civil procedure€¦ · exclaiming, "i'm glad you survived so you can pay the judgment...

MONTEREY COLLEGE OF LAW

CIVIL PROCEDURE

Midterm Examination

FALL 2010

Hon. Steven Sanders

INSTRUCTIONS:

There are three (3} questions in this examination. You will be given three (3} hours to complete the examination.

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Civil Procedure Fall 2010 Steve Sanders

Question 1

Paul, a Nevada resident, worked for an underground mining operation which was located entirely in California. Paul rented a room in California close to the mine where he worked since it was a two hour drive to Paul's home in Nevada. Paul would drive back home to Nevada on weekends. Paul bought a new fuel efficient car and offered to sell his 1977 El Camino pick-up to his coworker, Dick, a California resident. Paul sold his El Camino, which was registered in Nevada, for $2500 on the condition that it would pass California's smog test. If the El Camino did not pass the smog test, Paul agreed to pay for all work (parts and labor) necessary to allow the El Camino to pass the smog test. Dick paid Paul $1000 down with an agreement to pay the balance in 2 weeks. After 2 weeks, Dick had not paid the balance to Paul. Dick claimed the El Camino would not pass smog until Dick paid an estimated $1500 worth of work on the El Camino. Paul disputed Dick's contention.

Before the dispute could be resolved, Dick became entrapped in the mine with several other miners. Heroic efforts were undertaken by the mining operator to free the miners by drilling of a small shaft originating on the Nevada side of the mine. Paul volunteered to go down the escape route to assist the trapped miners. After leading Dick and the other miners to safety on the Nevada side, Paul handed Dick a summons and complaint in a lawsuit filed in Nevada State Court, exclaiming, "I'm glad you survived so you can pay the judgment I'm going to get against you in Nevada."

Dick had never been to Nevada, except to get married 35 years earlier and to play slots in Las Vegas twice times in the past 20 years. Dick did have a side business selling decorative whirly-gigs on the internet. About 5 of the 100 whirly gigs Dick sold were shipped to Nevada residents from California.

Nevada has prejudgment attachment statute that allows a plaintiff to obtain possession of personal property upon the filing of an affidavit submitted ex parte to a judge for review if the facts contained in the affidavit established that a plaintiff was more likely than not to prevail in a lawsuit seeking possession of personal property. No bond is required from a plaintiff but a defendant can obtain return of the property upon filing affidavits by two affiants establishing by clear and convincing evidence that either the plaintiff will not prevail or that the property was not in jeopardy of loss or damage. Defendant was required to post a bond to obtain possession of the property. The Nevada prejudgment attachment statute did not allow for a hearing on the issue.

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(1) Can Dick successfully challenge the Nevada state court's exercise of jurisdiction in this suit? Assume Nevada has a long-arm statute that allows Nevada state courts to exercise jurisdiction to the maximum extent permissible under the US constitution. Discuss jurisdiction fully, but do not discuss subject matter jurisdiction.

(2) Assuming the Nevada state court has jurisdiction, if Paul seeks to obtain prejudgment possession of the El Camino, can Dick successfully challenge the propriety of the Nevada prejudgment attachment statute? Discuss fully.

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'Vro 1)

1.

In Personam Jurisdiction

In personam jurisdiction is the power of a court to exercise power over a person. In order to

exercise in personam jurisdiction, a person must be present, domiciled in the state, or consent

to jurisdiction. Modernly, in personam jurisdiction can also be found where the party has

sufficient minimum contacts such as would not offend traditional notions of fair play and

substantial justice.

Presence

Here, Dick was present in Nevada when he was served, so he could be considered present.

Dick will argue that he was only in Nevada under the most extraordinary of circumstances;

however, there is no exception for extraordinary circumstances. Presence might be

questionable if Paul in any way committed acts of fraud to induce Dick into Nevada. However,

no facts support this. Paul may have had alterior motives for going down into the mine, but if

he had not gone it is likely that someone else involved in the heroic efforts would have.

Therefore, there was no fraud and Dick was present in Nevada when served, which makes

jurisdiction appropriate.

Domicile

Dick was a California resident and had only been to Nevada three times in the past 35 years, so

he was not domiciled in Nevada. Therefore, domicile is not a valid way to obtain jurisdiction in

Nevada.

Consent

No facts suggest that Dick in any way consented to Nevada jurisdiction. Therefore, consent is

not a valid way to obtain jurisdiction in Nevada.

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(Question 1 continued)

Long-Arm Statute

Nevada's long-arm statute allows its courts to exercise jurisdiction to the maximum extent ---·, I I

permissible under the U.S. Constitution. Therefore, there are no Constitutional issues as long\ /'' I

as there are sufficient minimum contacts. \

Minimum Contacts

Dick will argue that as he had only been to Nevada three times in his life, he did not have

sufficient minimum contacts. Paul will point out that five percent of his whirly-gigs sold on the

Internet were sold to Nevada residents. However, Dick's whirly-gig business has little to do with

this lawsuit. As it is not specifically involved, a court will require a more general showing of

contacts from Dick. Further, case law suggests that merely selling things on the Internet to

residents of another state is insufficient as a minimum contact because the seller would not

expect to be haled into court there. Paul will point out that Dick availed himself to Nevada law

when he made those sales, as Nevada laws protected his rights as a seller. However, no facts

suggest the Dick at any time took advantage of those protections. Further, the fact that only

five percent of his product is shipped there suggests that it is not a market he is heavily

invested in, and this was only a side business, so his interest was minima!.

Further, it must be determined if it is fair and reasonable to hale Dick into court in Nevada

based on these contacts. As Dick sold products to people in Nevada, he might expect that

something could happen with one of his whirly-gigs that would expose him to suit there.

However, as his contacts with Nevada are so strained, it is unlikely that a court would find it fair

to hale him into court there.

In Rem

In rem jurisdiction is the power of a court to exercise power over property. Here, there are no

facts that suggest that Dick owned any property in Nevada. Therefore, the court cannot obtain

jurisdiction over Dick's property.

Quasi In Rem

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Quasi in rem jurisdiction allows a court to exercise power over a person up to the value of their

property in the jurisdiction. As above, there are no facts that suggest that Dick owned any

property in Nevada. Therefore, the court cannot obtain jurisdiction over Dick via quasi in rem

jurisdiction.

Therefore, in personam jurisdiction can be obtained via Dick's presence only.

2.

Dick may be able to challenge the propriety of the prejudgment attachment statute based on

the Fourteenth Amendment, which entitles Dick to notice and an opportunity to be heard.

Prejudgment attachment statutes are generally disfavored by courts, but some have been

found to pass constitutional muster if they provide sufficient safeguards for the defendant's

interests.

Here, the ex parte submission is to a judge, who should be able to be neutral and detachE}cl:

However, the burden was only that it be more likely than not that the plaintiff would preyail. ,/·

This low burden is problematic because the judge will only have one side of the story. Further,

statutes found to be constitutional typically require that a plaintiff submit a bond worth at least

twice the value of the property to be attached to prevent frivolous attachments. Also, there is

no requirement that the plaintiff prove that the property is in jeopardy at all. As such, plaintiffs

would be able to attach any of the defendants property, whether it was an item in dispute or not.

Even worse, the statute does not allow for a hearing on the issue. If a defendant wants to be

heard, they have to file affidavits by two affiants and prove by clear and convincing evidence

that the plaintiff will not prevail or that the property was not in jeopardy. By contrast, as the

burden for the plaintiff is only "more likely than not," there is little protection in place for the

defendants. Plus, Dick will argue that the requirement of a bond for the value of the property is

disproportionately unfair, especially since the value of the car is in dispute and there is no bond

requirement from the plaintiff at all.

Also, there is no requirement of urgency. As the property may not be in any threat of being

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removed from the jurisdiction or destroyed, there is no reason why a court should not wait and

give the defendant a hearing to plead his/her case in order to allow the defendant ample notice

and an opportunity to be heard.

For all of the above reasons, there are insufficient safeguards in place to allow defendants

adequate notice and an opportunity to be heard. Therefore, Dick would probably be successful

in challenging the statute.

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Question 2

Suzy was born and raised in New Hampshire. After she graduated from high school, Suzy went to college in her home town while continuing to live at home with her parents. After graduation from college, Suzy went to medical school at the University of Montana where she met Sam, a citizen of India, who came to the US to study medicine at the University of Montana. Immediately upon graduation, Suzy and Sam married and moved in with Suzy's parents back in New Hampshire and lived there until they were both accepted into a one year internship program in Montana on an Indian reservation which provided medical care to Native Americans.

On their day off while hiking in Montana, Suzy and Sam came upon Pam, a Montana resident, who had fallen from a cliff, sustaining serious injuries. Suzy and Sam rendered medical care and transported Pam to a local hospital. Ultimately, Pam's leg had to be amputated but she survived.

Pam sued Suzy and Sam for malpractice in Federal District Court in Montana, claiming her injuries were exacerbated by the care they provided.

Montana had enacted a state law to deter frivolous lawsuits against doctors. The law provided that "no.suit for malpractice under Montana law may be commenced against a doctor unless a statement of two Montana doctors is filed concurrently with the complaint. The statement shall establish that the doctors have reviewed the medical records and the circumstances of the treatment and conclude, that in their professional opinion, probable cause exists to believe that malpractice has occurred."

Federal Rules of Civil Procedure (FRCP}, Rule 8(a) states that a suit may be commenced upon the filing of a complaint which specifies "a short and plain statement of the claim showing that the pleader is entitled to relief.. .. " Also FRCP Rule 11 specifies that an attorney signing a pleading certifies the attorney's good faith belief in the merits of the action. Nowhere in the FRCP is a requirement similar to Montana's required malpractice statement.

Pam filed the complaint without filing the Montana required statement of two health care practitioners. Pam complied with FRCP Rules 8(a) and 11. Suzy and Sam moved to dismiss the case alleging lack of subject matter jurisdiction and on the ground that the complaint was filed without the statement of two doctors.

(1) Does the Federal District Court have subject matter jurisdiction over the case?

(2) Does the Montana law requiring a statement of two doctors apply in cases brought in federal court?

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2)

1.

Subject-matter jurisdiction is the power of a court to hear a particular kind of case. Federal

courts can hear two kinds of cases: Diversity of Citizenship cases and Federal Question cases.

Federal Question

Here, there are no federal-question issues as malpractice is a state issue. Therefore, the only

avenue to obtain subject-matter jurisdiction is diversity of citizenship.

Diversity of Citizenship

Diversity of citizenship requires that no plaintiff resides in the same state as any defendant, and

that the amount in controversy exceeds $75,000. Here, there are no facts to indicate what

amount Pam is suing for, but malpractice suits are usually quite expensive. Especially

considering that Pam's leg had to be amputated, it is likely that the amount would exceed /

$75,000.

Citizenship is determined by presence and an intent to remain.

The facts state that Pam is a Montana resident, so in order for diversity of citizenship to apply,

Sam and Suzy must not be residents of Montana. Sam and Suzy will argue that they met in

Montana at the university, and they intended to come back and do their internship there, so

their intent was always to remain in Montana, which would defeat citizenship. Pam will point out

that they graduated and moved back home with Suzy's parents in New Hampshire, where Suzy

was born, raised, and went to high school and college. She will also point out that Sam is a

citizen of India and therefore an alien who is not considered a resident of any state. Sam and

Suzy will argue that they never intended to remain in Suzy's parents house, as that is no place

for a budding marriage to blossom. Pam will then point out that their internship is only for one

year, and they will have to go elsewhere when it ends. Sam and Suzy may be able to argue

that they intend to remain in Montana thereafter, but there are no facts to support their intent

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after the internship ends. For that reason, Pam is likely to win this argument. Therefore, Sam

and Suzy will be found not to be residents of Montana, and diversity of citizenship applies.

Therefore, the Federal District Court does have proper subject-matter jurisdiction over the case.

2.

The Montana law requiring the statements from the doctors seems to be at odds with FRCP 8

(a). When a state law conflicts with a federal law, under the Erie doctrine courts will look to

whether the laws are substantial or procedural. If substantial, they apply state law; if

procedural, they apply federal law.

Here, it is unclear whether the Montana statute is procedural or substantial on its face. The

federal law is probably a matter of procedure, as it is part of the Federal Rules of Civil

Procedure. However, the state law has elements of both, as the filing of the statements is

procedural, but the substance of the statements suggests something more substantial. For that

reason, a court after Erie would be likely to follow the Montana law.

Courts have further developed this doctrine. One possible test is to determine whether the law

is outcome-determinative. If it would affect the outcome, it is considered substantial, and state

law should be followed. Here, if the Montana law is followed, the case must be dismissed

because it did not include the required statements. However, the case will proceed under the

federal rules. Thus, it affects the outcome and under this test the state law would be followed.

Another possible test is to weigh the federal interest against the state interests. The states

have an interest in detering frivolous lawsuits against doctors, whereas federally, there is in

interest in short and plain statements for the sake of judicial economy. However, another

purpose of the Erie doctrine is to deter forum shopping. Here, people suing for malpractice

would be likely to flock to federal courts if the federal law is applied because of the reduced

requirements for filing an action. Maintaining the balance between state and federal courts is in

both interests, so under this test a court would follow the state law.

Finally, under the Rules Enabling Act, if there is a federal directive on point, the federal law

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takes precedence. Here, Sam and Suzy will argue that the federal law is not on point because

there is no reference to doctors or malpractice. Pam may argue that it's implied and that "a

short and plain statement" applies to all suits. However, this argument is not likely to succeed

since the Montana courts probably have other laws that are more similar to FRCP 8(a) than

their statute to deter frivolous lawsuits against doctors. Therefore, under the Rules Enabling

Act, the court should apply Montana law.

Thus, under each test Montana law should be applied by the federal court and the law requiring

the statements of two doctors should apply in federal court.

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Question 3

Solar Panels/ Inc. (SPIL a corporation incorporated in the State of California/ manufactures solar panels that generate electricity. SPI has two assembly plants1 one in Texas and one in Arizona. Each plant assembles about 50% of the companls solar panels. SPrs sales force is located in Nevada whereas its administrative corporate office is located in California.

Perry1 a recent college graduate and a citizen of Arizona/ was granted a paid internship ($101000/month) with SPI in its California office. The employment contract stated that Perris internship was for a one year period unless Perry quit or was terminated for good cause. Since the internship was to last only for a year1 Perry rented the home he owned in Arizona to a tenant and he rented an apartment in California near his SPI office for the year.

One month into the internship1 SPI terminated the internship. Perry filed suit in Federal District Court in Arizona/ alleging two claims:

(a) An employment discrimination claim based on section 1983 ·of the federal Civil Rights Act; and

(b) A breach of contract claim under Arizona law alleging that SPI fired Perry in violation of the employment agreement claiming that SPI fired Perry because of his religion/ not because of poor performance or any violation of SPI personnel regulations.

A summons and the complaint were left with the head engineer in the Arizona assembly plant.

(1) Was service proper?

(2) Assuming that the federal district court has valid subject matter jurisdiction over the federal question (the section 1983 claim); can Perry include the claim for breach of contract in the federal district court action? Be sure to discuss whether the federal district court has an independent basis for subject matter jurisdiction and any alternative theories for the court to exercise subject matter jurisdiction over the breach of contract claim.

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3)

1.

In order to properly effect service on a corporation, the person served must be well integrated in

the company and familiar with formalities.

Here, the head engineer is probably quite well integrated with the company because, as head

engineer in the Arizona plant, he would be supervising engineering of about half of the

company's solar panels. This would put him in contact with many people in the corporate office,

sales office, and probably the other plant as well. Thus he would probably be considered well

integrated in the company.

As for being familiar with formalities, he would have had to know what to do with the summons

and complaint. An engineer, even a head engineer, is probably not very familiar with law suits

and may not know what to do with it immediately. Although he may have been capable and

may have been able to find out what to do with it, he was probably not familar enough with

formalities. Thus, service to him was improper.

Further, courts will look to see if service was effected in a way likely to put the proper people on

notice. Here, since the corporate office was located in California, it was most likely that

whomever is in charge of litigation for the company worked in the California office. As Perry

used to work in that office, he should have known that. Therefore, serving the head engineer in

another location was probably improper.

2.

If Perry's clai.m for breach of contract has independent subject-matter jurisdiction, then it can be

included in his federal district court action via permissive joinder. As an alternative, it can be

heard via supplemental jurisdiction or under a theory of mandatory joinder.

Subject-Matter Jurisdiction

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Federal courts can hear cases that fall under either diversity of citizenship or federal questions.

Here, breach of contract is a state-law claim, so federal question does not apply. ,_.//

Diversity of citizenship requires that the plaintiffs do not reside in the same state as any of the

defendants and that the amount in controversy be at least $75,000. Here, Perry would be

seeking damages for at least the 11 months left on his contract. Eleven months at $10,000 per

month is $110,000, which is well above the $75,000 threshold.

/ As for citizenship, Perry was a citizen of Arizona. Corporations can have two states of

citizenship: Their state of incorporation and their principle place of business. Here, the state of

incorporation is California. As for the principle place of business, there are three tests to

determine where the principle place of business is: The nerve-center test, the muscle test, and

the overall activities test.

Under the nerve-center test, a court will look at where the decision-making power is in the

company. Under this test, their corporate office would probably be considered their principle

place of business, which would also be in California.

Under the muscle test, a court will look at where most of the business is done. In most

companies the sales office and corporate office are usually much smaller than the assembly

plants. However, the assembly plants are divided between Texas and Arizona with each

producing about 50 percent of their product. Since the production is "about 50" percent, that

means that one does more and the other does less. Whichever does more would be

considered the principle place of business under the muscle test, which may defeat citizenship

if it is determined that the one in Arizona is the principle place of business.

Under the overall activities test, a court looks at a corporations total operations, including the

nerve-center and muscle test. A court applying this test would likely conclude that California is

the principle place of business as it is difficult to pinpoint where the bulk of the business is

done, but the nerve-center is easy to point out.

Permissive Joinder

If subject-matter jurisdiction is proper, Perry can join the two actions together, as any two (or

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more) claims against the same party may be brought together. /

Supplemental Jurisdiction

Supplemental jurisdiction allows a federal court to hear a case based on state law if it has

proper subject-matter jurisdiction for the other case and they arise out of the same case or

controversy. Here, Perry will argue that the breach of contract claim is the same case or

controversy as the discrimination claim because his contract would not have been broken if not

for his religion, which would be the basis for his discrimination claim. Note that I am inferring

the the discrimination claim is based on Perry's religion. If the discrimination claim is based on

something other than his religion, then they would not arise out of the same case or controversy

and supplemental jurisdiction would be improper.

Mandatory Joinder

Perry must include all claims in his suit that arise out of the same transaction or occurrence.

Any claims that must be joined under this rule need not have independent subject-matter

jurisdiction. Here, Perry is arguing that he was discriminated against via breach of his contract.

Here, substantially the same facts are key to both claims, that Perry had an employment

contract with SP! and that they discriminated against him based on his religion. Further, if he is

able to bring the discrimination claim and not the breach of contract claim, res judicata may bar

the breach claim because the matter of the religious discrimination will have already been tried.

Because the two claims are so closely intertwined, one cannot be brought without the other,

joinder is mandatory, and no independent subject-matter jurisdiction need be proved.

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