Civ Pro II - McDermott (Spring 2008)

CIVIL PROCEDURE II Professor McDermott Spring 2008 I. PERSONAL JURISDICTION A. THE ORIGINS 1. Pennoyer v. Neff: First suit: N hired M, lawyer from OR, to do some legal work; N failed to pay M’s fee, and M sued him in OR state court; N was a non-resident of the state who was not personally served with process and did not appear to contest the lawsuit, and a default judgment was entered against N upon constructive notice by publication; after his default judgment, N acquired land in OR from federal government; to satisfy his judgment, M had a sheriff seize and sell the land; P bought the land and received the title; second suit: after awhile, N reappeared and brought suit in federal court in OR against P to recover his land a. Issue: Whether the Oregon state court had jurisdiction over N to impose a judgment against him? b. There are four ways that the court may have had personal jurisdiction over N in the first case: i. If he appeared in the court (answer) ii. If he was found and served with process within the state iii. If he was a resident of the state iv. If he owned property in the state at the commencement of the action a) Acquiring jurisdiction over a person requires that the property is owned by that person at the commencement of the action and that it is attached i) A writ of attachment is filed at the same time as the complaint – M needed to get one before the commencement of the action in order to have jurisdiction over N v. If, after International Shoe, specific or general jurisdiction that satisfies the minimum contacts standard is met c. In personam personal jurisdiction (power over the party himself): i. Consent ii. Territoriality iii. Residence or domicile d. In rem personal jurisdiction (power over the party’s property): i. Attach property with state before commencement of the action ii. In rem jurisdiction was available if one wanted to decide the ownership of property when one could not acquire in personam jurisdiction over a defendant claiming title a) It could also be used to adjudicate claims unrelated to the property itself (quasi in rem personal jurisdiction) i) Abolished in Shaffer, now need minimum contacts to attach property 1 e. There was no in rem jurisdiction because N didn’t yet own the property, and in personam didn’t apply because he was never served, he didn’t consent, and when it was filed, he was not a resident of OR i. Therefore there was no personal jurisdiction over N, and so the writ of execution was improperly executed and the sale to P was invalid f. Exceptions: Marriage and family relations – a deserted spouse could sue for divorce (though not alimony or child support) even if the absent wife or husband could not be served within the state 2. Mechanics of Jurisdictions: Challenge and Waiver a. If the defendant chooses not to appear, and the plaintiff obtains a default judgment and tries to bring it to the plaintiff’s jurisdiction to enforce it, the plaintiff can then collaterally attack the issue of personal jurisdiction b. Making a pre-answer potion that omits a defense of personal jurisdiction is treated as a waiver of jurisdiction c. Making an appearance or litigating other issues but failing to challenge personal jurisdiction in either an answer or 12(b)(2) (lack of personal jurisdiction) pre-answer motion results in waiver of the jurisdictional defense d. A “special appearance” permits the defendant to object to jurisdiction without the action of objecting being itself the basis for jurisdiction\ B. THE MODERN CONSTITUTIONAL FORMULATION OF POWER 1. Redefining Constitutional Power a. Milliken v. Meyer: i. For due process issues, consider whether or not the form of substituted service provided for such cases and employed is reasonably calculated to give him actual notice of the proceedings and an opportunity to be heard a) If it is, the traditional notions of fair play and substantial justice implicit in due process are satisfied ii. The state which accords him privileges and affords protection to him and his property by virtue of his domicile may also exact reciprocal duties b. International Shoe Co. v. Washington: IS was a company incorporated in DE whose principal place of business was in MI; it was sued by the state of WA for unpaid contributions to the state’s unemployment fund enacted by statute, which were required to be paid by employers; notice was served upon a sales solicitor employed by IS in WA and a copy was also mailed to MI; IS challenged the state’s personal jurisdiction to hear the matter, claiming that it was not doing business within the state and had no agent upon whom notice could be served i. Due process requires only that in order to subject a defendant to a judgment in personam that he have certain minimum contacts with it such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice” 2 ii. Presence in a state = when a defendant’s activities in the state have been continuous and systematic iii. The court held that IS’s activities in WA were systematic and continuous and therefore their operations established sufficient contacts c. Minimum contacts can be established in two ways: i. General jurisdiction: In some cases the defendant will have such substantial contacts with the forum state to make it fair to assert jurisdiction even over claims unrelated to those contacts a) The defendant party whose contacts are systematic and continuous can be subject to jurisdiction even on claims that are unrelated to the contacts ii. Specific jurisdiction: Where the defendant’s activities fall short of general jurisdiction, courts then worry about the extent of those contacts and about the relation between those contacts and that claim on which the plaintiff is suing a) The defendant party’s contacts give rise to the claim iii. If the claim arises out of contacts w/the state then there is personal jurisdiction a) If the claim does not arise out of the contacts with the state, there is personal jurisdiction if contacts with the state are continuous and systematic 2. Absorbing In Rem Jurisdiction a. McGee v. International Life Insurance Co: L, a CA resident, purchased a life insurance policy from an insurer that was bought by IL; IL mailed a reinsurance certificate to L in CA offering to insure him; L accepted and paid premiums by mail from CA to the company’s TX office; when M, the beneficiary of the policy, informed IL of L’s death, they wouldn’t pay; when M sued IL claimed lack of personal jurisdiction i. Modern transportation and communication have made it much less burdensome for a party sued to defend himself in a state where he engages in economic activity ii. The contract was delivered in California, the premiums were paid from there, and the insured lived there a) It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims b. Hanson v. Denckla: D established a trust in DE and then moved for FL; the dispute arose over whether FL or DE courts had jurisdiction over the trust assets; if FL had jurisdiction, two daughters got the entire trust, and if DE had jurisdiction, all three daughters had to share i. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had the minimum contacts with that state that are a prerequisite to its exercise of power over him 3 ii. It is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws c. Shaffer v. Heitner: H, a nonresident of DE, owned stock in Greyhound Corp, which was incorporated in DE and had its principal place of business in AZ; H filed a shareholder’s derivative suit in DE, and the activities of the defendants at the center of the suit took place in OR; H filed a motion to sequester stock in DE; G argued that it did not have sufficient contacts with DE to be subject to its jurisdiction; the suit was brought in quasi in rem jurisdiction i. In cases where the property is unrelated to the claim (quasi in rem), it would violate the constitution to assert personal jurisdiction over the defendant a) Thus jurisdiction can only be shown through the traditional methods (consent, found in state, residence + in rem) or by establishing minimum contracts and fair play and substantial justice b) In this case, minimum contacts were not established – yes the defendant has property in the state, but the property does not satisfy minimum contacts ii. The property (the stocks) was not the subject matter of the litigation, nor was the underlying cause of action related to the property 3. Specific Jurisdiction: The Modern Cases a. Ask: i. Are there minimum contacts? ii. Would the defendant reasonably anticipate being haled into court there? iii. Does assertion of jurisdiction comport with fair play and substantial justice (reasonability factors from World Wide Volkswagen)? b. World-Wide Volkswagen Corp. v. Woodson: R brought car from SW in NY; R family, who lived in NY, left for a new home in AZ, and during their trip when they were in OK, they were injured because of the car; R sued A (manufacturer)m V of A (importer), WWV (regional distributor) and SW (retailer) in OK state court; SW and WWV entered special appearances, arguing that OK did not have personal jurisdiction over them (A and V of A wanted them out so there would be diversity and they could remove to federal court); Both SW and WWV were incorporated and had its principal place of business in NY i. RULE: A state court may exercise personal jurisdiction over a nonresident defendant only so long as there exists “minimum contacts” between the defendant and the forum state; the defendant’s contacts with the forum state must be such that maintenance of the suit does not offend traditional notices of fair play and substantial justice 4 Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of the other relevant factors, including: i) The forum state’s interest in adjudicating the dispute ii) The plaintiff’s interest in obtaining convenient and effective relief iii)The interstate judicial system’s interest in obtaining the most efficient resolution of controversies iv) The shared interest of several states in furthering fundamental substantive social policies ii. Forseeability is not totally irrelevant, rather, it is that the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there iii. When a corporation purposefully avails itself of the privilege of conducting activities within the forum state, it has clear notice that it is subject to suit there (purposeful availment). iv. The forum state does not exceed its powers under the due process clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state (stream of commerce) a) But the mere unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum state. v. Brennan dissented, arguing that the interest of the OK court in the litigation was strong – evidence and witnesses were there, and the state had a legitimate interest in keeping its highways safe c. In theory, a successful motion to dismiss for want of personal jurisdiction only delays the suit. There will be some jurisdiction where the suit can be brought i. Even if the case persists, the defendant has done two things. He has delayed the date at which he may have to pay damages, and he’s moved the case to a different forum which, for reasons having nothing to do with jurisdiction, may be friendlier d. Asahi Metal Industry Co. v. Superior Court: Z lost control of his Honda motorcycle and crashed; he sued CS Rubber (Taiwanese manufacturer of the tube) who impleaded A (Japanese manufacturer of tube’s valve assembly) in CA state court; A objected to CA’s jurisdiction over it; the CA supreme court supported Brennan’s dissent in WWVW, which said that jurisdiction could be based on no more than the defendant’s act of placing the product into the stream of commerce i. Other courts have understood the due process clause to require something more than the defendant was aware of its product’s entry into the forum state through the stream of commerce in order for the state to exert jurisdiction over the defendant a) 5 The “substantial connection” between the defendant and the forum state necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum state (stream of commerce plus) ii. Considered factors listed in WWVW and concluded that an assertion of jurisdiction over A would be unreasonable iii. Dissent argues that stream of commerce is enough, and there are minimum contacts, but that it would be unreasonable to assert jurisdiction over A in CA iv. This case suggests that substantial justice and fair play is not a synonym for minimum contacts but an independent requirement a) In this case, the substantial justice requirement defeated jurisdiction, even though a majority of the justices seemed prepared to say that A did have minimum contacts with CA, the forum state e. Burger King Corp v. Rudzewicz: BK operates franchise system in FL, with regional offices in the franchisees’ areas; R, a MI resident, and M applied for a franchise in MI; M attended managerial courses in Miami and the duo purchased equipment from BK in Miami; they had issues with the contract and negotiated with the franchise office in MI; when rent payments fell behind, BK first negotiated, then sued R in FL i. Once it has been decided that a defendant purposefully established minimum contacts within the forum state, these contacts may be considered in light of other facts to determine whether they comport with fair play and substantial justice a) These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required b) Minimum requirements inherent in the concept of fair play and substantial justice may defendant the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities ii. The court held that assertion of personal jurisdiction over R was not unreasonable – the contract governing their relationship had substantial connection with FL, plus there was a choice of law provision in the contract iii. STEPS: Once it has been decided that there are minimum contracts, you considered whether its fair and substantially justified to submit the person to personal jurisdiction (consider factors from WWVW) iv. Difference between Burger King and WWVW a) Multi-defendant case v. single defendant case i) If R’s motion was granted, the case was over for BK ii) In WWVW, if the motion to dismiss SW and WW was granted, there were still two other defendants to sue a) 6 Purposeful availment i) In WWVW, neither SW nor WW purposefully availed themselves of the state’s benefits ii) R approached BK, which turned out to be a FL company v. Difference between Burger King and Asahi a) Reasonableness i) In Asahi it was unreasonable to assert jurisdiction over the defendant ii) Here, it was reasonable – R was on notice that he would be called into FL court (assented to a contract that would be governed by FL law) b) Importance to forum state i) In Asahi, the only California party settled – this was between two non-California residents ii) In this case, this is an action brought by a FL resident vi. How could R have avoided personal jurisdiction? File suit in MI first, where there would definitely be personal jurisdiction over BK vii. Rule 4(k)(1)(a) gives a federal court the same jurisdictional reach as a court of the state in which it sits, except when either a specific federal statute extends that reach a) A federal district court has the same personal jurisdiction over defendants as the state court in the state in which the federal court is located has f. Pavlovich v. Superior Court: CCA was a DE company with principal place of business in CA; CCA licensed CSS technology which protected copyrighted material on DVDs; P, a TX resident; started a website which provided information about how to defeat the CSS technology; CCA sued P in CA state court, seeking injunctive relief; P argued that CA court did not have personal jurisdiction over him i. CA long arm statute: A court may exercise specific jurisdiction over a nonresident defendant only if (1) the defendant has purposefully availed himself of forum benefits, (2) the controversy is related to or arises out of the defendant’s contacts with the forum, and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice ii. The scope of personal jurisdiction based on Internet use should use a sliding scale analysis. At one end of the spectrum are situations where a defendant clearly does business over the internet, and at the opposite end are situations where a defendant has simply posted information on a Web site; the middle ground is occupied by interactive Web sites where a user can exchange information with the host computer a) P’s website solicited no business, just posted information, and there was no evidence that the site specifically targeted CA iii. CCA argued that P’s knowledge that his conduct would harm industries situated in CA was sufficient to establish reason to impose jurisdiction b) 7 The court disagreed, noting that knowledge cannot establish purposeful availment b) Also, CCA could sue somewhere else, just not CA 4. General Jurisdiction a. General jurisdiction is defined as the defendant having contacts that are systematic and continuous so that the defendant can be sued within the state for any claim, including any claims that are unrelated to the defendant’s contacts in that state i. Suits not arising out of contacts with the form state – need systematic and continuous contacts - corporations can be sued in state of incorporation or principal business; individuals can be sued in state of domicile b. Coastal Video Communications Corp v. The Staywell Corp: CVC is a VA company who made an employee handbook which deals with protecting your back; K is a DE company with its principal place of business in CA which also publishes training manuals, one of which deals with protecting your back and is copyrighted; CVC filed suit in VA seeking a declaration that their handbook did not infringe on K’s book; K, who is a partner with S, filed a motion to dismiss based on lack of personal jurisdiction i. The plaintiff bears the burden of demonstrating personal jurisdiction by a preponderance of the evidence once its existence is questioned by the defendant ii. Specific jurisdiction: a) The court pointed out that even if CVC was able to demonstrate that K had sold the handbook in VA, the court would still not have specific jurisdiction because the declaratory judgment action currently before the court did not arise from the sale of K’s publication iii. General jurisdiction: a) A court may still exercise personal jurisdiction over a defendant if it has “general jurisdiction” in which the requisite minimum contacts between the defendant and the forum state are “fairly extensive” b) Only when the continuous corporate operation within a state is thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities may a court assert general jurisdiction over a corporate defendant iv. Gator.com Corp v. LL Bean: The court held that contacts established through an interactive website that conducts business could be used to find general jurisdiction v. Helicopteros: In an action where a helicopter (owned by Columbian company) crashed in Peru and four people from TX were killed, TX supreme court said there was sufficient contacts for jurisdiction a) The Supreme Court reversed, and said that the contacts (sending its CEO to Houston, accepting checks in NY bank accounts a) 8 from Houston, sending personnel to TX for training) was not enough c. Burnham v. Superior Court: D and F separated and agreed to divorce; F moved to CA with kids, and D stayed in NJ; D filed for divorce in NJ, and F was never served with process or notified of he suit; F filed for divorce in CA; when D was in CA to visit his children and for business, he was served with process of CA divorce proceedings; D made a special appearance in CA court moving to quash service of process for lack of personal jurisdiction i. A “minimum contacts” analysis (D was arguing for lack of minimum contacts and activities with the forum state) was irrelevant here – D was served with process while present in the state, which is a tradition method of obtaining personal jurisdiction over a defendant a) Jurisdiction based on physical presence alone satisfies due process because it is based on tradition ii. Brennan’s dissent argued that there still should be an independent inquiry as to whether or not it was fair to impose jurisdiction over D, and the historical relevance of the rule the majority used should not be so heavily weighted a) He uses Shaffer’s “All assertions of state-court jurisdiction must be evaluated according to the standards set for in International Shoe and its progeny” i) A transient defendant actually avails himself to the significant benefits provided by the state 5. Challenging Personal Jurisdiction: a. Defendant can make a special appearance by showing up only to say that the court doesn’t have personal jurisdiction over him; this is rare today i. Minority of jurisdictions have a special appearance procedure (including CA) b. Rule 12(b)(2): Motion to dismiss on grounds of lack of personal jurisdiction (must be first response to complaint or it is waived). c. Collateral Attack: Defendant ignores service of process, allow court to enter default judgment, then when plaintiff tries to enforce, defendant makes a collateral attack and argue that the judgment is not entitled to full faith and credit b/c the original court didn’t have personal jurisdiction 6. Review: a. Two periods – the pre-International Shoe period, and the post-International Shoe period i. Before International Shoe = the focus was on the traditional methods of establishing personal jurisdiction, tracing back to Pennoyer a) Territoriality (being found in state) b) Residence c) Consent d) Appearance in court (waiving objections) e) In rem (property in the state) f) Conducting business in the state 9 g) Having an agent who can be served with process in the state ii. After International Shoe = the focus was on the constitutional basis for personal jurisdiction a) Minimum contacts b) Fair play and substantial justice c) In personam – specific and general i) Specific = McGhee, Hanson, Asahi, WWVW ii) General = Helicopteros, and discussion in Coastal Video d) Residence (state of incorporation and state of principal place of business) C. CONSENT AS A SUBSTITUTE FOR POWER 1. Either power or consent can establish personal jurisdiction a. A defendant may, either at the outset of the lawsuit or before it, consent to jurisdiction in a forum b. Consent often refers to consent implied from presence (contacts) 2. Carnival Cruise Lines, Inc. v. Shute: S bought a ticket for a cruise from CC; the tickets contained a forum selection clause for FL court; S went on cruises and Mrs. S was injured on the ship; S filed suit against CC in district court in WA; CC moved for summary judgment in respect for the forum selection clause, which S argued shouldn’t apply because it was not the product of negotiations a. The court held that there were many good reasons for the forum selection clause – a cruise ship carries passengers from everywhere and having a set forum is easier (so long as it has contacts wit the forum) – plus, there was no indication that CC set FL as the forum as a means of discouraging passengers from pursuing their claims b. Dissent argues that this was an adhesion contract that should be scrutinized and where there was a disparity of bargaining power c. Various provisions: i. Choice of law: Do not purport to say where suit shall be brought but do provide that the substantive law of a particular jurisdiction will govern disputes arising under the contract ii. Consent to jurisdiction: Say that the parties consent to suit in a particular place, thus waiving challenges to personal jurisdiction; such clauses permit, but do not require, that the suit be brought in the consented-to place iii. Forum selection clause: Limits the forum to a single location iv. Arbitration clause: Take disputes out of the hands of the judicial system all together and place them in an arbitration procedure v. Cognovit clause: A contract that authorizes an attorney to confess judgment against the person or persons signing it; it involves not only consent to jurisdiction but also a waiver of the right to assert a defense and the right to trial and appeal. 10 D. THE CONSTITUTIONAL REQUIREMENT OF NOTICE 1. In order to exercise jurisdiction over a defendant, a forum state must have either power or the defendant’s consent, plus notice a. Personal service of process on the defendant within the state simultaneously asserts power and gives notice 2. Mullane v. Central Hanover Bank & Trust Co: CH established a common trust fund in NY, where it was required to have accountings periodically; CH petitioned to settle the first account; the only notice given to the beneficiaries was publication in a newspaper, which was in compliance with minimum requirements of NY law; however, before this action, the trust had managed to mail each person a notice for another reason; M appeared specially, objecting to the notice on grounds that it was inadequate; the NY court overruled the objections and the decision was sealed and finalized (no beneficiaries could challenge it) a. The due process clause’s words at a minimum require that deprivation of life, liberty, or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case b. RULE: An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonable calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections i. The notice, under the circumstances, is not reasonably calculated to reach those who could easily be informed by other means at hand c. A party can resort to publication as a customary substitute in another class of cases where it is not reasonably possible practicable to give more adequate warning i. In this case, notice by publication was okay to those beneficiaries that CH did not have the names and addresses of 3. Service of Process a. For a court to enter an enforceable judgment over a person, the court needs: i. Personal jurisdiction ii. Subject matter jurisdiction iii. Proper venue iv. Defendant must receive notice and have an opportunity to be heard b. Rule 4: Summons i. (c) Service with Complaint; By Whom Served: (1) A summons shall be served together with a copy of the complaint; (2) Service may be effected by any person who is not a party and who is at least 18 years old ii. (d) Waiver of Service: (1) A defendant who waives service of a summons does not thereby waive any objection to the venue or the jurisdiction of the court; (2) Any party subject to service has a duty to avoid unnecessary costs of serving the summons, so the plaintiff may notify such a defendant of the commencement of the action and request that the defendant waive service; (3) A defendant that timely returns a waiver so requested is not required to serve an answer to the 11 complaint until 60 days after the date on which the request is sent; (5) The costs to be imposed on a defendant for failure to comply with a request to waive service shall include the costs subsequently incurred in effecting service together with the costs of any motion required to collect the costs of service iii. (e) Service Upon Individuals Within a Judicial District of the US: Service upon an individual may be effected in any judicial district of the US (1) pursuant to the law of the state in which the district court is located, or by leaving copies thereof at the individual’s dwelling house or usual place of abode with some person of suitable age and discretion iv. (f) Service Upon Individuals in a Foreign Country: Service may be effected by any internationally agreed means reasonably calculated to give notice v. (h) Service Upon Corporations and Associations: Can be effected by delivering a copy of the summons and complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or law to receive service of process vi. (i) Serving the United States: Service upon the US shall be effected (1) by delivering a copy to the US attorney for the district in which the action is brought and (2) by also sending a copy by registered or certified mail to the Attorney General of the US in Washington DC vii. (k) Territorial Limits of Effective Service: (1) Service of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant (a) who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located viii. (m) Time Limit for Service: If service is not made upon a defendant within 120 days after filing the complaint, the court, upon motion or on its own initiative, shall dismiss the action with prejudice ix. By waving service, a defendant gives up a 12(b)(4) and 12(b)(5) defenses a) They do not waive defense of objection to venue or personal jurisdiction, or any defense to the merits of the lawsuit x. Not all defendants can waive service a) The government b) Incompetents c) Minors c. Rule 3: A civil action is started when the complaint is filed with the court i. The statute of limitations stops running when the action is filed d. California has a different rule for how long you have to serve a defendant after the action has been filed i. In California, a plaintiff has a discretionary period (2 years) and an absolute period (3 years) ii. Federal court: The plaintiff has 120 days to serve a defendant with summons after filing the action 12 E. SELF-IMPOSED RESTRAINTS ON JURISDICTIONAL POWER 1. Long-Arm Statutes as a Restraint on Jurisdiction a. A court may exercise jurisdiction over a defendant only when the state or federal government authorizes it to do so b. Long-arm statutes do just that – it extends the jurisdictional arms of the state or federal court c. California long-arm statute: CCCP § 410.10 i. A court of this state may exercise jurisdiction on any basis not inconsistent with the constitution of this state or of the United States d. Two kinds of long-arm statutes: Enumerated acts statutes and Californiatype statutes i. Some states didn’t want to get into those so they enacted “enumerating acts statutes” a) Certain kinds of acts are enumerated, where the state is saying “we will allow, in our courts, actions against out-of-state defendants who have committed only certain acts” ii. California authorizes any acts to be the basis of an action in its courts so long as the assertion of personal jurisdiction over the out-of-state defendant is constitutional e. Whether a court has jurisdiction over a defendant can be either a one or a two step process: i. If you are given a case in a state like California, it is a one step process, and you should point out that California has a long-arm statute that will allow the state to entertain jurisdiction over any outof-state defendant where the assertion jurisdiction is constitutional a) Having said that, go on to analyze the constitutionality of the jurisdiction (must have minimum contacts) ii. If you are given a state that has an enumerated acts statute, it is a two step process: a) (1) You have to decide whether the out-of-state defendant’s conduct comes within the language of the long-arm statute i) If you decide that the conduct does not come within the statute, then that ends the analysis b) (2) If you decide that the conduct is covered by the statute, then you go on to the discussion of the constitutionality of the assertion of personal jurisdiction over the state over the defendant (minimum contacts) f. Gibbons v. Brown: G was driving with Mrs. and Mr. B, and G gave faulty directions to Mr. B causing him to get in an accident; G, a TX resident, sued Mr. B in FL; two years later, Mrs. B sued G in FL seeking to recover for her own injuries; Mrs. B alleged that G had subjected herself to personal jurisdiction in FL by bringing the prior lawsuit i. FL had an enumerated-acts long-arm statute which required more activities or contacts with the forum state than does the Supreme Court 13 The court noted that Mrs. B had not shown that G was “engaged” in any activity in FL other than defending the present suit b) Given the time between the actions, there was no satisfactory ground for personal jurisdiction according to the statute g. Good example of enumerated acts long-arm statute: i. A court is permitted to exercise personal jurisdiction over a nondomiciliary who: (1) commits a tortious act without the state causing injury to person or property within the state if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce 2. Venue as a Further Localizing Principle a. Venue focuses on the residence of the defendants b. 28 USC § 1391: Venue Generally i. (a) A civil action wherein jurisdiction is founded only on diversity of citizenship may be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same state, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought ii. (b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same state, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought c. Notes on the statute: i. 1391(a) decides where venue is proper a) If you are in federal court not founded solely on diversity (because of a federal question, or a mixed case) ii. 1391(b) deals with federal diversity iii. 1391(c) venue of a corporation a) Corporation is deemed to reside in any district which has personal jurisdiction over it at the time the action is commenced iv. 1391(d) an alien may be sued in any district v. Difference between (a)(3) and (b)(3): a) 14 1391(a)(3) requires that a defendant be subject to personal jurisdiction in a district; 1391(b)(3) allows for venue whenever a defendant “may be found” in that district vi. To use either (a)(1) or (b)(1) all of the defendants must be from the same state d. Dee-K Enterprises Inc v. Heveafil Sdn. Bhd: Two American purchasers, D (VA) and A (NC), of rubber thread sued foreign manufacturers and distributors of the thread alleging an international conspiracy to restrain trade, fix prices, and other antitrust allegations; the defendants challenged jurisdiction and venue i. Personal jurisdiction = Clayton Act provides for nationwide and worldwide service of process, and analyzing due process issues, the defendant’s customization of products of US market made jurisdiction proper (had an agent in US = stream of commerce plus) ii. Venue = Clayton Act lays venue in any district where defendant is “found” or where “it transacts business” a) The defendants could not be found in any judicial district, but 1391(d), which says that aliens can be sued anywhere, overrides the Act, and therefore they can be sued anywhere iii. For the domestic defendants, venue would be established under 1391(b): not (1) because the defendants did not all reside in same state; not (2) because the substantial events didn’t all take place in one place; so (3) anywhere where a defendant can be found a) The court treats “being found” the same as being able to assert personal jurisdiction, and someone of the defendants did not object to venue being where it was, so there must have been sufficient contacts e. Where venue is improper: i. D can move for dismissal under R. 12(b)(3) ii. §1406: Court can either dismiss or transfer to a district with proper venue 3. Declining Jurisdiction: Transfer and Forum Non Conveniens a. Both state and federal courts posses the power to decline to exercise jurisdiction even though they possess it b. Forum Non Conveniens i. Doctrine which allows a court to dismiss a case that it has jurisdiction and venue over on the grounds that practical factors indicate that it should be heard in another court and that court is outside of the same judicial system; different from transfer because transfer is within the same judicial system ii. Two requirements: (1) There must be adequate alternative forum available; (2) there must be a showing that interests of convenience to the parties override the plaintiff’s original choice of forum a) The factors for private interests include: i) Relative ease of access to sources of proof a) 15 ii) Availability of compulsory process for attendance of unwilling, and the cost obtaining attendance of willing, witnesses iii)Possibility of view of premises, if view would be appropriate to the action iv) The court talks about the problems posed by the inability to implead potential third party defendants b) These factors for public interests include: i) Administrative difficulties flowing from court congestion ii) The local interest in having controversies decided at home iii)The interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action iv) The avoidance of unnecessary problems in conflict of laws or application of foreign law v) Unfairness of burdening citizens in an unrelated forum with jury duty iii. Piper Aircraft v. Reyno: A plane crashed in Scotland; the pilot and all passengers were all Scottish and were all killed; the plane was manufactured in PA, the propellers in Ohio; the plane was owned and operated by a Scottish company; R sued Piper (plane) and H (propeller) in CA, admitting that the actions were filed in US because its laws were more favorable to its position than Scottish law; H and P removed to federal court; P then sought transfer to PA; the district court transferred the cases; after moving to PA, H and P filed motions to dismiss on grounds of forum non conveniens, which the district court granted; the third circuit reversed, holding R may defeat the motion by showing that the law in the alternative forum would be less favorable a) The possibility of a change in substantive law should not ordinarily be given conclusive or even substantial weight in the forum non conveniens inquiry. b) When a plaintiff is foreign, the assumption in favor of their choice of forum is much less reasonable iv. Courts regularly require that a defendant moving to dismiss on grounds of an inconvenient forum agree in advance to waive the statute of limitations defense in the alternative forum c. Transfer Under 28 USC §§ 1404, 1406, and 1631 i. A federal court may decide to either transfer the case to another federal court under § 1404 or dismiss it under the forum non conveniens doctrine for trial in another country a) A state court may transfer (under a state statute analogous to § 1404 to another court in the same state or dismiss under the forum non conveniens doctrine for refilling in another state or country 16 ii. The party wanting to change venue to an alternative venue would concede that jurisdiction is proper in the district they wanted to be transferred to iii. § 1404 – Transfer a) “A district court may transfer any civil action to any other district where it might have been brought” i) In order to transfer this case, you have to establish the three requisites again for the transferee district (subject matter jurisdiction, personal jurisdiction, venue) ii) Which law do you use to decide all the three factors? The law of the transferor or the transferee court? i. The transferee court should apply the law that would have been applied in the transferor court b) Consider Piper: i) Subject matter jurisdiction = the same in PA as in CA ii) Personal jurisdiction = P’s principal place of business which is general jurisdiction; H conceded personal jurisdiction in PA in their § 1631 motion to transfer iii)Venue = no venue under 1391(a)(1) because defendants reside in different states; no venue under 1391(a)(2) because accident took place in Scotland; but there is venue under 1391(a)(3) because personal jurisdiction can be established over both defendants in PA iv. § 1406(a): When venue is not proper in a court, a motion made under this statute allows the judge to either dismiss the case for improper venue (similar to 12(b)(3) motion) or can transfer to where venue would be proper v. § 1631: A motion for transfer from a court where there is no personal jurisdiction over the defendant to a court where there is – the party seeking transfer is conceding that the transferee court has jurisdiction II. SUBJECT MATTER JURISDICTION OF THE FEDERAL COURTS A. THE IDEA AND THE STRUCTURE OF SUBJECT MATTER JURISDICTION 1. The general federal question statute, 28 USC § 1331, grants federal courts jurisdiction over cases that arise under federal law 2. Diversity jurisdiction, under 28 USC § 1332, is concurrent with state courts, and diversity of citizenship needs to be complete and is determined by where parties are “domiciliaries” 3. Original jurisdiction if the initial claim was filed in federal court 4. In some instances, Congress has made federal jurisdiction exclusive a. Federal courts have exclusive jurisdiction over admiralty, bankruptcy, patent and copyright infringement, federal antitrust, and securities 5. Rule 8(a) requires every federal complaint to begin with a “short and plain statement of the grounds upon which the court’s jurisdiction depends” 17 6. Defense of lack of subject matter jurisdiction: Cannot be waived, can be raised at any time, even after judgment is entered B. FEDERAL QUESTION JURISDICTION 1. 28 USC § 1331: The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States 2. Federal courts do not have exclusive jurisdiction over such cases a. Cases arising under this statute can brought in state as well as federal courts b. This shared jurisdiction is called concurrent jurisdiction 3. Louisville & Nashville Railroad v. Mottley: Ms had a settlement with LN where they got a lifetime pass for free transportation; soon after, Congress made such passes illegal by federal statute; LN refused to honor Ms’s passes, citing the new law, and M sued them in federal court seeking specific performance a. The court declined to judge the merits of the case, as the federal courts did not have jurisdiction over the issue i. There were no grounds for federal question jurisdiction because this was merely a breach of contract claim b. From this we get the “well-pleaded” complaint rule – the federal claim must appear as part of a well-pleaded complaint i. Federal question must be stated in the original complaint – it is not sufficient that it will be raised in anticipation as a defense by defendant 4. The restrictive reading this case (and others) gives to “arising under” is not constitutionally required a. The Supreme Court has said that the meaning of “arising under” in Article III is broader than the same phrase in § 1331 – the constitutional meaning of “arising under” is broader than its statutory meaning 5. When a defendant challenges federal question jurisdiction, one of three questions commonly arises: a. (1) Is there a federal issue at all? b. (2) Does it “give rise” to plaintiff’s claim? c. (3) Is it sufficiently important to “federalize” the case? 6. Challenging Federal Subject Matter Jurisdiction a. A defendant can move for dismissal under Rule 12(b)(1), asserting the absence of federal subject matter jurisdiction b. Because “arising under” jurisdiction depends on the substance of the plaintiff’s claim, one can think of the challenge as attacking either the claim (there is no federal claim, therefore no federal jurisdiction) or jurisdiction (there’s no jurisdiction because there’s no claim arising under federal law) i. If there’s any arguable basis for a federal claim, the district court should examine the federal question not as a matter of jurisdiction but on a 12(b)(6) motion to dismiss the substantive claim (judgment on the merits) c. When the court dismisses the case for lack of jurisdiction, the plaintiff can still bring it in state court (but not if the court dismisses for failure to state a claim upon which relief can be granted) 18 d. Results: i. Parties who appear, challenge subject matter jurisdiction of a federal court, and lose are bound by that determination ii. Parties who have appeared but failed to challenge subject matter jurisdiction of a district court may generally not thereafter attack its judgment in another court, state or federal, for lack of diversity or federal question jurisdiction iii. In situations where defendants default, it is uncertain whether they may collaterally attack subject matter jurisdiction in another court C. DIVERSITY JURISDICTION 1. § 1332: Diversity of Citizenship (a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between a. (1) citizens of different states b. (2) citizens of a state and citizens or subjects of a foreign state c. (3) citizens of different states and in which citizens or subjects of a foreign state are additional parties d. (4) a foreign state as plaintiff and citizens of a state or of different states a. For the purposes of this section, an alien admitted to the United States for permanent residence shall be deemed a citizen of the sate in which such alien is domiciled 2. Redner v. Sanders: R sued S in federal court with diversity jurisdiction; S moved under 12(b)(1) to dismiss for lack of subject matter jurisdiction; R said he was a US citizen residing in France and the two defendants are residents of NY; R alleged that diversity existed under 1332(a)(2) which says that jurisdiction exists when the dispute is between citizens of a state and citizens of a foreign state a. R’s complaint spoke of residence whereas the statute speaks of citizenship b. R then tried to assert his contacts with CA, and tried to get diversity under 1332(a)(1) which allows jurisdiction over residents of different states i. A person is a citizen of the United States within the meaning of § 1332 if he is a citizen of the United States and is domiciled within the state in question a) RULE: State citizenship depends on present domicile and intent to remain indefinitely ii. He could sue in state court (as long as the statute of limitations had not yet run) where there would be personal jurisdiction over the defendants iii. He could have established diversity by becoming a French citizen or by changing residence so he could claim to be CA domiciliary 3. The time for measuring citizenship for diversity purposes is as of the date on which the complaint is filed in federal court 19 4. Although § 1332 does not by its terms require that each plaintiff be diverse from each defendant, that interpretation was attached to the statute in Strawbridge and has been unquestioned ever since a. Constitution only requires minimum diversity – diversity between any two parties (State v. Tashire) 5. The rules for determining a corporation’s citizenship are set out in § 1332(c) a. The corporation has dual citizenship: where it is incorporated and where it has its chief place of business b. The chief place of business of a corporation is said to be a question of fact i. One test is to emphasize the corporate “nerve” center where the executive and administrative functions are controlled, where decisionmaking takes place, where chief executives are located ii. Another tests concentrates on the everyday business activities of the company, where the grunt work is done, where the factories are located – sometimes called the “muscle” 6. Partnerships are not considered entities but are collections of individuals, thus the citizenship of each of the members of a partnership must be considered 7. §1332(c)(2): Legal representative of an estate or a decedent or infant or incompetent person is deemed a citizen of that state 8. Ankenbrandt says that suits for divorce, alimony or child custody fell outside the scope of diversity jurisdiction, even if the spouses were citizens of different states when the suit was brought 9. Saadeh v. Farouki: F borrowed $ from S and then defaulted on the loan, and S sued F; at the time suit was filed, F, a Jordanian citizen living in MD, was considered a permanent resident of US; S was a Greek citizen; during litigation F became US citizen a. 1332(a)(4) states that an alien admitted to the United States for permanent residence shall be deemed a citizen of the state in which such alien is domiciled i. Under this amendment, diversity of citizenship no longer exists in an action between a citizen of state A and an alien admitted to the US who resides in state A; read literally, the statute would create diversity between S and F because it would make it a 1332(a)(2) situation b. The court says that Congress was trying to restrict diversity jurisdiction, and this reading has the effect of expanding it i. Without 1332(a)(4), S couldn’t sue F in federal court, because they’d both be considered aliens c. The court decided that 1332(a)(4) would not allow a suit between a permanent resident and a foreign person 10. Different result about the statutory language: a. In Singh v. Daimler Benz, “the legislative history did not provide an overriding reason to depart from the plain language of the statute” 11. Amount in Controversy a. § 1332(b) requires an amount greater than $75,000 in controversy 20 b. The courts have viewed the allegations of the pleading as all but controlling, rather than engaging in judicial guessing about the likelihood that the plaintiff would succeed in collecting as much as he had prayed for i. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal ii. Plaintiff’s mere hope for an extreme punitive award cannot be the sole basis for jurisdiction c. If a plaintiff asks for an injunction, factors used to determine the amount in controversy include: i. Determine the value of the injunction to the plaintiff ii. Determine the cost to the defendant of complying iii. Determine the cost of value to the party invoking federal jurisdiction d. A compulsory counterclaim may be heard regardless of amount; a permissive counterclaim requires an independent jurisdictional basis i. A permissive counterclaim is not related to the original claim D. SUPPLEMENTAL JURISDICTION 1. If the federal court has subject matter jurisdiction over one claim and there is a second claim that the federal court doesn’t necessarily have jurisdiction over, but it is related to the first claim, the court will be considered to have subject matter jurisdiction over the second claim under § 1367 2. § 1367: Supplemental Jurisdiction a. In any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the Constitution b. In any civil action of which the district courts have original jurisdiction founded solely on § 1332 (diversity), the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20 or 24 of Federal rules, or over claims by persons proposed to be joined as plaintiffs under Rule 19, or seeking to intervene as plaintiffs under Rule 24, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of § 1332 c. The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if i. (1) The claim raises a novel or complex issue of law ii. (2) The claim substantially predominates over the claim or claims over which the district court has original jurisdiction iii. (3) The district court has dismissed all claims over which it has original jurisdiction iv. (4) In exceptional circumstances, there are other compelling reasons for declining jurisdiction 21 3. Summary: a. §1367(a): If federal court has original jurisdiction, they have supplemental jurisdiction over all claims rising out of the same case or controversy, including claims that involve joinder or intervention. b. §1367(b) Exceptions: Where court has original jurisdiction founded solely on §1332 (diversity), there is no supplemental jurisdiction over claims made under Rule 14, 19, 20 or 24 (joinder, intervention) 4. Jin v. Ministry of State Security: J were 51 Falun Gong practitioners who were visiting Chinese nationals, US residents or citizens, alleging defamation, violations of their constitutional rights and of RICO; they charged that the Chinese gov’t began a campaign to eradicate Falun Gong by publishing a series of negative articles in state-run newspapers, and used many threat tactics in the US as well; a. No diversity because some plaintiffs were resident aliens, some were nonresident aliens b. On a motion to dismiss for lack of subject matter jurisdiction (12(b)(1)), the plaintiff bears the burden of establishing that the court has subject matter jurisdiction c. Courts apply a two-part test for supplemental jurisdiction i. First, the court looks to see whether the plaintiffs’ defamation claim shares a common nucleus of operative facts with the other claims ii. Second, the court decides whether the interests of judicial economy, convenience, and fairness support the exercise of supplemental jurisdiction d. Here, the facts supporting the defamation claims were linked to the facts supporting the rest of the claim because they form a key part of an alleged campaign E. REMOVAL 1. § 1441 – Removal a. Any civil action brought in a state court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants to the district court of the United States for the district embracing the place where such action is pending (concurrent jurisdiction) b. Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the US (federal question jurisdiction) shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendant is a citizen of the state in which such action is brought (diversity jurisdiction) i. In a federal question case, the defendant can always remove the case ii. In a diversity case, the defendant can remove the case only if the defendant is from a different state than the state in which the action has been brought 22 The Constitution supposes that home states favor their own plaintiffs, their own citizens iii. When both federal question and diversity jurisdictions are implicated, it’s a discretionary issue under 1441(c) 2. Removal is almost automatic – if the defendant wants it to happen, it happens, and then once its been removed, then the plaintiff can contest the removability of the case and brings a motion to remand 3. The procedure for removal is set forth in § 1446, and that for challenging removal in § 1447 a. § 1446(a) Notice of removal, signed pursuant to Rule 11, containing a short and plain statement of grounds for removal, together with a copy of all complaint, orders, pleadings and process b. Rule 11 sanctions mentioned in 1446(a) c. 1446(b): Notice of removal of a civil action shall be filed within 30 days after the receipt by the defendant of a copy of the initial pleading or service of summons d. 1446(b): If the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant of a copy of an amended pleading from which it may be ascertained that the case is one which is or has become removable, except that this case may not be removed on the basis of diversity jurisdiction more than 1 year after commencement of the action e. 1447(c): A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal – does this mean they could refile for removal? i. If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded f. 1447(d): An order remanding a case to the state court form which it was removed is not reviewable on appeal or otherwise 4. Caterpillar Inc. v. Lewis: L, a KY resident, sued in KY state court after being injured by a bulldozer, which C (DE corp., IL principal place of business) manufactured; he also sued W, a KY corp; later, L’s insurance co LM (MA corp) intervened as a plaintiff; later, L settled with W, and after learning about this, C filed a notice of removal; L objected to removal and moved to remand because LM had not settled its claim against W; district court denied L’s motion to remand; later LM and W settled, and in the case between L and C, the jury found for C a. The court said that the district court had incorrectly treated W as dropped from the case prior to removal, and that the complete diversity requirement was not satisfied at the time of removal i. The issue was, did any of this matter, since W settled with LM anyways? b. If C had waited until W was properly out of the case (by settling with LM), the 1 year limit for filing for removal would have run a) 23 c. The court said that to wipe out the adjudication post-judgment and return to the state court a case now satisfying all federal jurisdictional requirements would impose an exorbitant cost on the dual court system i. This sort of error will generally not happen again, so this is okay F. CHALLENGING SUBJECT MATTER JURISDICTION 1. If the parties are not diverse, defendant can file a 12(b)(1) motion to dismiss 2. If the reason for being in federal court is a claim under a federal statute and there is no claim properly stated under that statute, D can move to dismiss under 12(b)(1) or (6) 3. If there is a federal question that is not properly pled in the complaint, it can be dismissed under 12(b)(6) 4. If a defendant challenges subject matter jurisdiction and loses, they are bound III. THE ERIE PROBLEM A. STATE COURTS AS LAWMAKERS IN FEDERAL SYSTEM 1. The Issue in Historical Context a. 28 USC § 1652: Rules of Decisions Act i. “The laws of several states, except where the Constitution or Acts of Congress otherwise require or provide, shall be regarded as rules of decisions in civil actions in the court of the US, in cases where they apply” (“laws of the several states” refers to state common law) b. In Swift v. Tyson, the “laws of the several states” means that if there is a state statute on point the federal courts are bound to follow it; if there is not, then the federal courts are able make their own law federal common law and could ignore state law c. Black and White Taxicab Co. v. Brown and Yellow Taxicab Co. caused the Supreme Court to realize that the concept of federal common law was not too great 2. Constitutionalizing the Issue a. RULE: A case that is in federal court because of diversity jurisdiction will use the substantive law of the state in which the federal court sits in i. When you’re in federal court b/c of diversity, use the substantive state law and the federal procedural law; the court will apply the law of the state where the accident arose b. Erie Railroad v. Tompkins: T was walking (and trespassing) next to ER’s railroad tracks in PA when a train passed him and an open door hit him and his right arm was severed; T sued in federal district court in NY; under PA law ER was only liable for wanton negligence which they hadn’t done; but T’s lawyer (who wanted to take advantage of Swift) instructed the jury on the “general law” that ER was liable for only ordinary negligence; the jury found for T i. Except in matters governed by the federal constitution or by acts of congress, the law to be applied in any case is the law of the state; and whether the law of the state shall be declared by its legislature in a 24 statute or by its highest court in a decision is not a matter of federal concern – there is no federal common law ii. Thus the laws of PA should apply in this case, the place where the accident giving rise to suit took place B. THE LIMITS OF STATE POWER IN FEDERAL COURTS 1. Interpreting the Constitutional Command of Erie a. Guaranty Trust Co. v. York: Y sued a bond trustee in federal diversity action alleging misrepresentation and breach of trust; NY law governed, and GT’s defense was NY statute of limitations; Y argued that the federal doctrine of laches should apply and that their claim shouldn’t be barred; the 2nd circuit held for Y; the Supreme Court disagreed i. The outcome of the litigation in the federal court should be substantially the same as if it were tried in a state court ii. Outcome determinative test: A state rule that was outcome determinative was to be followed, no matter how it might be labeled (substantive v. procedural) a) If the court applies the state rule, it knows how the case comes out – statute applies and plaintiff loses b) If the court applies the federal doctrine of laches, it is not sure what the outcome is because under the doctrine of laches, the plaintiff would have an opportunity to explain why it took him so long to bring this action b. After Guaranty and other cases, it seemed like the Supreme Court was favoring state laws, which caused some people to get upset c. Byrd v. Blue Ridge Rural Electric Cooperative: B was working as an independent contractor for BR and was injured while working; B sued BR, and BR’s defense was that B was a “statutory employee” and that B couldn’t sue in tort – he would have to file a claim with workman’s compensation; under state law the determination of whether he’s a statutory employee was made by a judge and under federal law it’s decided by a jury i. This choice was not outcome-determinative ii. This was the first case since Erie that holds that using state law is not necessary iii. Brennan decides that state law should not apply a) Bases this on an interest-balancing test, not a constitutional b) Jury trials are mandated by the 7th Amendment, but are not required, but there is a strong federal policy in favor of them iv. Byrd test: There are three questions; a) (1) Is the state practice “bound up with the definition of the rights and obligations of the parties”? If so, state law governs b) (2) Even if it isn’t part of the substantive rights and obligations would its application determine the outcome of the case? c) (3) If so, are there “affirmative countervailing considerations of federal judicial administration present? (balance state against federal interests) 25 2. De-Constitutionalizing Erie a. Progression: i. 1938: Erie a) If you’re in federal court because of diversity, use the substantive law of the forum state, while using the federal procedural law ii. 1945: Guaranty Trust a) Outcome-determinative test b) To prevent forum shopping, get the same result in federal court as if you were in state court iii. 1958: Byrd a) Balancing test a strong federal interest with state interest b. Hanna v. Plumer: H was injured by the driver of a car (P was the executor of the driver’s estate); H sued; the issue involved how service of process was to be accomplished – according to MA state law, an executor was to be served by hand delivery / according to federal Rule 4(e)(2), service could be could be accomplished by leaving the summons at the place of abode with a competent person of a certain age (substituted service); H used the federal rule and so P moved to dismiss; district court granted, Supreme Court reversed i. This case is outcome determinative but the court says this test does not apply because it conflicts with Erie’s two goals of discouraging forum shopping and avoiding inequitable administration of the laws ii. RULE: If there is a federal rule of civil procedure that is on point, it controls so long as it was enacted in compliance with the Rules Enabling Act and so long as it is constitutional a) If there isn’t a federal rule of civil procedure that is not on point, then the court uses a modified outcome-determinative test i) Consider whether this will encourage forum shopping or it result inequitable administration of the laws iii. This is the modified outcome determinative test c. Forum shopping = the practice of seeking a court that will be most hospitable to the client’s claims or defenses d. Inequitable administration of the laws = refers to patterns of federal practice that regularly result in different applications of what is nominally the same substantive law, such as federal courts’ pre-Erie willingness to enter injunctions in situations where the state courts would not 3. Determining Scope of Federal Law: Avoiding and Accommodating Erie a. Semteck Int’l Inc. v. Lockheed Martin Corp: S sued L in CA state court, and L removed to federal court in CA; L defense was that the CA statute of limitations was up and district court dismissed the case on the merits with prejudice; S sued again in MD state court (which had longer statute of limitations; MD court dismisses for claim preclusion; Supreme Court reversed; S argued, relying on Dupasseur, that the dismissal of an action on statute-of-limitations grounds by a CA state court would not be claim preclusion, and therefore a district court’s dismissal could not be preclusive 26 either; L argued that Rule 41(b) (governing involuntary dismissals) should apply i. Under Hanna, if a court is sitting in diversity, we look to see whether there is a federal rule of civil procedure on point – L said this is 41(b) a) There was an involuntary dismissal here, which should operate as an adjudication upon the merits b) Scalia did not like the use of 41(b) as the controlling reason for three reasons: i) (1) A judgment on the merits is not what it used to be; it is no longer true that a judgment on the merits is a judgment entitled to claim preclusive effect ii) (2) Rule 41(b) violates part of the Rules Enabling Act, specifically 28 USC § 2072(b), which says that the Rules “shall not abridge, enlarge, or modify any substantive right” a. Under California law, S has a substantive right to go and find a jurisdiction with a longer statute of limitations and refile the action there b. If we use 41(b) here, we are abridging or modifying that substantive right, and therefore to use 41(b) violates the Act, and therefore violates Hanna iii)(3) To use 41(b) would encourage forum shopping, because there’s a different result in the state court and federal court, and would be contrary to one of the twin aims of Erie C. ERIE TEST 1. Is the issue covered by a FRCP or federal statue? a. NO: Can the practice be labeled as substantive or procedural? i. Substantive: Apply state law ii. Unable to determine: a) Modified Outcome-Determinative Test: i) Is forum shopping encouraged? a. YES: Use Byrd Balancing Test to determine if there are any countervailing fed policies that warrant application of the federal standard notwithstanding its promotion of forum shopping. i. Is a state substantive policy furthered? ii. YES: Is there a countervailing federal interest? iii. NO: Apply federal practice iv. Is there a countervailing federal interest? v. YES: Apply federal practice vi. NO: Apply state practice b. NO: Is inequitable administration of the laws likely? 27 Use Byrd Balancing Test to determine if there are any countervailing federal policies that warrant application of the federal standard notwithstanding its promotion of inequitable administration of the laws. (Apply as above) b. YES: Is Rule or Statute in conflict with the relevant state law? i. NO: Apply federal law ii. YES: Is the issue procedural? a) NO: Apply state law b) YES: Is it a Federal Statute or a Federal Rule? i) Federal Statute: Apply Federal Statute ii) Federal Rule: Does it comply w/ REA? a. YES: Apply federal law b. NO: Apply state law i. IV. JOINDER A. JOINDER OF CLAIMS 1. Joinder of Claims by Plaintiff a. The Federal Rules i. Rule 18: Joinder of Claims: A party asserting a claim, counterclaim, third-party claim, or cross-claim, may join as many claims as it has against an opposing party a) There is no compulsory joinder of claims; but the principles of former adjudication often require a plaintiff to join related claims, especially when they arise out of the same incident ii. Always have to be concerned about two things: a) (1) Is there a federal rule that allows the joinder? b) (2) Is there subject matter jurisdiction over the joined claim? iii. Subject matter jurisdiction? a) § 1331 –Federal question b) § 1332(a)(1) – Complete diversity c) § 1367(a) – Supplemental jurisdiction (form part of the same case or controversy) 2. Claims by the Defendant: Counterclaims a. Rule 13: Counterclaims i. (a) Compulsory Counterclaims: A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction a) The pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action, or (2) the opposing party brought suit upon the claim by attachment or other process by which the court did not acquire 28 personal jurisdiction to render a personal judgment on that claim ii. (b) Permissive Counterclaims: A pleading may state as a counterclaim any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party’s claim iii. (g) Cross-claims: A claim by one party against co-party arising out of same transaction or occurrence that is the subject matter of the original claim or the counterclaim; cross-claims are permissive, not compulsory b. Plant v. Blazer Financial Services: P was a borrower who sued lender BF in federal court for its failure to make certain required disclosures as mandated by a federal statute; there was federal question subject matter jurisdiction under § 1331; BF counterclaimed for the unclaimed balance of her promissory note; the issue was whether the counterclaim was compulsory or permissive i. Why does it matter? a) If it was permissive, then BR’s action for the debt would have to be pursued in state court because there would be no independent subject matter jurisdiction over that claim in this federal court b) If it was compulsory, the action would have to arise out of the same transaction or occurrence as P’s original claim against BR, then the counterclaim is so-related to the P’s claim so as to be part of the same case or controversy = it would be covered as supplemental jurisdiction and be able to be pursued in federal court ii. The court held that the counterclaim was compulsory because under § 1367(a) there is supplemental jurisdiction over the counterclaim a) There are four tests the court mentions to define when a claim and counterclaim arise from the same transaction: i) (1) Are the issues of fact and law raised by the claim and counterclaim largely the same? ii) (2) Would res judicata bar a subsequent suit on defendant’s claim absent the compulsory counterclaim rule? iii)(3) Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s counterclaim? iv) (4) Is there any logical relation between the claim and the counterclaim? v) Also: Logical relation test – a loose standard that permits flexibility iii. If a claim is compulsory, it means two things: (1) It must be brought at the risk of losing it; and (2) if it is brought, supplemental jurisdiction extends to cover it 29 c. If Plant occurred after § 1367 was enacted, how might she use § 1367(c)(4) to argue to the court that it should not exercise supplemental jurisdiction over BR’s counterclaim? i. If BF could get a judgment against her for her default, it might discourage her and others like her from bringing actions under the Truth in Lending Act B. JOINDER OF PARTIES 1. Joinder By Plaintiffs a. Rule 20: Permissive Joinder of Parties i. All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the action ii. All persons may join in one action as defendants if they assert any right to relief jointly, severally or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action iii. A plaintiff or defendant need not be interested in obtaining or defending against all the relief demanded iv. Judgment may be given for one or more of the plaintiffs according to their respective rights to relief and against one or more defendants according to their respective liabilities b. Mosley v. General Motors Corp: M and others joined in bringing the action alleging race discrimination and 10 different claims; district court ordered the claims to be severed and each plaintiff to bring their own action, holding that there was no right to relief arising out of the same transaction or occurrence to sustain joinder under Rule 20(a); the circuit court disagreed i. Rule 20(a): Two requirements a) All plaintiffs may join in one action if (1) they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if (2) any question of law or fact common to all these parsons will arise in the action ii. The discriminatory character of a defendant’s conduct is basic to the class, and the fact that the individual class members may have suffered different effects from the alleged discrimination is immaterial for the purposes of the prerequisites c. Defendants can challenge joinder of plaintiffs i. The judge is a third party who rules on any challenges to joinder under Rule 20 but also exercises independent power to consolidate and sever claims under Rule 42 2. Joinder By Defendants: Third-Party Claims a. Rule 14(a): Third Party Practice 30 i. A defending party, as a third party plaintiff, may cause a summons and complaint to be served upon a person (third party defendant) not a party to the action who is or may be liable to the third party plaintiff for all or part of the plaintiff’s claims against the third party plaintiff b. Price v. CTB, Inc: P, a farmer, hired L to build a new chicken house; alleging the structure was defective; P sued CTB and L; L moved to file a third party complaint against ITW alleging that ITW had defectively designed the nails used in the construction; ITW brought a 12(b)(6) motion to dismiss, arguing that it was improperly impleaded under Rule 14 i. Under Rule 14, a defendant may assert a claim against anyone not a party to the original action if that third party’s liability is in some way dependent upon the outcome of the original outcome a) A third party claim will not be permitted when it is based upon a separate and independent claim i) Third party liability must be in some way derivative of the original claim; a third party may be impleaded only when the original defendant is trying to pass all or part of the liability onto the third party ii) It is no longer possible under Rule 14 to implead a third party claimed to be solely liable to the plaintiff ii. ITW argued that the propriety of the application of Rule 14 depends upon the existence of a right to indemnity under the substantive law; the court agreed, but that Alabama law recognized such a right a) You can only use impleader if there are one of two very special relationships: i) A tortious relationship which is based on contribution a. Allows one tortfeasor to demand that another fellow wrongdoer “contribute” to the damages payable to the harmed plaintiff ii) A contractual relationship which is based on indemnification a. If a seller incurs liability based upon a product the seller is selling that they got from the manufacturer, the manufacturer will indemnify them for the costs iii. Court holds that L has properly pleaded a claim against ITW based upon implied contractual indemnification c. In deciding whether the allow impleader, the court must balance the benefits derived from the impleader – that is, the benefits of settling related matters in one suit – against the potential prejudice to the plaintiff and third party defendants d. Parties already in the case may be able to object to a motion to implead either on the grounds that (1) impleader doesn’t lie (because substantive law doesn’t allow an action for indemnity or contribution under the circumstances) or (2) because allowing the impleader will unjustifiably increase delay or expense 31 e. Personal jurisdiction over an impleaded third party defendant will usually lie because in many circumstances the third party defendant will have been involved in the occurrence or transaction that led to the original claim and thus subject to personal jurisdiction under International Shoe; there is also usually subject matter jurisdiction under § 1367 i. Rule 4(k)(1)(b): Service of summons is effective is effective to establish jurisdiction over the person of a defendant (b) who is a party joined under Rule 14 or 19 and is served within a judicial district of the US and not more than 100 miles from the place from which the summons issues (100-mile bulge rule) f. Once you get a claim properly pleaded under Rule 13(a), 13(g) or 14, then and only then does Rule 18(a) allow you to join as many other claims as you have (you can’t use Rule 18 by itself, except where one party is suing another party) 3. More Complex Litigation a. Kroger v. Omaha Public Power District: K (IO) brought suit against OPPD (NB) based on diversity for damages resulting from decedent’s wrongful death by electrocution; OPPD implead the lessor of the crane the decedent was on when injured, Owen Equipment (NB); in the pleading OE says its from NB, but in discovery admits its from IO, so no diversity; OE then files a 12(b)(1) motion to dismiss the case; dc denies this and circuit court affirms with Zielinski rationale – ambiguous and deceptive pleading to cause the statute of limitations to run out and avoid suit b. Owen Equipment & Erection Co. v. Kroger: Supreme Court reversed the circuit court, arguing that there was a separate and independent claim and that there was no ancillary jurisdiction, therefore the motion to dismiss should have been granted (no supplemental jurisdiction to cover the claim against OE) i. § 1367 was enacted after this case: a) The result would have been the same under this statute, because Congress codified this case’s result in § 1367(b) only applies when the subject matter jurisdiction of the original claim is based upon diversity, even though the requirements of (a) might be met (“same case or controversy”) we won’t allow supplemental jurisdiction over claims by plaintiffs against parties who have been joined under Rules 13, 14, 19, or 20 i) 1367(b) only prevents supplemental jurisdiction over claims asserted by plaintiffs joined under Rule 14, not by parties who have been joined under Rule 14 4. Compulsory Joinder a. Rule 19: Joinder of Persons Needed for Just Adjudication i. (a) Persons to be Joined if Feasible: a) A person who is subject to service of process and whose joinder will not deprive the count of jurisdiction over the subject matter of the action shall be joined as a party in the action if 32 i) (1) in the person’s absence complete relief cannot be accorded among those already parties, or ii) (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence may (i) as a practical matter impair or impede the person’s ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest ii. (b) Determination by Court Whenever Joinder Not Feasible: a) If a person as described in subdivision (a)(1)-(2) cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable b) The factors to be considered by the court include: to what extent a judgment rendered in the person’s absence might be prejudicial to the person or those already parties; the extent to which, by protective provisions in the judgment by the shaping of relief or other measures, the prejudice can be lessened or avoided; whether a judgment rendered in the person’s absence will be adequate; whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder b. Rule 19 can be construed into three categories: i. (1) Necessity: a) If a person comes within one of three categories in 19(a)(1), then that person is necessary; if they do not come within one of these categories, this person is not necessary ii. (2) Feasibility: a) If the person is necessary, then we ask, is the joinder of that person feasible? b) The joinder is feasible if there is personal jurisdiction over that person, and if the joinder of that person doesn’t destroy subject matter jurisdiction or venue c) If joinder is not feasible, we look at indispensability… iii. (3) Indispensability: a) …and ask, is that person indispensable? b) Look at 19(b) c) If the answer is no, the case continues without that person being joined d) If the answer is yes, the 12(b)(7) motion is granted and the case is dismissed c. Temple v. Synthes Corp: T had a place and screw device installed in his back which later broke apart; T sued S in federal court on diversity jurisdiction; he initiated administrative proceedings against the doctor and 33 the hospital and later sued them in state court in a separate action; S did not implead the doc or hospital, but instead filed a 12(b)(7) motion to dismiss for failure to join a party under Rule 19 (S couldn’t have impleaded them because it would be saying “it’s them not us”); the trial court held that the doctor and hospital were necessary parties and T had 20 days to join them; T didn’t join them, so the case was dismissed; the 5th Circuit affirmed i. The Supreme Court reversed, because the doctor and hospital were not indispensable a) The court says that the doctor and the hospital were not necessary parties, because they had joint and several liability i) When joint tortfeasors have joint and several liability, it is not necessary to join both of them d. Helzberg’s Diamond Shops v. Valley West Des Moines Shopping Center: VW promised H in their lease that they would not lease space to more than two other retail jewelry stores; VW contracted with Lord’s for a jewelry store, which L wanted to operate as a retail jewelry store; H filed suit against VW to enjoin them from breaching their lease, filed in Missouri (where H is from) and VW is from Iowa = diversity; VW moved to dismiss under Rule 19 because Lords needed to be made a defendant; the district court denied the motion, and ordered a preliminary injunction stopping VW from breaching the lease i. Is there necessity? a) Yes, L’s joinder is necessary because H was seeking injunctive relief which may prevent L from operating its jewelry store in the manner in which it originally intended ii. Is joinder feasible? a) No, because L was not subject to personal jurisdiction in the Western District of Missouri i) L is an Iowa company and does not operate in Missouri, and would not have to submit to the personal jurisdiction of a court in Missouri ii) Feasibility requires personal jurisdiction over the party iii. Is there indispensability? a) The court decides that L is not indispensable b) L will not be prejudiced if they are not joined i) None of its rights or obligations will have been adjudicated as a result of the present proceedings – L could bring its own action against VW and there will not be preclusion because it’s a separate claim c) Maybe VW will be prejudiced, but it was their fault for entering into an agreement which was inconsistent with its earlier one with H C. INTERVENTION 1. Intervention allows an unjoined party to elbow her way into a suit where no one wants her 34 2. Rule 24: Intervention a. (a) Intervention of Right: i. Upon timely application anyone shall be permitted to intervene in an action: a) (1) when a statute of the US confers an unconditional right to intervene, or b) (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties b. (b) Permissive Intervention: i. Upon timely application anyone may be permitted to intervene in an action: a) (1) when a statute of the US confers a conditional right to intervene b) (2) when an applicant’s claim or defense and the main action have a question of law or fact in common ii. In exercising its discretion, the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties 3. Natural Resources Defense Council v. United States Nuclear Regulatory Commission: NRDC sued for declaratory and injunctive relief against the NRC and the NM Environmental Improvement Agency prohibiting them from issuing licenses for uranium mills in NM without first preparing environmental impact statements; KM, AMC and UNC were potential recipients of the licenses; UNC had filed a motion to intervene which was granted (they had already been given a license; KM and AMC filed motions to intervene which were denied on the ground that the interests of the parties would be adequately represented by UNC a. Under 24(a)(2), the requirements to intervene have been met: i. (1) Whether the applicant claims an interest relating to the property or transaction which is the subject of the action ii. (2) Whether the claimants are so situated that the disposition of the action may as a practical matter impair or impede their ability to protect that interest iii. (3) Whether their interest is not adequately represented by existing parties (district court had only considered this) b. The court grants the motions because UNC couldn’t represent them – they had already gotten a license and weren’t interested in fighting for prospective licensees 4. Martin v. Wilks: First suit: NACCP and 7 blacks sued City of Birmingham alleging racial hiring discrimination in violation with federal statute; eventually the parties entered into consent decrees which set forth a remedial scheme including goals of promoting blacks within the fire department; the decrees weren’t yet final, and the B FF Ass’n appeared and objected to its decrees and 35 filed motions to intervene, which were denied because untimely; the decrees were approved; Second suit: 7 white ffs sued the city seeking injunctive relief against enforcement of the decrees; district court denied relief; Third suit: A new group of white ffs sued the City alleging that they were being denied promotions in violation with federal law; a group of blacks individuals were allowed to intervene to defend the decrees; they moved to dismiss alleging that the white suit was an impermissible collateral attack; district court granted the motion; 11th circuit reversed, saying there was no preclusion a. The Supreme Court allows the plaintiffs to proceed with their lawsuit and the attack on the consent decrees will stand b. The dissent argues for compulsory intervention – that the plaintiffs could have intervened in the earlier case and therefore they should be bound by the earlier decision upholding the decrees c. RULE: If the parties have the notice and opportunity to intervene, they will not be bound by the previous decision and can file suit on the same issue i. In the end, Congress enacted a statute agreeing with the minority in cases of employment civil rights cases, calling for compulsory intervention d. A judgment or decree among parties to a lawsuit resolves issues as among them, but it does not conclude the rights of strangers to those proceedings i. Claim preclusion – who is precluded? Parties e. Joinder as a party, rather knowledge of a lawsuit and an opportunity to intervene, is the method by which potential parties are subjected to the jurisdiction of the court and bound by a judgment or decree D. INTERPLEADER 1. Interpleader provides a procedure by which a stakeholder – often a bank or insurer – can require the competing claimants to litigate their rights to the fund or property in question a. Typically the stakeholder invokes interpleader, joining the claimants as parties 2. Two types of interpleader: Rules Interpleader and Statutory Interpleader a. Congress enacted the Federal Interpleader Act, codified in these statutes (the Act expands venue provisions to permit venue where any claimant resides) i. § 1335 – Interpleader: a) (a) The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader filed by any person, firm, corporation, association or society having in his or its custody or possession money or property of the value of $500 or more if i) (1) Two or more adverse claimants, of diverse citizenship, as defined in 1332, are claiming or may claim to be entitled to such money or property, or to any one or more of the benefits arising by virtue of any note, bond, 36 certificate, policy, or other instrument, or arising by virtue of any such obligation; and if ii) (2) the plaintiff has deposited such money or property or has paid the amount of the loan or other value of such instrument or the amount due under such obligation into the registry of the court, there to abide the judgment of the court, conditioned upon the compliance by the plaintiff with the future order or judgment of the court with respect to the subject matter of the controversy b) (b) Such an action may be entertained although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another ii. § 1397 – Interpleader: a) Any civil action of interpleader or in the nature of interpleader may be brought in the judicial district in which one or more of the claimants reside iii. § 2361 – Interpleader: Process and Procedure a) In any civil action of interpleader, a district court may issue its process for all claimants and enter its order restraining them from instituting or prosecuting any proceeding in any state or US court affecting the property, instrument or obligation involved in the interpleader action until further order of the court b. Rule 22: Interpleader i. (1) Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability Issue Subject Matter Jurisdiction (1) Diversity (2) Amount Personal Jurisdiction; service of process STATUTORY Minimal diversity; determined as between claimants $500 in controversy Nationwide service of process under § 2361 RULE 22 Complete diversity; stakeholder on one side and claimants on the other $75,000 Need personal jurisdiction; service under Rule 4 Residence of any claimants (if all from one state); district where dispute arose; district where property is; district where any claimant found if no other basis for venue Only basis is provision in 28 USC § 2283 for stay "where necessary in aid of jurisdiction" Venue Residence of one or more claimants under § 1397 Injunctions Statutory authority for injunctions (28 USC § 2361) 37 3. CONSIDER: Do we have subject matter jurisdiction? Do we have personal jurisdiction? What about venue? a. Subject matter jurisdiction: i. Statutory = minimal diversity, just diversity between claimants – W1 and W2 have to be from different states ii. Rules = complete diversity, between stakeholder, two claimants a) Treating it like any other diversity action that arises under § 1332(a)(1) b) Amount in controversy = $75,000 or more c) Why does statutory interpleader only require minimal diversity and Rules completely diversity? If minimal diversity is the constitutional requirement, why not minimal diversity for Rules interpleader too? i) Congress made it minimal diversity because they wanted to, statutorily, to make it easier to use interpleader, make it more available than Rules interpleader b. When would you ever use Rules interpleader? i. When the stakeholder is a citizen of one state and all claimants are citizens of a different state (there is no diversity of claimants = no minimal diversity = no statutory interpleader) c. Personal Jurisdiction: i. Statutory = nationwide service of process under § 2361 a) Really doesn’t matter where the claimants are located, so long as they are located within the nation ii. Rules = need personal jurisdiction the old-fashioned way, and service under Rule 4 a) Ex: Stakeholder insurance company (IL) v. W1 (NJ) and W2 (CA) i) SH would file the claim in IL ii) How would we get personal jurisdiction over W1 and W2? a. Probably the two wives consented b. Long arm statute used? d. Venue: i. Statutory = § 1397 venue where any claimant resides ii. Rules = venue under § 1391(a) (in federal court because of diversity) – residence of any claimants (if all from one state); district where property is; district where any claimant found if no other basis for venue a) § 1391(a)(1) – no – judicial district where any defendant resides, if all defendants reside in the same state b) § 1391(a)(2) – no – a judicial district where a substantial part of the events or omission giving rise to the claim occurred c) § 1391(a)(3) – we have venue under this – any judicial district where any claimant is subject to personal jurisdiction 38 4. Cohen v. The Republic of the Philippines: C received four paintings (worth $5 million) from B, who was M’s agent; when B asked for them back, C was unsure who exactly owned them so he brought an interpleader action against B and the Philippines (who claim M used government money to buy paintings); M sought to intervene in the action a. The court evaluated the elements of intervention and allowed M to come into the lawsuit as a party b. Interpleader elements: i. Personal jurisdiction – B is in NY, and Philippines consented ii. Venue – yes under § 1391(a)(2) because substantial events took place in NY iii. Subject matter jurisdiction = diversity under § 1331 E. CLASS ACTIONS 1. Introduction a. A class action permits one or more parties to sue or be sued as representative parties on behalf of all those similarly situated b. Rule 23: Class Actions i. (a) Prerequisites to a Class Action: One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class ii. (b) Class Actions Maintainable: An action may be maintained as a class action if the prerequisites of (a) are satisfied and in addition: a) (1) The prosecution of separate actions by or against individual members of the class would create risk of i) (A) Inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or ii) (B) Adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interest; or b) (2) The party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or c) (3) The court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is 39 superior to other available methods for the fair and efficient adjudication of the controversy 2. Statutory Requirements a. To become certified, a class action must meet both the requirements of Rule 23(a) and also fit in to one of the three categories of Rule 23(b) i. The four requirements of 23(a) are: a) (1) Numerosity: It is established if the class representative can show that enough persons are in the class to make joining them as individuals impractical; typically classes consist of at least hundreds of persons b) (2) Commonality: Jargon for the idea that the class should be a class – that it should consist of persons who share characteristics that matter in terms of the substantive law involved c) (3) Typicality: Requirement that class representatives stand, in significant respects, in the same shoes as the average class member d) (4) Adequacy of Representation: The representative’s relation to the lawyer should be straightforward b. The lawyer seeking class certification has to show that the litigation fits within one of the three categories of Rule 23(b) i. Rule 23(b)(1) Classes: a) It groups the challengers and supports into classes, with the court preventing a situation in which varying adjudications with respect to individual members of the class would establish incompatible standards of conduct for the party opposing the class ii. Rule 23(b)(2) Classes: a) Provides for class actions where the party opposing the class has acted or refused to act on grounds generally applicable to the class b) The drafters had civil rights claims in mind c) It is limited to cases in which the plaintiffs are seeking injunctive or declaratory relief iii. Rule 23(b)(3) Classes: a) It comprises all class actions not captured in (1) and (2) b) In particular it includes all claims in which the plaintiffs are seeking primarily money damages c) There are generally two types: i) (1) Small claims lawsuits: a. Actions in which many persons allege small amounts of damage ii) (2) Mass tort: a. An airplane crash, hotel fire, exposure of thousands to asbestos 40 b. Because of the amount of potential damages, each of the individual plaintiffs will have a viable lawsuit c. Notice: i. Rule 23(c)(2)(B) requires individual notice to class members in a 23(b)(3) class, but not in the other two categories a) Rule 23(c)(2)(A) allows but does not require appropriate notice to the class in (b)(1) or (b)(2) cases d. Communities for Equity v. Michigan High School Athletic Assn: Title IX case where a group of female students alleged that they had unequal opportunities to participate in school sports and had received unequal treatment and gender discrimination; whether or not to certify all present and future female students participating in sports or who are deterred from participating because of the discrimination i. Elements: a) Numerosity = satisfied, there are thousands of students b) Commonality = common when the damage complained of involves and illegal procedure, and the question at the heart of the matter is whether the defendant acted illegally c) Typicality = even though the plaintiffs came from different sports and had different concerns, they all had the same concern that they were receiving unequal treatment from the boys d) Adequacy of representation = an association can represent them ii. Now a defendant or plaintiff can appeal a certification or denial of certification (but it’s discretionary) iii. This was certified as a 23(b)(2) class because they were seeking injunctive relief e. Heaven v. Trust Company Bank: Similar to Plant, H brought suit against TC for failure to comply with strict disclosure requirements of a federal statute; H wanted to gain certification for her an all other persons similarly situated; TC counterclaimed that the individual class members had defaulted on their leases and/or made false statements in their application; district court denied certification i. The issue was whether there was supplemental jurisdiction over the counterclaim a) If the counterclaim was compulsory, there would be supplemental jurisdiction b) If there was no supplemental jurisdiction (and thus a permissive counterclaim), then the counterclaim would be dismissed because there would be no subject matter jurisdiction ii. H had established the four prerequisites of Rule 23(a) but could not meet the requirements of 23(b)(3) a) Individual lessee counterclaim defendants would be compelled to come forward with individual defenses, which would require the court to engage in multiple separate factual determinations 41 Rule 23(b)(3)(d): Matters pertinent to the finding include: (D) the difficulties likely to be encountered in the management of a class action i) Therefore, compulsory counterclaims provided a basis for denying certification 3. The Class Action and the Constitution a. Representative Adequacy i. Hansberry v. Lee: L sued H (a black family) to prevent them from moving into a neighborhood where L lived that had a raciallyrestrictive covenant; there had been an earlier case, Burke, which decided and upheld the covenant even though the holding was based on a false stipulation that the minimum amount of signatures needed to enforce the covenant was met (so covenant was never supposed to take effect); L argued that H should be estopped and bound by the ruling in Burke; H defended that they were not adequately represented by the class in Burke, which were the plaintiffs seeking to enforce the covenant, so they should not be bound; Illinois SC held that L’s claim should win because of the res judicata effect of the Burke decision, and H is estopped from opposing L’s claim because Burke established the validity of the restriction a) In order for someone in a class action to be bound when they are not a party themselves, the key is whether they have been adequately represented in that action b) The court held that his interest wasn’t represented by the “class” and that his interests were in fact opposite of the class’s interests b. Jurisdiction i. Phillips Petroleum v. Shutts: P sold natural gas, and it leased gasproducing lands and paid royalties to the owners of the land; when the price of gas went up and P was making more money, it wasn’t paying S and other owners more royalties; S sued on behalf of all the owners, claiming entitlement to differential; this was certified as a 23(b)(3) class, meaning each plaintiff had to have notice; the suit was filed in KS, but most of the plaintiffs were from out of state; the class won; P appealed, arguing that there was not proper personal jurisdiction over the class members who were from out of state – P argued that they didn’t consent, and that they needed to opt-in, not opt-out; and that the court needed to establish minimum contacts over them a) RULE: A forum state may exercise jurisdiction over the claim of an absent class-action plaintiff, even though that plaintiff may not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant i) So long as the out-of-state plaintiffs are adequately represented by the class represented, then their interests are being taken care of, and the kinds of things we should b) 42 worry about for out-of-state defendants we don’t have to worry about here c. Class Actions and the Federal Courts i. Why was Shutts not brought in a federal court? a) Federal question: i) There was not a federal question b) Diversity: i) Supreme Tribe of Ben-Hur v. Cauble held that for purposes of complete diversity, courts should look to the citizenship only of the class representatives and ignore the class members a. For a diversity class action, the diversity just needs to be between the class representatives (one or more class members) and the defendants ii) In Shutts, PP was from OK, and S was from Kansas, so there would have at least been diversity under Ben-Hur a. But it couldn’t get into federal court because the amount in controversy did not meet the minimum ii. Exxon Mobile a) Under the Zahn rule, the class members whose claims were $75,000 or less couldn’t be class members b) The court said so long as one of the class representatives meets the amount in controversy requirement, the rest of the class or representatives can have supplemental jurisdiction over their claims under 1367(a) and 1367(b) is not going to upset us (because plaintiffs were not joined by defendants) 4. Settlement of Class Actions and the “Settlement” Class a. Fees i. Fees are paid out of the common fund doctrine a) A plaintiff whose efforts create a fund is entitled to have those who benefit contribute to his lawyer’s fees b) Courts regularly award the class lawyer a fee taken directly from the fund created by the litigation b. Damages and Injunctive Relief c. Settlement and Dismissal i. Rule 23(e)(3): The court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to class members who had an earlier opportunity to opt out and didn’t choose to a) If it’s a 23(b)(3) class, a member gets an opportunity to opt out before the class is certified b) But under this rule, you get a new opportunity to opt out of the settlement c) The court is not bound to accept a settlement, so they will only accept the settlements that are reasonable ii. Amchem Products, Inc v. Windsor: The class wants to create a settlement scheme that will apply to all asbestos-related claims; the 43 settling parties – the consortium of defendants and the representatives of the plaintiff class – presented the district court with a complaint, an answer, a proposed settlement agreement, and a joint motion for conditional class certification a) This is a “settlement class” = the case is filed, certification is sought, and settlement is approved all at the same time b) What was the class here? i) There were two classes – (1) class members who had claims already pending = inventory plaintiffs; (2) class members who had been exposed and were showing symptoms but the diseases hadn’t developed to the point where they could file a claim or had been exposed but not yet manifested any of the symptoms of any of the diseases c) Some potential future plaintiffs appealed the settlement took the case to the Third Circuit, who reversed, holding that serious intra-class conflicts precluded the class from meeting the adequacy of representation requirement of 23(a)(4) i) Third circuit set aside the settlement d) The Supreme Court affirmed the Third Circuit i) The court said there was an issue with adequacy of representation under 23(a)(4) 44