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International Aspects of U.S. Litigation: A Practitioner's Deskbook

International Aspects of U.S. Litigation: A Practitioner's Deskbook

Автор James Berger

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International Aspects of U.S. Litigation: A Practitioner's Deskbook

Автор James Berger

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Издано:
1 июн. 2018 г.
ISBN:
9781634255585
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Описание

International Aspects of U.S. Litigation addresses the topics that arise when international disputes find their way to U.S. courts, which they do with great frequency. The purpose of this book is to explain the authority and competence of American courts with regard to international disputes and explore the topics that arise most often—and cause practitioners the greatest amount of confusion and difficulty—in connection with those disputes. Topics covered include:

A basic overview of the U.S. court system

Concepts of subject matter and personal jurisdiction

Concepts of forum and venue

Governing law, and choice-of-law

Discovery

Judgment

Arbitration

Sovereign litigation, bankruptcy, and trade disputes

Издатель:
Издано:
1 июн. 2018 г.
ISBN:
9781634255585
Формат:
Книга

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International Aspects of U.S. Litigation - James Berger

Editor

PART I

JURISDICTION, VENUE, AND SERVICE OF PROCESS

Chapter I.A

THE BASICS OF U.S. JURISDICTION

James E. Berger • Victoria Ashworth*

The U.S. judiciary is a product of American Federalism, a political philosophy premised on a profound distrust of centralized government. One of the fundamental tenets of federalism was that the states of the Union would retain their sovereignty, and consequently the majority of power, vis-à-vis the federal government. In this vein, the nation’s founding fathers specifically contemplated that the states would be self-regulating, subject to the supremacy of the federal government only in those areas where the federal government is permitted by the U.S. Constitution to regulate national affairs.¹ Over the past 200 years, the visage of federalism has changed, and the balance of power between the federal government and the states has undoubtedly shifted. Nevertheless, the American judicial system, perhaps more than the other two branches of government, continues to reflect this founding principle.

As such, the U.S. judiciary is characterized by a parallel court system comprised of state courts of general jurisdiction and federal courts of limited jurisdiction. Jurisdiction here refers to a court’s authority to hear and decide a particular type of case. In short, a court of general jurisdiction can hear any kind of case, and a court of limited jurisdiction can hear only those matters it is specifically authorized to entertain. Generally speaking, the U.S. Constitution and, to a large extent, the U.S. Congress control the limits of federal jurisdiction by expressly delineating the types of matters that federal courts are entitled to hear. State courts enjoy the largely exclusive power to handle everything else.

Although the jurisdiction of state courts and federal courts is distinct, it is often overlapping. For example, some cases otherwise falling within the jurisdiction of state courts can—in certain instances—be removed to federal court. Conversely, many cases arising under federal law may be heard by state courts.² This chapter provides an introductory discussion of the U.S. judiciary, with an emphasis on how the parallel state and federal judiciaries coexist and complement each other.

I. JURISDICTION OF STATE COURTS

There are fifty states in the Union, and each has its own independent judiciary created by the constitution and/or laws of the state.³ State courts are courts of general jurisdiction, meaning they have the authority to entertain any case brought before them that has sufficient connection with the state. For example, a state court could hear a property claim relating to land in the state, a matrimonial claim between residents of the state, a contract claim between individuals or entities within the state, and a criminal claim relating to a breach of the laws or statutes of the state. In all but a few limited instances, state courts also have concurrent jurisdiction over claims arising under federal law and have the authority to construe, apply, and adjudicate claims arising under federal law, including the U.S. Constitution. The vast majority of civil lawsuits brought in the United States are brought before state courts rather than federal courts.⁴

Most states have—to varying degrees—allocated jurisdiction over particular matters to specific courts. State courts of limited jurisdiction, also known as inferior jurisdiction courts, include municipal courts, probate courts, juvenile courts, family courts, and small claims courts. These courts are generally presided over by a magistrate judge or justice of the peace who hears matters relating to a particular subject (e.g., probate) or matters relating to lesser sums of money or misdemeanor crimes that do not warrant a hearing before a court of superior jurisdiction (i.e., a superior court).

Superior courts (also referred to as district, common pleas,⁵ circuit or county courts, and—in the case of New York—the supreme court) have jurisdiction over any case that does not fall within the exclusive jurisdiction of another court (e.g., an inferior or federal court). In other words, there exists a presumption that state courts have subject matter jurisdiction. Matters heard by superior courts are generally civil matters where the amount in controversy meets a specified minimum threshold and trials for felony crimes.

Generally, superior courts are trial courts or courts of original jurisdiction. Original jurisdiction refers simply to a court’s authority to entertain a matter from its inception as contrasted with appellate jurisdiction, discussed below. In trial courts, evidence and testimony are presented to the finder of fact pursuant to the applicable rules of procedure of the state and/or the particular court. The finder of fact (i.e., the person or persons who make determinations of fact based on the evidence presented) is often a jury but can also be the judge presiding alone, a procedure referred to as a bench trial. The judge is always the arbiter of the law and makes findings of law based on the arguments presented. In the case of a bench trial, the judge is the arbiter of both fact and law.

Decisions of the superior courts are generally appealable to a state’s intermediate appellate court, often called the court of appeals.⁶ And decisions of a court of appeals are generally appealable to a state’s court of last resort (i.e., the highest court in the state), which is often called the supreme court. Appeal to state courts of last resort is typically not available as of right (meaning the court must hear the appeal) but only with permission of the court (or the court from which appeal is sought).⁷ Notably, there is no constitutional right to appellate review of state court decisions.⁸ In most states, however, a party is statutorily entitled to one appeal as of right.

Most appeals are handled at the intermediate level and are usually presided over by a panel of two or three judges. A state’s supreme court generally only agrees to review a case in circumstances involving highly controversial matters, unique points of law, and/or issues that have been decided differently by different appellate courts in the jurisdiction. A decision by a state supreme court is generally final and nonappealable. The state supreme court is the final arbiter of the laws and constitution of that state. The only avenue of appeal from a state court of last resort arises where the state court rules on an issue of federal law or where the court’s ruling on state law implicates a principle of federal constitutional law, in which case the decision may be appealed to the U.S. Supreme Court.

Generally, trial courts create and maintain a record of the evidence and argument presented. On appeal, the record is certified and transmitted to the relevant appellate body. Appellate courts have limited jurisdiction in the sense that they are generally only competent to make rulings on matters of law or in relation to serious procedural errors. In other words, appellate courts generally cannot consider evidence or testimony not already presented to the trial court.¹⁰ Moreover, appellate courts are generally restricted to hearing only matters that were originally presented to the trial court. In other words, an appellant is not permitted to advance a new theory on appeal.¹¹

Finally, state court judges—unlike federal judges—are not appointed for life but are either elected or appointed (or some combination of the two) for a set number of years.

II. JURISDICTION OF FEDERAL COURTS

Federal courts fall into one of two categories depending on their provenance. Article III courts are those federal courts expressly provided for by Article III of the U.S. Constitution (i.e., the Supreme Court) or created by Congress pursuant to Article III. Article III provides in relevant part that [t]he judicial power of the United States, shall be vested in one supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.¹² Beginning with the Judiciary Act of 1789¹³ and continuing until 1982 when Congress added the Federal Circuit,¹⁴ Congress has created over 100 inferior federal courts.

The federal court system has gone through several permutations over the past 200 years. At present, there are 94 U.S. district courts in the United States spread over 12 regional circuits. The district courts are the trial courts (i.e., courts of original jurisdiction) of the federal system. Every state has at least one district court. Larger states such as New York have multiple district courts covering various regions within the state (i.e., the Eastern District of New York, the Western District of New York, the Southern District of New York, and the Northern District of New York).

Every circuit has one U.S. circuit court of appeals that hears appeals from decisions of the district courts located within its circuit. There is a thirteenth U.S. circuit court of appeals, the U.S. Court of Appeals for the Federal Circuit, which sits in Washington, D.C., and has nationwide jurisdiction over cases involving the federal intellectual property laws and claims against the United States. Circuit courts generally sit in panels of three judges, although they occasionally will rehear cases en banc, meaning all active members of the court will hear and vote on the case.

Decisions of the circuit courts (and, in very rare cases, the district courts and state supreme courts) are appealable to the U.S. Supreme Court by way of petition. A petition requesting the Supreme Court consider a matter is called a Petition for a Writ of Certiorari (or "cert.). The Supreme Court grants cert. to a very small percentage of the cases it is petitioned to hear. Generally, the cases selected implicate important constitutional issues and/or involve issues that have been decided differently by different circuit courts (i.e., there is a circuit split"). The Supreme Court is comprised of nine judges, called justices, and presided over by a chief justice.¹⁵

As appellate courts (like appellate courts at the state level), the circuit courts and the Supreme Court only review cases for mistakes of law and clearly erroneous factual findings made by the lower courts. The factual record generally is not open for reconsideration or addition. The exception to this is that the Supreme Court does have original jurisdiction, which is exercised rarely, over cases involving ambassadors and cases brought by one state against another.

Another special Article III court created by Congress is the U.S. Court of International Trade, which sits in New York and handles cases involving tariffs and international trade disputes.¹⁶

The second type of federal courts are Article I courts. Article I courts are courts created by Congress that have a very specific mandate. They are the bankruptcy courts, which handle cases under the Bankruptcy Code; the U.S. Court of Claims, which handles monetary claims against the government; the U.S. Court of Military Appeals, which handles appeals arising from cases tried under the Uniform Code of Military Justice; the U.S. Tax Court, which handles cases arising over alleged tax deficiencies; and the U.S. Court of Veterans Appeals, which handles cases involving veterans’ rights.

As set forth at the outset, federal courts are courts of limited jurisdiction. When a case is brought before a federal tribunal, the court must first determine that it has the authority to handle the type of case (i.e., that it has subject matter jurisdiction). By contrast, as discussed above, state courts are courts of general jurisdiction and therefore may hear virtually any type of case properly brought before them. In the case of Article I courts and the special Article III courts, their jurisdiction is limited to hearing cases regarding the subject matter for which they were created (e.g., bankruptcy, international trade, tax matters, and so on).

The jurisdiction of the other Article III courts (e.g., the U.S. district courts) is limited to the categories of cases as set out in Title 28 of the United States Code sections 1330 through 1332. The two main categories of cases over which the federal courts have jurisdiction are federal question and diversity cases. Section 1331 provides that [t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States. This jurisdiction is referred to as federal question jurisdiction, which was first granted to federal courts by Congress in 1875.¹⁷ Cases arising under federal question jurisdiction are generally cases that involve the breach of a federal statute or are related to the constitutionality of a given law or regulation. Such cases include disputes between states, claims relating to intellectual property, admiralty, antitrust, securities and banking regulation, civil rights, labor relations, environmental issues, and cases involving federal crimes.

Title 28 of the United States Code section 1332 provides for what is called diversity jurisdiction.¹⁸ In brief, diversity jurisdiction exists where all the parties to a particular case are from different states (or countries) and the amount in controversy exceeds $75,000. In other words, any claim that would otherwise fall within the exclusive jurisdiction of a state court may be brought in (or removed to) federal court if the parties are diverse and the claim is of a certain size. The historical rationale for diversity jurisdiction stems from the concern that a state court would be—or would appear to be—biased against an out-of-state party. Today, the issue of whether to bring a case where diversity jurisdiction is available in state or federal court is most often a tactical determination made by the practitioner.

III. CONCURRENT JURISDICTION

The circumstance of both a state and a federal court being seized of jurisdiction of a particular matter is referred to as concurrent jurisdiction. As noted above, state courts have authority to rule on matters of federal law, and federal courts, typically in diversity cases, frequently rule on issues of state law. As the Supreme Court recently reiterated, In cases ‘arising under’ federal law [i.e., federal question cases], we note, there is a ‘deeply rooted presumption in favor of concurrent state court jurisdiction,’ rebuttable if ‘Congress affirmatively ousts the state courts of jurisdiction over a particular federal claim.’ One example of Congress ousting the state courts of jurisdiction over a particular subject matter is Title 28 of the United States Code section 1333, which provides that "[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of (1) Any civil case of admiralty or maritime jurisdiction" (emphasis added). Other areas where Congress has legislated the exclusivity of federal court jurisdiction include bankruptcy matters and proceedings; patent and copyright cases; actions against consuls and vice consuls; actions or proceedings for the recovery or enforcement of civil fines, penalties, or forfeitures incurred under federal statutes; seizures under the laws of the United States on land or on waters not within the admiralty or maritime jurisdiction; and crimes against the United States.¹⁹

The presumption of concurrent state court jurisdiction can also be overcome by an explicit statutory directive, by unmistakable implication from legislative history, or by clear incompatibility between state-court jurisdiction and federal interests.²⁰ When a state court does exercise its jurisdiction over a case arising under federal law, it subjects itself to the following two conditions that secure state-court compliance with and national uniformity of federal law, namely, that (1) state courts must interpret and enforce faithfully the supreme laws of the land; and (2) the state courts’ decisions are subject to review by the United States Supreme Court.²¹ In such circumstances, the Supreme Court limits its review solely to that part of the decision that implicates federal law and/or has a federal constitutional dimension. In other words, the Supreme Court may review a state court decision only insofar as it purports to handle a federal question. The Supreme Court may not review a state court’s interpretation of state law or any other decision (or part of a decision) that falls within the exclusive jurisdiction of state courts unless, as noted above, the state court’s application of state law implicates a principle of federal constitutional law.

IV. THE PRINCIPLE OF STARE DECISIS

With one limited exception,²² the United States is a common law country, and court decisions make up a large part of American law. Stare decisis is the common law principle that a court should decide cases predictably and in accordance with similar, previously decided matters, or precedent. Stated simply, courts are bound to follow precedential decisions of appellate courts. Stare decisis is an abbreviation of the latin phrase stare decisis et non quieta movere, which—literally translated—means to stand by decisions and not to disturb settled matters. As a general rule, courts are bound only by their own past decisions (sometimes referred to as horizontal stare decisis) and the decisions of their directly superior courts (sometimes referred to as vertical stare decisis).

Such decisions are referred to as binding authority. Binding authority—as the name implies—must be followed and/or may only be deviated from if a case is distinguishable (i.e., has sufficiently different facts as to make the precedent inapplicable) or where there is very good reason to overturn the existing law.

By contrast, persuasive authority is not binding and holds only as much weight as a given court is willing to accord it. The most commonly cited forms of persuasive authority include decisions from similarly situated (or sister) courts, decisions from foreign courts, and excerpts from encyclopedias, treatises, or other academic works. For example, a decision of the Eastern District Court of New York might be cited as persuasive authority before the District Court of New Jersey. Decisions of the United Kingdom’s House of Lords (now the Supreme Court of the United Kingdom) are occasionally cited as persuasive authority before U.S. courts, particularly in historical cases or cases where an international authority could be seen as being helpful.

Given the United States’ parallel judicial system, there is an interesting interplay between the precedential authority of decisions of state and federal courts. The U.S. Supreme Court is the highest court in the land, and therefore its decisions constitute binding authority on matters of federal law. Consistent with the system of dual sovereignty, however, federal courts are not considered superior to state courts, and decisions of lower federal courts on either federal or state law are not binding on state courts. By contrast, federal courts are bound by decisions of a state’s highest court on questions of state law, which is a state court’s exclusive province of authority.²³

Indeed, even in cases where a federal court is seized of jurisdiction of a matter, if an unsettled question of state law arises, the federal court may employ a process known as certification, where it formally submits the question for final (and therefore binding) determination by the relevant state supreme court.²⁴

Certification of questions of law by a federal court to a state court is governed by state constitution, statute, or court rule. Most states have adopted some form of the Uniform Certification of Questions of Law Act,²⁵ which provides generally as follows:

The [STATE] supreme court may answer questions of law certified to it by the supreme court of the United States, a court of appeals of the United States, a United States district court or the highest appellate court or the intermediate appellate court of any other state, when requested by the certifying court if there are involved in any proceeding before it questions of law of this state which may be determinative of the cause then pending in the certifying court and as to which it appears to the certifying court there is no controlling precedent in the decisions of the supreme court and the court of appeals of this state.²⁶

As set out above, a federal court will generally only certify a question for state court determination if the following factors are met: (1) the question of law is unsettled and/or there is a lack of definitive state court authority on point; (2) the issue is one of importance to state policy; and (3) a determination of the issue by the state court is likely to be determinative in the litigation.²⁷ Certification is not obligatory, however, and a federal court may refuse to certify a question in circumstances in which it believes it is able to make a confident guess as to how the state’s highest court would rule.²⁸ Finally, it is the state court’s prerogative whether to accept the question certified.

Where a state court refuses to entertain a certified question, however, (or, more generally, where certification has not been sought), a federal court may abstain from ruling on a matter it determines is (or should be) first addressed by the state court.²⁹ As discussed more fully in Chapter I.B, there are several so-called abstention doctrines that may apply depending on the type of issues litigated and the procedural posture of the case. For example, a federal court may abstain where the issue is the constitutionality of a state law if the state court has not had the opportunity to rule on the matter previously;³⁰ where an individual is seeking redress for a civil rights violation if the state has not completed its prosecution of the matter;³¹ where the state court has greater expertise in a particular matter and/or the case implicates significant public policy issues best addressed by the state;³² or simply where parallel litigation would be duplicative and wasteful.³³

* James E. Berger is a partner in the Global Disputes practice at King & Spalding LLP, based in New York. Mr. Berger received his J.D. from Fordham University School of Law and his B.A. from George Washington University. Victoria Ashworth is Executive Director for Asia-Pacific Litigation at J.P. Morgan Chase Bank, based in Hong Kong. Ms. Ashworth received her J.D. from the National Law Center at George Washington University and her B.A. from Colgate University.

1. U.S. CONST. amend. X (The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.); see also, e.g., United States v. Darby, 312 U.S. 100, 124 (1941) (The [Tenth Amendment] states but a truism that all is retained which has not been surrendered. There is nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and state governments as it had been established by the Constitution before the amendment or that its purpose was other than to allay fears that the new national government might seek to exercise powers not granted, and that the states might not be able to exercise fully their reserved powers.).

2. For a detailed discussion of the subject matter jurisdiction of federal courts, see Chapter I.B, infra.

3. The District of Columbia falls within the exclusive jurisdiction of Congress and is therefore not part of any state, but it is treated as a state for many purposes. U.S. CONST. art. 1, § 8. The Superior Court of the District of Columbia is the trial court, which exercises original jurisdiction over most cases. The Court of Appeals of the District of Columbia serves as the court of last resort on matters of District of Columbia law. The District of Columbia is the only jurisdiction in the nation in which federal prosecutors (the U.S. Attorney’s Office as opposed to local government) prosecute both federal and non-federal crimes.

4. For example, roughly three times as many civil cases are filed in California alone as in all U.S. district courts combined. State and federal caseload statistics are respectively available at http://www.courtstatistics.org/Other-Pages/StateCourtCaseloadStatistics.aspx and http://www.uscourts.gov/Statistics/JudicialBusiness/2012/judicial-caseload-indicators.aspx.

5. In Pennsylvania, the Court of Common Pleas is the court of original jurisdiction and the Superior Court is one of two intermediate appellate courts of the state.

6. Delaware, the District of Columbia, Maine, Montana, Nevada, New Hampshire, North Dakota, Rhode Island, South Dakota, Vermont, West Virginia, and Wyoming do not have intermediate appellate courts.

7. See, e.g., N.Y. CODE art. 56 (Appeals to the Court of Appeals) at C.P.L.R. §§ 5601 and 5602. (In short, appeals from final determinations of the appellate division are available as of right where two justices dissent on a question of law and/or where the decision implicates a significant constitutional issue. Generally, any final determination of the appellate division—if it is not appealable as of right—can be appealed if permission is granted by either the appellate court or the court of appeals pursuant to the rules that govern those courts. In practice, however, the court of appeals only grants permission where a significant legal issue is involved. Such circumstances include instances in which the court of appeals deems it necessary to address (1) a split in authority among the departments of the appellate division; (2) statutory construction in developing areas of regulation; (3) emerging areas of common law; (4) outmoded precedent; and/or (5) errors of law committed by the Appellate Division.)

8. See Smith v. Robbins, 528 U.S. 259, 270 n.5 (2000), 120 S. Ct. 746, 145 L. Ed. 2d 756 ([t]he Constitution does not … require states to create appellate review in the first place) (citations omitted); M.L.B. v. S.L.J., 519 U.S. 102, 110, 117 S. Ct. 555, 136 L. Ed. 2d 473 (1996) (the Federal Constitution guarantees no right to appellate review) (citation omitted).

9. See, e.g., J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) (U.S. Supreme Court granted certiorari to hear case involving state court’s exercise of jurisdiction under state long-arm statute and analysis of federal due process implications of exercise of jurisdiction).

10. See, e.g., Brown v. City of New York, 60 N.Y.2d 893, 894 (1983).

11. See, e.g., Bingham v. New York City Trans. Auth., 99 N.Y.2d 355, 359 (2003).

12. U.S. CONST. art. III, § 1.

13. Act of Sept. 24, 1789, ch. 20, 1 Stat. 73.

14. Act of Apr. 2, 1982, Pub. L. No. 97-164, 96 Stat. 25.

15. At the time of this writing, the Chief Justice of the Supreme Court is John G. Roberts, Jr., and the seven active Associate Justices are Anthony M. Kennedy; Clarence Thomas; Ruth Bader Ginsburg; Stephen G. Breyer; Samuel Anthony Alito; Sonia Sotomayor; and Elena Kagan. One seat on the Supreme Court, the one held by the late Justice Antonin Scalia, remains vacant.

16. For a comprehensive discussion of trade disputes and the manner in which they are handled in the U.S. courts, see Chapter VI.C, infra.

17. See Act of Mar. 3, 1875, § 1, 18 Stat. 470.

18. 28 U.S.C. § 1332 provides in relevant part as follows:

(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—

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

(4) a foreign state, defined in section 1603 (a) of this title, as plaintiff and citizens of a State or of different States.

19. 13 FED. PRAC. & PROC. JURIS. § 3527 (3d ed.) (citations omitted).

20. Id. (quoting Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478, 101 S. Ct. 2870, 69 L. Ed. 2d 784 (1981)).

21. 32A AM. JUR. 2D FEDERAL COURTS § 911 (citing McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Dept. of Business Regulation of Florida, 496 U.S. 18, 110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990)).

22. The law of the state of Louisiana is unique in that it is derived from the French and Spanish civil codes rather than English common law.

23. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817 (1938) (holding that decisions of a state’s highest court on matters of state law are binding on federal courts pursuant to the Rules of Decision Act); and 28 U.S.C. § 1652 (The laws 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.).

24. See, e.g., PRACTICE HANDBOOK ON CERTIFICATION OF STATE LAW QUESTIONS BY THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT TO THE NEW YORK STATE COURT OF APPEALS (2d ed. 2006), available at http://www.nycourts.gov/ctapps/forms/certhandbk.pdf; see generally Rebecca A. Cochran, Federal Court Certification of Questions of State Law to State Courts: A Theoretical and Empirical Study, 29 J. LEGIS. 157 (2003).

25. See Judith S. Kaye & Kenneth I. Weissman, Interactive Judicial Federalism: Certified Questions in New York, 69 FORDHAM L. REV. 373 n.1 and Appendix A (2000), available at http://ir.lawnet.fordham.edu/flr/vol69/iss2/3.

26. See, e.g., IOWA CODE at Cap. 684A.1 et seq.; KANSAS CIV. P. at arts. 60-3201 et seq.; MARYLAND CODE at §§ 12-601 et seq.; NORTH DAKOTA RULES OF APPELLATE PROCEDURE at R. 47; see also UNIFORM CERTIFICATION OF QUESTIONS OF LAW [ACT] [RULE] (1995), available at http://www.uniformlaws.org/shared/docs/certification_of_questions_of_law/ucqla_final_95.pdf.

27. See Casey v. Merk & Co., Inc., 653 F.3d 95 (2d Cir. 2011) (citing U.S. Ct. of App. 2d Cir. Rules § 27.2).

28. See 36 C.J.S. Federal Courts § 81 (citing Clay v. Sun Ins. Office Limited, 363 U.S. 207, 80 S. Ct. 1222, 4 L. Ed. 2d 1170 (1960)).

29. 36 C.J.S. FEDERAL COURTS § 84 (citing Cuesnongle v. Ramos, 835 F.2d 1486 (1st Cir. 1987)).

30. See, e.g., Railroad Commission v. Pullman Co., 312 U.S. 496 (1941).

31. See, e.g., Younger v. Harris, 401 U.S. 37 (1971).

32. See, e.g., Burford v. Sun Oil Co., 319 U.S. 315 (1943); Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25 (1959).

33. See, e.g., Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

Chapter I.B

SUBJECT MATTER JURISDICTION

Edward M. Mullins • Douglas J. Giuliano*

I. INTRODUCTION

A fundamental principle of the U.S. judicial system is that its federal courts are of limited jurisdiction. At its most basic, this means that a federal court’s authority to adjudicate a case is not unlimited but instead is finite and is confined to the categories of cases enumerated in the U.S. Constitution as well as to those statutorily dictated by Congress (within constitutional bounds).¹ This concept, which is known as subject matter jurisdiction, applies to all federal courts, ranging from the so-called Article I courts, to Article III district courts, to the circuit courts of appeal, and even the U.S. Supreme Court.

Because subject matter jurisdiction speaks to a court’s very competency to adjudicate a case, its significance cannot be overstated. Put simply, a judgment rendered by a court in a case over which the court lacks subject matter jurisdiction is void ab initio and of no effect—its effect is the same as if it never had been entered.² Indeed, subject matter jurisdiction is so important that it is one of the few types of defenses that are not subject to waiver, as it may be raised at any time by any of the parties, even after a judgment already has been rendered or after a case has gone up on appeal.³ Lack of subject matter jurisdiction even may be raised by a court sua sponte. To be sure, not only are courts authorized to raise the issue of subject matter jurisdiction on their own initiative if the parties have failed to do so, they have an affirmative duty to do so.⁴

This chapter examines issues relating to subject matter jurisdiction, including threshold obstacles such as what constitutes a case or controversy within the meaning of the Constitution, whether a litigant in federal court has the required standing to prosecute the suit, and the interrelated concepts of ripeness and mootness. Also to be examined are other obstacles that may prevent a court from adjudicating a case, including certain scenarios in which a court technically has subject matter jurisdiction but nonetheless will decline to exercise it, such as those implicating political questions or various other abstention doctrines. Other issues affecting a court’s ability to adjudicate a case, including Eleventh Amendment immunity, the independent and adequate state ground doctrine, and the Anti-Injunction Act, are also discussed. The chapter additionally examines the three principal bases for federal court jurisdiction—federal question, diversity, and supplemental jurisdiction—under which a federal court may adjudicate claims based on state law over which it otherwise would lack jurisdiction. Also addressed are the circumstances in which a case may be removed from state court to federal court. Finally, the jurisdiction of the federal courts relating to appeals is covered.

II. THRESHOLD MATTERS

A. Origin of the Federal Courts

Subject matter jurisdiction of U.S. federal courts is fixed by Article III of the U.S. Constitution. Specifically, Section 1 of Article III, entitled Judicial Powers, states the following:

The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behavior, and shall, at stated Times, receive for their Services a Compensation which shall not be diminished during their Continuance in Office.

As is evident from Section 1, the only federal court specifically mentioned in and created under the Constitution is the Supreme Court of the United States; otherwise, the Constitution generally refers to inferior courts that are within Congress’s power to create.⁵ Congress wasted no time, however, in utilizing the power vested in it by Section 1 and created the first 13 district courts through the Judiciary Act of 1789.⁶ Over a century later, in 1891, Congress created the first circuit courts of appeal through the Act of March 3, 1891 (also known as the Evarts Act).⁷ Together, these three courts—the Supreme Court, the district courts, and the circuit courts of appeal—are known as the Article III courts, since their existence stems from Article III, Section 1.⁸

In addition to the Article III courts, there are also the so-called Article I courts, which, as their name indicates, are derived from Article I of the Constitution, which deals with the legislative branch. A comprehensive discussion of Article I courts and how they differ from Article III courts is beyond the scope of this chapter. In summary, Article I courts, which include the bankruptcy, military appellate, and tax courts, are created with the legislative powers that are granted to Congress through Article I, which is why these courts are sometimes called legislative courts. The very first Congress made use of such a court.⁹ Along with their jurisdiction and powers being much more limited than the Article III, or constitutional courts,¹⁰ another major difference between the two types of courts is that Article III judges have lifetime tenure and salary protection, while Article I judges do not.

Whether dealing with Article III or Article I courts, certain conditions must be present in order for a case to be deemed justiciable before a federal court. The next section discusses these conditions, including what constitutes a case or controversy for purposes of jurisdiction and the requirement that litigants have standing to present their cases.

B. Case or Controversy

An unassailable principle of modern jurisdictional doctrine is that federal courts are prohibited from rendering advisory opinions, or, put another way, they only may decide disputes that amount to cases or controversies within the meaning of Article III, Section 2, Clause 1. Federal courts have steadfastly applied this principle since at least the 1911 Supreme Court decision in Muskrat v. United States.¹¹ There, the Court held it lacked jurisdiction over the dispute, which involved the validity of a law affecting Indian tribal lands, because although the U.S. government was named as a defendant, it did not have a real stake in the outcome of the case, and therefore the dispute was not a true case or controversy.¹²

This was not always the case, however. Very early in its history, the Supreme Court did render advisory opinions on occasion, mostly in the form of letters to the executive branch.¹³ The practice stopped in 1793, however, when, as recounted in Muskrat, then-Chief Justice of the Court, John Jay, in response to a request by President George Washington for legal advice on treaties with foreign nations, informed the president that in the Court’s view the giving of such advice was not supported by the Constitution.¹⁴

In any event, today there is no question that federal courts may only hear disputes that constitute a case or controversy within the meaning of Article III. The source of this limitation, Article III, Section 2, Clause 1, provides the following:

The 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;—to all Cases affecting Ambassadors, other public ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction;—to Controversies to which the United States shall be a Party;—to Controversies between two or more States;—between a State and Citizens of another State;—between Citizens of different States;—between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.¹⁵

Determining whether a particular dispute is a case or controversy, however, is easier said than done. The Supreme Court has observed that [t]he difference between an abstract question and a ‘case or controversy’ is one of degree, of course, and is not discernible by any precise test.¹⁶ In light of this, [t]he basic inquiry is whether the conflicting contentions of the parties present a real, substantial controversy between parties having adverse legal interests, a dispute definite and concrete, not hypothetical or abstract.¹⁷

From these and similar somewhat generalized statements, federal courts have fashioned tests to aid them in separating cases and controversies from nonjusticiable disputes. One such formulation, by the Ninth Circuit Court of Appeals, involves three prongs:

First, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.¹⁸

As this test indicates, and as will be seen in the next sections, the constitutional thresholds for a justiciable case—including that a case or controversy exists, that the litigants have standing, and that the case be ripe and not moot—are not treated abstractly or in a vacuum but rather are interrelated and considered together. To illustrate, although the Ninth Circuit described this test as being used to determine whether a dispute is a case or controversy, the Supreme Court case upon which it relied, Lujan v. Defenders of Wildlife, discussed the same test in the context of standing. Thus, the better approach is to consider these principles as the sum of a greater whole of constitutional thresholds that must be met for federal jurisdiction to exist instead of separately.

C. Standing

The concept of standing is that only individuals with a real and sufficient stake in the outcome of a controversy may have their disputes heard and decided in federal court. Standing is derived from the case and controversy principle of Article III, Section 2, Clause 1, in the sense that a party who lacks standing is not part of a true case or controversy. While standing certainly is not a modern invention—references to it may be found in cases dating at least to the 1860s¹⁹—the relatively recent case of Lujan v. Defenders of Wildlife in 1992 did serve to both cement the importance of standing as well as provide guidance for lower courts in determining whether standing is present.

Lujan involved a challenge by certain environmental groups against regulations passed by the Departments of Interior and Commerce under the Endangered Species Act. The Act required the Secretary of Interior to consult with other agencies when their actions threatened the continued existence of an endangered plant or animal. The regulations, however, interpreted the statute to apply to domestic activities, not to activities of U.S. agencies in other countries. The groups filed an action in district court against Manuel Lujan, the Secretary of the Interior, in an attempt to reverse these regulations, but the district court found that the groups lacked standing. The Eighth Circuit Court of Appeals reversed and remanded, however, and the plaintiff groups were victorious in the remanded action. After their victory was affirmed by the Eighth Circuit, the Supreme Court granted a writ of certiorari.

Citing to earlier cases, the Supreme Court stated that the irreducible constitutional minimum of standing contains three elements, the first being that the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.²⁰ The second element requires a causal connection between the injury and the conduct complained of—the injury has to be fairly … traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court.²¹ The third and final element is that it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.²²

Then, noting that the burden is on the plaintiff to show that the standing requirements are met, the Court applied this test to the plaintiffs’ claims and ultimately concluded that they lacked standing. The Court rejected the three principal theories asserted by the plaintiffs. The first of these was that two of plaintiffs’ members had visited, and hoped to revisit, some of the impacted areas. The second was the ecosystem nexus approach, which posited that any of plaintiffs’ members who utilized any part of world ecosystem had a cognizable interest in the whole ecosystem and suffered an injury when any part of that globally interwoven system is injured. The third theory was based on the animal nexus approach, under which it was said that people interested in study of the endangered animals had a cognizable interest in protecting the species they were interested in worldwide, even if they had no plans to visit the habitat.²³

The standing holding established in Lujan continues to be relied on by the Supreme Court and lower courts. For example, in an April 2011 case involving a challenge by taxpayers under the Establishment Clause, the Supreme Court applied the "minimum constitutional requirements for standing [that] were explained in Lujan" and found that the taxpayers lacked standing.²⁴

D. Mootness

The diametrically opposite but related doctrines of mootness and ripeness are an important part of a jurisdictional analysis. They serve to keep out of federal courts disputes that are either stale (moot) or premature (ripeness), even if the disputes otherwise would be justiciable.

Mootness may be thought of as an analysis of standing over a time frame. Standing requires that a real controversy exist between two or more litigants in order for a federal court to have jurisdiction. Under the mootness doctrine, it is not enough that a real controversy existed at some point. Instead, the doctrine requires that the controversy be in continuous existence throughout the litigation, including not only at the time the case is filed but also until a judgment is rendered.

Thus, if the circumstances surrounding a dispute change so as to render what was once a controversy sufficient to support jurisdiction into a moot point, a federal court will be unable to adjudicate the dispute. Typically, such change in circumstances will entail either a legal or factual change. An illustration of a legal change would entail a case in which a plaintiff sues to challenge the constitutionality of a statute believed to be unconstitutional. If after filing the case, the statute is repealed, the case presumably would be deemed moot and dismissed. An example of a factual change sufficient to render a case moot would be one in which a plaintiff brings a suit to enforce what it perceives to be another party’s anticipatory refusal to abide by a contract, but the defendant later performs the contract on schedule.

The mootness doctrine is not absolute. The three principal exceptions are (1) capable of repetition yet evading review; (2) voluntary cessation of challenged conduct; and (3) collateral consequences.²⁵

1. Capable of Repetition yet Evading Review

The first exception applies in cases involving injuries that are capable of recurrence yet of a short enough duration that each particular instance of the injury technically would be rendered moot before the case (including appellate review) could be fully adjudicated. This exception was applied by the Supreme Court in the famous (and still controversial) abortion case Roe v. Wade.²⁶ The mootness issue in Roe arose due to the duration of human pregnancies and how that duration would make it virtually impossible for the case of a woman challenging a law restricting abortion to make its way through the courts, and particularly appellate courts, before the case technically would be rendered moot due to the ending of the pregnancy.

In the Court’s view, such an inflexible application of the mootness doctrine would be neither fair nor sensible:

But when, as here, pregnancy is a significant fact in the litigation, the normal 266-day human gestation period is so short that the pregnancy will come to term before the usual appellate process is complete. If that termination makes a case moot, pregnancy litigation seldom will survive much beyond the trial stage, and appellate review will be effectively denied. Our law should not be that rigid.²⁷

The Court further noted that [p]regnancy often comes more than once to the same woman, and this, combined with the duration issue, rendered pregnancy a classic justification for a conclusion of nonmootness.²⁸ This exception has been invoked in a variety of circumstances.²⁹

2. Voluntary Cessation of Challenged Conduct

The second exception—voluntary cessation of challenged conduct—means that a case should not automatically be rendered moot simply because the defendant temporarily has ceased or promised to cease the conduct giving rise to the case. An example of a situation justifying this exception would be one in which a litigant seeks injunctive relief against another. Technically speaking, if the party sought to be enjoined ceased the offending activity, the need for the injunctive relief would be moot. Yet, courts hold that without a court order actually enjoining the party, there is nothing to prevent the offending party from resuming the offending activity. As one court noted, [i]t is well settled that a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice … [o]therwise, a party could moot a challenge to a practice simply by changing the practice during the course of the lawsuit, and then reinstate the practice as soon as the litigation was brought to a close.³⁰ Thus, only where there is no reasonable expectation that the accused litigant will resume the conduct after the lawsuit is dismissed will voluntary cessation be sufficient to render a case moot.³¹ As well, the burden is on the offending party to show that the complained-of conduct will not resume in the future.³²

3. Collateral Consequences

The third exception—collateral consequences—involves those cases when, although the plaintiff’s primary injury that led to the case being filed in the first place may have been rendered moot, collateral consequences stemming from that primary injury are deemed important enough to render the case not moot.

United States v. Schrimsher³³ involved an appeal by an attorney who had been found in criminal contempt of court. In rejecting an argument that the case had been rendered moot by the fact that the attorney had cleared the contempt by serving the jail time imposed by the court, the appellate court noted that the attorney had suffered other consequences as a result of the contempt, including his ability to attract clients and to represent them effectively, especially in open court.³⁴

E. Ripeness

Ripeness is the opposite facet of mootness. It precludes federal courts from hearing cases that are not sufficiently ripe for adjudication, since such unripe disputes do not present an actual case or controversy as is required for federal jurisdiction. Courts principally consider two factors in determining whether a case is sufficiently ripe. The first entails an evaluation of the fitness of the issues for judicial decision, while the second involves the hardship to the parties of withholding court consideration.³⁵

Application of the fitness standard is analyzed by asking whether the case involves uncertain or contingent future events that may not occur as anticipated, or indeed may not occur at all, while the hardship inquiry looks at whether the challenged action creates a direct and immediate dilemma for the parties.³⁶

A seminal example of a case where jurisdiction was found to be lacking due to unripeness is Poe v. Ullman.³⁷ There, the Supreme Court found that a case involving a challenge to a law banning the use of contraceptives was not ripe because no plaintiff had alleged that he or she had been prosecuted under the law, and in fact none had been. The Court observed that, despite the existence of the law on the books, contraceptives are commonly and notoriously sold in Connecticut drug stores and that no prosecutions are recorded.³⁸ It was clear, then, that the Court viewed the law as being more theoretical than actual, and that the seemingly unlikely threat of prosecution was insufficient to constitute a real case or controversy.

F. Concurrent vs. Exclusive Jurisdiction

With respect to most types of cases, federal courts do not have exclusive jurisdiction but rather have concurrent, or shared, jurisdiction with the courts of the various states. This stems from the federal nature of the U.S. government and in particular the concept of dual sovereignty recognized under that system, under which the various states retained their sovereignty subject to the proviso that such sovereignty would yield to that of the federal government when necessary to avoid conflict.³⁹

As a result, state courts are presumed to have the authority to adjudicate most types of cases, including ones involving or arising under federal law,⁴⁰ unless Congress statutorily has declared otherwise. Notable examples of cases falling exclusively within federal court jurisdiction include those involving patent and copyright;⁴¹ bankruptcy matters and proceedings;⁴² actions against consuls and vice consuls;⁴³ cases involving the recovery or enforcement of civil fines, penalties, or forfeitures under federal statutes;⁴⁴ maritime prize cases;⁴⁵ and crimes against the United States.⁴⁶

The Supreme Court has stated that in addition to explicit statutory directives such as those above, exclusive federal jurisdiction may be based on unmistakable implication from legislative history and when there is a clear incompatibility between state-court jurisdiction and federal interests.⁴⁷ These exceptions seem to be more theoretical than actual, particularly the second one relating to legislative history. For instance, Justice Scalia in his concurring opinion in Tafflin, in addition to noting that the Court never had found exclusive federal jurisdiction based on legislative history, seriously questioned whether such a finding ever could be based on legislative history. In his view, there is a significant difference between congressional action (as reflected in a statute) and congressional discussion (legislative history), and only the former would be sufficient to oust jurisdiction from state courts.⁴⁸

G. Political Questions

There are many instances where federal courts technically possess jurisdiction over a dispute, but nonetheless will decline to do so, based on prudential considerations. This is usually referred to under the rubric of justiciability. The first type of justiciability issue examined here involves political questions.

The concept of a court declining to adjudicate a political question stems from the separation of powers under the Constitution, the idea being that a court’s involvement with a political question would constitute an infringement by the Judiciary on the prerogatives of either the executive or the legislative branches.

A seminal case on political questions is Baker v. Carr.⁴⁹ Baker arose out of a suit filed by voters of certain counties of Tennessee, who contended that the way a state statute apportioned representatives of the state legislature among the state’s 95 counties had the effect of diluting votes and that this was an unconstitutional deprivation of the equal protection of the laws. A lower court dismissed the case, finding that it lacked subject matter jurisdiction and that plaintiffs had failed to state a claim upon which relief could be granted.

On appeal, the Supreme Court acknowledged various types of cases that might present a nonjusticiable political question. Among these were cases involving (a) foreign relations, (b) dates of duration of hostilities, (c) validity of enactments, (d) status of Indian tribes, and (e) republican form of government. Even with respect to these, however, the Court noted that there is no blanket rule.⁵⁰

Instead, the Court set forth various factors that courts should consider in determining whether a dispute should be treated as a political question: (1) there is a textually demonstrable constitutional commitment of the issue to a coordinate political department, (2) there is a lack of judicially discoverable and manageable standards for resolving it, (3) there is an impossibility of deciding the issue without an initial policy determination of a kind clearly for nonjudicial discretion, (4) there is an impossibility of a court’s undertaking independent resolution without expressing lack of the respect due coordinate branches of government, (5) there is an unusual need for unquestioning adherence to a political decision already made, or (6) there is the potentiality of embarrassment from multifarious pronouncements by various departments on one question.⁵¹

Applying these factors, the Court concluded that the challenge presented by the plaintiffs did not constitute a nonjusticiable political question. The Court found that the claims presented a justiciable issue of whether their equal protection rights guaranteed under the Constitution had been violated and that such a potential violation could be addressed under the Fourteenth Amendment to the Constitution.

The Court relied on these principles in Nixon v. United States.⁵² There, a former district court judge claimed that the manner in which he was impeached had been done in violation of the Constitution. In particular, he argued that the Senate’s use of a committee, which was made up of less than all the members of the Senate, to take testimony and gather evidence regarding his impeachment by the House of Representatives deprived him of a trial within the meaning of Article 1, Section 3, Clause 6 of the Constitution, which provides that the Senate shall have the sole Power to try all impeachments. The former judge argued that this language required the full Senate to conduct trials, instead of only some Senators.

The Supreme Court found that the case presented a political question. The Court held that the Constitution’s solely vesting of the Senate with the power to try impeachments meant that only the Senate could determine the procedures applicable to such trials, and therefore it would be improper for a court to second-guess the propriety of such procedures.

In 2012, the Supreme Court held that an action for an injunction by the parents of a child born in Jerusalem to enjoin the Secretary of State to identify the child’s place of birth as Jerusalem, Israel in official documents pursuant to Foreign Relations Authorization Act, was not barred under political question doctrine because the action did not seek to have the Secretary recognize Jerusalem as the capital of Israel.⁵³

H. Abstention Doctrines

There are several scenarios in which federal courts will refrain, or abstain, from deciding a case even though subject matter jurisdiction technically exists. This section will focus on four of the more frequently applied abstention doctrines: Pullman, Burford, Younger, and Colorado River.⁵⁴ All four of these doctrines share a common thread: in certain cases, it is advisable for a federal court to decline exercising jurisdiction in a case that should be, or already is being, handled by a state court. This concept, in turn, has its roots in comity principles—that is, one judiciary’s respect for another judiciary’s decision—as well as in federalism.

1. Pullman Abstention

The first of these doctrines originated with the case of Railroad Commission of Texas v. Pullman Company.⁵⁵ The Pullman doctrine applies in cases in which a federal court is faced with a federal constitutional question vis-à-vis a state law, but there is a possibility that the constitutional question would be eliminated, or at least materially affected, by how the state law is interpreted or applied by the courts of that state. It is derived from the principle of constitutional avoidance, under which federal courts strive to avoid rendering constitutional rulings unless actually necessary. As Justice Brandeis once wrote, It is not the habit of the Court to decide questions of a Constitutional nature unless absolutely necessary to a decision of the case.⁵⁶

Pullman involved a challenge to the authority of the Texas Railroad Commission to issue an order that allegedly discriminated against African-American train porters. The challengers had sued the Railroad Commission, claiming that the order, which had the effect of precluding the African-American porters from enjoying the use of sleeping cars, violated both Texas state law and the U.S. Constitution.

On appeal, the Supreme Court acknowledged that the complaint had undoubtedly tendered a substantial constitutional issue—that is, that the complaint had presented at least one bona fide constitutional issue that was proper for resolution by a federal court.⁵⁷ Nonetheless, the Court concluded that abstention was warranted under the circumstances of the case. This was because there was a possibility that the constitutional issues raised by the Railroad Commission’s order, including whether the order improperly discriminated against the African-American porters in violation of their equal protection rights, could be rendered entirely moot if it turned out that the Railroad Commission had lacked the authority under the applicable laws of Texas. Because, as the Court observed, this threshold issue had not been resolved definitively by the Texas courts, and because its resolution could obviate the need for the constitutional rulings, the Court decided it would abstain from the case and remanded it to the Texas courts for a ruling on the Railroad Commission’s authority.

Fundamentally, the Pullman doctrine is one rooted in practicality. Not only does it further the principle of constitutional avoidance, but it also ensures that no such constitutional rulings ever would amount to improper merely advisory opinions. A similar rationale is behind the other abstention doctrines.

2. Burford Abstention

The Burford abstention comes from the Supreme Court decision in Burford v. Sun Oil Company.⁵⁸ This type of abstention calls for federal courts to avoid exercising jurisdiction over cases when doing so would interfere with a state’s complex administrative or regulatory processes.

In Burford, the plaintiff, Sun Oil Company, had filed a lawsuit in federal court to challenge the Texas Railroad Commission’s grant of an oil drilling permit, claiming that it amounted to deprivation of property without due process of law. The Supreme Court began its analysis by noting that the order had been passed in accordance with the procedures that had been enacted by Texas as part of a complex regulatory system established to further the state’s interest in oil and gas resources. Among other things, the Court emphasized that Texas law consolidated judicial review of commission orders in a single state court, which allowed the courts to acquire specialized knowledge of the oil and gas regulations and industry, and therefore act as working partners with the Railroad Commission in the business of creating a regulatory system for the oil industry.⁵⁹

Given the complex and detailed system created by the Texas legislature, the Court regarded the proper role of federal courts in such a system to being limited: As a practical matter, the federal courts can make small contribution to the well organized system of regulation and review which the Texas statutes provide.⁶⁰ For instance,

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