Solution Manual for Introduction to Law and the Legal System, 11th Edition, Frank August Schubert,
ISBN-10: 1285438256, ISBN-13: 9781285438252
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CHAPTER IV
The Judicial System
CHAPTER OBJECTIVES
1. Understand the basic underlying common law heritage from England.
2. Describe how the federal and state court systems are organized.
3. Identify the functions of the trial and appellate courts.
4. Summarize the procedural differences between cases tried to juries and cases tried to judges.
5. Summarize the fundamental requirements for jurisdiction and venue in the federal and state judicial systems.
6. Describe when cases can be removed from state court to federal court.
7. Understand the policy reason underlying the Erie doctrine.
SUMMARY OVERVIEW
In this chapter readers have learned how federal and state court systems are organized and about the different functions of trial and appellate courts. Explanations also were provided as to the procedural differences between jury trials and bench trials. The fundamental requirements for subject-matter and personal jurisdiction in federal and state courts were summarized, and the importance of venue was explained Students also learned the circumstances under which cases can be removed from state court to federal court and why federal trial courts need to be concerned about the Erie doctrine
CHAPTER OUTLINE
I. COURTS
A. Trial Courts
B. Appellate Courts
II. STATE COURT SYSTEMS
III. JURISDICTION
A. Subject-Matter Jurisdiction in State Court
B. Introduction to Cheap Escape Co., Inc. v. Haddox LLC
C. Jurisdiction over the Person
D. Long-Arm Statutes
E. Introduction to Swoboda v. Hero Decks
F. In Personam Jurisdiction over Corporations
G. Jurisdiction over Property In Rem Jurisdiction
H. Procedural Due Process Requirements
I. Venue
IV. THE FEDERAL COURT SYSTEM
V. THE U. S. DISTRICT COURTS
A. The Plaintiff’s Choice of Forum
B. Introduction to St. James Apartments, LLC v. Coinmach Corporation
C. In Rem and In Personam Jurisdiction
D. Venue in Federal Courts
E. Removal from State to Federal Courts (Removal Jurisdiction)
F. Introduction to Abigail Frump v. Claire’s Boutiques, Inc.
G. The Erie Doctrine
VI. THE THIRTEEN U.S. COURTS OF APPEALS
VII. THE U. S. SUPREME COURT
VIII. THE FOREIGN INTELLIGENCE SURVEILLANCE COURTS
IX. CHAPTER SUMMARY
X. CHAPTER QUESTIONS
XI. NOTES
COURT CASES
Summary
900 N.E.2d 601 Supreme Court of Ohio
December 11, 2008
In the following case, plaintiff/appellant filed suit in the Franklin County Municipal Court against the defendant/appellee for breach of contract and was awarded a default judgment when the defendant failed to answer the plaintiff’s complaint. Approximately 11 months later, the defendant filed a motion asking the municipal court to vacate its own judgment, claiming that the court lacked subject matter jurisdiction to rule in the case. The intermediate court of appeals held that subject matter jurisdiction did not exist in the municipal court and reversed the lower court.
The case was brought before the Ohio Supreme Court. Ohio’s highest court found the statute controlling subject matter jurisdiction to be ambiguous. The court then turned to a canon of construction and reviewed the statutes in pari materia (which essentially means closely related to the same subject). The court then examined all relevant jurisdictional statutes with the intention of interpreting them so that all work together. The State supreme court could not come up with any reason why the Ohio legislature would have permitted municipal courts to exercise state-wide subject matter jurisdiction over civil cases and restrict the municipal courts’ subject matter jurisdiction in criminal cases to within the territorial boundaries of the municipality. The court held that the parties could not by contract confer subject matter jurisdiction in this case on the Franklin County Municipal Court and affirmed the decision of the appellate court.
Case Question and Answer
1. The parties to this case contractually agreed that in the event of a breach, suit could be brought in either the Franklin County Municipal Court or the Franklin County Court of Common Pleas. Why did the Ohio Supreme Court conclude that this contractual term could not be enforced?
Ohio’s highest court found the statute controlling subject matter jurisdiction to be ambiguous and used a canon of construction to reach its decision. Because there was no logical reason for the Ohio legislature to have permitted municipal courts to exercise state-wide subject matter jurisdiction over civil cases and restrict the municipal courts’ subject matter jurisdiction in criminal cases to within the territorial boundaries of the municipality, the court held the Franklin County Municipal Court did not have subject matter jurisdiction and affirmed the decision of the appellate court.
Summary
Ronald A. Swoboda v. Hero Decks, A Division of Parody Productions, LLC
36 So.3d 994
Court of Appeal of Louisiana, Fourth Circuit
March 31, 2010
Parody,an Ohio company, offeredplaying cardsfor sale on its Internet website. The product at issuein this case isreferred to as the “HeroDecks”linethat portrays well-known players from a sportsteam’s history. One suchdeck includesfifty-two(52) past and present playersfrom the NewYorkMets baseballteam. The plaintiffin thissuit, RonaldSwoboda,isincludedinthe New YorkMets Hero Deck. Parody had no connections with Louisianaother than the operationofa website from which residents of any statecouldinteractively purchaseitsproducts. Swobodaclaimedthat Parody had used hislikeness withouthis permission and filedsuit in Louisianaseekinginjunctivereliefand damages. Swobodaargued that hisattorney’sonline purchasefrom Parody of a“Hero Deck”ofcards that containedSwoboda’slikeness wasenough ofa connection between Louisianaand Parodyto satisfythe minimumcontacts requirementsofthe DueProcess Clause. Thetrial court disagreedand ruled that it lackedpersonal jurisdictionto decide themerits of thecase. Swobodathen appealedthe trial court’s decisiontothe Louisianaintermediatecourtofappeals.
The question presented to thecourtfor decision was whether Parody,asan Internetmerchandiser, had established sufficient minimumcontactswith Louisianato besubjectedtothepersonal jurisdictionof its courts.Theappellatecourtagreedwiththetrialcourt thatthecourts of Louisianadidnot have personaljurisdiction overParody. The court pointed outthatin determining whether awebsite created minimumcontacts in theforum state sufficient toinvokepersonaljurisdiction,it mustlooktothe interactivityandcommercialnatureofthe exchange occurring viathe website.In thiscasethe record established that playingcardscould be purchased directlyfrom the site. Otherthan theabilityof Louisianaresidentstoaccessthe websiteand purchasethemerchandise,therecord wasvoidofany othercontact Parody had with the State of Louisiana.Thecourt statedthat theconnection between Parody’s contact withLouisianaand Swoboda’s cause ofaction wastoo attenuatedtopermit the courts to constitutionallyexercise personal jurisdictionover Parody. Underthe factsandcircumstances of that case,thecourtheldthatextending personal jurisdictionover Parody would not comport with the notions of fair play and substantialjusticeasconstitutionallyrequired.Therefore,it affirmedthetrial court’sruling.
Case Questions and Answers
1. Why did the Louisiana Court of Appeals conclude that the courts of that state did not have the right to exercise personal jurisdiction in this case?
Assuming the applicable statute of limitations has not expired, he could bring his action to another court where personal jurisdiction could be satisfied (i.e., Ohio)
2. In your opinion, might Swoboda be able to establish personal jurisdiction in Ohio?
The question calls for an opinion.
3. What is your reaction to the decision in this case? The question calls for an opinion
Summary
St. James Apartments, LLC v. Coinmach Corporation
Civil Action No. 10-6778 (GEB)
United States District Court, D. New Jersey
July 13, 2011
This case arises out of a dispute regarding the execution and validity of certain lease agreements between St. James Apartments, LLC (Plaintiffs) and Coinmach Corporation (Defendant). The Defendant sought to dismiss the lawsuit based upon the lack of subject matter jurisdiction. Plaintiffs asserted diversity jurisdiction under 28 U.S.C. § 1332 existed based upon their allegation that Plaintiffs and Defendant were citizens of different states (Florida for the Plaintiffs and Delaware and New Jersey for the Defendant), and the total amount in controversy exceeded $75,000. Defendant did not contest that it is a citizen of Delaware and New Jersey or that the amount in controversy exceeded $75,000. In its motion to dismiss, however, Defendant argued that Plaintiffs were in fact actually citizens of New Jersey and misrepresented their New Jersey citizenship in an attempt to manufacture diversity jurisdiction. Defendant based this argument upon records that listed a business address for Plaintiffs in New Jersey. It appeared undisputed that Plaintiffs St. James Apartments, LLC and Jasontown Apartments, LLC were limited liability companies, and Plaintiff Hackensack Associates, L.P. was a limited partnership. It also appeared undisputed that the sole member of all three Plaintiffs was James Nuckel (“Nuckel”). In response to Defendant’s motion, Nuckel argued that he was domiciled in Florida and, therefore, diversity jurisdiction was appropriate. Coinmach, the defendant corporation, sought dismissal of the lawsuit on the grounds that the parties were not totally diverse as the plaintiffs were also citizens of New Jersey despite their claims of citizenship in Florida.
In denying Defendant’s motion to dismiss the complaint for lack of subject matter jurisdiction, the court stated the general principle that any party asserting diversity jurisdiction bears the burden of proving their citizenship is diverse from that of the adverse party. For citizenship purposes, limited liability companies are considered citizens of each state in which their individual members are citizens. The court further stated that an individual is considered a citizen of the state in which he is domiciled. In determining an individual’s domicile, courts consider a variety of factors including: house of residence, payment of personal taxes, vehicle registration, place of business, and the exercise of political rights. The Court in this case concluded that the Plaintiffs had carried the burden of establishing diversity jurisdiction through the certification of their managing partner, James Nuckel. Nuckel was undisputedly the sole managing party of the three Plaintiffs and in his certification stated that he and his immediate family resided in a primary residence in Florida, his children attended school in Florida, his vehicle was registered in Florida, he was registered to vote in Florida, and he would be filing his income taxes as a Florida resident. The court felt the Defendant had failed to successfully rebut Nuckel’s assertion that he was a citizen of Florida, rather than New Jersey. According to the court, the factual allegations made by the Defendant that Nuckel reported a New Jersey business address for the purpose of allowing him to register his business in New Jersey and that he maintained an “owner occupied” home in New Jersey were not enough to persuade it that Nuckel was a New Jersey citizen when viewed in light of Nuckel’s Certification. As a result, the court deemed the Plaintiffs to be Florida residents for purposes of establishing diversity jurisdiction
Case Questions and Answers
1. What factors did the court say it considered in determining where a party is domiciled (and therefore has citizenship for purposes of diversity jurisdiction in federal courts)?
In determining domicile, courts consider a variety of factors including: house of residence, payment of personal taxes, vehicle registration, place of business, and the exercise of political rights.
2. Assume that a student who graduated from high school in Hawaii attends college in Oregon. What factors should influence the determination of where that student is domiciled?
The factors that should influence the domicile determination of a student who graduated from high school in Hawaii and subsequently attended college in Oregon would include: residence when not attending school, payment of personal taxes, vehicle registration, work history when not attending school and the exercise of political rights. A temporary residence while away attending school would carry less weight.
3. Can you think of any policy reasons for the need for the federal courts to have subject-matter jurisdiction in diversity of citizenship cases, as these cases could be decided in state courts?
A policy justification for the federal courts having subject matter jurisdiction in diversity of citizenship cases is to help assure basic fairness to litigants, particularly the defendant, by providing an alternative forum to state courts.
Summary
Abigail Frump v. Claire’s Boutiques, Inc. Case No. 10-1106-CV-W-SWH
United States District Court, W.D. Missouri, Western Division
March 22, 2011
The plaintiff, Abigail Frump, a minor, was detained by store security personnel in conjunction with an alleged theft while shopping at the Defendant’s store located at the Oak Park Mall in Overland Park, Kansas. Plaintiff was accused of theft and alleged that one of Defendant’s employees would not let her leave the store. The Overland Park Police Department was called and plaintiff was issued a citation for theft as well as a citation directing her not to return to Oak Park Mall for one year. Plaintiff was later charged with a Class A Misdemeanor that was subsequently dismissed. After the criminal charges against plaintiff were dismissed, this civil action was brought against the defendant in state court in Missouri. The action alleges false imprisonment, negligent supervision, and malicious prosecution (Count III). Plaintiff claims that as a result of defendant’s actions, she experienced mental suffering, injury to feelings, injury to reputation, embarrassment, humiliation, fear, indignity, disgrace, stress and loss of liberty. For each count, plaintiff sought actual damages in excess of $25,000, as well as an unspecified amount of punitive damages, interest costs, and attorney’s fees. The defendant responded by filing a removal motion in federal court alleging that the court had diversity subject matter jurisdiction. The plaintiff opposed the removal motion and asked the federal judge to remand the matter to the Missouri state courts. In support of her remand motion, she claimed that as of the date of her motion for remand the “known” damages in the case could not exceed $75,000. The issue presented to the court for decision was whether the “amount in controversy” requirement of 28 U.S.C. § 1332(a) was satisfied so that the Court could retain jurisdiction over the case or whether the case must be remanded to state court.
The court stated the general rule that if, after the removal of an action to federal court, the plaintiff seeks a remand to state court, the defendant bears the burden of establishing federal jurisdiction by a preponderance of the evidence. In this case, the court felt the decision by plaintiff’s counsel to plead specific damages amounts in excess of the basic jurisdictional requirement established pursuant to Missouri law was a representation as to the value of the case and could not be ignored. The court went on to find when Plaintiff’s false imprisonment and malicious prosecution claims of $25,000 each were aggregated with her claim for punitive damages, which clearly could have exceeded another $25,000, the “amount in controversy” requirement for federal diversity jurisdiction had been satisfied. As a result, Plaintiff’s motion for remand was denied.
Case Questions and Answers
1. What is the general federal rule in a diversity case as to how judges should decide whether the amount in controversy exceeds $75,000?
The general federal rule in a diversity case as to how judges should decide whether the amount in controversy exceeds $75,000 is that the sum claimed by the plaintiff in the complaint itself controls if the claim is apparently made in good faith.
2. Under what circumstances should a U.S. District Court judge in a diversity case conclude that the plaintiff’s allegations as to the amount in controversy should be rejected?
Only when from the face of the pleadings, it is apparent to a legal certainty that plaintiff’s claim is really for less than the jurisdictional amount should a U.S. District Court Judge in a diversity case reject the plaintiff’s allegations as to the amount in controversy.
3. Assume that the defendant in a diversity action has removed the case to federal court and that the plaintiff wants the federal court to remand the matter back to the state court. Assume also that the parties disagree as to whether the amount in controversy exceeds $75,000. Which party has the burden of proving the existence of federal jurisdiction?
Assuming that the defendant in a diversity action has removed the case to federal court, that the plaintiff wants the federal court to remand the matter back to the state court and that the parties disagree as to whether the amount in controversy exceeds $75,000, then it is the defendant that bears the burden of establishing federal jurisdiction by a preponderance of the evidence and any doubt about the court’s removal jurisdiction should be resolved in favor of a remand to state court.
Summary
Charles and April Land v. Yamaha Motor Corporation
272 F.3d 514
U.S. Court of Appeals for the Seventh Circuit
December 10, 2001
The plaintiffs in the case of Land v. Yamaha filed suit in a federal district court sitting in Indiana. The court, at Yamaha Motor Corporation’s request, granted Yamaha summary judgment, thereby declaring Yamaha the prevailing party in this lawsuit.
The key issue at trial and on appeal was whether Indiana or California law should be applied to this product liability case. Yamaha argued that Indiana law should be applied, and Charles and April Land maintained that California law should control. The district court, following the principles of the Erie doctrine, concluded that Indiana law should apply. It determined that Indiana’s Statute of Repose (another term for statute of limitations) required that this product liability suit be brought within 10 years of the date of the WaveRunner’s initial purchase from Yamaha. Therefore, said the district court, inasmuch as the Lands had not started their suit within that time period, there was no way that they could prevail at trial. Yamaha, concluded the court, was entitled to summary judgment. The Lands subsequently appealed to the Seventh Circuit, arguing that the district court had wrongfully applied Indiana law instead of California law.
The Seventh Circuit affirmed the district court, agreeing that Indiana law controlled. Under Indiana conflict of law rules the place of the injury, if significant, is the law that applies in the case. In this case Land was injured in Indiana, and the injury happening in Indiana was not just a matter of bad luck and an insignificant fact. Further, because Indiana’s Statute of Repose bars product liability actions that are brought more than 10 years after the manufacturer’s initial delivery of the product to the first consumer (and this lawsuit was brought after the 10-year period had expired), the Seventh Circuit affirmed the district court’s grant of summary judgment in favor of Yamaha.
Case Questions and Answers
1. What was the basis for federal jurisdiction in this case? Diversity of citizenship jurisdiction
2. Since the case was heard in federal court, why didn’t the judge apply the law as generally applied in the nation, rather than the law of Indiana?
Under the Erie doctrine, a federal court must apply the substantive law of the state in which it sits. Were this not the general rule, and were the state and federal judiciaries to apply differing substantive laws, plaintiffs would likely select a federal or state forum based on an assessment of which body of substantive law was more likely to benefit the plaintiff. The Erie doctrine helps to prevent this from happening.
CHAPTER QUESTIONS AND ANSWERS
1. Bensusan Restaurant Corporation owns and operates a popular, large New York City jazz club called “The Blue Note.” Richard King owns and has operated a small cabaret, also called “The Blue Note,” in Columbia, Missouri, since 1980. King’s establishment features live music and attracts its customers from central Missouri. In 1996, King decided to establish a website for the purpose of advertising his cabaret. King included a disclaimer on his website in which he gave a plug to Bensusan’s club and made it clear that the two businesses were unrelated. He later modified this disclaimer by making it even more explicit and said that his “cyberspot was created to provide information for Columbia, Missouri area individuals only.”
Bensusan brought suit in the U.S. District court for the Southern District of New York against King seeking monetary damages and injunctive relief. The plaintiff maintained that King had infringed on his federally protected trademark by calling his cabaret “The Blue Note.” King moved to dismiss the complaint for lack of personal jurisdiction. He contended that he had neither engaged in business within New York nor committed any act sufficient to confer in personam jurisdiction over him by New York. The U.S. District Court agreed with King, and the case was appealed to the U. S. Court of Appeals for the Second Circuit. Should the Second Circuit affirm or reverse the District Court? Why?
Bensusan Restaurant Corporation v. Richard B. King, Docket No. 96-9344, 126 F.3d 25, U.S. Court of Appeals (2ndCircuit 1997)
Bensusan did not claim in personam jurisdiction over King under the theory that King was transacting business in New York. Instead, it argued that King had committed a tortious act within the state. Nonresidents who commit torts within New York are subject to suit under the New York long-arm statute. King defended by claiming that the facts in the case did not come within the reach of New York law. That law, said King, requires that either he or an agent be found to have been physically present within New York when the tort was committed. After reviewing the relevant New York case law, the Second Circuit affirmed the district court. It concluded that the requirements of the longarm statute had not been met. “The acts giving rise to Bensusan’s lawsuit including the authorization and creation of King’s website, the use of the words ‘Blue Note’ and the Blue Note logo on the site, and the creation of a hyperlink to Bensusan’s website were performed by persons physically present in Colorado and not in New York.” Bensusan also failed to establish a basis for in personam jurisdiction in New York based on the theory that King should have expected his Colorado actions to have caused tortious injuries in New York. To prevail under this theory under New York law, said the Second Circuit, Bensusan had to prove that King had derived substantial revenues from interstate commerce. As King’s operation was strictly local, Bensusan was unable to sustain its burden of proof.
2. Dorothy Hooks brought a class action suit against Associated Financial Services, Inc., and others for breach of contract, fraud, and conspiracy. In her complaint, Hooks stipulated for the members of the class that the plaintiffs would waive both the right to recover more than $49,000 in damages and any right to recover punitive damages. The defendant nevertheless sought removal predicated on diversity of citizenship jurisdiction. Should the U.S. District Court grant the plaintiff’s petition
to remand this case back to the state courts?
Hooks v. Associated Financial Services Company, Inc. et al., 966 F. Supp. 1098 (1997)
The defendant wanted to remove the case from state to federal court. Plaintiff Hooks expressly limited her damage recovery to $49,000, an amount below the jurisdictional amount of $50,000. The district court judge ruled “… this court concludes that the possibility the Plaintiff could receive more than she has claimed if liability is found does not establish that the existence of the jurisdictional amount is a legal certainty.” The court found that the amount in controversy was below the jurisdictional amount and no federal question had been raised, so the plaintiff’s motion to remand the case to state court was granted.
3. David Singer was injured when his automobile was struck by an uninsured motorist. David was insured against this type of accident up to a policy limit of $30,000 by State Farm Mutual Automobile Insurance Company. When State Farm stalled on paying on his insurance claim, David filed suit in state court, alleging breach of contract and breach of good faith and fair dealing. David did not demand any specified amount of money damages in his complaint because state law prohibited him from doing so. State Farm filed a removal petition in U.S. District Court, alleging that the federal court had subject-matter jurisdiction based on diversity of citizenship. The defendant alleged that damages existed in excess of $50,000 (the jurisdictional amount at the time the suit was filed). Has the defendant followed the correct procedure, under these circumstances, for establishing the existence of the jurisdictional amount? How should the U.S. Court of Appeals for the Ninth Circuit rule?
Singer v. State Farm, No. 95-55441, 116 F.3d 373, U.S. Court of Appeals (9th Circuit 1997)
This case was brought in state court by an insured (Singer) against his insurance company (State Farm). State Farm wanted the case removed to federal court. As the plaintiff was not allowed under state law to state a particular sum in the complaint (called an ad damnum clause), that could not be used to satisfy a good faith allegation of claims exceeding the jurisdictional amount. The plaintiff, however, had admitted in open court that the damages did exceed $50,000.
According to this procedure, the district court can determine whether the jurisdictional amount requirement is satisfied by examining the face of the complaint and requiring the parties to submit summary-judgment-type evidence. In this case, the court was able to consider the plaintiff’s allegations in the complaint that State Farm had breached a $30,000 contractual obligation, a covenant of good faith and fair dealing in the amount of $30,000, and was liable in tort to plaintiff, permitting the plaintiff to recover punitive damages. The Ninth Circuit concluded that the plaintiff’s admission established by a preponderance of the evidence that the amount in controversy exceeded the jurisdictional amount.
4. Sludge Inc., a Wisconsin corporation, has a website in Wisconsin in which it advertises its wares. This website is accessible in every state in the nation. Can a Colorado corporation that believes Sludge has infringed on its trademarks successfully establish a basis for in personam jurisdiction if suit is brought in a Colorado court? Should it make a difference if the website had generated several thousand messages, as well as 500 contacts, and 10 percent of its sales from
Colorado? What argument would you make in favor of jurisdiction over Sludge? What argument would you make in opposition to jurisdiction over Sludge?
It can be argued that Sludge, Inc., might reasonably expect to be sued if it has established sufficient minimum contacts with Colorado and actively solicits business on its website, encourages customers to interact with the company via email messages, promotes its tollfree telephone number, and has received communications from more than 200 computers within Colorado. See Minnesota v. Granite Gate Resorts Inc., 568 N.W. 2d 715 (Minn. Ct. App. 1997) and Maritz Inc. v Cybergold Inc., 947 F. Supp 1328 (E.D. Mo 1996).
Sludge needs to be able to demonstrate that it has been passive vis-à-vis Colorado, as King did in the case brought by Bensusan. It can then argue that it has not established sufficient contacts for jurisdictional purposes. It should try to show that it has no physical presence in Colorado; that its contacts with Colorado are few in number, sporadic, and unsystematic; and that those contacts have not generated significant revenues (i.e., not substantial revenue). Under these facts, Sludge would conclude that it could not “reasonably anticipate” having to defend in that state.
5. Mr. and Mrs. Woodson instituted a product liability action in an Oklahoma state court to recover for personal injuries sustained in Oklahoma in an accident involving a car that they had bought in New York while they were New York residents. The Woodsons were driving the car through Oklahoma at the time of the accident. The defendants were the car retailer and its wholesaler, both New York corporations, who did no business in Oklahoma. The defendants entered a special appearance, claiming that the Oklahoma state court did not have personal jurisdiction. Would there be enough “minimum contacts” between the defendants and the forum state for the forum state to have personal jurisdiction over the defendants?
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980)
No. The U.S. Supreme Court held that the Oklahoma trial court may not exercise in personam jurisdiction over the defendants. There was a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state court jurisdiction. The defendants carried on no activity whatsoever in Oklahoma. They closed no sales and performed no services there. They did not avail themselves of any of the benefits of Oklahoma law. They solicited no business there either through salespeople or through advertising reasonably calculated to reach that state.
6. In this hypothetical diversity of citizenship case, federal law requires complete diversity of citizenship between plaintiffs and defendants and an amount in controversy greater than $75,000 in order for federal courts to entertain jurisdiction of an action. Tom Jones and Leonard Woodrock were deep-shaft coal miners in West Virginia, although Leonard lived across the border in Kentucky. Tom purchased a new Eureka, a National Motors car, from Pappy’s Auto Sales, a local firm. National Motors Corporation is a large auto manufacturer with its main factory in Indiana, and is incorporated in Kentucky. When Tom was driving Leonard home from the mine, the Eureka’s steering wheel inexplicably locked. The car hurtled down a 100-foot embankment and came to rest against a tree. The Eureka, which cost $17,100, was a total loss. Tom and Leonard suffered damages of $58,000 apiece for personal injuries. Can Tom sue National Motors for damages in a federal court? Why?Can Leonard?
Can Leonard and Tom join their claims and sue National Motors in federal court?
Yes. Tom has suffered damages of $58,000 for personal injuries and $17,500 property damage. Thus, Tom has suffered a total of $75,500 damages, sufficient to meet the $75,000 amount in controversy requirement. For diversity purposes, Tom is a citizen of the state of his domicile, West Virginia. National Motors is a citizen of Kentucky (state of incorporation) and Indiana (principal place of business). Tom has met the requirements of diversity of citizenship and amount in controversy and thus may sue in a federal district court.
No. Leonard has suffered only $58,000 in damages, an amount not sufficient to meet the $75,000 minimum. Further, there is no diversity of citizenship between National Motors and Leonard Woodrock because they are both “citizens” of Kentucky.
No. The addition of Leonard as a party plaintiff would destroy diversity of citizenship between plaintiffs and defendant. People with separate and distinct claims for relief may not aggregate their claims to meet the jurisdictional requirement of $75,000 amount in controversy.
7. National Mutual Insurance Company is a District of Columbia corporation. It brought a diversity action in the U.S. District Court for the District of Maryland against Tidewater Transfer Company, a Virginia corporation doing business in Maryland. National Mutual contends that, for diversity purposes, a D.C. resident may file suit against the resident of a state. Tidewater Transfer disagrees. What should be taken into consideration in deciding whether the District of Columbia can, for diversity purposes, be regarded as a state?
National Mutual Insurance v. Tidewater Transfer Co., 337 U.S. 582 (1949)
The Supreme Court found for National Mutual Insurance Company. It reasoned that the writers of the Constitution did not contemplate an area like the District of Columbia, and although the district is not a state, its citizens should not be denied the federal courts. It then relied on the standard justification for diversity freedom from local prejudice.
8. Several Arizona citizens brought a diversity suit in a federal district court against Harsh Building Company, an Oregon corporation. All parties involved in the suit stipulated that the defendant had its principal place of business in Oregon. During the trial, evidence showed that the only real business activity of Harsh Building Co. was owning and operating the Phoenix apartment complex that was the subject of the suit. The plaintiffs lost the suit. On appeal, they claimed that the district court did not have jurisdiction because of lack of diversity of citizenship. Did the plaintiffs waive their right to challenge jurisdiction?
Bialac v. Harsh Building Co., 463 F.2d 1185 (9th Cir. 1972)
No. The decision of the district court was reversed. The court of appeals concluded that they must find there was a lack of diversity of citizenship. The court recognized that it was tragic to come up with such a result after the case had gone through a long trial. An objection to jurisdiction based on lack of complete diversity between the parties in a lawsuit is never waived, nor is it lost by stipulation. In this case, there was at least one citizen of Arizona on each side of the case. Where a corporation is engaged in only one business activity, substantially all of whose operations occur in one state, even though policy and administrative decisions are made elsewhere, the state of operations is the corporation’s principal place of business.
9. “ ’’’ Colin Cody, a Connecticut resident, invested $200,000 in the common
stock of Phillips Company, a firm that installs video gambling machines in Louisiana casinos. Cody brought suit against the defendant, Kevin Ward, a resident of California, alleging that Ward had used an Internet website called “Money Talk” to perpetrate a fraud on potential investors. The gist of Cody’s complaint was that Ward had engaged in false and fraudulent misrepresentations about the Phillips Company’s impending financial prospects. Cody claimed to have made decisions about whether to buy and hold Phillips stock in partial reliance on Ward’s misrepresentations on the Internet and in telephone calls made by Ward that encouraged Cody to buy and hold Phillips stock. Cody further claimed that the Phillips stock was essentially worthless. Ward sought to dismiss the complaint, alleging that he could not be sued in Connecticut because there were insufficient grounds for personal jurisdiction. Cody maintains that a defendant who orally or in writing causes information to enter Connecticut by wire is committing a tortious act within Connecticut and is subject to suit pursuant to the Connecticut long-arm statute. Do you believe that Ward has committed a tortious act within the forum state that would satisfy the requirements of the long-arm statute? Do you believe that there is a constitutional basis for Connecticut to exercise in personam jurisdiction over Ward?
Cody v. Ward, 954 F.Supp 43 (D. Conn. 1997)
The district court determined that the state’s long-arm statute would apply even to a person who, although physically outside the state, nevertheless had purposely established minimum contacts within Connecticut when the allegedly tortious acts occurred. The court said that its interpretation furthered the state’s interest in providing its residents “with a convenient forum to seek redress for losses they suffer here as a result of a nonresident’s tortious actions.” The court noted that many other states have adopted this rule when “oral and written misrepresentations are directed specifically to the forum.” The court concluded by pointing out that its approach to this issue is consistent with “Connecticut’s traditional adherence to the doctrine that tort cases are governed by the law of the place of the injury.”
As far as Connecticut’s right to exercise in personam jurisdiction over the defendant is concerned, the district court concluded that the defendant had established substantial contacts with the plaintiff. The defendant “should reasonably have anticipated being sued [in Connecticut].” The court took notice of the nature and number of the telephone calls and email messages from the defendant to the plaintiff, encouraging the plaintiff to purchase Phillipsstock. Requiring the defendant to litigate in Connecticut, the judge determined, would not be unjust.
9. The Stars’ Desert Inn Hotel filed suit against Richard Hwang, a citizen of Taiwan, to collect on a $1,885,000 gambling debt. Stars unsuccessfully tried to serve Hwang on six occasions at a guarded and gated housing complex in Beverly Hills. The process server, after verifying with the guard that Hwang was inside, left the summons and complaint with the gate attendant. Hwang moved to quash the service. Was Hwang properly served?
Stars’ Desert Inn Hotel & Country Club v. Hwang, 105 F.3d 521 (9th Cir. 1997)
The district court denied Hwang’s motion to quash. The process server was denied entry to the guarded and gated compound on six occasions, and the court permitted the substituted service on Hwang by leaving the summons and complaint with the gate attendant.
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