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Civil Procedure-Personal Jurisdiction

I. TRADITIONAL BASES OF JURISDICTION

- Rule of territoriality (Prior to Pennoyer)- Each state has sovereignty only over the people
found within its territory. Cannot exercise jurisdiction over citizens of other states.

- Due Process Clause of 14th Amendment: Limits the state’s power to exercise jurisdiction over
a nonresident defendant. Exercise of jurisdiction must be in accord with traditional notions of
fair play and substantial justice.

A. Ways to Acquire in personam jurisdiction (over the person)


1. Citizen or someone domiciled within the state
2. Transient Rule: found within the state
3. Voluntarily appearing in court without objecting to the proceeding
4. Appointment of an agent within the state
5. Consent (express vs. implied look up). Hess v. Pawlowski- Massachusetts.

B. Ways to acquire in rem jurisdiction (over property located within the state); Property must
be attached at the outset.
1. true in rem - where the lawsuit is against the property (i.e. car used in drug trade = U.S. vs.
Corvette).
1a. quasi in rem jurisdiction- over property located within the forum state (i.e. land, bank
accounts pigs at state fair).

Before Long-Arm Jurisdiction


Pennoyer v. Neff: Oregon court attempted to exercise jurisdiction over Neff, based on the
allegation that he had property in the state of Oregon. However, Court could not exercise in rem
jurisdiction over nonresident defendant because he did not have property within the state at the
time of the lawsuit.

Harris v. Balk: Harris, an N.C. resident owed a debt to Balk, an N.C. resident. When Harris
travelled to Baltimore, Epstein, an Md. resident, attached the debt owed from Harris to Balk,
because Balk allegedly owed him money. Court held that Harris’ presence in Md. was the
equivalent of Balk having property in the state, and because Epstein attached this property at the
outset of the lawsuit, the judgement was valid.

After Long-Arm Jurisdiction ( Harris v. Balk overruled).


3 types of quasi in rem jurisdiction: (a) Type 1- plaintiff sues to enforce preexisting interest in the
property (suit by lender to foreclose on mortgage); (b) Type 2a-suits that relate to property but
plaintiff does not have preexisting interest (P sues for personal injury based on D’s failure to
maintain sidewalk); (c) Type 2b- suits unrelated to the property where plaintiff does not have
preexisting interest ( defamation suit where P attaches D’s bank account).
**GENERAL RULE** Application of minimum contacts test will seldom defeat
jurisdiction in type 1 and type 2(a) cases.

Shaffer v. Heitner: Heitner, a nonresident of Delaware, filed a derivate suit against the former
board of directors of Greyhound, claiming that they breached a fiduciary duty to the
shareholders. She attached their shares of stock, which were held to be in Delaware, in order to
establish quasi in rem jurisdiction. Court overruled Harris v. Balk and requires minimum
contacts analysis when property is used to establish in rem jurisdiction. Type 2b property because
the plaintiff does not have a preexisting interest in the property and it is unrelated to the claim
(breach of fiduciary duty). Court held that because in rem jurisdiction is not preceding against
the property, but rather the owner’s interest in the property, traditional notions of fair play and
substantial justice should apply. Shaffer, et. al, have no contacts in Delaware and thus exercising
in rem jurisdiction would violate Due Process. Established rule that when using property to
establish in rem jurisdiction, minimum contacts (throughout the state not just regarding
property) analysis must be satisfied.

Reexamining Transient Rule- After Long-Arm Jurisdiction

Burnham v. Superior Court: Francie Burnham filed for divorce and served her husband, Dennis
Burnham, while he was visiting his children in California. Court held that physical presence in
state does not require minimum contacts analysis. Plurality felt that reasoning was “minimum
contacts” analysis was analogy to determine if the defendant was “present” within the state and
therefore is a continuing tradition that defines “traditional notions of fair play and substantial
justice.” Brennan and 3 other justices believe that all rules of jurisdiction must satisfy
contemporary notions of due process and that the transient rule satisfies this notion because it
gives defendant clear notice that he is subject to suit in the forum.

II. LONG-ARM JURISDICTION


- Long-arm jurisdiction is used to modify the rule of territoriality, which became difficult to
apply with modern advances in transportation. Allowed states to assert jurisdiction over a
nonresident defendant when exercise of jurisdiction comports with traditional notions of fair
play and substantial justice (i.e. application of minimum contacts test).

State Minimum Contacts Test


1. Does the state have an applicable long arm-statute?
a. Tailored or Specific-Act statutes: state enumerates specific acts that allow for jurisdictional
analysis if committed.
b. Due-process statutes: any act that does not violate the 14th Amendment.
2a. Has defendant “purposefully availed” itself of the privilege to conduct business within the
state (i.e. Burger King) or “purposefully directed” activity toward the state such that they can
reasonably foresee being haled into court for such action?
2b. Does the lawsuit arise out of defendant’s purposeful contacts with forum (specific
jurisdiction); or are defendant’s activities within the state so continuous, systematic and
substantial that no such relationship is necessary (general jurisdiction)?

WHEN PARTS 1, 2A AND 2B ARE SATISFIED MINIMUM CONTACTS


PRESUMPTIVELY EXIST.

3. Would the exercise of jurisdiction be unfair & unreasonable (Gestalt Factors)?

Federal Long Arm Provisions: Filed in Federal Court


Rule 4(k)(1)(a)- allows federal court to adopt the state long arm statute of the state it is located.
Rule 4(k)(1)(b)- (100-mile bulge rule)- Court or the defendant has the power to add defendant
to the suit, can be served within 100 mile radius of courthouse, even if it is not within the state.
Minimum contacts analysis must be done within bulge area.

NATIONAL CONTACTS TEST


Only applies in federal question cases or when allowed by a federal statute
Minimum Contacts analysis must comport with Due Process Clause of the 5th Amendment.

1. Is there a federal long arm provision that allows federal court to exercise jurisdiction?
Rule 4(k)(1)(a)- allows federal court to adopt the state long arm statute of the state it is located.
Rule 4(k)(1)(b)- (100-mile bulge rule)- Court or the defendant has the power to add defendant
to the suit, can be served within 100 mile radius of courthouse, even if it is not within the state.
Minimum contacts analysis must be done within bulge area.
Rule 4(k)(1)(c)- federal courts can exercise personal jurisdiction when authorized by a federal
statute.
Rule 4(k)(2)- federal courts can obtain personal jurisdiction if plaintiff can show defendant is
not subject to jurisdiction under any state laws & exercise of jurisdiction is constitutional.

2a. Has defendant “purposefully availed” itself of the privilege to conduct business within the
U.S. or “purposefully directed” activity toward the U.S. such that they can reasonably foresee
being haled into court for such action?
2b. Does the lawsuit arise out of defendant’s purposeful contacts with forum; or are defendant’s
forum activities so continuous, systematic & substantial that no such relationship is necessary?

3. Would exercise of jurisdiction be unfair & unreasonable (Typically easier to meet


unreasonableness test under National Contacts).

Spectrum of Minimum Contacts: Zero- Sporadic/Single-Continuous & Systematic- Continuous,


Systematic & Substantial.
III. PURPOSEFUL AVAILMENT / PURPOSEFUL DIRECTION- STEP 2A

WAYS TO SATISFY PA/PD


1. Entering state & conducting activity there.
2. Entering contractual relationships with forum residents.
3. Stream of commerce theory/ Stream of Commerce Plus theory
4. Effects Test

A. Entering State & Conducting Activity


International Shoe: International Shoe employed 11-13 salesmen under direct supervision and
control of sales managers located in St. Louis (Principal Place of Business); Salesmen resided
in Washington; commissions each year totaled more than $31,000; rented permanent sample
rooms. Court ruled that International Shoe’s activities were regular and systematic, which
resulted in a substantial amount of revenue being generated through interstate commerce, such
that International Shoe could foresee being haled into court if a problem arose in Washington.
Established rule that if Due Process requires that a defendant must have “minimum
contacts” within the state such that the suit does not offend traditional notions of fair play
and substantial justice.

B. Contractual Relationship
Hanson v. Denckla: Decedent was a resident of Pennsylvania and contracted with Delaware
trust company to establish trust. Later moved to Florida and continued mailing correspondence
to Delaware Trust. Court held that Trust’s activity was unilateral and therefore not enough to
satisfy purposeful direction. Established rule that unilateral activity by someone other
than nonresident defendant is not enough to satisfy purposeful availment.

McGee: Life Insurance company mailed correspondence to former beneficiary in order to get
her to renew contract, which she did. Court held that even though contact with forum state
was single/sporadic, their activity was purposefully directed toward the state of CA.

Burger King: Franchisees opened up BK franchise in Michigan. Contract was signed with a
Florida choice of law clause, entered into contract for 20 years and $1 million (not random or
fortuitous, quickly saw that they had to deal with Miami HQ. Court held that a contract alone
is not enough to establish purposeful availment. It is the nature of the contract
(prior negotiations and future consequences- this case 20 year term and amount obl. to pay)
that must be evaluated in order to determine whether defendant purposefully availed
themselves of benefits of forum state. Court also held that choice of law clause alone is
not enough to establish minimum contacts. Activity with Miami HQ and continued use of
trademark without permission meant that it was reasonably foreseeable that defendant would
be haled into FL court if problems arose. Established rule that contract alone is not
enough to satisfy purposeful availment; Nature of contract (i.e. prior negotiations and
future consequences must be evaluated (i.e. neg. for better terms, length of contract).
**ACTIVE VS. PASSIVE PURCHASER RULE** To determine whether Ct. can
exercise jurisdiction over a purchaser, it must determine whether they are an active or
passive purchaser. Active= active negotiations, custom-made product
satisfies purposeful availment). Passive= merely accepts terms of the offer (cannot
satisfy purposeful availment).

Chalek v. Klein: Klein merely asked about product over the phone. Court held that because
there is no evidence that they negotiated terms of eventual agreements, he was a passive
purchaser, which is not enough to satisfy purposeful availment.

C. Stream of Commerce Theory


Stream of Commerce goes from the manufacturer to the final retail sale (almost always
applies in products liabilities cases.)

Stream of Commerce Theory Pure: Putting product into stream of commerce creates
awareness that product will reach forum state, which is enough to satisfy min. contacts
with the state. (Usually applies to finished products).

Stream of Commerce Plus: Awareness that product will reach forum state is not enough
to establish that activity was purposefully directed toward the state. Must show that
employer had agents, offices or solicited business within the state through advertisement.
(usually applies to component parts).

World-Wide Volkswagen Corporation- Plaintiff bought car in N.Y. from dealer, that operated
only in a tri-state area. Subsequently drove car to Oklahoma, where car was in an accident
that caused the plaintiffs serious injuries (presumably because of a defective car). Court
applied SOC Pure and held that stream of commerce ended in N.Y.; retailer could not
foresee being haled into court for unilateral activity of purchaser who drove to OK.

Asahi: Taiwanese company manufactured component parts to be used in a motorcycle. Sold


parts to Japanese company, who exported final product to CA. Plurality of the Court (4
mem. applied SOC Plus test which held that awareness is not enough to satisfy purposeful
direction when it comes to component parts; Other 4 members applied SOC Pure test
where awareness was enough. 1 member did not endorse either SOC, but believed volume,
and hazardous character of components should be used to determine whether awareness
was enough to satisfy purposeful direction.

D. Effects Test
Typically applies to intentional torts; must show: (1) D committed intentional tort
the state; (2) actions were directed at forum state; (3) brunt of harm was suffered in the forum
state, such that it is the focal point of litigation.
Calder: National Enquirer employees wrote an article that defamed Jones, an actress who lived
and worked in CA. They knew that she lived & worked there; and knew or should have known
that the National Enquirer’s largest circulation was in CA; received information from CA
sources. Court held that their actions were purposefully directed toward the state of CA, which
had a special relationship to the movie industry, such that the brunt of the harm was suffered in
CA (damage to reputation, loss of work), making it the focal point of the lawsuit.

Kulko: Defendant sent daughter to CA to live with her mother. Court held that although his
actions were directed toward CA and the brunt of the harm was suffered there, he did not
“purposefully avail” himself of the state’s benefits by making a decision that promoted family
harmony. The focal point of the lawsuit was still N.Y., as the custody agreement was signed
there. Court also stated that it would be unreasonable to subject one parent to custody suit in
any state that the other parent moved to.

Internet Effects Test


Zippo-Passive: merely allows owner to post information (does not satisfy purposeful direction).
Zippo-interactive: owners engage in repeated online contacts with forum residents over the
internet (does satisfy purposeful direction).

In between are websites with some levels of interactive elements, allows bilateral information
exchange with visitors (analysis needed).

Revell v. Lidov: Lidov, a professor, posted an article on Columbia University’s internet bulletin
board about the terrorist bombing of Pan Am Flight 103 and Revell’s involvement in it. The
website fell within the passive-interactive spectrum because visitors are allowed to participate
in an open forum hosted by the website. Court held that posting of article and internet bulletin
board did not satisfy purposeful direction because their actions were not directed at the state of
Texas, as they did not know Revell lived in Texas (directed at world does not mean specifically
directed at 1 state). Although he suffered harm (damage to reputation), unlike Calder, Texas did
not have a special relationship to Pan Am Flight 103.

IV. RELATEDNESS
A. GENERAL JURISDICTION
Are defendant’s forum contacts so continuous, systematic & substantial that relationship to
cause of action is unnecessary? (deemed to be present within the state).

Perkins v. Benguet Consolidated Mining Co.: Perkins, a non-Ohio resident, sued Benguet for
unpaid dividends. Benguet was a Philippines company that was operating out of Ohio, while the
Japanese occupied the Philippine Islands. Its president conducted personal affairs, kept office
files of the company, conducted business-related correspondence, distributed salary checks to
himself and 2 other employees, and maintained company bank accounts that carried a substantial
amount of company funds. Court held that the activities during the war, were directed from Ohio
and they were “so present” within the state that exercise of general jurisdiction is reasonable.

Helicopteros: Helicol was a Colombian company that provided helicopter transportation for oil
and construction companies in South America. On one of these helicopter trips, four American
citizens lost their lives. Relatives of decedents filed suit in Texas, seeking to establish general
jurisdiction. Helicol’s activities in Texas included systematic purchase of helicopters over a 7-
year period, which included pilot helicopter training; receiving checks drawn upon a Texas bank
(unilateral activity not related to Helicol); sending its employees to Texas to learn about plant
familiarization; and a negotiation session in Houston. Court held that single & sporadic activity
(negotiations) is not enough to warrant general jurisdiction. Also, systematic purchases are not
enough to warrant general jurisdiction.
Solicitation, marketing, sales and related trips normally will not subject a defendant to
general jurisdiction even when it has sales representatives in the forum state.

Courts tend to relax strict standard regarding solicitation & sales, when suit is brought by a
forum resident (takes into account jurisdiction by necessity).

B. SPECIFIC JURISDICTION
Defendant’s forum contacts must arise out of or relate to harm- nexus between forum activities
and cause of action;

Spec. Spectrum: But For- Substantial Conn./Lies in Wake-Prox. Cause/Substantive Relevance

But for: Loose relationship (never solely used to establish necessary relationship).

Substantial Connection: Looser standard than proximate cause Forum Contacts substantially
related to cause of action. Harm lies in the the wake of forum activities.(Endorsed in Tak How).

Proximate Cause/Substantive Relevance: Strictest standard for establishing nexus. Incorporates


but for relationship as well as legal cause (defendant’s contacts are substantial factor in bringing
about harm to plaintiff).

Proximate Cause used in tort claims; Substantive Relevance used in commercial transactions.

Nowak v. Tak How Investments: Tak How was a Hong Kong corporation that owned a Holiday
Inn in Hong Kong. It continued a business relationship initiated by Kiddie Products, a
Massachusetts company that exclusively conducted business in Hong Kong. Tak How faxed a
copy of corporate rates to Kiddie Products, who continued to book all of its business related
hotel stays there. Mr. Nowak, a Kiddie employee, stayed there with his wife, who drowned in the
pool. Court loosened proximate cause standard and endorsed substantial connection standard.
Reasoned that when a foreign corporation directly targets residents in an ongoing effort to further
a business relationship, absence of proximate cause per se does not render exercise of
jurisdiction unconstitutional.
Specific Relatedness also works on a sliding scale in relation to forum contacts. As contacts
increase, courts are more willing to loosen the standard for relatedness.

V. REASONABLENESS
When Steps 1, 2A and 2B are proven, minimum contacts presumptively exist and exercise of
jurisdiction is presumed to be fair. Burden then shifts to defendant to prove that exercise of
jurisdiction is nonetheless unreasonable.

Gestalt Factors: determine whether exercise of jurisdiction is reasonable (1-3 most important).
1. Burden on defendant- defendant’s burden of litigating in foreign tribunal; almost always
present, so defendant must show more reasons why subjecting it to jurisdiction is extremely
onerous.
2. Forum state’s interest in adjudicating dispute- what interests is the forum state looking to
protect (i.e. rights of citizens).
3. Plaintiff’s convenience- plaintiff’s right to choose a convenient forum to litigate the matter in
comparison to other available forums.
4. Administration of Justice: can the whole conflict be resolved in this forum-judicial efficiency.
5. Foreign State’s Interest- What interests does the forum state have in the matter. Tread
carefully when it is a truly foreign defendant (minimal interests of plaintiff do not outweigh
substantial interests of foreign state.

Asahi: Indemnity action between a Taiwanese manufacturer and the Japanese manufacturer of
the tire valve. Burden on defendant is substantially great to have to fly in witnesses, and
adjudicate matter in CA. Foreign state has less of an interest in protecting safety of products
because it is an indemnity action; Not the most convenient place to adjudicate the matter for
plaintiff, who is a Taiwanese company; Matter can be completely resolved but there is a burden
on the court to apply Taiwanese law; Foreign state has substantial interest in adjudicating the
matter (Plaintiff’s interest in choosing CA is minimal and U.S. cannot exercise jurisdiction over
truly foreign defendants without substantial interest of either the forum or plaintiff).

Nowak v. Tak How: Applying the Gestalt factors; 1. Burden is placed on the defendant, but that
burden is always great (nothing special argued about burden being specially onerous); 2.
Massachusetts has a strong interest in protecting citizens from out-of-state solicitations that
prove to be unsafe and interest in providing forum for residents to assert claims; 3. MA forum is
more convenient for Nowaks than Hong Kong, which makes contingency fee litigation a burden;
4. All of matter can be resolved in MA court despite the need to interpreters and the potential
absence of witnesses, while all of matter may not be resolved in Hong Kong, which was
politically unstable at the time and potentially had a need for interpreters as well; 5. Hong Kong
has substantial interest in preserving tourism industry, and protecting businesses. MA’s interest in
protecting citizens might be compromised in Hong Kong, while Hong Kong’s interest in
protecting businesses might be compromised in MA. Protecting rights of citizens trumps rights
of businesses.
VI. CHALLENGING JURISDICTION
A. Direct Attack: Rule 12(b)(2)- Challenges jurisdiction ; In most states challenge is waived if
defendant fails to raise objection as part of her first filing or appearance in court.

In CA, if defendant loses objection to jurisdiction, must file an immediate interlocutory appeal or
allow default judgement to be entered, in order to preserve objection.

Rule 60(b)(4)- Defendant asks trial court to set aside judgement on the ground that it is void.
Defendant who failed to object to jurisdiction, can still directly attack jurisdiction so long as she
did not appear in the proceedings and had a default judgement entered against her. Cannot be
basis of appeal because it was not raised in the trial court.

B. Collateral Attack: Defendant must have totally ignored proceedings and allowed default
judgement to be entered against him. Collaterally attack when plaintiff seeks to enforce
judgement under Full Faith & Credit Clause.

If a defendant appears in a proceeding and waives an objection to jurisdiction by failing to raise


it in a proper manner or loses on the issue, the defendant cannot collaterally attack the judgement
on jurisdictional grounds.

Full Faith & Credit Clause (Art. 4, Section 1): Requires Courts of each state to enforce valid
judgements rendered by their sister states. If a state refused to do so, it could be ordered to by the
U.S. Supreme Court. State Courts can only challenge the validity of a judgement when it
believes the 1st court lacked either personal or subject matter jurisdiction.

Pendent Personal Jurisdiction: Court may assert pendent personal jdx. over a defendant with
respect to a claim for which there is no independent basis of personal jdx. so long as it arises
out of a common nucleus of operative fact with a claim in the same suit over which a court
does have personal jdx.

CIVIL PROCEDURE-SERVICE OF PROCESS

I. SERVICE OF PROCESS OVERVIEW


Service of process is the procedure by which a court asserts jurisdiction over the person of the
party served. A judgement rendered without affording the defendant proper notice of the suit is
invalid.
Adequacy of service depends on: (1) compliance with the relevant rule (Rule 4 FRCP); and (2)
must comport with due process (5th or 14th Amendment) unless defendant waives right to
service or defendant can be immune from service.

Elemental & Fundamental Requirement of Due Process is that notice is reasonably calculated,
under the circumstances, to apprise parties of the pendency of the action & of such nature to
reasonably convey required information.

A. REQUEST FOR WAIVER OF SERVICE


Rule 4(d)- allows plaintiff to send a copy of the complaint to the defendant by first-class mail or
other reliable means, accompanied by a “Notice of Lawsuit and Request for Waiver of
Summons.” Envisions 2 step process: 1. seeking waiver; 2. effecting formal service if no waiver
is obtained.

If in the U.S.: 30 days to respond; If outside the U.S. 60 days to respond

Incentives to Sign Waiver:


Rule 4(d)(1)- imposes a duty to avoid unnecessary expenses of serving summons. Unless
defendant waives service, Court “must: impose on the defendant, the expenses later incurred in
making service and the reasonable expenses (including attorney’s fees of any motion required to
collect service expenses).

Complaint does not have to be answered until 60 days after the request for the waiver was sent
(i.e. 30 days after the waiver is due).

Rule 4(d)(4)- service is deemed to have occurred on the date that plaintiff files the signed waiver
with the court.

Incentive NOT to sign waiver: When statute of limitations is tolled only by service of process,
and defendant can run out the clock, by failing to sign near the end of the 30 day waiver period.

B. EFFECTING SERVICE ON INDIVIDUALS/CORPORATIONS


1.Individuals
Rule 4(e)(2)- allows plaintiff to serve the defendant personally; leave the summons and
complaint at the defendant’s “dwelling or usual place of abode with someone of suitable age and
discretion who resides there”; or deliver copies to an agent who has been authorized by
appointment or law to receive service on defendant’s behalf.

2. Corporations
Rule 4(h)(1)(A)- allows plaintiff to borrow state law rules of service, as permitted when serving
individuals under 4(e)(1). Must be within United States.
Rule 4(h)(1)(B)- allows plaintiff to deliver a copy of the summons and complaint to “an
officer, a managing or general agent, or to any other agent authorized by appointment or by law
to receive service of process.” Courts often flexible in deciding whether a person qualifies as a
managing or general agent- Individual must be sufficiently connected with company’s operations
to render it likely that service will provide notice to defendant.

AICPA v. Affinity Card: Professional process server handed summons and complaint to
McDonald at Affinity’s principal place of business and subsequently filed affidavit of service that
identified McDonald as Assistant Vice President of Affinity Card. However, McDonald was
Assistant Vice-President of Primecard, which shared its office with Affinity and had been
working there only for a few months. Affinity moved to vacate default judgement. Court held
that McDonald was not a representative of Affinity and since he was only working there for a
few months, he was not integrated with organization, which would allow him to know what to do
with the papers. Court established that where the parties’ accounts on service of process
differ, but are both inherently plausible, court should credit the version of the party that
allows case to be heard on its merits. 3 ways of service (go back to that).

3. Defendants in a Foreign Country


If a defendant is to be served in a foreign country, federal court must exercise caution so as to
not intrude upon sovereignty of another nation.

Court must be certain manner of service ensures fair notice to interested parties.

Rule 4 authorizes special and highly flexible procedures for serving defendants in foreign
countries, whether defendant is an individual, corporation, or partnership.

Rule 4(f)- Individuals


Rule 4(h)(2)- corporations
Rule 4(f)(1)- federal treaty; Hague Convention

C. SUBSTANTIAL COMPLIANCE
Courts take a liberal approach to service of process and accept substantial compliance with the
statute rather than strict adherence to all of a statute’s technicalities.

Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient
notice of the complaint. However without substantial compliance with Rule 4, neither actual
notice or simply naming the defendant in the complaint will provide personal jurisdiction.

Distinguish between mere technical errors and a complete disregard for Rule 4
Factors to Consider Pg 232.:
1. Type of Service involved
2. Whether Plaintiff made good faith/reasonable mistake
3. whether defendant was evading service
4. Whether service provision is inherently ambiguous
5. Whether justice would be served by a relaxed construction.

D. TIME LIMIT FOR EFFECTING SERVICE


Rule 4(m): allows federal court to dismiss an action without prejudice as to any defendant in the
U.S. who is not served within 120 days after the complaint is filed.

Time of service must be extended when the plaintiff shows good cause for the failure.

Even if no good cause is shown, Court can (but not required to) extend time of service if
1. statute of limitations would bar the refiled action; or
2. if the defendant is evading service; or
3. if defendant conceals a defect in attempted service until after 120 day period.

Dismissal is “without prejudice”- which means that dismissal is not based on the merits, so if
plaintiff refiles suit, it is not barred by res judicata or claim preclusion.

Savings Statutes: Extends statute of limitations if a suit was timely filed but then dismissed. Does
not always apply to Rule 4(m) situation where dismissal is for failure to to serve process in a
timely fashion.

II. DUE PROCESS RIGHT TO NOTICE


**GENERAL RULE** When there is a potential deprivation of life, liberty, or property,
Due Process requires notice and opportunity for hearing appropriate to the nature of the
case.

Method of service must also comply with Due Process clause of 5th or 14th Amendment.

Requires that a person who is made party to lawsuit must be afforded adequate notice of that
lawsuit. Judgement rendered in the absence of notice is void.

Adequacy of notice depends on whether the method of service employed will be effective,
or if not effective, whether it is substantially less likely to be effective than other reasonably
available means.

Test
1. Is type of service reasonably certain to inform? If so satisfies due process; If not go to # 2
2. If no, is the substitute substantially less likely than others to inform party? If yes not adequate
notice.

Mullane v. Central Hanover Bank & Trust: During accounting period, CHBT effected service to
beneficiaries (some were known, some were future beneficiaries and others were unknown) by
publishing notice of lawsuit in the newspaper, which complied with N.Y.’s Banking Law. Court
held there was a potential for deprivation of property interest, beneficiaries required to notice.
Unknown beneficiaries- publication by notice is enough because nothing is reasonably certain to
work and publication by notice is not substantially less likely to work than other available
methods; contingent remainders- places undue burden of due dilligence on CHBT; known
beneficiaries- does not satisfy due process because CHBT has the names of beneficiaries on the
books and regularly dispenses payments to them (mail is substantially more likely to work).

Mennonite Board of Missions v. Adams: Moore entered into mortgage agreement with Mennonite
Board of Missions on her property in Indiana. Moore failed to pay property taxes and County
provided her notice by certified mail and published notice of tax sale. MBM not informed of tax
sale. Adams purchased property. Court held that State was required to perform due dilligence.
Use of publication or notice to property owner, are not methods such as one desirous of actually
informing the party might take to accomplish it. Mail is substantially more likely to work.

A. Prefiling Waiver & Consent

Confession of judgement- debtor consents in advance to holder’s obtaining a judgement without


notice or hearing; possibly with appearance, of an attorney, on debtor’s behalf, that is designated
by holder. (very disfavored).

Cognovit Clause- waives right to notice; usually present in a contract (similar to Forum Selection
Clause).

Underwood Farmers Elevator v. Leidholm: Leidholm contracted with Underwood Farmers to


deliver bushels of oats, but cancelled payment due to drought and offered to compensate for the
difference between contracted price & current market price. UFL refused & caused Leidholm to
incur $30,000 liability, to which he signed confession of judgement in order to work out
amicable agreement. Court endorsed standard that waiver of notice & a hearing requires that the
waiver is (1) voluntary; (2) knowing; and (3) intelligently made. Court remanded case for those
determinations. Established rule that in order to waive pre-judgement notice & the
opportunity to be heard, waiver of service must be entered into voluntarily, knowingly, and
intelligently.

Courts will enforce them under Full Faith & Credit even if they do not recognize them in
that state.

B. Policy Based Immunities & Exemptions


1. Witness Immunity: A witness who enters the state to participate in a legal proceeding is
immune from being subject to in personam jurisdiction.
Engaging in substantial business dealings unrelated to litigation proceeding, waives
immunity from service of process. (Trivial, casual or insubstantial business dealings do not
waive immunity.
Fun-Damental Too, Ltd. v. Hwung: Fun-Damental sued variety of parties in two separate lawsuits
for trademark infringement. Hwung, the president of one of the companies being sued, came to
New York to testify in the first lawsuit, and while there ate dinner with a business associate &
visited showroom of company. Fun-Damental argued that Hwung did not have witness immunity
because he allegedly participated in business related activities unrelated to the litigation. Court
held that Hwung’s activities did not waive immunity from service of process because his visit to
the showroom was unrelated to his duties as president (not involved in sales), and the fact that he
ate dinner with an associate absent proof of what they talked about is merely insubstantial.
Established rule that if while in the jurisdiction person claiming immunity engages in
activities of a business nature unrelated to litigation, immunity from service of process is
waived. (Not waived if business dealings are casual & unforeseen or trivial & insubstantial).

Lamb exception-Supreme Court carved out exception to general immunity would undermine the
purpose of the action in which the witness participating is served.

2. Trickery or Fraud: Courts tend to refuse to exercise jurisdiction over a defendant who
was served with process only after being lured into the state by trickery or fraud.

Most courts allow a plaintiff to use trickery or fraud to serve a defendant in the state because
there is a duty upon persons within the jurisdiction to submit to service of process.

May Department Stores v. Wilansky: Wilansky lured to Missouri when he decided he was going
to leave the company for a competitor, where upon confirmation of his resignation May served
him with process. Court held that luring Wilansky to Missouri was not trickery or fraud because
they wanted to confirm that he was leaving (although they filed complaint with court on a
Saturday and had attorneys in a separate room during meeting). However, it did violate bright-
line rule that requires plaintiff to make it clear to defendant that service of process may be made
if the defendant enters the jurisdiction. Court required new service to be effected. Endorsed
Bright line rule that plaintiff luring defendant to jurisdiction must warn defendant that he
may be served if he enters the state.

III. NOTICE & HEARING WHEN PROPERTY IS ATTACHED


Service of process require that an individual be given an opportunity for a hearing before he is
deprived of any significant property interest except for extraordinary situations where exigent
circumstances exist.

Matthews Test: Balancing test that determines when court can waive defendant’s right to pre-
seizure hearing: (1) private interest that will be affected by official action
(2) risk of an erroneous deprivation (i.e. lack of documentary proof).
(3) presence of any exigent circumstances (i.e. defendant trying to sell property).
Mitchell Factors (safeguards): must be employed when right to pre-seizure hearing is
denied:
(1) must allege specific facts
(2) must be reviewed by a judge
(3) prompt post-seizure hearings

Matthews v. Eldridge: Involved breach of contract where plaintiff sought to recover consumer
goods. When it comes to deprivation of property, private interest affected is usually great, but
risk of erroneous deprivation was low because there was documentary proof (breach of contract)
and the presence of exigent circumstances (decreased value of consumer goods daily).
Circumstances warranted depriving defendant of pre-seizure attachment hearing.

Connecticut v. Doehr: DiGiovanni attached Doehr’s house prior to a judgement and without
giving Doehr notice, as a way to secure judgement on an alleged battery committed by Doehr.
Court applied Matthews Balancing test: (1) property interests that attachment affects are
significant because it clouds title, impairs ability to sell property and taints credit rating; (2)
there is a risk of erroneous deprivation because there is no evidence of documentary proof as to
the alleged battery (plaintiff would not file lawsuit if he didn’t think he would win); (3)
defendant not currently trying to sell property. Thus the court held that the state’s interests were
de minimis and did not warrant pre-judgement attachment of property.

IV. CHALLENGING SERVICE


A party challenging service must raise it by a motion to dismiss 12(b)(5) or in the answer,
whichever is filed first.

Challenge to service is waived if it is omitted from pre-answer motion to dismiss or if it is


omitted from the answer (when a motion to dismiss is not filed).

Rule 12(b)(4)- allows party to file a motion to dismiss for insufficient process (insufficiency of
the content of the summons).

Challenge is waived if not asserted in a timely fashion.

CIVIL PROCEDURE SUBJECT MATTER JURISDICTION

I. SUBJECT MATTER JDX. IN COURTS


-Court must satisfy Article III §2 and a statute in order to establish subject matter jurisdiction.

Satisfying the statute always satisfies Article III (do statute analysis 1st).

- Article III § 2 lists 9 categories that may be heard within federal court:
1. Arising Under federal law (leading case:Osborn; potential federal ingredient- does not have
to actually be decided in the case).
2. Between citizens of different states
3. Between a state, citizens thereof, and foreign states, citizens or subjects
4. Affecting ambassadors, other public ministers and consuls
5. In admiralty and maritime jdx.
6. To which the united states shall be a party.
7. Between 2 or more states
8. a state and citizens of another state
9. Between a citizens of the same state claiming lands under grants from different states

Congress has never allowed courts to hear all of cases described in Article III §2; Limits subject
matter jurisdiction by statute. Majority of cases arise under federal question jdx. or diversity

Supreme Court’s jurisdiction over cases from lower federal courts is derivative- cannot exercise
jdx. if lower court did not have subject matter jdx.

Supreme Court’s jdx. over state courts is not derivative. It can review issues in state courts if
federal issue is ever decided.

State courts have concurrent jdx. with Federal courts - Litigant can file federal question cases in
either state or federal forum.

II. FEDERAL QUESTION JDX. (§1331)


Case in which an issue of federal law is properly presented for judicial resolution.

- 28 U.S.C. § 1331 district courts shall have original jdx. of all civil actions arising under
federal law. Defined more narrowly than Article III “arising under.”

- Satisfies statutory “arising under” by (1) creation test or (2) essential federal ingredient test.

1. Creation Test
Express right of action- Includes all federally created laws that create the plaintiff’s cause of
action

Exception: Shoshone Exception- despite presence of congressionally created cause of action,


case can not “arise under” federal law, where the substantive law to be applied is state law, thus
making it a nonfederal matter. (Extremely rare exception).

Implied right of action- where Congress creates substantive rights or immunities without
specifying whether private persons may sue to enforce those rights. Normally there is a
presumption that if a statute does not expressly create a private cause of action one does not
exist.
Court looks at 4 factors to determine whether implied right of action exists (Cort Factors):
1. whether plaintiff is one of the class for whose special benefit statute was enacted.
2. whether there is any indication of legislative intent, explicit or implicit, either to create such a
remedy or to deny one (MAIN FACTOR).
3. whether implying a private remedy would be consistent with the underlying purposes of the
legislative scheme.
4. whether the claim is one traditionally relegated to state law.
Main factor is legislative intent, other factors are only relevant to provide evidence of whether
Congress intended to create a private cause of action.

Example: implied right of action against fed. Gov’t officials for violation of constitutional rights.

2. Essential Federal Ingredient Test (EFI)


Elements necessary to satisfy EFI are:
1. essential federal ingredient embedded in an otherwise nonfederal claim such that
vindication of the nonfederal claim is dependent on a point of federal law.
2. federal ingredient must actually be disputed within the context of the case.
3. federal ingredient must be important or substantial in the sense that it requires uniformity
of a federal decision.
4. Cannot upset the congressionally mandated allocation of jdx. between state & federal
courts. (Does it open the floodgates to federal courts?)
Ex. likelihood of breach of contract claim containing Fed. Safety Skateboards Act.

Grable & Sons: IRS seized Michigan real property belonging to Grable & Sons to satisfy federal
tax delinquency. Grable & Sons challenged foreclosure and argued that they were not given
notice under §6335a, which they believe required personal service. Court applied Cort factors:
(1) state claim (foreclosure was invalid because notice was improper) contained essential federal
ingredient (the type of service required under §6335(a)) embedded within the claim; (2) Federal
ingredient was actually disputed because Grable thought statute could only be tolled by personal
service while Darue believed it could be tolled by certified mail; (3) Fed. ingredient was
substantial because it involved federal tax matters, which require uniformity; (4) Does not open
the floodgates because it is the rare state title case that raises a contested matter of federal law.

Merrell Dow: Involved state tort claim resting on allegation that the defendant drug company
violated federal misbranding prohibition and was negligent under Ohio law. Cort factors: (1)
federal ingredient embedded in claim (federal branding requirement); (2) federal ingredient was
actually disputed; (3) Some consideration in the assessment of substantiality; (4) would of
opened the floodgates to federal courts of state misbranding actions that involved federal claims.
Established upset balance and would open floodgates.

A. WELL-PLEADED COMPLAINT/ARTFUL PLEADING


- Well- pleaded complaint rule- is a judicially created doctrine that ensures that only a plaintiff’s
claim of relief determines the presence or absence of statutory arising under jurisdiction. Only
allegations pertaining to the necessary elements of the plaintiff’s claim will be considered
in determining if the case arises under federal law.
- Declaratory Judgement Act §2201-2202: gives federal district courts the power to enter
declaratory judgements in cases over which they would have otherwise had jurisdiction. Does
not expand subject matter jurisdiction. Either side may file for declaratory relief (decision is
binding). Only arises under federal law for purposes of §1331 when it would have arisen
under 1331, if one of the parties had been seeking coercive relief (Must determine who would
have been the plaintiff).

Louisville & Nashville Railroad v. Mottley: Mottleys were injured while passengers on a train
and were given free train rides for life in exchange for their agreement not to sue. Congress later
passed a statute that prohibited Railroads from giving free transportation. Mottleys sued claiming
breach of contract, and alleged that the Railroad’s defense which would be the statute violated
their right to due process. Court held that potential federal question (counter-argument to
plaintiff’s defense) is not enough to show that plaintiff’s original cause of action arises under the
Constitution.

- Artful Pleading- Prevents plaintiff from defeating federal jurisdiction by disguising what is
clearly a federal claim as a state law claim. Mandates that the case be treated as a federal claim
-
- B. PREEMPTION
- Preemption doctrine- theory that U.S. Constitution and all laws enacted pursuant to it is the
supreme law of the land. Valid federal law trumps all state laws inconsistent with the specific
terms or objectives of the federal law.

- Preemption satisfies §1331 when: (1) it is the basis for the plaintiff’s claim;
(2) Complete preemption (Very Rare)- where Congress intended to convert state law into federal
law; federal law wholly displaces state-law cause of action; Under this theory, a claim that
comes under the scope of this cause of action, even if pleaded as a state law claim is in reality
a federal law claim.

III. DIVERSITY JURISDICTION


A. Overview
Article III §2 merely requires minimal diversity- any two adverse parties are not co-citizens
of the same state. Possible that in a two party case, opposing parties can be co-citizens yet still
satisfy minimal diversity under Article III, when one party has multiple citizenship.
§1332 (a) allows diversity jurisdiction over:
(1) citizens of different states (interstate diversity);
(2) citizens of a State and citizens & subjects of a foreign state (alienage jurisdiction);
(3) citizens of different states in which citizens or subjects of a foreign state are additional
parties (mix of interstate diversity & alienage jdx.); and
(4) a foreign state, as plaintiff and citizens of a State or of different States (foreign gov’t against
citizens of one or more states).
§1332 requires complete diversity- no plaintiff is a citizen of the same state as any of the
defendants; and the Amount In Controversy is satisfied (currently $75,000).

- Congress has passed statutes that allow federal courts to hear certain types of cases, even if
there is only minimal rather than complete diversity: (1) Multiparty, Multiforum Trial Jdx. Act
of 2002 28 U.S.C. §1369, applies to certain civil actions that arise from a single accident (i.e.
plane crash) where at least 75 people died at a discreet location; (2) Class Action Fairness Act of
2005- permits some class actions to be filed in or removed to federal court if the amount in
controversy exceeds $5 million and if any member of the class of plaintiffs is diverse from any
defendant. Cannot be invoked if suit is well-suited for litigation in state court (i.e. 67% of the
class members are from the state where the suit was filed, at least one defendant is a citizen of
that sate, and most of the injuries occurred there). Court can also deny jdx. when more than 1/3,
but less than 2/3 of the class members are defendants are citizens of the forum state and the
“totality of circumstances” make the action better suited for litigation in state court.

Even if complete diversity is satisfied, a district court will not exercise subject matter jdx. over
domestic relations proceedings (i.e. divorce, alimony and child custody proceedings) or over
probate proceedings.

B. §1332- Diversity

**GENERAL RULE** Domicile is established at the time the suit is filed and cannot be
lost by a subsequent change in citizenship. Burden is on plaintiff to establish citizenship,
when it is challenged by defendant.

Lundquist: Lundquist filed a motion to recover promissory notes relating to the sale of stock in
Winnipesaukee Airlines and alleged that Court had subject matter jdx. based on diversity.
Defendant argued court did not have subject matter jdx, because he was a citizen of NH based on
the fact that he owned property in NH, had an NH driver’s license since 1986, was registered to
vote and did vote in NH until 1990, and corporate filings gave his address as NH. Lundquist
contended that he was a FL resident because he purchase real property in FL, had an FL driver’s
license since 1984, kept FL bank accounts, most of his personal property was in FL, listed FL
residence on federal tax returns in 1987,’88 and ’89, and he and his wife belonged to several
community organizations in FL. Court held that corporate filings and Lundquist’s continued
voting in NH were more important factors in determining he was domiciled in NH- did not
satisfy §1332. Because it was a mixed question of law and fact, the district court’s decision
could not be set aside unless clearly erroneous.

U.S. Citizen domiciled abroad cannot sue or be sued in a federal court based on diversity-
because U.S. Citizen domiciled who is not domiciled in a U.S. state, territory or D.C. is not a
citizen of any state within the meaning of §1332; and does not qualify as a “citizen or subject”
of a “foreign state” for diversity purposes because the term only applies to foreign nationals.
Tests used to determine a corporation’s PPB:
(1) nerve center test- wherever a corporation has its “nerve center or brain” i.e. corporate
headquarters.

§1332(c)- a corporation shall be deemed to be a citizen of any state by which it has been
incorporated and of the state where it has its principal place of business.

Hertz v. Friend: Friend and Nhieu were California citizens, who filed an action against Hertz
alleging violation of wage and hour laws. Hertz attempted to remove pursuant to 1441(a)
because they were citizens of different states. However, Friend and Nhieu argued that Hertz was
a citizen of California and therefore diversity jurisdiction was lacking. Established nerve center
as test for principal place of business, where its main headquarters are located. As Hertz’s
headquarters is located in New Jersey, that is its principal place of business under the nerve
center test.

Unincorporated organizations and associations that are not incorporated are deemed for
diversity purposes, to be citizens of every state and country of which any member is a citizen.

Forum Doctrine- (judicially created before 1958 amendment to §1332(c) which defined
corporate citizenship- most lower courts have rejected it after §1332(c)- Supreme Court has not
addressed the issue)- if a corporation is incorporated in more than one state, and sues in one
of its states of incorporation, it is treated as being a citizen of its PPB and of forum state,
but not of other states of incorporation.

C. Amount in Controversy
- Congress has always required that amount in controversy exceeds a specified minimum
currently $75,000.
- Amount in Controversy claimed by the plaintiff will be accepted if it is apparently made in
good faith.
- Good faith test has a subjective component (what the plaintiff actually knew or believed) and
an objective component (what a reasonable person would have known).
- Legal certainty-jdx. does not exist if it can be shown to a legal certainty that even if plaintiff
establishes liability, she could not recover jurisdictional minimum- considered a part of the
good faith test. Legal certainty is relevant to the point that it reveals a lack of good faith on
the part of the plaintiff.

- Subsequent event: Amount in Controversy is in excess of statutory minimum; something


happens that reduces amount in controversy (i.e. Defendant pays a portion of the amount) but
does not divest Court’s jdx. over controversy or undermine plaintiff’s good faith as of the date
that the lawsuit was filed. As of the time lawsuit was filed known to a legal certainty that
amount satisfied statutory minimum.
- Subsequent revelation: Discover something that reveals amount in controversy is less than
claimed; refers back to the date the lawsuit was filed (potentially affects good faith claim of
the plaintiff).

Coventry: Coventry sued Dworkin over their failure to pay for sewer main usage, which was
based on the number of cubic feet of water consumed on the property and assessed by the Kent
County Water Authority (KCWA). At the time the lawsuit was filed, the AIC exceeded statutory
minimum, but subsequent inquiries by Dworkin revealed that KCWA made a mistake in
assessing the water bill. Coventry’s claim in regards to the Amount in Controversy was a
subsequent revelation because it referred back to the filing date of the complaint, but it did not
affect the objective standard of the test because the water consumption was assessed by a 3rd
party who forwarded the information to Dworkin, who then forwarded it to Coventry.

- Aggregation of Claims- Plaintiff can aggregate all of her claims against a single defendant,
even if the claims are not related to one another.
- When there is more than one plaintiff-Each plaintiff must satisfy the AIC requirement against
the defendant.
- When there is more than one defendant-Plaintiff must satisfy AIC against each defendant.

Single Title or Right Exception: When separate parties have a single title or right in which the
parties have a “common and undivided interest” aggregation is allowed by multiple plaintiffs
suing one defendant(i.e. baseball collection passed in will equally to brothers was destroyed by a
single party- brothers can sue defendant and satisfy AIC if total worth of cards exceeds AIC
because single right (came from one source) and each brother has an equal, undivided interest in
each card).

Joint & Several Liability Exception: Aggregation of claims is allowed, where each defendant
caused a portion of the harm to plaintiff, but can each be held liable for the total damage caused
by the defendants as a group. Plaintiff is enforcing single title or right and Defendants have a
common and undivided interest for each is liable for the total harm caused.

Computing AIC in Suits for Declaratory or Injunctive Relief:


1. Plaintiff’s viewpoint- the amount in controversy is the value or benefit to the plaintiff in
obtaining relief sought.
2. Either viewpoint (more widely used)- the AIC is the amount related to either party which the
judgement would directly produce.
3. Defendant’s viewpoint- AIC is value or benefit to the defendant.
4. Jurisdictional- AIC is value of the party seeking to invoke the court’s jurisdiction.

IV. SUPPLEMENTAL JURISDICTION


- pendent jurisdiction- permitted federal courts to take jdx. over claims asserted by the original
plaintiff for which there was no independent basis of subject matter jurisdiction. Exists
whenever there is a claim “arising under federal law” and the relationship between the
federal claim and state law claim permits the conclusion that the entire action before the
court comprises but one constitutional case.”

- ancillary jurisdiction- permitted federal courts to take jdx. over claims by someone other than
original plaintiff, where no independent basis of jdx. existed (i.e. counterclaims, cross-claims
between defendants, claims by defendant against 3rd party a.k.a. impleader).

- common nucleus of operative fact- federal & state law claim involve same facts. Virtually
certain to be met when they are alternate legal theories for redressing the same underlying
wrong.

United Mine Workers of America v. Gibbs: Coal company laid off miners from the United Mine
Workers Union, and hired Gibbs, as a superintendent, to open a new mine and use miners from a
rival union. Armed members of UMW forcibly prevented opening of the mine by force & the
creation of a picket line, which caused Gibbs to lose his job and his haulage contract. Gibbs’
cause of action was intentional interference with his contract of employment (state law claim)
and violation of §303 for the secondary boycotts (federal law claim). Court held that it was
proper for lower court to retain state law claim because the federal claim was substantial, both
claims evolved from a common nucleus of operative fact (strike), and were separate claims
that one would expect to be tried in one proceeding (different methods of recovery for the same
claim-just involved different standard).

Owen Equipment v. Kroger: Kroger filed wrongful death lawsuit against OPPD when her
husband was electrocuted by the boom of a steel crane. OPPD filed third-party complaint against
Owen, who owned and operated the crane. While motion was pending, Kroger amended
complaint, which named Owen as an additional defendant (pendent jdx.). Court held that it did
not have pendent jdx. over Owen when OPPD was dismissed from the lawsuit, because her
amendment of the lawsuit destroyed complete diversity between the parties ( she & Owen were
both Iowa residents).

A. §1367-SUPPLEMENTAL JDX.
- Incorporated & replaced common law doctrines of pendent & ancillary jdx.
- Gives courts the power to hear cases based on supplemental jdx. but court has the power to
remand state law claims back to state court; not a plaintiff’s right.

**GENERAL RULE** In order for a court to exercise supplemental jdx. over a case, the
state law claim must not have an independent basis of jurisdiction (IBJ) and involve the
same common nucleus of operative fact as the federal claim such that they are “one
constitutional case.”
§1367(a)[Court’s Power]- District courts have supplemental jdx. over all other claims that are
so related to the federal claims in the action that they form part of the same case or controversy
under Article III of the Constitution (one constitutional case).

- Most courts construe same case or controversy- as common nucleus of operative fact (Minority
of jdx. give §1367(a) broader meaning in that only a loose factual relationship to the federal
claim is allowed).

- Court cannot infer or imply Congress’ intent to negate supplemental jurisdiction. Congress
must expressly negate supplemental jdx. over type of lawsuit by statute.

§1367(b)- bars supplemental jurisdiction where court’s jurisdiction is founded solely on §1332-
diversity, where it offends standards of diversity.

§1367(c)[Court’s Discretion]- gives Courts the power to decline to exercise supplemental jdx.
when:
(1) claim raises a novel or complex issue of State law.
(2) claim substantially predominates over federal claim
(3) district court has dismissed all claims over which it has original jurisdiction
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction
(split over subsection 4- Some courts believe that it is a catch-all where court can dismiss if
exercising jurisdiction is not in the best interest of judicial economy and convenience & fairness
to litgants; other courts believe that subsection 4 restricts a court’s discretion, holding that a court
cannot decline supplemental jurisdiction solely on the basis of judicial economy, convenience or
fairness).

§1367(d)- If a federal court refuses to exercise supplemental jurisdiction, statute of limitations


for refiling in state court is tolled for the period during which the federal suit was pending and
for at least 30 days after the dismissal. Must have fallen within supplemental jdx. under
§1367(a) Statute of limitation cannot have run at the time the lawsuit commenced.

- Does not apply to claims filed in federal court against nonconsenting States because the 11th
Amendment prevents a federal court from hearing claims against a state without the state’s
consent.

- Standing (Justiciability): Limits federal court’s power to adjudicate cases to actual cases and
not hypothetical or feigned disputes. Requires plaintiff to establish a causal link between
something done by the defendant and an injury suffered by the plaintiff. If not met the case or
the claims where standing is lacking must be dismissed. Court has rejected theory of
supplemental standing.
V. REMOVAL JURISDICTION
- Federal court’s ability to hear cases that the defendant removes to federal courts to override
plaintiff’s choice of forum.

- Case can only be removed to the federal district court embracing the place where the state suit
is pending.(Different from transfer).

§1441(a)- allows defendant or defendants to remove case to federal court if it is one over which
the district court would have had original jurisdiction (satisfies §1331, §1332, or §1367).

§1441(b)- Bars removal in diversity cases if any defendant is a citizen of the forum state.

McCurtain County Production v. Cowett: McCurtain sought $15,215.59 against the Cowetts for
payment on a defaulted promissory note. Alternatively sought judgement against other
defendants including John Deere for $2,903.94. John Deere attempted to remove the case to
federal court under 1441(a) because of diversity. However, the court held that because there was
no separate & independent claim against John Deere, their attempt at removal was defective
because the motion was not made by all of the defendants. Furthermore, the case could not have
originally been brought in federal court because the Amount in Controversy as to each defendant
was not satisfied.

§1441(c)- whenever a separate & independent claim that is a federal question is joined with an
otherwise nonremovable claim, the entire case may be removed & the federal court has the
discretion to determine the entire case or remand all matters in which state law predominates.
Requires:
(1) separate & independent claim (does not substantially involve the same facts)
(2) joined with a federal question
(3) otherwise nonremovable
(4) matter in which state law predominates

- Under 1441(c), only defendants involved in separate & independent claim need file for removal
to federal court.

Eastus v. Blue Bell: Eastus, who worked for Blue Bell, was fired after he took time off to be with
his wife, who was pregnant. He sued for intentional infliction of emotional distress and tortious
interference with prospective contractual relations for telling potential employers that he was
hard to work with, in state court. Blue Bell removed to federal court because there was a federal
question. Eastus moved to have the state law claims remanded, which the court did pursuant to
1441(c). The FMLA claim (wrongful termination) is not separate and independent from the
intentional infliction of emotional distress claim because they involve the same facts
(termination) and are merely two claims seeking different theories of recovery. However, the
tortious interference claim involves separate acts by Blue Bell, calling prospective employers,
and bears no relationship to the FMLA claim. Firing someone and preventing them from finding
a new job are separate wrongs, and the first does not necessarily lead to the second. As proof of
the two counts will not substantially involve the same facts, the state court has the power to
remand separate and independent claims, where state law predominates as to the individual
claim.

When a court can retain jurisdiction over separate and independent claims:
1. state law claim between diverse parties, that does not meet AIC, but is removed pursuant to
1441(c) and not 1332.
2. state law claim that is part of the same constitutional case as the separate and independent
federal claim, but was not removable under 1441(a) and (b). Permissible under supplemental
jurisdiction, where court only requires a loose factual nexus to satisfy common nucleus of
operative fact. Federal court does not act unconstitutionally by retaining the entire case after it
was removed by the defendant sued on the federal question.

NOTICE PLEADING

-Fact pleading (later rejected)- required party to carefully align the facts with each element of
the asserted right (i.e. each element of duty, breach, causation must be identified and factually
supported).

- Adoption of FRCP, rejected fact pleading and provided simplified form of pleading called
notice pleading.
- FRCP 8(a) a pleading that states a claim for relief must contain:
1. a short and plain statement of the grounds for the court’s jurisdiction
2. short and plain statement of the claim showing that the pleader is entitled to relief
3. demand for the relief sought

FRCP 8(d)(1)-each allegation must be simple, concise and direct. No technical form is required.

- Once the defendant has been served with a summons and a copy of the complaint, her response
(answer) is normally due within 20 days (unless she has timely waived service under rule 4(d),
then has 60 days to respond if resides in U.S. and 90 if resides outside of U.S.). FRCP 12(a).

Presenting Defenses FRCP 12(b)


1. lack of subject matter jurisdiction
2. lack of personal jurisdiction
3. improper venue
4. insufficient process
5. insufficient service of process
6. failure to state a claim upon which relief can be granted
7. failure to join a party under Rule 19
VENUE TRANSFER
A. OVERVIEW
- Venue- geographic location of the court in which the lawsuit is filed, third and final step in
selecting the appropriate court (after personal jurisdiction and subject matter jurisdiction).

- Venue is a personal right of the defendant that can be waived or altered by agreement (lack of
proper venue does not automatically deprive court of authority to adjudicate issue).

- Convenience of a particular venue is presumed if a statute provides that the chosen venue is
appropriate (all states have a “general” venue statute designed to cover the bulk of all civil
litigation).

- Distinction between Local and Transitory Actions:


- 1. Transitory Actions- (bulk of all civil actions i.e. contract, torts) nature of underlying claim
does not lock the controversy to a specific venue. Can be filed anywhere.
- 2. Local Action-directly affects the ownership or possession of real property and can only be
filed in the locality in which the real property is located.
Caveat: actions involving damages to real property are not considered local as they do not
affect ownership. However states can amend by statute.
- 3. Mixed Actions- (mix between local and transitory) action is governed by the nature of the
“main relief” (local or transitory); court will look to complaint to see what type of relief
predominates the plaintiff’s claims.

- If an action is deemed local, it may only be filed in the federal judicial district in which the
property is situated, even if venue statute allows for additional options.

- Example of Venue Statutes in State Courts:


California Code of Civil Procedure §395(a)-Governs Transitory Actions- Except as otherwise
provided by law and subject to the power of the court to transfer actions or proceedings as
provided in this title, the superior court in the county where the defendants or some of them
reside at the commencement of the action is the proper court for the trial of the action.

California Code of Civil Procedure §392(a)(1)-Governs Local Actions- the superior court in
the county where the real property, that is the subject of the action, or some part thereof, is
situated is the proper court for the trial of the following actions: (1) for the recovery of real
property or of an estate or interest therein, or for the determination in any form, of that right or
interest, and for injuries to real property; or (2) for the foreclosure of all liens and mortgages on
real property.

B. PROPER VENUE IN FEDERAL COURTS

General Venue Statute: 28 U.S.C. §1391: applies to all diversity cases and a most federal
question cases.
§1391(a)- applies to diversity actions- civil action wherein jurisdiction is founded only on
diversity of citizenship may, except as otherwise provided by law, be brought only in
(1) a judicial district where any defendant resides, if all defendants reside in the same state, or
(2) a judicial district in which a substantial part of the events or omissions giving rise to the
claim occurred, or a substantial part of the property that is subject to the action is situated,
(3) a judicial district in which any defendant is subject to personal jurisdiction at the time the
action is commenced, if there is no district in which the action may otherwise be brought.

§1391(b)- applies to federal question cases- a civil action wherein jurisdiction is not founded
solely on diversity of citizenship may, except as otherwise provided by law, be brought only in:
(1) a judicial district where any defendant resides, if all defendants reside in the same State; or
(2) a judicial district in which a substantial part of the events or omissions giving rise to the
claim occurred, or a substantial part of the property that is the subject of the action is situated;
(3) a judicial district in which any defendant may be found, if there is no district in which the
action may otherwise be brought.

Subsections (a)(1) and (b)(1)- Residence- Residence means domicile (i.e. if defendant is
domiciled in the Central District of California, both subsections (a)(1) and (b)(1) provide the
option of venue in that district).

- Subsection (c) Under (a)(1) or (b)(1)- Residence of Corporations- a Defendant that is a


corporation shall be deemed to reside in any judicial district in which it is subject to personal
jurisdiction at the time the action is commenced.

- In a single district state, this means that a corporate defendant is a resident of the state’s judicial
district if the corporation’s contacts with the state satisfy due process standards of either
specific or general jurisdiction.

-In a multidistrict state, this means a corporate defendant is deemed to reside in any district in
that State within which its contacts would be sufficient to subject it to personal jurisdiction if that
district were a separate state.

- What does personal jurisdiction under §1391(c) mean?


Some courts require the court to apply the standards of the state’s long-statute in addition to the
due process analysis, which is not a problem in a single district state. However, in a multidistrict
state, there may be problems if the long-arm statute cannot be applied to any specific district.

Other courts only require due process analysis, presents a question of federal law to which state
law is irrelevant (Erie doctrine).

Subsections (a)(2) and (b)(2)- Substantial Part of Events- “events or omissions giving rise to
the claim occurred.” is generally given a broad interpretation, which eliminated the difficulty in
determining the district where venue would be proper. Events that might only have some
tangential connection with the dispute in litigation are not enough. Substantiality is intended to
preserve the element of fairness so that a defendant is not haled into a remote district having no
relationship to the dispute.

First of Michigan Corp. v. Bramlet: Bramlets invested $62,000 in an IRA with First Michigan
pursuant to advice from Sobol, an investment broker. Bramlets initiated an arbitration action
against First of Michigan and Sobol in Florida. Subsequently, First of Michigan and Sobol filed
suit to enjoin and dismiss arbitration claim in the Eastern District of Michigan. Bramlets filed
FRCP 12(b)(3) motion to dismiss for improper venue. The district court dismissed because it
held that “the substantial event” giving rise to the claim was the Bramlets filing the arbitration
suit, which occurred in Florida and thus venue was improper. On appeal, the appellate court held
that this was an obsolete standard as the proper venue was no longer the district where the “most
substantial event giving rise to the claim, but any substantial event giving rise to the claim. Since
most of the Bramlets investments took place in Michigan or resulted from contact the Bramlets
had with Sobol, who only conducted business in Michigan, venue is proper in the Eastern
District of Michigan. Established rule that under §1391(a)(2) proper venue is any district
court where there are substantial events giving rise to the claim.

Normally a district court order dismissing a suit for improper venue is reviewed under an
abuse of discretion standard, but because the district court misapplied the statute, the appellate
court reviewed the dismissal for lack of venue under a “de novo” standard.

-Subsections (a)(3) and (b)(3)-Fallback Provisions- Can only be used if there is no district in
which the action may otherwise be brought. If venue is proper under either the “residence” or
“substantial events” clauses, the fallback provisions are not available.

(a)(3) states venue in a judicial district in which any defendant is subject to personal jurisdiction
at the time the action is commenced,

(b)(3) states venue in a judicial district in which any defendant may be found- allows for more
leeway in terms of when the defendant may be found, as defendant may be found after the
lawsuit has been commenced. However, “found” can be either construed as subject to personal
jurisdiction or only transient jurisdiction.

C. TRANSFER OF VENUE IN FEDERAL COURT

28 U.S.C. §1404 (a):Transfer from Proper Venue to Proper Venue- For the convenience of the
parties and witnesses, in the interest of justice, a district court may transfer any civil action to
any other district or division where it might have been brought. Defendant has the burden of
demonstrating that district court should transfer the action.
- Under §1404(a)- can only transfer to a court where venue and personal jurisdiction would have
been satisfied at the commencement of the lawsuit and the factors favor a transfer.
-
- Hoffman v. Blaski: Supreme Court held that a case could not be transferred under §1404(a) to a
district in a state that lacked personal jurisdiction over the defendants at the commencement of
the lawsuit because it was not literally one where the suit “could have been brought.” Remains
true even if at the time of the transfer defendants are willing to waive any objection to personal
jurisdiction in the transferee court. Also applies to §1406(a) transfer.

Factors to consider in §1404(a) transfer:


(1) availability and convenience of witnesses and parties
(2) the location of books and records
(3) the cost of obtaining attendance of witnesses and other trial expenses
(4) the place of the alleged wrong
(5) the possibility of delay and prejudice if transfer is granted
(6) the plaintiff’s choice of forum (Given the greatest deference)

Smith v. Colonial Penn Insurance Co.: Smith is suing Colonial Penn for the breach of an
insurance contract. Smith brought claim in Galveston Division of the Southern District, while
Colonial Penn seeks to transfer the motion to the Houston Division of the Southern District.
Defendant contended that it would be inconvenient to litigate in Galveston because it did not
have an airport. Court held that since Galveston was the same distance from the Houston airport
as the Houston District Court, there was no inconvenience and this was not enough to warrant a
transfer given that the plaintiff’s choice of forum is given the greatest deference.

28 U.S.C. §1406(a) Transfer from improper venue to proper venue: Where venue is improper,
the district court of a district in which a case is filed shall dismiss or if it be in the interest of
justice transfer such case to any district or division in which it could have been brought.

What law applies in transfer cases?

Van Dusen Rule-Under a §1404(a) transfer- The court where the action is transferred to, will
use the same substantive law as the court where the action was transferred from. (i.e. A suit
originally filed in State X and transferred to State Y under §1404(a) will apply the same law
State X would substantively apply).

Under a §1406(a) transfer- the court where the action is transferred to will use its own choice of
law principles (i.e A suit originally filed in State X and transferred to State Y under §1406(a) will
apply the same law that State Y would substantively apply).
This rule does not apply in federal question cases which is based on the fiction that federal
law is uniform throughout the nation, so a transfer from one federal forum to another should
make no difference. Thus federal law of circuit in which the receiving court sits shall be applied.
What happens when the originating court lacks personal jurisdiction?
If a court lacks personal jurisdiction over a defendant, the standard remedy is to dismiss the case
as to that party.

Goldlawr transfer- only applies to federal courts and works as an alternative to dismissal-under
a §1406(a) transfer a federal district court that lacked proper venue and personal jurisdiction over
the defendant could dismiss the case and then transfer it to a venue that would be proper.

When personal jurisdiction is lacking but the venue is proper, the majority of federal courts
use a §1404(a) transfer, while a minority use §1406(a) transfer.

A few courts use 28 U.S.C §1631 to transfer to a proper venue when there is a “want of
jurisdiction” in the originating court. §1631 transfer was originally used when exclusive
subject matter jurisdiction was lodged in a court other than the originating court, but its language
is more encompassing.

**GENERAL RULE** When personal jurisdiction is lacking in the originating court,


whether a §1404(a), §1406(a) or §1631(a) transfer motion, the Van Dusen Rule does not
apply, meaning the law of the originating court does not transfer to the transferee court.

Multidistrict Litigation:Procedural device established by 28 U.S.C. §1407 which allows the


federal judicial system to coordinate and consolidate pretrial proceedings in factually related
lawsuits. There is no comparable device for cases filed in a multiplicity of state courts.

Transfer is allowed when civil actions involving one or more common questions of fact are
pending in different districts, if doing so will be for the convenience of the parties and witnesses
and will promote the just and efficient conduct of such actions. Primary focus is the just and
efficient conduct of such actions (usually involved in cases of mass torts, airline disasters and
complex antitrust/securities cases).

After the pretrial matter are conducted (i.e. discovery), matter is transferred back to the federal
district court from which they were transferred.

D. FORUM SELECTION CLAUSES


- A forum selection clause is a provision in a contract under which the parties agree to file any
suit arising under the terms of the contract in a specific forum.

- M/S Bremen Standard-If the selected forum is in a foreign country or in a specified state
court, federal courts will, on motion, dismiss a suit filed n federal court, unless the objecting
party can “clearly” show that the enforcement would be unreasonable and unjust or the
clause is invalid or overreaching.

- When there is a forum selection clause that designates a specific court, the majority of forum
selection clauses are enforced.

-When there is a forum selection clause and the defendant seeks to transfer- if a forum
selection clause broadly describes the selected forum as any court located in a certain state or
geographic region, a federal court will treat the clause as no more than a presumptively valid
venue to or from which a case may be transferred.

Jones v. GNC Franchising, Inc.: Jones, a franchisee of a GNC store had a contractual agreement
with GNC and it contained a forum selection clause that designated any court whether federal or
state is a proper venue in addition to containing a Pennsylvania choice of law clause. Jones filed
suit in the state court of California. GNC removed the case to federal court based on §1332,
diversity, and then moved to either dismiss the case or transfer venue to the Western District of
Pennsylvania. The court held that the forum selection clause was unenforceable because it
contradicted California’s strong public policy(declared by statute) against forum selection
clauses as applied to franchise agreements. While the forum selec

E. FORUM NON CONVENIENS

-Forum non conveniens is a common law dismissal doctrine that permits a court to decline the
exercise of jurisdiction in order to permit a suit to be filed in another more convenient forum.

- It may be used in federal court when the more convenient forum is in a foreign country or a
state court in the United States; It may be used in a state court when the more convenient forum
is in a foreign or sister state.

- A party must show that (1) there is an available alternate forum; and (2) the balance of private
and public concerns weigh heavily in the favor of dismissal.

Gilbert Factors of forum non conveniens


Public Factors
1. administrative difficulties flowing from court congestion
2. the local interest in having localized interests decided at home
3. the interest in having the trial of a diversity case in a forum that is at home with the law that
must govern the action
4. the avoidance of unnecessary problems in conflict of laws or in the application of foreign law
5. the unfairness of burdening citizens in an unrelated forum with jury duty
Private Factors
1. relative ease of access to sources of proof
2. availability of compulsory process for attendance of unwilling and the cost of obtaining
attendance of willing witnesses
3. possibility of view of premises if view would be appropriate to the action;
4. all other practical problems that would make trial of a case easy, expeditious, and inexpensive.

Piper Aircraft v. Reyno: A small commercial aircraft crashed in the Scottish highlands during a
charter flight, where the pilot and five passengers were killed instantly. The decedents were all
Scottish subjects and residents and at the time of the crash the plane was subject to Scottish air
traffic control. The plane was manufactured in Pennsylvania by Piper Aircraft, while the
propellers were manufactured in Ohio by Hartzell. Reyno, the secretary of the lawyer who filed
the lawsuit, was appointed administatrix and a lawsuit was commence in California for wrongful
death against Piper and Hartzell because the U.S. laws regarding liability are more favorable than
Scotland’s, which does not recognize strict liability in tort. The case was removed to the federal
court in the Central District of California. Then Piper moved to transfer to the Western District of
Pennsylvania under §1404(a), while Hartzell moved to dismiss because it was not subject to
personal jurisdiction or transfer the case to Pennsylvania. Once it was transferred, Piper and
Hartzell moved to dismiss because of forum non conveniens. Although evidence concerning the
plane and propeller was located in the U.S., the private interests pointed to Scotland as the
appropriate forum because (1) the real parties in interest are from Scotland, (2) inability to
implead third-party defendants located in Scotland, (3) forcing parties to rely on actions of
indemnity an contribution would be burdensome, which is sufficient to support dismissal on
grounds of forum non conveniens, and (4) witnesses are out of reach of the compulsory process.
The public factors also weigh in favor of Scotland as: (1) court would apply Pennsylvania law to
Piper and Scottish law to Hartzell, (2) lack of familiarity with Scottish law, (3) Scotland has a
strong interest in the case because it occurred in their airspace, all of the decedents were scotish
and all of the potential plaintiffs and defendants aside from Piper and Hartzell were either
English or Scottish.

ERIE DOCTRINE
**GENERAL RULE** Federal courts sitting in diversity will generally apply federal
procedural law and state substantive law. Operates as alternative forum for adjudication of
the state created right. Erie Railroad Co. v. Tompkins. (Foundation Case).

- Substantive right- defines the standards of conduct applicable to everyday life. (i.e. law of
negligence provides “substantive” standards against which to measure our everyday duties to
one another).
- Procedural rules- specify the manner or means through which claims arising under the
substantive law may be adjudicated.

- Statute of limitations is a procedural tool that can act substantively if federal statute of
limitations permits substantive right to be adjudicated while state statute of limitations bars the
claim, and vice versa.

- Rules of Decision Act (RDA) - 28 U.S.C. §1652- the laws of the several states, except where
the Constitution, treaties or statutes of the United States otherwise require or provide, shall be
regarded as rules of decision in trials at common law, in the Courts of the United States, in cases
where they apply.

Swift v. Tyson: The issue was whether an individual who had purchased a bill of exchange for
value and in good faith be barred from recovering on the bill due to the fraud of the original
holder. Under New York common law, the person obligated on the bill could raise the fraud
defense against a bona fide purchaser, while under the general principles of common law, he
could not. The Court, in an effort to promote uniformity throughout the country, held that the
common law of the states was not law, common law of the states were not laws as defined by the
Rules of Decisions Act, and the federal courts were free to create their own body of general
common law to apply to the matter.

Black & White Taxicab Co. v. Brown & Yellow Taxicab Co.: Brown & Yellow Taxicab, a
Kentucky corporation, wanted to enter into a contract with the Bowling Green, Kentucky
railroad station, which would grant them the exclusive privilege of soliciting passenger and
baggage transportation at the railroad; they also wanted to prevent the Black & White Taxicab, a
Kentucky corporation, from interfering with that privilege. Brown & Yellow reincorporated in
Tennessee, and executed the contract. The inequities of Swift v. Tyson were brought to light when
they brought suit to enjoin competition against Black & White, and the district court affirmed the
decree under the general common law rather than the common law of Kentucky.

Erie Railroad Co. v. Tompkins: Tompkins was injured by a passing freight train of the Erie
Railroad Company, while walking along its right of way. He claimed that the accident occurred
through negligence in the operation or maintenance of the train; that he was rightfully on the
premises because he was using a commonly used footpath which ran alongside the tracks, and
was ultimately struck by a door from a moving freight car. Erie denied liability and argued that
the matter should be determined as a matter of Pennsylvania law, where the accident occurred,
pursuant to the Federal Judiciary Act of 1789 (Rules of Decision Act), which stated that laws of
the several states, except where the Constitution, treaties or statutes of the United States provide
otherwise shall be regarded as rules of decisions in trials at common law. Tompkins, on the other
hand, argued that the matter should be determined as a matter of federal general common law.
The Court held that Swift v. Tyson was wrong in allowing federal courts to ignore the unwritten
law of the state and instead, exercise independent judgement as to what the common law of the
state should be, because it created discrimination by non-citizens against citizens and rendered
equal protection of the law impossible (invaded authority of the State, denial of independence).
Therefore, the court ended federal general common law, and held that the decisions rendered by
the Supreme Court of the state were laws of the state and were to be applied in accordance with
Rules of Decisions Act. Established that federal courts sitting in diversity must follow the
substantive laws of the state, including the state’s common law.

Klaxon: Contract dispute between a New York company and a Delaware company. The parties
disagreed over whether to apply New York or Delaware law. The court held that a federal district
court must apply the choice-of-law principles that a Delaware state court would apply.

Erie + Klaxon = A federal district court exercising jurisdiction over a state law claim must
apply the same substantive law as would be applied by the courts of the state in which the
federal district court sits.

- Erie overruled Swift v. Tyson, which allowed federal courts to freely ignore state common law
and apply its own view of general common law. Pre- Erie: Courts allowed to do this despite
Rules of Decision Act (RDA) because state common law was not considered law.

- Erie type problems arise when federal procedural law conflicts with state substantive law.
Question becomes which trumps the other.
1. Track One- Federal Procedure derived from Federal Statute
2. Track Two- Federal Procedure derived from a Federal Rule of Civil Procedure
3. Track Three- Federal Procedure derived from federal common-law

I. TRACK ONE- FEDERAL PROCEDURE DERIVED FROM FEDERAL STATUTE

- Supremacy Clause- The Constitution, and the Laws of the United States made pursuant to it;
and all treaties made under the authority of the United States, shall be the Supreme Law of the
land; and the Judges in every state shall be bound thereby, any Thing in the Constitution or
Laws of any State to the contrary notwithstanding.

- Translation- State law must conform to the Constitution and must yield to constitutionally
valid federal law whenever a conflict between state and federal law arises.

-Track One Analysis:


(1) Is the statute “sufficiently broad to control the issue” before the Court? (“direct collision”
between state and federal law).
(2) Is the statute valid? Is it capable of being rationally classifiable as procedural? (premised on
enumerated power in Constitution, does it violate separation of powers, does it limit a power in
the Constitution). If so, federal procedural law must be applied.

Stewart v. Ricoh: Stewart Organization, an Alabama company, entered into a dealership


agreement to market copier products of Ricoh. The contract contained a forum selection clause
providing that any dispute arising out of the contract could be brought only in a court in
Manhattan, and a choice-of-law provision designating that New York law would control disputes.
Ricoh sought to transfer motion to S.D.N.Y., but Stewart argued that Alabama law governed the
transfer motion, and had a public policy against contractual forum-selection clauses. The Court
held that 1404(a) was broad enough to cover the issue because it gives courts the discretion to
transfer based on individualized case-specific factors, while Alabama has a policy that
categorically disfavors forum selection clauses. It is valid because it is a housekeeping measure
that falls comfortably within Congress’ powers under Article III as designated by the Necessary
& Proper Clause. Federal law governs the transfer motion. Scalia Dissent- The subtle role of
Erie played a role in Scalia’s dissent, interpreted provision narrowly to avoid conflict with State
law, where he stated that 1404(a) is a venue provision and is not broad enough to preempt
Alabama state law regarding contracts.

-Erie sometimes plays a subtle role in Track One by inviting a narrow reading of the federal
statute in order to avoid a conflict with state law or policy.

- Erie sounded death knell for federal general common law, but not federal common law, which
is the federal court’s power to develop common law pertaining to matters over which the
Constitution vests authority in the federal government.

- Federal common law that stems from a federal statute, the Constitution, treaties and laws
of the United States triggers a Track One Analysis and trumps state law to the contrary
on a Supremacy Clause Analysis.
-Examples:
1. Constitutional Common law- Supreme Court interpretations of the U.S. Constitution (i.e.
minimum contacts test from due process clause and interpretation of “arising under” of Article
III).
2. Statutory federal common law- Judicial interpretation of federal statute to the extent that it
adds or alters rights or obligations, or fills a gap in the statutory scheme.
a. interstitial federal common law- created when federal courts fill a gap in an otherwise
comprehensive legislative scheme (i.e. implied rights of action).
b. global statutory federal common law- creation of statutory federal common law that does
more than fill a gap (i.e. deciding when Sherman Antitrust Act applies).
3. Uniquely federal interests- judicially created laws that protect uniquely federal interests (i.e.
federal interests that stem from a statute). often triggered when the liability of the United
States is at stake. Sometimes triggers Track One Analysis because it sometimes stems from
federal statute.
4. Foreign relations & customary international law - creation of federal common law to prevent
state or foreign law interference with federal interests.
5. Interstate Relations- national interest in uniformity in controversies over water rights allows
Supreme Court to act where there is an absence of congressional legislation.
6. Admiralty & Maritime Law- power of federal courts to create federal common law in the
context of admiralty and maritime suits.
II. TRACK TWO- FEDERAL PROCEDURE DERIVED FROM FRCP

- 28 U.S.C. § 2072 Rules Enabling Act (REA)-


- (a) Supreme Court has 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.

- There is a strong presumption that any federal rule of civil procedure is valid.

Track Two Analysis


1. Is the federal rule broad enough to cover the circumstances?
2. Is the federal rule capable of being rationally classifiable as procedural?
3. Does it abridge, enlarge or modify any substantive right? If not must be applied regardless of
state law to the contrary.

Erie plays a subtle role in Track 2 analysis in that courts will take a narrow reading of the federal
rule to avoid conflict and enforce state law.

Sibbach v. Wilson & Co.: Sibbach was injured in an automobile accident in Indiana, which she
claimed was caused by one of Wilson’s employees. Wilson denied liability and moved for an
order requiring her to submit to a physical examination pursuant to FRCP 35 (a). The court held
that the FRCP was broad enough to cover the issue because FRCP 35(a) gave district court
judges the power to compel physical examinations, while Sibbach refused to comply because
Illinois law refused to give state court judges the power to order physical examinations. Plaintiff
concedes that rules are procedural in nature in an attempt to avoid application of Indiana law,
where substantial events giving rise to the claim occurred, which is consistent with FRCP 35(a).
The court held that it does not abridge, enlarge or modify any substantive right because the right
to freedom from invasion is not a substantive right, but rather a substantial right. Her right to
privacy arose solely in connection with the conduct of litigation and is therefore more properly
categorized as a procedural right. FRCP 35(a) must be applied, but lower court erred in holding
Sibbach in contempt pursuant to FRCP 37.

- Some judges felt that Erie was an omnipresent principle of federalism and the simple model
adopted in Sibbach disappeared until Hannah v. Plumer.

Trilogy of Cases

Ragan v. Merchants Transfer & Warehouse Co.: A highway accident occurred in Kansas, and the
plaintiff invoked diversity jurisdiction by filing the complaint in federal court within the state’s
two-year statute of limitations, but service of process was not effected until after the statute had
run. FRCP 3 stated that a civil action is deemed commenced by filing a complaint. The court did
not examine Rule 3 under Sibbach and the express standards of the REA, and held that since
state law created the cause of action, the “measure” of that cause must be governed by state
tolling provision.

Woods v. Interstate Realty Co.: Tennessee corporation sued a resident of Mississippi seeing a
broker’s commission on real estate sold by the corporation on behalf of the resident. Woods
claimed that the contract was void because Interstate failed to register to do business within the
state. The Court held that since Mississippi denied the corporation a remedy (substantive right)
access to the federal court must be denied as well.

Cohen v. Beneficial Industrial Loan Corp.: Cohen filed a stockholder’s derivative action filed
against Beneficial involving allegation of corporate mismanagement and fraud. While the suit
was pending, New Jersey enacted a statute that allowed any corporation subject to a derivative
suit the right to demand the plaintiff post security for reasonable expenses that might be incurred
by the corporation in defending the suit. Beneficial filed a motion to require the plaintiff to post a
security bond, district court denied the motion. The Court held that although Rule 23 did not
require the plaintiff to post a bond, under Erie, the court was obligated to follow state law.

- Hannah was a response to the confusing trilogy of cases decided after Sibbach.

Hannah v. Plumer(Part I): Hannah filed her complaint in the District Court of Massachusetts,
claiming damages for personal injuries stemming from an car accident. The accident occurred in
South Carolina and was allegedly caused by the negligence of Plumer. Service was made on
Plumer’s executor by leaving copies of the summons and complaint with the executor’s wife at
his residence, in compliance with FRCP 4(d)(1). Massachusetts law, on the other hand, required
in hand service. Direct collision between federal and state law because Rule 4(d)(1) states that
in-hand service is not required in federal courts. Rule 4(d)(1) is rationally classifiable as
procedural because it prescribes the manner in which a defendant is to be notified that a suit has
been instituted against him. Does not abridge, enlarge or modify substantive right, because the
only right at issue is how service should be effected, which is procedural. Reinterpreted the
trilogy of cases as Erie had never been applied to void a Federal Rule, but rather that the
scope of the Federal Rule was not as broad as the losing party urged, and therefore
commanded the enforcement of state law. Declared Erie irrelevant as a measure of validity.

Walker v. Armco Steel: Walker, a carpenter, injured himself while pounding a nail manufactured
by Armco into a cement wall. Walker argued that the nail was manufactured defectively, which
caused its head to shatter and strike him in the eye. Although Walker filed the complaint in a
timely manner, the Oklahoma statute of limitations deems an action commenced when service is
commenced on the defendant; or in the alternative, petitioner has 60 days to serve defendant,
even if service is made outside of statute of limitations. Service was not made until after 60-day
period. Erie played a subtle influence as the Court held that the FRCP was not as broad as the
Walker urged. FRCP 3 governs when a lawsuit commences, which governs timing requirements
of Federal Rules, but does not explicitly toll the statute of limitations. No direct conflict, state
law applies.
III. TRACK THREE-FEDERAL PROCEDURAL COMMON LAW- WHERE NO RULE
EXISTS

- Under this track, Erie plays a direct & significant role.

Procedural Common law- authority to create a nonconstitutional federal common law of


procedure. Derives from Article III’s power to create free-standing procedural common law
where no constitutional, statutory, or formal federal rule exists. (i.e. forum non conveniens and
res judicata). Always triggers Track III analysis.

Track Three Analysis


1. Is there a potential conflict between judge-made rule & state rule?
2. Is it arguably procedural?
3. Is it valid? Is it outcome determinative? Twin aims of Erie are to avoid forum shopping that
leads to an inequitable administration of the law.
4. If so, is there a strong federal policy that outweighs the state interest at stake?

Guaranty Trust v. York: York filed suit against Guaranty Trust claiming breach of fiduciary duty
for devaluing the notes that she held as a beneficiary, and sought equitable relief. The appellate
court reversed the trial court’s decision and held that a trust relationship did not exist and the
court was free to ignore the state statute of limitations, which barred the suit.; instead they were
free to rely on the doctrine of laches (timing doctrine in equitable relief procedures), which did
not bar the suit. The Court held that where a federal court is adjudicating a state-created right,
solely for the purposes of diversity of citizenship, it cannot afford recovery if the right to recover
is made unavailable by the State, nor can it substantially affect the enforcement of the right as
given by the State. Since the statute of limitations would have barred recovery in state court, a
federal court cannot afford recovery. Created outcome determinative test. Refined Erie and
established that federal courts must apply state law whenever application of federal law
would alter the outcome of the case.

Byrd v. Blue Ridge: Byrd lost both of his forearms, while working for an independent contractor,
Blue Ridge, at a construction site in South Carolina. Blue Ridge denied liability on the grounds
that Byrd was a “statutory employee” whose recovery was limited to that provided by worker’s
compensation. Blue Ridge argued that South Carolina law, pursuant to Adams v. Davison-Paxon
Co., mandated that a judge determine whether a person was a statutory employee. In analyzing
Adams, the Court held that the decision defined the scope and method of judicial review, as state
courts were allowed to distribute functions of its judicial machinery (whether judge or jury
decides certain questions) at its discretion. Therefore, it did not arise as part of the integral
relationship created by the statute. Lastly, it held that the federal policy of having juries decide
questions of fact (derived from the Seventh Amendment) trumps the state rules regarding
statutory employees because the state rule wasn’t really outcome determinative. Created Byrd-
Balancing- formula which allowed strong federal policy to trump state rules.
Byrd Balancing- The comparison between the federal policy underlying the federal standard and
the state rule used to determine whether an outcome determinative federal standard should be
applied instead of the state rule.

Hannah v. Plumer (Part II): Purely Dictum. Abandons strict “outcome determinative” test of
York, and creates a refined “outcome determinative” test that incorporates the forum shopping
rationale of Erie (do not want forum shopping that leads to inequitable administration of the
law). State rules should be applied instead of federal standards where application of the federal
rule is outcome determinative, unless there is a strong federal policy that favors the federal
standard.

Gasperini: Gasperini was a journalist for CBS News and the Christian Science Monitor, who
worked in Central America, and took over 5,000 transparencies that depicted active war zones,
political leaders, etc. He agreed to let the Center for Humanities use some of his transparencies
for a documentary, but they lost some of them, and he subsequently sued. The Center conceded
liability and the jury awarded a verdict of $450,000 in compensatory damages. The Center
moved for a new trial under FRCP 59. The conflict was whether the method for reviewing
itemized jury verdicts was to be determined excessive under an “abuse of discretion/shocks the
conscience” standard, which was reconcilable with the 7th Amendment’s mandate for a fair trial
or a “deviates materially” standard, which was codified by New York. The normal “shocks the
conscience” standard of appellate review was seen as outcome determinative because the
“deviates materially” standard was designed to reduce excessive damages awards through closer
oversight. The Court avoided Byrd balancing by holding that the district court would adopt a
“deviates materially” standard while the appellate court would continue to apply a “shocks the
conscience” standard.

Semtek: Semtek filed a complaint against Lockheed alleging inducement of breach of contract.
Lockheed moved to dismiss on grounds that the claim was barred by California’s 2-year statute
of limitations. The court granted the motion to dismiss on the merits,with prejudice, and Semtek
filed the same complaint in Maryland, which had a 3-year statute of limitations. The Maryland
state court dismissed on the ground of res judicata. The conflict was whether the judgement
entered into by the California court had a claim-preclusive effect, as governed by the federal
common law or the law of the state in which the federal court sits. The Court held that there is no
need for a formal federal rule and to prevent forum shopping, which would lead to an inequitable
administration of the law, it held that the same claim-preclusive rule (state rule) applied whether
case had been ordered by a state or federal court.
JOINDER OF CLAIMS & PARTIES

I. OVERVIEW OF JOINDER

- Joinder is a means of allowing litigants to assert additional claims and bring in additional
parties to the lawsuit.

- Joinder is governed almost exclusively by statutes and rules, but the mere fact that a federal
rule authorizes the filing of a claim does not guarantee that the federal can hear it.

- In 1846, New York abolished its court of equity and implemented the Field Code, which
created one form of action to protect a citizen’s private rights, the civil action.

- By merging law and equity, Field Code sought to ensure that a litigant could obtain all of the
relief to which she was entitled in a single lawsuit.

- Legal claims/causes of action were divided into classes such as: (1) contracts; (2) injuries to
person; (3) injuries to property; an (4) actions arising from the same transaction, or transactions
connected with the same subject of the action.

- Borrowed from the common law, which permitted joinder of claims of the same type i.e. all
contract claims; and borrowed from equity, which permitted joinder of claims of the same
transaction.

- Codes were only partially successful in liberalizing joinder of claims, as courts read the same
transaction in a highly restrictive fashion (see Anderson v. Hill where court held that although
beating of woman and calling her a dirty, thieving whore happened at the same time, they
constituted different transactions), and litigants could not otherwise join claims that did not fall
within the same form of action.

- Code provisions also failed to liberalize joinder of parties because claims involving multiple
defendants also had to fall within the same code class, and each claim had to affect all parties to
the action. Lastly, multiple plaintiffs could only join together if they had an interest in the
subject of the action and in obtaining the relief demanded (Defendants also had to have an
interest in the controversy). Often construed narrowly and had the effect of only allowing
mandatory joinder and excluding permissive joinder.

- The Federal Rules of Civil Procedure (FRCP) served to liberate the rules of joinder for both
claims and parties.

II. JOINDER OF CLAIMS


A. Permissive Joinder
- FRCP provide complete and unrestricted joinder of claims between plaintiffs and defendants,
but court must still have subject matter jurisdiction over the claim, and venue must be proper
for each claim.

- Venue generally does not pose an obstacle to joinder of additional claims, if venue is based on
1391(a)(1) civil action founded solely on diversity is proper in any district where the defendant
resides, if all of the defendants reside in the same state; or 1391(b)(1) civil action not based
solely on diversity, venue is proper in a judicial district where any defendant resides, if all of
defendants reside in the same state.

- Problems may arise when venue is based on 1391(a)(2) or 1391(b)(2), which state venue is
proper in a district where a substantial part of the events/omissions giving rise to the claim have
occurred, as venue may be proper for one claim, but not the other.

- If this happens, plaintiff may ask court to invoke discretionary doctrine of pendent venue,
which is permissible if the claims arise from a common nucleus of operative fact. (Look Up
Pendent Venue).

-Counterclaims filed in response to plaintiff’s joinder of claims- Plaintiff chose venue and has
waived right to object to any claims that the defendant has asserted against her.

- FRCP 18(a)- (permissive joinder of claims) plaintiff may join, as independent or alternative
claims, as many claims, as he/she has against a defendant.

B. COUNTERCLAIMS

FRCP 13(a)- compulsory counterclaims- Defendant must file compulsory counterclaim. A


counterclaim is compulsory when:
1. It exists at the time of the pleading (maturity)
2. Arises out of the same transaction or occurrence
3. Does not require adjudication over parties, who the court does not have jurisdiction over

Burlington Northern Railroad Co v. Strong: Strong was injured in two separate accidents, and
received $11,678.21 as Supplemental Sickness Benefit (SSB), pursuant to the collective
bargaining agreement his union had with Burlington Northern Railroad. The agreement stated
that any SSB received by employees would not duplicate recovery of lost wages from a disability
case. Strong sued Burlington for personal injury tort damages, and won $73,000. Burlington
moved to have the money Strong received as SSB, set against the judgement. The trial court
refused, and Burlington sued in a separate action to recover the money. Strong appealed the
judgement in Burlington’s favor on the grounds that it should have been barred by res judicata.
However, the court held that Burlington’s counterclaim did not arise out of the same transaction,
as it was based on the collective bargaining agreement signed before Strong’s accident, and even
if it did arise out of the same transaction, the claim had not matured at the time of the pleading
because Burlington did not know that it was entitled to the money until after the judgement was
entered in favor of Strong in the first suit. Applied rule for compulsory counterclaims (same
transaction and maturity of claim).

Exceptions to Compulsory Counterclaim rule


1. Claims the defendant did not possess at the time he answered the complaint and which
matured or were acquired later.
2. Claims that require the presence of third parties over whom the court cannot acquire
jurisdiction
3. Claims that were the subject of another pending action at the same time the action was
commenced (would not serve the interests of judicial economy).
4. Claims by defendant over whom the court has obtained only in rem or quasi in rem
jurisdiction if that defendant has not filed any other counterclaims against the defendant.

Consequences for failing to asset a counterclaim- If a party fails to assert a counterclaim, the
counterclaim is usually barred under a theory of waiver or estoppel. However, courts are flexible
and FRCP 13(f) allows the court the power to grant leave to file a counterclaim that was omitted
through oversight, inadvertence, excusable neglect, or if justice so requires. Excusable neglect is
determined by the good faith of the claimant, the extent of the delay, and the danger of prejudice
to the opposing party.

- Under 1367(a), federal courts may exercise jurisdiction over a compulsory counterclaim
regardless of whether there is an independent basis of jurisdiction (compulsory counterclaims
naturally arise out of the same transaction). Permissive counterclaims need an independent basis
of jurisdiction to be joined.

Hart v. Clayton-Parker and Associates, Inc.: Hart was unable to pay her credit card bill from J.C.
Penney, which was then assigned to Clayton-Parker for collection. Hart alleged that Clayton-
Parker engaged in deceptive, unfair and abusive debt-collection practices in violation of the Fair
Debt Collection Practices Act (FDCPA) and applicable Arizona law prohibiting unreasonable
debt collection practices. Clayton-Parker’s counterclaim alleged that she defaulted on her
payments and owed an installment credit with J.C. Penneys. In order to determine whether the
court had to determine whether it had subject matter over the counterclaim, it had to determine
whether it was a compulsory or permissive counterclaim. The court held that it was not a
compulsory counterclaim because although the defendant’s right to payment and the fairness of
its collection practices are factually linked, a cause of action on the debt arises out of events
different from the cause of action for abuse in collecting (evidence regarding existence of a
contract and failure to perform contract vs. evidence centering on improprieties and
transgressions as defined by the FDCPA). Thus, it was a permissive counterclaim of which the
court did not have subject matter jurisdiction over and therefore, it had to be dismissed.
- Parallel Federal Proceedings
The failure to assert a compulsory counterclaim under FRCP 13(a) operates as a bar to filing the
claim in a second suit only if the first suit has already gone to judgement. A party can attempt to
litigate an omitted compulsory counterclaim by filing a second action while the first suit is still
pending. But, under first-to-file rule, court may enjoin the second action, or the court may stay
dismiss or transfer the action before it, which forces the party to assert the omitted
counterclaim in the first suit.

Semmes Motors, Inc. v. Ford Motor Company: Ford devised a warranty claims scheme, whereby
a purchaser that finds a defect with the car can return the car to the dealer, who will repair it, and
submit a Warranty Refund Claim to Ford. The company then reimburses the dealer for the
replacement part at cost plus a profit and for labor. Ford believed that it was receiving false
claims, and informed Semmes that it was conducting an audit, which comprised of inspecting the
dealership records, contacting customers, and inspecting repaired units. Semmes, who formed
the Ford Dealers Alliance to combat abuse because of the franchise system, filed a claim for an
injunctive relief against Ford contacting its customers, but they did not file for interlocutory
relief (prevent Ford from doing anything until matter was adjudicated). Ford counterclaimed to
recover false warranty claims. As Ford prepared to interview the customers who allegedly had
warranty claims (because Semmes failed to file interlocutory appeal). Semmes informed Ford of
its intent to file a second suit that was identical to the first, except that the second suit contained a
temporary restraining order against contacting customers. Ford terminated their franchise
relationship with Semmes, and Semmes was granted leave to amend its second suit to include
wrongful termination of their dealership. The Court held that the New York court should have
stayed its proceedings because its claim of wrongful termination arose out of the same
transaction as the Ford’s termination of the dealership in the first suit. Established that even
when the party filing the suit in the second action is the plaintiff rather than the defendant,
the first court has priority over a parallel lawsuit filed with the second court, absent the
showing of balance of convenience in favor of the second action. (Rule determines forum
shopping by the plaintiff in the second action).

- Rule 13(a) operates to force the defendant to file any counterclaims it has against the
defendant, and also serves to force the plaintiff to file any counterclaims it has against the
plaintiff in its reply to the defendant’s answer.

- Although FRCP 18(a) allows a plaintiff to join any claims she has against a defendant, and does
not force her to file any claims unless the defendant has filed a counterclaim, the doctrine of res
judicata can force a plaintiff to assert all of her claims at once, or else the causes of action
which arise out of the same transaction as the first suit will be barred in the second suit.

-Exception to rule 13(a)- If a plaintiff is forced to split his claims by law, a defendant is not
barred from asserting a compulsory counterclaim in the second proceeding as opposed to the first
proceeding, as it does not involve the circuity of action 13(a) was designed to prevent.
C. CROSSCLAIMS

FRCP 13(g)- Cross-Claim against a co-party: A pleading may state as a cross-claim any claim by
one party against a co-party arising out of the same transaction or occurrence that is the subject
matter of the original action or of a counterclaim therein.

Majority Rule: Co-parties become opposing parties within the meaning of FRCP 13(a)
after one party pleads an initial cross-claim against the other (other party must file any
compulsory counterclaim it has). Rule only applies when initial cross-claim is a substantive
claim (does not include claims for contribution or indemnity).

Rainbow Management Group v. Atlantis Submarines Hawaii: Rainbow Management Group


(RMG) was under contract with Atlantis to transport passengers back and forth from Atlantis’
submarine. While transporting passengers, RMG’s boat collided with Haydu’s boat, which was
carrying passengers as they prepared to scuba dive. Berry, an injured passenger aboard Haydu’s
boat, sued RMG and Atlantis, alleging that they negligently handled their boats. Atlantis filed a
cross-claim against RMG and a third-party complaint against Haydu (breach of contract, and
indemnity). RMG filed a cross-claim against Atlantis seeking indemnity and denying any
wrongdoing. Later, RMG filed a second suit seeking recovery of damage to its vessel, and loss of
its use resulting from the collision. The court held because Atlantis filed a cross-claim against
RMG for breach of contract (substantive claim), they became adversaries, and RMG was forced
to file any compulsory counterclaims that it had against Atlantis. Thus, claims in the second suit
were barred. Established that co-parties become adversaries and are subject to 13(a) when
one party files a cross-claim against the other.

Harrison v. M.S. Carriers: Harrison,and passengers filed a suit against M.S. Carriers for
damages sustained after his car collided with tractor owned by M.S. Carriers. Passengers moved
to amend their complaint to name their co-plaintiff Harrison as well as his insurer Guaranty
National Insurance as co-defendants. The court held that the passengers were allowed to file a
cross claim against its co-plaintiff. However, technically the the passengers should not have been
allowed to assert a cross-claim against its co-plaintiff because FRCP 7(a) requires a cross-claim/
counterclaim to be attached to a pleading, and there was no pleading filed against Harrison.

Rule 18(a)- Once a party asserts a cross-claim against its co-party that arises out of the same
transaction as the cause of action, the party can join with that cross-claim any other claims
that she has against the opposing party, including those that are totally unrelated to the main
actions or any counterclaims filed within the suit. Caveat- Court must still be able to assert
subject matter jurisdiction over those claims.
III. JOINDER OF PARTIES
A. Permissive Joinder of Parties by Plaintiffs

Real party in Interest


- FRCP 17(a)- Every action shall be prosecuted in the name of the real party in interest. No
action shall be dismissed on the ground that it is not prosecuted in the name of the real party in
interest until a reasonable time has been allowed after objection for ratification of
commencement of the action by joinder of real party in interest, which shall have the same
effect as if the action had been commenced in the name of the real party in interest.

FRCP 17(a)(3)- Courts have the discretion to either allow substitution or dismiss the action, if
the suit is not filed by the real party in interest.

Green v. Daimler Benz, AG: Green, as President of Infants Children & Youth, purchased a
Mercedes-Benz, which he crashed into a snow bank, and subsequently caught fire, allegedly
because of defects. The car was insured under his own name with Metropolitan Insurance, who
paid the insurance proceeds to Green minus the $1,000 deductible. Daimler Benz moved for
summary judgement on the basis since Metropolitan had paid the insurance proceeds, it was the
real party in interest. The court noted that Pennsylvania law differed from federal law, as federal
law required the real party in interest to file the suit while Pennsylvania law had a similar rule,
but did not enforce the rule where a subrogee is the real party in interest. Further noting the
amendment to FRCP 17(a), the court denied the motion for summary judgement, as (1) it was
unclear who the real party in interest was; (2) Green could have been the real party in interest in
Pennsylvania state court where the claim was originally filed, and (3) Daimler raised the
objection once the trial was moved to federal court, and thus, there was not a reasonable time
after rejection for ratification.

- Executors, administrators, guardians may bring suit in their own name, without having to join
the party for whose benefit the action is brought.

- Collusive Transfer- §1359 District courts shall not have jurisdiction over claims in which any
party by assignment has been improperly or collusively made or joined to invoke the
jurisdiction of the court
- Consider whether assignee lacked a prior interest in claim;
assignment is between closely affiliated business entities;
assignment occurred closed to the time the suit was commenced
lack of meaningful consideration for assignment
direct evidence of motive to create diversity jurisdiction

- Courts have taken a similar where there have been assignments to defeat diversity jurisdiction.

Permissive Joinder of Parties


FRCP 20(a)-1 Persons who may join or be joined-A. Persons may join in one action as
plaintiffs if they assert any right to relief jointly, severally, or in the alternative with respect to or
arising out of the same transaction, occurrence, or series of transactions or occurrences; and B.
any question of law or fact common to all plaintiffs will arise in the action.

2. Defendants Persons- may be joined in one action as defendants if (A) any right to relief is
asserted against them jointly, severally or in the alternative with respect to arising out of the
same transaction; and any question of law or fact common to all defendants will arise in the
action.

1367(a)- Federal courts have supplemental jurisdiction over all claims that are so related to
claims, which the court has original jurisdiction over, that they form the same case or
controversy under Article III.

1367(b)- any claim founded solely only on 1332; district courts shall not have supplemental
jurisdiction over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24;
or over claims by persons proposed to be joined as plaintiffs under Rule 19 or seeking to
intervene as plaintiffs under Rule 24, when exercising supplemental jurisdiction would be
inconsistent with the jurisdictional requirements of section 1332 (complete diversity and amount
in controversy).

Exxon Mobil Corp. v. Allapattah Services, Inc.:Exxon dealers filed a class-action suit against the
Exxon Corporation, alleging an intentional and systematic scheme by Exxon to overcharge them
fuel purchased from Exxon. Rosario Ortega v. Star-Kist (decided along with Exxon) 9-year old
girl sued Star-Kist in a diversity action seeking damages when she sliced her finger on a tuna
can. Her family joined in the suit, seeking damages for emotional distress and medical expenses.
The Court held that because the plaintiffs were joined pursuant to rule 20, it does not matter that
they do not satisfy the AIC, as joinder under rule 20 is not prohibited by 1367(b), if there are
other jurisdictional defects. Established the contamination theory, which is if additional parties
are not completely diverse, then the addition of these parties contaminates the original claim,
which defeats diversity jurisdiction. Contamination theory only applies to acts by plaintiffs.

Ex. Where neither party satisfies AIC, or where complete diversity is not met then 1367(a) is not
satisfied.

Anomaly caused by multiple defendants: If there is a small class of defendants, who are joined
pursuant to rule 20, and where one of the plaintiffs does not meet the AIC requirement,
supplemental jurisdiction cannot be exercised. However, if there is a large class of defendants
joined under rule 23, class actions, then the fact that one of the plaintiffs does not meet the AIC
requirement does not prevent supplemental jurisdiction.
B. JOINDER OF PARTIES BY DEFENDANTS
FRCP 13(h)- permits a defendant who has filed a counterclaim or crossclaim against an existing
party to join a new party to that claim.

FRCP 14(a)- allows a defendant to file a third party complaint against a nonparty who is or may
be liable to indemnify the defendant for all or part of the plaintiff’s claim against him.

If Joinder is proper under either of these rules, it is also necessary that the court be able to
obtain personal jurisdiction over the new party.

Schoot v. United States: Schoot and Vorbau were each assessed a 100% penalty for their failure
to collect, truthfully account for, and pa over withholding and Federal Insurance Contribution
Act taxes that stemmed from Steelograph Business Interiors. Schoot sued the government to
recover Internal Revenue taxes and interest that were allegedly erroneously assessed. The
government counterclaimed against Schoot, and used 13(h) to attach Vorbau, the president of
Steelograph as an additional defendant of the government’s counterclaim. Vorbau was subject to
personal jurisdiction and therefore the counterclaim was proper. Venue was also proper because
in suits against the government, venue is proper in any district where the plaintiff resides, which
is satisfied. Furthermore, as this is a compulsory counterclaim (part of original claim) Vorbau
cannot object to venue because he was not a part of the original claim. Joinder pursuant to rule
20 is proper because (analyzing from the government’s perspective) Vorbau and Schoot had
common issues of law or fact, under the defendant’s counterclaim.

Hartford Steam Boiler Inspection and Insurance Co. v. Quantum Chemical Corp.: A heat
exchanger failed at Quantum, causing damage to the heat exchanger and some surrounding
property. Quantum had insurance coverage with Hartford (covers damages from accident but not
explosion), and with Property Insurers (covers damages from explosions but not accidents).
Hartford refused to arbitrate and instead sought declaratory judgement that Quantum’s losses
were not covered under its policy. Quantum filed a counterclaim against Hartford pursuant to
FRCP 13h and added Property Insurers as a third party defendant to its counterclaim. Quantum
instituted action to try and get the case dismissed, but court held that it had supplemental
jurisdiction over the claim because although Property Insurers was joined pursuant to Rule 20,
the claim was made by Quantum a defendant, and therefore 1367(b) does not bar Quantum’s
counterclaim. Special Note- Quantum’s counterclaims against Hartford are compulsory and
although they are not diverse, Court still has supplemental jurisdiction (not an act done by the
plaintiff)- not technically a defendant nor a plaintiff-when drawn visually in the middle.

FRCP 14- A defending party, as a third-party plaintiff, may cause a summons and complaint to
be served upon a person not a party to the action who is or may be liable to a third-party plaintiff
for all or part of the plaintiff’s claim against the third-party plaintiff.

Types of claims allowed by Rule 14(a):


1. impleader- indemnity claim against 3rd party defendant
2. 14(a)(2)(b) - counterclaims by third-party defendant against third-party plaintiff and
cross claims by third-party defendant against co-party third-party defendant.
3. 14(a)(2)(D)- claims by third-party defendant against the original plaintiff
4. 14(a)(3)- claims by plaintiff against third-party defendant

Use of 14(a) or (b) triggers compulsory counterclaim rule.

FRCP 18(a)- A party asserting a claim, counterclaim, crossclaim, or third-party claim may join
as independent or alternative claims, as many claims as it has against an opposing party.

Wallkill 5 Associates II v. Tectonic Engineering, P.C.: S&S Associates, the predecessor in interest
to Wallkill Associates planned to buy property. They hired Tectonic to perform geotechnical tests
on the property and to issue a formal geotechnical report. Relying on Tectonic’s reports, Wallkill
purchased the property and hired Poppe to develop the vacant land and construct a warehouse.
Poppe informed Wallkill that areas of the land were unsuitable for building due to the existence
of unsuitable organic material. Wallkill sued Tectonic, who attempted to join Poppe as a party
pursuant to FRCP 14. The court held that joinder was improper because Tectonic attempted to
assert Poppe’s liability to Wallkill rather than assert a theory of derivative liability, where if it
were found liable, Poppe would be liable to it under a theory of indemnification.

Guaranteed Systems Inc. v. American National Can Co.: Guaranteed Systems filed suit against
American National Can for failure to pay for construction work on a facility. American Can filed
a counterclaim alleging that Guaranteed Systems had been negligent in the performance of its
construction work. Defending against American National Can’s counterclaim, and pursuant to
rule 14(b), Guaranteed Systems filed a third-party action against sub-contractor HydroVac
alleging claims for indemnity and contribution. Would have been permitted prior to 1367(b)
because not seen as an end-run around standards of diversity, Guaranteed Systems was a
defendant to American National Can’s counterclaim, and therefore permissible.

Rule 14(a)(5)- Fourth Party Impleader- allows a third-party defendant who is sued for indemnity
to proceed under this rule against a nonparty who is or may be liable to the third-party defendant
for all or part of any claim against it.

C. INTERVENTION BY ABSENTEES

In certain situations, a stranger may be allowed to intervene in an action even over the opposition
of the existing parties, particularly if the stranger has an interest that may be harmed if the suit
were to proceed without them. Governed by FRCP 24

FRCP 24(a) Intervention of Right. On a timely motion, the court must permit anyone to intervene
who:
(1) is given an unconditional right to intervene by a federal statute or
(2)Interest in the action- Would-be intervenor must establish
(a) a timely motion has been filed;
(b) an interest relating to the property or transaction that is the subject matter of the action;
(c) an impairment without intervention; and
(d) the movant’s interest is not adequately represented

24(b)(1)(A)- Court can permit anyone to intervene who is given a conditional right to intervene
by a federal statute.
24(b)(1)(B)- Permissive Intervention- may be granted when an applicant’s claim or defense and
the main action have a question of law or fact in common.

Great Atlantic &Pacific Tea Co v. Town of East Hampton: Town of East Hampton adopted and
filed a zoning law, with the State of New York, which amended the East Hampton Town Code to
restrict the establishment of very large retail stores within East Hampton outside of the Central
Business Zone. The Superstore Law prevented Great A&P from its plan to develop a
supermarket in the Neighborhood Business Zone and they filed suit against the Town of East
Hampton. The Group of South Fork sought to intervene pursuant to rule 24. The Court held that:
(1) the motion was filed in a timely manner since it was not contested; (2) there interest was
direct, substantial and legally protectable because it concerns legislation supported by the group
and the continued rural character of East Hampton would be threatened if the Superstore law was
invalidated; (3) low threshold “may as a practical matter impair interest” means potential adverse
judgement satisfies this test ; and (4) because the Town of East Hampton shares the same
ultimate objective as The Group (validating the Superstore Law), which is the single legal issue
to be decided in the case. There is a strong presumption that a government will adequately
represent your interest if they coincide. Though they sought to decide the same question of law
or fact, the court chose not to allow The Group to intervene in the lawsuit pursuant to 24(b)(2)
permissive intervention for the same foregoing reasons regarding adequate representation by the
Town of East Hampton.

American Honda Motor Co. v. Clair International: American Honda sought declaratory
judgement, holding that its award to Boch of a prospective Honda dealership in Norwood,
Massachusetts did not violate Massachusetts General Law. Boch sought to intervene as a
defendant and assert a cross-claim against Clair for a declaratory judgement that the proposed
assignment of the Norwood dealership was lawful. The court held that in determining the
alignment of the parties for jurisdictional purposes, the courts have to look beyond the pleadings
and arrange the parties according to their sides in the dispute. Since, Boch’s interests are aligned
with American Honda, and they do not have a “collision of interests” they should be joined as
plaintiff-intervenor, which defeats the complete diversity requirement of 1332 and bars
supplemental jurisdiction over the claim pursuant to 1367(b).

D. INTERPLEADER

Interpleader is a joinder device that comes into play when two or more persons claim they are
entitled to the same property or stake. The person is holding the property is the stakeholder.
Step 1: Is the stakeholder faced with adverse claims to the same stake or property?
Step 2: Adverse claimants litigate against each other to see who is entitled to the stake?

State interpleader is only allowed when all of the claimants live in the same state or are subject
to personal jurisdiction in the state.

The stakeholder is treated as a claimant when it claims that it does not owe any claimant the
stake.

Statutory Interpleader §1335 Requires:


SMJ: Diversity from at least two claimants (minimal diversity) and stake is worth at least $500;
Venue: District where any claimant resides
PJ: in any district
Must Deposit stake or bond with court; and Court may enjoin all other suits against the Stake

Rule Interpleader FRCP 22 Requires:


SMJ: §1332-stakeholder diverse from all claimants and stake worth $75,0000
Venue: §1391
PJ: 4(k)(1)(a): borrow state long arm statute
Optional to deposit stake with court; Court may enjoin all other suits against the stake

Indianapolis Colts v. Mayor and City of Baltimore: The Indianapolis Colts filed an interpleader
action claiming interpleader jurisdiction on the ground that Baltimore and the Capital
Improvement Board of Managers of Marion County, Indiana (CIB) had conflicting claims
against the team. The court held that the district court erred in enjoining Baltimore’s suit against
the Colts because the court did not have interpleader jurisdiction to hear the suit. The court did
not have interpleader jurisdiction because CIB is not a claimant to the stake, as they are not
seeking ownership of the team, but instead they just have a lease that requires the team to play its
games in the Hoosier Dome (right of 1st refusal does not give CIB an option to buy the Colts).

- Rule 22(a)(2)- allows defensive interpleader by allowing a plaintiff to file a compulsory


counterclaim and attaching a third party pursuant to 13(h) and joining pursuant to 20. Do not
have to file a separate lawsuit.

Geler v. National Westminster Bank: Ghitelman and the Gelers claimed title to a certificate of
deposit left by Ghitelman’s late husband. The court held that rule interpleader was satisfied
because the bank was diverse from both of the claimants (Israeli citizens and therefore
considered aliens), and the AIC was satisfied. Under rule interpleader, the court has the power to
enjoin all other proceedings. The court exercised this power because interpleader will not be
really effective unless all claimants are brought before the same court in one proceeding and
restricted to that singe forum in the assertion of their claims.
E. COMPULSORY JOINDER

At the insistence of the defendant, the court might order the plaintiff to amend her complaint to
include all necessary parties to the suit, if joinder is feasible.

Compulsory Joinder – FRCP §19 – Persons to be Joined if Feasible:


(a) A person who is subject to service of process and whose joinder will not deprive the court of
jurisdiction over the subject matter of the action shall be joined as a party in the action if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or
(2) The person claims an interest relating to the subject of the action and is so situated that the
disposition of the action in the person's absence may
As a practical matter impair or impede the person's ability to protect that interest or
Leave any of the persons already parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reason of the claimed interest...
(b) Steps:
(1) Should the absent party be joined? (low bar) (only need to find prejudice as to one of them)?
(a) Prejudice to Plaintiff
(b) Prejudice to Defendant
(c) Prejudice to absent party
(d) Prejudice to the justice system
(2) Is joinder feasible?
(a) is the absent party subject to service of process (personal jurisdiction)?
(b) Would the presence of the absent party destroy complete diversity
(c) If joinder of absent party would render venue improper and absent party objects to venue,
joinder is not feasible
(3) Can the court proceed without the absent party?
(a) Prejudice to absent party
(b) prejudice to Plaintiff (including adequacy of remedies)
(c) prejudice to Defendant
(d) prejudice to justice system
(e) can the court shape relief to avoid prejudice?

Provident Tradesmens Bank v. Patterson – Two vehicles involved in an accident, vehicle 1


owned by Dutcher but driven by Cionci, vehicle 2 driven by Smith. Two passengers Lynch and
Harris. Head on collision, everyone but Harris dies. 4 lawsuits result. Duthcer not named in
lawsuit. Plaintiffs want declaratory relief as to whether Cionci was driving with Dutcher’s
permission. If he was then Lumbermans ends up having to pay. Court of Appeals says Dutcher
was an indispensable party and had to be joined in the case so it should have been dismissed.
Step 1: Required party?
1. Prejudice to plaintiff? No. Complete relief already.
2. Prejudice to defendant? No, won’t harm them if Dutcher isn’t a party.
3. Prejudice to absent party? Dutcher may be forced to relitiagte the claim.
Step 2: Joinder Feasible?
1. SOP? Yes, he’s from Pennsylvania.
2. Destroy Complete Diversity? Yes. He’s from Pennsylvania. Thus not feasible.
Step 3: Still Proceed?
1. Prejudice to absent party? If he had an obligation to intervene and did not exercise it then he
waived it. If no obligation then can’t be bound. Either way not much harm to Dutcher.
2. Prejudice to Plaintiffs? Yes. They would have to relitigate claim.
3. Prejudice to defendant? Waived their right so no.
4. Prejudice to justice system? Starting over is very inefficient. So yes prejudice to them.
Dutcher is NOT indispensable. Can proceed without him.

Republic of Philippines v. Pimentel - this is a sovereign immunity case (a more rigid approach to
Rule 19). The interpleader action was commenced to determine the ownership of property
allegedly stolen by a former president of the Republic. The Pimentel class claimed a right to the
assets pursuant to a judgment against the president and his estate. The Republic and the
Commission claimed a right to the assets under Philippine law. The Republic and the
commission were entitled to sovereign immunity under the Foreign Sovereign Immunities Act of
1976 and argued that the action could not proceed without them under Fed. R. Civ. P. 19(b).
Court forces Merill Lynch to file an interpleader. DC awards the money to the Plimentel class
since the Philippines cannot decide what to do with the assets. Republic appeals.

BRIGHT LINE RULE: Where there is sovereign immunity and a non-frivolous claim, the
case cannot proceed.

Temple v. Synthes Corp., Ltd. - Temple gets back surgery with plate and screws inserted by Dr.
LaRocca. Screws fall out, he sues Synthes. Instead of trying to bring in the doctor as part of the
suit, Synthes tries to dismiss the case for failure to join necessary parties.
BLACK LETTER RULE - Mere fact that an absent party is a potential joint tortfeasor is not in
itself sufficient to join a party.
19(a)(1)(A) – the chance of additional lawsuits is rarely enough by itself to make an absentee a
necessary party.

SUMMARY JUDGEMENT

Ways to dismiss a trial on the merits


1. 12(b)(6) Motion to Dismiss- tests legal sufficiency of claim- even if the facts set forth were
taken as true, the law still does not entitle the plaintiff to a remedy. Does not test evidentiary
sufficiency of claims as plaintiff merely has to assert claims in good faith without evidentiary
support.
2. Motion for directed verdict- tests evidentiary sufficiency of the claim- if either party failed to
present evidence from which a reasonable jury could rule, the court could abort the
proceeding.
3. Summary Judgement FRCP 56- no genuine issue as to any materail fact and that movement is
entitled to a judgement as a matter of law.

FRCP 56(c)- Summary judgment is proper if the pleadings, depositions, answers to


interrogatories, and admissions on file, together with the affidavits, show that there is no genuine
issue as to any material fact.

FRCP 56(e)- Requires the nonmoving party to go beyond the pleadings and by her own
affidavits or by the “depositions, answers to interrogatories, and admissions on file” designate
specific facts showing that there is a genuine issue for trial. Evidence does not have to be in a
form that would be admissible at trial.

Summary judgement burdens of production: Party moving (Movant) for summary judgement has
the initial burden of identifying evidence that, if not contradicted, would compel the jury to rule
in his favor. Then, burden of production shifts for nonmovant to present evidence that is a
genuine issue of material fact.

- What a movant must show in order to carry her initial burden of production turns on whether
she would have the burden of persuasion at trial.

- For claims set forth in the complaint, the burden of persuasion rests with the plaintiff
- For counterclaims and most defenses, defendant has the burden of persuasion.

Movant (party with burden of production for summary judgement), who also has burden of
persuasion must establish each and every element of her claim .

Partial summary judgement is granted when nonmovant can only produce evidence that
establishes genuine issue of material fact for less than all of the elements.

Anderson v. Liberty Lobby, Inc.: Anderson, the publisher of the Investigator magazine, published
an article about Liberty Lobby, which portrayed them as neo-Nazi, anti-Semitic, and racist.
Liberty Lobby sued for libel. Anderson moved for summary judgement alleging that their
publishment of the magazine did not constitute actual malice as a matter of law, which Liberty
Lobby was required to prove. In response, Liberty Lobby asserted that there were numerous
inaccuracies in the articles and the magazine relied on unreliable sources. The Court stated that
summary judgement’s “genuine issue of material fact” is very similar to a motion for directed
verdict’s “reasonable jury” requirement and the primary difference is merely procedural, former
occurring before trial and the latter after trial. The Court held that Liberty Lobby did not produce
clear and convincing evidence (the standard established in a previous libel case) that actual
malice existed in order to produce a genuine issue of material fact. Because they merely pointed
to their complaint, summary judgement should be granted for the defendant. Established that
standard for defeating summary judgement motion is as strict as motion for directed
verdict.

- Standard employed in ruling on summary judgement motions differs in two aspects:


1. Case mirrors the evidentiary standard that would be employed at trial (Liberty Lobby-clear
and convincing standard; normally preponderance of the evidence).
2. Amount of evidence needed to survive a motion for summary judgement depends on the
evidence presented by the movant.

Judicial exceptions: Even if summary judgement is otherwise warranted, a court may deny
summary judgment in a case where there is reason to believe that the better course would be to
proceed to trial (i.e. novel legal issues). However, this is rare.

Matsushita Electic Industrial Co v. Zenith Radio Corp.: Antitrust suit brought by U.S. television
manufacturers against Japanese companies that produced and sold television sets. Complaint
alleged that the Japanese defendants had engaged in a 30-year conspiracy to drive plaintiffs from
the U.S. market by setting artificially low prices on televisions sold in the United States.
However, the plaintiffs had no direct evidence that the defendant’s pricing policy was aimed at
driving them out of the market. Defendants moved for summary judgement, citing evidence that
their pricing policy stemmed from the lawful goal of increasing U.S. sales. The Court granted
summary judgement, holding that the plaintiffs failed to present “sufficiently unambiguous”
evidence that supported their claim- not a genuine issue of material fact. Established that
summary judgement may be used in complex cases, where state of mind is hard to
determine. Judges must evaluate strength and persuasiveness of the competing evidence
under the same burden of persuasion that would apply at trial- If the factual context
renders a claim implausible (Zenith’s argument made economical sense), then nonmovant
must come forward with more persuasive evidence to support their claim.

Celotex: Catrett alleged that her husband died because of exposure to products containing
asbestos manufactured or distributed by 15 named corporations. Celotex moved for summary
judgement claiming that Catrett failed to produce evidence that any Celotex product was the
proximate cause of the injuries. Catrett then produced three documents, which she claimed
demonstrated that there was a genuine issue of material fact, as the documents tended to show
that Catrett had been exposed to Celotex’s asbestos products while in Chicago. Celotex argued
that this evidence was inadmissible. The Court of appeals denied Celotex’s motion on the
grounds that it failed to produce affidavits to support its motion. The Court held that this standard
was inconsistent with FRCP 56(a) and (b), which state that the moving party can move for
summary judgement with or without supporting affidavits. All the moving party has to do is
point to evidence in the record showing that there is not a genuine issue of material fact. Then the
burden of production shifts to the nonmovant to go beyond the pleadings and produce evidence
showing that there is a genuine issue of material fact. The case was remanded because Celotex’s
motion for summary judgement was not defective.
Movant party without burden of persuasion at trial can satisfy 56(c) burden of production
by : 1. submitting affirmative evidence that negates essential element of nonmoving party’s
claim; or 2. demonstrate to the Court that the nonmoving party’s evidence is insufficient to
establish an essential element of the nonmoving party’s claim.

Movant party with burden of persuasion at trial can satisfy 56(c) burden of production by
submitting affirmative evidence showing that it is entitled to a directed verdict (no genuine
issue of material fact).

California, in Aguilar v. Atlantic Richfield Co., interpreted Celotex as holding that a party for
summary judgement merely can point out a lack of evidence. California rule requires movant
party to present evidence and not point out that lack of evidence to support a claim.

Verified pleadings-pleading (complaint, answer) whose contents were sworn to be true under
penalty of perjury can be used to refute a motion for summary judgement. Exempt from 56(e)’s
prohibition against using own pleadings because these have the legal equivalence of an affidavit.

Summary Judgement for Plaintiff


Plaintiff must prove that there is no genuine issue of fact with respect to every element of claim.

-Courts allow plaintiffs to move for partial summary judgement (no genuine issue of fact as to
part of the issue).

- Cross-motions for summary judgement- parties agree as to critical underlying facts, but
disagree as to their legal consequences (i.e. suits challenging constitutionality of gov’t action).

- Cross-motions for summary judgement can also apply to different issues (i.e. defendant moves
for summary judgement based on statute of limitations, and plaintiff files for summary
judgement based on the merits of claim).

Johnson v. Tuff N Rumble Managment Inc.: Johnson and Quezergue claim that they are sole
composers and copyright owners of the song “It Ain’t My Fault,” as evidenced by the copyright
they filed with the U.S. Copyright office in 1964. Jones claims a 50% ownership interest in the
song pursuant to the power of attorney that Johnson granted him in 1992. Jones filed a copyright
registration renewal with the Office that listed Johnson and Quezergue as the authors and
Johnson Publishing Co and Melder Publishing Co. as co-owners (claimed ownership by written
agreement). Johnson and Quezergue moved for summary judgement on the issue that Jones
obtained ownership in the song because he failed to present evidence showing that the interest
was assigned to him. Johnson and Quezergue sent Jones a Request for Admissions asking him to
admit or deny that he had a written assignment regarding ownership interest. He failed to
respond. FRCP 36(a) states that a party served with requests for admissions must respond within
30 days or the matter is deemed admitted. 36(b) states that any matter admitted is conclusively
established unless the court on motion permits withdrawal or amendment of the admission. Thus,
it is admitted that Jones does not have a valid written assignment to establish an ownership
interest in the song, and there is not a genuine issue of fact as to whether he owns a copyright
interest in the song.

-Federal courts possess the power to enter summary judgement sua sponte, on their own
initiative, as long as losing party was on notice that she had to come forward with all of her
evidence. (can occur when a party moves for summary judgement, but the court decides that
summary judgement should be rendered against rather than for the movant).

CLAIM & ISSUE PRECLUSION

Res Judicata encompasses two technically distinct doctrines: claim preclusion (claim or cause of
action resolved in one case operates to preclude further litigation in a subsequent case), and
collateral estoppel/issue preclusion (extent to which discrete issues decided in a prior suit may be
binding in subsequent litigation involving different claims).

Claim Preclusion
1. Same Claim
2. Judgement must be final, valid, and on the merits
3. First & Second proceedings must involve the same parties or those in privity with them.

Same claim
- Whether claims are deemed the same depends on how broadly they are defined.

Primary Rights theory (California): basic rights and duties imposed on individuals by the
substantive law (i.e. freedom to enter contracts, personal injury, injury to property).

Transactional approach (federal model): claim defined as a group of operative facts giving rise to
one or more rights of action.
To determine whether two claims are the same, Restatement analyzes two factors:
1. relation of facts in time, space, origin or motivation:
a. arise out of the same occurrence
b. redress the same wrong
c. do they rest on same factual basis
2. whether the facts underlying the claims form a convenient trial unit (require substantially same
evidence)
3. whether underlying facts as a trial unit conform to the parties’ expectations

Same-evidence test: Claim is defined as causes of action where the factual overlap between them
is perfectly coextensive.
Porn v. National Grange Mutual Insurance Co.: Porn was involved in an accident in Maine
when another motorist sped through a stop sign and broadsided his vehicle. His damages
exceeded the other motorist’s policy limit, so sought recovery from the underinsured motorist
coverage of his policy. National Grange refused to pay, and he filed suit. He prevailed in the 1st
action and was awarded damages. Porn instituted second action alleging that National Grange’s
conduct in handling his underinsured motorist claim constituted breach of the covenant of good
faith, intentional infliction of emotional distress. Porn appeals District Court’s grant of motion
for summary judgement. The court held that Porn’s claims in the second action were related in
time, space origin or motivation because they arose out of the same occurrence: National
Grange’s refusal to pay the claim, and sought to redress the same basic wrong, and rest on
similar factual basis (the accident); would use much of the same evidence to prove bad-faith
claim and therefore would have formed convenient trial unit; meets parties expectations because
he knew the facts necessary for bringing a bad faith claim as he threatened National Grange with
the claim, if they refused to pay. Equitable exception may exist in cases of unusual hardship, but
that doesn’t apply here (not endorsed by Supreme Court but followed by lower federal courts).

Scope of claim preclusion normally encompasses the time from the alleged injury until the start
of trial, unless otherwise stipulated by the parties.

Events occurring after commencement of litigation normally give rise to a separate claim.

In a case involving a continuing or recurrent wrong (nuisance), plaintiff is given the option of
suing once for the total harm (past and prospective), or suing from time to time for the damages
incurred up to the date of the suit.

Los Angeles Branch NAACP v. LAUSD: Crawford litigation (1st proceeding) began in 1963 on
behalf of black high school students seeking to desegregate a high school in Los Angeles. The
parties stipulated that the court could consider activities from 1963-1969. The district court
found de facto (as a matter of fact-not intentional) and de jure (intentional) segregation. The
court of appeals affirmed on the basis that de facto segregation existed and remanded the cause
to the trial court for the development of a reasonably feasible desegregation plan. The trial court
rejected LAUSD’s voluntary desegregation plan, and ordered a mandatory pupil reassignment;
California passed Prop. I, which limited state court’s power to order mandatory pupil
reassignment unless it violated Constitution (de jure segregation only). Trial court denied motion
by school district to halt mandatory pupil reassignment pursuant to Prop. I, holding that the
Crawford court found de jure segregation. California Court of Appeal reversed and vacated the
1980 segregation order, holding that only de facto segregation was found in the previous
preceding. NAACP filed present case while Crawford was still pending in Superior Court.
California follows the primary rights model, and under that model the two cases involve the
same claim because the first proceeding involved allegations of de jure segregation (Cal.
Supreme Court just chose not to rely on it), and they both involve the same primary right: right
to an equal opportunity education, as segregation whether de facto or de jure has the same effect.
However, res judicata claim preclusion does not bar plaintiffs from litigating matters that were
within the scope of the claim litigated in first proceeding. Scope of litigation was from
1963-1970, and claim preclusion only applies to these dates. Established that, under primary
rights theory, different primary rights aren’t involved just because relief may be granted
under federal or state law, or under two legal theories.

Intersystem Preclusion- application of claim and issue preclusion across jurisdictional lines.
Second court must apply the law of preclusion that would be applied by the 1st court.

State to State:Pursuant to Full Faith & Credit Clause of Constitution


State to Federal: Pursuant to statutory full faith and credit
Federal to State: Pursuant to Supremacy Clause

Final valid and on the merits

- A claim is final when a trial court has definitively ruled on it (all that remains left for the court
to do is assess costs or execute the judgement).

- Finality is not altered by the availability of an appeal or by the ability to file a motion to
reconsider or vacate the judgement. Trial court’s decision is the final decision until reversed on
appeal.

- A decision imposing liability but not assessing the amount of damages is not final since all
steps in the adjudication process have not been completed.
- However, a decision entering an injunction is final even though the court retains supervisory
authority over the enjoined party, as adjudication is complete.

Federated Department Stores v. Moitie: United States brought an antitrust action against
Federated Department stores, alleging that they had violated the Sherman Antitrust Act by
agreeing to fix the retail price of women’s clothing sold in Northern California. Several parallel
civil actions were filed by plaintiffs including one by Moitie in state court, and by Brown in
federal court. The actions were removed to federal court and were dismissed because the
plaintiffs failed to show an injury to their business. 5 of the 7 plaintiffs appealed, excluding
Moitie and Brown, who instead refiled their actions in state court. The second action was
removed to federal court, as they argued the same claims, but artfully couched them in state law.
The case was barred by res judicata. They appealed, and while the case was pending, the
Supreme Court held in a separate suit that retail purchasers can suffer injury to business or
property under the Antitrust Act. The 9th Circuit remanded the other 5 cases to the District court
for a ruling not inconsistent with the Supreme Court ruling. However, as to Brown and Moitie,
the Supreme Court ruled that the res judicata effect of a final, unappealed judgement on the
merits is not altered by the fact that the judgement may have been wrong or rested on a
legal principle subsequently overturned in another case. Because they didn’t appeal, they
are barred by the previous judgement. There is not an equitable exception to the doctrine
of res judicata.
California- A decision is not final for purposes of preclusion until the completion of the appellate
process.
- A judgement is deemed valid if the defendant had proper notice, if personal jurisdiction was
satisfied and if the rendering court had subject matter jurisdiction over the controversy.

- All judgements for plaintiff are on the merits (includes default judgement).
- Defendant-if judgement is entered in favor of a defendant after trial on plaintiff’s substantive
claims, then it is on the merits, and will have preclusive effect.

Not on the merits:


1. Dismissal for lack of jurisdiction, improper venue, or nonjoinder/misjoinder of parties
2. when plaintiff agrees or elects to nonsuit (voluntary dismissal) without prejudice or the court
dismisses without prejudice.
3. when by statute or rule of court the judgement does not operate as a bar to another action on
the same claim.
4. A valid and final judgement for defendant that rests on the prematurity of the action or on the
plaintiff’s failure to satisfy a precondition to suit.

(See 4 Above) Restatement §20(1): A valid and final personal judgement for the defendant which
rests on the prematurity of the action or on the plaintiff’s failure to satisfy a precondition to the
suit does not bar another action by the plaintiff instituted after the claim has matured or the
precondition has been satisfied unless a second action is precluded by operation of substantive
law.

Statute of limitations: Dismissal in one state for failure to satisfy statute of limitations in one
state, is on the merits in State A, and does not bar claim from being filed in another state, if that
state has a longer statute of limitations period. However, if both states have the same statute of
limitations then 1st judgement is on the merits for both states.

Same Parties or Those in Privity with Them

Claim preclusion binds and benefits only the parties to the previously decided action or those in
privity with them.

A party is defined as a person who is named as a party to an action and subjected to the
jurisdiction of the court.

A person in privity with a party is someone whose relationship with that party is such that the
former will be treated as a party for purposes of claim preclusion.
Exceptions
-Party who is named in one legal capacity will not be subject to claim preclusion as to other legal
capacities, unless the substance of the initial case included those other capacities (i.e. executor of
estate is not barred for bringing the same claim as an individual).

- Parties who were not adversaries are not bound (benefited) by every claim decided in an action
(i.e. codefendants may not use claim preclusion against one another unless they were
adversaries on that claim by virtue of cross-claim).

- If a party’s incapacity undermines the integrity of the adversarial process, she will not be bound
by the decision despite her technical presence in the suit.
- Privity- flows from an examination of the relationship between the party and nonparty, and
whether their interests were sufficiently aligned.

1. Owners of successive interests in real/personal property: A conveyance of property carries the


benefits and burdens of the owner’s title. Claim preclusion is a concept of underlying property
law. Also, individuals who succeed one another as trustees, executors, etc. are deemed in privity
with their predecessors in title for purposes of claim and issue preclusion.

2. Intertwined Substantive Legal Interests: Privity is found where two persons have a
relationship such that one is vicariously responsible for the conduct of another (i.e. bailor/
bailee)- Vicarious liability.

3. Representational relationships: The interests of a nonparty are represented by a party to the


action (i.e. trustee represents the interests of a trust beneficiary; or gov’t represents nonparty’s
interests)- determining factor (actual control of 1st proceeding or adequate representation), or
reverse-representational relationship-similar facts to Taylor.

Virtual representation theory rejected by Taylor v. Sturgell.- Principle of general application in


Anglo-American jurisprudence that one is not bound by a judgement in personam in a litigation
in which he is not designated as a party or to which he has not been made a party by service of
process. Privity exceptions exist.

Exceptions to general principle (outlined in Taylor v. Sturgell)


1. waiver- person agrees to be bound by the determination of issues in an action between others
is bound in accordance with the terms of his agreement.
2. Pre-existing substantive legal relationship
3. Adequate representation- a. interests of party and nonparty are aligned; b. either party
understood herself to be acting in a representative capacity or court took care to protect interests
of nonparty; c. (sometimes) requires notice of original suit to parties alleged to have been
represented.
4. Assumed Control- nonparty is bound by a judgement if she assumed control over the litigation
in which that judgement was rendered.
5. Proxy- Party bound by a judgement cannot escape claim preclusive effect by relitigating
through a proxy (designated representative of a person who was a party to prior suit).
6. Special statutory scheme- statutory scheme forecloses successive litigation by nonlitigants (i.e.
bankruptcy and probate proceedings).

Taylor v. Sturgell: Taylor filed suit under the Freedom of Information Act (FIA) seeking to obtain
documents from the FAA. Herrick, Taylor’s friend, previously sought to obtain the same records
in order to help him restore his historic F-45 airplane to its original condition. FAA refused
because it held that activities were subject to trade secrets, and the court granted FAA’s summary
judgement motion. 10th Circuit appealed, but noted that Herrick failed to challenge whether
trade-secret status could be restored to documents that had lost protection, and whether trade-
secret status was regained, when the company only claimed status after Herrick initiated the
request. Taylor then filed a lawsuit arguing the same claims, which was challenged on the basis
or res judicata. Ginsburg recategorized the three examples of privity into six exceptions, in order
to determine whether Taylor was in privity with Herrick. He did not agree to be bound by the
prior decision; they were not in a pre-existing legal relationship; Herrick did not understand
himself to be suing on Taylor’s behalf, Taylor may not have been aware of Herrick’s suit, nor did
court take care to protect nonparty’s interest FOIA claim grants relief to private party; Taylor did
not assume control of Herrick’s litigation; and no special statutory scheme that bars litigation by
nonparties. There is a question regarding the proxy exception because although Taylor is not
Herrick’s legal representative and is not suing in a representative capacity, the proxy relationship
can be established if he is acting as Herrick’s undisclosed agent (used same lawyer).

Issue Preclusion/Collateral Estoppel


Issue preclusion forecloses the relitigation of discrete issues that were actually litigated and
decided in a previous case even if that litigation involved different claims.

Requires:
1. Same issue involved in both actions
2. Issue was actually litigated in the first action
3. Issue was decided and necessary to a valid judgement in the 1st action.
4. Both actions involve the same parties or those in privity with them.

Same issue
Same issue requires that there is enough of a factual and legal overlap between the issues(are the
facts separable or has the legal landscape changed) that it is reasonable to treat them as the same
for purposes of issue preclusion.

Commissioner of Internal Revenue v. Sunnen: Sunnen granted a corporation the right to market
his inventions in exchange for royalties. He entered two essentially identical contracts with the
corporation in 1928 and 1929, and assigned his rights to the royalties under both contracts to his
wife, who reported the income on her separate tax returns. The IRS disputed the validity of the
assignments involving the 1929-31 tax years under the 1928 agreement. The tax court held that
the assignment was properly reported under the 1928 agreement. the IRS Commissioner
challenged the assignments for the 1937 tax year under the 1928 agreement, and for the
1938-1941 tax years under the 1929 agreement. In between the two proceedings, the Supreme
Court, in Helvering, imposed tax liability on transferors who had assigned or transferred various
forms of income to others within their family groups. The Court held that collateral estoppel does
not apply when there is a subsequent modification of the significant facts or a change in the
controlling legal principles. The validity of the royalty assignments under the 1929 contract were
not litigated in the first proceeding, and although it is virtually identical to the 1928 assignment,
it is not barred by collateral estoppel. The 1928 contract involves a change in legal landscape
because of the Helvering case, and therefore is not barred by collateral estoppel.

Issue preclusion applies to pure questions of fact (whether A was present at Mulberry Street on
a certain date); mixed questions of law and fact (A negligently caused an accident on Mulberry
Street); but whether it applies to pure questions of law depends on whether those issues arise
in separate cases involving the same historical facts (A sues B for injuries sustained while
playing with a toy manufactured by it and fails to convince the court to adopt a strict liability
standard, he is not barred from attempting to convince a subsequent court to adopt that same
standard 3 years later for injuries caused by another product)-separable facts.

Lumpkin v. Jordan: Lumpkin was a Baptist minister, who was appointed to serve as a member of
the City of San Francisco’s Human Rights Commission. Lumpkin made derogatory comments
about homosexuality and its consequences. There was a public outcry for Lumpkin’s removal
from the commission. Lumpkin then made comments regarding homosexuality “man who sleeps
with a man should be put to death.” Mayor Jordan removed Lumpkin from the commission on
the theory that he did not condone Lumpkin enciting violence. Lumpkin brought suit in state
court, the case was removed to federal court, alleging that he was terminated based solely on his
religious beliefs. The court granted summary judgement to Mayor Jordan for all claims except
the California FEHA, which it declined to exercise jurisdiction over. Lumpkin refiled state
FEHA claim against Jordan. The court held that although the federal anti-discrimination claims
(1st proceeding) and FEHA are substantively different, they both turn on the same substantive
issue, whether Lumpkin was dismissed for legitimate, nondiscriminatory reason. Because this
issue was actually litigated in the first proceeding, and is between the same parties, it is barred by
collateral estoppel.

Actually litigated
- Issue preclusion only applies to issues that were actually litigated in the 1st proceeding.
- For an issue to be actually litigated, it must be properly raised, formally contested between the
parties, and submitted to the court for determination.
- Actual litigation can occur at the trial itself, or through a variety of pre-and post-trial motions
(i.e. motions to dismiss for lack of personal jurisdiction, venue, failure to state a claim,
summary judgement, directed verdicts).
- An issue is not actually litigated if it is admitted by the opposing party or if it is simply not
contested at all.
- Majority of jurisdictions- no issues are actually litigated when a judgement is entered by
default, confession, or stipulation, or due to failure to prosecute.

Decided and Necessary


-Decided-matter was previously resolved as part of a final judgment (matter can be expressly or
implicitly decided by findings of fact or conclusions of law made by the judge).

- However, when a jury renders a general verdict, which issues were decided by the jury have to
be inferred from the logic of the result and an assessment of the issues actually litigated. Second
court may examine pleadings to determine what issues were actually litigated or use extrinsic
evidence (testimony from lawyers).

-Necessary-Resolution was essential to that judgement (i.e. if a court dismisses for lack of
personal jurisdiction but at the same time finds that the absent defendant did not have some
contacts with the state, these findings are not necessary to the judgement for dismissal, and have
no effect on the judgement entered.

-Necessary requirement stems from concern that the gratuitous resolution of an issue may not
have been given the full judicial attention it deserved, and the party against whom the issue was
decided may have had little incentive to appeal the decision since a reversal as to that issue
would have no effect on the outcome of the case.

Cunningham v. Outten: Cunningham was hit by car driven by Outten. Outten was charged with
inattentive driving. Cunningham sued and tried to use collateral estoppel to establish that Outten
was negligent. The court held that collateral estoppel did not bar the defendant from arguing that
he was not negligent because the issue of liability was not before the 1st court, and the issue of
causation (cause in fact, proximate cause) was not before the 1st proceeding. Furthermore, issue
of comparative negligence was not decided to apportion liability.

Even if an issue is decided and necessary to the judgement, it will not be given preclusive effect if
the initial forum in which litigation took place provided significantly less extensive or less formal
procedures for resolution of the underlying controversy, or if as a matter of law party against
whom issue preclusion is being asserted could not have appealed the initial judgement.
Eg. decision by a small claims court cannot have preclusive effect.

Alternative Grounds- If a judgement is based on determinations of two issues, either of


which standing independently would be sufficient to support the result, the judgement is
not conclusive with respect to either issue standing alone. Therefore not necessary.

Aldrich v. State of New York: Aldrich sought personal injury and property damages stemming
from the flooding of Six Mile Creek, which was adjacent to their land. They alleged that the
flooding was caused by the State’s negligence in designing and constructing the bridge. The
court held that damages resulted from an act of God (force majeure), and the state was not
negligent in its design (decision to use single culvert vs. twin culvert). After the Creek flooded
again, Aldrich brought another action alleging that the state was negligent. New York argued that
this issue should be barred because of collateral estoppel. Although the decision in the first
proceeding was reached on alternative grounds, the court held that collateral estoppel applied
because the issue had been specifically alleged, and it was specifically addressed by the judge in
the 1st proceeding.

Same Parties or those in Privity

Generally the rules that govern parties and parties in privity for claim preclusion also apply in
issue preclusion.

1. Named Parties
2. Representational relationship
3. One who controls a prior litigation or substantially participates in it although not technically a
party or in privity with a named party.
Distinction: Mutuality is no longer the rule in issue preclusion. A person not bound by a
previously decided issue can use issue preclusion to prevent relitigation of that issue in a
subsequent case.

Bernhard v. Bank of America National Trust: Sather authorized the Cooks to make drafts against
her commercial account at the First National Bank of San Dimas. Checks were drawn upon the
account to meet her various expenses. Cook then withdrew the entire balance and deposited it in
his bank account. Sather died in 1933, and Cook qualified as the executor. He filed an account at
the probate court, which did not mention the money transferred by Sather to the San Dimas bank.
Her beneficiares, which included Bernhard, filed an objection to the account. The probate court
declared that Sather had made a valid gift to Cook during her lifetime. After Cook resigned as
executor, Bernhard became the executor, and filed lawsuit against Bank of America, the
successor in interest to the San Dimas Bank alleging that Bank of America was indebted to the
estate for this amount because Sather never authorized the withdrawal. Bank of America was not
a party to the first suit and neither was the San Dimas Bank, but since their is no requirement of
mutuality, it can assert collateral estoppel against Bernhard, who was a party in the 1st
proceeding (as an executor she is in privity with beneficiaries who argued the case in the first
proceeding-proxy).

Use of offensive collateral estoppel (plaintiff asserting issue preclusion) by a party who was
not bound by the prior suit does not produce judicial efficiency. Court has wide discretion
when it should be allowed.

Analysis: Where plaintiff could have easily joined in the earlier action, or where
application of offensive collateral estoppel would be unfair to the defendant (little incentive
to defend vigorously in 1st proceeding because he is sued for nominal damages; if inconsistent
with one or more previous decisions in favor of defendant; second action affords procedural
opportunities unavailable in the 1st action that could cause a different result), offensive
collateral estoppel should be barred.

Parklane Hosiery v. Shore: Shore brought stockholder’s class action against Parklane, alleging
that its officers had issued a false and misleading proxy statement in connection with a merger.
Before the action came to trial, the SEC filed suit against the same defendants in federal court
alleging the same issue. After a 4-day trial, the court in the 1st proceeding found that the proxy
statement was materially false and misleading and entered a declaratory judgement to that effect.
Shore then moved for partial summary judgement against Parklane based on collateral estoppel.
The court held that use of offensive collateral estoppel should be allowed because Shore
probably could not have joined injunctive action brought by the SEC; defendant had every
incentive to defend allegations vigorously because of the foreseeability of subsequent private
suits; no procedural opportunities available to the petitioners that were unavailable in the first
action of a kind that might be likely to cause a different result. 7th Amendment right to a jury
trial is not an exception to collateral estoppel.

-Generally the law of preclusion that would be followed within the jurisdiction of the court first
rendering judgement controls the application of preclusion to that judgement by a court from
another jurisdiction.

- A few courts have held that the law of preclusion that would be applied by the 1st court is the
minimum amount of preclusion that would be accorded by that court’s judgement, and the
second court can give greater issue preclusive effect that the first court.