Chapter 2 - The Resolution of Private Disputes
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Chapter 2 - The Resolution of Private Disputes
- 1. 2-1 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
- 2. 1 P A R T Foundations of American Law • The Nature of Law • The Resolution of Private Disputes • Business and The Constitution • Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking 2-2
- 3. C H A P T E R 02 The Resolution of Private Disputes “In case of dissension, never dare to judge till you have heard the other side.” Euripides 2-3
- 4. Learning Objectives • Differentiate state court and federal court systems • Explain jurisdiction and differentiate between subject matter and in personam jurisdiction • Understand civil procedure • Describe alternative dispute resolution methods 2-4
- 5. The US Judicial System • The United States has a federal court system, and each state (and District of Columbia) has a court system • A Court is established by a government to hear and decide matters before it and redress past or prevent future wrongs • Jurisdiction (the power to hear and speak) may be original (trial) or appellate (reviews trial court) 2-5
- 6. General vs. Limited Jurisdiction • General jurisdiction courts (i.e., trial courts) hear most types of cases – Levels generally classified according to dollar amount of damages or location – Examples: county courts, district courts • Limited jurisdiction courts hear specialized types of cases; appeals from decisions often require new trial in general jurisdiction court – Examples: traffic court, tax court, family court 2-6
- 7. Subject-Matter Jurisdiction • Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute • Courts of criminal jurisdiction hear trials of crimes and misdemeanors – Offenses against the public at large • Courts of civil jurisdiction hear and decide issues concerning private rights and duties (e.g., contracts, torts), and non-criminal public matters (e.g., zoning, probate) 2-7
- 8. In Personam or In Rem Jurisdiction • In addition to subject-matter jurisdiction, a court must have either in personam or in rem jurisdiction • In personam jurisdiction requires that the defendant be a resident of, located within, or have committed acts within the physical boundaries of the court’s authority 2-8
- 9. In Personam or In Rem Jurisdiction • In rem jurisdiction applies when property that is the subject of a dispute is located within the physical boundaries of a court’s authority – Example: a dispute over a sale 2-9
- 10. Bombliss v. Cornelsen • Facts & Procedural History: – Illinois residents sued Oklahoma residents in Illinois court and the Oklahoma defendants moved to dismiss for lack of in personam jurisdiction – Trial court dismissed complaint and Plaintiffs appealed • Issue: Does the Illinois long-arm statute permit state courts to exercise jurisdiction over Oklahoma defendants? 2-10
- 11. Bombliss v. Cornelsen • Analysis and Application to Facts: – Defendant must purposefully avail self of privilege of conducting activities within the state so he would reasonably anticipate being haled into state’s court – Where a contract exists, minimum contacts shown by negotiations between parties, course of dealing between parties, and foreseeable consequences – Existence of a contract, defendants’ interactive website, and contact with potential customers of plaintiffs equate to minimum contacts 2-11
- 12. Bombliss v. Cornelsen • Holding: – In personam jurisdiction exists. Trial court decision reversed and case remanded. 2-12
- 13. Federal Court Jurisdiction • Federal courts must have jurisdiction based on diversity or federal question • Diversity jurisdiction exists when the dispute is between citizens of different states and amount in controversy exceeds $75,000 • Federal question jurisdiction exists when the dispute arises under the Constitution, laws, or treaties of the United States 2-13
- 14. Hertz Corp. V. Friend • Issue: – Whether corporation was a California citizen for purposes of diversity jurisdiction statute and removal from state to federal court • Lower Court Decision: – Federal district court applied Ninth Circuit’s test to determine a corporation’s principal place of business and concluded that Hertz’s activities in California exceeded activities in other states, thus Hertz was California citizen and diversity jurisdiction does not exist; Ninth Circuit affirmed 2-14
- 15. Hertz Corp. V. Friend • Supreme Court’s Reasoning and Holding: – Lower courts have interpreted principle place of business differently, but best interpretation is “nerve center” approach, meaning the place where corporation’s officers direct, control, and coordinate the corporation’s activities – Hertz’s nerve center is in New Jersey, thus diversity exists 2-15
- 16. Federal Court Hierarchy • U.S. Supreme Court (appellate jurisdiction; final review and final decision) Courts of Appeals (appellate jurisdiction) District Courts (trial courts; original jurisdiction) or Statutory Courts (original limited jurisdiction), such as Tax Court, Court of Int’l Trade, Court of Federal Claims, etc. 2-16
- 17. State Court Hierarchy • State Supreme Court (final appellate) State Civil or Criminal Courts of Appeals District Courts (trial courts for civil matters over certain $ amount) and Criminal Courts County Courts (civil trial courts for matters under certain $ amount) Justice of the Peace Courts (small claims and misdemeanor courts) • Limited Jurisdiction Courts (e.g, family, traffic) 2-17
- 18. Civil Procedure • A set of rules establishing how a lawsuit proceeds from beginning to end • In an adversarial system, the plaintiff bears the burden of proof to prove his/her case by a preponderance of the evidence • Once the plaintiff has made a prima facie case (i.e., proved the basic case), the burden of proof may shift to the defendant 2-18
- 19. Civil Pre-Trial Procedure • Action or event occurs allegedly causes harm • Injured party, known as Plaintiff, files a Petition or Complaint • Sheriff serves process (writ, notice, summons) on Defendant • Defendant Answers Complaint • Case proceeds to trial or settlement 2-19
- 20. Civil Pre-Trial Procedure • Plaintiff’s complaint or petition plus the defendant’s answer or response are known as the pleadings • Defendant may enter a counterclaim against the plaintiff or a cross- complaint against a third party • Other parties may enter the case 2-20
- 21. Civil Pre-Trial Procedure • Motion Practice: some motions ask the judge to decide the result before trial – Motion to dismiss (or demurrer) – Motion for judgment on the pleadings – Motion for summary judgment • Motions should NOT be taken lightly! 2-21
- 22. Civil Pre-Trial Procedure • Discovery: Obtaining evidence from other party through interrogatories, requests for admissions, requests for documents, and depositions – Discovery process can be a battleground – See Allstate Indemnity Co. v. Ruiz • Pretrial Conference: Where judge will hear and rule on many evidentiary issues, discovery disputes, and other concerns 2-22
- 23. WWP, Inc. v. Wounded Warriors Family Support, Inc. • Facts and Ruling of Eighth Circuit: – In dispute about confusingly similar domain names, court awarded damages to plaintiff WWP. On appeal, WWFS argued that trial court erred in denying motion to compel WWP to produce certain discovery documents and allowing certain expert testimony at trial – District court had broad discretion to conclude that WWFS’s request for production was overbroad and WWP’s expert testimony was allowable 2-23
- 24. Civil Trial Procedure • Jury Selection – Voir Dire or Jury Questioning • Opening Statement from each party 2-24
- 25. Civil Trial Procedure • Plaintiff’s case through direct examination of witnesses (defendant performs cross- examination) and defendant’s case through direct examination (and plaintiff’s cross-examination) 2-25
- 26. Civil Trial Procedure • Closing argument or summation from each party • Jury verdict 2-26
- 27. Civil Trial Procedure • Trial motions include: motions in limine (motion to limit evidence), voluntary non- suit or dismissal (drop the case), motion for compulsory non-suit or summary judgment • After summation or closing argument, a party may move for a mistrial (injustice or overwhelming prejudice) or directed verdict (weight of evidence leads to only one conclusion) 2-27
- 28. Civil Trial Procedure • Trier of Fact sees material evidence (physical objects, documents), hears testimony of witnesses (who provide factual evidence), and decides outcome of the case based on facts; trier of fact may be judge or jury • Matters of law are issues not of fact, but of law; matters of law decided by a judge – E.g., whether a statute means X or Y, or one law or another applies to the facts 2-28
- 29. Civil Post-Trial Procedure • After the jury verdict, a party may make a motion for new trial, judgment non obstanto verdicto (notwithstanding the verdict; JNOV) or remittitur (defendant’s request for the judge to reduce the amount of damages the jury recommended; very common) 2-29
- 30. Civil Post-Trial Procedure • After a judgment has been entered, losing party may appeal decision to a higher court • After a judgment, winning party must have the judgment executed (carried out) to obtain money, property, or action ordered by the court • Bottom line: a judgment is issued and enforcement of the judgment begins 2-30
- 31. Point of Procedure • Not all dispute resolution mechanisms in the legal system are heard by a judge • Disputes with government often resolved by the relevant administrative agency – Administrative agencies generally have a unique dispute resolution process (hearings, appeals) • Also, disputants may choose alternative dispute resolution 2-31
- 32. Alternate Dispute Resolution • Arbitration: dispute settled by one or more arbitrators selected by the parties to a dispute; relatively formal; Uniform or Federal Arbitration acts typically used • Mediation: parties choose neutral party to aid resolution of dispute • Reference to Third Party: dispute resolution by rent-a-judge, minitrial, summary jury trial, or association tribunal 2-32
- 33. Why Choose ADR? • Less costly, in general • May be more appropriate method of resolution for certain types of cases – Example: family law disputes, real estate disputes between neighbors, high-tech or trade-secret disputes • May be required by clause in contract – Example: Preston v. Ferrer 2-33
- 34. AT&T Mobility LLC v. Concepcion • Facts and Ruling: – Vincent & Liza Concepcion filed fraud and false advertising lawsuit based on their AT&T cell phone contract, which had arbitration clause that prohibited class action claims; AT&T filed motion to compel arbitration – U.S. Supreme Court: • When parties agree to arbitrate disputes, the FAA controls and dispute must be submitted to arbitration even if the clause prohibits class claims in contravention of state law 2-34
- 35. Test Your Knowledge • True=A, False = B – A trial court has original jurisdiction and an appellate court has appellate jurisdiction – The difference between general jurisdiction and limited jurisdiction is based on the amount in controversy (the damages amount) – Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute 2-35
- 36. Test Your Knowledge • True=A, False = B – In personam jurisdiction refers to the court’s jurisdiction over the defendant, but in rem jurisdiction refers to the court’s jurisdiction over the property in dispute – The burden of proof solely rests on the plaintiff – Matters of law are determined by either the jury or the judge. 2-36
- 37. Test Your Knowledge • Multiple Choice – Diversity jurisdiction refers to: a) a jury pool that reflects the ethnic makeup of the city b) a citizen’s lawsuit against the government c) a lawsuit by a citizen of one state against a citizen of a different state – Methods of alternative dispute resolution: a) Mediation b) Arbitration c) Summary jury trial d) All of the above 2-37
- 38. Test Your Knowledge • Multiple Choice – Discovery refers to: a) the discovery that a dispute exists b) the pre-trial process involving interrogatories, requests for admissions, and requests for documents c) the analysis of fault in a dispute – After the verdict: a) Either party may make post-verdict motions b) The trial must end c) The trial begins 2-38
- 39. Thought Question • If you were served with a lawsuit, what would you do about it? 2-39
Notes de l'éditeur
- This is a well-known dog breeder case. In Bombliss v. Cornelsen, the Oklahoma defendants’ Internet use helped lead to a conclusion that the courts of Illinois could properly exert in personam jurisdiction over the defendants. As Bombliss illustrates, Internet activities of a nonresident defendant frequently play a key role in the determination of whether a state or federal court’s exertion of in personam jurisdiction over that defendant is legally permissible.
- Hertz was sued by California citizens in California state court, but Hertz filed a notice seeking removal of the case to federal court on the basis of diversity of jurisdiction. Hertz argued that New Jersey was the company’s headquarters, but the plaintiffs argued that most corporate activities occurred in California.
- The Court followed and expanded upon a 1959 decision by judge Edward Weinfeld in Scot Typewriter Co. v. Underwood Corp ., 170 F. Supp. 962, 965 (S.D.N.Y. 1959).
- Allstate Indemnity Co. v. Ruiz: One month after securing insurance coverage from Allstate Indemnity Co. for their Chevrolet Blazer, Joaquin and Paulina Ruiz purchased an Oldsmobile Cutlass. They instructed Allstate agent Paul Cobb to add that vehicle to the policy. Cobb added the Cutlass to the policy but mistakenly deleted the Blazer. The Ruizes were not notified that the Blazer was no longer covered under their insurance policy. Joaquin Ruiz was later involved in an accident while driving the Blazer. When the Ruizes submitted a claim for collision coverage, Allstate denied payment, asserting that the Blazer was not covered under the policy. The Ruizes filed suit, alleging that Cobb and Allstate had been negligent in deleting the Blazer from the insurance policy, and that Allstate had engaged in bad faith and unfair claim settlement practices in violation of a Florida statute. After the filing of the lawsuit, Allstate admitted its obligation to provide collision coverage. Even though the basic coverage issue was resolved, the bad faith claim remained pending. In connection with the bad faith claim, the Ruizes sought discovery of certain documents, including Allstate’s claim and investigative file and materials, Allstate internal manuals, and Cobb’s file regarding the bad faith claim. Allstate refused to supply the requested documents, so the Ruizes asked the trial court to compel production of them. After reviewing the documents sought by the Ruizes, the trial judge ordered that the documents be provided to them because the documents contained relevant information regarding Allstate’s handling of the underlying insurance claim. The judge also determined that the requested documents did not constitute work product or attorney-client communications and thus were not exempt from disclosure during the discovery process. (Because communications between an attorney and his or her client are privileged, they are not subject to discovery. Work product is a term used to describe documents and materials prepared by an attorney and his or her client in anticipation of litigation. In general, work product is not subject to discovery.) Allstate appealed to Florida’s intermediate court of appeals, arguing that the dispute over the Ruizes’ insurance coverage was immediately apparent when Allstate refused to make payment, that litigation was anticipated at all pertinent times, and that all of the material sought by the Ruizes was nondiscoverable work product. The appellate court concluded that several requested items were not protected work product and therefore were properly discoverable, including: Cobb’s statement of January 7, 1997; computer diaries and entries from the date Joaquin Ruiz reported the accident on December 28, 1996, through January 10, 1997; and a January 7, 1997, memorandum from an Allstate insurance adjustor to her boss. However, the appellate court determined that the balance of the documents sought by the Ruizes were prepared by Allstate in anticipation of litigation and were thus nondiscoverable work product. Both parties were dissatisfied with the appellate court’s decision, the Ruizes because some of what they sought was held nondiscoverable and Allstate because some of what it sought to withhold was held discoverable. The Supreme Court of Florida granted Allstate’s request for review.
- In general, parties to a dispute cannot make overbroad or unreasonable requests for production of documents or other materials, but must focus on the subject matter of the case. A trial court has broad discretion in determining what is reasonable in such requests. The same discretion is available to the court for witness testimony.
- Note the dissent in this case, in which Breyer, Ginsburg, Sotomayor, and Kagan declare that the FAA does not prohibit class action. Compare this case about arbitration with the case of Preston v. Ferrer , which involved a contract dispute between Judge Alex Ferrer, who has arbitrated disputes on the Fox Channel television show as “Judge Alex.” Ferrer’s lawyer and manager, Arnold Preston, worked as personal manager for entertainers. In June 2005, Preston began arbitration proceedings with American Arbitration Association claiming fees due from Ferrer’s earnings from “Judge Alex” under a contract the parties signed in 2002 that had an arbitration agreement. The agreement provided that disputes about the validity of the contract would be decided by arbitration. Ferrer filed a motion to stay the arbitration, arguing that under the California Talent Agencies Act (TAA ), the dispute should first be heard by the California Labor Commission. Specifically, Ferrer argued that Preston was working as an unlicensed talent agent when their contract was signed, thus the contract was invalid under the TAA (requires that talent agents be licensed). Supporting "Judge Alex" in the case were the Screen Actors Guild and the American Federation of Television & Radio Artists. The dispute really was about who got to decide whether Preston was an unlicensed talent agent or an unregulated personal manager. The Court of Appeal in a 2-1 decision held that the Labor Commissioner had authority to resolve the dispute about Preston’s status under the TAA and that the FAA did not preempt the TAA, basing this second decision on U.S. Supreme Court precedence in Buckeye Check Cashing, Inc. v. Cardegna . Preston appealed the decision to the California Supreme Court, which denied review, and then he appealed to the U.S. Supreme Court. The Supreme Court promptly heard the case and issued its decision a mere one month later. Apparently, the U.S. Supreme Court read Buckeye very differently from the California court because it found Preston v. Ferrer to be essentially controlled by its prior decision in Buckeye.
- True False. General jurisdiction refers to a court that may hear a wide variety of cases, but limited jurisdiction refers to a court that may only hear specific types of cases, such as tax, traffic, probate, or family disputes. True.
- True. False. The burden of proof begins with the plaintiff, but once a plaintiff proves a prima facie (on its face) case, the burden may shift to the defendant. For example, in an auto accident case, the plaintiff may prove the prima facie case by showing a police report that places the fault of the accident on the defendant and showing that the accident caused plaintiff’s injuries (property damage, physical injury). The burden then shifts to the defendant, who may raise a defense, such as contributory negligence. False. Only a judge may determine a matter of law. A judge OR jury may act as the trier of fact.
- The correct answer is (c) The correct answer is (d)
- The correct answer is (b) The correct answer is (a). Post-verdict motions include remittitur, motion for new trial, motion for judgment notwithstanding the verdict.
- Class discussion opportunity