Chapter 2
Traditional and Online
Dispute Resolution
§1: Judiciary’s Role
Judiciary interprets and applies law to
resolve disputes.
Judicial Review is not mentioned in the
Constitution but established in Marbury
v. Madison (1803).
Power of the court to “decide what the law is.”
Process by which a court decides upon
constitutionality of legislative enactments and
executive actions.
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§2: Basic Judicial Requirements
Jurisdiction—power of a court to decide
a case.
Personal Jurisdiction over people within
a court’s geographical area.
Long-Arm statutes give jurisdiction over non-
residents with “minimum contacts” with court’s
geographical area.
Corporations: minimum contact if business is
transaction within the area.
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Basic Judicial Requirements
In Rem Jurisdiction over property located
within the court’s geographical area.
Subject Matter Jurisdiction over
particular types of cases.
Defined by statute: Probate, bankruptcy,
divorce, etc.
Original and Appellate Jurisdiction.
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Basic Judicial Requirements
Federal Courts can exercise jurisdiction
over cases involving:
Federal Questions
Diversity of Citizenship
• Parties from different states involving at least
$75,000
Bankruptcy, patents and suits between states.
Concurrent jurisdiction with state courts.
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Jurisdiction in Cyberspace
Internet transcends geographical and
political borders.
Courts use the “sliding-scale” approach
to determine jurisdiction.
Yes
Depends
E-Commerce
Some Business
No
Passive Ads
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Basic Judicial Requirements
Venue—most appropriate location for a
trial.
Court balances parties interests.
Standing to Sue—plaintiff must have a
legally protected and tangible interest which
has been injured.
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§3: State and Federal
Court Systems
State Supreme Court
U.S. Supreme Court
State Appellate Courts
U.S. Courts of Appeal
State Trial Courts
U.S. District Courts
Municipal Courts
Federal Admin.
U.S. Specialized
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§4: Alternative Dispute Resolution
Trials are a means of dispute resolution
that are very expensive and sometimes
take many months to resolve.
There are “alternative dispute
resolution” (ADR) methods to resolve
disputes that are inexpensive, relatively
quick and leave more control with the
parties involved.
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ADR
ADR describes any procedure or device
(including such internet sites as
www.squaretrade.com ) for resolving disputes
other than the traditional judicial process.
Unless court-ordered, there is no record which
is an important factor in commercial litigation
due to trade secrets.
Most common: negotiation, mediation,
arbitration.
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Negotiation
Less than 10% of cases reach trial.
Negotiation is informal discussion of the
parties, sometimes without attorneys,
where differences are aired with the goal
of coming to a “meeting of the minds” in
resolving the case.
Successful negotiation involves thorough
preparation, from a position of strength.
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Assisted Negotiation
Mini-Trial: Attorneys for each side
informally present their case before a
mutually agreed-upon neutral 3rd party
(e.g., a retired judge) who renders a nonbinding “verdict.” This facilitates further
discussion and settlement.
Expert evaluations.
Conciliation: 3rd party assists in
reconciling differences.
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Mediation
Involves a neutral 3rd party (mediator).
Mediator talks face-to-face with parties
(who typically are in different adjoining
rooms) to determine “common ground.”
Advantages: few rules, customize process,
parties control results (win-win).
Disadvantages: mediator fees, no sanctions or
deadlines.
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Arbitration
Many labor contracts have binding
arbitration clauses.
Settling of a dispute by a neutral 3rd
party (arbitrator) who renders a legallybinding decision; usually an expert or
well-respected government official.
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Arbitration Disadvantages
Results may be unpredictable because
arbitrators do not have to follow
precedent or rules of procedure or
evidence.
Arbitrators do not have to issue written
opinions.
Generally, no discovery available.
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Arbitration Process
Case begins with a submission to an
arbitrator. Next comes the hearing where
parties present evidence and arguments.
Finally, the arbitrator renders an award.
Courts are not involved in arbitration
unless arbitration clause in contract needs
enforcement.
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ADR and Courts [2]
Court-related mediation.
Summary jury trials.
ADR and mass torts.
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§5: Online Dispute Resolution
ODR refers to the proces of resolving
disputes using web-based technology.
Squaretrade.com
ODR is being used more often by
companies like Ebay.com to resolve
disputes.
Negotiation and mediation services.
Cybersettle.com and Clicknsettle.com
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Case 2.1: Cole v. Mileti
FACTS:
Mileti, a California resident, produced a movie
“Streamers.”
Mileti organized Streamers International
Distributors, Inc., (SIDI) to distribute the film.
Cole, an Ohio resident, bought two hundred
shares of Streamers stock.
Cole also lent SIDI $475,000, borrowed from
Equitable Bank of Baltimore.
Streamers was unsuccessful.
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Case 2.1: Cole v. Mileti
FACTS (cont’d)
Mileti agreed to repay Cole’s loan in a contract
arranged through phone calls and correspondence
between California and Ohio. Mileti did not repay
the loan.
Bank sued Cole, who in turn sued Mileti in a
federal district court in Ohio.
The court entered a judgment against Mileti.
Mileti appealed, arguing that the court had no
jurisdiction.
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Case 2.1: Cole v. Mileti
HELD: JUDGMENT AGAINST MILETI
AFFIRMED. COURT HAD JURISDICTION.
Sixth Circuit used a three-part test to
determine whether a court has jurisdiction
over a nonresident defendant:
A defendant must conduct activities in the state in
which the suit is filed,
The cause of action must arise from those
activities,, and
Those activities or their consequences must have a
substantial connection to the state.
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Case 2.2: International League
Against Racism vs. Yahoo!, Inc.
FACTS:
Yahoo!, Inc., had items for sale that
included Nazi memorabilia which was
against the law in France.
Plaintiff sued Yahoo in French court
seeking injunctive relief and damages.
The court ordered Yahoo to block
access by persons in France or French
territory to the Nazi items.
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Case 2.2: International League
Against Racism vs. Yahoo!, Inc.
FACTS (cont’d):
Yahoo argued the court did not have jurisdiction
and that even if it did, Yahoo could not technically
do the blocking.
HELD: AFFIRMED.
Jurisdiction is based on Yahoo’s awareness “that it
is addressing French parties because upon
making a connection to its auctions site from a
terminal located in France it responds by
transmitting advertising banners written in the
French language.”
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Case 2.3: Circuit City v. Adams
FACTS:
Adams applied for a job at Circuit Ciy.
She signed an employment application containing
a clause requiring the arbitration of any federal or
state employment-related disputes.
Adams was hired as a sales counselor in a Circuit
City store in Santa Rosa, California.
Later, Adams sued Circuit City filed a suit in a
California alleging employment discrimination in
violation of state law.
Circuit City then sued Adams in a federal court,
asking the court to compel arbitration of Adams’s
claim.
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Case 2.3: Circuit City v. Adams
FACTS (cont’d)
Adams defended the suit by arguing that Section 1
of the Federal Arbitration Act (FAA) excluded all
employment contracts.
The court entered an order in favor of Circuit City.
Adams appealed to the Ninth Circuit, which
reversed the trial court, excluding employment
contracts from the FAA. Circuit City appeal to the
U.S. Supreme Court.
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Case 2.3: Circuit City v. Adams
HELD: REVERSED. FAA applies to most
employment contracts.
The Supreme Court found that the federal
appellate court’s decision to exclude all
employment contracts was inconsistent with the
Court’s previous decisions. The Court also
reasoned that “[c]onstruing [interpreting] the
residual phrase to exclude all employment
contracts fails to give independent effect to the
statute’s enumeration of the specific categories of
workers which precedes it….”
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