Civil Procedure

Chapter One(Pg. 4) Where can a suit be filed?

Reasons: Convenience, for one party may be inconvenient for the opposing party

Jury may be more sympathetic in a particular venue Judge avoidance Court docket concerns (timeliness)

(Pg. 5) Personal Jurisdiction: A court cannot exercise power over a defendant unless the state in which the court sits has some connection to them or to the incident that gives rise to the plaintiffs claim. This does not mean a defendant can only be sued in their home state-but it does mean that a state that has no connection with a defendant cannot enter a judgment against them. The doctrine of personal jurisdiction focuses on the defendant, who is being taken to court against their will

The United States district courts are the trial courts of the federal court system. There are 94 federal judicial districts, including at least one district in each state, the District of Columbia and Puerto Rico. Three territories of the United States -- the Virgin Islands, Guam, and the Northern Mariana Islands -- have district courts that hear federal cases, including bankruptcy cases. 

How does a case get to Federal Court or have to remain in State Court?

Federal Courts have limited jurisdiction: Congress sets the boundary limits of what types of cases the federal courts will be allowed to review. These boundaries are set by: Article III of The US Constitution (See pg. 278 in Rule Book)

Also apply 28 U.S.C. §§ 1331 and 1332 (see page 236 in Rule Book)

CASE Hawkins v. Masters Farms , Federal R. Civ. P. 12 (b) (1) Defendant Motion to dismiss for lack of subject matter jurisdiction. See Rule 28 U.S.C § 1332 GrantedNATURE OF CASE: Federal R. Civ. P. 12 (b) (1) Defendant Motion to dismiss for lack of subject matter jurisdiction.

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FACTS: The representatives of James Creal (P) brought suit against Masters (D) in the federal district court for Kansas, alleging the existence of diversity jurisdiction under 28 U.S.C. § 1332. Masters (D) moved to dismiss, disputing that there was complete diversity among the parties. RULE OF LAW: For purposes of determining diversity jurisdiction, a person is a “citizen” of the state in which he or she is “domiciled,” which for adults is established by physical presence in a place in connection with the intent to remain there. HOLDING AND DECISION: Yes (D) motion to dismiss is granted.

CASE Bridges v. Diesel Service, Inc. Motion for sanctions pursuant to Fed. R. Civ. P. 11. Denied NATURE OF CASE: Motion for sanctions pursuant to Fed. R. Civ. P. 11. FACTS: Bridges (P) commenced this action against Diesel Service Inc. (D) under the Americans with Disabilities Act (ADA) alleging that his employer dismissed him from his job as a result of a disability. By an order dated June 29, 1994, the court dismissed Bridges’s (P) complaint without prejudice for failure to exhaust administrative remedies. In particular, Bridges (P) did not file a charge with the Equal Employment Opportunity Commission (EEOC) until after commencement of this action. Diesel Service, Inc. (D) then moved for sanctions pursuant to Fed. R. Civ. P. 11.RULE OF LAW Fed: R. Civ. P. 11 imposes an obligation on counsel and client to stop, think, investigate and research before filing papers either to initiate the suit or to conduct the litigation. HOLDING AND DECISION: (Huyett, J.) Yes. Fed. R. Civ. P. 11 imposes an obligation on counsel and client to stop, think, investigate and research before filing papers either to initiate the suit or to conduct the litigation. The court is not convinced that Plaintiff’s lawyer displayed a competent level of legal research. A brief review of case law would have revealed the EEOC filing requirement. Further, an award of sanctions for failure to exhaust administrative remedies is not unprecedented. However, the court will not grant sanctions. The prime goal of Rule 11 sanctions is deterrence of improper conduct. In this case, monetary sanctions are not necessary to deter future misconduct,

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since plaintiff’s counsel immediately acknowledged his error and attempted to rectify the situation. Motion is denied.

CASE Bell v. Novick Transfer Co. Motion to dismiss for failure to state a claim. Fed. R. Civ. P. 8. DeniedNATURE OF CASE: Motion to dismiss for failure to state a claim. FACTS: Bell (P) filed a tort complaint in federal court after removal that stated only that Novick Transfer Co.’ s (D) agent drove a truck that negligently collided with the car in which Bell (P) was riding, causing injury to Bell (P). RULE OF LAW: A complaint that alleges only that a defendant negligently drove a motor vehicle and thereby injured the plaintiff is sufficient under Fed. R. Civ. P. 8. HOLDING AND DECISION: (Thompsen, J.) Yes. This tort action was originally filed in Court of Common Pleas of Baltimore City but was removed to federal court. After such a removal, the Federal Rules of Civil Procedure apply rather than the laws of the State of Maryland . Thus, while Maryland law might regard the complaint here as insufficient for failure to state a cause of action, the inquiry here is to be made in light of the Federal Rules of Civil Procedure. Rule 8 controls the sufficiency of complaints, and requires only “a short and plain statement of the claim showing the pleader is entitled to relief.” The complaint in this case contains such a statement and sufficiently states a cause of action under Rule 8. A complaint that alleges only that a defendant negligently drove a motor vehicle and thereby injured the plaintiff is sufficient under Rule 8. Motion is overruled.

CASE Larson v. American Family Mutual Ins. Co. Motion to amend complaint to add party. Fed. R. Civ. P. 20 (A) GrantedNATURE OF CASE: Motion to amend complaint to add party. FACTS: The Larsons (P) retained an attorney, Brad Ross -Shannon (D) to sue American Family Mutual Insurance Company (American Family) (D), which held their homeowners’ policy, after the company (D) failed to pay a house-fire claim. Ross-Shannon (D) did not pursue their claim because he was trying to be hired by American Family (D) in other matters. The Larsons (P) fired Ross- Shannon (D) and hired another attorney, who initially filed a complaint in April 2006 against only American Family (D), in state court. American Family (D) removed the case to federal court on the basis of diversity jurisdiction. After the insurance company (D) provided discovery in January 2007, the Larsons ( P) learned that Ross-Shannon (D) was in talks with the company (D) while he was representing the Larsons (P). The Larsons (P) attorney then sought to amend their complaint to add Ross-Shannon (D) as an additional defendant, based on breach of fiduciary duty, legal malpractice, and conspiracy, claims that would destroy diversity and

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force a remand to state court. Ross-Shannon (D) and American Family (D) objected, arguing that the amendment was not timely filed, since they knew of the purported claims against Ross-Shannon (D) in February 2006, but waited until February 2007 to filed the amendment, and that joinder of new parties should not be allowed, because the new claims do not arise out of the same transaction or occurrence as the other claim. RULE OF LAW: (1) An amendment to a complaint seeking to join a party to a lawsuit that is filed one month after complainant confirms the party’s involvement in the lawsuit is timely filed under the Federal Rules of Civil Procedure. (2) All persons may be joined in one action as defendants if claims against them arise out of the same transaction or occurrence as the other claims. HOLDING AND DECISION: (Figa, J.) (1) Yes. An amendment to a complaint seeking to join a party to a lawsuit that is filed one month after complainant confirms the party’s involvement in the lawsuit is timely filed under the Federal Rules of Civil Procedure. The Larsons (P) may have suspected that Ross-Shannon (D) was negotiating with American Family (D) before February 2006, but could not confirm that it was so until American Family (D) provided discovery in January 2007. In addition, they would be prejudiced if they were denied the opportunity to amend their complaint to add these claims in this case, because they would then be required to bring the claims in a separate and somewhat duplicative lawsuit in state court. (2) Yes. All persons may be joined in one action as defendants if claims against them arise out of the same transaction or occurrence as the other claims. One theory proposed in the amended complaint is that the delay by Ross-Shannon (D) in the filing of a lawsuit against American Family (D) and American Family’s (D) denial of payment of the claim was due in part to the fact that the lawyer (D) and insurer (D) were discussing the possibility of joining forces. The breach of their respective duties arise out of the same occurrence or transaction, or series of occurrences or transactions, and it would be inefficient to have one set of claims tried against American Family (D) in federal court and another set tried against the lawyer (D) in state court. Joinder is therefore proper. Remanded to state court.

JOINDER RULES

Fed. R. Civ. P. 18 (pg. 50) Joinder of ClaimsFed. R. Civ. P. 19 (pg. 51-4) Required Joinder of ClaimsFed. R. Civ. P. 20 (pg. 54) Permissive Joinder of ClaimsFed. R. Civ. P. 24 (pg. 65-6) Intervention

CASE Butler v. Rigby

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Disclosures and Discovery Fed. R. Civ. P. 26 (pg.67-78)Affirmed in part, reversed in part. NATURE OF CASE: Appeal from denial of protective order in personal-injury action. FACTS: After an automobile accident, the plaintiffs hired attorneys who may have had some connection to American Medical Group (AMG) and Midtown Health Care (MHC), two medical care providers. The defendants filed identical notices of depositions on AMG and MHC and sought past and current patient lists, as well as the total number of patients treated over a significant period of time. AMG and MHC moved for a protective order on the grounds that the information was not relevant, was protected by the health care provider-patient privilege and was overly burdensome. However, the magistrate judge disagreed and ordered that most of the information was discoverable. AMG and MHC appealed. RULE OF LAW: Lists of past and current patients are privileged from discovery. HOLDING AND DECISION: (Vance, J.) Yes. Lists of past and current patients are privileged from discovery. The Federal Rules provide for liberal discovery and broad treatment of relevance. The discovery sought need not be admissible at trial if the information appears reasonably calculated to lead to the discovery of admissible evidence. However, discovery may be limited by the court if it determines that the discovery sought is unreasonably cumulative or duplicative or if the burden and expense outweighs its likely benefit. Privileged information also is not discoverable. In the present case, the number of total patients treated by AMG and MHC could be relevant in demonstrating that their connection with the plaintiff’s attorneys shows bias. Thus, the magistrate was not clearly wrong in ordering this information discoverable despite the significant expense and burden of compiling the information. However, as to the patient lists sought, Louisiana law construes the health care provider-patient privilege broadly. Thus, the lists are not discoverable and an order should have been granted to AMG and MHC on that issue. Affirmed in part, reversed in part.

CASE Houchens v. American Home Assurance Co Fed. R. Civ. P. 56 Motion for Summary Judgment (pg. 129) GrantedNATURE OF CASE: Appeal of dismissal of action for damages for breach of contract. FACTS: Houchens’s (P) husband disappeared in Thailand in August, 1980, and was not heard from since. Under Virginia law, a person who is missing for seven years is presumed dead. In 1988, Houchens (P) had her husband declared legally dead. Houchens (P) attempted to collect on two life

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insurance policies issued by American (D), under which the proceeds would only be paid upon proof that the insured’s death was accidental. American Home Assurance Co. (American) (D) refused to pay and Houchens (P) sued in federal court for breach of contract. American (D) moved for summary judgment, arguing there was no evidence that the insured had died or that he had died accidentally. The district court granted the motion and dismissed the case, and Houchens (P) appealed. RULE OF LAW: Under Fed. R. Civ. P. 56, a federal court must enter summary judgment if after complete discovery a party fails to show that the evidence, viewed in the light most favorable to that party, is sufficient to establish the existence of an essential element on which that party has the burden of proof. HOLDING AND DECISION: (Ervin, C.J.) Yes. Under Fed. R. Civ. P . 56, a federal court must enter summary judgment if a party fails to show that the evidence, viewed in the light most favorable to that party, is sufficient to establish the existence of an essential element on which that party has the burden of proof. Under Rule 56( c), a summary judgment motion must be granted where there is “no genuine issue as to any material fact.” Here, Houchens (P) is entitled to the Virginia presumption that her husband is dead. However, for recovery on the policy it still must be shown that her husband’s death was accidental. The meager circumstances surrounding his disappearance do not provide sufficient evidence to allow a reasonable jury to conclude that he died accidentally. Under Virginia law, Houchens (D) had the burden of proof as to accident, a necessary element of her case. She had insufficient evidence to meet this burden. Thus, as there was no genuine issue as to a material fact, the summary judgment motion was properly granted. Affirmed.

CASE Norton v. Snapper Power Equipment Fed. R. Civ. P. 50(A) Motion for a Directed Verdict (pg. 117)DeniedNATURE OF CASE: Appeal from judgment notwithstanding the verdict denying damages for personal injuries. FACTS: Norton (P), a commercial gardener, was injured while riding a lawn mower manufactured by Snapper Power Equipment (Snapper) (D). Norton (P) sued Snapper (D) for damages based on strict liability. At the close of Norton’s (P) case, and against the close of all evidence, Snapper (D) moved for a directed verdict. The court left the strict liability claim for the jury, and the jury returned a verdict for Norton (P), holding Snapper (D) liable for 80 percent of the injuries. After dismissing the jury, the court indicated that it would enter a

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judgment notwithstanding the verdict based on Snapper’s (D) contention that since a reconstruction of Norton’s (P) accident with the mower was impossible, the jury could not determine whether a blade-stopping device would have eliminated or lessened Norton’s (P) injury. Norton (P) appealed. RULE OF LAW: A judgment notwithstanding the verdict should be granted only where the evidence so strongly points in favor of a moving party that reasonable people could not arrive at a contrary verdict. HOLDING AND DECISION: (Clark, J.) Yes. A judgment notwithstanding the verdict should be granted only where the evidence so strongly points in favor of a moving party that reasonable people could not arrive at a contrary verdict. The issues here were whether the failure to install “dead man” devices rendered the mower defective, and if the mower was defective, whether the lack of a “dead man” control caused the injury. Snapper (D) claims that there was little or no evidence to support the jury’s verdict. The jury is, however, permitted to reconstruct the series of events by drawing an inference upon an inference. The causation evidence here, although circumstantial, was far more impressive than Snapper (D) contends, and Snapper (D) was given every opportunity to point out the weaknesses in Norton’s (P) proof, but was unpersuasive to the jury. Reversed and remanded.

CHAPTER 2 PAGES 60-64Jurisdiction and the Constitution Lawyers would describe the challenge to the Illinois suit against your California landlord as involving a question of personal jurisdiction—the power of an Illinois court to render a judgment binding someone who may have never set foot in Illinois. They would describe the challenge to the federal courts’ power to decide the question At the outset you need only bear in mind that personal and subject matter jurisdiction are both necessary ingredients of any court’s power to render a binding decision in a case; that is, a court must have both subject matter and personal jurisdiction to render a valid judgment.

Three parts of the Constitution bear on jurisdiction. Article III authorizes the establishment of the system of federal courts Section 2 sets the limits of federal judicial authority. Federal courts cannot exceed those jurisdictional boundaries, and Congress has the power in many instances to restrict the scope of federal judicial authority more narrowly than does the Constitution

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Article IV, Section 1 requires that “Full Faith and Credit … be given in each State to judicial proceedings of every other State.” The Supreme Court has interpreted this clause to require that one state recognize and enforce judgments of another state. For example, suppose a court in State A enters a judgment for $ 100,000 against D, but plaintiff cannot find any assets of D within State A to satisfy the judgment. D’s only assets turn out to be a large bank account at a bank located in State B. Under the Full Faith and Credit Clause (and state legislation implementing it), plaintiff commences a summary proceeding in a court in State B, records State A’s judgment, and can then obtain a writ of execution from the State B court enforcing State A’s judgment against any assets of D located in State B.

Section 1 of the Fourteenth Amendment provides that no “State [shall] deprive any person of life, liberty or property without due process of law.” This clause, known as the Due Process Clause, has proved to be one of the cornerstones of modern constitutional and procedural theory. It derives its relation to jurisdiction from Pennoyer v. Neff, a case that might be termed the great-grandparent of personal jurisdiction. Pennoyer made the question of what we now call personal jurisdiction part of the Constitution.

There are two key ways in which the Constitution dictates choice of law. First, Article VI provides that the Constitution and federal laws “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding .” This provision is commonly referred to as the Supremacy Clause.

The clause means that if Congress has validly enacted a statute dealing with a particular subject, both federal and state courts are required to enforce the federal statute, regardless of whether there is a contrary state statute or state common law rule.

CHAPTER 3Subject Matter Jurisdiction of the Federal Courts

Because of limits on federal power, federal courts can hear only certain kinds of cases. Consequently litigants, their lawyers, and federal judges need to know whether a particular kind of case must be filed in federal court. Other cases can only be filed in state court. And in many others, both state and federal courts are available. Lawyers describe this sorting of cases between court systems as “subject matter jurisdiction.”

Doctrine Personal Jurisdiction Federal Subject Matter Jurisdiction

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Constitutional Source Due Process Clause of the Fourteenth Amendment

Article III

Statutory Source State and federal long-arm statutes (e.g., Rule 4( k)(1)( A))

Federal jurisdictional statutes (e.g., 28 U.S.C. § § 1331, 1332, etc.)

Effect Limits power of state and federal courts in any given state over cases involving particular defendants

Limits power of federal courts to certain kinds of cases

To have the requisite authority, a federal district court must have both personal jurisdiction over the defendant and subject matter jurisdiction over the kind of case.

Section 2 of Article III Article III limits federal courts’ jurisdiction to the list set forth in § 2. By implication a case not listed in Article III may not be heard in a federal court. Such a case could be heard only in a state court. Within the boundaries of Article III, however, Congress remains free to bestow all or some of the constitutionally permissible jurisdiction on the lower federal courts.Because the federal courts are courts of limited jurisdiction, two questions lurk at the threshold of every case brought in a federal court: Does the case fall within one of the enumerated categories of Article III, § 2; and has Congress further authorized the lower federal courts to assume that jurisdiction? Rule 8( a) reflects these concerns by requiring every federal complaint to begin with a “short and plain statement of the grounds for the court’s jurisdiction.”

In judging those jurisdictional statements, the courts look to three bodies of law—

o The Constitution, o The statutes conferring jurisdiction o The case law interpreting both.

Federal courts share much of their jurisdiction with state courts.

28 U.S.C. § 1331. Grants federal courts jurisdiction over cases that arise under federal law. The federal courts have such jurisdiction does not seem surprising, but it may be surprising to learn that they do not have exclusive jurisdiction over such cases. So far as Congress and the Constitution are concerned, cases arising under this statute can be brought in state as well as federal courts. Lawyers describe such shared jurisdiction as concurrent.

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In some instances Congress has made federal jurisdiction exclusive. (28 U.S.C. § § 1333 (admiralty), 1334 (bankruptcy), 1346 (b) (tort suits based on negligence of a federal employee), 1337 (antitrust).) See 28 U.S.C. § 1338

FEDERAL QUESTION JURISDICTION

Case Merrell Dow Pharmaceuticals, Inc. v. ThompsonNo federal question is raised because the Petitioners’ claim did not arise under federal law. The Supreme Court of the United States affirmed the court of appeal’s decision. Brief Fact Summary. Action filed by multiple Respondents against Merrell Dow Pharmaceuticals, Inc. (Petitioner), a corporation, that manufactures and distributes the drug Bendectin. Complaints filed in the Court of Common Pleas in Hamilton County, Ohio alleged that a child was born with multiple deformities as a result of a mother’s ingestion of Bendectin during pregnancy. In the complaints, five of the six counts alleged common-law theories of negligence, breach of warranty, strict liability, fraud and gross negligence. However, in count four, Respondents alleged that the drug Bendectin was misbranded in violation of the Federal Food, Drug and Cosmetic Act (Act) because its labeling did not provide adequate warning that its use was potentially dangerous. The Petitioner sought removal to federal district court, in part, upon the ground that the claims arose under the federal laws of the United States. After removal, the cases were consolidated. The district court found a cause of action arising under the federal laws, but the United States Court of Appeals for the Sixth Circuit reversed, noting that the Act does not create or imply a private right of action for individuals injured as a result of violations of the act. Rule of Law. A complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim arising under the Constitution, laws or treaties of the United States.

CASE Louisville & Nashville Railroad v. Mottley Federal Rule 12( h)( 3) Lack of Subject-Matter Jurisdiction. If the court determines at any

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time that it lacks subject-matter jurisdiction, the court must dismiss the action.NATURE OF CASE : Appeal of a decision overruling a demurrer in an action for specific performance of a contract. FACTS: In 1871 , Mottley (P) and his wife were injured while riding on the Louisville & Nashville Railroad (D). The Mottleys (P) released their claims for damages against the Louisville & Nashville Railroad (D) upon receiving a contract granting free transportation during the remainder of their lives. In 1907, the Louisville & Nashville Railroad (D) refused to renew the Mottleys’ (P) passes, relying upon an act of Congress that forbade the giving of free passes or free transportation. The Mottleys (P) filed an action in a Circuit Court of the United States for the Western District of Kentucky. The Mottleys (P) and the Louisville & Nashville Railroad (D) were both citizens of Kentucky. Therefore, the Mottleys (P) attempted to establish federal jurisdiction by claiming that the Louisville & Nashville Railroad (D) would raise a constitutional defense in their answer, thus raising a federal question. The Louisville & Nashville Railroad (D) filed a demurrer to the complaint for failing to state a cause of action. The demurrer was denied. On appeal, the Supreme Court did not look at the issue raised by the litigants, but on their own motion raised the issue of whether the federal courts had jurisdiction to hear the case. RULE OF LAW: Alleging an anticipated constitutional defense in the complaint does not give a federal court jurisdiction if there is no diversity of citizenship between the litigants. HOLDING AND DECISION: (Moody, J.) No. The Supreme Court reversed the lower court’s ruling and remitted the case to that court with instructions to dismiss the suit for want of jurisdiction. Neither party to the litigation alleged that the federal court had jurisdiction in this case, and neither party challenged the jurisdiction of the federal court to hear the case. Because the jurisdiction of the circuit court is defined and limited by statute, the Supreme Court stated that it is their duty to see that such jurisdiction is not exceeded. Both parties to the litigation were citizens of Kentucky and so there was no diversity of citizenship. The only way that the federal court could have jurisdiction in this case would be if there was a federal question involved. Mottley (P) did allege in his complaint that the Louisville & Nashville Railroad (D) based their refusal to renew the free pass on a federal statute. Mottley (P) then attempted to allege information that would defeat the defense of the Louisville & Nashville Railroad (D). This is not sufficient. The plaintiff’s complaint must be based upon the federal laws of the Constitution to confer jurisdiction on the federal courts. Mottley’s (P) cause of action was not based on any federal laws or constitutional privileges; it was based on a contract. Even though it is evident that a federal question will be brought up at the trial, plaintiff’s cause of action must be based on a federal statute or the constitution in order to have a federal question that would grant jurisdiction to the federal courts. Reversed and remanded.

Motley’s Well-pleaded

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complaint ruling

A rule of procedure that federal question jurisdiction cannot be acquired over a case unless an issue of federal law appears on the face of a properly pleaded complaint The well-pleaded complaint rule is not satisfied by a defense based on federal law, including a defense of federal preemption, or by anticipation of such a defense in the complaint

When a defendant challenges federal question jurisdiction in district court, one of three questions commonly arises:

a. Is there a federal issue at all? If the plaintiff’s claim is based on some federal statute or regulation, the problem consists in interpreting legislation. If the plaintiff claims the right to relief under federal common law, the question is whether such federal common law exists. b. Assuming there is a federal issue, does it “give rise to” plaintiff’s claim? That is the question in Mottley. c. If there is a federal issue that is not the basis for plaintiff’s claim, is it sufficiently important to “federalize” the case?

CASE Grable & Sons Metal Prod. Inc. v. Darue Land was sold to satisfy an Internal Revenue Service lien for unpaid taxes. To assure that it had clean title, the purchaser of the land brought a quiet title action in state court, at which point the original owner of the land challenged title, alleging that the notice of the sale was inadequate. Defendant sought to remove to federal court, arguing that the underlying issue was the adequacy of the IRS system of notice in their tax sales. Federal question jurisdiction was proper, said the Court. In a unanimous opinion

Grable set out a three-part test for such federalized claimsDoes a state-law claim [1] necessarily raise a federal issue,[2] actually disputed and substantial,

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[3] which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilitiesLower courts interpreting this test have overwhelmingly remanded such cases to state courts, usually claiming, without much analysis, that the case fails the third of the Grable criteria.

A case can start out as a federal case, but then lose its federal status after a judgment or settlement.

Plaintiffs sue defendants on a claim arising under federal law. The parties then settle the case by signing an agreement. The case is dismissed by agreement of the parties in an order that makes no reference to the settlement agreement. Plaintiff then sues defendant for violation of the agreement. Is there federal question jurisdiction? No: The settlement agreement is an ordinary contract, whose breach does not arise under federal law. But if the parties had embodied their agreement in a consent decree (which would have been part of the court’s judgment), its breach would arise under federal law, because federal courts have jurisdiction to enforce their own judgments. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (1994).

Sally borrowed money from Frank, giving him a mortgage as security. She then declared bankruptcy, and, in a federal bankruptcy proceeding, Frank’s interest was transferred to Joe. (Recall that there is exclusive federal jurisdiction over bankruptcy.) Through an error, however, the transfer to Joe was never properly recorded. Frank now sues Joe, alleging that he still holds a mortgage on the property. Joe seeks to remove the case to federal district court, arguing that Frank’s lawsuit calls into question the validity of the federal bankruptcy judgment and thus “arises under” federal law. Held: No, in Rivet v. Regions Bank, 522 U.S. 470 (1998) (claim preclusion based on a prior federal judgment is a defense, so the claim does not arise under federal law, citing Mottley).

Federal Removal Jurisdiction

Challenging Federal Subject Matter Jurisdiction

Difference between a Rule 12(b) (1) dismissal versus a Rule 12 (b) (6)

If a defendant moves for dismissal under 12(b) (1)

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The federal court rules case DOES NOT arise under federal law and grants dismissal Case CAN BE refilled in state court If a defendant moves for dismissal under 12(b) (6)The federal court rules case DOES NOT arise under federal law and grants dismissal Case CANNOT BE refilled in state court

Suppose that the defendant DOES NOT move to dismiss under either Rule 12( b)( 1) or 12( b)( 6) and the CASE PROCEEDS. Is the objection to jurisdiction waived? NO, AS MOTLEY DEMONSTRATES THE COURT FINDS FEDERAL JURISDICTION SO CRUCIAL THEY MUST RAISE THE QUESTION SUA SPONTE (ON THE COURT’S OWN MOTION TO DISMISS ON LACK OF JURISDICTION)

A PARTY THAT MAKES AN APPEARACE IN COURT IN AN ATTEMPT TO CHALLENGE SUBJECT MATTER JURISDICTION AND LOSES WILL BE BOUND BY THAT DECISION... Parties who appear, challenge the subject matter jurisdiction of a federal court, and lose are bound by that determination; just as with personal jurisdiction, they may not thereafter challenge the judgment in a second action. Stoll v. Gottlieb, 305 U.S. 165 (1938); Durfee v. Duke (infra page 779).

A PARTY THAT MAKES AN APPEARACE IN COURT BUT DOES NOT CHALLENGE SUBJECT MATTER JURISDICTION AND LOSES WILL BE BOUND BY THAT DECISION... Parties who have appeared but failed to challenge the subject matter jurisdiction of a district court may generally not thereafter attack its judgment in another court, for lack of diversity or federal question jurisdiction. Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371 (1939).

A PARTY NEVER MAKES AN APPEARACE IN COURT AND LOSES BY DEFAULT CAN THEY NOW MAKE AN ATTEMPT TO CHALLENGE SUBJECT MATTER JURISDICTION...Here one cannot be certain. If one extends Chicot County Drainage District, one concludes that collateral attack is not available— that a party wishing to challenge subject matter jurisdiction must appear in the first suit. Kalb, however, points in the opposite direction: A party who had appeared (in the foreclosure proceeding) was nevertheless able to raise a collateral challenge. To be sure, Kalb involved a statute that, as the Court saw things, permitted collateral challenge. The only entirely safe

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statement is that the Court has not clearly resolved the question. As one commentator put it, using an example from state rather than federal subject matter jurisdiction: The proverbial case involves a justice of the peace who has undertaken to grant a divorce [thus clearly overstepping his subject matter jurisdiction]. [W] ould [one] require the respondent in such a case to appear before the justice under penalty that otherwise the divorce would be legally valid[?] I cannot believe that any court would hold that.Geoffrey C. Hazard, Jr., Revisiting the Second Restatement of Judgments: Issue Preclusion and Related Problems, 66 Cornell L. Rev. 564, 591 (1981

DOUBLING UP ON JURISDICTIONAL CHALLENGES What if a defendant challenges both subject matter and personal jurisdiction? Suppose defendant files a pre-answer motion seeking dismissal based on Rule 12( b)( 1) and 12( b)( 2), as the Rule permits. If either challenge is well founded, the case will be dismissed. But a dismissal will have different consequences for a refilled suit; depending on which ground is used for dismissal.

If a case is dismissed for want of federal subject matter jurisdiction, a plaintiff is free to refile the suit in state court because the judgment establishes only the lack of federal jurisdiction, leaving the state court open.

If the case is dismissed for want of personal jurisdiction, principles of former adjudication (Chapter 11) preclude plaintiff from refilling in state court in the same state because the federal court’s decision that personal jurisdiction is lacking will bind the state court.

Under those circumstances, should a federal court faced with motions to dismiss on both grounds always take subject matter jurisdiction first, because that will have the narrowest subsequent effect? No, the Supreme Court has said; the discretion of a trial court to handle its docket allows it to dismiss for want of personal jurisdiction if that is the most obvious ground, even though that will preclude subsequent state-court litigation. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999).

IN SUMMARY:A CASE DISMIISED FOR LACK OF FEDERAL SUBJECT MATTER JURISDICTION CAN BE REFILED

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A CASE DISMISSED FOR LACK OF PERSONAL JURISDICTION CANNOT BE REFILED DECISION IS ALSO BINDING ON STATE COURT

WHY DIVERSITY JURISDICTION MATTERS

In order to provide a federal forum for plaintiffs who seek to vindicate federal rights, Congress has conferred on the district courts original jurisdiction in federal-question cases— civil actions that arise under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. In order to provide a neutral forum for what have come to be known as diversity cases, Congress also has granted district courts original jurisdiction in civil actions between citizens of different States, between U.S. citizens and foreign citizens, or by foreign states against U.S. citizens. § 1332. Exxon-Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005).

CASE: Redner v. Sanders Motion to dismiss for lack of diversity jurisdiction. FACTS: When plaintiff claimed he was a “resident” of France, defendants argued that only plaintiff’s “citizenship” in France would satisfy federal diversity jurisdictional requirements. Plaintiff filed a complaint in federal court, alleging that he was at all times mentioned “a citizen of the United States residing in France,” and that defendants are residents of the State of New York. Defendants moved to dismiss for lack of subject matter jurisdiction, arguing that mere residency in a foreign country does not equate with citizenship of a foreign country as required by 28 U.S.C. § 1332( a)( 2). RULE OF LAW For purposes of diversity jurisdiction under 28 U.S.C. § 1332( a)( 2), the controversy must be between citizens of a state and citizens or subjects of a foreign state, not merely “residents.” ISSUE: For purposes of diversity jurisdiction under 28 U.S.C. § 1332( a)( 2), must the controversy be between citizens of a state and citizens or subjects of a foreign state, not merely “residents?” HOLDING AND DECISION: (Griesa, J.) Yes. purposes of diversity jurisdiction under 28 U.S.C. § 1332( a)( 2), the controversy must be between citizens of a state and citizens or subjects of a foreign state, not merely “residents.” Here, plaintiff’s complaint speaks of his “residing” in France, whereas the statute speaks of citizenship. The two are not synonymous. It appears in fact that defendants are citizens of the State of New York. However, for jurisdiction to exist under (a)( 2), plaintiff would need to be a citizen of a foreign state, not merely a resident, and the complaint itself actually alleges that plaintiff is a citizen of the United States. Thus, the case does not involve an action between citizens of the United States and a citizen

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of a foreign state. Accordingly, there is no jurisdiction under § 1332( a)( 2). Motion granted and suit dismissed.

As with § 1331, the federal question statute, the courts read § 1332 very carefully. It’s not enough that there are “a bunch of people not from the same state.” Instead the courts insist that the diversity required exactly match one of the statutory definitions.

“Citizen” takes on different meanings, depending on which

section of § 1332 one is reading. To be a “citizen” of France means that one is a French national, having taken an oath of allegiance to the Republic of France, with all the political rights and obligations that entails. To be a “citizen” of California, for diversity purposes, means simply that one makes one’s permanent home there.

The time for measuring citizenship for diversity purposes is as of the date on which the complaint is filed in federal court. That is true even if the plaintiff has moved to another state for the sole purpose of establishing diversity:

COMPLETE DIVERSITY IS NEEDEDStrawbridge v. Curtiss TEST The presence of parties from the same State on both sides of a case dispels this concern, eliminating a principal reason for conferring § 1332 jurisdiction over any of the claims in the action. Although 28 U.S.C. § 1332 does not by its terms require that each plaintiff be diverse from each defendant, that interpretation was attached to the predecessor statute by Chief Justice Marshall in Strawbridge v. Curtiss, 7 U.S. 267 (1806), and has been unquestioned law every since. Thus even in a case with multiple diverse parties the existence of a single party with the same state citizenship as that of an opposing party will destroy diversity. As an opinion written more than 200 years after Strawbridge explained it: The complete diversity requirement is not mandated by the Constitution, or by the plain text of § 1332( a). The Court, nonetheless, has adhered to the complete diversity rule in light of the purpose of the diversity requirement, which is to provide a federal forum for important disputes where state courts might favor, or be perceived as favoring, home-state litigants. The presence of parties from the same State on both sides of a case dispels this concern, eliminating a principal reason for conferring § 1332 jurisdiction over any of the claims in the action.

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FOR DIVERSITY TEST WHAT ABOUT PARTNERSHIPS?For diversity purposes, partnerships are not considered as entities but as collections of individuals; thus the citizenship of each of the members of a partnership must be considered

CORPORATIONS?

CASE: Hertz Corp. v. Friend MOTION TO REMOVE A CLASS ACTION LAWSUIT TO FEDERAL COURT BASED ON DIVERSITY JURISDICTIONGRANTED US SUPREME COURT THUS ESTABLISHINGNERVE CENTER TEST FOR PRINCIPAL PLACE OF BUSINESS FACTS: California-based employees (P) of Hertz Corp. (D) claimed in a class action that Hertz (D) violated California’s wage and hours laws. Hertz (D) tried to remove to federal court on the basis of diversity jurisdiction. The federal diversity jurisdiction statute provides that “a corporation shall be deemed to be a citizen of any state by which it has been incorporated and of the state where it has its principal place of business.” The employees (P) objected, arguing that because Hertz (D) derived more revenue from California than any other, and because the plurality of its business activities occurred there, California was its principal place of business. RULE OF LAW The phrase “principal place of business” in the federal diversity jurisdiction statute refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities. FACTS: ISSUE: Does the phrase “principal place of business” in the federal diversity jurisdiction statute refer to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities?HOLDING AND DECISION: (Breyer, J.) Yes. The phrase “principal place of business” in the federal diversity jurisdiction statute refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities. Some courts refer to this test as the “nerve center” test. Normally, this would be where the corporation maintains its headquarters, provided headquarters is not simply an office where the corporation holds its board meetings. This interpretation is supported by the statute’s language. The statute uses the word “place” in the singular form of the word, not the plural. It is also supported by its advancement of administrative simplicity, which demands that courts be provided straightforward rules under which they can readily assure themselves of their power to hear a case. And it is supported by the statute’s legislative history, which suggests that the words “principal place of business” should be interpreted to be no more complex than the initial test put forth by the Judicial Conference, the “half of gross income” test, a test the Conference rejected as too impractical to apply. A “nerve center” test offers greater simplicity. There may be no perfect test that satisfies all administrative and purposive criteria, but some complication must be accepted in view of the necessity of having a clearer rule.

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HOW CAN WE TEST THE $75K REQUIREMENT FOR JURISDICTIONAL PURPOSESIt must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. Nor does the fact that the complaint discloses the existence of a valid defense of the claim. But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed , or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.

Plaintiff has not provided “competent proof” to meet his burden of demonstrating the requisite amount in controversy. Instead, he argues that he satisfies the jurisdictional requirement because he is entitled to recovery of punitive damages that could result in a verdict in excess of $ 75,000. …

[ Plaintiff] has pled that the Defendants acted “intentionally,” thus punitive damages are potentially recoverable under Illinois law if Salmi can prove what he has alleged.

Even assuming [Plaintiff] can recover punitive damages, [however,] … he would have to recover multiple times his actual damages to satisfy the $ 75,000 amount. Such a recovery certainly would “stretch[] the normal ratio, and would face certain remittitur.” Plaintiff’s mere hope for an extreme punitive award cannot be the sole basis for jurisdiction.… Salmi v. D.T. Management, Inc., 2002 U.S. Dist. LEXIS 17970 (N.D. Ill. 2002).

May a plaintiff aggregate the amount sought as relief for different claims to reach the statutory minimum? SOMETIMES:Some guidelines from the case law:

A single plaintiff with two or more unrelated claims against a single defendant may aggregate claims to satisfy the statutory amount.

If two plaintiffs each have claims against a single defendant, they may not aggregate if their claims are regarded as “separate and distinct.”

If one plaintiff has a claim in excess of the statutory amount and a second plaintiff has the same claim for less than the statutory amount, both against the same defendant, the first plaintiff can sue in federal court. What about the second? Yes, so long as the second plaintiff’s claim arises out of the “same case or controversy” as the first there will be supplemental jurisdiction: Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546

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(2005). d. In situations involving multiple plaintiffs or multiple defendants with a common undivided interest and single title or right, the value of the total interest will be used to determine the amount in controversy. This is not the case if the various claims are considered several and distinct, and they may be so considered even though the claims arose from a single instrument or the parties have a community of interest.

The preceding rules have complex application to class actions.o For class actions that meet the criteria of the Class

Actions Fairness Act of 2005, codified in part in § 1332( d) (discussed more fully in Chapter 12 ), one can aggregate the claims of all class members; if they reach $ 5 million, the amount in controversy requirement is met.

o For class actions based on diversity that do not meet the requirements of the Act, one cannot simply add up the claims of all class members. Instead at least some members must have claims that individually satisfy the jurisdictional amount. Snyder v. Harris, 394 U.S. 332 (1969). But if one member meets the amount in controversy requirement, the others can take advantage of supplemental jurisdiction. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005).

Counterclaims are treated differently, depending on their classification under Rule 13 as either compulsory or permissive. Basically, when a plaintiff’s claim exceeds $ 75,000 (the statutory amount), a compulsory counterclaim may be heard regardless of amount. A permissive counterclaim not arising from the same transaction or occurrence requires an independent jurisdictional basis. The law is unsettled, however, when plaintiff’s claim falls short of $ 75,000 but defendant’s counterclaim increases the amount in controversy to more than $ 75,000. See generally Wright, Federal Courts 216 (reporting “virtually no holdings” addressing the question).

SUPPLEMENTAL JURISDICTION

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o We turn now to a doctrine that broadens federal jurisdiction, filling in selectively some of the area between the inner and the outer rings . This doctrine, now known as supplemental jurisdiction, originated in case law and has now taken statutory form.

o Supplemental jurisdiction originated in case law that stretched federal jurisdiction to cover parts of cases that, if brought independently, would not have fit within the district courts ’ subject matter jurisdiction. Congress then codified some and modified other case law results. Examine the statute, 28 U.S.C. § 1367, and consider structure and its application to some basic problems.

; CASE: In re Ameriquest Mortgage Co. Mortgage Lending Practices Pursuant to Federal Rule of Civil Procedure 12( b)( 1) and 28 U.S.C. § § 1367( a) and (b), defendant Douglas Trevino now moves to dismiss Counts II and III of plaintiff Barbara Skanes’ Amended Complaint.… We deny Trevino’s motion. We find that: a) there is a sufficient nexus between Skanes’ state law claims and her TILA claim to support supplemental jurisdiction; and b) the discretionary factors set forth in § 1367( b)

OUTER BOUNDARY OF ARTICLE III POWER

UNEXPOITED ARTICLE III POWER

POWER CONFERED BY THE

STATUTES

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(c)do not weigh in favor of a decision to decline to exercise supplemental jurisdiction.

CASE: Szendrey-Ramos v. First Bancorp DECLINE SUPLEMENTAL JURISDICTIONCANNOT HEAR THE CASE BECAUSE:State-law claims substantially predominate over the federal claimUpon careful consideration of the issues presented by this case, and the law governing such issues, we decline to exercise supplemental jurisdiction over the P.R. law claims. Accordingly, these claims will be dismissed without prejudice, and Defendants’ arguments for dismissal on the merits of such claims are thus moot. As for the Title VII discrimination and retaliation claims, they survive the motion to dismiss. This case thus goes forward solely under Title VII. We explain our reasoning below.… The Court finds that two of § 1367( c)’ s subsections are at issue here: (1) that the state law claims raise complex or novel issues and (2) that the state-law claims substantially predominate over the federal claim. We start with the latter and work our way back to the former. FEDERAL REMOVAL JURISDICTION 28 U.S.C. § 1441Jurisdictional statutes give plaintiffs an initial choice of state or federal court for cases in which federal and state court jurisdictions overlap. Congress has also given defendants the power to second-guess plaintiffs who choose a state court in cases that could have been brought in federal court. The process, known as removal, has as its basic text 28 U.S.C. § 1441

CASE: Caterpillar, Inc. v. Lewis Manufacturer NATURE OF CASE: Appeal of judgment vacating verdict for the defense in personal-injury case. FACT SUMMARY: A federal district court denied a motion to remand a case to state court even though the case lacked complete diversity and later entered judgment after the nondiverse defendant had settled out of the case. RULE OF LAW A district court’s error in failing to remand a case improperly removed does not prevent adjudication if the jurisdictional requirements are satisfied at the time of judgment.FACTS: Lewis (P) filed a personal-injury claim in state court. The case was removed to federal district court at Caterpillar Inc.’ s (D) request although there was not complete diversity of citizenship among the parties. After the removal, Lewis (P) moved to remand the case to state court for lack of federal jurisdiction. The district court denied the motion. Subsequently, the nondiverse defendant settled out of the

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case. At trial, Caterpillar (D) prevailed. Lewis (P) appealed, claiming that the district court did not have jurisdiction at the time of removal. The court of appeals agreed and vacated the judgment. Caterpillar (D) appealed. ISSUE: Does a district court’s error in failing to remand a case improperly removed prevent adjudication if the jurisdictional requirements are satisfied at the time of judgment? HOLDING AND DECISION: (Ginsburg, J.) No. A district court’s error in failing to remand a case improperly removed does not prevent adjudication if the jurisdictional requirements are satisfied at the time of judgment. The lack of subject matter jurisdiction at the time of removal is not fatal to later adjudication of the case. The only issue is whether the jurisdictional requirements are met at the time the judgment is entered. In the present case, allowing removal when there was not complete diversity was a mistake by the district court. However, when judgment was entered, complete diversity did exist. Thus, there was sufficient subject matter jurisdiction to adjudicate the case. Reversed and remanded.

HOW CAN A DEFENDANT REMOVE A CASE TO FEDERAL COURT?28 U.S.C. §1441(a) AND (b)Sec. 1441. Actions removable generally

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending. . .

(b) Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

28 U.S.C. §1446Sec. 1446. Procedure for removal (a) A defendant or defendants desiring to remove. . . shall file in the district court. . . a

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notice of removal signed pursuant to Rule 11. . .containing a short and plain statement of the grounds for removal. . . . (b) The notice of removal of a civil action or proceeding shall be filed within thirty days after. . . a copy of the initial pleading. . .If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt . . . of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is. . . removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

State Law in Federal Courts: Erie and Its Entailments

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