Agenda for 23nd Class
• Name plates out
• Subject matter jurisdiction
– Federal Question Jurisdiction
• Next Class -- Settlement
– Settlement Handout
– Writing Assignment - Settlement Problems
• Mid-semester feedback
– 2 suggestions made by substantial number of people
• 1) Lecture on topic before assigning reading and writing
– Will start today
• 2) Shorter writing assignments
– Will stop asking you to summarize cases
– If assignment goes longer than 3 pages, just stop
» Will give full credit for 3 good pages, even if you have not
answered all questions
– Will also try to take into account other suggestions
– Not sure how to make cold-calling less anxiety producing
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Court Visit Info
• Small change to procedure for turning in assignment on Monday 11/5
• Two options for turning in writing assignments:
– Turn it in in the normal way, at USC Law School, by 8AM Monday
morning
• Over the weekend is also fine.
• Papers turned in to the Law School after 8AM on Monday will be
marked late.
– Turn it in to Julie Ryan near the entrance to Judge Snyder’s court room
by 9:15AM Monday morning.
• Courtroom is 312 N. Spring Street, 2nd Floor, Courtroom 5.
• Julie will stay until 9:45 to collect late papers.
• More details later
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Personal Jurisdiction & Internet
• No Supreme Court cases, so rules unclear
• Zippo
– Jurisdiction more likely when website more active
• Torts – defamation, trademark infringement
– Factors which support jurisdiction
• Defendant knew that injured person resided in forum state
• Defamation involved events in forum state
• Defamatory website was targeted to forum state or had wide
viewership there
• Defendant had other related contacts with the forum state (e.g.
mailed letter there)
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28 USC 1391
• (b)(1). If all defendants reside in the same state, venue is proper in any
judicial district in which at least one defendant resides
– For individuals residing in US, residence = domicile. (c)(1)
• Confusing, because domicile is usually defined as residence + intent
to remain indefinitely
– If you currently reside where you intent to remain, then your
current residence is your domicile
– If you currently reside where in a place you do NOT intend to
remain, then your domicile is the last place you resided with
intent to remain indefinitely
– Corporations are resident in any district in which they would be subject to
personal jurisdiction, if district were considered a state. (d)
• If reside in district, then reside in state in which district located
• (b)(2). Venue is proper in judicial district where event or omission giving rise
to claim occurred
• (b)(3). If no district satisfies (b)(1) or (b)(2), then venue is proper in any
district in which in which any defendant is subject to personal jurisdiction.
• IMPORTANT. Even if venue is proper, court still needs to have personal4
jurisdiction over EACH AND EVERY defendant.
Venue Questions
• Pp. 175ff. Qs 2,4a,b,d (ignore the reference to 28 USC 1392)
• Briefly Summarize Dee-K Enterprises
• Plaintiffs sued Malaysian, Indonesian, and Thai corporations in the ED of VA
alleging conspiracy to fix rubber thread prices. It is implicit that plaintiffs
also sued some US corporations. Defendants challenged jurisdiction and
venue. The Clayton Act provides for worldwide service of process. FRCP
4(k)(2) says that service of process establishes jurisdiction if defendant is
not subject to jurisdiction in any state (which seems to be the case here) and
if consistent with US law (which is the case, because of the Clayton Act) and
if it is consistent with the US Constitution. Jurisdiction is constitutional
because defendants had a US sales agent and customized products for the
US market. The court was implicitly applying O’Connor’s “Stream of
Commerce Plus” test. 1391(d) (now 1391(c)(3)) says that non-residents
may be sued in any district. The US defendants reside in different states and
the relevant actions and omissions took place outside the US, so jurisdiction
was proper “in a judicial district in which any defendant may be found.” (This
is no longer in 1391). It isn’t clear whether any defendant can be “found” in
ED of VA, so the court ordered the plaintiff to show that at least one has 5a
connection to EDVA in order for venue to be proper.
Venue Questions
• P. 176 Q5; pp. 178ff Q1a, 2
• Suppose a chemical plant in India owned by an American company leaks
gas into the surrounding neighborhood and kills 16,000 people and injures
half a million. The victims sue in US court. Defendants move for dismissal on
the basis of forum non conveniens. The plaintiffs argue that dismissal is
inappropriate, because Indian courts require a filing fee equal to 5% of
damages claimed, which in this case could be billions of dollars. There are
long delays in Indian courts. Indian courts have very few tort precedents
and none relevant to mass torts. Discovery is usually very narrow, if allowed
at all. Should the court grant the forum non conveniens motion? If it does,
are there any conditions it should attach?
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Subject Matter Jurisdiction I
• 2 meanings
– Federal or state court (focus of class)
– Specialized federal or state court
• Bankruptcy court
• Probate court
• Other specialized courts
• Federal subject matter jurisdiction
– Federal courts are supposed to be of limited jurisdiction (power)
– Can only exercise jurisdiction over cases allowed by Article III and
authorized by federal statute
• E.g. no general federal subject matter jurisdiction until 1875
– 2 basic headings of federal subject matter jurisdiction
• Federal question
• Diversity
• Need subject matter jurisdiction AND personal jurisdiction AND Venue
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Subject Matter Jurisdiction II
• Most federal jurisdiction is “concurrent”
– Most diversity cases and federal question cases could be heard in state
court, if plaintiff sued there and defendant did not remove case to federal
court
• Some cases are in the “exclusive” jurisdiction of federal courts
– 28 USC 1338. cases involving “patents, plant variety protection, and
copyright”
• But jurisdiction over trademarks is NOT exclusive (it is concurrent)
• Removal
– If case is within federal subject matter jurisdiction and plaintiff chooses to
sue in state court, defendant can usually “remove” the case to federal
court. 28 USC 1441(a)
• Exception under 28 USC 1441(b) when case is based on diversity
AND defendant is from forum state
• Objections to subject matter jurisdiction are never waived
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• Judge can raise subject matter jurisdiction problem sua sponte
Federal Q J Qs
• Summarize Louisville.
– Your summary should include the answer to Yeazell. P. 199 Q1
• Under the FRCP as it exists today
– If plaintiff had drafted a “well pleaded complaint,” what would have been
the key allegations of that complaint?
– If plaintiff had drafted a well-pleaded complaint, what paper would
defendant have filed in response? What would have been the key
elements of that paper?
– How would plaintiff have raised the unconstitutionality the Act of
Congress which the defendant alleges prohibited giving the passes that
the railroad gave the Mottleys?
– If defendant’s answer had admitted that it had given passes to the
Mottleys, but argued that they were invalid, what motion would the
plaintiff have had to make in order to get the Court to grant the Mottleys
the relief they requested without discovery or trial?
• Yeazell pp. 199ff Qs 2, 3, 4b,
• Under 28 USC 1441(a) & (b), if plaintiff had brought the two cases at issue in
Yeazell p. 199 Q2 in state court, which of the two cases could defendant9
remove to federal district court?
Settlement I
• A settlement is a contract between the plaintiff and the defendant
– Usually the defendant promises money or other relief to the plaintiff
– The plaintiff promises to drop the case and/or not to bring related cases
– Usually involves compromise
• Extremely common
– Roughly 2/3rds of cases settle
– A quarter are resolved by motions to dismiss and summary judgment
– Only about 5% go to trial
• Usually negotiated by lawyers
– Sometimes assisted by judge --- Settlement conference
– Sometimes assisted by mediator
• Mediation is sometimes required by courts
• Mediation is sometimes completely voluntary
• Settlement can occur at any time
– Before filing of suit; before, during, or after discovery; during trial; while
case is on appeal…
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– Often settlement happens after discovery is complete and after summary
judgment
Settlement II
• Advantages
– Saves litigation costs for parties and courts
– Reduces uncertainty
– Can provide relief that courts cannot or would not order
• Apology, continuing business relationship, etc.
– Can preserve secrecy/confidentiality
• If part of settlement agreement
• Disadvantages
– No precedent
– Usually provides less than full relief
– Secrecy means public may never learn about wrongdoing
• Judicial policy is to encourage settlement
• Buffalo Creek, Part III provides good description of settlement negotiation
– Harr, A Civil Action, provides even better description
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Economic Model of Settlement I
• Economic models are simplifications of reality
– But can provide insight into real world
• There are many more complicated models of settlement that take into
account informational asymmetries, the multi-stage nature of litigation,
multiple parties, and other complications not included in the model you read
• Plaintiff determines minimum settlement amount it will accept
= expected recovery if goes to trial
= (Estimated probability of prevailing x damages if prevails) – litigation
costs
– Litigation costs here are additional costs incurred if case does not settle
– Cost already incurred are sunk costs, which should not effect
negotiations
– Irrational to settle for less than expected value of going to trial
• at least if plaintiff is risk neutral
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Economic Model of Settlement II
• Defendant determines maximum settlement amount it will accept
= expected liability if goes to trial
= (Estimated probability of plaintiff prevailing x damages if prevails) +
litigation costs
– irrational to settle for more than expected liability if goes to trial
• at least if defendant is risk neutral
– Litigation costs, as above, are additional costs incurred if case does not
settle
• Note that litigation costs are ADDED to expected liability for defendant, but
SUBTRACTED from expected recovery of plaintiff
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Economic Model of Settlement III
• Plaintiff’s estimate of its probability of prevailing may differ from defendant’s
estimate of plaintiff’s probability of prevailing
– If plaintiff’s estimate is higher, then parties are optimistic relative to each
other
• e.g. plaintiff thinks it has a 70% of prevailing, but defendant thinks
plaintiff has a 40% chance of prevailing
– Or plaintiff thinks it has a 30% chance of prevailing, but
defendant thinks plaintiff has a 20% chance of prevailing
– If plaintiff’s estimate is lower, then parties are pessimistic relative to each
other
– Optimism is more common
• If plaintiff’s minimum acceptable offer is higher than defendant’s
maximum offer, then settlement is impossible
• If plaintiff’s minimum acceptable offer is lower than defendant’s
maximum offer, then settlement is possible
– But still might not happen, if parties engage in strategic behavior and fail
to reach agreement an exact settlement amount
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Economic Model of Settlement IV
• Factors encouraging settlement
– Mutual pessimism
– High litigation costs
– Risk aversion
– All lower plaintiff’s minimum acceptable offer and increases defendants
maximum offer
• Factor discouraging settlement
– Mutual optimism
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