discussion Back to Top USC 1367 Supplemental Jurisdiction Analysis (Passed 1990) Venue is largely resolved by 1367 screen Congress moves to enact 1367 w/a few exceptions what this section does is generally codify the law of supplemental jurisdiction prior to 1990 Overrules the prior idea of party pendent jurisdiction in Fed claims Three Prong Analysis for Supplemental Jurisdiction Prong 1 Is there Constitutional power under Art III Section 2 to hear the supp claim? Must meet the Gibbs test o 1 Substantial Federal question If you have a non-frivolous federal question then we will move to the Gibbs test o 2 Common nucleus of operative fact Prong 2 If constitution is satisfied, is there statutory authorization for jurisdiction on this question? o Looking for attempts by Ps and potential interveners trying to circumvent the diversity requirements of 1332 o Only an issue if basis for SMJ in main claim is diversity 1367 is trying to keep in place that test from Owen Equipment & Erection Co. v. Kroger

Diversity could not have been maintained if P had sued both Ds initially so the joinder of the second D DESTROYED the diversity o If main claim is FQ you only need a common nucleus of operative fact constitutional question 1367/Gibbs analysis Means that in every federal question the court must resolve the Article III question of whether Xs claim about the apartment contract is from the same nucleus of operative fact as Xs slip and fall on ice in front of the complex These are pretty fact-bound discussions w/a constitutional dressing o DIVERSITY Cases WE ARE ENFORCING COMPLETE DIVERSITY No supplemental jurisdiction over claims by Ps against persons made parties by following methods if it would destroy complete diversity of parties Rule 14 impleader Rule 19 (necessary party joinder) Rule 20 (permissive party joinder) Rule 24 (intervention) This just means we are going to enforce the complete diversity requirement of Strawbridge Prong 3 DISCRETION District Courts MAY DECLINE to exercise supplemental jurisdiction over a claim under subsection (a) IF o 1 The claim raises a novel or complex issue of State law o 2 The claim substantially predominates over the claim or claims giving original jurisdiction to the district court o 3 The district court has dismissed all claims over which it has original jurisdiction, or o 4 In exceptional circumstances, there are other compelling reasons for declining jurisdiction

Back to Top Constitutional Test for Supplemental Jurisdiction Modern Test for Federal Supplemental Jurisdiction o If there is PJ over a D then stuff from w/in that common nucleus can come in through supplemental jurisdiction o If not, then it is a different claim which is analyzed separately For pendent jurisdiction to exist the federal claim must have substance sufficient to confer SMJ on the court United Mine Workers of America v. Gibbs o This goes to how much of a focus you will have on the claims

o If the state claim is really where all the action is and the fed claim is just an add-on you will often see the D Ct decline to exercise that supplemental jurisdiction and remand to state court Constitution requires that the state and federal claims must derive from a common nucleus of operative fact United Mine Workers of America v. Gibbs o If, considered w/out regard for their state or federal character, a Ps claims are such that he would ordinarily be expected to try them all in one judicial proceeding then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole o Constitution gives power over cases in controversy rather than just claims The issue is whether this is over the same case/controversy rather than just the same claim o Kind of a circular test because whether one would try them all in the same proceeding is largely the product of the legal rule you have developed ex ante Basically whether, all things considered, this seems like the same factual package of stuff Everything else is a discretionary decision by the D. Ct. Court often looks at procedurally whether they would go together w/would be a procedural sort of difference leading a court to remand a claim to state court? o One example where you might separate if there is a distinction in what evidence might be available, different burdens of proof, etc. DISCRETION Pendent jurisdiction is a doctrine of discretion, not of plaintiffs right United Mine Workers of America v. Gibbs o Justification lies in considerations of judicial economy, convenience and fairness to litigants o If these elements are not present a federal court should hesitate to exercise jurisdiction over state claims If the Fed claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well United Mine Workers of America v. Gibbs o There may, however, be situations where the state claim is so closely tied to questions of federal policy that the argument for exercise of pendent jurisdiction is particularly strong o This just leaves non-diverse state law claim o If there are 30 parties waiting for federal trials you have to prioritize those Have non-diverse parties who are litigating a state law claim go deal w/it in state court May be reasons independent of jurisdictional considerations that would justify separating state and federal claims United Mine Workers of America v. Gibbs o Eg. Jury confusion in treating divergent legal theories of relief This is ordinarily resolved on the pleadings but remains open throughout the litigation United Mine Workers of America v. Gibbs o Once it appears that a state claim constitutes the real body of a case, to which the federal claim is only an appendage, the state claim may fairly be dismissed

It might be particularly important to remand a state issue claim to state court rather than have Fed Ct proceed if it is an ISSUE OF FIRST IMPRESSION Dont want Fed. Cts. making Erie guesses o The Fed Ct cannot pronounce with any authority on these issues Fed Ct interpretations have no legal authority over state law except beyond the contours of that case o State Supreme Courts often shrug off COA rulings as incorrect and clarify the law Fundamental base of Erie is that federal courts were seen as impeding/retarding decisions by state courts which the federal courts didnt like Because of this dynamic a fed ct will be reluctant to give w/is essentially an advisory opinion on this matter

Back to Top United Mine Workers of America v. Gibbs (US 1966) Two claims Gibbs raises against the union defendant. There was 1) a violation of Fed Statute and 2) there was a tort under state CL. Trial court set aside the jury verdict on the federal claim only thing left in the case is the state CL claim (obviously no diversity here). Question of whether this was appropriate pendent jurisdiction. Court (Brennan) Hurn v. Oursler Determined permissible exercise of Federal power by contrasting a case where two distinct grounds in support of a single cause of action are alleged, one only of which presents a federal question, and a case where two separate and distinct causes of action are alleged, one only of which is federal in character o In the former where the federal question is not insubstantial the federal court, even though the federal ground is not established, may still retain and dispose of the case on the nonfederal ground o In the latter it may not do so on a nonfederal cause of action This old distinction is less meaningful now that the FRCP has merged law and equity For pendent jurisdiction to exist the federal claim must have substance sufficient to confer SMJ on the court The state and federal claims must derive from a common nucleus of operative fact o If, considered w/out regard for their state or federal character, a Ps claims are such that he would ordinarily be expected to try them all in one judicial proceeding then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole Pendent jurisdiction is a doctrine of discretion, not of plaintiffs right o Justification lies in considerations of judicial economy, convenience and fairness to litigants o If these elements are not present a federal court should hesitate to exercise jurisdiction over state claims If the Fed claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well

o If it appears the state issues substantially predominate the state claims may be dismissed without prejudice and left for resolution in state tribunals o There may, however, be situations where the state claim is so closely tied to questions of federal policy that the argument for exercise of pendent jurisdiction is particularly strong May be reasons independent of jurisdictional considerations that would justify separating state and federal claims o Eg. Jury confusion in treating divergent legal theories of relief This is ordinarily resolved on the pleadings but remains open throughout the litigation o Once it appears that a state claim constitutes the real body of a case, to which the federal claim is only an appendage, the state claim may fairly be dismissed

Additional Notes The constitutional basis for being able to hear the pendent state law claim is a common nucleus of operative fact between the two claims Old Hurn approach was to look at w/t it was the same cause of action o By the time you get to Gibbs there is beginning to be lots of legislation which never would have existed in the old days and doesnt track the old state causes of action Gibbs test largely tracks the approach of the FRCP much friendlier approach to packing things together than in the old days Back to Top Statutory Supplemental Jurisdiction Test (and Background) Back to Top Modern Test for Federal Supplemental Jurisdiction PRIMARY TEST

These cases Predate 1367 (passed in 1990)

The question of pendent-party jurisdiction is whether by virtue of the statutory grant of SMJ, Congress has addressed itself to the party as to whom jurisdiction pendent to the principal claim is sought Aldinger v. Howard o Resolution of such a claim calls for careful attention to the relevant statutory language o Different statutory grants and alignments of parties might call for a different result o Eg. When the Federal court is the only court which can statutorily hear the federal claim Then the argument of judicial economy/convenience can be coupled with the additional argument that only in a federal court may all the claims be tried together

District courts should ask whether Congress in the statutes conferring jurisdiction has not expressly or by implication negated its existence. Aldinger v. Howard CHANGED BELOW BY FINLEY Mrs. K (IA) sues Omaha Power (NE) OP brings in Owen (IA) Once OP brings in Owen then SJ is granted for OP and all left is K (IA) and Owen (IA) Owen Equipment & Erection Co. v. Kroger Notes on Plaintiff Strategy Following Case o Beyond constitutional minimum (Gibbs) of a common nucleus of operative fact, there must be an examination of the specific statute conferring jurisdiction over the federal claim This is intended to determine whether Congress has expressly or by implication negated the exercise of jurisdiction over the particular nonfederal claim o Congressional mandate in 1332 is that diversity jurisdiction is NOT to be available when ANY P is from the same state as any D Diversity could not have been maintained if P had sued both Ds initially so the joinder of the second D DESTROYED the diversity o Neither convenience of the litigants nor considerations of judicial economy can suffice to justify extension of doctrine of ancillary jurisdiction to a Ps cause of action against a citizen of the same state in a diversity case There will NOT be an assumption of pendent-jurisdiction over additional parties IN THE ABSENCE of statutory authorization by Congress Finley v. United States o A grant of jurisdiction over claims involving particular parties does not itself confer jurisdiction over additional claims by or against different parties

Aldinger v. Howard (US 1976) P from WA is suing some officials under 1983, a Fed Statute which provides a vehicle for going to Fed Ct when they are alleging that a state official is depriving them of some Federal right. At the time counties were not considered part of 1983 P is also suing the county under a state law theory and wants to sue in Fed Ct under common nucleus theory. Question of what to do when a federal claim is asserted against one D and a closely related state claim is asserted against another who is not diverse from the P. Court Extension of Gibbs to this kind of pendent-party jurisdiction bringing in an additional defendant on a state law claim at the behest of the plaintiff presents different statutory and judicial considerations The question of pendent-party jurisdiction is whether by virtue of the statutory grant of SMJ, Congress has addressed itself to the party as to whom jurisdiction pendent to the principal claim is sought Resolution of such a claim calls for careful attention to the relevant statutory language o A fair reading of the statutes sued on here requires a holding that the joinder of a municipal corporation for purposes of asserting a non-diverse state-law claim is beyond the statutory jurisdiction of the district court o Other statutory grants and alignments of parties might call for a different result

o Eg. When the Federal court is the only court which can statutorily hear the federal claim Then the argument of judicial economy/convenience can be coupled with the additional argument that only in a federal court may all the claims be tried together District courts should ask if Congress in the statutes conferring jurisdiction has not expressly or by implication negated its existence.

Class Notes W/are the two reasons why they do not allow this claim? 1 1983 specifically excluded counties and municipalities if a statute doesnt reach to counties then it seems odd to gut the congressional interpretation by allowing supplementary jurisdiction to get you back to the same place o Same place because state law doctrines often parallel federal law o Granting fed jur over the country seems contrary to Congress intention in passing 1983 2 It would go against the principle of limited SMJ Fed jurisdiction to allow this o Maybe we allow a packaging of claims when people are there anyway but it crosses the line to add an entirely new kind of tort Back to Top Owen Equipment & Erection Co. v. Kroger (US 1978) Application of pendent jurisdiction in diversity cases P sued one D (different state), who brought in another D (same state as P) and then won SJ, leaving just the same state D. Mrs. K (IA) sues Omaha Power (NE) OP brings in Owen Once OP brings in Owen then SJ is granted for OP and all left is K and Owen Over trial is becomes clear that Owens principal place of business is actually in IA o So all you have is non-diverse litigation (once OP is out of the picture) Court (Stevens) Beyond constitutional minimum (Gibbs) of a common nucleus of operative fact, there must be an examination of the specific statute conferring jurisdiction over the federal claim o This is intended to determine whether Congress has expressly or by implication negated the exercise of jurisdiction over the particular nonfederal claim Congressional mandate in 1332 is that diversity jurisdiction is not to be available when any P is from the same state as any D o This is clear in the enactment and subsequent renewals of the statute o Diversity could not have been maintained if P had sued both Ds initially so the joinder of the second D destroyed the diversity Neither convenience of the litigants nor considerations of judicial economy can suffice to justify extension of doctrine of ancillary jurisdiction to a Ps cause of action against a citizen of the same state in a diversity case

o To allow the diversity requirement to be circumvented in this way would flout the congressional command Additional Notes Would be surprising if the P was trying to manipulate this and play games w/Owens principal place of jurisdiction o Also surprising for Owen to do this it is not a fun dynamic to have to say after a few days of trial that you forgot where your primary place of business is o Would be a bad thing to have happen to you if you ever wanted to litigate in the area again SC says that once diversity is lost, the case must go back to state court o 1332 has been interpreted to consistently require complete diversity of citizenship o It was seen as manipulative and gutting of the complete diversity idea to allow future parties to just sue the diverse litigant, allow that litigant to join the other D who is non-diverse then drop out of the case leaving only non-diverse parties o You can often predict with near-total certainty when your opponent will bring in another party If she wants a federal forum one other option o She can file two lawsuits she can sue Owen in state court then sue OP separately in Fed Ct o This is probably not worth the money o OP can litigate against Owen on its claim in Fed Ct even if there is a bar to resolving their case w/K in one case So Owen might have to defend against OPs Rule 14(a) claim in Fed Ct and also against Mrs. K in state court on the underlying tort claim o Their factual presentation about why their product is good will probably be the same in both the Fed and state forums against both OP and Mrs. K o It might happen that the Fed Ct will reach a conclusion that their crane is ok while the state court concludes the crane is defective o Mrs K might want to see how the claim works out b/t OP and Owen If Owens crane is determined to be defective in the Fed Claim then Mrs. K might try to use collateral estoppel to capitalize on that ruling Back to Top Finley v. United States (US 1989) Mrs. F brings her case concerning a plane crash in Fed Ct against the US through the FAA. She sues under the Fed Tort Claims Act. Court (Scalia) There will not be an assumption of pendent-jurisdiction over additional parties in the absence of statutory authorization by Congress

o A grant of jurisdiction over claims involving particular parties does not itself confer jurisdiction over additional claims by or against different parties Dissent (Stevens) This changes the Aldinger rule that pendent-jurisdiction would exist over parties unless it was barred by congress this says that the grant must happen not just be denied Class Notes Finley leads to/invites the enactment of 1367 o Majority said this should be something Congress ought to address w/a statute Idea that pendent-claim and pendent-party jurisdiction are different o We allow Fed Cts to resolve the former but not the latter Also a statutory-type argument like the one in Aldinger o Congress didnt expressly include these parties so jurisdiction is inappropriate o This is a bit weaker than Aldinger in that case 1983 had been read to exclude counties o Here the Fed Tort Claims act hadnt been read to exclude San Diego or the power company but it does say it addresses claims against the United States o Idea that in Congress expressly conferring jurisdiction against the US, it was silent about SD and power companies, therefore jurisdiction should not be extended here o If they are wrong Congress can fix it Dissent Aldinger was different there they just carved out a county whereas here they are just limiting the ready availability of the courts o Will lead to more claims being brought overall Back to Top

Removal
Back to Top Burden of showing the case is properly removable is on the removing party o Ability to remove is same analysis as w/t that case could be filed initially in state court o Must remove entire case cannot only remove some of the claims Statutory Provision USC 1441 A Unless Cong otherwise directs, any civil suit brought in state court which the P could have brought in Fed Ct can be removed by the D in the case to Fed Ct o ONLY if the case could have been there in the first place can the Ds bring it there D. Ct. must have had original jurisdiction o Only the Ds can remove a case you cannot remove a case if you are P (doesnt make sense, the P brought the case in state court) o You can only remove to the D. Ct. for the district and division embracing the place where such action is pending [in the state court].

o If there are multiple Ds then all the Ds must agree to remove if one D wants to litigate in state court then they all must law must presume that state courts are fair forums B With Fed Q suit, D or Ds can remove regardless of diversity of person o BUT: This is still subject to the well pleaded complaint rule of Louisville & Nashville R.R. Co. v. Mottley D CANNOT remove simply because they are raising an FQ in defense it MUST be in original complaint Federal Jurisdiction for Federal Questions Law o In Diversity Cases, Ds CANNOT remove if ANY legitimate D is a citizen of the state where case was filed in state court True even if the P is not from that state and they have complete diversity Eg. If P from CA sues an IL D in IL state court then that IL D cannot remove to Fed Ct saying they cannot get a fair shake in their own state court C D. Ct. can remand state law claims if Fed ones are removed o Just like 1367(c) and Gibbs factors o When all that is left of a case is remanded under Gibbs analysis, the Ps case isnt time barred P went to state court, D makes an FQ counterclaim Original P cannot remove that case to Federal Court Shamrock Oil & Gas Corp. v. Sheets o P is presumed to have made this decision in the first instance o A counterclaim isnt like a unicorn and the idea that somebody might raise a counterclaim should be foreseen by anyone o The P is tied because the original claim was a state claim and P didnt have the option of Fed Ct

Back to Top Shamrock Oil & Gas Corp. v. Sheets (US 1941) Question was whether a P could remove a state court action to Fed Cts because D interposed a counter-claim. Court (Stone) The law says that any action commenced in state courts may be removed by the defendant or the defendants to Federal Court (assuming the requirements are met) This language was modified from earlier language authoring either party to remove a case o Congress cannot be assumed to have modified this language for no purpose The policy of successive Congressional Acts regulating the jurisdiction of the Fed Cts is further evidence of Congressional intent to limit federal jurisdiction o Strict construction of such legislation is required

Back to Top

Introduction Traditional Bases for Personal Jurisdiction

Back to Top SMJ Compared to PJ Pennoyer Explanation o Important Caveats to Pennoyer o Pennoyer v. Neff This is the longest section we look at interesting from a jurisprudential perspective o Developments in the real world affect how courts handle things Personal Jur is almost always a discussion about Ds rather than Ps o Possible issues in Class Action where we talk about Ps but almost always about Ds o If you are asking a court to resolve a dispute you have fundamentally agreed that your person is subject to the jurisdiction of that court

Traditional analysis distinguishes three types of jurisdiction 1 In personam Court exercises its power to render a judgment for or against a person by virtue of his presence within the states territory or his citizenship there 2 In rem Court exercises it power to determine the status of property located within its territory the determination of that court is binding w/respect to all possible interest holders in the property 3 Quasi-in-rem Court renders a judgment for or against a person but recovery is limited to the value of their property within the jurisdiction and thus subject to the courts authority SMJ Compared to PJ 1st difference SMJ is about the authority of the court to hear that case/controversy at al o Personal Jur is about power over the person we are debating/discussing nd 2 SMJ can never be waived it is about much more than these particular litigants so the two people in a case cannot simply waive the SMJ requirement these lines are a big deal and courts must respect them o Personal Jur can easily be waived because it is a right of that individual litigant o You can almost always waive lots of rights even if it is a very poor idea Ex. You get in a car accident in London w/a Brit. Clearly SMJ jurisdiction but almost certainly not personal jurisdiction over the Brit ND IL court does not have jur you must go to courts in England to raise that claim Personal jur always implicates both statutory foundation and a constitutional component/foundation o PJ is a bit more nuanced than SMJ two subcomponents o 1 (main one) Authority and legitimate assertions of authority by a court system Can the court system of the state exercise legitimate authority over the person whos jurisdiction is at issue

o 2 Notice there must be notice which is provided in order for personal jurisdiction to work Back to Top Pennoyer Explanation SC holds there is no personal jurisdiction over Neff in the main suit two principals driving them o 1 Each state has exclusive jurisdiction over the land/people w/in its boundaries o 2 By negative implication no state exercise jurisdiction or authority over persons/property outside the states territory This was the classic exposition of personal jur at that time (and in international law at that time where it retains substantial vitality) o PJ is based on power over the D which is based on land and sovereignty o Big emphasis on state power, they have exclusive power w/in their borders and no state can direct authority over those in another state o Person or property w/in a state are both sufficient and necessary to grant PJ US Const. Art IV, Sect 1 Full faith and credit shall be given in each state to the public actsand judicial proceedings of every other state. o This is not federal court but state court o 28 USC 1738 tracks this saying the judicial proceedings of any court shall have full faith/credit in every other court o But the DPC puts a limit on the above if a judgment is not secured initially in compliance w/the US Const it is not entitled to full faith/credit o This is technically dicta though because the 14th Amendment has not been officially passed yet DPC requires that in order for a judgment to be valid in every case, the trial court has valid PJ over person of D and the D must be given proper notice of the judicial proceeding the key is state power/authority o A state cannot directly assert jurisdiction over someone in another state This does allow a state to assert PJ indirectly by using their in-state property 1 You proceed in rem means we are litigating about ownership of that property from the beginning who owns the farm, boat, etc 2 Can litigate more broadly when there is property w/in a state o You have to attach the land before the lawsuit begins o You can litigate about anything (perhaps default if person doesnt come) o Your cap is the value of the land you cannot recover more than their land in the state quasi-in rem jurisdiction o In this time period you could nail process to the door of the property This was thought to be legitimate at the time and people were expected if they were genuinely exercising rights over property to have somebody close (probably with a gun) to keep an eye on their property So if someone comes and nails something to the door it will probably actually work to give them service

Authority Notice

In Personam Person in territory Personal Service

In Rem Property in territory Attach + publish, at minimum

Quasi-in rem Property in territory Attach + publish, at minimum

Why not do just an in rem suit from the beginning in OR? o The first lawsuit in OR isnt about the land and rights to it it is about the lawyers fees o They could have proceeded quasi-in rem but they didnt they didnt actually attach the land so they cannot recover on it o Actual attachment gives people notice With this framework there is not much separation between ideas of power and notice o States will generally not be asserting PJ over people in other places o Typically people are in the states borders and you serve them The view in Pennoyer is based on a robust view of state sovereignty o The implications of it do not translate very comfortably to modern realities o There are other ideas starting to drive the debate as we move into the 20th century In last 60 years the driving conditions are ideas of fairness to the D in terms of their travel to a potentially hostile forum o Fairness to the P if P cannot sue in home forum they may be effectively stripped of ability to recover o Practical concerns w/the introduction of the automobile into society and increased mobility

Back to Top Important caveats in Pennoyer Quasi-in rem jurisdiction important because even the most robust view of presence has this exception 3 more recognized exceptions 1 Personal status cases when a state confers a legal relationship on a state then you can dissolve it through a legal proceeding when your spouse leaves the state 2 Partnerships people (including probably corporations) situations where the mode of service are presumed to be assented to o A state can condition giving incorporation rights on that corporation making itself amenable to suit in that state o Similar to a doing business authorization If a company wants to do business in your state you can condition their entry on them making themselves available for service o Major expansion of the nations economy and industrial base world in America in 1850 and world in 1920 3 You can sue people in their domicile even if they are not present in the state at the time of the suit

o Their domicile state is affording privileges and protections there is a reciprocity concept that if a P comes to your domicile you can be required to answer to legal claims in that lawsuit Back to Top Pennoyer v. Neff (US 1877) Action to recover legal fees for an action to recover possession of a tract of land in Oregon. The D therein (P in this case) was not a resident and was not living in OR. The original P gave the original D constructive notice and won a judgment in default against him he was not personally served w/process and did not appear therein. Judgment was entered in default in not answering the complaint, upon a constructive service of summons by publication. Court The authority of every tribunal is necessarily restricted by the territorial limits of the state in which it is established o Any attempt to exercise authority beyond those limits would be an illegitimate assumption of power In the case disputed here, the property in controversy sold to pay the personal judgment was not attached or in any way brought under the jurisdiction of the court o It was, therefore, not disposed of due to adjudication but in enforcement of a personal judgment w/no relation to the property against a nonresident w/out service of process or his appearance The judgment below was void for want of personal service or his appearance o The premises in controversy could not be used for payment except by a proceeding in rem a direct proceeding against the property This flows from two well established principles of public law respecting the rights of states o Except as restrained and limited by the constitution they possess and exercise the authority of independent states 1 Every state possesses exclusive jurisdiction and sovereignty over persons and property within its territory o State tribunals may compel persons domiciled there to satisfy judgments arising from contracts involving property in another state o This does not interfere w/the other states control over that property 2 No state can exercise direct jurisdiction and authority over persons or property outside its territory the independence of one state implies the exclusion of power from all others o State tribunals may subject property in the state owned by non-residents to the payment of demands of its citizens this does not interfere w/other states sovereignty over these people o Every state owes protection to its citizens and when non-citizens deal w/them it may use their property in the state to satisfy these dealings If the non-resident has no property in the state there is nothing upon which they can adjudicate

If, without personal service, judgments in personam obtained w/out their presence against non-residents were enforced it would lead to constant fraud/oppression In rem is different o Substituted service (eg publication) may be sufficient to notify the party of proceedings where property is brought under the control of the court by seizure o The law assumes property is always in the possession of its owner and it proceeds on the theory that seizure will notify him This seizure must be ex ante the judgment cannot occupy the doubtful position of being valid if property be found and void if there be none o If the judgment was previously void it will not become valid by subsequent discovery of Ds property in the state o If it was void when rendered it will always remain void o Validity of every judgment depends upon the jurisdiction of the court before it is rendered not upon what happens subsequently Used to be supposed that full faith and credit gave one states tribunals judgment validity in every other state o Since the 14th Amendment and application of DPC to the states, suits over parties where court lacks proper jurisdiction violate DP Except in cases over personal status (eg marriage cases one state can grant divorce even if other party has left the forum) of the P or ones where alternate service methods were consented to beforehand o Substituted service of process is only effectual where in connection w/process the Ds property is seized by the courts o Only ok when the action is a proceeding in rem

Class Notes Publication notice generally disfavored o Means notice of a lawsuit is published publication here occurred in an OR local paper o This is not really the effort you would make to give someone a best shot to find out w/is going on if they live in CA There is a default judgment (meaning that Neff never showed up) o If you dont show up/come to court and you have been properly served the P can get a default judgment o Courts try to give you a couple chances but a P is not precluded from prevailing if you just never show up 1 This is an in personam judgment against Neff o This phrase is used very much today o Means it is a judgment against the person of Neff and his general assets o OR state court is asserting power over the person of Neff based on the fact that there is property in OR and it is within the territory of OR state 2 A judgment (including a valid default judgment) must be collected upon by the winning P

o The judgment on its own isnt anything, it is just a piece of paper saying you are entitled to collect o People will often go through extraordinary efforts to find assets (many of which have been intentionally hidden) so they can execute upon the judgment o Mitchell goes to court to get an order of execution upon Neffs piece of real property in the state of OR Mitchell triggers a sheriffs sale of that land o He then buys it for $350 (fraudulently) and sells it by quitclaim deed to Pennoyer (who becomes the P in the later case against Neff) o There is the default judgment against Neff standing behind everything This is the second case o When Pennoyer shows Neff the default judgment against him in the suit with Mitchell as part of his claim to the land he says it is not valid as to him because he was never served with process or made aware of the suit o As with SMJ a valid exercise of PJ requires compliance w/local statute and the constitution o OR statute was followed so the issue before the SC is w/t this satisfies the DP requirements of the constitution o If there was valid PJ in the 1st case then the default judgment is valid and all the subsequent sales have bite and Neffs ejectment suit should fail

Back to Top

Modern Personal Jurisdiction

Back to Top Vehicular Origins of Modern PJ International Shoe and Modern PJ Doctrine o Law after International Shoe o International Shoe Co. v. Washington

12h1 Unless the D brings up an objection to PJ at the beginning of trial then their objection is waived

Long Arm Statutes Typically designed to allow very broad/long claims by Ps Fed statute typically says as long as your contacts w/the US exist somewhere then minimum contacts are w/the US as a whole can cobble together minimum contacts from different contact points Typically Fed Cts borrow the long arm statute of the state in which they sit
o

Minimum Contacts are evaluated from the perspective of a court of the state where the federal court sits

Vehicular Origins of Modern PJ One of the biggest changes in 20th century is car travel Kaine v. New Jersey (US 1916) Holds NJ may condition use of its roads by out of state drivers on consent to jurisdiction of NJ courts relating to that partys activity while in NJ o Consent was procured by forcing the party to appoint a legal person to receive process in NJ o This formal appointment model does not work very well as millions of people obtain cars we are not going to have people filling out these forms every time they cross a state border time consuming and wasteful Law quickly transitions and deals w/this reality leading us to below case The state, having the power to exclude a non-resident from using their highways until they appoint an agent to receive process, may declare that use of the highway by a nonresident is the equivalent of appointing the registrar as agent on whom process may be served Hess v. Pawloski o It does not discriminate against non-residents but tends to put them on the same footing as residents o States power to regulate its highways extends to non-residents as well as residents Back to Top Hess v. Pawloski (US 1927)

MA has a statute for out of state residents driving in their state. It provides that by driving in the state of MA they impliedly consent to appoint the state registrar as their in-state agent to serve process upon. This service is adequate so long as the P also sends them a copy by registered mail at their home address. Question is whether the MA statute satisfies DP. Court Mere transaction of business in a state does not imply consent to be bound by the process of its courts This provision simply requires those who drive in MA to be answerable to others whos rights they may violate o It does not discriminate against non-residents but tends to put them on the same footing as residents o States power to regulate its highways extends to non-residents as well as residents The state, having the power to exclude a non-resident from using their highways until they appoint an agent to receive process, may declare that use of the highway by a nonresident is the equivalent of appointing the registrar as agent on whom process may be served Additional Notes There is not actual in-hand service on D w/steps do they take? o They have a statute allowing them to give service through the state registrar who then has to mail a copy to the D by registered mail o They must file a certified pleading that they have in fact mailed it to the D Consent here is implied by a Ds use of the states roads o SC says this is fine and the distinction from Kaine is not substantial You are not allowed to withhold your consent under this law o MA didnt have to let you come in at all o If they can keep you out entirely they can certainly say that if you do come you can be forced to consent to jurisdiction There is a pretty substantial state interest here o MA needs to preserve its public safety by ensuring that those who drive in the state can be held responsible for their torts/actions Standard for service is that you must take those steps that you would legitimately take if you actually wanted somebody to find out about it This now clearly separates the ideas of presence and notice o Nobody is under the misapprehension that the letter sent to PA will be read w/in the borders of MA It is fair because it gives the D a chance to get an attorney and come litigate o But we cannot ignore the question about w/sort of notice is required when we want someone to come litigate in another state Back to Top

International Shoe and a New Theory of Jurisdiction Back to Top This is recognized as one of the most important Con Law cases ever and a victory for legal realism due to its flexibility

Pre-Shoe Conditions The composition of the US had shifted and is much more interconnected and industrial than in the time of Pennoyer o Now we have gigantic economic entities w/business all over the country There are lots of counterclaims and such when businesses sue each other o It is usually a two-way street w/both sides advancing all sorts of claims o People must have some reasonable assurance w/out bankrupting themselves that they will get some modicum of justice o Inability to get PJ in some way hurts everybody hurts businesses and consumers o People want nationwide markets but dont want to sacrifice their ability to sue Much of this will focus on corporations o Oldest theory of corporate presence (in era of Pennoyer) was that corporations could have no existence beyond the boundaries of the state in which they are incorporated o This totally breaks down as corporations seek to do business nationally Idea of registering an agent as a condition to doing business is most useful when you are dealing w/honest people o If you are planning to commit fraud you will just ignore this o Big problem with people just blowing off this statute and are doing business w/your citizens w/out having an agent to receive service Functional presence (pre-Shoe) done w/in the framework of Pennoyer o Idea that a foreign corporation is amenable to service/process if it is doing business there Before Shoe attorneys had developed a variety of ways for corporations to send agents into a state while avoiding jurisdiction through various circumspections of their duties, etc. Back to Top Law after International Shoe Shift from State sovereignty to a new set of factor/considerations for Courts The relative burdens on each side of being required to litigate there, fair to compel D to come there, can the D competently defend itself there (eg. Does it have the necessary witnesses in the forum state, etc.) o This case is on the side of open-ended almost conclusory tests Generally two sorts of statutes states have when asserting personal jurisdiction o 1 A comprehensive enumerated statute specifies in 12/13 bullets that this state will assert personal jurisdiction if x, y or z

o 2 An unenumerated DPC assertion Legislature says they will assert PJ over Ds up to the point that the constitution tells them to stop General Jurisdiction D may have sufficient contact with the forum to warrant asserting jurisdiction over it for all matters o Ds contacts w/the state are continuous and systematic so they are subject to the jurisdiction of the state on any claim regardless of whether it arises out of their contact o For most individuals the state of their domicile o For most corporations principal place of business Specific Jurisdiction Key is the relationship between defendants contact and the facts that give rise to the plaintiffs claim o D may have sufficient contact w/the forum to warrant asserting jurisdiction over it for matters related to its activity with the forum (without having sufficient contact to warrant general jurisdiction) o You dont have continuous and systematic contacts but have some level contacts and they are related to the Ps claim Not seen as overly inconvenient for this company who does lots of business in WA to hire an attorney to litigate in the state Through a rather conclusory analysis the SC says it would be ok for the state to enforce the obligation which the Shoe incurred by doing business in the state Notice is going to have an independent vitality from presence SC says notice must be done in a way that is reasonably calculated to be effective In rem still have in rem jurisdiction against property Quasi-in rem still exists Transient Jurisdiction Still have jurisdiction over anyone who passes through the state

Back to Top International Shoe Co. v. Washington (US 1945) P was being sued to pay a tax by the state of Washington. It was incorporated in DE and had its principal place of business in St Louis. They had some salesmen working and living in Washington State. Shoes attorneys have structured the affairs of the company to manipulate the many technicalities in post-Pennoyer world this is all done to avoid PJ, state taxes, etc. Case is brought by WA b/c Shoe hasnt paid employment taxes on its agents in the state Court (Stone, J) Due process requires that to subject a D to a judgment in personam, he must have certain minimum contacts w/the forum state and maintenance of the suit must not offend traditional notions of fair play and substantial justice

A corporate presence within or without a state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it Presence has never been doubted when the activities are not only continuous and systematic, but give rise to the liabilities sued on o Even though no consent to be sued has been given Conversely the casual presence of a corporate agent or even a single or isolated activities on the corporations behalf are not enough to subject it to suit on causes of action unconnected w/the activities there Some instances when continuous corporate activities were so much to merit suit against it on causes of action arising from dealings entirely distinct from those activities Criteria by which we mark the boundary line b/t activities justifying subjection of a corporation to suit and those which do not cannot be mechanical or quantitative o Whether DP is satisfied must depend on the quality/nature of the activity in relation to the fair/orderly administration of the laws it was the purpose of DPC to insure o To the extent a corporation exercises privilege conducting activities w/in a state it enjoys the benefits and protection of the laws of that state this privilege gives rise to obligations

Black Fed Const give the power to the state to open its courts to its citizens to sue companies doing business in that state The Courts do not have the power to make these elastic judgments about fair play and justice Additional Notes SC is jettisoning many of the old fictions and establishing much of the foundation of modern jurisdictional theory this test is going to be used for individuals as well as corporations Because there is no designated legal agent they served Shoes salesmen with notice of the suit and also mailed a copy of it to Shoes headquarters in MO o Shoe appears is just there on a limited appearance to contest PJ o Not there fully (thereby putting themselves under WA jur) If there is not physical presence we look for Minimum Contacts o Based on activities that are continuous, systematic o You have to avail yourself of the states benefits and if you do then you are subject to jurisdiction Traditional notions of fair play and substantial justice o Whether DP is served will depend on the quality and nature of the activity of the D as it relates to the fair and orderly administration of the laws o Shift from is it there to is it fair Justice Black does not like having this malleable test

He is a Lochner-era guy so his concerns may seem somewhat extreme today but he is coming at this through that lens where the courts were using the DPC to strike things down and say state assertions of authority couldnt be done He doesnt want an open-ended, does this feel fair type test where courts are just deciding on all these different ideas He thinks DP is just a question of whether you get process according to clear laws of a state o If the government has clear laws and acts according to those laws that is, by definition, due process of law

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Specific Personal Jurisdiction

Back to Top STREAM OF COMMERCE This is a very fact specific test often in the area of PJ the court leaves things fairly vague and fact-specific (standards predominate in this area) This suit was based on a K which had substantial connection w/CA McGee v. International Life Insurance Co. o CA also had a manifest interest in providing effect means of redress for its residents when their insurers refused to pay claims o There may be inconvenience to the insurer in having to defend in CA but nothing rising to the level of DP o Does not talk much about the Ds conduct most concerned w/convenience of the P o McGee is the high water mark in PJ and pretty quickly gets an important limitation from Hanson The restrictions in International Shoe are more than just fairness they are a consequence of territorial limitations on the power of the respective states Hanson v. Deckla Similar facts to McGee (Black, writer of McGee, dissents) o The necessary contacts do not exist in this case D had no offices in FL and beyond sending a few statements the decedent didnt have substantial contact w/them while she lived in FL Unilateral activity of those who claim some relationship with a nonresident D cannot satisfy the requirement of contact w/the forum state Hanson v. Deckla o If you want to assert PJ over a party, that party needs to choose, they need to purposefully avail themselves of the laws/protections of that forum Primary conduct people must have some knowledge of how to structure their affairs so they can control where they will be subject to lawsuits World-Wide Volkswagon Corp. v. Woodson Minimum contacts performs two related, but distinguishable, functions WorldWide Volkswagon Corp. v. Woodson o 1 Protects D against the burdens of litigating in a distant/inconvenient forum o 2 Acts to ensure the states, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system Inconvenience is typically described in terms of reasonableness D must establish minimum contacts such that it doesnt offend our traditional notions of fair play and substantial justice burden on the D will be considered in light of other relevant factors, including World-Wide Volkswagon Corp. v. Woodson o 1 The forum states interest in adjudicating the dispute o 2 Burden on the P o 3 The plaintiffs interest in obtaining convenient and effective relief

At least where that interest is not adequately protected by the Ps power to choose the forum o 4 The interstate judicial systems interest in obtaining the most efficient resolution of controversies o 5 Shared interest of the several states in furthering fundamental substantive social policies Foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause World-Wide Volkswagon Corp. v. Woodson o If foreseeability was sufficient then any seller of chattel would be making the chattel their agent and would be submitting to PJ anywhere that the chattel ends up Foreseeability or knowledge is not enough but if you take some steps toward that state then it can be World-Wide Volkswagon Corp. v. Woodson o Requires some specific actions w/the state this principal has become increasingly important as the internet has become available You can create a webpage which is nationally accessible but that probably shouldnt subject you to jurisdiction across the country state-specific advertising might be enough Lots of states have safety requirements for products if you are manufacturer who engineers to a states standards so you can sell your products in CA then you have availed yourself of CAs laws and can be subject to PJ there The restriction on state sovereign power described in Volkswagen is ultimately a function of the individual liberty interest preserved by the DPC Insurance Corp. of Ireland v. Compagnie Des Bauxites De Guinee (US 1982) (White in a footnote) o If federalism operated as an independent restriction on the sovereign power of the court, it would not be possible to waive the personal jurisdiction requirement Contract Plus Just having a K (even with a forum selection clause) is not enough to assert PJ over an out of state D (must be something more) Burger King v. Rudzewicz o Question is whether the Ds conduct/connection w/the forum state is such that he might reasonably expect to be haled into court there Minimum requirements inherent in the concept of fair play and substantial justice may defeat the reasonableness of jurisdiction even if the D has purposefully engaged in forum activities Burger King v. Rudzewicz Formalism cannot govern here a realistic evaluation is needed o Prior negotiations, contemplated future consequences, the terms of the K and parties actual course of dealing must be evaluated in determining whether the D purposefully established minimum contacts w/the forum must look at all the circumstances surrounding the K in addition to just the K itself Burger King v. Rudzewicz Though not in this case, inconvenience may at some point become so substantial as to achieve constitutional magnitude Burger King v. Rudzewicz

Great care/reserve should be exercised when extending jurisdiction over an international field Asahi Metal Industry Co. v. Superior Court State Department Concerns o Unique burdens of having to litigate in a foreign legal system should carry special weight o Asahi has its most profound influence on cases involving the international arena

STREAM OF COMMERCE PJ would be appropriate if a corporation was delivering its products into the stream of commerce w/the expectation that they will be purchased by consumers in the forum state World-Wide Volkswagon Corp. v. Woodson The substantial connection b/t the D and forum state for minimum contacts must come about by an action of the D purposefully directed toward the forum state Asahi Metal Industry Co. v. Superior Court (OConnor Plurality) o Additional conduct of the D may indicate intention/purpose to serve the market in the forum state o Awareness and a product in the stream of commerce ending up in the forum state is not enough o Two Steps 1 Is there purposeful availment by the D? If so, 2 Is this exercise of jurisdiction reasonable? o Need additional conduct showing in intent or purpose to send product into the forum P does not have to show additional conduct Ds awareness that their products will enter the forum state is presumptively enough Asahi Metal Industry Co. v. Superior Court (Brennan Plurality) o Under the presumption that knowledge/foreseeability is enough you have met that standard by sending products into a state o The only way to avoid PJ under Brennan would be to sever that business relationship with the forum state OConnor misapplied her own standards Asahi Metal Industry Co. v. Superior Court (Stevens for Three) All PJ discussion in Asahi Metal Industry Co. v. Superior Court is, strictly speaking, just dicta core holding of the case Back to Top McGee v. International Life Insurance Co. (US 1957) CA resident has life insurance policy from AZ company. Resident dies and another resident of CA sues the AZ company. D refused to pay on Ps insurance policy so P sued in CA court under a CA statute subjecting all foreign corporations to suit on insurance Ks with in-state residents. The case was in TX because after they got the judgment in CA, the original AZ company had been acquired by a TX company the person w/the judgment went to collect in TX collateral challenge where the TX court being asked to enforce the judgment is being asked whether there was PJ in the first place. Personal jurisdiction in California?

Court (Black believes in minimum DP constraints on state power) Exercise of jurisdiction was proper There had been a trend toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents This suit was based on a K which had substantial connection w/CA o CA also had a manifest interest in providing effect means of redress for its residents when their insurers refused to pay claims There may be inconvenience to the insurer in having to defend in CA but nothing rising to the level of DP Additional Notes Not a lot of bases by which CA can assert PJ in this case This insurance companys only business in CA is one K being held by a CA person through a corporate acquisition they made o K executed in CA? No it was delivered to CA but was executed elsewhere o Any solicitation to CA by this D? No they never advertised or sought customers there o Best contact here is when the corporate acquisition took place, the new owner of the insurance company sent a letter to the new policy holder in CA letting them know and asking whether they wanted to hold onto this policy That is also where the premiums were mailed Does not talk much about the Ds conduct most concerned w/convenience of the P o The state of CA has an interest in protecting its residents/disputes o P has an interest in litigating close to home the dispute was over the nature of the death so all the witnesses/evidence was available in CA Big focus on Ps interests and w/kind of position this will put the P in, also a big focus on the forum states interest Also a presumption that insurance is sort of a state issue McGee is the high water mark in PJ no discussions about the interests of TX, fairness to the D, etc. resonates w/Blacks separate opinion in Shoe McGee pretty quickly gets an important limitation from Hanson Back to Top Hanson v. Deckla (US 1958) Person established a trust in DE. She moved to FL. She then exercised a power of appointment in the trust. After she died some of heirs sued on the grounds that her power was improperly exercised (and was therefore void) the DE bank (trustee) was an essential party. The DE court found for the appointee while the FL court found the appointment was invalid FL was first so did FL have jurisdiction over the bank in order for res judicata to control? Dispute over validity of a trust b/t two daughters of a woman one daughter brings suit in FL contending that the corpus of the trust passed under the will while her sister sued in DE who said that some of it passed through an inter vivos conveyance to

some of her children. State of DE finds for one sister, state of FL finds for the other sister also FL decision comes down first (raising lots of res judicata issues) Under FL law this trustee must be part of the litigation necessary party Question is w/t FL could validly assert personal jurisdiction over the trustee (where the money is)

Court (Warren) The restrictions in International Shoe are more than just fairness they are a consequence of territorial limitations on the power of the respective states The necessary contacts do not exist in this case o D had no offices in FL and beyond sending a few statements the decedent didnt have substantial contact w/them while she lived in FL Unilateral activity of those who claim some relationship with a nonresident D cannot satisfy the requirement of contact w/the forum state As the trustee is an essential party under FL law the court must have jurisdiction over them before entering a binding judgment o It does not acquire that jur by being the center of gravity of the controversy or the most convenient place to litigate o The issue is personal jurisdiction, not choice of law Dissent Black Court is correct that question whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment but two are closely related and have similar considerations FL, home-place of the settlors, was a reasonably convenient forum for all D chose to maintain business in FL w/the decedent and FLs interest in the validity of the appointment is made more emphatic by the fact that her will is being administered in that state Additional Notes Similar facts to McGee o Trust has no office/business in FL o Trust income was paid to the settlor (decedent) in FL o Some trust administration papers were mailed b/t DE and FL o Maybe a distinction in that McGee D sent a letter to the P in CA while this trustee didnt realize there was a relationship w/FL (the trust was set up while the decedent was in PA) Black would say this is within Hanson o FL has an interest in adjudicating the conflicts involving its citizens o It would be inconvenient for the P (sister) to go outside FL and litigate in DE o This is about administering wills and we should not set up rules making it difficult for ordinary people to litigate wills Warren doesnt want the unilateral activity of the decedent to pull the trustee under FL jurisdiction the activity needs to be by the D o If you want to assert PJ over a party, that party needs to choose, they need to purposefully avail themselves of the laws/protections of that forum

o Litigant over whom PJ is sought must purposefully avail themselves of the privilege of conducting activities within the forum state This is a gating mechanism in virtually every case This is seen as a way for businesses to structure their primary conduct, secondary conduct is what you do as a litigant o Warren is big on individual liberties now a D in the civil context can know in advance and make choices about whether they want to subject themselves to liability in a particular judicial forum o Ds have the ability to determine by what they do w/t they are subjecting themselves to liability in a particular state

Back to Top World-Wide Volkswagon Corp. v. Woodson (US 1980) People (residents of NY) bought a car in NY. They were in an accident in OK. They brought a products liability action and included the dealer in NY and the importer (who did business only in the NE). Is there personal jurisdiction in OK over these two entities? Ps are NY citizens who bought a car from a NY dealer before moving to AZ as they are driving across the country there is an engine fire in the car in OK they sue the regional distributor (operating just in the tri-state area) and the NY car dealer (Joes Volkswagon) all happens in OK state trial court At time lawsuit is filed the Ps are still considered to be citizens of NY OK long-arm statute was an enumerated statute w/very generic language allowing state to assert PJ when a D has caused a tortious injury in the state and where that out of state D derives substantial revenue from goods used w/in the state Court (White) Minimum contacts performs two related, but distinguishable, functions o 1 Protects D against the burdens of litigating in a distant/inconvenient forum o 2 Acts to ensure the states, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system Inconvenience is typically described in terms of reasonableness implicit in this emphasis is the understanding that the burden on the D will in some cases be considered in light of other relevant factors, including o The forum states interest in adjudicating the dispute o The plaintiffs interest in obtaining convenient and effective relief at least where that interest is not adequately protected by the Ps power to choose the forum o The interstate judicial systems interest in obtaining the most efficient resolution of controversies o Shared interest of the several states in furthering fundamental substantive social policies Limits imposed by DPC on state jur have been relaxed lately due to nationalization of economy however the sovereignty of each state implies a limitation on the sovereignty of all its sister states

o Reasonableness of jur must be assessed in the context of our federal system DPC sometimes acts as instrument of interstate federalism to divest the state of its power to render a valid judgment Foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause When a corporation purposefully avails itself of the privilege of conducting activities within the forum state it has clear notice that it is subject to suit there o PJ would be appropriate if a corporation was delivering its products into the stream of commerce w/the expectation that they will be purchased by consumers in the forum state

Dissent Brennan That considerations other than the D and the forum are relevant necessarily means that the constitution does not require trial be held in the state with the best contacts with the D The D focus of International Shoe is outdated the orderly administration of laws provides a firm basis for according some protection to the interests of Ps and states as well as Ds Now minimum contacts must exist among the parties, the contested transaction and the forum state the contacts b/t any two of these should not be determinative o Require the P demonstrate sufficient contacts among the parties, the forum and the litigation to make the forum a reasonable state in which to hold the trial Additional Notes Pretty good argument that this uniform model statute shouldnt apply in this case o There is no evidence that any car from that dealer has ever been in the state of OK other than this one o Similarly no evidence about cars from the distributor being in OK o But OK supreme court says this statute covered the car dealer and the regional distributor this is a state law interpretation and nobody in the world except the OK state legislature can tell the OK SC its wrong Ps want to bring the case in OK because OKs juries are more sympathetic to Ps and give larger jury awards most cases are about money Why do the Plaintiffs want to include the NY car dealer in this case? o There is no risk that w/e judgment comes from this case the International maker of VW and the national distributor will not make good on the judgment o This is a design defect case meaning that the manufacturer in Europe screwed up o But if the NY car dealer is in the case then there is not complete diversity and the defendants cannot remove to federal court State court is more pro-plaintiff and a design defect claim is a state law claim

If you assert PJ over the car dealer in OK with non-diverse parties (NY Ps and NY dealer) then the international maker and national distributor cannot remove the case Real world consequence in this case is w/t P will be able to have a full/fair trial in Fed Ct w/Fed jury panel and Fed judge or a trial in OK state court o For someone on the SC if you are looking at the real world you will not stretch far to prevent the case from being heard (in practical terms) in Fed Ct. This case is not that good even on the standards from McGee o This is not that convenient for the P, there is some inconvenience for the Ds o The car dealer is not a major corporation and, while some witnesses are in OK, much is outside the forum states interest o OK has some interest in having safe roads but these arent even OK citizens Brennan wants to go to a super fairness/reasonableness standard for assessing personal jurisdiction o Minimum contacts is just one way to think about w/is fair and reasonable but it is really not the only way W/does Brennan say about burden on the D? o He puts a star on the mobility of the defense o If the D can move around and can make its case in the forum then there is no reason why jurisdiction shouldnt exist there

Back to Top Burger King Corp. v. Rudzewicz (US 1985) BK was a Florida corporation. D was a franchisee in Michigan. There was a problem in the K between the two parties and BK sought to sue D in a FL court. Court (Brennan) Relevant foreseeability is whether the Ds conduct/connection w/the forum state is such that he might reasonably expect to be haled into court there Minimum requirements inherent in the concept of fair play and substantial justice may defeat the reasonableness of jurisdiction even if the D has purposefully engaged in forum activities Formalism cannot govern here a realistic evaluation is needed prior negotiations, contemplated future consequences, the terms of the K and parties actual course of dealing must be evaluated in determining whether the D purposefully established minimum contacts w/the forum must look at all the circumstances surrounding the K in addition to just the K itself o In this case the D knew that BK was headquartered in FL and carried on a continuous course of business w/BKs decision making officers in FL D has not pointed to other factors which outweigh the considerations above and established the unconstitutionality of FLs jurisdiction here o Though inconvenience may at some point become so substantial as to achieve constitutional magnitude

the facts of each case must [always] be weighed in determining whether personal jurisdiction would comport with fair play and substantial justice. o Jurisdiction can only be grounded on a fair contract and should prevent rules which enable parties to obtain default judgments against unwitting customers

Dissent Stevens, White D dealt almost entirely w/BKs representatives in MI he had reason to assume that the same state as the supervisory office (MI) would be the state he was sued in no proper notice he might have to face suit in FL D was financially unprepared to meet the costs of suit in FL Bargaining power seriously favored BK they pushed this onto the D Additional Notes In PJ the majority generally did not follow Brennan he was typically not speaking for a full court So long as there is this purposeful availment then all the factors go into a big balance o If we have lots of other stuff then we will require less minimum contacts o If there is purposeful availment then the D is going to have to show grave difficulty and inconvenience litigating in the forum state Back to Top Asahi Metal Industry Co. v. Superior Court (US 1987) Taiwanese company sought to sue a Japanese parts maker in CA court for indemnification in a suit arising from a malfunctioning tire which injured an American. The only litigants remaining in the suit are the Asian companies and the Taiwanese Companys theory for personal jurisdiction over Asahi is that it sold products which would foreseeably enter the stream of commerce in CA. Court (OConnor) Unanimous Reasonableness of PJ depends on several factors consideration of these factors reveals the unreasonableness of jurisdiction over Asahi (even apart from question of placement of goods into stream of commerce) When minimum contacts have been established often the interests of the forum state and the P will be enough to outweigh the Ds inconvenience o Not so here (P is not a CA resident and CA has no particular interest in this indemnity action) Great care/reserve should be exercised when extending jurisdiction over an international field o Unique burdens of having to litigate in a foreign legal system should carry special weight Plurality OConnor (Four Votes) PJ must have a basis in some act by which the D purposefully avails themselves of the privilege of conducting activities w/in the forum state o Thus invoking the benefits and protections of its laws

Consumers unilateral action of bringing a Ds product into the state is insufficient to establish PJ The substantial connection b/t the D and forum state for minimum contacts must come about by an action of the D purposefully directed toward the forum state o Additional conduct of the D may indicate intention/purpose to serve the market in the forum state o Ds mere awareness that their product may end up in the forum state isnt enough to constitute an act purposefully directed at the forum state

Concurring Brennan (Four) So long as a company is aware the final product is being marketed in the forum state, the possibility of a lawsuit there cannot come as a surprise o They still obtain the benefits of the forum state and the protection of its laws Concurring Stevens (Three) Purposefully directed activities test is not necessary for the decision of this case An unwavering line cannot be drawn between mere awareness that a component will find its way into the forum state and purposeful availment of the forums market Additional Notes Important to see how justices are defining this issue OConnor (speaking for a four justice plurality) says that when a manufacturer puts a product in the stream of commerce knowing it is going to be sold in a state (actual knowledge) but there is nothing more that is not enough for minimum contacts o You also need to show the D purposefully directed his actions at that state o Eg. Advertising in the forum state, designing specifically for the forum state Purposeful availment is a prerequisite were going to require o All the global things were thinking about are ways to think about purposeful availment o She is resisting the view from Brennan that we should look at this broadly for reasonability/fairness o She is putting a threshold gate of purposeful availment before we get to reasonableness Two step test o 1) Do we have purposeful availment on the threshold? o 2) Is it reasonable? Brennan writes for four justices also these cases create lots of litigation because there is no majority opinion and nobody knows w/the actual law is He does not think P should have to show additional conduct awareness is presumptively enough The safest way to avoid liability is to not send your stuff to a state

o Unless you have that knowledge, unless you can win on the reasonableness screen o Under the presumption that knowledge/foreseeability is enough you have met that standard by sending products into a state o The only way to avoid PJ under Brennan would be to sever that business relationship o Pretty harsh standard which promotes a situation where you have entities subject to suit all over the place How does Brennans knowledge/awareness position square w/Volkswagen? o In Volkswagen it was merely foreseeable to the dealer that a car would get into OK here there is knowledge o Some people think that the Brennan position in Asahi and result in VW are not reconcilable This is a difficult argument to make given that White joins Brennan in Asahi To the extent people find tensions there the reconciliation is that you have a different volume here and a different nature of the product Stevens thinks there is no big distinction between awareness or purposeful availment He thinks that the higher the volume of goods the more likely it is enough Hazardousness of the product matters this is a high risk product where if something goes wrong there is a major accident But hazardousness, volume, the value of w/is going on all factors going into Stevens PJ analysis

Back to Top What Case Actually Turns on They all agree that this fails on the fair play/reasonableness side of the inquiry The majority looks at overall how much contact Asahi had w/CA o There would be large burdens on the D in this case if jurisdiction were asserted D is in Asia w/all their records, the P is also in Asia there is nothing particularly convenient about CA The forum state has very little interest in a dispute between two Asian corporations o If somebody is killed in CA by a defective product they have a substantial interest in ensuring that citizen has a forum to recover Dealings w/foreign parties affects a reasonableness analysis o Counsel to the US State Dept wants to promote good relations with other countries o They probably dont want US Courts to take the case o Part of what is driving this case is the idea that there is a foreign D who doesnt want to be in CA court

o The US government filed an amicus in this case suggesting that we not assert jurisdiction due to the strong foreign relations interest in not forcing people into US state court who are foreign and do not want to be here o To the extent you pull these companies in and assert jurisdiction in situations where there is not much of an American interest you undermine foreign relations goodwill Asahi has its most profound influence on cases involving the international arena Is Asahi limited to international defendants?

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General Jurisdiction
Back to Top Courts will be reluctant to allow GJ so that suits w/no connection to the forum can go forward o It could be a huge imposition on a state for everyone to be litigating there o Most courts have hundreds of cases and do not have the time/resources to oversee disputes from far-away places

Six possible ways to get GJ 1 Domicile of the D you can typically always sue the D in his/her domicile o Even if someone has moved temporarily to Germany, if they have a permanent residence in MO you can sue them in MO o It is hard to see how a D is suffering a violation of DP rights when the process is playing out in their backyard

2 You can always go and sue a corporation in its state of incorporation No state presently allows a corporation to be created by its state law but not be subject to the control of that states laws
o

Looks a lot more like Pennoyer presence analysis than I-Shoe minimum contacts analysis

3 You can typically sue in the principal place of business of a corporation Perkins 4 The area of continuous/systematic contacts of an individual/corporate entity
o

If you reach that level of activity it will provide for GJ even if the suit is unrelated to the contacts Perkins v. Benguet Consolidated Mining Co., Helicopteros

SC in Helicopteros Nacionales de Columbia, S.A. v. Hall is analyzing these factors not together but rather one at a time

Law profs make a big deal out of the fact that these were analyzed one at a time thinking is that when you do GJ analysis you have to analyze the factors one at a time Not clear w/this means maybe if there are 15 close calls then its not enough because you consider them sequentially

Mere purchases, even if occurring at regular intervals, are not enough to warrant a States exercising general jurisdiction over a nonresident corporation Helicopteros Nacionales de Columbia, S.A. v. Hall

5 Tag jurisdiction this and other four allow for GJ can sue D for anything in that forum

6 Consent w/consent you also have forum selection clauses Zapata o If you have a forum selection clause or some other form of consent it can be a factor which cuts in favor of GJ o Not as dispositive as domicile or incorporation but consent does matter

Caselaw To assert GJ just based on sales which are unrelated to the accident doesnt fly Fisher Governor Co. o If it did then lots of companies wouldnt sell their stuff to CA because they want to avoid jurisdiction there o It would set up a legal embargo around the state o Also the CA courts would have been overwhelmed if this was enough to for a GJ claim in CA Sending some marketing materials and products into a state is not going to be enough for the state to have general jurisdiction Ratliff v. Cooper Laboratories, Inc. Mere purchases, even if occurring at regular intervals, are not enough to warrant a States exercising in personam jurisdiction over a nonresident corporation in an action not related to those purchase transactions Helicopteros Nacionales de Columbia, S.A. v. Hall Analysis of why the Contacts Were Inadequate in Case o Nor does the corporation sending some personnel to Texas for training in connection w/purchase of some helicopters/equipment in the state enhance that companys contact w/Texas o Training was part of a package of goods/services purchased by Helicol from Bell Helicopter SC is analyzing these factors not together but rather one at a time Helicopteros Nacionales de Columbia, S.A. v. Hall o Law profs make a big deal out of the fact that these were analyzed one at a time thinking is that when you do GJ analysis you have to analyze the factors one at a time o Not clear w/this means maybe if there are 15 close calls then its not enough because you consider them sequentially See again here the idea about foreign relations implications Helicopteros Nacionales de Columbia, S.A. v. Hall o SG was intervening to argue against broad GJ o If these sorts of contacts are enough for GJ then there is a serious disincentive for foreign companies to buy American goods In their analysis, SC talks about w/kinds of contacts the D didnt have Helicopteros Nacionales de Columbia, S.A. v. Hall o Ds hadnt sold products in TX o Hadnt signed Ks in TX o Hadnt advertised in TX o No property in TX o Were not authorized to do business in TX

Four potential contacts in Helicopteros o Two years earlier CEO came to talk w/reps of the joint venture o D accepted into NY bank account checks drawn from a TX bank o Purchase of some helicopters and training services from a TX co-defendant o Some personnel were sent to TX for training One trip is not continuous and systematic o The K was in Spanish and was concluded in Peru on state stationary o However, the fact that the K parties agreed to litigate in Peru is not necessarily binding on the Ps in this case o The Ps are not parties to the K so it is not necessarily binding on them o But if they want to assert a right under that K then they might have to accept all of its terms They had no control over where the payment checks came from so this should not merit jurisdiction Helicopter purchases and training in TX is not enough on its own (and is all there is left) o Cite Brandeis opinion that mere purchases (even if at regular intervals) do not merit assertion of GJ by a state o Otherwise you would be saying that if a company buys anything from GA they can be sued for anything they do in GA this would be pretty problematic w/modern national markets

Back to Top Perkins v. Benguet Consolidated Mining Co. (US 1952) Philippine Corporation was sued by a nonresident of Ohio in Ohio state court for a claim not arising out of the corporations contact with Ohio. The president of the corporation had lived and worked in Ohio during WWII and was in Ohio when he was served with process for the corporation. During WWII the company had their directors meetings in Ohio and handled most administrative matters in Ohio. It is essentially being run from Ohio. The question is whether, as a matter of DP, the business done in Ohio was sufficient to permit the state to entertain a cause of action against the corporation. Court Under the circumstances explained above it would not violate DP for OH either to take or decline jurisdiction over the corporation in this proceeding Back to Top Fisher Governor Co. (CA 1959) Manufacturer of the defective product is FGC. They have a non-exclusive sales agent in CA. This means the person sells stuff FGC makes as well as others in CA. The only contact FGC has w/CA is that they have sales in CA through these non-exclusive agents and promote sales there. Court (Traynor) This lawsuit is not about anything sold in CA and is not about a CA P

o The accident and the P are from Boise and the company is from IA the company sells unrelated stuff in CA The P wants to nonetheless proceed on that suit To assert GJ just based on sales which are unrelated to the accident doesnt fly o If it did then lots of companies wouldnt sell their stuff to CA because they want to avoid jurisdiction there o It would set up a legal embargo around the state o Also the CA courts would have been overwhelmed if this was enough to for a GJ claim in CA This is a pretty naked forum shopping case if accepted then all sorts of cases start flying into CA

Back to Top Ratliff v. Cooper Laboratories, Inc. (4th Cir. 1971) Two pharmaceutical companies incorporated in DE w/principal place of business in NY. The drugs are manufactured outside SC and the Ps dont live in SC. They wanted to litigate in SC because that state has the longest statute of limitations. Their state and the companys state say the suit is time-barred but it is not time-barred under SC law. Court This suit was not allowed to proceed the other factors were not sufficient for GJ o They sent some marketing materials and products into SC not enough for GJ Courts in these cases are not saying the P cannot proceed with their suits o The P is going to be able to sue in multiple places o The place where accident happened, the place the P is from, the place the business is incorporated, etc Back to Top Helicopteros Nacionales de Columbia, S.A. v. Hall (1984) (128) (Blackmun) D was a Columbian corporation hired by some South American companies to provide helicopter transportation. One of its helicopters crashes in Peru, killing four Americans. Americans were working for a Peruvian consortium in Peru which was the alter-ego of a joint venture headquartered in Houston. It was formed b/c Peruvian law (like many nations) has limitations on what foreign companies can do in the borders of the country (variety of reasons). Peruvian law will not allow a non-Peruvian corporation to get a K for this gas project. Court (Blackmun) All parties agree that the claim does not arise out of any of the Ds contacts with Texas so this is a General Jurisdiction case This company did not have continuous and systematic contacts with Texas sufficient to warrant an exercise of GJ

o Mere purchases, even if occurring at regular intervals, are not enough to warrant a States exercising in personam jurisdiction over a nonresident corporation in an action not related to those purchase transactions o Nor does the corporation sending some personnel to Texas for training in connection w/purchase of some helicopters/equipment in the state enhance that companys contact w/Texas o Training was part of a package of goods/services purchased by Helicol from Bell Helicopter Additional Notes The parties agreed it wasnt an SJ case they brought the action as GJ o Typically the court will accept the agreed positions of parties o Particularly in an appellate setting cases are shaped by w/the agreements and disagreements are b/t the parties below This is the first case where the SC distinguished b/t specific and GJ but that concept was not a novel one in the law o This was not a new idea, the vocabulary just hadnt been used by the SC yet Test SC is using is continuous and systematic contacts are required for assertion of GJ o Majority does not find these sorts of contacts in this case Dissent Brennan SJ is implicated whenever a Ds contacts with the forum relate to the cause of action. These contacts are sufficiently important and related to the cause of action to make it reasonable to assert personal jurisdiction o No offense to traditional notions of fair plan and substantial justice b/c they are continuous commercial contacts o The cause of action didnt arise out of them, but they were substantially related to it. Decision shouldnt turn on the pleading requirements of the state could be less demanding Additional Notes Brennan tries to redefine SJ pretty broadly o Says there really is not distinction between these two o The contacts b/t the D and TX make it fair/reasonable for TX to assert jurisdiction Brennan would allow GJ over a foreign corporation whenever a suit is brought against a nonresident corporation in a state which is significantly affected by the corporations activities o Significantly affecting a state is enough to submit to its jurisdiction Brennan is very consistent in his broad conception of jurisdiction in Helicopteros he says there was SJ even when the parties agreed there was not Black might approve of the result of jurisdiction being asserted but does not like any sort of balancing approach o Black is very big on jurisdiction but analyzes it in a linear fashion o These totality of circumstances type tests are anathema to Black

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Jurisdiction Based on Power over Property Quasi-In Rem

Back to Top Quasi in rem action is commonly used when jurisdiction over the defendant is unobtainable due to his/her absence from the state This is not about executing judgments o You can get a judgment and execute it anywhere in the US o All you do is go to the courts of a state w/a judgment from another state o If you have a judgment the court in the other state will give it full faith/credit This is about PJ o You want to come to another state to litigate the lawsuit in the first place o The reason you are coming to this state in a quasi-in rem jurisdiction is because there is some property or a debt in the state which you want to get/enforce a judgment on Any judgment will affect only the property seized, as in personam jurisdiction is unobtainable. o The property could be seized to obtain a claim against the defendant. o A judgment based on quasi in rem jurisdiction generally affects rights to the property only between the persons involved and does not "bind the entire world" as does a judgment based on jurisdiction in rem The claim does not have to be related to the property seized, but the person must have minimum contacts with the forum state in order for jurisdiction to be proper. The obligation of a debtor to pay his debt goes with him everywhere Harris v. Balk o Would be no defense to such a suit for the debtor to plead he was only in the foreign state casually or temporarily Jurisdiction over the interests of persons in their property is analyzed using the minimum-contacts standard from I-Shoe Shaffer v. Heitner o Does not ignore the fact that the presence of property in a State may bear on the existence of jurisdiction by providing contacts among the forum state, the D and the litigation o In cases where the property itself is the source of the underlying controversy it would be unusual for the State where the property is located not to have jurisdiction State has strong interest in assuring the marketability of property w/in its borders and Providing a procedure for peaceful resolution of disputes about the possession of that property and Important records/witnesses to the dispute are probably in the state

o Presence of property might also favor jurisdiction where the Ds ownership of property is conceded but the cause of action is otherwise related to the rights/duties growing out of that ownership (eg. Injured on Ds land) Quasi in rem here the purpose of allowing suit for any issue to be brought in DE and based on stock certificates is to evade the requirements of PJ Shaffer v. Heitner o If an assertion of PJ in the case would violate the constitution an indirect assertion of jurisdiction should be equally impermissible o While the history of allowing suit on anything when property is present is important, is it not dispositive Its continued acceptance would only serve to allow state court jurisdiction that is fundamentally unfair to the D Shaffers real impact is on quasi-in rem jurisdiction the in rem cases are going to come out the same way as before

Back to Top Harris v. Balk (US 1905) (145) Epstein sues Harris in garnishment and wants to take the $180 in Harris pocket (Harris owes it to Balk) as partial satisfaction of a $344 debt which Balk owes him. Balk is given opportunity to come but does not, Harris consents to the judgment and pays Epstein. Later Balk sues Harris in NC for the $180 and Harris says the MD judgment is valid in MD and full faith/credit should apply and shield him from Balks suit in NC. NC SC rules for Balk saying he was only temporarily in MD and that is not enough (they also say the situs of the debt was in NC). Epstein cant get in personam jurisdiction over Harris, because no dispute between the two parties. Epstein just wants to garnish debt. So Epstein files in rem jurisdiction claim. Court Power over the person of the garnishee confers jurisdiction on the courts of the state where the writ issues o If, while temporarily there, his creditor might sue him there and recover the debt then he is liable to process of garnishment, no matter where the situs of the debt was originally Situs of the debt is irrelevant in attachment proceedings the obligation of the debtor to pay his debt goes with him everywhere Would be no defense to such a suit for the debtor to plead he was only in the foreign state casually or temporarily o It is nothing but the obligation to pay which is garnished or attached Additional Notes Court rejects the idea of situs of the debt o They say the debt always goes with the person the obligation travels and they reject this idea of mere temporary presence The formulation that debt follows the person seems as plausible as formulation in which debt is like property, stays in the state where it was formed.

Court had to pick rule, so just picked one? Useful when PJ was more limited, under Pennoyer.

o But through time, w/ Intl Shoe development, seems anachronistic. This is artifact of Pennoyer Back to Top Shaffer v. Heitner (US 1977) (147) P Heitner, nonresident of DE, owner of one share of Greyhound stock, filed shareholders derivative suit in DE, naming as Ds Greyound, its subsidiary, and 28 officers or directors of those companies, also nonresidents of DE. Greyhound was incorporated in DE with principal place of business in AZ. Suit alleged that Ds violated duties to Greyhound by causing it and subsidiary to engage in actions that resulted in companies being held liable for damages in private antitrust suit and large fine in criminal contempt action. The activities giving rise to those penalties occurred in OR. Heitner also filed motion for order of sequestration of DE property of individual Ds, pursuant to DE statute. 82,000 shares of Greyhound stock, and options, were seized. None of certificates representing seized property were physically in DE. But DE statute makes DE the situs of ownership for all stock in DE corporations. Grayhound has to submit to jurisdiction in DE because that is where it is incorporated o The P is attaching the stock certificates in this case they are attaching the property rights/share value that those certificates represent Officers/directors are fiduciaries so if a corporations money is wrongfully lost by the directors/officers they are liable o The law realizes that these guys will not sue themselves so shareholders can initiate suits against corporations o To the extent that they get recoveries the money goes into the corporate coffers (and they recover through the corporations added wealth) Under DE law, anyone owning any shares in a DE corporation is considered to own those shares in DE o Once you buy shares of a company incorporated in DE (this is not what people think about this is w/Stevens is talking about) o If you own shares the DE statute says that those shares are in situ in DE Even though the stock certificates might be elsewhere their value are always in DE o If someone sues on your stock they can take it if you dont show up o You have to show up and defend the stock value and by showing up you consent to personal jurisdiction in DE o If you want to show up to fight about the value of the stock you can either show up and consent generally to anything or you are effectively held hostage on the value of that stock Court (Marshall) This calls for applying to jurisdiction in rem the same test of fair play and substantial justice as governs assertions of jurisdiction in personam

It is premised on recognition that the phrase, jurisdiction over a thing is a customary elliptical way of bringing jurisdiction over the interests of a person in a thing In order to justify and exercise of jurisdiction in rem the basis for jurisdiction must be sufficient to justify exercising jurisdiction over the interests of persons in a thing The standard for determining whether an exercise of jurisdiction over the interests of persons in their property (in rem) is the minimum-contacts standard elucidated in I-Shoe o Does not ignore the fact that the presence of property in a State may bear on the existence of jurisdiction by providing contacts among the forum state, the D and the litigation o In cases where the property itself is the source of the underlying controversy it would be unusual for the State where the property is located not to have jurisdiction State has strong interest in assuring the marketability of property w/in its borders and Providing a procedure for peaceful resolution of disputes about the possession of that property and Important records/witnesses to the dispute are probably in the state o Presence of property might also favor jurisdiction where the Ds ownership of property is conceded but the cause of action is otherwise related to the rights/duties growing out of that ownership (eg. Injured on Ds land) Quasi in rem here the purpose of allowing suit for any issue to be brought in DE and based on stock certificates is to evade the requirements of PJ o If an assertion of PJ in the case would violate the constitution it seems like an indirect assertion of jurisdiction should be equally impermissible o While the history of allowing suit on anything when property is present is important, is it not dispositive Its continued acceptance would only serve to allow state court jurisdiction that is fundamentally unfair to the D o While allowing jurisdiction wherever property is present might be more administrable, this is not enough to sacrifice justice DEs assertion of jurisdiction in this case is inconsistent with the constitutional limit on state power

Concurring (Powell) Interested in certainty and ability of people to predict where they will be brought into suit o He is talking mostly about immovable property rather than intangible property o If you buy/own land in another state then you have taken a sufficiently momentous step that you should be able to know/plan ahead of time for jurisdiction in that state Concurring (Stevens) Focuses more on the issue of notice

In cases of in rem jurisdiction you can assume there is notice because it is on their property and landowners have people checking on their property, etc o With quasi-in rem you dont have that They are talking about administrability concerns mostly

Concurring and Dissenting (Brennan) Says we shouldnt discuss/analyze minimum contacts analysis o Even if we apply fair play/minimum contacts analysis there are such contacts in this case He talks about how the state has a regulatory interest in this case (also through the company these guys have contacts) Bottom line: Brennan would find jurisdiction but is writing only for himself Additional Notes Even if you are very pro-history, sometimes it is very difficult to know what the historical consensus is o Pretty easy to know the police cannot historically kick down your door w/out a warrant o History is much less clear on many other arcane things Marshall says DEs interest in policing the conduct of fiduciaries in companies incorporated there is not enough because these suits can be about anything o They dont just have to be against directors o They could be against little old ladies who arent directors, orphans who own stock through a trust, if you own stock in a DE company then this regime applies to you o Also if DE has a real interest in regulating corporate officers then they can write a statute about that specifically Case comes out w/DE not having jurisdiction o The connections b/t DE and the conduct at issue and the directors at issue is almost nil o It affects DE no more than it affects anywhere Hypo Suppose R lives in MD next to land owned by an absentee owner w/no contacts w/MD other than that land. R realizes his neighbors fence is on his land and brings suit in MD. MD has jurisdiction over the absentee owner because land is a substantial contact w/the state.

Jurisdiction Based on Presence Tag Jurisdiction

Back to Top One of the most firmly established principles of jurisdiction in American law is that states have jurisdiction over anyone in the state is that if you are in the state then they have general jurisdiction as long as you are in the state Burnham v. Superior Court (Scalia four votes) o The only cases questioning transient jurisdiction are cases which thought they were following Shaffer which cannot be binding here o Someone being present in a state overrides the concerns about fairness Even if fairness mattered, the established history makes this assertion of jurisdiction fair Burnham v. Superior Court (Scalia four votes) History should not foreclose this decision it should instead be analyzed under his standard fairness inquiry Burnham v. Superior Court (Brennan four votes) o Transient Ds benefit from being in the forum state and its protection while in the state therefore they can be fairly subject to jurisdiction there

Health/safety are guaranteed by the states emergency services He is free to travel in the state He enjoys the fruits of the states economy

Many people think tag jurisdiction is unfair sometimes it will be o Ex. You tell someone their child is sick and they need to come immediately if that is a lie and you just want to serve them, no dice Unclean hands exception has been built into the law You could be put in an awkward position of being sued in a state which you did not believe had personal jurisdiction over you o If you come to fight over PJ over you then you have mooted the issue by giving the state PJ over you o This is an unhelpful dynamic so states do allow a limited appearance (usually via an attorney) where you are there only to contest PJ (so you are not coming under the states authority and thereby mooting the issue of PJ)

Burnham v. Superior Court (1990) (160) Dennis Burnham and Francie Burnham decided to separate, agreed that Francie would take custody of children, and before she moved from family home in New Jersey to California, they decided she would file for divorce on irreconcilable differences. But a few months later, Dennis filed for divorce on desertion grounds. Did not attempt to serve wife with process, did not obtain issuance of summons. Then Francie brought suit for divorce in California. Dennis came to visit in California, was served with California summons and copy of Francies divorce petition, then returned to New Jersey. Returned to make special appearance. Claimed no personal jurisdiction because his only contacts w California were visits for business and to visit children.

Court (Scalia Four Votes) The principle that a court w/out jurisdiction cannot render a judgment goes back 500 years o American courts refusing to give effect to judgments when the rendering court had no jurisdiction goes back long before the 14th amendment o Pennoyer just weaves this idea into the DPC One of the most firmly established principles of jurisdiction in American law is that states have jurisdiction over anyone in the state o If you are in the state then they have general jurisdiction as long as you are in the state Recent academic writing indicates that p/h this sort of transient jurisdiction may have exaggerated the extent to which British courts did this o This doesnt matter though because this is w/everyone believed DP required at the time of the 14th amendment o The only cases questioning transient jurisdiction are cases which thought they were following Shaffer which cannot be binding here Someone being present in a state overrides the concerns about fairness o If a person doesnt live in a state then you dont need minimum contacts o Being in the state and being served there is DP and is sufficient to meet its requirements He says we dont need to get into all the other analyses we use whenever you arent present because you are there and are therefore subject to jurisdiction Shaffer only applies in cases where the D is not in the state and is the analysis for when we dont have a persons physical presence o When a person is physically present that is the end of the analysis Fairness/reasonableness? o Fairness exists because there is a tradition o Just as presence is DP, established history/tradition is fairness Concern about judges hijacking authority from the state legislatures o Big fear about subjectivity and judicial usurping of roles better served by the legislature o If this tradition is to be changed it should be changed by the legislatures rather than the SC Rejects the idea that Mr. Burnham took benefits from CA o They were minimal and are a silly way of justifying jurisdiction This demonstrates his problem w/the reasonableness test generally and how it will lead to lots of litigation (which is undesirable) If people dont like this rule, states or congress should change it Concurring (Brennan four votes)

Does not want history to foreclose this decision but feels it should instead be analyzed under his standard fairness inquiry It may be open ended in that it is not a razor sharp rule, but is not just w/feels fair to the judge that morning

Rather we are applying these decisions that have developed since I-Shoe to assess jurisdiction

o It might be gray at the edges but it invites principled debate

Transient Ds benefit from being in the forum state and its protection while in the state therefore they can be fairly subject to jurisdiction there o Health/safety are guaranteed by the states emergency services o He is free to travel in the state o He like enjoys the fruits of the states economy

Academics have pointed out that Brennans factors could subject defendants to PJ in a wide range of circumstances o They think Brennan wasnt serious about this but just wanted to ensure Scalia didnt get a majority for his history-oriented analysis

This is probably wrong though because Brennan has a consistent view that pretty much whenever the state wants to assert jurisdiction and the P wants to bring suit there then the suit should be able to go forward
o

Pretty strong sense that the P should be able to sue and the state has an interest in letting them sue and that the conveniences of modern technology should permit the suit He gets to basically the same point Justice Black once maintained

Brennan would say history should not control and its meaning is difficult to determine anyway o Scalia of course disagrees and thinks history is very important o This debate comes up frequently and they are having this argument w/one eye on how other cases about same-sex marriage or abortion are going to come out their theory has, therefore, intruded onto civil procedure

Concurring (White) This fight b/t Scalia and Brennan is kind of silly this is an easy case so lets not have a firefight we dont have to have This is a widely accepted bright line rule, nobody feels very sad for Mr. Burnham so in the future if there is a different case w/more questions maybe he will have more to say but certainly not about this case

Concurring (Stevens) Notes he didnt join majority in Shaffer b/c of its broad language Says they are all right so lets just affirm this easy case and move on

Additional Notes This is a PJ case which could be summarized in about 20 words but the debates that are in there about constitutional interpretation and how those issues play out are very thoughtful and are things you will see in most con law classes here/otherwise

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Jurisdiction Based on Consent

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12h1 Unless the D brings up an objection to PJ at the beginning of trial then their objection is waived

Three types of forum selection clauses

1 Parties agree to submit to the jurisdiction of a designated court for any action arising out of the transaction 2 Parties agree to submit to the jurisdiction of a designated court to the exclusion of all others for any action arising out of the transaction 3 Parties agree to submit to the jurisdiction of any court for any action arising out of the transaction

By submitting to the jurisdiction of a court for the limited purpose of contesting jurisdiction the defendant agrees to abide by that courts determination on the issue of jurisdiction Insurance Corp. of Ireland v. Company Des Bauxites (US 1982) o The manner in which the court determines this includes a wide variety of legal rules/presumptions as well as straightforward fact-finding o Ds, having submitted, do not have the option of refusing to comply w/discovery and other court orders

Forum selection clauses will be enforced unless the disputing party can show it is unreasonable under the circumstances SC held that a forum selection clause agreed between a US company and a European one to have all disputes litigated before the London Court of Justice would be enforced even though the accident happened in FL M/S Bremin v. Zapata (US 1972) o It would cause problems with international trade if they didnt enforce this sort of clause Nobody would do business w/US companies

o Lots of companies dont want to be in our courts o English maritime courts have always been viewed (for centuries) as the most expert places in the world to have maritime disputes sorted out

SC says enforceability of such contracts simply depends on whether they can pass judicial scrutiny on fairness grounds Carnival Cruise Lines, Inc. v. Shute o Given the facts of this case the test does not appear very stringent o These Ps have no connection to FL o D was soliciting business in WA o Ps were probably not thinking much about forum selection when they bought cruise tickets

Forum selection clause like one on a cruise ticket might be permissible for several reasons Carnival Cruise Lines, Inc. v. Shute o 1 Cruise line has a special interest in limiting the fora in which it potentially could be subject to suit
o

2 Clause establishing the forum for dispute resolution ex ante has the effect of dispelling confusion about where suits from the K should be brought/defended Sparing litigants the cost of determining the proper forum

3 Passengers who purchase tickets containing a forum clause like this one benefit from reduced fares as the cruise company passes along its litigation savings Applies Bremin standard even though this is not a business to business setting

This test is rooted in K principles rather than DP principles w/forum selection the usual PJ dilemma is reversed o D is attempting to hale an unwilling/unsuspecting P into a distant jurisdiction o Because PJ review has always been D-oriented, no DP rights or review attach to assertion of PJ over a P

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Carnival Cruise Lines, Inc. v. Shute (US 1991) There is a forum selection clause between a cruise ship company and a couple who buys tickets through a travel agent. They cruise company sends tickets to WA and they have a provision saying all disputes will be litigated in the FL courts exclusively. P is injured on boat and sues in WA.

Court Forum selection clause like this might be permissible for several reasons o 1 Cruise line has a special interest in limiting the fora in which it potentially could be subject to suit
o

2 Clause establishing the forum for dispute resolution ex ante has the effect of dispelling confusion about where suits from the K should be brought/defended Sparing litigants the cost of determining the proper forum

3 Passengers who purchase tickets containing a forum clause like this one benefit from reduced fares as the cruise company passes along its litigation savings

Additional Notes

SC applies Bremin approach to forum selection clauses and personal jurisdiction without regard to the fact that this is not a business-business setting SC reaches pretty hard to find reasons why this should be enforced and litigation should happen in FL several reasons o Cruise line wants to limit fora it can be sued in passengers from everywhere o This saves resources fighting over threshold jurisdictional issues o Reduces prices for passengers

SC says enforceability of such contracts simply depends on whether they can pass judicial scrutiny on fairness grounds o Given the facts of this case the test does not appear very stringent o These Ps have no connection to FL o D was soliciting business in WA o Ps were probably not thinking much about forum selection when they bought cruise tickets

Unclear if the SC would have allowed the company in Asahi to have a clause requiring the consumer to litigate in Japan o W/domestic fora it is pretty likely to be enforced

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Notice
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Notice becomes more significant as we move into Shoe world and out of the Pennoyer world now that we are suing people outside the state Phrases associated w/Jackson pragmatism, reasonability, tradition o He believes in tradition-rooted pragmatism

Two Requirements

1 Must give notice in a way that satisfies the states statute 2 The statute itself must be consistent with the requirements of DP

Must use a form of notice you would employ if you actually wanted the other party to find out about the suit and must provide the parties a reasonable time to make their appearance Mullane v. Central Hanover Bank and Trust Co. o The means employed must be that one who actually wanted the person to find out would employ o If w/regard to practicalities of the situation these conditions are reasonably met the constitutional requirements are satisfied

Personal service of written notice if you put something in someones hand they can never complain o Jackson identifies this as a classic form of notice adequate in every procedure

Court will permit use of something like publication which is likely to be futile if there is no way to determine the identity/whereabouts of the party you wish to notify Mullane v. Central Hanover Bank and Trust Co. o It is ok w/beneficiaries who are indeterminate to adhere to the statutory publication requirement and nothing else (even though it will probably not succeed) o Similar for those whose interests are future or conjectural (eg. Remaindermen or contingent beneficiaries)

Different for known present beneficiaries where the names/addresses are available more than publication and nothing less than mail is required Mullane v. Central Hanover Bank and Trust Co.

o Personal service is not required in this case the trust is a conglomeration of many smaller interests o We generally think the US mails is going to work o Notice reasonably certain to reach most of those interested in objecting to any changes will inure to the benefit of all since they all benefit from the trusts success

We are ok with mail here because in hand service is that it costs a lot o The reason we had consolidated trusts to begin with was to reduce costs o If we have to do personal service every time we want to change something we will bankrupt the trust

Notice was given to a mortgagee that his property was going to be foreclosed for nonpayment by posting something on the door Mennonite Board of Missions v. Adams (US 1983)
o

Constructive notice by publication must be supplemented by notice mailed to the mortgagees last known available address or by personal service

o Unless the mortgagee is not reasonably identifiable, constructive notice alone is not enough

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Mullane v. Central Hanover Bank and Trust Co. (US 1950) A trust was being settled/terminated in NY which had a large number of beneficiaries, known and unknown, both in and outside of NY. The trust company sought to notify all those outside the state that a court proceeding was moving forward terminating their rights in the trust through publication in a paper of the name of the trust and the coming proceeding they did nothing else to notify anyone. Sufficient for DP (since this was a deprivation of property)?

Court (Jackson)

Distinctions between in rem and in personam are ancient and outdated o The requirements of DP do not depend on classifications with such elusive standards which are different in every state

o W/ever the technical definition of its chosen procedure states have an interest in providing means to close trusts and determine the interests of all claimants

Jurisdiction the state of NYs law creates the trust they should be able to regulate the trust o We have typically allowed jurisdiction of this sort and we need to have it if this didnt work then we couldnt even have these trusts

Elementary requirement of DP in any proceeding is notice reasonably calculated (under the circumstances) to apprise interested parties of the pending the action and afford them the opportunity to be heard Notice must be the sort which would reasonably convey the required information and must provide the parties a reasonable time to make their appearance o The means employed must be that one who actually wanted the person to find out would employ o If w/regard to practicalities of the situation these conditions are reasonably met the constitutional requirements are satisfied

Publication alone is not a reliable means of acquainting interested parties of a lawsuit o This publication was not reinforced by any other steps to apprise parties of the suit as is typically required

Court will permit use of something like publication which is likely to be futile if there is no way to determine the identity/whereabouts of the party you wish to notify o It is ok w/the beneficiaries who are indeterminate to adhere to the statutory publication requirement and nothing else (even though it will probably not succeed) o Similar for those whose interests are future or conjectural (eg. Remaindermen or contingent beneficiaries)

Different for known present beneficiaries where the names/addresses are available more than publication and nothing less than mail is required o Personal service is not required in this case the trust is a conglomeration of many smaller interests o Notice reasonably certain to reach most of those interested in objecting to any changes will inure to the benefit of all since they all benefit from the trusts success

Must use notice reasonably calculated to succeed

Additional Notes

Case essentially involves an action for judicial settlement of accounts by a trustee of a common fund which aggregates a number of small trusts so that these various small trusts could gain the advantage of larger-scale portfolio strategy, etc. o Oftentimes the trustees would be little banks if there wasnt a way to allow these to be integrated and handled on a larger basis (than w/individual people) then the banks wouldnt be able to manage them profitably and wouldnt be able to use professional account managers o When banks do this, the trustee presents accountings to the court for approval
o

When you are a fiduciary you are subject to a high standard of liability the trustee is exposed to material legal exposure for any efforts/mistakes in their management

Trustee needs to regularly have an accounting and get a clean bill of health from the court putting an end to any suits o Legal effect of judicial approval of the accounting will bar individuals w/an interest in the fund from bringing a suit against the trustee for mismanagement, etc. o Bars everyone w/an interest in the property

Jurisdiction

If PJ is allowed here then other parties (beneficiaries, potential beneficiaries, settlors) will be bound by this judgment Using a traditional approach (19th century) you could just assert jurisdiction over the corpus of the trust In Rem o Since settling an account is just over the money in the trust you dont even need people

Jackson doesnt like the in rem-quasi in rem distinction distinctions o States can have different approaches to this question so there is a patchwork of different vocabularies and tags put on these things

In personam is problematic because people may not know the trust is in NY and may not even know they are beneficiaries o They might be contingent beneficiaries who dont even know about their involvement the is no Purposeful Availment

Also, the assets held by the trust may have nothing to do w/the state of NY o The trust is organized under NY law but that doesnt mean any of the assets it controls are actually in the state

Notice

We want to ensure people affected by the suit have an opportunity to be heard Person challenging this form of notice is someone who was appointed as a special guardian for the unknown beneficiaries Court appointed two guardians one for people w/an interest in the principal and one for people w/an interest in the income of the trust o They have differing/conflicting interests in w/happens with the trust o You have people not really there being represented by someone who is trying to represent people w/a common interest Trying to determine whether people have common interests even though they are separate

o People w/an interest in the principal will typically avoid risky investments To affect service you must provide them the service which you would give if you actually wanted them to find out o You have to employ means such that one actually desirous of informing the absentee would use very practical solution

Doesnt require in-hand service all the time but we get benchmarks about how this will come out Publication notice was inadequate for the named parties o You must mail them a letter notifying them of the action o We generally think the US mails is going to work o If we miss one or two people it is not the end of the world, why?

Because everyone you are trying to contact to address potential fraud have a common interest o All the beneficiaries have the same interest in preventing fraud
o

If there is a group of 100 people w/an interest in the principal and we notify 80 of them we can be pretty confident they have the same interest as the 20 people who didnt get the letter in calling the trustee to account

These ideas about adequacy, common interests and how even when there is some degree of commonality of people you must be careful about any divergence in desires will all come up again in the class action context

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McDonald v. Mabee (US 1917) To dispense with personal service the substitute most likely to reach the D is required to satisfy DP
o

Mullane seems to lesson the standard of Mabee

Venue
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Federal Venue Law

Venue refers to the place where a lawsuit should be heard and is distinct from a courts authority to adjudicate a case

A state venue rule allocates judicial business within a state while a federal venue rule allocates judicial business within the nation Federal venue rules are structured broadly if a state has PJ over a D you will almost always have venue in one or more judicial districts there If you remove a case from state court to federal court it always goes to the federal district that embraces the county of the state in question o You dont remove a case from state court in S. IL to Fed Ct in Chicago o You would go to Fed Ct in S. IL
o

Once its removed to Fed Ct you can make a 1404 motion to transfer b/t federal districts

Venue rules are entirely creatures of state statutes or state CL doctrines o Different rules in different states they dont implicate constitutional issues o The Federal Constitution doesnt care w/county you are in, in the state of VA

Venue is very important o County-location of the trial will often be hugely important to the outcome (Madison County is much more pro-plaintiff than Champagne County) o Venue affects the jury pool, the judges, choice of law (particularly between states) o P will typically have the case litigated in their home or a pro-plaintiff area D might want to move the case to their home district where they are prominent and liked, etc.

Factors in State Venue Statutes

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Factors in State Venue Statutes Venue depends upon the theory of a claim, subject matter of the claim, parties involved or a combination of these factors most codes make provision for the place of trial in local actions Thirteen different fact situations upon which venue statutes are predicated 1 Where the subject/action is situated
o o

CL concept of actions in which they were tried locally Based on idea that the court of the county in which the subject matter of the suit is located is best able to deal w/problem

2 Where the cause of action (or part of it) arose/accrued o Convenience of witnesses is the main reason for having the suit/trial in this place

3 Where some fact is present or happened o Many statutes provide for trial in the county where some particular fact/situation related to the cause of action happened

4 Where the D resides 5 Where the D is doing business 6 Where the D has an office or place of business, or an agent, or representative, or where an agent/officer of defendant resides 7 Where the P resides 8 Where the P is doing business 9 Where the D may be found 10 Where the D may be summoned/served 11 In the county designated in the Ps complaint 12 In any county 13 Where the seat of government is located

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Federal Venue Law

Change of Venue Multidistrict Litigation

USC 1391 Venue Generally May be waived by D

(a) Civil action under diversity only must be brought only in o 1 District where any D resides if they are all in the same state Resides generally = domicile

o 2 District in which a substantial part of the events/omissions giving rise to the claim occurred or a substantial part of property subject to the action is situated
o

Assures a relation between the underlying events that are litigated and the place where it is tried

3 Judicial district in which any D is subject to PJ at the time the action is commenced if there is no district in which the action may otherwise be brought fallback provision if 1 or 2 is not possible

Both a3 and b3 apply only if there is no district anywhere in the United States in which the case can be brought under the other subsections of the statute

(b) Civil action where jurisdiction is not solely diversity o 1 Judicial district where any D resides, if all Ds reside in same state o 2 same as above
o

3 District where any D may be found, if there is nowhere else action may be brought fallback provision if 1 or 2 is not possible

(c) Corporate citizenship for purposes of venue Only if no other place o 1 Shall be deemed to reside in any judicial district in which it is subject to PJ when the suit is brought o 2 If it is subject to PJ in more than one judicial district, it resides in any district where its contacts would be enough for PJ if the district were in a separate state

o 3 If 2 does not exist then the corporation resides in the district where it has the most significant contacts

(d) An alien may be sued in any district

Limited Exceptions 1 except as otherwise provided by law law might include specialized venue provisions which govern what venues are appropriate 2 local actions are exempt from venue from early days of CL, courts have treated certain actions relating to interests in land as local actions which must be prosecuted where the land is located

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USC 1404 Change of Venue

(a) Changes of courthouses in Fed System for convenience of the parties and witnesses and in the interest of justice, a D. Ct. may transfer any civil action to any other district or division where it might have been brought (b) Upon motion, consent or stipulation a suit may be transferred, in the discretion of the court, from the division in which it is pending to any other division in the same district 1404(a) says that for the convenience of the parties/witnesses and in the interest of justice a D. Ct. may transfer any civil action to any other district/division where the case might have been brought o Basically codified what conceptually used to be known and understood through FNC Suits may only be transferred ONLY to courts which would have had jurisdiction over the suit when it was originally brought Hoffman v. Blaski o This transfer does not depend on the wish/waiver of the D but rather w/t the original court had jurisdiction when the action was brought o Means if 2nd D. Ct. didnt have PJ over D originally transfer is NOT allowed o Otherwise a D. Ct. upon finding convenience could transfer an action to any jurisdiction desired by defendants and in which they would waive statutory defenses to venue/jurisdiction over their persons The Hoffman rule is criticized widely in academia for the reasons stated in the Dissent

o It is not unfair to the non-movant to transfer the case somewhere that there wasnt PJ and venue originally because these are traditionally thought of as protections for the D against the P bringing the case wherever they want o If the D doesnt care and wants to waive, why should they be stopped? In assessing whether to grant change of venue courts look at private interest factors (one category) and public interest factors (2nd general category) The private interest factors look at things more specific to the case and the parties and the witnesses o Will it be easier somewhere to get access to the relevant evidence/proof o Where will it be easier to get witnesses/experts to testify o Where will you have compulsory power to make witnesses testify who dont want to o Encompasses the general practical problems which need to be solved to make trying a case efficient, easy, etc. o Not going to let one party harass or oppress the other side by having silly inconveniences not related to the substance dictate the outcome Public interest factors look at broad concerns o Jury service costs should be imposed on people who have some connection to the dispute Other broad efficiencies/practicalities of the jury pool o Same thing for judicial resources Court are overworked so it makes sense for them to pick the cases which relate to their community People then have familiarity with the law which applies in their home/courtroom Preferable to have somebody from AR applying AR law as opposed to someone in Guam o Conveniences of non-party witnesses (always an important factor) Very much an open-ended balance party wanting to transfer has the burden of proof and must win by more than a feather o They need to show it makes more sense to try the case in their desired forum CHOICE OF LAW Important principal in a case originally situated under diversity jurisdiction in Fed Cts, if it is transferred the law from the original forum (most importantly the law about choice of law) follows the case from its original court o The new forum does not mean new law Different if it is a federal question case o Fed Law is supposed to be uniform throughout the country and to the extent that Circuits differ it will get sorted out soon by the SC o We are not going to worry about w/t we are applying 7th Circuit law or 9th Circuit law o W/e district court ends up with the case will apply that circuits law This means you will have fights under 1404(a) about whether a case will be heard in GA or NY

People will know which circuits law is better for them or is known to them people try to situate cases in a circuit they know/like

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USC 1407 Multidistrict Litigation NOT ON EXAM

(a) When civil actions involving one or more common questions of fact are pending in different districts, they can be merged for pretrial purposes only o These transfers are made by the judicial panel on multidistrict litigation authorized by this section upon its determination that transfers for the proceedings will be convenient for the parties/witnesses and will promote just/efficient conduct of such actions o Every case so transferred will then be remanded to the district where it came from at (or before) conclusion of the pretrial proceedings

(b) These coordinated proceedings will be conducted by a judge(s) to whom the action is assigned by the judicial panel on multidistrict litigation o Upon request of the panel, a circuit judge or a district judge may be assigned temporarily for service in the transferee district by the Chief Justice or the Chief Judge of the Circuit as may be required o With consent of the transferee D. Ct. the actions may be assigned to a judge(s) of the district

(c) Proceedings for the transfer of an action under this section may be initiated by o (i) the judicial panel on multidistrict litigation upon its own initiative o (ii) motion filed with the panel by a party in any action where this transfer would be appropriate A copy must be filed in the D. Ct. in which the moving partys action is pending MORE IN FRCP

(d) Judicial panel on multidistrict litigation shall consist of seven circuit and district judges designated from time to time by the Chief Justice o No two may be from the same circuit o Concurrence of four members is necessary for any action by the panel

Back to Top Hoffman v. Blaski (US 1960) The question is whether a court may transfer under 1404 an action, on the motion of the D, to a district in which the P did not have a right to bring it. Here the P sued the D (a TX corporation) in the ND of TX and the D sought to removed it to the ND of IL (where the P was and which would not have been able to assert jurisdiction over the D on its own). Court (Whittaker) Suits may only be transferred to courts which would have had jurisdiction over the suit when it was originally brought o This transfer does not depend on the wish/waiver of the D but rather w/t the original court had jurisdiction when the action was brought Otherwise a D. Ct. upon finding convenience could transfer an action to any jurisdiction desired by defendants and in which they would waive statutory defenses to venue/jurisdiction over their persons o Nothing in 1404 suggests giving Ds this unilateral power Dissent (Frankfurter) Court constructs own verbal prison by construing words where it might have been brought to require that it be only somewhere the P could have originally brought the suit Holding otherwise doesnt mean transfer will be made wherever and whenever the D wants o It will still be limited to places where the action might have been brought and as justice requires The courts view gets us into the complex proposition of determining whether each D could have been served in the transferee forum on the date the suit was originally filed o This will be particularly difficult w/non-corporate defendants Additional Notes Issue is whether the D can use 1404(a) to transfer the action to a district where the P didnt have a right to bring it in the first instance Ps say the Ds have nothing to do w/ND of IL and the patent infringement didnt happen there o As a consequence of this the Ps didnt have a right to bring suit in Chicago in the first instance o Ds say they want to transfer because it would be more convenient for parties/witnesses Ds are arguing that 1404 should be construed as meaning transfer should be allowed anywhere that a suit might have been brought o This is a very orthodox argument in an FNC setting SC rejects this argument and says you may only transfer the suit somewhere it may have been initially brought they dont want to let the Ds move these suits around Dissent

The language the majority says is so clear isnt really clear at all If transfer gives the D some unfair advantage then it isnt in the interest of justice and they should just deny the motion Majority here is using more of a plain meaning argument and the dissent is being more practical o Wants more of an all things considered approach

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Forum Non Conveniens

Back to Top Factors Courts Consider Forum non conveniens A court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute o P is sometimes tempted to file suit in the most inconvenient permissible forum for the D (even at some inconvenience to himself) Gulf Oil Corp. v. Gilbert Courts will consider various things and try to prevent P from unnecessarily harassing D through forum selection Gulf Oil Corp. v. Gilbert o But unless things cut sharply for D the Ps choice will probably be respected list of considerations in book Factors of public interest are also involved Gulf Oil Corp. v. Gilbert o Eg. Dont want to force a community unconnected to an action to have to deal w/jury duty, dont want litigation affecting many people happening far from them where they cannot follow it, etc. Courts take statutes of limitations into consideration and try to make sure the action being dismissed wont be time-limited by refilling in another court o The D is typically saying this should take place elsewhere so the court might say that the D must agree as part of its dismissal here that it wont invoke SOL in its foreign suit o If they do then the case will be reopened in the dismissing court o These concerns are the main reasons for the dissent in Hoffman v. Blaski Ps cannot defeat a motion to dismiss for FNC simply by showing the substantive law in the alternative forum is less favorable than the present forum the possibility of a change in substantive law is not given substantial weight in an FNC inquiry Piper Aircraft Co. v. Reyno o This does not mean a change in law is NEVER enough if the alternate forum does not, for example, permit the sort of recovery sought that might defeat an FNC motion Presumption in favor of the Ps choice of forum has less strength when the P is a foreigner Piper Aircraft Co. v. Reyno o When the home forum has been chosen it is reasonable to assume this choice was convenient when the foreign forum is chosen this assumption is less reasonable FNC determination is committed to the sound discretion of the trial court Piper Aircraft Co. v. Reyno o May be reversed only when there is a clear abuse of discretion o Trial judge must weigh the competing interests of the parties and consider the public interest When court grants an FNC motion it dismisses the case o Fed Court in Cleveland cant transfer anything to a court in Japan o It dismisses the case upon the parties representation that they will re-file it in Belgium

FNC and personal jurisdiction the reasonableness prong of Asahi looks similar to FNC o Your chances of getting the case dismissed on PJ grounds are lower than your chances of getting the case transferred or dismissed for FNC o If there is purposeful availment the reasonableness bar is pretty low for PJ o There are many cases where as a fallback, the transfer motions or FNC dismissal come up if the motion to dismiss due to reasonableness under PJ fails (which is often likely)

Look at private interest factors (one category) and public interest factors (2nd general category) The private interest factors look at things more specific to the case and the parties and the witnesses o Will it be easier somewhere to get access to the relevant evidence/proof o Where will it be easier to get witnesses/experts to testify o Where will you have compulsory power to make witnesses testify who dont want to o Encompasses the general practical problems which need to be solved to make trying a case efficient, easy, etc. o Not going to let one party harass or oppress the other side by having silly inconveniences not related to the substance dictate the outcome Public interest factors look at broad concerns o Jury service costs should be imposed on people who have some connection to the dispute Other broad efficiencies/practicalities of the jury pool o Same thing for judicial resources Court are overworked so it makes sense for them to pick the cases which relate to their community People then have familiarity with the law which applies in their home/courtroom Preferable to have somebody from AR applying AR law as opposed to someone in Guam o Conveniences of non-party witnesses (always an important factor) Very much an open-ended balance party wanting to transfer has the burden of proof and must win by more than a feather o They need to show it makes more sense to try the case in their desired forum Back to Top Gulf Oil Corp. v. Gilbert (US 1947) Forum non conveniens A court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute P is sometimes tempted to file suit in the most inconvenient permissible forum for the D (even at some inconvenience to himself) Most states have given courts discretionary power to change place of trial on various grounds such as ends of justice

o No equivalent express grant to the federal district courts Courts will consider various things and try to prevent P from unnecessarily harassing D through forum selection o But unless things cut sharply for D the Ps choice will probably be respected list of considerations in book Factors of public interest are also involved o Eg. Dont want to force a community unconnected to an action to have to deal w/jury duty, dont want litigation affecting many people happening far from them where they cannot follow it, etc.

Back to Top Piper Aircraft Co. v. Reyno (US 1981) P was the secretary of an American lawyer suing in US on behalf of Scottish people killed in a plane crash in Scotland. Everything happened in Scotland but the plane was made here. It was admitted they were suing in US only because of more liberal tort recovery rules in US than in Scotland (strict liability vs. negligence). The D moved to dismiss under forum non conveniens because the Ps had a much more convenient in Scotland than in the MD of PA where the plane-maker was located. Court (Marshall) Ps cannot defeat a motion to dismiss for FNC simply by showing the substantive law in the alternative forum is less favorable than the present forum the possibility of a change in substantive law is not given substantial weight in an FNC inquiry o If it were, then dismissal would rarely be proper Ps almost always choose the best substantive law among several available forums this cannot be enough to defeat an FNC motion o If the change in law was enough to defeat it would require complex comparative law analyses to be conducted by courts before granting/dismissing FNC motions o This does not mean a change in law is never enough if the alternate forum does not, for example, permit the sort of recovery sought that might defeat an FNC motion Presumption in favor of the Ps choice of forum has less strength when the P is a foreigner o When the home forum has been chosen it is reasonable to assume this choice was convenient when the foreign forum is chosen this assumption is less reasonable FNC determination is committed to the sound discretion of the trial court o May be reversed only when there is a clear abuse of discretion The trial court reasonably weighed the competing interests of the parties in litigating in PA versus Scotland list in case Trial Court also correctly weighed the PI in this case o Consideration of the problems of trying one D w/US law and one w/Scottish law was appropriate

o Would be confusing for a jury and that D Ct. knew little Scottish law so it would be problematic for them In sum, Scotland has strong interest in resolving this incremental deterrence added from trying it here is not enough to give the US a significant enough interest to justify the major investment of judicial time/resources it would require to try the case here

Additional Notes There is complete diversity so there is subject matter jurisdiction over this suit in federal court o Corporations have two places for citizenshipwhere they are incorporated + where they do the bulk of their business o Ds here are makers of the plane and propeller they are American companies located in the Midwest o Ps in interest are surviving relatives of 5 Scottish passengers who died in a plane crash in Scotland all the Ps live in Scotland There is personal jurisdiction? o 1391: (1) defendants reside; (2) events happened there; (3) defendant subject to personal jurisdiction o Where do defendants reside? Subject matter jurisdiction: incorporation + where business is done does/should this apply to personal jurisdiction too? o Piper doesnt fit (1) or (2) so maybe just (3) but wait, 1391(c)for corporation defendants, reside means everywhere there is personal jurisdiction at the time the action is commenced so 1 =3 for corporate entities. o Less worried about convenience for companies than we are individual people they have more resources, are often global, or at least national. o Also, aliens can be sued in any district. Hard to figure out where they reside. The district court transfers the case from California to Pennsylvania. o California did have jurisdiction but can still be transferred. o 1404 & 1406: balance test of convenience of the parties and witnesses; in the interest of justice courts consistently say that they will only reluctantly transfer cases/presumption that plaintiffs forum choice should be honored if the plaintiff establishes that a court has jurisdiction to hear the case. o Could the law suit have been brought in Pennsylvania? Seems like it: Pipers principle place of business is in Pennsylvania but what about Blaski? In Blaski, the court did not originally have jurisdiction and the defendant could not consent to such jurisdiction ex post. o Forum is limited because it was designed to protect the defendant so this logic is not applicable to cases where the defendant consents to the forum. On the other hand, the clause in 1404: a district court may transfer any civil action to any other district or division where it may have been brought would be extraneous. o 1406you can even transfer a case when original venue is lacking. Piper Aircraft takes this one step further because it says that you can transfer a case when personal jurisdiction is lacking in the first instance. Forum non conveniens

o The law of the first forum carries with the litigation when the case is transferred. o There is only a limit when the first forum did not have jurisdiction. o Defendants want to dismiss the case altogether via forum non conveniens doctrine. o But this case is complicated because what carries over is not necessarily California tort law but actually the choice of laws that California provides. o Not super convenient for these US companies to litigate in Scotland but they know the substantive law in Scotland will be more favorable to them o Better tort system for defendants. Usually immaterial that the P will have more favorable law in the forum that the P selects. o If this was determinative then FNC (dismissal) would never happen because the P almost always picks the forum w/the best law for them. o It is really hard to figure out which law is better for the P and the courts would have to engage in complex comparative law questions. o Can be relevant if the remedy provided by the alternative forum is clearly inadequate/unsatisfactory. But what does inadequate/unsatisfactory mean? Most important thing to remember for transfer and FNC is that federal courts are overriding a plaintiffs preferred forum for litigation. o Maybe the court is worried about plaintiffs strategic moves, but the test is about balancing interests so probably not. o 1 If the P is foreign this is probably not the most convenient place for them Although if convenience were the only thing it wouldnt really matter where anybody is from o 2 US court system is not open for business to be a court for the world on litigation not meaningfully connected to America (resources and interest in litigation though if you think about it chastising American manufacturers for making a faulty product is of interest to American courtsits just lucky that the fault product happened to end up in Scotland rather than America) Where do these rules come from? On what authority is the judge dismissing the case? The federal law contains no such express criteria to guide the district court in exercising its power. In fact the statutes seem to make it mandatory that the court hears the case But the problem is a very old one affecting the administration of the courts as well as the rights of litigants, and both in England and in this country the common law worked out techniques and criteria for dealing with it. See Gulf Corp. v Gilbert [But does it matter now, given that we have 28 U.S.C. 1652 which seems to codify common law?] Back to Top

Governing Law Erie Issues

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Before Erie
Background for Erie Swift v. Tyson Main Ideas behind Swift Black & White Taxicab Co. v. Brown & Yellow Taxicab Co. Erie questions only arise with diversity jurisdiction o You have a case which could proceed in federal court that is subject to being refilled in another courthouse (state) right down the street Erie doctrines implicate some of the most fundamental questions about w/law is, w/courts are and how courts work in the United States Horizontal Choice of law question With a case in state court where you are fighting over w/states law to apply o Fighting about one states law or another Vertical Choice of Law Question Arises because in the U.S. unlike most countries, we have an overlapping system of courts o We have municipal courts, state courts contrasted w/overlapping federal system o Choice is typically about w/t you will be applying Federal law in Fed Court as opposed to a state law rule complicated question

Rules of Decision Act 28 U.S.C. 1652 The laws of the several statesshall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply. Two phrases, in particular, potentially make this confusing The laws of the several states issue about w/the law encompasses o 1) W/t it refers to the statutes of that state or perhaps the statutes and constitution of that state o 2 P/h statutes, constitution and settled/immovable customs in the state o 3 Any law that state gives w/t from state SC, state leg, etc. in cases where they apply telling people to apply it wherever it applies can foment argument

Back to Top Background for Erie Seminal interpretation for a century was Swift not the law anymore but you need to know about it to understand w/is going on Swift arose from a complicated land fraud scheme turns on w/t a release from a preexisting debt counted as valuable consideration in the law

Legal doctrine @ time idea that he could demand payment was seen as the better rule o Tyson is trying to invoke the older rule enshrined in state law (here NY law) under which he would not have to pay on the demand This case is tried in a Fed Ct sitting in diversity in NY o Question comes down to w/t that Fed Court should apply the old rule of NY law (no consideration) or the majority position which had been substantially adopted in the U.S. where this was believed to be consideration SC held that the Fed Ct did not have to apply the NY CL they were to apply the general common law here and in England Turned on the law of the several states o Swift court holds unanimously that this phrase applies only to state statutes, interpretations of state statutes, legal principles relating to fixed property and w/was called at the time long established local customs (this was an area people would fight about) Does not apply to CL decisions and rules of decisions rendered by state courts including state SCs o If a unanimous NY Ct of Appeals said the law of NY is X that is not part of the law of NY which must be applied by fed cts under Swift o Swift was seen as a very easy case by the justices of the SC at that time o Consequence is that the Fed Ct in NY is free to apply its broader conceptions of the principles of competition and its understanding of CL Storey said it can hardly be contended that the decisions of courts constitute laws they are, at best, evidence of laws Swift reflected very different conceptions about w/law is Swift is much more in sway in England than here today

Back to Top The Idea behind Swift is Swift is talking about who makes laws, what laws are and whether there is this uniform body of law First there is some sort of overarching true body of Law o Holmes later refers to this concept of the CL as a brooding omnipresence in the sky He says CL is not that but rather is just the articulate voice of some sovereign o This is more natural in England because they do not have this patchwork of courts One system of unified courts Five people at top are law lords (SC for entire empire) This system works to discover the Law which applies from London to Burma Dont have to wonder/ask what different rules are being applied in MT or IL o This English model was largely borrowed in the U.S. and is reflected in Swift

Second (still has vitality in law today) Courts dont/shouldnt readily make laws courts interpret laws, they dont create laws o Unquestionably the case (most cases have right answers if you work hard enough you will find the answer) that sometimes things are hazy and there is no right answer when that happens the court is, essentially, making law o Idea of Swift is that generally speaking courts shouldnt be the law-makers if there are alternatives o Comes up with retroactivity whether decisions of law apply retroactively to all litigants Judicial decisions apply retroactively based on idea that courts are not making up the law but just applying law that already exists Judicial decisions do not apply prospectively because that is w/statutes do judicial decisions are just existing law so they apply retroactively Is Swift really about a nationalist view of Federal law that Fed courts will articulate and which will unify the system? o This is a pretty speculative take on Swift o Seems more likely that the above ideas of w/law is and who makes it are huge parts of w/motivates Swift this idea of unified law is not the sole reason

Back to Top Swift v. Tyson (US 1842) Dispute between Maine residents and New York residents. Tyson pays for land with a check but the seller doesnt really have title. The seller then gives Swift Tysons check. Swift then sues Tyson for the check but Tyson says since he was defrauded out of his money he owes nothing to Swift. Question of what law appliesstatute in New York says that fraud taints the check and provides a defense; Swift says that new emerging common law doctrine (English) stands for the opposite proposition, bona fide purchaser w/o knowledge means that the contract is not void. Question of whether the phrase laws of the several states encompassed both the statutory and decisional law of the states if it commanded Fed Cts to follow both state statutes and state court decisions in cases in which they covered the controversy Justice Story (for unanimous court) concluded that the Act commanded fed courts to follow simply the statutory law of the states. o The decisions of state courts constitute, at most, only evidence of what the laws are and are not themselves laws assumption that there is a natural law. o The laws of a state are more commonly understood to mean the rules and enactments promulgated by the legislative authority thereof or long established customs having the force of laws o This section is strictly limited to local statutes and local usages of the character before stated local usage is more like zoning/things that are particular to the locality but the court does not really explain this. Back to Top

Black and White Taxicab v. Brown and Yellow Taxicab (US 1928) Holmes Dissent Anticipates Erie but grounds it in the Constitution Respondent is a TN company doing business in KY. Respondent incorporated in TN because they had a K w/a RR in KY to provide transport services which would be illegal under KY CL they made the K in TN to avoid this. Petitioner contends that respondent was incorporated in KY solely for the fraudulent purpose of giving the Fed Cts jurisdiction here and evading a KY CL rule regarding competition. Court (Butler) The required diversity exists here and is real/substantial incorporation in TN to have its rights determined by a federal court was not improper under the law This court is not required to adopt KY constructions of the CL no state statute or long custom/tradition is here involved distinction has always been made between statutes of a state and the decisions of its courts on questions of general law o With issues of general law federal courts, while inclining to follow the decisions of the courts in the state where the controversy arises, are free to exercise their independent judgment Dissent (Holmes w/Brandeis and Stone) The notion that Federal Courts applying state law are not bound by that states CL is based on a fallacy o Fallacy that there is one great independent CL which the Fed Cts are equally well positioned to divine/apply there is no such body of law CL is not the CL generally but is the law of that state w/out regard to w/it may have been in England or anywhere else There is no reason why a states law should have less effect when it speaks in a voice other than statute or constitution o If a states constitution said that its highest court shall establish the law until modified by statute or later decision then Fed Cts would be bound o When the state constitution establishes a supreme court it, by implication, makes this declaration as clearly as if it did so expressly The authority of the state should utter the last word would uphold Swift but would not extend it into any new fields Additional Notes After this case Congress considered stripping diversity jurisdiction out of Fed Cts. entirely Tumultuous time in law some states are trying some doctrines to solve modern problems while others try different ones o Patchwork of state doctrines to address various problems had evolved Holmes When dissents are in casebooks it is usually because they are important This dissent is by three of the most important justices ever Holmes rejects idea of general CL says this CL doctrine varies state to state and LA doesnt even use the CL at all

o But now we are coming in to tell the courts of LA w/rules they ought to apply as general CL when they have never adopted CL to begin with when they are applying a system none of the SC is trained in Swift was an unconstitutional assumption of power by the Fed Cts of the US o It was an attempt by the Fed Cts. to adopt lawmaking power o Unconstitutionally usurping power and stepping on the prerogatives of state power and state legislatures in this case the state of KY This is not an articulation of federal law that will apply in the next case in KY if the case had proceeded in KY courts the case would have come out exactly the opposite dynamic now is that if the case happens in one building they will win and if P can reincorporate as a corporation in another state and sue in diversity then the case might come out completely different also, if the case is re-litigated two weeks later there is no guarantee that it will come out the same way if a 2nd P is savvy enough to get into Fed Ct this is because this case does not declare a rule of law, it is just one courts understanding of w/the CL is Swift court didnt think this was unconstitutional because they thought Fed Cts were just explicating this brooding truth of what the law was Natural law has very little vitality in contemporary legal analysis and interpretation but those natural law ideas were much more palatable to justices of the Swift era Dec of Ind, inalienable rights, etc. The court did not think their ruling was unconstitutional Holmes very much rejected the idea of the law existing independently of the states and the Swift approach to this issue that the law was something fixed out there which transcended the generations He is a legal positivist and thinks law is this kind of sausage coming out of this imprecise process it comes out differently in different places, sometimes for bad reasons sometimes because the situation is different in different states the law is simply w/a sovereign gives us as the law This is humbling the judge is not some workman chipping away to find w/is written in the heavens as the law rather the judge is supposed to work to determine what the sovereign (the state) has dictated to be the law you must apply the law as given by the state Rule of Swift was an unconstitutional assumption of power by the Fed Cts inasmuch as they assumed the power to dictate laws beyond the constitutional law-making authorization for the Federal Government Idea that these were exclusive areas of state authority some of the language in Erie is very broad and seems to say that the Fed Gov as an entity doesnt have the power to affect rules in things like state tort areas this approach to Erie does not fit comfortably with modern world o Few people thing Congress cant pass a law setting negligence standards on transcontinental RRs This is beyond the power of the Fed Gov also discusses leg history of rules of decision act says the leg history shows that Swift is wrong B&W Taxicab was a big deal Congress discussed stripping courts of diversity jur because of this case gets us to Erie

BeforeErie

Erie
Back to Top Rules of Decision Act 28 U.S.C. 1652 The laws of the several statesshall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply Erie Clearly tells us that Fed Cts will apply the substantive rules of state law F Except when Fed law/constitution says otherwise the law to be applied is the law of the state and this includes both state statute and state law declared by its highest court Erie R. Co. v. Tompkins o There is no federal general common law. o Nothing in the constitution gives Congress the power to declare substantive rules of CL applicable in a state for commercial or tort law Similarly no clause in the constitution purports to give federal courts this power o Such interference w/a states law is an invasion of the authority of the state and a denial of its independence No clause in the constitution purports to confer such a power on the federal courts. o This idea about separation of powers is the most common reading about where the law is after Erie o Congress can enact statutes governing these issues but the Fed Cts cant just make it up Reed Concurrence the constitution authorizes legislation giving Fed procedural rules for Fed Cts o The power of Congress to set up the judiciary + the necessary and proper clause gives them the authority to control procedure

Back to Top Erie R. Co. v. Tompkins (US 1938) Boy was injured while walking along a train track in PA. What are the two laws? Under PA CL he would be deemed a trespasser and be barred from recovery. Majority rule in most states (through statute), however, was that a RR owed a duty of ordinary care to traveler on a parallel footpath. Which law to apply uphold Swift? What is motivating the Court to actually overturn Eerie? Whats the relevance of the Constitution? Court (Brandeis) Experience in applying Swift has demonstrated that it has yielded none of its supposed benefits while it has many political and social defects

o State courts have persisted in their own interpretations of CL so uniformity has not resulted and there is no firm line b/t general and state law o Bradeis says that there are bad unintended consequences: Forum Shopping by Ps Parties have manipulated diversity jurisdiction to avoid a particular states CL doctrines. [COUNTER ARGUMENT: could have just outlawed strategic gaming] Inconsistent Application of Laws Made rights under state law vary according to w/t a party was sued in state or fed courtseems just kind of like moral luck that you end up with two in state parties vs. one in state and one out of state [COUNTER ARGUMENT: But isnt this why we have diversity? IE out of state defendants should get different less prejudicial law in federal court.] o Bradeis doesnt want to admit that federal common law favors corporate entities and now it is 1938 depression time and so he wants to reverse that trend (ironic that in this case the federal common law favored the plaintiff and not the railroad and the state law favored the railroad.) Constitutional argument: except when Fed law/constitution says otherwise the law to be applied is the law of the state and this includes both state statute and state law declared by its highest court o There is no federal general common law.** There is all sorts of federal common law, IE forum non convenience doctrine. o Nothing in the constitution gives Congress the power to declare substantive rules of CL applicable in a state for commercial or tort law (Combine Article I, Section 8 which defines Congressional power & Amendment X which reserves rights not granted to Congress to the states of course now Congress gets a lot of power from the Commerce Clause in Section 8 but in 1938 the Court had a very narrow interpretation of the Commerce Clause.) There is a potential violation of Article I power. (Two steps for constitutional law(1) does the Constitution grant authority; once the Constitution grants authority, (2) did Congress pass legislation that was unconstitutional due to some other side constraint.) There is a potential problem with Article III because the judiciary is legislating (separation of powers problem) through creating common law. Nothing in Article III allows the courts to legislate. o Such interference w/a states law is an invasion of the authority of the state and a denial of its independence o Doctrine rests on the fallacy Holmes described in Taxicab that there is some general CL which fed courts can discern.

Concurrence (Reed) To make this decision the court need only say that the laws include in their meaning the decisions of local tribunals It is unnecessary to go further and declare that the court pursued under Swift was unconstitutional this issue was not raised Additional Notes Erie

Lawyers could have gone to four different forums: (1) PA Federal Court; (2) NY Federal Court; (3) PA State Court; (4) NY State Court o Lawyer for Tompkins does not want PA or NY state courts because they dont want PA state law which they would get in NY state court because the accident took place in PA so NY would just use PA state law. So lawyer wants to take the case to NY fed. court because NY federal courts use the general common law rule which is what would support Tompkins position. The RR arguing w/in this Swift framework whether or not this question dealt with long-established local customs. Court holds they have to apply the states law and it doesnt matter whether it is a state statute or state common law This goes back to debate between positivists who believe courts make law and those on the other side who believed courts only found law o Brandeis embraces modern view that it doesnt matter w/t law comes from state legislature or state courts Brandeis is saying the federal courts have assumed broad power to declare law beyond that law which even Congress could make o Idea about the limits on the authority of the Fed Gov This doctrine of limits doesnt square easily w/the body of American law in 2007 o It is not the law today that Congress cannot enact statutes to deal w/commercial or tort law (as suggested on pp. 366-67) Other idea that this is more about separation of powers o Even if Congress/President can pass statutes addressing commercial law or tort law (at least on interstate issues) that is one thing o Doesnt mean by extension that Fed Cts sitting in diversity can just make up their own rules of decision just because they think their idea is better than w/the state uses Criticism of the Swift rule? o The Swift rule encourages fraud there is naked forum-shopping trying to get into Fed Ct just because litigants prefer the rules/law applied there o State SCs were not just following the Federal enunciations of CL so Swift was not leading to the uniform body of law which it was intended to foster Swift is promoting the unequal application of the law depending on what court you are in o This unequal application gives a constitutional dimension to the rule of Swift v. Tyson that justifies the SC going in overruling the Swift interpretation of the Rules of Decision Act Lots of the constitutional stuff here is window-dressing o He realizes that the idea of equal protection here is kind of a shell everyone in Fed Ct gets same rule applied to them so it isnt unequal in an overt sense o He is saying there is unevenness between Fed and State court o This unevenness means we dont have the most workable system in applying Swift and dont have this all worked out There is no federal general common law. Generally speaking that principle is true. Fed Cts dont sit as CL courts and make up CL doctrines as state courts do

o Fed Cts fundamentally apply Federal Statutes some cases interpret Fed Statutes but its not CL and to call it that is misleading o People talk about what statutes say, but Fed Law is a positivist system in which it is supposed to be applied as written and subject to modification o There are areas proceeding in a CL fashion in explicating ambiguous portions of the constitution different than true CL though o Limited exceptions where Fed Cts proceed in a CL fashion where Fed interests are paramount and where state law/doctrine will not adequately address the issue 2nd Thing Next passage No clause in the constitution purports to confer such a power on the federal courts. this idea about separation of powers is the most common reading about where the law is after Erie o Congress can enact statutes governing these issues but the Fed Cts cant just make it up

Reed Concurrence Most important line is last sentence the constitution authorizes legislation giving Fed procedural rules for Fed Cts He sees this as more of a statutory case o The idea that Fed Cts dont have power to declare substantive rules seems at least debatable and maybe Congress thought they could do this w/Rules of Decision act o At minimum cant we all agree that the Fed Gov has the following authority in these cases The power of Congress to set up the judiciary + the necessary and proper clause gives them the authority to control procedure Line between procedural and substantive is often fuzzy and difficult to draw Additional Erie Summed Up Positivism prevails in Erie o Not a quibble about Rules of Decision act driving the court o Brandeis has a different conception about the CL and modern law Brandeis sees CL as the broad pronouncement of law from the states and their courts Consequences of this are most profound in terms of ability of individuals/businesses to plan their primary conduct many people find primary conduct to be very powerful in terms of being explanatory o Primary conduct is what human beings really do and like what they do in trying not to injure others, to abide by tort duties, form/enforce contracts, etc. o Different from secondary conduct what you do when your primary conduct becomes the subject of a lawsuit o Most people overwhelmingly engage in primary conduct and secondary conduct is an exception people avoid lawsuits Allowing certainty about w/law is going to control is giving people that clarity so they can engage in primary conduct in a productive way Two more things

1 Constitutional argument from Erie turns out to be much harder/more limited than it appears from quickly reading the Brandeis opinion o The commerce clause has changed a lot over last 60 years o Broad consensus about the authority of Congress under CC to legislate in ways that Erie suggests it may not be able to 2 Congress can do two things o It can pass federal statutes to address that conduct o Congress can general the rules of procedure, evidence, etc to govern the mechanics of Fed trials Big focus after Erie is what rules are affected by the Erie doctrine What does Erie mean/command us to do? Clearly tells us that Fed Cts will apply the substantive rules of state law o Important tool at outset to never forget, important because it gives answer in lots of situations o What are tort rules in state law, rules governing K interpretation, etc. Some profound issues that have big effects on outcomes of cases but not clear Erie will require their application o There are many different systems of handling the processing of cases but one common paradigm of state cases is that w/e judge is sitting that day rules on one matter while another day you get another judge, etc. o This is alien to Fed Ct in Fed Ct you keep the same judge throughout the trial this process has profound implications for the outcome of cases o It would be totally unworkable to do this in the Fed system so we dont even though it is a fairly important state practice One more point of background idea of distinguishing between substance and procedure is a historical benchmark courts have tried to use o First generated in international litigation oftentimes the court in which the case is proceeding is applying another nations laws

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Evolution of the Erie Doctrine Modern Law

Back to Top Rules of Decision Act 28 U.S.C. 1652 The law of the several states, except where the constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply. Plausible argument that under Rules of Decision Act you would need to apply every state law no matter what Two reasons why FRCP work o 1 Congress will provide various rules it will set forth o 2 State rules about briefs or procedure are not rules of decision/substance Two basic points 1 There is some Federal CL its not massive but there is some

o To the extent there is Federal CL there is debate about the scope/legitimacy of that Fed CL o Examples 2 When there is Fed CL, it applies without debate because it is Federal Law and due to the supremacy clause, it governs o Divergence in outcomes used to persist over time between state and federal courts o When you do have true Federal CL it applies it is entitled to the force of the Supremacy Clause

Rules Enabling Act Hanna and Erie Doctrine Contd Swift was criticized for favoring federal pro-business law over state law. Erie is (1) considered with federalism (grows out of the fact that the national government is one of enumerated powers; cannot create laws without legislative authority granted by the Constitution, via Article I, Section 8) federal government cannot aggrandize itself through making law it has no authority to do (2) Horizontal separation of problems judges have been making federal common law but they are not suppose to do this eitherwe want to make sure that the Congress is the one legislating, not the courts.

Early Application Erie Doctrine After Erie, Fed Cts do not have the power to deny substantive rights created by state law or to create substantive rights denied by state law Guaranty Trust Co. v. York Outcome determinative test Question of whether a state law is one of substance thus turns on whether it would significantly affect the course of litigation in the Fed Ct if a law were disregarded which would control in a state court Guaranty Trust Co. v. York o Goal of Erie was to ensure that the outcome in a Fed Ct would be substantially the same, so far as legal rules are concerned, as in state court Statute of Limitations laws are both procedural and substantive o Procedural Clear out dockets, protect court and Ds from waste, etc. o Substantive Repose is a social and political value, encourage diligence by hastening litigation, etc. Three cases applying York shortly thereafter SC held that FRCP 3 was not intended to govern questions concerning the tolling of SOLs and therefore state law would determine when the statute was tolled Ragan v. Merchants Transfer (US 1949) Fed Ct must apply a NJ statute requiring a P in a shareholder derivative suit to post a security-for-expenses bond even though FR 23.1 did not require a bond Cohen v. Beneficial Industrial Loan Corp. (US 1949) o Court believed 23.1 did not contradict state law but just addressed different concerns

TN corp. not qualified to do business in MI could not maintain diversity action in Fed Ct because MI courts would not allow it to sue there (having not qualified to do business) Woods v. Interstate Realty Co. Byrd was a balance in which the Fed Ct looked at states interest in the rule and balanced that against the interest of Fed Cts in uniformity and the influence that comes indirectly from things like the 7th Amendment Byrd v. Blue Ridge Rural Electric Cooperative, Inc. o The Byrd test has had much more primacy in academic literature than it has in the courts Erie determined that Fed Cts in diversity cases must respect the definition of state-created rights/obligations by the state courts Byrd v. Blue Ridge Rural Electric Cooperative, Inc. Great Big Balancing Test o 1 Nothing in the SC workmans comp statute suggests it was an integral part of the workmans comp remedy It was happenstance o 2 Fed Cts should go further and try to conform to w/state courts would do in the situation presented by adopting all state rules which bear substantially on the litigations outcome should try to achieve same outcome as state courts But state rules cannot alter the essential character/function of fed ct Juries, supported by the 7th Amendment, are an essential factor in federal adjudication Fed Cts have an interest in applying a standard sort of practice in cases they are familiar with o These sort of uniformity interests are always true and are always a factor Putting things w/the jury as opposed to the judge will not have this binary world-changing shift because in theory a Fed Ct a judge can comment on the weight of evidence for the jury (although this is virtually never done) Trial judge also can grant new trial motions if a manifest injustice has occurred in the trial courts view (Fs colleague has been a judge for 35 years and has granted a new trial motion once system affords great respect to jury decisions) o 3 Outcome here would not be clearly affected by the different rule, likelihood of a different result in Fed Ct is not strong enough to require Fed practice of juries to yield to the state rule in the interest of uniformity of outcome

Back to Top Rules Enabling Act (A) The SC shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States District Courts and Courts of Appeals

(B) Such Rules shall not abridge, enlarge or modify any substantive right. All laws in conflict with such rules shall be of no further force or effect. o This statute has led to the FRCP, FRAP, Fed Rules of Evidence, etc. o In classical conceptions the SC has zero legislative authority Nowadays the SC cannot knock down that limitation on power of the Fed Gov by just calling rules procedural (Eg. SC Code of Tort Procedure filled w/damages caps, etc.)

Modern Application of Erie Doctrine Hanna 2 First you do REA inquiry to assess w/t it abridges, enlarges or modifies substantive rights and then you should ask Constitutional Q of w/t it is arguably procedural statute then constitution as an absolute bottom-line hard to see how you get past REA test and not arguably procedural Con. Test o Constitutional test for a federal rule must be whether a rule really regulates procedure (if so, Fed governs) or whether it is integral to state created rights and duties in the substantive law (where State governs) Hanna v. Plumer o Adoption of Rule 4d1 neither exceed Congressional mandate nor transgressed constitutional bounds that rule is therefore the standard to be applied by Fed Cts o If a rule is arguably procedural (rationally capable of being classified as procedural) then it falls w/in Congress power o Rules Enabling Act is constitutional because of the combination of Congress power under Article III coupled with the Necessary and Proper Clause comes back to Justice Reed in Erie Under Harlans reading of Hanna, any arguably procedural rule would apply no matter how seriously it frustrated a States substantive regulation of the primary conduct/affairs of its citizens o Does not give enough weight to state interests Hanna 1 Twin aims of Erie Hanna v. Plumer o 1 Discouragement of the forum shopping which had emerged following Swift Warren means forum shopping such that if we are at day one thinking about where to put the lawsuit, whether this tweak in procedure going to substantially affect where we go to court FN 7 o 2 Preventing inequitable administration of the laws depending on whether you sued in state or federal court Application of rule will make such an important difference to the character/result of the litigation that failure to enforce it would discriminate against citizens of the forum state FN 7 o SC has never defined inequitable administration of laws Much depends on our background understanding of how the world seems to normally work Normally people think about how would this case play out in state court v. federal court

Hanna 1 Outcome determination test cannot be read w/out reference to these twin aims (in some sense everything is outcome determinative) Hanna v. Plumer o In this case all Rule 4d1 does is dictate that litigation will proceed because service was adequate this is only outcome determinative in the sense that any procedural rule is o Though choice of Fed or state will have a marked effect on outcome Different between the two rules would be of little relevance in forum selection o Mode of service is similarly not sufficiently substantial to raise the sort of EP problems to which Erie alluded Hanna 2 only applies if there is a direct collision between the Federal Rule and the state law Walker v. Armco Steel Corp. o Here the FR is not as broad as petitioner urges and does not touch on the issue of SOLs It does not say that it is meant to affect the tolling period for SOLs Also this is controlled by Ragan in which the SC held that state statutes of limitations were substantive and governed petitioner wants the court to overturn o Since there is no direct conflict between the FR and state law, the Hanna analysis does not apply Hanna 2 does not apply if there is no direct conflict b/t FR and state law instead Hanna 1 and the twin aims policy behind Erie controls Walker v. Armco Steel Corp. o In this particular case there were not forum shopping problems o But there was a potential problem with the inequitable administration of laws Appears to be a retrospective approach There is no reason why an action indisputably time-barred in state court should be able to proceed to judgment in Fed Ct simply because of diversity between the parties FRAP 38s discretionary mode of operation unmistakably conflicts with the mandatory provision of Alabamas affirmance penalty statute Burlington Northern R. Co. v. Woods o Purposes underlying the Rule are sufficiently coextensive with the asserted purposes of the AL statute to indicate that the Rule occupies the statutes field of operation so as to preclude its application in Fed diversity actions o W/the AL state rule, if you lose you pay and you always pay 10% (inflexible in amount) o Fed R is discretionary about both whether a fine will be applied and also about how much it will be Direct collision language just means the Fed Statute must be broad enough to cover the issue before the D. Ct. Stewart Organization, Inc. v. Ricoh Corp. o If the D. Ct. determines a federal statute covers the point in dispute, it proceeds to inquire whether the statute represents a valid exercise of Congress authority under the constitution If it is arguably procedural then it is ok Hanna

Section 1404(a) is intended to place discretion in the D. Ct. to adjudicate motions for transfer according to an individualized determination Stewart Organization, Inc. v. Ricoh Corp. o Flexible and individualized analysis Congress prescribed encompasses consideration of the parties private expression of their venue preferences o With two choices in the field of operation, the instructions of Congress are supreme This case is probably not one where you have this sort of absolute clash b/t Alabamas approach and 1404(a) Stewart Organization, Inc. v. Ricoh Corp. o 1404(a) would just look at that forum selection clause, just more flexibly o Marshall says that approach speaks to Congress expression of its desire for Fed Law this is enough to control Possibly a narrowing of the Stewart understanding of direct collision between Federal and State law Gasperini v. Center for Humanities, Inc. BUT R 59 Motion is just a vehicle to damage review majoritys INTERP IS NOT NEC WRONG o In FN 17 Ginsburg rejects Rule 59 as controlling new trial may be grantedfor any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States o One application has been to allow judge-rehearing of jury damage awards when the damages are excessive This portion is judge-made, SEE SCALIA DISSENT o Thus the rule applies in this context and, under Stewarts reasoning, seems like it would apply If no Fed Statute covers the contended point Stewart Organization, Inc. v. Ricoh Corp. o The D. Ct. must determine whether the application of fed judge-made law would disserve the two twin aims of the Erie rule o If it would the D. Ct. should apply state law Enforcement of valid forum-selection clauses, bargained for by the parties, protects their expectations and furthers vital interests of the justice system Stewart Organization, Inc. v. Ricoh Corp. Kennedy Concurrence o The authority of Fed Cts to assess these clauses under 1404(a) should be exercised so that a valid forum-selection clause is given controlling weight in all but the most exceptional cases Proper test Twin-aim outcome oriented test Gasperini v. Center for Humanities, Inc. B/c there was no FR addressing judicial review of jury awards o Outcome determinative in this sense Would application of the standard/test have so important an effect upon the fortunes of one or both of the litigants that failure to apply it would unfairly discriminate against citizens of the forum state or be likely to cause a P to choose the federal court? From FN 7 of Hanna NYs check on excessive jury awards implicates the twin aims of Erie Gasperini v. Center for Humanities, Inc. o Just as the Erie principle precludes a federal court from giving a state-created claim longer life than it would have had in state court, a litigant cannot have

a significantly larger recovery in federal court than would have been tolerated in state court o Forum shopping lawyers will forum-shop based on this selection of review of jury damage awards o Inconsistent in the exact same case you might get substantially different damage awards depending on which court you filed in In Byrds discussion of the 7th Amendment the court faced a one or the other choice trial by judge in state court or trial by jury in federal practice. In this case a choice of that order is not required Gasperini v. Center for Humanities, Inc. o NYs dominant interest can be respected w/out disrupting the Fed system if the D. Ct. applies the States deviates materially standard in line w/NY case law evolving under CPLR Section 5501(c) 1st point in time o COA review must be guided by the NY standard but they should review for abuse of discretion (as is the practice in Fed Cts, rather than the de novo standard called for in the NY statute) 2nd point in time 7th Amendment has a clause prohibiting reexamination of facts determined by juries influence SCALIA DISSENT says NO COA REVIEW, NY says de novo G picks the middle ground and rejects the history as being totally binding/controlling here o She settles on Fed Standard because of the influence of the 7th Amendment and o Institutional concerns about whether the COA can really add value to the trial courts finding by reviewing it at a higher standard The trial court has the evidence in front of them better understanding of the case/facts than the COA which only has the record If the COA must spend a month reviewing damage awards it may be institutionally undesirable and excessively resource-consuming Back to Top Guaranty Trust Co. v. York (US 1945) P brought a diversity suit against the D on allegations that the D had breached its fiduciary duties. Relief for this was governed by equitable principles and the question was whether the NY state statute of limitations should apply (thereby barring the action). Two laws: NY state statute of limitations (bars action) or flexible laches doctrine (does not bar action). This laches doctrine is a federal made rule. Court picks state statute. Erie left some issues unresolved: does Erie demand that state law trump federal equity provision in federal diversity cases? RFD mentions acts of congress. Does Erie only apply to civil actions? Court (Frankfurter)

After Erie, Fed Cts do not have the power to deny substantive rights created by state law or to create substantive rights denied by state law o This does not mean that every equitable remedy available in a state court must be available in a diversity suit or conversely, that a fed ct may not afford an equitable remedy not available in state court. o States cannot define the remedies a federal court can give simply because a fed ct in diversity is an alternate tribunal to the states courts The question here though is whether a state-created rights statute of limitations is so fundamental to the states law that it cannot be ignored by a federal court whether is a right of substance or a right of procedure Since a Fed Ct adjudicating a state-created right solely because of diversity jurisdiction is, in effect, only another court of the state o It cannot afford recovery if the right to recover is made unavailable by the state, not can it substantially affect enforcement of the right as given by the state The question of whether a state law is one of substance thus turns on whether it would significantly affect the course of litigation in the Fed Ct if a law were disregarded which would control in a state court o Goal of Erie was to ensure that the outcome in a Fed Ct would be substantially the same, so far as legal rules are concerned, as in state court o Not something to be mired in terminological niceties Thus a statute which would completely bar recovery in a suit if brought in a state court bears vitally, not formally or negligibly, on a state-created right and must be applied by a Fed Ct

Dissent Rutledge In this borderland between procedural and substantive rights that extension of Erie should be most cautious While these words are not talismanic they have come to designate in a broad way large/distinctive legal domains Additional Notes Frankfurter Talks a lot about the difference between law and equity o Frankfurter was in law school 100 years ago o The difference between law and equity then had enormous consequences o This difference is not terribly profound/important today Difference between substance and procedure is pretty factually-dependant and context-dependant trying to cabin things as substance or procedure doesnt get you anywhere Relevant q whether the rules of the state or federal will significantly affect the outcome of the litigation o Whether you are in federal court or state court you should get the same outcome no matter what Gives the outcome determinative test for when to apply state law/rules o Fed Cts should be humble and track the rules that state governments provide

o As a consequence there shouldnt be substantially divergent outcomes in state v. federal court at least not based on different rules o Catch phrase is outcome determinacy if the court selection was outcome determinative then the state rule should apply This is an extraordinarily pro-state rule at some point any rule can be outcome-determinative o Everything ultimately is potentially going to fall in this category time limits for return of service, etc. Outcome determinative test has not withstood the test of time o Similar to Marshall in Piper it is always going to affect the outcome somewhat and is outcome determinative on some level or people wouldnt fight about it o Every procedural difference is important Very much extends the Erie doctrine. Erie required the lower federal court to apply the state duty of care because neither the federal courts nor Congress had constitutional authority to create rules of tort law. But here there was federal authority to create a separate rule for the federal courtsCongress has the power to establish lower courts (Article III) and to make laws necessary and proper for exercising that power. Article I, Section 8. Thus there is constitutional authority to make federal procedural rules even for diversity cases. o The Court here is much less focused on the Constitution and much more concerned with making state and federal diversity cases uniform. o There seems to be little less of the FRCP. See Ragan v. Merchants Transfer & Warehouse Co This decision would mean death for uniform federal ruleswhy? Federal diversity court would have to compare FRCP to state courtsometimes conflicts, sometimes doesnt but winner will always be state law. So for example, Californias statute of limitations may be exactly the same as the FRCP but Alabamas might be different. FRCP trumps in the first case (because it is the same as the state law) but fails in the second (because the state law is different and the state law trumps).

Back to Top Byrd v. Blue Ridge Rural Electric Cooperative, Inc. (US 1958) P is a worker in SC who was injured. Under SC state law he would be an employee of the D for workmans comp and tort purposes. Question was w/t the jury (as fed practice require) or the judge (as the SC Workmans Comp statute required) determined factually whether he should be an employee or not. State law left the q to the judge. Practice in federal court was to send issues to the jury. Court (Brennan) The choice between a jury and a judge could be outcome determinative at least the parties think so because that is what they are fighting about.

Erie determined that Fed Cts in diversity cases must respect the definition of statecreated rights/obligations by the state courts when the choice is outcome determinative. But the Court seems to be focused on the 7th Amendment the court doesnt say it controls but doesnt like the outcome determinative test (either proves too much or leaves to too much uncertainty) Brennan expresses courts adherence to Erie then looks at the states reason for using a judge rather than a jury in making this determination o He says this is a happenstance it evolved this way without great consideration o There is nothing to suggest that this approach is an integral part of the special relationship created by the state statute o Appears to be just a form and mode of enforcing just the immunity against ordinary court suits for the employer in a no-fault situation o This is now a balancing testsnot outcome determinative.

Back to Top Hanna v. Plumer (US 1965) Service of process was made in accordance with FRCP 4d1 (service on a spouse is okay) which is less rigorous than that MA rule regarding service (in-hand personal service is necessary) in this situation. Which governs? Three tests on the table: Swift test: state statute could apply because this is a statute, not state made common law. York outcome determinative test: state statute would definitely be used. Byrd balancing test: really care about the executor getting service so probably would use state statute too. Hanna has a new test: look at the reasoning of Eriepreoccupied with deter strategic gaming of the forum system and also a desire to promote uniformity of substantial issues. Hanna also concerns a FRCP and a Rules Enabling Act. [Dictaeven if there was no FRCP we might still use federal law] Does the FRCP comply with 2072(a) & (b)? Does it comply with the constitution (Article III, Article I, Necessary & Proper Clause?) Court (Warren) Adoption of Rule 4d1 neither exceed Congressional mandate nor transgressed constitutional bounds that rule is therefore the standard to be applied by Fed Cts. Constitutional test must be whether a rule really regulates procedure (if so, Fed governs) or whether it is integral to state created rights and duties in the substantive law (where State governs) Erie rule is rooted in

o 1) the realization that it would be unfair for the character/result of litigation to differ because suit was brought in Fed rather than state court o 2) Reaction to practice of forum-shopping which emerged following Swift Outcome determination test cannot be read w/out reference to these twin aims in this case all Rule 4d1 does is dictate that litigation will proceed because service was adequate o This is only outcome determinative in the sense that any procedural rule is o Though choice of Fed or state will have a marked effect on outcome Difference between the two rules would be of little relevance in forum selection o Mode of service is similarly not sufficiently substantial to raise the sort of EP problems to which Erie alluded More fundamental issue here Erie has never been invoked to void an affirmative federal rule o Holding was not that fed rule must be displaced, rather it was that if there was no Federal Rule governing the issue then state law should be used Here the court has been affirmatively instructed to apply the Fed Rule and can only decline to do so if the rule goes beyond Congress power or the constitution o This rule does not go beyond Fed power because constitutional power to create a Fed court system carries w/it Congressional power to make rules governing the practice/pleading in those courts o Shaping purpose of FRCP is to bring about uniformity in Federal adjudication by getting away from local rules this should govern o Erie casts no doubt on the power of Congress to prescribe procedural rules for Fed Courts even though some of those rules will inevitably differ from comparable state rules

Concurring (Harlan) Erie was about more than forum shopping and avoidance of inequitable administration of laws o It recognized there should not be two conflicting systems of law controlling the primary activity of citizens because alternative governing authority gives rise to uncertainty in planning ones affairs In turning from the outcome test to the forum-shopping rationale the court oversimplifies things o Forum-shopping proves too much since litigants will choose Fed Cts due to their procedural preference for Fed adjudication Real question is w/t the choice of rule will substantially affect the primary decisions of conduct which the constitution leaves to state determination o If so, then the state rule prevails regardless of conflicting federal commands If the Fed Rule had provided a substantially less effective means for dealing with the suit in question then the state rule should have prevailed o This rule does not do that so the FRCP should prevail Additional Notes Fight is about which rules will govern concerning service of process

o Specifics of that rule are different now (42 years later) than they were in early 60s at time service was made on Ds wife in accordance with FRCP 4 o FR allowed the other side to serve process on the litigants spouse at his/her place of abode o Hanna held that the state rule applied This is the first case where were are discussing an FRCP o Court starts out saying FRCP 4 is consistent with and ok under the Rules Enabling Act o If it does meet the REA criteria then it is going to be constitutionally permissible Constitutional because of the combination of Congress power under Article III coupled with the Necessary and Proper Clause comes back to Justice Reed o Article III allows Congress to regulate the Fed Cts and REA is necessary and proper to achieve that Hanna the REA and FRCP govern even if they are outcome determinative o You cannot be a York absolutist after Hanna o We are not saying that applying the FRCP will never matter, but the fact that we are applying rules of procedure means that it can be a rule which does not affect a substantive right even though it still has consequences o D in lower court (executor) argued that York operated as a check on the rules of civil procedure Warren says this outcome determinative test is potentially problematic and cant be this talisman because anything is outcome determinative then he says we must look at the twin aims of Erie what are these important o 1 Discouragement of forum shopping o 2 Preventing inequitable administration of the laws Non-substantial or trivial variations in laws are not going to implicate these concerns o FRCP are not going to unduly cause people to forum shop or move from one court to another This is not going to promote the inequitable administration of the laws o Byrd balancing is only relevant inasmuch as we look at Warrens twin aims (Gasperini was the end of Byrd) All this is Hanna DICTA (truly dicta) though because the case does not rely on this reasoning this is very important dicta o If an FR is on point then what is the proper analysis you just go back to the question of Federal Authority We first have to determine whether FRCP applies, then we have to determine the validity of that FRCP by looking at w/t the SC and Congress unanimously erred in their prima facie determination that this was a procedural rule How do we look at ties/vagaries in this area? o If it could possibly be substantive or procedural and Congress made the assessment through FR that this is a procedural rule then that tie goes in favor of the validity of the rule/statute under the rules enabling act o When something could rationally be considered substantive or procedural and fairly applies then it is ok

Once you decide FRCP applies then you are not in an Erie setting you are just trying to determine whether it is constitutional or not

Harlan Concurrence There are some powers the state has and the federal government cannot trump it (majority asks the opposite questionwhat power does the federal government have?) Erie was not just about forum shopping and inequitable administration of the law; Harlan sees Erie as a cornerstone of Federalism he was a big proponent/advocate of the states as laboratories of democracy Federalism promoted/facilitated that role o Doesnt think there are different tests. o Erie is constitutional; Constitution controls everything; we should ask : Will it substantially affect the way that members of society structure their affairs? (opposite premise because starts from the state and works out and the majority works from the federal government and works down) This reflects a basic disagreement about who should govern btwn/ state and federal govt Warren massively expands federal govt to the detriment of the states powers these disputes are about the federalism principles. Hannah notes: In the Swift and Erie world, the question was whether there was a state law (Rules of Decision Act). York/Byrd: federal created rule outcome determinative; fed/state interest balancing tests. Hannah: FRCP v. state rule two questions: (1) is the FRCP consistent with the Rules Enabling Act (A. practice/procedure of the SC. B. Cant abridge, enlarge, or modify substantive rights); (2) is it constitutional (Article III + Necessary & Proper Clause) Federal rule will more likely to pass under FRCP analysis (Hannah) than York/Byrd. Underlying this is how to think of federalism concerns federal government has the power to decide these cases. Hannah does say something about York/Byrd hypothetically imagines no FRCP, might still apply the federal rule over the MA rule . If federal rule and state rule does not come into conflict then look at twin-Erie test forum shopping/inequitable administration of law. ** Court ignores the reason for having the state rule and instead uses forum shopping/inequitable administration analysis (footnote 7). Seems to wipe out Byrd. Has the effect of favoring application of federal rule over state rule. What is the source of constitutionality for the FRCP? Article III & the Necessary & Proper Clause. What is the test for authorization? The Rules Enabling Act is broader

than Byrd/York but less broad than constitutional authority to do so. (Constitution > Rules Enabling Act > Byrd/York) Rules Enabling Act = Any rule that is arguably procedural (could be substantive too could be overlap). Back to Top Walker v. Armco Steel Corp. (US 1980) The question is what determines when the statute of limitations for a tort action is tolled. The states law states that a litigant must filed their suit before it tolls then serve the D with process within 60 days of that. FRCP 3 says the suit commences when it is filed. What are the parties fighting about? Federal rule of civil procedure against state law. But the court doesnt conclude that the federal rule is unconstitutional or abridges/enlarges/modifies (Hannah 2). The court doesnt run this analysis because the preliminary question is whether the federal rule is in direct conflict with the state law. Where do we get when the time tolls if it was a federal question case? Either make up the rule or say it is FRCP 3. Footnote 11 & 12 says that they arent going to address the question. Why is the court working so hard to say that the federal rule doesnt apply? Harlans federalism concerns again. This is part of the state policies. So maybe we do want to take into account some state policy reasons when we are deciding whether the state law and federal law directly conflict. Court (Marshall) This is controlled by Ragan in which the SC held that state statutes of limitations were substantive and governed petitioner wants the court to overturn Hanna held that Erie doctrine was not the right way to think about the FRCP o It has never been invoked to void a Federal Rule o Where one is applicable the test would be whether it was within the scope of the Enabling Act and the constitution Hanna only applies if there is a direct collision between the Federal Rule and the state law o Here the FR is not as broad as petitioner urges and does not touch on the issue of SOLs It does not say that it is meant to affect the tolling period for SOLs o Since there is no direct conflict between the FR and state law, the Hanna analysis does not apply Additional Notes Issue here is whether in a diversity case the Fed Ct should follow state law or FRCP 3 in determining when an action is commenced for purposes of tolling the state SOL Under OK SOL they are supposed to be served w/in two years

o But if complaint is filed w/in two years then you get another sixty days to actually serve process o Marshall finds that the action is time-barred because under state law the SOL has tolled Looks at Ragan (which held SOLs were substantive and part of the state causes of action) Why doesnt Hanna apply here? o Because the state SOL was outside the scope of the rule The H analysis is proper only when there is a direct collision between the federal rule and state law H dealt w/an unavoidable clash b/t FRCP 4 and the states in-hand service requirement o Marshall says there is no reason to believe that FRCP 3 was intended to toll a state SOL much less that it was intended to displace the state tolling rules for SOL purposes In contrast the OK statute does speak to the question at hand o This is part of OKs way of dealing with the SOL o You only get the 60 day window o There is no time conflict between R3 and the OK statute What did Marshall say about the Hanna twin-aims analysis? o In this particular case there were not forum shopping problems o But there was a potential problem with the inequitable administration of laws There is no reason why an action indisputably time-barred in state court should be able to proceed to judgment in Fed Ct simply because of diversity between the parties Court reserves the issue of whether FRCP 3 will govern tolling in Fed Q cases

Back to Top Burlington Northern R. Co. v. Woods (US 1987) P in lower court won a jury verdict in a PI action tried in the AL D. Ct. COA assessed the penalty prescribed by AL law for all unsuccessful appeals of money judgments (10% of the damages). D objects that under FRAP 38 penalties were appropriate only if, in the judgment of the appellate court, the appeal was frivolous. Court (Marshall) FRAP 38s discretionary mode of operation unmistakably conflicts with the mandatory provision of Alabamas affirmance penalty statute o Moreover the purposes underlying the Rule are sufficiently coextensive with the asserted purposes of the AL statute to indicate that the Rule occupies the statutes field of operation so as to preclude its application in Fed diversity actions FRCP regulates matters which can be reasonably classified as procedural thereby satisfying the constitutional standard for validity

Class Notes Marshall holds that FR 38 controls in this case First step in resolving these conflicts between FRs and state laws? o Determining whether the FR is sufficiently broad to cause a direct collision with the state law, thereby leaving no room for operation of the state law FRCP 38 is in direct conflict w/the AL state rule o The Fed Rule adopts a discretionary case-by-case approach to assessing whether a penalty is appropriate whereas w/the AL state rule, if you lose you pay W/else is fundamentally different? o The penalty in AL law is always 10% and is inflexible in amount under R 38 the amount of the penalty is also supposed to be discretionary o 10% is a lot it is very rare in a federal setting to award damages this high for an appeal o Fed R is discretionary about both whether a fine will be applied and also about how much it will be If the Fed Statute speaks to the question at hand, then the only question is whether it is constitutional or not back to the Warren arguably procedural test from Hanna Back to Top Stewart Organization, Inc. v. Ricoh Corp. (US 1988) AL corporation had an agreement with a national business located primarily in NJ to market their product. The K had a forum selection clause stating everything would be litigated in SDNY. AL corporation sued in AL D Ct. under diversity NJ company sought to remove to SDNY. AL Ct. applied AL law that forum selection clauses are disfavored and struck it down. 11th Cir reverse concluded that venue questions in diversity actions are governed by federal law. The law of the state is to hate the forum selection clause. The federal law is venue selection provision. Apply federal law (1404) here is what is weird there is nothing in 1404 about forum selection clauses so why not say they dont conflict? Reads the federal law very broadly but why not read it narrowly like in Walker? Court (Marshall) This is simply a question of Fed Statutory interpretation assessing whether it is sufficiently broad to control the issue before the court. o If the D. Ct. determines a federal statute covers the point in dispute, it proceeds to inquire whether the statute represents a valid exercise of Congress authority under the constitution If the law as applied is consistent w/the constitution that is the end of the inquiry o D. Ct. sitting in diversity must apply a federal statute that controls the issue before the court and that represents a valid exercise of Congress constitutional powers o Direct collision language just means the Fed Statute must be broad enough to cover the issue before the D. Ct.

If no Fed Statute covers the contended point o The D. Ct. must determine whether the application of fed judge-made law would disserve the two twin aims of the Erie rule o If it would the D. Ct. should apply state law Section 1404(a) is intended to place discretion in the D. Ct. to adjudicate motions for transfer according to an individualized determination o Flexible and individualized analysis Congress prescribed encompasses consideration of the parties private expression of their venue preferences o With two choices in the field of operation, the instructions of Congress are supreme This power falls comfortably within Congressional power under Article III augmented by the Necessary and Proper Clause

Concurring (Kennedy) Enforcement of valid forum-selection clauses, bargained for by the parties, protects their expectations and furthers vital interests of the justice system The authority of Fed Cts to assess these clauses under 1404(a) should be exercised so that a valid forum-selection clause is given controlling weight in all but the most exceptional cases Dissent (Scalia) The language of 1404(a) does not apply here o That statute looks forward with reference to the convenience of the parties and witnesses in the interest of justice o Requires consideration of things in the future when the case will be tried o This decision inappropriately imports a retrospective element Federal Courts are not empowered to make common law on the validity of forum-selection clauses in the absence of statutory authorization o They only have the authority to make procedural rules governing the practice before them Under the twin aims test, state law controls the question of the validity of a forum-selection clause between the parties o 11th Cir rule encourages forum shopping venue is a hugely important matter o It also fails part two by creating an inequitable administration of our laws Additional Notes Ricoh moves to remove to SDNY D. Ct. denies it but not in an orthodox 1404(a) fashion o They apply AL which looks unfavorably on forum selection clauses This is the backdrop behind Erie this is what it potentially allows o Forum-selection clauses are typically uncontroversial but AL doesnt like them or think they should be afforded substantial weight Justice Marshall who has written this entire line of cases first emphasizes at the outset that this is not a relatively unguided Erie case

o Erie doctrine involves situation where you dont have the focus effect of a positive rule of law which comes from the process set up for the federal rules of evidence/civil procedure or, here, an ordinary statute 1404(a) When the federal law sought to be applied is a federal statute the first question we have to look at is whether the statute covers the point in question o Prior language discussed direct conflicts, primary thrust, etc The thinking was that you previously had to have an irreconcilable conflict/direct clash o Whether the statute covers the issue before us is a fairly straightforward statutory-interpretation question If it covers the situation we come to the question of w/t that statute represents a valid exercise of congressional authority under the constitution o Comes back to the question of whether it is substantive or procedural o If it is arguably procedural then it is ok Hanna How do we evaluate judge-made rules? o You must consider their applicability under the twin-aims of Erie 1404(a) is determined to speak to the issue at hand o There is fundamentally a different sort of look under 1404(a) to evaluate forum selection clause more flexibly looking for coercion, etc. This case is probably not one where you have this sort of absolute clash b/t ALs approach and 1404(a) o 1404(a) would just look at that forum selection clause, just more flexibly o Marshall says that approach speaks to Congress expression of its desire for Fed Law this is enough to control Scalia Scalia talks about this retrospective element doesnt believe 1404a speaks to the question at hand o He does not believe Fed Cts can fashion a judge-made rule to govern this question consistent with the twin aims of Erie o He sees this as a question of the validity of a contractual term That said, 1404a pretty clearly speaks to this issue Something useful here application of the twin aims test o What does it mean in terms of the inequitable administration of justice/laws o He is saying the forum-selection analysis is a hugely important matter encourages forum shopping Inequitable administration point gets a little fuzzy (though he thinks this creates an inequitable administration of laws) o Certain amount here of importing background understandings o In the SOL case where Marshall says you cannot bring this in state court so why should you be able to bring this in Fed Ct Back to Top Judge made rule (York/Byrd): Outcome determinative & interest balancing

FRCP (Hannah + Walker): A FRCP apply? B. FRCP valid (1. REA; 2. Constitution) Fed. Statute (Stewart): Rule covers and state rule gives way to federal statute. Should we be trying to avoid a conflict? Statute apply? Statute valid? Article III (is this arguably procedural?... same test as in FRCP). Article VI, Section 2 (Supremacy Clause) So hierarchyfederal statute is most often going to win out over the state statute (only way to beat it is say that the federal statute is unconstitutional). Additional constraint for FRCP is the Rules Enabling Act. Fed. Constitution > Federal Statute > FRCP > Judge made rule. Flows from the idea of federal supremacy. Gasperini v. Center for Humanities, Inc. (US 1996) Under law of NY COAs can review the size of jury verdicts and award new trials when the jurys award deviates materially from what would be reasonable compensation. Question here is whether this is trumped by the part of the 7th Amendment stating no fact tried by a jury, shall be otherwise reexamined in any Court of the US, than according to the rules of the common law. NY Statute (5501(c)): deviates materially (Center) Appellate court/trial courts Gasperini argues that the 7th Amendment reconsideration clause demands that the verdict be left aloneshocks the conscience (Fed. trial court) or abuse of discretion (2nd circuit appellate court). 7th Reexamination clause is what is at issue in this case. Facts tried by a jury cannot be reexamined but the court has interpreted the reexamination clause differently and has held that despite the language of the 7th amendment there is at least the abuse of discretion standard (not a fact question but a legal question). In this case there is some review available in the federal courts cannot have expansive review in the federal courts Is there a federal statute? Nope. What about a FRCP? Rule 59? If this was a federal question case then you would turn to Rule 59. Motion for new trial because there was something wrong with the jury verdict one common ground is that the jury verdict is excessive. But Ginsburg says what is excessive has to be grounded in some legal standard in this case it is grounded in state law (the NY law at hand) but where would it come from in federal law? (Cox: Has a phony quality like in Walker regarding the statutory interpretation when it comes to think of this case as a federal question jurisdiction). Federal standard or state law There is no federal common law but this was an over statement they obviously have some powerArticle III has inherent power to create some federal standards.

Federal appellate court uses abuse of discretion/ trial court uses shock the conscience shocks the conscience deviates materially. There is a federal interest in having a uniform standard. Doesnt really apply forum shopping/inequitable administration seems much more focused on balancing test. After this test, we dont know if outcome determination (forum shopping + inequitable administration) or Byrd balancing test will apply when considering judge made rules. Why is Scalia so angry? He is a 7th Amendment absolutist. He loves juries. Strong federal interest. Says the constitution is really important and FRCP is controlling. This is about what rule federalism playsScalia wants the federal gov standard to control. Court (Ginsburg) Proper test Twin-aim outcome oriented test o Outcome in this sense Would application of the standard/test have so important an effect upon the fortunes of one or both of the litigants that failure to apply it would unfairly discriminate against citizens of the forum state or be likely to cause a P to choose the federal court? NYs check on excessive jury awards implicates the twin aims of Erie o Just as the Erie principle precludes a federal court from giving a state-created claim longer life than it would have had in state court, a litigant cannot have a significantly larger recovery in federal court than would have been tolerated in state court Appellate review of trial court decisions to set aside jury verdicts for retrial for abuse of discretion is reconcilable with the 7th Amendment as a control necessary and proper to the fair administration of justice In Byrds discussion of the 7th Amendment the court faced a one or the other choice trial by judge in state court or trial by jury in federal practice. In this case a choice of that order is not required o NYs dominant interest can be respected w/out disrupting the Fed system if the D. Ct. applies the States deviates materially standard in line w/NY case law evolving under CPLR Section 5501(c) o COA review must be guided by the NY standard but they should review for abuse of discretion (as is the practice in Fed Cts, rather than the de novo standard called for in the NY statute) G rejects the argument that the 7th Amendment precludes her opinion for two reasons o 1 Reason going to her role/majoritys view about the weight history is afforded in constitutional analysis She concedes there was a time when the 7th Amendment would not have allowed this H/e it has been understood for a long time in lower courts, scholarship, dicta, etc. that there can be review of lower court fact-finding which is ok under the 7th Amendment

History can include things after 1793 later history shows some review of fact-finding is ok o 2 The COA is not doing fact-finding here this is just legal review of the lower courts legal determination of whether or not these damages were excessive That said, it is not wantonly unconstitutional to engage in some factfinding at the COA level To the extent to which the COA is looking to see whether or not there is evidence of something (looking at transcripts, etc.) like willful/wanton disregard by the D that starts to look like fact finding so while Gs point is useful it does not cover the entire spectrum Dissent Stevens Byrd has no bearing on this case it had nothing to do with the second clause of the 7th Amendment that amendment in no way commands COAs review D. Ct.s applications of state substantive law for abuse of discretion While the majoritys standard of review is wrong, Stevens agrees that state substantive law applies in damage-control Dissent Scalia At CL, review of judgments was had only on writ of error and was limited to questions of law because appeals from damage award motions are questions of fact this plainly bars COAs from reexamining D. Ct.s findings The COA can only review D. Ct. damage determinations by reexamining the facts the Court is relying solely on agreement among the COAs that they have this power no authority for this proposition since it is a factual inquiry prohibited at the appellate level This is not a substantive law anyway the analogy between this discretion proffering rule and a statutory cap on damages is wrong o Absolutely fundamental distinction between a rule of law such as that, ordinarily imposed upon the jury in trial courts instructions and a rule of review, which simply determines how closely the jury verdict will be scrutinized for compliance with the instructions o Court here commits the Erie mistake of regarding whatever changes the outcome as substantive state courts do not get to control the allocation of fact-finding power to the jury simply because that is outcome determinative o What seems far more likely to produce forum shopping is the consistent difference between state and federal appellate standards which the SC leaves untouched Under the courts view a state rule directing courts to determine that an award is excessive or inadequate if it deviates in any degree from the proper measure of compensation would have to be applied in federal courts, effectively requiring federal judges to determine the amount of damages de novo taking the matter away from the jury entirely Not even an Erie question because the Fed Gov has spoken FRCP 59 new trial may be grantedfor any of the reasons for which new trials have heretofore

been granted in actions at law in the courts of the United States undeniably a federal standard o FRCP 59 is sufficiently broad to cause a direct collision with the state law or, implicitly, to control the issue before the court no choice but to apply the FR Additional Notes 1st issue SC deals with whether or not this NY rule was procedural or substantive o It could be viewed as both substantive and procedural o Procedural in that it allocates responsibility to the COA in how they review cases Gives a different standard o Substantive in that it can seriously affect a judgment It is substantive the whole reason people are having this debate is because there was an idea that it would reduce the level of jury awards in NY from the level at which they had been She implicitly rejects that this is just a Rule 59 issue covered by the FRCP o Addresses this in a footnote only says sure Rule 59 deals w/post-trial review of verdicts but one of the grounds on which we review things in a Rule 59 setting is excessiveness of verdict But there is nothing in the rule which calls for that excessiveness review That is effectively a judge-made rule within the context of Rule 59 which is now in conflict with NY law o Even if Rule 59 is at the heading of the post-trial motion the trial judge has to evaluate excessive through the shock the conscience metric which is itself judge-made and is in conflict with NY statute How does NYs deviates materially standard sort out using these twin aims? o Forum shopping lawyers will forum-shop based on this selection of review of jury damage awards o Inconsistent in the exact same case you might get substantially different damage awards depending on which court you filed in Majority turns to separate question on the standard of appellate review important constitutional provision here o 7th Amendment has a clause prohibiting reexamination of facts determined by juries o Where did 7th Amendment come up before? Byrd v. Blue Ridge where we saw the jury trial right from 1st of 7th amendment o Now we are looking at clause twos reexamination provision o The dissent in Gasperini says this just cannot happen this is what the 7th Amendment is all about and this is unconstitutional for them to think about having review of this at the COA level o Justice Ginsburg rejects this idea this is more, if anything, close to a sort of control/not-controlled type of constitutional argument like Byrd

Ginsburg concedes that at one point people might have considered this as not possible under the 7th Amendment, but there have been various cases addressing this over the years and all the COAs think this is ok so the majority concludes this is ok o NY rule that COA gets in as deeply as trial court would have Middle ground abuse of discretion review of the trial courts award o We are not talking about total reexamination of the facts this is a pretty hands-off approach o It is not directly reviewing the jury decision but rather reexamining the trial courts treatment of that decision o Makes sense because the trial court has the evidence in front of them better understanding of the case/facts than the COA which only has the record o If the COA must spend a month reviewing damage awards it may be institutionally undesirable and excessively resource-consuming

Dissent Scalia Much of the dispute hinged on the role of history in constitutional interpretation o Dissent is saying that at CL there was only COA review through a writ of error writ of error only could deal w/questions of law o For many years everyone understood that the amount of damages awarded by a jury was merely a factual question and the COAs could not review its excessiveness since they could only review legal questions This is why we have a 7th Amendment because we dont want COAs reviewing damage awards This shows the challenges for people who are strong adherents to historical approaches in constitutional analysis o Talking about things in old England which never existed in NY and present a problem in addressing these old realities in the modern world Present purposes consequences of all that is that when looking at q of appellate review, it is just not constitutional to do 7th amendment prohibits this entirely Dissent rejects the idea that this excessiveness review can be turned into a legal question by saying it is policing a boundary drawn in the trial court Scalia takes and applies the line of thinking from the Marshall trilogy what rule does Scalia see as governing things in the trial court? o Rule 59 he says this speaks to the question at hand and does not include the deviates materially standard this means no NY standard in trial context Ginsburg says sure Rule 59 applies but then asks what is the standard? o Rule 59 doesnt speak to that so the old measure is something from federal jurisprudence which implicates an Erie question and means we must go down that path o Dissent thinks this is a Fed Rule and Erie is precluded Back to Top There are areas where Federal CL exists Fed CL might govern rules of timeliness of arbitration in settings of international arbitration

o How you calculate the time at which your clock to make an arbitration demand runs, does Sunday count, etc. o Oftentimes you would have a Fed CL rule to deal w/that limited situation Defenses Products liability suits o If you make certain disclosures as a pharmaceutical manufacturer to the U.S. Army and they say they still want it then you have a GC defense and the soldier cannot sue on the grounds that had they known that disclosure they would never have taken the drugs

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Determining Which States Law Governs

Back to Top State Choice of Law Federal Courts must apply the conflicts-of-laws rules of the state in which they sit in assessing what states law should apply to the conflict Klaxon Co. v. Stentor Electric Mfg. Co. o Not for the federal courts to thwart such local policies by enforcing an independent general law of conflict of laws o District court sitting in diversity applies the state rules of the state in which it sits to ascertain what states law will ultimately be applied Saying you will use choice of law tools of state in which you sit does not mean that you just apply the forum states substantive law You just borrow the choice of law principles of that state Consequence is you dont have Federal CL for choice of law in diversity cases o Choice of law rules are, therefore, substantive rules Critical Identity is the State Originally Filed in Van Dusen v. Barrack (US 1964) D in a diversity suit sought to transfer from PA to MA because MA had more favorable substantive law for their case Court determined the critical identity is between the federal court that decides the case and the courts of the state in which the action was filed o Court speaks of not letting the accident of federal diversity jurisdiction affect the outcome of the lawsuit Van Dusen appears to make it possible for a suit to be filed in federal court in one state then transferred to a different state with the result that the law applied will differ from the law which would have been applied had it initially been filed in the transferee court

When a State Can Apply Own Law Allstate Ins. Co. v. Hague (US 1985) A state can apply its substantive law to a case so long as the state had significant contacts or a significant aggregation of contacts with the parties and the transaction Involves choice of law issues when you have a 1404a transfer o The states law travels with the case o If you file initially in IN and it is transferred to IL o Because it was filed in IN, when the case is transferred the choice of laws set remains IN choice of law principles the transferee court will still apply the same choice of law as when the case was originally filed Effects of that is that you dont see forum-shopping efforts because there are no Ds trying to get 1404a transfers due to choice of law advantages

Summary: 1- There are several discrete doctrines stemming from Erie. Question we are always asking: is there a federal rule that applies in this situation and is valid? If there is, we are done. 2- Fight is over which regime youre in because it leads to a different outcome (AKA are you in federal standard regime, federal law regime, ect.) 3- Question of statutory interpretation/rule interpretationwhen answering that questionkeep in mind different conceptions of federalism. 4- If anything is clear, there is no federal general common law is wrongwrong in the framework we have been discussing because the court will make judge made rules that apply to these cases. Authorized by constitution to make federal law.

Prior Adjudication
Back to Top Four common sense principles animate the doctrine of prior adjudication 1 Claim preclusion: Party normally only gets one chance to litigate a claim o If a party only litigates part of her claim the first time around she risks losing the chance to litigate the rest. o Doesnt require an actual litigation of the issueonly requires that you had a chance to do so and you didnt. 2 Issue Preclusion: A party ordinarily gets only one chance to litigate a factual or legal issue o Once litigated, she cannot ask a second court to decide it differently later o So even if there is a different claim, you cant re-litigate an issue already decided in a prior suit. o Requires an actual litigation of the issue. 3 A party is entitled to at least one full and fair chance to litigate before being precluded 4 Preclusion may be waived unless it is claimed at an early stage of the litigation Res Judicata General term referring to all the ways in which one judgment will have a binding effect on another True res judicata or claim preclusion valid final adjudication of a claim precludes a second action on that claim or part of it o Forecloses any litigation of matters that have never been litigated because of the determination that they should have been advanced in an earlier suit Collateral Estoppel or issue preclusion An issue of fact/law which was litigated and resolved by a final judgment binds the parties in a subsequent action, whether on the same or a different claim o Effect of foreclosing relitigation of matters that have once been decided o Litigants in subsequent litigation can sometimes take advantage of the prior resolution of those issues in subsequent cases Why have this doctrine? Give a defendant a sense of finalityotherwise defendants would not have stability or be able to organize their lives (Hayekian concept of being able to plan). Helps defendants prospectively and also helps third parties who would otherwise deal with defendants. Gives the court who issued the first judgment legitimacy. There is a serious coordination problemwho to pick between the judgments. Saves resources. Additional Notes Prohibition against claim splitting A litigant cant split a lawsuit against a putative D into little pieces and shoot them off at different times related to RJ

When you read about these things you get the sense that courts just dont care about the truth if it has been litigated before that is good enough for them o Judges do care about whether or not truth prevails out but the reality of it is that absolute truth in human affairs is often impossible to know o You are often trying to historically recreate an event using people who were involved in it and are intensely interested in the outcome o So, when the legal system has litigated a matter once and given a clear interest on that matter the general view is that the matter is over and resolved Shortness of life of claims issue here o Allowing someone to keep litigating forever gives a vindictive, rich or irrational person the ability to just keep fighting the same claim again and again o There is a democratic effect of the one-shot system you can fight out the claim once and win and know that you have won it all o When you give finality to the first set of lawsuits it incentivizes people to do their best the first time o With inconsistent judgments there is often no reason to choose one over the other the results may be different and there is no reason to think that one may be more right than another Tends to promote settlements in law Bottom line when a matter is adjudicated it is a big deal Collateral Esoppel/Issue Preclusion Suits related to a particular claim or set of claims can govern/control issues relating to separate claims o Two important differences from RJ o 1 CE can sometimes operate beyond the parties involved in the first case gives it much more potential power than RJ in scope o 2 CE operates much more surgically than RJ RJ is a giant shield against relitigation of a claim CE is more surgical it takes a single issue and resolves it in the subsequent case Dont get this idea about w/t you raised it or not issue for CE has to have actually been adjudicated in the prior case and its resolution has to have been central to the judgment in the prior situation All grounded on idea that everyone gets one bite at the apple everyone gets one shot at their claim, not multiple shots once that is done the entire thing is over

Claim and Defense Preclusion Res Judicata

Back to Top Differences between RJ and CE Res Judicata/Claim Preclusion When you have RJ you are required To have the same parties or parties in privy with them involved RJ must be something that is the same claim/cause of action/nucleus of operative facts If the P wins that claim, the claim merges into a judgment in the Ps favor If the D wins then the Ps claim regarding that nucleus of facts is extinguished and the judgment acts as a bar Effect of that judgment extends b/t those two parties to all issues arising from that claim o It extinguishes all possible claims which could be raised from that factual landscape o Anything that could have been raised at trial For claim preclusion to operate, three elements are required 1 Only judgments that are final, valid, and on the merits have preclusive effect 2 Parties in the subsequent action must be identical to those in the first o One of the most important distinctions between claim preclusion and its sister doctrine, issue preclusion 3 The claim in the second suit must involve matters properly considered included in the first action turns on what the first action decided or should have decided How is RJ different than stare decisis? 1 RJ only applies to two parties involved while stare decisis has broader application than that o SD announces a legal rule 2 RJ applies in any subsequent court while stare decisis is only relevant when the prior judgment was issued by that court or a higher and binding court 3 Stare Decisis is mostly if not entirely about legal principles while RJ is about a set of facts and the claims they give rise to SD is a principle of policy and not mechanical adherence o Required for consistency and regularity in the law essential to rule of law values Caselaw The negligent action constituted by one tort and a single tort can be the basis of only one action Rush v. City of Maple Heights o Combining the two is necessary to prevent multiplicity of suits, burdensome expense, delays to Ps and vexatious litigation against Ds o A P may maintain only one action to enforce his rights existing at the time such action is commenced

It is not ok to make an exception and you cannot use public policy to trump RJ Federated Department Stores v. Moitie o RJ is a public good because it gives people an incentive to litigate their claims to finality That finality is in societys interest and the RJ rule is one of fundamental and substantial justice in public policy and private peace o With some exceptions at the margins, even if a prior decision is wrong it is left undisturbed Two Limited Exceptions to RJ If initial judgment was by a court lacking subject-matter jurisdiction o If it truly lacks SMJ then that judgment is void in its entirety from the beginning If a judgment was obtained by fraud on the court then it does not have RJ effect Back to Top Rush v. City of Maple Heights (OH 1958) Woman was injured in a fall from her motorcycle. She brought an action in the Municipal Court of Cleveland for damage to her personal property. She won that case (up through the SC). She then brought this action in the Court of Common Pleas for personal injuries she incurred in the accident. Her motion to set trial on the issue of damages was granted on the ground that the negligence issue was res judicata due to the prior action. The woman says that she should win because there was issue preclusion against the defendant and that the second case should just be about damages. In reply the defendant says that there is claim preclusion because she should have brought that issue in the first case. Court Old rule (from Vasu v. Kohlers) Injuries to both person and property suffered by the same person as a result of the same wrongful act are infringements of different rights and give rise to distinct causes of action o Recovery/denial of recovery of compensation for damages to the property is no bar to an action subsequently prosecuted for the personal injury o Unless by an adverse judgment in the first action issues are determined against the P which operate as an estoppel against him in the 2nd action o Majority says that Vasu was dicta. Majority Rule The negligent action constituted by one tort and a single tort can be the basis of only one action. o It is not improper to declare in different counts damages to the person and property when both result from the same tort o Combining the two is necessary to prevent multiplicity of suits, burdensome expense, delays to Ps and vexatious litigation against Ds. Majority rule is better whether or not injuries to both person and property resulting from the same wrongful act are to be treated as injuries to separate rights or as

separate items of damage a P may maintain only one action to enforce his rights existing at the time such action is commenced. Concurring Stewart The old rule outlined in Vasu was not essential to the decision of that case it was merely dicta and therefore its persuasive value is lower Dissent Zimmerman Established law should remain undisturbed to ensure the orderly function of the legal system Additional Notes P sued the city for negligent maintenance of the street she was seeking judgment for damages to her personal property (motorcycle) o She wins on that claim She brings a second suit against the city for her personal injuries o City argues that this is has already been litigated and this girl is claim splitting o She cannot split his claim relating to this accident If she had two different accidents she could have two different lawsuits but this is one accident from one set of facts o One set of facts = only one tort court adopts this Rule 13: compulsory counter claimyou want to resolve all the issues at one time. This is derivable from ideas related to preclusion. Even if there is no mandatory claim rule, there is sort of is given preclusion. Third party effects the plaintiff thought based on Vasu she would be able to litigate twice. Zimmerman Dissent focuses on the reliance issues which courts should consider when thinking about changing the law RJ and CE are varying among the states and none of the approaches are meaningfully wrong but this approach to claim splitting is the majority position Claims arent just the specific elements of a cause of action something you might see in double jeopardy context o In civil context it is done on the basis of the same set of facts whether this is the same transaction or series of interrelated transactions as one which has been previously litigated Same transaction or occurrence idea is how courts generally look at it o Dovetails back to the triggering mechanism for compulsory counter-claims o If a D has been sued on a set of facts they have to raise their counter-claims against the P on that set of facts or they are subject to waiver. Back to Top Federated Department Stores, Inc. v. Moitie (US 1981) Respondents were two of seven Ps in a major antitrust suit. The seven Ps were consolidated and then their claim was dismissed. Five Ps appealed to 9th Circuit while the two here refilled in state court. The twos claim was removed to fed ct and dismissed on

res judicata grounds. Then, the five appealed to Ninth where the trial court was reversed in part due to a new SC opinion in the interlude. The two then appealed to the Ninth which held res judicata should preclude their action but there was an exception when the dismissal rested on a case that had been effectively overruled. SC disagreed. Court Grave injustice would not be done here by the application of the principles of res judicata justice is achieved when a complex body of law developed over years is evenly applied o No principle of law/equity sanctions the rejection by a federal court of the salutary principle of res judicata Public policy dictates that there be an end to litigation that those who have contested an issue shall be bound by the result of the contest and that matters once tried shall be considered forever settled as between the parties Res Judicata is more than mere practice/procedure it is a rule of formal/substantial justice Class Notes What does the D. Ct. do w/the seven suits? The D. Ct. dismisses them for failure to allege an antitrust injury to business or property under the antitrust act 7 Ps appeal to the 9th Circuit 9th Circuit remands them for retrial because there is a new SC opinion which could change the outcome These 2 Ps didnt appeal, they tried to re-file in state court the Ds then removed the actions to Fed Ct where they were dismissed due to RJ The 2 then appeal to 9th Circuit again and argue that due to the new SC opinion there should be an exception to RJ doctrine o There should be an exception to RJ when the decision of the trial court was based on law which has subsequently overruled Lots of times in the law D. Cts. make decisions before COAs give a clear rule on the issue if it were an issue of first impression maybe people will have different approaches o But we dont let people wait around until there is a decision from some higher court making the rule clear then try and square off their claims from before with the new rule o All past decisions dont have to be squared with the new rule o If you didnt have RJ you would have to revisit every trial court case and square them up with what the intermediate court said instead of doing that squaring up The outcome which every litigant gets when it ceases litigating the case will stand Back to Top

Issue Preclusion
Back to Top Direct estoppel When the two suits involve the same cause of action Collateral Estoppel When the second suit involves a new claim or cause of action, issue preclusion is sometimes referred to as collateral estoppel

Differences between RJ and CE Justifications for CE Three Main Args Defensive non-mutual CE Offensive non-mutual CE CE is not as strictly applied as RJ When case 1 and case 2 involve the same parties, the party who lost in the first case may be allowed to re-litigate an issue under various circumstances o If, as a matter of law, appellate review was unavailable on the issue in case 1 then you may not see CE apply If the state doesnt allow appeals on a small claim, for example o Even if review was available, if the nature of the proceeding in the court in the first case was informal or expedited you sometimes wont see CE effect given Stuff in traffic court, small claims court, etc. not likely to give CE in some $1 million suit Many civil disputes are resolved through arbitration (cases large and small) If there were altered evidence rights in the arbitration there are often extensive debates about whether it is appropriate to take results of initial arbitration for CE in a judicial setting where the rules are much different o If burden of proof shifts or is materially different CE is unlikely o If the stakes in case 1 are nickel and dime it seems irrational to give preclusive effects to the issues resolved Seven Prerequisites for CE 1 Must be an issue of fact or law o In contrast with an entire case like RJ 2 Must have been actually litigated in case 1 Cromwell v. County of Sac o Need to examine carefully what was actually litigated o Need to establish that the issue at hand was actually disputed and litigated on the merits o If the parties stipulate to something in case 1 they can still litigate that issue in the second case 3 Must have been clearly decided and ESSENTIAL to the cases judgment o To give estoppel effect you have to know the issue was the actual basis of the final judgment below POSSIBLY NOT ENOUGH MORE BELOW

o It must either be apparent on the face of the verdict or you can use extrinsic evidence to find out what the jury held Russell v. Place Extrinsic evidence is typically evidence outside the record of the trial of the proceeding Generally extrinsic evidence is broadly and almost maniacally precluded in subsequent litigation Very difficult, even if criminal defense lawyer, to bring in conversations you had with the jury members or something o If you want to have this potential for estoppel effects you must give interrogatory forms to the jury which ask them to make special findings This is a very discretionary process and sometimes courts are reluctant to give them to the jury There is enough debate/confusion about getting the elements of the instructions right so the judge is often reluctant to let the sides try and draw up their punch-list of key issues o Without those special verdicts it is hard to use issues from a previous case for CE o Case Holding a General Verdict was Good for CE on All Issues Kelley v. Curtis 4 Judgment must have been final, valid and on the merits quality requirement Appeallable? o on the merits requirement does not apply if the issue being precluded is exclusively a procedural issue If all that is true then the resolution of a factual or legal issue in case 1 is conclusive in case 2 IF 5 Case 2 involves the same parties or their privies (mutuality requirement) no longer the law in most places o Can be relevant when there is judicial discretion about w/t or not CE should apply 6 CE is raised not self-executing 7 Applies even if case 2 involves a different claim or suit (but the same issue)

Some courts require STILL MORE before they will allow a party to invoke issue preclusion fewer and fewer courts impose these today (particularly second) 1 That the issue have occupied a HIGH POSITION in the hierarchy of legal rules applied in the first action that it was important 2 Mutuality party invoking preclusion would have been bound by an unfavorable judgment in the first suit Could have CE from CRIMINAL TO CIVIL if the criminal is convicted (that would Estop his civil defense) More Here Caselaw Right, question or fact distinctly directly determined by a court of competent jurisdiction as a basis of recovery cannot be disputed in later suit between the parties or their privies Southern Pacific Railroad Co. v. United States

o Even if the second suit is for a different cause of action, the right, question or fact once determined is taken as conclusively established between the parties or their privie Operates as an estoppel only as to those matters in issue or points actually controverted in trial upon which the finding/verdict was rendered Cromwell v. County of Sac Actually Litigated o Only those points/questions actually litigated/determined act as estoppel in different causes of action o It is not the recovery, but the matter alleged by the party, upon which the recovery proceeds, which creates the estoppel. o Holding the judgment on the invalidity of the bonds stands but the P can still show that he acquired them before maturity and gave value for them These are different bonds they may be of the same series and may be related but there is nothing adjudged in the former action which can preclude the present P from making such proof here The fact that a party may not have shown that he gave value for one bond is not presumptive or conclusive that he didnt give value for another bond/coupon For this estoppel to work it must appear, either on the face of the record or be shown by extrinsic evidence, that the precise question was raised and determined in the former suit Russell v. Place o The record lacks the certainty required for estoppel and does not preclude the Ds from contesting validity of the patent in this suit o Court says there is only estoppel where it is clear what issues were decided in case 1 Case submitted to jury with instruction that if they found either that the D was not negligent or the P was guilty of contributory negligence Kelley v. Curtis (NJ 1954) o The general verdict is considered as determining both grounds in the Ds favor DIFFERENT RULE FROM RUSSELL

Back to Top Southern Pacific Railroad Co. v. United States (Harlan 1897) Right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in later suit between the parties or their privies Even if the second suit is for a different cause of action, the right, question or fact once so determined must, between the parties or their privies, be taken as conclusively established so long as the judgment in the first suit remains unmodified Class Notes Claims are different in Case 1 and case 2 but there are common issues Case 1 Landlord sues tenant for failure to pay rent in 2003 and wins at the end of 2003 tenant pays 2003 and remains in the apt in 2004 but fails to pay 2004 Case 2 LL sues for the 2004 rent. This is not barred by RJ because the debt didnt exist when the judgment was entered in 2003.

o There will be issue preclusion h/e with regard to the issues litigated and decided in case one Back to Top Differences between RJ and CE 1 RJ operates more like an axe than a scalpel bars entire causes of action o CE operates more like a scalpel it bars particular issues and only bars part of the action 2 RJ requires that the parties be the same o Some types of CE do not require this sort of privity 3 Idea of whether it was raised or could have been raised is alien to CE o It not only had to be raised in case 1 but also must have been central to case 1s judgment 4 RJ can only be used defensively while CE can be used offensively in some circumstances o Best served by thinking about both of them but they are different Back to Top Justifications for CE Three Main Args 1 Efficiency concern you dont want to spend resources deciding something twice o CE saves resources overall o Tends to be a little more complicated than you get in the book the resolution of a particular issue might be extremely important to a particular group who will then devote monumental resources to litigation of that issue Thus it is unclear whether it saves resources since tremendous resources are devoted to initial litigation of that issue o However there is value in pushing hard to litigate the issue the first time around If you are a disability rights group suing some random hotel in middle of nowhere, the question of whether some small part of the hotel violates the law might not be very important to the hotel but would be enormously important to the disability rights group for both CE and stare decisis. 2 Saving judicial resources 3 Appearance of justice in the legal system in having consistent results in the legal system o Facially inconsistent results on the same set of facts are not usually viewed as consistent with justice Back to Top Cromwell v. County of Sac (US 1876) Actually Litigated To defeat an action the defendant relied upon the estoppel of a judgment rendered in favor of the county in a prior action brought by one Samuel Smith upon certain earlier

maturing coupons on the same bonds accompanied by proof that P was the owner of the coupons in that action and that action was prosecuted for his sole use/benefit. There is a legal action on 4 $1k bonds. The bonds were issued in 1860 and made payable to the bearer in the City of NY in various years. The D relies on estoppel of a judgment previously rendered in favor of the county in an action brought by someone else on the very same bonds. Proof that Cromwell was the current owner of the bonds in that action and that action was prosecuted on his behalf. 1- The second set of coupons had not matured. 2- Secured transaction law/negotiable instrumentswe want people to trade them around so we dont want suits to preclude trading. What about issue preclusion? The first issue about whether there is fraud has been precluded. But the court didnt make a determination about the second set of coupons. Court (Field) Difference between 1 Effects of a judgment as a bar/estoppel against prosecution of a second action upon the same claim/demand o Judgment, if rendered on the merits, is an absolute bar to a subsequent action o Judgment estops every ground which might have been presented in the first bringing of the claim 2 Its effect as an estoppel in another action between the same parties on a different claim or cause of action o Operates as an estoppel only as to those matters in issue or points controverted upon which the finding/verdict was rendered o Only those points/questions actually litigated/determined act as estoppel in different causes of action It is not the recovery, but the matter alleged by the party, upon which the recovery proceeds, which creates the estoppel. o Precludes parties/privies from contending to the contrary of facts which were found against them or those w they are in privy with Nothing was found in the prior case that the P had not made the sort of proof which he seeks to make here so he is, therefore, not precluded from making it Additional Notes In an estoppel situation you must pay close attention to what issues were litigated and what was actually decided o Idea behind not giving CE effect to something not essential to the judgment is that you dont want to hold people to things not decided on the merits in prior cases o Resolution of one issue doesnt necessarily dictate/influence the resolution of another issue even if they are factually related The P wants to offer evidence in 2nd suit about whether he gave value for the bonds in question in case 2 if so, they will not be void o P wants to show he is a bfp if P cannot show he gave value then he is not a bfp and good holder in course and will not prevail

o D says P failed to adduce that he gave value in case 1 on the bonds at issue in that case o P should be allowed to provide evidence that he paid value for the bonds in this case Holding the judgment on the invalidity of the bonds stands but the P can still show that he acquired them before maturity and gave value for them o These are different bonds they may be of the same series and may be related but there is nothing adjudged in the former action which can preclude the present P from making such proof here o The fact that a party may not have shown that he gave value for one bond is not presumptive or conclusive that he didnt give value for another bond/coupon

Back to Top Russell v. Place (US 1876) Necessarily Decided This arises from a patent dispute. The same patents had been once litigated and the defendants lost the first trial (which was based on the patented products want of novelty in invention and lack of use by the public for more than two years prior to the application for a patent). Ps claim in a second action that Ds are estopped from insisting on any ground going to the validity of the patent which might have been used as a defense in the first action. Court (Field) Judgment of a court of competent jurisdiction, upon a question directly involved in one suit, is conclusive as to that question in another suit between the same parties For this estoppel to work it must appear, either on the face of the record or be shown by extrinsic evidence, that the precise question was raised and determined in the former suit o If there be any uncertainty on this head in the record then the whole subject matter of the action will be at large and open to contention o Unless this uncertainty be removed by extrinsic evidence showing the precise point involved/determined The record of the first action does not disclose the nature of the infringement for which damages were recovered o The record lacks the certainty required for estoppel and does not preclude the Ds from contesting validity of the patent in this suit Class Notes First suit the P sued the D for patent infringement on two bases o 1 Use of fat liquor in the treatment of leather o 2 Use of his process to treat skins with some compound Outcome of trial 1 they found there was infringement but the court didnt say which ground it relied on o There was a general verdict for the P with damages Substance of case 2 There was a case about the validity of the patent (they didnt ask for an injunction in the first lawsuit just damages

o The D has continued in its business activities in a way the P believes infringes on his patent) that the P filed to get an injunction to prevent further violation Defense raised in the first case? o The patent is not novel o The patent has not been used for two years o D wants to litigate the same defenses which it litigated and lost in case 1

Back to Top Civil-Criminal CE Criminal Case Company is acquitted in a criminal case of fraud. Prosecutor has the burden of proof here. SEC comes along seeking civil fines against the officers. Burden of proof is civil standard of preponderance. Corporate officers lawyers try to assert CE against the government relying on the criminal acquittal to show they did not commit fraud (because the P couldnt show they committed fraud beyond a reasonable doubt). o This doesnt work because here was just need preponderance showing by the SEC This is a lower standard than the P carried in case 1 so CE isnt going to work here o There is no way of knowing how much of their case the government proved in case 1 they might have crossed preponderance line but not reasonable doubt Comes up in sentencing proceedings you dont need Beyond Reasonable Doubt in sentencing hearings like you do in convictions o There might be factual questions relevant to the sentencing which are resolved by preponderance of the evidence o Nonetheless you will not see factual resolutions from determinations in a sentencing proceeding given CE effect in subsequent civil proceedings because the rules of evidence are different in the sentencing hearing (even though the burden of proof might otherwise be the same) Could have CE from criminal to civil if the criminal is convicted (that would estop his civil defense) Back to Top

Decline of the Mutuality Doctrine

Back to Top CE is not as strictly applied as RJ When case 1 and case 2 involve the same parties, the party who lost in the first case may be allowed to re-litigate an issue under various circumstances o If, as a matter of law, appellate review was unavailable on the issue in case 1 then you may not see CE applied If the state doesnt allow appeals on a small claim, for example o Even if review was available, if the nature of the proceeding in the court in the first case was informal or expedited you sometimes wont see CE effect given Stuff in traffic court, small claims court, etc. not likely to give CE in some $1 million suit Many civil disputes are resolved through arbitration (cases large and small) If there were altered evidence rights in the arbitration there are often extensive debates about whether it is appropriate to take results of initial arbitration for CE in a judicial setting where the rules are much different o If burden of proof shifts or is materially different CE is unlikely o If the stakes in case 1 are nickel and dime it seems irrational to give preclusive effects to the issues resolved Sixty years ago mutuality was a requirement for the use of CE o Most jurisdictions today dont require it

Two sub-parts Defensive non-mutual CE where you seek to use resolution of an issue in a prior proceeding against the party now suing you as a shield o This is not very controversial today typically permitted, at least as other CE elements are met o Textbook example is Bernhard Offensive non-mutual CE when you seek to use resolution of an issue in a different case to affirmatively seek recovery against one of the prior cases litigants o Ds say when someone else is trying to invoke offensive CE that they should get their day in court against them The D shouldnt have to win every time winning 90 times and losing once shouldnt open the D to CE on the 1 loss Idea is that everyone is entitled to one bite at the apple but if you had your bite and you lost then someone else can preclude you from taking another shot at it o Cuts down on inconsistent judgments, lowers litigation costs, etc o You dont want Ps going down the sideline of Ds trying over and over again

Defensive Non-Mutual CE Many courts have abandoned requirement of mutuality and have confined the requirement of privity to the party against whom CE is asserted o Others have created broad exceptions with same effect Bernhard v. Bank of America Nat. Trust & Sav. Assn Mutuality is not necessary where the liability of the D asserting CE is dependant on or derived from the liability of one who was exonerated in an earlier suit brought by the same P on the same facts Eg. If a servant is sued by a P and the P loses that P cannot turn around and sue the master for the same incident In determining the validity of a plea of RJ there are three pertinent questions Bernhard v. Bank of America Nat. Trust & Sav. Assn o 1 Was the issue decided in the prior adjudication identical to the one presented in the action in question? o 2 Was there a final judgment on the merits? o 3 Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? Shield notion Idea is that if you previously had a chance to litigate something and lost, the 2nd person you sue can put up that shield of your prior loss Bernhard v. Bank of America Nat. Trust & Sav. Assn o Bank is putting up shield that this was already determined to be an authorized gift o This is the adoption of defensive non-mutual CE SC begins to adopt defensive non-mutual CE Blonder-Tongue Laboratories, Inc. v. University of IL Foundation o Broad question of whether it is tenable to afford a litigant more than one full/fair opportunity for judicial resolution of the same issue In any lawsuit where a D, because of mutuality, is forced to present a complete defense to a claim which the P has fully litigated and lost in a prior action there is an arguable misallocation of resources Ds time and money are diverted from alternative uses to relitigation of a decided issue o Assuming the issue was correctly resolved in the first suit, there is reason to be concerned about Ps allocation of resources Permitting repeated litigation of the same issue as long as the supply of unrelated Ds holds out reflects the aura of the gaming table o Litigants who have never appeared in a prior action may not be collaterally estopped without litigating the issue they have never had a chance to present their evidence and arguments on the claim o Authorities have been more willing to permit a D in a second suit to invoke estoppel against a P who lost in an earlier suit than they have been to allow a P in the second suit to use offensively a judgment obtained by a different P in a prior suit against the same D

Possible rationales for SCs Holding o Patent-specific reason o 1 In non-mutual defensive the party had a full/fair chance to litigate it and lost o 2 Judicial economy reduces re-litigation of issues and gives people incentives to bring all their resources to bear in their first lawsuit

Back to Top Offensive Non-Mutual CE This is the most litigated issue o Courts have a substantial amount of discretion here about whether to allow non-mutual offensive CE o Whether it will be applied tends to be very fact-specific and assessed with the facially vague fairness standard Several reasons to treat offensive and defensive collateral estoppel differently Parklane Hosiery Co. v. Shore Two Cases Filed SEC and Regular (discussion of two case issues following) 1 Offensive use does not promote judicial economy in the same manner defensive does Parklane Hosiery Co. v. Shore o Offensive creates opposite incentive Ps can adopt wait and see attitude, hoping that the first action by another P will result in a favorable judgment o Here this factor isnt disabling to the Ps because they couldnt join in the SEC action private litigants are not allowed to join these regulatory enforcement actions 2 Unfair to the D Parklane Hoisery Co. v. Shore o 1 If D was sued for little in the first action and future suits were unforeseeable, he may have little incentive to defend vigorously o 2 If judgment relied on as a basis for CE is itself inconsistent with one or more previous judgments in favor of the D If there have been 25 lawsuits and D has won 24 you have to be thoughtful about whether that one outlier can fairly be applied against that litigant in an offensive non-mutual CE way o Second action might provide D procedural opportunities unavailable in the first action which could readily cause a different result Preferable approach is not to preclude offensive CE, but to grant trial courts broad discretion in assessing when it should be applied Parklane Hoisery Co. v. Shore o General rule In cases where a P could easily have joined in the earlier action or where, for the above reason or others, offensive CE would be unfair to a D, trial judge should not allow offensive CE Use of CE in this way would not violate Ds 7th Amendment right to a jury trial Parklane Hoisery Co. v. Shore

o Ds argue that 7th Amendment is assessed in reference to CL in 1791 and because mutuality of obligation was required for CE in 1791, CE cannot be constitutionally applied here o No persuasive reason why meaning of 7th Amendment should depend on whether or not mutuality of parties exists o Many procedural devices adopted since 1791 that have diminished the jurys historic domain have been found consistent with the 7th Amendment Rehnquist dissent questioning Stewarts application of the Seventh Amendment in Case Parklane Hoisery Co. v. Shore You are not bound by a judgment if you are not a represented party (like in a class action) to because you didnt have your one shot to litigate the issue Martin v. Wilks

Back to Top Bernhard v. Bank of America Nat. Trust & Sav. Assn (CA SC 1942) P was the administratrix of a will and is suing BOA for unauthorized prior transfer of funds by the testatrix. There was a prior action by a prior administrator on the same issue against the bank which previously controlled the account decided in favor of that bank. The question is whether BOA can rely on this judgment here even though it was not a party to or in privity with the first D and would not have been mutually bound had the first D lost the first claim. In the first case there is an old woman named Sather living with the Cook family in San Dimas. Sather and Cook transfer all the money in Sathers accounts into ones controlled by Mr. Cook on Sathers behalf. When Sather dies all the money is with Cook. When S dies beneficiaries of her sue Mr. Cook and say he stole the money. Outcome in case 1 They conclude the transfer was a gift so the beneficiaries cannot collect money (suit against Mr. Cook) Court (Traynor) Under the requirement of privity only parties to the former judgment or their privies may take advantage of it o Party is one who is directly interested in the subject matter and had a right to make defense, or control the proceeding and to appeal from the judgment o Privy is one who, after rendition of the judgment, has acquired an interest in the subject matter affected by the judgment through one of the parties, as by inheritance, succession or purchase o Estoppel is mutual if the one taking advantage of the earlier adjudication would have been bound by it had it gone against him Due process of law forbids the assertion of res judicata against a party unless he was bound by the earlier litigation in which the matter was decided o No compelling reason, however, for requiring that the party asserting the plea of res judicata must have been a party, or in privity with a party, to the earlier litigation No satisfactory reason has been advanced for the requirement of mutuality

o No reason why a party not bound by the previous action should be precluded from using it as res judicata against a party who was bound by it o Many courts have abandoned requirement of mutuality and have confined the requirement of privity to the party against whom res judicata is asserted o Others have created broad exception with same effect That the two are not necessary where the liability of the D asserting RJ is dependant on or derived from the liability of one who was exonerated in an earlier suit brought by the same P on the same facts Eg. If a servant is sued by a P and the P loses that P cannot turn around and sue the master for the same incident In determining the validity of a plea of RJ there are three pertinent questions o 1 Was the issue decided in the prior adjudication identical to the one presented in the action in question? o 2 Was there a final judgment on the merits? o 3 Ws the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? This plaintiff represents the same persons that were represented in the earlier hearing on the executors account so this plea of res judicata is appropriate

Additional Notes Now she is not suing Mr. Cook but rather is suing BOA on theory that the bank should never have transferred the money on the theory that it was not a gift Bank defends on various grounds o Including RJ (but it is really CE here because the parties are different) o They want to rely on probate courts determination against Bernhard that Cook actually owned the money CA SC does not require mutuality draws a distinction between when party can assert RJ (CE really) o Sword/Shield notion Idea is that if you previously had a chance to litigate something and lost, the 2nd person coming along when you sue them can put up that shield Bank is putting up shield that this was already determined to be an authorized gift o This is the adoption of defensive non-mutual CE Back to Top Blonder-Tongue Laboratories, Inc. v. University of IL Foundation (US 1971) Patent case SC begins to eliminate the mutuality requirement for the federal system. Court Most cases connect erosion of the mutuality requirement to the goal of limiting relitigation of issues where that can be achieved without compromising fairness in particular cases

Broader question is whether it is tenable to afford a litigant more than one full/fair opportunity for judicial resolution of the same issue o In any lawsuit where a D, because of mutuality, is forced to present a complete defense to a claim which the P has fully litigated and lost in a prior action there is an arguable misallocation of resources Ds time and money are diverted from alternative uses to relitigation of a decided issue o Still assuming the issue was correctly resolved in the first suit, there is reason to be concerned about Ps allocation of resources Permitting repeated litigation of the same issue as long as the supply of unrelated Ds holds out reflects the aura of the gaming table Litigants who have never appeared in a prior action may not be collaterally estopped without litigating the issue they have never had a chance to present their evidence and arguments on the claim o Authorities have been more willing to permit a D in a second suit to invoke estoppel against a P who lost in an earlier suit than they have been to allow a P in the second suit to use offensively a judgment obtained by a different P in a prior suit against the same D Even if the amount of time saved by eliminating mutuality in patent suits is de minimis, it is clear that it will save some judicial time if even a few relatively lengthy patent suits may be fairly disposed of on pleas of estoppel

Additional Notes This case is included because non-mutual CE has moved from CA to now being embraced by the US SC UIL group owned a patent design and sued for infringement. The patent was found invalid. o Undeterred UIL goes after a second antenna maker and wins patent is found valid. SC finds that defensive non-mutual CE will apply against UIL. Back to Top Parklane Hoisery Co. v. Shore (US 1979) Offensive CE In a suit w/the SEC, the D. Ct. found that a proxy statement issued by the same defendants was false and misleading. These Ps moved for partial SJ against the Ds in their action, asserting that the Ds were collaterally estopped from relitigating the issues resolved against them in the SEC action. Question of whether CE can be used offensively and whether this use violates Ds 7th Amendment jury trial right. Court (Stewart) Several reasons to treat offensive and defensive collateral estoppel differently 1 Offensive use does not promote judicial economy in the same manner defensive does o Offensive creates opposite incentive Ps can adopt wait and see attitude, hoping that the first action by another P will result in a favorable judgment 2 Unfair to the D

o If D was sued for little in the first action and future suits were unforeseeable, he may have little incentive to defend vigorously o If judgment relied on as a basis for CE is itself inconsistent with one or more previous judgments in favor of the D o Second action might provide D procedural opportunities unavailable in the first action which could readily cause a different result Preferable approach is not to preclude offensive CE, but to grant trial courts broad discretion in assessing when it should be applied o General rule In cases where a P could easily have joined in the earlier action or where, for the above reason or others, offensive CE would be unfair to a D, trial judge should not allow offensive CE o None of the considerations which would justify refusal to allow use of offensive CE is present in this case Use of CE in this way would not violate Ds 7th Amendment right to a jury trial Ds argue that 7th Amendment is assessed in referenced to CL in 1791 and because mutuality of obligation was required for CE in 1791, CE cannot be constitutionally applied here No persuasive reason why meaning of 7th Amendment should depend on whether or not mutuality of parties exists Many procedural devices adopted since 1791 that have diminished the jurys historic domain have been found consistent with the 7th Amendment

Dissent Rehnquist 7th Amendment requires that the jury right be preserved because of this, cases have uniformly held that the content of the right must be judged by historical standards o This adoption of non-mutual offensive CE is a substantial departure from CL and using it here deprives Ds of their rights to have a jury determine contested issues of fact It is unfair to apply offensive CE to a party who had not had an opportunity to have the facts of his case determined by a jury o 1 Use of offensive CE in this case runs counter to strong federal policy favoring jury trials o 2 Opportunity for jury trial in the second action could easily lead to a different result from the first action before a court Therefore unfair to estop Ds from relitigating Potential for conserving the resources of the judiciary or litigants is doubtful at best Additional Notes Two cases here the first filed case actually becomes case 2 for CE purposesly o 2nd filed case which is resolved 1st o Important when looking at the propriety of offensive CE to see that case 1 had already been filed when case 2 was filed o Everyone knows there is this overhanging litigation which has already been filed

Case 1 (resolved first, filed second) is an enforcement action by the SEC o Alleging that Parklane Hoisery filed a false and misleading proxy statement o SEC seeks injunction and there is a bench trial and the D. Ct. finds in favor of the SEC and finds that the proxy statement was false and misleading Case 2 P was the shareholders in a class action with essentially the same allegations which the SEC had brought. o Stockholders are happy to ride the SECs coattails in these situations they copycat the SEC prosecution P wants to see offensive CE to say that because SEC won on the issue of the proxy statements so that issue should be resolved for their litigation o It was a false proxy statement o Of course, if they have this resolved, their case probably wont take much more o SC is called upon to address non-mutual offensive CE Ps were not involved in case 1 and wants to use case 1 to offensively use CE against a D o Court offers reasons for why non-mutual offensive and non-mutual defensive are used differently o Allowing defensive nonmutual CE encourages Ps to join all Ds in the same lawsuit up front o Non-mutual offensive CE works in a different way If you are a P and there are lots of Ps which might sue the D, there is a school thinking you should sit on sidelines and wait for another P to win If they do then you can piggyback on their victory to win against the D o Here that factor isnt disabling to the Ps because they couldnt join in the SEC action private litigants are not allowed to join these regulatory enforcement actions Another factor idea of the first lawsuit being small stakes while the second lawsuit is geometrically more in controversy o If someone sued on $10 breach of warranty and beat the D o Then someone else said ok, now its $10 million we might not allow the second guy to enforce that Serial litigation issue? o There may have been multiple actions against same D and the court doesnt want to allow the P to cherry pick among them o There have been 25 lawsuits and D has won 24 you have to be thoughtful about whether that one outlier can fairly be applied against that litigant in an offensive non-mutual CE way Whether or not the procedural opportunities available to the D are different in the second proceeding than they were in the first proceeding o Lawyers believe that process matters and affects the results o When you change the procedural landscape you can get different outcomes so if the first case involved a truncated process or quirky rules of evidence then issues will be unlikely to be allowed for CE in the second case

Court doesnt say that you cant have offensive non-mutual CE they say it is up to the discretion of the trial court but that court is bound up in the issues/reasons they described

Back to Top Martin v. Wilks (US 1989) Not a very important case confusing City of Birmingham and the Jefferson County Personnel Board entered into consent judgments (judicial judgments) with black firefighters setting goals for hiring/promoting black firefighters. White firefighters subsequently brought suit against the City and the Board arguing that this violated Title VII and EPC. City and Board responded that the consent decrees mandated the procedures they were using and estopped the current suit. Court (Rehnquist) Law does not impose on any person absolutely entitled to a hearing the burden of voluntary intervention in a suit to which he is a stranger o Person not a privy may rest assured a judgment recovered therein will not affect his legal rights Joinder as a party, rather than knowledge of a lawsuit and opportunity to intervene, is the method by which potential parties are subjected to the power of the court and bound by a judgment or decree o The parties to a lawsuit know best the scope of relief sought and at whose expense it might be granted o They should have the burden of bringing in additional parties rather than placing on potential additional parties a duty to intervene when they acquire knowledge of the lawsuit Difficulties in potential adverse claimants and inconsistent results arise from the nature of the relief sought not because of any choice between mandatory intervention and joinder o Having a mandatory intervention policy does not eliminate the need for, or difficulty of, identifying persons who should be included in a suit Voluntary settlement through a consent decree b/t one group of employees and their employer cannot settle, voluntarily or otherwise, the conflicting claims of another group of employees not party to the agreement o Parties who choose to resolve litigation through settlement may not dispose of the claims of a third party Dissent (Stevens w/Brennan, Marshall and Blackmun) Vast difference between persons party to litigation and those who merely have an interest that may be practically impaired by the outcome of the case o Persons in the latter category have a right to intervene in a time fashion or they may be joined as parties against their will o If they do not intervene, they may be harmed as a practical matter even though their legal rights are unaffected o This does not mean they have been deprived of legal rights or that they have standing to appeal from that decree without becoming parties

Parties with no right to appeal from a final judgment may collaterally attack it on narrow grounds o If the court had no jurisdiction over the matter or o It is was the product of corruption, fraud, duress, collusion or mistake o Much more limited than on appeal thus a person who can foresee a lawsuit will have a heavy practical impact on his interests pays a heavy price by not intervening Takes the risk his legal rights might be impaired In complex litigation this court has said that sideline-sitter may be bound as firmly as an actual party if he had adequate notice and a fair opportunity to intervene and the judicial interest in finality is sufficiently strong

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Class Actions Introduction

Back to Top Jurisdiction and Preclusive Effects of Judgments Mass Torts Issues, Including Settlement Issues Introductory Claims Benefits/Problems of Class Actions Initiating a Class Action lawsuit Seven Requirements Mechanics of class certification decision for the Court Hansberry and Due Process Concerns

Two traditional viewpoints/ideas of class actions 1 It is a super Rule 20 (joinder) device 2 It is viewed as a representational device allows named Ps to act on behalf of others o Both these perspectives are in the case law There are different sorts of class actions o Some deal primarily with injunctive claims (23b2 claims) Eg. An injunction against college athletic department alleging it is violating discrimination laws against female athletes in the athletic department o Some which deal only/primarily with money damages claims Inventory plaintiff is the opposite of a named plaintiff o Asbestos attorneys want to try and get as many clients as possible they might drive a bus into a town a/doctors to try and sign people up to be Ps o Inventory plaintiffs are people who are just part of the queue they are run of the mill plaintiffs in the case Back to Top Introductory Notes Tend to typically be quite unusual large/complex class actions can present issues relating to virtually all the topics studied in this class Class Action cases also tend to be very high stakes affairs for the litigants and for the lawyers involved in them o Certain class actions seek to aggregate claims and allege damages in the billions of dollars o With that much money at stake, the fate of entire companies or industries are implicated by issues relating to the class action o Companies are big institutions and many people have their fates tied up in that corporation o The attorneys involved (particularly the plaintiffs attorneys) can stand to make tens or hundreds of millions of dollars has some impact on how case is framed

Two things flow from this 1 The academic debate is highly disconnected from the real legal world You should think about why these various procedural debates are going on People are using procedural tools in class actions to try and generate leverage which will translate into success in the case You need to appreciate that if the consequence of a procedural change is $100 million moving into the settlement then it is an analysis divorced from the real world implications in the case 2 The biggest part of a class action is whether or not to certify that class or deny that motion class action then proceeds w/named plaintiffs The named Ps advance the claim on behalf of all the Ps involved the resolution of their cases governs the outcome for the entire rest of the class Courts take a rigorous but practical look at the class and try to assess whether the proposed named plaintiffs might not advance claims which other plaintiffs elsewhere would want to make when this handful of peoples claims are resolved, have we truly/fairly resolved the claims of everyone else across the country A lot of this turns on how the case is framed Part of the reason this is so important is because once a class is certified the potential damages exposure for the D increases geometrically sometimes 10 million-fold If you have a case w/one P and a $10k claim that is nothing however if that is a case with 10k Ps it becomes a $10 billion case There are some cases where you can be almost certain you are going to win or you are going to lose o But most litigation is inherently uncertain and most attorneys will tell you that even when you get into predictions around 85% you are probably beyond what is predictable This is demonstrated in watching lots of trials and doing focus group jury studies o 10 juries see the same case and often have divergent outcomes o There is no truth that everyone is driving at, there is lots of personal discretion, etc. in the case If this is the situation and it is a $10 billion case, even if you are super sure you are going to win (as the companys lawyer) you cant just tell the P to pound sand and go to trial because if you lose it will bankrupt the company o If things are going really well w/focus groups and stuff maybe you can say there is an 85% chance of winning o This means the company should take a $1.5 billion settlement on a $10 billion case so maybe you can talk it down to $500 million but you should settle o Certification in that setting has taken the case and given it enormous value Equation works in both ways lots of times if the case isnt certified, even if the P has a 90% winner the wrong often will not go litigated o Very few attorneys will take a $10k case o Vast majority of cases in life are about the money

o Here the D will get away with w/e wrong they may have committed There is a lot of rhetoric about tort reform and class actions like many things where you stand on this depends on where you sit o Many people will tell you that their ability to have an impact in cases involving disability rights, race discrimination, etc depends on the ability to proceed in a class setting o Truth on class litigation is that it depends a lot on the case and the situation at hand in a way that doesnt allow for broad pronouncements w/out knowing the specifics of the case o The class decision is really really important procedural question w/enormous substantive impact

Back to Top Benefits of CAs Promote efficiency for Ps and Ds in court Allow small wrongs to be righted because of our ability to aggregate small claims Provide an opportunity to give fair outcomes both to Ds and to similarly situated Ps (horizontally uniform outcome) Problems of CAs Agency problems exist in a CA on two dimensions o 1 Named Ps purporting to act in best interests of everyone in the world behind them They might prioritize their own personal situation over the interests of the class as a whole o 2 Loss between class attorney, the named Ps and class at-large Often the P in a class case is a fiction whom you never see and the real driver is the attorneys who fronted millions of dollars to push the case forward Judicial blackmail concern about settlement pressures Whether or not its pragmatic to have these one-shot iterations of cases when there is so much money at stake o Isnt it better to take 4-5 shots at this and try to get some kind of consensus about whether there was a wrong here before we transfer $X billion o Smaller bites than the fate of the industry in one bite Both these views are probably right some of the time CAs can be either really good or really bad o Substantial discretion is given to the trial courts on these its a hard call whether to certify and its a decision which affects lots of people

Back to Top Initiating a Class Action Suit Certification Issues in Mass Torts Class Actions

When a litigant seeks to represent a class they dont need to consult anyone in the class about that unilateral decision Litigants initial complaint can seek CA treatment or that can be done by amendment after the initial complaint is filed o It used to be required that you decide w/t to make it a CA before you filed o That was changed to modern rule that certification decision must be made at an early time When you decide to seek certification there is a period of discovery leading up to that decision o The focus of that discovery is not about whether or not the underlying claim is valid o Also lots of attention on whether or not the claims of all the potential members of the class would be completely/adequately resolved by the cases of five named Ps whether or not the claim at issue can be proven with class-wide proof o FORM LETTER Lots of attention paid to whether or not the action is based on a form letter (truth in lending act claim) sent by the D to all its customers Means all the Ps have the same set of facts to litigate If so, it might push us toward CA since everyone got the same letter o Whether class-wide proof put on the table by the named Ps is going to give us an outcome which is fair to everybody in the class Reviewed for abuse of discretion Castano v. American Tobacco Co. If the amount in controversy exceeds $5 million then only minimal diversity is needed for Federal Court and none of the Ps need to have a claim over $75k o If the amount in controversy is below $5 million then one P must be claiming over $75k to satisfy the amount in controversy requirement

Seven requirements to certify a class and the burden is on the P seeking certification to prove all seven this is because class actions are generally creatures of the last forty years They remain the exception even today Presumption is that individuals litigate their own claims its not the end of the world if the class isnt certified, people can just go litigate on their own behalf 1 Class representative has to be a member of the class goes to a fundamental question about standing o You have to actually be a member of the class and actually be affected by how the proceedings play out o The class representatives who are there have to actually be there to represent the divergent potential perspectives of the people who comprise the class o If matter at issue is such that class reps individual interest will expire before a ruling can be made (eg. Pretrial detention w/out a probable cause hearing), the class may be certified despite mootness of the named Ps claim 2 You must have a defined or a definable class Originally not express in Rule 23 but courts require this (now required by 23c1B)

o You cant have a class action which requires you to litigate the situation of every human being to see if they are potentially in the class Eg. You can have a class of every person whos insurance health claim was ever denied would require litigation over each specific persons situation to know if they were wrongly denied 3 23a1 Class must be large enough that joinder is impracticable o Typically considered that more than 40 people is enough for a CA and less than 25 is not enough o When class is b/t 25 and 40 variables such as geographic dispersion of class members and size of individual claims becomes important Joinder generally is impracticable is the claims are small b/c people are not likely to sue on their own for small amounts of money Joinder is typically feasible if each individuals stake is large 4 23a2 Commonality Requirement Must be at least one common issue of law or fact o Must be some unifying issue as to why we are going to bring everyone together and propose to have these people litigate together o This is typically not an enormous problem most lawyers can come up with a common issue of law or fact and most courts give them pretty broad latitude to come up w/stuff o Critical question is whether differences in the factual background of each claim will affect the outcome of the legal issue. 5 23a3 Typicality Claim of the proposed named party and their case is typical of the cases of the other people whom they purport to represent o If there were some enormous issue about w/t the Ps claim falls w/in the statute of limitations so lots of trial will be about whether they are time barred you would typically not let them be the class representative because so much time will be sucked up by their personal issue of the SOL o They are not typical 6 Rule 23 Adequacy Evaluated both as to the potential named P (23a4) and the attorneys for the P class (23g1b) (the attorneys are typically driving things much more than the named P) o Is the named P adequately interested in this litigation and will they effectively represent the entire class very low threshold they just have to have a basic understand of what is going on Serves to uncover conflicts of interest between named parties and the class they seek to represent o There will be a much more serious focus on the quality of the attorneys representing the class court must consider Work they have done identifying/investigating potential claims Whether they have done CAs before Their knowledge of the applicable law The resources counsel will commit to representing the class Have they ever been sanctioned There are lots of sophisticated attorneys in this area often a big fight over who will step forward to be the consensus class attorney

o Huge part of adequacy analysis looks at whether or not there are inherent conflicts w/in the proposed class conflicts of interest about how things will be resolved Classic example came up in asbestos litigation in a huge number of cases it created issues w/no medical consequence but in a small fraction it had the most serious consequences imaginable In a class seeking to include people who have been exposed but nothing happened, people with mild symptoms and people with serious medical needs they have very divergent interests and there was no way to come up with a one class solution to this problem o CONSTITUTIONAL COMPONENT TO DETERMINE W/T SUIT IS BINDING You have to think about whether or not there are different viewpoints/interests within a proposed class such that not having those viewpoints represented renders inadequate the process for rendering the judgment Hansberry v. Lee As an issue of DP it is subject to collateral attack because of that DP defect he can attack it when it becomes important to him later If courts dont get things right on adequacy in the first instance the resolution everyone thinks they have achieved for themselves may be completely unwound later when a subsequent court reviewing in a collateral setting determines there was a DP problem o Two Part Constitutional Test Gonzales v. Cassidy TO DETERMINE W/T Class Action IS BINDING ON CLASS MEMBERS 1 Did the trial court in the first suit correctly determine, initially, that the representative would adequately represent his class? 2 Does it appear, after the termination of the suit, that the class representative adequately protected the interest of the class? Adequacy or representation will be examined more than once: First by the court certifying the class Second by the court called upon to evaluate the binding effect of the first action. o Ultimately, a FINAL DETERMINATION of adequacy of representation can only be made through subsequent constitutional attacks to the res judicata effect of the suit 7 23b (three subcategories b2 and b3 are where most of the action is) o B2 Injunctive or declaratory relief if the primary mode of relief being sought Often in a b2 claim there are no damages sought at all (civil rights cases, prison conditions cases, etc.) Looking at whether the injunctive relief will be appropriate for the entire class or not These cases tend to get certified more frequently because there are less issues Often the class question is less momentous If an individual P gets an injunction against a D then that is a judgment binding against the D on that particular issue and

other Ps might be able to later use resolution of this issue through CE They will benefit from it regardless of w/t CA is certified or not o B3 MONEY DAMAGES cases involving a common question of law or fact Three factors here 1 Predominance whether the common issues predominate over individualized questions which have to be analyzed for each member of the P class Commonality of a2 really comes back to the fore are we still going to need to have a very individualized inquiry required for each member of the potential P class if the Ps prevail o This is a problem because once you certify a class then you are responsible for sorting out the claims of the class individuals o If each individual in the class claim is disputable then the class will be denied on grounds of predominance because the court cant litigate each of 150 million Ps A fraud CA cannot be certified when individual reliance will be an issue Castano v. American Tobacco Co. Going beyond the pleadings is necessary, as a court must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues Castano v. American Tobacco Co. Problems associated with certification of immature torts 2 Is the CA manageable? Are we really going to be able to sensibly manage this over the next X months in a way that will get answers for people With state law theories of recovery o D. Ct. must consider variations in state law when a class action involves multiple jurisdictions Castano v. American Tobacco Co. o Is it appropriate to have one jury looking through 50 verdict forms to render parallel verdicts on each states law as opposed to individual suits going forward in smaller pieces? 3 Superiority Is CA superior to the traditional methods of dispute resolution leaving them to individuals to fairly/efficiently adjudicate the controversy Historically, certification of mass tort litigation classes has been disfavored Castano v. American Tobacco Co. Also Consider

Interests of class members in having individual control of their claims Extent and nature of new litigation which has already proceeded concerning this type of claim Desirability or not of concentrating everything in one forum o Sometimes local interests are implicated which make you not want to do a claim elsewhere o B1 Limited Assets CA Sometimes looks a lot like a glorified interpleader action where you have a defined asset or pool of assets and want to resolve everyones claims to that pool These CAs are often from what are called limited funds cases where you dont have enough to satisfy all claims Dont want inconsistent judgments and dont want a race to the courthouse between Ps seeking part of a limited asset When there arent limited funds b1 can blur into b2 you dont want to tell two different prisons being sued that they have to do different things SC has limited this category of class action Back to Top Mechanics of class certification decision for the Court Court can amend a class certification decision or decertify as the case goes forward o Its not a way that D. Cts. can abdicate their responsibility to make a rigorous assessment the first time o Was a period of time where D. Cts. took a rough sweep at these the first approach but that is different now Done as early as possible Subject to interlocutory review o You can change things if facts change but the initial class certification decision has the potential to be reviewed on an interlocutory basis because the issue of w/t to certify a class or not is so big and so important that there will often never be a trial if the case is certified (due to settlement) Appoints class reps and class counsel Creates a definition of the class which is binding gives contour/definition to the class The CA better resolve most of the claims/issues of all its plaintiffs o You cant just say it is going to resolve everything because the whole class is about one issue o We try to resolve claims for people, not just one issue so you cant just resolve that one issue then send people with whole claims back into the world Back to Top

Hansberry and DP Concerns Class suit was an invention of equity to enable it to proceed to a decree in suits where there are so many people interested in the litigation that their joinder as parties is impracticable Hansberry v. Lee Adequacy Members of a class not present in the litigation may be bound by the judgment when Hansberry v. Lee o They are adequately represented by parties who are present or o When they participate in the conduct of litigation in which members of the class are present as parties or o Where the interest of the members of the class, some of whom are present as parties, is joined or o Where for any other reason the relationship between the present and absent parties is such as legally to entitle the former to stand in judgment for the latter Such a procedure affords protection to the absent parties so represented which satisfies due process and full faith/credit Hansberry v. Lee o Because the putative parties to this agreement have such dual and potentially conflicting interests in compelling or resisting its performance, it is impossible to say that solely because they are parties to it, they are members of the same class

Hansberry v. Lee (US 1940) DP Concerns This suit was brought by landowners seeking to enforce a racially restrictive covenant in Hyde Park. The binding effect of the covenant had been established in an earlier Illinois state court action holding that 95 percent of all the landowners involved had signed the agreement (95% was the amount of landowners required to sign to make the covenant enforceable on the neighborhood). The defendants here pleaded that the earlier case was not res judicata against them because they were not litigants in the prior covenant case (where that was determined) nor were they successors in interest or in privity with that cases litigants. Court (Stone) Class suit was an invention of equity to enable it to proceed to a decree in suits where there are so many people interested in the litigation that their joinder as parties is impracticable o In cases where the interests of those not joined are the same as the interests of those who are, and where it is considered that the latter fairly represent the former in the litigation of issues in which they share a common interest, the court will proceed to a decree Members of a class not present in the litigation may be bound by the judgment when o They are adequately represented by parties who are present or o When they participate in the conduct of litigation in which members of the class are present as parties or

o Where the interest of the members of the class, some of whom are present as parties, is joined or o Where for any other reason the relationship between the present and absent parties is such as legally to entitle the former to stand in judgment for the latter Such a procedure affords protection to the parties who are represented though absent which satisfies due process and full faith/credit The procedure and course of litigation sustained here by the plea of res judicata do not satisfy these requirements o Those who sought to enforce the covenant in the first suit cannot be said to be in the same class with or represent those whose interest was in resisting performance o Their interests are not identical such that any group elected to enforce rights conferred by the agreement could be said to be acting in the interest of others who wished to deny its obligation Because the putative parties to the agreement have such dual and potentially conflicting interests in compelling or resisting its performance, it is impossible to say that solely because they are parties to it, they are members of the same class o It is one thing to say some members may represent other members where to sole interest of the class is either to assert a common right or challenge an asserted obligation o Another to hold that all those free alternatively either to assert rights or challenge them are of a single class

Additional Notes Mr. Hansberry was represented by U of C Laws first black graduate This addressed restrictive land covenants o These are restrictions on title which run with the land o They are typically put on by real estate developers and are usually good things (eg. Requirements that you paint your house a certain way, that you keep your trees, etc.) o The restrictive covenants here were ones which prevented rental/sale of any home in the area to black people o These covenants were constitutionally invalidated a little after this case in Shelly v. Kramer (argued by T. Marshall) Under IL law, how much of a % did you have to have from a community of affected landowners to get a covenant put into a neighborhood? o Threshold required was 95% for it to be valid under IL law Two cases at issue here 1 Burke v. Kleinman Mrs. Burke (on behalf of herself and similarly situated in the community people thought to be all residents of South Park) sued a landowner to evict an AA family this was thought to be a CA where she represented all people living in Southpark 2 This case, Mr. H was black, bought a home in Southpark and the neighborhood residents sought to evict him

o His nuts/bolts claim is that 95% issue is wrong and that really only about 54% of community had agreed to this o This 95% number can from a stipulation by the parties in the first case the parties stipulated and said we agree that everybody signed it o As Hs case is going forward the IL courts are saying this was wrong but it wasnt a fraud so they are not going to change it Lawyers could have made a CE argument that it wasnt litigated nor did it have a final decision on it it was just a stipulation and therefore cant be used for CE o Argument about stipulation wasnt raised IL courts decided that unless there was fraud then the number stands and this is not a basis on which H can prevail o They also find it is binding on Mr. H as a land covenant o Idea that land covenants bind people isnt a wild idea but the attorneys for H attack this in terms of adequacy of the issue in dealing with it as a class issue Argument about adequacy at the SC? o The fact that he wasnt in the first case wont help H because in a class action almost nobody is really there o Important part is the idea of adequacy in the initial class the initial class here wasnt really sufficient to capture the interests of everyone in the class o There may have been plenty of people in the initial class who, even if not black, didnt actively support enforcement of racial covenants o Further, it is not adequate to have a defined class where the named parties are trying to exclude a group who comprise part of the class also the class as defined doesnt accommodate for the black viewpoint and allow that viewpoint to be litigated Couple things People sometimes think Hansberry showed CAs were constitutional o This is an overstatement it wasnt about whether or not you could have a class action they had been recognized long before this This case showed in an acute way that you have to think about whether or not there are different viewpoints/interests within a proposed class such that not having those viewpoints represented renders inadequate the process for rendering the judgment o Adequacy is now tracked out in rule 23 but it is also an issue of DP o As an issue of DP it is subject to collateral attack because of that DP defect he can attack it when it becomes important to him later o This matters because if courts dont get things right on adequacy in the first instance the resolution everyone thinks they have achieved for themselves may be completely unwound later when a subsequent court reviewing in a collateral setting determines there was a DP problem

Back to Top Gonzales v. Cassidy (5th Cir. 1973)

Set up a two-part test to review whether the named P adequately represented the class so as to make the judgment in the suit binding on the absent class members 1 Did the trial court in the first suit correctly determine, initially, that the representative would adequately represent his class? 2 Does it appear, after the termination of the suit, that the class representative adequately protected the interest of the class?

Additional Notes Gonzales means that adequacy or representation will be examined more than once: first by the court certifying the class, and second by the court called upon to evaluate the binding effect of the first action. Ultimately, a final determination of adequacy of representation can only be made through subsequent attacks to the res judicata effect of the suit Courts must be vigilant in looking for potential conflicts of interest among class members often not very clear Back to Top

Jurisdiction/Preclusive Effects of Judgments

Back to Top A forum state may exercise jurisdiction over the claim of an absent class-action plaintiff even if they do not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant Phillips Petroleum Co. v. Shutts If the forum State wishes to bind an absent plaintiff concerning a claim for money damages or similar relief at law, it must provide minimal procedural due process protection Phillips Petroleum Co. v. Shutts o The plaintiff must receive notice plus an opportunity to be heard and participate in the litigation, whether in person or through counsel. o 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. o The notice should describe the action and the plaintiffs' rights in it. Due process requires at a minimum that an absent plaintiff be provided with an opportunity to remove himself from the class by executing and returning an opt out or request for exclusion form to the court Phillips Petroleum Co. v. Shutts Finally, the Due Process Clause of course requires that the named plaintiff at all times adequately represent the interests of the absent class members Phillips Petroleum Co. v. Shutts DPC and Full Faith/Credit Clause provide modest restrictions on the application of forum law require that the state must have a significant contact or aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair Phillips Petroleum Co. v. Shutts o When considering fairness in this context, an important element is the expectations of the parties o There is no indication that when the leases involving land and royalty owners outside of KS were executed, the parties had any idea that KS law would control

Class Notes For CA In diversity cases you only look at the citizenship of the named parties o 1367 Only one party needs to meet the amount in controversy requirement and if other parties are below they come in through supplemental jurisdiction FQ If you have an FQ you have supplemental jurisdiction underneath it Phillips Petroleum Co. v. Shutts Shutts and several other royalty owners in Phillips Petroleum brought suit against the company in a KS state court to recover interest on royalty payments that had been delayed. The trial court certified a class consisting of 33,000 royalty owners. Each was sent a letter detailing the action. Final class consisted of 28,100 members, residing in every state, DC and several foreign countries. Although over 99% of the gas leases in question and 97% of the P class members had no apparent connection to KS except the lawsuit, the trial court applied KS contract and equity law to every claim.

Court (Rehnquist) PPC argues that unless out-of-state Ps affirmatively consent (submitting to jurisdiction) then KS courts may not exert jurisdiction over their claims o Failure to return request for exclusion forms cannot constitute consent of the out-of-state Ps o KS courts may exercise jurisdiction over these Ps only if they possess sufficient minimum contacts with KS as the term is used in PJ Purpose of minimum contacts test is to protect a D from the difficulty of defending in a distant forum, unless the Ds contacts with the forum make it just to force him to defend there o It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty. Burdens placed by a state upon an absent class-action P are not of the same order/magnitude as those it places upon an absent defendant o Out of state D summoned by a P is faced w/the full power of the forum state to render judgment against it o D must hire counsel, travel to the forum to defend itself, engage in lengthy discovery, etc. or suffer a default judgment A class-action P is in a very different posture Absent Ps would be bound by the decree only so long as the named parties adequately represented the absent class and the prosecution of the litigation was within the common interest o A plaintiff class cannot be certified without a judicial inquiry o Class actions, once certified, cannot be dismissed or compromised without approval of the court o Unlike a D, a class-action P is not required to fend for himself the court and named Ps protect his interests In addition to the system looking out for their rights, absent P class members are not subject to other burdens imposed on Ds o Unlike a D in a civil suit, an absent class-action P is not required to do anything Holding on jurisdiction o A forum state may exercise jurisdiction over the claim of an absent classaction plaintiff even if they do not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant. o If the forum State wishes to bind an absent plaintiff concerning a claim for money damages or similar relief at law, it must provide minimal procedural due process protection The plaintiff 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. The notice should describe the action and the plaintiffs' rights in it. o Due process requires at a minimum that an absent plaintiff be provided with an opportunity to remove himself from the class by executing and returning an opt out or request for exclusion form to the court.

o Finally, the Due Process Clause of course requires that the named plaintiff at all times adequately represent the interests of the absent class members DPC and Full Faith/Credit Clause provide modest restrictions on the application of forum law require that the state must have a significant contact or aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair o When considering fairness in this context, an important element is the expectations of the parties o There is no indication that when the leases involving land and royalty owners outside of KS were executed, the parties had any idea that KS law would control o Nothing in DPC requires KS to substitute for its own laws another statute but KS may not abrogate the rights of parties beyond its borders having no relation to anything done or to be done within them.

Class Notes Seminal case on P PJ two issues PJ and choice of law This is a CA against Philips Petroleum framed as a nation-wide class but the real geographic heart of the case is in TX, OK and LA 97% of the putative class have no apparent connection to KS save the lawsuit Ps are seeking to recover the interest payments (about $100 per person) due to delayed royalty payments on gas leases The judgment doesnt atypically relate to the D here Philips is obviously subject to KS jurisdiction o The issue is PJ over the class members if there isnt PJ then the judgment of that KS court wouldnt be binding over absenet members Two reasons why Philips cares about w/t KS can enter binding judgments over nonpresent class members if there is no PJ one of 2 things happens o 1 Philips wins this trial and it only binds this P and the rest of the 34k can sue you later o 2 Philips loses this trial and then all the Ps who would not have been bound would be able to use RJ to recover against them Class Notes Contd. Shutts has an interest in this judgment being binding if they win they want it to be over and if they lose/settle they want to know this is the law suit o Also a concern that if you make it proceed in a smaller fashion it might peter out on its own Phillips argued that absent P class members must opt-in to become part of the class rather than default in subject to opting out o SC rejects this and says that DP requirements for jurisdiction over CA Ps are lower than for Ds o Absent Ps dont have to do anything while D would have to come present a full defense dichotomy between burdens facing absent class member and absent D

o All these lawsuits here are about $100 per person so if there is no way to facilitate this the suits wont go forward given inertia, people probably wont opt in o Much of the pre-certification strategizing is about which party gains the benefit of Ps inertia Reserved in FN3 whether or not things are different if this had been a defendant class action o You will need more than this opt-out right in those cases given that a D will probably have higher burdens o D class actions are pretty rare mostly just injunctive suits against state officials (Eg. immigration injunctions against INS) How does opt-out work w/regard to a B2 or B1 CA as to Ps? o W/B2 actions w/injunctions ideas about opting-out dont have much traction b/c whenever you grant injunctive relief the first P sets things up for everyone else If the first P wins and the court issues an injunction the D is bound Even if other people are affected by the scope of that order, in practice that initial injunction will govern the whole field o Also w/t or not you can create a situation in a limited fund case (b1) and not afford meaningful opt-out rights and bind the entire class to litigate in that forum? open issue, not on final What does DP require? What must we give in notice/opt-out rights? o Ct. affirms KS procedure of First Class mail w/affirmative explanation of their right to opt-out o W/kind of notice? Idea about best practicable notice genuinely structured in a way to give people information about the lawsuit o If you know about people you must mail them something If you know they all live in AR then you must run some ads in AR newspapers Best practicable under the circumstances o Fundamental part of DP is that the class must be adequately represented throughout the course of the litigation encompasses not just w/t the person filed briefs or showed up to court Adequacy of sort in Hansberry their interests must be sufficiently aligned with the entire class such that there are not meaningful conflicts b/t parts of the class Courts tend to be very hawkish about conflict issues b/t attorneys and clients it doesnt have to be as obvious as Hansberry for the court to find a conflict CA attorneys have tremendous power and are a fiduciary to their clients courts will not give lots of leeway to these lawyers Courts are assertive about this because in a CA setting there are incentives for de facto conspiracies between D who wants to get rid of the case and P attorneys who just want to make a buck (w/named Ps who dont know whats going on) they will take a settlement that is not in the interest of the entire class. Court must step in on behalf of

the absent parties who often dont know about the case and arent lawyers Constitutional choice of law they applied KS law in the case to everyone o 99% of class members have nothing to do w/KS o Phillips argues that this application of KS law is inappropriate what is their legal argument? DP and full faith argument that KS cant just impose its law on the nation w/out thinking about whether there are conflicts there o This is a very real consideration when one state is out of step w/what other states are doing Eg. One state says it is a requirement that car repairmen use recycled parts and three other states conclude recycled parts are defective and forbid them If you to claim someone is being fraudulent by not giving these parts it matters a lot what states law you file under o Floor for choice of law? States must have significant contact or significant aggregation of contacts creating a state interest such that the choice of its law isnt unfair o This is an ambiguous definition and doesnt mean it must be the most clear choice of law possible just prevents the arbitrary assertion of a states law when the state has nothing to do w/the suit o This prevents people from taking shortcuts and saying who cares how other states do it you must actually do some work and assess how other states do it o You might conclude there are 15 different approaches when there is that diversity of rules and its attendant complications (or just total lack of clarity) it feeds into problems of R23 superiority or manageability o Shutts rule has fostered smaller state-specific CAs or ones that are grouped when six states do it this way or that way avoid CAs where there are lots of different states laws needing to be applied W/national CA you have one set of lawyers about to become super rich who are arguing it would be great as a national CA o They are offset by groups of other lawyers who are arguing this would be much better resolved as a variety of state CAs There is no Federal CL developed to deal w/the Shutts choice of law issue when Fed Cts are not making Fed CL then you dont have a Fed CL convention available as an option for dealing w/these state choice of law questions o Oftentimes state law has different rules applying to different sequences of the trial

Cooper v. Federal Reserve Bank of Richmond (US SC 1984) There was a class action lawsuit under Title VII alleging that it had engaged in policies and practices that included failing and refusing to promote blacks because of race. The class of all black persons employed by the company in the relevant time period who were discriminated against was certified and the case proceeded. The Ps in this case were members of that class. It was found that in the prior case that there was insufficient evidence to show the employer engaged in a pattern or practice of racial discrimination above pay-grade 5 at the bank (and that there had only been any in grades 4 and 5). These Ps sued after the class action was over alleging they had each personally been denied a

promotion due to race. The bank moved to dismiss that complaint on the ground that each of them was a member of the class that had been certified in the original (Cooper) litigation. Shows that CE operates in the Class Setting but you must be thoughtful about what the issue is you give preclusive effect to going forward Court (Stevens) Claims of two types were adjudicated in the Cooper litigation o First, the individuals claims of each of the four intervening (representative) Ps were finally decided in the Banks favor o Second, the class claim that the bank followed policies and practices of discriminating against its employees was also decided Crucial difference between an individuals claim of discrimination and a class action alleging a general pattern/practice of discrimination is manifest o At the liability stage of a pattern/practice trail the focus will not be on individual hiring decisions, but on a pattern of discriminatory decision-making Existence of a valid individual claim does necessarily warrant the conclusion that the individual plaintiff may successfully maintain a class action o Class Ps attempt to prove the existence of a company-wide policy may fail even though discrimination against one or two individuals has been proven o A racially balanced work force cannot immunize an employer from liability for specific acts of discrimination COA erred in application of the preclusive effect of the prior judgment here that judgment o 1 Bars the class members from bringing another class action against the Bank alleging a pattern/practice of discrimination for the relevant time period o 2 Precludes the class members in any other litigation with the Bank from relitigating the question whether the Bank engaged in a pattern/practice of discrimination against black employees during the relevant time period Prior adjudication may still prove beneficial to the Bank as the determination that the Bank had not engaged in a general pattern/practice of discrimination is relevant on the issue of pretext

Mass Tort Issues, Including Settlement Issues

Back to Top Mass Torts Class Action Issues Settlement Issues in Class Actions Asbestos Cases This information about mass torts w/asbestos and tobacco litigation is not where the new stuff is going on o Traditionally you did not have mass torts CAs things like plane crashes, etc. o Back then you had stuff like Agent Orange or breast implant litigation The latter particularly gets criticized because the science under that was just wrong Modern, cutting-edge stuff is still mass tort but not as we would think about it Lots of attempts to use fraud, RICO statutes to create widespread financial exposure (racketeering fraud, consumer-fraud, etc.) these attempts to push contract-type issues into the fraud setting are where the cutting-edge CA stuff is Problems in CA of exit, loyalty and voice in democratic representation in the CA context SC has focused on loyalty and class cohesion and fears a division of a class into warring sects of subclasses which may weaken the claim that CA is superior to adjudication of individual claims Better solution might be to increase exit opportunities for class members at all stages of the litigation ensures they may opt out when a settlement is not in their best interests BUT: Possible problems w/uninformed Ps not knowing to opt out

Mass Torts Class Action Issues

Back to Top Castano v. American Tobacco Co. D. Ct. certified all smokers as a class Complaint is a novel and wholly untested theory of tobacco company liability The Class Certification Order The district court erred in its analysis in two distinct ways. 1st Failed to Consider Variations in State Law A district court's duty to determine whether the plaintiff has borne its burden on class certification requires that a court consider variations in state law when a class action involves multiple jurisdictions o The D. Ct. conducted only a cursory review of state law variations and gave short shrift to the defendants' arguments concerning variations 2nd Predominance District court certainly may look past the pleadings to determine whether the requirements of R23 have been met

o Going beyond the pleadings is necessary, as a court must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues Fraud claims require a showing of reliance on each individuals basis will require litigation of each persons claim o If you have 100 million Ps and must do an individualized reliance inquiry, even if each P took 5 minutes it would take forever to resolve that case o That said, in a class action you can prove things on the basis of class-wide proof its not impossible to deal w/individual proof issues in a general way but with something with reliance where the issue turns completely on what each person knew you have to make these individual inquiries Problems associated with certification of immature torts o This is a novel issue so maybe it makes sense to have smaller steps at the beginning rather than just taking one major swing at the whole field o W/is P lawyers response? 1 There is no novel theory exception But 2, more importantly, there is nothing novel about a fraudulent omissions case that is as novel as 13th century England Maybe this application is a little different but this is just a fraud case With immature torts you dont have settled teachings from the different states about it o To the extent you have a state/fed court outside the state in question making Erie guesses about how they would resolve that litigation it is highly speculative o If you have the Fed Ct in TX certifying a class, on appeal to the 5th Cir. They have no more authority to say w/KS or IA would have done if presenting with this novel legal question these Fed Cts are not equipped to be guessing at what the various states laws would be on this issue o Courts are skittish about setting up this dynamic Money Damages Seven Requirements

This Class also fails the Superiority Requirement of 23b3 Class certification creates insurmountable pressure on Ds to settle whereas individual trials would not o Ct. thinks you are irrationally creating, in an area where you have discretion to do otherwise, a one iteration attempt to address a question which could be broken up creates the potential for judicial blackmail The coercion idea is that people who are fiduciaries for Ds in these settings cant go to trial if there is some meaningful chance that losing will wipe out the company They have to settle not optimal Maybe we should take 3-4 shots at this major $$ litigation so Ds have the option/ability to defend themselves Historically, certification of mass tort litigation classes has been disfavored. o Certification of an immature tort such as this results in a higher than normal risk that the class action may not be superior to individual adjudication

Plaintiffs claim that time is running out ignores the reality of the class action device o Class action device could lengthen, not shorten, the time it takes for the plaintiffs to reach final judgment

Back to Top Castano v. American Tobacco Co. (5th Cir. 1996) In what may be the largest class action ever attempted in federal court, the district court entered a class certification order for the following class: (a) All nicotine-dependent persons in the United States ... who have purchased and smoked cigarettes manufactured by the defendants; (b) the estates, representatives, and administrators of these nicotine-dependent cigarette smokers; and (c) the spouses, children, relatives and significant others of these nicotinedependent cigarette smokers as their heirs or survivors Court Class Complaint Complaint is the novel and wholly untested theory that the defendants fraudulently failed to inform consumers that nicotine is addictive and manipulated the level of nicotine in cigarettes to sustain their addictive nature. The Class Certification Order The district court erred in its analysis in two distinct ways. o First, it failed to consider how variations in state law affect predominance and superiority o Second, its predominance inquiry did not include consideration of how a trial on the merits would be conducted. Variations in State Law A district court's duty to determine whether the plaintiff has borne its burden on class certification requires that a court consider variations in state law when a class action involves multiple jurisdictions The D. Ct. conducted only a cursory review of state law variations and gave short shrift to the defendants' arguments concerning variations Absent considered judgment on the manageability of the class, a comparison to millions of potential individual trials is meaningless Predominance District court certainly may look past the pleadings to determine whether the requirements of R23 have been met o Going beyond the pleadings is necessary, as a court must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues D. Ct. just assumed that because common issues would play a part in every trial, they must be significant o A fraud CA cannot be certified when individual reliance will be an issue Predominance inquiry here shows problems associated with certification of immature torts.

o Determining whether the common issues are a significant part of each individual case has an abstract quality to it when no court in this country has ever tried an injury-as-addiction claim. Cases with fewer manageability problems have given courts pause This Class also fails the Superiority Requirement of 23b3 o Class certification creates insurmountable pressure on Ds to settle whereas individual trials would not o Historically, certification of mass tort litigation classes has been disfavored. Certification of an immature tort such as this results in a higher than normal risk that the class action may not be superior to individual adjudication o Very real possibility that the millions of other claims the D. Ct. seeks to avoid may never materialize Plaintiffs claim that time is running out ignores the reality of the class action device o Class action device could lengthen, not shorten, the time it takes for the plaintiffs to reach final judgment

Back to Top

Settlement Issues in Class Actions Asbestos Litigation

Back to Top Asbestos Litigation Introduction Amchem The Proposed Settlement Amchem SCs Reasons for Rejecting Certification Amchem The Case Fireboard SCs Reasons for Rejecting Settlement Certification in a B1 Class Action Ortiz v. Fireboard o This is part of the theme of REA FRCP 23 cannot be used to preclude somebody from getting a bigger recovery through the b1 action than they would otherwise Because there is no opt-out here you are creating a Seventh Am issue w/trial rights

Introduction Breyer is important in this area o His factual assertions about the asbestos litigation are not in dispute majorities just disagree about how to resolve them Asbestos exposure was extremely widespread placed in lots of products and seen as a way to prevent fires Effects of asbestos exposure are very complicated decades after meaningful exposure there can be diseases related to that exposure

o Some effects are debatable there are instances of pleural thickening which are asymptomatic when they manifest most global settlements often have low or no settlement value to those cases o The asymptomatic stuff is more controversial and often their cases are filed after someone drives an x-ray truck into town and tells them they need to sue For all the money that has moved hands in asbestos cases, the majority of it (60%ish) has gone to transaction costs and lawyers fees that is bad because the bulk of the money shouldnt be going to this waste o It is often hard to get damages/recompense to people who are dying and have medical expenses o Along the way were bankruptcies of entire industries the most obvious users of asbestos o Problem b/c many people w/the most serious problems got nothing because there was nothing left to recover on All that has led many judges to call out for a legislative solution from Congress o Congress has looked at this issue but has not yet succeeded at developing a solution o The lawyers from Amchem have also tried to help devise a solution 3rd Cir. Wouldnt approve the settlement too many issues of predominance and state law variation o Also insufficient showing of adequacy because of inter-class conflict o The settlement favors some types of Ps over the others so there are irreconcilable conflicts o Superiority this kind of case could never be tried and it was preferable to have various state iterations Opt-out this is proposed as a limited fund suit so there are not opt-out rights o Many of these Ds are settling as bankrupted estates so this will expend all their funds o The recovery picture is limited o People with no injury/disease yet are probably not going to opt-out because they just dont know whats going on o Ps attorneys not on the settlement team will be objecting as will the loss of consortium Ps o Much of this questioned the good faith of people perhaps inappropriately o Normally you would have opt-outs of 23b3 damages actions

Back to Top Amchem The Proposed Settlement. Amchems issue was the legitimacy under R23 of a CA certification seeking to achieve a global settlement of current and future asbestos-related claims o Settlement covers current suits and future suits by people who may become injured and/or sue in the future o Litigation history seems on its face to be very dubious they file a CA complaint, an answer, a proposed settlement, etc all on the first day in court

o The process behind this had been months of meetings/negotiations between lots of people to come up with this not just some sort of sham but it wasnt produced through litigation There was a perception that the playing field was skewed toward people w/present injuries primarily b/c there wasnt an inflation-accounting measure o There were also caps on recovery o Some potential claims got nothing Loss of consortium Purely pleural claims with no accompanying impairment claims were capped at zero Various other state law recoveries (varying among the states) where you can recover if exposure-only for increased risk of cancer, fear of future injury and medical monitoring P class is bound forever but the Ds can opt-out of the settlement after ten years Administering this process on behalf of the Ps is the P counsel and the AFL-CIO o Often in these sorts of cases someone could say (Breyer makes this point) that AFL-CIO might have potential conflicts but, that said, they are the only people who will be here to administer this type of system o AFL-CIO also represents many of the claimants, including those who are most sick (the ones who worked in the production/installation process) Ps counsel will be paid through court-approved fees, often a large portion of the recovery o Nonetheless, best thing lawyers could do to make money is not come up with a settlement since they are making lots of money in the current regime Objections to settlement o Lack of inflation adjustment puts a hurt on someone whose disease manifests later o If your claim is compromised out at zero then this claim doesnt seem very good to you o There are big objections about the adequacy of representation People w/injuries cant represent people who dont have injuries yet Lawyers w/lots of inventory Ps cannot represent members of the new class

Back to Top Amchem SCs Reasons for Rejecting Certification Ginsburg begins talking about the concerns in a settlement-only class certification o Manageability is no longer a concern we dont have to worry about managing a trial because there wont be a trial o That said, we have to look more closely at adequacy, conflicts, etc Even if the settlement hearing was well-done it all happens quickly so these concerns are much more acute in a settlement posture This precludes future claims so these concerns are acute

Federal courts lack authority to substitute for Rule 23s certification criteria a standard never adopted by the rule-makers that if a settlement is fair, then certification is proper. o First, the standards set for the protection of absent class members serve to inhibit class certifications dependent upon the courts overarching impression of the settlement's fairness. o Second, if a fairness inquiry under Rule 23(e) controlled certification, eclipsing Rule 23(a) and (b), and permitting class designation despite the impossibility of litigation, both class counsel and court would be disarmed Predominance Argument that settlements fairness is a common predominant question rejected o If a common interest in a fair compromise could satisfy the predominance requirement of Rule 23b3, that vital prescription would be stripped of any meaning in the settlement context Superiority SC doesnt accept that when looking at superiority it is a metaquestion of whether any solution is better than the tragic chaos of people dying w/out recovery and all the money going to lawyers o Rather, they ask w/t this mode of litigating this lawsuit is superior to the alternative which is only theoretically available of individualized lawsuits o BUT: Breyers response if this wasnt the real world and individual Ps could actually file their own lawsuits this would be great The reality is that these people cannot file claims, they take too long and lawyers get all the money bad Adequacy Deals w/this question about sub-classes we are going to have to have sub-classing to deal w/this problem and ensure it is structurally fair o The process of the sub-classing is going to have an impact on the fairness of the settlement o Settling parties achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected Ginsburg sees this use of R23 here as violative of the Rules Enabling Act If R 23 is going to do this much work we are now abridging substantive rights under state law and we just cant do that o Rule 23b3 permits certification where class suit may nevertheless be convenient and desirable. Advisory Committee had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all. Dissent Breyer First, the majority understates the importance of settlement in this case o These lawsuits have consumed tremendous resources in the Federal System Second, no idea how one could decide whether common questions predominate in the abstract without looking at what is likely to be at issue in the proceedings that will ensue the settlement o The settlement underscored the importance of A The common fact of exposure,

B The common interest in receiving some compensation for certain rather than running a strong risk of no compensation, and C The common interest in avoiding large legal fees, other transaction costs, and delays o AFL-CIO wants this to happen the alternative of individualized litigation is not real and Congress is just not going to address this issue courts can just step aside and wash their hands of this problem Third, the problem of the currently injured securing payments now which jeopardize future payments to people who become injured in the future often exists in toxic tort cases o D. Ct. determined that the exposure-only Ps derived significant value from the settlement and make the call that certification was in order Fourth, the basic fairness of the settlement does not seem as clear as the majority believes it o This isnt unfair talented people on both sides of the case o This will reduce payments to lawyers good thing

Back to Top Amchem Products, Inc. v. Windsor (US 1997) Complaint identifies nine lead plaintiffs, designating them and members of their families as representatives of a class comprised of all persons who had not previously sued any of the asbestos-manufacturing companies that are petitioners in this suit, but who (1) had been exposed-occupationally or through the occupational exposure of a spouse or household member-to asbestos attributable to a petitioner, or (2) whose spouse or family member had been so exposed. Stipulation of settlement accompanied the pleadings o Proposed to settle, and to preclude nearly all class members from litigating against CCR companies, all claims not filed before January 15, 1993, involving compensation for present and future asbestos-related personal injury or death. o For each qualifying disease category, the stipulation specifies the range of damages CCR will pay to qualifying claimants. o Payments under the settlement are not adjustable for inflation. o Class members, in the main, are bound by the settlement in perpetuity, while CCR defendants may choose to withdraw from the settlement after ten years o Administration of the settlement will be monitored by the AFL-CIO and class counsel This class was certified various class members raised objections to the settlement stipulation several objections o Rejecting these and all other objections, Judge Reed concluded that the settlement terms were fair and had been negotiated without collusion. o He also found that adequate notice had been given to class members Strenuous objections had been asserted regarding the adequacy of representation, a R23a4 requirement

o Objectors maintained that class counsel and class representatives had disqualifying conflicts of interests. Claimants whose injuries had become manifest and claimants without manifest injuries should not have common counsel and should not be aggregated in a single class Court (Ginsburg) Rule 23b3 permits certification where class suit may nevertheless be convenient and desirable. o Seeks to cover cases in which a class action would achieve economies of time, effort, and expense, and promote ... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. o Advisory Committee had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all. Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems o Other specifications of the Rule those designed to protect absentees by blocking unwarranted or overbroad class definitions demand heightened attention in the settlement context. Safeguards provided by the Rule 23(a) and (b) class-qualifying criteria have use in the settlement-class context o First, the standards set for the protection of absent class members serve to inhibit class certifications dependent upon the courts overarching impression of the settlement's fairness. o Second, if a fairness inquiry under Rule 23(e) controlled certification, eclipsing Rule 23(a) and (b), and permitting class designation despite the impossibility of litigation, both class counsel and court would be disarmed o Federal courts lack authority to substitute for Rule 23s certification criteria a standard never adopted by the rulemakers that if a settlement is fair, then certification is proper. Predominance Argument that settlements fairness is a common predominant question rejected o The benefits asbestos-exposed persons might gain from a grand-scale compensation scheme is not pertinent to the predominance inquiry o The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. o If a common interest in a fair compromise could satisfy the predominance requirement of Rule 23b3, that vital prescription would be stripped of any meaning in the settlement context o The [exposure-only] plaintiffs especially share little in common, either with each other or with the presently injured class members. It is unclear whether they will contract asbestos-related disease and, if so, what disease each will suffer They will also incur different medical expenses

o Differences in state law compound these disparities o Mass accident cases are likely to have predominance problems and are ordinarily not appropriate for class treatment Adequacy Named parties with diverse medical conditions sought to act on behalf of a single giant class rather than on behalf of discrete subclasses o Terms of the settlement reflect essential allocation decisions designed to confine compensation and to limit defendants' liability o Settling parties achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected

Dissent Breyer w/Stevens First, the majority understates the importance of settlement in this case o These lawsuits have consumed tremendous resources in the Federal System o The court believed this would create a more fair and efficient compensation system Second, no idea how one could decide whether common questions predominate in the abstract without looking at what is likely to be at issue in the proceedings that will ensue the settlement o The settlement underscored the importance of A The common fact of exposure, B The common interest in receiving some compensation for certain rather than running a strong risk of no compensation, and C The common interest in avoiding large legal fees, other transaction costs, and delays o Determination on sub-classes was better left to the discretion of the D. Ct. Third, the problem of the currently injured securing payments now which jeopardize future payments to people who become injured in the future often exists in toxic tort cases o D. Ct. determined that the exposure-only Ps derived significant value from the settlement and make the call that certification was in order o This is a call which they deserve deference in making Fourth, the basic fairness of the settlement does not seem as clear as the majority believes it Back to Top SCs Reasons for Rejecting Certification in Fireboard This doesnt work for a limited fund the common char. of a limited fund 23b1 CA is that its all in and nobody is holding back anything o Everyone participating in the deal gets the most they ever could o No D should get a better deal than they would have w/individual suits o Every P gets a pro rata share everyone w/in property classes is treated equally o These are required prerequisites to having a limited fund CA Not just sufficient components

1st Problem Uncritical adoption by the D. Ct. and COA of figures agreed upon by the parties in defining the limits of the fund and demonstrating its inadequacy o Day after settlement was announced the companys stock went up Ct. thinks company benefiting is not consistent w/limited fund suits o 1st difficulty w/certifying limited fund treatment of huge numbers of actions for non-liquidated damages arising from mass torts is computation of total claims o 2nd Element also not met here they did not make the showing of insufficiency of funds required for an limited fund action There is no independent valuation of the insurance settlement which the D is here just offering up to the plaintiffs o Breyer again dissents few people roll over on $1.5 billion nd 2 Problem There is a need for inclusiveness of the class and fairness of distributions to those within it o Definition of the class includes people with myriad causes of action or foreseeable causes of action people with no disease yet who are locked in The settled inventory claims appear to have better settlement terms for their situations than others o Total equity in division among class members must be sought through provision of procedures to resolve different issues First Amchem requires that a class divided between holders of present and future claims requires division into homogeneous subclasses under 23c4B Second The class included people exposed b/f and after 1959 Ds insurance coverage from their primary provider covers only pre-1959 claims making those claims much more valuable 3rd Problem This settlement certification departs from limited fund requirements in providing a fund smaller than the assets available for payment of claims Notably, Fibreboard was allowed to retain virtually its entire net worth o Fireboards retention of its net worth is incompatible with the justification of necessity in denying any opportunity for withdrawal of class members whose jury trial rights will be compromised, whose damages will be capped and whose payments will be delayed

Back to Top Ortiz v. Fibreboard Corp. (US 1999) This dealt w/a situation where the company itself was in a precarious situation about to go BK. Big substance for the settlement would be a $1.5 billion stake from a settlement of insurance litigation the insurance companies will put this money up and it will be the bulk of the recoveries against the settlement. In doing so, they will settle a separate action then-proceeding between them and the company regarding their liability. The lawyers set this up as a limited fund class action (b2) this is a limited fund action in that this is all the money we will put into the settlement. The bulk of w/is going in there is the insurance settlement. Because this is a limited fund action, there are no opt-outs for the Ps.

If you are representing P class you have a company worth $200 million with a hope that they will have a massive billion dollar recovery from insurance companies Or, you can take $1.5 billion and a couple nickels from company lots of money and your clients can recover against it In this plan, the company will survive but the company is not going to settle itself out of existence. They might go bk if they loose but they wont settle themselves into oblivion. Instead they just tell Ps they can have insurance settlement.

Court (Souter) Inherent tension between representative suits and the day-in-court ideal is magnified if applied to damage claims gathered in a mandatory class o Unlike 23b3 actions, objectors to the collectivism of a mandatory subdivision 23b1B action have no inherent right to abstain 1st Problem Uncritical adoption by the D. Ct. and COA of figures agreed upon by the parties in defining the limits of the fund and demonstrating its inadequacy o When a D. Ct. certifies for settlement only, the moment of certification requires heightened attention o 1st difficulty w/certifying limited fund treatment of huge numbers of actions for non-liquidated damages arising from mass torts is computation of total claims o 2nd Element also not met here they did not make the showing of insufficiency of funds required for an limited fund action There is no independent valuation of the insurance settlement which the D is here just offering up to the plaintiffs nd 2 Problem There is a need for inclusiveness of the class and fairness of distributions to those within it o Definition of the class includes people with myriad causes of action or foreseeable causes of action The settled inventory claims appear to have better settlement terms for their situations than others Even ostensible parity between settling nonclass Ps and class members would be insufficient to overcome the failure to provide structural protection of independent representation for the subclasses w/conflicting interests o Total equity in division among class members must be sought through provision of procedures to resolve different issues First Amchem requires that a class divided between holders of present and future claims requires division into homogeneous subclasses under 23c4B Second The class included people exposed b/f and after 1959 Ds insurance coverage from their primary provider covers only pre-1959 claims making those claims much more valuable Another instance is disparate interests within the class 3rd Problem This settlement certification departs from limited fund requirements in providing a fund smaller than the assets available for payment of claims Notably, Fibreboard was allowed to retain virtually its entire net worth

o Fireboards retention of its net worth is incompatible with the justification of necessity in denying any opportunity for withdrawal of class members whose jury trial rights will be compromised, whose damages will be capped and whose payments will be delayed Advantage of CA is the saving of transaction costs from piecemeal litigation of claims o D. Ct. seemed to have this in mind when it certified this CA o Question remains open whether a credit may be recognized as an incentive to settlement of the saving transaction costs that would never have gone into a class members pocket absent the settlement

Additional Notes This doesnt work for a limited fund The common chars of a limited fund 23b1 CA is that its all in and nobody is holding back anything o Everyone participating in the deal gets the most they ever could o No D gets a better deal than they would have w/individual suits o Every P gets a pro rata share everyone w/in property classes is treated equally o These are required prerequisites to having a limited fund CA Not just sufficient components Three Problems SC had 1 People with no disease yet who are locked in o No recognition about whether disease was b/f or after 1959 claims much insurance coverage is just pre-1959 claims o Not going to let you use a b3 claim to lock people in b1 was better 3 ADR steps you must go through in damage caps 1 Uncritical adoption by D. Ct. and 5th circuit of party figures about limits of the fund and its adequacy o Day after settlement was announced the companys stock went up o Ct. thinks company benefiting is not consistent w/limited fund suits o There was no hard look at the likelihoods in that insurance litigation o Breyer again dissents few people roll over on $1.5 billion This is part of the theme of REA FRCP 23 cannot be used in a fashion which would preclude somebody from getting a bigger recovery through the b1 action than they would otherwise o Because there is no opt-out here you are creating a Seventh Am issue w/trial rights Book Note Problems in CA of exit, loyalty and voice in democratic representation in the CA context SC has focused on loyalty and class cohesion and fears a division of a class into warring sects of subclasses which may weaken the claim that CA is superior to adjudication of individual claims H/e class reps pay little role in actual litigation of class claims so voice may not be the problem

Better solution might be to increase exit opportunities for class members at all stages of the litigation ensures they may opt out when a settlement is not in their best interests Possible problems w/uninformed Ps not knowing to opt out