I.
C IVIL P ROCEDURE II O UTLINE
S PRING 1999 P ROFESSOR F LETCHER J OSHUA R OOM
T ABLE OF C ONTENTS
Territorial Jurisdiction 7
A. In Personam, In Rem, and/or Quasi In Rem Jurisdiction 7
B. Quasi In Rem Jurisdiction 7
1. Must attach property for quasi in rem jurisdiction: Pennoyer v. Neff (1877) 7
Limitations on the "Physical” Analysis 7
What Pennoyer Added to the Analysis 8
C. Expansion of In Rem Jurisdiction 8
2. Debt is "property” that may be "attached” from third-party debtor: Harris v. Balk
(1905) 8
D. Expansion of In Personam Jurisdiction 8
3. State may declare use of car appoints registrar for process: Hess v. Pawloski (1927)
8
The "Fiction” of Appointment & "Actual Service” 8
E. Development of "Minimum Contacts” Analysis 9
4. Salesmen in state enough "minimum contact” for jurisdiction: International Shoe
(1945) 9
5. Cannot sue NY father in CA for child support: Kulko v. Superior Court (1978) 9
6. Cannot sue exclusively NY dealer for OK crash: World-Wide VW v. Woodson (1980)
10
7. General jurisdiction requires "continuous & systematic”: Helicopteros... v. Hall (1984)
10
The Texas Long-Arm Statute
(1985)
Protective Statutes 11
10
F. Reformulation of "Minimum Contacts” 10
8. Franchise contract enough for "minimum contact”: Burger King... v. Rudzewicz
11
Commercial vs. Consumer 11
"Other Factors” Analysis 11
"Convenience” vs. Venue 11
9. Only place a "reasonable” burden on defendant: Asahi... v. Superior Court (1987)
12
What Happened in the Asahi Opinion 12
Rule 4. Summons: ...(k) Territorial Limits of Effective Service. ... (2) 12
10. Jurisdiction over valve manufacturer: Gray v. American Radiator (IL 1961) 13
The Strangeness of the Asahi Opinion
G. "General” vs. "Specific” Jurisdiction
13
13
11. Insurance contract sufficient for specific: McGee v. International Life Insurance
(1957) 13
12. DE trustee not enough for specific jurisdiction: Hanson v. Denckla (1958) 14
13. "Continuous and systematic” = general: Perkins v. Benguet...Mining (1952) 14
H. Long-Arm Statutes 14
Rule 4. Summons 14
The DES Cases 14
14. Long-arm statute guides state jurisdiction: American Eutectic v. Dytron (2d Cir 1971)
15
1

15. Federal personal jurisdiction must be authorized by statute: Omni v. Wolff (1987)
15
FRCP 4 (Process/Jurisdiction) 15
The Rules Enabling Act "Problem” 16
I. "Presence” as a basis for Jurisdiction 16
16. International Shoe controls - no "type 2” quasi in rem suits: Shaffer v. Heitner (1977)
16
The State’s Interest 17
Shareholder "Strike Suits” 17
17. Presence in state - minimum contact not required: Burnham v. Superior Court (1990)
17
Exception for "Fraudulently Enticed” Physical Presence? 18
Physical Presence vs. Property
Overview of Jurisdiction 18
J. Notice 19
18
18. Notice "reasonably calculated to apprise” required: Mullane v. Central Hanover
(1950) 19
What Really Happened in Mullane 19
Personal Jurisdiction in Mullane 19
Notice and Personal Jurisdiction 19
Notice Required by Mullane 20
Mullane, Eisen, and Rule 23 Drafting 20
K. Consent to Jurisdiction 20
19. Failure to timely object to jurisdiction is deemed consent: Cuellar v. Cuellar (TX
1966) 20
20. TX corp. suing in CA, subject to jurisdiction on cross-claim: Adam v. Saenger (1938)
21
Waiving Objection to Jurisdiction 21
21. Forum-choice clause may govern jurisdiction: Carnival Cruise v. Shute (1991)
21
Strange "Bad Faith” Analysis in Carnival Cruise 22
22. Clause designating agent for service controls: National Equipment v. Szukhent (1964)
22
Bremen a "Sea Change” for Forum-Choice Clauses 22
23. Forum-choice clause is not dispositive in § 1404 motion: Stewart v. Ricoh (1988)
22
L. Objecting to Jurisdiction 22
24. Court may use discovery sanction - jurisdiction: Insurance Corp v. Compagnie (1982)
23
"Special Appearance” and the "Rational Defendant”
M.
23
Relation of Territorial Jurisdiction to Choice of Law 24
25. In personam jurisdiction does not guarantee choice of law: Phillips v. Shutts (1985)
24
Full Faith & Credit vs. Due Process for Choice of Law 25
Post-Shaffer Territorial Jurisdiction 25
II. Subject Matter Jurisdiction 25
Waiver of In Personam, not Subject Matter 26
Jurisdiction must be Granted by Statute 26
A. Federal Question Jurisdiction 26
28 USC § 1331. Federal Question; amount in controversy; costs 26
2

1. Constitutional scope of federal jurisdiction is very broad: Osborn v. Bank of US (1824)
26
2. 28 USC § 1331 is construed more narrowly: "well-pleaded complaint” rule of Mottley
26
3. Plaintiff claim must be based on federal law / Constitution: Louisville v. Mottley
(1908) 26
"Arising Under” More Narrow in Statute (§ 1331) than in Constitution 26
Mottley, "Arising Under,” and a "Well-Pleaded Complaint” 27
4. Using federal statute in state claim - not federal: Merrell Dow v. Thompson (1986)
27
Merrell Dow and the Well-Pleaded Complaint Rule
Pleading the Well-Pleaded Complaint 28
27
5. Not explicitly limited to claims "created” by federal law: Smith v. KC Title (1921)
28
From Smith to Merrell Dow - Importance of Federal Question 28
6. Declaratory suit not a "well-pleaded complaint”: Skelly v. Phillips Petroleum (1950)
28
"Preposterous” Skelly Oil Decision 28
7. "Malicious prosecution” (federal) - no jurisdiction: Berg v. Leason (9th Cir 1994)
B.
29
Diversity Jurisdiction 29
28 USC § 1332. Diversity of Citizenship; amount in controversy; costs 29
8. For diversity, party is a "citizen” of state of "domicile”: Mas v. Perry (5th Cir 1974)
29
"Domicile” and the "Bonafide Intent to Remain” 30
9. "Complete diversity” is required by § 1332: Strawbridge v. Curtiss (1806) 30
10. Federal court may dismiss non-indispensable non-diverse defendant under Rule 21
30
11. Defendant - "legal certainty” of not enough in controversy: St. Paul v. Red Cab
(1938) 30
13. Multiple claims aggregate, but not multiple plaintiffs: Snyder v. Harris (1969)
30
14. Federal-court counterclaims not counted; compulsory (removal) counterclaims may be 30
15. Diversity cannot be by "assignment” or "collusion”: Kramer v. Caribbean Mills
(1969) 31
16. Diversity jurisdiction - excludes probate/domestic: Ankenbrandt v. Richards (1992)
31
Complete Diversity and "Improper or Collusive” Assignment/Joinder 31
"Fraudulent Joinder” 31
C. Supplemental Jurisdiction 31
"Supplemental Jurisdiction” 31
17. Federal question must be "substantial” to case:United Mine Workers v. Gibbs (1966)
32
"Common Nucleus of Operative Fact” 32
No Diversity Jurisdiction in United Mine Workers 33
18. Claims apparently must be against same party/parties: Aldinger v. Howard (1976)
33
19. Still must have complete diversity under § 1332: Owen Equipment v. Kroger (1978)
33
Complete Diversity Required at all Times 33
3

20. For single "case,” claims arise from "common nucleus of operative fact” 33
21. No ancillary even if exclusive federal (overruled by § 1367): Finley v. US (1989)
34
How Finley Screwed Things Up, Led to § 1367 34
22. 28 USC § 1367 subsumes "pendent” and "ancillary” under "supplemental” 34
23. Supplemental jurisdiction attaches very broadly to federal question cases 34
24. Supplemental jurisdiction attaches more narrowly to diversity claims 34
25. Zahn overruled by § 1367 - unnamed class members: Free v. Abbott (5th Cir 1995)
34
26. No amount requirement for Rule 20 joinder: Stromberg v. Press (7th Cir 1996)
35
27. Other bases (besides § 1367) for supplemental jurisdiction: set-off, ancillary 35
What § 1367 Does to Other Federal Rules 35
The Effect of § 1367(c) and § 1367(d) 36
D. Removal 36
28. Removal - plaintiff’s "well-pleaded complaint”: Caterpillar v. Williams (1987)
36
"Complete Preemption” and the "Well-Pleaded Complaint” 36
29. Exception to plaintiff control of forum for "artful pleading”: Avco v. Aero (1968)
37
30. Removal not available in diversity case if any defendant is in-stater 37
31. Defeating diversity removal: (1) insufficient damages; (2) assignment; (3) joinder
37
32. Some claims are non-removable by statute (e.g., FELA - 28 USC § 1445(a)) 37
33. Confusing (and nearly superfluous) application of 28 USC § 1441(c) 37
34. Remand order only appealable if obviously not decided on jurisdictional ground
37
35. "Artful pleading” limited to "complete preemption”: Rivet v. Regions Bank (1998)
37
36. Defendant has only one year to determine if joinder is "fraudulent” 37
37. Improper removal does not necessarily void judgment: Caterpillar v. Lewis (1996)
38
E. Challenging Federal Subject Matter Jurisdiction 38
37. Lack of jurisdiction enforced even after judgment: American Fire v. Finn (1951)
38
III.
The Unfairness of Finn 38
38. No "doctrine of hypothetical jurisdiction” available: Steel Co. v. Citizens (1998)
Venue
38
38
A. State Courts 38
B. Federal Courts 38
1. 28 USC § 1391 (a) and (b) are virtually (and inexplicably) identical/redundant 39
2. Venue where (1) person "resides”; (2) events "occurred”; or (3) otherwise unavailable
39
3. Venue in suits against US/employees may also be where plaintiff "resides” 39
4. Special venue statutes (including antitrust, IRS, patent, interpleader) 39
5. Federal venue requirements do not apply to cases removed from state court 39
Venue is a Waivable Defect; Confusing Statute 39
C. Federal Change of Venue and Related Topics 39
6. A § 1404(a) transfer requires lower showing than forum non conveniens dismissal
40
4

7. Transfer only to "where [the suit] might have been brought”: Hoffman v. Blaski (1960)
40
8. § 1404(a) is change of courtroom, not change of law: Van Dusen v. Barrack (1964)
40
Issues Left Open by the Van Dusen Opinion 40
9. A § 1404(a) transfer does not change the law applied: Ferens v. John Deere (1990)
41
10. § 1406(a) transfer even when no in personam jurisdiction: Goldlawr v. Heiman
(1962) 41
11. 28 USC § 1631 transfer for "want” of (subject matter) jurisdiction 41
12. Transfer for purposes of consolidating similar cases under 28 USC § 1407 41
13. Federal courts follow own Circuit on federal law: Korean Air Lines (DC Cir 1989)
42
Venue not Waivable in Transferee Forum 42
§ 1406 as a Federal Long-Arm Statute 42
Transfer for Consolidation (§ 1407) only for Pre-Trial (usually) 42
Transfer under § 1404, 1406, and 1631 42
Transfer Law unless Forum Non Conveniens in State Court 43
IV. Forum Non Conveniens 43
1. Change of law unfavorable to plaintiff does not bar dismissal: Piper v. Reyno (1981)
43
2. State courts may not enjoin in personam federal suits: General Atomic v. Felter (1977)
44
Piper as a Review of Venue Law 44
The Proper Forum for the Piper Litigation 44
The Source for Forum Non Conveniens Law 44
3. No federal law of forum non conveniens: American Dredging Co. v. Miller (1994)
44
The Lack of a Uniform Forum Non Conveniens Law (Federal) 44
V. The Erie Problem 45
A. The Law Applied in Federal Court: The Problem of Erie Railroad v. Tompkins 45
1. Federal courts should apply federal law when state law deviates: Swift v. Tyson (1842)
45
Tension between State and Federal Courts 46
2. Swift v. Tyson disapproved: no federal common law: Erie RR v. Tompkins (1938)
46
The Grounds for the Erie Decision 46
Federal Common Law Persists after Erie 47
Erie and Federal Question Cases 47
The Law under Erie 47
3. FRCP on physical examinations controls in federal court: Sibbach v. Wilson (1941)
48
4. State statute of limitations in diversity suit - state law: Guaranty Trust v. York (1945)
48
The "Outcome Determinative” Test in the York Decision 48
Federal Statutes, Rules, and "Practices” 49
5. State rule taking decision out of jury’s hands not binding: Byrd v. Blue Ridge...(1958)
50
The Grounds for the Byrd Decision 50
5

6. Service of process controlled by federal rather than state rule: Hanna v. Plumer (1965)
51
7. Ragan survived Hanna - must be "direct collision” with Rule: Walker v. Armco (1980)
51
Cautious Reading of Rule 3 51
Hanna and a New Forward-Looking/Forum-Shopping "Outcome-Determinative Test” 52
8. Federal Rule 3 does control in cases based on federal law: West v. Conrail (1987)
52
9. State offer-of-settlement law applies (only) to diversity case: S.A. Healy (7th Cir 1995)
52
Walker’s Footnote 11 and Federal vs. State Law 53
10. Must follow state "deviates substantially” standard for jury verdicts: Gasperini (1996)
53
Applying the York and Byrd tests in Gasperini 53
Different Review of Jury Verdict and Judicial "Abuse of Discretion” 54
The Sloppy but "Basically Right” Gasperini Opinion
The Difference for Cases Based on Federal Law 55
54
B. "Reverse Erie”: Federal Law in State Courts 55
11. FELA actions in state courts governed by federal law: Dice v. Akron...RR (1952)
55
What the Court did in the Dice Decision 56
Dice as "Reverse-Erie”—Reconciling Byrd 56
12. State court cannot require strict pleading in FELA case: Brown v. Western RR (1949)
56
13. State procedures may not unduly interfere with federal law: Felder v. Casey (1988)
56
14. Interlocutory appeal (§ 1983) not required in state court: Johnson v. Fankell (1997)
56
The Extension of Dice to Non-FELA Cases 57
C. Ascertaining State Law 57
15. Federal courts follow state’s highest court: Commissioner v. Estate of Bosch (1967)
57
16. Federal courts apply location state choice of law principles: Klaxon v. Stentor (1941)
58
17. No deference to District Court on state law questions: Salve Regina v. Russell (1991)
58
18. NY law has a "due diligence” requirement:DeWeerth v. Baldinger (2nd Cir 1987)
58
19. No such "due diligence” requirement in New York:Guggenheim v. Lubell (NY 1991)
58
20. FRCP 60: reopening due to appellate court error:DeWeerth v. Baldinger (SDNY
1992) 58
21. Cannot use FRCP 60 for misread of state law: DeWeerth v. Baldinger (2d Cir 1994)
58
Alternatives to Having Federal Courts "Guess” on State Law
D. Federal Common Law 58
58
22. Federal common law inferred from: (1) strong federal interest; (2) statute/Constitution
59
23. Checks paid by U.S. governed by federal common law: Clearfield Trust v. US (1943)
59
24. Federal common law - "clear and substantial” federal interest: US v. Yazell (1966)
6

59
Reconciling Clearfield Trust and Yazell 59
The "Golden Age” of Federal Common Law
VI. Fletcher’s Review of the Entire Course 60
60
A. Introduction 60
B. Territorial Jurisdiction 60
1. Pennoyer is of course overruled, but it still tells us something about our system
60
2. International Shoe replaces one set of "fictions” with a more "gestalt” analysis 61
B. Subject Matter Jurisdiction 61
3. Subject matter jurisdiction is not a waivable defect 62
4. Broad constitutional boundaries on subject matter jurisdiction; need a statute 62
5. Look to the "well-pleaded complaint” for assertion of a federal question 62
6. Under the diversity jurisdiction statute (§ 1332), complete diversity of "domicile”
62
7. The "game” of defeating diversity/removal: damages, joinder, FELA 63
8. § 1441 says if it could have been filed in federal court, it can be removed
9. Very broad supplemental jurisdiction for federal question: § 1367(a) 63
D. Forum Non Conveniens 63
63
7

Assignments
1/19 180-193
1/21 194-215, Supp. 21
1/26 215-225
2/1 225-242, Supp. 21
2/2 242-269; Rule 4(k)(2)
2/4 287-296, Supp. 26-29
2/8 296-306, Supp. 29-30, Rule 4
2/9 306-323
2/11 323-338; Overview of what we have done so far
2/16 269-287; Supp. 25-26; Washington Post article
2/18 339-361; Supp. 31-32
2/22 361-380
2/23 380-383, 392-407, Supp. 32
2/25 407-418
3/9 418-434, 28 USC § 1367, Supp. 35-42
3/15 434-444
3/18 444-468, Supp. 42-46
3/29 468-480, Supp. 47
3/30 481-487
4/1 487-501
4/19 501-514, Supp. 48-49
4/20 514-525
4/22 526-539, Supp. 49-51
4/26 539-551, Supp. 51-52
4/27 551-556
4/29 Gasperini handout
8

I. T ERRITORIAL J URISDICTION (180-182)
Four requirements before a suit can be brought in a particular court: (1) territorial jurisdiction; (2) subject matter jurisdiction; (3) venue; and (4) ability to withstand a motion to dismiss for forum non conveniens . Ever since the landmark case of Pennoyer v. Neff (1877) , the Supreme Court has consistently held that plaintiffs are not free to bring suit wherever they choose, on the basis of 14th
Amendment Due Process.
A. I N P ERSONAM , I N R EM , AND / OR Q UASI I N R EM J URISDICTION
Territorial jurisdiction concerns power of a court to engage in binding adjudication over a person or thing. The conventional term for jurisdiction of a "person” is in personam jurisdiction. The conventional terms for jurisdiction over property are in rem and quasi in rem jurisdiction. The territorial jurisdiction doctrine proceeded from early focus on physical presence in a state to the modern concept of "minimum contacts.” Generally, a federal court is limited to the jurisdiction of the courts of the state in which it sits.
Types of territorial jurisdiction: (1) In personam , (2) In rem , (3) Quasi in rem . In personam actions bind a defendant personally, typically providing damages or injunctive relief. In rem actions bind property in the sense of adjudicating the rights of all persons who claim interest in the property; it determines ownership in the property, and is a judgment "against the world.” Quasi in rem actions are of 2 types: (1) judgment on ownership of property which only binds those in the jurisdiction (not
"against the world”); and (2) the underlying dispute is unrelated to the property, but the action establishes rights to property - the property is brought within the jurisdiction of the court by
"attachment” - this was the case in Pennoyer v. Neff .
B. Q
UASI
I
N
R
EM
J
URISDICTION
(182-193)
If you want quasi in rem jurisdiction, you have to attach the property first. You cannot file off a suit, and then as soon as the poor sucker acquires some property, attach the judgment to that property.
Under the system before Pennoyer v. Neff , the Full Faith and Credit Clause would have allowed the judgment of the state of Oregon to be executed in California if jurisdiction had been proper. But Full
Faith and Credit does not allow a state judgment lacking proper jurisdiction to be executed in another state. But if both actions are taking place within one state (judgment and subsequent execution), Full
Faith and Credit does not protect party sued. So what protects him? Justice Field says Due Process
Clause of 14th Amend requires Oregon to abide by Due Process before depriving Neff of life, liberty or property. This is only basis in federal law for preventing Oregon from doing something like this in-state. The 14th Amendment is being used to project a national vision of what should be required for jurisdiction (territorial/personal).
1. Must attach property for quasi in rem jurisdiction: Pennoyer v. Neff (1877)
Suit brought by attorney for fees allegedly owed, no personal service of process (only publication) and no attachment of propery allegedly owned by defendant. Default judgment against defendant, such that propery subsequently acquired was sold at auction to plaintiff.
Court says suit "in the manner of an in rem proceeding” like this cannot be valid for jurisdiction, absent personal service, against a non-resident of the state, unless the property is itself attached and brought under court control. Violation of due process to not either personally serve or attach property of defendant. Every state possesses exclusive jurisdiction, and may acquire jurisdiction over non-residents who own property in the state, but only if proper notice is provided by attaching that property. Assume that propery is always in the possession of its owner; attachment before suit = proper jurisdiction. Justice Field, at the end of Pennoyer , identifies certain instances in which this methodology will be too limited, and thus identifies certain "exceptions” in which jurisdiction attaches automatically. Divorce is a primary example,
9

and he also identifies a possibility of requiring "consent” from those doing business in-state.
They may be required to appoint an agent for purposes of service of process, etc. Example of time when quasi in rem jurisdiction would be too limited: when a person comes into a state, does a bad thing, and leaves, making it very difficult to get jurisdiction.
L IMITATIONS ON THE "P HYSICAL ” A NALYSIS : Under the Pennoyer scheme, you have to do something to announce your "power”, either by service of process on the person, or by "attaching” property. Examples of times when this way of attaching jurisdiction would be too limited: when a person comes into a state, does a bad thing, and leaves. Justice Field, at the end of Pennoyer , identifies certain instances in which this methodology will be too limited, and therefore identifies certain "exceptions” in which jurisdiction may attach more automatically. Divorce, and possibility of requiring "consent” from those doing business in-state.
W
HAT
P
ENNOYER
A
DDED TO THE
A
NALYSIS
: Prior to the passage of the 14th Amendment, there was virtually no control under Federal law over what a state could do to control jurisdiction, and to allow for various remedies or lack thereof. Prior to the passage of the 14th Amendment, the pre-review happenings of Pennoyer might have been norm. Without the 14th Amendment, there would have been no federal basis for Neff to sue to regain his land. He would have had to rely on Oregon law, which in this case would not have afforded him any relief. Even before the 14th Amendment, he could possibly have argued in a California court (if Mitchell had brought his Oregon judgment to California seeking to execute it) that there was no basis for jurisdiction in
Oregon, and the CA court could find that since there was no basis for jurisdiction in Oregon, no Full Faith and
Credit for judgment. The real "surprise” of Pennoyer , therefore, is that now the Full Faith and Credit Clause is not the only way under federal law to get at not only the execution of the judgment, but at the judgment itself.
C. E XPANSION OF I N R EM J URISDICTION (194-196)
In Harris v. Balk (1905) , the "debt” is given a "place,” and this "place” is wherever the debtor is.
Getting property in your hands when you have opportunity to do so is a time-honored solution where it appears that mobility may be an obstacle to collection by the creditor (e.g., admiralty suits). The law is generally plaintiff-favorable, so we end up with a system that says maybe you can’t force Balk to come to MD, but if he is so unwise/unlucky as to have one of his debtors come into Maryland,then you may collect the debt.
2. Debt is "property” that may be "attached” from third-party debtor: Harris v. Balk (1905)
Balk (NC) owed money to Epstein (MD), and Harris (NC) owed money to Balk. Harris went to
MD, and while he was there, Epstein "attached” the debt owed by Harris to Balk (half of his own), which Harris paid. Balk later sued Harris in NC, and Harris said he already paid in MD.
Debt is declared satisfied, because the obligation of the debtor follows him (or his own debtors) wherever he goes. Judgment was valid because of personal service of process on Harris by
Epstein. If Balk had wanted to protest the collection of the debt by Epstein from Harris, he could have appeared.
D. E XPANSION OF I N P ERSONAM J URISDICTION (197-201)
In Hess v. Pawloski , the Court stretches the definition of in personam jurisdiction to include service on an "appointed” in-state representative, appointed by virtue of the fact that car is driven within the state.
At one point, drivers actually had to fill out paperwork consenting to assertion of jurisdiction to be allowed in so this assumption of consent is just an approximation of that power to exclude. This is another "fiction” (the "fiction” of "consent”), based on historical practice. (This is parallel to the
"fiction” in Harris v. Balk that the "intangible property” flows with the person owning the property).
Again, this seems fair if the suit is legitimate, but it seems unfair if the suit is frivolous and we are forcing the defendant to come into the state to defend. We don’t know at the time the suit is filed if it is "true” or merely "alleged.”
A "pure practicality” in Harris and in Hess - in both cases the Court insists that the party that stands to lose (debtor and driver of car) receive "actual notice” of suit. In Wuchter v. Pizzutti (1928) , Note 3 on
10

p. 201, Court finally brings it squarely within Due Process that actual notice is required. A statute which gave notice to the state official but which did not require notice to the defendant was a Due
Process violation. They do only require that it be "reasonably probable” that the defendant would get the notice, so defendant does not actually have to get the notice, so long as it was "reasonably probable” that he would (loophole).
3. State may declare use of car appoints registrar for process: Hess v. Pawloski (1927)
Massachusetts statute says that operating a car in the state means that the registrar is automatically appointed as your true and lawful attorney upon whom process may be served.
Plaintiff may serve process on registrar, as long as he also sends notice to the defendant by way of registered mail. A defendant has no Due Process complaint so long as actual notice is received from the registrar.
T
HE
"F
ICTION
”
OF
A
PPOINTMENT
& "A
CTUAL
S
ERVICE
” : Another "fiction” (of "consent”), parallel to the
"fiction” in Harris v. Balk that "intangible property” flows with the person owning it. Again, this seems fair if the suit is legitimate, but unfair if the suit is frivolous. A "pure practicality” in Harris and in Hess - in both cases the Court insists party that stands to lose receive "actual notice.” In Harris they do not really do it in terms of Full Faith and Credit, but Harris is only allowed to rely on it as a defense if he has fulfilled fairness duty. Reinforced in Hess , and more specifically in Wuchter v. Pizzutti (1928) , where Court finally brings it squarely within Due Process that actual notice is required. They do only require that it be "reasonably probable” that the defendant would get notice, so defendant does not actually have to get the notice, so long as it was "reasonably probable.”
E. D EVELOPMENT OF "M INIMUM C ONTACTS ” A NALYSIS (202-241)
In International Shoe (1945) , the Supreme Court fundamentally recast the law of jurisdiction, but the old conceptual framework did not disappear. Pennoyer and cases it spawned "still rule us from their graves.” Now, however, instead of having a system based on personal jurisdiction and in rem jurisdiction with lots of exceptions, under International Shoe we have moved to a system of
"minimum contacts.” Instead of a system so riddled with exceptions that it captures relatively few of the cases we have a system that captures most of the cases. In recent decades, International Shoe has itself come under a great deal of pressure. This does not mean it will be overruled anytime soon (not in our lifetime), but not completely satisfactory.
Court in International Shoe suggested that a corporation that chooses to conduct activities within a state accepts (implicitly) a reciprocal duty to answer for its in-state activities in the local courts. Because court’s power to exercise jurisdiction derives from defendant’s voluntary relation to the state, the power should be limited to cases arising out of that relation. Subsequent cases confirm that minimum contacts jurisdiction is limited to claims arising from (or related to) the defendant’s contact with the forum state, unless contacts are so numerous and varied that it becomes reasonable to expect company to expect suit on all matters, at which point "general” (rather than "specific”) jurisdiction attaches and allows any kind of suit.
4. Salesmen in state enough "minimum contact” for jurisdiction: International Shoe (1945)
Trouble with company with salesmen in WA, but with core of business outside the state, making every effort to keep business from being associated with WA. Question is whether this company with minimal contact with the state of Washington can remain free of the assertion of jurisdiction by the state of Washington. Two questions of jurisdiction: (1) Do they have to appear to defend lawsuits in Washington; and (2) Do they have to pay taxes? The answer to both is yes. Do not take "minimum contacts” as a legal "test”; this is simply a general description of the scheme that is elaborated elsewhere. Page 206 - first full paragraph; a more detailed description of the "minimum contacts” requirement. Reasonable/fair to expect company to pay tax and be subject to jurisdiction.
11

T
HE
I
NTELLECTUAL
F
RAMEWORK FOR
"M
INIMUM
C
ONTACTS
”: "Due Process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.’” Do not take this as a legal "test”; this is simply a general description of the scheme that is elaborated elsewhere. Page 220: "the defendant’s conduct and connection with the forum state
[must be] such that he should reasonably anticipate being haled into court there.” The "reasonable anticipation” is key.
5. Cannot sue NY father in CA for child support: Kulko v. Superior Court (1978)
Father who had only been in CA twice on brief stopovers while in the military allowed his child to move to CA to live with ex-wife. Ex-wife attempted to sue father for more child support in
CA court. Court says allowing child to move to CA was not enough of a "purposeful act” to warrant jurisdiction, and that he did not "purposefully derive benefit” from any activities in the
State of CA. Therefore CA assertion of jurisdiction is "unreasonable.” No basis on which he could "reasonably have anticipated being 'haled before a CA court,’” not a "fair forum.” In order to get at the state court decision, Supreme Court has to reach it on federal law grounds.
Federal courts have some ability to decide state-law questions, but not when that case has been decided by the state’s highest court. So Supreme Court can only reverse CA Supreme Court on
Due Process. "Reasonably anticipate” is in a sense circular, in that you don’t know what to anticipate until the Court tells you, but it may also reflect an accurate sense of reality, in that it may be less likely for a non-corporation like Kulko to anticipate this jurisdiction. Page 230:
"And California has not attempted to assert any particularized interest in trying such cases in its courts by, e.g., enacting a special jurisdictional statute.” What is the Court saying here? Is it implying that if CA had a statute saying that it may assert jurisdiction in any case involving child support for children living in CA, it would make a difference for assertion of jurisdiction over
Ezra Kulko? Would that make a difference? Current statute says CA asserts jurisdiction "to extent permitted by the Constitution”? Would it somehow help if there were an aside saying
"and by the way, this also means you, if you are sued for child support...”? Fletcher says there would not be any effect of such a statute, so what is Court talking about? This is in a sense inviting CA to write such a statute, though it does not seem such a statute would change the outcome. So, under Kulko , mother has to go to NY to sue for increased child support (and register divorce/custody). Court drawing distinction between commercial and "private” cases; manufacturer who sells products in CA (but is in NY) subject to CA jurisdiction.
6. Cannot sue exclusively NY dealer for OK crash: World-Wide VW v. Woodson (1980)
Car bought from Seaway VW (dealer) in NY exploded after being rear-ended in Oklahoma, and the buyers sued the dealer, the regional distributor (World-Wide VW), the national distributor
(VW of America) and the manufacturer (Audi) in Oklahoma state court. Not much question that "general” jurisdiction applies to Audi and VW, but Seaway and World-Wide contest OK jurisdiction. Both World-Wide and Seaway are incorporated and do all their business in New
York. Court finds that there are no contacts between these companies and OK, so no jurisdiction attaches. Page 220: "the defendant’s conduct and connection with the forum state
[must be] such that he should reasonably anticipate being haled into court there.” This suit is really about proceeding in state court in Creek County, OK vs. proceeding in federal court in the city. If we knock out Seaway and World-Wide, then diversity will be complete (because plaintiffs are from NY), and case will go to federal court. Neither of these two defendants
"purposely availed” themselves of resources of Oklahoma.
7. General jurisdiction requires "continuous & systematic”: Helicopteros... v. Hall (1984)
Colombian helicopter company operating in South America bought parts in Texas, sent employees and management to be trained there, but had no other business contacts with Texas.
A helicopter crashed in Peru, and four U.S. citizens were among those killed; they tried to sue in
12

Texas. Court says that claims did not "arise out of,” and are not related to, the company’s activities in Texas, and that the company’s activities in Texas were not "continuous and systematic” enough to suffice for a general jurisdiction. Purchases and related trips alone do not meet "minimum contacts” test. The assumption is they will now have to sue in Colombia or
Peru, where they will not do as well. What about McGee (pp. 212-213), which gives an example of "specific jurisdiction”? Is the suit in this case in some way "based on” the actions of the helicopter company in Texas? The Court summarily dismisses the possibility of "specific” jurisdiction. They say plaintiffs "conceded” that there was no specific jurisdiction, but the transcript does not reveal this. Court appears to be convinced by the argument presented by the
Solicitor General, and chooses to "protect” American businesses selling abroad in favor of allowing personal injury suits to proceed for American citizens. But the Solicitor General says he is worried about suits arising out of purchases that are "totally unrelated” to the basis of the suit; this is not the case here. Why not use the "sovereignty” analysis in the Pennoyer sense and consider the entire United States as a single "sovereign,” such that NY and FL contacts would be relevant to the unified "sovereignty”? Page 235 contract clause.
T
HE
T
EXAS
L
ONG
-A
RM
S
TATUTE
: How can Court take this supposed "concession” and use it against litigants when the concession, if it exists at all, is not clear and obvious. Is there in fact a sufficient basis for bringing suit in federal district court in Texas? Consorcio is essentially a US operation, but because of requirements in
South America it incorporates there. It has set up to do work on a pipeline, and contracts with Helicol to do transport in South America. Helicol has a number of contacts with the US, some through Consorcio (indirect), and some through purchases and trips to Texas (direct). They also maintain two bank accounts, one in Florida and another in New York. This is a fair number of contacts. Four employees of Consorcio are killed in a crash, and their survivors bring suit in Texas state court. The Texas state court holds that the Texas long-arm statute can bring jurisdiction, but the Supreme Court says that the long-arm statute cannot constitutionally reach that far. Page 235: Contract has a clause saying that controversies arising out of contract must be litigated in
Peru, so why is this clause not dispositive? Because parties suing are not parties to the contract (and are not suing on it). However, this may have some bearing on the reasonable expectations of the Helicol company.
Sometimes, somebody who would be a beneficiary of a contract (a third party) may sue to enforce the contract even though a party chooses not to. But this is to enforce benefits of the contract. But may Consorcio contract away the rights of its workers, such that this is a "detriment” of the contract that is being enforced (in
Peru).
F. R
EFORMULATION OF
"M
INIMUM
C
ONTACTS
” (242-269)
Several important aspects of the minimum contacts test have been settled by cases since International
Shoe : (1) the minimum contacts test applies to individual as well as corporate defendants; (2) the limitations on personal jurisdiction found in long-arm statutes are distinct from the constitutional limit imposed by the minimum contacts test; (3) defendant may have sufficient contacts with a state for minimum contacts even though she did not act within the state; (4) minimum contacts analysis focuses on the time when defendant acted, not the time of the lawsuit. The toughest problem in applying the minimum contacts test has been defining the "quality and nature” that makes a contact sufficient to support jurisdiction.
Many cases have relied on the statement in Hanson v. Denckla that the defendant must have "purposely avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws.” This emphasizes that a defendant must have made a deliberate choice to relate to the state in some meaningful way before she can be made to bear the burden of defending there.
Since the Asahi court split sharply on the issue of whether the mere act of selling goods outside the forum state, which will likely be imported into the forum state for resale, suffices to support jurisdiction, it is difficult to say what "the law” is on stream-of-commerce cases today. Some courts contine to apply a fairly broad stream-of-commerce approach based on World-Wide , while others like Asahi say
13

"purpose” is required.
8. Franchise contract enough for "minimum contact”: Burger King... v. Rudzewicz (1985)
Father and son in MI entered into franchise agreement with Burger King (FL). Eventually, it all turned sour and they defaulted on their franchise payments. Burger King sued in Florida federal court and Rudzewicz (father) specially appeared to contest jurisdiction. Contract has a clause saying any disputes would be governed by Florida law. Court says "minimum contacts” were in fact established, and that it was "reasonably foreseeable” they would be "haled” into Florida court. They "purposely availed” themselves of Florida market, and established contacts. In order to beat jurisdiction, they would have to present "compelling case” that "other factors” (such as burden on the defendant, forum State’s interests, plaintiff’s interest in convenience) make it unreasonable. If it is really inconvenient, rather than defeating jurisdiction a defendant can seek a change of venue. Contract alone did not establish jurisdiction, but negotiations and relationship with FL substantial. Clause for disputes governed by FL law also contributes to determination (not dispositive). This clause does not particularly suggest that he is "actively seeking out” the protection of Florida laws, so there does not seem to be much of a reason for using this to support the jurisdictional minimum contacts analysis. In other words, he may have acquiesced to having this clause in the contract, but that does not aid analysis. No successful
"other factors” defense established. Defendant established a "substantial and continuing relationship” with Burger King’s Miami headquarters.
P ROTECTIVE S TATUTES : Fletcher does not think MI statute in notes after Burger King affords much protection, and would not have made any difference for Rudzewicz. Even a clause in the contract saying Burger King could bring the suit in FL would not be affected by the MI law; it only forbids clauses that require suits go forward only in FL. This is different than defendant being forced to go to Florida by the fact that the Florida franchisor chooses to sue in Florida, so this would not be affected by law. Could Michigan prohibit franchisors from suing in any other state than Michigan? What would happen if MI had a clearer law prohibiting any suit outside of MI for franchisors? What would happen if franchisor then tried to bring suit in FL? Could FL court assert jurisdiction; would it have to defer to MI court? At some point, such a statute will run up against
Dormant Commerce Clause.
C OMMERCIAL VS .
C ONSUMER : Is this really only a commercial case, or does analysis also apply to a consumer context? J. Brennan says it does not; he says somebody who buys from LL Bean will not have to go to Maine to defend against suits that arise, but is he correct? In order to differentiate, you have to say that one is
"commercial” and one is "consumer.” Just saying things like "deliberately reached out,” or "purposefully availed” or whatever, does not distinguish between cases. So majority careful to say decision only applies in
"commercial” context.
"O THER F ACTORS ” A NALYSIS : Page 249: All of a sudden, these "other factors” are part of the test. The clearest are three factors: (1) burden on the defendant; (2) the forum State’s interest in adjudicating; (3) plaintiff’s interest in obtaining convenient and effective relief. Paragraph turns back upon itself: it starts out saying you first have to establish minimum contacts, and now says lower standard might be allowed.
"C
ONVENIENCE
”
VS
.
V
ENUE
: Basically, what Court is saying is that availability of change of venue in federal court (not in state court) makes test for jurisdiction less "final.” In other words, because defendant in federal case can apply for change of venue for convenience, Court might be more willing to find jurisdiction (not worrying quite as much about inconvenience to defendant). Remember the four things that any lawyer has to establish to bring suit: (1) territorial jurisdiction; (2) subject matter jurisdiction; (3) venue; and (4) ability to withstand a forum non conveniens motion. (1), (3) and (4) are all convenience-based, but they all must be passed separately. We do not want to push all of our analysis into the territorial/personal jurisdiction question, but what the Court seems to be doing in Burger King is to push the entire analysis (for venue and forum) into
14

the territorial jurisdiction question. By the time this question is decided, we may have pre-decided the venue and forum (separate) analyses.
9. Only place a "reasonable” burden on defendant: Asahi... v. Superior Court (1987)
Plaintiff Zurcher brings suit v. Defendants Honda, X and Cheng Shin in state court in California for a faulty tire on a motorcycle (Cheng Shin made inner tube). Cheng Shin cross-claims against the co-defendants, and also brings in 3rd-party defendant Asahi (valve manufacturer).
Everything else settles, and the only thing that survives is third-party plaintiff suit between
Cheng Shin and Asahi. Cheng Shin is trying to recover whatever it might have paid out in the settlement. Cheng Shin is in Taiwan, and Asahi is in Japan. Court holds there is no in personam jurisdiction over Asahi in California. In II-A O’Connor says that it must be the defendant (not a third-party or the consumer) who "purposefully avails” of the forum State; it must indicate a purpose and desire to do business in and benefit from the forum State. In II-B the Court says assertion of jurisdiction over Asahi is "unreasonable,” regardless of placement of goods in the stream of commerce (i.e., whether it was "purposeful”); severe burden on the defendant, not justified by slight interests of the plaintiff and the forum State, would be unreasonable and unfair. Pay attention to fact that Part II-A is only plurality, so Justice
O’Connor only has "voice of the Court” for part of the opinion. What would have happened if the suit had gone through with the plaintiff still being Zurcher and all the other parties? Fletcher thinks that jurisdiction would have attached, so what is different about Asahi’s contact with the forum state with Zurcher and without him? Why does the fact this is just a third-party indemnification claim mean that there is no personal jurisdiction? Notice the majority does not agree that the "conduct” of Asahi was just not enough to establish jurisdiction (II-A).
W HAT H APPENED IN THE A SAHI O PINION : US Supreme Court has power to make "federal common law,” but it does not do it very often. They might be able to establish a federal common law rule of forum non conveniens , when the alternative forum is in a foreign country, so why do they not simply do that? They are more interested in saying that the CA court does not have jurisdiction in the first place (rather than saying jurisdiction is okay, but the forum is not convenient). But this is at its core a forum non conveniens case, disguised as jurisdictional question. With Zurcher still in the case, there would be absolutely no grounds for forum non conveniens , but once he drops out, it becomes likelier. Why is the Supreme Court more comfortable dismissing on the grounds of jurisdiction rather than on some federal common law forum non conveniens doctrine? There is some discomfort about extending oneself beyond the bounds of federal statute, but the
Court sometimes does do it. At the state level, forum non conveniens is by and large judge-made law, so there is at least a similar precedent. So why is it that the Court is reluctant to create this federal common law?
Perhaps because they had available to them a good, developing doctrine of Due Process that they were thinking about. It is not much of a jump from Burger King to Asahi . Remember the factors given in Burger
King (page 249): (1) burden on defendant; (2) forum State’s interest; (3) plaintiff’s choice of forum, etc. The forum non conveniens approach would have been a much more substantial step, which they had never taken before. It is just easier to rely on the Due Process analysis. So now the jurisdictional analysis has become multi-factored. It is no longer just "minimum contacts,” or the "general” vs. "specific” jurisdiction matrix that we got out of International Shoe . We will continue to talk about these things, but we will also ask what connection parties have to the forum State, interests of the plaintiff and burden on the defendant, etc. There is some weighing under the Due Process clause of whether the Court considers the interest of the state of
California to be "real,” particularly weighed against a "national” interest. It is possible to read both
Helicopteros and Asahi as cases that are controlled by the fact that this is "foreign” litigation, and are affected by the fact that they include interests from outside of the United States. Fletcher thinks you get a different answer if you replace the "foreign” parties with US parties from other (faraway) states. Plurality: Justice
O’Connor saying in II-A there should not be jurisdiction over manufacturer of component part, but there should be jurisdiction over manufacturer of ultimate product. Jurisdiction should not attach to manufacturer of component merely because it was incorporated into product later sold in CA. If O’Connor’s opinion became
15

law, Fletcher thinks that Gray v. American Radiator (268, Note 2) would disappear and so would a lot of other cases and principles of the basis for the jurisdictional analysis. It may even be that she would protect the manufacturer of the hot water heater (not just valve) if "conduct” of hot water heater manufacturer did not indicate "purposeful availment” of the state’s market. If this is in fact a part of her analysis in Part II-A, she will be taking out a significant chunk from the jurisdictional analysis. She seems to be taking away "natural and probable consequences” analysis, and requiring that company really intend to engage in commerce in a particular jurisdiction (maybe even having to have staff in the state).
R ULE 4.
S UMMONS : ...
(k) Territorial Limits of Effective Service.
... (2) I F THE EXERCISE OF JURISDICTION
IS CONSISTENT WITH THE C ONSTITUTION AND LAWS OF THE U NITED S TATES , SERVING A SUMMONS OR FILING
A WAIVER OF SERVICE IS ALSO EFFECTIVE , WITH RESPECT TO CLAIMS ARISING UNDER FEDERAL LAW , TO
ESTABLISH PERSONAL JURISDICTION OVER THE PERSON OF ANY DEFENDANT WHO IS NOT SUBJECT TO THE
JURISDICTION OF THE COURTS OF GENERAL JURISDICTION OF ANY STATE .
10. Jurisdiction over valve manufacturer: Gray v. American Radiator (IL 1961)
IL Supreme Court: valve manufacturer (in hot water heater) could also be required to appear.
T
HE
S
TRANGENESS OF THE
A
SAHI
O
PINION
: Due Process analysis does not look solely at burden on defendant
(Asahi), so why should it matter whether Zurcher has settled out of the case? It may even be less after Zurcher has settled out. Yet it still seems more likely in personam jurisdiction would be allowed if Zurcher were still in. The original dispute arose in California, but by the time that Zurcher has settled out of the case does it still make sense to make Cheng Shin and Asahi settle their dispute in a California courtroom? Should California law still govern the case; it appears not if case is not even going to go forward in a California court. What if the contract says Asahi will not be liable for any indemnification for faulty valves, and this is contrary to CA public policy / CA does not normally allow liability to be eliminated by contract? This might increase the interest of the state of California. This is the thrust of the second paragraph on page 264; CA does not have such a strong interest, says the Court, because the suit is/was about indemnification not about safety standards.
Fletcher finds this language baffling. The Court says that the CA Supreme Court "argued,” which is a total misnomer, since the CA Supreme Court does not "argue,” it "holds” what CA law is. What does Court mean by "overly broad,” and where does the Court have a basis for concluding that CA Supreme Court has taken an
"overly broad” view of own interests? What do they mean by "should govern”? Do they mean desirable, or unconstitutional, or what? What California wants to do with CA public policy is CA’s business, unless it conflicts with federal (constitutional) law. There is clearly written into here a fair amount of hostility to CA’s assertion of interest, but they really have no right to be "commenting” on what CA perceives its interests to be, without any basis in constitutional analysis. It is clear that the Court views questions of foreign trade as more of a "national” issue, where the federal government ought to be the assertive power. But how can they do so without a federal statute? They appear to be asserting their power even without a federal statute (or a clause of the Constitution), which is really beyond their power. They ought to be relying on a statute, but instead they just say CA Supreme Court was "wrong” in perception of CA’s interest.
G. "G ENERAL ” VS .
"S PECIFIC ” J URISDICTION (211-214)
International Shoe did not itself use "general” and "specific” jurisdiction, but the Court has since picked up on the terminology. "General” jurisdiction means company (or individual) has so many contacts and/or business in a particular state/jurisdiction that it can be sued on any cause of action, whether or not the cause of action has anything to do with the business conducted by the company within the state (e.g.,
GM may be sued in Michigan for anything with proper jurisdiction, regardless of whether the suit is related to MI dealings). "Specific” jurisdiction, at least in the extreme form, means only one transaction but that transaction is so tightly related to the forum sought that jurisdiction attaches. It is sufficient for there to be jurisdiction to only have the one contact, as long as the one contact is sufficiently related to the suit.
As number of contacts goes up, likelihood of jurisdiction goes up; as relatedness of contacts to cause of
16

action goes up, likelihood of jurisdiction increases. "General jurisdiction”: So many contacts with state
- jurisdiction over the defendant without regard to whether the specific contacts have anything to do with the cause of action. "Specific jurisdiction”: Few contacts, but contacts are closely related to cause of action. These terms are not employed by Justice Stone in International Shoe . His language is more subtle and nuanced. These terms were developed later, and adopted by the Supreme Court with some loss of nuance.
11. Insurance contract sufficient for specific: McGee v. International Life Insurance (1957)
Plaintiff was the beneficiary of a life insurance policy owned by her son (who lived in
California) with a non-California insurance company. Defendant had never solicited or done any business in California apart from this one policy. When the son died, the insurer refused to pay, saying that he had committed suicide. The mother got a judgment against the company in
California, but it said it lacked jurisdiction to enforce the judgment. She sought to enforce it in
Texas (defendant principal place of business), but Texas courts refused. Court said "it is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with California.” It said that the contract was delivered in CA, the premiums was mailed from there, and insured lived there when he died. California has a manifest interest in providing effective means of redress. Not fair to force CA residents to follow the insurance company to a distant State to hold it accountable. This is an example of what we would today call "specific jurisdiction,” and in these cases the court must consider the relation of the contacts to the cause of action against the defendant. The one (and only) policy was enough to support jurisdiction for an action arising out of the single policy.
12. DE trustee not enough for specific jurisdiction: Hanson v. Denckla (1958)
Dora Donner, then a resident of PA, established a trust in DE and named a DE company as trustee. At her death, the income securities were to go to whomever she designated during her lifetime or in her will. She moved to FL and died there after 8 years, during which time she communicated on a regular basis with the DE trustee, and received income payments from the trust. Three daughters fought over the trust assets, and a FL court said that it had jurisdiction over the trustee. But a DE court (on a suit brought by another daughter) reached contrary conclusion on the facts of the case. The FL case went to final judgment first, and parties argued that it was conclusive on DE court. But the Supreme Court said that the FL court did not have jurisdiction over the trust assets, or over the DE trustee; since trustee was an indispensable party to FL suit, FL judgment was invalid. The Court distinguished McGee , saying that it should not have been seen to enlarge jurisdiction without limit: "defendant trust company has no office in Florida, and transacts no business there..” But it is difficult to see how these 2 cases can really be distinguished, since she conducted business with the DE trustee, receiving payments from the trust, and if we say that the trust assets were in FL this gives a definite "situs” to intangible property (securities) like in Harris v. Balk . At the very least, it was a close case that may have been decided by the Court’s sympathy for the daughter suing in DE and its distaste for the two other daughters trying to close her out of her share in the suit in FL.
13. "Continuous and systematic” = general: Perkins v. Benguet...Mining (1952)
Note Case: A Phillipine mining corporation was sued in Ohio for dividends and damages.
Plaintiff was non-resident of Ohio, and it was conceded that the suit involved a "cause of action not arising out of the corporation’s activities in the State of the forum.” During WWII, activities in Phillipines were completely halted, and during that time, the president (and general manager and principal) of the company returned to his home in Ohio. "He carried on in Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the company both during the occupation of the company’s properties by the Japanese and immediately thereafter.” Enough for general, but Court did not actually use this terminology at
17

the time this case was decided.
H. L ONG -A RM S TATUTES (287-306)
A court will not find in personam jurisdiction unless there is statutory authorization. Jurisdictional statutes that reach across state lines are typically referred to as "long-arm” statutes. Some authorize jurisdiction to the maximum extent permitted by the Constitution; in those states, the only relevant jurisdictional question is what the Due Process Clause requires. Other states have more detailed long-arm statutes; usually these detailed statutes do not extend jurisdiction to the full extent permitted by
Due Process. Federal procedural law is usually content to rely on the long-arm statutes of the state in which the federal court sits. However there are a few federal long-arm statutes that assert nationwide in personam jurisdiction.
Remember that for any state long-arm statute, it is a two-step process: (1) Determine to what extent and for what matters the state statute allows in personam jurisdiction; and (2) Determine if assertion of jurisdiction in the particular case (or under the statute in general) is consistent with the Due Process
Clause.
R
ULE
4.
S
UMMONS
T HE DES C ASES : Note 6 in the Supplement (page 26): The federal and the state courts each have a suit against the same defendant. The federal court (in a "daring” fashion) tries to assert/sustain jurisdiction. The state court asserts jurisdiction, but on a slightly different basis. So the NY court requires more "purposeful” action than did the federal court. Notice the federal court’s analysis, and how far the Burger King and Asahi logic might go. Under the circumstances, Boyle will not have to do much work to defend himself (because of his minimal market share and the presence of other defendants). Should it make a difference that he is just "along for the ride,” and really only has to hire an attorney to monitor the events? There is no showing that Boyle sold any products in New York. Should it make a jurisdictional difference that a product is or might be particularly dangerous? Does this (as was perhaps the case in World-Wide VW ) lessen the burden which must be met for jurisdiction to attach? Does this make up for the fact (if true) that Boyle did not sell any products in New
York? Should he be required to? Fletcher cannot find a good reason for allowing jurisdiction to attach over
Boyle in the federal case. He does not see the basis for jurisdiction, either under the long-arm statute or under
Due Process. However, if we take the facts as found in the NY appellate division, Fletcher thinks there is a much better basis for finding jurisdiction. He points out that these are both "lower level” cases, which may have made the courts more experimental/bold.
NY M EDICAL T REATMENT C ASE : Note 7 on page 28 of supplement: NY court did not sustain jurisdiction for a doctor living on the border of VT (near NY), who was licensed in NY and treated NY patients, but only in VT.
Court was willing to assume that defendant’s conduct "caused injury within NY,” but it found that he neither did nor solicited business in NY nor derived substantial revenue from interstate commerce. Fletcher finds it a bit surprising to find no jurisdiction here, given assertions of jurisdiction in other cases. This points out jurisdiction question is not decided consistently, even when the cases are decided on the basis of the same law
(in this case NY law). One explanation may be that individual defendants are treated differently than are corporate defendants. This is because corporations are "fictitious entities.” Fletcher is not ready to say that jurisdiction is more likely to attach to a corporate defendant than to a corporation; he restrains himself to saying that it is just "different.”
14. Long-arm statute guides state jurisdiction: American Eutectic v. Dytron (2d Cir 1971)
The suit is against two individual defendants (former employees of the plaintiff) and Dytron
(their new employer) accusing them of stealing out-of-state business from the plaintiff, a NY business. None of the activities took place in NY. The question this court is deciding is not jurisdiction under Due Process. The court is only trying to decide whether jurisdiction attaches under NY’s (enumerated) long-arm statute. It has little trouble deciding jurisdiction does attach
18

to 2 individual defendants; the more difficult question is jurisdiction over Dytron. The court decides it does not attach based on the out-of-state actions of Dytron; injury was not in NY. Is what Dytron did a "tortious act” committed outside the state "causing injury to person or property within the state”? Does Dytron meet the standard of being able to "expect or reasonably expecting” that its actions would have "consequences in the state.” Does this cover financial "injury,” and if it does, where does the injury take place? Should jurisdiction attach over Dytron for their activities in Kentucky and Pennsylvania? Apparently not. Since this is a tort rather than a contract case, no opportunity for a choice-of-law provision or other way of controlling where jurisdiction will attach. There is little or no prior relationship between the parties. Fletcher guesses from the facts of this case that Dytron knows exactly what it is doing; it knows that it is stealing customers from American Eutectic. Does this foreknowledge matter in terms of jurisdiction? How does the fact that this is a federal court interpreting NY law affect the interpretation of the statute? The fact that NY has an enumerated statute (rather than simply asserting jurisdiction "to extent allowed by Due Process”) is itself a bit of an oddity, a remnant of a past when legislators thought an enumerated statute would get further. It is not clear why NY has not gotten around to changing its statute.
15. Federal personal jurisdiction must be authorized by statute: Omni v. Wolff (1987)
Omni has impleaded Wolff, saying it was ultimately responsible for the investment mistakes for which Omni has been sued by its investors. Wolff says there is no federal court jurisdiction, and the federal court agrees, because there is no statute giving authority to the assertion of jurisdiction. The court declines the invitation from Omni to establish federal common law giving jurisdiction.
FRCP 4 (P ROCESS /J URISDICTION ) : The new Rule 4(k)(2), which came into effect after this case, would allow minimum contacts to be assessed with the US as a whole to determine whether it is reasonable to assert federal jurisdiction. Omni refers to the old Rule. Rule 4(k)(1) gives rules for assertion of federal jurisdiction for a domestic defendant. Rule 4(k)(2) deals specially with foreign defendants. Rule 4(k)(1)(b) is the so-called
"bulge rule,” which allows federal jurisdiction even where state court would not if party is within 100 mi of federal court. For foreign defendants: Rule 4(k)(2) says that consistent with the Constitution, serving a summons consistent with federal law may assert jurisdiction in any federal court. It does not matter what the state is; if defendant has contacts with any state, this provision allows aggregation of contacts with all states in
US. Exception/Omission: What happens in Omni , if the suit is brought in LA, and Omni seeks to implead
Wolff, and Wolff says that while we may be subject to jurisdiction in NY, we have no contact with LA. The standard reading of 4(k)(2) is that it allows nationwide aggregation of contacts only where there is not enough contact with any one state to allow jurisdiction in that state. So if a defendant can be subjected to jurisdiction in any state, then Rule 4(k)(2) does not apply. So in this case, Wolff can refuse LA jurisdiction, saying jurisdiction should apply only in NY. So this may not help Omni since they are impleading, and are stuck in
LA. The only thing Omni might be able to do is to switch the forum to federal court in NY, but since § 1404 has so much deference for the interests of the plaintiff, this probably will not be allowed. Congress could have written Rule 4(k)(2) to help Omni, but did not. This is ironic, since Omni was the reason it was written. This rule really only helps a plaintiff (who can choose a forum); it does not help an impleading defendant who seeks to bring in another party to defend against their own liability. The operation of the statute is perfectly understandable on the level of the plaintiff’s interests.
T HE R ULES E NABLING A CT "P ROBLEM ” : In the 1930s, there was a fair concern over "Delegation Doctrine,” which has since been buried, but which resulted in the strangeness in Note 1 (page 301) in 28 USC § 2072(b): the Federal Rules "shall not abridge, enlarge, or modify any substantive right.” The only time Congress has actually "objected” to the Federal Rules which come up through Advisory Committee system to Supreme Court before being forwarded to Congress is in the 1970s when Congress objected to some of the privileges in the
Federal Rules of Evidence. So now we have Rule 4(k)(2), which has just expanded in personam jurisdiction over foreign defendants. Does this expansion lie within the "powers” of the Advisory Committee? The
19

Committee was aware of the question. This awareness explains the "Special Note” on page 301. The question is, is the expansion of jurisdiction what might be called a "substantive right.” It might be, and it certainly seems to be more than just procedural. Fletcher thinks Congress would have been concerned by this (if they had been paying attention to what happened). "Don’t look to the Rules for establishing jurisdiction; look elsewhere.” Fletcher says that the Supreme Court does not care about this problem, only law professors do.
He says it seems fairly possible that Rule 4(k)(2) is illegal under the Rules Enabling Act, but no Rule of Civil
Procedure has ever been knocked down, and he does not think (though he hopes) that Court is likely to pay any more attention to this problem than it has.
I. "P
RESENCE
”
AS A BASIS FOR
J
URISDICTION
(307-339)
In the world of Pennoyer v. Neff , physical presence within the territory of a state was sufficient for a state to exercise jurisdiction: the presence of property could justify in rem and quasi in rem jurisdiction, and the presence of a person could justify in personam jurisdiction. This is sufficient if the test of jurisdiction is power, but what if the test is fairness? International Shoe declared that Due Process requires "minimum contacts” with the forum state "such that the maintenance of the suit does not offend
'traditional notions of fair play and substantial justice.’” Does this mean that in some cases mere presence is not enough?
16. International Shoe controls - no "type 2” quasi in rem suits: Shaffer v. Heitner (1977)
Shareholder lawsuit against Greyhound (a DE corporation) and officers as individual defendants.
Keep in mind that the shareholder only owns one share of the corporation. The Court applies
International Shoe and says there were not sufficient contacts with state of DE to warrant personal jurisdiction. In a sense, the Court is overruling Harris v. Balk as well as Pennoyer v.
Neff.
There is little question that Due Process Clause as adopted in 14th Amendment was thought to embrace "grammar” as expressed in Harris v. Balk and Pennoyer v. Neff . So what happened? Has some new feeling/interpretation about Due Process come to the fore? Debate about "textualism” and the Constitution. This is a strict text-based original intent of the
Constitution analysis, rather than the broader conception allowed by Harris v. Balk and
Pennoyer v. Neff . If this analysis is "wrong,” then it seems that perhaps International Shoe would have to also be wrong. Here we are talking about "contacts” between defendant and state, and asking whether they are such that assertion of jurisdiction will not offend traditional notions of fair play and substantial justice. This case would essentially be a classic " quasi in rem type two” case, but Court says you cannot use attachment as sole basis for assertion of jurisdiction (this was enough for jurisdiction in Harris and Pennoyer ). So this case is saying that regardless of property to attach, question is still level of contact.
S
TATE
L
ONG
-A
RM
S
TATUTES AND THE
C
OURT
: What if NY has both old quasi in rem statute (that was never repealed) and a long-arm statute of the type that we have seen it has. Then case comes along that has sufficient minimum contacts to satisfy Due Process such that it would be reached by a statute such as that in CA. What if the NY long-arm statute does not reach the particular behavior; can NY assert jurisdiction on the basis of the quasi in rem jurisdiction. This is what is reached by Note 2 on pages 321-322. This is consistent with
International Shoe , but may not be consistent with Section IV of the Shaffer v. Heitner opinion. It is very difficult to tell what it is the Court would want, nor is it clear what Court is talking about in all the places that it says that the directors had nothing to do with Delaware. Was there "minimum contacts” in this case? If we had doubts about interests of the state of Delaware, this was answered by the legislation referenced in Note 1 on page 321. Was "consent” necessary to this statute? It appears Delaware legislature is going back to the
"historical” assertion of jurisdiction, perhaps having been "burned” once by Supreme Court. They are just hedging bets, and asserting jurisdiction in two ways. So, Fletcher does not like Section IV, but up to Section
IV flows naturally from International Shoe . Fletcher says that unless we adopt a very narrow, text-based analysis of Due Process, this was inescapable. The question remains, though, whether assertion of jurisdiction is valid without "consent”? This may depend on facts of the case. Notice how rest of Note 1 narrows down
20

"consent” to acts arising out of breaches of DE corporate law. Fletcher thinks that even absent the requirement of "consent,” this statute would confer jurisdiction.
T
HE
S
TATE
’
S
I
NTEREST
: It seems under a properly-drawn statute there could have been assertion of jurisdiction (since Part IV refers to how the statute in question does not allege a particular interest of the state).
What if DE had re-passed the statute, but also included a statement in the statute saying that "we mean hereby to assert interest of the state of DE in suits against directors of DE corporations.” Would that be enough? It does not seem like it would be. What did the DE legislature intend when it did pass this law? Fletcher says that this statute does imply that legislature of DE did intend to assert jurisdiction (why else have statute). Is Court just being disingenuous (or overly fastidious) in alleging that statute does not cover this behavior? We have seen a variation of this in a couple of cases, where the Court expresses skepticism either about constitutionality of jurisdiction, or about the means of asserting jurisdiction, and has done so by questioning whether state really has an interest in the matter of the suit. Why? Do they really expect state(s) to pass statutes specifically telling Court what it is that state is interested in? Maybe it is some kind of "clear statement” rule, where at
"outer bounds” of jurisdiction Court is requiring clarity.
S
HAREHOLDER
"S
TRIKE
S
UITS
” : This is a "shareholder derivative suit” based on the shareholder’s one share.
This is essentially suing to force corporation to sue the officers and directors. This is the shareholder bringing suit "on behalf” of the corporation, which is supposed to happen only after the corporation has declined to bring its own suit. In 1977 there was even more "upset” about these so-called "strike suits” among the corporate defense bar than there is today. Fletcher does not think, however, that this decision was fueled by this dislike of strike suits. He says it is the "natural consequence” of International Shoe , which had been brewing for quite some time. If this had been a suit in which the corporation had brought suit against its own officers, Fletcher says that we would not have gotten Section IV written the way that it was. However, he says that Section IV is no less baffling on the facts of this case than it would be under those circumstances. What does this case say?
17. Presence in state - minimum contact not required: Burnham v. Superior Court (1990)
Question of whether father who did not have any other contacts with the state should be subject to jurisdiction simply because he was served with process while he was physically in the state.
Yes. Scalia announces judgment of the Court, but not its opinion. Court agrees that jurisdiction should attach, but Justices are divergent on their reasons for thinking so. Scalia: Scalia gets out from under Shaffer and International Shoe logic by claiming that those only deal with absent defendants, and that there is no reason to apply them to physically present defendants. But what about the methodological question that these cases have moved us substantially beyond what the framers of the 14th Amendment might or could have envisioned when it was developed? How does he reconcile his historical approach with the fact that International Shoe and Shaffer have developed an a-historical analysis? He does not, really, and this is a very uncomfortable analysis, because he wants to stay as close to the historical analysis as he can, but has no power to overrule Shaffer and International Shoe , so there is some split in his opinion (that may be more implicit than explicit). Which is preferable: a "fairness” rationale or a "historical” analysis. Justice Scalia is the primary spokesperson for a narrow vision of what Framers intended, and the primary objector to a "looser” type of constitutional interpretation that allows the document to "adapt” to the times. What about if Kulko has not read this case, and he comes to California to see his kids and gets served with process by his ex-wife (for child support increases); is this fair? Even if not fair, should we want it this way? This puts all out-of-state potential defendants in the position of saying if they want to avoid being brought into court by their ex-spouses (for instance), they should not go to that state. MacArthur case: It does seem that Scalia divorces argument from level of contacts, so there is no particular reason, according to him, that service could not be given on an airplane flying over state. It would be a hard case for Scalia to decide whether somebody just transferring planes in an airport, or even just flying overhead, who is served while "present” in the state, should be subjected to that state’s
21

jurisdiction. Brennan: If we do apply "minimum contacts” analysis to Burnham (which Scalia does not), how convincing is the case for minimum contacts presented by Brennan (based on availment to emergency services, etc.)? Not very, and if it were it would seem it would also allow them to serve process on him by registered mail after he goes back to New Jersey.
According to the minimum contacts analysis, this would also seem covered. Should we read
Brennan’s opinion as really saying that "three days plus service while in the state” is enough?
Scalia seems to say that voluntary physical presence is enough, period, while Brennan seems to be saying that it requires voluntary physical presence plus a little bit (very little) of "availment” of state services. Is this a more accurate reading of his opinion than just saying minimum availment on its own is enough? What Brennan may be saying is that the service while in the state is a minimum contact, in itself, and that it is a sufficiently important contact to put the analysis over the edge.
E XCEPTION FOR "F RAUDULENTLY E NTICED ” P HYSICAL P RESENCE ?
: Note 5, p. 338: Wyman v. Newhouse .
Why should it matter that he was "fraudulently enticed” to enter the state? How is this different from being
"drawn” by children being held "hostage” by a former spouse? And how is it different from the type of deception that is routinely used by process servers to do their jobs (see handout from the Washington Post ).
P
HYSICAL
P
RESENCE VS
.
P
ROPERTY
: The classic case of "physical presence” being enough is in admiralty law, where the ship being in the harbor is sufficient to allow the sheriff to go down and "seize” the ship on the basis of an admiralty civil suit, regardless of the citizenships of the plaintiff, defendant, owners, etc. This may just be the only way to get one’s hands on it. Fletcher does not see Shaffer as having interfered with this process, in any case. But this may just be because of the particular "needs” to grab ships while you can. Is there a good reason for extending this to other types of property that are not so "mobile”? Where the question is the ownership of property ("classic” in rem proceeding), it has to be okay to assert jurisdiction even over an out-of-state owner/defendant. The real question is whether it should be allowed for purposes of quasi in rem , type two, where the suit is not over deciding title to the property. What if one of the potential "owners” of a property has no contact with the state in which a classic in rem action is taking place, and does not receive any notice (attempted by publication, etc.) before his interest is decided? It is still probably okay to adjudicate his interest in his absence.
O
VERVIEW OF
J
URISDICTION
: Court has been fairly criticized for intellectual framework, but nobody has come up with anything better. "Domestic” Cases: Court has difficulty with division of responsibility between state and federal law/courts. The best tool the Court has found for these kinds of analysis is Due Process clause, but if you are trying to fit all of these incredibly disparate cases under same analysis, it causes odd contortions.
Kulko and Gray v. American Radiator - In radiator case, question is whether you also have jurisdiction over the manufacturer of the valve, who did not intend or perhaps even know its part would end up in state of jurisdiction. Most courts would say yes you do, though O’Connor (in her plurality) said no; the question is what you take to be "the law” on this point. In Kulko, out-of-state father who is served in NY for a suit in CA not considered subject to jurisdiction. What should court do with these common cases? Under the system of
Kulko and Burnham , this has been somewhat simplified by the relative uniformity of divorce proceedings
(no-fault, etc.) in the various states, but there is still no obvious good answer to where case should go forward
(in NY or in CA). An argument could be made that it is not best to have the case go forward in either place, and Due Process does not give a good answer. There is no happy or easy answer in the out-of-state parent situation. Sometimes we just need a rule. The "Foreign Defendant” (or Plaintiff) Cases: Here there is a remarkable inconsistency. The criticism has been that the reasons for getting to the conclusions are not at all clear. Applying framework developed in one setting does not seem to work in another setting. If the competing forums are different state courts, it may make sense to talk about minimum contacts with the various states, but if they are a US court versus a foreign court, it may make a lot less sense to talk about contacts with a particular state (e.g., the state of Texas in Helicopteros ). Congress has addressed this question somewhat with
Rule 4(k)(2), but this does not help for actions based on state law (it only applies to federal law cases). We also saw how it does not help in those cases in which there are substantial contacts with one state (aggregation
22

is only allowed when there is not one state with substantial contacts). Court has tried to rationalize/reconcile so many disparate fact circumstances that it has a choice between either being inconsistent or speaking in such large generalities that the rule is not generally/easily applicable. The moral : the law of the case is always going to lie in the particular facts of the case in front of you, and its likeness to the fact patterns of other cases that have already been decided. So stating a rule is only the beginning and the real question is how the rule applies to the particular facts (e.g., "this case is like World-Wide VW ,” so if it is a question of "purposeful availment” we may want to ask whether they "purposefully availed” themselves). Of course the dealers in
World-Wide VW are depending on dealers, roads, etc. in other states to make their product attractive. Does this add up to "purposeful availment,” such that jurisdiction should attach? No. What Court is responding to is a
"feeling” that these are really just local dealers. Fletcher likes how Burger King and Asahi turned it into (or admitted it was) multi-factored analysis. Brennan: most extreme position in favor of plaintiff’s choice/jurisdiction for the plaintiff. He always votes for jurisdiction, and will find some means for attaching jurisdiction in a particular case. Notice his analysis on facts of Burnham , where he says the burden on the defendant is "slight”; is this a fair assessment? Probably not. But the question may be who is it more of a burden for, the husband or the wife? It may be better to say that the burden on both parties is substantial, and say that even so the choice goes to the plaintiff (whether because we say her burden (with kids) is larger or because plaintiff gets to choose forum) on these facts. Note 13 in Justice Brennan’s opinion in Burnham is a
"quick overview” of Civil Procedure. The one point in this note which may have some real validity is the part about § 1404, except that you will never be in federal court for a domestic or custody situation. But if you can get into federal court, you may be able to balance the hardship under § 1404. However, this comment has to be taken with a grain of salt in Burnham .
J. N OTICE (269-287)
The achievement of Mullane was to dissociate the question of the constitutionality of a method of service of process from the classification of the underlying cause of action: in personam , quasi in rem , or in rem . Mullane makes it clear that the constitutional adequacy of service of process must be judged by practicality of giving notice rather than by its technical classification under concepts of territorial jurisdiction.
18. Notice "reasonably calculated to apprise” required: Mullane v. Central Hanover (1950)
Trustee of common trust fund (in which smaller trusts "pool” into larger trust) wanted to settle the trust (apparently to liquidate it), and so gave notice to the beneficiaries by publication in local paper as was required by statute. Court-appointed guardian for all unrepresented interests said that this form of notice was constitutionally insufficient. Court first says that question is not decided by the issue of whether the case is in personam or in rem , but by practicality of providing notice. Notice must be "reasonably calculated” to apprise interested parties of the pendency of the action. Court says publication is sufficient for those beneficiaries whose identities or whereabouts are unknown, but it is not sufficient for known beneficiaries, who must be given notice by mail. In other words, notice is a question of fact determined by the particular circumstances of the case.
W
HAT
R
EALLY
H
APPENED IN
M
ULLANE
: The basic idea of an "accounting” is to require trustee to show court what it has done. The banks were probably the ones behind this statute in the first place, so why did they put in this accounting procedure? They probably determined that it would be easier to do these regular "accountings” than to have to do it at behest of individual beneficiaries. They have managed to get the "accountings” on a regular schedule, as well as achieving an economy of scale by allowing "pooling” of trusts. This proceeding is designed not for benefit of the beneficiaries, but for the benefit of the bank, because once this accounting proceeding is completed, suits are barred on the basis of the period accounted for. So what the banks have set up is a procedure where every 3 years there is a little publication in the back of a newspaper, a little private accounting takes place, and then all of the beneficiaries are statutorily barred from bringing suit for the period covered by the accounting.
23

P
ERSONAL
J
URISDICTION IN
M
ULLANE
: How does the NY bank have personal jurisdiction over somebody that has never come to NY but who happens to be a beneficiary? Note that the case takes place in 1950, so this is preShaffer . This is 5 years after International Shoe , so still in Pennoyer v. Neff and Harris v. Balk world.
The "intangible” property in NY was at that time sufficient to exercise quasi in rem jurisdiction, but would there still be assertion of jurisdiction today? The state clearly does have an interest, but does this justify personal jurisdiction? Should trusts be able to be administered/accounted in the absence of their beneficiaries? To the extent that these trusts are properly administered, trustors (settlors) and beneficiaries are also getting benefit, which may mean that they are "deriving benefit” from the laws of NY. But what about the beneficiary not in
NY: has this beneficiary had sufficient "minimum contacts” with NY to justify assertion of personal jurisdiction? It does not seem that this person would meet threshold for "minimum contacts” in NY. Is there sufficient connection between a "contingent beneficiary” of one of these trusts (who may/does not even know about being a beneficiary) and the state of NY to justify the assertion of personal jurisdiction? It does not seem so, although the argument could be made that this person is still "benefiting” from laws of NY. Whether or not he is protected by the actions of others similarly situated who are aware of beneficiary status, can we say that he has sufficient contacts with the state of NY to justify jurisdiction? We can no longer rely on quasi in rem jurisdiction from control over "property” (including "intangible” property). However, it does seem that if this suit is going to be decided anywhere, it is going to be in NY, since this is the law under which trust was formed, and it only seems logical to decide any dispute there. But this does not seem to fit under "logic” of the jurisdictional decisions we have to base the decision on, since there do not seem to be sufficient contacts. So how do we reconcile "apparent” interest of state of NY with "minimum contacts” analysis? A trust can be set up in a virtually unlimited number of ways, with almost any number/type of conditions. What happens if beneficiary several years later wants to bring suit but cannot because he is bound by "accounting” procedure’s elimination of liability for accounted period? It appears he is out of luck, but is that fair?
N OTICE AND P ERSONAL J URISDICTION : Let’s assume he got notice, but just throws it all away. Should this be enough to assert personal jurisdiction? In other words, is receipt of notice in itself sufficient to bring jurisdiction? The answer appears to be no; the notice cannot by itself be a sufficient basis for jurisdiction.
Does the bank have a stronger case for territorial jurisdiction simply because the notice was received? It does not appear that it does. So long as the individual is outside the state, the service of process outside the state is irrelevant for jurisdiction. It may be that you have to have notice as another part of the Due Process requirement, but it does not increase the strength of the territorial jurisdiction argument (still must prove
"minimum contacts” for jurisdiction).
N OTICE R EQUIRED BY M ULLANE : Let’s look at the notice that is required, and test that is set up by the Court for determining proper notice. What kind of notice is "fair,” to allow somebody with an interest to "fairly” participate in proceedings? How should we balance notice to interested party against cost of providing notice?
"Personal notice” through the mail for all known beneficiaries for whom they have addresses or could discover addresses with reasonable diligence is standard developed by the Court. What Court seems to be saying is there are a higher percentage of people who are income beneficiaries who must be notified than there are principal beneficiaries who must be similarly notified. See page 276: "conjectural or future” beneficiaries, or those who are not "known” by the trustees, are entitled to less notice than "present” or "known” beneficiaries.
This suggests Vaughn mistaken in not contesting accounting procedure, since it is not clear whether language is limited to contingent future interests (what Fletcher thinks he means), or also includes vested future interests such as beneficiaries who have interest in principal of trust(s). Not like Justice Jackson to use words carelessly, so possible he does mean no constitutional interest in notice above publication to any future beneficiaries (odd given the rest of his opinion). Let’s pay attention to present/income beneficiaries. Eisen v.
Carlisle & Jacquelin case (page 891) is a class action brought on behalf of those who have been overcharged on
"oddlot” trading on NYSE. This is an example of what would be required by Mullane , and the fact is that it might cost more to give the amount of notice that it would require than each individual claim is actually worth.
Page 274: Allowance for the particular facts of the case/situation. Page 277: "notice reasonably certain to reach most of those interested in objecting...”; is this an accurate and fair description of what will happen. This is not a "flat rule,” very context- and fact-specific. Flexible. Assuming this flexibility, what would you do as
24

the District Judge in the Eisen case: how would you meet the notice requirement? You do not have to choose the polar opposites of "publication” or "personal service”; perhaps you could choose publication in a paper likely to be read by the members of the class, plus do personal service for some of the members of the class.
Justice Jackson almost explicitly says this when he says you only have to personally notify most of the members of the (trust case) class. This is not a "hard and fast” requirement.
M
ULLANE
, E
ISEN
,
AND
R
ULE
23 D
RAFTING
: See the notice requirements decided on in Eisen.
Do these meet the "flexible” requirements set by Mullane ? It sounds pretty good, but the Court strikes it down as insufficient in Eisen . Why? It was struck down in what Fletcher thinks is a deliberately vague opinion which invokes
Mullane , but which really relies on Rule 23 (Rule governing class actions). Rule 23(b)(2) class actions are
"injunction class actions.” Rule 23(b)(3) class actions are so-called "damages” class actions; category into which Eisen attempts to fit. Rule 23 contains a special Rule-based notice requirement for (b)(3) class actions
(not required for (b)(1) or (b)(2) cases). Rule 23(c)(2) says that the notice required for a 23(b)(2) class action is: "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” First half of this sounds like Mullane , but the second half is a significant expansion of Mullane , because it only says that they must be able to identify the members through reasonable effort, not identify and notify them with reasonable effort. So this means that all those who can be identified with reasonable effort must be notified. Did the drafters of the Rule intend to so drastically expand on
Mullane ? No, they clearly thought they were only "codifying” the holding of Mullane . Why did they put it in at all, since they did not have to (i.e., Mullane would apply anyway)? They clearly intended to codify Mullane , but they just made a drafting error. It is clear the Court understands what happened (drafting error), so why not simply step in and say drafters misinterpreted Mullane in writing Rule 23. Because they hated "strike suits,” and gave into a "hostile” reading of Rule. Eisen is not based on Mullane , but is instead a very strict reading of the Rule used because the Court is so hostile to "strike suits.”
K. C ONSENT TO J URISDICTION (339-350)
Defect in territorial jurisdiction is waivable. A defendant who makes a general appearance (deliberate or inadvertent) will be deemed to have consented to territorial jurisdiction. A plaintiff is also deemed to have consented to jurisdiction, at least for certain purposes, in the forum in which she has filed suit.
Finally, it appears that choice-of-forum may be governed by contract (apparently without regard to level of contacts). Congress has overruled Carnival Cruise Lines , but only as to tickets on passenger vessels: a 1992 amend. to the Vessel Owner’s Liability Act prohibits forum-selection clauses in passenger tickets on vessels taking passengers between US ports, or between US and foreign ports. This was a "surprise” amendment, and according to the Supplement (page 31) this legislative result was apparently overturned in 1993. The decision in Carnival Cruise has been sharply criticized, but is apparently still good for consumer contracts.
19. Failure to timely object to jurisdiction is deemed consent: Cuellar v. Cuellar (TX 1966)
Plaintiff brought a child support action in Texas against her former husband, who lived in
Indiana. The court held that the husband consented to jurisdiction when he filed answer without objecting.
20. TX corp. suing in CA, subject to jurisdiction on cross-claim: Adam v. Saenger (1938)
CA defendant filed a cross-claim/counterclaim, and the plaintiff defaulted. Court held that
Texas corporation, by filing suit, had consented to in personam jurisdiction on the cross-claim.
Did not distinguish between compulsory and permissive cross-claims (i.e., did not limit to related claims).
W
AIVING
O
BJECTION TO
J
URISDICTION
: Defect in in personam jurisdiction is waivable; defendant can consent to proceed with case. Note that waiver of subject matter jurisdiction is not possible; you cannot consent to subject matter jurisdiction. Consent may happen purposefully or inadvertently. If a lawyer answers without objecting to jurisdiction, she consents to jurisdiction. In some jurisdictions (including CA) even if you
25

object at same time that you answer the complaint, this will amount to a consent to jurisdiction. If you sue in a particular jurisdiction, this will be taken as consent to jurisdiction on any cross-claim. Probably true not only for compulsory counter-claims (out of same transaction), but also for permissive counter-claims. However, probably limited to suit currently proceeding, so does not (necessarily) give "minimum contacts” for separate suit brought against original plaintiff. For example, in Adam v. Saenger , the Court says there is in personam jurisdiction over TX corporation in CA, because corporation brought suit in CA and therefore subjected itself to any cross-claim or counterclaim arising out of the suit. This does not apply to a separate party who tries to sue the original plaintiff (probably not a sufficient "contact”). If they were served while they were in CA suing, would this give in personam jurisdiction? This is probably a "privileged” appearance in CA (if he is there for the purposes of settlement on the original case), such that he is not subject to being served with process for the purpose of acquiring jurisdiction.
21. Forum-choice clause may govern jurisdiction: Carnival Cruise v. Shute (1991)
Plaintiffs (Shutes) bought passage on a cruise through a travel agent in WA, and payment was sent from the agent to FL, and the tickets were sent back to WA. The tickets had small print which said that any disputes arising out of the "contract” would be litigated, if at all, in FL.
Shutes filed suit for negligence in a slip-and-fall in District Court in WA, and cruise ship company sought summary judgment because (1) forum clause controls, and (2) District court lacked jurisdiction because lack of contacts with state of WA. District court granted motion on basis of (2). Court of Appeals reversed, saying that company had sufficient contacts with WA, and that forum clause should not be honored because it was not "freely bargained for” and because it would be a hardship for Shutes to follow suit in FL (and suit would not go forward).
Court reverses, saying that it is "conceded” that Shutes had "notice” of the forum clause, that it is unwilling to agree with Court of Appeals that non-negotiated forum-choice clauses are never enforceable, and that "hardship” was not proven. It says that the clause cannot be deemed unenforceable without specific judicial scrutiny, and that it does not violate 46 U.S.C.App. §
183c so it is enforceable under federal (admiralty) law.
E NFORCEABILITY OF F ORUM -C HOICE C LAUSES : Very tight, specific contract clause, saying any suit must be litigated in Florida courts. Is it fair to hold the Shutes to this small-print, non-negotiated condition on a ticket they did not even get until after they had paid their money, at which point they could not have rejected the clause in any case? In Bremen , it was a contract to tow a drilling rig at sea with a clause saying any disputes would be litigated in a certain court in England (neutral forum between US and Germany). The rig-owner then defies the contract and sues in US (in Florida). This seems like "bad faith,” but it is clear how hostile courts were or are to forum-choice clauses because even though this was clearly "negotiated,” the US plaintiff won in
District Court and in the Court of Appeals. It took the Supreme Court to enforce the contract clause. Fletcher thinks this was the best outcome, since it does seem only fair to enforce a fully-negotiated clause like this one.
He agrees that the clause in Bremen should have been enforced. The real question is whether this has anything to tell us about the proper outcome in this case ( Carnival Cruise )? The Court treats Carnival as if it is a very easy case. Normally, contracta would be decided under state law, but this is admiralty, so under federal
(common, judge-made) law. Court holds as matter of federal law that for commercial vessel carrying passengers this sort of clause is enforceable. We might anticipate that this enforcement of the clause would result in higher profits for the cruise ship lines, but on page 344 the Court just assumes this might somehow miraculously result in a favorable impact on ticket prices. They really have no idea (and no facts on which to base this) what effect this might really have. They also have no idea what the "world of passengers” really wants in a situation like this. There is an implication in the final sentence of the second paragraph on page 344 that this is a benefit to the passengers, but there is no evidence that this is what the passengers want. Does the
Court have any business ascribing this kind of "benefit” analysis? Fletcher is profoundly skeptical of the
Court’s easy analysis that this is for the benefit of passengers. The analysis of the Court of Appeals is a bit odd, ("too poor” to go to FL to continue litigation). But they were not too poor to take the cruise (out of LA), nor to file the lawsuit in the first place. More likely case does not justify expense.
26

S
TRANGE
"B
AD
F
AITH
” A
NALYSIS IN
C
ARNIVAL
C
RUISE
: This is the real question, the cost-benefit analysis.
Page 345: "It bears emphasis...” Is the Court just being completely disingenuous here? What does it mean that there is "no indication” that the cruise ship line meant this to happen? Couldn’t they have foreseen this result? Why do they insist that this would be a "bad faith” motive, as opposed to just an ordinary commercial motive? It seems like the Court is moving from a "fundamental fairness” analysis to asking if there was "bad faith.” This not only distorts the meaning of "bad faith,” it restricts the "fairness” analysis to the question of
"bad faith.” We should not have to conclude that they are acting in "bad faith” in order to prohibit enforcement of this clause. One thing the Court does not do (which Fletcher would have been more comfortable with) is to say that in the absence of a Congressional statute invalidating this type of clause they are going to leave it alone.
Maybe at the core this is what they are intending to do/think they are doing. But they come off making it sound like this is a great deal easier to decide than it actually is. They act as if they are deciding "fairness,” but don’t really do so. Did respondents really "concede” that they were given proper "notice” of the clause by the
"contract”? Fletcher would be quite comfortable justifying this decision simply by saying "this is Congress’s business,” but as it stands, he does not have much respect for this decision. Most of us (sitting on the Court) would invalidate. Federal judges, except in particular specialized areas, are not particularly accustomed to dealing with contract law. This appears to be a classic case of a contract of adhesion, or unconscionability.
State courts are much more accustomed to making common law (torts, etc.), and federal courts have much less to do with this. So it is not too surprising that the judges here do not do it particularly well. Fletcher expects that if this case were brought in state court, it would probably result in an invalidation of the forum-choice clause for unconscionability. So why didn’t the Court just say "we agree that this is a little sketchy, but without a statute we must uphold it”?
22. Clause designating agent for service controls: National Equipment v. Szukhent (1964)
Two MI farmers leased equipment from National Equipment Rental (NER), whose principal place of business was NY. The farmers signed a form contract in MI that designated the wife of one of the officers of NER, who lived in NY, their agent for service of process. Court found that clause constituted an agreement to submit to in personam jurisdiction in NY (5-4 decision).
B REMEN A "S EA C HANGE ” FOR F ORUM -C HOICE C LAUSES : National Equipment may remind us of early case(s) where Secretary of State served as the agent for service of process for people driving into the state.
Farmers have no problem with how she performed her duties. Real question is what law should form the basis of the decision. If it is a contract decision, it should perhaps be state law. But Court messes around and finally decides that it is a Due Process analysis, and upholds the clause. Fletcher says this is an intermediate case between Carnival Cruise and Bremen , in that it is not exactly one large company against another, but not
"consumer” against a commercial company. If he has to choose one, he would say this is a "commercial” contract, but he expects that there is a difference in sophistication. Notice how close and tightly contested this case was, and how it could have gone the other way. Why was Carnival Cruise so one-sided? This may have been that Bremen did create "sea change” in treatment of forum-choice clauses. The climate changed dramatically, and Court became much more friendly to forum-choice clauses. What this means once Carnival
Cruise is on the books is that forum-choice clauses may be very powerful, and very useful. The only thing it may not control, is a § 1404 transfer (see Ricoh ). Carnival Cruise is an odd opinion, at several points, and largely inexplicable.
23. Forum-choice clause is not dispositive in § 1404 motion: Stewart v. Ricoh (1988)
Parties’ agreement provided that the federal District Court for Southern District of NY would have "exclusive jurisdiction,” but Court said that as a matter of federal law this was a factor but was not dispositive; factors other than the interests of the contracting parties are considered in the statute.
L. O BJECTING TO J URISDICTION (351-361)
All US court systems, state and federal, provide for special appearances for the sole purpose of
27

contesting territorial jurisdiction. A defendant must be careful she does not inadvertently make a general appearance: e.g., California state courts will find that a defendant has appeared generally if she answers on the merits, even if at the same time she states that she is not submitting to the jurisdiction of the court, and in Texas a defendant will be found to have made a general appearance if she answers at the same time she objects to jurisdiction. Under FRCP Rule 12, special appearances are permitted in federal court, though they are not called special appearances: defendant may move for dismissal under
Rule 12(b)(2) for "lack of jurisdiction over the person,” and this motion may be joined with other 12(b) motions or with a "responsive pleading,” such as an answer to the complaint. But if any motion is made under 12(b), or any responsive pleading is filed, without a prior or simultaneous 12(b)(2) motion, defendant is deemed to waive objection.
If a defendant is confident that territorial jurisdiction does not exist, she may just stay away altogether, and allow a default judgment to be entered against her. Then the plaintiff will bring that judgment to the state in which the defendant lives, and seek to enforce it in the courts of that state (Full Faith and
Credit). The defendant may resist enforcement on the basis of lack of territorial jurisdiction, and the court in the state in which enforcement is sought will then decide. This is a tidy but risky strategy, because the only question open to consideration in the court in which enforcement is sought is the jurisdictional question; if she loses she is foreclosed from making any defense on the merits of the suit.
Risking an entire suit may be foolish. This is a more common strategy in international litigation. A defendant who makes a special appearance for the purpose of contesting territorial jurisdiction, and loses, can only challenge that decision by appeal within the court system that has asserted jurisdiction
(this is true of both state and federal court systems).
Prior to Shaffer v. Heitner , it was common for a defendant to be sued quasi in rem in a state with which he had few if any contacts beyond the property in question. The solution offered by some states was to allow the defendant to appear to defend the merits of the lawsuit, but only up to the value of the property forming the basis for the jurisdiction. Other states refused to allow this, and required defendants to defend entire amount in controversy. Since Shaffer , this issue has lost much of its urgency, since quasi in rem suits are now fairly rare. There are still a very few cases in which quasi in rem suits proceed under state law (361).
24. Court may use discovery sanction - jurisdiction: Insurance Corp v. Compagnie (1982)
Compagnie (CBG) is a DE corporation that filed suit in District Court in PA against its "excess insurers” for claims of loss of business due to mechanical problems. The excess insurers claimed lack of in personam jurisdiction (along with other defenses), and filed for summary judgment on this basis. CBG requested discovery on question of insurance contracts in PA (for jurisdiction), but insurers delayed and protested and did not comply with discovery. The court gave a 60 day warning, and said if they did not comply he would grant jurisdiction. When insurers still did not comply he found personal jurisdiction. Court says requirement of personal jurisdiction flows from Due Process Clause, and it is not inconsistent with Due Process to grant jurisdiction in this case. The actions of the defendant may amount to a legal submission to the jurisdiction of the court, even if not voluntary. The expression of legal rights is often subject to certain procedural rules; failure to follow those rules may well result in a curtailment of the rights. Rule 37 sanction is such a rule.
Concurrence: Case should have been decided on basis of "minimum contacts,” which were present in this case. Court has abandoned its jurisprudence, which combines "fair play” with
"contacts.”
"S
PECIAL
A
PPEARANCE
”
AND THE
"R
ATIONAL
D
EFENDANT
” : Fletcher agrees with Justice White - Insurance
Corp. v. Compagnie is a fairly simple case. Defendant always has choice to stay away, allow a default judgment, and argue when plaintiff seeks to enforce it. This is risky: the better choice may be to go to the jurisdiction where you contend there is no jurisdiction, because then you get to argue both jurisdiction and
28

merits of case. Fletcher clearly thinks that there is no problem with granting jurisdiction as discovery sanction.
Defendant’s "mistake” in Insurance Corp.
was to object to jurisdiction, make a special appearance to do so, and then refuse to cooperate. Notice they answer at the same time they are objecting. This is permitted under the
Federal Rules, but it must be simultaneous (or objection must come before the answer). But by doing so, they subject themselves to Court’s power, such that when they refuse to provide discovery, court relies on Rule 37 to find factually against the defendants. They give the classic "run-around,” and finally the judge says that unless you provide the documents I will assume they would establish minimum contacts. This does not seem unfair, especially if you assume documents would show minimum contacts. The analytic question is whether court can find factually the facts that establish jurisdiction. Answer must be yes. The rational defendant will almost always choose to make the special appearance, in order to contest jurisdiction and then to contest the case on the merits. This is much less true of foreign defendants, both because of fears about "home court advantage” and because of the different treatment that jurisdiction receives in foreign courts. A foreign defendant may be more likely to be successful avoiding (enforcement) jurisdiction in a foreign court. Therefore you may be more likely to see foreign defendants staying away (though even here it is a minority). Once defendants make a special appearance, they submit themselves to the jurisdiction of the forum court at least for the purposes of determining jurisdiction. This includes all of the procedural devices (including discovery) that go along with this determination. American discovery is much more far-reaching than any other country. If the defendant stays away and a default judgment is rendered, this decision is not necessarily binding in a Full Faith and Credit sense. The jurisdictional question may be re-decided by a subsequent court. It may be the best strategy to object before submitting an answer (decide that question first).
M. R ELATION OF T ERRITORIAL J URISDICTION TO C HOICE OF L AW (361-380)
The constitutional test for in personam jurisdiction is whether there are "minimum contacts...such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.’”
The test for choice of law is whether there is "'a significant contact, or significant aggregation of contacts, such that [a state’s] choice of its law is neither arbitrary nor fundamentally unfair.’” The 2 tests obviously overlap, but they are not identical. There can be insufficient contacts for in personam jurisdiction, yet sufficient contacts to justify applying the law of the state - Kulko and Shaffer , and vice versa - Shutts .
Shutts is one of the few cases in which the Court has been willing to limit a state’s scope in choosing the law. The Court employs two constitutional provisions, the Full Faith and Credit Clause and Due
Process, but the test is the same under the two clauses (as long as question is not enforcement of final judgment).
25. In personam jurisdiction does not guarantee choice of law: Phillips v. Shutts (1985)
Oil company which had leases from property owners in all 50 states, the District of Columbia, and several foreign countries, was sued for back royalties and interest for delayed price increases. Suit was brought by Kansas landowners (Shutts), who sought to certify a nationwide
"opt out” class action and sue under Kansas law. Phillips objected, saying there was no in personam jurisdiction over the non-Kansas plaintiffs (who had never been to Kansas), and that
Kansas law should not be applied to non-Kansas members of the plaintiff class. Court affirms
KS decision that in personam jurisdiction did exist even for the non-Kansas plaintiffs, saying that notice and "opt out” provisions of class action procedure gave them due process protection.
Not the same analysis for class action plaintiff as it is for a defendant. Court reverses KS decision that KS law should apply to all claims in the class action, saying that for those plaintiffs from states with laws which conflict directly or indirectly with KS law, the KS court should apply the laws of those states under conflict of laws principles. Court remands for adjudication consistent with these principles.
R ULE 23 R EQUIREMENTS IN P HILLIPS : Phillips did not pass along the benefit of price increases to property holders. In aggregate, this amounts to millions of dollars, though for each plaintiff only a hundred dollars or
29

so. Phillips argues (1) that there should not have been jurisdiction over all the non-Kansas plaintiffs - it should have required an "opt in” clause rather than an "opt out” clause; (2) there were not sufficient contacts with
Kansas by the non-Kansas plaintiffs to justify asserting jurisdiction over non-Kansas plaintiffs. For Rule 23
Class Actions, the idea is to aggregate groups of litigants in circumstances where there are too many class members for joinder. Quite odd idea to "bind” non-named but nonetheless included litigants by whatever decision is reached. Because of this "procedural difficulty,” Rule 23 has lots of "protections.” Rule 23(a) requirements: (1) Numerosity - too numerous for joinder; (2) Commonality - common questions of law or fact;
(3) Typicality - named litigant’s claims typical of the class; (4) Effective Representation - to some degree overlaps with #4, really has to do with quality of class lawyer. Rule 23(b) has additional requirements: (1)
Common questions "predominate”; (2) Class action must be superior to other methods of adjudication (with a non-exhaustive list of criteria). For Rule 23(b)(3) class action, Rule 23(c)(2) provides a particular kind of notice for members who might wish to "opt out” of the class. This includes the notion that members who are known must receive increased notice. Kansas rule essentially the same as Federal Rule, and has its own "opt out” provision. If you do not opt out, you are bound by the outcome of the case, whether it comes to a judgment or just to a settlement. One of the virtues of the class action from the perspective of the plaintiff is that it can overcome the flaw of being defeated in a small-stakes litigation by the simple unwillingness (and obstinacy) of defendant to pay. The standard rule in US is that each side pays its own attorneys’ fees, so unless amount at stake in the case is worth going forward, it may be defeated by sheer weight of attorneys’ fees. In
Adam v. Saenger we saw that a plaintiff automatically subjects himself to counter/cross-claims arising out of the same litigation, but Court is quite careful to say here that this is not necessarily the case for class actions.
Court says it is willing to subject the class members to jurisdiction on the assumption that there will be no counter-claims arising out of the suit (which are quite rare in class actions in any case).
C
HOICE OF
L
AW IN
P
HILLIPS
: We can easily understand why defendant does not want a class action (or at least wants it reduced), and we can also easily understand why it would not want Kansas law applied, since Kansas has highest interest rates. It seems Court is really just re-writing the reasoning of the opinion, more than changing the substantive outcome. In fact, on remand the Kansas Supreme Court does essentially the same thing. Why not just have the choice of law question be determined by the jurisdictional question. In other words, if a court has jurisdiction, it applies its own laws. Choice of law is a very complicated puzzle. 1st
Restatement of Conflicts was much clearer than 2nd Restatement (current) - influence of law professors. Full
Faith and Credit says that valid judgment will be enforced in other states, even if judgment obviously wrong.
F ULL F AITH & C REDIT VS .
D UE P ROCESS FOR C HOICE OF L AW : Using Phillips Petroleum as an example, there is a claim that OK law should be used for at least some of the claims brought in KS on behalf of the OK leaseholders. Is the KS court required/compelled by Full Faith and Credit Clause to apply OK law? Viewed from the other direction, it becomes a Due Process question: In other words, does it violate Due Process for KS court to apply KS law to an OK plaintiff? Court is happy to point out that this is under both Full Faith and
Credit and Due Process; test is the same under both clauses. Bottom of page 371: statement of the test under both clauses. The choice of law must be "neither arbitary nor fundamentally unfair.” This sounds a lot like
International Shoe , but it is in fact a different test. It is possible to find in personam jurisdiction under
International Shoe , and not find adjudicative jurisdiction (choice of law) under Phillips Petroleum , and vice versa. Allstate is an outlier case (Note 4 on 377), but it is an indication of how far distinction might go.
"Stacking” is a matter of state law, allowed or not allowed by state insurance agency. She brings suit in MN, and question is whether this violated Due Process for MN court not to apply WI law. Fletcher says as far as contacts with the litigation/interest in it are concerned, it seems clear WI has the greater claim, but Court says it is not a violation of Due Process to apply MN law (in part because she moved there for reasons not related to the litigation). This is a fairly effective demonstration of how weak the Full Faith and Credit Clause is, though this is at the boundary of how weak Clause will ever be. Most good lawyers should know how choice of law will affect any case of significance, but most do not. Most lawyers are uncomfortable with questions of conflicts of law, and seek to avoid them at all costs.
P
OST
S
HAFFER
T
ERRITORIAL
J
URISDICTION
: Question left hanging in Mullane - whether sufficient contacts
30

with state of NY to allow territorial jurisdiction. Propriety of exercising jurisdiction in the case was assumed, because this was preShaffer . But after Shaffer , is there territorial jurisdiction. Fletcher is quite sure there would be, though he is much less sure of proper reasoning. Is it enough that the beneficiaries were receiving checks? Perhaps, perhaps not. Is it enough to assume that the beneficiaries consented? Perhaps. What about the consent of the trustor/settlor? Is this enough? Maybe. None of this is an argument that we see in
Mullane , because world was "simpler” in preShaffer days. Another possibility is that jurisdiction would attach because of "jurisdiction by necessity.” We might be willing to find jurisdiction in NY because that otherwise we might not find jurisdiction anywhere. SO...he is fairly sure jurisdiction would attach, but he is not sure on what basis.
E
XAM
T
IP FOR
T
ERRITORIAL
J
URISDICTION
: This is both (1) very fact dependent and (2) very Supreme Court case dependent. Very unusual combination; only other area of law is 4th Amendment search and seizure (or
1st Amendment). To answer the exam, best to have fact patterns of cases in mind, set out quick general statement of framework (not very helpful), and then analyze question by comparison to the fact patterns of the various cases.
II. S UBJECT M ATTER J URISDICTION (380-383)
A court must have both territorial jurisdiction and subject matter jurisdiction before it can adjudicate a case (as well as proper venue and ability to withstand a forum non conveniens motion for dismissal).
Although they share "jurisdiction,” territorial and subject matter jurisdiction are fundamentally distinct.
The lack of territorial jurisdiction is a waivable defect (either deliberately or inadvertently). A want of subject matter jurisdiction, however, cannot be cured by waiver or consent of the parties. Even if both the plaintiff and the defendant agree they wish a state probate court to hear an ordinary contract dispute, or a federal court to hear a dispute based on state law between two citizens of the same state, they cannot do so.
State trial courts have concurrent subject matter jurisdiction with federal courts over most cases involving federal law. A state court of general jurisdiction can hear cases based on either federal or state law, subject only to the ability of Congress to confer exclusive jurisdiction on the federal courts over specific categories of cases. The general rule is that state courts have concurrent jurisdiction over all cases based on federal law, unless Congress has explicitly provided for exclusive jurisdiction. The only exception is federal anti-trust suits, for which there is exclusive (federal) jurisdiction even though the statute is silent. In all other cases of exclusive (federal) jurisdiction, an explicit federal statute provides it (e.g., admiralty, bankruptcy, patent and copyright, and some cases under the Securities
Exchange Act of 1934). Except for claims that are within exclusive jurisdiction of federal courts, a state court has a constitutional obligation to adjudicate claims and defenses within their jurisdiction.
Federal District Courts have concurrent jurisdiction with the state courts over many cases involving state law. So long as there is a basis for federal subject matter jurisdiction, a federal court may hear the case, even if it involves state law. Usually, jurisdiction in such a case will be based on diversity of citizenship, but often a federal question case will also involve a claim or defense based on state law.
State courts have exclusive jurisdiction in cases where there is no federal grant of subject matter jurisdiction to the federal courts (based on state law, or no diversity between the parties).
W
AIVER OF
I
N
P
ERSONAM
,
NOT
S
UBJECT
M
ATTER
: Territorial jurisdiction defect may be waived because for the most part it is a matter of your own convenience, so that is up to you. However, subject matter jurisdiction is somewhat different, because it is designed to apportion the division of labor between the "heads” of jurisdiction, in this case in particular the federal and state courts. It was specifically decided not to make the federal courts into courts of general jurisdiction, so we should not let private parties rearrange the allocation of power so carefully drawn in the constitutional convention. It is not just a matter of their convenience, and so it is not up to them.
J URISDICTION MUST BE G RANTED BY S TATUTE : Article III sets outer boundaries of permissible federal court jurisdiction, but it does not compel jurisdiction. That is up to Congress, and Congress may choose to authorize
31

all or only some of the federal question jurisdiction, diversity jurisdiction, etc. Federal courts must base jurisdiction on explicit grant of power. Fletcher will assume for purposes of our work the received general wisdom: (1) constitutional parameters of jurisdiction are quite broad; (2) the statutory bounds of jurisdiction are less broad; and (3) it is not unconstitutional for jurisdiction to be less than its constitutional boundaries.
A. F EDERAL Q UESTION J URISDICTION (392-407)
It was not until after the Civil War, in 1875, that a general federal question jurisdiction statute was passed. The present form of the statute is 28 USC § 1331, which is little changed from the form enacted in 1875. The present statute provides, in words that echo the constitutional authorization, "The
District Courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States.” Although "arising under” matches the words of the constitution, the two meanings are different.
28 USC § 1331.
F EDERAL Q UESTION ; AMOUNT IN CONTROVERSY ; COSTS
1. Constitutional scope of federal jurisdiction is very broad: Osborn v. Bank of US (1824)
Bank of US authorized by statute to sue and be sued in federal court, even in cases where cause of action did not depend on federal law and/or no question of federal law was at issue. Enough that the bank was created under federal charter and a question of federal law might arise in suit brought by or against the Bank. Osborn just reaffirmed (despite criticism) in American National
Red Cross v. S.G and A.E. (1992) , where statute allowing suit was also affirmed because of federal charter. The upshot seems to be that constitutional limits on statutorily-given jurisdiction are very broad.
2. 28 USC § 1331 is construed more narrowly: "well-pleaded complaint” rule of Mottley
Plaintiff may not anticipate a federal defense by the defendant in her complaint and use that as basis for federal jurisdiction. The plaintiff’s cause of action must depend on/"arise under” federal law. Note that the well-pleaded complaint rule applies to the original jurisdiction of the
District Court, but not to appellate jurisdiction of the U.S. Supreme Court. Supreme Court’s appellate jurisdiction over cases coming up from state courts is governed by 28 USC § 1257, which gives jurisdiction whenever a question of federal law may be dispositive, regardless of which party asserted a right.
3. Plaintiff claim must be based on federal law / Constitution: Louisville v. Mottley (1908)
Suit because plaintiffs (H&W) agreed to release claims for negligence damages against railroad in exchange for lifetime free passes, but then railroad stopped giving them free passage because of an Act of Congress that forbade free passes/transportation. Plaintiffs claimed that (1) law does not do what the railroad says it does (forbid free passes), and (2) if it does it violates 5th
Amendment Due Process. Supreme Court says it does not have to reach the law, contract, or
Due Process questions because the circuit court (now called District Court) below did not have jurisdiction. Neither party questioned the jurisdiction, "but it is the duty of this court” to enforce jurisdiction anyway. There was no diversity of citizenship. Thus, it would have to rely on federal question jurisdiction, which can arise only when a "plaintiff’s statement of his own cause of action shows that it is based upon those [federal] laws or that Constitution.” Not enough for plaintiff to allege an anticipated defense.
"A RISING U NDER ” M ORE N ARROW IN S TATUTE (§ 1331) THAN IN C ONSTITUTION : Federal question jurisdiction statute (§ 1331) stops far short of outer constitutional boundary. "Arising under”: parallel phrasing to Constitution, but does not mean the same thing. The drafters of the statute in 1875 intended them to have parallel phrasing (and parallel meaning), but it quickly became apparent that the statute would push too much business into the federal courts. Instead of sending the statute back to Congress for a re-drafting, however,
Court just decided to re-construe it. So parallel phrasing is not a result of poor drafting; they were just
32

rebuffed.
M OTTLEY , "A RISING U NDER ,” AND A "W ELL -P LEADED C OMPLAINT ” : The jurisdiction question "must be” raised sua sponte by a court "when seen,” even if only for the first time on appeal. Court says the plaintiffs were anticipating a federal defense, and were only claiming a 5th Amendment violation as a response to that defense. So not really part of "well-pleaded complaint.” Does this result naturally from the "arising under” language? One might say Osborn actually got it wrong, and that perhaps "arising under” is actually not the best way to describe the outcome in that case. Perhaps it is more accurate to say suit must "potentially involve” question of federal law. "Well-pleaded complaint” rule may accurately describe the "arising under” analysis, but perhaps this rule is just a bit too narrow. Fletcher is not saying Osborn was wrong, but on a language basis without respect to the history or context it may be that "arising under” is not an accurate description of federal question jurisdiction. The line between "plaintiff’s case” and "affirmative defense” is very blurry, so it may be a bit disingenuous to say that the plaintiffs’ claim of a 5th Amendment violation in this case is not part of the "complaint” and is only a "response” to an "affirmative defense.” It may be correct to say 5th Amendment violation (the "taking” by the government) does not happen until after the defendant alleges the statute as a defense, such that this violation would not appear on the "face” of the complaint. Thus Court appears to be saying though this may be part of "well-pleaded reply,” it is not part of "well-pleaded complaint.”
On the facts of this case, this is a rather stupid rule. The thing that we are really arguing about in this case is a federal statute, so how is this not a federal case? The string cite on page 394 indicates just how "well-settled” a rule this was by the time Mottley came about (since 1888), yet for some reason not only lawyers but judges below Supreme Court had a hard time accepting or understanding it. This rule will have the consequence of sending into state court some cases where federal question really does predominate, but this rule has remained because nobody can think of any alternative that is not worse.
4. Using federal statute in state claim - not federal: Merrell Dow v. Thompson (1986)
Families brought tort suit against Merrell Dow (pharmaceuticals) for birth defects (negligence, strict liability, etc.) caused by manufactured drug. Alleged drug was "misbranded” in violation of the Federal Food, Drug, and Cosmetic Act (FDCA) and this constituted a "rebuttable presumption of negligence.” Merrell Dow removed to federal court, claiming import of standard from federal statute meant action was "founded, in part, on an alleged claim arising under the laws of the United States.” District Court denied motion to remand, and dismissed for forum non conveniens . The appellate court reversed, saying federal question jurisdiction would only exist if plaintiffs’ right to relief "depended necessarily” on a substantial question of federal law. Supreme Court affirms this decision, saying that this was not a case to which federal subject matter ought to attach. Although the constitutional meaning of "arising under” may extend to all cases in which a federal question is even a mere "ingredient” of an action, the statutory grant of questions "arising under” federal law is more limited. This must be determined by reference to the "well-pleaded complaint” (both for the question of subject matter jurisdiction and the question of removal jurisdiction). Usually two ways a claim may arise under federal law: (1) a "suit arises under the law the creates the cause of action,” so that the vast majority of general federal-question jurisdiction suits are those in which federal law creates the cause of action; (2) "vindication of a right under state law necessarily turned on some construction of federal law,” but this statement must be read with caution (limited application).
In this case, there is no allegation that federal law creates any of the causes of action asserted, and the parties agree that there is no federal cause of action for FDCA violations (Congress did not intend a private federal remedy for violations of the statute it enacted). The "long-settled” understanding is that the "mere presence” of a federal issue in a state cause of action does not confer jurisdiction. In a complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim "arising under the Constitution, laws, or treaties of the United States.”
Dissent: Should be federal subject-matter jurisdiction over the question of interpreting and
33

applying FDCA. Fact that Congress did not create a private remedy does not indicate no federal jurisdiction. To assume that Congress intended no private right of action would pre-empt any state restrictions.
M ERRELL D OW AND THE W ELL -P LEADED C OMPLAINT R ULE : The well-pleaded complaint rule works fairly well both as a means of sorting cases that should go into federal and state courts and as a means of predicting how courts will construe 28 USC § 1331. As seen in Merrell Dow , however, rule does not work perfectly. No one disputed that the Merrell Dow plaintiffs’ federal question was properly pleaded in their complaint, but the
Supreme Court denied jurisdiction anyway. The Court has noted that while it is a "powerful doctrine” and a
"quick rule of thumb,” the well-pleaded complaint rule could "produce awkward results.” Professor Cohen said in 1967 that no single rule was ever likely to suffice for interpreting general federal question statute (28
USC § 1331). Still true.
P LEADING THE W ELL -P LEADED C OMPLAINT : Rule 8 is basic Rule in federal court: "short and plain statement.” 8(c) talks about affirmative defenses (list has been there since 1938), and explicitly indicates non-exclusive list. Remember this deals not just with complaints pleaded in federal court, but also those that start in state court and are then removed. This tends to be glossed over. The Well-Pleaded Complaint Rule asks what is in the complaint when well-pleaded (ideal) without anticipating what has to be a defense to the complaint. So consider the best version of the complaint without anticipation. What if you bring suit in federal court with both a federal claim and state claim, and federal claim is dismissed (12(b)(6)) early on. Does this mean you lose federal jurisdiction? No, unless federal claim was "frivolous.” Do not have to have
"winning” federal claim in order to sustain jurisdiction.
5. Not explicitly limited to claims "created” by federal law: Smith v. KC Title (1921)
Justice Holmes suggested federal question jurisdiction should exist under § 1331 whenever federal law "creates” the cause of action: "A suit arises under the law that creates the cause of action.” But this test is too restrictive. If case satisfies the test there is clearly federal question jurisdiction under § 1331, but some cases that do not satisfy the test are nevertheless federal question. For example, in Smith plaintiff was shareholder in a corporation that sought to purchase bonds issued by federal agencies under the authority of federal law. Plaintiff asserted state law cause of action, but argued that the bonds were invalid under federal law on the ground that the federal statutes under which they were issued was unconstitutional. The validity of the bonds was the central, indeed the only, issue in the case. Thus, the cause of action was created under state law, but the only question that was actually presented was federal. The Court held that there was jurisdiction under § 1331. How is this case reconcilable with Merrell Dow (by the importance of the federal issues in the case)?
F
ROM
S
MITH TO
M
ERRELL
D
OW
I
MPORTANCE OF
F
EDERAL
Q
UESTION
: In Merrell Dow we are in federal court, where plaintiffs did not want to be. 6 causes of action, one of which alleges FDCA creates a "rebuttable presumption” of "misbranding.” We know that if Congress had specifically created a federal cause of action for misbranding, there would be federal question jurisdiction. But is converse automatically true (if Congress has not specifically created a federal cause of action there is not federal question jurisdiction)? If this is true, then Smith goes out the window (as is pointed out in the dissent to Merrell Dow ). Can Smith and Merrell
Dow both be good law? It may be that Merrell Dow is not saying that you cannot have federal question without a cause of action created in the statute by Congress (though they are at least implying it is unlikely) - it might be more that FDCA question does not go as much to the heart of the matter as did the bond issue in Smith v. KC Title and Trust . But if Merrell Dow is read as saying that not having a federal cause of action is the deciding issue, it is inconsistent. The only way it is possibly consistent is if you read this opinion to be actually saying not having a federal cause of action is a strong factor, but not dispositive/decisive (especially when you consider centrality of federal question). To some extent (Fletcher says), rhetoric of the opinion expresses
Stevens’ desire to overturn Smith , but he does not have a majority behind that sentiment, so his rhetoric may or may not match the final outcome. What happens after Merrell Dow in terms of determining whether a federal
34

question gives jurisdiction? It appears to be necessary to assess in every (predominantly state law case) the importance/centrality of the federal question. This opinion is in a way Holmes’ perspective ("arising under” = only a federal cause of action) creeping back in, but Stevens cannot get the votes to overrule Smith (from which
Holmes dissented quite vigorously). Fletcher’s primary objection to case is not whether it belongs in federal court, but rule is difficult to anticipate and to administer.
6. Declaratory suit not a "well-pleaded complaint”: Skelly v. Phillips Petroleum (1950)
A declaratory judgment suit is used to obtain an early judicial determination of rights. A plaintiff in a declaratory judgment suit is often someone who would have been defendant had he simply gone ahead with the action contemplated/asked about in the declaratory suit. This means that a plaintiff’s "well-pleaded” declaratory judgment complaint will assert rights based on federal law that would have appeared in the answer had plaintiff waited to be made a defendant in a "coercive suit.” But Court has said (repeatedly) Congress did not intend (with the Federal
Declaratory Judgment Act) to expand the practical reach of federal question subject matter jurisdiction by allowing declaratory plaintiffs to rely on federal rights that (without the Act) could only have been asserted as defenses in a "coercive suit.” Federal courts are not responsible for hypothesizing possible complaints.
"P REPOSTEROUS ” S KELLY O IL D ECISION : Fletcher thinks Skelly Oil is a "preposterous” reading of the Federal
Declaratory Judgment Act, a result of Frankfurter’s "deeply principled” belief that federal question jurisdiction is "bad” (also wanted to restrict flow of cases into federal court).
Skelly says you must look at "hypothetical” complaint that would be filed in a "coercive suit,” rather than actual complaint in a declaratory judgment case.
7. "Malicious prosecution” (federal) - no jurisdiction: Berg v. Leason (9th Cir 1994)
Plaintiff sued for malicious prosecution under CA law, basing jurisdiction on § 1331. Plaintiff contended that defendants had filed a malicious suit (lacking in "probable cause”) under federal
Security and Exchange Act and federal RICO. "Probable cause” determined by assessing whether underlying causes of action in first suit (prosecution) were legally tenable. Ninth
Circuit declined to find federal jurisdiction: "The task of deciding whether an underlying federal claim was legally tenable does not raise a substantial federal question of federal law.”
B. D
IVERSITY
J
URISDICTION
(407-418)
Article III confers jurisdiction on federal courts over "Controversies...between Citizens of different
States; ...and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.” 28 USC
§ 1332 is still remarkably similar to the 1789 version. The most obvious purpose of diversity jurisdiction was to protect out-of-state litigants against local prejudice. Another purpose of diversity jurisdiction was to provide a nationwide system of courts in which important commercial disputes could be adjudicated and a uniform system of law applied. Commercial law was almost entirely judge-made common law, which could vary from state to state. By and large, the state courts appreciated the stability and uniformity of the federal courts’ decisions in commercial cases, and tried to conform their decisions to the federal precedent. However, the general common law of Swift v. Tyson was abandoned by the Supreme Court in Erie , and federal courts now follow the laws of the states in which they sit.
Thus, whatever advantage diversity jurisdiction and the general common law might once have provided in achieving uniformity is now gone. This advantage had disappeared (or been outweighed by problems) by the end of the nineteenth century. Therefore, only the rationale of protection of out-of-staters from prejudice remains. Is this convincing?
28 USC § 1332.
D IVERSITY OF C ITIZENSHIP ; AMOUNT IN CONTROVERSY ; COSTS
For diversity purposes, a natural person is a citizen of a state in which he or she is "domiciled,” which is distinct from residence (note that venue and related statutes use "residence” rather than "domicile”).
There is an oddity to this statute as it applies to Mas v. Perry , since an American citizen domiciled
35

abroad has no way of using § 1332 (not citizen "of a state,” not a "foreign Subject”), but alien can use §
1332 in 2 ways: (1) as subject of a foreign state; and/or (2) as a permanent resident of a diverse state.
For federal diversity jurisdiction, corporation is treated as citizen of both state of incorporation and principal place of business. Two separate lines of authority about concept of principal place of business: (1) principal place of business is where corporation carries on its primary production / service activities; or (2) principal place of business is where corporation’s administrative office, or "nerve center,” is located. One court has merged the two, applying a "total activity” test that looks at either or both place of production and administration, depending on how corporation is organized. Meanwhile, unincorporated association is a citizen of all states in which members of the association are citizens.
This rule has most frequent application to business partnerships and unions. For trusts, suit on behalf of a trust may be brought solely in name of trustee; if so, citizenship of the trustee alone, and not that of the trust beneficiaries, will be considered for purposes of diversity.
8. For diversity, party is a "citizen” of state of "domicile”: Mas v. Perry (5th Cir 1974)
Mr. Mas is a citizen of France and Mrs. Mas grew up in MS (parents’ home). They were graduate students at LSU (in LA), got married, and then went back to LSU. Then moved to IL, but at time of trial intending to go back to LSU for Mr. Mas to finish a PhD. They are suing landlord of the place they lived after getting married and returning to LSU for spying on them through two-way mirrors in the bathroom and bedroom ("peeping Tom”). Defendant (Perry) challenges jurisdiction, saying since everybody lives in LA, no diversity. Court says Mr. Mas is a citizen of France, so he can use § 1332 for diversity, and Mrs. Mas, because she has not established a new "domicile” since leaving MS, is still legal "citizen” of MS. Thus there are two bases for diversity jurisdiction. Court says change of domicile requires (1) taking up residence in a different domicile with (2) intent to remain there, and since there was never a clearly-established intent for the Mas’ to stay in LA, not a new domicile. It would also be incongruous to allow Mr. Mas on diversity jurisdiction as a citizen of France but not allow Mrs.
Mas to sue in federal court (implying that her jurisdiction can "ride along” with his). As for the question of amount in controversy (since Mr. Mas was only awarded $5,000), court says it only requires that plaintiff plead "in good faith” required amount, not that he actually collect it.
"Since the district court had jurisdiction of Mr. Mas’s action, sound judicial administration militates strongly in favor of jurisdiction of Mrs. Mas’s claim.”
"D OMICILE ” AND THE "B ONAFIDE I NTENT TO R EMAIN ” : The question in Mas v. Perry is whether there is diversity jurisdiction (and whether amount in controversy is sufficient). Court finds that though wife resides in
LA, she is "domiciled” in MS. "Domicile” requires not just that person "resides” somewhere, but that he or she has the "intent” to "remain indefinitely.” In order to adopt a new domicile you must meet both criteria, and until you do, you are still a citizen of your former "domiciliary” state (so she is still domiciled in MS until she adopts a domicile in another state). Mere fact of being a domiciliary of a particular state is not enough, however, to assert personal jurisdiction over you (you still must have "minimum contacts”), although there is one old case that says so. You can manifest a "bonafide intent” to remain even after only two weeks, but it must be a bonafide intent.
9. "Complete diversity” is required by § 1332: Strawbridge v. Curtiss (1806)
"Complete diversity” means that all plaintiffs must be of a different citizenship from all defendants. Complete diversity is a statutory requirement under § 1332, not a constitutional requirement. For example, the federal interpleader statute (28 USC § 1335) does not require complete diversity, and for a class action under Rule 23, only the citizenship of the named class representative(s) counts.
10. Federal court may dismiss non-indispensable non-diverse defendant under Rule 21
In a suit originally filed in federal court against several defendants, one of whom defeats complete diversity, or in a suit removed from state court in which such a defendant is added after
36

removal, the District Court may dismiss the defendant under Rule 21 in order to preserve jurisdiction. The dismissal is in the "sound discretion” of the district judge, and is permissible so long as defendant is not an "indispensable party” under Rule 19. A Court of Appeals may also do this (w/o remand). Higher standard if a defendant seeks to remove, and tries to dismiss a non-diverse defendant; must show that the non-diverse defendant was joined "fraudulently” in an attempt to defeat removal.
11. Defendant - "legal certainty” of not enough in controversy: St. Paul v. Red Cab (1938)
Defendant opposing jurisdiction on the ground of an insufficient amount in controversy must prove to a "legal certainty” that plaintiff cannot recover damages in excess of (now) $50,000.
The test is obviously designed to favor plaintiffs, but it is not an "open sesame” for all claims, even when the plaintiff has suffered substantial harm. Claims for punitive damages part of jurisdictional amount, but "a claim for punitive damages is to be given closer scrutiny, and the trial judge accorded greater discretion than a claim for actual damages.” (I remember they cannot be too speculative).
"A
MOUNT IN
C
ONTROVERSY
”
MUST BE DEFEATED BY
"L
EGAL
C
ERTAINTY
”: Should fact that Mr. Mas only ultimately recovered $5,000 mean he should have failed amount in controversy requirement of $10,000? Court says no, he only has to have sought a sufficient amount "in good faith.” Amount in controversy is only defeated when court can establish "to a legal certainty” that less than amount in controversy is at stake. This will almost never be possible in tort suits, and only sometimes in contracts (perhaps more possible because of unavailability of punitives / pain and suffering). Designed to prevent federal courts from turning into
"diversity” small claims.
12. Injunction valued by highest-value perspective (P or D): Glenwood v. Mutual (1915)
In Glenwood the Supreme Court upheld jurisdiction by valuing the injunctive relief sought from the plaintiff’s perspective. The general tendency (though not uniform) is to find jurisdiction if the amount in controversy is satisfied when the relief is assessed as if by either plaintiff or defendant.
13. Multiple claims aggregate, but not multiple plaintiffs: Snyder v. Harris (1969)
The general rule is that a plaintiff may aggregate all claims brought in single complaint, even if the causes of action are unrelated to one another, to satisfy the jurisdictional amount. The same is not true, however, of multiple plaintiffs. This rule extends to class actions, in that each member of the class (named and unnamed) must satisfy the jurisdictional amount. However, if individual or class plaintiffs have an undivided interest in he claim (e.g., common interest as shareholders), the value of the entire interest may be considered (e.g., amount of injury to entire class of shareholders).
14. Federal-court counterclaims not counted; compulsory (removal) counterclaims may be
Amounts sought in permissive counterclaims (Rule 13(b)) are not considered part of the amount in controversy. Neither are compulsory counterclaims (Rule 13(a)) on cases filed directly in federal court. However, the cases are split on whether to allow removal on the basis of compulsory counter claiming over $50,000 in damages. Some allow removal on this basis; some do not.
15. Diversity cannot be by "assignment” or "collusion”: Kramer v. Caribbean Mills (1969)
Assignment or joinder of parties may not be done "improperly or collusively” to get jurisdiction
(28 USC § 1359). In Kramer , a Haitian and a Panamanian corporation were in a dispute, and the Panamanian corporation assigned its entire claim ($165K) to its lawyer (Kramer), a TX citizen, for the sum of $1. In a separate agreement, Kramer agreed to pay 95% of any recovery as a "bonus.” Kramer then sued in his own name on diversity jurisdiction, and got a verdict of
$165K. Court said that there was no jurisdiction, because if this were allowed every state case
37

could be federal.
16. Diversity jurisdiction - excludes probate/domestic: Ankenbrandt v. Richards (1992)
Although no explicit exception in § 1332, under long-established case law diversity jurisdiction is not applicable to proceedings to probate a will or to administer a decedent’s estate, to domestic suit including divorce, alimony, or child custody. In Ankenbrandt , the Court recognized the existence of the domestic relations exception, but sustained custody over an incest case as not applying.
C
OMPLETE
D
IVERSITY AND
"I
MPROPER OR
C
OLLUSIVE
” A
SSIGNMENT
/J
OINDER
: Diversity jurisdiction
(under § 1332) is only available so long as there is complete diversity between plaintiffs and defendants. This is only a statutory rule, not a constitutional rule. Interpleader (§ 1335) is a special statutory rule that does not require complete diversity. For interpleader, diversity required is only "minimal diversity among the claimaints,” which means that only one of the claimants has to be diverse from other claimants. "Assignment”:
§ 1359 provides that assignment or joinder of parties may not be done "improperly or collusively” (so presumably jurisdiction can be created by assignment or joinder, so long as it is not "improper or collusive”).
Statute does not say assignment or joinder cannot be used to defeat diversity jurisdiction. Law used to say you could not use assignment or joinder at all, but statute recognizes there are some assignments that are legitimate, that have nothing to do with creating diversity. What "collusive or improper” means is that there are going to be some questions about the interpretation of these terms used to describe assignment/joinder. The statute does not rule out assignment to defeat jurisdiction.
"F RAUDULENT J OINDER ” : World-Wide Volkswagen - If you get rid of the last two defendants (the dealer and the regional distributor, both in NY), there is diversity jurisdiction; with them in the case, it is defeated. The fight was really about whether we can keep in these defendants in order to defeat jurisdiction and stay in OK.
"Fraudulent Joinder”: To preserve diversity, judge may dismiss "fradulently joined” defendants (or plaintiffs?). However, judge’s power is not limited to this; may also dismiss any non-"indispensable party” under Rule 19. The fine-grained law on much of diversity jurisdiction is not Supreme Court law; mostly decided by lower courts.
C. S
UPPLEMENTAL
J
URISDICTION
(418-434; S
UPP
.
35-41)
In 1990, by recommendation from Federal Courts Study Committee, Congress enacted 28 USC § 1367, conferring "supplemental jurisdiction” on the federal courts. "Supplemental jurisdiction” is a new term, subsuming old categories: "pendent jurisdiction,” "ancillary jurisdiction,” and "pendent party jurisdiction.” The new statute preserves the results reached in United Mine Workers v. Gibbs and Owen
Equipment .
Modern notion of judicial efficiency is that court should resolve as much as possible in single proceeding (e.g., rules allowing or requiring joinder of claims and parties). But efficient resolution of disputes is not always possible, and FRCP 82 makes explicit what would almost certainly be true even if not stated: The "rules shall not be construed to extend or limit the jurisdiction of the United States
District Courts.” If the Federal Rules would permit a claim or party to be joined but the jurisdictional statutes do not permit it, the Federal Rules must give way. The controlling limitation is always federal subject matter jurisdiction.
"S UPPLEMENTAL J URISDICTION ” : Jurisdiction over claims brought between existing parties or between existing parties and new parties, for which there is no federal subject matter jurisdiction if the claims are considered alone. For example, a plaintiff who is a co-citizen with the defendant may have two claims against the defendant, one in federal law and one in state law. There is federal question jurisdiction (§ 1331) over the federal-law claim, but no subject matter jurisdiction over the state-law claim (if considered independently of the federal-law claim). Prior to enactment of the new supplemental jurisdiction statute, several different terms
38

were used to describe whether any federal jurisdiction could attach to a state-law claim: "Pendent jurisdiction” was jurisdiction over additional claims brought by the same plaintiff against the same defendant (as in United
Mine Workers ); "Ancillary jurisdiction” was jurisdiction over additional claims brought by existing parties other than plaintiff (usually defendant) or over claims brought by or against additional parties ( Owen Equipment );
"Pendent party jurisdiction,” a subcategory of "ancillary jurisdiction” was jurisdiction over claims brought against additional parties, as in Owen Equipment .
17. Federal question must be "substantial” to case: United Mine Workers v. Gibbs (1966)
Rivalry between two labor unions: United Mine Workers (Local 5881) and Southern Labor
Union. Laid-off members of UMW Local 5881 beat up members/organizers of SLU for jobs they felt they had been promised at newly-opening mine (no representative of international
UMW was present). Gibbs was one of those hired through SLU to work new mine, who was prevented from working. He lost his job, and soon began to lose other trucking contracts and mine leases as well; he argues it was the result of a concerted union plan against him, and he is suing the international UMW ( not the members of the Local or its administration). Brought suit in District Court in TN under § 303 of Labor Management Relations Act (federal), and for conspiracy to interfere with contract (state - based on pendent jurisdiction). Jury verdict against
UMW on both counts. Supreme Court says that for the initial question of whether the federal court had jurisdiction over the state claim, test in Hurn v. Ousler was whether there was a single
"cause of action” containing both federal and state bases for relief (in which case jurisdiction was proper) or two distinct "causes of action,” only one of which was federal in character (in which case it was not). Court says this test, as interpreted, is too limited. True test is that "pendent jurisdiction” exists whenever there is claim arising under the Constitution, laws, or treaties of the
US, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one "case.” The federal claim must have "substance sufficient to confer subject matter jurisdiction on the court.” Power of a court to hear all claims in one "case” is discretionary (not a right of the plaintiff), but there is no reason a court may not exercise this power over a single "case.” The question of power is resolved on the pleadings, but the issue of whether pendent jurisdiction has been properly assumed remains open throughout the litigation ("substantial hegemony of state law claims” may lead to dismissal).
"Once it appears that a state claim constitutes the real body of a case, to which the federal claim is only an appendage, the state claim may fairly be dismissed.” In this case the District Court did not exceed its discretion in proceeding to judgment on the state claim: the § 303 claims were substantial part of the case, and emanated from the same nucleus of operative fact as the state claims. Fact that federal claims ultimately failed and recovery was only on state claims does not mean that questions of federal law played a "remote” or "minor” role in the trial. Also, possible question of preemption by federal law was a question particularly suited to the federal court.
REVERSAL ON MERITS.
"C OMMON N UCLEUS OF O PERATIVE F ACT ” : Court tells us there is something called "pendent jurisdiction” which allows the federal court to hear the state law claim, but is there any textual basis for this argument (in the
Constitution). The Court says this is authorized by Article III, § 2, and says that "common nucleus of operative fact” makes this one "case” such that it should be decided by a single court (in this case a federal court). The
Court completely makes this "common nucleus of operative fact” language up in United Mine Workers v.
Gibbs . There is really nothing in the text of Art. III that gives the federal courts this power (at least explicitly), and this outer constitutional boundary is created by the Court. So this sets the "outer constitutional boundary”: so long as the dispute(s) arise out of a "common nucleus of operative fact,” there is constitutional authority for a single (federal) court to hear them. But there still has to be statutory authority for the assertion of jurisdiction; why not just consider the Federal Rules to be conferring the necessary jurisdiction? NOTE: Rule 82 says that the Rules do not extend jurisdiction (or confer it). We look elsewhere for jurisdiction, to §§ 1331, 1332, 1335,
1367, etc. It is possible that even if we did not have Rule 82 specifically, the Rules Enabling Act would still prevent the Rules from conferring or extending jurisdiction. Rules allow very liberal joinder of parties, but
39

there will be occasions where the Rules permit it, but the underlying statute does not (for reasons of jurisdiction/diversity). If the statutory structure does not permit it, you are "out of luck,” and Rules will give no warning of this potential/actual conflict. Does it make sense to allow pendent jurisdiction on the facts of
United Mine Workers v. Gibbs . If there is no pendent jurisdiction over the state law claim, then the plaintiffs will either have to file the state and federal claims separately, or have them both resolved in a state court. So one of the things this rule does is to allow somebody to come into federal court to get dispute resolved; we now have two courts capable of fully resolving the dispute. There will be some issues on which federal court will have an exclusive grant of jurisdiction, such that you cannot go into state court to resolve both claims, but this is not one of those kinds of cases. This frees up "plaintiff’s choice,” although if the plaintiff goes into state court, the defendant may remove. If the plaintiff files in federal court, the defendant may not take it back to state court (it will remain in federal). United Mine Workers was a "landmark” case; it replaces the "grudging” rule that preceded it with a fairly workable test for determining federal jurisdiction over "pendent” state claims.
The problem is what to do when we come up against a statutory limitation that comes up short of the constitutional boundary.
N O D IVERSITY J URISDICTION IN U NITED M INE W ORKERS : Why no diversity jurisdiction? Remember not to do a "minimum contacts” analysis, since that is only for personal jurisdiction. Our question is the "citizenship” of the parties in the case. A corporation is a "citizen” of both its state of incorporation and its principal place of business. A labor union (as an "organization”) is a citizen of all the states of its membership. This means that since it has members in Tennessee, it is a "citizen” of Tennessee, and there is no diversity jurisdiction with
Gibbs.
18. Claims apparently must be against same party/parties: Aldinger v. Howard (1976)
Plaintiff brought federal Civil Rights claim against individual defendants under 28 USC § 1343 and 42 USC § 1983, and a state-law claim arising out of the same facts against Spokane County.
The Supreme Court denied ("pendent”) jurisdiction over the state-law claim against the additional party, Spokane County. Plaintiff could have sued all the defendants in state court, and the Court noted that a different case would be presented if one of the defendants could only be sued in federal court (i.e., state claim would presumably be allowed, for judicial economy entire suit in one court).
19. Still must have complete diversity under § 1332: Owen Equipment v. Kroger (1978)
Kroger was electrocuted when the boom of a steel crane next to which he was walking came too close to a power line. His widow filed wrongful-death action in District Court in Nebraska against the Omaha Public Power District (OPPD), alleging negligence. Federal diversity jurisdiction, since widow was a citizen of Iowa. OPPD filed third-party complaint against
Owen Equipment, saying crane was owned and operated by them, and their negligence was the proximate cause. OPPD also moved for summary judgment on Kroger’s complaint, Kroger amended complaint to include Owen as additional defendant, and OPPD’s summary judgment was granted. Amended complaint now against Owen, allegedly corporation in NE, still giving diversity jurisdiction. On third day of trial, discovered Owen actually a "citizen” of Iowa, so no diversity. District Court reserved judgment, and jury verdict in favor of Kroger came through
(court later denied motion to dismiss). Judgment affirmed on appeal; question is application of
United Mine Workers to diversity jurisdiction case. Undisputed there was no independent basis of federal jurisdiction over state-law tort action, since both are citizens of Iowa. But United
Mine Workers was about "pendent” jurisdiction, not like this one about "ancillary” jurisdiction - no claim based on substantive federal law, only state-law torts against two different defendants.
United Mine Workers delineated constitutional limits of federal judicial power, but constitutional power is "merely the first hurdle”; also statutory limitations. The diversity jurisdiction statute (§
1332) requires complete diversity; it is clear that Kroger could not have brought suit in federal court (originally) naming Owen and OPPD as codefendants, but this is what resulted when she
40

amended her complaint (complete diversity was destroyed). Principles of ancillary jurisdiction cannot justify extension of diversity jurisdiction to non-diverse litigants.
C
OMPLETE
D
IVERSITY
R
EQUIRED AT ALL
T
IMES
: If Owens had been filed directly against both defendants in federal court, it would not have diversity. The only question is whether the way that this came about (by way of a third-party complaint and an amended complaint) should make a difference for diversity jurisdiction (i.e., does "ancillary” jurisdiction overcome lack of diversity). The Court says that it makes no difference, and complete diversity is always required. Should we care whether this could be a way of making an "end run” around the statutory need for complete diversity? This depends on how much importance we want to attach to the complete diversity rule. Remember that this is a statutory rule, and if Owen Equipment were to come out the other way, this would be constitutional. We have a "common nucleus of operative fact” here, and the constitution requires only "minimal diversity,” not complete diversity. So Congress could turn around and change this requirement.
20. For single "case,” claims arise from "common nucleus of operative fact”
The constitutional test in Gibbs says that claims must arise from common nucleus of operative fact and must be such that plaintiff "would ordinarily be expected to try them all in one...proceeding.” However, Rule 18, which allows a plaintiff to join all claims she has against a defendant in a single complaint whether or not the claims are related, permits a plaintiff to assert claims that satisfy the second but not the first part of the test. Gibbs writes the test more narrowly than Rule 18. Court has never determined whether this definition of "case” extends to ancillary jurisdiction ( Gibbs was a pendent jurisdiction case); the most obvious question is what to do with set-off cases: is it okay for defendant to counterclaim for a set-off based on a debt owed by plaintiff that is unrelated? This is okay under Rule 13, but it would apparently not be permitted by Gibbs . The Supreme Court has never addressed the issue, but lower courts have held that an unrelated set-off is permitted.
21. No ancillary even if exclusive federal (overruled by § 1367): Finley v. US (1989)
Private plaintiff sued the US under the Federal Tort Claims Act, which grants exclusive jurisdiction to federal courts. Plaintiff sought to join state-law claims against San Diego and power company under ancillary jurisdiction since neither additional party was of diverse citizenship from plaintiff. Court said that even though only court where claims could be brought together was federal court, and even though in previous dicta it had indicated this would be proper for federal court, no grant of ancillary jurisdiction over the claims against the two additional parties - denied. Led to § 1367.
H OW F INLEY S CREWED T HINGS U P , L ED TO § 1367 : In Finley , possible defendants included U.S. The plaintiff is not "reaching” to join all these defendants; these are all sensible defendants (not an "abuse” of joinder). Claims against U.S. can proceed only in federal court; other claims are based on state law. Absent
"ancillary” (or "pendent”) jurisdiction you would have to bring these as two different suits. Everybody assumed that the answer was clear (that it had been told to us in Aldinger ), and that the Supreme Court would clearly grant the ancillary jurisdiction. But the Supreme Court said, "No, sorry.” There is no "pendent party” or "ancillary” jurisdiction, even in circumstances where a defendant can only be sued in federal court, was the answer given by Finley . This is what led us to § 1367. It would have been easy to just overrule Finley , to say ancillary jurisdiction will attach whenever there is a claim within the exclusive jurisdiction of the federal courts.
But that is not what the statute did. Instead it gave us pendent/ancillary ("supplemental”) jurisdiction as broad as it would constitutionally go.
22. 28 USC § 1367 subsumes "pendent” and "ancillary” under "supplemental”
Section 1367(a) confers supplemental jurisdiction on the federal courts to the extent permitted by
Article III, subject to the exceptions set out in (b) and (c). Subsection (b) excepts claims or parties where jurisdiction is based on diversity of citizenship. Combined effect of (a) and (b) is
41

to give broad supplemental jurisdiction over claims combined with claims brought under federal question jurisdiction and somewhat narrower supplemental jurisdiction over claims combined with state-law claims brought under diversity jurisdiction. Section (c) gives District Court discretion to decline.
23. Supplemental jurisdiction attaches very broadly to federal question cases
Supplemental jurisdiction under § 1367(a) is as broad as Article III will permit, and this applies to cases in which the original claim is based on federal law without restriction. This is a significant broadening of the case law, going beyond a mere overruling of Finley . Also overruled are cases in which plaintiff brought suit against one defendant under federal law and then sought to add more defendants based on state-law claims, but in which there was concurrent jurisdiction in state court over the federal claim (such as Aldinger ) - the "common nucleus of operative fact” test will have a powerful influence on construing constitutional scope of Article
III for supplemental jurisdiction.
24. Supplemental jurisdiction attaches more narrowly to diversity claims
Exceptions in § 1367(b) make supplemental jurisdiction much more narrowly available in diversity cases; jurisdiction is restricted as a way of conserving the resources of the federal courts, and of encouraging litigants to take such disputes to state courts. The drafting of §
1367(b) is awkward, but it preserves prior law of pendent and ancillary jurisdiction in diversity cases ( Owen still good).
25. Zahn overruled by § 1367 - unnamed class members: Free v. Abbott (5th Cir 1995)
Plaintiffs filed suit for themselves and on behalf of a class in state court in LA; alleging conspiracy to fix prices. Defendants removed to federal court; plaintiffs moved to remand.
Court says it has proper diversity jurisdiction for both named and unnamed plaintiffs, and amount in controversy is met (even though each plaintiff only claims $20K) because attorneys’ fees will push each to $50K (at least for the named plaintiffs, which is all that is required). As for supplemental jurisdiction, it appears that under Zahn not possible to exercise diversity jurisdiction over unnamed class members who did not meet the amount-in-controversy requirement, but § 1367 is written more broadly, and does not carve out an exception in (b) for class actions. Maybe Congress did not intend § 1367 to overrule Zahn , but the statute is not written that way. When statute is not unclear or ambiguous, no need to search legislative history. The statute’s first section vests federal courts with power to hear supplemental claims generally, subject to limited second section exceptions; class actions not among these.
Overturning Zahn "not absurd.” Under § 1367, court can exercise jurisdiction over unnamed class members who do not meet amount-in-controversy requirement. Not remanded.
W HAT § 1367 DID TO Z AHN AND TO C LASS A CTIONS : In Free , plaintiffs filed class action in state court, and defendant removed to federal court. Plaintiffs moved for remand back to state court, and the federal court granted (declined to retain jurisdiction), even though (presumably) it could have had diversity jurisdiction, on the basis of the "doctrine of abstention.” The court says that the statute overrules Zahn (even though it might be a "mistake”). Prior to the passage of § 1367, law as to class actions and diversity jurisdiction was very
"weird.” Rule 23(b)(3): a "damages” class action. Rule for 23(b)(3) class actions and diversity prior to § 1367 was "anomalous.” For named plaintiffs, still had the requirements of diversity and amount in controversy.
Unclear, however, whether this applied to unnamed plaintiffs. Ben Hur said unnamed plaintiffs do not have to be diverse; their citizenship does not matter. This is still the rule (unchanged by § 1367). Zahn said unnamed plaintiffs still had to be able to claim the amount in controversy in order for there to be jurisdiction (obvious tensions between these two cases). Zahn was overruled by § 1367 as interpreted through Free . How did inconsistency develop? Ben Hur was decided a long time ago, before courts were particularly worried about class actions, while Zahn was a more recent expression of hostility to class actions. Did Congress intend to
42

overrule Zahn through the passage of § 1367? Who knows, and who cares? Not actually concerned about what they "intended,” but more what they actually did. § 1367 says it must be a common "case or controversy,” which is undefined. Presumably "common nucleus...” Fletcher is not sure that "common nucleus of operative fact” is or should be the constitutional test; it does not have a "historical aura,” since
Brennan made it up. However, it may have been what drafters meant. Notice that § 1367(a) says "except for as provided in (b) and (c)”; this takes away some of the jurisdiction so broadly granted in (a). There are a list of "excluded claims,” which does not include Rule 23. Therefore, Free is right in saying that class actions are not excluded from the broad jurisdiction given in § 1367(a). The delicious irony is that Judge Higginbotham is actually fairly conservative, and though he feels bound by the language of the statute to grant jurisdiction in this case, he would probably not want this much jurisdiction. This is also how the drafters of the statute undoubtedly felt (they did not mean to make it this broad, perhaps). They did not mean it to overrule Zahn , but the statute that they created clearly did so on its language. The circumstance with class actions is unusual, in that § 1367 did not actually overrule many things done beforehand. Leonhardt v. Western Sugar Co.
, 160 F.3d
631 (10th Cir., Nov. 13, 1998); goes other way from Free and holds that Zahn is not overruled.
26. No amount requirement for Rule 20 joinder: Stromberg v. Press (7th Cir 1996)
The court found supplemental jurisdiction over a claim by an additional plaintiff joined under
Rule 20 in a diversity case even when plaintiff could not satisfy the amount in controversy requirement. Free was not directly on point but both cases share the same analytic structure: failure of § 1367(b) to explicitly exclude class members under Rule 23 and plaintiffs joined under Rule 20.
27. Other bases (besides § 1367) for supplemental jurisdiction: set-off, ancillary
Counterclaims for set-off usually do not arise out of a "common nucleus of operative fact” with the plaintiff’s claim; if § 1367 is only for such related claims, can it be brought in? Probably yes? An additional way that courts might be granted supplemental jurisdiction is if a settlement agreement is not followed, and there is an explicit clause in the settlement requiring compliance.
Court indicates that this would be a violation of an order, and ancillary jurisdiction to enforce the agreement.
W
HAT
§ 1367 D
OES TO
O
THER
F
EDERAL
R
ULES
: Rule 13:The old Rule 13 was divided into compulsory and permissive counterclaims for ancillary jurisdiction. For the compulsory counterclaim, there was ancillary, while for permissive there was not. § 1367 does not make any specific mention of counterclaims (either permissive or compulsory) - the "Judge Friendly problem” US for the Use and Benefit of D’Agostino
Excavators, Inc. v. Heyward-Robinson Co.
Back in the days when ancillary jurisdiction and Rule 13(a)
(compulsory) were seen to be coextensive, there was a fair amount of pressure to read "compulsory counterclaims” under Rule 13(a) fairly broadly. But Judge Friendly said that this did not make any sense, because it will force parties to plead everything as a possible counterclaim for fear of losing their ability to proceed on the claim, even though there is a different reason to read it broadly. § 1367 takes care of this
"problem”: we don’t have to worry so much about compulsory vs. permissive. Rule 14: § 1367(b) excludes
Rule 14 from supplemental jurisdiction. Under the pre-1367 rule, if a third-party defendant made a claim against the original plaintiff, and the plaintiff had a compulsory counterclaim against the third-party defendant, it seemed that ancillary jurisdiction would attach. This is clearly no longer possible (though this only eliminates one case every 35 years). Rule 19: Also excluded from § 1367 (this is the "necessary and indispensable parties” rule). Old rule is preserved; cannot join a plaintiff or defendant under Rule 19 if this would defeat diversity in a diversity case. If the party is indispensable, the remedy is to dismiss the case (not to join the party). Rule 24: Cannot claim against an intervenor, or claim as an intervenor, if that person would defeat diversity.All of these specific rules makes the absence of Rule 23 just "jump out at you.”
T HE E FFECT OF § 1367( C ) AND § 1367( D ) : § 1367(c) says merely because court can exercise supplemental jurisdiction, under certain circumstances the court is not required to exercise supplemental jurisdiction. To the extent that these criteria are different from those given in UMW v. Gibbs , these critera control for all claims
43

under (a) (all supplemental jurisdiction): (1) novel or complex issue of state law; (2) state law claim substantially predominates; (3) the district court has dismissed all claims over which it has original jurisdiction; or (4) other exceptional circumstances. The district judge actually has a fair amount of discretion, and Fletcher thinks they use it a lot. Why should Congress be able to potentially extend the statute of limitations under §
1367(d)? This statute is designed to take care of cases that spend a few years in federal court after having been originally filed in federal court, and then are dismissed to go back to state court. SoL is "tolled” by being filed in federal court.
D. R EMOVAL (434-444, S UPP .
41-43)
Caterpillar illustrates two important principles applicable to federal question removal cases under §
1441: (1) the plaintiff is the "master” of his complaint; and (2) federal defenses are not viable basis for removal. If plaintiff is willing to forgo federal-law cause of action, she may prevent removal by confining complaint to state-law cause of action. Removal is proper only if plaintiff could have filed the suit in federal court in the first place; well-pleaded complaint rule applies to removal by defendant as well as to the initial filing. Only the defendant has the right of removal; plaintiff may not remove based on a defendant’s counterclaim asserting a right under federal law. Strange to rely on plaintiff’s complaint given relaxation on pleading? There is an exception for "artful pleading” of a complaint to try to make a federal law claim look like state law claim; this is apparently most common in (or exclusive to?) cases where federal law preempts state.
M
ORE
L
IMITED
R
EMOVAL FOR
D
IVERSITY
C
ASES
: Removal is a one-way ticket; you cannot "remove” back to state court, and you can remand only if there is a failure of federal jurisdiction, or the federal court exercises its discretion under § 1367(c). Removal is evaluated on the same criteria on which you judge jurisdiction for a claim filed in federal court. The "well-pleaded complaint” rule applies both under § 1331 and § 1441. You must have the federal question in the complaint, apparently, which may not make as much sense for a removal case. "Look to the complaint.” § 1441(b) has a restriction on removal for diversity jurisdiction cases - hidden in the second sentence; "other such action” means a diversity-jurisdiction case. Totally confusingly written, but here the removal jurisdiction is actually narrower than original jurisdiction. What this rule means is that if a state court claim is brought by a plaintiff in the home state of any one of the defendants, defendants may not remove to federal court. This is an incorporation of the "prejudice rationale”; removal is denied if there is no
"prejudice.”
28. Removal - plaintiff’s "well-pleaded complaint”: Caterpillar v. Williams (1987)
Plaintiffs were employees laid off by Caterpillar who brought suit for breach of contract solely on CA state law in CA state court. Caterpillar then removed to federal court, arguing that removal was proper because individual employment contracts were "merged” into collective bargaining and thus were pre-empted by federal collective-bargaining law. Court says absent diversity (not present) the presence or absence of federal question jurisdiction is governed by
"well-pleaded complaint rule,” and exists only when it is presented on the face of the plaintiff’s complaint. Court disagrees that right to sue under individual contracts was completely preempted by federal law; agrees plaintiffs could have chosen to sue under federal law (or in addition) but they are "masters of the complaint.” State-law claims not "actually” federal law claims, since plaintiff covered by collective-bargaining agreement still free to assert state-law contract rights independent of that agreement, so long as the contract relied upon is not a collective-bargaining agreement (i.e., individual contract). Employer may dispute continuing viability of individual contract because of collective-bargaining agreement in state court.
Plaintiff’s state-law claim may not be preempted simply because defense to claim of employer raises a federal question. Plaintiff is the master of the complaint, a federal question must appear on the face of the complaint, and plaintiff may choose state court by declining to pursue federal claims. Defendant cannot try to inject a federal question not pleaded by the complaint.
44

"C
OMPLETE
P
REEMPTION
”
AND THE
"W
ELL
-P
LEADED
C
OMPLAINT
” : What the Court has done with labor law is to say that any laborer who brings suit against the employer when laboring under a collective-bargaining agreement is bringing a suit that is "completely preempted” by federal law. So if the suit is brought in state court, it is almost certainly subject to removal to federal court (though of course removal is not required, if defendant declines). Note that "complete preemption” is a flat-out exception to the "well-pleaded complaint rule.” If the Court is trying to rationalize the "complete preemption” doctrine, and treat it as not an exception, it will say that because of the "complete preemption,” the only claim the plaintiff really has is a federal law claim (not true here).
29. Exception to plaintiff control of forum for "artful pleading”: Avco v. Aero (1968)
The Supreme Court has developed an odd and unruly exception that permits removal when plaintiff has engaged in "artful pleading,” and where plaintiff has tried to plead a state-law cause of action that is really entirely preempted by federal law (only conceivable cause of action is federal). This case involved a plaintiff-employer suing under state law to enjoin a strike, relying on a no-strike clause in its collective bargaining agreement. Court upheld removal, saying that a claim under a collective bargaining agreement was preempted by federal labor law (despite
"artful pleading”).
30. Removal not available in diversity case if any defendant is in-stater
Removal in a diversity case (unlike federal question case) is narrower than original jurisdiction; in original jurisdiction in diversity under § 1332, plaintiff and defendant must be citizens of different states. For removal, however, there is an additional requirement. Removal is unavailable in case on basis of diversity if any defendant named and served is a citizen of the state in which the suit is brought. In other words, you can only remove if you are not sued in your own state.
31. Defeating diversity removal: (1) insufficient damages; (2) assignment; (3) joinder
A plaintiff may defeat removal in a diversity suit by choosing to forego damage recovery in excess of the jurisdictional amount ($50,000). Plaintiff must make it plain before removal that she seeks $50,000 or less; she may not obtain a remand by reducing her damage claim after a removal. In Provident Savings Life Assurance Society v. Ford (1885) , the Court upheld an assignment to defeat diversity, and the case has not been overruled in the more than one hundred years since; but the lower federal courts have begun to move away from Provident , so no longer clear. Plaintiff is also able to prevent removal by joining defendants who would destroy complete diversity. But if joinder of defendant is "fraudulent” in the sense that there is no colorable ground supporting claim, or if plaintiff has no real intention of prosecuting the claim against the defendant, case is removed and the defendant will be dismissed (however "heavy burden of persuasion” to show fraudulent).
32. Some claims are non-removable by statute (e.g., FELA - 28 USC § 1445(a))
Claims under the Federal Employers Liability Act (a statute under which workers on interstate
RRs can recover for injuries negligently caused during course of employment) are non-removable. Congress (in 1908) made cases non-removable because of geographic disadvantage for plaintiffs suing RRs (and because, Fletcher says, federal courts were less hospitable to plaintiff claims).
33. Confusing (and nearly superfluous) application of 28 USC § 1441(c)
Since 1990 revision and addition of § 1367, now apparently has consequences in only two ways:
(1) May allow remand of both state and federal matters to state courts when state law predominates; (2) Possibly allows removal of claims made non-removable by statute (if combined with "separate and independent claim” as required by § 1441(c)). On balance, more trouble than it is worth.
45

34. Remand order only appealable if obviously not decided on jurisdictional ground
§ 1447(d) provides that remands to state court of cases removed under § 1441 are "not reviewable on appeal or otherwise.” This used to be an inviolate rule, until Judge
Hermansdorfer abused the privilege. Now remand order will only be appealed if the judge makes it clear there is some other reason for granting remand (e.g., must say, "I hate this case” or "I’m too busy”). If a judge goes through the motions of doing it on the basis of lack of jurisdiction, non-reviewable even if absurd.
35. "Artful pleading” limited to "complete preemption”: Rivet v. Regions Bank (1998)
The Supreme Court signficantly narrowed or perhaps nullified the troublesome footnote in
Moitie (footnote 2) which suggested that removal would be allowed when defendant pleads res judicata to the state court action based on an earlier federal judgment (thus trying to get federal court to apply). "The prior federal judgment does not transform...plaintiff’s state-law claims into federal claims but rather extinguishes them altogether...not a proper basis for removal.”
Thus limited to preemption.
36. Defendant has only one year to determine if joinder is "fraudulent”
If joinder of defendant to defeat diversity is "fraudulent,” the case may be removed and fraudulent defendant dismissed. But diversity case must be removed within one year of its filing (§ 1446(b)), and there is no exception for fraudulent joinder. Thus, a defendant has one year to discover fraud.
37. Improper removal does not necessarily void judgment: Caterpillar v. Lewis (1996)
A diversity suit was improperly removed to federal court, and the District Court wrongly denied a timely motion to remand. The non-diverse defendant settled out of the suit before trial; wrongly removed plaintiff lost on the merits at trial and renewed his objection to removal. The
Court said removal had been improper and that the District Court had wrongly denied the motion to remand. But "no jurisdictional defect lingered through judgment in the District Court. To wipe out the adjudication post-judgment, and return to the state court a case now satisfying ... jurisdictional requirements, would impose an exorbitant cost on our dual court system...”
E. C HALLENGING F EDERAL S UBJECT M ATTER J URISDICTION (445-446, S UPP .
43-44)
Defect of federal subject matter jurisdiction not waivable in District Court or appeal. It may be challenged directly until a judgment has become final and appeals are no longer possible. It may be raised in District Court (by any party) at any time before judgment. It may also be raised on appeal, even if not previously raised in trial. It may be/must be raised by the federal court sua sponte if it comes to the court’s attention. A collateral attack on subject matter jurisdiction is treated differently, and is usually unsuccessful.
37. Lack of jurisdiction enforced even after judgment: American Fire v. Finn (1951)
Plaintiff Finn suffered loss to fire and brought suit in state court. Defendants removed to federal court, and plaintiff motion for remand was denied. Plaintiff won case in federal court, defendant then moved to vacate judgment and remand to state court - jurisdiction. Precisely the remand the plaintiff had sought and defendants resisted before trial, but not after having lost on the merits the defendant sought to avoid the judgment of the federal court it had preferred.
Supreme Court held that there was no subject matter jurisdiction and vacated the judgment. Is this a fair outcome?
T HE U NFAIRNESS OF F INN : Finn is where the Court goes the farthest in showing how harsh the
"non-waivable defect” rule can get. This seems like a patently unfair outcome to deny jurisdiction after an adverse judgment, but Court says "sorry.” This cannot be a good rule; only the Court can love that rule. The
46

academic community has been really scathing in its criticism; when "fuddy-duddies” like ALI say "fetish of jurisdiction” it is serious.
38. No "doctrine of hypothetical jurisdiction” available: Steel Co. v. Citizens (1998)
Court disapproved "doctrine of hypothetical jurisdiction” under which a court could assume that it has subject matter jurisdiction in order to decide merits when merits were easier than jurisdiction, and when the result would be the same as if jurisdiction were denied ("advisory opinion”).
III. V ENUE (446-468, S UPP .
44-46)
Venue is a separate, largely statutory requirement about a proper place to bring the action. The primary purpose of venue is to protect the defendant, since the plaintiff who has the initial choice of forum will have taken her own interests into account in making her initial choice.
A. S
TATE
C
OURTS
State court venue systems restrict a litigant’s choice of forum within the state, generally requiring that suit be brought in a particular county ( in personam jurisdiction within the state as a whole is assumed).
Venue requirements, like in personam requirements, are generally waivable. A very few venue requirements are like subject matter jurisdiction requirements, and are not waivable. "Local actions” - actions involving title to real estate or other intensely local actions - must be tried in the county where the real estate is located; "Transient actions” - all other actions - are usually triable in more than one county. Venue in transitory actions depends on the place where the cause of action arose, on the subject matter of the suit, and on the residence and character of the parties; venue is generally available where the events giving rise to the cause of action took place, or where the defendant resides or is doing business.
B. F EDERAL C OURTS
Small or sparsely populated states have a single federal judicial district; large, populous states have two, or several. District Court for a judicial district ordinarily sits in the largest city in the district (not always). Venue rules in federal courts also divide suits between "local” and "transitory” actions (not in statute). The District Courts have generally applied the local action venue rule as it is applied in the states in which they sit; application of the rule does not vary significantly from one state to another.
The overwhelming majority of cases are "transitory” actions, and are governed by the federal venue statute: 28 USC § 1391.
1. 28 USC § 1391 (a) and (b) are virtually (and inexplicably) identical/redundant
Subsection (a) provides for venue in diversity cases; (b) is for venue in cases "not founded solely on diversity” (federal question cases). Okay to separate them, but language is virtually identical. This is result of a drafting error dating all the way back to 1887 Differences in wording between (a)(3) and (b)(3) are the only apparent differences, and do not seem to make material difference. They apparently operate identically, so why not just get rid of one of them and have just one?
2. Venue where (1) person "resides”; (2) events "occurred”; or (3) otherwise unavailable
Venue is available under § 1391(a)(1) and (b)(1) in any judicial district where defendant
"resides,” so long as all the defendants reside in the same state. If two defendants reside in separate states, venue is not available under this subsection. "Residence” for a natural person may or may not be synonymous with "domicile” (used to be yes, now probably not); probably limited to current site. Venue is available under § 1391(a)(2) and (b)(2) in a judicial district "in which a substantial part of the events or omissions giving rise to the claim occurred,” or "a substantial part of property that is the subject of the action is situated.” This standard is more liberal than previous statute, and venue can now often be available in more than 1 district.
47

Subsections 1391(a)(3) and (b)(3) are fallback provisions, available, only when venue is unavailable under (1) or (2). Under a 1988 liberalization of the venue statute, a corporation
"resides’ in any judicial district in which subject to in personam jurisdiction, subject to slight complication in states with more than one district. Prior to 1988 revision, unincorporated association was treated like a corporation, (subject to suit where it was doing business or licensed to do business), but since unincorporated associations not mentioned in the venue statutes, unclear whether treated the same. An alien may be sued in any district.
3. Venue in suits against US/employees may also be where plaintiff "resides”
Section 1391(e) provides that venue in suits against officers or employees of the US, or against its administrative agencies, is available (1) where defendant resides, (2) where a substantial part of the event or omissions giving rise to a claim occurred, or (3) where plaintiff resides if no real property is involved in the action. (3) was added to allow litigation involving the federal government to be decided where most convenient for plaintiff; not a "fallback”/depends on unavailability provision.
4. Special venue statutes (including antitrust, IRS, patent, interpleader)
Some are supplemental, allowing venue under either general or specific; others are exclusive.
5. Federal venue requirements do not apply to cases removed from state court
28 USC § 1441(a) requires only that a suit be removed to District Court where state court sits.
V ENUE IS A W AIVABLE D EFECT ; C ONFUSING S TATUTE : Venue is a waivable defect (either expressly or inadvertently). Federal venue rules are in § 1391, and are a perfect example of why you cannot trust congress with jurisdiction or venue. They started out with a drafting mistake in 1887, and have never really fixed it.
They have fixed it to a point that it no longer makes a substantive difference, but it is not sort of nonsensical and redundant. § 1391(a) and (b) are now virtually the same; the only difference is now that subsection (3) has different words - it is hard to tell whether these actually have a different meaning. Once they make the words of these sections the same "they could have but a single section.”Pay attention to the word "resident.”
C. F EDERAL C HANGE OF V ENUE AND R ELATED T OPICS
In Baltimore & Ohio RR v. Kepner (1941) , plaintiff Kepner brought FELA suit against railroad in federal District Court in NY. In personam jurisdiction and venue were proper, but railroad sued in
Ohio seeking an injunction against continued prosecution of suit in NY. The Ohio Supreme Court denied the injunction, and U.S. Supreme Court affirmed (typical FELA "distant forum” suit). In another case six years later, however, Gulf Oil Corp. v. Gilbert (1947) , plaintiff Gilbert brought diversity suit in federal District Court in NY for damages from a fire in VA. Again, in personam and venue were proper, but this time Supreme Court upheld a forum non conveniens dismissal, first time it endorsed its use by the federal courts. The Court was careful to say that forum non conveniens was not available in
FELA cases, and should only be used very rarely in non-FELA cases. But because forum non conveniens not available in FELA cases, and only in extreme cases otherwise, Congress passed 28 USC
§ 1404(a), permitting a transfer from one federal District Court to another "for the convenience of parties and witnesses, in the interest of justice.”
6. A § 1404(a) transfer requires lower showing than forum non conveniens dismissal
§ 1404(a) permits transfer rather than dismissal and permits transfer of cases under both state and federal law, including FELA. The central function of § 1404(a) is to allow a defendant to escape a seriously inconvenient forum choice by plaintiff, but as Ferens makes clear, either party may seek a transfer. The decision to transfer lies in discretion of District Judge. Factors include: "the place where the operative facts occurred; the convenience of the parties; the convenience of the witnesses; the relative ease of access to the sources of proof and the availability of process to compel attendance of unwilling witnesses; the plaintiff’s choice of
48

forum; a forum’s familiarity with the governing law; trial efficiency; and the interests of justice.”
A forum-selection clause will be "a significant factor” in motion to transfer under § 1404(a), but it will not automatically dictate.
7. Transfer only to "where [the suit] might have been brought”: Hoffman v. Blaski (1960)
Supreme Court held that a transfer under § 1404(a) can only be to a District Court in which venue is proper independent of any waiver by the defendant. Waiver by defendant does not suffice .
8. § 1404(a) is change of courtroom, not change of law: Van Dusen v. Barrack (1964)
Airplane crash in Boston, just after it had taken off for Philadelphia. More than 100 suits filed in District Court in MA, and more than 45 in District Court in PA. Defendants in the PA suits moved (successfully) for transfer to District Court in MA under § 1404(a). PA law allowed much more generous damages in wrongful death cases than MA law; plaintiffs hoped that
District Court in PA would apply generous PA law, and feared that District Court in MA would apply ungenerous MA law. The Court held that the transferred plaintiffs should not be deprived of favorable law because of the transfer: "A change of venue under § 1404(a) generally should be, with respect to state law, but a change of courtrooms.” A federal district court is required to follow the state law of the state in which it sits, but the state law so required is not necessarily the substantive law of that state, but the choice-of-law rules that the state court would apply. The net effect of the Court’s holding was that the District Court in MA, in the cases removed from the District Court in PA, should apply the choice-of-law rules that the PA state courts would have applied. In the suits filed in District Court in MA, meanwhile, the court should follow the
MA choice-of-law rules. The Court left open two questions: what would happen if (1) the plaintiff sought transfer under § 1404(a) (answered later in Ferens ); or (2) state court in the state from which the case was transferred would have dismissed the case on the ground of forum non conveniens . Second question is as yet unanswered.
I SSUES L EFT O PEN BY THE V AN D USEN O PINION : What if Ferens filed in Mississippi, but the Mississippi court had said that despite jurisdiction it did not make sense to continue with case there? What does Ferens have to do then? Find a more convenient state that also has the longer statute of limitations, or else be stuck just with the contract action. The federal District Court in MS (or anywhere else) applies the substantive law that the state courts would. So in this case the federal court in MS will apply the substantive law of PA, but the procedural law of MS (longer statute of limitations, for instance). So all of this is designed to come back to the second question left open by Van Dusen - (2) What if the MS court would have dismissed this case on the grounds of forum non conveniens?
They can no longer apply the law that MS court would have applied since
MS would have dismissed the case. § 1404 is a bit like the forum non conveniens dismissal, but a transfer is much more readily available than a dismissal, and is designed to take advantage of the federal court system.
Most § 1404 transfers take place in cases in which a forum non conveniens dismissal would have been denied.
What Van Dusen invited us to do was to differentiate between cases where the state court would have kept the case and cases where the state court would have dismissed under forum non conveniens . Clearly you cannot apply MS law if MS state court would have dismissed; it must be the law of the forum to which it is transferred.
This is essentially forcing the federal court that is engaging in § 1404 transfer to speculate about what the state court would have done; it is set up this way because quite often these cases are never filed in state courts.
Sun
Oil v. Wortman says that the federal court can apply the state law of the state in which it sits regardless of any contact between the transaction and the suit. For instance, in Ferens MS court can apply MS statute of limitations even though Ferens has never even been to MS. "Substantive law” is apparently the only thing that is covered by Due Process or Full Faith and Credit, not "procedural law,” so this case is not (although it appears to be) inconsistent with Phillips Petroleum.
Another possible question: if this is only true for "procedural” law, how is the federal court in Mississippi able to apply the substantive law of Pennsylvania in the first place? (Is
Statute of Limitations a "procedural rule” for purposes of Erie?
Probably not. Statute of limitations is
49

perhaps "procedural” for some purposes and not for others).
9. A § 1404(a) transfer does not change the law applied: Ferens v. John Deere (1990)
Plaintiff lost his right hand in a combine manufactured by defendant while working his farm in
PA. He delayed filing a tort suit, and PA 2-year statute of limitations expired. In the third year he sued in District Court in PA for contract and warranty claims for which SofL had not yet run
(diversity). Also sued (also diversity) in District Court in Mississippi for negligence and product liability (torts) because Mississippi had a 6-year statute of limitations, and MS choice-of-law provisions would let MS courts use MS SofL but apply PA substantive law.
Plaintiff then moved under § 1404(a) to transfer the MS tort action to the federal court in PA on the ground that PA was more convenient, and on the assumption that PA court would still apply the MS choice-of-law rules and MS SofL. Deere (based in DE) did not oppose, and case was transferred to PA and consolidated with other claims. District Court in PA said that PA SofL should apply, and dismissed tort action; Court of Appeals affirmed this decision twice, once on a
Due Process theory (reversed by S.C.), and then on the ground that Van Dusen decision saying that choice of law rules are determined by tranferor court (rather than transferee court) did not apply to a § 1404(a) transfer by a plaintiff. Court says this is not a defensible distinction, and reverses. The law applicable to a diversity case does not change upon a transfer initiated by either a plaintiff or a defendant . Three reasons: (1) § 1404(a) should not deprive parties of state law advantages that exist absent diversity; (2) § 1404(a) should not create or multiply opportunities for forum shopping; (3) the decision to transfer venue should turn on considerations of convenience and the interest of justice rather than on a possible prejudice resulting from a change of law. All three of these were satisfied in Van Dusen , and also satisfied in this case: (1) Allowing transferor court choice of law to control alters the choices available under state law less than allowing transferee court choice of law to control; (2) applying transferee law is more likely to create opportunities for forum shopping; and (3) It is beside the point to say that the plaintiff should "pay the price” for choosing an inconvenient forum in the first place; § 1404(a) is not just for the benefit of the moving party, but also for benefit of witnesses and interest of justice. "The desire to take a punitive view of the plaintiff’s actions should not obscure the systemic costs of litigating in an inconvenient place.” No alternative rule would produce a better result.
Dissent: Court condones file-and-transfer ploy as a method of forum-shopping; central issue really whether § 1404(a) read this way would violate the Rules of Decision Act. Should adjust
Erie .
10. § 1406(a) transfer even when no in personam jurisdiction: Goldlawr v. Heiman (1962)
§ 1406(a) provides that the "District Court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” The purpose is to permit transfer rather than dismissal, thereby protecting a plaintiff from a statute of limitations defense that might be available if the plaintiff were forced to refile the suit in a proper court. The
Supreme Court has applied the statute expansively, allowing transfer even when there is no in personam jurisdiction over the defendant, as well as when there is a defect in venue. In
Goldlawr , both in personam and venue were lacking, and the Court’s decision was consistent with § 1406(a) in the sense that the statutory premise of "venue in the wrong division or district” is satisfied. Lower court cases have gone beyond Goldlawr to permit transfers even when venue is good, but in personam is lacking. Other courts have refused to allow transfer when venue is good and only in personam is lacking.
11. 28 USC § 1631 transfer for "want” of (subject matter) jurisdiction
Section 1631 provides that federal courts in which there is a "want of jurisdiction” may transfer
50

the case to other federal courts in which there is jurisdiction. The legislative history makes clear that it was intended to address defects in subject matter jurisdiction (particularly admin law cases). The legislative history makes no mention of in personam jurisdiction, but at least one court has allowed a transfer under § 1631 to cure a defect in in personam jurisdiction. This would replace § 1406(a).
12. Transfer for purposes of consolidating similar cases under 28 USC § 1407
For "civil actions involving one or more common questions of fact...pending in different districts.” This section is typically employed in mass tort cases or other complex litigation in which numerous cases arising out of the same occurrence or transaction are filed in different federal District Courts. The decision whether to transfer cases is made by the Judicial Panel on
Multidistrict Litigation. A transfer is only for consolidation for pre-trial proceedings, after which the case is transferred back. The exception is for antitrust cases under the Clayton Act, in which case trial is in transferee court.
13. Federal courts follow own Circuit on federal law: Korean Air Lines (DC Cir 1989)
If a suit is transferred from one Circuit Court to another, the transferee federal court should follow what it thinks is the correct interpretation of the federal law at issue in the case, irrespective of the interpretation followed in the transferor Circuit. Recent Court of Appeals decisions have agreed.
V
ENUE NOT
W
AIVABLE IN
T
RANSFEREE
F
ORUM
: Under § 1391, venue is a waivable defect. But notice that under § 1404, venue in transferee district is not waivable. See Note 3 on page 465: Hoffman v. Blaski (1960) .
The waiver did not mean that the suit "might have been brought” in the transferee forum. The Court reads this as meaning it can only be brought in a venue "where it might have been brought” without the waiver of the defendant. In other words, they make it more restrictive; there is no possibility of waiver in the transferee forum. Hoffman v. Blaski is a Justice Whitaker (short-lived Supreme Court career) opinion,
"unfortunately,” though it probably has very little practical consequence, because the venue statute that was quite narrow at this time has since been substantially broadened. This means it is much easier to procure proper venue, and so it is not very likely that you will transfer from one court where venue is not available to another where it is also not available.
§ 1406 AS A F EDERAL L ONG -A RM S TATUTE : If you file in wrong court, what do you do? You use § 1406 to search out a proper court. This also helps the plaintiff preserve statute of limitations (because the original filing date still applies, rather than refiling date). If there is a problem of both venue and jurisdiction, Goldlawr v. Heiman , the Court said (Note 7; p. 467) that the court can transfer the case to a court that does have both.
This seems illogical, because how can the court do this if it does not have jurisdiction over a claim or a party to do so. The court says that § 1406 allows this. This means that § 1406 is essentially a federal "long-arm statute.” If there were no court with jurisdiction, then we would have a big problem. But as long as there is a court with jurisdiction, the federal government has the power to pass such a statute. But to get around the logical problem, you have to read things into the statute that are not really there. The court essentially "made it up” in Goldlawr . Goldlawr has been expanded even further by lower (federal) courts, which say that it is not only lack of venue that is the trigger for § 1406. If a filing has venue but lacks personal jurisdiction (though it is hard to imagine when that would happen), then the court may also use § 1406 to transfer the case. Far beyond the statutory intent.
T RANSFER FOR C ONSOLIDATION (§ 1407) ONLY FOR P RE -T RIAL ( USUALLY ) : The only thing that will not happen under transfer for consolidation is actual trial (transfer back for that). A practice of "self-transfer” came up, where the transferee judge would be willing to allow cases to remain after a long period of transfer/pre-trial stuff. Then the 9th Circuit did it, and the Supreme Court reversed; not allowed to keep -
Lexecon was the case.
51

T
RANSFER UNDER
§ 1404, 1406,
AND
1631 : § 1404(a) has a bias in favor of keeping the case where it was filed; if the "conveniences” are evenly balanced, the case stays where it it. If there is a defect of either venue or in personam jurisdiction, the District Court does not have to dismiss, but can instead transfer the case under §
1406. If you just read § 1406 (plain text), you would think that it applied only to venue defects, but the
Supreme Court (back in the "good old days”) said it also applies to in personam defects. The Supreme Court only dealt with a case that had both venue and in personam defects, but the lower federal courts have since made it "law” that even an in personam defect by itself can be properly transferred under § 1406. This is one way of dealing with the possibility that the statute of limitations might have run if the case were dismissed; instead of dismissing the case, court can choose to transfer the defective case under § 1406. Under Van Dusen and Ferens , transfer is "only a change of courtrooms, not a change of law.” Fletcher is sure that if the state court would have dismissed for forum non conveniens , the law of that state cannot travel along with the suit.
So if the state court would have dismissed, must using law of court to which the case is transferred, rather than the law of the court from which the case was transferred. This is a result of the fact that the federal court is trying to replicate the result that the state court would have given. SO...a § 1404 transfer will ordinarily give you the law of the first court, not the second (except if the state court would have dismissed for forum non conveniens ). HOWEVER...a § 1406 transfer will ordinarily give you the law of the second court rather than the first, because the premise is that the original court did not have proper jurisdiction (either in personam defect or venue defect caused the court to transfer the case). There is a possibility of transfer also under §
1631. It is clear that § 1631 was not intended to be a "cleaning up” of § 1406, in other words to take care of the fact that in personam jurisdiction was not mentioned in § 1406. § 1631 is designed to allow transfers in cases lacking subject matter jurisdiction, but courts have begun using it (through a "combination of creativity and ignorance”) to remedy problems with in personam jurisdiction. It is not used for this problem too often, but a few courts have begun using it this way. (Why bother?) "§ 1406 does not say it, but we think it means it. §
1631 says it, but we don’t think it means it.”
T RANSFER L AW UNLESS F ORUM N ON C ONVENIENS IN S TATE C OURT : Transferring (and transferred to) federal court has to consider what law will be applied by transferee court, and if transferor court’s state court would have dismissed on forum non conveniens or lack of jurisdiction, law will not transfer. Otherwise it will.
IV. F ORUM N ON C ONVENIENS (469-480, S UPP . 47)
A motion to dismiss on grounds of forum non conveniens in federal District Court is proper only when the alternative forum is in a foreign country, as it was in Piper v. Reyno . If the alternative forum is in the US, the proper motion is for transfer to another federal District Court under 28 USC § 1404(a). It is common for a court to condition a forum non conveniens dismissal on an agreement by the defendant to waive the statute of limitations, in personam jurisdiction, or occasionally other defenses in the alternative forum. State courts do not have the power directly to transfer cases to courts outside the state, but this power to impose conditions on dismissal such as waiver of defenses in the alternative forum has the same effect.
There is significant variation among the states in the ease or difficulty with which a forum non conveniens dismissal may be obtained. The Court in Piper wrote that federal law of forum non conveniens was nearly identical to that of California and Pennsylvania. When the Court wrote this, it was almost certainly wrong; California law was much more favorable to plaintiffs than the Court’s holding in Piper . The Court was unwilling to face up to the issue of the character of forum non conveniens law. By pretending that the CA and federal laws of forum non conveniens were identical, the Court did not have to choose between them. If the Court had recognized that CA law was different, it would have had to answer the question posed by Erie RR v. Tompkins - should federal courts follow the law of forum non conveniens of the state in which they sit, or should they follow their own independent federal law of forum non conveniens . Lower federal courts have begun to answer this question: standard answer is that federal courts may apply federal forum non conveniens law irrespective of any differences from the law of the states in which they sit.
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Litigants sued in an inconvenient forum can, and often do, move in that forum for a dismissal on grounds of forum non conveniens . Another strategy is to seek from a more convenient forum (which is frequently the forum where the plaintiff resides) an injunction forbidding the plaintiff to pursue the suit in the other inconvenient forum. In domestic litigation, such injunctions are almost never available.
The Court has flatly prohibited state court injunctions against federal court in personam litigation.
Conversely, the power of federal courts to enjoin state court litigation is extremely circumscribed by
Anti-Injunction Act; prevents federal injunctions against state court proceedings when only argument is that state forum is inconvenient. State courts do have power to enjoin parties before them from engaging in litigation in other state courts, but it is rarely employed. The general rule is that a suit in another state will be enjoined only "when the injunction will prevent a multiplicity of suits or will protect a party from vexatious or harassing litigation.”
1. Change of law unfavorable to plaintiff does not bar dismissal: Piper v. Reyno (1981)
An air crash in Scotland led to a wrongful death action in District Court in PA. Defendants
(Piper) moved to dismiss on forum non conveniens grounds, and District Court agreed
(alternative forum in Scotland). Court of Appeals reversed, saying a dismissal is automatically barred where law of the alternative forum is less favorable to the plaintiff than the law of the forum chosen by plaintiff. The Supreme Court reverses, saying that unfavorable change in law does not alone bar dismissal. Decedents and heirs and next of kin are Scottish citizens and residents. Plane manufactured in PA. Reyno administrator of estates of the five passengers appointed by a CA court; not related to nor does she know any of the decedents or their survivors
(legal secretary to attorney filing suit). The attorney for whom she worked filed wrongful-death suits in state court in CA, and Piper removed to US District Court. Then Piper moved for transfer to District Court in PA under § 1404(a), and both Piper and Hartzell (propeller manufacturer) moved to dismiss for forum non conveniens . The District Court granted the motion, but Court of Appeals reversed. Supreme Court says that District Court’s analysis, which said that plaintiff’s choice of forum normally deserves deference but must yield to a forum non conveniens motion when one party is from a foreign country, and that factors examined by the court pointed toward Scotland as the appropriate forum, was appropriate. Court of appeals erred in holding that plaintiffs could defeat the motion "merely” by showing substantive law that would be applied in the alternative forum would be less favorable to the plaintiffs. Change in substantive law should not be given "conclusive or even substantial weight” in the inquiry. The central focus of the forum non conveniens inquiry is convenience, not substantive law. Change in law might at some point be a factor in a forum non conveniens inquiry, but is is not conclusive.
2. State courts may not enjoin in personam federal suits: General Atomic v. Felter (1977)
It is not within the power of state courts to bar litigants from filing and prosecuting in personam actions in the federal courts. (Must bring motion for forum non conveniens where suit was filed).
P IPER AS A R EVIEW OF V ENUE L AW : Defendants first move for removal in the state court case, then move for a § 1404 transfer to the federal court in Pennsylvania. Both defendants then move to dismiss the entire action on forum non conveniens ground, and District Court grants it. The Circuit Court reverses, in part because
Scottish (alternative forum) law would be less favorable to the plaintiff. But then the Supreme Court comes in and says that this is not a sufficient reason to block forum non conveniens . The District Court in California agrees with Hartzell that there is no in personam jurisdiction over Hartzell in CA, but rather than dismissing the case the court allows a § 1406 transfer to District Court in PA. The transfer of Piper to PA was a § 1404 transfer (presumably because there was in personam jurisdiction over Piper in CA). Remember the distinction:
§ 1404 vs § 1406. Fn 8 (p. 472): Difference in choice-of-law rules applied to the two defendants, because
Piper transferred under § 1404, while Hartzell transferred under § 1406. CA and PA apply not only different
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choice-of-law substantive rules, but also different "styles” of choice-of-law rules. This means the two courts could come up with different outcomes.
T
HE
P
ROPER
F
ORUM FOR THE
P
IPER
L
ITIGATION
: The theory of the case is that there was a design defect in the plane, but it is conceded that the pilot was flying too low, and there is a very real possibility of "pilot error” in the case. Where are we most likely to get information about design defects? In Pennsylvania (or possibly
Ohio); so why send the case to Scotland? The Scottish court (because Scottish law is not as discovery-happy) is not at all likely to issue discovery orders to Piper and Hartzell to get information on whether the plane has a tendency to spin. Several years after the case there was actually information released about how Piper planes do have a tendency to spin. It is not clear that the plaintiffs would have been able to get this information even in the US, but it is fairly clear that they would not have gotten it in Scotland. It is clear that the only thing in the mind of the Court (and probably the parties) is that the plaintiffs wanted to be in the US because it is more plaintiff-friendly. This is actually an easy case for the Court, because the plaintiffs make no real attempt to hide the fact that they are just "forum-shopping.” If they could have presented any convincing reason apart from the more favorable treatment they were likely to receive in an American court (by an
American jury), such as that certain facts were only available in Pennsylvania, etc., then it seems much more likely the Court would have denied dismissal.
T HE S OURCE FOR F ORUM N ON C ONVENIENS L AW : What forum non conveniens law does the Supreme Court apply? Federal. Why don’t they apply PA or CA forum non conveniens law? Because they don’t feel like it.
They claim laws are identical, and would produce the same answer, so they "do not need to choose among them,” but this is clearly wrong. This is "saving” Erie question about when you follow state federal law. Any competent CA lawyer could have told you at the time that Piper did not state CA forum non conveniens law, though it is closer now. The Court did not even see the issue (the Erie question) until the opinion was in almost-final draft. Because they did not want to make major changes, they just threw in footnote 13. This is a
"complete cheat,” a "total fraud.” Fletcher has inside information from one of the law clerks this is how this case happened. What is the source of forum non conveniens authority? Is it purely a question of state law; is it a question of state law that if we are in federal court the court is bound to follow; or is it a question of federal law? The Supreme Court has not made it entirely clear. To the extent there is a tendency in the lower federal courts, it is to follow the law of the state in which the federal court sits. The Supreme Court has not said anything about it. Fletcher says there is a fairly strong argument that forum non conveniens law in a federal court should be a federal question. This is particularly true because it is only available when the alternative forum is in another country. One might want to have a uniform national approach about when we will allow foreign plaintiffs to come to the U.S. to sue American defendants (or vice versa). It would be best if we had a uniform rule in the U.S. He would like a federal rule that not only controls federal courts, but that state courts are bound to follow when case involves a foreign country.
3. No federal law of forum non conveniens: American Dredging Co. v. Miller (1994)
Court was careful to indicate that it did not decide whether there should be a uniform federal law of forum non conveniens in non-domestic cases. Still unwilling to do what Asahi implied.
T
HE
L
ACK OF A
U
NIFORM
F
ORUM
N
ON
C
ONVENIENS
L
AW
(F
EDERAL
) : The Supreme Court did not say in
Asahi that forum non conveniens would apply even in state courts when the party is in a foreign country. The
Court was unwilling (or did not recognize) to say that Asahi should be governed by (federal) forum non conveniens law. SO...there is no federal law of forum non conveniens that is binding on the states. Still
(apparently) a state law question, though Fletcher thinks that we need to take a uniform approach.
V. T HE E RIE P ROBLEM
A. T HE L AW A PPLIED IN F EDERAL C OURT : T HE P ROBLEM OF E RIE R AILROAD V .
T OMPKINS (481-532)
Determining that federal District Court has jurisdiction to hear a case does not determine what law it should use in deciding the case. When the choice is between federal and state law, the problem is conventionally referred to as the Erie problem, after Erie Railroad v. Tompkins (1938) . Although
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Erie problem is modern its origins lie in the 18th and 19th centuries. The centerpiece of the story is the most misunderstood and reviled choice-of-law case in our history, Swift v. Tyson (1842) .
At time of Swift three choices of law: (1) federal law; (2) general law; and (3) state / local law. (1)
There was no "federal common law.” Federal law was both jurisdiction-conferring and supreme; original federal question jurisdiction existed in a few specific instances, such as suits by or against the
Bank of the United States; where it existed it was supreme such that state courts had to follow federal law wherever it applied (instead of inconsistent general or state law). (2) General law was general common law, applied more or less uniformly by all civil courts, federal and state, in U.S. No precise modern equivalent (Restatement is the closest). The general law in the U.S. at the time of Swift covered commercial subjects like contracts, insurance, and negotiable instruments. In the absence of supreme federal commercial law, the general law supplied the need of American merchants for relatively uniform rules governing commercial dealings in the various states. General law was neither jurisdiction-conferring nor supreme. (3) State law at the time of Swift was non-federal, non-general law
(often called "local” law). State/local law covered certain subject areas to which general law did not extend, such as marriage, inheritance, and real property. Federal courts routinely followed state/local law of the states in which they sat in these subject areas. State/local law also included particular rules of commercial law where state had clearly departed from uniform rule of general law. On specific rule at issue in Swift , NY courts had established "local” law different from "general” law of negotiable instruments. Court said federal court should apply federal/general law rather than state/local law when it differed. By end of the nineteenth century, Swift had come to be seen as a case of enormous import, but when it was decided it was seen as both correctly decided and relatively unimportant.
For the entire pre-Civil War period, the state and federal courts lived in relative harmony, with the state courts deferring (usually gratefully) to the decisions of the U.S. Supreme Court on questions of general law. After the Civil War, however, the economic interests of the states began increasingly to diverge, and the federal courts did two things to destroy the harmony of the federal system: (1) The Court expanded the scope of the general law, so that it included for the first time a general law of tort. This meant industrial accidents were governed in the federal courts by the general law rather than by the law of the state in which the federal court sat; (2) The Court and lower federal courts constructed a general law that increasingly favored the creditors and employers. Many state courts refused to follow the lead of the federal courts. By the end of the century, the battle lines were clearly drawn. For those who favored the results achieved in the state courts, Swift was no longer the natural outgrowth of a harmonious system; it was now the tool of the enemy. Swift and Justice Story were attacked unmercifully by various scholars and commentators.
1. Federal courts should apply federal law when state law deviates: Swift v. Tyson (1842)
Swift owned a bill of exchange (i.e., private written promise to pay) that had originally been made by Tyson to two other men, who had endorsed it over to Swift. Swift sued Tyson in federal court for payment, but Tyson responded that the two men had not performed the contract in return for which he had given the bill of exchange. The issue was whether a "remote endorsee” (i.e., Swift) took the bill of exchange free of an underlying defense against the two original payees. Under the "local law” of New York, the defense against the two original payees was also good against Swift. Under the "general law” of the U.S. federal courts, the defense was not available against Swift. The Court held that the federal court was not obliged to follow the "local” law of New York, and that it should, instead, follow the "general” law.
Justice Story’s opinion said that the Judiciary Act (which became the Rules of Decision Act) says the federal courts have to follow the "laws” of the several states, but that this only means the federal courts have to follow state laws enacted by state legislatures, not "laws” designed by state courts (these are not laws, but interpretations of laws). The Court was unanimous in holding that the federal courts should follow the general law rather than a state’s local law in cases where
55

the state law deviated from the general law.
T
ENSION BETWEEN
S
TATE AND
F
EDERAL
C
OURTS
: Prior to Swift v. Tyson , disagreements between state and federal courts about the general common law were just that, "disagreements,” and neither court necessarily had to give deference to the other. This case is the first time that a disagreement between the state and federal court over the general common law has come to the U.S. Supreme Court. This is the first sign of a potential breakdown in a system that had worked very well and very smoothly for about 50 years. The real signs of strain do not become apparent until after the Civil War. After Civil War, the federal courts are populated by
"pro-business centralizers,” who believed in business and in federal power, while the state courts were populated either by similar types of judges or by "populists.” So we began to see a strong divergence of interests between the state and federal courts, first on negotiable instruments and then on other areas of
"commercial law.” For instance, the "remote endorsee” rule at issue in Swift v. Tyson would either advantage the creditor or the debtor depending on how it is enforced (federal vs. state, respectively). In addition to differentiation of interests, the other thing that happens after the Civil War is that the scope of the general law dramatically increases. Prior to the Civil War, it is confined to contracts, but after the Civil War it is expanded to include tort as well. This means that more and more things are covered by the general law. This means
Swift is an enormously important "engine of social policy,” and great source of conflict. The primary function of Swift v. Tyson , to provide uniformity/conformity, begins to fall away. After the Civil War, state and federal courts begin to no longer cooperate with one another. You begin to be able to get a different answer depending on federal vs. state courts, diversity jurisdiction or not. You can see that this will begin to give an advantage to large corporations. During the Swift period, there remained a body of law ("local” law) where federal courts would follow state/local law. These were subject areas that were governed by "local law.” One of those areas would be the laws governing tort actions relating to real property. So the parties in Erie were arguing over where boundary between general law and local law should be drawn, but much to their surprise the Court instead says it is deciding that federal courts should apply state laws of their states.
2. Swift v. Tyson disapproved: no federal common law: Erie RR v. Tompkins (1938)
Tompkins was injured by a passing freight train in PA when he was walking alongside the tracks. He sued in federal court in NY (proper in personam jurisdiction), but Erie RR argued that he was a trespasser, which limited their duty/liability. It contended the case should be decided according to PA state law, while Tompkins claimed that there was no PA law on the subject and that it should be decided under federal general law. The District Court and Court of
Appeals agreed that it was a question of general law because there was no local statute, only an alleged PA common law. Swift v. Tyson held that federal courts exercising jurisdiction on the ground of diversity of citizenship need not, in matters of general jurisprudence, apply the unwritten law of the state as declared by its highest court. Three grounds for reversal: (1) recent research of a "competent scholar” established that the Court had used an "erroneous” copy of
Section 34 of the Federal Judiciary Act in Swift . Criticism of the doctrine has been widespread since the decision was announced; (2) experience in applying the doctrine of Swift has revealed its defects, political and social, and its lack of benefits. The doctrine rendered impossible equal protection of the law, because of the difference between a suit proceeding in the federal and the state courts in a particular state (and no consistency of law); (3) except in matters governed by the U.S. Constitution or acts of Congress, the law to be applied in any case is the law of the state.
Whether the law of the state is declared by the state legislature or by its a highest court is not a matter of federal concern. "There is no federal general common law.” The doctrine of Swift v.
Tyson was an "unconstitutional assumption of powers by the Courts of the United States which no lapse of time or respectable array of opinion” justifies. Reversed.
Concurrence: "The laws” includes the decisions of the state’s highest court (in addition to statutes).
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T
HE
G
ROUNDS FOR THE
E
RIE
D
ECISION
: (1) Rules Enabling Act misconstrued in Swift v. Tyson ; his evidence is the "original document” dug up by Charles Warren which apparently suggests that the statute was intended to cause federal courts to be bound by state laws. Fletcher says that what was discovered by Charles Warren was in fact not at all clear, and he thinks it unlikely it would have changed Justice Story’s mind if he had seen it.
Charles Warren found what he was looking for , and Fletcher says it is quite possible (even probable) that
Warren was dead wrong in the conclusion that he drew. (2) Swift v. Tyson just does not work on a practical (or fairness) level; Fletcher completely agrees. By 1938 this had produced a completely impractical system. (3)
This is an unconstitutional exercise of power by the federal courts (and by Congress?); It is ironic that Justice
Brandeis would be asserting the unconstitutionality of the federal legislative power since the Court was fighting tooth and nail about extending the Commerce Clause power during this period (the New Deal laws and cases).
This argument may have been barely true at this time, but it was very soon after this no longer true because of the New Deal decisions by the Court which upheld expansive federal power to regulate commerce (and related matters).
F
EDERAL
C
OMMON
L
AW
P
ERSISTS AFTER
E
RIE
: Brandeis does not quite say there is no federal common law; what he says is that there is no "federal general common law.” He does not say that there is no federal common law. Somewhere between 1842 and 1938, the federal courts had gotten into the practice of making some federal common law that was both jurisdiction-conferring and supreme. "General law,” meanwhile, was neither supreme nor jurisdiction-conferring. What Erie does is get rid of the federal general common law; what had previously been federal vs. state general law is just collapsed into state law. So now we only have federal law and state law (though federal law apparently still contains federal common law cases already decided). Erie is an enormously important political event, the culmination of generations of fighting over the role of the federal government. In this case the liberals triumphed; this case actually aligns with the New Deal cases decided at the same time.
E RIE AND F EDERAL Q UESTION C ASES : Does Erie apply in federal question cases (trick question)? Yes .
When he says federal question cases he means cases under § 1331 (and "well-pleaded complaint” rule). In federal question cases there may also be questions of state law, and Erie would of course apply in cases applying federal as well as state questions. It is more common that you would find Erie questions in a diversity case, but it would be a mistake to say "this is a diversity case, so Erie applies,” since Erie could also apply in a federal question case.
T HE L AW UNDER E RIE : What is the modern law under Erie ? It is the law we already knew: the federal court applies the law of the court of the state in which it is sitting (unless of course it is a federal question). There are two kinds of law: federal and state. If it is not federal, it is state. This does not mean that you necessarily follow the substantive law of that state. It means that you apply whatever law that state court would have applied. So this means that federal courts really follow the choice-of-law rules of the states in which they sit.
Fletcher thinks Erie is "right,” in the sense that the old Swift system is no longer workable. The systematic deviation between state and federal courts meant that we needed a better method of ensuring uniformity. We
"screwed things up” by passing a statute in 1934 which allowed creation of Federal Rules of Civil Procedure.
All of a sudden, in 1938, we get the substantive law and the procedural law going in different directions.
While the substantive law is now being uniform-ized (in that federal courts will now follow state law), at the very same time (in 1938) the Federal Rules of Civil Procedure are adopted, such that federal courts now have different procedures than do state courts. Now the big question: What is a substantive law question and what is a procedural one? Rules of Decision Act, § 1652 (passed in 1789 as the famous § 34); Rules Enabling Act, §
2072 (passed in 1934 setting up the Federal Rules of Civil Procedure). We know from the Rules of Decision
Act that whenever there is a valid federal law it must be followed. So this apparently applies to the Federal
Rules, even though in some cases the "statute” is not "legislative.” This means that where there is a statute
(such as for § 1404 versus state forum non conveniens law), you follow the statute. So where do difficult Erie questions come up? When there is no statute or Federal Rule. Erie stands for the principle that you are essentially entitled to the same treatment whether you are in state or federal court. This was the case before the
Civil War, and again after Erie . There was just this interlude after Swift v. Tyson , when the federal and state
57

courts did not agree, so that there was the possibility of quite different treatment in the state and federal courts.
The federal and state courts set off on their own separate courses. There is no "law” aside from that which is articulated by either the sovereign (federal government) or the quasi-sovereign (state governments). What do you do when you are in federal court and the procedural rule followed in federal court is different than the procedural rule that would be followed if the case were in state court? It depends on how important the procedural rule is (minor ones it may not matter). If it is an important rule, that might affect the "substance” of the case, then we may want to say that the federal court should follow the procedures of the state in which it sits. Furthermore, what do you do when the "procedural practice” is not actually written into the rules. What do you do when the "practice” in state court is different from the "practice” in federal court, and it is not written either place. What we call today an "Erie problem” is trying to decide about procedural rules that differ.
E RIE AND THE S UBSTANCE /P ROCEDURE D ISTINCTION : Effect of Erie on substantive law clear. Two previous categories of law—general and local—were collapsed into one, and became "state law” that the federal courts were obliged to follow. But what about procedural law? For 150 years, the federal courts mostly followed procedural rules of states in which they sat. But as the Supreme Court moved to require the federal courts to conform their decisions to those of the states on matters of substantive law, Congress moved in precisely the opposite direction on matters of procedural law. In 1934, four years before Erie , Congress enacted the Rules
Enabling Act, which authorized the adoption of the Federal Rules of Civil Procedure (adopted in 1938, the same year as Erie ). Court has struggled for many years with the question of whether (or when) Erie required federal
District Court to follow state procedural rules or practices. The Court has at times followed the Federal Rules of Procedure, and at times has seemed to forget that they exist. The key case in this development is Guaranty
Trust v. York (1945) .
3. FRCP on physical examinations controls in federal court: Sibbach v. Wilson (1941)
Plaintiff argued that Federal Rule 35, by requiring physical examinations in personal injury cases, violated the Rules Enabling Act. The Court rejected this argument, saying that Congress has this power to regulate the practice and procedure of federal courts. However, four dissenters led by J. Frankfurter said that this kind of "drastic change” in public policy should only be made by explicit act of Congress, not by a "general authorization to formulate rules” for the federal courts.
4. State statute of limitations in diversity suit - state law: Guaranty Trust v. York (1945)
Plaintiff filed in NY federal District Court a diversity suit in equity for fraud. Defendant pleaded a statute of limitations defense, invoking the NY rule that a statute of limitations period applied alike to actions at law and in equity. Plaintiff argued that the more flexible doctrine of laches, followed by federal courts in equity suits, should be followed. The Court of Appeals held that District Court should have applied, not the NY "strict” time rule, but the more elastic federal laches doctrine. The Supreme Court reversed this judgment, saying court should apply the state statute of limitations. A federal court "adjudicating a state-created right solely because of the diversity of citizenship of the parties is for that purpose, in effect, only another court of the
State, it cannot afford recovery if the right to recover is made unavailable by the State nor can it substantially effect the enforcement of the right as given by the State.” Whether the right is
"substantive” or "procedural” is immaterial. Intent of Erie was to "insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.”
The state statute barring recovery cannot be ignored.
T HE "O UTCOME D ETERMINATIVE ” T EST IN THE Y ORK D ECISION : York is described as using an "outcome determinative” test. But aren’t many procedural rules outcome determinative if they are disobeyed? Consider the cases decided after York to see if the rule was helpful in predicting what the Court would do. For instance,
58

in Angel v. Bullington (1947) , a plaintiff was precluded from bringing a diversity action in federal court on a case in which a judgment of demurrer had been entered against him in state court. The Court said that judgment of state court would clearly bar the suit if it had been brought in a state court, and since the federal court is "only another court of the state” for purposes of diversity jurisdiction, the case was also barred in federal court. Similarly, in Cohen v. Beneficial Industrial Loan (1949) , the Court found that a plaintiff had to post security for expenses and attorneys’ fees as required by New Jersey statute before proceeding with a diversity action in federal court. "Even if we were to agree that the New Jersey statute is procedural, it would not determine that it is not applicable. Rules which lawyers call procedural do not always exhaust their effect by regulating procedure. But this statute is not merely a regulation of procedure,” since it creates a new "liability” on the part of the stakeholder who is required to put up the security for expenses and fees. Cannot be disregarded as a "mere procedural device.” Moreover, the applicable Rule 23, which has its own requirements, does not conflict with these state requirements, so the federal court should comply with the state requirements in addition to that required by Rule 23. The dissenters said the NJ statute did "not add one iota to nor subtract one iota from that cause of action,” and merely prescribe "method” by which the suits should be prosecuted.
Therefore, this should not fall under Erie , because it does not "define, qualify or delimit the cause of action or otherwise relate to it.” In Ragan v. Merchants Transfer (1949) , the Court barred a diversity cause of action in which the plaintiff had filed the complaint within the applicable state statute of limitations but had effected service of process after the period expired, and then sought to rely on FRCP 3 to say that the action was
"commenced” when the complaint was filed (contrary to state law). The Court said that "local law” both created the cause of action and brought it to a close, and federal courts "cannot give it longer life.” In Woods v.
Interstate Realty (1949) , a District Court dismissed an action brought by a TN corporation in MS due to MS statute saying that "foreign corporations” had to meet certain requirements to be able to bring suit; the Court affirmed the dismissal, saying that "where in such cases one is barred from recovery in the state court, he should likewise be barred in the federal court.” Finally, in Bernhardt v. Polygraphic (1956) , plaintiff sued in Vermont state court for breach of an employment contract, which had a provision calling for arbitration of any dispute.
The defendant removed to federal court and moved for a stay pending arbitration, but the District Court denied motion for stay, on the ground that under Vermont law an arbitration agreement was revocable at any time prior to award. The Court upheld the District Court, first finding that U.S. Arbitration Act did not apply, and then saying federal court could not enforce clause in face of contrary state law: "The federal court enforcing a state-created right in a diversity case is, as we said in Guaranty Trust Co.
. . . in substance 'only another court of the State.’ The federal court therefore may not 'substantially affect the enforcement of the right as given by the state.’ . . . The change from a court of law to an arbitration panel may make a radical difference in ultimate result.”
W
HAT
H
APPENED IN THE
Y
ORK
D
ECISION
: Difference between the state of New York’s "strict” statute of limitations applying to both equity suits and suits at law, and the federal "laches” statute of limitations that was more lenient in applying the limitation. "Laches” is a more discretionary standard, essentially allowing the judge to determine whether it is "fair” to allow the plaintiff to bring the suit, or whether too much time has elapsed and the plaintiff should be barred. Before the merger of law and equity, we had essentially two separate systems of law. This was one of the changes wrought by the Federal Rules, in that Rule 1 said "there would be but one court.” Only a couple of states still have two separate court systems (DE being one).
Nowadays, the statute of limitations is the outer limit on time to file, regardless of what kind of remedy you are seeking. However, there may still be a "laches” limitation on equitable relief (e.g., specific performance) that is shorter than the SofL. Guaranty Trust took place, however, in a time when there was still a difference between cases at law and equity. Though the courts had been merged, there was still a pattern of using laches and statutes of limitations differently in the federal courts. New York has already arrived at what we might call the "modern” system: case is governed by the statute of limitations as the outer boundary regardless of the type of suit. The federal courts, however, were still following a system where the underlying period for filing depended on the type of suit (law or equity). In this case it makes a difference, because if this case were brought in state court it would be barred by the statute of limitations, whereas if it were brought in federal court, the lack of prejudice or equitable reliance presumably would mean that the laches period would still not have run out. The Court says that the choice between the laches period and the statute of limitations period is, for
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Erie purposes, "substantive,” so that the federal court has to follow the state court. Therefore the federal court should not apply laches instead of the statute of limitations, because this would change the outcome, and would be a "substantive” difference between bringing suit in federal as opposed to state court. Page 503: "...should not lead to a substantially different result.” York is thought of as applying an "outcome determinative” test: if the choice of rule is "outcome determinative,” then you apply the state court rule. In a sense, this is an oversimplification of the opinion, because Justice Frankfurter actually says it has to be a "substantially” different, not just different. This is not just dependent on a "different result.”
E RIE AND D IVERSITY J URISDICTION : Justice Frankfurter’s majority opinion implies that Erie only applies in cases based on diversity jurisdiction, but he probably meant cases in which federal court is applying state law.
F EDERAL S TATUTES , R ULES , AND "P RACTICES ” : Sibbach v. Wilson (1941): One of the things the Federal
Rules did was to give enormously expanded discovery, and one of the particularly startling expansions was to give a compulsory physical examination whenever physical condition was an issue. The plaintiff objects, saying that because she does not have to do it in state court, she should not have to do it in federal court. She loses 5-4, and the Court says that she has to submit to the Federal Rules. Justice Frankfurter (who wrote the majority in Guaranty Trust v. York ) leads the 4 dissenters, and says that the state court rule should be followed rather than the federal court rule. But he does not do so on an explicit "outcome determinative” test. At the bottom of page 500: "Plainly the Rules are not acts of Congress and cannot be treated as such.” What does he mean by this? He is talking about how Congress does not have a real part in the creation of the Rules (though they could if they so chose), and in large part the Rules are created not by Congress but by the Committee.
This is designed to capitalize on the political inertia in Congress, in that Congress is unlikely to take action on the Rules. These are not "acts of Congress,” they are Rules, and they are promulgated subject to the restriction that Rules "shall neither abridge, enlarge, or modify any substantive right.” Thus they are limited in their impact. What if the Supreme Court were to promulgate a Rule 1A saying that "comparative negligence” is now the rule in federal tort cases, and this were allowed to slide by Congress? The question is how
"substantive” an effect the Rule has, such that any Rule that has a "substantive” effect is automatically limited by the "substantive” limitation. This is what Justice Frankfurter is referring to, as he says that the Rules are not "acts of Congress,” and thus are not able to make substantive changes in the rights of litigants. He goes on to say that Congress did not explicitly consider this Rule change (compulsory physical examination), and is too
"substantive” to be done by Rule. He would strike down Rule 35 as inconsistent with limitation written into 28
USC § 2072 (Rules Enabling Act). The test may be a little different when you actually have a federal RULE
(as in Sibbach ), as opposed to a federal "practice” that exists apart from any rule (as in Guaranty Trust v. York ).
It appears that in Sibbach Frankfurter would invalidate the Rule (which would require following state law), though for different reasons than "outcome determinative” test that was applied in Guaranty Trust v. York . In other words, Rules have their own limitation built into the Rules Enabling Act. But question is whether those procedures in federal courts that are not Rule-based are subject to a similar limitation. The answer is clearly yes, but it is contained in the "outcome determinative” test instead. Thus, the test depends on what type of source of federal authority is consulted: (1) Statute - Congress can do whatever it wants so long as it is acting within its enumerated powers; (2) Rules - limited by § 2072; (3) Judge-made practice - judges can do whatever they want so long as it does not "substantially affect the result.”
5. State rule taking decision out of jury’s hands not binding: Byrd v. Blue Ridge...(1958)
In a state personal injury suit, defendant raised affirmative defenses that under SC statute plaintiff had the status of a statutory employee and was thus barred from suing outside workmens’ comp. The defendant argued on the basis of a SC Supreme Court case that the issue of immunity should be decided by the judge and not by the jury. The defendant said this decision governs the case and "divests the jury of its normal function” to decide the disputed fact question of his immunity under Erie . Supreme Court says it sees no reason that the rule displacing the jury with the judge is so "bound up with” the rights and obligations of state law that it has to be binding. They "simply” are a reflection of a "policy,” not an "integral part of the special relationship created by the statute.” It is "merely a form and mode of enforcing the
60

immunity.” Though cases following Erie have stated broader policy of ensuring that the federal courts should conform as near as possible to state rules, a similar "outcome” is not the only consideration here because the federal system has its own rules giving preference to jury determinations of disputed fact questions. In this case the Court said the federal court should not defer to the state rule, especially since it might not change the outcome. It would be different if there were actually a state statute or constitution expressing this court rule.
T HE G ROUNDS FOR THE B YRD D ECISION : There are three parts to the Byrd analysis—(1) "Integral part” of the state statute: the US Supreme Court discounted the Adams decision by the SC Supreme Court as not reflecting a considered judgment that this judge/jury division was an integral part of the state workers’ compensation statute; (2) Importance of the federal interest: the "influence” of the Seventh Amendment, though Court declines to decide whether it actually requires a jury determination of disputed facts, still gives strong federal interest to jury control; (3) Outcome determinativeness: the Court backs away from its early concession that it
"may well” affect outcome. York is known for providing an "outcome determinative” test, while Byrd is known for its "balancing” (this time the federal interest in a jury determination "outweighed” the interest in federal and state court uniformity).
T
HE
"B
ALANCING
T
EST
” I
N THE
B
YRD
D
ECISION
: The question is whether the federal courts should apply the federal practice (the jury) or the state practice (judge). The Supreme Court says it is okay for the federal court to follow the federal jury practice, rather than state. Seventh Amendment requires jury trials in federal civil cases ("at common law”), but it has not been applied to the states. South Carolina is within its rights to try issue by judge. If this suit had been brought in state court in SC, statutory employee question would have been decided by a state court judge. But the Court says decision-making by judge is not particularly important to
SC, nor particularly important to statutory scheme of workmens’ compensation. Court says that the judge is only deciding single "affirmative defense” of the "jurisdictional facts” of employment: "Thus the requirement appears to be merely a form and mode of enforcing the immunity.” The Court is setting up a weighing of interests, of state vs. federal, so it is trying to downplay the state interest. So we get this elaborate little analysis that says this "accidental” policy is not very important to South Carolina. The Court wants it both ways: at the beginning it sounds fairly outcome-determinative, but by the end it has backed away from an outcome-determinative analysis. Why does the Court think that a jury is important? Because it is outcome-determinative, in the sense that a jury might be more sympathetic to the injured worker. The
"balancing” test of Byrd says that when the federal interest is strong, and the state interest weak, we should go with the federal rule, rather than with the state. When we combine this with the "outcome-determinative” test of York , we may be pulled in two different directions by these two tests (or they may go the same way). This would have been a very easy case if the Court had simply found that the Seventh Amendment required a jury trial in a federal civil case, but the Seventh Amendment does not "command” this.
E
RIE
, H
ANNA
,
AND THE
F
EDERAL
R
ULES
: A careful reading of Hanna leads to the following analysis: (1) The
Federal Rules of Civil Procedure control matters within their scope, even when state procedural rules would, if applicable, require something different. The Federal Rules are Acts of Congress for purposes of the Rules of
Decision Act. (2) A Federal Rule must be valid and applicable. The restriction in the Rules Enabling Act that the Rules may not "abridge, enlarge or modify any substantive right” was originally intended for separation of powers purposes (to limit non-Congressional lawmaking), but it has today become intimately connected with
Erie . After the Court’s decision in Erie , the restriction was understood to protect state substatntive law from undue distortion. In practical fact, the Supreme Court has never struck down a Federal Rule as invalid because it exceeds the Rules Enabling Act restriction, but the restriction has occasionally had real consequence on the drafting of the rules that are proposed by the Supreme Court under the Act, and on the interpretation of the rules adopted. In addition, a Federal Rule must not only be valid; it must also be applicable to the issue at hand.
Ordinarily, the meaning and scope of a federal rule is fairly obvious. But sometimes not, as in Walker v.
Armco Steel Corp. (1980) . If there is no applicable Federal Rule, either "outcome determinative” test ( York ) or "balancing” test ( Byrd ) is applied.
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6. Service of process controlled by federal rather than state rule: Hanna v. Plumer (1965)
Case brought in District Court in MA, based on diversity of citizenship, for personal injury case.
By the time the case was brought, defendant had died, so plaintiff served complaint on executor of estate (also MA citizen like the defendant). Plaintiff served executor by leaving copies of summons and complaint with his wife at his residence, in compliance with FRCP Rule 4(d)(1).
This method did not comply with the MA state rule for service of process, which required in-hand service. The District Court granted summary judgment (for improper service), saying state rule should control, and the Court of Appeal affirmed. Supreme Court disagrees, saying federal rule should control the procedure of the federal court. Rule 4(d)(1) did not exceed the congressional mandate of the Rules Enabling Act and was not beyond the constitutional power of
Congress/the courts. Rule 4(d)(1) relates to the "practice and procedure of the district courts,” and so does not "operate to abridge, enlarge, or modify the rules of decision by which that court will adjudicate its rights.” So if there were no conflicting state procedure, Rule 4(d)(1) would control. As for the conflicting MA rule, the Court says that the broad command of Erie was that federal courts are to apply state substantive law and federal procedural law. However,
"outcome-determination” analysis was never intended to serve as a talisman. The message of
York is that choice between state and federal law are to be made not by application of any automatic, "litmus paper” criterion, but rather by reference to the policies underlying the
Erie rule: the "outcome-determination” test should be read with reference to the twin aims of the
Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the law. Any procedural rule is "outcome-determinative”; the question is whether the change in the federal rule would have a substantial effect on administration of law. " Erie and its offspring cast no doubt on the long-recognized power of Congress to prescribe housekeeping rules for federal courts even though some of those rules will inevitably differ from comparable state rules.” Federal rules do not simply cease to function whenever they conflict with state rules.
Concurrence: Should not replace strict "outcome-determination” with "unadorned” forum-shopping test, because this is also an oversimplification. The real question is whether a choice of rule would "substantially affect those primary decisions respecting human conduct which our constitutional system leaves to state regulation.” In this case, the difference in the federal rule is not a big deal.
7. Ragan survived Hanna - must be "direct collision” with Rule: Walker v. Armco (1980)
State law claim (negligence in construction of nail which led to injury) brought in District Court on basis of diversity jurisdiction. Defendant filed motion to dismiss on basis of applicable
Oklahoma statute of limitations; though action was filed within 2-year limit, Oklahoma law did not deem the action "commenced” until service of the summons on the defendant. Plaintiff did not serve notice until well after the 2 years + 60 days given by OK law. Plaintiff argued that statute of limitations should be controlled by FRCP Rule 3 instead which says action
"commences” with filing. District Court dismissed the complaint, and Court of Appeal affirmed the dismissal. Now Supreme Court also affirms the dismissal. Court says that York decision leads to the conclusion that the outcome of the litigation in federal court should be substantially the same as would be in state court, and this conclusion was reinforced in Ragan , which held that a Kansas statute of limitations should apply in an identical circumstance of a conflict between state law and Federal Rule over "commencement” of the action. The Court in Ragan said that the service of summons statute controlled because it was an integral part of the state statute of limitations, and that statute of limitations was part of the state cause of action. This decision was not overruled by Hanna , because Hanna only dealt with cases in which there was a "direct collision” between Federal Rule and a state law. Hanna distinguished Ragan , it did not overrule it. The Scope of the Federal Rule (Rule 3) is not as broad as the plaintiff argues, and there is therefore no Federal Rule which directly covers the issue. Therefore state law still controls, based on the "outcome-determinative” test of Erie and York . "There is no indication that the
62

Rule was intended to toll a state statute of limitations, much less that it purported to displace state tolling rules for purposes of state statutes of limitations. In our view, in diversity actions
Rule 3 governs the date from which various timing requirements of the federal rules begin to run, but does not affect state statutes of limitations.” In the absence of a controlling federal rule, action based on state law which would be barred in state courts should not be allowed to proceed.
C
AUTIOUS
R
EADING OF
R
ULE
3 : The Court in Walker was cautious in reading Rule 3; it refused to construe
"commenced” in the Rule as meaning that a suit brought under state law was commenced by filing a complaint, for purposes of tolling a state statute of limitation, when that state required actual service to toll the state SofL.
H
ANNA AND A
N
EW
F
ORWARD
-L
OOKING
/F
ORUM
-S
HOPPING
"O
UTCOME
-D
ETERMINATIVE
T
EST
” : Is the choice between the two rules in Hanna "outcome-determinative”? By the time we get the case, the choice between the two rules clearly is outcome-determinative, because the statute of limitations has run. If we are going to follow the state rule, the suit will be dismissed on the merits for failure to meet the statute of limitations. The difference might be expressed as whether the choice of rule is outcome-determinative before you file the suit, or is it only outcome-determinative "after the fact”? In other words, is the rule only outcome-determinative after you have failed to comply with it. Justice Frankfurter would likely be concerned with "outcome-determinative” rules only as they might affect the choice of forum. So it has to have a
"substantial” enough effect on outcome to have a substantial influence on the choice of forum. The
"outcome-determinative” test has come to mean this in the hands of the Hanna Court. Fletcher says he thinks this is also the answer that Frankfurter would have made.
A "D IRECTLY C OLLIDING ” F EDERAL R ULE C ONTROLS : In Hanna , question is whether service of summons/ complaint is controlled by federal or state rule in a diversity case. Notice that of the principal cases we have so far seen, we have not yet had a Federal Rule of Civil Procedure; we have had "practices” and "procedures” used by the federal courts, but this is the first case with an actual Rule. Why does the Court say that Federal Rules should be followed? The Court says that if the applicable Rule is valid under the Rules Enabling Act, follow it and that is the end of the question. If there is something in the Federal Rules that applies to the situation, then follow it. If there is not a Rule, then this becomes a harder question. We essentially have an unsolvable problem, in that we have two different regimes of procedure. We have solved many of the problems of different substantive law between state and federal forums (we have gotten rid of the federal general common law, for instance), but we cannot make them the same without a merging of the rules. 28 USC § 1652 (Rules of Decision Act) - 1789; A federal court should follow state law where it applies. 28 USC § 2072 (Rules
Enabling Act) - 1934; Allows the federal system to set up Rules of Procedure. We know under the Supremacy
Clause that federal law controls over state law that is inconsistent; therefore, the only question is whether the
Rules are valid under the Rules Enabling Act. If they are, they control. The harder part comes if there is no applicable Federal Rule. If the judge-made rule is "federal common law,” it is binding federal law and will be followed. In some cases, it may even be required to be followed in state court as well as federal (depending on the scope). If the judge-made rule is a form of "general federal law” (the last remnant of Swift ), it may be followed only in the federal courts and only when it is not fatally inconsistent with state law. In Walker , under the OK rule, statute of limitations is tolled at date of filing, provided that you serve within 60 days (so it is really tolled by service of process). This is a fairly common way for the system to work, and in fact this is the way the Federal Rule now works (except that it is 120 days instead of 60 days). Plaintiff’s argument is that
Federal Rule 3 controls (which tolls the statute of limitations at filing regardless of the service of process), but defendant argues that the OK rule should control (in which case the SofL has run). The Court rejects plaintiff’s argument that Hanna overruled Ragan ; the Hanna decision distinguished Ragan , it did not overrule it. There must be a "direct collision” between the state rule and the Federal Rule for the Federal Rule to control; otherwise you have to do the normal York or Byrd test. Rule 3 might be invalid under the Rules Enabling Act
(§ 2072) if the Court went the other way; this may be a major reason why the Court goes through all these verbal gymnastics to avoid giving Rule 3 this power.
8. Federal Rule 3 does control in cases based on federal law: West v. Conrail (1987)
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FRCP 3 governs tolling of statutes of limitations for causes of action based on federal law.
Court did not mention, and perhaps did not perceive, problem posed by the failure of the Rules
Enabling Act, and of Rule 3 itself, to differentiate between federal and state substantive law.
The Court just said that when the underlying cause of action is based on state law, state statutes of limitations and methods of service control, but this requirement does not apply to federal-question cases.
9. State offer-of-settlement law applies (only) to diversity case: S.A. Healy (7th Cir 1995)
In diversity case relying on WI substantive law, plaintiff sought to use WI offer-of-settlement rule. Under the WI rule, if plaintiff makes an offer of settlement which is refused, and then wins more than the rejected offer, plaintiff is entitled to twice his or her taxable costs plus 12% interest. The only comparable rule is FRCP 68, which applies only to offers of settlement by defendants. The Court of Appeals held that Rule 68 did not occupy the field and did not conflict with the WI rule so the WI rule should be applied by the federal court. Judge Posner’s opinion relied heavily on fact that it was a diversity case involving questions of substantive state law.
By negative implication, his discussion suggests that the WI offer-of-settlement rule should not apply to a case involving a question of substantive federal law. But would forum-shopping incentives be any less for federal question cases? Presumably, WI rule would be applied in state court to cases of federal law.
W ALKER ’ S F OOTNOTE 11 AND F EDERAL VS .
S TATE L AW : What about Walker’s footnote 11 (which left open the question whether FRCP 3 would toll the statute of limitations for cases based on federal, not state, law)?
What is going on with this "bad” footnote? In a fair number of federal statutes, statute does not specify particular statute of limitations. Until recently, the Supreme Court would look to the most closely analogous statute they could find (either federal or state). Congress finally stepped in and said "We don’t like this default deal” in 1990, and said that if Congress did not specify the statute of limitations in the federal statute, then the
"general” statute of limitations in 28 USC § 1658 would apply, so that the Court does not have the discretion to pick among "analogous” sources of law. Once we know what the statute of limitations is, where does the
"tolling” rule come from? Is this state law or federal law? If the goal of Erie is to have uniformity between state and federal courts, then presumably you would want the federal court to apply the tolling rule applied by the state court in which the federal court sits. But this "perfectly sensible” answer is not actually correct. §
2072 does not say a Rule cannot enlarge, abridge or modify any state substantive right. The Supreme Court made this up, not because of the statute or any legislative intent, but because they thought it was a good idea.
Does this mean we have to read every Federal Rule of Civil Procedure differently depending on whether it is a federal or state cause of action? This "Walker/Conrail” problem is maybe confined to statute of limitations, but
Fletcher is not so sure. If you look at the note case, pages 49-50 of the Supplement, it may also have been extended to the offer-of-settlement rule. The reasoning in this case appears to allow different treatment depending on whether it is state or federal law. Federal Rule 68 (offer-of-settlement) is a very quirky rule; there is no state rule that works exactly the same way. There are several ways in which the federal rule is different from the standard state offer-of-settlement rule. If you are in federal court, and an offer of settlement not covered by Rule 68 (i.e., offered by the plaintiff) takes place, what should you do? Should you apply the state rule, and would you also do this if it is a federal case? This is what has happened: every Federal Rule must now be examined with these questions in mind: whether it is possible to use a state rule instead, and if so whether there is a different rule of application for state vs. federal. Fletcher would prefer, since he doesn’t like
Rule 68, to change it rather than to use a state rule instead, because of the labor that is entailed by every time having to look around to see if there is an applicable state rule.
10. Must follow state "deviates substantially” standard for jury verdicts: Gasperini (1996)
Plaintiff in a diversity suit based on New York law obtained a jury verdict of $450,000.
Defendant sought to overturn the award as excessive. New York trial and appellate courts are required to find a jury award excessive "if it deviates substantially from what would be reasonable compensation.” Federal District Courts have the power under FRCP 59(a) to order
64

either a new trial, or remittitur of a jury award, "for any of the reasons for which new trials have heretofore been granted...in the courts of the United States.” Court of Appeals for the Second
Circuit will overturn a jury verdict only if it is so large as to "shock the conscience.” The
Supreme Court, in a 5-4 decision written by Justice Ginsburg, held that the federal courts should apply the New York "deviates substantially” standard in cases based on New York law.
Applying the York test, the Court concluded that the choice between the New York "deviates substantially” standard and the federal appellate "shocks the conscience” standard was
"outcome-affective” in the sense that it "would [unfairly discriminate against citizens of the forum State, or] be likely to cause the plaintiff to choose the federal court.” The Court then asked whether application of the "deviates substantially” test by a federal court is a violation of the Seventh Amendment ("no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law”); the Court said the federal courts have the power to set aside jury verdicts as excessive despite Seventh Amendment; "New
York’s dominant interest can be respected without disrupting the federal system.” Justice Scalia argued in dissent that the New York standard was in direct conflict with Rule 59, allowing a
District Judge to order a new trial only when "'it is quite clear that the jury has reached a seriously erroneous result,’” which would result in a "'miscarriage of justice.’” Justice
Ginsburge replied that whether the damages were excessive would depend on state law, and therefore since state law governed this question it would also govern the question of the standard for excessive damages.
A PPLYING THE Y ORK AND B YRD TESTS IN G ASPERINI : Gasperini is the first Supreme Court case since Byrd to apply a Byrd analysis to an Erie problem, and is also the first case to apply a combined York and Byrd analysis.
The majority finds that Rule 59(a) does not provide a federal standard for excessiveness (Scalia disagrees), but it is a bit disingenuous for the majority to say there is "no candidate” other than state law because of the "shock the conscience” standard in the Circuit. Under the Court’s analysis in Hanna , when there is no controlling
Rule, it is a "relatively unguided Erie choice,” which means using York and Byrd . Is the choice between the federal "shock the conscience” and the state "deviates substantially” "outcome-effective” in the sense of affecting forum choice?
D ISTINGUISHING B YRD IN G ASPERINI : The Court distinguishes Byrd as involving the question of whether a jury would be allowed to address the question at all compared to this case where the question is how much judicial interference with the jury’s verdict will be permitted. In neither Byrd nor Gasperini is the federal practice required by the Seventh Amendment; if that had been the case, an Erie analysis would have been unnecessary, for Seventh Amendment would simply have prevailed over inconsistent state law by virtue of the supremacy of federal law.
D
IFFERENT
R
EVIEW OF
J
URY
V
ERDICT AND
J
UDICIAL
"A
BUSE OF
D
ISCRETION
” : In Gasperini , Court also held for first time that Seventh Amendment permits appellate court reduction of jury verdict, despite the language in the Seventh Amendment that "no fact tried by a jury, shall be otherwise re-examined.” There is no
Federal Rule of Appellate Procedure prescribing the "abuse of discretion” standard that the Federal Courts of
Appeal apply in reviewing a decision by a District Court not to reduce a jury damage verdict. The Supreme
Court endorses the "abuse of discretion” standard of review, but has to engage in another "relatively unguided
Erie choice” to decide whether New York "materially deviates” standard should override the "abuse of discretion” standard. The Court does not bother with a York outcome-determinative analysis, but it does engage in a Byrd interest-balancing, and says that the standard of review by the Court of Appeals should be governed by the federal standard.
T
HE
S
LOPPY BUT
"B
ASICALLY
R
IGHT
” G
ASPERINI
O
PINION
: Until this point, the federal courts had applied the "shock the conscience” standard, so why should the court switch? "Common ground” (both sides agree): If
New York had passed a statutory "cap” on damages, and assuming it was a constitutionally valid limitation, it would be proper for federal courts to follow that in diversity cases in NY. But that is not case here; instead
65

there is this "materially deviates” standard. Is that "substantive”? The Court of Appeals says yes (and indeed the Supreme Court agrees). What if Rule 59 had the "shock the conscience” standard in it? Theoretically, the federal courts would apply the standard given by the Rule, but the question would be whether the Rule would then be valid. If there were a state law statutory cap on damages, and Rule 59 had a "shock the conscience” standard, which would be applied in the federal courts? If these were in conflict, would the state statute control, or would Rule 59 control? Under these circumstances, would Rule 59 be invalidated under the terms of the Rules Enabling Act if it were used by the federal court to enlarge a verdict beyond that allowed by the state statutory cap? But that is not the case before us. Instead we have a "judgment call” about whether a verdict "deviates materially” from the reasonable amount, under the state rule, or whether it "shocks the conscience” under the federal common law rule that is referenced in Rule 59. Under these circumstances, do we follow the state rule or the federal rule? The question that the Supreme Court thought it was answering was this: It had this "deviates materially” state standard, on the one hand, and on the other it had this "shocks the conscience” standard (that it said was) not imbedded in any federal rule (only a matter of federal common law).
Applying the York and Byrd analysis, would this be "outcome determinative” between the federal and state rule, in the sense that it would be "outcome determinative” in advance, and might affect the plaintiff’s choice of forum? The ultimate question may be whether there is really a forum-choosing difference between the two standards? Do we treat the damages function, in terms of interfering with the jury’s verdict, as a "substantive” matter? The majority opinion in Gasperini assumes that Rule 59 does not speak to this question (see especially fn 22 on page 2224 of the opinion). "There is no candidate for that governance” other than the law of New
York; is that true? She may have decided it is not a very strong candidate, but it is certainly a candidate.
Justice Scalia (on page 2239, second column) actually decides that Rule 59 is not only a candidate, but that it should control. For Justice Scalia, even though the words "shocks the conscience” are not in Rule 59, he would read them in, based on the facts that this is what is done "in the courts of the United States.” Fletcher is not sure that he is right, just because a lot of stuff is done "in the courts of the United States,” but he thinks Rule 59 controls. The majority decision is "perfectly defensible.” There is, however, another Erie question floating around here, and that is what the Court of Appeals should do. What is the standard by which the Court of
Appeals should review the decision of the District Court: "materially deviates” (state law) or "abuse of discretion” (federal law). The words of the New York statute were written to be directed only at appellate review, but it has also been construed to apply to trial court review of jury verdicts. So what should the federal appellate court do when it is reviewing a District Court decision applying the state law and the state law jury review standard? The Court says that we should go with the "abuse of discretion” standard, for a couple of reasons: (1) It is not so far away to go from "materially deviates” to "abuse of discretion” (not as far as "shocks the conscience”); and (2) the Court is under the influence if not the command of the Seventh Amendment. At the appellate level, we are getting a "true” Byrd and York analysis combined. This is reinforced by the influence of the Seventh Amendment. The opinion could have been re-drafted a little bit to make it more clear.
He thinks the decision in Gasperini is "basically right,” though the reasoning and writing is overly confusing.
T HE D IFFERENCE FOR C ASES B ASED ON F EDERAL L AW : What if this were a federal question case instead of a diversity case, and the plaintiff had brought the state law claim in under supplemental jurisdiction? Would this bring a different answer, based on the text on page 2220 of the case, quoting from Guaranty Trust v. York?
Is this just Justice Frankfurter speaking imprecisely? We must assume that what he is actually talking about when we are dealing with state-law claims, and is not intending to limit this rule to diversity cases. Presumably it also applies to federal question cases: We should read this as a "shorthand” expression for what he really means: the application of state law. Where there is no applicable Federal Rule, the "outcome determinative” test is applied to state law cases in federal courts; it is not applied to federal causes of action in federal court (so it would not apply to an FELA case). If there were a FELA claim brought in NY federal court with jury verdict that was challenged for being "excessive,” the verdict would be reviewed by the trial court on a "shock the conscience” standard. Now, if the same FELA case were brought in a state court, what standard should the state court judge apply in reviewing the "whopper” of a jury verdict? Does Dice provide any guidance? The disputed question in Dice was whether the Ohio state court had to follow the federal judge/jury division of
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labor; the Supreme Court said that the state court had to act as a federal court would have, because the judge/jury division was "part and parcel” of the operation of the FELA. What should the state court judge do in the FELA case with an "excessive” jury verdict; is the federal "shocks the conscience” standard "part and parcel” of the FELA scheme, or can the state judge choose instead to apply the "deviates materially” standard given by the state statute. If Dice is still "good law,” in the sense of still having motive force, it appears that in the FELA case in state court the state court judge will have to follow the federal "shocks the conscience” standard, because of the possibly material difference between "deviates materially” and "shocks the conscience.” But Fletcher does not know if Dice is "good law” in sense of generating new law. Dice and
Brown v. Western RR , to the extent they are "good law,” may be limited to FELA. What if this were a § 1983 claim brought in state court, and there is clearly no "qualified immunity,” and again we get a "whopper” of a verdict. Do we apply the "shocks the conscience” standard? Fletcher thinks it would be much less clear here, because it is not clear that Dice has any controlling authority for other federal statutes.
B. "R
EVERSE
E
RIE
”: F
EDERAL
L
AW IN
S
TATE
C
OURTS
(533-539)
A state court is required to hear civil suits based on federal causes of action. But once it is granted that the state court must hear case (decided in Testa v. Katt (1947) ), what procedures may the state court employ? Can both Dice and Byrd be right? Justice Black’s justification for requiring the state to follow federal practice in Dice was that the right to a jury decision was "part and parcel” of the FELA.
Justice Brennan’s reason for not following the state practice in Byrd was that the state assignment of responsibility to judge and jury was not an "integral part” of the South Carolina workers’ compensation statute. Is there something wrong with a system that gives the federal courts (the Supreme Court) a last word on both the meaning of the FELA (federal statute) in Dice and the workers’ comp. system (state statute) in Byrd?
11. FELA actions in state courts governed by federal law: Dice v. Akron...RR (1952)
Plaintiff sued his employer (RR) under FELA for negligence in an Ohio state court. There was a question as to whether documents that he signed were just receipts for payments he had received, or were valid releases of any claims and agreement to full and complete settlement.
Plaintiff said that he only signed the releases due to defendant’s deliberately false statement that the document was nothing more than a receipt. Jury found in favor of plaintiff, but trial judge entered judgment notwithstanding the verdict, saying that plaintiff had been guilty of "supine negligence” in his not reading the releases before he signed them. The Court of Appeals of
Ohio reversed, saying under federal law, the jury’s verdict had to stand as long as there was ample evidence to support finding of fraud. The Ohio Supreme Court reversed again, holding that Ohio law governed, and that under that law plaintiff, a man of ordinary intelligence who could read, was bound by the release even though he had been induced to signed by deliberately false statement, and that Ohio law also gave certain factual issues about fraud in execution of the release to the judge rather than the jury. The Supreme Court reverses again, agreeing with the
Ohio Court of Appeals that the validity of releases under FELA is a federal question to be determined by federal rather than state law. States cannot be allowed to defeat or interfere with rights given under the Act, and only federal law will ensure a uniform application of the Act to effectuate its purposes. The correct federal rule is that a release of rights under the Act is void when the employee is induced to sign by deliberately false statements. Finally, the right to trial by jury is too substantial a part of the rights afforded by the Act to deny.
Concurrence/Dissent: Court has misconstrued the role played by the judge and jury in Ohio cases, and it would be counterproductive to require Ohio to deviate from its normal division of labor in a case brought under FELA. However, Court still reaches the right conclusion: federal law controls.
W HAT THE C OURT DID IN THE D ICE D ECISION : The FELA is an avowedly pro-plaintiff statute, designed to provide an effective remedy to injured railroad workers. Under the FELA, the plaintiff may file suit in either state or federal court. If he files in state court, the defendant railroad may not remove to federal court. This is
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designed to protect plaintiffs from having to travel long distances to federal courts, but under the Court’s decision in Dice a plaintiff could litigate close to home, in state court, without sacrificing his federal procedural rights.
D ICE AS "R EVERSE E RIE ”—R ECONCILING B YRD : Issues in the case: (1) Validity of releases under FELA is a question of federal law; (2) Releases are void when premised on false statements; (3) Right to jury trial is too important to allow state court to deny it. Dissent by Justice Frankfurter: This is too much of an intrusion into state court power; he does not say this, but he is essentially saying you have to "take the state courts as you find them.” But the majority disagrees: it says that the Ohio state court must follow federal procedures and rules at least for those cases decided under the FELA (it turns out later that it doesn’t actually extend beyond this law).
The "scurrilous explanation” for this case: Justice Black had previously been a very successful plaintiff’s lawyer, with his primary clientele composed of injured railroad workers. He depended on jury sympathies.
FELA cases, if filed in state court, may not be removed to federal court (one of the few statutes that does this).
This is both to allow plaintiffs to choose (more sympathetic) state courts, and to not force them to travel far.
The Supreme Court is split on the judge/jury question (3); they are not split on issues (1) and (2). They agree on the proper legal standard, and the fact that it is a federal question. Black’s judgment was that on balance he thought it would be better for plaintiffs to have juries, and he did not want to make them have to travel great distances to get a jury (also better to have a home-town jury). It is also not implausible to read this intent into the statute, since Congress was so avowedly pro-plaintiff in passing the FELA. This case has come in for a
"huge amount of grief” over the years. Many view this only as "lawless,” plaintiff-friendly, populist jurisprudence of worst kind (if you happen not to like that sort of thing). So, now how does the Supreme Court deal with this opinion in Byrd; how can they both be valid/consistent? The Court attempts to distinguish between "basic rights” (trial by jury) in Dice , and less important rights (judge/jury distinction in the workers’ compensation scheme in South CarolinaByrd ). The Court in Dice said that trial by jury is "part and parcel” of the right/remedy given by FELA. In Byrd , the Court says that the state of South Caroline (and the SC Supreme
Court) does not view the judge/jury rule as "part and parcel” of the workers’ compensation scheme/statute.
How does the Supreme Court know this in Byrd?
The only way that they can say this is that the SC rule came up in an "odd” way (but then they all do). The easier way to decide the Byrd decision would have been just to rely on the Seventh Amendment, and to say that of course there is a Seventh Amendment right to a jury trial
(but they don’t do this, though academic literature says they should have). In both Dice and Byrd , the plaintiff ends up getting a jury trial. So the only constant (and perhaps the "rule”) is that plaintiffs get jury trials when they want them. Fletcher thinks Dice can actually plausibly be supported by a reading of FELA that says that
Congress intended jury trials. He has more trouble with Byrd ,unless you read it as "really” a Seventh
Amendment case "in disguise” (then it is okay); otherwise it is a problematic case.
12. State court cannot require strict pleading in FELA case: Brown v. Western RR (1949)
The Supreme Court required the Georgia courts to abandon their usual pleading requirements, and to adopt instead a relaxed pleading standard similar to that of the federal rules. "Strict local rules of pleading cannot be used to impose unnecessary burdens upon rights... [under] federal laws.”
Dissent: Georgia allowed amendment of a complaint to supply greater particularity and plaintiff had declined to amend; "I cannot find that the Court of Appeals has either sought to evade the law of the [U.S.] or did so unwittingly....[GA] has not contracted rights...nor hobbled the plaintiff...”
13. State procedures may not unduly interfere with federal law: Felder v. Casey (1988)
Plaintiff brought a federal civil rights claim in WI state court under 42 USC § 1983 against City of Milwaukee (and police officers). In suits against municipalities, WI courts applied notice-of-claim requirement, under which a plaintiff was required within 120 days of an incident to notify the city of a claim, and of his or her intent to hold the city liable. This was a de facto statute of limitations, though the actual statute of limitations for § 1983 claims is the most
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closely analogous state statute of limitations, in this case two years. Supreme Court said the WI requirement unduly interfered.
14. Interlocutory appeal (§ 1983) not required in state court: Johnson v. Fankell (1997)
Plaintiff brought a federal civil rights suit (§ 1983) in state court and defendants asserted
"qualified immunity.” Trial judge rejected defense; state supreme court refused to hear interlocutory appeal by the defendants (not a "final judgment”). In federal court, interlocutory appeals allowed, but the Supreme Court said availability of interlocutory appeal was not
"outcome determinative.”
T
HE
E
XTENSION OF
D
ICE TO
N
ON
-FELA C
ASES
: Dice does in state court what Erie did in federal court; it says that when applying this particular federal law (FELA) states have to adjust judge and jury division to meet the federal practice and procedure. Felder v. Casey asks a statute of limitations question about a § 1983 case; §
1983 confers concurrent jurisdiction in both state and federal court. What do we do about state statutes of limitations when the claim is brought in state court? The court says that the state court must apply federal law, but this is strange since § 1983 says that the statute of limitations should be taken from the "most closely analogous” state statute of limitations. What the Court is really saying is that in certain circumstances the state statute of limitations will "cut too deeply” into the substantive right granted under federal law. But the question we have to ask is: If it is so burdensome on the plaintiff to comply with the 120-day notice of claim rule, why did the plaintiff file in state court? Why not just file in federal court? This is a fairly strong objection, unless you begin to look at the state and federal courts as "equal partners,” and say that the state court cannot "divest itself” of the obligation to hear federal civil rights claims. One of the underlying premises of the case is that the state courts cannot simply close their courtrooms to these claims. Fletcher is not sure this was really the motivation behind the 120-day limitation; he thinks it more likely they wanted to close down the civil rights claims altogether. Plaintiffs at this time would prefer to be in state court, and courts may have wanted to shut down the number of these types of claims they were getting. Why not allow the state to determine this rule? In large part, it is because this is federal law, and federal courts must determine this. However, the statute of limitations for § 1983 determined by state statutes of limitations, so the Court does not do a good job of explaining this complication. In Johnson v. Fankell , meanwhile, the court considers appellate procedure under § 1983. In federal court, there is a clear exception to the "final judgment rule” which allows appeal of a denial of the summary judgment motion (for "qualified immunity”) for police officers/other state officers in a §
1983 case. This is the rule of the federal courts, but what happens when the suit is going forward in state courts. Is this type of appeal important enough to the pursuit of the federal right to have this rule control the state courts? Fletcher would have thought the Court would have said yes, the state courts have to apply the federal rule, but in fact the Court said the state courts did not have to allow an interlocutory appeal if they did not want to. The Court said it was just not willing to interfere to this fundamenal aspect of the state court system. Fletcher thinks Johnson v. Fankell is in direct conflict with Dice at that point. They are absolutely taking opposite approaches to the same fundamental question: Dice does require interference with the state judge/jury system in a fundamental way, where Johnson v. Fankell has the Court saying it is unwilling to do so.
The underlying approach/philosophy of these two cases are "fundamentally in conflict.” He says he does not think that either of them is an accurate description of the Court’s real approach. He would have predicted that
Johnson v. Fankell would have gone the other way, because he thinks the availability of interlocutory appeal is very important to the operation of § 1983, especially for the officer and the state which employs him.
Fletcher does not think Dice is likely to be overruled, however, because the question will not come up. If it were really that important to state defendant/officer, they could simply remove the case to federal court.
R EVISITING THE Q UESTION OF FRCP 4( K )(2): Allowing jurisdiction to attach on basis of all contacts in the
United States. Is this Rule valid under Rules Enabling Act? The Advisory Committee recognized the possible problem with this Rule; who knows what Congress did with this "Special Note.” It is probably something less than a "deliberate endorsement” of this Rule. However, any argument that we might make about the invalidity of this Rule under the Rules Enabling Act is likely to fail, because we will have to get the Supreme Court
(which first came up with the idea for the Rule) to agree that the Rule is a violation of the Rules Enabling Act.
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The Court came up with this Rule in response to Omni Capital , and Fletcher does not think that the Court is really particularly concerned with strict application of the Rules Enabling Act. Unlikely to invalidate their own
Rules.
C. A SCERTAINING S TATE L AW (539-551)
When deciding a question of state law, a federal court should put itself in the position of a state court of the state in which it sits. In the years immediately following Erie , federal courts thought they were required to follow even lower state court decisions of doubtful authority. The Supreme Court eventually described the federal courts’ task more realistically as relyin on the state’s highest court as the best authority on its own law. "If there is no decision by that court then federal authorities must apply what they find to be the state law after giving 'proper regard’ to relevant rulings of other courts of the State.” Thus, federal courts have the same freedom as the state courts to consider a range of sources and policy considerations.
15. Federal courts follow state’s highest court: Commissioner v. Estate of Bosch (1967)
Instead of following every lower state court decision, federal courts are only bound by the state’s highest court decisions. For every other decision, federal courts are like "another state court,” and may rely on a diversity of precedents and policy considerations in making decisions on state law.
16. Federal courts apply location state choice of law principles: Klaxon v. Stentor (1941)
The federal court is required to apply the choice of law principles of the state in which it is sitting. This usually, but not always, leads to application of substantive law of that state. Judge
Friendly once began an opinion in a diversity case: "Our principal task, in this diversity of citizenship case, is to determine what the New York courts would think the California courts would think on an issue about which neither has thought.” So it can sometimes get complicated.
17. No deference to District Court on state law questions: Salve Regina v. Russell (1991)
Prior to the Court’s decision in Salve Regina , most federal Courts of Appeals treated District
Court decision on questions of state law almost like findings of fact ("foreign law”), subject to reversal only if clearly erroneous. Now a decision by the federal District Court on a question of state law is entitled to no special deference from the Court of Appeals; reviewed like any other question of law.
18. NY law has a "due diligence” requirement: DeWeerth v. Baldinger (2nd Cir 1987)
19. No such "due diligence” requirement in New York: Guggenheim v. Lubell (NY 1991)
20. FRCP 60: reopening due to appellate court error: DeWeerth v. Baldinger (SDNY 1992)
21. Cannot use FRCP 60 for misread of state law: DeWeerth v. Baldinger (2d Cir 1994)
Court of Appeals reversed the decision of the District Court granting relief under FRCP 60(b)(6), thereby reinstating the Court of Appeals’ incorrect interpretation of New York law. The Court justified its decision by saying that though the DeWeerth panel’s prediction had turned out wrong, the plaintiff knew of this risk when she chose to file the state claim in federal court. The outcome in the state court case, Guggenheim , "does not impugn the integrity of the DeWeerth decision or the fairness of the process that was accorded DeWeerth.” This would have been the same result if she had filed in state court and defendant had removed to federal court; "the very nature of diversity jurisdiction leaves open the possibility that a state court will subsequently disagree with a federal court’s interpretation of state law”; this not justify subjecting all diversity judgments to revision. This would be "tantamount” to saying "doctrine of finality” does not apply to diversity judgments.
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A LTERNATIVES TO H AVING F EDERAL C OURTS "G UESS ” ON S TATE L AW : The 2nd Circuit "guesses” that
New York law would impose a "due diligence” requirement, because they think that the law is intended to protect the innocent purchaser. He says the opposite interpretation of the law would protect thieves more than it protected innocent purchasers, and would be out of compliance with other states. Is there any reason to think that it is not an accident that New York has a different rule than any other states? The court in Guggenheim says that there is something about New York as an "art center” that says we will treat this differently, and we will protect the "true owner” more than any other jurisdiction will. Even under the New York law as it is eventually revealed, there is no guarantee that DeWeerth would have won, because of the "laches” rule and the prejudice to the defendant cited by court in Guggenheim . In other words, the New York court is only saying that there is no flat "due diligence” requirement, and the court must engage in a more fact-specific, multi-layered assessment of the prejudice to the defendant (and to the plaintiff). Did 2nd Circuit have to reverse second time? Should we upset "final judgments” on this basis? What about the possibility of allowing an appeal to a state supreme court on questions of state law? Why not have a statute that does at this level what the statute does that allows appeals from the state supreme court to the U.S. Supreme Court on questions of federal law? This would be resoundingly defeated (politically). What about another alternative (rejected by the Supreme Court in 1991), which would be to treat state law in federal court the same way we treat "foreign law” (law of other countries). We would allow expert testimony on the law, and treat the question as a
"question of fact” (raising the standard of review to "clear error”). This would mean the appellate court should overturn the District Court decision only if there were clear error.
D. F EDERAL C OMMON L AW (551-556)
Federal common law is judge-made federal law. It is both jurisdiction-conferring under the federal courts’ federal question jurisdiction, and supreme under Supremacy Clause of the Constitution. The
Court that overruled Swift understood the distinction; Judge Friendly praised Erie , in part because the abandonment of the general common law of Swift cleared the way for further development of a true federal common law. The federal common law did not begin to emerge until the second half of the nineteenth century, but it is now an important and accepted part of federal law (though not included in the Rules of Decision Act).
22. Federal common law inferred from: (1) strong federal interest; (2) statute/Constitution
(1) The Supreme Court has formulated federal common law in a number of areas without relying on specific federal constitutional, treaty, or statutory provisions: (a) Cases in which the U.S. is a party—the fact that the U.S. is a party is not enough by itself to support federal common law rule; there must be, in addition, a strong federal interest in the formulation and application of a uniform federal rule; (b) Cases involving foreign states/relations; (c) Interstate disputes; and (d)
Admiralty. (2) Federal common law is sometimes inferred from federal statutory or constitutional provisions. This is not free-standing common law, for it is tied, however loosely, to these textual provisions. But it is common law in the sense that judge-made law is inferred from very general provisions or fills important gaps. Inferred from the necessity for rules to fill in/effectuate statutory purposes.
23. Checks paid by U.S. governed by federal common law: Clearfield Trust v. US (1943)
W.P.A. check made out to an employee (drawn on federal funds) was stolen from the mailbox of the employee and used by a forger to buy goods at J.C. Penney; the check was then endorsed over to J.C. Penney’s bank and eventually collected on by Clearfield Trust (the bank). It is assumed the bank and J.C. Penney both acted in good faith. Then it became clear it was a forgery when worker reported he never got his check, but it took almost a year for the U.S. to inform Clearfield Trust. The U.S. sued in District Court to recover the amount of the check, but the District Court held that under the laws of PA (applying Erie , it chose the state law) it was barred from recovery because it was unreasonably delayed in giving notice of the forgery. The
Court of Appeals reversed, saying that Erie did not apply, and that "the rights and duties of the
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United States on commercial paper which it issues are governed by federal rather than local law.” Constitutional power, and federal government has a significant interest in having uniform application of law governing currency. In Swift v. Tyson the general common law was eliminated, but its precedents are still informative. A case called US v. National Exchange Bank said that the US could still recover despite a significant delay, so delay was not itself necessarily a barrier to recovery. However, prompt notice might be a defense, and it will depend on the particular facts of the case whether recovery should be allowed. The Court appears to be saying that the current facts do not show enough of a loss tied to a delay in notice to warrant barring commencement of the suit, so they also allow the case to go forward.
24. Federal common law - "clear and substantial” federal interest: US v. Yazell (1966)
Mr. and Mrs. Yazell received a loan from the federal Small Business Administration, and then they defaulted on the loan. The federal government sought recovery from both of them, including the separate property of Mrs. Yazell. Under Texas law of coverture, Mrs. Yazell’s separate property was not available to satisfy the loan, but the U.S. argued for a uniform rule of federal common law applicable to all federal loans that would disregard state-law defenses such as coverture. The Court refused to adopt a federal common law rule. It said that federal interests did not require override of the state rule involved in the case, because should only be done with "clear and substantial interests of the National Government, which cannot be served consistently with respect for such interests.”
R ECONCILING C LEARFIELD T RUST AND Y AZELL : In Clearfield Trust , there is nothing preventing Congress from creating a rule governing payment of federal checks and notification; should we treat the failure of
Congress to do so as an indication that they did not want to, or as an indication that they would have if they had only gotten around to it. What is the justification for allowing federal courts to create federal law in the absence of statutes? The Supreme Court does not have a particular amount of knowledge about bank payment systems, etc. From that perspective this is a classic legislative task, since Congress can have hearings, etc.
Similarly, in US v. Yazell , whether the separate property of Mrs. Yazell is available for payment on the defaulted loan is a disputed question between federal law and state (Texas) law. The Supreme Court says it is unwilling to create a federal rule that overrides the state rule in this case. Can these cases be reconciled?
What the Court is doing in both Clearfield Trust and Yazell is not saying "these rules are required by federal statutes or by the Constitution.” They are instead estimating what Congress would/might have done if
Congress would have gotten around to it. These rules can be changed/overridden by Congress; it is the Court’s best guess as to what Congress might have done. In order to do so, they look at what Congress historically has done; the question is not whether Congress could pass a statute, but whether Congress would. Fletcher thinks the Court probably got it right, because there is a far greater reluctance on the part of Congress to step in / regulate loan arrangements with federal law. So, these cases are reconcilable based on historical role Congress played in these issues. See p.52 of Supplement: "This is not one of those extraordinary cases in which the judicial creation of a federal rule of decision is warranted.”
T HE "G OLDEN A GE ” OF F EDERAL C OMMON L AW : Fletcher thinks if Clearfield Trust had come to Supreme
Court for the first time today, it is doubtful this Court would formulate a federal common law rule (they think of themselves as non-"activists”). Federal courts (and particularly Supreme Court) are farther and farther away from traditional role as regulators of commercial activity. Until 1930s, perhaps, the Supreme Court was actually quite familiar with the regulation of commercial/financial activities. Therefore, their expertise has waned significantly, and this has coincided with an increasing deference toward Congress (and a desire for
Congressional findings).
F
LETCHER
W
ANTS
"F
EDERAL
C
OMMON
L
AW
”
ON
F
ORUM
N
ON
C
ONVENIENS
: Let us assume for a moment that forum non conveniens law (federal) created by Court in Piper is different from a forum non conveniens rule in a state in which a court sits. Which forum non conveniens should control? Should we apply an "outcome determinative” test and say the state law has to control? Or should we use the federal rule on the theory that
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the plaintiff assumed the risk of a different rule by filing in federal court? If they did make this a rule of federal common law, then all states would be required to follow it whenever there was a foreign defendant (and a motion for forum non conveniens ). The Supreme Court has been unwilling to say that forum non conveniens , when one party is in a foreign country, is a question of federal law. They keep backing away from the question, and not answering it directly. Supp. pp 46-47: Perhaps in a properly-presented case, this will not be an Erie question (i.e., state law vs. federal law on the question of forum non conveniens ), but will instead become a federal common law question, in which the Court would formulate a federal common law that would be binding on both state and federal courts. Fletcher would welcome such a rule, both because it would clear up some of the difficulties in cases such as Asahi and Piper , and because he thinks that something dealing with foreign entities should have a uniform federal rule. So, forum non conveniens is, at the moment, apparently
"general federal common law,” in that it is neither jurisdiction-conferring nor supreme. He thinks that the
Court should get around to federalizing this issue, or else the proper answer under Erie should be that the state rule should control because it is "outcome determinative.” He thinks that this Court might actually be willing to federalize the forum non conveniens rule, because this Court is sensitive to issues involving foreign countries.
VI. F LETCHER ’ S R EVIEW OF THE E NTIRE C OURSE
A. I NTRODUCTION
The choices of the court/forum show up in four different categories: (1) Territorial jurisdiction (often shortened to in personam jurisdiction, though this is not a complete description); (2) Subject matter jurisdiction; (3) Venue; and (4) withstanding Forum Non Conveniens. Plus Erie problem.
B. T ERRITORIAL J URISDICTION
1. Pennoyer is of course overruled, but it still tells us something about our system
The case is significant because for the first time the Court says not only does that violate general principles of state law, but it also violates federal law. This is process of "constitutionalizing” what had been state law. So, of course Pennoyer now gone, and no longer sufficient just to attach property. Depending on the lawsuit, property may be a "sufficient minimum contact” but it is not necessarily so. After Shaffer v. Heitner , we analyze territorial jurisdiction under questions of contacts (also affects Harris ). So what remains of Pennoyer? If we were to start with a "tabula rasa” and ask where a suit should be brought, we might focus on things like where the incident happened, where the witnesses and parties are, etc. Pennoyer ’s remaining effect, therefore, is that we do not ask these kind of free-flowing "practical” questions first. RATHER:
We ask what have been the contacts between the defendant appearing involuntarily and the state in which he is being bound to appear. This attachment to "proper forum” may be seen by what we do in federal courts. Most of the time in federal court we do not evaluate the contacts between the defendant and the "federal forum.” Rather, we almost always evaluate the contacts between the defendant and the state forum in which the defendant is brought to court. We only assess the contacts between the defendant and the "nation” in certain exceptional cases, not even in those cases when the case is based on federal law. Interestingly, one of the times where there is "nationwide jurisdiction” is for interpleader cases, which are actually based on state law. So there is no connection between the assertion of nationwide jurisdiction and the use of federal law. So when we move away from Pennoyer , we see that it still stays with us because state boundaries are still so important. Pennoyer is based on "presence.” If the person is present that is enough. If the person is not present, then the person’s property being present starts out being not enough, but then the Court begins developing "fictions” that make the presence of the person’s "property” enough.
2. International Shoe replaces one set of "fictions” with a more "gestalt” analysis
The Court has to fundamentally rearrange the analysis. Probably Burger King and Asahi
(particularly Part II.B, remember Part II.A is only a plurality) are the Court’s most recent and helpful analyses of this "minimum contacts” analysis. What the Supreme Court is really
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responding to in these cases is a "gestalt,” that is then fed back through the analytic categories more as an analytic exercise. We are better off just having the fact patterns of the cases in our heads, and attaching the doctrine to these particular facts as best we can. We have seen a focus on long-arm statutes. How far are those allowed to go? The Court has been of two minds about this: In some respects they are likely to let them go very far, but then will suddenly draw up short. For example, some find it at least arguable that World-Wide VW should have gone the other way. Was it really unreasonable for the dealer to foresee that the car would be driven outside of New York? Would it have been unfair to subject the dealer and the distributor in
Oklahoma given that suit was already going forward against the manufacturer and the importer in Oklahoma. How much burden would that really be on the dealer? Just as burden on those two defendants is not that great, however, there is also not so much advantage to the plaintiff of having these particular two defendants in the case (already had deep pockets). This means
World-Wide VW is really an odd case, because plaintiffs were motivated by trying to keep case out of federal court. So the Justices had to decide a case on facts that don’t really express the parties’ "realities.” Other cases in which the doctrinal analysis does not seem to have gone particularly well, and in which the decision might have gone the other way: A particularly odd set of facts were considered in Helicopteros . He is not sure that this case is driven by any sort of "abstract” analysis; he thinks it is more driven by the fact that the Court did not want to bring a foreign company into an American court just based on the fact that it had taken it upon itself to use American helicopters. You can see how the Court is grasping by the way that it relies on the parties "concession” that there is no general jurisdiction. So you can see the Court knew it was having trouble with the doctrine, but it muscled its way to the result that it desired. So there will be nuances to these cases that we cannot understand without having a fairly good grip on how and why these particular cases were decided. You know if you are in state court, you first have to ask: (1) what is the state long arm statute, and is there proper jurisdiction under the long arm statute. Then, you ask (2) is jurisdiction proper under Due Process? Some states
(including California) have collapsed these two steps by the way they write their long arm statutes. One question (that is heightened by Shaffer v. Heitner ): What if a state has an
"antiquated” long-arm statute that has not been revised since the decision in Shaffer v. Heitner .
Does Shaffer v. Heitner prohibit the state from using a long arm statute that depends on the presence of property if there is nonetheless "minimum contacts” with the state such that the presence of property is not necessary. If you read Shaffer v. Heitner literally, it seems to say that even using this kind of statute is prohibited, but Fletcher thinks it can’t be what they meant.
What Shaffer v. Heitner makes clear (and where Fletcher thinks they were right) is that the jurisdiction question must ultimately be decided under the "minimum contacts” analysis. But this does not seem to necessarily prohibit use of other bases for jurisdiction, as long as there is also sufficient minimum contacts. As Helicopteros shows us, with a very few exceptions, we still assess jurisdiction on a state-by-state basis. For reasons that Fletcher does not understand, the Supreme Court has consistently played coy and "refused to decide” whether "nationwide contacts” may be assessed with respect to a foreign defendant. There is clearly no limit to this practice in the constitution, so Fletcher says that if the statute permits it this must be the possible practice. He does not understand why our assertion of jurisdiction with regard to foreign defendants has been "cautious in the extreme.” The closest we have come to this is Rule
4(k)(2), which asserts nationwide jurisdiction only when there is a federal cause of action, and only when there is no state that would otherwise have jurisdiction. He says there is no doubt about Congress’s ability to assert jurisdiction more broadly, they just haven’t done so.
B. S
UBJECT
M
ATTER
J
URISDICTION
At the time of the framing of the national government, we had individual states and state governments already in place, and there was a great deal of suspicion about a possibly "tyrannical” federal government. To protect the states, in the court system, federal courts were authorized only to authorize
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jurisdiction in specific instances, and were not given general jurisdiction. The specific grants of jurisdiction were limited; we have focused only on (1) federal question jurisdiction, and (2) diversity (of citizens) jurisdiction.
3. Subject matter jurisdiction is not a waivable defect
Personal jurisdiction is a waivable defect, either inadvertently or advertently. You cannot waive a defect in subject matter jurisdiction, though the reason why does not convince Fletcher as thoroughly as it is made out to do: the parties are not allowed to redraw structural lines by consent, the structure of the court system is not theirs to give away. Fletcher says okay, but he does not think it should result in the kind of monstrously unfair cases that result from this hard-and-fast rule (see Finn v. American
Casualty ). Why is it that no amount of deceit, fraud, etc. can bring about a waiver of subject matter jurisdiction defect. This means that before we come close to a federal court we should understand subject matter jurisdiction, and that the Federal Rules are a very poor guide to the application of jurisdiction. They are designed liberally, but will not help much if subject matter jurisdiction is lacking; remember to think about these separately.
4. Broad constitutional boundaries on subject matter jurisdiction; need a statute
There must only be some sort of federal question jurisdiction. This is not, however, the statutory grant of jurisdiction. You cannot argue for jurisdiction on the basis of the constitutional boundaries, because jurisdiction must be granted by statute. This means that you look to § 1331, which grants only part of the available subject matter jurisdiction.
5. Look to the "well-pleaded complaint” for assertion of a federal question
The interpretation is that you must look to the "well-pleaded complaint” for an assertion of a federal question; you do not always look at actual complaint, because you must read the complaint without any improperly anticipated federal defenses. For instance, in Mottley , the plaintiff was not allowed to assert what was obviously going to be the argument of the defendant in its own defense in its complaint. This was not part of the "well-pleaded complaint.” The strange thing about the "well-pleaded complaint” is that it was dreamed up at a time that lawyers actually understood pleading. Since "notice pleading” and relaxed pleading rules became the norm, lawyers have much less of a grasp of pleading than they used to. Most of the time you will know what is part of your affirmative case, and what is a defense, but in those cases where you are not sure the rule may cause problems. There are grounds for arguing for a different rule, but Fletcher shies away from "analytically elegant” rules because it will be too expensive to get to such a rule. He favors a rule in which the great majority of cases is easily and quickly adjudicated, which is the case with the "well-pleaded complaint” rule. Remember, the well-pleaded complaint rule does not mean you have to assert a winning federal claim. All you have to do is assert a "non-frivolous” federal claim to sustain subject matter jurisdiction. There are certain exceptions to the "well-pleaded complaint rule”: (1) Complete pre-emption cases, such as LMRA (the Caterpillar case), § 301, or ERISA - these are comprehensive federal statutes taking over an entire field. The Supreme Court has said that these kinds of claims can only be federal claims, so that if somebody tries to assert a state cause of action under a collective-bargaining agreement or under a benefits plan covered by ERISA, this is one time when the complaint does not control, because this essentially means there is only federal cause of action. (2) The second "exception” is a declaratory judgment action, where plaintiff is seeking a declaration/clarification of rights before taking some action. The question then is do you read the complaint in the declaratory judgment as a "well-pleaded complaint,” or do you read something else? The answer is that you read something else, and the reason why is that the
"plaintiff” in a declaratory judgment case is most often a would-be defendant, who is only trying to avoid liability by seeking a declaratory judgment to insure him/herself from later suit. This means that the assertion of federal claims in a declaratory judgment complaint is not enough.
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The Court holds that the Declaratory Judgment Act (in Skelly Oil ) was never intended to
"broaden” the scope of federal jurisdiction, and that therefore the court should read not the actual complaint, but rather the complaint that would have been filed if the incident about which declaration is being sought had actually taken place. Fletcher hates this rule, and says it is only the creation of an academic that Congress has never gotten around to changing.
6. Under the diversity jurisdiction statute (§ 1332), complete diversity of "domicile”
A party’s citizenship is limited to that state in which he or she is "domiciled.” A "domicile” state is a state in which the party is a resident "with the intent to remain.” AND you keep your old domicile until you acquire a new domicile, so that you may still be a domiciliary of former home state if you have not yet established a domicile in a new state.
7. The "game” of defeating diversity/removal: damages, joinder, FELA
A familiar "game” played by lawyers trying to figure out jurisdiction, in trying either to acquire or defeat diversity. Lawyers may even claim damages of less than $75K to stay in state court.
8. § 1441 says if it could have been filed in federal court, it can be removed
The only exception is that there is no removal if one of the defendants is a citizen of the state in which the state court suit is filed. So if an out-of-state plaintiff chooses to sue in the state court, the fear of "prejudice” against the defendant is removed, and there is therefore no justification for allowing the defendant to remove to federal court. So the removal jurisdiction in diversity cases is a little bit narrower than the original jurisdiction. And then there are certain causes of action (e.g., FELA) where removal is not allowed at all.
9. Very broad supplemental jurisdiction for federal question: § 1367(a)
Supplemental jurisdiction for diversity jurisdiction cases is narrower under § 1367(b), which is subject to certain exceptions that are spelled out in the Rule. There has been a lot of debate about these exceptions (for instance, what do we do about class actions under Rule 23).
Complete jurisdiction except for specifications in § 1367(b).
C. V
ENUE
What do we do about the place where the case is being tried. In federal court, even if in personam jurisdiction is proper, you may or may not get to stay in that court, because the place that the case is actually tried depends on the convenience to all parties and witnesses. In a state court, this is not so, and the only way you get out of a state court is by a forum non conveniens motion (or by way of removing to federal court). So venue objection (and transfer under § 1404-1407) limited to federal court
10. You also have to satisfy venue, though like personal jurisdiction it is waivable
Venue is written in terms of either "residence” of parties, or "where are the facts of the case.”
Notice that under § 1391 the wording is "residence” rather than "citizenship.” Does this rule mean ”domicile”? Probably not. There is a very early 19th century case that suggests that
"residence” is the same as "citizenship,” but the modern view is that these are different concepts, and Fletcher says the modern view is more correct, because the issue for venue is "convenience,” so it is more appropriate to link this to where you are currently living, not where you have at some point established a "domicile” (e.g., military people often have no real "domicile”).
11. If proper venue is inconvenient, in federal court you can transfer under § 1404
If you have no venue and no personal jurisdiction (though the statute does not say it), you can also transfer the case under § 1406. There is still the question of whether you can transfer only for lack of personal jurisdiction. Remember that Piper brings up the question of the different
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kinds of transfer for Piper and Hartzell. In the very same case, we can see both kinds of transfers. After transfer under § 1404 (Van Dusen rule), the same law is applied as would have been applied in the prior forum; it is only a change of courtrooms, not a change of law. What about after a § 1406 transfer? This question has not been answered by the Supreme Court, but the lower courts have answered this question with what Fletcher thinks is the right answer. This is a change of courtrooms and a change of law, because you could not bring suit in the previous forum. Remember, that under Ferens it does not matter who initiates the transfer, plaintiff or defendant
D. F
ORUM
N
ON
C
ONVENIENS
The principal case is Piper v. Reyno . We are given a very nice set of rules, but we have to ask: Where does this apply? For instance, what was going on in Asahi?
Was this really a forum non conveniens case in disguise? What if we have a forum non conveniens case in which the state rule and the federal rule differ? If it is a federal law case and the alternative forum is a foreign country, do we apply the
Piper rule? What about if it is a state law case, either in federal court or in state court? The Court specifically did not answer this question. Any federal court with "half a brain” will follow Piper for forum non conveniens , even though Fletcher is not sure that this is the answer the Supreme Court would come up with. He thinks there is a very strong argument that forum non conveniens is "outcome determinative” in the York sense, so this might be the wrong way to go. On the other hand, Fletcher thinks that there ought to be a federal common law of forum non conveniens
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