WARNING!

This answer key does NOT take into account subsequent changes in the law. Some of what is said here may no longer be correct.

This examination has twelve (12) pages, including this cover sheet.

The total number of points for the entire exam is 300.  The exam consists of two Parts.

Part I consists of 12 multiple-choice questions, each of which is worth 8 points, and 8 True/False questions, each of which is worth 3 points. The total number of points for Part I is 120. Use the scantron form for your answers.

Part II consists of 5 short essay questions. The total number of points for Part II is 180. Use blue books for your answers.

Pace accordingly! Around 1½ hours should be devoted to Part I and around 2½ hours to Part II. Try to answer all the questions.

Commercial outlines, hornbooks, treatises etc. are not permitted in the examination. You may bring into the examination only the following materials:
1)  All materials assigned in this course:
- FIELD, KAPLAN & CLERMONT, CIVIL PROCEDURE (8th ed.)
- GLANNON, CIVIL PROCEDURE: EXAMPLES AND EXPLANATIONS (4th ed.)
- FEDERAL RULES OF CIVIL PROCEDURE (West 2003) (or any other version of the Federal Rules and statutory materials used in the course, provided it contains only material available from the West book)
- Material off the website for the course.
2) Any outline made by you or by a study group within which you participated.
3)  Your class notes.

Part I. Section 1.

Multiple Choice Questions.

12 Questions. 8 points each. 96 points total.

Question 1.
P, a citizen of New York, sues D, a citizen of New Jersey, in the Federal District Court for the Southern District of New York. P and D are individuals. P’s suit is for $100,000 in damages under New York state battery law and concerns a barroom brawl between P and D in New York City. Assume that under New York law, service of process on individual defendants can be effected by in-hand service of a summons and complaint by the plaintiff. Assume that in-hand service by a party is invalid under New Jersey state law. P personally serves D with the summons and complaint in hand in New Jersey, in accordance with New York state law. Which of the following is most accurate?

a. P’s service is improper because P must first send D a request for a waiver of service. If D fails to return the waiver within a reasonable time, which shall be at least 30 days from the date on which the request is sent, P may serve D.

Wrong. Requesting a waiver of service is optional, not required. See FRCP 4(d). Only one person chose this answer.

b. P’s service is improper because, under Hanna v. Plumer, if a Federal Rule of Civil Procedure governs service, the Rule, not state law, will apply in a diversity case. Therefore, the Federal Rules of Civil Procedure, not state law, provide standards for service on individuals in federal court.

Wrong. True, it follows from Hanna that FRCP 4 governs service, even in a diversity case. But FRCP 4(e)(1) includes state law methods as a possible means of effecting service. Under FRCP 4(e)(1), service may be effected "pursuant to the law of the state in which the district court is located, or in which service is effected." So mere appeal to the FRCP does not show that service in the case was improper, since service appears to be "pursuant to the law of the state in which the district court is located" (namely New York). 12 people chose this answer.

c. P’s service is improper because it was not pursuant to the law of the state where service was effected (New Jersey), as is required under the Federal Rules of Civil Procedure.

Wrong. Under FRCP 4(e)(1), service may also be effected "pursuant to the law of the state in which the district court is located," not merely pursuant to the law of the state "in which service is effected." So this is an insufficient reason to show why service was improper. 5 people chose this answer.

d. Service is improper, because the Federal Rules of Civil Procedure, although stating that service may be effected pursuant to the law of the state where the district court is located, has a separate standard concerning who may serve and P did not satisfy that standard.

Correct, because this is the most accurate answer. Although FRCP 4(e)(1) allows service "pursuant to the law of the state in which the district court is located," there is a separate standard in FRCP 4(c)(2), which states that service "may be effected by any person who is not a party and who is at least 18 years of age." P did not satisfy this standard. True, it is a matter of debate which wins out, FRCP 4(e)(1) or 4(c)2). Glannon argued (or more correctly assumed) that 4(e)(1) trumps 4(c)(2), that is, that state standards concerning who may serve apply when the method of service is according to state law (although he said this in a case where the state standards concerning who may serve were more stringent than 4(c)(2), whereas this is a case where the state standards are less stringent). I argued in class that 4(c)(2) trumps 4(e)(1). But even though this answer is not iron-clad, it is arguable (whereas all the other answers are  wrong). So it is the most accurate. 54 people chose this answer.

e. Service is improper under the Federal Rules of Civil Procedure, because a New York state court of general jurisdiction would not have personal jurisdiction over D. D was tagged in New Jersey, not New York.

Wrong. True, under FRCP 4(k)(1)(A), service "is effective to establish jurisdiction over the person of a defendant who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located." But even assuming that failure to satisfy 4(k) should be characterized as improper service, rather than lack of personal jurisdiction, 4(k) was satisfied. Tagging is not the only way that a New York state court could get PJ over D. PJ could be on the basis on past Int'l Shoe contacts. In this case the contacts between D and New York, namely the brawl in New York City that is the subject matter of P's cause of action, would clearly be sufficient for specific PJ over D. 5 people chose this answer.

Question 2.
P’s lawyer, L, drafts and signs a complaint against D, which L files in the Federal District Court for the Southern District of New York. After an adequate allegation of jurisdiction, the complaint alleges that “D wronged P, resulting in damages of $100,000.” The complaint then asks for compensatory damages and whatever other relief the court finds appropriate. Which of the following is most accurate?

a. The complaint fails to state a claim and should be dismissed under Fed. R. Civ. P. 12(b)(6).
Wrong. A complaint fails to state a claim if it fails to allege an element of the cause of action. For example, a complaint for negligence would fail to state a claim if it left out an allegation of damages, or causation, or the defendant's breach of a duty of care. That is not the problem with this complaint. The problem is that we do not know what cause of action is being alleged. If the way that D "wronged" P is by breaching a duty of care, then P has successfully stated a claim for negligence -- he has alleged a breach of duty, causation and damages. But because the complaint lacks specificity we can't figure that out. 32 of you gave this answer.

b. The complaint violates Fed. R. Civ. P. 11.
Wrong. First of all we have no reason to believe that P's "allegations and other factual contentions [lack] evidentiary support." FRCP 11(b)(3). P might have excellent evidence that D wronged him (for example a videotape of D punching him). A stronger argument could be made that the requirement that P's "claims, defenses, and other legal contentions therein [be] warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law" was violated. FRCP 11(b)(2). But the problem with P's allegations is not frivolousness, it is lack of specificity. Assume that the way D wronged P is by punching him. If so P's claim is clearly warranted by existing law -- D has committed a battery. There many other ways that D might wrong P such that P's claim against D would be warranted by existing law. For this reason b is not the best answer. 6 gave this answer.

c. The complaint violates Fed. R. Civ. P. 8(a).
Correct. The problem with the complaint is a lack of specificity. FRCP 8(a) does not require much of pleaders as far a specificity is concerned. All they have to do is provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Nevertheless, this standard can be violated, and this is an example. A complaint must give the defendant sufficient notice that he can answer and prepare a defense. This complaint fails to do that. 37 of you gave this answer. Incidentally, those who did better on the multiple choice exam as a whole were significantly more likely to choose this answer.

d. The complaint violates Fed. R. Civ. P. 9(b).
Wrong. FRCP 9(b) is a special pleading rule that applies to allegations of fraud and mistake. We have no reason to believe that the rule applies in this case. Only one person chose this answer.

e. Summary judgment under Fed. R. Civ. P. 56 should be granted to D.
Wrong. The appropriateness of summary judgment for D can be determined only by looking behind the pleadings at the evidence. If, in the light of the evidence presented by P and/or D, the court determines that no reasonable jury could find for P, summary judgment for D is appropriate. But we have no idea what evidence P and/or D have. P's evidence could be sufficient to withstand a summary judgment motion by D. P's problem is with his pleading, not his evidence. Only one person chose this answer.

Question 3.
P, D and X get into a barroom brawl in New York City. Soon afterward, P, a citizen of New York, sues D, a citizen of New Jersey, in the Federal District Court for the Southern District of New York for $100,000 in damages, under New York battery law, to compensate him for the partial loss of sight in one eye. D joins a claim against X, a citizen of New York, for the $20,000 in damages that D sustained from the blows that X threw at D in the brawl. Which of the following is most accurate?

a. P may not sue D in diversity in federal court in New York, because P is a resident of New York.
Wrong. This was intended to take advantage of confusion between the conditions for a plaintiff bringing a diversity action in federal court and the conditions for a defendant removing such an action to federal court. Under the removal statute (28 USC 1441(b)) a diversity action is removable "only if none of the parties in interest properly joined and served as defendants is a citizen [not a resident, incidentally] of the State in which such action is brought." But there is no such restriction in 28 USC 1332 upon an in-state plaintiff suing in diversity in federal court. No one fell for this.

b. D’s claim against X is part of the same constitutional case or controversy as P’s claim against D.
Correct. Although this action is not joinable under the joinder rules of the FRCP, it is nevertheless part of the same constitutional case and controversy as P's claim against D. They concern the same nucleus of operative fact (the brawl). Indeed there would also be supplemental jurisdiction for D's action against X under 28 USC 1367. 61 chose this answer.

c. D’s claim against X does not need supplemental jurisdiction, because it has diversity jurisdiction on its own.
Wrong. D's action against X probably does not have diversity jurisdiction on its own -- the amount in controversy requirement probably is not met, since D is not asking for more that $75,000. It is true that this action would have supplemental jurisdiction, but that is not the same as having diversity jurisdiction. 7 chose this answer.

d. D’s claim against X is properly joined under Fed. R. Civ. P. 18(a).
Wrong. According to FRCP 18(a), a "party asserting a claim to relief as an original claim, counterclaim, cross-claim, or third-party claim, may join, either as independent or as alternate claims, as many claims, legal, equitable, or maritime, as the party has against an opposing party." In other words, if you already have a claim against someone, you may join any claim against that person. But D cannot take advantage of 18(a), because his claim against X is not being joined to another claim against X. This is D's only claim against X. If D had first brought an action for contribution or indemnification against X, which is joinable under FRCP 14(a) (see my discussion immediately below), then the action against X for D's own damages could have been joined to the 14(a) action under FRCP 18(a). But that's not what happened. 3 chose this answer.

e. D’s claim against X is properly joined under Fed. R. Civ. P. 14(a).
Wrong. D's claim is not properly joined under FRCP 14(a). To be a proper 14(a) action, D would have to be arguing that X is or may be liable to D for all or part of P's claim against D (as in an action for contribution or indemnification). That's not what D is arguing. 6 choose this answer.

Question 4.
P, a citizen of New York, sues D, a citizen of New Jersey, for $100,000 in damages under New York battery law in the Federal District Court for the Southern District of New York. P seeks compensation for the partial loss of sight in an eye, as a result of a barroom brawl between P, on one side, and D and D’s friend, X (a citizen of New Jersey), on the other. D joins a contribution action against X for $50,000. After discovery, X brings a motion for summary judgment against D on the grounds that a reasonable jury would have to find that all of P’s damages were the result of D’s actions alone. X’s motion is granted. At trial, P receives a verdict in his favor and the court awards him a judgment against D for $60,000. Some months later, D sues X in New York state court under New York battery law for the $10,000 in damages caused by X’s blows against D during the brawl. Which of the following is most accurate about D’s $10,000 action against X?

a. It is claim precluded.
Correct. To bring a contribution action, D must have been claiming that the damages that P was asking from D were the result of X's and D's actions as joint tortfeasors. Under such circumstances P can sue D for the total damages P sustained from X's and D's activities, but D has a right to sue X for contribution to recover that part of the damages that D paid to P that were X's responsibility. At the time D sued X for contribution, D had an obligation to join all causes of action he had against X that concerned the same transaction as the contribution action. The transactional standard is used under both federal and New York law of claim preclusion (see O'Brien v. City of Syracuse for the New York standard) so you don't have to worry about the Erie issue of whether state or federal common law applies concerning the scope of a claim in diversity actions. D's claim against X for the damages that X caused D in the brawl concerns the same transaction as D's contribution action against X. Therefore, D is claim precluded from bringing it later. 32 people chose this answer.

b. It is not claim precluded, because X was not a necessary party in the earlier proceedings in federal court.
Wrong. This is basically gibberish. When D sues X, claim preclusion applies whether or not X is a necessary party. 7 chose this answer.

c. It is not claim precluded. The action could not have been entertained by the federal court because there would have been no federal subject matter jurisdiction for it.
Wrong. There would have been supplemental jurisdiction. D's claim against X concerned the same constitutional case or controversy as P's diversity action against D. They both concerned a common nucleus of operative fact (the brawl). This would, incidentally, have been a case of ancillary jurisdiction. In addition, 28 USC 1367(b) would have been satisfied because D's claim against X would not have been a claim by a plaintiff "against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or [a claim] by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules." 11 chose this answer.

d. It is not claim precluded, because Fed. R. Civ. P. 14(a) would not have allowed the action to be joined. It was not a claim that X was liable to D for all or part of P’s claim against D.
Wrong. It is true that the action would not have been joinable under R. 14(a) for the reason stated. But under R. 18(a) it would have been joinable to the contribution action that D had already properly joined against X under R. 14(a). Under R. 18(a), "a party asserting a claim to relief as [a] ... third-party claim, may join, either as independent or as alternate claims, as many claims, legal, equitable, or maritime, as the party has against an opposing party." D was already bringing a third-party claim (the contribution action) and so, under 18(a) may join whatever other claims he has against X. 25 chose this answer.

e. It is not claim precluded, because D’s action against X in the earlier proceedings in federal court was disposed of on summary judgment.
Wrong. Summary judgments have claim preclusive effect. 3 chose this answer.

Question 5.
P, a citizen of New York, sues D, a citizen of Maryland, in the federal district court for the District of Maryland. Subject matter jurisdiction for P’s suit is under diversity (28 U.S.C. § 1332). P’s suit, which is for $100,000 in damages under the common-law tort of intentional infliction of emotional distress, concerns some names that D called P in a bar in New York City. Assume that under Maryland common law, no damages can be recovered for intentional infliction of emotional distress unless there is also some accompanying physical harm. Which of the following is the best reason that P’s suit against D is not bound by the Maryland limitation on damages?

a. It conflicts with a federal statute (28 U.S.C. § 1332). Since that federal statute governs matters that are arguably procedural, it is valid and the state-law rule must yield to it.
Wrong. 28 USC 1332 (the diversity statute) does not conflict with the use of the Maryland limitation on damages. 1332 merely gives federal courts subject matter jurisdiction for diversity cases. Only one person chose this answer.

b. Under Klaxon Co. v. Stentor Co., Maryland choice-of-law rules apply in a diversity action in federal court in Maryland. Since, under Maryland choice-of-law rules, the law of the place of the tort applies, the federal court should use New York’s law of intentional infliction of emotional distress in this case.
Correct. Klaxon says that the forum state's choice-of-law rules (here Maryland's) would apply in a diversity case. You did not know whether, in fact, Maryland uses the place of the tort approach (it does), but you have no reason to think this is false. And under the place of the tort approach, New York law on limitation of damages, not Maryland law, would apply. This is the best reason. 70 people chose this answer.

c. Although the failure of a federal court to use the Maryland rule would cause forum shopping between Maryland state courts and federal courts, there are strong countervailing federal interests in the uniform application of federal law in diversity cases.
Wrong. This answer assumes that there is a federal common law rule not allowing Maryland's limitations on damages. First of all, there is no such federal rule. Second, as b shows, even if there were such a federal rule, the Erie choice would not be between Maryland's limitation on damages and the federal rule. It would be between New York's law on the matter and the federal rule. Third, even if there were a federal rule and the competing state law were Maryland's, it would surely be inappropriate to use the federal rule in diversity cases. Limitations on damages of the sort that Maryland imposes would be considered bound up with state rights and obligations, such that it would be unconstitutional for a federal court to use a contrary federal rule in a diversity case. See Byrd p. 348. After all, to say that one must have physical harm to get damages in an intentional infliction of emotional distress case is to say what constitutes actionable intentional infliction of emotional distress -- that is, what the Maryland rights and obligations concerning intentional infliction of emotional distress are. For a federal court to make up its own rule on that matter for diversity cases would be very much like what went on in Swift v. Tyson. But even if it were not unconstitutional for the federal court to use its own rule, it would fail the more flexible policy test for the federal court to use its own rule. There would be massive incentives to forum shop, since plaintiffs without physical harm could bring actions in federal court that would be thrown out for failure to state a claim in state court. Furthermore, what are these allegedly strong countervailing federal interests in uniformity? Why is it so important to have horizontal uniformity concerning limitations on damages? 5 people chose this answer.

d. Whether P fails to state a claim for intentional infliction of emotional distress is governed by Fed. R. Civ. P. 12(b)(6). Since that rule satisfies the Rules Enabling Act (in particular, it does not abridge, enlarge, or modify a substantive right), Maryland law must yield to it.
Wrong. 12(b)(6) allows the defense of failure to state a claim to be brought in a pre-answer motion (not merely in an answer). But it doesn't answer the question of when a pleader has failed to state a claim. In a diversity case, that's a question of state law. So there is no conflict here between the use of Maryland's limitation on damages and 12(b)(6). No one chose this answer.

e. Under federal choice-of-law rules, New York’s law of intentional infliction of emotional distress applies.
Wrong. Federal choice-of-law rules are not allowed in diversity cases. This follows from Klaxon. Only one person chose this answer.

Question 6.
P is suing the D Corp. for disability benefits in the Federal District Court for the Southern District of New York. P has some home movies made by her husband of P lifting their child to help him put a star on the Christmas tree. The movie suggests that P does not have the requisite disability after all. Which of the following is most accurate?

a. P has a disclosure obligation to turn over the tape even without being asked for it in discovery.
Wrong. Under 26(a)(1)(B), P has a disclosure obligation to turn over material "that the disclosing party may use to support its claims or defenses." This is not material that P would use to support her claims -- it undermines her claims. As I noted in class, there is no longer a disclosure requirement to turn over damaging material. 4 people chose this.

b. The D Corp. can get the tape in discovery, but only through a subpoena.
Wrong. A subpoena tuces tecum would be needed if P were not a party, but she is. Provided that the material is not privileged, a simple FRCP 34 request for documents and tangible things is enough. 2 people chose this.

c. The D Corp. can get the tape in discovery through a document request under Rule 34, but only if it can show substantial need of the tape and the inability without undue hardship to obtain its substantial equivalent by other means.
Wrong. This answer assumes that the tape is work product. It isn't -- it was not created in anticipation of litigation. People do not film the trimming of Christmas trees in anticipation of litigation. See FRCP 26(b)(3). 9 people chose this.

d. The D Corp. can get the tape in discovery, but P has the right to depose the D Corp.’s witnesses prior to turning it over.
Wrong. This answer has things backwards. When the other side is requesting of you evidence that impeaches their witnesses, courts will commonly require you to turn the evidence over only if you are first allowed to depose the witnesses that would be impeached. This is in order to catch the witnesses in a falsehood before they have a chance to tailor their story to accommodate your impeachment evidence. For example, if the D Corp. was the one that had the tape of P engaging in heavy lifting and P requested the tape in discovery, then the D Corp. would generally not have to turn the tape over until it got the opportunity to depose P and catch her in a lie (such as "I can't lift my child anymore"). On the other hand, when the other side is requesting of you evidence that impeaches your own witnesses (as is the case in the question), the right to depose doesn't make any sense. 9 people chose this.

e. The tape is freely discoverable through a document request under Rule 34.
Correct. Such impeachment evidence is freely discoverable. 54 people chose this.

Question 7.
P, a citizen of New York, sues D, a citizen of New Jersey, for breach of contract in the Federal District Court for the Southern District of New York, which is in the Second Circuit. P is asking for $100,000 owed to him by D for his delivery to D of 1000 bolts of cloth. In his answer D introduces the defense of fraud – at the time they entered into the contract, P knowingly misrepresented to D that the cloth would be appropriate for the garments D was manufacturing. Assume that, at the time D drafted his answer, D had no evidence that P knew P’s representation about the cloth was false, but D did have evidence at the time making it likely that such evidence would appear after a reasonable opportunity for further discovery. Which of the following is most accurate?

a. D does not have to worry about his allegations of fraud satisfying Rule 9(b). Because P’s action is under diversity, New York state law on pleading fraud applies.
Wrong. As Hanna v. Plumer shows, a FRCP will apply even in a diversity case. Of course, the rule has to satisfy the requirements of the Rules Enabling Act, but R. 9(b) clearly does. R. 9(b) is rule of practice and procedure and does not abridge, enlarge or modify any substantive right. Indeed if it failed the requirements of the Rules Enabling Act, it would be invalid entirely -- even in federal question cases -- and we would have never learned it in the course. 4 people chose this.

b. D does not have to worry about his allegations of fraud satisfying Rule 9(b), because he is bringing fraud up as an affirmative defense, not in a complaint.
Wrong. R. 9(b) applies to "all averments of fraud or mistake," including allegations of fraud in affirmative defenses. (I said this a number of times in class.) You should have been able to figure this out anyway. 9(b) exists in part because of concern that allegations of fraud are likely to be frivolous. There is no reason that  frivolousness would be less likely when fraud is introduced as a defense than when it is alleged in a complaint. 11 people chose this.

c. D does not have to worry about his allegations of fraud satisfying Rule 9(b) because the Private Securities Litigation Reform Act abrogated the Second Circuit’s interpretation of Rule 9(b).
Wrong. This is wrong in two ways. First of all, the PSLRA codified the 2nd Cir. interpretation of 9(b) (although only in connection with securities fraud cases)  -- it did not abrogate it. Second, this is not a case to which the PSLRA would apply. The fraud does not concern a security. One person chose this.

d. D does not have to worry about his allegations of fraud satisfying Rule 9(b), provided that D specifically identifies the relevant allegation (that is, that P knew his representation concerning the cloth was false) as one that does not have evidentiary support but is likely to have evidentiary support after a reasonable opportunity for further discovery.
Wrong. True, FRCP 11 does not require that the pleader have evidence for an allegation if the pleader specifically identifies that the allegation, although not having evidentiary support, is likely to have evidentiary support after a reasonable opportunity for further discovery (and in fact it is reasonable for the pleader to believe that such evidentiary support is forthcoming). So D can satisfy R. 11. But R. 9(b) is a different requirement that concerns pleading. 9(b) standards still apply. Furthermore, since we are in the 2nd Circuit, its interpretation of R. 9(b) would apply. The Private Securities Litigation Reform Act made the split between the 9th and the 2nd Circuits moot in securities fraud cases, by codifying the 2nd Circuit's approach for those cases. This, however, is a non-securities fraud case, so the split still applies. As the Glenfed case makes clear, the 2nd Cir. approaches allegations of scienter differently from the 9th Cir. In the 2nd Cir. the pleader must plead facts giving rise to a "strong inference of fraudulent intent." In short, he must plead evidence of scienter in the complaint. If he does not have this evidence to plead, then he cannot satisfy R. 9(b). (He could, however, satisfy 9(b) if the case were in the 9th Circuit.) 46 chose this very tricky answer.

e. D cannot satisfy both Rule 9(b) and Rule 11.
Correct. To satisfy 9(b) in the 2nd Cir., he would have to plead certain facts giving rise to a "strong inference of fraudulent intent." But since he has no such facts, he would have to make them up. He would have to say something like "I have a document from P indicating that he knew that the cloth was inappropriate" when he in fact had no such document. And that would clearly violate R. 11. He would be making an allegation (namely that he had the document) that did not have evidentiary support. He could satisfy R. 11 only by refusing to plead these facts (saying instead that he reasonably believed evidence of scienter would come out in discovery). But that would mean violating R. 9(b). 15 people chose this. But those who did well on the other multiple choice questions were significantly more likely to choose this answer.

Question 8.
P, a citizen of New York, sues D, a citizen of New York, in the Federal District Court for the Southern District of New York for violation of the Securities Exchange Act and for state-law fraud.  P’s actions concern a hand-held computer P bought from D in a store in Manhattan. A computer is not a security. For this reason, fraud in connection with the sale of a computer is not covered by the Securities Exchange Act. Which of the following is most accurate?

a. The Securities Exchange Act action should not be dismissed, but the state-law fraud action should be dismissed for lack of subject matter jurisdiction.
Wrong. Of course the SEA action should be dismissed. I said in the question itself that the SEA does not apply. The only question is whether it should be dismissed for failure to state a claim or, using the theory discussed in the Bell v. Hood case, for lack of subject matter jurisdiction. The Bell v. Hood theory allows a case to be dismissed for lack of SMJ "where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction." That's probably true here.
Furthermore, if it really were true that the SEA action should not be dismissed, then there would be no reason to dismiss the state-law fraud action for lack of SMJ. It would have supplemental jurisdiction.
2 chose this.

b. The Securities Exchange Act action should be dismissed for lack of subject matter jurisdiction and the court should, in accordance with 28 U.S.C. § 1367(c), decline to exercise supplemental jurisdiction over the state-law fraud action.
Wrong. If the SEA action lacks SMJ, then the state law fraud action lacks SMJ as well. It cannot have supplemental jurisdiction, because there is no action with its own source of SMJ for it to be supplemental to.  1367(c) is irrelevant. 1367(c) applies to actions that actually have supplemental SMJ but that the court declines to take because of the concerns originally identified in the Gibbs case. You can't even get to 1367(c) concerning the state-law fraud actions if the SEA action lacks SMJ.
Now if the SEA action were instead dismissed for failure to state a claim, then the state law fraud action would have supplemental jurisdiction. And then 1367(c) could come into play. Furthermore, the state-law fraud action would almost certainly be dismissed under 1367(c), since 1367(c)(3) applies: "the district court has dismissed all claims over which it has original jurisdiction." But 1367(c)(3) can't apply if there never was a claim over which the district court had original jurisdiction.
45 people chose this.

c. The Securities Exchange Act action should be dismissed for lack of subject matter jurisdiction and the court should, in accordance with 28 U.S.C. § 1367(c), continue to exercise supplemental jurisdiction over the state-law fraud action.
Wrong. As my answer to b showed, 1367(c) is not an issue for the state-law fraud action if the SEA action lacks SMJ. The state law fraud action simply must be dismissed for lack of SMJ as well. 1 person chose this.

d. The Securities Exchange Act action should be dismissed for lack of subject matter jurisdiction and the state-law fraud action should be dismissed for lack of subject matter jurisdiction.
Correct. See my answer to b. 19 people chose this. But those who did better on the multiple choice were more likely to chose this answer.

e. Neither the Securities Exchange Act action nor the state law fraud action should be dismissed.
Wrong. Of course the SEA action should be dismissed. I specifically said in the question that the SEA does not cover this case. It either fails to state a claim or it lacks SMJ (under the theory discussed in Bell v. Hood). If it lacks SMJ, then so does the state law fraud action. If it fails to state a claim, then the state law fraud action has supplemental jurisdiction, but is almost certain to be dismissed under 1367(c). 10 people chose this.

Question 9.
P (a citizen of Delaware) sues D (a citizen of Delaware) in the federal district court for the District of Delaware for violation of federal securities laws. D fails to answer, and P receives a default judgment of $50,000. P then files a suit against D on the default judgment in state court in Alaska. In his complaint, P asks the Alaska court to attach some stock D owns in an Alaska corporation. Under Alaska law, the situs of all stock in an Alaska corporation is taken to be Alaska. D removes the action to federal court. Which of the following statements about the removed action is most accurate?

a. In the light of Shaffer v. Heitner, D should be able to get the removed action dismissed for lack of personal jurisdiction. But D cannot get the removed action dismissed for improper venue.
    Wrong. First, the issue of PJ. The most important thing to see is that Shaffer v. Heitner is irrelevant to this action (except in a minor way, which I will deal with below). Shaffer involved a quasi-in-rem action, where stock (which was considered by law to be in Delaware) was attached by a Delaware court to create personal jurisdiction for a cause of action unrelated to the property. Our question here  would be a quasi-in-rem action like Shaffer if P had sued D in Alaska under federal securities laws, using the Alaska stock as the source of PJ. But P sued under federal securities law in Delaware (where presumably there was in personam jurisdiction), got a judgment, and then brought a separate action on the judgment in Alaska. An action on a judgment is a state-law action to collect a debt, where the debt was created by an earlier judgment. In other words, P is suing D in Alaska to get the $50,000 (or its equivalent). So he must be attaching the Alaska stock because it will satisfy the debt. That means the Alaska property that is the source of PJ is related to the cause of action. The cause of action is to get that very property. So this is not like Shaffer at all. It is an action concerning property, where the source of PJ is the property.
    Shaffer, you will remember, said that quasi-in-rem actions must be examined in the light of Int'l Shoe. This was a problem in the Shaffer case because the cause of action was unrelated to the property. But there is not the same problem in this question, since the cause of action concerns the very property that is the source of PJ. To be sure, there are still some worries about whether there is PJ, because there could be some concerns about whether the property really is located in Alaska. After all, it is only considered to be located there by law. Furthermore, this problem is somewhat related to Shaffer, because the similar problem of the stock being located in Delaware by law was likely a factor in the Shaffer court's conclusion that there was no PJ. But even if the Shaffer court had concluded that the stock clearly was in Delaware, there would still be the much larger issue of whether this contact with Delaware could create PJ under Int'l Shoe, given that the cause of action was unrelated to the stock. This second, far more important, problem in Shaffer is simply not an issue in our question. That there is no PJ in our question does not follow obviously from Shaffer. It is very questionable. For this reason it is not most accurate answer, because the answer at e is clearly correct.
    On the other hand, it is true that the action cannot get dismissed for improper venue. It is a no-brainer that there is venue. When an action is removed, it goes to the federal district that encompasses the state court where the action was removed from. Furthermore, there is always venue in that federal district, even if the district would not have satisfied the venue statute if the action had been brought by the plaintiff originally there.
 

6 people chose this answer.

b. Had D not removed the action, then, in the light of Shaffer v. Heitner, he should have been able to get it dismissed for lack of personal jurisdiction. But D waived his right to dismiss the action for lack of personal jurisdiction by willingly removing the action to federal court. Furthermore, D cannot get his action dismissed for improper venue
Wrong. A defendant's removal of an action to federal court does not mean that the defendant has waived the right to get the action dismissed for lack of PJ. (We discussed this in class.) It is true however, that D would not be able to get his action dismissed for lack of venue. (On the venue issue, see my discussion of answer a.) 10 people chose this.

c. In the light of Shaffer v. Heitner, D should be able to get the removed action dismissed for lack of personal jurisdiction. Furthermore, D should be able to get his action dismissed for improper venue.
Wrong. It is questionable that D should be able to get the removed action dismissed for lack of PJ. Furthermore, D would not be able to get his action dismissed for improper venue. (For further details on both, see my discussion of answer a.) 14 people chose this.

d. D should not be able to get the removed action dismissed for lack of personal jurisdiction, because the personal jurisdictional scope of federal courts is limited by the Fifth, not the Fourteenth, Amendment. Furthermore, D should not be able to get his action dismissed for improper venue.
Wrong. It is true that, as a constitutional matter, Fifth Amendment due process is all that matters when determining PJ over D in federal court. Furthermore, it is also true that the Fifth Amendment is clearly satisfied, because D has copious Int'l Shoe contacts with the United States. BUT FRCP 4(k) (with exceptions not relevant here) requires a federal court in Alaska to assert PJ over D only if a state court in Alaska would be able to assert PJ over D as well. So the Fourteenth Amendment is relevant.
It is true, however, that D would not be able to get his action dismissed for lack of venue. (On the venue issue, see my discussion of answer a.) 4 people chose this.

e. P should be able to get the action remanded to Alaska state court for lack of federal subject matter jurisdiction.
Correct. This is the most accurate answer, because it is absolutely clear that P's action lacks subject matter jurisdiction. An action on a judgment is a state-law action (I said this many times in class). This is true, even when the judgment on which the plaintiff is bringing an action was a judgment in federal court. So this is a state-law action between non-diverse parties. It cannot have federal subject matter jurisdiction under federal question jurisdiction or diversity. Furthermore, it clearly cannot have supplemental jurisdiction, because it is an action all by itself -- it is not joined with an action that had federal subject matter jurisdiction.  43 people chose this.

Question 10.
P, a citizen of Maryland, sues D, a German citizen living in Germany, in diversity in federal court under German battery law. P’s suit concerns a brawl in a Bierstube in Munich. P is asking for $100,000 in damages due to the partial loss of sight in one eye. 18 days after service of the summons and complaint upon him in Munich, D files and has P served with an answer denying P’s allegation that P’s partial loss of sight was the result of the brawl. P asks for, but is denied, a reply to D’s answer. Twenty-one days after serving his answer, D begins to think he has a valid defense of lack of personal jurisdiction. D has never been to, and has never had any contact with, the United States. D asks for, and is granted, an amendment of his answer. In his amendment he introduces the defense of lack of personal jurisdiction. Which of the following is most accurate?

a. D’s defense of lack of personal jurisdiction is saved. Because it would be unconstitutional for a federal court to assert personal jurisdiction over someone who lacks International Shoe contacts with the United States as a whole, it is not a waivable defense.
Wrong. This answer played off of a possible confusion between the defense of PJ and the defense of SMJ. The defense of SMJ is not waivable by the defendant. See FRCP 12(h)(3). It is for this reason that a defendant can introduce the defense of SMJ at any time in the litigation and the court can dismiss for lack of SMJ sua sponte. The same thing is not true of PJ. This defense can indeed be waived by the defendant, as FRCP 12(h)(1) makes clear. FRCP 12(h)(1) makes no exception for the case when the defendant fails to have Int'l Shoe contacts with the United States as a whole.
    The reason 12(h)(1) makes the defense of PJ waivable by the defendant is that the doctrine of PJ exists primarily to protect the defendant. If the defendant is not interested in its protections, as evidenced by his failure to bring the defense up in a timely fashion, he should not receive them. In contrast, the doctrine of SMJ is not primarily about protecting defendants. It is a limitation on the judicial power of the US courts that is tied to the interests of entities that are not party to the litigation -- in particular the states. So it does not matter that the defendant wants to do without the protections of SMJ. 12 people chose this answer.
b. D’s defense of lack of personal jurisdiction is saved, because P asked for a reply to D’s answer.
Wrong. Under FRCP 12(h)(1), if a defendant's first response is an answer and the answer fails to contain the defense of PJ, the defense is waived unless introduced in an "amendment [of the answer] permitted by Rule 15(a) to be made as a matter of course." Under FRCP 15(a) a "party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted ... the party may so amend it at any time within 20 days after it is served." More than 20 days have passed since D served his answer. So D may not amend the answer as a matter of course. Had P been allowed by the court to file a reply, then a responsive pleading to D's answer would have been permitted and D could have amended as a matter of course, because the responsive pleading (the reply) had not yet been served. But, although P asked to file a reply, he was not permitted to by the court, so this method of saving the defense of PJ won't work. No one chose this answer.
c. D’s defense of lack of personal jurisdiction is saved, because the court granted D’s request for an amendment.
Wrong. D's defense of PJ can be saved only through an amendment as a matter of course, not an amendment by leave of the court. And an amendment of the answer as a matter of course is not possible. (See my discussion of answer b.) 19 people chose this answer.
d. D’s defense of lack of personal jurisdiction is not saved.
Correct. It is waived. See my discussion of answers b and c. 44 people chose this answer.
e. Under Fed. R. Civ. P. 4(k)(2), D did not have a valid defense of lack of personal jurisdiction anyway.
Wrong. FRCP 4(k)(2) allows a federal court to assert PJ over a defendant even if a state court would not have been able to do so, if 1) "the exercise of jurisdiction is consistent with the Constitution and laws of the United States," 2) the claim arises "under federal law" and 3) the "defendant ... is not subject to the jurisdiction of the courts of general jurisdiction of any state." FRCP 4(k)(2) does not apply here because the claim is not under federal law (it is under German law) and the exercise of jurisdiction is not consistent with the Constitution of the US, since D does not have sufficient Int'l Shoe contacts with the US. So D would have had a valid defense of PJ if he had not waived it. 2 people chose this answer.

Question 11.
P, D, and X, driving three separate automobiles, are involved in an accident in Wyoming.  P sues D for negligence under Wyoming law in Wyoming state court. D introduces in his answer the defenses that he was not negligent and that if he was, P was contributorily negligent, because P was drunk. (Assume Wyoming still recognizes the contributory negligence rule.) P prevails on the basis of a jury’s special verdict that D was negligent and that P was not contributorily negligent. After judgment is entered but while an appeal is still pending in P v. D, X files a negligence action under Wyoming law against P in Nebraska state court. X’s action concerns the same three-car accident litigated in P v. D. X’s complaint alleges that P was negligent because he was drunk and that P’s negligence caused X’s injuries.  P moves for summary judgment based on the preclusive effect of the jury’s special verdict in the earlier action. Assume that non-mutual issue preclusion is allowed under Wyoming law, but not under Nebraska law.

a. The motion should be denied, because X was not a party to the action in Wyoming.
Correct. X cannot possibly be bound by the earlier judgment, because he was not a party to it (and was not in privity with someone who was a party). 19 people chose this. Those who did well on the rest of the multiple choice exam were, however, significantly more likely to chose this.
b. The motion should be granted, because, although X was not a party to the action in Wyoming, non-mutual issue preclusion is allowed under Wyoming law.
Wrong. It was shocking how many people chose this. X cannot be issue precluded because he was not a party in the earlier action (nor was he in privity with someone who was a party). To bind X to a determination of P's lack of negligence without ever giving X an opportunity to litigate the issue is not merely not allowed by any state -- it would be a clear violation of due process. This is true even in states that allow non-mutual issue preclusion. What makes issue-preclusion non-mutual is not that the person bound by issue preclusion was not a party to the earlier action (as we've seen, no state allows THAT), it is that the person taking advantage of issue preclusion was not a party. 35 people chose this.
c. The motion should be denied, because an appeal is still pending in the action in Wyoming.
Wrong. Issue preclusion does not apply here because X was not a party in the earlier action. But if he had been a party, it would not matter that the earlier action was on appeal. Judgments on appeal can still have issue (and claim) preclusive effect. 5 people chose this.
d. The motion should be denied, because non-mutual issue preclusion is not allowed under Nebraska law.
Wrong. This is confused in two ways. First of all, the relevant issue preclusion law is Wyoming's, not Nebraska's. A court uses the preclusion law of the state where the precluding judgment was entered, not the state where preclusion is being taken advantage of. Second, this is not a case of non-mutual issue preclusion anyway -- the person taking advantage of issue preclusion (P) was a party to the earlier action. Even states that allow non-mutual issue preclusion would not allow preclusion in this case. (See my discussion of answer b.) 9 people chose this.
e. The motion should be denied, because the special verdict on contributory negligence was not necessary to the judgment in the action in Wyoming.
Wrong. First of all, issue preclusion is not allowed here, no matter what, because X was not a party to the earlier action (and was not in privity with such a party). Second, the exception to issue preclusion when the issue was not necessary to the earlier judgment does not apply here because P's contributory negligence was necessary to the earlier judgment. In the earlier judgment, P prevailed. For P to prevail the jury had to determine not merely that D was negligent but also that P was not contributorily negligent. 9 people chose this.

Question 12.
P, a citizen of Wyoming, sues D1, a citizen of Wyoming, and D2, a citizen of Wyoming, in Wyoming state court. P has two causes of action against D1. The first is under the Federal Hate Crime Civil Action Act (FHCCAA), a federal law that allows for private damages actions against perpetrators of hate crimes. P’s FHCCAA action concerns a barroom brawl between P, D1 and D2 that occurred in Wyoming. P’s second cause of action against D1 is for state-law breach of contract, because D1 failed to mow P’s lawn after P had paid him to do so. P’s cause of action against D2 is under state-law battery. Although D2 participated in the barroom brawl, P is not suing him under the FHCCAA, because he cannot allege that D2 was motivated by P’s race. D2 simply entered into the fray after P and D1 began fighting. D1 and D2 remove the actions against them to the United States District Court for the District of Wyoming. P makes a motion to remand all three actions back to state court. Which of the following is most accurate?

a. All three actions will be remanded back to state court. P’s contract action against D1 and his battery action against D2 lack federal subject matter jurisdiction. And because they were validly joined to P’s FHCCAA action, it too must be remanded, although it would have federal subject matter jurisdiction on its own. This is an example of joinder to defeat federal subject matter jurisdiction.
    Wrong. This is a complicated case involving 1441(c) and 1367 (the supplemental jurisdiction statute). Let's begin with P's FHCCAA action against D1. This should be removable to federal court as a federal question case (under 28 USC 1331). The first problem, however, is that there is an action joined to it that does not have any source of federal SMJ. This is P's action against D1 for breach of contract. It does not have federal question jurisdiction, because it is a state-law action. It does not have diversity jurisdiction, because P and D1 are citizens of the same state. And it does not have supplemental jurisdiction because it is not part of the same constitutional case or controversy as P's FHCCAA action against D1. The two actions do not concern a common core of operative facts.
    Under the principle that the entire litigation unit (with all joined causes of action) must be removable, it looks like P has successfully joined to defeat diversity. But 1441(c) deals with just this problem. You didn't have to know all the details of 1441(c), but you did have to know this one effect of the rule. 1441(c) says the following: "Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates." What this means is that a federal question action (like the FHCCAA action) will not be rendered non-removable simply because a separate and independent non-removable action (like the breach of contract action) is joined to it. What will happen instead is that the whole litigation unit will be removable, but the separate and independent action that is otherwise non-removable can be remanded. In fact, in this case, the breach of contract action would have to be remanded, since the court lacks federal SMJ for the action. What 1441(c) does is allow the federal court to break apart the actions -- allowing the federal question action to remain in federal court and remanding the unrelated action. This is an exception to the rule that plaintiff is master of the claim and can join to defeat federal subject matter jurisdiction.
    Therefore it is false that P's joinder of the breach of contract action against D1 is an example of joinder to defeat federal SMJ. Under 1441(c), the breach of contract action will be remanded, but not the FHCCAA action.
    But there is another action joined to P's FHCCAA action against D1. That's P's state-law battery action against D2. Does it have SMJ? The battery action does not have federal question jurisdiction, because it is under state law. It does not have diversity jurisdiction, because P and D2 are citizens of the same state. But it does have supplemental jurisdiction. First of all, it is part of the same constitutional case or controversy as P's FHCCAA action against D1. The two actions concern a common core of operative facts (the brawl). Second, the exclusions in 28 USC 1367(b) do not apply, because one need consider them only in "any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title." This is a case in which the district courts have original jurisdiction under 1331 (federal question), not 1332 (diversity). Indeed the battery action is an example of pendent party jurisdiction, which was specifically allowed with the passage of 1367.
    Therefore it is false that P's state law battery claim against D2 lacks federal SMJ. For this reason it would remain in federal court with the FHCCAA against D1. Only P's contract action against D1 would be remanded.
    6 people chose this.

b.   All three actions will be remanded back to state court. P’s contract action against D1 lacks federal subject matter jurisdiction. And because it was validly joined to his FHCCAA action and his battery action, they too must be remanded, although they would have federal subject matter jurisdiction on their own. This is an example of joinder to defeat federal subject matter jurisdiction.
    Wrong. See my discussion of answer a. This answer is slightly better than a, because it recognizes that P's battery action against D2 has federal SMJ (namely supplemental jurisdiction). But, like a, it ignores the effect of 1441(c). 2 people chose this.

c. Only P’s contract action against D1 will be remanded, because it lacks federal subject matter jurisdiction.
    Correct. See my discussion of answer a. 41 people chose this.

d. Only P’s contract action against D1 and his battery action against D2 will be remanded, because they lack federal subject matter jurisdiction.
    Wrong. See my discussion of answer a. This answer is slightly superior to a, because it recognizes the effect of 1441(c). But it ignores the fact that P's battery action against D2 would have supplemental jurisdiction. 14 people chose this.

e. All three actions will be remanded back to state court, because in-state defendants may not validly remove actions to federal court.
    Wrong. This answer misunderstands the effect of 28 USC 1441(b). This is what 1441(b) says: "Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought."
    1441(b) does not keep P's FHCCAA action against D1 from being removed, because it is a claim arising under the laws of the United States (the FHCCAA). In fact, all actions that have supplemental jurisdiction to a federal cause of action are also removable even though there is an in-state defendant. Therefore P's battery action against D2 is also removable even though it has an in-state defendant.
    The primary effect of 1441(b) is to keep a defendant in a diversity action from removing to federal court if there is an in-state defendant. This is not a diversity case. This restriction on diversity removal in 1441(b) makes sense. Diversity jurisdiction exists to protect out-of-staters against the alleged bias of state court judges. But it makes no sense for in-state defendants to request such protection by removing to federal court -- they would only benefit from the bias. 14 people chose this.

Part I. Section 2.  True/False Questions. 8 questions. 3 points each. 24 points total.
Choose “True” if it is the most accurate.  Choose “False” if it is the most accurate.

Question 13. Under the Federal Rules of Civil Procedure, hearsay material is discoverable.
a. True.
Correct. See FRCP 26(b)(1): "Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party ... Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." So hearsay material, although not admissible, is discoverable if it is reasonably calculated to lead to the discovery of admissible evidence. 74 people chose this.
b. False.
2 people chose this.

Question 14. Under the Federal Rules of Civil Procedure, only material that is admissible at trial can be considered by a court entertaining a motion for summary judgment.
a. True.
34 people chose this.
b. False.
Correct. Under FRCP 56(e), "supporting and opposing affidavits ... made on personal knowledge" are considered by a court in entertaining a motion for summary judgment. Affidavits are hearsay and would not be admissible at trial. To be sure, the affidavits must "set forth such facts as would be admissible in evidence." So the question arises what "material" means here -- the affidavits themselves or their content. In response to this question during the exam, I announced that for the purpose of this question "materials" is to be read broadly. 42 people chose this. Those who did better on the multiple choice exam were more likely to get this correct.

Question 15. Under the Federal Rules of Civil Procedure, the proper method for getting documents from a non-party is through a document request under Federal Rule of Civil Procedure 34.
a. True.
14 people chose this.
b. False.
Correct. FRCP 34 states that "any party may serve on any other party" a Rule 34 request. If you want documents from a non-party you must use a subpoena duces tecum. 62 people chose this.

Question 16. A statute passed by Congress allowing any state-law cause of action to be removed by the defendant to federal court if the amount in controversy is greater than $1,000,000 would be unconstitutional.
a. True.
Correct. The statute would allow actions to be entertained by a federal court even if there was no minimal diversity between the parties. For example, according to the statute, a citizen of Nebraska could sue a citizen of Nebraska under state law in federal court, if the amount in controversy were for more than $1,000,000. That is contrary to the judicial powers of the United States articulated in Article III of the Constitution. 51 people chose this.
b. False.
25 people chose this.

Question 17. P is suing D in federal court. Under the Federal Rules of Civil Procedure, a document that P prepared in anticipation of litigation must be disclosed to D if the document was considered by an expert whose testimony P will offer at trial, even if D cannot demonstrate substantial need of the document.
a. True.
Correct.  Under FRCP 26(a)(2)(B), a party offering an expert witness at trial must disclose to the other side "a written report prepared and signed by the witness." The report must include "the data or other information considered by the witness in forming the opinions." In short, privileged material becomes subject to disclosure when given to a testifying expert for consideration. 48 people chose this.
b. False.
28 people chose this.

Question 18. P sues D for negligence in federal court. Assume that D moves for summary judgment. It is possible for D’s motion to be properly denied even though P offers no evidence that he has any damages as a result of D’s negligence.
a. True.
Correct. This situation was identified in Brennan's dissent in the Celotex case. D must satisfy her burden of production before P needs to make any response to D's motion. This does not mean that D must offer evidence (as Rehnquist's opinion in Celotex makes clear). But D must offer an argument that P's evidence is insufficient to convince a reasonable jury. This argument must spend time canvassing the evidence in the record. If D does not do this, then P does not have to do anything in response -- D's motion fails. 48 people chose this.
b. False.
28 people chose this.

Question 19. Last year, the D Corp. had its financial headquarters in Oregon, but it has since moved out of the state and has no contacts with it. A state court in Oregon would no longer have general personal jurisdiction over the D Corp.
a. True.
Correct. As has been mentioned many times in class, general personal jurisdiction over a corporation (that is, PJ for a cause of action unrelated to the contacts with the forum state) requires not merely "continuous corporate operations" that are "substantial," as Int'l Shoe says (p. 505 in F&K). In addition, the contacts must be current ones -- that is, contacts at the time of the suit. Past contacts alone can give rise only to specific jurisdiction. 61 people chose this.
b. False.
15 people chose this.

Question 20. A statute passed by Congress giving federal courts the power to create choice-of-law rules for diversity cases would be unconstitutional.
a. True.
19 people chose this.
b. False.
Correct. This is a relatively simple Erie question, since we are talking about a federal statute. The question in such a case, as Hanna makes clear, is whether choice of law is arguably procedural or, to use Hanna's words, "rationally capable of classification" as substance or procedure. If so then it is within Congress's power to regulate the federal courts. Clearly choice of law is arguably procedural. So the statute is constitutional. To be sure, there could be other constitutional concerns about such a statute. For example, the particular choice-of-law rules might be so bizarre that they violated 5th Amendment due process. But we have no reason to think that is true of this statute.  57 people chose this.
 

Part II. Short Essay Questions.
5 Questions. 180 points total.

Remember to keep your answers brief, organized and to the point. Write your answers in blue books.
If you need to make an assumption to answer a question, make your assumption explicit.  Don't make an assumption if it is not necessary to answer the question.

Essay Question 1. [30 points]

Oregon has enacted a statute stating that anyone driving in the state appoints the secretary of state of Oregon as his agent for service of process. According to the statute, service on the Oregon secretary of state will create personal jurisdiction in Oregon state courts over any out-of-state defendant who has driven in Oregon in the past.
D drives in Oregon after the enactment of the statute, on a trip from his home in Sacramento, California to Seattle, Washington. D has never visited or had any contact with the state of Oregon other than this trip.
P, a citizen of Oregon, decides to sue D in the Federal District Court for the District of Oregon, for battery in connection with a barroom brawl that occurred in Sacramento, California. P is asking for $100,000 in compensation for severe back and shoulder pain resulting from the fight. P has a process server serve D in hand with the summons and complaint in California. P also has the secretary of state of Oregon served in accordance with the Oregon statute. D defaults and P is awarded a judgment of $100,000.
P then brings an action on the judgment against D in state court in California. In his answer D collaterally attacks the Oregon default judgment for lack of personal jurisdiction. Will D’s collateral attack succeed and why or why not?

Answer

This was a much more difficult question than most of you suggested.

Of course, since we are talking about a personal jurisdiction in federal court, the first issue is whether, as a constitutional matter, there is personal jurisdiction over the defendant, which is a question of 5th Amendment due process. The answer is easily yes, since D, as a resident and domiciliary of the United States, has sufficient International Shoe contacts with the United States for a federal court to assert personal jurisdiction over him for any cause of action.

But FRCP 4(k)(1)(A) (with exceptions irrelevant to this case) allows a federal court to assert personal jurisdiction over D only if an Oregon state court of general subject matter jurisdiction would have personal jurisdiction. We know that the Oregon long-arm statute allows PJ, since it is precisely the fact that the long-arm statute allows PJ that is the issue in this question. Another issue, which should be mentioned only to set aside (since we don’t know anything about it), is the Oregon constitution, which could forbid PJ over D by an Oregon state court.

The real problem is 14th Amendment due process. Now, examined from the perspective of International Shoe, PJ seems clearly inappropriate. After all, D’s contact with Oregon was two single trips through the state (hardly the substantial continuous contacts necessary for general jurisdiction) and the cause of action – the battery – was completely unrelated to those contacts. So specific jurisdiction seems inappropriate as well.

That is where most of you left things. But why isn’t this case an example of tagging? I was surprised how many of you said that this case did not count as tagging because D was tagged in California. His agent for service of process was tagged in Oregon. So why wasn’t he tagged in Oregon through his agent for service of process? Why doesn't Burnham tell us that PJ is appropriate here. An argument was needed for why that wasn’t the case. Very few of you bothered to give any such argument.

Notice that if PJ were allowed in this case, it would be no worse from an Int’l Shoe perspective than more normal cases of tagging. Imagine that D had been tagged for the battery action while he was driving in Oregon. The same low level of contact and low level of relatedness would exist, and yet, as Burnham tells us (albeit without any coherently articulated rationale), PJ would exist.

We need to distinguish this case from normal tagging. The problem is that that statutes implying the appointment of a permanent official in the state as one’s agent for service of process by virtue of in-state activities have often been allowed. Most states have such statutes on the books in connection with corporations engaging in intra-state commerce. Implied appointment of an agent for service of process was considered appropriate if the corporation could have been prohibited from engaging in the in-state activities that were taken to create the agent. Because corporations were not protected by the Privileges and Immunities clause of Article IV, they (unlike individuals) could be refused the right to do business in the state. The only exception to this is that refusal in connection with interstate commerce would be in violation of the dormant Commerce Clause. But this would not be a problem with respect to intra-state commerce. I discussed this topic in class and it was in the reading F&K 498-500.

Although these statutes still exist, they were or greater importance  under the Pennoyer regime, to overcome the problem of the limitations on PJ create by Pennoyer. They are not important now, because Int'l Shoe would allow for PJ even if there had been not implied creation of an agent for service of process. F&K even discuss how uncertain it was at the time whether the implied agent could be tagged for PJ in connection with causes of action unrelated to the intra-state commerce. That is very analogous to our case.

The only difference is that we have an individual who is impliedly appointing an agent. Driving, being a hazardous activity, is one that the state could refuse to allow D to engage in, without violating the Privileges and Immunities Clause (as I mentioned a number of times in class). So it seems that, at least under the Pennoyer regime, an agent for service of process can be impliedly appointed. The only problem is that the cause of action is unrelated to the activity that impliedly appointed the agent. But, as we have seen, it is not clear whether that is a problem with respect to corporations, so it is not clear that is a problem with respect to individuals.

The best argument is to deny that we should take a form of PJ to be valid now simply because it was valid under Pennoyer. But this is a challenge, since one does not want to throw the baby (more normal cases of tagging) out with the bathwater. After all, if one takes the standards of Int'l Shoe too seriously, most cases of tagging will not create PJ. And yet we know from Burnham that tagging can create PJ. The best method to distinguish the two would probably be Scalia’s approach in Burnham. If a method of PJ is accepted at the time of the enactment of the 14th Amendment and is still generally accepted by the states today, then there is PJ. Although the form of PJ in this question might have been generally accepted under the Pennoyer regime (and that is itself doubtful) it would not be generally accepted by the states now.

This is not the only way you could have approached the question, but some discussion of tagging and some attempt to differentiate this case from more classical examples of tagging were necessary in order to have a persuasive answer.

Some of you insisted on talking about venue, subject matter jurisdiction, and Mullane issues of adequacy of notice. These were all irrelevant to the question.

This was not an Erie question, incidentally. In essence, FRCP 4(k)(1)(A) answers the question of whether state or federal law should be used. It decides that state standards should be looked to for PJ. The federal court should (with a few exceptions spelled out in 4(k)) mimic the personal jurisdiction decisions a state court would make. But, of course, the state court would take into account its limitations under the 14th Amendment, so a federal court should engage in the 14th Amendment analysis too. It is this 14th Amendment analysis that is the primary issue in the question.

Essay Question 2. [20 points]

As you know, the following cases were brought originally in state court:
International Shoe Co. v. Washington
Perkins v. Benguet Consolidated Mining Co.
Shaffer v. Heitner
World-Wide Volkswagen v. Woodson
Asahi Metal Industry Co. v. Superior Court.
In each, a party challenged the state court’s assertion of personal jurisdiction over that party. Assume that each case had instead been brought originally in federal court (in the district encompassing the state court where the case was actually brought). Do not worry about whether there is federal subject matter jurisdiction. Assume further that the party that argued that the action should be dismissed for lack of personal jurisdiction argued instead that it should be dismissed because of improper venue. Also assume that no state is divided up into more than one federal district. All activities within the state where the action was brought can be assumed to have occurred within the same federal district. In all other respects assume that the facts of the cases are the same. Given these assumptions, very briefly describe whether the motion to dismiss for improper venue would succeed for each case and why or why not. You do not have to describe the facts of the cases. Around two sentences per case should be sufficient.

Answer

For all of the cases, it is  reasonable to assume that, since the action is under state law, 28 USC 1391(a) rather than 1391(b) is appropriate for determining venue. After all, if the action were in federal court, it would have to be solely a diversity action. (I did not require that you specify whether 1391(a) or 1391(b) applied however.)

Int'l Shoe

There is a Western and an Eastern District of Washington, but for the purpose of this question, we assume that there is only one district, the District of Washington.

There is venue in the district under 1391(a)(1), because the Int'l Shoe Corp. resides in the district (and all defendants reside in the state, since the Int'l Shoe is the only defendant). Int'l Shoe resides in the district because, as a corporation, its residence is determined by 1391(c), which states that 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." Since Int'l Shoe is subject to PJ in Washington (as the Int'l Shoe case itself makes clear), it resides in the district.

In addition, there is venue under 1391(a)(2), because a substantial part of the events or omissions giving rise to the claim occurred in the district. The action is for Int'l Shoe's obligations under an unemployment insurance system and the obligations were incurred in the district.

Perkins

There is a Northern and a Southern District of Ohio, but for the purpose of this question, we assume that there is only one district, the District of Ohio.

Benguet Consolidated Mining Co. is incorporated in the Philippines. It is thus an alien and may be sued in any district. 1391(d). Since it is the only defendant, there is no problem of venue.

For those who did not catch this, I gave some credit for recognizing that there would be venue in the district under 1391(a)(1), because Benguet resides in the district (and all defendants reside in the state, since Benguet is the only defendant). Benguet resides in the district because, as a corporation, its residence is determined by 1391(c), which states that 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." Since Benguet is subject to PJ in Ohio (as the Perkins case itself makes clear), it resides in the district.

Incidentally, there is no venue under 1391(a)(2), because no substantial part of the events or omissions giving rise to the claim occurred in the district. The failure to pay Perkins her dividends did not occur in Ohio. It occurred in the Philippines. You should have known this from the fact that Perkins is a general personal jurisdiction case. The cause of action was unrelated to the contacts with the forum state.

Shaffer v. Heitner

There is no venue in the district of Delaware. The defendants do not reside there. Since we are speaking of individual defendants, not corporations, 1391(c) is NOT used to determine their residence. Their lack of residence is not determined by seeing whether there is PJ over them in Delaware.

Incidentally, many of you spoke of Greyhound as if it were the party challenging venue. But I said that the party who challenged PJ in the original action should be treated as challenging venue. Greyhound did not challenge the PJ of the Delaware state court in Shaffer. (How could it? It was incorporated in Delaware. Such a challenge would have been frivolous.) Indeed, although the corporation is a named defendant in a shareholder's derivative action, the real defendants are the officers and directors who violated their duty to the corporation. The action is one brought on behalf of the corporation (at least in theory). Derivative actions exist because sometimes the corporation cannot sue the individual defendants itself, because its actions are being controlled by those very defendants.

There is no venue under 1391(a)(2), because no substantial part of the events or omissions giving rise to the claim occurred in the district. The action concerns antitrust violations in Oregon. Furthermore, it is not likely that there is venue under 1391(a)(2), because no substantial part of property that is the subject of the action is situated in the district. The attached stock is not the subject of the action. It is the (alleged) source of personal jurisdiction. But I accepted this justification for venue, but only if there was an acknowledgement that the argument is a weak one, because the cause of action does not concern the stock.

Finally, there is no venue under 1391(a)(3), which allows venue in "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." The reason is that there is another district where there would be venue-- the District of Oregon.

World-Wide Volkswagen

There is a Northern, Eastern and Western District of Oklahoma, but for the purpose of this question, we assume that there is only one district, the District of Oklahoma.

There is venue under 1391(a)(2), because a substantial part of the events or omissions giving rise to the claim occurred in the district. The car accident and explosion at issue in the case occurred in Oklahoma.

Incidentally, there is no venue under 1391(a)(1), because not all the defendants reside in Oklahoma. True, Audi, as a German corporation, is an alien that is not considered for venue purposes (1391(d)). But Seaway and World-Wide Volkswagen do not reside in Oklahoma. They do not reside in the district because, as corporations, their residence is determined by 1391(c), which states that 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." Since they are not subject to PJ in Oklahoma (as the World-Wide Volkswagen case itself makes clear), they do not reside in the district.

Asahi

There is a Northern, Eastern and Central and Southern District of California, but for the purpose of this question, we assume that there is only one district, the District of California.

There is no venue problem for two reasons. First of all, Cheng Shin's action against Asahi was an impleader. Impleaders do not have to satisfy the venue requirements. In addition, Asahi is a Japanese corporation. It is thus an alien and may be sued in any district. 1391(d).

Some who missed this argued that there was venue under 1391(a)(2) because a "substantial part of the events or omissions giving rise to the claim occurred" in the district. This is plausible, but such an argument is unnecessary given that venue need not be shown.

Essay Question 3. [50 points]

A partner enters your office and tells you about the following suit recently brought against the D Corp., which is a client. The partner wants you to think of ways that the suit could be dismissed for lack of personal jurisdiction, subject matter jurisdiction or venue.
When Fred and Jane got married in 1996, Fred moved from his home in New York City to Jane’s home of Houston, Texas (in the Southern District of Texas). In 1998, Fred was convicted of bank robbery and sentenced to ten years in prison in San Quentin, California (in the Northern District of California). Jane moved to San Rafael, California (also in the Northern District of California) to be near her husband, but later in 1998 she divorced him. She decided to remain in San Rafael, however. Fred owns bonds issued by the D Corp. He receives interest payments of $100,000 per year from the bonds. Every year a payment is put into Fred’s account (which is now in a bank run by the prison). In 1998, soon after her divorce, a representative of the D Corp. in Houston told her that she was entitled to half of the interest payments from the bonds. The D Corp. subsequently refused to pay her however. Finally, in 2001, Jane brought an action for injunctive relief (under various state-law theories) against the D Corp. in the Federal District Court for the Northern District of the California, to compel the D Corp. to make direct payments to her of half of the interest payments.
The D Corp. makes razors. It is incorporated in Delaware and has its administrative headquarters and a factory in Los Angeles (in the Central District of California). The board of directors meets in Los Angeles and the Chief Executive Officer lives and works in Los Angeles. It has four other factories. Two are in Houston, Texas (in the Southern District of Texas) and two are in El Paso, Texas (in the Western District of Texas).
Any thoughts?

Answer

Around a quarter of you recognized that Fred is a necessary party to this action. Fred is a necessary party because he "claims an interest relating to the subject of the action" (he surely wants all the interest from the bonds without giving half to his ex-wife) and he "is so situated that the disposition of the action in [his] absence may . . . leave [the D Corp.] subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations"  FRCP 19(a). After all, if Jane wins, the D Corp. will have to give 1/2 of the interest from the bonds to her (the other 1/2 would go to Fred). But Fred will not be bound by that judgment. So he can sue the D Corp. and may get a judgment that he has a right to all the interest. The D Corp. will have to pay out 150% of the interest that is really due on the bonds. This is precisely the kind of "whip-sawed" problem that generates necessary parties.

If the D Corp. makes a motion to join Fred, should he be joined as a plaintiff or as a defendant? You were rewarded if you spent time thinking about this problem -- although I did not expect you to answer it. It was something we did not discuss in class. Especially if F is joined as a defendant, it is possible that F would destroy diversity, or that there is no PJ over F, or that with F included as a defendant there is no venue. If any of these is true, one must then address the question of whether F is an indispensable party, which would mean that the whole case would be dismissed.

As we shall see, F is likely to destroy diversity. The arguments that there is no PJ over him or that his inclusion leads there to be no venue are weak, however.

But is F is an indispensable party? The factors to be considered under 19(b) are: "first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder." The first and third factors really deal with what made Fred a necessary party in the first place. A judgment in F's absence would pretty strongly be prejudicial to the D Corp.'s interest and for that reason would be inadequate. But the second and the fourth factors also argue for Fred being indispensable. Relief cannot be changed to lessen the whip-saw problem for  the D Corp., and Jane can get an adequate remedy if there is a dismissal, namely by suing in Calif. state court (assuming that the reason F can't be joined is that he destroys diversity if he were).

    Personal Jurisdiction

        Over the D Corp.

PJ over the D Corp. is extremely easy to show. First of all, since we are in federal court the first question is 5th Amendment due process. This is not a problem because the D Corp. has sufficient Int'l Shoe contacts with the United States as a whole. But under FRCP 4(k) a federal court in California can exercise PJ over the D Corp. only if a California state court (of general subject matter jurisdiction) would have PJ. So we have to answer the question of 14th Amendment due process. But that is also easy to show that there is PJ under the 14th Amendment. The D Corp. has a factory and its headquarters in California. That's the type of substantial and systematic contacts with California that would allow for general jurisdiction. The D Corp. could be sued on any cause of action in a California state court, so it can be sued on this cause of action. Furthermore, there is very likely specific jurisdiction as well. The promise to give Jane 1/2 of the interest payments was made in Texas, but the decision not to send the payments to her was probably made at the headquarters in Calif., and furthermore the D Corp. sent the interest to Fred's account in California. Jane's cause action concerns these activities in California.

The California Constitution (about which we know nothing) would have to be considered but it is unlikely that it would be a problem here. Finally, the California long-arm statute is not a factor, because it allows PJ up to the limit of 14th Amendment due process.

        Over Fred.

Since Fred is a necessary party, one must ask the question of whether a Calif. state court would have PJ over him. He could probably simply be tagged in Calif., of course. But setting this aside, one might wonder whether in fact his other contacts in Calif. are really the type that could satisfy Int'l Shoe, since they are largely involuntary. You were rewarded for thinking about this problem -- I did not expect an answer to it. But the fact that F had the interest payments put into a Calif. account would probably be enough for specific PJ since that is a voluntary contact with California that is closely related to the cause of action.

    Subject Matter Jurisdiction

This must be a diversity case, since Jane is suing under state law. The amount in controversy is surely met since Jane is asking for yearly payments of $50,000. All we need is two years' payment and the value of the injunction will be more than $75,000.

That leaves the issue of diversity of citizenship. What are the domiciles (citizenships) of the parties?

    Jane

Jane's domicile is unquestionably Calif. She is present within the state and, since she remained after the divorce, we have no reason to believe that she does not have the intent to make the state her home for the indefinite future.

    D Corp.

Under 28 USC 1331(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." So we know that the D Corp has a domicile of Delaware (its place of incorporation). What is its principle place of business? Probably California if we use the less commonly employed nerve center test, but probably Texas if we use what is sometimes called the muscle test. You don't know what test the 9th Circuit uses, so you can't really answer that question, but if the nerve center test is used that is enough on its own to get the action dismissed for lack of SMJ.

    Fred

Things get much more interesting with Fred. Let's say that he is joined as a defendant. Is diversity destroyed because he has the same domicile as the plaintiff (namely California)? What is the domicile of a prisoner? You were rewarded for worrying about this problem. After all, a prisoner does not seem to have the intent to remain in the state. His very presence in the state is involuntary. The traditional approach to this problem was a per se rule that a prisoner retains his domicile at the time of incarceration. That would make F a domiciliary of Texas. But there has recently been some loosening of this approach, allowing a court to consider evidence that the prisoner has the requisite intent to make him a domiciliary of his state of incarceration. Stifel v. Hopkins, 477 F.2d 1116 (6th Cir. 1973). (You did not need to know this, of course.)

Of course, if F is joined as a plaintiff, diversity might still be destroyed, because F would have the same domicile as the D Corp. (namely Texas -- assuming the muscle approach). Once again, whether F should be joined as a plaintiff or a defendant is something I rewarded you for worrying about. I did not expect an answer.

    Venue

There are two main ways of getting venue in the N.D. Cal. under 28 USC 1391(a)(1)-(2). One could argue that it is a district where a defendant resides, and all defendants reside in the same state. And one can argue that it is "a district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated." 1391(a)(3) is irrelevant to this case.

First of all, it seems likely that there is venue in the N.D. Cal. because a substantial part of the property that is the subject of the action (the interest payments) are situated -- or more correctly will be situated -- in the N.D. Cal. (in Fred's bank account). Also a substantial part of the events giving rise to the claim occurred in the N.D. Cal. because the D Corp.'s sending the entirety of the interest payments to Fred's bank account in the N.D. Cal. is a substantial part of what gave rise to the claim. (Keep in mind that there can be more than one district where a substantial part of the events giving rise to the claim can occur.) Some people noted that it was unclear where Fred's bank was located. I said it was the prison bank, but it is conceivable that the prison used a bank located out of the N.D. Cal. You were given equal credit if you said there was no venue because the bank was located in a different district.

What about the residence of the defendant approach? The residence of a corporate defendant in 1391(a)(1) is determined by 1391(c), which states that "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 State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be 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."

Would the D Corp. be subject to PJ in the N.D. Cal. if that were a state? It seems pretty clear that it would be subject to specific PJ, since it sent Fred's interest payments to that district contrary to its promise to Jane (once again, this assumes that the prison bank is in the district where the prison is). That act is the activity being sued upon. True, the D Corp. has much greater contacts with the Central District of Calif. (which includes L.A.)  -- so many contacts that it would be subject to general PJ there. But a corporation can reside in many districts.

Finally, if one includes Fred as a defendant, one could argue that Fred resides in the N.D. Cal. and that both defendants reside in the same state (since the D Corp. unquestionably resides in the C.D. Cal.). But that also brings up issues, which you were rewarded for worrying about, of where prisoners reside for the purposes of the venue statute. This is not the same question as where they are domiciled. Remember that venue is primarily about convenience. What counts as residence should be interpreted in that light -- and there are certainly arguments that, if a prisoner is a party to a case, it is convenient to litigate in the district where a prisoner is incarcerated.

Essay Question 4. [30 points]

P (a citizen of New York) is the named plaintiff in a class action. The other (unnamed) members of the 10,000 people in the plaintiff class are citizens of New York, New Jersey and Connecticut. The D Corp. is incorporated in Delaware and has its principal place of business in New Jersey. The class is suing the D Corp. for violating the New Jersey Fair Lending Act, by failing to disclose, in bills, when payment was due and then imposing excessive penalties for late payments. The plaintiff class is asking for refunds of penalties, plus attorney fees (which are likely to exceed $100,000). The average refund is $100 per member of the plaintiff class. The member with the largest refund is P, who is entitled to $1,000.
In addition, the class is also asking for injunctive relief, in which the D Corp. informs the members’ credit agencies that they should not be identified in their credit reports as having paid late. In fact only 5000 members of the class would be entitled to the injunctive relief, because only 5000 had adverse credit reports. P is entitled to injunctive relief. The D Corp. estimates that it will cost around $100 per customer entitled to the relief to inform the appropriate agency.
Is there federal subject matter jurisdiction for this class action? Why or why not?

Answer

This question dealt with problems of diversity class actions. The first question to address is whether the complete diversity requirement of 28 USC 1332 is satisfied. It is: When determining whether there is complete diversity, only the citizenship of the named members of the class (that is the representatives of the class) need be considered. In this case the named plaintiff, P, is a citizen of New York and the defendant (the D Corp.) is a citizen of Delaware (its state of incorporation) and New Jersey (its principal place of business). That there are New Jersey citizens in the plaintiff class does not matter.

Incidentally, the citizenships of only the named parties of the class are considered even in Circuits that consider supplemental jurisdiction to be unavailable in class actions, that is, even in those Circuits that consider 28 USC 1367 to not have abrogated Zahn. Quite a few of you treated this as an issue of supplemental jurisdiction.

The next and more significant issue is whether the amount in controversy (of greater than $75,000) has been satisfied. There are two distinct problems to address here. The first is whether, assuming that at least one member of the plaintiff class has causes of action against the D Corp. that add up to more than $75,000, the rest of the members of the plaintiff class will have supplemental jurisdiction. This is a controversial topic, which needed to be acknowledged in your answer. Under Zahn v. Int'l Paper Co., all members of the plaintiff class must satisfy the amount in controversy requirement. But after Zahn the supplemental jurisdiction statute (28 USC 1367) was passed. And the plain language of 1367 seems to allow for supplemental jurisdiction in class actions like ours. First of all, the claims in our class action probably concern the same constitutional case or controversy, since they concern a common nucleus of operative fact (the D Corp.'s failing to disclose payment due dates and imposing excessive penalties upon its customers). In addition, 28 USC 1367(b) would be satisfied. Although this is a case in which "district courts have original jurisdiction founded solely on section 1332" the causes of action alleged to have supplemental jurisdiction are not claims by a plaintiff "against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules." Notice Rule 23 is not mentioned anywhere in 1367(b). This is enough for some Circuits (e.g. the 5th and 7th). Other Circuits find it relevant that Congress, when enacting 1367, did not want to abrogate Zahn. So the issue comes down to how seriously one takes congressional intent when the language of a statute is clear.

But even if one can take advantage of supplemental jurisdiction, one needs to find a member of the plaintiff class whose actions against the D Corp. satisfy the amount in controversy requirement. When determining whether the amount in controversy requirement is satisfied by a member of the class, one may aggregate only claims by the same plaintiff against the same defendant. See Snyder v. Harris. One may not aggregate claims by a number of plaintiffs against the same defendant to get above the amount in controversy threshold. I looked carefully to see whether the difference between aggregation and supplemental jurisdiction was clear in your answer.

This makes it difficult to see how any member of the plaintiff class can satisfy the jurisdictional minimum. Consider P. He has a claim against the D Corp. for a refund of $1000 and he has a claim for injunctive relief (in which the D Corp. informs P's credit agencies that P was not late). What is the value of this injunction? There is currently uncertainty in the federal courts in determining the value of an injunction. Some look to the value to the plaintiff, others look to whichever is greater -- the value to the plaintiff or the cost to the defendant of satisfying the injunction. Still others look to the cost to the defendant if the defendant is removing to federal court and the value to the plaintiff if the plaintiff is suing originally in federal court. (We don't know, incidentally, whether this case is one of removal or of a plaintiff suing originally.) But whatever approach one takes, it seems impossible that P's claim would exceed the jurisdictional minimum. The cost to the D Corp. of providing injunctive relief to P is $100. The value to P might be greater than that, but is it going to be greater than $74,000? Not likely.

Some of you, when considering the cost to the D Corp., simply considered the cost to the D Corp. of satisfying the injunctive relief for all the 5000 members of the plaintiff class who were entitled to it. But this is aggregation, and it is as forbidden when one looks to the cost to the defendant as when one looks to the value of the plaintiff. The relevant cost is that of injunctive relief flowing only to a particular plaintiff. That's only $100.

BUT Snyder notes an exception to the non-aggregation rule for cases where plaintiffs join to enforce a common and undivided interest. However, as I discussed in class, that works in cases of injunctive relief when the injunction would by its very nature have to flow to all of the members of the class. (An example is an injunction for the defendant to stop polluting. The defendant cannot stop polluting for some plaintiffs and continue for others.) This is not such a case, since the D Corp. can inform the credit agencies of some plaintiffs without informing the credit agencies of others. Had aggregation been allowed in the case of the injunction, those members of the plaintiff class who were asking for such relief (5000 of the 10,000-member plaintiff class) would each be bumped above the jurisdictional minimum. The cost of the injunction for all of these 5000 members would be $500,000, which is above the $75,000 limit. A truly shocking and saddening number of you (a good 20%) said that the jurisdictional minimum would not be met even if there was a common and undivided interest in the injunction because the result would be only $50,000, which is still below the minimum. But 100 times 5000 is 500,000, NOT 50,000! So the total cost to the defendant of an injunction flowing to 5000 members of the plaintiff class with a cost of $100 per beneficiary of the injunction is $500,000.

If the 5000 beneficiaries of the injunction were above the jurisdictional minimum because of aggregation, the other members of the class would still have to be brought in under supplemental jurisdiction, provided, of course, we are in a Circuit where that would be allowed.

By the way, some of you rightly noted that the class action might have not been properly certified in the first place, because only some of the class members were entitled to injunctive relief. This got you a few points, but I did not ask whether the class should have been certified, only whether it had federal subject matter jurisdiction. You still needed to answer that question.

But what about claiming that each of the members of the plaintiff class have a common and undivided interest in the attorney's fees? You were rewarded for worrying about this problem. Most courts have rejected the idea that plaintiffs have a common and undivided interest in attorney's fees (although I did not expect you to know this). The idea is that each class member incurs an individual obligation to the lawyer for the class and that obligation can be discharged by the defendant for one member of the plaintiff class without discharging the obligations of all the members of class. Therefore, there is no common and undivided interest.

Some of you argued that attorney's fees could not be used to increase the amount in controversy because 1332(a) states that "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." But attorney's fees are not costs. Costs include fairly small fees, such as those for witnesses' travel and filing. (I discussed this in class.) In federal courts the loser pays the winner's costs, but the loser does not pay the winner's attorney's fees unless it is specifically allowed by statute. We must conclude that the New Jersey Fair Lending Act must allow plaintiffs to recover attorney's fees.
 

Essay Question 5. [50 points]

In September 1997, P (a citizen of New York) and D (a citizen of New Jersey) entered into a lease, which was to run for five years (from January 1, 1998 to December 31, 2002). The terms of the lease were that D was to be given use of P’s commercial building in New York City, with $50,000 annual rent to be paid to P at the beginning of each year. Although it was not part of the lease, P knew that D was to pay $20,000 of the yearly rent from an “Encouragement Grant” D received annually from the City of New York. “Encouragement Grants” are intended to subsidize rent for those who start businesses in distressed neighborhoods. D’s intended business was a florist shop.
D took possession of the property in January of 1998 but moved out at the end of the year, claiming the property lacked the floor space and the foot traffic that P had promised. D never paid rent, including for the first year of use (1998). He promised P that he would pay him the 1998 rent when he could get the money together, but he refused to reoccupy the premises or pay for any of the remaining years under the lease. P was unable to find another tenant for the property.
P initiated suit against D in February of 2000 in the Federal District Court for the Southern District of New York. P asked for $100,000 in damages as compensation for the rent that should have been paid for 1999 and 2000. In his answer, D admitted entering into the lease and failing to pay the rent, but introduced the affirmative defense of fraud, because P materially misrepresented the floor space and foot traffic of the property. P made a motion for a more definite statement, on the ground that D’s answer failed to state with specificity the content of P’s misrepresentations concerning floor space and foot traffic. The court granted the motion. D amended his answer. But P, still dissatisfied by the level of specificity, made a motion to strike the affirmative defense, which was granted by the court. P then made a motion for a judgment on the pleadings. This also was granted and P was awarded a judgment of $100,000. D declined to appeal the judgment.
D refused to pay the rent due in 2001 and 2002. D also refused to pay P for the 1998 rent. In January of 2003, P once again sued D, this time in New York state court, for $160,000. $150,000 of the relief P requested represented the rents due in 1998, 2001 and 2002. The extra $10,000 was under a New York City law allowing those who inform the City that an “Encouragement Grant” is being misused to sue the grantee for $10,000. A condition for such a suit, however, is the issuance of a right-to-sue letter by the New York City Encouragement Grant Authority. Although P had informed the City of D’s misuse of the grant in late 1999, the Authority had not yet issued P a right-to-sue letter when P initially sued D in February of 2000. (It finally issued the letter in February of 2001.)
In his answer, D introduced two affirmative defenses: 1) that claim preclusion barred all of P’s actions and 2) that P had no right to the rent because of fraud – P materially misrepresented the floor space and foot traffic of the property.
Should D’s affirmative defense of claim preclusion succeed? Why or why not? Does D’s affirmative defense of fraud have a chance of succeeding? Why or why not?

Answer

    Is P claim precluded?

Many of you addressed the Erie question of what claim preclusion law applies here. We know that the claim preclusion law that applies is the law of the court where the claim precluding judgment was entered, not the law of the court where claim preclusion is being appealed to. But the court where the claim precluding judgment was entered in this question was a federal court in New York sitting in diversity (P's action for rent was presumably under state law), so the relevant claim preclusion law could be either New York or federal law. Accordingly, many of you engaged in the Erie analysis to determine which applied. The Semtek case suggests that New York claim preclusion law applies, but Semtek was about whether a dismissal on statute of limitations grounds has claim preclusive effect. Our current case is about the scope of a claim -- are the action for the 1998 rent, the actions for the 2001 and 2002 rent, and the Encouragement Grant action part of the same claim as the actions for the 1999 and 2000 rent? For an argument for why federal law on the scope of a claim, not state law, should apply, see the answer key for Essay Question 2 from the 1999 Exam.

But why is it necessary to answer the Erie question? Federal law takes the "transactional" approach to the scope of a claim, as you should know. But so does New York law. See O'Brien v. City of Syracuse (p. 664-65 of F&K). To be sure, there are some questions (as we shall see) about the scope of a claim that are not answered simply by appeal to the transactional standard. But you don't know that New York and federal law differ on these topics. Knowing which law applies will not help you answer this question. I gave some points for a good Erie discussion, but you did not do well on this question unless you discussed other topics.

The issue therefore is the following: Under either federal or New York law, were the actions brought in New York state court barred because of the earlier judgment in federal court? The first step in answering the question is whether the judgment in federal court was one that had claim preclusive effect (that is, whether it was "on the merits" -- we know that it was final and valid). Is a judgment on the pleadings (a judgment that ultimately had its source in D's failure to abide by 9(b) pleading standards concerning fraud) on the merits? We did not answer this question in class, but some analogies with failure to state a claim were appropriate. Given that the dismissal of a plaintiff's action for failure to state a claim can have claim preclusive effect unless the court says the dismissal was without prejudice, see Rinehart v. Locke (F&K 681-83) and Restatement 2nd Judgments section 20 (F&K p. 684), it makes sense that a judgment on the pleadings against a defendant should also have claim preclusive effect. The plaintiff had an obligation to bring all causes of action concerning the same transaction against the defendant and the fact that the plaintiff received a judgment against the defendant solely because the defendant could not plead a valid defense should not change this fact.

Once we've determined that the judgment is on the merits and so has claim preclusive effect, it seems straightforward that the 1998 rent action should be claim precluded. Under the Sutcliffe case "claims for amounts due on running accounts, such as rent under a lease, must include all amounts due at the time action is brought" (F&K 669) and the 1998 rent was due when the 1999 and 2000 rent actions were brought. To be sure, the Sutcliffe case only concerns federal claim preclusion law, but we have no reason to believe that New York law is any different. It is also true that the Sutcliffe case was about claim splitting, whereas this question does concern claim splitting, since the two cases were not running concurrently. Because the SDNY case came to a judgment before the NY state court cause was initiated, this question concerns claim preclusion. However, the Sutcliffe case tells us what causes of action are part of the same claim, a fact that is as relevant for determining claim preclusion as it is for determining claim splitting.

By the same token, it seems clear that actions for the 2001 and 2002 rent should not be claim precluded, because these rents were not due at the time that the earlier action was brought.

But you were rewarded for not being too hasty here. The role of claim preclusion law is to encourage the plaintiff to bring all actions that were available to him at the time (provided that the actions together form a convenient litigation unit). D arguably anticipatorily repudiated the entire contract (except for the 1998 rent), including the 2001 and 2002 rent installments. For this reason, P knew that the actions for the 2001 and 2002 rent would have to be brought. It is very plausible that this subjected P to a duty under claim preclusion law to join them in the first action. You were heavily rewarded for worrying about this -- I did not expect you to know the answer. For a discussion, see Restatement 2nd Judgments section 26, comment g.

By the same token, D's promise to pay P the 1998 rent may have relieved P of the obligation to include an action for the 1998 rent in the earlier suit. After all, his failure to include the 1998 action was the result of reliance on a misrepresentation by D. Once again, you were heavily rewarded for worrying about this -- I did not expect an answer. For a discussion, see Restatement 2nd Judgments section 26, comment j.

What about the Encouragement Grant action (a surprisingly large number of you simply ignored this action)? A condition for bringing the action, namely the issuance of the right to sue letter, had not been fulfilled. Does that absolve P from any obligations under claim preclusion? To be sure, when an action cannot be brought in the forum at all (for example because there is no subject matter jurisdiction for it there) the plaintiff is not barred from bringing the action subsequently. But what if a mere condition for the action has yet to be fulfilled? Imagine, for example, that it is a condition that could be quickly and easily fulfilled -- surely then the plaintiff should not be relieved of his obligations under claim preclusion to join the action. Instead the law of claim preclusion would simply obligate the plaintiff to fulfill the condition so the action can be joined. But what if fulfilling the condition is one that is partially out of the plaintiff's control, as is the case in this question? Must he wait to bring suit until the condition is fulfilled? Some courts have held that he must. Boateng v. InterAmerican University, 210 F.3d 56, 62-63 (1st Cir. 2000) (plaintiff was claim precluded from bringing action in second suit even though the right-to-sue letter that was a condition for the action was not issued until after the judgment in the first suit).  Once again, you were heavily rewarded for worrying about this -- I did not expect an answer.

Some of you engaged in Erie analysis to determine whether the right-to-sue letter condition would apply in federal court. The answer is clearly yes, since differences in procedure would encourage massive forum shopping (plaintiffs would go to federal court to avoid having to get a right to sue letter), there are no interests in federal uniformity (federal courts are not committed to there being no right-to-sue letter requirements in all diversity actions) and the state is clearly interested in its rule applying in federal court (it wants to control the number of actions brought against those who receive E-grants and make sure those that are brought have merit). I gave some points for this analysis but the claim preclusion issues were far more important to a good answer.

    Is D issue precluded?

The same issue of P's fraud concerning floor space and foot traffic that is D's defense in second suit was also introduced by D as a defense in the first suit. Is D issue precluded from reintroducing this defense? The important problem here is whether the determination that a party cannot plead fraud with the particularity sufficient to satisfy  FRCP 9(b) means that the issue of fraud has been actually litigated and decided against that party.

We never discussed this in class. You were rewarded for worrying about it. The argument that D is indeed  issue precluded is the following: D's failure to satisfy the standards for particularity under FRCP 9(b) must have meant that he possessed insufficient evidence of P's fraud. Because he had insufficient evidence, he could not be specific enough about P's fraud without violating Rule 11's requirement of evidentiary support for one's allegations. The fact that D has insufficient evidence is a reason to conclude that the issue of P's fraud has indeed been actually litigated. It has some analogies to the determination of an issue on summary judgment. But there are some disanalogies. D did not yet have the benefit of discovery. See Restatement 2nd Judgments section 27 comment d. Once again, you were heavily rewarded for worrying about this -- I did not expect this particular answer.

Some discussed the question of whether the determination that there was no fraud (a determination that was made by the court when it refused to allow D to plead fraud in his answer) was essential to the judgment. It clearly was. It was only because of the court's refusal to allow D to plead fraud that P got his judgment on the pleadings.
 
 
 
 
 
 
 

END OF THE EXAMINATION!