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CIVIL PROCEDURE
by Alison G. Myhra*
I.
INTRODUCTION ........................................ 689
Il.
NOTEWORTHY SUPREME COURT DECISIONS-OCTOBER 2005
TERM ............................................... 692
I. PERSONAL JURISDICTION ................................
A. Due Process, Stream of Commerce Theory, and the Split
Among the Circuits .................................
B. Injection into the Stream of Commerce Versus Injection
into the Stream of Commerce PlusAdditional Conduct:
Discussion of the Fifth Circuit'sDecision in Luv N' Care,
Ltd. v. Insta-M ix, Inc ................................
IV. SUBJECT MATTER JURISDICTION ..........................
A. Conflating Subject Matter Jurisdictionand Pleading
Essential Elements of a Federal Claim: Discussion of
the Fifth Circuit's2004 Decision in Arbaugh v. Y & H
Corporation .......................................
B. The Supreme Court's2006 Reversal of Arbaugh ..........
698
698
707
713
713
716
I. INTRODUCTION
Like most legal subjects, civil procedure can be approached from a
variety of perspectives, including, but not limited to, the theoretical and the
practical. Thinking about the theoretical, some emphasize an instrumental
focus on procedure and consider the values it serves.' An instrumental focus
forces society to consider its procedural system in terms of the
accomplishment of certain ends or goals deemed to be important, such as the
"efficient implementation of substantive norms or recognition of the essential
humanity of people affected by decisions."2 Thus, for example, Professor
Michelman has articulated four types of distinct but interrelated values that he
believes constitute accepted reasons for having a procedural system and
allowing litigation: dignity values, participation values, deterrence values, and
effectuation values. Such an instrumental emphasis on the ends or values to
* Professor of Law, Texas Tech University School of Law. B.A., B.S. Ed., University of North
Dakota, 1982; J.D., University of North Dakota, 1985; LL.M., Harvard University, 1991.
1. See generally ROBERT M. COVER& OWEN M. FIss, THE STRUCTURE OF PROCEDuRE 2-3 (1979).
2. Id. at 2.
3. See id. at 3-4 (citing Frank I. Michelman, The Supreme Court andLitigationAccess Fees: The
Right to Protect One'sRights, 1973 DuKE L.J. 1153, 1172 (1973)). Under Professor Michelman's typology,
dignity values "reflect concern for the humiliation or loss of self-respect which a person might suffer if
denied an opportunity to litigate," participation values "reflect an appreciation of litigation as one of the
modes in which persons exert influence, or have their wills 'counted,' in societal decisions," deterrence
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be promoted conflates procedure and the public good and recognizes "the
moral duties of officers exercising power over fellow citizens in a
democracy." 4
From a practical perspective, in contrast, civil procedure is lawyer's law,
with the basics or mechanics of the subject matter consisting of remedies
(sometimes), pleading, joinder, discovery, personal jurisdiction, subject matter
jurisdiction, removal jurisdiction, supplemental jurisdiction, venue, the Erie
doctrine, and the doctrines of finality and preclusion. Some view all of this
-civil litigation-as the "lawyer's toolbox" or the "keys to the kingdom" 5 or
a "game ' or even more narrowly "a certain cerebral board game."7 From the
standpoint of a litigator--one properly focused on the competent and effective
representation of individuals-reality necessitates the daunting task of learning
about the toolbox, obtaining the keys, or mastering the game in a world that
is always changing.8
Whether one approaches civil procedure from the theoretical perspective
or the practical perspective, however, the present is undoubtedly a crucial time,
for various developments are reshaping, and sometimes changing in profound
ways, our procedural system as we have known it. One such development is
the unquestioned arrival of the digital age, which has wrought an exponential
increase in the amount of material that is stored and transmitted electronically.9
values "recognize the instrumentality of litigation as a mechanism for influencing or constraining individual
behavior in ways thought socially desirable," and effectuation values "see litigation as an important means
through which persons are enabled to get, or are given assurance of having, whatever we are pleased to
regard as rightfully theirs." Id.
4. Paul D. Carrington, Teaching Civil Procedure: A Retrospective View, 49 J. LEGAL EDUc. 311,
314-15 (Sept. 1999). According to Professor Carrington, "[a] polity served by a [legal] profession
understanding those moral duties has a good chance of remaining a republic; a polity lacking such a
profession, our ancients believed, is unlikely to be self-governing for long." Id. at 315. Moreover, as
Professor Carrington has observed, "Tocqueville found American lawyers to be like European aristocrats
not because of their pretensions to social status, but because of the stabilizing role they played in democratic
government." Id. at 314 (citing ALEXIS DE TocQUEVLLE, DEMOCRACY IN AMERICA 106-50,264-65,268-70
(J.P. Mayer ed., George Lawrence trans., HarperPerennial 1969) (1835)).
5. Robin Pogrebin & Edward Klaris, The Rules of the Game, THE LAW SCHOOL: The Magazine
of the New York University School of Law, Autumn 2006, at 24, 26, available at http://www.law.nyu.edu/
pubs/magazine/autumn2006documents/CivilProcedure.pdf. According to Pogrebin and Klaris, the civil
procedure professors at New York University School of Law use these phrases to describe civil procedure.
Id. at 26.
6. See GENE R. SHREVE & PErER RAVEN-HANSEN, UNDERSTANDING CIVIL PROCEDURE 1-2 (3d
ed. 2002). Professors Shreve and Raven-Hansen describe the view of civil procedure as a "game" as
follows: "Litigants are like players and judges are like umpires. The litigation game is remorselessly
competitive and is often thought to have winners and losers. Its rules, like those of many other games, are
difficult to understand in the abstract." Id. at 1.
7. See Pogrebin & Klaris, supra note 5, at 26 (referring to the game of chess). According to
Professor Issacharoff at New York University School of Law, civil procedure is like chess because it has
"an expanding universe of choices-any of which can make or break your case." Id. In his comparison of
civil procedure to chess, Professor Issacharoff has stated that "[a] good player always considers the
implications many moves down the road and a weak player sees only the immediate issue." Id.
8. See id.
9. See Jason Krause, E-Discovery Gets Real, A.B.A. J., Feb. 2007, at 44, 44, available at
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The existence of large volumes of electronic information has generated new
challenges for pre-trial discovery, and, as a result, on December 1, 2006, major
revisions to Rules 16, 26, 33, 34, 37, 45, and Form 35 of the Federal Rules of
Civil Procedure-referred to as the electronic-discovery or e-discovery ruleswent into effect.10 Another development is the proposed amendments to the
Federal Rules of Civil Procedure-known as the Style Project-that rework
all eighty-six rules and the forms to make them easier to understand and more
consistent. 1 If the Supreme Court approves the proposed amendments, as is
anticipated, they will go into effect on December 1, 2007.1" A final example
of current developments affecting our procedural system is the continued
discussion of access to courts and the changes to class action litigation
mandated by the Class Action Fairness Act of 2005 (CAFA), which President
Bush signed into law on February 18, 2005.13 Intended to curb the perceived
abuses of the class action device, CAFA, in a nutshell, expands federal court
http://www.abanet.org/journalredesign/02fcle.html. The Judicial Conference's Standing Committee on
Rules of Practice and Procedure, the entity charged with proposing amendments to the Federal Rules of
Civil Procedure, has noted "the capacity of large organizations' computer networks to store information in
terabytes, each of which represents the equivalent of 500 million typewritten pages of plain text, and to
receive 250 to 300 million e-mail messages monthly." COMMiTTEE ON RULES OF PRACTICE AND
PROCEDURE & CIVIL RULES ADVISORY COMMITTEE, THE NEW E-DISCOVERY RULES 9 (2006) [hereinafter
NEW E-DIscOvERY RULES]. For a leading discussion on e-discovery, see Richard L. Marcus, The Phillip
Reed Lecture Series: Only Yesterday: Reflections on Rulemaking Responses to E-Discovery, 73 FORDHAM
L REV. 1 (2004).
10. See NEW E-DIsCOVERY RULES, supra note 9, at 9-89. Without a doubt, the new rules will result
in much litigation, as litigants seek to flesh out the precise meaning of the new rules. Accord Krause, supra
note 9, at 47. The fights over interpretation will be fierce because the fight, at base, is all about money: ediscovery is more expensive than traditional discovery because of the need to utilize computer and network
experts. See id. In addition to the e-discovery package, other amendments went into effect on December
1,2006. See NEW E-DISCOVERY RULES, supranote 9, at 90,93,97. Rule 5(e) has been amended to provide
that courts, pursuant to local rule, may permit or even require electronic filing. NEW E-DIscoVERY RULES,
supra note 9, at 90. Rule 50(b) has been amended to remove a potential trap for defendants by allowing
them to make a Rule 50(a) motion after the plaintiff rests and then renewing it after verdict. NEW EDISCOVERY RULES, supranote 9, at 93. Supplemental Rule G, which governs forfeiture actions in rem, has
been amended to separate out civil forfeiture actions in light of the Civil Asset Forfeiture Reform Act of
2000. NEW E-DISCOVERY RULES, supra note 9, at 97.
11. See COMMITTEE ON RULES OF PROCEDURE & PROCEDURE OFTHE JUDICIAL CONFERENCE OF THE
UNITED STATES, REPORT OF THE CIVIL RULES ADVISORY COMMITTEE (July 20, 2006) [hereinafter CIVIL
RULES ADVISORY COMmITTEE REPORT], available at http://www.uscourts.gov/rules/AppendixD.pdf. For
example, currently Rule 8(e)(2) provides as follows: "When two or more statements are made in the
alternative and one of them if made independently would be sufficient, the pleading is not made insufficient
by the insufficiency of one or more of the alternative statements." FED. R. Civ. P. 8(e)(2). The new, restyled
Rule 8(e)(2) will provide that "[i] f a party makes alternative statements, the pleading is sufficient if any one
of them is sufficient." Joseph Kimble, Guiding Principles for Restyling the Federal Rules of Civil
Procedure(Part1), 84 MICH. B. J. 56 (Sept. 2005), available at http://www.michbar.org/journalpdf/pdf4
article909.pdf (providing information from Kimble, a Style Project participant).
12. See CIVIL RULES ADVISORY COMMITTEE REPORT, supra note 11, at 3.
13. Class Action Fairness Act of 2005, Pub. L. No.109-2, 119 Stat. 4 (2005) (codified as amended
in scattered sections of 28 U.S.C.); Press Release, The White House, President Signs Class-Action Fairness
Act of 2005 (Feb. 18, 2005), available at http://www.whitehouse.gov/news/releases/2005/02/print/
20050218-11 .html.
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the judiciary greater
jurisdiction over class action lawsuits and affords
14
settlements.
and
lawyers
authority over class action
The Fifth Circuit has also contributed to making the present an important
time for civil procedure. During the survey period, the Fifth Circuit decided
a number of cases covering the range of topics that make up civil procedure. 5
This Article focuses on the notable Fifth Circuit decisions in the areas of
personal jurisdiction and subject matter jurisdiction.
6
II. NOTEWORTHY SUPREME COURT DECISIONS-OCTOBER 2005 TERM'
In Jonesv. Flowers, the Supreme Court applied and elaborated on the due
process requirement, first articulated in Mullane v. CentralHanover Bank &
Trust Co., of "notice reasonably calculated, under all the circumstances, to
apprise interested parties of the pendency of the action and afford them an
opportunity to present their objections" in the context of a state's notice of tax
sale. 17 In Jones the State of Arkansas sought to take the petitioner's home for
failure to pay property taxes. 18 To provide the petitioner with notice of the tax
delinquency, the impending sale of his home, and of his right to redeem the
property, the state sent the petitioner a certified letter to the home's address.19
Because nobody was ever home to sign for the letter or went to the post office
to pick up the letter, however, the post office marked the letter "unclaimed"
and returned it-unopened-to the state. 20 Two years later, the state sent a
second certified letter to the petitioner's home, notifying him that unless he
paid the delinquent taxes, his home would be sold to the respondent. 2' The
14. Accord C. Douglas Floyd, The Inadequacy of the Interstate Commerce Justificationfor the
Class Action FairnessAct of 2005, 55 EMORY L.J. 487,490-91 (2006). Interestingly, as Professor Woo has
observed, as the United States continues to adjust to its recent class action reforms designed to reign in class
action lawsuits, other countries are considering group litigation as a possible way to deal with corporate
misconduct, a matter that will be discussed next fall at the International Association of Procedural Law's
World Congress on Procedural Law in Salvador-Bahia, Brazil. Margaret Y. K. Woo, Message from the
Chair,2006 AALS Civ. PROC. SEC. NEWSL. (Assoc. of Am. Law Sch. Sec. on Civ. Proc.), Fall 2006, at 1,
available at http://slomanson.tjsl.edu/AALS_2006_Newsltr.pdf.
15. The survey period is June 1, 2005 through May 31, 2006.
16. While this Article is a survey of significant Fifth Circuit cases, the Supreme Court issued several
important decisions on procedure during its October 2005 Term. Failure to mention them would render any
discussion of current developments in the area of civil procedure incomplete.
17. Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708, 1713-14 (Apr. 2006) (quoting Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)).
18. Id. at 1712.
19. Id. In April 2000 when the state sent the certified letter to the petitioner, he no longer resided
in the home in question. Id. The petitioner and his wife separated in 1993, and he moved out of the house
and into an apartment, while his wife continued living in the home. Id. For the next thirty years, however,
the petitioner paid the mortgage and the mortgage company paid the property taxes on the home. Id. The
property taxes on the home became delinquent after the petitioner paid off the mortgage in 1997, and the
property taxes went unpaid. Id.
20. Id.
21. Id.
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post office also marked this letter "unclaimed" and returned it to the state. 22
Shortly thereafter, the respondent purchased the petitioner's home from the
state and, thirty days after the thirty-day period for post-sale redemption had
passed, caused an unlawful detainer notice to be delivered to the petitioner's
home.23 The petitioner's daughter received the unlawful detainer notice and
forwarded it to the petitioner. 24
The petitioner filed a lawsuit in state court against the state and the
respondent, claiming constitutionally inadequate notice, i.e., that the failure of
the state to provide notice of the tax sale and of his right to redeem the
property constituted a taking of his property without due process of law. 25 The
state and the respondent argued that the two certified letters sent by the state
were constitutionally sufficient attempts at notice. 26 On cross-motions for
summary judgment, the state trial court agreed with the state and the
respondent, concluding that the state tax sale statute, which the state had
followed, satisfied the requirements of due process.27 The state supreme court
affirmed the decision of the state trial court on appeal and held that due
process does not require actual notice and, further, that the state's attempts to
provide notice by certified mail satisfied due process under the
circumstances.28
The Supreme Court granted certiorari to resolve a conflict among the
federal circuits and state supreme courts regarding "whether the Due Process
Clause requires the government to take additional reasonable steps to notify
a property owner when notice of a tax sale is returned undelivered. 9 The
Court observed that under the Mullane standard-notice reasonably calculated,
under all the circumstances, to apprise interested parties of the pendency of the
action-Due Process does not require actual notice.30 Indeed, the Court noted
that it had in a number of prior cases found notice sent by regular mail to be
constitutionally adequate.3 Nonetheless, the Court determined that the facts
in Flowerspresented a "new wrinkle" because the Court had never considered
"whether due process entails further responsibility when the government
becomes aware prior to the taking that its attempt at notice has failed. 3 2
22.
23.
24.
Id. at 1712-13.
Id. at 1713.
Id.
25.
Id.
26.
Id.
27.
28.
Id.
Id.
29.
30.
Id.
Id. (citing Dusenbery v. United States, 34 U.S. 161, 170 (2002)); see Mullane v. Central
Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).
31. Jones, 126 S. Ct. at 1714. The Court noted that in the cases involving notice via regular mail,
the government attempted notice but never received any feedback suggesting that the attempt had failed.
Id.
32.
Id.
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Noting that most circuits and state supreme courts addressing the notice
issue in the property forfeiture context had held that when the government,
state or federal, learns that its effort to provide notice has failed, due process
requires additional governmental efforts before real property may be sold at
a tax sale, the Court held that when the certified letters were returned
unclaimed, the state was obligated to "take additional reasonable steps to
attempt to provide notice to the property owner before selling his property, if
practicable to do so. ''33 In addition, the Court held that under the
circumstances, the state had available additional reasonable steps.34
In reaching its conclusion, the Court focused on the principle from
Mullane that under the Due Process Clause, notice is a person's due and the
means of notice employed "must be such of one desirous of actually informing
Applying this principle, the Court stated that an individual
the absentee. ...
who desired actually to inform a homeowner of an impending tax sale would
not do nothing when the certified letter sent to the homeowner is returned by
the post office. 36 Thus, the Court concluded that the state had been
unreasonable when it took no action after its attempted notice was returned and
that the petitioner, from his perspective, was no better off than if the notice had
never been sent.37 For these reasons, while the state did not have the
obligation to search for the petitioner's new address in the telephone book or
other government records, it did have possible reasonable steps that it could
have and should have taken.38 Such possible steps included resending the
letter via regular mail so that a signature was not required, resending the letter
to the home's "occupant," or posting a notice on the front door of the
petitioner's home.39
33. Id. at 1713-15. Flowers involved an unusual lineup of the justices. See id. at 1712. Chief
Justice Roberts wrote the opinion, in which Justices Stevens, Souter, Ginsburg, and Breyer joined. Id.
Justice Thomas filed a dissent, in which Justices Scalia and Kennedy joined. Id. Justice Alito did not
participate in the consideration or decision of the case. Id.
34. Id. at 1713.
35. Id. at 1715 (quoting Mullane, 339 U.S. at 315).
36. Id. at 1716.
37. Id. The Court rejected three arguments advanced by the state for why its attempt at notice to
the petitioner was reasonable and, therefore, constitutionally sufficient. Id. at 1717-18. First, the Court
rejected the state's argument that the petitioner had a legal obligation to keep a current address on file. Id.
at 1717. Second, the Court rejected the state's argument that the petitioner was on inquiry notice that his
property might be sold in a tax sale after failing to receive a property tax bill and pay property taxes. Id. at
1717-18. Third, the Court rejected the state's argument that the petitioner had a duty to ensure that those
with whom he left his property would notify him if the property was in jeopardy. Id.
38. id. at 1718-19.
39. Id. Justice Thomas, joined by Justices Scalia and Kennedy, dissented, essentially agreeing with
the state that its attempted notice was constitutionally reasonable because actual notice is not required and
that the petitioner should have taken better care of his property. Id. at 721-26 (Thomas, J., dissenting).
Justice Thomas also viewed the Court's proposed additional steps, in addition to being constitutionally
unnecessary, as "burdensome, impractical, and no more likely to effect notice than the methods actually
employed by the State." Id. at 1725.
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CIVIL PROCEDURE
In addition to addressing the notice issue left unanswered in the seminal
1959 Due Process case of Mullane, the Court resolved a split among the
circuits regarding when attorneys' fees should be awarded when a case
removed from state court to federal court is remanded to state court due to lack
of subject matter jurisdiction.' Under the removal jurisdiction of the federal
district courts, as a general matter, a defendant or defendants may remove any
civil action brought in state court to the federal district court so long as the
case could have been brought in federal court initially." If it is determined,
however, that the federal district court lacks subject matter jurisdiction, then
the case must be remanded to the state court and "[a]n order remanding the
case may require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal."4 2
In Martin v. Franklin Capital Corp., the petitioners filed a class action
lawsuit in New Mexico state court, which the respondent, pursuant to section
1441 of the United States Code, removed to federal district court on the basis
of diversity of citizenship. 3 Although the respondent acknowledged in its
removal notice that the amount in controversy was not clear from the face of
the complaint, the respondent asserted that the requirement was satisfied on a
theory suggested in case precedent that punitive damages and attorneys' fees
can be aggregated in the class action context to satisfy the amount-incontroversy requirement." Subsequently, the petitioners, pursuant to section
1447(c) of the United States Code, moved to remand the lawsuit to state court,
arguing that diversity of citizenship did not exist because their claims failed
to satisfy the amount-in-controversy requirement. 45 The federal district court
denied the motion.' On appeal, the Tenth Circuit agreed with the petitioners
that the amount-in-controversy requirement had not been satisfied.47 Relying
in part on decisions issued after the federal district court's refusal to remand,
the Tenth Circuit ruled that punitive damages and attorneys' fees cannot be
aggregated in determining the amount in controversy.48
After the Tenth Circuit remanded the case to federal district court with
instructions to remand the case to state court, the petitioners moved for
attorneys' fees pursuant to section 1447(c). 49 The federal district court
40. See Martin v. Franklin Capital Corp., 546 U.S. 132, 126 S. Ct. 704, 708 (Dec. 2005); see
generally 28 U.S.C. § 1441 (2000 and Supp. 2004) (explaining removal of a case from state to federal
court); 28 U.S.C. § 1447(c) (2000) (explaining remand of a case removed from state to federal court back
to state court due to the federal court's lack of subject matter jurisdiction).
41. Id. § 1441.
42. Id. § 1447(c).
43. Martin, 126 S. Ct. at 707.
44. Id. at 707-08.
45.
46.
47.
48.
49.
Id. at 708.
Id. Ultimately, the federal district court dismissed the case. Id.
Id.
Id.
Id.
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evaluated the respondent's basis for removal and found that, while the Tenth
Circuit ultimately determined that it was improper, the respondent had
"legitimate" and "objectively reasonable grounds" for understanding that the
case fell within the federal district court's jurisdiction and that removal was
legally appropriate.5 0 The petitioners then appealed the federal district court's
denial of their motion for attorneys' fees to the Tenth Circuit, claiming that
section 1447(c) mandates an award of attorneys' fees as a matter of course on
remand.5 1 The Tenth Circuit, relying on an abuse of discretion standard,
rejected the petitioners' claim and held that the federal district court did not
abuse its discretion because the respondent, in calculating the amount in
controversy, had relied on case law only later found to be unsound.52
In a unanimous opinion, the Supreme Court rejected the petitioners'
argument that attorneys' fees should be automatic upon remand and adopted
the rule that "[a]bsent unusual circumstances, courts may award [attorneys']
fees under § 1447(c) only where the removing party lacked an objectively
reasonable basis for seeking removal."53 The Court's analysis is multifaceted.
First, the Court focused on the text of section 1447(c), which provides that an
order remanding a case "may" require payment of attorneys' fees.54 The
express wording of the statute, the Court reasoned, suggests the exercise of
discretion. The Court explained that "Congress used the word 'shall' often
enough in § 1447(c)
. .
. to dissuade us from the conclusion that it meant
'shall' when it used 'may' in authorizing an award of [attorneys'] fees. 56 On
the other hand, the Court rejected the respondent's argument that section
1447(c) is merely a jurisdiction-conferring statute that grants courts power to
award costs and attorneys' fees only when warranted by some other authority,
such as Rule 11 of the Federal Rules of Civil Procedure. 57 Taking seriously
50.
Id.
51.
Id.
52. Id.
53. Id. at711.
54. Id. at 709.
55. Id. With respect to this line of reasoning, Chief Justice Roberts relied on former Chief Justice
Rehnquist, who explained that "[t]he word 'may' clearly connotes discretion. The automatic awarding of
attorneys' fees to the prevailing party would predetermine the exercise of that discretion." Id (quoting
Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994)).
56. Id. The Court also rejected the petitioners' alternative argument, based on an analogy to
attorneys' fees awards to prevailing plaintiffs in civil rights cases, that when a remand order exists, a
presumption in favor of awarding attorneys' fees should exist. Id. The Court reasoned that unlike plaintiffs
who have successfully litigated a civil rights action, plaintiffs who have successfully sought and obtained
a remand order after a removal are not serving as private attorneys general. Id. In addition, the Court
observed that unlike losing defendants in civil rights cases, defendants on remand are not violators of federal
law. Id. In the words of the Court, "incorrectly invoking a federal right [to removal] is not comparable to
violating substantive federal law." Id.
57. Id. at 709-10. The Court explained that "[i]f the statue were strictly jurisdictional, there would
be no need to limit awards to 'just' costs; any award authorized by other provisions of law would
presumably be 'just."' Id. at 710.
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697
the idea that the statutory term "may" connotes discretion, the Court also
rejected the argument of the Solicitor General that section 1447(c) requires an
award of attorneys' fees only when the removing party's position was
"frivolous, unreasonable, or without foundation."5 8 In short, the Court rejected
the parties' proposed legal standards governing a court's discretion under
section 1447(c) on both extremes, finding nothing to suggest that attorneys'
fees should be typically granted or typically denied.5 9
The Court then considered the standard that federal district courts should
use when exercising their discretion to determine whether an award of
attorneys' fee and costs under section 1447(c) is "just" in a given case.' The
Court carefully emphasized that Congress enacted section 1441 to provide a
right to a federal forum to certain state-court defendants and that an automatic
fee on remand would obviously discourage the right to remove except in cases
in which the right to remove is obvious.6 According to the Court, this result
could not have been Congress's intent in section 1447(c). 62 Rather, according
to the Court, Congress intended an award of attorneys' fees and costs-fee
shifting-in only certain cases.6 3 Thus, the Court held that the standard is
whether the removing party "lacked an objectively reasonable basis for
Significantly, the Court held that the removing party
seeking removal."'
meets the standard when it seeks removal "for the purpose of prolonging
litigation and imposing costs on the opposing party."'65 In short, the Court
established a standard that it believed struck a balance by recognizing
Congress's desire to deter removals sought for purposes of delay and
increasing costs, but at the same time, protecting the right of defendants to
remove when the statutory criteria are met.'
58. Id. (citations omitted). The standard urged by the Solicitor General is the standard used for
awarding attorneys' fees against unsuccessful civil rights plaintiffs and unsuccessful intervenors in civil
rights cases. See Flight Attendants v. Zipes, 491 U.S. 754, 762 (1989) (applying the standard to
unsuccessful intervenors); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421 (1978) (applying the
standard to unsuccessful civil rights plaintiffs).
59. Martin, 126 S. Ct. at 710.
60. Id. at 710-11. The Court specifically stated that just because no presumption exists either
favoring awards or disfavoring awards, i.e., there is "no heavy congressional thumb one either side of the
scales," does not mean that no legal standard governing the federal district court's discretion exists. Id. at
710.
61.
Id. at 711.
62. Id.
63. Id.
64.
Id.
65. Id.
66. Id. Applying this standard to the facts in Martin, the Court affirmed the judgment of the Tenth
Circuit that the respondent had an objectively reasonable basis for removal because the petitioners did not
contest the reasonableness of the respondent's arguments in favor of removal. Id. at 711-12.
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III. PERSONAL JURISDICTION
A. Due Process, Stream of Commerce Theory, and the Split
Among the Circuits
The constitutional reasonableness of a plaintiffs forum selection is
judged by focusing on the relationship between the defendant and the forum
and by determining whether the defendant has sufficient minimum contacts
with the forum such that the maintenance of the lawsuit "does not offend
'traditional notions of fair play and substantial justice."' 67 The underlying
concern is protection of the defendant's "liberty interest in not being subject
to the binding judgments of a forum with which he has established no
meaningful 'contacts, ties, or relations.' "68 Typically, when a plaintiff chooses
a defendant's home state as the forum, the reasonableness of the choice is
virtually presumed because the defendant will have multiple and varied
69
contacts, ties, and relations with the state in which the defendant resides.
When the plaintiff chooses a forum other than the defendant's home state,
however, the question of reasonableness is more complex, for the fairness
standard embodied in the minimum contacts test is rather vague and openended.7 ° Indeed, the Supreme Court, in adopting the minimum contacts test
in 1945, recognized the test's inherent uncertainties when it noted that the test
is not mechanical or quantitative.7 t
67. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation omitted). The standard is
derived from the Due Process Clause. Id. The Court has described InternationalShoe's minimum contacts
test as the "constitutional touchstone." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). In a
series of post-1945 cases, the Court has sought to explain and apply the minimum contacts test. See
generally JACK H. FRIEDENTHAL, MARY KAY KANE, & ARTHUR R. MILLER, CIVIL PROCEDURE (4th ed.
2005) 121-65 (discussing InternationalShoe and its progeny); SHREVE & RAVEN-HANSEN, supra note 6,
at 46-93 (discussing InternationalShoe and its progeny).
68. Burger King Corp., 471 U.S. at 471-72 (quoting Int'l Shoe, 326 U.S. at 319). In other words,
the minimum contacts requirement ensures that a nonresident defendant will not have to litigate in an
inconvenient or distant forum. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980).
69. See id.; SHREVE & RAVEN-HANSEN, supra note 6, at 47-8.
70. See World-Wide Volkswagen Corp., 444 U.S. at 292; SHREVE & RAVEN-HANSEN, supra note
6, at 48. In the words of Professors Shreve and Raven-Hansen: "Fairness is a vague concept. It is one thing
to declare that due process permits jurisdiction over nonresident defendants when fair under the
circumstances. It is another to sift the facts of cases in an effort to apply the standard." SHREVE & RAVENHANSEN, supra note 6, at 48. The Supreme Court of Illinois has echoed this sentiment:
Whether the type of activity conducted within the State is adequate to satisfy the requirement [of
minimum contacts] depends upon the facts in the particular case. The question cannot be
answered by applying a mechanical formula or rule of thumb but by ascertaining what is fair and
reasonable in the circumstances ....
Gray v. Am. Radiator & Standard Corp., 176 N.E.2d 761, 765 (111.1961) (citation omitted).
71. See Int'l Shoe, 326 U.S. at 319. In this regard, the Court explained as follows:
It is evident that the criteria by which we mark the boundary line between those activities which
justify the subjection of a corporation to suit, and those which do not, cannot be simply
mechanical or quantitative. The test is not merely, as has sometimes been suggested, whether
the activity, which the corporation has seen fit to procure through its agents in another state, is
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In assessing minimum contacts and determining the constitutional
reasonableness of a forum's assertion of personal jurisdiction over a defendant,
some products liability lawsuits-those in which the defendant has acted
outside the forum by placing a defective product into the stream of commerce
that causes harm inside the forum-have proven to be particularly troublesome
analytically.72 When a defendant acts inside the forum and causes harm, or
sends an agent into the forum who causes harm, the minimum contacts test
usually will be satisfied because numerous connections will exist between the
defendant's activities, the forum, and the controversy that can be easily
articulated.7 3 In contrast, when the defendant acts outside of the forum by
placing a defective product into the stream of commerce, the defendant's
activities vis-a-vis the forum may be random and isolated rather than
continuous and systematic, and the possible paucity of direct contacts will
necessitate a more nuanced review of the nature and quality of the defendant's
forum-connected activities.74
In evaluating minimum contacts in such "stream of commerce" cases, the
Supreme Court has indicated that the focus must be on the degree to which the
defendant has "purposely avail[ed] itself of the privilege of conducting
activities within the forum State."7 " The Court explained as follows:
[I]f the sale of a product of a manufacturer or distributor... is not simply an
isolated occurrence, but arises from the efforts of the manufacturer or
distributor to serve directly or indirectly, the market for its product in other
States, it is not unreasonable to subject it to suit in one of those States if its
allegedly defective merchandise has there been the source of injury to its
owner or to others. The forum State does not exceed its powers under the
Due Process Clause if it asserts personal jurisdiction over a corporation that
a little more or a little less. Whether due process is satisfied must depend rather upon the quality
and nature of the activity in relation to the fair and orderly administration of the laws which it
was the purpose of the due process clause to insure.
Id. (citation omitted). In a later case, Justice Marshall opined that InternationalShoe's minimum contacts
test is "one in which few answers will be written 'in black and white. The greys are dominant and even
among them the shades are innumerable."' Kulko v. Superior Court of Calif., 436 U.S. 84, 92 (1978)
(citation omitted).
72. See, e.g., Asahi Metal Indus. Co. v. Superior Court of Calif., 480 U.S. 102 (1987) (plurality
opinion) (involving a defective motorcycle tire tube valve assembly); World-Wide Volkswagen Corp., 444
U.S. at 286 (involving a defective automobile); Gray, 176 N.E. at 761 (involving a defective water heater
safety valve).
73. See SHREVE & RAvEN-HANSEN, supra note 6, at 74.
74. See id. at 74-75.
75. World-Wide Volkswagen Corp., 444 U.S. at 286 (citing Hanson v. Denckla, 357 U.S. 235, 253
(1958)). According to the Court, when the defendant has purposely availed itself of the privilege of
conducting activities within the forum state, the defendant "has clear notice that it is subject to suit there,
and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs
on to customers, or, if the risks are too great, severing its connection with the State." Id.
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delivers its products into the stream of commerce with the expectation that
they will be purchased by consumers in the forum state.76
The key to minimum contacts analysis in stream of commerce cases, then, is
the extent to which the nonresident defendant has reached out to the forum
state and served or sought to serve the market in that state.77
It was on this basis that the Court in World-Wide Volkswagen
Corporationv. Woodson determined that a local New York automobile retailer
and its three-state regional distributor could not be subjected to personal
jurisdiction in Oklahoma in a suit for personal injuries resulting from a
defective automobile that the plaintiffs purchased in New York and drove to
Oklahoma.7 8 The Court found a total absence of the necessary affiliating
circumstances or minimum contacts, reasoning that the local retailer sold
automobiles only in New York and that the regional distributor was limited to
New York, New Jersey, and Connecticut.79 The Court concluded that the
retailer and distributor, because they did not serve or seek to serve the
Oklahoma market and, therefore, had not reached out to the state, could not
have foreseen that they would be called upon to defend a lawsuit in
Oklahoma.8 °
The significance of World-Wide Volkswagen, however, lies in the Court's
dictum regarding the two other defendants in the lawsuit, the international
manufacturer and the national importer of the defective car. 8 Asking whether
these defendants had purposely availed themselves of the privilege of
conducting activities within Oklahoma, i.e., whether they had directly or
indirectly served the Oklahoma market, the Court responded in the
affirmative.82 The Court found that the international manufacturer and
national importer had purposefully served the Oklahoma market because they
served the national market and distributed their automobiles throughout the
76. Id. at 297-98 (citing Gray, 176 N.E.2d 761).
77. Id.
78. Id. at 295, 297-99.
79. Id. at 298.
80. Id. at 297. The Court stated as follows: "[T]he foreseeability that is critical to due process
analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the
defendant's conduct and connection with the forum State are such that he should reasonably anticipate being
haled into court there." Id. (citations omitted). To hold otherwise, the Court indicated, would be
unacceptable, for "[e]very seller of chattels would in effect appoint the chattel his agent for service of
process" and the seller's "amenability to suit would travel with the chattel." Id. at 296. For an interesting
account of the litigation in World-Wide Volkswagen, see Charles W. Adams, World-Wide Volkswagen v.
Woodson-The Rest of the Story, 72 NEB. L. REv. 1122 (1993).
81. World-Wide Volkswagen Corp., 444 U.S. at 288. The intemational manufacturer, Audi, never
challenged personal jurisdiction, and the national importer, Volkswagen of America, dropped its personal
jurisdiction objection before the appeal to the Supreme Court. Id. at n.3. Accordingly, the Supreme Court's
discussion with respect to these two defendants is dictum.
82. Id. at 297-98.
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United States.8 3 Unlike the local retailer and regional distributor, whose
product reached the distant state of Oklahoma only because a consumer took
it there, the product of the international manufacturer and national importer
reached the distant state through established chains of distribution.' As the
Court explained, "[t]he forum State does not exceed its powers under the Due
Process Clause if it asserts personal jurisdiction over a corporation that
delivers its products into the stream of commerce with expectation that they
will be purchased by consumers in the forum State."85
The Court's stream of commerce theory in World-Wide Volkswagen,
although technically dictum, constitutes a basis for asserting and finding
constitutionally sufficient minimum contacts in products liability lawsuits
against manufacturers, distributors, and sellers.86 Professors Friedenthal,
Kane, and Miller have observed that as a result of World-Wide Volkswagen,
a court has two options in identifying purposeful conduct on the part of a
defendant: If a court cannot find direct acts of the defendant within the forum
state, then the court must look for acts of the defendant outside of the forum
state that, due to their nature and quality, would have caused the defendant to
foresee the possibility of defending a lawsuit there.87 In addition to finding
purposeful conduct, or purposeful availment, based on either of these two
methods, the Court's further refinements to the minimum contacts test require
that the court answer the now familiar question of whether the maintenance of
the lawsuit in the forum state would "offend 'traditional notions of fair play
and substantial justice.' 88 This latter fairness analysis requires evaluation of
83. Id.
84. Id. at 306-07. Justices Brennan, Marshall, and Blackmun disagreed with the Court about the
significance of this distinction, arguing that it was constitutionally irrelevant whether the defective product
reached the forum state through channels of distribution or the consumer using the product in its intended
way. See id. at 306-03, nn. 11, 12 (Brennan, J., dissenting); id. at 315 (Marshall, J., dissenting); id. at 318-19
(Blackmun, J., dissenting).
85. Id. at 297-98 (citing Am. Radiator & Standard Sanitary Corp., 176 N.E.2d 761 (111.1961)). The
Court held that the assertion of personal jurisdiction would be reasonable because the corporation, having
purposefully availed itself of the privilege of conducting activities in the forum state, would be on notice
that it is subject to suit in the forum state and could take steps to minimize the costs and burdens of litigating
there. Id. at 297. The Court noted that the corporation could obtain insurance, pass the expected costs on
to the consumers by raising prices, or even terminate its connection to the state. Id.; see generally
FRIEDENTHAL, KANE, & MILLER, supra note 67, at 138-39 (summarizing and explaining the Court's dictum
in World-Wide Volkswagen).
86. FRIEDENTHAL, KANE, & MILLER, supra note 67, at 139. World-Wide Volkswagen's stream of
commerce theory, as Professors Shreve and Raven-Hansen have observed, received mixed reviews, and
some lower courts continued to base personal jurisdiction over nonresident defendants solely on the basis
that an injury occurred in the forum. SHREVE & RAVEN-HANSEN, supra note 6, at 77.
87. FRIEDENTHAL, KANE, & MILLER, supra note 67, at 139.
88. World-Wide Volkswagen Corp., 444 U.S. at 292 (citing International Shoe Co. v. Wash., 326
U.S. 310, 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940))); see also Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 476-77 (1985) (discussing the establishment of minimum contacts within the
forum state and the consideration of those contacts "to determine whether the assertion of personal
jurisdiction would comport with 'fair play and substantial justice').
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the "forum State's interest in adjudicating the dispute," the "plaintiff s interest
in obtaining convenient and effective relief," the "burden on the defendant,"
the "interstate judicial system's interest in obtaining the most efficient
resolution of controversies," and the "shared interest of the several States in
furthering fundamental substantive social policies. '"9
Seven years after World- Wide Volkswagen, the Court considered stream
of commerce theory for the second time, in a products liability action against
foreign manufacturers from Taiwan and Japan. 90 In Asahi Metal Industry
Company v. Superior Court of California, the plaintiff lost control of the
motorcycle he and his wife were riding, and the motorcycle collided with a
tractor, injuring the plaintiff and killing his wife. 91 The plaintiff commenced
a products liability action in California state court against Cheng Shin Rubber
Industrial Co. (Cheng Shin), the Taiwanese manufacturer of the tire, alleging
that an explosion in the rear tire caused by defects in the tire, tire valve, and
sealant caused the accident. 92 Cheng Shin then filed a cross-complaint for
indemnity against Asahi Metal Industry Company (Asahi), the Japanese
manufacturer of the tire's valve assembly. 93 Subsequently, the plaintiff settled
with Cheng Shin, leaving for adjudication only Cheng Shin's claim for
indemnification against Asahi.94
Personal jurisdiction became an issue when Asahi moved to quash Cheng
Shin's service of the summons for the indemnity cross-complaint on the
ground that any assertion of personal jurisdiction over it would violate the Due
89. World-Wide Volkswagen Corp., 444 U.S. at 292. In sum, the InternationalShoe standard has
two components: minimum contacts and fairness factors. See Burger King Corp., 471 U.S. at 476. The
Court has explained the two-step analysis as follows: "Once it has been decided that a defendant
purposefully established minimum contacts within the forum State, these contacts may be considered in light
of other factors to determine whether the assertion of personal jurisdiction would comport with 'fair play
and substantial justice."' Id. (quoting InternationalShoe, 326 U.S. at 320). After World-Wide Volkswagen,
the stream of commerce theory is one way of evaluating whether sufficient minimum contacts exist. See
World-Wide Volkswagen Corp., 444 U.S. at 292. Professors Friedenthal, Kane, and Miller have described
the InternationalShoe standard as a three-step test rather than a two-step test: (1) whether the defendant
purposefully availed itself of the privileges and benefits of the forum state, (2) whether the plaintiff's cause
of action arises from the defendant's contacts with the forum state, and (3) whether the exercise of personal
jurisdiction would be reasonable. FRIFDENTHAL, KANE, & MILLER, supranote 67, at 144. The two tests
are really the same, however. In InternationalShoe, the Court listed as a contact the fact that "[t]he
obligation which is here sued upon arose out of" activities of the defendant in the forum." International
Shoe, 326 U.S. at 320. The three-step analysis described by Professors Friedenthal, Kane, and Miller,
therefore, is the same as the two-step analysis described by the Court in Burger King, with the exception
that the requirement of a relationship between the plaintiff's cause of action and the defendant's forum
activities stands alone as the second step rather than being subsumed by the Court's first step. The Fifth
Circuit uses the three-step analysis. See, e.g., Nuovo Pignone, Spa v. Storman Asia M/V, 310 F.3d 374, 378
(5th Cir. 2002) (citing Burger King, 471 U.S. at 474).
90. See Asahi Metal Indus. Co. v. Superior Court of Calif., 480 U.S. 102 (1987) (plurality opinion).
91. Id.at 105.
92. Id.at 106.
93. Id.
94. Id.
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703
Process Clause of the Fourteenth Amendment.95 Information supplied to the
state court revealed that Asahi manufactured tire valve assemblies and sold
them to Cheng Shin and other tire manufacturers for use as components in
finished tires, that Asahi's sales to Cheng Shin took place in Taiwan, that
Asahi shipped its valve assemblies from Japan to Cheng Shin in Taiwan, that
Cheng Shin incorporated Asahi's valve assemblies into its finished tires, and
that twenty percent of Cheng Shin's sales in the United States were in
California. 96 In an affidavit, a manager for Cheng Shin stated that he had
discussed with Asahi representatives the fact that Cheng Shin sells tires
throughout the world, including in the United States, and that "Asahi was fully
aware that valve stem assemblies sold to [Cheng Shin] and to others would end
up throughout the United States and in California."'97 In an opposing affidavit,
the president of Asahi stated that Asahi had never contemplated that its limited
sales of valve assemblies to Cheng Shin in Taiwan would make it amenable
to lawsuits in California.98
The California state courts differed in their understanding and application
of stream of commerce analysis. 99 The state trial court denied the motion to
quash because it found that Asahi conducted business on an international scale,
and, therefore, making it defend against claims that its product was defective
was not unreasonable.' ° The state court of appeals disagreed and reversed,
ruling that "it would be unreasonable to require Asahi to respond in California
solely on the basis of ultimately realized foreseeabililty that the product into
which its component was embodied would be sold all over the world including
California."'' 1 The state supreme court reversed and, agreeing with the state
trial court, ruled that California had a constitutional basis for asserting personal
jurisdiction over Asahi.'02 The state supreme court noted that while Asahi had
no offices, agents, or property in California, solicited no business there, made
no direct sales there, and did not design or control the distribution channel that
brought its valve assemblies into the state, the exercise of personal jurisdiction
over the company would nonetheless comport with the Due Process Clause. 3
The state supreme court concluded that it was enough that Asahi intentionally
placed its valve assemblies into the stream of commerce knowing that at least
some of them would ultimately reach California."°
95. Id.
96. Id. "Cheng Shin bought and incorporated into its tire tubes 150,000 Asahi valve assemblies in
1978; 500,000 in 1979; 500,000 in 1980; 100,000 in 1981; and 100,000 in 1982." Id.
97. Id. at 107.
98. Id.
99. See id. at 107-8.
100. Id. at 107.
101. Id. at 108.
102. Id.
103. Id.
104.
Id.
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The Supreme Court framed the issue on appeal as follows: "whether the
mere awareness on the part of a foreign defendant that the components it
manufactured, sold, and delivered outside the United States would reach the
forum State in the stream of commerce constitutes 'minimum contacts'
between the defendant and the forum State" so that the maintenance of the
lawsuit "'does not offend "traditional notions of fair play and substantial
justice.' .105 Eight Justices found that the exercise of personal jurisdiction
over Asahi would offend traditional notions of fair play and substantial
justice' °6 Evaluating the five fairness factors that it first articulated in WorldWide Volkswagen to determine the reasonableness of an assertion of personal
jurisdiction-step two in the two-step InternationalShoe standard-the Court
found that requiring Asahi to defend a lawsuit in faraway California would
place too severe a burden on Asahi.' 07 The Court also found that the plaintiff's
and California's interests in the lawsuit were slight because the plaintiff was
not a resident of California and had settled all of his claims, leaving for
adjudication only Cheng Shin's indemnification claim against Asahi.108 With
respect to the interests of the several states in the efficient resolution of
disputes and the advancement of substantive social policies, the Court
concluded that these factors had less import in this case because they would
require the consideration of the procedural and substantive policies of foreign
nations.'0 9 Emphasizing the alien status of Asahi, the Court concluded that
"[c]onsidering the international context, the heavy burden on the alien
defendant, and the slight interests of the plaintiff and the forum State, the
exercise of personal jurisdiction by a California court over Asahi in this
instance would be unreasonable and unfair."' 110
While eight members of the Court held that California's assertion of
personal jurisdiction would violate the Due Process Clause because it would
be unreasonable under the five fairness factors, the Court in Asahi splintered
along predictable lines regarding its understanding of stream of commerce
analysis as a way of evaluating minimum contacts."' Justice O'Connor,
joined by Chief Justice Rehnquist, Justice Powell, and Justice Scalia, focusing
on the "constitutional touchstone" of purposeful availment, interpreted WorldWide Volkswagen "to require the action of the defendant to be more
purposefully directed at the forum State than the mere act of placing a product
105. Id. at 105 (citations omitted).
106. Id. at 113.
107. Id. at 114; see supra notes 88-89 and accompanying text (discussing the World-Wide
Volkswagen fairness factors and the InternationalShoe standard).
108. Id. at 114-15.
109. Id. at 115.
110. Id.at 116.
111. See id. at 108-114, 116-21. See generally Robert A. Weninger, Civil Procedure,32 TEx. TEcH.
L. REv. 717, 725-27 (2001) (discussing "the background of a United States Supreme Court divided over the
stream-of-commerce rationale for asserting personal jurisdiction").
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in the stream of commerce."'1 2 Thus, for Justice O'Connor, Asahi's awareness
that its valve assemblies were being sold in California was constitutionally
insufficient to allow California to exercise personal jurisdiction over Asahi. 3
She explained that purposeful availment required additional conduct beyond
merely placing the product into the stream of commerce." 4 According to
Justice O'Connor, such additional conduct that would signify the defendant's
intent to serve the market of the forum state would include "designing the
product for the market in the forum State, advertising in the forum State,
establishing channels for providing regular advice to customers in the forum
State, or marketing the product through a distributor who has agreed to serve
as the sales agent in the forum State.""'
Justice Brennan, in a concurring opinion in which Justice White, Justice
Marshall, and Justice Blackmun joined, rejected the requirement of additional
conduct beyond the placement of the product into the stream of commerce.16
Justice Brennan reasoned that so long as the defendant is aware that its product
is reaching the forum state, a lawsuit in the forum state "cannot come as a
surprise" because, after all, "[t]he stream of commerce refers not to
unpredictable currents or eddies, but to the regular and anticipated flow of
products from manufacture to distribution to retail sale."''' Justice Brennan
also noted that in such cases, the economic benefits from the retail sale of the
final product in the forum state, as well as the legal benefits from the forum
state's laws that encourage and regulate commercial activity, will offset any
burden of litigating in the forum state." 8 On this basis, Justice Brennan
concluded that Asahi had sufficient minimum contacts with California. '9
In the aftermath of Asahi, the lower courts, faced with conflicting stream
of commerce theories from the Supreme Court, remained split on whether to
follow the "stream of commerce plus" test urged by Justice O'Connor or the
112.
Asahi Metal Indus. Co., 480 U.S. at 108-10.
113. Id. at 111-13, 116. Justice O'Connor wrote that "a defendant's awareness that the stream of
commerce may or will sweep the product into the forum State does not convert the mere act of placing the
product into the stream into an act purposefully directed toward the forum State." Id. at 112.
114.
115.
Id.
Id.
116.
See id. at 116-22 (Brennan, J., concurring in part and concurring in the judgment).
117.
Id. at 117.
118. Id.
119. Id. at 121. Justice Stevens agreed that Asahi had sufficient minimum contacts with California
and provided the fifth vote on that issue. See id. at 121-22 (Stevens, J.,
concurring in part and concurring
in the judgment). Thus, although a five-member majority found that Asahi had constitutionally adequate
contacts with California, the same majority, along with Justice O'Connor, Chief Justice Rehnquist, and
Justice Powell, determined that California could not constitutionally exercise personal jurisdiction because
to do so would be unreasonable. See supra notes 106-10 and accompanying text. In this regard, Justice
Brennan noted that Asahi was a "rare" case in which consideration of the fairness factors rendered unfair
the forum state's assertion of personal jurisdiction, notwithstanding the existence of sufficient minimum
contacts. Asahi Metal Indus. Co., 80 U.S. at 116 (Brennan, J., concurring in part and concurring in the
judgment).
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"stream of commerce" test advocated by Justice Brennan.120 In 1993 the Fifth
Circuit complained that "the Court's splintered view of minimum contacts in
Asahi provides no clear guidance ....,12' Today, a conflict exists among the
courts of appeals and state courts: Some courts of appeals and state courts
follow Justice O'Connor's plurality opinion while others follow Justice
Brennan's concurring opinion."22
120. Compare Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610,613-15 (8th Cir.
1994) (following JusticelBrennan's stream of commerce test); Ruston Gas Turbines, Inc. v. Donaldson Co.,
9 F.3d 415,420 (5th Cir. 1993) (following Justice Brennan's stream of commerce test); Dehmlow v. Austin
Fireworks, 963 F.2d 941,947 (7th Cir. 1992) (following Justice Brennan's stream of commerce test); Cont'l
Research Corp. v. Reeves, 419 S.E.2d 48, 53 (Ga. Ct. App. 1992) (following Justice Brennan's stream of
commerce test); Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 571-72 (Minn. 2004)
(following Justice Brennan's stream of commerce test); Cox v. Hozelock, Ltd., 411 S.E.2d 640, 644 (N.C.
Ct. App. 1992) (following Justice Brennan's stream of commerce test); Hill v. Showa Denko, K.K., 425
S.E.2d 609, 616 (W. Va. 1992) (following Justice Brennan's stream of commerce test); and Kopke v. A.
Hartrodt S.R.L. 629 N.W.2d 662, 674 (Wis. 2001) (following Justice Brennan's stream of commerce test),
with Bridgeport Music, Inc. v. Still N The Water Publ'g, 327 F.3d 472, 479-80 (6th Cir. 2003) (following
Justice O'Connor's stream of commerce plus test); Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939,94546 (4th Cir. 1994) (following Justice O'Connor's stream of commerce plus test); Boit v. Gar-Tec Prods.,
Inc., 967 F.2d 671, 683 (lst Cir. 1992) (following Justice O'Connor's stream of commerce plus test);
Madara v. Hall, 916 F.2d 1510, 1519 (1 th Cir. 1990) (following Justice O'Connor's stream of commerce
plus test); Ex parte Alloy Wheels Int'l, 882 So.2d 819, 827 (Ala. 2003) (following Justice O'Connor's
stream of commerce plus test); Rollin v. William V. Frankel & Co., 996 P.2d 1254, 1257-58 (Ariz. Ct. App.
2000) (following Justice O'Connor's stream of commerce plus test); Carretti v. Italpast, 125 Cal. Rptr. 2d
126, 135 (Cal. Ct. App. 2002) (following Justice O'Connor's stream of commerce plus test); Union Pac.
R.R. Co. v. Equitas Ltd., 987 P.2d 954, 957 (Colo. Ct. App. 1999) (following Justice O'Connor's stream
of commerce plus test); Holder v. Haarmann & Reimer Corp., 779 A.2d 264, 273 (D.C. 2001) (following
Justice O'Connor's stream of commerce plus test); Kin Yong Lung Indus. Co. v. Temple, 816 S.2d 663, 666
(Fl. Dist. Ct. App. 2002) (following Justice O'Connor's stream of commerce plus test); Halderman v.
Sanderson Forklifts Co., 818 S.W.2d 270, 274 (Ky. Ct. App. 1991) (following Justice O'Connor's stream
of commerce plus test); Hollingsworth & Vose Co. v. Connor, 764 A.2d 318, 330-31 (Md. Ct. Spec. App.
2000) (following Justice O'Connor's stream of commerce plus test); Witbeck v. Bill Cody's Ranch Inn, 411
N.W.2d 439, 448 (Mich. 1987) (following Justice O'Connor's stream of commerce plus test); Sorrells v.
R & R Custom Coach Works, Inc., 636 So.2d 668, 674 (Miss. 1994) (following Justice O'Connor's stream
of commerce plus test); Schultz v. Hyman, 201 A.D.2d 956, 957 (N.Y. App. Div. 1994) (following Justice
O'Connor's stream of commerce plus test); Sherry v. Geissler U. Pehr GmbH, 651 N.E.2d 1383, 1388 (Ohio
Ct. App. 1995) (following Justice O'Connor's stream of commerce plus test); Graham v. Mach. Distribution,
Inc., 599 A.2d 984, 987 (Pa. Super. Ct. 1991) (following Justice O'Connor's stream of commerce plus test);
Dal v. Kaylor, 658 A.2d 78, 80 (Vt. 1995) (following Justice O'Connor's stream of commerce plus test);
and Sutherland v. Robby Thruston Carpentry, Inc., 68 Va. Cir. 43 (Va. Cir. Ct. 2005) (following Justice
O'Connor's stream of commerce plus test). Even before Asahi, the lower courts, in interpreting World-Wide
Volkswagen, had developed the two approaches promoted by Justice O'Connor and Justice Brennan
respectively. See Asahi Metal Indus. Co., 80 U.S. at 110-12 (cataloging cases); id. at 117-20 (Brennan, J.,
concurring in part and concurring in the judgment) (cataloging cases).
121. Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415,429 (5th Cir. 1993) (citation omitted).
122. See supra note 120.
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B. Injection into the Stream of Commerce Versus Injection into the
Stream of Commerce PlusAdditional Conduct: Discussionof
the Fifth Circuit's Decision in Luv N' Care, Ltd. v. Insta-Mix, Inc.
In Luv N' Care, Ltd. v. Insta-Mix, Inc., a panel of the Fifth Circuit
followed Fifth Circuit precedent and employed Justice Brennan's stream of
commerce test in assessing whether the forum state could constitutionally
exercise personal jurisdiction over a nonresident defendant. 23 In a special
concurrence, however, one judge indicated that although he was bound by
precedent to utilize Justice Brennan's stream of commerce test, he preferred
Justice O'Connor's stream of commerce plus test.' 24 Accordingly, he urged
"the Supreme Court to take up the minimum contacts issue and resolve it and
the increasing circuit divide with clarity.""
The plaintiff, Luv N' Care, an international corporation based in Monroe,
Louisiana, specialized in the design, manufacture, and sale of a variety of
infant care products, including a unique "straw cap" for plastic bottles.' 26 The
defendant, Insta-Mix, a small Colorado company, sold patented twochambered plastic bottles with freezable cores, primarily for use by athletes
and children. 27 Luv N' Care alleged that the straw cap of Insta-Mix's bottle
resembled a bottle cap that it manufactured and, therefore, that Insta-Mix had
engaged in copyright infringement, trademark dilution, and unfair
competition. 128 Luv N' Care filed its complaint in a federal district court in
Louisiana, and Insta-Mix challenged personal jurisdiction with a motion 1to
29
dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.
The federal magistrate recommended that the federal district court judge grant
the motion, reasoning that Insta-Mix's mere placement of products into the
stream of commerce, even if it were foreseeable that they would find their way
into Louisiana, was an insufficient basis for exercising personal jurisdiction
over Insta-Mix. 303 1 The district court judge agreed and adopted the
recommendation. 1
123.
Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 470 (5th Cir. Jan. 2006), cert. denied, 126
S.Ct. 2968 (2006).
124. Id. at 474 (DeMoss, J., specially concurring).
125. Id. at 476. Judge DeMoss added that "[tihe recent changes in the composition of the Court
should produce a new effort by the Court to definitively answer this controversy." Id. at 476.
126.
Id. at 468 (majority opinion).
127.
128.
Id.
Id.
129.
Id. Rule 12(b)(2) authorizes a motion to dismiss when a defendant asserts the defense of "lack
of jurisdiction over the person." FED. R. Civ. P.. 12(b)(2). In Luv N' Care the defendant also asserted the
defense of improper venue and moved to dismiss pursuant to Rule 12 (b)(3). Luv N' Care, Ltd.,
438 F.3d
at 468.
130. Id. at 468-69. The magistrate did not rule on Insta-Mix's motion to dismiss due to improper
venue because he found the personal jurisdiction issue dispositive. Id. at 469.
13 1. Id. Under Rule 52(a) of the Federal Rules of Civil Procedure, district courts are not required
to draft findings of fact and conclusions of law in ruling on Rule 12 motions. FED. R. Cir. P. 52(a); see
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On appeal, the Fifth Circuit noted that there was no dispute that Insta-Mix
did not have employees or an agent for service of process in Louisiana and,
further, that Insta-Mix did not conduct direct sales or marketing there.' 32
Instead, Insta-Mix's connection to Louisiana, the court observed, resulted from
sales of its patented bottles to Wal-Mart, which transported the bottles from
Insta-Mix's loading dock in Colorado Springs, where it took ownership of the
bottles pursuant to the parties' vendor agreement, to its distribution center in
Opelousas, Louisiana. 3 3 In total, in 2002 and 2003, Wal-Mart transported
3,696 bottles in roughly sixty-five shipments, which generated $8,923.30 in
revenue for Insta-Mix, from Colorado to Louisiana."3 Thus, the court noted
that Insta-Mix did not ship its bottles directly to Wal-Mart stores but, rather,
relied on third-party carriers that Wal-Mart hired. 35 As a final matter, the
court noted that Insta-Mix received and filled purchase orders from Wal-Mart
information concerning the
through an electronic data system, which provided136
price, quantity, and destination of each shipment.
Noting that it had previously converted the two-step InternationalShoe
minimum contacts standard into a "convenient three-step analysis," the Fifth
Circuit described the constitutional inquiry as follows:
generallyWeninger, supra note 111, at 720 (discussing Federal Rule of Civil Procedure 52(a)). Apparently,
in Luv N' Care,consistent with Rule 52(a), the district court did not prepare findings of fact and conclusions
of law. See Luv N' Care,Ltd., 438 F.3d at 469 (lacking of any reference to the district's courts findings of
fact and conclusions of law).
132. Id. at 468. The Fifth Circuit stated that the applicable standard of review for an appeal from a
dismissal for lack of personal jurisdiction is de novo. Id. at 469 (citing Adams v. Unione Mediterranea Di
Sicurta, 220 F.3d 659, 667 (5th Cir. 2000)); accord Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir.
1999) (citing Felch v. Transportes Lar-Mex S.A. De CV, 92 F.3d 320, 324 (5th Cir. 1996)). The court also
explained that the plaintiff has the burden of proving personal jurisdiction when the defendant challenges
jurisdiction. Luv N' Care,Ltd., 438 F.3d at 469 (citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982)).
The court observed that to meet this burden, however, a plaintiff need not establish jurisdiction by a
preponderance of the evidence; instead, a prima facie showing of personal jurisdiction will suffice. Id.
(citing Wyatt, 686 F.2d at 280). In determining whether the plaintiff has met this burden, the court stated
that it "must resolve all undisputed facts submitted by the plaintiff, as well as all facts contested in the
affidavits, in favor of jurisdiction." Id. (citing Wyatt, 686 F.2d at 280).
133. Id. at 468.
134. Id. at 468,471. The opinion is somewhat unclear as to the precise number of bottles that InstaMix sold to Wal-Mart. See id. at 468. In the opinion, the court noted that "Insta-Mix... sold 82,224 of its
patented bottles to Wal-Mart and a few other vendors" and that "Wal-Mart transported 3,696 copies of the
bottle, or approximately 65 shipments, with total revenue to Insta-Mix of $8,923.20, to its distribution center
in Opelousas, Louisiana." Id.
135. Id.
136. Id. The Fifth Circuit noted that once Insta-Mix filled an order, the electronic data system would
generate an electronic invoice for Wal-Mart containing the letterhead of an Insta-Mix-related entity and the
place of destination. Id. Moreover, the court noted that the record contained several invoices showing the
destination address as Wal-Mart's distribution center in Opelousas, Louisiana. Id. Insta-Mix disputed that
it had any knowledge of Wal-Mart's intended destination for its bottles until, in response to a pretrial
discovery request, it printed out information from the electronic data system. Id.
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(1) whether the defendant ... purposely directed its activities toward the
forum state or purposely availed itself of the privileges of conducting
activities there; (2) whether the plaintiffs cause of action arises out of or
results from the defendant's forum-related contacts; and (3) whether the
exercise of personal jurisdiction [by the forum state] is fair and reasonable.'37
Applying this standard, the Fifth Circuit reversed the district court. 13 ' The
court rather easily addressed and answered the second question, finding that
Luv N' Care claimed infringement, trademark dilution, and unfair competition
"from the same bottle that traveled through the stream of commerce from
Colorado to Louisiana" and that a "connection between the allegedly
infringing product and the forum state is sufficient to confer personal
jurisdiction."' 39 As for the third question, the Fifth Circuit noted the five
fairness factors and without hesitation concluded that Louisiana and the
plaintiff had strong interests pointing towards the fairness of litigating in
Louisiana and that asking Insta-Mix to defend there would not be
unreasonable, as it had benefitted from Louisiana's markets."4° As for InstaMix's claims that Wal-Mart, the retailer, and Royal King, the alleged
manufacturer of the offending bottle cap, would be more appropriate
defendants and that Luv N' Care's lawsuit amounted to an effort by a big
manufacturer to scare a small competitor from the market, the Fifth Circuit
simply stated that if Luv N' Care's lawsuit proved to be frivolous, the district
court would "deal with that deficiency."''
137. Id. at 469 (quoting Nuovo Pignone, Spa v. Storman Asia MNV, 310 F.3d 374, 378 (5th Cir.
2002) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985))); see generally supra notes 67,
86-89 and accompanying text (discussing the two-step InternationalShoe minimum contacts standard).
138. Luv N' Care,Ltd., 438 F.3d at 468.
139. Id. at 473 & n. 16. The court noted that in previous cases it had been reluctant to extend stream
of commerce theory beyond products liability cases but that it had found jurisdiction when "the same public
policy concerns that justify use of the stream-of-commerce principle in the products liability context are
present." Id. at 472-73 (quoting Nuovo Pignone, Spa, 310 F.3d at 378). Although it found in Luv N' Care
that copyright infringement, trademark dilution, and unfair competition raised the same public policy
concerns, the court cautioned that it reserves "judgment on whether jurisdiction would lie for other causes
of action outside the arena of products liability." Id. at 473 n. 16.
140. Id. at 474; see generallysupra notes 88, 89 and accompanying text (discussing the five fairness
factors). According to the court, Louisiana had a strong interest in having its courts mediate the dispute
because the defendant's product caused economic injury in the state. Luv N' Care, Ltd., 438 F.3d at 474.
Similarly, the court found that the plaintiff had a strong interest in litigating in Louisiana because the
defendant regularly distributed its offending product there. Id. Interestingly, instead of citing World-Wide
Volkswagen as the authority for requiring consideration of the five fairness factors, the Fifth Circuit cited
only one of its precedents. See id. at 473 (citing Felch v. Transportes Lar-Mex S.A. De CV, 92 F.3d 320,
324 (5th Cir. 1996)).
141. Id. at 473-74. The court characterized these arguments as pertaining to the third and fourth
fairness factors, the plaintiff's interest in securing relief, and the interstate judicial system's interest in the
efficient administration of justice. Id. The court apparently did not evaluate the fifth factor-the shared
interest of the states in promoting fundamental social policies. See id.
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The Fifth Circuit's analysis of the third prong-whether Insta-Mix had
purposely directed activities toward Louisiana or purposely availed itself of the
privileges of conducting activities there-is particularly interesting in light of
Asahi, the cases that have come after it, and the apparent growing discontent
with the Fifth Circuit's approach, as revealed by the special concurrence.'4 2
In determining whether Insta-Mix had acted vis-A-vis Louisiana in such a way
that it could reasonably anticipate being subject to suit there, the court
expressly stated: "This court has consistently held that 'mere foreseeability or
awareness [is] a constitutionally sufficient basis for personal jurisdiction if the
defendant's product made its way into the forum state while still in the stream
of commerce."" 4 3 The court explained that it had adopted the "more relaxed"
stream of commerce test and rejected the stream of commerce plus test in an
effort to be faithful to World-Wide Volkswagen.'" The court emphasized that,
under World-Wide Volkswagen, when a defendant knowingly benefits from a
particular state's market, "it is only fitting that the defendant be amenable to
suit in that state."' 14 ' Applying this "mere foreseeability" test, the Fifth Circuit
found that Insta-Mix had sufficient contacts with Louisiana, and, therefore, the
district court had erred in holding otherwise.' 46
In reaching it conclusion, the court rejected two arguments advanced by
Insta-Mix. 147 Insta-Mix first argued that its bottles reached Louisiana by virtue
of Wal-Mart's unilateral decision to take them there and that, under WorldWide Volkswagen, was insufficient to confer jurisdiction. 48 The court found
this argument unconvincing because the record showed that in 2002 and 2003,
Insta-Mix filled sixty-five purchase orders for bottles to be sent to Louisiana
and that Insta-Mix sent Wal-Mart invoices confirming the orders bound for
Louisiana. 149 In this regard, the court observed that four and a half percent of
142. See id. at 470-72.
143. Id. at 470 (quoting Ruston Gas Turbines v. Donaldson Co., 9 F.3d 415, 419 (5th Cir. 1993)
(citing Asahi Metal Indus. Co. v. Superior Court of Calif., 480 U.S. 102, 111 (1987) (plurality opinion);
Bean Dredging Corp. v. Dredge Tech. Corp., 744 F.2d 1081 (5th Cir. 1984))).
144. Id. The court construed World-Wide Volkswagen to hold "that a state does not offend due
process by exercising jurisdiction over an entity that 'delivers its products into the stream of commerce with
the expectation that they will be purchased by consumers in the forum State."' Id. (citation omitted).
145. Id. (citing Oswalt v. Scripto, Inc., 616 F.2d 191, 199-200 (5th Cir. 1980). In Oswalt the Fifth
Circuit found personal jurisdiction because the defendant had not attempted in any way to limit the states
in which its products could be sold and understood that its product would be sold to a nationwide market.
Oswalt, 616 F.2d at 199-200.
146. Luv N' Care, Ltd., 438 F.3d at 470.
147. See id. at 470-71.
148. Id. at 470.
149. Id. at 471. The court found "implausible" Insta-Mix's claim that it had no knowledge of the
intended destination of its bottles until it reviewed information from the electronic data system during
discovery. Id. In the words of the court, "[a]lthough businesses should be able to take advantage of the
increased efficiencies made possible by the electronic processing of purchase orders, they cannot then claim
ignorance of the contents of those orders once their products inevitably reach the intended market." Id.
(footnote omitted).
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Insta-Mix's total distribution, from which Insta-Mix derived substantial
revenue, went to Opelousas, Louisiana. 50 Insta-Mix also argued that it had
structured its activities to avoid jurisdiction by including a provision in the
parties' vendor agreement that transferred ownership to Wal-Mart when WalMart took possession of the bottles on Insta-Mix' s loading dock in Colorado
Springs. 5 ' Acknowledging that in previous cases it had suggested that the
Free On Board term in a contract is one factor to consider in determining
whether a defendant has sufficient minimum contacts with the forum state, the
court concluded that personal jurisdiction is not dependent upon the
technicalities of title and the passage of title when other factors, quantity and
regularity of shipment, for example, suggest that jurisdiction is proper.'
In a special concurrence, Judge DeMoss concurred in the majority
opinion based on Fifth Circuit precedent and urged Insta-Mix to apply for a
writ of certiorari so that the United States Supreme Court could resolve the
split among the circuit courts regarding whether Justice Brennan's stream of
commerce test or Justice O'Connor's stream of commerce plus test controls
minimum contacts analysis.5 13 According to Judge DeMoss, the minimum
contacts principle is a court-created principle, and Justice O'Connor's stream
of commerce plus test is more constitutionally defensible than Justice
Brennan's stream of commerce test.' 54 Judge DeMoss argued that to permit
an exercise of personal jurisdiction simply because the defendant placed a
product into the stream of commerce, the product reached the forum state, and
it was foreseeable that the product would reach the forum state defies
principles of federalism.' 55 This is so, he explained, because the assertion of
jurisdiction in such a case "destroys the notion of individual sovereignties
inherent in our system of federalism."' 156 Judge DeMoss reasoned that InstaMix should not be subject to suit in Louisiana because "[s]ubjecting Insta-Mix
to suit in Louisiana create[d] a 'Wal-Mart exception,' rendering any small
company that sells a product to Wal-Mart subject to suit in any state in the
nation in which Wal-Mart resells the company's products."' 57 Insta-Mix filed
a petition for a writ of certiorari on March 22, 2006.158 The Supreme Court,
150.
Id.
151.
Id.
152. Id. The court rejected any notion that its finding meant that Insta-Mix would now have to
choose between conducting business with Wal-Mart or being subject to suit in every state. Id. at 472 n.13.
153. Id. at 474-76 (DeMoss, J., specially concurring). Judge DeMoss's encouragement to Insta-Mix
was overtly political. See id. In the sentence immediately following the sentence in which he encouraged
Insta-Mix to seek a writ of certiorari, he explained: "The recent changes in the composition of the Court
should produce a new effort by the Court to definitively answer this controversy." Id.
154.
155.
Id. at 475.
Id.
156.
Id. (quoting Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939, 945 (4th Cir. 1994)).
157.
Id.
158. See Petition for a Writ of Certiorari, Insta-Mix, Inc. v. Luv N' Care, Ltd., 126 S. Ct. 2968 (2006)
(No. 05-1232). Insta-Mix framed the question presented as follows:
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however, neither accepted Judge DeMoss's invitation nor granted Insta-Mix's
petition. "9
The Court probably denied certiorari for a number of reasons. One reason
might be Judge DeMoss's federalism argument, which is contrary to Supreme
Court precedent." 6° Early on, the Supreme Court thought of personal
jurisdiction in terms of state sovereignty.' 61 In 1877 the Court declared that
"the laws of one State have no operation outside of its territory, except so far
as is allowed by comity; and that no tribunal established by it can extend its
process beyond that territory so as to subject either persons or property to its
decisions."' 162 In 1980, well after InternationalShoe and its establishment of
the minimum contacts standard, the Court continued to talk about personal
jurisdiction as related to state sovereignty. 63 Thus, in World-Wide
Volkswagen, the Court noted that the constitutional concept of minimum
contacts not only protects defendants from the burdens of litigating in distant
or inconvenient states, but it also "acts to ensure that the States through their
courts, do no reach out beyond the limits imposed on them by their status as
coequal sovereigns in a federal system."'" Significantly, however, two years
after World-Wide Volkswagen, the Court concluded that the requirement of
minimum contacts is a matter of individual liberty and not state sovereignty. 65
In InsuranceCorporationofIrelandv. Compagniedes Bauxites de Guinee, the
Court expressly stated that although the requirement of minimum contacts
operates in some cases to restrict state power, it "must be seen as ultimately a
function of the individual liberty interest preserved by the Due Process
the
Clause" and not as matter "of federalism concems."' 66 Thus, in short,
67
Court in 1982 disavowed the very basis of Judge DeMoss's invitation. 1
Whether the Court should resolve a significant and entrenched circuit split and hold that the Fifth
Circuit erred in applying the "stream of commerce" test described in a plurality opinion in Asahi
Metal Industry Co., Ltd. v. Superior Court of California ....
thereby concluding that petitioner's
sales of its product free and clear to a retailer who directed that product into the forum state were
sufficient to subject petitioner to personal jurisdiction, even though numerous other circuits and
states apply a "stream of commerce plus" test set forth in a different plurality opinion in Asahi,
under which petitioner plainly would not have been subject to personal jurisdiction in the forum
state.
Id. at .
159. See Insta-Mix, Inc., 126 S.Ct. 2968 (2006). The Court also denied Insta-Mix's petition for
rehearing. See Insta-Mix, Inc. v. Luv N' Care, Ltd., 127 S. Ct. 21 (2006).
160. See Luv N' Care, Ltd., 438 F.3d at 474-76 (DeMoss, J., specially concurring).
161. See Pennoyer v. Neff, 95 U.S. 714, 722 (1877).
162. Id.
163. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980).
164. Id.
165. See Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-03, n. 10 (1982).
166. Id.; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 & n.13 (1985) (discussing
Insurance Corporation of Ireland).
167. See Ins. Corp. of Ir., 456 U.S. 694, 702-03, n. 10; Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d
465, 474-76 (5th Cir. Jan. 2006) (DeMoss, J., specially concurring), cert. denied, 126 U.S. 2968 (2006).
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IV.
SUBJECT MATTER JURISDICTION
A. Conflating Subject Matter Jurisdictionand Pleading Essential
Elements of a Federal Claim: Discussion of the Fifth Circuit's
2004 Decision in Arbaugh v. Y & H Corporation
The defense that a district court lacks subject matter jurisdiction is a
favorite of defendants because they may assert it at any time in the litigation
process, even after trial and the entry of judgment or on appeal for the first
time. 168 The defense that the plaintiffs complaint fails to state a claim upon
which relief can be granted, in contrast, is less a favorite of defendants because
they must assert it early in the pleading stage or, at the latest, at trial.
69
In
2004 the Fifth Circuit considered whether a provision in Title VII of the Civil
Rights Act of 1964 making the Act applicable only to certain employers
-those with fifteen or more employees-"affects federal-court subject-matter
jurisdiction or, instead, delineates a substantive ingredient of a Title VII claim
for relief."' 10 The issue presented was important in light of the differences
between a motion to dismiss for lack of subject matter jurisdiction, which may
be asserted at any time, and a motion to dismiss for failure to state a claim
relief may be granted, which must be asserted no later than at
upon which
1
trial.
17
In Arbaugh v. Y & H Corp., the plaintiff sued the defendant, her former
employer, in federal district court alleging sexual harassment in violation of
172
Title VII of the Civil Rights Act of 1964, as well as various state tort claims.
The jury returned a verdict for the plaintiff after a two-day trial. 173 One month
168. See FED. R. Civ. P. 12(b)(I) (authorizing a motion to dismiss based upon the defense that the
court lacks subject matter jurisdiction). Rule 12(h)(3) requires a court to dismiss an action "[w]henever it
appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter .... "
FED. R. Civ. P. 12(h)(3). For a general discussion of Rule 12, see Kontrick v. Ryan, 540 U.S. 443 (2004).
169. See FED. R. Civ. P. 12(b)(6) (authorizing a motion to dismiss for "failure to state a claim upon
which relief can be granted"). Rule 12(h)(2) provides that a Rule 12(b)(6) objection can be raised in any
pleading ordered under Rule 7(a), in a motion for judgment on the pleadings, or at the trial on the merits.
FED. R. Crv. P. 12(h)(2). The objection of failure to state a claim upon which relief can be granted is
considered less useful than other defenses also because if granted, courts generally allow the plaintiff "to
try again" by filing an amended complaint. See generally SHREVE & RAvEN-HANSEN, supra note 6, at 235
("Depending upon the federal circuit, amendment as of right or by permission is available even after a
motion to dismiss has been granted, unless the court indicates that no curative amendments possible.")
(footnote omitted).
170. Arbaugh v. Y & H Corp., 380 F.3d 219, 223 (5th Cir. 2004), rev'd, 546, U.S. 500, 126 S. Ct.
1235 (2006).
171. See id.
172. Id. at 221. In her complaint, the plaintiff asserted federal question subject matter jurisdiction
pursuant to section 1331 of Title 28 of the United States Code. Id. The plaintiff also asserted that she had
filed a charge with the Equal Employment Opportunity Commission and had received a right-to-sue notice.
Id. As for her state court claims, the plaintiff asserted that the district court had supplemental jurisdiction
pursuant to section 1367 of Title 28 of the United States Code. Id. at 221 n.l.
173. Id at 221. The jury award the plaintiff $5,000 in back pay; $5,000 in compensatory damages;
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later, for the first time, the defendant filed a motion to dismiss the entire action
pursuant to Rule 12(h)(3) of the Federal Rules of Civil Procedure on the
ground that the district court lacked subject matter jurisdiction because the
defendant did not qualify as an "employer" under Title VII because it did not
employ fifteen or more employees for twenty or more weeks during the period
in question.174 In response, the district court converted the defendant's motion
to dismiss to a motion for summary judgment, granted the motion, and vacated
and reversed the plaintiff's jury verdict and judgment, ruling that because the
defendant did not employ the requisite fifteen or more employees, the
defendant was exempt from Title VII coverage and the district court did not
have subject matter jurisdiction.'75 In other words, the district court
determined that Title VII's employee-numerosity requirement was
jurisdictional, as opposed to a matter of pleading the essential elements of a
Title VII claim.'76
On appeal to the Fifth Circuit, the plaintiff argued that Fifth Circuit
authority on the issue of whether the numerosity requirement went to subject
matter jurisdiction or pleading was unclear, or at least insufficiently
considered. 177 Accordingly, she asserted that the Fifth Circuit should adopt the
approach of the Second, Seventh, and Fifth Circuits, concluding that the
statutory numerosity requirement goes to pleading the merits of a Title VI
employment discrimination claim. 78 She noted that the Second Circuit's
observations were relevant:
Whether a disputed matter concemsjurisdiction or the merits (or occasionally
both) is sometimes a close question. Court decisions often obscure the issue
by stating that the court is dismissing "for lack of jurisdiction" when some
threshold fact has not been established, without explicitly considering
whether the dismissal should be for lack of subject matter jurisdiction for
1 79
failure to state a claim.
The plaintiff also relied on both Fifth and Seventh Circuit authority for the
proposition that "a plaintiff who files a nonfrivolous suit in federal court
and $30,000 in punitive damages. Id. at 222.
174. Id. at 221. The defendant had admitted that the district court had subject matter jurisdiction,
and supplemental jurisdiction, in its answer and at the preliminary conference. Plaintiff-Appellant's
Original Brief at 8, Arbaugh, 380 F.3d 219 (No. 05-1232); see also Arbaugh, 126 S.Ct. at 1240-41
(reversing the Fifth Circuit's holding and remanding the case).
175. Arbaugh, 380 F.3d at 222; see also Arbaugh, 126 S. Ct. at 1238 (reversing the Fifth Circuit's
holding and remanding the case). The district court recognized that it was "unfair and a waste of judicial
resources" to grant the defendant's motion. Arbaugh, 126 S.Ct. at 1238 (citation omitted).
176. Id.
177. Arbaugh, 380 F. 3d at 223.
178. Id.
179. Id. (citing Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 361 (2d Cir. 2000)).
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without more imparts the court with subject matter jurisdiction."'' 0 She
claimed that because her lawsuit was nonfrivolous, the district court had
subject matter jurisdiction.' 8' The plaintiff's final argument was that the issue
presented raised questions concerning judicial economy: late dismissals for
82
lack of subject matter jurisdiction waste judicial resources.'
In response, the defendant argued that, contrary to the plaintiff's
assertions, Fifth Circuit precedent was clear that a defendant's failure to
qualify as an employer under Title VII destroyed subject matter jurisdiction.'83
The defendant also pointed out that while the Second, Seventh, and Fifth
Circuits have reached the opposite conclusion, the Fourth, Sixth, Ninth, Tenth,
and Eleventh Circuits all have agreed that the employer numerosity
requirement of Title VII is a jurisdictional requirement. 84
In an opinion written by Judge DeMoss, the Fifth Circuit affirmed the
district court.' 85 The court did not discuss policy and relegated the plaintiff's
argument about judicial economy to a footnote. 86
' Instead, the court concluded
that the defendant was correct in its assertion that clear Fifth Circuit precedent
governed.1 87 The definitive case, explained the court, was Dumas v. Town of
Mt. Vernon, in which the court in 1980 dismissed Title VII claims against a
defendant who did not qualify as an employer under the statute for lack of
subject matter jurisdiction. 188 As for the plaintiff's argument that her
nonfrivolous claim imparted subject matter jurisdiction on the district court,
the Fifth Circuit found that the case supporting that proposition, Clark v.
Tarrant County, Texas, was not binding because it was decided before
180. Id. (citing Sharpe v. Jefferson Distrib. Co., 148 F.3d 676, 677 (7th Cir. 1998), abrogated on
other grounds by Papa v. Katy Indus., Inc., 166 F.3d 937, 939-40 (7th Cir. 1999)). The Fifth Circuit case
to which the plaintiff referred was Clark v. Tarrant County, Tex., 798 F.2d 736 (5th Cir. 1986). See id. at
224. In Clark, the Fifth Circuit held as follows:
The determination of whether appellants come within an exception of Title VII is intertwined
with the merits of the Title VII claim. Where the challenge to the court's jurisdiction is also a
challenge to the existence of a federal cause of action, and assuming that the plaintiffs federal
claim is neither insubstantial, frivolous, nor made solely for the purpose of obtaining jurisdiction,
the district court should find that it has jurisdiction over the case and deal with the defendant's
challenge as an attack on the merits.
Clark, 798 F.2d at 742.
181. Arbaugh, 380 F. 3d at 223.
182. Id. at 223 n.3. The plaintiff also noted that a plaintiffs state law claims were also at stake, as
a late dismissal might mean that the state law claims may be time-barred. Id.
183. Id. at 223-24. The defendant cited three Fifth Circuit cases to support this claim. Id. at 224
(citing Greenlees v. Eidenmuller Enters., Inc., 32 F.3d 197, 198 (5th Cir. 1994); Womble v. Bhangu, 864
F.2d 1212, 1213 (5th Cir. 1989); Dumas v. Town of Mt. Vernon, 612 F.2d 974,980 (5th Cir. 1980)).
184.
Id.
185. Id. at 231. The court stated that the standard of review for both dismissals for lack of subject
matter jurisdiction and grants of summary judgment is de novo. Id. at 222.
186. See id. at 223-25, 223 n.3.
187. Id. at 224-25.
188. Id. at 224 (citing Dumas, 612 F.2d at 980).
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Dumas.'89 The court concluded, therefore, that "[b]ecause the precise issue
before us was decided in Dumas six years before Clark, and because Clark
was neither a Supreme Court case nor an en banc decision, we are bound by
the holding in Dumas that the employee census finding is determinative of
subject matter jurisdiction."' 90 Accordingly, the Fifth Circuit affirmed the
decision of the trial court. 19'
B. The Supreme Court's 2006 Reversal of Arbaugh
The Supreme Court described the problem in Arbaugh as the confusion
or conflation of two distinct concepts: federal district court subject matter
jurisdiction over a controversy and the essential ingredients of a federal
claim. 192 The Court granted certiorari "to resolve conflicting opinions in
Courts of Appeals on the question whether Title VH's employee-numerosity
requirement, 42 U.S.C. § 2000e(b), is jurisdictional or simply an element of
a plaintiff's claim for relief."'9 a The Court expressly noted the significance of
the question. 94 if, as the Fifth Circuit held, the numerosity requirement is a
condition of subject matter jurisdiction, then the jury verdict in favor of the
plaintiff must be erased. 9 5 On the other hand, if the requirement concerns the
merits of the plaintiff's case, then the defendant raised the objection too late
and the jury verdict stands.' 96 The Court reversed the Fifth Circuit and held
that Title VII's numerosity requirement-the limitation of covered employees
to those with fifteen or more employees-concerns the merits of the case and
197
not subject matter jurisdiction.
Writing for a unanimous (8-0) Court, Justice Ginsburg first discussed the
general problem that courts tend to be rather imprecise and, indeed, sometimes
even "profligate," in using the word "jurisdiction.' 98 She noted, for example,
that courts sometimes state that nonextendable time limits are "'mandatory and
jurisdictional,"' when, in fact, they are not at all matters of jurisdiction. 99
189. Id.
190. Id. at 225 (referring to Clark v. Tarrant County, Tex., 798 F.2d 736 (5th Cir. 1986)). In the
remainder of the opinion, the court considered whether the district court had erred in ruling that the
defendant employed fewer than fifteen employees. See id. at 225-31.
191. Id. at 231.
192. Arbaugh v. Y & H Corp., 546 U.S. 500,126 S. Ct. 1235, 1238(2006), rev'g, 380 F.3d 219(5th
Cir. 2004).
193. Id. at 1241-42.
194. See id. at 1242.
195. Id.
196. Id.
197. Id. at 1245.
198. Id.at 1242. Justice Alito did not participate in the consideration or decision of the case. Id. at
1238.
199. Id. at 1242 (quoting United States v. Robinson, 361 U.S. 220, 229 (1960)). Justice Ginsburg
noted that in several recent cases, the Court had clarified that nonextendable time limits "are not properly
typed 'jurisdictional."' Id. (citations omitted).
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Justice Ginsburg also noted the problem of "drive-by jurisdictional rulings," 2"
whereby courts dismiss for lack of jurisdiction "when some threshold fact has
not been established, without explicitly considering whether the dismissal
should be for lack of subject matter jurisdiction or for failure to state a
claim."2 1 She noted that such "unrefined dispositions" have no precedential
value.202
The core of Justice Ginsburg's analysis concerned in general the proper
invocation of federal question jurisdiction and in particular whether the
plaintiffs case arose under the Constitution or laws of the United States.20 a
She noted that a claim invoking federal question jurisdiction may be dismissed
if it is not colorable, i.e., it is immaterial and asserted solely for the purpose of
obtaining jurisdiction or it is "wholly insubstantial and frivolous." 2" Without
further discussion, she found that Arbaugh's case "surely" did not belong in
that category because it was based on Title VII, a federal statute.20 5
Justice Ginsburg then considered three consequences of a ruling that Title
VIl's numerosity requirement is jurisdictional and thus determinant of subject
matter jurisdiction. 206 First, she noted that subject matter jurisdiction cannot
be forfeited or waived, and, therefore, courts have an independent obligation
to determine whether it exists, but that nothing in Title VII suggests that
Congress intended the federal courts, on their own initiative, to determine
whether the threshold employee numerosity requirement has been satisfied.20 7
Second, in terms of allocating duties between judge and jury, she noted that
when subject matter turns on contested facts, the judge may review the
evidence and resolve the issue, but that when satisfaction of an essential
element of a claim is the issue, the jury reviews and determines the contested
facts.20 8 Finally, she noted that when a case is dismissed for lack of subject
matter jurisdiction, the plaintiffs complaint is dismissed in its entirety,
including any pendent state law claims, but that when a case is dismissed for
failure to state a claim upon which relief can be granted, the federal court
retains discretion to exercise supplemental jurisdiction over the pendent
claims. 2° Justice Ginsburg also found significant the fact that Congress had
200. Id. at 1243 (quoting Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 91 (1998)).
201. Id. (citing Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 361 (2d Cir. 2000)).
202. Id. at 1242-43. Justice Ginsburg cited two examples of cases fitting this description. See id.
at 1243 (citing EEOC v. Arabian Am. Oil Co., 499 U.S. 244 (1991); Hishon v. King & Spalding, 467 U.S.
69(1984)).
203. See id. at 1244-45. Under section 1331 of Title 28 of the United States Code, "[t]he district
courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of
the United States." 28 U.S.C. § 1331 (2000).
204. Arbaugh, 126 S.Ct. at 1244 (citations omitted).
205. Id.
206. See id.
207. Id.
208. Id.
209. Id. at 1244-45.
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not made the numerosity requirement jurisdictional and, further, that making
the requirement jurisdictional would be unfair and wasteful of judicial
210
resources.
In light of these considerations, the Court opted for what it called a
"readily administrable bright line" rule and held that the numerosity
requirement in Title VII is nonjurisdictional in character.2 '
210.
211.
Id. at 1245.
Id.
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