[Note: Numbers in brackets refer to the printed pages of the Emanuel Law Outline where the topic is discussed.]
Emanuel Law Outlines
Civil Procedure
Chapter 1
INTRODUCTION
I. CIVIL PROCEDURE GENERALLY
A. A road map: Here is a "road map" for analyzing a Civil Procedure problem:
1. Personal jurisdiction: First, make sure that the court has "personal jurisdiction" or "jurisdiction over the parties." You must check to make sure that: (1) D had minimum contacts with the forum state (whether the court is a state or federal court); and (2) D received such notice and opportunity to be heard as to satisfy the constitutional requirement of due process. [7 - 85]
2. Venue: Then, check whether venue was correct. In federal court suits, the venue requirement describes what judicial district the case may be heard in. Essentially, the case must be heard either: (1) in any district where the defendant resides (with special rules for multi-defendant cases; or (2) in any district in which a substantial part of the events giving rise to the claim occurred. See 28 U.S.C. §1391. [86 - 97]
3. Subject matter jurisdiction: If the case is a federal case, you must then ask whether the court has subject matter jurisdiction. Essentially, this means that one of the following two things must be true: [100 - 146]
a. Diversity: Either the case is between citizens of different states (with "complete diversity" required, so that no plaintiff is a citizen of the same state as any defendant) and at least $75,000 is at stake; or
b. Federal question: The case raises a "federal question." Essentially, this means that plaintiff's right to recover stems from the U.S. Constitution, a federal treaty, or an act of Congress. (There is no minimum amount required to be at stake in federal question cases.)
4. Pleading: Next, you must examine whether the pleadings are proper. [149 - 179]
5. Discovery: Next, you may have a complex of issues relating to pre-trial discovery. [181 - 231]
6. Ascertaining applicable law: Now, figure out what jurisdiction's law should be used in the case. The most important problem of this type is: In a diversity case, may the federal court apply its own concepts of "federal common law", or must the court apply the law of the state where the federal court sits? If the state has a substantive law (whether a statute or a judge-made principle) that is on point, the federal court sitting in diversity must apply that law. This is the "rule" of Erie v. Tompkins. (Example: In a diversity case concerning negligence, the federal court must normally apply the negligence law of the state where the court sits.) [234 - 256]
7. Trial procedure: Next, you may face a series of issues relating to trial procedure. [260 - 302]
8. Multi-party and multi-claim litigation: If there is more than one claim in the case, or more than the basic two parties (a single plaintiff and a single defendant), you will face a whole host of issues related to the multi-party or multi-claim nature of the litigation. You must be prepared to deal with the various methods of bringing multiple parties and multiple claims into a case. In federal courts: [305 - 376]
a. Counterclaim: D may make a claim against P, by use of the counterclaim. See FRCP 13. Check whether the counterclaim is "permissive" or "compulsory." (Also, remember that third parties, who are neither the original plaintiff nor the original defendant, may make a counterclaim.) [309]
b. Joinder of claims: Once a party has made a claim against some other party, she may then make any other claim she wishes against that party. This is "joinder of claims." See Rule 18(a). [315]
c. Joinder of parties: Multiple parties may join their actions together. Check to see whether either "permissive joinder" or "compulsory joinder" is applicable. Also, remember that each of these two types of joinder can apply to either multiple plaintiffs or multiple defendants. See FRCP 19 and 20. [316]
d. Class actions: Check whether a class action is available as a device to handle the claims of many similarly-situated plaintiffs, or claims against many similarly-situated defendants. See FRCP 23. Look for the possibility of a class action wherever there are 25 or more similarly-situated plaintiffs or similarly-situated defendants. [330]
e. Intervention: A person who is not initially part of a lawsuit may be able to enter the suit on his own initiative, under the doctrine of intervention. See FRCP 24. Check whether the intervention is "of right" or "permissive." [356]
f. Interpleader: Where a party owes something to two or more other persons, but isn't sure which, that party may want to use the device of interpleader to prevent being made to pay the same claim twice. After checking whether interpleader might be desirable, decide whether the stakeholder should use "statutory interpleader" or "Rule interpleader." See 28 U.S.C. §1335 (statutory interpleader) and FRCP 22 (Rule interpleader). [360]
g. Third-party practice (impleader): Anytime D has a potential claim against some third person who is not already in the lawsuit, by which that third person will be liable to D for some or all of P's recovery against D, D should be able to "implead" the third person. (Example: Employee, while working for Employer, hits Victim with a company car. Victim sues Employer in diversity, under the doctrine of respondeat superior. Under traditional concepts of indemnity, Employer will be able to recover from Employee for any amount that Employer is forced to pay Victim. Therefore, Employer should "implead" Employee as a "third party defendant" to the Victim-Employer action.) See FRCP 14(a). Once a third-party defendant is brought into the case, consider what other claims might now be available (e.g., a counterclaim by the third-party defendant against the third-party plaintiff, a cross-claim against some other third-party defendant, a counterclaim against the original plaintiff, etc.). [368]
h. Cross-claims: Check to see whether any party has made, or should make, a claim against a co-party. This is a cross-claim. See FRCP 13(g). [374]
i. Jurisdiction: For any of these multi-party or multi-claim devices, check to see whether the requirements of personal jurisdiction and subject matter jurisdiction have been satisfied. To do this, you will need to know whether the doctrine of "supplemental" jurisdiction applies to the particular device in question. If it does not, the new claim, or the new party, will typically have to independently meet the requirements of federal subject matter jurisdiction. (Example: P, from Massachusetts, sues D, from Connecticut, in diversity. X, from Massachusetts, wants to intervene in the case on the side of D. Because supplemental jurisdiction does not apply to intervention, X must independently satisfy the requirement of diversity, which he cannot do because he is a citizen of the same state as P. Therefore, X cannot intervene.)
9. Former adjudication: Lastly, check whether the results in some prior litigation are binding in the current suit. Distinguish between situations in which the judgment in the prior suit is binding on an entire cause of action in the present suit (under the doctrines of merger and bar), and the situation where a finding of fact is binding on the current suit, even though the judgment itself is not binding (the "collateral estoppel" situation).
a. Non-mutual collateral estoppel: Where a "stranger" to the first action (one not a party to that first action) now seeks to take advantage of a finding of fact in that first suit, consider whether this "non-mutual" collateral estoppel should be allowed. [392]
b. Full Faith and Credit: Lastly, if the two suits have taken place in different jurisdictions, consider to what extent the principles of Full Faith and Credit limit the second court's freedom to ignore what happened in the first suit. [410]
Chapter 2
JURISDICTION OVER THE PARTIES
I. GENERAL PRINCIPLES
A. Two kinds of jurisdiction: Before a court can decide a case, it must have jurisdiction over the parties as well as over the subject matter. [7]
1. Subject matter jurisdiction: Subject matter jurisdiction refers to the court's power to decide the kind of case before it. (Examples of subject matter jurisdiction issues: (1) Does the federal court for the District of New Jersey have the power to decide cases in which the two parties are citizens of different states? (2) Does the Binghamton Municipal Court have the power to decide cases involving more than $1,000?)
2. Jurisdiction over the parties: Jurisdiction over the parties refers to whether the court has jurisdiction to decide a case between the particular parties, or concerning the property, before it. (Examples of issues concerning jurisdiction over the parties: (1) Does Court X have jurisdiction over D, who is a citizen of State X, but who is temporarily out of the state? (2) Does Court Y have jurisdiction over property in State Y where the action is one by P to register title to the land in his name?)
B. Jurisdiction over the parties: There are two distinct requirements which must be met before a court has jurisdiction over the parties: [8]
1. Substantive due process: The court must have power to act, either upon given property, or on a given person so as to subject her to personal liability. The Constitution's Fourteenth Amendment Due Process Clause imposes this requirement of power to act, as a matter of "substantive due process."
2. Procedural due process: Also, the court must have given the defendant adequate notice of the action against him, and an opportunity to be heard. These, taken together, are requirements of procedural due process, also imposed by the Fourteenth Amendment's Due Process Clause.
C. Three kinds of jurisdiction over the parties: There are three different kinds of jurisdiction which a court may exercise over the parties - one of these three must be present for the case to go forward. [8]
1. In personam: In personam jurisdiction, or jurisdiction over the defendant's "person," gives the court power to issue a judgment against her personally. Thus all of the person's assets may be seized to satisfy the judgment, and the judgment can be sued upon in other states as well. [8]
2. In rem: In rem jurisdiction, or jurisdiction over a thing, gives the court power to adjudicate a claim made about a piece of property or about a status. (Examples: An action to quiet title to real estate, or an action to pronounce a marriage dissolved.) [8]
3. Quasi in rem jurisdiction: In quasi in rem jurisdiction, the action is begun by seizing property owned by (attachment), or a debt owed to (garnishment) the defendant, within the forum state. The thing seized is a pretext for the court to decide the case without having jurisdiction over the defendant's person. Any judgment affects only the property seized, and the judgment cannot be sued upon in any other court. [8]
4. Minimum contacts requirement: If jurisdiction in the case is in personam or quasi in rem, the court may not exercise that jurisdiction unless D has "minimum contacts" with the state in which the court sits. In brief, the requirement of minimum contacts means that D has to have taken actions that were purposefully directed towards the forum state. (Examples of the required action: D sold goods in the state, or incorporated in the state, or visited the state, or bought property in the state, etc.) Without such minimum contacts, exercise of jurisdiction would violate D's Fourteenth Amendment federal constitutional right to due process. [8]
a. Unreasonable exercise: Even if D has the requisite "minimum contacts" with the forum state, the court will not exercise jurisdiction if considerations of "fair play and substantial justice" would require making D defend in the forum state so unreasonable as to constitute a due process violation. But in most cases, if D has the required minimum contacts with the forum state, it will not be unreasonable for the case to be tried there.
D. Long-arm statute: Most states have "long-arm statutes." A long-arm statute is a statute which permits the court of a state to obtain jurisdiction over persons not physically present within the state at the time of service. (Example: A long-arm might allow jurisdiction over an out-of-stater who has committed a tort in the state.) [9]
1. Substitute service: Long-arms typically provide for "substitute" means of service, since in-state personal service is not possible. (Example: A long-arm statute might allow the plaintiff to cause the defendant to be served out of state by registered mail.)
II. JURISDICTION OVER INDIVIDUALS
A. Different categories: In most states, there are a number of different criteria which will enable the court to take personal jurisdiction over an individual. Some of the most common (each of which will be considered in detail below) are: [9]
1. Presence within the forum state;
2. Domicile or residence within the forum state;
3. Consent to be sued within the forum state;
4. Driving a car within the forum state;
5. Committing a tortious act within the state (or, perhaps, committing an out-of-state act with in-state tortious consequences);
6. Ownership of property in the forum state;
7. Conducting business in the forum state;
8. Being married in, or living while married in, the forum state.
Note: Regardless of the criteria used by the state and its long-arm for establishing personal jurisdiction over the individual, due process requires that the individual have minimum contacts with the forum state before personal jurisdiction may be exercised over her. The meaning of "minimum contacts" is discussed further below in the treatment of jurisdiction over corporations.
B. Presence: Jurisdiction may be exercised over an individual by virtue of his presence within the forum state. That is, even if the individual is an out-of-state resident who comes into the forum state only briefly, personal jurisdiction over him may be gotten as long as service was made on him while he was in the forum state. [10]
Example: D and his wife, P, separate while residing in New Jersey. P moves to California with their children. D visits California on business, and stops briefly to visit the children. While D is visiting, P serves him with process in a California suit for divorce. D never visits the state again.
Held, California can constitutionally assert personal jurisdiction over D based on his presence in the state at the time of service, even though that presence was brief, and even though D had virtually no other contacts with the state. [Burnham v. Superior Court].
C. Domicile: Jurisdiction may be exercised over a person who is domiciled within the forum state, even if the person is temporarily absent from the state. A person is considered to be domiciled in the place where he has his current dwelling place, if he also has the intention to remain in that place for an indefinite period. [11 - 13]
D. Residence: Some states allow jurisdiction to be exercised on the basis of D's residence in the forum state, even though he is absent from the state. A person may have several residences simultaneously. (The Supreme Court has not yet passed on the due process validity of jurisdiction based solely on residence, so this remains presumptively a valid method of gaining jurisdiction.) [13]
E. Consent: Jurisdiction over a party can be exercised by virtue of her consent, even if she has no contacts whatsoever with the forum state. [14]
Example: P, who does not reside in Ohio or have any other contacts with Ohio, brings suit against D in Ohio. By filing the suit in Ohio, P will be deemed to have consented to Ohio's jurisdiction. D may then counterclaim against P. Even if P dismisses his own suit, his consent to the action will be binding, and the Ohio courts will have personal jurisdiction over him on the counterclaim.
F. Non-resident motorist: Most states have statutes allowing the courts to exercise jurisdiction over non-resident motorists who have been involved in accidents in the state. [15]
Example: P is a resident of the forum state. D, not a resident of the forum state, is driving his car in the forum state, and has a collision with P's car. Even if D has no other contacts with the state, a non-resident motorist statute will probably be in force in the state, and will probably give the forum state's courts jurisdiction over a tort suit by P against D.
1. Service on state official: Most of the non-resident motorist statutes provide for in-state service of process on a designated state official (e.g., the Director of Motor Vehicles) and for registered mail service on the out-of-state defendant himself. [16]
G. In-state tortiousness: Many states have statutes allowing their courts jurisdiction over persons committing tortious acts within the state. [16]
Example: D, an out-of-stater, gets into a fight with P at a bar in P's home state. P wants to bring a civil battery claim against D in the state. If, as is likely, the state has a long-arm provision governing tortious acts within the state, P will be able to get personal jurisdiction over D in the battery action.
1. Out-of-state acts with in-state consequences: Some "in-state tortious acts" long-arm clauses have been interpreted to include acts done outside the state which produce tortious consequences within the state. In a products liability situation, a vendor who sells products that he knows will be used in the state may constitutionally be required to defend in the state, if the product causes injury in the state. [Gray v. American Radiator Corp.] [16]
H. Owners of in-state property: Many states exercise jurisdiction over owners of in-state property in causes of action arising from that property. [18]
I. Conducting business: States often exercise jurisdiction over non-residents who conduct businesses within the state. Since states may regulate an individual's business conduct in the state, they may constitutionally exercise jurisdiction relating to that doing of business. [19]
J. Domestic relations cases: Courts sometimes try to take personal jurisdiction over a non-resident party to a domestic relations case. However, the requirement of "minimum contacts" applies here (as in every personal jurisdiction situation), and that requirement may bar the state from taking jurisdiction. [26]
Example: A father resides in New York, and permits his minor daughter to go to California to live there with her mother. Held, the father does not have sufficient minimum contacts with California to allow the mother to bring an in personam suit in California against him for increased child support. [Kulko v. Superior Court]
III. JURISDICTION OVER CORPORATIONS
A. Domestic corporations: Any action may be brought against a domestic corporation, i.e., one which is incorporated in the forum state. [21]
B. Foreign corporations generally: A state is much more limited in its ability to exercise jurisdiction over a foreign corporation (i.e., a corporation not incorporated in the forum state). [22 - 27]
1. Minimum contacts: The forum state may exercise personal jurisdiction over the corporation only if the corporation has "minimum contacts" with the forum state "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" [International Shoe Co. v. Washington] [22 - 23]
2. Dealings with residents of forum state: Usually, a corporation will be found to have the requisite "minimum contacts" with the forum state only if the corporation has somehow voluntarily sought to do business in, or with the residents of, the forum state. [23 - 27]
Example 1 (minimum contacts found): D has no activities in Washington except for the activities of its salesmen, who live in the state and work from their homes. All orders are sent by the salesmen to the home office, and approved at the home office. The salesmen earn a total of $31,000 per year in commissions.
Held, the company has minimum contacts with Washington. [International Shoe Co.]
Example 2 (minimum contacts found): D is a Texas insurance company. It does not solicit business in California. However, it takes over, from a previous insurance company, a policy written on the life of X, a California resident. D sends X a new policy; X sends premiums from his California home to D's out-of-state office. X dies; P (the beneficiary under the policy) is a California resident. P sues D in California for payment under the policy.
Held, D has minimum contacts with California, and can thus be sued in personam there in a suit by P for payment on the policy. [McGee v. International Life Ins. Co.]
Example 3 (minimum contacts not found): D is a Delaware bank, which acts as trustee of a certain trust. S, the settlor of the trust, is a Pennsylvania resident at the time she sets up the trust. Years later, she moves to Florida. Later, her two children, also Florida residents, want to sue D in Florida for a judgment that they are entitled to the remaining trust assets. D has no other contacts with Florida.
Held, D does not have minimum contacts with Florida, and therefore, cannot be sued in personam there. [Hanson v. Denckla]
Note: The key idea is that D will be found to have minimum contacts with the state only if D has purposely availed itself of the chance to do business in the forum state. Thus in McGee (Example 2 above), the insurance company offered a policy to someone who it knew was a resident of the forum state. In Hanson (Example 3 above), by contrast, the trustee never voluntarily initiated business transactions with a resident of the forum state or otherwise voluntarily did business in the state - it was only S's unilateral decision to move to the forum state that established any kind of connection with that state, so minimum contacts did not exist.
C. Use of agents: Sometimes an out-of-state company does not itself conduct activities within the forum state, but uses another company as its agent in the state. Even though all business within the state is done by the agent, the principal (the foreign corporation) can be sued there, if the agent does a significant amount of business on the foreign company's behalf. [27]
D. Operation of an Internet Website that reaches in-staters: A hot question today is whether the operation of an Internet Website that's hosted outside the forum state, but that's accessed by some in-staters, constitutes minimum contacts with the state. The main issue is, did the Website operator intended to "target" residents of the forum state? If yes, there are probably minimum contacts; if no, there probably aren't. [27 - 29]
1. Passive site that just posts information: So if an out-of-state local business just passively posts info on the Web, and doesn't especially want to reach in-staters or conduct transactions with them, this probably doesn't amount to minimum contacts, even if some in-staters happen to access the site.
Example: D operates a local jazz cafe in a small town in Kansas. He puts up a Website with a schedule of upcoming events, and uses a trademark belonging to P on the site. P, based in New York, sues D in N.Y. federal court for trademark infringement. Even though a few New Yorkers may have accessed D's site, this won't be enough to constitute minimum contacts with N.Y., because D wasn't trying to attract business from N.Y. [Cf. Cybersell, Inc. v. Cybersell, Inc.]
2. Conducting transactions with in-staters: But if D runs an "e-commerce" site that actively tries to get in-staters to buy stuff from the site, and some do, that probably will be enough to constitute minimum contacts with the state, at least where the suit relates to the in-staters' transactions. (And if the Web-based transactions with in-staters are "systematic and continuous," as discussed in the next paragraph, then these contacts will even be enough for jurisdiction in the state on claims not relating to the in-state activities.) [32]
E. Claims unrelated to in-state activities: The above discusses generally assumes that the claim relates to D's in-state activities. Where the cause of action does not arise from the company's in-state activities, greater contacts between D and the forum state are required. The in-state activities in this situation must be "systematic and continuous." [29 - 31]
Example: D is a South American corporation that supplies helicopter transportation in South America for oil companies. D has no contacts with Texas except: (1) one negotiation there with a client, (2) the purchase by D of 80% of its helicopter fleet from a Texas supplier, (3) the sending of pilots and maintenance people to Texas for training, and (4) the receipt out-of-state of two checks written in Texas by the client. D is sued in Texas by the Ps (Texas residents) when they are killed in South America while being transported by D.
Held, the Ps cannot sue D in Texas. Because the Ps' claims did not arise out of D's in-Texas activities, those Texas contacts had to be "systematic and continuous" in order to be sufficient for jurisdiction. The contacts here were too sparse for that. [Helicopteros Nacionales de Colombia v. Hall]
F. Products liability: The requirement of "minimum contacts" with the forum state has special bite in products liability cases. [32 - 37]
1. Effort to market in forum state: The mere fact that a product manufactured or sold by D outside of the forum state finds its way into the forum state and causes injury there is not enough to subject D to personal jurisdiction there. Instead, D can be sued in the forum state only if it made some effort to market in the forum state, either directly or indirectly. [33]
Example: The Ps are injured in Oklahoma in an accident involving an allegedly defective car. They had purchased the car in New York while they were New York residents. The Ps sue in Oklahoma. D1 is the distributor of the car, who distributed only on the East Coast. D2 is the dealer, whose showroom was in New York. Neither D1 nor D2 sold cars in Oklahoma or did any business there.
Held, neither D may be sued in Oklahoma. Neither D had made efforts to "serve directly or indirectly" the Oklahoma market. Any connection between the Ds' product and Oklahoma was merely an isolated occurrence, completely due to the unilateral activity of the Ps. [World-Wide Volkswagen v. Woodson]
2. Knowledge of in-state sales enough: But if the out-of-state manufacturer makes or sells a product that it knows will be eventually sold in the forum state, this fact by itself is probably enough to establish minimum contacts. However, if this is the only contact that exists, it may nonetheless be "unreasonable" to make D defend there, and thus violate due process. [34 - 37]
Example: P is injured while riding a motorcycle in California. He brings a products liability suit in California against, inter alia, D, the Taiwanese manufacturer who made the cycle's rear innertube. D "impleads" X, the Japanese manufacturer of the tube's valve assembly, claiming that X must pay D any amount that D has to pay to P. X has no contacts with California, except that X knew that: (1) tires made by D from X's components were sold in the U.S., and (2) 20% of the U.S. sales were in California. The P-D suit has been settled but the D-X case is to be tried.
Held, X had minimum contacts with California, because it put its goods into a stream of commerce that it knew would lead many of them to California. But despite these minimum contacts, it would be "unreasonable and unfair" - and thus a violation of due process - for California to hear the case, because of the burden to X of having to defend in California, the slenderness of California's interest in having the case heard there, and the foreign relations problems that would be created by hearing an indemnity suit between two foreign corporations. [Asahi Metal Industry Co. v. Superior Court]
G. Unreasonableness: As the case in the above example shows, even where minimum contacts exist, it will be a violation of due process for the court to hear a case against a non-resident defendant where it would be "unreasonable" for the suit to be heard. The more burdensome it is to the defendant to have to litigate the case in the forum state, and the slimmer the contacts (though "minimum") with the forum state, the more likely this result is to occur. [35]
H. Suits based on contractual relationship: The requisite "minimum contacts" are more likely to be found where one party to a contract is a resident of the forum state. But the fact that one party to a contract is a resident does not by itself automatically mean that the other party has "minimum contacts" - the existence of a contract is just one factor to look at. [37 - 40]
1. Contractual relationship involving the state: Where the contract itself somehow ties the parties' business activities into the forum state, this will be an important factor tending to show the existence of minimum contacts. For instance, if one party is to make payments to the other, and the latter will be receiving the payments in the forum state, this stream of payments coming into the state is likely to establish minimum contacts and thus to permit suit against the payor.
Example: D runs a fast food restaurant in Michigan under franchise from P, which has its headquarters in Florida. The contract requires D to make royalty payments to P in Florida.
Held, P may sue D in Florida. The fact that the payment stream comes into Florida is an important factor, though not by itself dispositive, in the court's conclusion that there were minimum contacts with Florida. [Burger King Corp. v. Rudzewicz]
2. Choice-of-law clause: Where there is a contract between the parties to the suit, the fact that the contract contains a choice of law clause requiring use of the forum state's law will also be a factor (though not a dispositive one) tending towards a finding of minimum contacts. (Example: On the facts of the above example, the franchise contract stated that Florida law would be used. This was a factor helping lead the court to conclude that D had minimum contacts with Florida.) [40]
3. "Reasonable anticipation" of defendant: In suits relating to a contract, as with any other kind of suit, the minimum contacts issue always boils down to this: Could the defendant have reasonably anticipated being required to litigate in the forum state? The fact that the other party was a resident of the forum state, the fact that a stream of payments went into the forum state, and the fact that the forum state's law was to be used in the contract, are all non-dispositive, but important, factors tending towards the conclusion that the out-of-stater had minimum contacts with the forum state. [40]
I. Class action plaintiffs: An "absent" plaintiff in a class action that takes place in the forum state may be bound by the decision in the case, even if that plaintiff did not have minimum contacts with the forum state. [Phillips Petroleum Co. v. Shutts] [40 - 42]
J. Libel and slander cases: The First Amendment imposes certain limits on the substantive libel and slander laws of the states (e.g., that no "public figure" may recover without a showing of "actual malice"). But this special first amendment protection does not affect the personal jurisdiction requirements for libel and slander suits - no more extensive contacts between D and the forum state must be shown in defamation suits than in any other type of case. [Calder v. Jones] [42]
IV. FEDERAL JURISDICTION OVER THE PARTIES
A. General principles: To determine whether a federal court has personal jurisdiction over the defendant, you must check three things: [45]
1. Territory for service: Whether service took place within the appropriate territory;
2. Manner of service: Whether the service was carried out in the correct manner; and
3. Amenability: Whether the defendant was "amenable" to the federal suit.
B. Territory for service: [46 - 49]
1. General rule: As a general rule, in both diversity actions and federal question cases, service of process may be made only: (1) within the territorial limits of the state in which the District Court sits; or (2) anywhere else permitted by the state law of the state where the District Court sits. FRCP 4(k)(1)(A). [45]
Example (within the territorial limits of state): P sues D in a federal action in the Northern District of Ohio. Whether the suit is based on diversity or federal question, service will be territorially valid if D is served with process anywhere within the state of Ohio, since this is the state where the district court sits. This is true even if service is physically made in the Southern District of Ohio.
Example (out-of-state service based on state law): Under the New Jersey long-arm statute, if a non-resident is involved in a motor vehicle accident inside New Jersey with a New Jersey resident, the New Jersey resident may serve the non-resident outside New Jersey, and the New Jersey courts may then exercise personal jurisdiction. P, a New Jersey resident, and D, a California resident, have an accident in New Jersey. P may sue D in diversity in federal District Court for New Jersey; P may serve D with process in California, because the long-arm of the state where the district court sits (New Jersey) would allow such service. FRCP 4(k)(1)(A).
2. 100-mile bulge: A special 100-mile bulge provision (FRCP 4(k)(1)(B)) allows for out-of-state service sometimes, even if local law does not permit it. When the provision applies, it allows service anywhere (even across a state boundary) within a 100-mile radius of the federal courthouse where suit is pending. The bulge provision applies only where out-of-staters will be brought in as additional parties to an already pending action. There are two types of parties against whom it can be used: [47 - 48]
a. Third-party defendants: Third-party defendants (FRCP 14) may be served within the bulge.
Example: P sues D in a New Jersey federal district court diversity action. D claims that if D is liable to P, X is liable to D as an indemnitor. The suit is pending in Newark, less than 100 miles from New York City. D may serve X in New York City, even if no New Jersey long-arm statute would allow the suit.
b. Indispensable parties: So-called "indispensable parties" - that is, persons who are needed in the action for just adjudication, and whose joinder will not involve subject matter jurisdiction problems - may also be served if they are within the bulge.
Example: P sues D for copyright infringement in federal district court for the Eastern District of Kentucky, located in Lexington. D files a counterclaim against P. D wants to join X as a co-defendant to this counterclaim, arguing that P and X conspired to violate D's copyrights. X resides in Cincinnati, Ohio, located 78 miles from Lexington. If the court agrees that X is required for just adjudication of D's counterclaim, service on X in Cincinnati is valid, even if the Kentucky long-arm would not allow service there.
3. Nationwide service of process: In several kinds of cases, Congress has provided for nationwide service of process. Suits against federal officials and agencies, and suits based on statutory interpleader, are examples of nationwide service. [47]
4. Foreign defendant not servable in any state: Rule 4(k)(2) allows a federal question suit to be brought against any person or organization who cannot be sued in any state court (almost always because they are a foreigner).
Example: D, a French company, without setting foot in the U.S., solicits business by phone and mail from residents of a large number of states. D does not solicit enough from the residents of any one state to satisfy that state's long-arm. Therefore, D could not be sued in any state court for a claim concerning its activities. P, a New York investor, brings a suit based upon the federal securities laws against D in the federal district court for the Southern District of New York. Assuming that D can be said to have had minimum contacts with the United States as a whole, the New York federal court will have personal jurisdiction over D for this federal-question claim, because D is not subject to the jurisdiction of the courts of any state. FRCP 4(k)(2).
5. Gaps possible: A defendant who is not located in the state where the district court sits may not be served if he does not fall within one of the four special cases described above (servable pursuant to state long-arm, 100-mile bulge, nationwide service or foreign defendant not servable in any state), even if he has the constitutionally-required minimum contacts with the forum. This is true whether the case is based on diversity or federal question. [49]
Example: P, a Connecticut resident, wants to bring a federal diversity suit in Connecticut against D, a New Yorker. The suit involves an accident that occurred in New York. D owns a second home in Connecticut, as well as lots of other real estate there. Assume that this ownership gives him not only minimum contacts but "systematic and continuous" contacts with Connecticut. However, Connecticut has a very narrow long-arm, which would not allow service on D in New York for a Connecticut state action.
P will not be able to serve D in New York in his federal action, because none of the special cases is satisfied. This is true even though it would not be a violation of due process for either the Connecticut courts or the federal court in Connecticut to exercise personal jurisdiction over D.
C. Manner of service: Once you determine that the party to be served lies within the territory described above, you must determine if the service was carried out in the correct manner.
1. Individual: Service on an individual (Rule 4(e)) may be made in any of several ways:
a. Personal: By serving him personally;
b. Substitute: By handing the summons and complaint to a person of "suitable age and discretion" residing at D's residence;
c. Agent: By serving an agent appointed or designated by law to receive process. (Example: Many states designate the Director of Motor Vehicles as the agent to receive process in suits involving car accidents);
d. Local state law: By serving D in the manner provided by either: (1) the law of the state where the district court sits, if that state has such a provision, or (2) the law of the state where the person is being served. (Example: P brings an action against D, a resident of California, in New Jersey federal court, and wishes to serve him by certified mail. Service will be possible if either the courts of New Jersey or California allow certified-mail service.)
2. Corporation: Service on a corporation may be made by leaving the papers with an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive process for the corporation. FRCP 4(h)(1).
a. Local state law: As with individuals, service on a corporation may also be made in the manner provided by the local law of (i) the state where the action is pending or (ii) the state where the service is made. FRCP 4(h)(1), first sentence.
3. Waiver of service: Rule 4(d) allows plaintiff to in effect serve the summons and complaint by mail, provided that the defendant cooperates. P mails to D a "request for waiver of service"; if D agrees, no actual in-person service is needed.
a. Incentives: D is free to refuse to grant the waiver, in which case P must serve the summons by the in-person methods described above. But, if D refuses the waiver, the court will impose the costs subsequently incurred by P in effecting service on D unless "good cause" is shown for D's refusal. (FRCP 4(d)(2), last sentence.)
D. Amenability to suit: If D was served in an appropriate territory, and in an appropriate manner, you still have to determine whether D is closely-enough linked to the state where the federal district court sits to make him "amenable to suit" in that court. [52 - 54]
1. Federal question: In federal question cases, most courts hold that D is amenable to suit in their court if jurisdiction could constitutionally be exercised over him in the state courts of the state where the federal court is sitting, even if the state court itself would not (because of a limited long-arm) have jurisdiction. [52]
Example: P sues D for copyright infringement. The suit is brought in the Northern District of Ohio. D's only contact with Ohio is that he sold 100 copies of the allegedly infringing book in Ohio. The state courts of Ohio, although they could constitutionally take personal jurisdiction over D in a similar state-created claim - libel, for instance - would not do so because the Ohio long-arm is very limited and would not cover any action growing out of these facts. However, the federal district court will hear the federal question copyright claim against D, because P has minimum contacts with the state where the federal court sits.
a. Foreign defendants: In general, if the defendant is a foreign corporation or resident, most federal courts will exercise jurisdiction over the defendant only if that defendant has minimum contacts with the state where the federal court sits, not merely minimum contacts with the United States as a whole. (Again, as with an out-of-state but not foreign defendant, the federal court will hear the federal question claim even though the state courts might not exercise jurisdiction over the defendant due to a limited state long-arm.)
i. Narrow exception: If a foreign defendant could not be sued in any state, he may be sued on a federal-question claim in any federal judicial district, assuming that he has minimum contacts with the U.S. as a whole. (FRCP 4(k)(2).) But assuming that the foreign defendant could be sued in at least some state court, the general rule described in the prior paragraph (D must have minimum contacts with the state where the federal court sits, not just with the U.S. as a whole) continues to apply.
2. Diversity: In diversity cases, the federal courts exercise only the jurisdiction that is allowed by the statutory law of the state in which they sit. So if the state statutory law does not go to the limits of due process, the federal court will follow suit. [54]
V. JURISDICTION OVER THINGS
A. Two types of actions: There are two types of actions that relate primarily to "things" rather than to people: (1) in rem actions; and (2) quasi in rem actions. [57 - 68]
1. In rem actions: In rem actions are ones which do not seek to impose personal liability on anyone, but instead seek to affect the interests of persons in a specific thing (or res). (Examples: Probate court actions; admiralty actions concerning title to a ship; actions to quiet title to real estate or to foreclose a lien upon it; actions for divorce.)
a. No personal liability: In all of these types of in rem actions, no judgment imposing personal liability on anyone results - all that happens is that the status of a thing is adjudicated. (Example: In a quiet title action, a determination is reached that A, rather than B, is the owner of Blackacre).
2. Quasi in rem actions: Quasi in rem actions are actions that would have been in personam if jurisdiction over D's person had been attainable. Instead, property or intangibles are seized not as the object of the litigation, but merely as a means of satisfying a possible judgment against D.
B. In rem jurisdiction: [58 - 59]
1. Specific performance of land sale contract: One important type of in rem action is an action for specific performance of a contract to convey land. Even if the defendant is out of state and has no connection with the forum state other than having entered into a contract to convey in-state land, the forum state may hear the action. D does not have to have minimum contacts with the forum state for the action to proceed - it is enough that the contract involved in-state land, and that D has received reasonable notice. [58]
2. Effect of Shaffer: The landmark case of Shaffer v. Heitner, discussed below, has almost no effect on in rem suits. Shaffer holds that there must be minimum contacts before a quasi in rem action may proceed; but no minimum contacts are needed for the court to adjudicate the status of property or some other thing located in the state, even though it affects the rights of an out-of-state defendant. [59]
C. Quasi in rem jurisdiction: [59 - 67]
1. Definition: As noted, a quasi in rem action is one that would have been in personam if jurisdiction over D's person had been attainable. Instead, property or intangibles are seized not as the object of the litigation, but merely as a means of satisfying a possible judgment against D. [59]
Example: P wants to sue D on a contract claim in California state court. The contract has no connection with California, nor does D himself have sufficient contacts with California to allow that state to exercise personal jurisdiction over him. D does, however, own a bank account in California. Putting aside constitutional due process problems, P could attach that bank account as a basis of jurisdiction, and bring a quasi in rem action on the contract claim. If P wins, he will be able to collect only the value of the bank account, and D will not be personally liable for the remainder if the damages exceed the value of the account.
2. No res judicata value: Quasi in rem judgments have no res judicata value. (Example: If P wins against D in a quasi in rem action in Connecticut, he cannot in a later suit against D in California claim that the matter has been decided for all time. Instead, he must go through another trial on the merits if he wishes to subject D to further liability.) [60]
a. Possible exception: Some courts hold that if D makes a limited appearance (an appearance that does not confer personal jurisdiction over him) and fully litigates certain issues, he will not be allowed to re-litigate those issues in a subsequent trial. But other courts hold that even here, the first suit will not prevent D from re-litigating the same issues later on.
3. Requirement of minimum contacts (Shaffer): Quasi in rem jurisdiction over D cannot be exercised unless D had such "minimum contacts" with the forum state that in personam jurisdiction could be exercised over him. This is the holding of the landmark case of Shaffer v. Heitner. [63 - 67]
Example: P brings a shareholder's derivative suit in Delaware on behalf of XYZ Corp. against 28 of XYZ's non-resident directors and officers. None of the activities complained of took place in Delaware, nor did any D have any other contact with Delaware. P takes advantage of a Delaware statute providing that any stock in a Delaware corporation is deemed to be present in Delaware, allowing that stock to be attached to provide quasi in rem jurisdiction against its owner. Thus P is able to tie up each D's XYZ stockholdings even though there is no other connection with Delaware.
Held, this use of quasi in rem jurisdiction violates constitutional due process. No D may be subjected to quasi in rem jurisdiction unless he has minimum contacts with the forum state. Here, neither the Ds' actions nor the fact that those actions related to a Delaware corporation were sufficient to create minimum contacts, so the exercise of jurisdiction was improper. [Shaffer v. Heitner]
4. Jurisdiction based on debt, insurance or other obligation: Shaffer basically abolishes the utility of quasi in rem jurisdiction - since quasi in rem is only used where there is no personal jurisdiction, and since the same minimum contacts needed for quasi in rem will suffice for personal jurisdiction, quasi in rem will rarely be advantageous. (The one exception is where minimum contacts are present, but the state long-arm for personal jurisdiction is too narrow to reach the defendant, yet a state attachment statute applies.) One big practical effect is that attachment of a third party's debt to the defendant, or attachment of an insurance company's obligation to defend and pay a claim, are largely wiped out as bases for jurisdiction. [61 - 62]
Example 1: Harris, of North Carolina, owes $180 to Balk, of North Carolina. Epstein, of Maryland, has a claim against Balk for $300. While Harris is visiting in Maryland, Epstein attaches Harris' debt to Balk by serving Harris with process in a Maryland suit. Under pre-Shaffer law, this established quasi in rem jurisdiction over the $180 debt, on the theory that the debt goes wherever the debtor goes. If Epstein won, he could require Harris to pay the $180 to him rather than to Balk. [Harris v. Balk] [61]
But after Shaffer, the fact that Balk's debtor happened to be in North Carolina and available for personal service was irrelevant. Since Balk himself did not minimum contacts with Maryland, and thus could not be sued there personally, Shaffer means that a quasi in rem suit based on Harris' debt to him may also not be heard in Maryland.
Example 2: Same facts as above, except assume that instead of Harris' being sued, Insurance Co., which had an obligation to defend Balk and pay judgments issued against Balk, was served in Maryland. Pre-Shaffer, this would have been enough for quasi in rem jurisdiction over Balk. [61]
But because of Shaffer, the fact that Insurer had minimum contacts with Maryland would be irrelevant - an insurance company's obligation to defend the debtor in the forum state and to pay claims arising out of suits in the forum state is not enough to subject the insured to a quasi in rem suit in the forum state.
D. Limited appearance: [66]
1. Definition: Some states allow a "limited appearance." Under a limited appearance, D appears in an in rem or quasi in rem suit, contests the case on its merits, but is subjected to liability only to the extent of the property attached or debt garnished by the court.
a. Distinguished from special appearance: Distinguish limited appearances from special appearances - in the latter, a defendant against whom personal jurisdiction is asserted is allowed to argue the invalidity of that jurisdiction without having this argument, or his presence in the court, itself constitute a submission to the court's jurisdiction.
2. Federal limited appearances: Federal courts usually follow the rule of the state in which they are sitting in determining whether to allow a limited appearance.
E. Federal quasi in rem jurisdiction: [67 - 68]
1. General rule: Quasi in rem jurisdiction is allowed in a federal court if: (1) the law of the state in which the federal court sits permits such quasi in rem jurisdiction, and (2) P cannot obtain personal jurisdiction over D in the state through reasonable efforts. Rule 4(n). (Examples of conditions satisfying (2): D is a fugitive, or the local long-arm is too weak to reach D even though he has minimum contacts with the state where the district court sits.)
2. Amount in controversy: In a federal quasi in rem case, courts are split as to whether it is the value of the attached property, or the amount claimed, which should control for the $75,000 amount in controversy requirement.
VI. NOTICE AND OPPORTUNITY TO BE HEARD
A. Notice generally: Even if the court has authority to judge the dispute between the parties or over the property before it (covered in the above sections), the court may not proceed unless D received adequate notice of the case against him. [69 - 78]
1. Reasonableness test: In order for D to have received adequate notice, it is not necessary that he actually have learned of the suit. Rather, the procedures used to alert him must have been reasonably likely to inform him, even if they actually failed to do so. [70]
Example: P's process server leaves the summons and complaint at D's house, with D's wife. D's wife throws it in the garbage, and D never learns of it. D has received adequate notice, so the court can exercise jurisdiction over him. Conversely, if P's process server had left the papers on the sidewalk outside the house, and D had happened to pick them up, this would not be adequate notice to D - the procedures used were not reasonably likely to give D notice, and they are not saved by the fact that D in fact learned of the suit.
2. Substitute service: Personal service - handing the papers to D himself - will always suffice as adequate notice. But all states, and the federal system, also allow "substitute service" in most instances. Substitute service means "some form of service other than directly handing the papers to the defendant." [71]
a. Leave at dwelling: The most common substitute service provision allows the process papers to be left at D's dwelling within the state, if D is not at home. These provisions usually require the papers to be left with an adult who is reasonably likely to give them to D. (Example: FRCP 4(e)(2) allows the papers to be left with a person of "suitable age and discretion residing in the dwelling place in question.")
b. Mail: Some states, and the federal system, allow service to be made by ordinary first class mail. However, usually this method is allowable only if D returns an acknowledgement or waiver form to P's lawyer. If D does not return the form, some other method of service must then be used. See FRCP 4(e)(1).
3. Service on out-of-staters: Where D is not present in the forum state, he must somehow be served out of state. Remember that in a state court suit, this can only be done if the state has a long-arm statute covering the type of case and defendant in question. Once the long-arm covers the situation, the out-of-state defendant must still be given some sort of notice. [72]
a. Mail notice: Many states provide for notice by registered or certified mail on the out-of-state defendant.
b. Public official: Sometimes, service may be made by serving a state official, plus giving notice by mail to D. (Example: Many non-resident motorist statutes allow P to serve the state Director of Motor Vehicles with a matching mailing to the out-of-state defendant.)
c. Newspaper publication: If D's identity or residence are unknown, some states allow service by newspaper publication. But this may only be used where D truly cannot be found by reasonable effort.
4. Corporations: Several means are commonly allowed for giving notice of suit to corporations. [73]
a. Corporate officer: Many states require that a corporation, if it wishes to be incorporated in the state or to do business in the state, must designate a corporate official to receive process for suits against the company. Service on this designated official is, of course, deemed to be adequate notice.
b. Federal Rule: The Federal Rules, and the rules of many states, are more liberal, in that they allow service on any person associated with the corporation who is of sufficiently high placement. Thus FRCP 4(h)(1) provides that service on a corporation may be made by giving the papers to "an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process."
B. Constitutional due process: Just as the Fourteenth Amendment's Due Process Clause prohibits jurisdiction over a defendant who lacks minimum contacts with the forum state (International Shoe), so that clause prohibits the exercise of jurisdiction over a defendant who has not been given "reasonable notice" of the suit. [Mullane v. Central Hanover Bank] [74]
1. Mail notice to all the identifiable parties: For instance, if a party's name and address are "reasonably ascertainable," publication notice will not be sufficient, and instead notice by mail (or other means equally likely to ensure actual notice) must be used. [Mennonite Board of Missions v. Adams] [74]
2. Actual receipt doesn't count: Remember that what matters is the appropriateness of the notice prescribed by statute and employed, not whether D actually got the notice. [74]
C. Opportunity to be heard: D must not only be notified of the suit against him, but must also be given an opportunity to be heard. That is, before his property may be taken, he must be given a chance to defend against the claim. This "opportunity to be heard" must be given to D not only when his property will be taken forever, but even before there is any significant interference with his property rights.
1. Pre-judgment remedy: Opportunity-to-be-heard questions arise most frequently in the context of pre-judgment remedies, which protect plaintiff against the defendant's hiding or squandering his assets during litigation. Two common forms of pre-judgment remedies are the attachment of D's bank account and the placing of a lis pendens against her real estate.
2. Three-part test: The court will weigh three factors against each other to determine whether due process was violated when D's property was interfered with through a pre-judgment remedy: [76 - 78]
a. First, the degree of harm to D's interest from the pre-judgment remedy;
b. Second, the risk that the deprivation of D's property right will be erroneous (especially if the state could have used additional procedural safeguards against this but did not); and
c. Third, the strength of the interest of the party (typically P) seeking the prejudgment remedy. [Connecticut v. Doehr] [77]
Example: A state statute allows P to get a prejudgment attachment of D's real estate without D's having a hearing first, so long as P "verifies by oath" that there is probable cause to sustain his claim. Factor 1 above (the strength of D's interest) works against allowing attachment, since an attachment clouds D's title and affects his credit rating. Factor 2 (risk of erroneous deprivation) also supports not allowing the attachment, since the judge can't accurately determine the likely outcome of the litigation based solely on P's one-sided conclusory statements in the oath. Factor 3 (strength of P's interest) also works against the attachment, since P is not required to show D is dissipating his assets. Consequently, the grant of a prejudgment attachment of D's property violates his due process rights. [Connecticut v. Doehr]
VII. DEFENSES TO CLAIMS OF JURISDICTION
A. Special appearance: In a "special appearance," D appears in the action with the express purpose of making a jurisdictional objection. By making a special appearance, D has not consented to the exercise of jurisdiction. [80]
1. Appeal: Most courts allow a defendant who has unsuccessfully made a special appearance to then defend on the merits, without losing his right to appeal the jurisdictional issue. [80]
2. Federal substitute for special appearance: The federal courts (and the many state courts with rules patterned after the Federal Rules) have abolished the special appearance. Instead, D makes a motion to dismiss for lack of jurisdiction over the parties; making this motion does not subject D to the jurisdiction that he is protesting. FRCP 12(b)(2). [80]
a. Waiver: The right to make a motion to dismiss for lack of personal jurisdiction is waived in the federal system if: (1) D makes a motion raising any of the defenses listed in Rule 12, and the personal jurisdiction defense is not included; or (2) D neither makes a Rule 12 motion nor raises the defense in his answer.
B. Collateral attack: [82]
1. General enforcement of judgments: A judgment entered in one jurisdiction may generally be enforced in another. That is, if State 1 enters a judgment against D, D's property in State 2 (or wages owed him in State 2) may be seized to satisfy the earlier State 1 judgment. [81]
2. Collateral attack on default judgment: If D defaults in an action in State 1, she may collaterally attack the default judgment when it is sued upon in State 2. Most commonly, D collaterally attacks the earlier judgment on the grounds that State 1 did not have personal jurisdiction over her, or did not have valid subject matter jurisdiction. [82 - 83]
Example: D has no contacts with Iowa. P, an Iowa resident, sues D in Iowa court. D never appears in the action, and a default judgment is entered against him for $100,000. P then brings a suit in D's home state of New Jersey to enforce the earlier Iowa judgment. D will be permitted to collaterally attack the Iowa judgment, by arguing that Iowa lacked personal jurisdiction over him. The New Jersey court will undoubtedly agree with D that, because D did not have minimum contacts with Iowa, Iowa could not constitutionally take jurisdiction over him. Therefore, the New Jersey court will decline to enforce the Iowa judgment.
3. Waiver by D: A defendant who appeared in the original action without objecting to jurisdiction, or one who unsuccessfully litigated the jurisdictional issue in the first action, may not collaterally attack the judgment. (Instead, a defendant who unsuccessfully litigates jurisdiction in the first action must appeal to the first state's system, rather than later making a collateral attack.) [82]
C. Defense of fraud or duress: A court may constitutionally exercise jurisdiction over a defendant found within the forum state, even if D's presence was the result of fraud or duress on the part of the plaintiff. But the court may exercise its discretion not to exercise jurisdiction. (Example: P entices D into the jurisdiction with a false love letter and a false statement that she is leaving the country forever and wants to see D once more. When D arrives at the airport in the forum state, P serves him with papers. Held, the forum state will decline to exercise its jurisdiction because of P's fraud. [Wyman v. Newhouse]) [83]
D. Immunity: Most jurisdictions give to non-residents of the forum state an immunity from service of process while they are in state to attend a trial. This is true whether the person is a witness, a party, or an attorney. Most states also grant the immunity for related proceedings such as depositions. [84 - 85]
1. Federal suits: Out-of-state parties, witnesses, and attorneys also generally receive immunity from federal court suits (whether diversity or federal question). [85]
VIII. VENUE
A. Definition: "Venue" refers to the place within a sovereign jurisdiction in which a given action is to be brought. It matters only if jurisdiction over the parties has been established. (Example: State X is found to have jurisdiction over the person of B, in a suit against him by A. Venue determines in which county or district of State X the case should be tried.) [86]
B. State action: In state trials, venue is determined by statute. The states are free to set up virtually any venue rules they wish, without worrying about the federal constitution. [87]
1. Basis for: Most commonly, venue is authorized based on the county or city where the defendant resides. Many states also allow venue based on where the cause of action arose, where the defendant does business, etc. [87]
2. Forum non conveniens: Under the doctrine of forum non conveniens, the state may use its discretion not to hear the case in a county where there is statutory venue. Sometimes, this involves shifting the case to a different place within the state. At other times, it involves the state not having the case take place in-state at all. Usually, it is the defendant who moves to have the case dismissed or transferred for forum non conveniens. [88 - 90]
a. Factors: Three factors that state courts often consider in deciding whether to dismiss for forum non conveniens are: (1) whether the plaintiff is a state resident (if so, he has a stronger claim to be able to have his case heard in his home state); (2) whether the witnesses and sources of proof are more available in a different state or county; and (3) whether the forum's own state laws will govern the action (transfer is more likely if a different state's law controls).
C. Venue in federal actions: In federal actions, the venue question is, "Which federal district court shall try the action?" Venue is controlled by 28 U.S.C. §1391. [90 - 97]
1. Still need personal jurisdiction: When you consider a venue problem, remember that venue is not a substitute for personal jurisdiction: the fact that venue lies in a particular judicial district does not automatically mean that suit can be brought there. Suit can be brought only in a district that satisfies both the venue requirements and the personal jurisdiction requirements as to all defendants. [91]
2. Three methods: There are three basic ways by which there might be venue in a particular judicial district: (1) if any defendant resides in that district, and all defendants reside in the state containing that district; (2) if a "substantial part of the events … giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated," in the district; and (3) if at least one defendant is "reachable" in the district, and no other district qualifies. Each of these is considered below, as sections 3, 4 and 5. [91]
3. "Defendant's residence" venue: For both diversity and federal question cases, venue lies in any district where any defendant resides, so long as, if there is more than one defendant, all the defendants reside in the state containing that district. [92]
Example: P, from Massachusetts, brings a diversity suit against D1, from the Southern District of New York, and D2, from the Eastern District of New York. Venue will lie in either the Southern District of New York or the Eastern District of New York - each of these is home to at least one defendant, and each of these two districts is in a state that is home to all the defendants. But if D2 had been a resident of the District of Connecticut instead of any New York district, there would not be any "defendant's residence" venue anywhere.
4. "Place of events or property" venue: For both diversity and federal question cases, venue lies in any 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…." This is "place of events" venue. [92]
a. Multiple districts: There can be multiple districts qualifying for "place of events" venue, as long as each district was the locus for a "substantial part" of the events relating to the claim. (Example: P, from Massachusetts, sues D, a car dealer from Connecticut. P alleges that D sold P a car in Connecticut, that P drove the car to Massachusetts, and that a defect in the car caused P to be injured in Massachusetts. Probably venue in either the District of Massachusetts or the District of Connecticut would be allowed under the "place of events" provision, since probably both the selling of the defective car and the incurring of the accident were a "substantial part" of the events.)
5. "Escape hatch" provision: Finally, for both diversity and federal question cases, there is an "escape hatch," by which venue may be founded in a district with which some or all defendants have close ties, if there is no district in which the action may otherwise be brought. This escape hatch is used mainly for cases in which nearly all the events occurred abroad. [93 - 95]
a. Diversity: In a case founded solely on diversity, the escape hatch gives venue in any judicial district "in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought." §1391(a)(3).
Example: P, from Massachusetts, brings a diversity suit against D1, who resides in the Southern District of New York, and D2, who lives in the District of Connecticut. P's suit is brought in the Southern District of New York. The suit relates solely to matters which occurred in Mexico.
The escape hatch applies - even though there is no "defendant's residence" venue or "place of events" venue in S.D.N.Y., the escape hatch works because at least one defendant (D1) is subject to personal jurisdiction in S.D.N.Y. by virtue of his residence there. The escape hatch works only because there's no other district where the suit could have been brought - there's no "defendants' residence" venue since there's no single state in which all defendants reside, and there's no "place of events" venue since everything happened in Mexico. (Also, remember that there still has to be personal jurisdiction over each defendant. So D2 will have to have minimum contacts with New York, and be reachable under the New York long-arm.)
b. Federal question cases: In federal question cases, the escape hatch provision gives venue in any judicial district "in which any defendant may be found, if there is no district in which the action may otherwise be brought." §1391(b)(3). (Probably a defendant is "found" in a district if he can be subject to personal jurisdiction in that district, i.e., he has minimum contacts with that district. So there's probably no real difference between the escape hatch for federal question cases and the one for diversity cases.)
6. No "plaintiff's residence" venue: There is no venue (as there used to be) based on plaintiff's residence. [95]
7. Corporation: The residence of a corporation for venue purposes matters only if the corporation is a defendant. A corporation is deemed to be a resident of any district as to which the corporation would have the "minimum contacts" necessary to support personal jurisdiction if that district were a separate state. Thus a corporation is a resident of at least the district where it has its principal place of business, any district where it has substantial operations, and probably any district in its state of incorporation. But merely because a corporation does business somewhere in the state, this does not make it a resident of all districts of that state. [95]
Example: XYZ Corp. is incorporated in Delaware, and has its only office in San Francisco. XYZ has no contacts with any part of California other than San Francisco. If XYZ is a defendant, it will reside, for venue purposes, in the district of Delaware and in the Northern District of California. XYZ is not a resident of any other districts in California - thus "defendant's residence" venue would not lie against XYZ, for instance, in a suit brought in the Central District of California, located in Los Angeles.
8. Removal: A case removed from state to federal court passes to "the district court of the U.S. for the district and division embracing the place where such action is pending." 28 U.S.C. §1441(a). [96]
9. Federal forum non conveniens: In the federal system, when a defendant successfully moves for forum non conveniens, the original court transfers the case to another district, rather than dismissing it. Under 28 U.S.C. §1404(a), "for the convenience of parties and witnesses … a district court may transfer any civil action to any other district or division where it might have been brought." [96 - 97]
a. Defendant's motion: Usually, it is the defendant who moves for forum non conveniens. When this happens, the case may be transferred only to a district where P would have had the right, independent of the wishes of D, to bring the action. (Example: If suit in a particular district would not have been possible, as an initial matter, because one or more of the Ds could not be personally served there, or because venue would not have been proper there, even the consent by all Ds would not authorize the action to be transferred to that district.)
b. Choice of law: When federal forum non conveniens is granted, the state law of the transferor court is to be applied by the transferee court. (Example: P brings a diversity action against D in Mississippi federal court. That court grants D's motion to have the case moved to Pennsylvania District Court. If, as is likely, Mississippi federal court would have applied Mississippi state law rather than Pennsylvania state law under Erie principles, the Pennsylvania federal court must also apply Mississippi state law.) This is true whether the forum non conveniens was sought by P or by D. [Ferens v. John Deere Co.] [97]
Chapter 3
SUBJECT MATTER JURISDICTION
I. GENERAL PRINCIPLES
A. Diversity vs. federal question: In the federal courts, there are two basic kinds of controversies over which the federal judiciary has subject matter jurisdiction: (1) suits between citizens of different states (so-called diversity jurisdiction); and (2) suits involving a "federal question." [100]
1. Other cases: Certain other kinds of cases specified in the constitution also fall under the federal judicial power. These are cases involving ambassadors, cases involving admiralty, and cases in which the United States is a party. But except in these very unusual cases, when you are considering a case that is brought in the federal courts, you must ask: Does it fall within the diversity jurisdiction or federal question jurisdiction? If it does not fall within either of these, probably it cannot be heard by the federal courts.
B. Amount in controversy: In federal suits based on diversity, an amount in excess of $75,000 must be in dispute. This is the "amount in controversy" requirement. In federal question cases, there is no amount in controversy requirement. [101]
C. Burden: The party seeking to invoke the jurisdiction of a federal court must make an affirmative showing that the case is within the court's subject matter jurisdiction. (Example: If P wants to invoke diversity jurisdiction, in her pleading she must allege the relevant facts about the citizenship of the parties.) [101]
D. Dismissal at any time: No matter when a deficiency in the subject matter jurisdiction of a federal court is noticed, the suit must be stopped, and dismissed for lack of jurisdiction. See FRCP 12(h)(3), requiring the court to dismiss the action at any time if it appears that the court lacks subject matter jurisdiction. [101 - 102]
Example: A case brought under federal question jurisdiction goes through trial and through one level of appeals, and is then heard by the Supreme Court. The Supreme Court decides that there was no federal question in the first place. Held, the entire case must be dismissed for lack of federal subject matter jurisdiction. [Louisville & National RR v. Mottley]
II. DIVERSITY JURISDICTION
A. Definition: The Constitution gives the federal courts jurisdiction over "controversies ... between the citizens of different states...." This is the grant of "diversity jurisdiction." [103 - 110]
Example: P, a citizen of California, wants to sue D, a citizen of Oregon, for hitting P with D's car. Assuming that P's damages exceed $75,000, P can bring her negligence suit against D in federal court, because it is between citizens of different states.
1. Date for determining: The existence of diversity is determined as of the commencement of the action. If diversity existed between the parties on that date, it is not defeated because one of the parties later moved to a state that is the home state of the opponent. [105]
2. Domicile: What controls for citizenship is domicile, not residence. A person's domicile is where she has her true, fixed and permanent home. (Example: P has his main home in New York, but has an expensive second home in Florida. D has her only home in Florida. P can bring a diversity action against D, because P is deemed a citizen only of New York, not Florida, even though P has a "residence" in Florida.) [105]
a. Resident alien: A resident alien (an alien who lives in the United States permanently) is deemed a citizen of the state in which he is domiciled.
b. Presence of foreigner: In a suit between citizens of different states, the fact that a foreign citizen (or foreign country) is a party does not destroy diversity. (Example: P, a citizen of Ohio, sues D1, a citizen of Michigan, and D2, a citizen of Canada. Diversity jurisdiction exists.) (In situations where one side consists solely of foreign citizens or foreign countries, "alienage" jurisdiction applies. See below.)
3. Complete diversity: The single most important principle to remember in connection with diversity jurisdiction is that "complete diversity" is required. That is, it must be the case that no plaintiff is a citizen of the same state as any defendant. [103]
Example: P, a citizen of New York, brings a suit against D1, a citizen of New York, and D2, a citizen of New Jersey. We ask, "Is there any plaintiff who is a citizen of the same state as any defendant?" Since the answer is "yes," the requirement of complete diversity is not satisfied, and there is no diversity jurisdiction.
4. Pleading not dispositive: In order to determine whether diversity exists, the pleadings do not settle the question of who are adverse parties. Instead, the court looks beyond the pleadings, and arranges the parties according to their real interests in the litigation. [104]
a. Nominal parties ignored: In determining the existence of diversity, nominal or purely formal parties are ignored. (Example: Where a guardian of an infant sues, the guardian is deemed to be a citizen only of the same state as the infant. See 28 U.S.C. §1332(c)(2).) [104 - 105]
B. Alienage jurisdiction: Related to diversity jurisdiction, but analytically distinct, is "alienage" jurisdiction. Alienage jurisdiction exists where there is a suit between citizens of a state, on one side, and foreign states or citizens thereof, on the other. (Example: P, a citizen of Mexico, sues D, a citizen of Illinois. Even if there is no federal question issue, there will be federal subject matter jurisdiction of the "alienage" variety, assuming that the amount in controversy requirement is satisfied.) [106 - 107]
1. Suit between two foreign citizens: But a suit solely between citizens of two foreign countries does not fall within the alienage jurisdiction. (Example: If P, a citizen of Canada, sues D, a citizen of Mexico, there is no alienage jurisdiction.)
C. Diversity involving corporations: For diversity purposes, a corporation is deemed a citizen of any state where it is incorporated and of the state where it has its principal place of business. In other words, for diversity to exist, no adversary of the corporation may be a citizen of the state in which the corporation is incorporated, or of the state in which it has its principal place of business. (Example: XYZ Corp., a corporation which is incorporated in Delaware, has its principal place of business in New York. In order for there to be diversity, no adverse party may be a citizen of either Delaware or New York.) [107]
1. Principal place of business: Courts have taken two different views about where a corporation's "principal place of business" is.
a. Home office: Some courts hold that the corporation's principal place of business is ordinarily the state in which its corporate headquarters, or "home office," is located. This is sometimes called the "nerve center" test.
b. Bulk of activity: Other courts hold that the principal place of business is the place in which the corporation carries on its main production or service activities. This is sometimes called the "muscle" test. This is the more commonly-used standard.
D. Devices to create or destroy diversity: The federal courts will not take jurisdiction of a suit in which any party has been "improperly or collusively joined" to obtain jurisdiction. 28 U.S.C. §1359. [108 - 110]
1. Assignment: This means that a claimant may not assign her claim in order to create diversity. (Example: Alex and Dennis are both citizens of Florida. Alex wants to bring a diversity action against Dennis. Alex assigns his claim to Barbara, a Massachusetts citizen, with the understanding that Barbara will remit to Alex 80% of any recovery. The court will not take diversity jurisdiction over the Barbara-vs.-Dennis action, because Barbara's presence in the suit was an improper or collusive joinder. [Kramer v. Caribbean Mills]) [108]
2. Devices to defeat removal: A plaintiff suing in state court may sometimes seek to defeat her adversary's potential right to remove to federal court. There is no federal statute prohibiting "improper or collusive" joinder for the purpose of defeating jurisdiction. However, as a matter of judge-made law, courts will often disregard obvious removal-defeating tactics (e.g., joinder of a defendant who has nothing to do with the underlying dispute, but who is a citizen of the same state as a plaintiff.) [108 - 110]
a. Low dollar claim: But the state-court plaintiff is always free to make a claim for less than the amount in controversy ($75,000), in order to defeat removal, even if P has really suffered a loss greater than this amount. (But the less-than-$75,000 amount must be named before D removes.)
III. FEDERAL QUESTION JURISDICTION
A. Generally: The Constitution gives the federal courts authority to hear "federal question" cases. More precisely, under 28 U.S.C. §1331, the federal courts have jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." [112 - 113]
1. Federal claim: There is no precise definition of a case "arising under" the Constitution or laws of the United States. But in the vast majority of cases, the reason there is a federal question is that federal law is the source of the plaintiff's claim. (Examples: A claim of copyright infringement, trademark infringement or patent infringement raises a federal question, because in each of these situations, a federal statute - the federal copyright statute, trademark statute or patent statute - is the source of the right the plaintiff is asserting.) [112]
a. Interpretation of federal law: It is not enough that P is asserting a state-created claim which requires interpretation of federal law. (Example: P brings a state-court product liability suit against D for injuries sustained by taking a drug made by D. P claims that D violated the federal FDA statute by mislabeling the drug, and that this mislabeling automatically constitutes common-law negligence. D wants to remove to federal court, so it claims that the case is within federal question jurisdiction, because its disposition requires interpretation of a federal statute. Held, no federal question is raised, because P's claim did not "arise under" federal law. [Merrell Dow Pharmaceuticals, Inc. v. Thompson]) [112]
b. Claim based on the merits: If P's claim clearly "arises" under federal law, it qualifies for federal question jurisdiction even if the claim is invalid on the merits. Here, the federal court must dismiss for failure to state a claim upon which relief may be granted (FRCP 12(b)(6)), not for lack of subject matter jurisdiction. [113]
c. Anticipation of defense: The federal question must be integral to P's cause of action, as revealed by P's complaint. It does not suffice for federal question jurisdiction that P anticipates a defense based on a federal statute, or even that D's answer does in fact raise a federal question. Thus the federal question must be part of a "well pleaded complaint." [113]
Example: P claims that D Railroad has breached its agreement to give P free railroad passes. A recently-passed federal statute prohibits the giving of such passes. In P's complaint, he anticipates the railroad's federal statutory defense, claiming that the statute violates the Fifth Amendment.
Held, since P's claim was merely a breach of contract claim, and the federal statute was not essential to that claim, there was no federal question - the fact that federal law was an integral part of D's anticipated defense is irrelevant. [Louisville & Nashville RR v. Mottley]
IV. AMOUNT IN CONTROVERSY
A. Diversity only: In diversity cases, but not in federal question cases, plaintiff must satisfy an "amount in controversy" requirement. In all diversity cases, the amount in controversy must exceed $75,000. [114]
1. Interest not included: The $75,000 figure does not include interest or court costs.
B. Standard of proof: The party seeking to invoke federal diversity jurisdiction does not have to prove that the amount in controversy exceeds $75,000. All she has to show is that there is some possibility that that much is in question. [115]
1. "Legal certainty" test: To put it another way, the claim cannot be dismissed for failing to meet the $75,000 requirement unless it appears to a legal certainty that the claim is really for less than the jurisdictional amount. [St. Paul Mercury Indemnity Co. v. Red Cab]
2. Eventual recovery irrelevant: The fact that P eventually recovers far less than the jurisdictional amount does not by itself render the verdict subject to reversal and dismissal on appeal for lack of jurisdiction.
a. Discretion to deny costs: But the federal court has discretion to deny costs to P, and even to impose costs on him, if he recovers less than $75,000. 28 U.S.C. §1332(b).
C. Whose point of view followed: The courts are split as to which party's point of view is to be considered in calculating the amount at stake. Most courts hold that the controversy must be worth $75,000 to the plaintiff in order to satisfy the jurisdictional amount. [115]
D. Aggregation of claims: In multi-plaintiff or multi-claim litigation, you must understand the rules governing when aggregation of claims is permissible for meeting the jurisdictional amount: [116 - 118]
1. Aggregation by single plaintiff: If a single plaintiff has a claim in excess of $75,000, he may add to it any other claim of his against the same defendant, even though these other claims are for less than the jurisdictional amount. This is done by the doctrine of supplemental jurisdiction. [116]
a. No claim exceeds $75,000: Even if a plaintiff does not have any single claim worth more than $75,000, he may add together all of his claims against a single defendant. So long as these claims against a single defendant total more than $75,000, the amount in controversy requirement is satisfied.
b. Additional defendants: But a plaintiff who has aggregated his claim against a particular defendant, usually may not join claims against other defendants for less than the jurisdictional amount.
Example: P has two claims, each for $40,000, against D1. P will be deemed to meet the amount in controversy requirement as to these claims, because they aggregate more than $75,000. But if P tries to bring D2 into the lawsuit, and has a single claim worth $40,000 against D2, most courts will not allow this claim, because P's total claims against D2 do not exceed $75,000, and the doctrine of supplemental jurisdiction does not apply.
2. Aggregation by multiple plaintiffs: [116 - 118]
a. At least one plaintiff meets amount: If one plaintiff meets the jurisdictional amount, it's not completely clear whether the other plaintiffs may join their related claims against that same defendant. The plaintiffs may probably use the doctrine of "supplemental jurisdiction" so as to enable the low-amount plaintiffs to join their claims together with the high-amount plaintiff.
b. No single claim meets the amount: If no single plaintiff has a claim or claims meeting the jurisdictional amount, aggregation by multiple plaintiffs is not allowed. (Exception: Where two or more plaintiff unite to enforce a single title or right in which they have a common and undivided interest, aggregation is allowed.)
c. Special restrictions for class actions: In class actions, until recently there has been an especially stringent, and clear, rule: every member of the class had to satisfy the jurisdictional amount. This meant that class actions in diversity cases were rarely possible. [Zahn v. International Paper Co.] [117] Some courts, however, have recently ruled that as long as the named class representatives each have a claim in excess of $75,000, the supplemental jurisdiction doctrine applies, so that the unnamed members need not meet the jurisdictional amount. [Free v. Abbott Labs.] [117]
E. Counterclaims: [118]
1. Suit initially brought in federal court: If P sues in federal court for less than the jurisdictional amount, and D counterclaims for an amount which (either by itself or added to P's claim) exceeds the jurisdictional amount, probably the amount in controversy requirement is not met.
2. Removal by defendant: If P originally sues in state court for less than $75,000, and D tries to remove to federal court, amount in controversy problems work out as follows:
a. Plaintiff removal: The plaintiff may never remove, even if D counterclaims against him for more than $75,000. (The removal statute simply does not apply to plaintiffs, apart from amount-in-controversy problems.)
b. Defendant removal: If the defendant counterclaims for more than $75,000, but plaintiff's original claim was for less than $75,000, the result depends on the type of counterclaim. If D's counterclaim was permissive (under state law), all courts agree that D may not remove. If D's claim was compulsory under state law, courts are split about whether D may remove.
V. SUPPLEMENTAL JURISDICTION
A. "Supplemental" jurisdiction: Suppose new parties or new claims are sought to be added to a basic controversy that by itself satisfies federal subject-matter jurisdictional requirements. Under the doctrine of "supplemental" jurisdiction, the new parties and new claims may not have to independently satisfy subject-matter jurisdiction - they can in effect be "tacked on" to the "core" controversy. See 28 U.S.C. §1367. [120 - 134]
1. Pendent and ancillary doctrines replaced: Supplemental jurisdiction replaces two older judge-made doctrines, "pendent" jurisdiction and "ancillary" jurisdiction.
2. Provision generally: Section 1367(a) says that "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 United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties." [124]
3. Federal question cases: Where the original claim comes within the court's federal question jurisdiction, §1367 basically allows the court to hear any closely related state-law claims. [124]
a. Pendent state claims with no new parties: Supplemental jurisdiction clearly applies when a related state claim involves the same parties as the federal question claim.
Example: P and D are both citizens of New York. Both sell orange juice nationally. P sues D in federal court for violation of the federal trademark statute, arguing that D's brand name infringes a mark registered to P. P also asserts that D's conduct violates a New York State "unfair competition" statute. There is clearly no independent federal subject matter jurisdiction for P's state law unfair competition claim against D - there is no diversity, and there is no federal question. But by the doctrine of supplemental jurisdiction, since the federal claim satisfies subject-matter jurisdictional requirements, P can add the state law claim that is closely related to it.
b. Additional parties to state-law claim: Section 1367 also allows additional parties to the state-law claim to be brought into the case. [125]
Example: P's husband and children are killed when their small plane hits power lines near an airfield. P sues D1 (the U.S.) in federal court, under the Federal Tort Claims Act, for failing to provide adequate runway lights. Then, P amends her complaint to include state-law tort claims against D2 and D3 (a city and a private company) who maintain the power lines. There is no diversity of citizenship between P and D2 and D3, and no federal-question claim against them. But because P's state-law claim against D2 and D3 arises from the same chain of events as P's federal claim against D1, P may bring D2 and D3 into the suit under the supplemental jurisdiction concept, and the last sentence of §1367(a). [This overrules Finley v. U.S.] [125]
4. Diversity cases: There is also supplemental jurisdiction in many cases where the "core" claim - the claim as to which there is independent federal subject matter jurisdiction - is based solely on diversity. But there are some important exclusions to the parties' right to add additional claims and parties to a diversity claim.
a. Claims covered: Here are the principal diversity-only situations in which supplemental jurisdiction applies: [129 - 130]
i. Rule 13(a) compulsory counterclaims.
ii. Rule 13(h) joinder of additional parties to compulsory counterclaims. (Example: P, from New York, brings a diversity suit against D, from New Jersey. The claim is for $80,000. D counterclaims that in the same episode, D was injured not only by P but also by Y; D's injuries total $1,000. Y is from New Jersey. D may bring Y in as a Rule 13(h) additional defendant to D's compulsory counterclaim against P, even though D and Y are both from New Jersey, and even though D's claim does not total $75,000 - supplemental jurisdiction applies, and obviates the need for D-Y diversity or for D to meet the amount in controversy requirement.)
iii. Rule 13(g) cross-claims, i.e., claims by one defendant against another. (Example: P, from Ohio, brings a diversity suit against D1 and D2, both from Kentucky. D1 brings a Rule 13(g) cross-claim against D2 - since it is a cross-claim, it necessarily relates to the same subject matter as P's claim. Even though there is no diversity as between D1 and D2, the cross-claim may be heard by the federal court.)
iv. Rule 14 impleader of third-party defendants, for claims by and against third-party plaintiffs, and claims by third-party defendants, but not claims by the original plaintiff against third-party defendants. (Example: P, from California, sues D, a retailer from Arizona, claiming that a product D sold P was defective and injured P. The suit is based solely on diversity. D brings a Rule 14 impleader claim against X, the manufacturer of the item, claiming that if D owes P, X must indemnify D. X is a citizen of Arizona. Because D's suit against X falls within the court's supplemental jurisdiction, the lack of diversity as between D and X makes no difference. Supplemental jurisdiction would also cover any claim by X against P. But any claim by P against X would not be within the court's supplemental jurisdiction, so P and X must be diverse and the claim must meet the amount in controversy requirement.)
b. Claims not covered: Where the core claim is based on diversity, some important types of claims do not get the benefit of supplemental jurisdiction: [126 - 128]
i. Claims against third-party defendants: Claims made by a plaintiff against a third-party defendant, pursuant to Rule 14(a), are excluded. (Example: P sues D, and D brings a third-party claim against X, asserting that if D is liable to P, X is liable to D. P and X are citizens of the same state. P does not get supplemental jurisdiction for her claim against X, so the P-vs.-X claim must be dismissed. [Owen Equipment v. Kroger, codified in §1367(b).] )
ii. Compulsory joinder: When a person is joined under Rule 19(a) as a person to be "joined if feasible" ("compulsory joinder"), neither a claim against such a person, nor a claim by that person, comes within the supplemental jurisdiction in a diversity-only case.
iii. Rule 20 joinder: When a plaintiff sues multiple defendants in the same action on common law and facts (Rule 20 "permissive joinder"), supplemental jurisdiction does not apply. (Example: P is hit by D1's car, then negligently ministered to by D2. P is from New York, D1 is from Connecticut, and D2 is from New Jersey. P's claim against D2 is for $20,000. The federal court cannot hear the P-D2 claim, because it does not meet the amount in controversy and does not fall within supplemental jurisdiction.)
iv. Intervention: Claims by prospective plaintiffs who try to intervene under Rule 24 do not get the benefit of supplemental jurisdiction. This is true whether the intervention is permissive or of right. (Example: P1 sues D in diversity. P2, on her own motion, moves for permission to intervene under Rule 24(b), because her claim against D has a question of law or fact in common with P1's claim. P1 is a citizen of Indiana, P2 of Illinois, and D of Illinois. Because there is no supplemental jurisdiction over intervention, the fact that P2 and D are citizens of the same state means that the court may not hear P2's claim. The same result would occur even if P2's claim was so closely related to the main action that P2 would otherwise be entitled to "intervention of right" under Rule 24(a).)
c. Defensive posture required: If you look at the situations where supplemental jurisdiction is allowed in diversity-only cases, and those where it is not allowed, you will see that basically, additional claims asserted by defendants fall within the court's supplemental jurisdiction, but additional claims (or the addition of new parties) by plaintiffs are generally not included. So expect supplemental jurisdiction only in cases where the claimant who is trying to benefit from it is in a "defensive posture." [125]
5. Discretion to reject exercise: Merely because a claim is within the court's supplemental jurisdiction, this does not mean that the court must hear that claim. Section 1367(c) gives four reasons for which a court may decline to exercise supplemental jurisdiction that exists. Most importantly, the court may abstain if it has already dismissed all claims over which it has original jurisdiction. This discretion is especially likely to be used where the case is in its early stages. (Example: P sues D1 (the U.S.) under a federal statute, then adds state-law claims against D2 and D3, as to which there is neither diversity nor federal question jurisdiction. Soon after the pleadings are filed, the court dismisses P's claim against D1 under FRCP 12(b)(6). Probably the court will then exercise its discretion to decline to hear the supplemental claims against D2 and D3.) [130]
6. No effect on personal jurisdiction: The application of the supplemental jurisdiction doctrine does not eliminate the requirement of jurisdiction over the parties, nor does it eliminate the requirement of service of process. It speaks solely to the question of subject matter jurisdiction. (But often in the supplemental jurisdiction situation, service in the 100-mile bulge area will be available.) [134]
a. Venue: Where supplemental jurisdiction applies, probably venue requirements do not have to be satisfied with respect to the new party. But usually, venue will not be a problem anyway in these kinds of situations.
VI. REMOVAL TO THE FEDERAL COURTS
A. Removal generally: Generally, any action brought in state court that the plaintiff could have brought in federal court may be removed by the defendant to federal district court. [139]
Example: P, from New Jersey, sues D, from New York, in New Jersey state court. The suit is a garden-variety automobile negligence case. The amount at issue is $100,000. D may remove the case to federal district court for the District of New Jersey.
1. Diversity limitation: The most important single thing to remember about removal jurisdiction is this: In diversity cases, the action may be removed only if no defendant is a citizen of the state in which the action is pending.
Example: P, from New Jersey, brings a negligence action against D, from New York, in the New York state court system. D may not remove the case to federal court for New York, because he is a citizen of the state (New York) in which the action is pending. (But if P's suit was for trademark infringement - a kind of suit that raises a federal question but may be brought in either state or federal court - D would be able to remove, because the "not a citizen of the state where the action is pending" requirement does not apply in suits raising a federal question.)
2. Where suit goes: When a case is removed, it passes to the federal district court for the district and division embracing the place where the state cause of action is pending. (Example: If a suit is brought in the branch of the California state court system located in Sacramento, removal would be to the federal district court in the Eastern District of California encompassing Sacramento.) [139]
B. Diversity and amount in controversy rules applicable: In removal cases, the usual rules governing existence of a federal question or of diversity, and those governing the jurisdictional amount, apply. (Example: If there is no federal question, diversity must be "complete.") [139]
C. No plaintiff removal: Only a defendant may remove. A plaintiff defending a counterclaim may not remove. (Example: P brings a suit for product liability against D. D counterclaims for libel in an amount of $100,000. P is from Ohio; D is from Indiana. The suit is pending in Michigan state court. Even though P is not a resident of the state where the action is pending, P may not remove, because the right of removal is limited to defendants.) [140]
D. Look only at plaintiff's complaint: The right of removal is generally decided from the face of the pleadings. The jurisdictional allegations of plaintiff's complaint control. [140]
Example: P is badly injured in an automobile accident caused by D's negligence. P's medical bills total $80,000, but P sues only for $60,000, for the express purpose of thwarting D's right to remove. The jurisdictional allegations of P's complaint control, so that D may not remove even though more than $75,000 is "really" at stake.
E. Removal of multiple claims: Where P asserts against D in state court two claims, one of which could be removed if sued upon alone, and the other of which could not, complications arise. [141 - 143]
1. Diversity: If the claim for which there is federal jurisdiction is a diversity claim, the presence of the second claim (for which there is no original federal jurisdiction) defeats the defendant's right of removal entirely - the whole case must stay in state court. [142]
2. Federal question case: Where the claim for which there is original federal jurisdiction is a federal question claim, and there is another, "separate and independent," claim for which there is no original federal jurisdiction, D may remove the whole case. 28 U.S.C. §1441(c). [142]
Example: P and D1 are both citizens of Kentucky. P brings an action in Kentucky state court alleging federal antitrust violations by D1. P adds to that claim a claim against D1 and D2, also from Kentucky, asserting that the two Ds have violated Kentucky state unfair competition laws. Section 1441(c) will allow D1 and D2 to remove to federal court, if the antitrust claim is "separate and independent" from the state unfair competition claim.
a. Remand: If §1441(c) applies, and the entire case is removed to federal court, the federal judge need not hear the entire matter. The court may instead remand all matters in which state law predominates.
i. Remand even the federal claim: In fact, the federal court, after determining that removal is proper, may remand all claims - even the properly-removed federal claim - if state law predominates in the whole controversy.
F. Compulsory remand: If the federal judge concludes that the removal did not satisfy the statutory requirements, she must remand the case to the state court from which it came. (Example: If in a diversity case it turns out that one or more of the Ds was a citizen of the state in which the state suit was commenced, the federal judge must send the case back to the state court where it began.) [143]
G. Mechanics of removal: [143]
1. Time: D must usually file for removal within 30 days of the time he receives service of the state-court complaint.
2. All defendants joined: All defendants (except purely nominal ones) must join in the notice of removal. (However, if removal occurs under §1441(c)'s "separate and independent federal claim" provision, then only the defendant(s) to the separate and independent federal claim needs to sign the notice of removal.)
Chapter 4
PLEADINGS
I. FEDERAL PLEADING GENERALLY
A. Approach generally: [149 - 157]
1. Two types: In most instances, there are only two types of pleadings in a federal action. These are the complaint and the answer. The complaint is the document by which the plaintiff begins the case. The answer is the defendant's response to the complaint. [149]
a. Reply: In two circumstances, there will be a third document, called the reply. The reply is, in effect, an "answer to the answer." A reply is allowable: (1) if the answer contains a counterclaim (in which case a reply is required); and (2) at plaintiff's option, if plaintiff obtains a court order allowing the reply.
2. No verification generally: Pleadings in a federal action normally need not be "verified," i.e., sworn to by the litigant. However, there are a couple of exceptions, two of which are: (1) the complaint in a stockholders' derivative action (see FRCP 23.1); and (2) when the complaint is seeking a temporary restraining order (FRCP 65(b)). [151]
3. Attorney must sign: The pleader's lawyer must sign the pleadings. This is true for both the complaint and the answer. By signing, the lawyer indicates that to the best of her belief, formed after reasonable inquiry, the pleading is not interposed for any improper purpose (e.g., harassing or causing unnecessary delays), the claims and defenses are warranted by existing law or a nonfrivolous argument for changing existing law, and (in general) the allegations or denials have evidentiary support. FRCP 11. [152]
a. Sanctions: If Rule 11 is violated (e.g., the complaint, as the lawyer knows, is not well grounded in fact, or supported by any plausible legal argument), the court must impose an appropriate sanction on either the signing lawyer, the client, or both. The most common sanction is the award of attorneys' fees to the other side.
b. Safe harbor: A party against whom a Rule 11 motion is made has a 21-day "safe harbor"' period in which she can withdraw or modify the challenged pleading and thereby avoid any sanction.
4. Pleading in the alternative: The pleader, whether plaintiff or defendant, may plead "in the alternative." "A party may set forth two or more statements of a claim or defense alternately or hypothetically." FRCP 8(e). (Example: In count 1, P claims that work done for D was done under a valid written contract. In count 2, P claims that if the contract was not valid, P rendered value to D and can recover in quantum meruit for the value. Such alternative pleading is allowed by Rule 8(e).) [157]
II. THE COMPLAINT
A. Complaint generally: The complaint is the initial pleading in a lawsuit, and is filed by the plaintiff. [157]
1. Commences action: The filing of the complaint is deemed to "commence" the action. The date of filing of the complaint is what counts for statute of limitation purposes in federal question suits (though in diversity suits, "commencement" for statute-of-limitations purposes depends on how state law defines commencement.)
2. Elements of complaint: There are three essential elements that a complaint must have (FRCP 8(a)): [157]
a. Jurisdiction: A short and plain statement of the grounds upon which the court's jurisdiction depends;
b. Statement of the claim: A short and plain statement of the claim showing that the pleader is entitled to relief; and
c. Relief: A demand for judgment for the relief (e.g., money damages, injunction, etc.) which the pleader seeks.
B. Specificity: Plaintiff must make a "short and plain statement" of the claim showing that she is entitled to relief. The level of factual detail required is not high - gaps in the facts are usually remedied through discovery. Plaintiff needs to state only the facts, not the legal theory she is relying upon. [158]
C. Special matters: Certain "special matters" must be pleaded with particularity if they are to be raised at trial. [160]
1. Catalog: The special matters (listed in FRCP 9) include: (1) denial of a party's legal capacity to sue or be sued; (2) the circumstances giving rise to any allegation of fraud or mistake; (3) any denial of performance or occurrence of a condition precedent; (4) the existence of judgments or official documents on which the pleader plans to rely; (5) material facts of time and place; (6) special damages; and (7) certain aspects of admiralty and maritime jurisdiction. [160]
a. Note: The above matters requiring special pleading apply to the answer as well as to the complaint.
2. Effect of failure to plead: The pleader takes the full risk of failure to plead any special matter. (Example: P brings a diversity claim for breach of contract against D. P has suffered certain unusual consequential damages, but fails to plead these special damages as required by FRCP 9(g). Even if P proves these items at trial, P may not recover these damages, unless the court agrees to specially permit this "variance" between proof and pleadings.) [160]
III. MOTIONS AGAINST THE COMPLAINT
A. Defenses against validity of complaint: Either in the answer, or by separate motion, defendant may attack the validity of the complaint in a number of respects. Rule 12(b) lists the following such defenses: [161]
1. Lack of jurisdiction over the subject matter;
2. Lack of jurisdiction over the person;
3. Improper venue;
4. Insufficiency of process;
5. Insufficiency of service of process;
6. Failure to state a claim upon which relief may be granted; and
7. Failure to join a necessary party under Rule 19.
B. 12(b)(6) motion to dismiss for failure to state a claim: Defense (6) above is especially important: if D believes that P's complaint does not state a legally sufficient claim, he can make a Rule 12(b)(6) motion to dismiss for "failure to state a claim upon which relief can be granted." The motion asserts that on the facts as pleaded by P, no recovery is possible under any legal theory. (Example: If P's complaint is barred by the statute of limitations, D should move under 12(b)(6) for failure to state a valid claim.) [161 - 163]
1. Different motion once D files answer: A Rule 12(b)(6) motion to dismiss is generally made before D files his answer. After D has filed an answer, and the pleadings are complete, D can accomplish the same result by making a Rule 12(c) motion for "judgment on the pleadings." [164]
C. Amendment: If the complaint is dismissed in response to D's dismissal motion, P will almost always have the opportunity to amend the complaint. [162]
1. Amendment as of right: If D makes a motion against the complaint before filing his answer, and the court grants the dismissal, P may automatically amend - Rule 15(a) allows amendment without leave of court any time before a responsive pleading is served, and motions made under 12(b) are not deemed to be responsive pleadings.
2. Amendment by leave of court: If D serves his answer before making the Rule 12(b) motion, and is then successful with the motion, P may amend only by getting leave of court (i.e., permission). But the court will almost always grant this permission following a 12(b) dismissal.
D. Motion for more definite statement: If the complaint is so "vague or ambiguous that [the defendant] cannot reasonably be required to frame a responsive pleading," D may move for a more definite statement under Rule 12(e). [164]
E. Motion to strike: If P has included "redundant, immaterial, impertinent or scandalous" material in the complaint, D may move to have this material stricken from the pleading. Rule 12(f). [164]
IV. THE ANSWER
A. The answer generally: The defendant's response to the plaintiff's complaint is called an "answer." In the answer, D states in short and plain terms his defenses to each claim asserted, and admits or denies each count of plaintiff's complaint. Rule 8(b). [168]
1. Alternative pleading: Defenses, like claims, may be pleaded in the alternative. (Example: In a breach of contract suit brought by P, D can in count 1 of his answer state that no contract ever existed, and in count 2 state that if such a contract did exist, it was breached by P, not D.)
B. Signed by defendant's attorney: The answer must be signed by the defendant's lawyer. As with the complaint, the attorney's signature constitutes a certificate that the signer has read the pleading, believes it is well founded, and that it is not interposed for delay. Rule 11. [169]
C. Denials: The defendant may make various kinds of denials of the truth of plaintiff's allegations. [168]
1. Where not denied: Averments in a complaint, other than those concerning the amount of damages, are "admitted when not denied...in [an answer]." Rule 8(d).
2. Kinds of denials: There are five kinds of denials in federal practice:
a. General denial: D may make a "general" denial, by which he denies each and every allegation in P's complaint. (But D must then contest all of P's allegations, or face sanctions.)
b. Specific denial: D may make a "specific" denial, which denies all of the allegations of a particular paragraph or count of the complaint.
c. Qualified denial: D may make a "qualified" denial, i.e., a denial of a particular portion of a particular allegation.
d. Denial of knowledge or information (DKI): D may make a denial of knowledge or information (DKI), by which he says that he does not have enough knowledge or information sufficient to form a belief as to the truth of P's complaint (but D must do this in good faith).
e. Denial based on information and belief: D may deny "based on information and belief." By this, D effectively says, "I don't know for sure, but I reasonably believe that P's allegation is false." This kind of denial is often used by large corporate defendants.
D. Affirmative defenses: There are certain defenses which must be explicitly pleaded in the answer, if D is to raise them at trial. These are so-called "affirmative defenses." [169 - 170]
1. Listing: Rule 8(c) lists 19 specific affirmative defenses, of which the most important are contributory negligence, fraud, res judicata, statute of limitations, and illegality.
2. General formulation: Also, Rule 8(c) contains a more general requirement, by which D must plead affirmatively "any other matter constituting an avoidance or affirmative defense." Any defense which relies on facts particularly within the defendant's knowledge is likely to be found to be an affirmative defense.
E. Counterclaim: In addition to defenses, if D has a claim against P, he may (in all cases) and must (in some cases) plead that claim as a counterclaim. If the counterclaim is one which D is required to plead, it is called a compulsory counterclaim. If it is one which D has the option of pleading or not, it is called a permissive counterclaim. A counterclaim is compulsory if it "arises out of the transaction or occurrence that is the subject matter of the [plaintiff's] claim...." Rule 13(a). [170]
V. TIME FOR VARIOUS PLEADINGS
A. Time table: Here is the time table for various pleading steps (see Rule 12(a)): [170]
1. Complaint: Filing of the complaint usually occurs before it is served. Service must then normally occur within 120 days. Rule 4(m).
2. Answer: The answer must be served within 20 days after service of the complaint, except that
a. Different state rule: If P has served D out of state, by using the state long-arm (see Rule 4(k)(1)(A)), the time to answer allowed under that state rule (typically longer) controls.
b. Rule 12 motion: If D makes a Rule 12 motion against the complaint and loses, D has 10 days after the court denies the motion to answer.
c. Waiver of formal service: If D waives formal service pursuant to Rule 4(d), then he gets 60 days to answer running from the date the request for waiver was sent by P. Rule 12(a)(1)(B).
3. Reply to counterclaim: If the answer contains a counterclaim, P must serve his reply within 20 days after service of the answer.
VI. AMENDMENT OF THE PLEADINGS
A. Liberal policy: The Federal Rules are extremely liberal in allowing amendment of the pleadings. [171]
B. Amendment as of right: A pleading may be amended once as a matter of right (i.e., without leave of court) as follows: [171]
1. Complaint: The complaint may be amended once at any time before the answer is served. (A motion is not the equivalent of an answer, so the fact that D has made a motion against the complaint does not stop P from amending once as a matter of right.)
2. Answer: The answer may be amended once within 20 days after D has served it. (If the answer contains a counterclaim, the answer may be amended up until the time P has served her reply.)
C. Amendment by leave of court: If the above requirements for amendment of right are not met, the pleading may be amended only by leave of court, or by consent of the other side. But leave by the court to amend "shall be freely given when justice so requires." (Rule 15(a).) Normally, the court will deny leave to amend only if amendment would cause actual prejudice to the other party. [171]
D. Relation back: When a pleading has been amended, the amendment will relate back to the date of the original pleading, if the claim or defenses asserted in the amended pleading "arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading." Rule 15(c). This "relation back" doctrine is mainly useful in meeting statutes of limitations that have run between filing of the original complaint and the amendment. [172 - 174]
Example: On Jan. 1, P files a complaint against D for negligently manufacturing a product that has injured P. The case is brought in diversity in Ohio federal district court. On Feb. 1, the Ohio statute of limitations (which controls in a diversity case) on both negligence and product liability claims arising out of this episode runs. On March 1, P amends to add a count alleging strict products liability. Because the products liability claim arises out of the same conduct or transaction as set forth in the original negligence complaint, the amendment will relate back to Jan. 1, and P will be deemed to have met the statute of limitations for his products liability claim.
1. A single "conduct, transaction or occurrence": Courts take a fairly narrow view of when the amendment and the original pleading involve the same "conduct, transaction or occurrence" (the requirement for relation-back). If what's amended is simply P's claim or theory, the court will typically find that the "same conduct" test is satisfied. But where the underlying facts needed to sustain the new pleading are materially different from those alleged in the original complaint, the court is likely to find that the "same conduct" standard is not met. [173]
2. When action is deemed "commenced": According to Rule 3, an action is deemed "commenced" as of the date on which the complaint is filed. In federal question cases, it is to this date that the amendment relates back. In diversity cases, by contrast, it is the date that state law regards as the date of commencement which controls. [172]
Example: In a diversity case, assume that state law regards the date on which the complaint is served, not the filing date, as being the commencement. In a diversity action in that state, any relation back will be to the date the complaint was served, not to the filing date.
3. Change of party: Where an amendment to a pleading changes the party against whom the claim is asserted, the amendment "relates back" only if three requirements are met: (1) the amendment covers the "same transaction or occurrence" as the original pleading (the same rules discussed above); (2) the party to be brought in by amendment received actual notice of the action before the end of the 120 days following original service; and (3) before the end of that 120-day service period, the new party knew or should have known that "but for a mistake concerning the identity of the proper party, the action would have been brought against the [new] party." Rule 15(c)(3). [174]
Example: P's complaint names D1, and is filed just prior to the expiration of the statute of limitations. Ten days after the running of the statute, P discovers that the complaint really should have named D2. P amends the complaint to name D2, and serves D2 60 days after the filing of the original complaint. The amendment as to D2 relates back to the original, timely filing, because within 120 days of the original filing, D2 received notice of the action and learned that but for P's mistake about the proper party, the action would have been brought against D2 rather than D1.
VII. VARIANCE OF PROOF FROM PLEADINGS
A. Federal practice: The Federal Rules allow substantial deviation of the proof at trial from the pleadings, so long as the variance does not seriously prejudice the other side. Rule 15(b). Unless omission of the issue from the pleading was intentional, and was designed to lead the objecting party into wasted preparation, the court will almost certainly allow amendment at trial. [175]
Example: P brings a diversity action for breach of contract against D. P's complaint does not allege any special damages. At trial, P shows that P lost considerable business and profits. D objects that special damages were not pleaded. Since D probably cannot show the court that D has wasted preparation, the court will almost certainly allow P to amend his pleadings to allege the special damages. If necessary, the court will give D extra time to develop evidence to rebut P's newly-claimed special damages.
Chapter 5
DISCOVERY AND PRETRIAL CONFERENCE
I. GENERAL PRINCIPLES
A. Forms of discovery: Discovery under the Federal Rules includes six main types: [181 - 182]
1. Automatic disclosure;
2. Depositions, taken from both written and oral questions;
3. Interrogatories addressed to a party;
4. Requests to inspect documents or property;
5. Requests for admission of facts;
6. Requests for physical or mental examination.
II. SCOPE OF DISCOVERY
A. Scope generally: Rule 26(b), which applies to all forms of discovery, provides that the parties "may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party." So the two principal requirements for discoverability of material are that it is: (1) not privileged; and (2) relevant to some claim or defense in the suit. [183 - 184]
B. Relevant but inadmissible: To be discoverable, it is not required that the information necessarily be admissible. For example, inadmissible material may be relevant, and thus discoverable, if it: (1) is likely to serve as a lead to admissible evidence; or (2) relates to the identity and whereabouts of any witness who is thought to have discoverable information. [184]
C. Privilege: Only material which is not privileged may be discovered. [188]
1. Who may assert: Only the person who could assert the privilege at trial may resist discovery on the grounds of privilege. (Example: P sues D1 and D2 for conversion. At P's deposition of D1, P asks D1 questions relating to the facts. D1 knows the answer and is willing to respond, but D2's lawyer objects on the grounds that the questions may violate D1's privilege against self-incrimination. D2's objection is without substance, because only D1 - the person who could assert the privilege at trial - may assert the privilege during discovery proceedings.)
2. Determining existence of privilege: Generally, in diversity cases, state law of privilege applies. See Federal Rule of Evidence 501. (Example: P brings a diversity action against D, asserting that D intentionally inflicted emotional distress on him. D seeks to depose P's psychotherapist, to determine the extent of P's anguish. The suit is brought in Ohio Federal District Court. The privilege laws of the state of Ohio, not general federal principles, are looked to to determine whether patient-psychotherapist confidences are privileged.)
D. Trial preparation immunity: Certain immunity from discovery is given to the materials prepared by counsel for trial purposes, and to the opinions of experts that counsel has consulted in trial preparation. This immunity is often referred to as "work-product" immunity. [188 - 193]
1. Qualified immunity: "Qualified" immunity is given to documents prepared "in anticipation of litigation" or for trial, by a party or that party's representative. [190 - 191]
a. "Representative" defined: A party's "representatives" include his attorney, consultant, insurance company, and anybody working for any of these people (e.g., a private investigator hired by the attorney).
b. Hardship: The privilege is "qualified" rather than "absolute." This means that the other side might be able to get discovery of the materials, but only by showing "substantial need of the materials in preparation of [the] case" and an inability to obtain the equivalent materials "without undue hardship." Rule 26(b)(3).
Example: A car driven by D runs over P. D's insurance company interviews X, a non-party witness to the accident. The insurer then prepares a transcript of the statement. This transcript was prepared "in anticipation of litigation," so it is protected by the qualified work-product immunity. Therefore, P will be able to obtain discovery of it only if he can show substantial need, and the inability without undue hardship to obtain the substantial equivalent by other means. Since P could conduct his own interview of the witness, the court will probably find that the qualified immunity is not overcome.
2. Absolute immunity: In addition to the qualified work-product immunity discussed above, there is also "absolute" immunity. Rule 26(b)(3) provides that even where a party has substantial need for materials (in other words, the showing for qualified immunity has been made), the court "shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation." [191 - 193]
Example: Same facts as above example. Now, D's lawyer reads X's statement, and writes a memo to the file stating "X appears to be lying for the following three reasons...." This lawyer memo, since it reflects the mental impressions and conclusions of an attorney or other representative of a party, will receive absolute immunity, and no showing by P will entitle him to get the memo.
E. Statements by witnesses: A person who makes a statement to a party or the party's lawyer may obtain a copy of that statement without any special showing. Rule 26(b)(3). This is true whether the person making the statement is a party or a non-party. [193 - 194]
Example: In an accident suit, D's insurance company takes P's statement about the accident, and transcribes it. D must give P a copy of P's statement, without any special showing of need by P.
F. Names of witnesses: The "identity and location of persons having knowledge of any discoverable matter" (so-called "occurrence witnesses") are discoverable. Rule 26(b)(1). This means, for instance, that each party must upon request disclose to the other the identity and whereabouts of any eyewitness to the events of the lawsuit. (Example: In an accident case, D's lawyer and investigator locate all eight people who saw the accident. D must on request furnish this list to P.) [194]
1. Some disclosure is automatic: If a person has discoverable information that a party plans to use in its case, then that party must automatically disclose the person's name and address (even without a specific request from the adversary), early on in the litigation. See Rule 26(a)(1)(A).
G. Discovery concerning experts: [194 - 197]
1. Experts to be called at trial: Where one side expects to call an expert at trial, the other side gets extensive discovery:
a. Identity: First, a party must automatically (without a request) give the other side a list identifying each expert who will be called at trial.
b. Report: Second, the party who intends to call an expert at trial must have the expert prepare and sign a report containing, among other things: (i) the expert's opinions, and the basis for them; (ii) the data considered by the expert; (iii) any exhibits to be used by the expert at trial; (iv) the expert's qualifications; (v) her compensation, and (vi) the names of all other cases in which she testified as an expert in the preceding 4 years.
c. Deposition: The expert who will be called at trial must also be made available for deposition by the other side.
2. Experts retained by counsel, but not to be called at trial: Where an expert has been retained by a party, but will not be called at trial, discovery concerning that expert (her identity, knowledge and opinions) may be discovered only upon a showing of exceptional circumstances making it impractical for the party seeking discovery to obtain the information by other means. Rule 26(b)(4)(B). [196]
3. Unretained experts not to be called at trial: Where an expert is consulted by a party, but not retained, and not to be called at trial, there is virtually no way the other side can discover the identity or opinions of that expert. [196]
4. Participant experts: A participant expert - one who actually took part in the transactions or occurrences that are part of the subject matter of the lawsuit - is treated like an ordinary witness. (Example: P's estate sues to compel D, an insurance company, to pay off on a policy covering P's life. D claims that it was a suicide, based on the results of an autopsy conducted by X, a pathologist. P may depose X, even though X is an expert - because X participated in the events, he is treated like an ordinary witness for purposes of discovery.) [197]
a. Expert is a party: Similarly, a party who is herself an expert (e.g., a doctor who is a defendant in a malpractice suit) is treated like an ordinary witness for discovery purposes, not like an expert.
H. Insurance: A party may obtain discovery of the existence and contents of any insurance agreement under which any insurer will be liable to satisfy any judgment that may result. (Example: P brings an automobile negligence suit against D in diversity. P may ask D, in an interrogatory, whether D has insurance, and in what amount by what insurer. P may do this without any special showing of need.) [198]
I. Mandatory disclosure: Certain types of disclosure are automatic and mandatory. [198 - 202]
1. Automatic pre-discovery disclosure: Under Rule 26(a)(1), a party must, even without a request from the other side, automatically disclose certain things early in the litigation. The most important are:
a. All witnesses with discoverable information: First, each party must disclose the name, address and phone number of each individual likely to have discoverable information that the party plans to use in its case.
Example: P sues D concerning a car accident in which P and D drove cars that collided. D plans to call W, who saw the accident, as a trial witness. Early in the case, D must automatically disclose W's name and address to P, even without a request from P for this information. (But if D didn't plan to call W, perhaps because W's story favors P, then D would not have to disclose W's name unless P specifically asked for this type of information in discovery.)
b. Documents: Second, a party must furnish a copy, or else a description by category and location, of all documents and tangible things in that party's possession, that the party plans to use in its case.
2. Other: Later in the litigation, each party must automatically disclose to the other the details of expert testimony (as discussed above) and witnesses and exhibits to be used at trial.
J. Privilege log: If a party is declining to furnish documents or information because of a claim of privilege or work product immunity, the party must make the claim expressly, and must describe the nature of the documents or communications. (Thus the party can't keep silent about the fact that such a claim is being made or about the nature of the documents/communications as to which it is being made). Rule 26(b)(5). [203]
K. Duty to supplement: A party who makes a disclosure during discovery now normally has a duty to supplement that response if the party then learns that the disclosed information is incomplete or incorrect. [202]
1. How it applies: This "duty to supplement" applies to any automatic pre-discovery disclosure (mainly witness names and documents); to any disclosure regarding experts to be called at trial; and to any responses to an interrogatory, a request for production, or request for admission. Rule 26(e)(1); 26(e)(2).
Example: P is suing D regarding a car accident in which P was injured. Early in the litigation, P gives D a list of all witnesses to the accident that P knows of, as required by Rule 26(a)(1)(A). If P later learns of another person who saw the accident, P must "supplement" her earlier disclosure by telling D about the new witness.
III. METHODS OF DISCOVERY
A. Characteristics: The various forms of discovery (depositions, interrogatories, requests to produce, requests for admission and requests for examination) have several common characteristics: [207]
1. Extrajudicial: Each of these methods (except requests for physical examination) operates without intervention of the court. Only where one party refuses to comply with the other's discovery request will the court intervene.
2. Scope: The scope of discovery is the same for all of these forms: the material sought must be relevant to the subject matter for the suit, and unprivileged.
3. Signature required: Every request for discovery of each of these types, and any response or objection to discovery, must be signed by the lawyer preparing it. Rule 26(g).
4. Only parties: Each of these types - except for depositions - may only be addressed to a party. Depositions (whether upon oral or written questions) may be addressed to either a party or to a non-party who possesses relevant information.
B. Oral depositions: After the beginning of an action, any party may take the oral testimony of any person thought to have information within the scope of discovery. This is known as an oral deposition. Rule 30. [208 - 210]
1. Usable against non-party: Not only parties, but any non-party with relevant information, may be deposed.
2. Subpoena: If a non-party is to be deposed, then the discovering party can only force the deponent to attend by issuing a subpoena. This subpoena must require the deposition to be held no more than 100 miles from the place where the deponent resides, is employed, or regularly transacts business in person. Rule 45(c)(3)(A)(ii).
a. No subpoena for party: If a party is to be deposed, a subpoena is not used. Instead, non-compliance with the notice can be followed up by a motion to compel discovery or to impose sanctions under Rule 37.
3. Request to produce: The person seeking discovery will often also want documents held by the deponent. If the deponent is a party, the discovering party may attach a Rule 34 request to produce to the notice to the party. But if the deponent is a non-party, the discovering party must use a subpoena duces tecum. [213]
4. Limits to ten: Each side is limited to a total of ten depositions, unless the adversary agrees to more or the court issues an order allowing more. Rule 30(a)(2)(A).
5. Method of recording: The party ordering the deposition can arrange to have it recorded by stenography (court reporter), by audio tape recorder, or by video recorder. Rule 30(b)(2).
C. Depositions upon written questions: Any party may take the oral responses to written questions, from any person (party or non-party) thought to have discoverable information. Rule 31. This is called a "deposition on written questions." [211]
1. Distant non-party witnesses: Depositions on written questions are mainly used for deposing distant non-party witnesses. Such witnesses cannot be served with interrogatories (since these are limited to parties), and cannot be compelled to travel more than 100 miles from their home or business.
D. Interrogatories to the parties: An interrogatory is a set of written questions to be answered in writing by the person to whom they are addressed. Interrogatories may be addressed only to a party. Rule 33(a). [211]
1. Limit of 25 questions: Each party is limited to 25 interrogatory questions directed to any other party, unless the parties stipulate otherwise or the court orders otherwise. Rule 33(a).
E. Requests for admission: One party may serve upon another party a written request for the admission, for the purposes of the pending action only, of the truth of any discoverable matters. Rule 36. This is a "request for admission." [212 - 213]
1. Coverage: The statements whose genuineness may be requested include statements or opinions of fact, the application of law to fact, and the genuineness of any documents. (Example: P, in a breach of contract action, may request that D admit that the attached document is a contract signed by both P and D.) [212]
2. Expenses for failure to admit: If a party fails to admit the truth of any matter requested for admission under Rule 36(a), and the party making the request proves the truth of the matter at trial, the court may then require the party who refused to admit to pay reasonable expenses sustained by the movant in proving the matter. Rule 37(c). (But no expenses may be charged in several situations, including where the party who failed to admit had reasonable grounds to think he might prevail on the issue at trial.) [213]
3. Effect at trial: If a party makes an admission under Rule 36, the matter is normally conclusively established at trial. (However, the court may grant a motion to withdraw or amend the admission, if this would help the action to be presented on its merits, and would not prejudice the other side.) [213]
F. Request to produce documents or to inspect land: A party may require any other party to produce documents and things. Rule 34. Thus any papers, photos or objects relevant to the subject matter of the case may be obtained from any other party, but not from a non-party. (Example: P sues D1 and D2 for antitrust and price fixing. P believes that the records of both Ds will show that they set prices in concert. P may require D1 and D2 to produce any documents in their control relating to the setting of prices.) [213]
1. Only to parties: A request to produce can only be addressed to parties. If documents in the possession of a non-party are desired, a subpoena duces tecum must be used.
2. Party's control: A party may be required to produce only those documents or other objects which are in her "possession, custody or control." Rule 34(a). [214]
3. Land: Rule 34 also allows a party to demand the right to inspect, photograph and survey any land within the control of another party. (Example: P sues D, a merchant, for negligence, because P fell on D's slippery floor. P may require D to open the premises so that P may inspect and photograph them.)
G. Physical and mental examination: When the mental or physical condition of a party is in controversy, the court may order the party to submit to a physical or mental examination by a suitably licensed or certified examiner. Rule 35. [214 - 215]
1. Motion and good cause: Unlike all other forms of discovery, Rule 35 operates only by court order. The discovering party must make a motion upon notice to the party to be examined, and must show good cause why the examination is needed. [214]
2. Controversy: The physical or mental condition of the party must be in controversy. In other words, it is not enough (as it is for other forms of discovery) that the condition would be somehow relevant. (Example: If P is suing D for medical malpractice arising out of an operation, P's condition would obviously be in controversy, and D would be entitled to have a physician conduct a physical examination of P. But if P were suing D for breach of contract, and D had some suspicion that P was fabricating the whole incident, a mental examination of P to find evidence of delusional behavior would probably not be found to be supported by good cause, so the court order granting the exam would probably not be made.) [214]
3. Reports from examiner: The actual medical report produced through a Rule 35 examination is discoverable (in contrast to the usual non-discoverability of experts' reports).
a. Who may receive: A person examined (typically the opposing party) may request, from the party causing the exam to be made, a copy of the examiner's written report.
b. Other examinations: Once the examined party asks for and receives this report, then the other party is entitled to reports of any other examinations made at the request of the examinee for the same condition. (Example: P sues D for automobile negligence. D causes P to be examined by a doctor retained by D, to measure the extent of P's injuries. P asks for a copy of the report, and D complies. Now, D is entitled to receive from P copies of any other reports of examinations made of P at P's request. In other words, by asking D for the report, P is deemed to have waived the physician-patient privilege as to exams conducted at P's request.) [215]
IV. ORDERS AND SANCTIONS
A. Two types: Discovery normally proceeds without court intervention. But the court where the action is pending may intercede in two main ways, by issuing orders and by awarding sanctions. The court may order abuse of discovery stopped (a protective order) or may order a recalcitrant party to furnish discovery (order compelling discovery). Sanctions can be awarded for failing to handle discovery properly.
B. Abuse of discovery: One party sometimes tries to use discovery to harass her adversary. (Example: P requests that D reveal trade secrets, or schedules 10 repetitive depositions of D.) The discoveree may fight back in two ways: (1) by simply objecting to a particular request; or (2) by seeking a Rule 26 protective order. [217 - 219]
1. Objection: A party may object to a discovery request the same way a question at trial may be objected to. Typical grounds are that the matter sought is not within the scope of discovery (i.e., not relevant to the subject matter) or that it is privileged. [217]
a. Form of objection: The form depends on the type of discovery. An objection to an interrogatory question is written down as part of the set of answers. Similarly, an objection to a request to admit is made in writing. An objection to a deposition question, by contrast, is raised as an oral objection by the lawyer representing the deponent or the party opposing the deposition. The deposition then continues, and the objections are later dealt with en masse by the judge.
2. Protective order: Where more than a few questions are at stake, the party opposing discovery may seek a "protective order." Rule 26(c) allows the judge to make "any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense...." [218 - 219]
Example 1: In a simple automobile negligence case brought under diversity, D schedules P for ten different depositions, and asks substantially the same questions each time. P may seek a protective order in which the judge orders that no further depositions of P may take place at all. The court will probably grant this request.
Example 2: P sues D for patent infringement, alleging that D's manufacturing methods violate P's patents. In a deposition of D's vice president, P asks the details of D's secret manufacturing processes. D may seek a protective order preventing P from learning these trade secrets, perhaps on the grounds that P does not need to know these secrets in order to pursue his patent case.
a. Prohibition of public disclosure: One common type of protective order allows trade secrets or other information to be discovered, but then bars the public disclosure of the information by the discovering litigant. (Example: On the facts of the above example, the judge might allow P to get discovery of D's trade secrets, but prevent P from disclosing that information to any third party.) [218]
C. Compelling discovery: Conversely, if one party refuses to cooperate in the other's discovery attempts, the aggrieved party may seek an order compelling discovery under Rule 37(a). [219 - 220]
1. When available: An order to compel discovery may be granted if the discoveree fails to: (1) answer a written or oral deposition question; (2) answer an interrogatory; (3) produce documents, or allow an inspection; (4) designate an officer to answer deposition questions, if the discoveree is a corporation.
D. Sanctions for failing to furnish discovery: The court may order a number of sanctions against parties who behave unreasonably during discovery. Principally, these sanctions are used against a party who fails to cooperate in the other party's discovery efforts. [220 - 223]
1. Financial sanctions: If a discovering party seeks an order compelling discovery, and the court grants the order, the court may require the discoveree to pay the reasonable expenses the other party incurred in obtaining the order. These may include attorney's fees for procuring the order. Rule 37(b). [220]
2. Other sanctions: Once one party obtains an order compelling the other to submit to discovery, and the latter persists in her refusal to grant discovery, then the court may (in addition to the financial sanctions mentioned above) impose additional sanctions: [221]
a. Facts established: The court may order that the matters involved in the discovery be taken to be established. (Example: In a product liability suit, P wants discovery of D's records, to show that D made the product that injured P. If D refuses to cooperate even after the court issues an order compelling discovery, then the court may treat as established D's having manufactured the item.)
b. Claims or defenses barred: The court may prevent the disobedient party from making certain claims or defenses, or introducing certain matters in evidence.
c. Entry of judgment: The court may also dismiss the action, or enter a default judgment.
d. Contempt: Finally, the court may hold the disobedient party in contempt of court.
V. USE OF DISCOVERY RESULTS AT TRIAL
A. Use at same trial: The rules for determining whether the fruits of discovery can be introduced at trial vary depending on the type of discovery. [223]
B. Request to produce: The admissibility of documents and reports that were obtained through a Rule 34 request to produce is determined without regard to the fact that these items were obtained through discovery. These documents will thus be admissible unless their contents constitute prejudicial, hearsay, or other inadmissible material. [224]
C. Depositions: The admissibility of depositions is determined through a two-part test. Both parts must be satisfied: [224 - 226]
1. Test 1: First, determine whether the deposition statement sought to be introduced would be admissible if the deponent were giving live testimony. If not, the statement is automatically inadmissible. (Example: Deponent says, "X told me that he committed the murder." If the hearsay rule would prevent deponent from making this statement live at trial, it will also prevent the deposition statement from coming in.)
2. Test 2: Second, apply the "four categories" test. Since the use of a deposition statement rather than live testimony is itself a form of hearsay, the deposition statement must fall within one of the four following categories, which are in effect exceptions to the hearsay rule:
a. Adverse party: The deposition of an adverse party, or of a director or officer of an adverse corporate party, may be admitted for any purpose at all. See Rule 32(a)(2). [224]
b. Impeachment: The deposition of any witness, party or non-party, may be used to impeach the witness' credibility. See Rule 32(a)(1).
c. Adverse witness' deposition for substantive purposes: A party may use a deposition of an adverse witness for substantive purposes, if it conflicts with that witness' trial testimony. (Example: In a suit by P versus D, W, a witness favorable to D and called by D, states at trial, "The light was red when P drove through it." P may introduce W's statement in a deposition, "The light was green when P drove through," not just for impeachment but to prove the substantive fact that the light was green.)
d. Other circumstances: The deposition of any person (party or non-party) can be used for any purpose if one of the following conditions, all relating to the witness' unavailability, exists: (1) the deponent is dead; (2) the deponent is located 100 or more miles from the trial; (3) the deponent is too ill to testify; (4) the deponent is not obtainable by subpoena; or (5) there are exceptional circumstances that make it desirable to dispense with the deponent's live testimony. See Rule 32(a)(3).
3. Partial offering: If only part of a deposition is offered into evidence by one party, an adverse party may introduce any other parts of the deposition which in fairness ought to be considered with the part introduced. Rule 32(a)(4). (Example: If one side reads part of an answer, the other side may almost always read the rest of the answer.)
D. Interrogatories: The interrogatory answer of a party can be used by an adverse party for any purpose. [226]
1. Not binding: Statements made in interrogatories, like statements made in depositions, are not binding upon the maker - he may contradict them in court. (Obviously the witness' credibility will suffer, but the witness is not legally bound to the prior statement.)
E. Admissions: Admissions obtained under Rule 36 conclusively establish the matter admitted. [226]
F. Physical and mental examinations: The results of physical and mental examinations made under Rule 35 are almost always admissible at trial. (Also, remember that if the examined party requests and obtains a report of the examiner, the examinee is held to waive any privilege associated with the report, such as the doctor/patient privilege.) [226]
Note: All of the above discussion of use at trial assumes that the use takes place during the very proceeding that gave rise to the discovery itself. Where the fruits of discovery in Action 1 are sought to be used in Action 2, different, more complicated, rules apply.
VI. PRETRIAL CONFERENCE
A. Generally: Many states, and the federal system, give the judge the authority to conduct a pretrial conference. The judge may use such a conference to simplify or formulate the issues for trial, and to facilitate a settlement. See Rule 16(a) and 16(c). [230 - 231]
1. Scheduling: The federal judge must issue a "scheduling order" within 120 days after filing of the complaint. This order sets a time limit for filing of motions, completion of discovery, etc. Rule 16(b). The trial judge may, but need not, conduct a pretrial conference.
2. Pretrial order: If the judge does hold a pretrial conference, she then must enter a pretrial order reciting the actions taken in the conference (e.g., narrowing the issues to be litigated, and summarizing the admissions of fact made by the lawyers).
Chapter 6
ASCERTAINING APPLICABLE LAW
I. NATURE OF PROBLEM
A. Generally: A particular controversy that is litigable in federal court may also, in most situations, be brought in state court. This chapter is about which law - federal law or state law - should be applied in cases brought in federal court. [235]
1. Forum shopping: A key concept to keep in sight is the federal courts' desire to discourage "forum shopping." If a particular case could be brought in either state or federal court, and the state courts would apply rules of law different from those that would be applied by the federal court, the plaintiff (and in situations where removal is possible, the defendant) will have an incentive to choose the court more favorable to her case. To prevent forum shopping of this sort, the courts generally apply state law in diversity cases. [235]
2. Rules of Decision Act: The Rules of Decision Act (RDA), 28 U.S.C. §1652, based upon the Supremacy Clause of the Constitution, is the main statute stating when the federal court should apply federal law, and when it should apply state law. [235 - 238]
a. Federal law applied: According to the clear language of the RDA, the federal Constitution, treaties, and constitutional statutes enacted by Congress, always take precedence, where relevant, over all state provisions. (In fact, this rule applies not only to federal proceedings but also to state court proceedings.)
b. State statutes: The RDA also clearly provides that in the absence of a federal constitutional or statutory provision on point, the federal courts must follow state constitutions and statutes. [235]
c. Dispute about common law: The interesting question, and one on which the RDA is silent, is what the federal court should do where there is no controlling constitutional or statutory provision, federal or state. In other words, the key question is, what law should the federal court follow where what is at issue is "common," or judge-made, law. [235]
Example: P sues D in a diversity action arising out of an automobile accident that took place in Kansas. The Kansas courts apply common-law contributory negligence. Must the federal judge hearing the case apply Kansas' common-law contributory negligence, or is the court free to make its own determination that comparative negligence is a sounder principle? The answer, as set forth in Erie v. Tompkins (discussed below), is that Kansas common law must be followed.
B. Erie v. Tompkins: The most important Supreme Court case in all of Civil Procedure is Erie Railroad v. Tompkins. That case holds that when the Rules of Decision Act says that the federal courts must apply the "law of the several states, except where the Constitution or ... acts of Congress otherwise require...," this language applies to state common law as well as state statutory law. The net result is that in diversity cases, the federal courts must apply state judge-made law on any substantive issue. [237 - 238]
1. Discrimination against citizens: The contrary rule that had been followed before Erie - Swift v. Tyson's holding that federal judges could ignore state common law in diversity cases - allowed non-citizens to discriminate against citizens of the state where the federal court sat. (Example: P, an Ohio resident, sues D, a Kansas resident, in federal district court for the District of Kansas. Kansas law would be favorable to D. Swift v. Tyson, which would allow P to choose federal or state court in Kansas, whichever was more favorable to him, would thus allow P to profit at D's expense. Erie v. Tompkins, by forcing the federal court to apply Kansas law, guarantees D, the Kansas citizen, the benefits of his own state's law.)
2. Facts of Erie: The facts of Erie remain a good illustration of the case's principle, that state rather than federal common law is to be followed on substantive matters in diversity cases. P, a Pennsylvania citizen, was injured while walking on the right of way maintained by D, a New York railroad. Under Pennsylvania judge-made law, P would probably have lost his negligence suit, because P was a trespasser, to whom D would be liable only for gross, not ordinary, negligence. P instead sued in New York federal district court, expecting the federal court to follow Swift v. Tyson and make its own "federal common law" which P hoped would make the railroad liable to him for ordinary negligence.
a. Holding: But the Supreme Court held that the federal court must follow state law on substantive issues, and that "state law" included judge-made (common) law as well as state statutes. So Pennsylvania law on the railroad's duty of care was to be followed (though the Court did not specify why Pennsylvania rather than New York law was what should be followed).
II. ERIE PROBLEMS
A. Ascertaining state law: Several problems arise when the federal court tries to determine what is the "state law," when there is no state statute on point. Obviously if the highest court of the state where the federal court sits has recently spoken on the issue, the problem is easy. But where this is not the case, life gets trickier. The general principle is that the federal court must try to determine how the state's highest court would determine the issue if the case arose before it today. [239 - 240]
1. Intermediate-court decisions: If there is no holding by the highest state court, the federal court looking for state law to apply considers intermediate-court decisions. These intermediate-court decisions will normally be followed, unless there are other reasons to believe that the state's highest court would not follow them. [239]
2. Where no state court has spoken: If no court in the state has ever considered the issue in question, then the court can look to other sources. One important source is decisions in prior federal diversity cases which have attempted to predict and apply the law of the same state. Similarly, the federal court may look at the practice of other states, other authorities (e.g., Restatements), etc. But the issue is always: What would the highest state court decide today? [239]
3. State decision obsolete: Where there is an old determination of state law by the highest state court, the federal court hearing the present case is always free to conclude that the state court would decide the issue differently if confronted with the present case. In that situation, the old ruling is not binding. [240]
4. Change to conform with new state decision: The federal court (even an appellate court) must give effect to a new decision of a state's highest court, even if the state court decision was handed down after the federal district court action was completed. [240]
B. Conflict of laws: The federal court must also apply state law governing conflict of laws. In other words, the conflict of laws rules of the state where the federal court sits must be followed. [Klaxon Co. v. Stentor Electric Mfg. Co.] [241]
Example: The Ps, soldiers, are injured in Cambodia by an explosion of a shell manufactured by D. The Ps sue D in Texas federal court. Texas tort law allows strict liability. The law of Cambodia does not allow strict liability.
Held, Texas conflict-of-laws principles must apply. Since the Texas courts would apply the tort law of the place where the accident occurred - Cambodia - so must the federal court. Therefore, strict liability will not be applied, and the Ps lose. [Day & Zimmermann, Inc. v. Challoner]
C. Burden of proof: The federal court must also follow the rules governing the allocation of the burden of proof in force in the state where the federal court is sitting. [241]
D. Procedure/substance distinction: Erie v. Tompkins says that state common law controls in "substantive" matters. But federal rules and policies control on matters that are essentially "procedural." Here are some guidelines for handling the procedure/substance distinction: [241 - 251]
1. Federal Rules take precedence: Erie is only applicable where there is no controlling federal statute. Since the Federal Rules of Civil Procedure are adopted pursuant to a congressional statute (the Rules Enabling Act), the FRCP, when applicable, take precedence over state policy. So if a Federal Rule arguably applies to the situation at hand, ask two questions: (1) Does the Rule in fact apply to the issue at hand? and (2) Is the Rule valid under the Rules Enabling Act? If the answer to both questions is "yes," then the Federal Rule takes precedence. [242]
a. Does Rule apply: The mere fact that a Federal Rule seems to have something to do with the issue at hand does not mean that the Rule applies - the Rules are construed narrowly, to cover just those situations that Congress intended them to cover. [244 - 246]
Example: FRCP 3 provides that a civil action "is commenced by filing a complaint with the court." P files a complaint against D with the court on Feb. 1. The statute of limitations on P's right of action expires on Feb. 15. On March 1, P causes D to be served with process. The suit takes place in Kentucky federal district court. Kentucky state law provides that the statute of limitations is satisfied only by service upon the defendant, not by mere filing with the court.
The federal court for Kentucky must ask, "Does Rule 3 really apply to this situation?" The Supreme Court has held on these facts that Rule 3 does not speak to the issue of when a state statute of limitations is tolled, but is merely designed to give a starting point for the measurement of various time periods in the federal suit. Since neither Rule 3 nor any other Federal Rule is on point, state common law - in this case, Kentucky's principle that the date of service is what counts - must be applied in the federal action. [Ragan v. Merchants Transfer; Walker v. Armco Steel Corp.]
b. Is Rule valid: If you conclude that the Rule applies to the issue at hand, the next question is, "Is the Rule valid?" The Rules Enabling Act provides that to be valid, a Rule must not "abridge, enlarge, [or] modify the substantive rights of any litigant." But as long as the Rule is arguably "procedural," it will be found to satisfy this test. No Federal Rule has ever been found to violate the "no abridgement, enlargement or modification of substantive rights" test of the Rules Enabling Act. [242]
c. Illustration: To see how the two part test works, consider this famous example: [248 - 249]
Example: P sues D in diversity in Massachusetts federal court. D is the executor of an estate. P causes process to be served on D's wife, by leaving copies of the summons and complaint with her at D's dwelling place. Federal Rule 4(d)(1) (now Rule 4(e)(2)) allows service on a defendant by leaving copies of the summons and complaint at the defendant's dwelling place with a person of suitable age and discretion, a standard met here. But a Massachusetts statute sets special standards for service on an executor of an estate, which were not complied with here.
Held, first, Rule 4(d)(1) is in harmony with the Enabling Act, since it is basically procedural. Second, the Rule clearly applies to the issue here, since it specifies the allowable method of service in a federal action. Therefore, the Rule takes priority over any contrary state policy or statute, even if applying the Rule might help produce a different outcome than had the state rule been applied. [Hanna v. Plumer]
2. Case not covered by a Federal Rule: If the issue at hand is not covered by anything in the FRCP, but is nonetheless arguably "procedural," the situation is more complicated: [246 - 248]
a. Rejection of "outcome determination": At one time, the test was whether the choice between state and federal policy was "outcome determinative" - if the choice was at all likely to influence who won the lawsuit, then the litigants' substantive rights would be affected by the choice, and the state policy must be followed. But the Supreme Court has rejected outcome-determinativeness as the standard. [Byrd v. Blue Ridge] [246]
b. Balance state and federal policies: Today, the federal court balances the state and federal policies against each other. Where the state interest in having its policy followed is fairly weak, and the federal interest strong, the court is likely to hold that the federal procedural policy should be followed. Here are some illustrations of how this balancing works out: [246 - 248]
i. Judge/Jury allocation: Where the question is, "Who decides a certain factual issue, judge or jury?" federal policies are to be followed. (Example: Whether P was an employee rather than an independent contractor is to be determined by following the federal policy of having factual matters determined by a jury, not the state policy of having such an issue decided by the judge, because the federal policy on judge-jury allocation is strong, the state policy is not tightly bound up with the rights of the parties, and the choice is not very outcome determinative. [Byrd v. Blue Ridge]) [246]
ii. Door-closing statute: Similarly, state procedural rules limiting in-state suits by non-residents against foreign corporations - "door-closing" rules - need not be followed by the federal court; the state interest here is weak, and the federal interest in furnishing a convenient forum for litigants is a strong one. [Szantay v. Beech Aircraft] [247]
iii. Unanimity for jury trials: Federal policy requiring a unanimous jury verdict will be applied in diversity suits, at the expense of the state policy allowing a verdict based on a less-than-unanimous majority. The state's policy (reducing hung juries) has little weight here, since the case is not taking place in the state system; the federal policy is strong, supported by tradition; the choice is not heavily outcome-determinative.
iv. Statute of limitations: But a state statute of limitations must be followed in a diversity case. Here, the state's interest is heavily outcome-determinative, and deeply bound up with the rights of the parties. The federal interest is relatively weak, and there is little to be gained from district-to-district uniformity. [Guaranty Trust Co. v. York, an older case that is still valid.] [244]
3. Federal statute (not Rule) on point: Where there is a federal procedural statute (as distinct from a Federal Rule) that is directly on point, it will control over any state law or policy, even though this may promote forum shopping. [234]
III. FEDERAL COMMON LAW
A. Federal common law still exists: Even though Erie makes it clear that there is no general federal common law, there are still particular instances in which federal common law is applied. That is, the federal court is occasionally free to disregard state law in deciding the case. [254]
B. Federal question cases: Most importantly, in federal question cases, federal common law, not state common law, usually applies. (Example: P sues D, the United States, in federal district court for the Northern District of Texas. This suit raises a federal question, since it involves the U.S. as a party. Even if there is no federal statute on point, and even if it is clear that under Texas law the U.S. would not be negligent, the federal court may and should apply general federal common law principles in deciding whether the U.S. was negligent and is thus liable.) [254]
C. Diversity cases: Occasionally, federal common law may even be applied where the basis for federal jurisdiction is diversity. For instance, if P's claim does not raise issues of federal law, but a defense asserted by D does raise federal law, the validity of that defense will be determined under federal common law principles. [255]
D. Federal common law in state courts: Conversely, the states are occasionally required to apply federal common law. If concurrent jurisdiction (state and federal) exists concerning a particular claim, and the suit is brought in state court, federal common law applies there if it would apply in federal court. [256]
Example: P brings a state-court action against D, a city, under a federal statute giving a cause of action for deprivation of civil rights. State law requires that P give notice to D within 120 days of injury before suing D if D is a city. Held, the state court may not impose this state-created procedural rule, since it would abridge federally-granted rights. [Felder v. Casey]
Chapter 7
TRIAL PROCEDURE
I. BURDEN OF PROOF
A. Two meanings of "burden of proof": There are two kinds of "burden of proof" which a party may have to bear. Assuming that the issue is called A: [261]
1. Burden of production: The party bears the "burden of production" if the following is true: unless the party produces some evidence that A exists, the judge must direct the jury to find that A does not exist. [261]
2. Burden of persuasion: The party bears the "burden of persuasion" if the following is true: at the close of the evidence, if the jury cannot decide whether A exists or not, the jury must find that A does not exist. [261]
Example of two burdens: P sues D, arguing that D failed to use reasonable care in driving his car, and therefore hit P, a pedestrian. P bears both the burden of production and the burden of persuasion as to D's negligence. To meet the burden of production, P will have to come up with at least some evidence that D was careless; if P does not do so, the judge will not let the jury decide the issue of negligence, and will instead direct the jury to find that there was no negligence. If P comes up with some evidence of negligence, and the case goes to the jury, the fact that P also bears the burden of persuasion means that the judge will tell the jury, "In order to find that D was negligent, you must find it more likely than not that D was negligent. If you find exactly a 50-50 chance that D was negligent, you must find non-negligence."
II. PRESUMPTIONS
A. Definition: A presumption is a convention that when a designated basic fact exists (call the designated basic fact B), another fact, called the presumed fact (call it P) must be taken to exist unless there is rebuttal evidence to show that P does not exist. [262]
B. Effect of presumption: The existence of a presumption always has an effect on the burden of production, and sometimes has an effect on the burden of persuasion. (In the following discussion, assume that there is a legal presumption that if B, then P. Assume also that plaintiff is trying to prove P. Also assume that if there were no presumption, plaintiff would bear the burden of persuasion as to P.) [262 - 264]
1. Effect on burden of production: The party against whom the presumption is directed bears the initial burden of producing evidence of non-P. If he produces no evidence, he suffers a directed verdict. [262]
Example: A statute establishes a presumption that when a railroad locomotive causes damage, the railroad was negligent. P proves that D's locomotive caused damage to him. Neither party puts on any evidence about D's actual negligence. Assume that if there were no presumption, P would have the burden of production on negligence. By showing damage, P has carried his burden of production; if D does not come up with any rebutting evidence of non-negligence, the judge will direct the jury to find for P on the negligence issue.
2. Burden of persuasion: If the defendant offers enough evidence of non-P that a reasonable jury might find non-P, it is clear that defendant has met his production burden, and that the case will go to the jury. But courts are split as to who bears the burden of persuasion. [262]
a. Federal Rules of Evidence: Most states, and federal courts in federal-question cases, follow the approach set out in the Federal Rules of Evidence. Under this approach, the presumption has no effect on the burden of persuasion, merely on the burden of production. This approach is sometimes called the "bursting bubble" approach - once evidence tending to show the non-existence of the presumed fact is introduced, the presumption bursts like a bubble. See FRE 301 ("A presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of non-persuasion...").
Example: Same facts as above example. After P shows evidence of damage by the locomotive, D comes forward with evidence that it was not negligent. This is enough to send the case to the jury. Now, under the FRE "bursting bubble" approach, P will still bear the burden of persuasion - unless P convinces the jury that it is more likely than not that D was negligent, D will win on the issue of negligence. This is because the presumption - that where there is locomotive damage, there is railroad negligence - has no effect on the burden of persuasion.
b. State law in diversity cases: But in diversity cases, the federal courts must defer to any contrary state rule concerning the effect of a presumption on the burden of persuasion. See FRE 302. In other words, FRE 301, applying the bursting bubble approach, applies only where a federal claim or defense is at issue, or state law is silent.
III. PREPONDERANCE OF THE EVIDENCE
A. "Preponderance" standard generally: The usual standard of proof in civil actions is the "preponderance of the evidence" standard. A proposition is proved by a preponderance of the evidence if the jury is convinced that it is "more likely than not" that the proposition is true. [264]
B. Adversary's denials: A party who has the burden of proving a fact by a preponderance of the evidence may not rely solely on the jury's disbelief of his adversary's denials of that fact. [265]
Example: P asserts that D behaved negligently by driving through a red light. P produces no affirmative evidence of this allegation. D takes the stand, and says, "The light was green when I drove through." P does not cross-examine D on this point. There is no other relevant evidence. The court must hold that P could not possibly have satisfied the "preponderance of the evidence" standard as to D's negligence - the fact that the jury might possibly disbelieve D's denials of negligence is not enough, and the court must enter a directed verdict for D on this point.
IV. ADJUDICATION WITHOUT TRIAL
A. Voluntary dismissal by plaintiff: A plaintiff in federal court may voluntarily dismiss her complaint without prejudice any time before the defendant serves an answer or moves for summary judgment. The fact that the dismissal is "without prejudice" means that she may bring the suit again. See Rule 41(a)(1). [267]
1. Only one dismissal: Only the first dismissal of the claim is without prejudice.
2. After answer or motion: After D has answered or moved for summary judgment, P may no longer automatically make a voluntary dismissal. Instead, P must get the court's approval. FRCP 41(a)(2).
B. Involuntary dismissal: P's claim may also be involuntarily dismissed by court order. [267]
1. Examples: Some of the grounds for which, under FRCP 41(b), the court may grant an involuntary dismissal, are: (1) P's failure to prosecute; (2) P's failure to obey court orders; (3) lack of jurisdiction or venue; or (4) P's failure to join an indispensable party.
2. Prejudice: Normally an involuntary dismissal is with prejudice. But some kinds of dismissals are not with prejudice (and thus the action may be brought anew): (1) dismissal for lack of jurisdiction, of both parties and subject matter, or for insufficient service; (2) improper venue; and (3) failure to join an indispensable party under Rule 19.
C. Summary judgment: If one party can show that there is no "genuine issue of material fact" in the lawsuit, and that she is "entitled to judgment as a matter of law," she can win the case without going to trial. Such a victory without trial is called a "summary judgment." See FRCP 56. [268 - 270]
1. Court goes behind pleadings: The court will go "behind the pleadings" in deciding a summary judgment motion - even if it appears from the pleadings that the parties are in dispute, the motion may be granted if the movant can show that the disputed factual issues presented by the pleadings are illusory. [268]
2. How shown: The movant can show the lack of a genuine issue by a number of means. For example, the movant may produce affidavits, or use the fruits of discovery (e.g., depositions and interrogatory answers) to show that there is no genuine issue of material fact. [268]
a. Burden of production: The person moving for summary judgment bears the initial burden of production in the summary judgment motion - that is, the movant must come up with at least some affirmative evidence that there is no genuine issue of material fact. [268]
3. Opposition: The party opposing the summary judgment usually also submits affidavits, depositions and other materials. [269]
a. Opponent can't rest on pleadings: If materials submitted by the movant show that there is no genuine material issue of fact for trial, the non-movant cannot avoid summary judgment merely by repeating his pleadings' denial of the allegations made by the movant. In other words, the party opposing the motion may not rest on restatements of her own pleadings, and must instead present by affidavits or the fruits of discovery specific facts showing that there is a genuine issue for trial. Rule 56(e). [269]
b. Construction most favorable to non-movant: On the other hand, once the opponent of the motion does submit opposing papers, he receives the benefit of the doubt. All matters in the motion are construed most favorably to the party opposing the motion. The fact that the movant is extremely likely to win at trial is not enough; only if there is no way, legally speaking, that the movant can lose at trial, should the court grant summary judgment. [270]
4. Partial summary judgment: Summary judgment may be granted with respect to certain claims in a lawsuit even when it is not granted with respect to all claims. This is called partial summary judgment. See Rule 54(b). (Example: Where P sues D for breach of contract, the court might grant P partial summary judgment on the issue of liability, because there is no genuine doubt about whether a breach occurred; the court might then conduct a trial on the remaining issue of damages.) [270]
V. TRIALS WITHOUT A JURY
A. When tried to court: A case will be tried without a jury if either of the two following conditions exists: [271]
1. No right to a jury trial exists; or
2. All parties have waived the right to a jury trial.
a. When waived: A party who wants a jury trial on a particular issue must file a demand for jury trial to the other parties within 10 days after the service of the last pleading directed to that issue. FRCP 38(b). Otherwise, the party is deemed to have waived her right to jury trial.
B. Effect: If there is no jury, the trial judge serves as both the finder of fact and the decider of law. [271]
C. Evidence rules: The rules of evidence followed by the judge (in federal trials, these are the Federal Rules of Evidence) are officially the same in non-jury trials as in jury trials. However, in practice, judges tend to relax the rules when there is no jury present. [272]
D. Findings of fact: If an action is tried without a jury, FRCP 52 requires the trial court to "find the facts specially and [to] state separately its conclusions of law thereon...." So the trial judge must set forth the facts with particularity, and must in a separate section of her opinion state the law which she believes applies to those facts. [272]
1. Where separate findings required: The federal judge must make separate findings of fact and conclusions of law not only in cases that are fully tried, but also: [272]
a. Where requests for interlocutory injunctions are made (whether granted or denied); and
b. Where "judgment on partial findings" is given pursuant to Rule 52(c).
2. Separate findings not required: The trial judge is not obligated to make separate findings of fact and conclusions of law when disposing of a motion, except a Rule 52(c) motion for judgment on partial findings. (Examples: If the judge denies a motion for summary judgment, or grants a 12(b)(6) motion to dismiss for failure to state a claim, the judge need not make detailed findings of fact.) [272]
3. Judgment on partial findings: The judge can conduct a "mini trial" of just one issue, if the judge thinks that this will dispose of the case. If the judge then finds against the party bearing the burden of proof on that issue, the judge issues a "judgment on partial findings." See FRCP 52(c). (Example: In an auto accident case, D pleads the three-year statute of limitations. The judge can conduct a mini trial concerning only the date of the accident; if the date is more than three years before P started the action, the judge can issue a judgment in D's favor based on the partial finding that the action is time-barred.) [272]
E. Appellate review of findings of fact: Although the appellate court has the full record of the case before it, it does not review the evidence for the purpose of making its own determination of what really happened. Appellate review as to factual matters is much more limited: [273 - 274]
1. General "clearly erroneous" standard: The general standard is that the trial judge's findings of fact will be set aside only if they are "clearly erroneous." FRCP 52(a). (Example: If the trial judge finds that D behaved negligently in an auto accident case, the appellate court will not set aside the verdict merely because it believes that there was only a 40% chance that D was negligent. Only if the trial judge's findings seem to the appellate court to be "clearly erroneous," a test not satisfied here, will the court reverse.) [273]
2. Witnesses' credibility: Where the findings of fact relate to trial testimony given by live witnesses, the appellate court must give "due regard … to the opportunity of the trial court to judge of the credibility of the witnesses." FRCP 52(a). In other words, the appellate court should be particularly loathe to overturn the trial judge's findings of fact regarding such testimony. [273]
a. Standard: Where the trial judge believes one of two witnesses who are telling conflicting stories, as long as the favored witness' story is internally consistent, "facially plausible," and not contradicted by extrinsic evidence, the appellate court will not overturn the findings of fact. [Anderson v. Bessemer City]
VI. THE JURY
A. Seventh Amendment generally: The Seventh Amendment to the U.S. Constitution says that "in suits at common law ... the right of trial by jury shall be preserved...." This Amendment applies to federal trials, but does not apply to state trials. [276]
B. Number of jurors: Traditionally, juries have been composed of 12 members. But this is breaking down today. [276]
1. Federal: Even in federal civil cases, the Seventh Amendment does not require a 12-member jury. FRCP 48 provides that a jury of at least six members will be seated.
a. Too few remaining: Normally the federal court seats more than six jurors, so that if some have to leave the panel, there will be at least six at the time of verdict. If there are fewer than six at the time of verdict, the court must declare a mistrial unless both parties agree to continue.
2. State trials: The number of jurors in state trials varies from state to state.
C. Unanimity: [276]
1. Federal: The verdict of a federal civil jury must be unanimous, unless the parties stipulate otherwise. FRCP 48.
2. States: Most states allow a less-than-unanimous civil verdict.
D. Jury selection: The process by which the jury is selected is called the "voir dire." In most states, the voir dire consists of oral questions by both sides' counsel to the prospective jurors. These questions are designed to discover whether a juror would be biased, or has connections with a party or prospective witness. [277]
1. Dismissal for cause: Any juror who is shown through the voir dire to be biased or connected to the case must be dismissed upon motion by a party (dismissal "for cause"). There is no limit to the number of for-cause challenges by either party.
2. Challenges without cause: In addition to the jurors dismissed for cause, each party may dismiss a certain number of other prospective jurors without showing cause for their dismissal ("peremptory challenges").
a. Federal practice: In federal civil trials, each party receives three peremptory challenges.
3. Balanced pool: The Seventh Amendment requires that the jury, and the pool from which it is drawn, be roughly representative of the overall community.
4. Alternates: In most states, the court orders the selection of up to six alternates after the "regular" members of the jury have been selected. But under federal practice, alternates are no longer used (FRCP 48).
E. Instructions: The judge must instruct the jury as to the relevant law. (Example: If P sues D for negligence, the judge must instruct the jury about the "reasonable person" standard, and the requirement of proximate cause.) [277]
1. Objections: A party who wants to raise the inadequacy of the instructions on appeal must object to those instructions before the jury retires. (Sometimes courts make an exception to this rule for "plain error.")
F. Juror misconduct: A jury verdict may be set aside, and a new trial ordered, for certain types of jury misconduct. (Examples: Talking to a party, receiving a bribe, concealing a bias on voir dire.) [278]
1. Traditional impeachment rule: The traditional rule, still followed in most states, is that the jury may not impeach its own verdict. That is, the verdict will not be set aside because of a juror's testimony of his own or another juror's misconduct - only evidence from a third party will suffice. [278]
a. Federal Rule: But the Federal Rules of Evidence have modified this principle slightly for federal trials. The general "jury can't impeach its own verdict" rule still applies, except that a juror may testify about whether extraneous prejudicial information was improperly brought to the jury's attention, or whether any outside influence was improperly brought to bear upon a juror. FRE 606(b). (Examples: One juror can testify that another read a newspaper article about the case, or was bribed by one of the parties. But a juror cannot testify that the jury disregarded the judge's instructions.)
2. Post-trial discovery of bias: If, after the trial, it turns out that a juror failed to disclose information during voir dire that would have indicated bias, the party may move for a new trial. In federal trials, the movant must show: (1) that the juror failed to answer honestly a material question during the voir dire; and (2) that a correct response would have led to a valid challenge for cause. [McDonough Power Equipment Inc. v. Greenwood] (Example: A party can get a new trial if he proves that a juror lied about knowing one of the parties, but not if the juror honestly gave a mistaken answer in voir dire because of confusion about the question.) [278]
VII. DIRECTED VERDICT
A. Defined: In both state and federal trials, either party may move for a directed verdict. Such a verdict takes the case away from the jury, and determines the outcome as a matter of law. [280]
1. Federal trials: In federal trials, the phrase "directed verdict" is no longer used - instead, a party moves for "judgment as a matter of law."
2. When made: Motions for directed verdict or judgment as a matter of law are made when the opposing party has been fully heard on the relevant issues. Thus D can move for directed verdict at the close of P's case, and either party may move for directed verdict after both sides have rested.
B. Standard for granting: Generally, the court will direct a verdict if the evidence is such that reasonable people could not differ as to the result. [280]
1. Federal standard: In federal trials, the standard is that the judge may enter judgment as a matter of law "if during a trial by jury, a party has been fully heard with respect to an issue and there is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue." FRCP 50(a)(1).
VIII. SPECIAL VERDICT AND INTERROGATORIES
A. Special verdict defined: A "special verdict" is a specific finding of fact, as opposed to a general verdict (which merely grants victory to one side or the other). (Example: In a contract case, the jury might be asked to render a special verdict as to whether a valid contract existed between the parties.) [283]
B. General verdict with interrogatories: The judge may, instead of requiring a special verdict, require a general verdict, supported by interrogatories as to specific findings of fact. See FRCP 49(b). This "general verdict with interrogatories" approach is more common than the specific verdict approach. [283]
IX. NEW TRIAL
A. Generally: The trial court, in both state and federal courts, usually has wider discretion to grant a new trial motion than to direct a verdict or disregard the jury's verdict (JNOV). The reason is that the grant of a new trial interferes less with the verdict winner's right to jury trial. [283]
B. Federal rules for granting: Here is a summary of the rules on grants of new trials in federal civil cases: [283 - 284]
1. Harmless error: A new trial may not be granted except for errors in the trial which are serious enough that they affect the substantial rights of the parties. FRCP 61. This is the so-called "harmless error" doctrine. Basically, unless the trial judge believes that the error might have made the case come out differently, she cannot grant a new trial motion. [284]
2. Evidence error: One common ground for granting a new trial is that the trial judge erroneously admitted or excluded evidence. [283]
3. Objection: For most types of error at the trial court level, the party injured by the error must make a timely objection, in order to preserve the right to cite that error on appeal as a ground for a new trial. (Example: If evidence is erroneously admitted or excluded, this cannot serve as grounds for a new trial unless the injured party immediately objects at the time the evidence is admitted or excluded.) [284]
4. Improper conduct: A new trial may be granted because of improper conduct by a party, witness or lawyer, posing a substantial risk that an unfair verdict will result. Similarly, a new trial may be granted where there is evidence that the jury behaved improperly (e.g., a juror was bribed or was contacted by a party). [284]
5. Verdict against weight of evidence: The trial judge (or the appeals court) may set aside a verdict as "against the weight of the evidence." Courts vary as to the standard for doing this. [285]
a. Federal standard: In federal courts, a verdict must be against the clear weight of the evidence, be based upon evidence which is false, or result in a miscarriage of justice. It is not enough that there is substantial evidence against the verdict, or that the trial judge disagrees with the verdict and would vote otherwise if he were a juror. (But it is still easier to get a federal judge to grant a new trial as against the weight of the evidence than to get the trial judge to direct judgment as a matter of law.)
6. Verdict excessive or inadequate: A new trial may be granted where a verdict is excessive or inadequate. [286]
a. Remittitur and additur: Where the verdict is excessive or inadequate, the judge may grant a conditional new trial order - the new trial will occur unless the plaintiff agrees to a reduction of the damages to a specified amount (called "remittitur") or the new trial to occur unless the defendant consents to a raising of the damages (called "additur"). Most state courts allow both additur and remittitur. In federal practice, only remittitur is allowed. If a party accepts the remittitur/additur, he may not thereafter appeal.
7. Partial new trial: The trial judge may grant a partial new trial, i.e., a retrial limited to a particular issue. Most typically, this occurs when the trial judge feels that the jury's conclusion that D is liable is reasonable, but feels that the damages awarded are inadequate or excessive - the judge can grant a new trial limited to the issue of damages. [287]
8. Newly-discovered evidence: The trial judge may grant a new trial because of newly-discovered evidence. The person seeking the new trial must show that: (1) the evidence was discovered since the end of the trial; (2) the movant was "reasonably diligent" in his search for the evidence before and during the trial, and could not reasonably have found the evidence before the end of the trial; (3) the evidence was material, and in fact likely to produce a different result; and (4) injustice would otherwise result. [287]
C. Review of orders granting or denying new trial: Both the grant of a new trial by the trial judge, and his denial of a new trial, may be reviewed upon appeal. Where the judge orders a new trial, the party who won the verdict may not appeal the new trial order, and must instead wait until the end of the new trial. [287]
X. JUDGMENT NOT WITHSTANDING VERDICT/JUDGMENT AS A MATTER OF LAW
A. Definition: Most states allow the judge to set aside the jury's verdict, and enter judgment for the verdict-loser. This is called a Judgment Notwithstanding Verdict, or JNOV. In federal practice, the device is called "judgment as a matter of law" (JML). [289 - 291]
1. Usefulness: Judges like the JNOV procedure better than directed verdicts, because it allows the jury to reach a verdict - then, if the judge is reversed on appeal, a new trial is not necessary (as would be the case if the trial judge erroneously directed a verdict).
B. Federal practice: Federal practice for "judgment as a matter of law" is spelled out in FRCP 50: [290]
1. Motion before jury retires: The most important thing to remember about JML in federal practice is that the party seeking the JML must make a motion for that judgment before the case is submitted to the jury. The movant also specifies why (in terms of law and facts) she thinks she is entitled to the JML. The judge reserves decision on the motion, then submits the case to the jury. If the verdict goes against the movant, and the judge agrees that no reasonable jury could have found against the movant, then the judge may effectively overturn the verdict by granting JML. [290]
2. Appeal: Appellate courts frequently reverse both grants and denials of JML. Since a JML is granted based on the legal sufficiency of the parties' cases, not a detailed consideration of the evidence, the appellate court is quicker to second-guess the trial judge than in the case of a motion for a new trial. [291 - 292]
XI. CONSTITUTIONAL RIGHT TO JURY TRIAL
A. Seventh Amendment: The Seventh Amendment provides that "in suits at common law...the right of trial by jury shall be preserved...." [292]
1. No state application: The Seventh Amendment has never been applicable to state trials, only federal ones.
2. Federal Rule: The Seventh Amendment does apply to all federal civil jury trials, and is incorporated in Rule 38(a).
a. Party must demand: The right to a jury trial in federal practice is not self-executing. A party who wishes a jury trial on a particular issue must file a demand for that jury trial to the other parties within 10 days after the service of the last pleading directed to that issue. (Rule 38(b).)
b. Equitable claim: There is no jury trial right as to "equitable" claims (e.g., a claim for injunction). The distinction between legal and equitable claims is very important, and is discussed further below.
B. Law in diversity cases: In a diversity case, the issue of whether a party has a right of jury trial on a particular claim is to be determined by federal, not state, law. (Example: Federal principles, not local state law, are used to determine whether a particular claim is "legal" rather than "equitable," even in diversity cases.) [292]
C. Suits with both legal and equitable claims: If a case presents both legal and equitable claims, and one party wants a jury trial on the legal claims, the court must normally try the legal claims first. [Beacon Theatres v. Westover] If the court allowed the equitable claims to be tried first, without a jury, this might effectively dispose of some of the legal issues as well, thus thwarting the party's right of jury trial on the legal claims. [293 - 296]
Example: P sues D for an injunction against certain contract violations. D counterclaims for damages for breach of contract. D demands a jury trial on its counterclaim. Assuming, as seems likely, the injunction claim is equitable and the damages counterclaim is legal, the judge must try the counterclaim to a jury before it conducts a bench trial of the injunction claim, as long as there may be some issues common to both claims.
D. Distinguishing "legal" vs. "equitable" claims: In deciding whether a claim is "legal" rather than "equitable," the issue is whether the claim is a claim "at common law." The main test is whether the claim is one in which the courts of law (as opposed to equity) would have recognized prior to the 1789 adoption of the Seventh Amendment. Here are the general rules for deciding this: [293]
1. Damages: Claims that basically involve money damages are almost always legal.
2. Injunctions are equitable: An action where the principal relief sought is an injunction will almost always be equitable. [295]
3. Shareholder derivative suit: A shareholder's derivative suit is either legal or equitable, depending on the status of the corporation's own suit - if the corporation's own suit would be legal, the derivative action is legal. (Example: P, a stockholder in X Corp., brings a derivative suit attempting to enforce X's rights against D, a former officer of X Corp., for an alleged embezzlement by D from X Corp. The suit seeks money damages. Since a suit on the same cause of action by X Corp. directly against D would be legal, P's shareholder's derivative suit is also legal. [Ross v. Bernhard]) [296]
4. Declaratory judgment: A declaratory judgment suit can be either legal or equitable, depending on the underlying issues in the suit. [295]
5. Bankruptcy is equitable: A claim asserted as part of bankruptcy proceedings will generally be treated as equitable, and will thus not involve a right to jury trial. [Katchen v. Landy] [298]
Chapter 8
MULTI-PARTY AND MULTI-CLAIM LITIGATION
I. COUNTERCLAIMS
A. Federal Rules generally: A "counterclaim" is a claim by a defendant against a plaintiff. The Federal Rules provide for both "permissive" and "compulsory" counterclaims. FRCP 13. [307]
1. Permissive counterclaim: Any defendant may bring against any plaintiff "any claim ... not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim." Rule 13(b). This is a "permissive" counterclaim. This means that no claim is too far removed from the subject of P's claim to be allowed as a counterclaim. [307]
Example: P sues D in diversity for a 1989 car accident. D counterclaims for breach of a 1990 contract having nothing to do with the auto accident. D's counterclaim is allowed, and is a "permissive" one because it has nothing to do with the subject matter of P's claim against D.
2. Compulsory counterclaim: If a claim does arise "out of the transaction or occurrence that is the subject matter of the opposing party's claim...," it is a "compulsory" counterclaim. See Rule 13(a). [308]
a. Failure to state compulsory counterclaim: If D does not assert her compulsory counterclaim, she will lose that claim in any future litigation. [308]
Example: Cars driven by P and D collide. P sues D in diversity, alleging personal injury. D makes no counterclaim. Later, D wants to bring either a federal or state suit against P for property damage sustained by D as part of the same car accident. Neither federal nor state courts will permit D to bring this action, because it arises out of the same transaction or occurrence as P's original claim - the car accident - and is thus barred since D did not assert it as a compulsory counterclaim in the initial action.
i. Exceptions: There are a couple of main exceptions to the rule that any claim involving the same "transaction or occurrence" as P's claim is compulsory: (1) claims by D which for "just adjudication" require the presence of additional parties of whom the court cannot get personal jurisdiction; and (2) claims by D in which the suit against D is in rem or quasi in rem (assuming D is not making any other counterclaim in the action). See Rule 13(a), including 13(a)(2).
b. Default by plaintiff: If D asserts a counterclaim (whether compulsory or permissive), and P neglects to either serve a reply or make a motion against the counterclaim, a default judgment may be entered against P on the counterclaim. Rule 55(d). [308]
B. Claims by third parties: A counterclaim may be made by any party against "any opposing party." Rule 13(a), Rule 13(b). [309]
1. By third-party defendant: Thus a third-party defendant may counterclaim against either the original defendant, or against the original plaintiff. (In the latter case, a claim by the plaintiff against the third-party defendant must first have been made.) [309]
2. By plaintiff: If D has counterclaimed against P, P may then assert a "counterclaim" against D, even though P has already asserted "regular" claims against D. In fact, P's "counter-counterclaim" will be compulsory if it relates to the same subject matter as D's counterclaim. (Example: P sues D about a car accident. D sues P for breach of an unrelated contract. Any claims P might have against D relating to that same contract are now compulsory counterclaims.) [309]
3. New parties: New parties to a counterclaim can be brought into a suit. Rule 13(h). (Example: P sues D for an auto accident. D believes that P and X conspired to ruin D's business, in an unrelated action. D may not only counterclaim against P for this conspiracy - a permissive counterclaim - but D may bring in X as a new party to D's counterclaim.) [309]
C. Subject-matter jurisdiction: The subject-matter jurisdiction treatment of counterclaims depends on whether the counterclaim is compulsory or permissive: [310]
1. Compulsory counterclaim: A compulsory counterclaim in a federal action is within the federal courts' supplemental jurisdiction. Therefore, it requires no independent subject-matter jurisdictional grounds.
Example: A, a New Yorker, sues B, from Massachusetts. The suit relates to an accident involving cars driven by A and B. B, in a counterclaim, asserts that A was at fault, and that the accident caused B $30,000 of damages. A's car was owned by C, a Massachusetts resident not yet in the action whom B would also like to sue. B may bring C in as an additional party to his counterclaim. Because supplemental jurisdiction applies to B's compulsory counterclaim, and even to the entrance of the new party defending that counterclaim, the fact that B and C are not diverse, and the fact that B's counterclaim does not meet the jurisdictional amount, are irrelevant.
2. Permissive counterclaims: A permissive counterclaim is probably not within the court's supplemental jurisdiction, and must therefore independently satisfy the requirements of federal subject matter jurisdiction. (Example: Same facts as above example, except that now, B's claim against A and C does not relate to the same transaction as A's claim against B. The absence of diversity as between B and C, and the fact that B's claim does not meet the jurisdictional amount, are both fatal, so B's permissive counterclaim may not go forward against either A or C.)
D. Statute of limitations for counterclaims: [311]
1. Time-barred when P sues: If D's counterclaim was already time-barred at the time P sued, few if any federal courts will allow D to make an affirmative recovery. Some courts will allow the counterclaim to be used as a defense; the court is more likely to do this if the counterclaim is compulsory than if it is permissive.
2. Time-barred after P sued: Where the statute of limitations on the counterclaim runs after P commenced the suit, but before D asserted his counterclaim, a federal court will probably allow the counterclaim. [Azada v. Carson]
II. JOINDER OF CLAIMS
A. Joinder of claims generally: Once a party has made a claim against some other party, he may then make any other claim he wishes against that party. Rule 18(a). (Example: P sues D, claiming that D intentionally assaulted and battered him. P may join to this claim a claim that D owes P money on a contract entirely unrelated to the tort.) [315]
1. Never required: Joinder of claims is never required by Rule 18(a), but is left at the claimant's option. (However, the rules on former adjudication, especially the rule against splitting a cause of action, may cause a claimant to lose the ability to bring the unasserted claim in a later suit.)
2. Subject-matter jurisdiction not affected: Supplemental jurisdiction probably does not apply to a claim joined with another under Rule 18(a). Thus the requirements of subject-matter jurisdiction must be independently satisfied by the joined claim. However, usually there will not be a subject-matter jurisdiction problem for joinder of claims (since diversity will not be affected, and since P may add all claims together for purposes of meeting the $75,000 requirement, under the aggregation doctrine).
III. JOINDER OF PARTIES
A. Permissive joinder: Joinder under Rule 20, done at the discretion of the plaintiffs, is called "permissive" joinder. ("Compulsory" joinder under Rule 19 is described below.) FRCP 20 allows two types of permissive joinder of parties: (1) the right of multiple plaintiffs to join together; and (2) a plaintiff's right to make several parties co-defendants to her claim. [317 - 318]
1. Joinder of plaintiffs: Multiple plaintiffs may voluntarily join together in an action if they satisfy two tests: [317]
a. Single transaction or occurrence: Their claims for relief must arise from a single "transaction, occurrence, or series of transactions or occurrences," and
b. Common questions: There must be a question of law or fact common to all plaintiffs which will arise in the action.
2. Joinder of defendants: If one or more plaintiffs have a claim against multiple defendants, these defendants may be joined based on the same two tests as plaintiff-joinder. That is, claims against the co-defendants must: (a) arise from a single "transaction, occurrence, or series of transactions or occurrences"; and (b) contain a common question of law or fact. [317]
a. At plaintiff's option: Joinder of multiple defendants is at the option of the plaintiff or plaintiffs.
B. Jurisdiction in permissive joinder cases: [318 - 320]
1. Personal jurisdiction: Where joinder of multiple defendants is involved, the requirements of personal jurisdiction must be met with regard to each defendant individually. That is: [318]
a. Service: Each D must be personally served;
b. Contacts: Each D must individually fall within the in personam jurisdiction of the court (by having "minimum contacts"); and
c. Long-arm limits: Each D must be "amenable" to suit. Since federal courts in diversity suits follow the long-arm of the state where they sit, if a potential co-defendant cannot be reached by the state long-arm, he cannot be part of the federal diversity action even if he has the requisite minimum contacts. (But in federal question suits, it doesn't matter that the state long-arm can't reach D.)
2. Subject-matter jurisdiction: There is no supplemental jurisdiction for Rule 20 joinder of multiple Ds; it's not clear whether there is for multiple Ps. So in a case with no federal question, it's clear that there has to be at least one P who's diverse with all Ds, and courts are split about whether it's fatal that some P is a citizen of the same state as some D. [127 - 128]
Example 1 (multiple Ds): P, from Mass., may not join as co-Ds D1 from New York and D2, from Mass, in a diversity action, because there's no supplemental jurisdiction for Rule 20 joinder of multiple Ds.
Example 2 (multiple Ps): If P1 (from Mass.) and P2 (from N.Y.) sue D, from N.Y., courts are split as to whether the action can go forward as a diversity action. Some say that since the P1-D pair is diverse, supplemental jurisdiction kicks in, so it doesn't matter that P2 and D are not diverse. But other courts say that supplemental jurisdiction doesn't apply to Rule 20 joinder of multiple Ps, so that complete diversity (all Ps to all Ds) is required; in such a court, the action can't go forward because of the lack of diversity between P2 and D.
Example 3 (multiple Ps and multiple Ds; no P diverse with all Ds): P1 (from Mass.) and P2 (from N.Y.) sue D1 (from Mass.) and D2 (from N.Y.) All courts agree that the case can't go forward as a diversity-only suit, because there is no P who's diverse with all Ds.
Example 4 (multiple Ps and multiple Ds; at least 1 pair is diverse: P1 (from Mass.) and P2 (from N.Y.) sue D1 (from N.Y.) and D2 (from N.J.) Courts are split about whether suit can go forward based solely on diversity. Some say that since there's one P who's diverse with all Ds (i.e., P1), supplemental jurisdiction applies [see e.g., Stromberg Metal Works, 128], so P2 can be added. Other courts say supplemental jurisdiction does not apply to multiple Ps or multiple Ds, so the case can't go forward.
a. Aggregation: It is not clear whether multiple plaintiffs may aggregate their claims to meet the jurisdictional amount in a diversity case. If no plaintiff meets this amount, aggregation is not allowed. If one or more does, but others do not, it is not clear whether either the aggregation doctrine or supplemental jurisdiction will allow the less-than-$75,000 plaintiffs to be part of the action.
i. Each defendant must meet: If the Rule 20 joinder involves multiple defendants, supplemental jurisdiction definitely does not apply to the claims against them, so each D in a diversity case must have claims against him equal to $75,000.
C. Compulsory joinder: There are certain situations in which additional parties must be joined, assuming the requirements of jurisdiction can be met. Such joinder, specified by Rule 19, is called "compulsory" joinder. The basic idea is that a party must be joined if it would be uneconomical or unfair to litigate a claim without her. [320 - 325]
1. Two categories: There are two categories of parties who must be joined where possible:
a. "Necessary" parties: The "less vital" group consists of parties: (1) who must be joined if this can be done; but (2) in whose absence because of jurisdictional problems the action will nonetheless be permitted to go forward. These parties are called "necessary" parties. See Rule 19(a).
b. "Indispensable" parties: The second, "more vital" group consists of parties who are so vital that if their joinder is impossible for jurisdictional reasons, the whole action must be dropped. These are called "indispensable" parties. See Rule 19(b).
2. "Necessary" defined: A party is "necessary" - and must be joined if jurisdictionally possible - if the party is not "indispensable" (defined below) and either of the two following tests is met: [320]
a. Incomplete relief: In the person's absence, complete relief cannot be accorded among those already parties; or
b. Impaired interest: The absentee has an interest relating to the action, and trying the case without the absentee will either impair the absentee's interest or leave one of the people already parties subject to multiple or inconsistent obligations.
3. "Indispensable" defined: If a party meets the test for "necessary" given in paragraph (2) above, but the party's joinder is impossible because of jurisdictional problems, the court has to decide whether the party is "indispensable." [321]
a. Consequence of indispensability: If the party is "indispensable," then the action must be dismissed in that party's absence.
b. Factors: When the court decides whether a party is "indispensable," the factors are: (1) the extent of prejudice to the absentee, or to those already parties; (2) the possibility of framing the judgment so as to mitigate such prejudice; (3) the adequacy of a remedy that can be granted in the party's absence; and (4) whether the plaintiff will have an adequate remedy if the action is dismissed. Rule 19(b).
Example: P sues D, a bank holding some stock. P alleges that although the stock is registered solely in the name of X, P and X in fact co-own the stock. P and D are citizens of different states, but X is a citizen of the same state as P. X thus cannot be joined as a co-defendant, because his presence would destroy diversity. The issue is whether X is "necessary" or "indispensable."
Held: (1) X is definitely a person who must be joined if feasible under Rule 19(a), because his absence will expose D to the risk of double obligation - a judgment that P owns the stock will not bind X, who can later sue D for the whole value of the stock; (2) X is in fact "indispensable" - his presence is so important that the suit must be dismissed rather than proceed in X's absence. [Haas v. Jefferson Bank] [323]
4. Jurisdiction: Where a non-party is one who must be "joined if feasible," the doctrine of supplemental jurisdiction does not apply to overcome any jurisdictional problems. So if the person who is sought to be joined as a defendant is not diverse with all plaintiffs, or if the claim against that would-be defendant does not meet the amount-in-controversy requirement in a diversity case, the joinder may not take place. [321]
IV. CLASS ACTIONS
A. Definition: The class action is a procedure whereby a single person or small group of co-parties may represent a larger group, or "class," of persons sharing a common interest. [330]
1. Jurisdiction: In the class action, only the representatives must satisfy the requirements of personal jurisdiction, subject-matter jurisdiction, and venue. (Example: P1 and P2 are the named co-plaintiffs who bring a diversity class action against D. There are 2,000 non-named class members. Only P1 and P2 must meet the requirements of diversity vis-a-vis D, so the fact that many non-named plaintiffs are citizens of the same state as D is irrelevant.)
2. Binding on absentees: The results of a class action are generally binding on the absent members. Therefore, all kinds of procedural rules (discussed below) exist to make sure that these absentees receive due process (e.g., they must receive notice of the action, and notice of any proposed settlement).
3. Defendant class: In federal practice, as well as in states permitting class actions, the class may be composed either of plaintiffs or defendants. The vast majority of the time, the class will be composed of plaintiffs. [331]
B. Rule 23 generally: The federal procedures for class actions are spelled out in FRCP 23. [331]
1. Four prerequisites: Four prerequisites (discussed below) must be met before there is any possibility of a class action.
2. Three categories: Once these prerequisites are met, a class action will still not be allowed unless the action fits into one of three categories, represented by Rule 23(b)(1), 23(b)(2), and 23(b)(3). (See Table 8-2, "Class Actions" [331].)
C. Prerequisites: Here are the four prerequisites which must be met before any federal class action is allowed: [331]
1. Size: The class must be so large that joinder of all members is impractical. Nearly all class actions involve a class of at least 25 members, and most involve substantially more (potentially tens of thousands). The more geographically dispersed the claimants are, the fewer are needed to satisfy the size requirement. [331]
2. Common questions: There must be "questions of law or fact common to the class." This is seldom a problem. [332]
3. Typical claims: The claims or defenses of the representatives must be "typical" of those of the class. This requirement of "typicality" is also rarely a problem. [332]
4. Fair representation: Finally, the representatives must show that they can "fairly and adequately protect the interests of the class." Thus the representatives must not have any conflict of interest with the absent class members, and they must furnish competent legal counsel to fight the suit. [332]
D. Three categories: As noted, there are three categories of class actions, all of which must meet the four prerequisites listed above. They are covered in Rules 23(b)(1), 23(b)(2) and 23(b)(3). [334 - 335]
Example: Taxpayers residing in City XYZ are unhappy with a municipal bond issue by XYZ. Some taxpayers want the issue declared invalid; others want merely to have the terms of the issue changed. If each taxpayer brought his own action, as the result of one suit XYZ might have to refrain from floating the issue altogether, but as the result of the other suit might just be forced to limit the size of the issue. XYZ thus faces a risk of incompatible standards of conduct. Therefore, a Rule 23(b)(1) action would be suitable on these facts.
b. No opting out: Members of the 23(b)(1) class may not "opt out" of the class. Any absentee will therefore necessarily be bound by the decision in the suit.
Example: Tens of thousands of women may have been injured by breast implants manufactured by D. If each brings an individual suit, D's financial resources may be exhausted, leaving nothing for those who bring suit later. A federal court might therefore hold that a 23(b)(1) action is suitable for determining, once and for all, whether D sold a defective device and whether it typically caused a certain type of medical injury. Each P would then have a separate claim on causation and damages only. [335]
2. 23(b)(2) actions: The second category, 23(b)(2), allows use of a class action if "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 … declaratory relief with respect to the class as a whole." In other words, if the suit is for an injunction or declaration that would affect all class members, (b)(2) is probably the right category. [336]
a. Civil rights case: The main use of 23(b)(2) is for civil rights cases, where the class says that it has been discriminated against, and seeks an injunction prohibiting further discrimination. (Example: A class action is brought on behalf of all black employees of XYZ Corp., alleging that executives of XYZ have paid them less money and given them fewer promotions than white employees. The suit seeks an injunction against further discrimination, as well as money damages. This would be an appropriate suit for a 23(b)(2) class action.)
b. No opt-out: Members of a 23(b)(2) class may not "opt out" of the class. See Rule 23(c)(3).
3. 23(b)(3) actions: The final type of class action is given in Rule 23(b)(3). This is the most common type. [336 - 337]
a. Two requirements: The court must make two findings for a (b)(3) class action:
i. Common questions: The court must find that the "questions of law or fact common to members of the class predominate over any questions affecting only individual members..."; and
ii. Superior method: The court must also find that "a class action is superior to other available methods" for deciding the controversy. In deciding "superiority," the court will consider four factors listed in 23(b)(3), including: (1) the interest of class members in individually controlling their separate actions; (2) the presence of any suits that have already been commenced involving class members; (3) the desirability of concentrating the litigation of the claims in a particular forum; and (4) any difficulties likely to be encountered in the management of a class action.
b. Securities cases: (b)(3) class actions are especially common in securities fraud cases, and in antitrust cases.
E. Requirement of notice: Absent class members (i.e., those other than the representatives) must almost always be given notice of the fact that the suit is pending. [337 - 338]
a. Individual notice: Individual notice, almost always by mail, must be given to all those class members whose names and addresses can be obtained with reasonable effort. This is true even if there are millions of class members, each with only small amounts at stake. [Eisen v. Carlisle & Jacquelin] [337]
b. Publication notice: For those class members whose names and addresses cannot be obtained with reasonable effort, publication notice will usually be sufficient.
3. Cost: The cost of both identifying and notifying each class member must normally be borne by the representative plaintiffs. If the plaintiff side is unwilling to bear this cost, the case must be dismissed. [Eisen v. Carlisle & Jacquelin; Oppenheimer Fund v. Sanders] [338]
F. Binding effect: Judgment in a class action is binding, whether it is for or against the class, on all those whom the court finds to be members of the class. [338]
1. Exclusion: In the case of a (b)(3) action, a person may opt out, i.e., exclude himself, from the action, by notifying the court to that effect prior to a date specified in the notice of the action sent to him. A person who opts out of the action will not be bound by an adverse judgment, but conversely may not assert collateral estoppel to take advantage of a judgment favorable to the class. (Absent class members in (b)(1) and (b)(2) actions do not have the right to opt out and thereafter bring their own suit.)
G. Amount in controversy: Only the named representatives of a class have to meet the requirements of diversity and venue. However, every member of the class must satisfy the applicable amount in controversy requirement. [339]
1. Diversity: Thus in diversity cases, each member of the class must have more than $75,000 at stake. [Zahn v. International Paper Co.] This obviously makes diversity class actions difficult to bring (but has not stood in the way of such actions in mass-tort cases).
2. Federal question suits: In federal question cases, there is no general amount in controversy requirement, so the problem does not arise.
H. Certification and denial of class status: Soon after an action purporting to be a class action is brought, the court must decide whether to "certify" the action. By certifying, the court agrees that the class action requirements have been met, and allows the suit to go forward as a class action. If the court refuses to certify the action: [340]
1. Continued by representative: The suit may still be continued by the "representatives," but with no res judicata effect for or against the absent would-be class members. Usually, the representatives will not want to proceed on this non-class-action basis. [340]
2. Sub-class: Alternatively, the suit may be continued by a sub-class of the original class. If so, res judicata extends to the members of the sub-class, but not to the other members of the original class. [340]
3. No appeal: The denial of class action status may not be immediately appealed, because it is not deemed to be a "final order." [Coopers & Lybrand v. Livesay] [340]
I. Settlements: Any proposed settlement of the class action must be approved by the court. FRCP 23(e). The court will approve the settlement only if it is convinced that the interests of the absent class members have been adequately protected (e.g., that settlement is not being urged by greedy contingent-fee lawyers who will pocket most of the settlement money). [341]
1. Notice requirement: If the class has already been certified, notice of any proposed settlement must be given to each class member.
J. Attorneys' fees: The court may award reasonable attorneys fees to the lawyers for the class. These fees are generally in rough proportion to the size of the recovery on behalf of the class. [342]
1. Federal statute requires: In the usual case of a class action brought under a federal statute, attorneys fees may be awarded only if a federal statute so provides. [Alyeska Pipeline Service Co. v. Wilderness Society.] Congress has authorized attorneys fees for many important federal statutes that are frequently the subject of class action suits (e.g., civil rights and securities law).
K. Mass tort cases: Class actions have begun to be used increasingly in "mass tort" cases. [342 - 350]
1. Definition of "mass tort": Mass torts fall into two categories. In a "mass accident," a large number of persons are injured as a result of a single accident. (Examples: an airplane crash, the collapse of a building, or the explosion of a factory accompanied by the release of toxic substances.) In a "mass product liability" case, a defective product is sold to thousands of buyers, who are thereby injured. [342]
2. Single-accident cases: In mass-tort cases involving a single "mass accident," or a single "course of conduct" by one defendant, many courts allow class certification. Cases involving a single explosion, or a single toxic dumping by one defendant on one occasion, are examples. [344]
3. Product liability cases: In mass-tort cases involving product liability, by contrast, most federal courts have held that the federal class action is not suitable. Usually courts don't allow it to be used even for the limited purpose of deciding core "all or nothing" issues like D's negligence, or the product's defectiveness. [345]
4. Factors for mass-tort cases: Here are some of the factors that courts consider in deciding whether to allow certification in a mass accident or mass product liability case: [346]
a. State-by-state law variations: If the suit is based on diversity (as it usually will be in a product liability case), and involves plaintiffs from many states, and if the federal court would therefore somehow have to apply the differing laws of many states (because of Erie), the court is less likely to grant class status.
b. Centrality of single issue: Where one issue is truly "central" to the case, the court is most likely to certify the class.
c. Size of typical claim: The larger each individual claim, the less likely the court is to allow class status (because each claimant could sue on his own).
d. Novelty of claim: Where the plaintiffs' claim is "novel," i.e., untested (e.g., that cigarette companies have fraudulently entrapped young people into addiction to nicotine), certification is unlikely, because the court won't want to let the future of a whole industry turn on whether one jury likes the claim.
e. Limited funds: Where there are so many thousands of claimants that there's reason to believe that the defendant(s) will be insolvent before the last claimant has recovered, certification is more likely.
V. INTERVENTION
A. Intervention generally: By the doctrine of "intervention," certain persons who are not initially part of a lawsuit may enter the suit on their own initiative. The person who intervenes is called an "intervenor." [356]
1. Two forms: In federal suits, FRCP 24 creates two forms of intervention:
a. "Intervention of right" (Rule 24(a)); and
b. "Permissive intervention" (Rule 24(b)).
2. Distinction: Where the intervention is "of right," no leave of court is required for the party's entry into the case. Where the facts are such that only "permissive" intervention is possible, it is up to the court's discretion whether to allow intervention.
B. Intervention of right: [356 - 358]
1. Three tests: A stranger to an existing action may intervene "of right," under Rule 24(a), if she meets all of the three following criteria: [356]
a. Interest in subject-matter: She must "claim an interest relating to the property or transaction which is the subject of the action";
b. Impaired interest: She must be "so situated that the disposition of the action may as a practical matter impair or impede [her] ability to protect that interest"; and
c. Inadequate representation: She must show that this interest is not "adequately represented by existing parties."
Note: Even if the outsider cannot meet one or more of these criteria, she may nonetheless automatically intervene under Rule 24(a) if a federal statute gives her such a right. (Example: The U.S. may intervene in any action involving the constitutionality of an act of Congress.) [356]
Example: P (the U.S. government) sues D, a local Board of Education, charging that D has drawn school boundaries on racially-discriminatory lines. X, the parent of a black public school student attending D's schools, wants to intervene. Probably X's intervention will be of right, since X has an interest in the subject-matter, and his ability to bring his own action in the future will be compromised if the U.S. loses the case. X will have to show that the U.S. may not adequately represent X's interest, which he can do by showing that the U.S. may be pursuing other objectives, such as settling a lot of suits quickly.
2. Jurisdiction: Independent subject-matter jurisdictional grounds are required for intervention of right in a diversity case. In other words, such intervention does not fall within the court's supplemental jurisdiction. [357]
Example: P, from California, sues D, from New York, in a diversity suit. X, from New York, would like to intervene. Even if the court concludes that the requirements of intervention of right are met by X, X cannot intervene because there is no supplemental jurisdiction for intervention of right; after X's intervention there would have to be complete diversity, and this would not be the case since X and D are both citizens of New York.
C. Permissive intervention: For a person to seek "permissive intervention," she merely has to have a "claim or defense" that involves a "question of law or fact in common" with the pending action. [358]
1. Discretion: Where the outsider seeks permissive intervention, it is up to the trial court's discretion whether to allow the intervention. The trial court's decision - whichever way it goes - is rarely reversed on appeal.
2. Jurisdiction: Like any intervenor of right, a permissive intervenor in a diversity case must independently meet federal subject-matter jurisdictional requirements. (Example: There must be diversity between the intervenor and all defendants.) [358]
VI. INTERPLEADER
A. Definition: Interpleader allows a party who owes something to one of two or more other persons, but is not sure whom, to force the other parties to argue out their claims among themselves. The technique is designed to allow the "stakeholder" to avoid being made to pay the same claim twice. [360]
Example: X and Y both claim a bank account at Bank. Y demands the money from Bank. If Bank had to litigate against Y, and then possibly defend a second suit brought by X, Bank might have to pay the amount of the account twice. By using the interpleader doctrine, Bank can force X and Y to litigate between themselves as to the ownership of the account, with Bank paying only the winner.
1. Federal practice: In federal practice, two kinds of interpleader are allowed:
a. "Statutory interpleader" under 28 U.S.C. §1335; and
b. "Rule interpleader" under FRCP 22.
Note: See Table 8-3, "Comparison: Statutory and Rule Interpleader" [365].
B. Federal statutory interpleader: 28 U.S.C. §1335 allows a person holding property which is or may be claimed by two or more "adverse claimants" to interplead those claimants. [362 - 364]
1. Jurisdictional benefits: The main benefits to the stakeholder from using statutory interpleader instead of Rule interpleader relate to jurisdiction and service: [362]
a. Nationwide service: Nationwide service of process is allowed in statutory interpleader actions. See 28 U.S.C. §2361. Thus the court where the stakeholder files a statutory interpleader suit may serve its process on any claimant, no matter where in the U.S. that claimant resides or is found.
b. Diversity: Diversity is satisfied as long as some two claimants are citizens of different states. (Example: Two New York residents and a Californian all claim the proceeds of a particular insurance policy. Since either New Yorker and the Californian form a diverse pair, the diversity requirement for statutory interpleader is satisfied. The citizenship of the insurance company is irrelevant.)
c. Amount in controversy: The property which is the subject of the suit must merely exceed $500 in value, in contrast to the usual $75,000.
2. How commenced: A statutory interpleader suit is commenced by the stakeholder. The stakeholder must, to begin the suit, deposit into court the amount of the property in question, or post a bond for that amount. [363]
a. Right to deny debt: Even though the stakeholder must deposit the amount of the property with the court, he is not estopped from claiming at trial that he does not owe the money to any claimant at all. [363]
3. Restraint on other suits: Once the statutory interpleader suit is begun, the court may restrain all claimants from starting or continuing any other action, in any state or federal suit, which would affect the property. (Example: On the facts of the above example, the court could prevent the two New Yorkers and the Californian from starting any state action to collect on the policy.) [363 - 364]
C. Rule interpleader: FRCP 22 provides an interpleader remedy for any person who "is or may be exposed to double or multiple liability." This is so-called "Rule interpleader." The stakeholder may invoke interpleader by coming into court on his own initiative (i.e., as plaintiff), or by counterclaiming or cross-claiming as defendant in an action already commenced against him by one claimant. [364]
1. Jurisdiction: The main difference between statutory interpleader and Rule interpleader is that Rule 22 interpleader has no effect on ordinary jurisdictional and venue requirements.
a. Complete diversity: Thus diversity must be complete between the stakeholder on one hand and all claimants on the other (assuming there is no federal question). (Example: Two New Yorkers and a Californian all claim a particular insurance policy, which is issued by a California-based insurer. Rule 22 interpleader cannot be used, because it is not the case that all claimants are of different citizenship than the insurer.)
b. Service: Service of process must be carried out as in any other diversity action - that is, within the state where the district court sits, or pursuant to the long-arm of the state. There is no "nationwide service of process" as in statutory interpleader.
c. Amount in controversy: The $75,000 amount in controversy requirement must be met.
2. No deposit: The stakeholder is not required to deposit the property or money into the court (as she is in statutory interpleader).
3. Denial of liability: The stakeholder may "aver that the plaintiff is not liable in whole or in part to any or all of the claimants." FRCP 22(1). In other words, the stakeholder may deny liability.
VII. REAL PARTY IN INTEREST
A. Generally: FRCP 17, and most states, require that a complaint be in the name of the "real party in interest." This means, for instance, that an assignee - a person to whom the original holder of a claim assigned that claim - must sue in the assignee's own name. [367]
1. Subrogation: This "real party in interest" rule covers subrogation. An insurer who has compensated its policy holder may sue the tortfeasor in lieu of suit by the policy holder - but the insurance company must sue in its own name, not in the name of the policy holder.
2. Representatives: Executors, administrators, bailees and other representatives are considered to be themselves "real parties in interest." Therefore, they may bring suit in their own names, not in the names of persons they represent (e.g., the estate). But the citizenship of the represented party (e.g., the estate) generally controls for diversity purposes.
VIII. THIRD-PARTY PRACTICE (IMPLEADER)
A. Impleader right generally: A defendant who believes that a third person is liable to him "for all or part of the plaintiff's claim against [the defendant]" may "implead such a person as a 'third party defendant.'" FRCP 14(a). [368]
Example: Victim is injured when a van driven by Employee and owned by Employer runs her over. Victim brings a diversity action against Employer, on a respondeat superior theory. Employer believes that if Employer is required to pay a judgment to Victim, Employee, under common law indemnity rules, will be required to reimburse Employer. Instead of waiting until the end of the Victim-Employer suit, Employer may instead "implead" Employee. That is, Employer (the third-party plaintiff or TPP) brings Employee into the action as a "third party defendant" (TPD), so that in a single action, the court may conclude that Employer owes Victim, and that Employee owes indemnity to Employer.
B. Claim must be derivative: For a third-party claim to be valid, the TPP may not claim that the TPD is the only one liable to the plaintiff, and that he himself is not liable at all. (Examples: Impleader works for claims for indemnity, subrogation, contribution and breach of warranty, since as to each of these, the TPD is liable only if the TPP is liable.) [368]
1. Alternative pleading: However, the TPP is not precluded from claiming in an alternative pleading that neither she nor the TPD is liable.
2. Partial claim: Also, the TPP may allege that only a portion of the recovery is due from the TPD. (Example: If TPP claims that TPD is liable for "contribution" rather than "indemnity," TPP will recover from TPD at most only part of any judgment that TPP owes to P.)
C. Leave of court: Leave of court is not necessary for impleader, as long as the TPP serves a summons and complaint on a TPD within 10 days after the time the TPP served his answer to P's claim. FRCP 14(a), second sentence. After this 10-day period, however, the court's permission to implead is necessary. [368]
D. Impleader by plaintiff: Just as the defendant may implead a TPD, so a plaintiff against whom a counterclaim is filed may implead a third person who is liable to him for any judgment on the counterclaim. FRCP 14(b). [369]
E. Jurisdictional requirements relaxed: Both personal and subject-matter jurisdictional requirements are relaxed with respect to the third-party claim: [369]
1. 100-mile bulge: Service of the third-party complaint may be made anywhere within the 100-mile bulge surrounding the courthouse, even if the place of service is outside the state and is beyond the scope of the local long-arm. FRCP 4(k)(1)(B). [369]
Example: In the above Victim/Employer/Employee example, if the suit is pending in the Southern District of New York (Manhattan), Employee could be served in Newark, New Jersey, even if the New York State long-arm would not reach him.
2. Supplemental jurisdiction: A third-party claim falls within the court's supplemental jurisdiction. Thus the TPD's citizenship is unimportant, and no amount-in-controversy requirement must be satisfied. [369]
3. Venue: Similarly, if venue is proper between the original parties, it remains valid regardless of the residence of the TPD. [369]
F. Additional claims involving the TPD: [369 - 371]
1. Claim by TPD: Once a TPD has been impleaded, she may make claims of her own, including: (1) counterclaims against the TPP (either permissive or compulsory); (2) cross-claims against any other TPDs; (3) any claim against the original plaintiff, but only if it arises out of the same transaction or occurrence that is the subject of the plaintiff's claim against the TPP; (4) any counterclaim against the original plaintiff, if the original plaintiff has made a claim against the TPD; and (5) impleader claims against persons not previously part of the suit, if these persons may be liable to the TPD for all or part of the TPP's claim against the TPD. [369]
a. Supplemental jurisdiction: All of the above kinds of claims, except permissive counterclaims, fall within the court's supplemental jurisdiction, and thus need no independent federal subject-matter jurisdictional grounds.
b. Defenses: A TPD may also raise against the original plaintiff the same defenses that the original defendant could have raised.
2. Claims by original plaintiff: The original plaintiff may assert any claims against the TPD arising out of the transaction or occurrence that is the subject-matter of that plaintiff's claim against the TPP. [370]
a. Jurisdiction: A claim by a plaintiff against the TPD must independently satisfy jurisdictional requirements - supplemental jurisdiction does not apply in this situation. (Example: In a diversity case, the original plaintiff's claim against the TPD must be supported by diversity between the plaintiff and the TPD, and that claim must satisfy the $75,000 amount in controversy.)
G. Dismissal of main claim: If the main claim is dismissed before or during trial, the court has discretion whether to hear the third-party claims relating to it (assuming that these are within the court's supplemental jurisdiction, as they will be in the case of an ordinary impleader claim). [371]
IX. CROSS-CLAIMS
A. Definition: A claim by a party against a co-party is called a "cross-claim." A cross-claim is made only against a party who is on the same side of an already-existing claim (e.g., a claim by one co-defendant against another, or by one co-plaintiff against another). [374]
B. Requirements: A cross-claim must meet two main requirements: [374]
1. Transaction requirements: It must have arisen out of the "transaction or occurrence" that is the subject of the original action or the subject of a counterclaim. FRCP 13(g). (A cross-claim is thus comparable to a compulsory counterclaim, in terms of how closely related it must be to the original claim.)
2. Actual relief: The cross-claim must ask for actual relief from the co-party against whom it is directed. (Example: D1 claims that he is blameless, and that D2 is the one who should be liable for all of P's claims. This is not a cross-claim, since D1 is not asking for actual relief from D2 - instead, D1 is merely asserting a defense.)
C. Not compulsory: A cross-claim, no matter how closely related it is to the subject of the existing action, is never compulsory. [375]
D. Jurisdiction: Cross-claims are within the supplemental jurisdiction of the court, and thus need no independent jurisdictional grounds. [375]
Chapter 9
FORMER ADJUDICATION
I. GENERAL PRINCIPLES
A. Former adjudication generally: There is a set of rules that prevents re-litigation of claims and issues; the set is sometimes collectively called the doctrine of "res judicata" (Latin for "things which have been decided"). [383]
1. Two categories: There are two main categories of rules governing re-litigation:
a. Merger and bar: One set of rules prevents a claim (or "cause of action") from being re-litigated. These rules are collectively called the rules of claim preclusion. They break down into two sub-rules:
i. Merger: Under the rule of "merger," if P wins the first action, his claim is "merged" into his judgment. He cannot later sue the same D on the same cause of action for higher damages.
ii. Bar: Under the doctrine of "bar," if P loses his first action, his claim is extinguished, and he is barred from suing again on that cause of action.
b. Collateral estoppel: The second main set of rules prevents re-litigation of a particular issue of fact or law. When a particular issue of fact or law has been determined in one proceeding, then in a subsequent proceeding between the same parties, even on a different cause of action, each party is "collaterally estopped" from claiming that that issue should have been decided differently than it was in the first action. This is known as the doctrine of "collateral estoppel" or "issue preclusion".
i. Use by stranger: Today, even one who is not a party to the first action (a "stranger to the first action") may in some circumstances assert in the second suit that her adversary, who was a party to the first action, is collaterally estopped from re-litigating an issue of fact or law decided in that first action.
B. Applicable only to new actions: The rules discussed in this "Former Adjudication" chapter apply only to new actions subsequent to the action in which the original judgment was rendered - they do not apply to further proceedings in the same action in which the original judgment was rendered. (Examples: These rules do not apply to a party seeking a new trial, or to one seeking to have a judgment reversed on appeal.) [384]
C. Privies: The rules of claim preclusion and collateral estoppel apply not only to the parties to the first action, but also to other persons who are said to be in "privity" with the litigants in the other action. [384]
Example: Victim is injured when hit by a van driven by Employee and owned by Employer. Victim sues Employer under respondeat superior. Employer notifies Employee of the latter's right to control the defense, but Employee does nothing. Victim gets a judgment against Employer, but Employer goes bankrupt before Victim can collect. Victim then sues Employee. Employee, as an indemnitor of Employer, will be covered by the same rules of claim preclusion and collateral estoppel in the Victim-Employee suit as Employer would be in a new suit by Victim. Therefore, Employee will be collaterally estopped from denying that he was at fault.
II. CLAIM PRECLUSION (MERGER AND BAR)
A. Definition: If a judgment is rendered for the plaintiff, his claim is "merged" into the judgment - the claim is extinguished and a new claim to enforce the judgment is created. If a judgment is for the defendant on the merits, the claim is extinguished and nothing new is created; plaintiff is "barred" from raising the claim again. [384 - 385]
Example 1: P sues D for $1,000 damages resulting from an automobile accident. The verdict and judgment grant P only $500. His claim, or cause of action, is "merged," meaning that P cannot start a new suit for the other $500.
Example 2: Same as Example 1, but D is found not to be liable at all. P is now "barred" from making the same claim in a second suit against D.
B. No claim-splitting: The basic concept of claim preclusion is that a judgment is conclusive with respect to the entire "claim" which it adjudicates. Consequently, P may not split her claim - if she sues upon any portion of the claim, the other aspects of that claim are merged in her judgment if she wins, and barred if she loses. [385 - 386]
Example: P believes that D has breached a contract with him, and that P has lost $100,000 as a result. If P sues for $25,000 and loses, P may not bring a second suit for the other $75,000. The same is true if P wins the $25,000 - the rule is "one suit per claim."
1. Installment contracts: Where the claim relates to payments due under a lease or installment contract, generally P must sue at the same time for all payments due at the time the suit is filed. (Example: If Tenant is six months behind in the rent at the time Landlord brings suit, Landlord must sue for the entire six months at once - any months missed that are not sued for when the suit is brought are waived.) [385 - 386]
2. Personal and property damage from accident: Today, most states hold that claims for personal injuries arising from an auto accident are part of the same cause of action as a claim for property damage sustained in the same accident. Thus generally, P must bring a single suit for property damage and personal injuries from a given accident. [387]
3. Multi-theory actions: The rule against splitting a claim also applies where P has several claims, all arising from the same set of facts, but involving different theories or remedies. The modern rule is that there will be merger or bar of all of P's rights against D with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose. [386 - 387]
Example: P works for D, and is then fired. P sues D for breach of an alleged oral contract promising two years of employment. P loses. P then sues D, alleging the same facts, and asserting the right to recover in quantum meruit for the reasonable value of services he performed for D. A modern court would probably hold that the two suits related to a single transaction or series of transactions, and that the first judgment against P therefore barred him from bringing the second suit.
a. Equitable/legal distinction: A demand for legal relief (generally, money damages) and a demand for equitable relief (e.g., an injunction) will both be deemed to be part of the same claim if they relate to the same facts - therefore, demands for both types of relief will have to be made in the same action. (Example: If P believes that D is violating P's copyrights, P cannot bring a suit for an injunction, followed by a separate suit for money damages.) [387]
4. Exceptions based on jurisdictional requirements: There is one important exception to the rule against splitting a cause of action - if the court trying the first action would not have had subject matter jurisdiction for a claim now asserted in the second action, there will be no bar or merger. (Example: P sues D in state court under state antitrust law, and loses on the merits. P then sues D in federal court alleging the same facts, and charging a violation of federal antitrust laws. Because the federal courts have exclusive jurisdiction of antitrust claims, the state court could not have heard the federal claim. Therefore, the second - federal court - action will not be barred.) [387]
5. State law followed in diversity cases: In diversity cases, the federal courts follow state law with respect to the application of the rules of claim preclusion (as well as collateral estoppel). In other words, if (and only if) the law of the state where the district court sits would have granted claim preclusion or collateral estoppel effect to an earlier state court judgment, the federal court will do the same. [387]
C. Adjudication on merits: Not every loss by the plaintiff in the first action will act as a "bar" to subsequent suits on the same claim. Plaintiff will be barred only if the original adjudication in favor of the defendant was "on the merits." [388 - 389]
1. Non-prejudicial grounds: In other words, some of the ways that a plaintiff may "lose" the first suit are deemed to be "without prejudice" to future suits. For instance, if the first suit is brought in federal court, plaintiff will not be barred from bringing a new action if the first action is dismissed because of: (1) lack of jurisdiction; (2) improper venue; or (3) failure to join an indispensable party. See FRCP 41(b). Any other type of dismissal (e.g., dismissal for failure to state a claim under 12(b)(6)) does bar a future claim by P, unless the court granting the dismissal specifies otherwise in its order. FRCP 41(b), last sentence. [388]
D. Counterclaims: A defendant who pleads a counterclaim is, in effect, a plaintiff with respect to that claim. He is bound by the outcome, just as a plaintiff is bound by the outcome of his original claim. [389 - 390]
1. No splitting: Thus D may not split his counterclaim into two parts. (Example: P sues D for damages from an auto accident. D counterclaims for his property damage from that same accident, but not for personal injuries. Whether D wins or loses with the counterclaim, he may not bring a second suit against P for personal injury arising from that same accident.) [389]
2. Compulsory counterclaim: Observe that state and federal rules making certain counterclaims "compulsory" serve a similar function to the merger or bar doctrine. (Example: P sues D for damages arising out of an auto accident. The rules of merger and bar do not by themselves force D to assert either his claim for property damage, or for personal injury, arising out of that same accident. But in the federal court and in most state courts, any counterclaim by D for either of these things would be "compulsory," so that D would not be able to use that claim in a subsequent suit against P.) [390]
E. Change of law: Once a final judgment has been rendered (and any appeals resolved), not even a change in the applicable law will prevent claim preclusion from operating. The fact that the losing party would, because of such an overruling of legal precedent, win the lawsuit if she were allowed to start it again, is irrelevant. [390]
F. Privies not party to the first action: Remember that sometimes, a non-party may be so closely related to a party to the first judgment, that she will be both burdened and benefited by that judgment as if she had been a party to it. The non-party is said to be a "privy" to the first judgment. A trustee and his beneficiary, and an indemnitor and her indemnitee, are examples of privity relationships. [391]
III. COLLATERAL ESTOPPEL
A. Definition: Regardless of which of the parties to an action wins, the judgment decides for all time any issue actually litigated in the suit. A party who seeks to re-litigate one of the issues disposed of in the first trial is said to be "collaterally estopped" from doing so. [392]
Example: Cars driven by A and B collide. A sues B for property damage. Assume that the jurisdiction has no rules making any counterclaim a compulsory counterclaim. B declines to assert any counterclaim in the suit brought by A. A recovers $1,000 of damages. The jurisdiction follows common-law contributory negligence, by which even a small amount of contributory negligence by A would have barred him from recovery. In a subsequent suit, B sues A for personal injuries arising out of the same accident.
The court will hold that B is "collaterally estopped" from re-litigating the issue of whether A was negligent - the first judgment in A's favor amounted to a specific finding that A was not negligent, because contributory negligence would have barred recovery if he had been. Therefore, B cannot recover from A on a negligence theory. [Little v. Blue Goose]
1. Distinguished from merger and bar: There are two major differences between collateral estoppel and claim preclusion (merger and bar): [392]
a. Issue vs. claim: Whereas claim preclusion applies only where the "cause of action" or "claim" in the second action is the same as the one in the first action, collateral estoppel applies as long as any issue is the same, even though the causes of action are different.
b. Suit not prevented: Whereas claim preclusion prevents the second suit altogether, collateral estoppel does not prevent suit, but merely compels the court to make the same finding of fact that the first court made on the identical issue.
2. To whom applied: Collateral estoppel always applies where both the parties in the second action were present in the first action. Collateral estoppel sometimes, but not always, applies where only the person against whom estoppel is sought to be used was present in the first action. [398 - 400]
B. Issues covered: For an issue to be subject to collateral estoppel, three requirements concerning that issue must be satisfied: (1) the issue must be the same as one that was fully and fairly litigated in the first action; (2) it must have been actually decided by the first court; and (3) the first court's decision on this issue must have been necessary to the outcome in the first suit. [393 - 398]
1. Same issue: For the re-litigation of an issue to be collaterally estopped, that issue must be identical to an issue litigated in the earlier trial. [393]
2. Actually litigated and decided: The issue must have been actually litigated and decided at the first trial. [393]
a. Need not raise all defenses: This means that D in the first trial is not obligated to raise all of his defenses. D does not forfeit these defenses by not raising them as he would forfeit a compulsory counterclaim. (Example: P sues D for an installment of rent under a lease, and wins. In a later suit for subsequent installments due on the same lease, D will not be collaterally estopped from denying that the lease was ever executed - since the issue of execution was not actually litigated and decided in the first action, collateral estoppel does not apply even though D could have raised this as a defense the first time. [Jacobson v. Miller])
b. "Full and fair" litigation: Also, the party against whom collateral estoppel is sought to be used must have had a "full and fair opportunity" to litigate the claim. (Example: In a negligence case by P against D, D asserts his own due care, but the trial court unjustly excludes relevant evidence tending to prove that D was careful. In a subsequent suit by D against P for his own injuries, D will not be estopped from contending that he behaved with due care, since he lacked a full and fair opportunity to litigate the due care issue in the first suit.)
3. Issue essential to verdict: Not only must the issue have been litigated and decided in the first action, but the finding on that issue must have been necessary to the judgment. [394]
Example: A sues B for common-law negligence, and loses. The court's findings state that both parties were negligent, and recovery is denied on the grounds that A was contributorily negligent. B then sues A. A claims that the earlier finding of B's negligence, together with the doctrine of contributory negligence, mean that B cannot now recover as plaintiff.
Held, collateral estoppel should not be applied against B. The first case's finding that B was negligent was not necessary to the first verdict, since A's contributory negligence would have been enough to dispose of the case. Collateral estoppel applies only to issues whose adjudication was necessary to the verdict in the first action. [Cambria v. Jeffery]
a. Alternate findings: Where a judgment rests upon alternate findings, either of which would be sufficient to sustain it, courts are split about whether either finding should be given collateral estoppel effect. The modern (and Restatement) view is that neither should be given collateral estoppel effect, since the case could have turned out the same way without that finding. [394]
4. Reasonably foreseeable future litigation: Many courts today apply collateral estoppel in a subsequent action only where that action was reasonably foreseeable at the time of the initial suit. Otherwise, "defeat in one suit might entail results beyond all calculation¼; a trivial controversy might bring utter disaster in its train." [The Evergreens v. Nunan] [394]
5. Court of limited jurisdiction: A finding made by a court of limited jurisdiction may be denied collateral estoppel effect in a subsequent suit that would have been beyond the first court's jurisdiction. This is especially true where the first court has jurisdiction limited to a dollar amount, and also has informal procedures. (Example: If the first suit is in a small claims court, most of which have no pleadings, no rules of evidence, and usually no lawyers, a finding will generally not be held to have collateral estoppel effect in a later suit that could not have been brought in the small claims court.) [394 - 395]
6. Differences in burden of proof: If in the first action the allocation of the burden of proof was more favorable to the party now seeking to apply collateral estoppel than it was in the second action, collateral estoppel will not be allowed. [396]
7. Settlement: In most jurisdictions, the settlement of an action by consent of the parties has no collateral estoppel effect. (The settlement document may, of course, provide otherwise.) [396]
8. Findings of law: A court's conclusion of law, like a conclusion of fact, is generally given collateral estoppel effect. [396 - 397]
a. Exceptions: But there are two situations in which a conclusion of law generally will not be given collateral estoppel effect: (1) where the two actions involve claims that are substantially unrelated to each other; and (2) where there has been a significant change in legal principles between the two suits, especially where use of collateral estoppel would impose on one of the parties a significant disadvantage, or confer on him a significant benefit, with respect to his competitors.
Example: D is a liquor wholesaler. P, a state liquor licensing agency, sues to have D's license revoked on the grounds that D is really functioning as a retailer. The trial court finds in D's favor. P then sues X, whose conduct is the same as D's; a higher court finds in favor of P, and orders X's license revoked. Now, P brings a second suit against D for revocation.
Collateral estoppel effect will probably not be given to the first P-D suit, since there has been an intervening change in legal principles, and since use of collateral estoppel would give D a perpetual, and unfair, advantage over X and other similar competitors.
C. Persons who can be estopped: Generally, only the actual parties to the first action can be bound by the finding on an issue. [398 - 400]
1. Privies: But someone who is very closely related to a party in the first action can also be bound. Such "privies" include successors in interest to real property, beneficiaries of trusts, and indemnitors. [398 - 399]
2. Strangers to first action: The most important thing to remember is that a true stranger to the first action cannot be collaterally estopped by the former judgment. [399]
Example: A bus owned by Bus Co. collides with a car driven by Driver. In a suit between these two, Bus Co. is held to have full responsibility. Passenger, who was riding in Driver's car, now sues Driver. Even though the court in the first action decided that Driver was not at all at fault, Passenger is not bound by this finding. This is because Passenger was a complete stranger to the first action (the rules about who was a privy do not apply to the passenger-driver situation where the two are not related), and a stranger can never be bound by any finding of fact in the first action.
D. Persons who can benefit from estoppel: [400 - 405]
1. Mutuality: Originally, it was held that a party not bound by an earlier judgment (because not a party to it) could not use that judgment to bind his adversary who was a party to the first action. This rule prohibiting a stranger's use of collateral estoppel was known as the doctrine of "mutuality." [400]
a. Abandoned: Nearly all courts have abandoned the general principle of mutuality. While many courts refuse in particular circumstances to allow the use of estoppel by one not a party to the first action, it is no longer a general rule that a stranger to the first action cannot benefit from findings of fact made against her adversary.
Example: A bus owned by Bus Co. and a car driven by Driver collide. Also involved in the collision is Pedestrian, who is badly injured. Bus Co. sues Driver for negligence, and the court decides that Driver was totally at fault. In a separate suit, Pedestrian now sues Driver. Application of the doctrine of mutuality would prevent Pedestrian from collaterally estopping Driver on the issue of negligence. But most courts today would give Pedestrian the benefit of collateral estoppel in this situation, even though Pedestrian was a stranger to the first action.
2. Offensive/defensive distinction: Courts are more willing to allow the "defensive" use of collateral estoppel by a stranger than they are to allow the "offensive" use. "Offensive" use refers to use by a stranger to the first action who is a plaintiff in the second action; "defensive" use refers to use by a stranger who is a defendant in the second action. [401]
a. Offensive use sometimes OK: But even offensive use is sometimes approved by the courts, just not as often as defensive use. (The above example is an illustration of offensive use that would probably be accepted by a court.) [402 - 403]
Example: The SEC sues D, a corporation, based on a false proxy statement D has issued. The trial court decides in the SEC's favor, concluding that the proxy statement contained certain falsehoods. P then brings a stockholder's derivative action against D, based on the same proxy statement. P wants to collaterally estop D from relitigating the falsity of the proxy statement.
Held, P may use collateral estoppel. This is true even though P was a stranger to the first action, and even though P's use is offensive, in the sense that the person seeking collateral estoppel is the plaintiff in the second action. [Park Lane Hosiery Co. v. Shore]
b. Factors: Here are some of the factors courts consider in deciding whether to allow offensive non-mutual estoppel in a particular case: [403 - 404]
i. Alignment: Whether the party sought to be bound (the defendant in the second suit) was a plaintiff or defendant in the first suit. (If she was a defendant, this will militate against use of estoppel.)
ii. Incentive to litigate: Whether the person to be estopped had a reasonable incentive to litigate the issue fully in the first suit, which will depend in part on whether the second suit was foreseeable at the time of the first suit. (The more incentive the party had to litigate the first time, the fairer it is to bind him now.)
iii. Discouraging break-away suits: Whether the plaintiff in the second action could have joined in the first action, but instead sat out that first action in order to derive a tactical advantage.
iv. Multiple plaintiff anomaly: Whether permitting offensive estoppel would present a danger of the "multiple plaintiff anomaly." (Example: All 200 passengers are killed when a plane owned by D crashes. If each P sues seriatim, and offensive estoppel is allowed, D might win the first 20 suits, lose the 21st, and then be estopped from denying liability in the next 179. This would be unfair to D.)
v. Procedural opportunities: Whether there are procedural opportunities not available to the party in the first action but available now in the second action - if there are, allowing offensive estoppel is less likely. (Examples: There was less extensive discovery available in the first action, or no jury trial right.)
vi. Issue of law: Whether the issue is one of law or merely of "fact." (Where the issue is one of law, the court is likely to use the more flexible doctrine of stare decisis, rather than collateral estoppel.)
vii. Government as party: Whether the defendant in the second action is the government - non-mutual offensive use of collateral estoppel will virtually never be allowed against the government. [U.S. v. Mendoza]
3. Criminal conviction: Courts are split as to whether a party's previous criminal conviction may serve to collaterally estop him in the subsequent civil action. (Example: D is convicted of drunk driving after getting into an accident in which V is injured. In a subsequent civil suit by V, some but not all courts will allow V to collaterally estop D from denying that he was drunk.) [404]
a. Guilty plea: Courts are also split about whether offensive collateral estoppel effect should be given to a guilty plea in the first proceeding.
b. Acquittal: Acquittal in a criminal case is never binding in a subsequent civil action. The main reason is that to grant estoppel effect to an acquittal would be to allow the criminal defendant to bind a non-party. (Example: D is prosecuted by the state for drunk driving in an accident in which V was injured. D is acquitted. V now brings a civil action for negligence against D, and seeks to show that D was drunk. V will not be collaterally estopped by the acquittal, because V was not a party to the earlier action. A second reason for rejecting estoppel is that the "beyond a reasonable doubt" standard of proof necessary in a criminal case was tougher for the prosecution to meet than the "preponderance of the evidence" standard used in the later civil suit, so estopping V would be extra unfair to him.) [405]
IV. FULL FAITH AND CREDIT
A. Full Faith and Credit generally: Special problems arise when two related suits occur in different jurisdictions. There may be two different states involved, or a state court and a federal court. In either situation, the second court's handling of the first court's judgment is governed by a general principle called "full faith and credit." [410]
1. Two states: When the courts of two different states are involved, the result is dictated by the Full Faith and Credit Clause of the U.S. Constitution (Article IV, Section 1). This clause requires each state to give to the judgment of any other state the same effect that that judgment would have in the state which rendered it. [410]
Example: P wins a judgment against D in Connecticut, but cannot find any property in Connecticut on which to levy. P then locates property held by D in Illinois. P may collect in Illinois by bringing a suit based on the Connecticut judgment. Because of the Full Faith and Credit Clause, the courts of Illinois must accept this judgment at face value, and may not reconsider any issues which it concluded. The Illinois courts must therefore give P all the rights that a judgment creditor would have if he got an Illinois judgment, including the right to have the sheriff sell D's Illinois assets.
a. Misinterpretation: The rule of full faith and credit applies even where the second court is convinced that the first court made a mistake on law or facts. Indeed, State A must give full faith and credit to an adjudication of State B even if that judgment was based on a misinterpretation of the laws of State A. [Fauntleroy v. Lum] [410]
b. Collateral attack on jurisdiction: There is one exception to the rule that the second court may not reconsider any aspect of the original judgment: the second court may reconsider whether the first court had jurisdiction (either personal or subject-matter), provided that the jurisdictional question was not litigated or waived in the first action. This is the doctrine of "collateral attack."
Example: P sues D in Connecticut. D defaults, by never appearing in the suit at all. The Connecticut court enters a judgment in favor of P. P then sues in Illinois, having found property of D there. At D's request, the Illinois court may consider whether the Connecticut court ever had valid personal jurisdiction over D. If it concludes that Connecticut did not, the Illinois court need not enforce the judgment. (But if D had litigated the jurisdictional issue in Connecticut, Illinois could not reconsider the jurisdiction question, even if it was convinced that Connecticut wrongly determined that it had jurisdiction.)
2. State followed by federal court: If the first court is a state court, and the second court is a federal court, a similar full faith and credit principle applies, but this is not dictated by the Constitution. Instead a federal statute, 28 U.S.C. §1738, requires every federal court to give to the judgment of any state court the same effect that that judgment would have in the courts of the state which rendered it. [411]
3. Federal followed by state court: Conversely, if the first judgment is in a federal court and the second suit is in a state court, full faith and credit again applies, though the mechanism by which this happens is not so clear. (Probably the Constitution's Supremacy Clause dictates that the state court honor a federal court judgment). [414]
B. Duty to follow the res judicata effect of first judgment: The full faith and credit principle - that one jurisdiction's courts must honor the judgments of another jurisdiction - applies not only generally, but specifically to the issue of res judicata effect. In other words, the earlier judgment must be given exactly the same effect, in terms of claim preclusion and collateral estoppel, as the judgment would have in the court that rendered it. [412]
1. Two states: Thus a state must give to the judgment of any other state at least the res judicata effect that that judgment would have in the state of its rendition. (Example: P litigates an issue with D in State 1. The issue is decided in favor of P. X now sues D in State 2 in a suit raising the same issue. The State 2 court determines that the courts of State 1 would allow X to use offensive collateral estoppel in this situation. The courts of State 2 must follow suit, even if the State 2 courts do not themselves generally allow offensive collateral estoppel in this situation.) [411]
a. Greater effect: Courts are split about whether they may or should give greater effect to another state's judgment than it would have in that other state. Probably no constitutional principle prevents the second state from giving greater effect to the first state's judgment, so it is within the second court's discretion whether to do so. (Example: On the facts of the above example, assume that State 2 would allow offensive collateral estoppel, but State 1 would not. Probably State 2 is free to give the State 1 judgment collateral estoppel effect, but State 2 might choose not to do so.)
2. State followed by federal: Similarly, if the first judgment is in a state court and the second suit is in a federal court, the federal court must grant the state court judgment the same res judicata effect that it would have in that state. [411 - 414]
a. Right of Congress to specify otherwise: There is an exception to this rule: Congress is always free to provide otherwise, in a specific context. If Congress does provide otherwise, then the federal court may be free to deny the earlier state court judgment the res judicata effect it would have in the rendering state. (Example: 42 U.S.C. §1983 gives a person the right to bring a federal suit against anyone who violates his constitutional rights "under color of" state law. Suppose Congress added a clause to §1983 saying that any state court criminal proceeding absolving an official of unconstitutional conduct should be ignored by the federal court hearing the §1983 action. If Congress did this, a federal court hearing a §1983 suit would be free to deny any state judgment the collateral estoppel effect it would have in the courts of the state that rendered it. But Congress has not in fact done this in §1983, so the federal courts must honor the collateral estoppel effect of state court judgments in §1983 suits.)
b. Can't give greater effect: The federal court may not give greater preclusive effect to the prior state court judgment than that state would give it. [Migra v. Warren City Board of Ed.] (Example: If the initial state judgment comes from a state that does not allow non-mutual offensive use of collateral estoppel, the federal court hearing the second suit may not apply such collateral estoppel, even if the situation is one in which the Supreme Court allows the use of collateral estoppel.) [413]
3. Federal suit followed by state suit: If the federal suit comes first and the state suit second, the state court must give to the federal judgment the same res judicata effect that that federal court would give to its own judgment. [414]