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