Please write this code number on each blue book or as a header to each
page of typed exam turned in. MICHAEL STEVEN GREEN
CIVIL PROCEDURE
Law 102
Section 2
FALL 2007
December 19, 2007
Four Hours Please check the appropriate box,
indicating what you are submitting.
□ Exam Questions
□ Scantron
□ Exam Answers
This examination consists of 10 pages, including this cover sheet. This
examination, with the cover sheet, must be returned.
TIME: You have Four Hours for this exam. Try your best to finish
the exam.
SCORING: The total number of points for the exam is 240. That’s one
minute of writing time per point. Pace accordingly.
Part I consists of 10 multiple-choice questions, each of which is worth
6 points. The total number of points for Part I is 60. Use the scantron
card for your answers.
Part II consists of 8 essay questions (some of which require only very
short answers). The total number of points for Part II is 180. Write
the essays in bluebooks or type your answers.
WHAT YOU MAY USE IN THE EXAM:
Commercial outlines, hornbooks, treatises etc. are not permitted in the
examination. You may have with you in the examination only the
following:
1) All materials assigned in this course:
FIELD, KAPLAN & CLERMONT, CIVIL PROCEDURE (9th ed.)
GLANNON, CIVIL PROCEDURE: EXAMPLES AND EXPLANATIONS (5th ed.)
FEDERAL RULES OF CIVIL PROCEDURE (West) (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 posted on the website for the course.
2) Any outline made by you or by a study group in which you
participated.
3) Your class notes.
Use of the Web is prohibited.
Should you feel ill or panicky in anyway, please immediately see Dean
Jackson in room 107.
Part I: 10 Multiple Choice Questions
[6 points each]
1. P (a citizen of New York) files a complaint
against D (a citizen of Wisconsin) in the Federal District Court for
the Southern District of New York. P’s suit is for violation of federal
securities laws that occurred in Wisconsin. D has never been to the
state of New York and has never had any contact with the state. P hires
a process server to serve D in Wisconsin. After knocking on the door of
D’s home and finding no one there, the server affixes the summons and
complaint to D’s front door. This manner of service is valid under New
York law but not under Wisconsin law. D makes a pre-answer motion to
dismiss for insufficient service of process. Which of the following is
most accurate?
a. D’s motion should succeed. Under Hanna v. Plumer,
the federal service rule applies.
b. D’s motion should succeed. Because P’s action has
federal question subject matter jurisdiction, the federal service rule
applies.
c. D’s motion should succeed. D must be served within
the state of New York.
d. D’s motion should succeed. Since the federal
service rule was not satisfied, service must be in accordance with
Wisconsin law – the law of the state where D was served.
e. D’s motion should not succeed.
Answer a is wrong for a number of
reasons. First of all, Hanna is largely irrelevant, because this is a
federal question, not a diversity case. Hanna addressed the question of
whether Fed. R. Civ. P. 4(e) should be used to assess service when a
federal court is sitting in diversity (or whether only the service
standard of the state where the federal court is located should be
used).
Second, and more importantly, a is
wrong, because state law methods are identified in 4(e) itself as a
means of adequately serving. There are five ways of satisfying Rule
4(e). Three are under what can be called the federal standard in
4(e)(2):
4(e)(2)(A) (delivering a copy of the
summons and of the complaint to the individual personally). This was
not done.
4(e)(2)(B) (leaving a copy of each at
the individual’s dwelling or usual place of abode with someone of
suitable age and discretion who resides there). This was not done.
4(e)(2)(c) (delivering a copy of each
to an agent authorized by appointment or by law to receive service of
process). This was also not done.
But there are two other ways of
satisfying 4(e), spelled out in 4(e)(1): “[F]ollowing state law for
serving a summons in an action brought in courts of general
jurisdiction in the state where the district court is located or where
service is made.” The law of the state where service is made
(Wisconsin) was not satisfied, but the law of the state where the
district court was located (New York) was. 5 people chose a.
The explanation above explains why b
and d are wrong too –Although b is right that Hanna is irrelevant, it
ignores the methods in 4(e)(1). 17 people chose b. And d ignores one of
the methods in 4(e)(1), namely the one that refers to the law of the
state where the district court is located. 13 people chose d.
Answer c plays off of possible
confusions between service and personal jurisdiction. It is true that
there will be no PJ without service on D in the state of NY, since
there is no other source of PJ available. But the question is about
whether the service rules are satisfied, not whether there is PJ. And
the service rules are satisfied. Service is not improper simply because
it occurs out of the state of New York, provided that 4(e) was
satisfied, which it was. 4 people chose c.
The answer, therefore, is e, which 44
people chose. (The point biserial was .54.)
2. Which of the following complaints, all filed in
federal court, is best described as improperly drafted?
a. A complaint for federal securities fraud that
fails to state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of mind.
b. A complaint for negligence that fails to allege
the evidentiary support for the plaintiff’s allegation that the
defendant acted negligently.
c. A complaint that alleges facts that constitute a
cause of action but that does not state what that cause of action is.
d. A complaint with legal contentions that are not
warranted by established law.
e. A complaint for fraud in connection with the
purchase of a house that fails to allege the state of mind of the
defendant with particularity.
Answer b is wrong. Under Rule 11,
there must be evidentiary support for the allegation of negligence
(unless it is specifically identified as likely to have evidentiary
support after a reasonable opportunity for further investigation or
discovery). But one need not allege this evidentiary support. It is
enough to offer the support when the defendant makes a motion for Rule
11 sanctions. 4 people chose b.
Answer c is wrong. As I noted in
class, a plaintiff is not in fact required to state what his cause of
action is (although it is a good idea to do so). 21 people chose c.
Answer d is wrong. Under Rule 11,
legal contentions need not be warranted by existing law if they are
warranted by a nonfrivolous argument for extending, modifying, or
reversing existing law or for establishing new law. 7 people chose d.
Answer e is wrong. Under Rule 9(b), a
party must state with particularity the circumstances constituting
fraud or mistake, but “malice, intent, knowledge, and other conditions
of a person’s mind may be alleged generally.” 5 people chose e.
The correct answer is a. This pleading
requirement for private securities fraud actions brought in federal
court is part of the Private Securities Litigation Reform Act. See
F&K 1142-1143. 44 people chose this. (The point biserial was .40.)
3. Which of the following cases is most likely to
have federal subject matter jurisdiction? In each case, the amount in
controversy for each plaintiff’s claim against each defendant is
$100,000.
a. P is a French citizen admitted for permanent
residency in the U.S. who is domiciled in New York. P sues D, a German
admitted for permanent residency in the U.S. who is domiciled in New
Jersey. P’s suit is for violation of New York negligence law.
b. P, a French citizen domiciled in France, sues D, a
German domiciled in Germany. P’s suit is for violation of federal
securities law.
c. P1, a New York citizen, and P2, a California
citizen, sue D, a California citizen, for violations of New York
negligence law.
d. P, a California citizen, claims to be a
beneficiary of the estate of X, a California citizen who recently died.
P’s suit is under California law and names D, the executor of X’s
estate, as the defendant. D is a citizen of Nevada.
e. P, a California citizen, sues D1, a New York
citizen, and D2, a California citizen, for violations of New York
negligence law.
Answer a is not the best answer. It is
true that under 28 USC 1332(a) an alien admitted to the United States
for permanent residence shall be deemed a citizen of the State in which
such alien is domiciled. So this looks like a diversity case, since it
is a statutory New Yorker suing a statutory New Jerseyan. But it is
arguable that even if this was allowed under 1332(a), it would be
unconstitutional. Such a conclusion was arrived at in Gall v. Topcall
Int'l, A.G., 2005 WL 664502 (E.D. Pa. 2005), in connection with a suit
by an alien domiciled in a state against an alien corporation. I
mentioned this in class. 22 people chose a.
Answers c and e are clearly wrong.
There isn’t complete diversity. It is important to see that in c there
is no supplemental jurisdiction because of Kennedy’s contamination
theory. See Allapattah. 3 people chose c. No one chose e.
Answer d is also not the best. Under
28 USC 1332(c)(2), “the legal representative of the estate of a
decedent shall be deemed to be a citizen only of the same State as the
decedent.” We never discussed this in class, nor was this section of
1332 assigned reading. So I expected you to be in doubt about whether, in a
diversity suit against an estate, one looked to the domicile of the
decedent or of the executor. In fact, you could have guessed that one
looks to the domicile of the decedent, if you thought about the
purposes of the diversity statute. A state court would likely be biased
in favor of an in-state decedent (and biased against an out-of-state
decedent) wherever the executor was from. After all, it is the
interests of the decedent, not the executor, that are at issue in the
suit. But I didn’t expect you to know this.
So how should you know that d isn’t
the best answer? Because answer b is so obviously correct. The suit in
answer b is under federal securities
law. A suit under federal securities law obviously has federal question subject matter
jurisdiction (indeed it has exclusive federal subject matter
jurisdiction), no matter what the domicile of the parties. So when
forced to choose between b (which clearly
has subject matter jurisdiction) and d, you should choose b. 44
people chose d. Only 14 people chose b. But those who chose b were much
more likely to choose the correct answers on other questions. The point
biserial for b was .27.
4. D is a partnership. W and H are wife and husband.
In reliance upon statements made by employees of D, W and H each made
separate purchases of bonds issued by D. The price of these bonds
subsequently plummeted and W and H each had to sell them at a heavy
loss. W sued D in federal court in New York for her damages resulting
from D’s alleged violation of federal securities laws. On a motion for
summary judgment, the court found that no reasonable jury could find
that the statements made by D’s employees were materially misleading.
The court therefore granted summary judgment to D. Subsequently, D was
purchased by the X Corp. After this purchase, H sued the X Corp in
federal court in California for H’s damages as a result of D’s
violations of federal securities laws. Which of the following is most
accurate?
a. Under Parklane Hosiery, H is issue precluded from
relitigating whether D’s employees’ statements were materially
misleading.
b. H is not issue precluded under Parklane Hosiery
from relitigating whether D’s employees’ statements were materially
misleading, because H could have easily intervened in W’s suit against
D.
c. Parklane Hosiery is irrelevant to whether H is
issue precluded, since the matter is determined by New York state law.
d. H is not issue precluded from relitigating whether
D’s employees’ statements were materially misleading, because the X
Corp and D are not in privity.
e. H is not issue precluded from relitigating whether
D’s employees’ statements were materially misleading, because W and H
are not in privity.
Answers a and b are clearly wrong. 31
people chose a, and 9 people chose b. Parklane Hosiery is irrelevant
here. Why? Parklane is about someone who was not a party (or in privity
with a party) in earlier litigation taking advantage of issue preclusion.
Parklane never suggests that whoever is disadvantaged by issue preclusion
– that is, bound by the
earlier adverse determination of the issue – can be someone who was not
a party (or in privity with a party) in the earlier litigation. The
question here is whether H (someone who was not a party or in privity
with a party in the earlier litigation) can be bound.
Answer c is wrong too. It is true that
Parklane is about the federal law
of issue preclusion. It is also true that it is an open question
whether the issue preclusive effect of a judgment of a federal court
sitting in diversity is
determined by federal law or the law of the state where the federal
court is located. This Erie question has not yet been determined by the
Supreme Court. But it is clear that the issue preclusive effect of the
earlier judgment in this question is a matter of federal law, since the
federal court that issued the judgment had federal question jurisdiction. 3
people chose c.
Answer d is wrong as well. 3 people
chose d. First of all, D and the X Corp are in privity. There is privity
because the X Corp is a successor in interest. But, what is more
important, the primary obstacle to issue preclusion here is that the
party to be bound (H) was
not a party and was not in privity with a party in the earlier
litigation.
That’s why e is right. It is true that
some courts have in highly unusual situations issue precluded someone
who was not a party or in privity with a party. But there is no reason
to think that this is one of those situations. Indeed I said a number
of times in class that spouses are not in privity. (After all, as those
of you who are married know, spouses’ interests do not always overlap.)
37 people chose e. The point biserial was .47.
5. In the case of P1 v. D1, P1 (a citizen of New
York) sues D1 (a citizen of California) in California state court. P1
has two causes of action: a $100,000 action for D1’s violation of
federal securities law and a $10,000 action for D1’s state-law breach
of an unrelated contract. In the case of P2 v. D2 and D3, P2 (a citizen
of California) sues D2 (a citizen of New York) and D3 (a citizen of New
York) in Nevada state court. P2’s action against D2 is for $100,000 in
damages due to D2’s negligence in a car accident. P2’s action against
D3 is for $10,000 in damages due to D3’s negligence in the same
accident. P2’s actions against D2 and D3 are under state law. Assume
that all defendants consent to removal. Which is the most accurate
description of the causes of action that can be successfully removed to
federal court (that is, removed without a subsequent remand to state
court)?
a. None of four causes of action can be successfully
removed.
b. All of the four causes of action can be
successfully removed.
c. Both of the causes of action in P1 v. D1 can be
successfully removed, but none of the causes of action in P2 v. D2 and
D3 can be.
d. Only the federal securities law action in P1 v. D1
may be successfully removed.
e. The federal securities law action in P1 v. D1 and
both of the causes of action in P2 v. D2 and D3 may be successfully
removed.
P1’s action against D1 under federal
securities law is removable under federal question subject matter
jurisdiction (indeed, it has exclusive federal subject matter
jurisdiction). But there is a problem. P1 has joined a state law cause
of action against D1 that does not have federal subject matter
jurisdiction.
Why not? Well it concerns an unrelated
contract, so it does not have supplemental jurisdiction (it is not part
of the same constitutional case or controversy as the federal
securities law action). Second, it does not have diversity subject
matter jurisdiction. Why not? The problem is not the jurisdictional
minimum. P1’s federal securities law action can be aggregated with the
contract action to get the contract action above the jurisdictional
minimum. The problem is that D1 is an in-state defendant and such
defendants may not remove diversity actions. See 28 USC 1441(b).
So is this a case of successful
joinder to defeat diversity? No – because of the application of 28 USC
1441(c), which 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.” (In fact, it
is more correct to say that the federal court has no discretion – it
must remand the non-removable state law action that was joined to the
federal question action.) 1441(c) keeps plaintiffs from making federal
question actions unremovable by joining to them unrelated state law
actions that have no federal subject matter jurisdiction. It allows the
federal court to split the federal question action from the state-law
action and remand the latter. This is just such a case.
Because we know that P1’s federal
securities law action can be successfully removed, and the state law
contract action cannot (since it will be remanded), we know that a, b,
and c are wrong. 5 people chose a, 13 people chose b, and 19 people
chose c.
Let us now consider P2’s actions
against D2 and D3. This is a case of successful joinder to defeat
diversity. P2’s action against D2 is a diversity action on its own, but
it cannot be successfully removed, since it is joined to an action
against D3 that, although part of the same case or controversy, does
not have supplemental jurisdiction (because it falls under the
exceptions spelled out in 1367(b)). So e is wrong and d is right. 25
people chose e and 21 chose d. But the point biserial for d, although
low compared to other correct answers (.17), was still acceptably high.
(The point biserial for e was only .03.)
6. P is considering bringing suit in federal court
against two co-defendants: the D1 Corp. (incorporated in Massachusetts)
and D2 (an individual). P’s suit is for damages that she received from
a defective toaster. The D1 Corp. owns a chain of large hardware
stores, with 30 stores in Massachusetts, 10 in the Albany, New York
area (in the Northern District of New York), and 10 in the New York
City area (in the Southern District of New York). The D1 Corp’s
headquarters is in Massachusetts. The D1 Corp advertises and has
employees or property only in areas where it has hardware stores. D2
lives in Connecticut but works in New York City (in the Southern
District of New York). While visiting Albany, New York, D2 bought a
toaster from a D1 Corp hardware store. D2 took it with him to Idaho, as
a gift to P, who lives in Idaho. When P used the toaster, it
malfunctioned, severely injuring P. Which is the most accurate list of
federal districts that have venue for the case of P v. D1 and D2?
a. District of Massachusetts, District of
Connecticut, Northern District of New York, Southern District of New
York, District of Idaho.
b. District of Massachusetts, District of
Connecticut, Northern District of New York, Southern District of New
York.
c. Northern District of New York, Southern District
of New York, District of Idaho.
d. Northern District of New York, Southern District
of New York.
e. Northern District of New York, District of Idaho.
This involves a simple application of
the venue statute, 28 USC 1391. Product liability law is largely state
law, so this is solely a diversity action. So 1391(a) applies rather
than 1391(b) (although nothing rides on this). There are two main ways
to get venue in a district under 1391(a). The first, in 1391(a)(1),
requires that all the defendants reside in the same state. That’s not
true here. D2 clearly resides only in the District of Connecticut,
where he is domiciled. And the D1 Corp clearly does not reside in the
District of Connecticut. As a corporation it has residence in any
district where it would be subject to PJ. See 1391(c). And it clearly
is not subject to PJ in Connecticut, since it has no stores or any
other contact there. It resides in the Southern and Northern Districts
of New York, but that doesn’t matter, because D2 does not reside in New
York. (As an individual, it does not matter for D2’s residence that it
would be subject to PJ in New York.)
So we need to use the second method,
in 1391(a)(2), which says that venue exists in the districts “in which
a substantial part of the events or omissions giving rise to the claim
occurred.” That includes the Northern District of New York (where the
toaster was bought) and the District of Idaho (where it caused harm).
So e was the right answer.
11 people chose a, 7 people chose b,
18 people chose c, 5 people chose d, and 42 people chose e. The point
biserial for e was .48.
7. P sues D for negligence in federal court in
connection with personal injuries that P sustained in a 3-car accident
involving cars driven by P, D, and X. Which of the following is the
most accurate statement about actions that may, may not, or must be
joined to P’s action against D? (Do not take into account subject
matter jurisdiction, personal jurisdiction, or venue in answering this
question.)
a. D may, but does not have to, join an action
against X for damages that D sustained as a result of X’s negligence in
the accident.
b. P may, but does not have to, join an action
against D for breach of an unrelated contract.
c. D may, but does not have to, join an action
against P for the damages that D sustained as a result of P’s
negligence in the accident.
d. If P is suing D for the totality of damages that P
sustained due to D’s and X’s conjoined negligence (that is, if P is
suing D under the theory that D and X were joint tortfeasors), D must
join an action against X for contribution.
e. If P is suing D for the totality of damages that P
sustained due to D’s and X’s conjoined negligence (that is, if P is
suing D under the theory that D and X were joint tortfeasors), P may
not join an action against X for P’s damages due to X’s negligence.
Answer a is wrong. D may not join such
an action. To join an action against X under 14(a), D must allege that
X is liable to D for all or part of D’s liability to P. That’s not so
here. 9 people chose a.
Answer c is wrong. D must join the
described action. See Rule 13(a). 2 people chose b.
Answer d is wrong. See Rule 14(a). D
may, but does not have to join a contribution action. D may instead
choose to sue X for contribution in a separate lawsuit. 8 people chose
c.
Answer e is wrong. There is nothing in
the joinder rules forbidding this. It is true that the final relief to
P can’t give him double recovery. He can’t get damages from D for X’s
negligence and damages from X for X’s negligence. But that does not
mean he can’t join these parties. 5 people chose e.
The correct answer is b. Such joinder
is allowed under Rule 18(a). 59 people chose b. The point biserial was
.45.
8. Assume P sues D in federal court for negligence.
Which of the following is least accurate?
a. D first brings a pre-answer motion to dismiss for
inadequate service. The motion is denied. D may not submit a second
pre-answer motion to dismiss for failure to state a claim.
b. D, having introduced the affirmative defense of
contributory negligence in his answer, brings a motion for summary
judgment, on the ground that no reasonable jury could find that P was
not contributorily negligent. If neither P nor D offers the court any
evidence in support of or in opposition to D’s motion, the motion
should be denied.
c. D, having introduced the affirmative defense of
contributory negligence in his answer, brings a motion for summary
judgment, arguing that no reasonable jury could find that P was not
contributorily negligent. D may offer in support of his motion an
affidavit from X, even though X could not testify at trial because his
testimony is hearsay.
d. If D impleads his insurer I, I may assert D’s
affirmative defense of statute of limitations against P.
e. If D brings a pre-answer motion to dismiss for
lack of personal jurisdiction, D may not introduce the defense of
improper service in D’s answer.
Answer a is not the least accurate. In
fact it is correct that D may not submit the second pre-answer motion –
since the defense of failure to state a claim was available to him at
the time of the first pre-answer motion. (D can introduce the defense
of failure to state a claim in his answer, however.) 19 people chose a.
Answer b is not the least accurate. In
fact it is correct. D has the burden of production and persuasion at
trial concerning contributory negligence. That makes this case
different from Celotex, where the defendant movant for summary judgment
was arguing that a reasonable jury could not find in the plaintiff’s
favor concerning an element of the plaintiff’s
cause of action (causation). Concerning these elements, the
defendant did not have the
burden of production and persuasion at trial. Because D has the burden
of production and persuasion at trial concerning the affirmative
defense, for D to satisfy his burden of production as a movant for
summary judgment in this case, he must offer evidence establishing that
a reasonable jury could not find in the plaintiff’s favor concerning
the affirmative defense. D did not do this, so he does not get summary
judgment. 20 people chose b.
Answer d is not the least accurate. In
fact under Rule 14(a)(2)(C) a third-party defendant (I) “may assert
against the plaintiff any defense that the third-party plaintiff [i.e.
D] has to the plaintiff’s claim.” 10 people chose d.
Answer e is not the least accurate. In
fact it is correct that D may not submit the defense of improper
service in his answer. It has been waived. See Rule 12(g)-(h). 13
people chose e.
Answer c is the least accurate. D may not offer in support of his
motion for summary judgment an affidavit from someone who may not
testify at trial because his testimony is hearsay. Under Rule 56(e)(1),
“[a] supporting or opposing affidavit must be made on personal
knowledge, set out facts that would be admissible in evidence, and show
that the affiant is competent to testify on the matters stated.” It is
true that the affidavit itself can be offered in support of the summary
judgment motion even though it is inadmissible hearsay. But the content of the affidavit can’t be
inadmissible hearsay. 21 people chose c. The point biserial was .31.
9. P, an employee of the D Corp, is suing the D Corp
in federal court concerning the damages P sustained from a large
industrial accident at a D Corp plant. Many people were severely
injured in the accident, which was apparently the result of the
introduction of a new chemical into the fuel used by the plant’s
machinery. Which of the following is least likely to be D Corp work
product under Fed. R. Civ. P. 26 and/or Hickman?
a. A memo drafted by the D Corp’s trial counsel for
the D Corp’s in-house counsel concerning the strategy to pursue in the
D Corp’s defense against P.
b. A tape recording of a witness’s recollections of
the accident. The witness is now deceased. The tape was made by a
private detective hired by the D Corp. soon after the accident.
c. An account of the probable causes of the accident,
drafted soon after the accident occurred by a D Corp engineer for the
Chief Executive Officer of the D Corp.
d. The minutes of a meeting, attended by the D Corp’s
in-house counsel, during which it was decided to introduce the new
chemical to the fuel.
e. A video of P gardening, clandestinely made by a
private detective hired by trial counsel for the D Corp in the hopes of
demonstrating that P’s injuries are less than P alleges in his
complaint.
Answer a is not the best answer
because what is described is work product. Under Rule 26(b)(3)(A)
“documents and tangible things that are prepared in anticipation of
litigation or for trial by or for another party or its representative
(including the other party’s attorney, consultant, surety, indemnitor,
insurer, or agent)” are work product. The memo is clearly created in
anticipation of litigation by and for the D Corp’s representative. In
addition, it is opinion work product, that is the “mental impressions,
conclusions, opinions, or legal theories of a party’s attorney or other
representative concerning the litigation.” 26(b)(3)(B). No one chose a.
Answer b is not the best answer
because what is described is work product. The tape was created in
anticipation of litigation by a D Corp representative. Some of you may
have been inclined to choose this because there is a good argument that
the work product privilege could be overcome. P may have substantial
need of the tape, and since the witness is deceased, P “cannot, without
undue hardship, obtain [its] substantial equivalent by other means.”
See 26(b)(3)(A)(ii). But that does not mean that the material is not
work product privileged, only that the privilege can be overcome. 15
people chose b.
Answer c is not the best answer
because what is described is probably work product. Since it was made
right after the accident, the account is likely created in anticipation
of litigation, and it was made by a representative of the D Corp. 7
people chose c.
Answer e is not the best answer
because what is described is work product. The video is surely created
in anticipation of litigation by a representative of the D Corp. 1
person chose e.
Answer d is the best answer, because
what is described is clearly not work product. It could not have been
created in anticipation of litigation about the accident, because when
it was made the accident had not
happened yet. The fact that a lawyer was present might make it
subject to the attorney-client privilege, but that’s not the
work-product privilege. What this looks like is a damaging document of
precisely the sort that must be turned over in discovery. 60 people
chose d. The point biserial was .50.
10. D, a New York state trooper, arrested P in New
York City on June 1, 2005. P filed a complaint against D in the
Southern District of New York on May 1, 2007. P’s complaint alleges
that D used excessive force in the arrest, thereby violating 42 U.S.C.
§1983 (the federal law that allows state officials to be sued for
damages resulting from violations of federal constitutional rights) and
New York battery law (a tort). Because §1983 has no statute of
limitations specified, the tort statute of limitations of the state
whether the federal court is located is used. New York’s tort statute
of limitations is 2 years. Under New York law, statutes of limitations
are tolled at service. D was served on August 1, 2007. Which of the
following is most accurate?
a. D can get both causes of action dismissed, because
D was not served within 30 days of the filing of the complaint.
b. D can get summary judgment on statute of
limitations grounds concerning both the federal and the state law
causes of action. The statute of limitations for both was tolled at
service, not at filing.
c. D cannot get summary judgment on statute of
limitations grounds. The statute of limitations for both the federal
and the state law causes of action was tolled at filing, not at service.
d. D can get summary judgment on statute of
limitations grounds concerning the state law but not the federal cause
of action. The statute of limitations for the federal cause of action
was tolled at filing, while the statute of limitations for the state
law cause of action was tolled at service.
e. Although the state law cause of action is beyond
the statute of limitations, it is saved because it relates back to the
federal cause of action, which is within the statute of limitations.
Answer a is not the most accurate. In
fact, P has 120 days after filing to serve D. One person chose a.
Answer b is not the most accurate.
True, we know from Ragan (as reaffirmed by Walker), that for state law
actions in federal court one uses the tolling rules of the state where
the federal court is located. So that means that for the state law
cause of action, the statute of limitations is tolled upon service, not
filing. But the same thing is not true for a federal cause of action
that simply borrows an analogous statute of limitations from the state
where it is located. In such cases the federal tolling rule is used.
See West v Conrail, discussed in footnote 11 in Walker. (I discussed
this in class.) 35 people chose b.
Answer c is not the most accurate,
because the statute of limitations for the state law cause of action is
tolled at service, not filing. This follows from Ragan and Walker. 15
people chose c.
Answers e is not the most accurate.
Relation back is relevant only when there is an amendment of a
pleading. See Rule 15(c). Here the state and federal causes of action
were both within the original complaint. There was no amendment. 9
people chose e.
Answer d is the most accurate, for the
reasons specified in connection with answers b and c. 23 people chose
d. But the point biserial was a very high .33.
Part II: 8 Essay Questions [180 points
total]
NOTE: If you feel that an essay
question provides you with inadequate information, identify what
information you need and how it would matter to your answer.
Essay Question 1. [45 points]
D lives in New York. He owns and runs a business, under the name “D
Diamonds,” which sells diamonds over the internet. D Diamonds is not
incorporated. (As a result, D is personally liable for D Diamonds’
debts.) D runs D Diamonds out of an office in New Jersey. He has one
employee, X, who, like D, lives in New York and works in the New Jersey
office. D describes X as an “assistant manager.”
The P Corp, a large diamond distributing company, is incorporated in
Delaware. Its main office and headquarters are in New Jersey, but all
its diamonds are kept in a number of safes in a small guarded storeroom
in New York. The P Corp has appointed the New Jersey Secretary of State
as its agent for service of process, as a condition for a license to do
business in the state.
D has had a long-standing relationship with the P Corp and D commonly
orders diamonds directly from the P Corp’s New York storeroom. In a
phone call from D’s home in New York to the P Corp’s storeroom, D
ordered $200,000 worth of diamonds. D paid a $100,000 deposit by phone,
using his personal credit card. Delivery was to be to the D Diamonds
office in New Jersey. The P Corp shipped the diamonds, but they were
stolen in New York soon afterward, before they made it to New Jersey. D
refused to pay the remaining $100,000 for the diamonds.
The P Corp filed a complaint in the Federal District Court for the
District of New Jersey for state-law breach of contract, naming “D,
doing business as D Diamonds” as the defendant. The complaint asked for
the remaining $100,000 owed for the diamonds. The P Corp argued that D
Diamonds had ownership of the diamonds at the moment they left the P
Corp storeroom in New York. Since ownership was transferred, D Diamonds
(and therefore D) was obliged to pay in full.
Service of the summons and complaint was upon X at X’s home in New
York. D answered, alleging that he was not liable for the remaining
$100,000, because ownership of the diamonds was never transferred.
Transfer would have occurred only if there had been successful delivery
of the diamonds to D Diamonds’s New Jersey office. D also included in
the answer the defenses of lack of personal jurisdiction, lack of
subject matter jurisdiction, improper venue, and insufficient service
of process, and a counterclaim for the return of the $100,000 deposit.
In its reply, the P Corp offered the following defense to D’s
counterclaim: The counterclaim could not succeed, the P Corp argued,
because D had failed to satisfy a New Jersey statute that states that
any company doing business in New Jersey “may maintain an action in any
of the courts of this state” only if it has appointed the New Jersey
Secretary of State as its agent for service of process. D had never
appointed the New Jersey Secretary of State as its agent for service of
process. Should the P Corp’s defense to D’s counterclaim succeed?
Should D’s defenses of lack of personal jurisdiction, subject matter
jurisdiction, venue, and improper service succeed?
The P Corp’s
defense to D’s counterclaim
The first thing to notice is the
strong similarity between this case and Woods v. Interstate Realty
(F&K 349). I lifted the language of the New Jersey statute from the
statute at issue in Woods. But in Woods the question was whether a plaintiff suing a defendant in
federal court sitting in diversity had to satisfy the statute. The
court concluded that the plaintiff did. (Notice that the P Corp did satisfy the New Jersey
statute, since it has appointed an agent for service.) The question
here is whether a defendant bringing
a compulsory counterclaim must satisfy the statute.
Before examining this question, let me first discuss some issues that
caused some of you to bypass the question entirely:
1) Some of you questioned whether even
in
New Jersey state courts the
statute would obligate D to have appointed an agent for service of
process in order to bring the compulsory counterclaim. The statute, you
argued,
would apply only to plaintiffs,
not to defendants bringing compulsory counterclaims. You were rewarded
for mentioning this issue, but since it makes the problem in the
question
disappear (and you had no real evidence that the NJ statute has not been applied to defendants
bringing compulsory counterclaims),
it was essential to discuss the question assuming that D would be obligated to satisfy the
statute in New
Jersey state courts. Given this assumption, is D
is obligated when the case is in a federal court sitting in diversity?
2) Others of you argued that
the
New Jersey statute was unconstitutional insofar as it applied to
individuals - including individual plaintiffs. (This too would make the
question of
whether the statute should apply in federal court moot). You argued
that under the Privileges and Immunities Clause of Art. IV, a state
cannot condition an individual's (as opposed to a corporation's) doing
business in a state upon his appointment of a permanent agent for
service of process within the state. The idea is that because, under
the P&I Clause, a state cannot forbid
the individual from doing busines in the state, it cannot put
a condition of this sort upon the individual doing business.
I
mentioned this idea (the relevant case is Flexner v. Farson) in class.
The context of the discussion was attempts within the Pennoyer
framework to get PJ over
defendants for past acts within the state. States used the fiction that
an activity in the state created a permanent agent for service of
process to get PJ over defendants for past acts, but, under Flexner,
this
fiction could not be used to get PJ over individuals who had done
business in the state.
I gave you some credit for mentioning this. But in fact I also said in
class that this argument is no longer
accepted (see Doherty & Co. v. Goodman). Indeed, the theory of PJ
in Int'l Shoe and its progeny is contrary to the principle in Flexner,
since Int'l Shoe and its progeny say generally that if someone enters a
state
and gets the protections of its laws, this puts
upon him reciprocal obligations to return to answer for causes of
action
related to those activities. There is no claim that one's reciprocal
obligations are limited by the P&I Clause. An individual who does
business in the state can be obligated by the state to return and
answer for his activities, even though the state could not have
forbidden him from doing business.
Furthermore, even if the Flexner argument were still accepted, it is
not directly relevant to the New
Jersey statute, which requires those who are doing business in the
state AND suing in its courts
to appoint an agent for service of process.
So it was important to go on and consider the question on the (correct)
assumption that the statute is constitutional.
3) Still others of you said that the New Jersey statute did not apply
to federal court because it says that any company doing business in the
state “may maintain an action in any
of the courts of this state”
only if it first appoints an agent for service of process. By "courts
of this state" the statute, you argued, meant only New Jersey state courts.
But even if it is true that the phrase was meant to apply only to New
Jersey state courts, not federal courts in New Jersey (which is not
clear), it is common for Erie analysis to recommend the application of
state procedural law in a federal diversity case even though the state
procedural law, by its own terms, applies only to that state's courts. Remember, I
took the language of the statute from Woods, where the Supreme Court
concluded that the statute applies to federal courts sitting in
diversity, even though the statute spoke only of "courts of this state."
There are a number of reasons why this is so. First of all, it is
unlikely that the legislature was actually thinking of Erie situations
when the statute was drafted. "Courts of this state" was probably used
to distinguish state courts in New Jersey from state courts in, say,
New York (in particular state courts in New York that are entertaining
New Jersey causes of action). The legislature did not want to dictate
to these New York state courts what procedure to use. The New Jersey
legislature probably did not even consider the question of whether
federal courts in New Jersey should use the statute. It is for this
reason that the analysis of the sort that went on in Szantay is
important (where one actually looks to the purposes of the statute to
see whether the state might not want the statute to apply in federal
court).
Second, let us assume that a legislature does not want the statute to
apply in federal court. It is not clear that Erie analysis would not still recommend that it applies in
federal court. Keep in mind that a main issue in Erie analysis is
whether the difference between state and federal procedure would cause
the type of forum shopping that is contrary to the purposes of
diversity jurisdiction. A federal court might conclude that the
avoidance of forum shopping is important enough to use state procedural
law, even though the state legislature doesn't want its law to apply in federal
court. It would be federal, not state, purposes that recommend the
application of state law in federal court. True, sometimes the fact
that the state does not want its law to apply argues for the
application of federal rather than state law (see Szantay). But it is
entirely possible for federal interests to nevertheless recommend the
application of state law.
So here too it was important to go on to detailed analysis of whether
the state statute should apply in federal courts sitting in diversity.
OK, now to the question of whether the
statute applies to a defendant bringing a compulsory counterclaim in a
federal court sitting in diversity. One way of looking at this question
is
to say
that, unlike in Woods, there is a Fed R Civ P that is directly contrary
to the state statute. That federal rule is the compulsory counterclaim
rule – 13(a).
So conceived, the answer to our question is simple. Under Hanna, the
federal rule, not the state law,
applies (assuming that the federal rule is valid under the Rules
Enabling Act, which 13(a) clearly is). The New Jersey statute says
that, under certain circumstances, a counterclaim may not be brought (namely when no
agent has been appointed), while Rule 13(a) says it must be brought. The federal
rule wins.
This appears to be the approach taken
in Avondale Shipyards,
Inc. v. Propulsion Sys., Inc., 53 F.R.D. 341 (C. D. La. 1971) on facts
similar to ours, although the argument in that case is not as clear as
it might be.
But one might argue that there isn’t a
direct conflict between 13(a)
and the New Jersey state statute. There are exceptions to 13(a) that
are not identified in the language of 13(a) itself, for example, when
subject matter jurisdiction prohibits the compulsory counterlciam from
being brought. Perhaps we should understand 13(a) as having an implicit
exception when procedural barriers for the counterclaim exist. Given
this exception in 13(a), one might see no direct conflict between 13(a)
and the New Jersey statute. So it was a good idea to
also examine the question assuming that there is merely a federal
common law rule of not requiring appointment of an agent to bring a
compulsory counterclaim.
Using the common law analysis one
would first look to whether a difference between state and federal
procedure on this matter would promote forum shopping and the
inequitable administration of the law. Many of you said that there
would be forum shopping because a plaintiff
would go to federal court to avoid having to appoint an agent to
sue. That’s wrong. We already know (from Woods, which is probably still
good law), that a plaintiff in federal court would be obligated to
satisfy the statute. The question is whether a defendant bringing a compulsory
counterclaim is obligated to satisfy it. It unlikely that a plaintiff
would go to federal court to make it easier for the defendant to bring a counterclaim
against him. Indeed, the real forum shopping likelihood is a defendant removing to federal court in order
to be able to bring a counterclaim without having to satisfy the New
Jersey statute. And plaintiffs would forum shop by avoiding federal
court.
What about New Jersey’s interest in
its law applying? The law appears to exist as a means of compelling
those doing business in the state to appoint an agent for service of
process. It is the price of doing
business in the state and the statute is a means of making sure
that price is paid. So understood, New Jersey would surely want that
statute to apply in federal court as well. Otherwise businesses, like D
Diamonds,
that are doing business in the state, can get out of their obligations
(although New Jersey might have other ways of compelling them to
appoint agents). An alternative interpretation is that the statute sets
the price of using New Jersey state
courts. So understood, New Jersey would not be that concerned if
the statute is not used in federal court.
Finally, what are the interests the
federal courts have in using federal law? These are the very strong
efficiency interests in having all causes of action concerning the same
transaction and occurence litigated at the same time (since the
relevant witnesses are there etc.). These interests, which stand behind
the compulsory counterclaim rule, are very significant and, to my mind,
strongly argue
against the application of the New Jersey statute in federal court.
Quite a few of you claimed that the New Jersey statute was contrary to
Fed. R. Civ. P. 4 (which governs service). That's not true. The New
Jersey statute does not say how D must serve the P Corp when bringing
the counterclaim. It does not say, for example, that D must serve the P
Corp's agent for service of process. (Nor does it say how the P Corp
must serve D.) All it says is that if D wants to
bring a counterclaim, D must appoint an agent for service of process.
That agent might then be used for service in connection with other lawsuits brought against D,
but D's appointing that agent is not a means of service itself. (And, incidentally, the way that service
for counterclaims must be effected is determined by Rule 5, not Rule
4.) If there is a direct conflict with a federal rule, that rule is
13(a).
D’s defenses
In connection with service, PJ, venue,
and SMJ, this question introduced an issue about which very little was
discussed in class or in the reading. A good deal was said about
individuals with respect to
these requirements. And some was
said about corporations and
even unincorporated associations,
like
labor unions or partnerships. But what about sole proprietorships – that is
cases in which an individual simply
does business, without being incorporated? In such cases the individual
is personally liable for the business’s debts.
P Corp appears to be suing D as a sole
proprietorship – D doing business as (d/b/a) D Diamonds. I
did not expect you to be able to get the law right here, since we did
not discuss these issues and they weren’t dealt with in the reading.
What I expected you to do was identify the problem and use what you do know to try to solve it.
Inadequate service
The first thing to mention is that we
cannot know whether service is adequate, because we don’t know New
Jersey and New York law on the matter. In fact, states’ procedural
codes often have rules for serving sole proprietorships. But assuming
that New Jersey and New York law do not allow this manner of service,
the question remains which provision of Fed R Civ P 4 applies to a sole
proprietorship – 4(e), which speaks of “Serving an Individual Within a
Judicial District of the United States” or 4(h), which speaks of
“Serving a Corporation, Partnership, or Association.”
If 4(e) applies, service was
inadequate. D was not served in hand; a copy of the commons and
complaint was not left at D’s dwelling or usual place of abode with
someone of suitable age and discretion who resides there; and D’s agent
for service of process was not served (there is no reason to think that
X was such an agent).
If 4(h) applies, then there is a
chance that service was adequate. We might understand service as being
upon an officer, a managing or general agent of D Diamonds (namely X),
although there is a question about whether X deserves to be called a
managing or general agent.
In fact, I have been unable to find a
case discussing this matter. The problem is that
in the vast majority of cases the plaintiff satisfies 4(e) and 4(h) by
simply having the owner of the
sole proprietorship served in hand. And when that doesn't happen, there are
usually are
state law methods for serving sole proprietorships and the plaintiff
satisfies those methods even when 4(e) is not satisfied. So I am unsure about how a court
would handle our case.
A simply statutory argument might
suggest that 4(e) applies, since a sole proprietorship is not
a corporation, partnership, or association. On the other hand more
practical considerations might suggest that 4(h) is appropriate. This
is especially true when one thinks of a very large sole proprietorship,
with many employees. Why, if a large sole proprietorship is being sued,
would it be wrong to serve by giving a summons and complaint to a
managing agent?
Lack of SMJ
In this case, you had more to go on.
First of all, the SMJ must be diversity if it is anything (it is not
indicated the P Corp was suing under federal law). We know the
jurisdictional minimum is met (there is $100,000 in controversy). The
question is solely whether the parties are diverse. The P Corp has
Delaware citizenship (its place of incorporation) and the citizenship
of the state of its principal place of business. This is probably New
Jersey. It is certainly New Jersey under the nerve center and probably
New Jersey under the total activity test (although I didn’t penalize
you for arguing a New York PPB).
The real question is the citizenship
of the defendant. Here you should have been able to reason that it is
New York. After all, you should have known that with respect to
unincorporated associations
(e.g. unions and partnerships), the state
of citizenship is the domicile of all the members. So that same rule
must apply
to sole proprietorships as well. The defendant’s citizenship must be
New York, since D is domiciled in New York. One does not look to the
principal place of business, the way one does with corporations –
although arguably one should, particularly when the sole proprietorship
is large.
Lack of PJ
First of all, it was good to say that
the federal court in NJ would have PJ only if a state court in NJ would
(according to Fed R Civ P 4(k)(1)(A)). It is also good to mention that
the New Jersey long-arm statute and New Jersey Constitution would be
relevant to one’s analysis about whether a NJ state court would have
PJ. But since you don’t know anything
about them, they can be set aside. We are concerned solely with the
14th Amendment inquiry. Would a NJ state court have PJ under the 14th
Amendment over D (or D Diamonds)? Once again, we have to deal with the
problem of sole proprietorships.
Let us first consider whether there is
specific jurisdiction. One problem here is that the activities giving
rise to the P Corp’s cause of action (namely D’s ordering the diamonds
in a call from his home in NY to the storeroom in NY) occurred in NY.
Some tried to argue that the breach of the contract occurred in NJ,
because that is where there was no delivery of the diamonds. But this
assumes that the suit is for non-delivery of the diamonds by the P
Corp. In fact, the suit is for non-payment by D. The relevant breach is
D’s not paying (although it is conceivable that D’s non-payment
occurred in
NJ, since that is where D runs D Diamonds).
In the end, there is probably a
simpler argument for specific jurisdiction. After all, D reached out to
the state of NJ in his phone call, by asking that the diamonds be
delivered there. It should not matter (although it might to a court
that fetishizes physical contact in PJ cases) that D’s act of reaching
out did not express itself in physical contact with NJ.
The McGee factors also argue in favor
of PJ, especially since NJ has a very strong interest in asserting PJ
over a person doing business in its state, especially when the
plaintiff
also does business in the state and the cause of action concerns their
business relationship.
Things really get interesting when one
looks to general jurisdiction
over D, d/b/a D Diamonds. With respect to individuals, a court will
have general jurisdiction (that is jurisdiction for any cause of
action) if the defendant is tagged in the state (not so here) or the
defendant is domiciled there (not so here). So one might conclude that
there is no general PJ. (Some of you did this.)
But that is surely a mistake, at least
if one is talking about a suit against D, d/b/a D Diamonds. After all,
D runs D Diamonds out of New Jersey.
The sole proprietorship is located there. There are substantial
continuous
contacts with the state that should allow D, d/b/a/D Diamonds, to be
sued on any cause of action concerning D Diamonds, whether or not the
cause of action arose in New Jersey.
Imagine, for example, that X, acting
as an agent for D Diamonds, went to Connecticut to pick up some
diamonds. There X got into a car accident with Y (from Connecticut).
Surely it would be fine for Y to sue D, d/b/a D Diamonds, in New Jersey
state court, under a theory of respondeat superior, even though the
activities giving rise to the cause of action occurred in Connecticut.
Since D Diamonds is located in New
Jersey, if it is located anywhere, it seems that D, d/b/a D
Diamonds, can be sued on any cause of action (that is, any cause of
action having to do with D Diamonds).
Of course, to say that D’s contact
with New Jersey is enough for general jurisdiction over D for causes of
action having to do with D Diamonds (even if the cause of action did
not arise in New Jersey) might not mean that it is enough for general
jurisdiction over D for any cause of action. D might not be able to be
sued in New Jersey by a German with whom D got in a brawl in Germany.
It seems clear, therefore, that there
is general jurisdiction. What
is more, when one does the specific jurisdiction
analysis, these substantial continuous contacts with New Jersey would
also argue for PJ, since, as we have seen, a court is more likely to
find specific jurisdiction if one throws in unrelated contacts with the
forum state. In this case the unrelated contacts are overwhelming.
I therefore expected you to find that
there was PJ . But in particular I expected sensitivity to the
problems of general personal jurisdiction over sole proprietorships.
How have courts deal with these
issues? Let's start with unincorporated associations and then move on
the sole proprietorships. Courts have certainly spoken of
unincorporated associations as
subject to general personal jurisdiction on the basis of the same type
of
substantial continuous contacts that apply to corporations. Indeed some
courts consider the domiciles of the association’s members to be
irrelevant for determining general personal jurisdiction over the
unincorporated association. Unincorporated associations are treated
like corporations as far as general personal jurisdiction is concerned.
(The domiciles of the
shareholders of a corporation are irrelevant in determining general
personal
jurisdiction over the corporation.) One court has insisted that “an
unincorporated association which does not itself conduct significant
activities in or enjoy affiliating circumstances with, a state cannot
be subject to the general personal jurisdiction of the state's courts
on the basis of a member's contacts within the state unless the member
carries on the in-forum activities under the association's substantial
influence.” Donatelli v. National Hockey League, 893 F.2d 459 (1st Cir
1990).
Notice how differently unincorporated
associations are treated with respect to SMJ and PJ. For SMJ, the
domicile of the members establishes citizenship, even if the members’
activities in their states of domicile have nothing to do with the activities
of the unincorporated association. On the other hand, courts are
inclined to find general PJ over unincorporated associations only on
the basis of activities of the
unincorporated association. For that reason it considers the
activities of the association’s members only insofar as they are
association-related activities.
For example, consider the case of a law firm (a partnership) located in
New York, but whose members live in New York, New Jersey and
Connecticut. For SMJ purposes, the law firm has NY, NJ and CT
citizenship, even if the partners living in NJ and CT never work at
home. But for PJ purposes, there would not be general jurisdiction over
the law firm in NJ and CT simply by virtue of the fact that some
partners live in those states. This is true even though the partners
are personally liable for the law firm's debts.
This approach to general PJ over unincorporated associations makes
sense. It would be wrong to submit the law firm to general PJ in CT
simply because some partners
of the law firm live in CT. After all, if a CT court asserted general
PJ over the law firm, it would in effect be asserting PJ over all the firms members (since they
are personally liable for the firms debts). But the partners domiciled
in NJ and NY have not reached out to CT in a way that would allow that
state to assert general PJ over them. On the other hand, there should
be general jurisdiction jurisdiction over the firm (and so all its
members) in NY, since the firm has substantial continuous contacts with
the state, even though some of the firm's members are domiciled in NJ
and CT.
What result would this reasoning have for
sole proprietorships? Well, if
an unincorporated association can be
subject to general PJ in a state other than the domiciles of the
association's members (provided the association has substantial
continuous contacts with that state), it should follow that there is
general PJ over
D Diamonds (and so D) in New Jersey, since D Diamonds has substantial
continuous contacts with NJ. It would not matter that D is domiciled in
NY.
What about general PJ over D, d/b/a/ D Diamonds, in NY? As we have seen, not only can
an unincorporated association be subject to general PJ in a state other
than the domiciles of the associations members, the asociation cannot be subject to general PJ in
a state simply because some association
members are domiciled there.
Would it follow, therefore, that there is no general PJ over D, d/b/a D
Diamonds, in NY? No. Since a
sole proprietorship has only one member,
there is no reason that there cannot also be general PJ over the
proprietorship in the state of domicile of the owner. The situations
would be analogous to a NY law firm whose partners alllive in CT. There would be general PJ over the firm both in NY
and CT.
To sum up, the substantial continuous
contacts that D Diamonds has with the state of
New Jersey should certainly allow for general PJ over D, d/b/a/ D
Diamonds, in New Jersey. This is backed up by the case law on the
matter. Sole proprietorships are commonly held subject
to
general jurisdiction if there are substantial continuous contacts with
the state of the sort that D Diamonds has with New Jersey (although in
all the
cases
I could find the defendant-owner was also domiciled in the state
asserting PJ, which made the conclusion that there was general
jurisdiction simpler).
Improper Venue
Once again we run into the problem
that the suit is against a sole proprietorship. There are two main ways
to get venue in a district under 1391(a). Under
1391(a)(1), there is venue in a district in which a defendant resides
if all the defendants reside in the same state. Since there is only one
defendant, the question is whether D, d/b/a/ D Diamonds, "resides" in
the
District of New Jersey. If one considers D as an
individual, then there is no venue in the District of New Jersey
through that method. D clearly resides in New York. But under 1391(c),
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. Should that standard apply to sole
proprietorships? I expected you to worry about this.
Once again, the example of
unincorporated associations is instructive. Although the venue statute
refers only
to corporations, its principles have been applied by analogy to
unincorporated associations by the
courts. What is more some
courts have also applied the standard to sole proprietorships. Taylor
& Francis Group, PLC v. McCue, 145 F.Supp.2d 627 (C. D. Pa. 2001).
But other courts have refused to apply the standard to small sole
proprietorships. Hsin Ten Enter. USA v. Clark Enter., 138 F.Supp.2d
449, 458 (S.D.N.Y.2000); PKWare, Inc., Meade, 79 F.Supp.2d 1007, 1016
(E.D.Wis.2000).
The argument for using the 1391(c)
standard for large sole proprietorships is compelling. After all,
questions of convenience don’t change simply because a company is
incorporated or unincorporated. Once again, I did not expect you to
know the law on this. But I did expect sensitivity to these problems.
The other possibility is to argue that
there is venue in the District of New Jersey on the basis of the second
method in 1391(a)(2), which says that venue exists in the districts “in
which a substantial part of the events or omissions giving rise to the
claim occurred.” Arguments for and against venue in the District of New
Jersey are similar to the arguments for and against specific personal
jurisdiction in New Jersey, discussed above. The problem is that
the events at issue seem to have occurred in NY, not NJ, although
arguments that a substantial part of the events or omissions giving
rise to the claim occurred in NJ are possible.
In general, I expected a recognition
on your part
that it made a good deal of sense for there to be venue in the District
of New Jersey. After all, it can hardly be said to be inconvenient for
D, d/b/a/ D Diamonds, to litigate in New Jersey, since that is where
the business is centered.
Those who concluded that there was no venue should have at least
acknowledged how odd this conclusion is.
Essay Question 2. [15 points]
P1 (a citizen of New York) and P2 (a citizen of New Jersey) joined as
co-plaintiffs to sue D (a citizen of Connecticut) for state-law
negligence in the Federal District Court for the District of
Connecticut. P1 and P2 are each asking for $100,000 in personal injury
damages as a result of a car accident in Connecticut involving four
cars driven by P1, P2, D, and X (a citizen of New York). After filing
and serving their complaint, P1 joined a state-law negligence action
against P2 and X, asking for $50,000 in damage to his car that P1
claims was due either to P2’s or X’s negligence in the same accident.
Is there federal subject matter jurisdiction for P1’s action against X?
If there is, is it right that there is? If there isn’t, is it right
that there isn’t?
Since P1’s action against X does not have its own source of SMJ (the
parties are not diverse and the jurisdictional minimum is not met), the
question is whether there is supplemental jurisdiction for it under 28
USC 1367. P1 & P2 v. D
looks like an adequate diversity case (there is complete diversity and
the jurisdictional minimum is met). Furthermore, P1’s action against X
is part of the same constitutional case or controversy as P1 & P2 v. D, so 1367(a) is
satisfied.
What most of you said at this point is that X was joined under Rule 20
and that P1’s action against X was therefore an action by a plaintiff
against someone made a party under R. 20. It therefore fell under one
of the exceptions to supplemental jurisdiction spelled out in 1367(b).
In fact, however, there is a good argument that X was joined under R.
13(h). 13(h) governs the joinder of parties to crossclaims, and that is
what is going on here: X is being joined to P1’s crossclaim against P2.
Therefore, there is a good argument that this action does not fall
under the exceptions in 1367(b), since 1367(b) does not mention actions
by plaintiffs against persons made parties under 13(h). Another
drafting error. It was a recognition of this error that I was really
looking for in the essay. If you mentioned it, you were heavily
rewarded. It is possible, however, to say that joinder under 13(h) is
joinder under Rules 20 or 19, since 13(h) refers to the standards in
Rules 20 and 19.
Does the fact that the action does not fall under the exceptions
spelled out in 1367(b) mean that it has supplemental jurisdiction? Not
so fast. One might be able to argue that supplemental jurisdiction is
unavailable because the addition of X contaminates the original action (P1 & P2 v. D), making that no
longer an action over which the court has original jurisdiction. (See
Kennedy’s contamination theory in Allapattah.) But one can argue that
the Kennedy’s contamination theory does not apply P1’s action against
X, because that is not an action by a plaintiff against a defendant. It
is an action by a plaintiff against a crossclaim defendant. It is only
to actions by plaintiffs against defendants that the contamination
theory is meant to apply. I didn’t expect a solution to this puzzle (it
is unclear just how far the contamination theory is supposed to go),
but I did expect you to worry about it.
As I noted, however, the vast majority of you did not even notice the
13(h) issue. You simply said that X was made a party under R. 20 and
thus that an exception 1367(b) applied. Incidentally, even here it may
be that the real reason that P1’s action against X would not have SMJ
is due to the contamination theory. X could contaminate the original
action of P1 & P2 v. D,
making the question of whether an exception in 1367(b) applies moot. (A
few of you noticed this.)
A final issue is that P1’s crossclaim against P2 does not itself have
supplemental jurisdiction (it clearly is an action by a plaintiff
against someone made a party under R 20 and so clearly falls under an
exception in 1367(b)). That creates a problem for how P1’s action
against X can be joined under 13(h), since there is no good crossclaim
for it to be joined to. I was hoping some of you might mention this
problem, but no one did.
Finally, should there be
supplemental jurisdiction here? The answer is
pretty clearly no. It would be an easy end-run around the diversity
statute, since P1, wanting to sue X in federal court but being unable
to do so directly because they not diverse, could get the action into
federal court anyway, by joining it to what is otherwise an acceptable
diversity action. The supplemental jurisdiction statute was drafted
(however inadequately) precisely to avoid such strategies.
Essay Question 3. [15 points]
P (a citizen of California) sues D (a citizen of Nevada) for negligence
under California law in the Federal District Court for the Southern
District of Texas. P’s suit concerns a car accident that took place
between P and D in California. In his complaint, P asks for $1,000,000
in damages for the loss of his arm in the accident. P alleges that the
source of personal jurisdiction over D is a plot of land owned by D
(and worth $35,000) that is located in the Southern District of Texas.
Under Texas law, limited appearances are not allowed: If the source of
personal jurisdiction over the defendant is the defendant’s property,
the defendant may limit a judgment against him to the value of the
property only by defaulting. If the defendant appears to defend on the
merits, he will be taken to have consented to in personam jurisdiction.
D appears and makes a motion to dismiss for improper venue and for lack
of subject-matter jurisdiction. How should D’s motions be
decided?
We never spoke about either venue or SMJ for quasi-in-rem actions
brought in federal court. But you should have been able to use some
things that you did know to address these problems.
But before getting to venue and SMJ, here is some background on
quasi-in-rem actions in federal court. You had every reason to assume
that a federal court in Texas should assert quasi-in-rem jurisdiction
over a defendant to the same extent that this was allowed under Texas
law. After all, this would appear to follow from Fed. R. Civ. P.
4(k)(1)(A), which mandates that a federal court look to the PJ law of
the state where the federal court is located (with some exceptions
irrelevant here). So if there is PJ in Texas state court under a
quasi-in-rem theory, there would be PJ in federal court in Texas under
the same theory. Furthermore, if there are no limited appearances
allowed in Texas state court, there would be no limited appearances
allowed in federal court in Texas as well.
In fact, the matter is a bit more complicated than this, since the
issue is not in fact governed by 4(k)(1)(A). There is special rule,
4(n), which I did not assign and you should not have known about, that
governs quasi-in-rem actions in federal court. This rule allows federal
courts to assert quasi-in-rem jurisdiction only if PJ is not possible
in the district through reasonable efforts by other means under Rule 4.
If these other methods fail, then a federal court may assert
quasi-in-rem jurisdiction to the extent that it is allowed by the state
where the federal court sits. Most federal courts have also concluded
that if state law prohibits a limited appearance it is prohibited in
federal court too.
So 4(n) would provide a hurdle to asserting quasi-in-rem jurisdiction
over D in federal court. But you had no reason to know this. You should
have simply assumed that because quasi-in-rem is available in Texas
state court, then it is available in federal court in Texas. And you
should have assumed that because limited appearances are not allowed in
Texas state court, they are not allowed in federal court in Texas.
Of course, if a Texas state court’s assertion of quasi-in-rem PJ is unconstitutional under the 14th
Amendment, then a federal court in Texas cannot assert quasi-in-rem
jurisdiction either. And Shaffer does put the constitutionality of
quasi-in-rem actions into doubt to some extent. But this case involves
real property, and quasi-in-rem PJ involving real property is the most
likely to be constitutional. In any event, there did not appear to be
an avenue in the question for discussing the constitutionality of
quasi-in-rem jurisdiction.
Now to the question of venue. It looks like there should be no venue
under 1391(a)(1), since D does not reside in the S.D. Tex. (he resides
in Nevada). Nor is there venue under the first clause of 1391(a)(2),
since no substantial part of the events or omissions giving rise to the
claim occurred in the S.D. Tex. (the car accident was in California).
BUT – and it is this that I was looking for – there is at least an argument for venue under the
second clause of 1391(a)(2), which says that there is venue in a
district in which a “substantial part of property that is the subject
of the action is situated.” It is unlikely, however, that the property
that is the source of PJ in a quasi-in-rem action should be understood
as the subject of the action
(although it would in an in rem action). The best answers considered
the argument and then rejected it, but considering it was the most
important thing. Finally there is no venue under 1391(a)(3) because are
other districts that would have venue (e.g. D. Nev.).
Notice that the venue statute makes quasi-in-rem of very limited
usefulness in federal courts. Even if one is able to get PJ over a
defendant in a district where his property is located for causes of
action unrelated to the property, the action will be dismissed on venue
grounds unless one can show that the defendant resides in the district
or a substantial part of the events or omissions giving rise to the
claim occurred there. These would usually have provided PJ on their own
anyway. (The only exceptions would be if the defendant is an alien, who
may be sued in any district, or the fallback provision of 1391(a)(3)
applies, because there is no other district with venue.)
How about SMJ? The big question here is whether the jurisdictional
minimum for diversity is met. It was a recognition of this problem that
I was looking for. Should one look to the amount that the plaintiff is
asking for or the value of the property that is the source of PJ? (This
question has been largely unanswered by the federal courts.) I
personally am inclined toward the value of the property that is the
source of PJ. If D defaulted, for example, it would be legally certain that his liability
would be only $35,000 and thus that the amount in controversy was below
the jurisdictional minimum. As a result the default judgment would be
void for lack of SMJ. If that's true, why shouldn't D be able to
get it dismissed on SMJ grounds now?
Of course, there is the added complication that limited appearances are
not allowed under Texas law (which we are assuming would apply in
federal court in Texas as well). Quite a few of you assumed that this
meant that there must be in personam PJ over D now, since he appeared
to argue that there was no venue or SMJ. That’s not so. To say that
Texas law does not allow limited appearances means that it is not
possible for D to appear and argue on the merits (that is concerning
his liability in the accident), without submitting himself to in
personam PJ. But that’s not what D has done. He has appeared to argue
lack of SMJ and improper venue.
Indeed even if there were a Texas law stating that an appearance to
challenge SMJ or venue submitted the defendant to in personam PJ (and,
to repeat, the prohibition on limited appearances is NOT such a law),
the law would not apply in federal court. Why? There is a federal rule
of civil procedure that is contrary to it. Rule 12(b) says, “No defense
or objection is waived by joining it with one or more other defenses or
objections in a responsive pleading or in a motion.” In other words,
the defense of PJ is not waived by having appeared to argue lack of SMJ
or improper venue.
In short, D is still free to limit his liability to the value of the
property attached. If that’s true, then it sounds like he has a good
argument that there is no SMJ over him.
Essay Question 4. [20 points]
D is a British national domiciled in New York. D promised to give P (a
citizen of New York) a $100,000 necklace, but failed to do so. P sued D
for breach of contract in the Federal District Court for the Northern
District of California. D made a pre-answer motion to dismiss on two
grounds. The first was failure to state a claim, since P did not allege
consideration. The second was lack of subject matter jurisdiction,
because the parties, D claimed, were not diverse. The court dismissed
P’s action, without prejudice, on both grounds. In accepting that there
was no subject matter jurisdiction, the court did not notice that D was
not admitted for permanent residency in the United States. P did not
appeal the dismissals. Soon afterward, P sued D in the Federal District
Court for the Southern District of New York. P's suit once again
concerned the necklace, but P’s cause of action was not breach of
contract, but promissory estoppel: P had reasonably relied upon D’s
promise, resulting in damages of $100,000. D made a pre-answer motion
to dismiss for lack of subject matter jurisdiction. Furthermore, D
argued that P was issue precluded from relitigating whether diversity
jurisdiction exists. Is D right?
First of all, the California federal
court did in fact make a mistake: Because D was not admitted for
permanent residency, D is not considered a citizen of New York under 28
USC 1332(a). That means that this is indeed a diversity (or, more
correctly, an alienage) case with federal subject matter jurisdiction.
But is P issue precluded from
relitigating D’s citizenship? It does not matter for issue preclusion
purposes that the earlier court was wrong. Indeed, if one could escape
issue preclusion by arguing that the earlier adjudication of the issue
was in error, there would be no such thing as issue preclusion at all.
The court determining whether issue preclusion applied would really be
relitigating the issue, undermining the very purposes of issue
preclusion.
We also have an identity of issues
here and the party being precluded (P) was a party in the earlier
litigation. Some of you argued that there was not an identity of
issues, since D’s citizenship might have changed in the intervening
time. The fact that D is a citizen of New York at one point does not
mean he is later. True enough and good to mention. But I said the
second suit was soon after the first, so you should have gone on to
address the question on the assumption that there was an identity of
issues, since that is likely.
Now for some errors. Many of you said
that because the earlier dismissal was designated as without prejudice,
it had no issue preclusive effect. That’s wrong. The designation means
only that there is no claim preclusive effect. And, of course, P is not
claim precluded, even if he is issue precluded concerning D’s
citizenship. P can sue D again concerning the same claim, for example
in state court. Some of you (perhaps drawing upon language in
commercial outlines) said that there could be no issue preclusion
whenever the judgment is not on the merits. That is not, strictly
speaking, true. The dismissal was not on the merits, but P can be issue
precluded concerning the jurisdictional facts that stood behind the
dismissal. That is what is going on here. I mentioned such a
possibility in class. (This is, incidentally, an example of direct
estoppel, although I did not expect you to identify it as such.)
For examples of courts issue
precluding a party from relitigating the question of the citizenship of
a party, see Baris v. Sulpicio Lines, Inc., 74 F.3d 567, 571 (5th Cir.
1996); Jones v. Law Firm of Hill & Ponton, 141 F.Supp.2d 1349,
1356–1357 (C.D. Fla. 2001).
Others of you said that there was no
issue preclusion because this was a pure issue of law. Not so. It was
clearly a mixed issue of law and fact. The issue was the concrete
question of D’s citizenship, although issues of law were involved in
that determination.
The real reason that issue preclusion
might be avoided here is that there are alternative grounds for the
dismissal, each of which is sufficient and so neither of which is
necessary. The two grounds are failure to state a claim and lack of
SMJ. (See Cambria.)
Many of you noticed this, although for
most of you that is where you stopped. It was very nice if you
mentioned reasons why alternative grounds might not be a problem here.
For example, given the special obligations that federal courts have to
determine their own SMJ, perhaps we can be sure that the federal court
took the issue of SMJ seriously. In fact, federal courts have an
obligation to decide failure to state a claim only after deciding that
there is SMJ, since the court cannot even entertain the motion to
dismiss for failure to state a claim if there is no SMJ. See, e.g, Bell
v. Hood, 327 U.S. 678, 682 (1946). (The federal court in California
violated this rule, insofar as it then went on to decide failure to
state a claim too. It should have simply dismissed on SMJ grounds.) I
didn’t expect you to know this, but the special obligations that
federal courts have to determine their SMJ should have indicated to you
that there might be an argument for issue preclusion here. If there are
these special obligations, we can be fairly confident that the federal
court in California fully considered SMJ and thus that issue preclusion
would be appropriate.
But there is another important
question here. We are trying to figure out whether P is issue
precluded. What law are we deciding the matter under? Yes, we have an
Erie problem. The relevant law is the law of the earlier court, but
that was a federal court sitting in diversity. Does federal or
California law apply? There were big rewards for noticing this problem,
even if you did not go into the full Erie analysis. Semtek (which was
about claim preclusive effect) suggests that California law applies.
But I think there are good reasons to think that federal law applies.
For an analysis of the Erie question, see the discussion in connection
with a similar question brought up in essay q. 1 of my 2003
exam.
Essay Question 5. [20 points]
P approaches a partner in your firm and tells her that he is
considering suing the D Corp in federal court for violation of the Age
Discrimination in Employment Act (“ADEA”). Under the ADEA, it is
unlawful for an employer to “discriminate against any individual with
respect to his compensation, terms, conditions, or privileges of
employment, because of such individual's age.” Essential to an ADEA
claim is that there was intent to discriminate on the basis of age,
rather than legitimate factors, such as inadequate job performance. P
is 60 years old and has worked at the D Corp for 10 years. P’s evidence
of discrimination is that he has been passed up for promotion twice by
X, the general manager of the D Corp. In both cases, the person X
promoted was 10 years younger than P and had been at the D Corp for
fewer years (8 in one case and 7 in the other). The two people promoted
were given better performance evaluations by X, but P believes that
these evaluations were themselves the result of X’s discriminatory
intent.
The partner is considering drafting P’s complaint and wants to know
what effect the recent decision by the Supreme Court in Bell Atlantic
v. Twombly, 127 S.Ct. 1955 (2007), might have for her. Briefly, what
can you tell her?
My grading here was more impressionistic than usual. In general I was
looking for the following:
1) An acknowledgement that Twombly was about an
antitrust class action and that it is not clear that the principles
articulated in it would apply at all to an employment discrimination
action brought by an individual plaintiff. It is worth noting (although none of
you did), that the majority distinguished its decision from
Swierkiewicz v. Sorema
N. A., 534 U.S. 506, 508 (2002), in which the
court rejected heightened pleading standards for Title VII employment
discrimination suits. (Stevens, on the other hand, argued in his dissent that the
majority's decision in Twombly is incompatible with Swierkiewicz.) 2) A
description of the analogy between the pleading challenges faced by P
and by the plaintiff in Twombly. In Twombly what the plaintiff had
direct evidence of was parallel conduct unfavorable to competition, but
the crucial element of the cause of action was an agreement to restrain
trade. P has direct evidence of disadvantageous employment decisions,
but the crucial element of his cause of action is an intent to
discriminate on the basis of age.
3) A genuine attempt to make sense of just what the
Twombly case is about (not an easy matter). In particular, you should
have been sensitive to the following problems:
a. At times it sounds as if the majority in Twombly
believes that the problem was that the plaintiff alleged parallel
conduct as an agreement. If
so, however, the problem could be solved
simply by clearly alleging an agreement and offering the parallel
conduct as evidence that the agreement existed. (By analogy, any
problems in our case would be solved simply by P’s clearly alleging
intent to discriminate and offering the adverse employment decisions as
evidence of the intent.)
b. At other times (particularly in footnote 10), the
majority suggests that the problem is insufficient specificity in the
complaint. The court doubted that a bare allegation of an agreement
“would have given the notice required by Rule 8.” The problem was that
“the pleadings mentioned no specific time, place, or person involved in
the alleged conspiracies.” So understood, Twombly is about 8(a), not
merely 12(b)(6). But it is not clear that there are the same problems
with drafting P’s complaint, since he has made it clear who at the D
Corp was discriminating against him (X was), and it is hard to see why
there is a need to identify when and where X’s intent arose.
c. In the end, what appears to really be driving the
majority opinion in Twombly is the worry that the plaintiff has
insufficient evidence of an agreement and that this lack of evidence
manifests itself in vagueness about the nature of the agreement when
pleading. The
court resists conclusory pleading of an agreement precisely because it
will allow the plaintiff to get to the discovery stage even though
it is unlikely that genuine evidence of an agreement will be found. So
understood, there are analogies with P’s case, since (on
the basis of what we know from the question) P has little to suggest
that evidence of discriminatory intent will arise in discovery. The
solution would be for P to plead some further evidence of an intent to
discriminate beyond the adverse employment decisions or to plead in a
manner that manifests the fact that he has this further evidence
(e.g. by being more specific about X’s intent).
Most of you did pretty well on this question, although many of you were
insufficiently sensitive to the ambiguities of the Twombly decision.
Essay Question 6. [25 points]
The D Corp (incorporated in Oregon) manufactures thimbles. It engaged
in a national search to locate a suitable engineer to work at its only
manufacturing plant, located in Medford, Oregon. The search involved a
number of advertisements in a trade publication with a national
circulation and the use of a company that specializes in recruiting
highly trained employees. In the end, the recruitment company located
P, who lived in Yreka, California – only 50 miles from Medford, Oregon.
In a letter sent from the D Corp’s main office in Medford to P’s home
in Yreka, the D Corp offered P a job, which P accepted. P decided to
continue living in Yreka and to commute the fifty miles to work. That P
continued to live in California was known to the D Corp.
P got into a serious accident working on a machine at the Oregon
factory and decided to sue the D Corp under state-law negligence
concerning the design of the machine. P brought his suit in the Federal
District Court for the Eastern District of California (which includes
the town of Yreka). The D Corp made a motion to dismiss for lack of
personal jurisdiction.
The D Corp’s other contacts with the state of California are the
following: The D Corp’s thimbles are sold all over the world, including
in California, although distribution of the thimbles is through an
independent distributing company that takes ownership of them at the D
Corp plant in Oregon. The D Corp sells about 100,000 thimbles per year
in California (around 33,000 of which are sold in the Eastern District
of California). The California sales of its thimbles amount to around
$10,000 per year and constitute around 3% of the D Corp’s total yearly
production. The D Corp does not advertise its thimbles in California,
nor does it own property, maintain an office, or have an agent for
service of process there. Should the D Corp’s motion succeed?
As always, it was good to say that the
federal court in CA would have PJ only if a state court in CA would
(according to Fed R Civ P 4(k)(1)(A)). It is also good to mention that
the CA long-arm statute and CA Constitution would be relevant to one’s
analysis about whether a CA state court would have PJ. But since the
former gives CA courts PJ up to constitutional limits and you know
nothing about the latter, they can be set aside. We are concerned
solely with the 14th Amendment inquiry. Would a CA state court have PJ
under the 14th Amendment over the D Corp?
This question bore a superficial resemblance to Asahi and other stream
of commerce cases. But the resemblance was superficial only. True,
Asahi and other stream of commerce cases involve a forum state trying
to get PJ over a manufacturer whose product are in the forum state
through the stream of commerce. But the stream of commerce cases are specific jurisdiction cases: The
defendant’s product in the forum state gave rise to
the cause of action. In Asahi, for example, the defendant's (or,
rather, third-party defendant's) tire valve malfunctioned in the forum
state, giving rise to the cause of action.
But our case is not about
P’s suffering harm because a D
Corp thimble exploded in CA. P’s cause of action concerns harm
he suffered from a
defective machine at the thimble factory in Oregon.
Understanding this difference is absolutely essential.
Talking about Asahi as if it were relevant to this question, which some
of you did, cost
you. Others spent time discussing the various positions in Asahi only
to end with the (correct) observation that the discussion of Asahi was
irrelevant because the cause of action did not concern thimbles'
presence CA. People who discussed Asahi in this way were not penalized,
but you were wasting precious time.
To be sure, the shipments of thimbles to CA are relevant insofar as
they could give rise to general PJ
– that is PJ over the D Corp for any
cause of action, even those unrelated
to the CA thimble contacts. To rise to this level the D Corp
contacts with CA would have to be substantial and continuous. Most of
you who got to this point recognized that general PJ was very very
unlikely. General PJ is usually due to a very serious presence in the
forum state, like a factory or major office. It was important to note
this.
A few of you went on to discuss one case I presented in class in which
shipments to the forum state were held to give rise to general PJ. This
is Ex Parte Newco, 481 So.2d 867 (Ala. 1985). In this case the Alabama
plaintiff was harmed by the Missouri defendant’s product (which was
manufactured in Maryland) while the Alabama plaintiff was in Tennessee.
The level of sales of the same product in Alabama was held by the court
to create general PJ over the defendant in Alabama.
It was fruitful to consider NewCo. But besides being an outlier, this
was a case where the cause of action
brought by the plaintiff in Alabama was of the same sort that might have
arisen due to the defendant’s Alabama sales.
Because the defendant sold the same product in Alabama, an action
similar to the plaintiff’s could have been brought by someone harmed by
the product in Alabama. Adding PJ for an action brought by someone
harmed by the product in Tennessee,
it might be argued, is not that big of an imposition on the defendant.
In short, it is not clear that Newco is really about PJ over the
defendant for any cause of
action as a result of sales in the forum state. The PJ might only be
for causes of action of the same sort
as those that would be brought in the forum state as a result of those
sales.
Our case would have been like Ex Parte Newco if P’s cause of action
concerned P’s harm from a defective
thimble that he bought in Oregon.
But that’s not so. P’s action is for negligence concerning the design
of a machine in the
D Corp’s plant in Oregon. P’s
cause of action is not of the sort that could
have been brought by those who bought D Corp’s thimbles in California.
So, even give the expansive
approach to
general PJ in Newco, it does not look like there would be PJ in our
case.
The only other possibility is specific
jurisdiction as a result of the D Corp’s reaching out to
California when looking for someone to fill the engineer position, for
example, by advertising for position in CA (although P did not, it
seems, ever read the ads) and, more importantly, by hiring a recruiting
company that ultimately contacted P in CA. Another contact is the D
Corp’s sending the offer letter to CA.
These contacts with CA at least have some connection with the cause of
action, because they are related to P and his employment at the D Corp.
But they don’t seem sufficiently related to P’s cause of action for
specific PJ. This is not a case like McGee, where the letter sent to
the state was the very contract being sued upon. P is not suing
concerning his employment contract – he is suing for negligence
concerning the design of a machine at the thimble plant in Oregon.
It is true that but for the
hiring of the recruiting firm and the sending of the offer letter, P
would not have taken the job and so would not have gotten into the
accident in Oregon. (You were rewarded for noting this.) But this does
not appear to be enough for specific PJ.
Finally, the fact that the company kept P on as an employee knowing
that he commuted from CA does not seem to involve the intentional
reaching out to CA that is required for specific PJ. The D Corp may
know
that P lives in CA. But it
doesn't care that P lives
there and that he does so is not the result of any intentional act on
the D Corp's part.
It is worth noting, however, that the finding of specific PJ would be
helped (although probably not sufficiently) by two things. The first is
the addition of the unrelated thimble sales in CA. As I noted in class,
specific jurisdiction is aided by a showing of unrelated contacts with
the forum state. The second is that the McGee factors suggest that
California is an appropriate forum. In particular, CA has an interest
in recovery for its harmed domiciliaries; P, who is injured, may find
litigating in Oregon burdensome; and the D Corp should not find
litigating in the E.D. Ca. to be that difficult.
Many of you discussed the McGee factors as relevant when discussing
whether there is general PJ.
As I noted in class, the SCt has never done this. McGee factors are
considered only in specific jurisdiction
cases.
In the end, it mattered much less whether you found that there was no
PJ than that you recognized the considerations that I have identified
above.
Essay Question 7. [20 points]
P (a citizen of Nebraska) sues D (a citizen of New York) for $100,000
damages in Nebraska state court in connection with a brawl that
occurred in Illinois. D has never been to the state of Nebraska and
owns no property there. D appears to argue that the Nebraska state
court lacks personal jurisdiction over her. Under Nebraska state law,
however, motions to dismiss for lack of personal jurisdiction are not
allowed: Anyone appearing before a Nebraska state court, even when
arguing lack of personal jurisdiction, submits himself to general
personal jurisdiction.
D argues that the Nebraska state law is unconstitutional. Is she right?
First of all, what does the state law do? In effect, it prohibits
special appearances. A defendant may not appear to challenge PJ,
because the appearance will be taken as consent to PJ. This does not
mean that D has no avenue to challenge PJ. She must default and then
collaterally attack the Nebraska judgment when P seeks to enforce it in
another forum (such as New York) where D has assets.
Now some of you will remember that Texas had such a law (as did
Mississippi). See F&K 511-12. But both got rid of them in the early
1960s (see footnote on p. 511). Currently, every state (except,
hypothetically, Nebraska) allows special appearances or their
equivalent. You may also remember from that same the reading that the
US SCt upheld Texas’s statute as constitutional in York v. Texas, 137
US 15 (1890). See F&K 511-12. The court considered the possibility
of a collateral attack to be sufficient to protect the defendant.
Some of you, relying on York or the general idea that special
appearances were not constitutionally required under the Pennoyer
regime, simply declared that the Nebraska law was constitutional. But
York v. Texas was a long time ago, and, as Shaffer v. Heitner shows,
the fact that a form of PJ was OK under Pennoyer does not mean it is OK
now.
To answer this question, therefore, it was a good idea to look to
Burnham, since it is the closest recent case to ours. Now most of you
who looked to Burnham simply said the following: Tagging is good under
Burnham. D is present when arguing no PJ and so can be tagged.
Therefore, the Nebraska law is constitutional.
That was too fast. Burnham involved a case in which the defendant came
to California willingly for business and to see his children. There he
was tagged in a suit for divorce and monetary relief. There were two
main theories in Burnham of why tagging was constitutional (Scalia’s
and Brennan’s). I don’t see how Nebraska’s law is constitutional under
either theory.
Under Scalia’s theory tagging is a constitutionally acceptable source
of PJ because it was at the time of the enactment of the 14th Amendment
and because it is still generally accepted as valid today (every state
uses tagging as a form of PJ). But that argument won’t work here
because no state (Nebraska hypothetically excepted) considers presence
for the purposes of challenging PJ as a source of PJ. So if Scalia
followed his reasoning in Burnham, he would strike down the Nebraska
law as unconstitutional. A surprisingly large number of you failed to
recognize this, even when you considered Scalia’s theory.
Next, under Brenan’s theory PJ was acceptable, given the facts in
Burnham, because it satisfied the considerations in International Shoe.
In particular, the defendant intentionally entered California and
received the benefits and protections of its laws. These benefits and
protections can give rise to an obligation to submit to PJ. Furthermore
the McGee factors argued for PJ. It was not too burdensome for the
defendant to go to CA (after all, he went there willingly) and the
defendant’s wife and children were there.
But I am pretty confident that Brennan would have found Nebraska’s law
unconstitutional. D did not voluntarily receive the benefits and
protections of Nebraska law. She is in Nebraska solely for the purposes
of challenging PJ. If Nebraska weren’t wrongly trying to assert PJ over
her, she wouldn’t have a thing to do with the state. Furthermore, the
McGee factors argue against PJ.
I can imagine arguments that the Nebraska law is constitutional that
use the theories in Burnham (or other arguments). Perhaps, as the court
in York v. Texas argued, the availability of a collateral attack is
sufficient to protect D's rights. But the hurdles described above
needed to be acknowledged.
Some of you took this to be an Erie case, which was a serious mistake.
The action is being brought in state court in Nebraska. Erie cases
arise only for federal courts sitting in diversity. It is true that the
Federal Rules of Civil Procedure allow for motions to dismiss for lack
of PJ. But the Federal Rules of Civil Procedure do not apply in state
courts.
Essay Question 8 [20 points]
In accordance with a special agreement between P and the D Corp (a new
start-up company), the D Corp issued, at a price of $100 per share,
10,000 shares of special preferred stock to P. The terms of the shares
included a provision (hereinafter “the Provision”) under which the
shares’ owner had a right to compel the D Corp to repurchase the shares
at the original purchase price.
The D Corp did poorly. As a result, P demanded, in accordance with the
Provision, that the D Corp repurchase P’s shares. The D Corp refused. P
sued the D Corp in state court in California. The California state
court determined that the Provision was contrary to Delaware law and
refused to enforce it. P declined to appeal.
[NOTE: During the exam I announced as a clarification that the D Corp
was incorporated under Delaware law and that Delaware law applied to
the validity of the shares.]
After this case, P and the D Corp entered into another special
agreement to purchase a new issuance of 5,000 shares of special
preferred stock, this time at the price of only $50 per share. Once
again, the terms of the shares included the Provision. Soon after this
second purchase, the Delaware Supreme Court determined, in a suit
involving different parties, that a provision with language just like
the Provision was enforceable.
After the Delaware Supreme Court case, P demanded, in accordance with
the Provision, that the D Corp repurchase both his original 10,000
shares at $100 per share and the more recent 5,000 shares at $50 per
share. The D Corp refused. P then sued the D Corp in Delaware state
court. The D Corp argued that the preclusive effect of the earlier
California suit barred P’s actions. How should the Delaware state court
decide?
First of all, it was important to mention that the question needed to
be answered by reference to California’s
preclusion law. The Delaware state court is obligated under the
Full Faith and Credit clause to give the California judgment the same
claim and issue preclusive effect that it would be given in California
state courts. This is true even though the California state court was
opining about Delaware law (and indeed even though it apparently got
the issue of Delaware law wrong). Of course, you know nothing about the
peculiarities of California’s claim and issue preclusion law, so you
had to answer the question on the basis of what you know about claim
and issue preclusion generally.
Second, it seems quite clear that P is claim precluded from demanding
that the D Corp repurchase the original 10,000 shares. (It should be
obvious why.)
Furthermore, although P cannot be claim precluded from suing concerning
the new 5,000 shares, P might be issue
precluded from relitigating whether the Provision is invalid
with respect to those shares. The issue (namely the validity of the
Provision) is the same. Furthermore, this is correctly described as a
mixed issue of law and fact, to which issue preclusion can apply.
I could imagine one going either way here, but the following
considerations were relevant. Arguing for issue preclusion is the fact
the D Corp may have relied upon the invalidity of the Provision when
negotiating the second issuance of shares (in particular when arriving
at the lower price of $50 per share). If this is true, one might argue
that P would get an unjustified windfall by being able to compel the D
Corp to repurchase the shares. (On the other hand, arguing against
reliance is the fact that the Provision was included in the terms of
the second shares in the first place.)
Arguing against issue preclusion is the similarity between this case
and IRS v. Sunnen. As you should know, a change in law on its own
generally is insufficient to overcome issue preclusion. (Think of
Moser.) But in the Sunnen case, the fact that a different financial
transaction was involved (namely a second assignment of income by
Sunnen to his wife) was relevant in concluding that issue preclusion
could be avoided. That’s true here too.
Some of you also mentioned the possibility of inequities between the
way P’s shares are treated and the way the shares owned by other
shareholders in the D Corp are treated. Such inequities are another
reason to reject issue preclusion, although it is not clear from the
question whether anyone else holds the same class of stock at P.