Agenda for 21st Class
• Admin
– Name plates
– Handouts
• Slides
• Review of Mediation
• Review of Fees
• Erie doctrine
• Choice of Law
• Introduction to Personal Jurisdiction
1
Assignment
– Personal Jurisdiction: International Shoe & early cases
• FRCP 4(k), especially 4(k)(1)(A)
• Yeazell, 79-91
• Writing Assignment for Group 2 / Questions to think about
– Briefly summarize International Shoe
– If the Supreme Court had not decided to change the rules in
International Shoe, would jurisdiction have been proper under the
prior rules? If your answer is “yes,” why do you think the Supreme
Court changed the rules? If you answer is “no,” why was the
outcome under the new rules better?
– Yeazell pp. 86ff. Qs 1b, 3
– Briefly summarize McGee and Hanson
• Optional: Glannon Chapters 1 & 2
2
Mock Mediations
• Summary of settlements
– $70m (40m to families, 30m to research & clean up)
– 60m (55m to families, 5m to research) + admission of dumping + internal
investigation
– 42m (32 to families, 5m research, 5m clean-up) + safe water + press
release
– 37.5m (22.5m to families, 15m to research)
– 34m (29m to families + 5m sholarship fund) + NDA
– 29m (21m to families, 5m for prevention & inspection, 3m for hospital
wing)
– 24m (22m to families, 1m for memorial, 1m for medical bills) + 3yr cleanup plan & NDA
– 20.1m (2.5 to families, 1.5 to research, 0.05% of Grace annual sales
(~1.6m) for 10 years to research & clean-up)
• But not fully agreed to?
– 14.4m (500K to each family + 10.4m endowment) + apology
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• Questions, comments, or suggestions?
Review of Fee Shifting
• Advantages of British Rule
– Allows plaintiffs to bring meritorious (high probability) cases,
even when litigation costs are high. See Example 11.
– Discourages plaintiffs from bringing frivolous (low probability)
suits. See Examples 15.
• Disadvantages of English Rule
– Public interest litigation to change the law may be deterred,
because it has a low probability of succeeding, even though
it is not “frivolous.”
– Risk averse plaintiffs may not bring even meritorious suits.
Example 14.
– Because of the way the English Rule magnifies optimism, it
may discourage settlement. See Example 16.
• Although risk averse parties may be more likely to settle
under British rule
4
Erie Doctrine I
• Swift v. Tyson (1841)(Story). Federal courts apply state statutes in diversity
cases, but do not need to follow state court decisions on common law. State
court decisions are only “evidence” of “general principles of commercial
law,” and federal courts are free to develop common law as they see fit
• Erie RR v. Tompkins (1938) (Brandeis)
– RR accident. Issue is whether to apply PA court decisions, defendant
may be liable only for “williful or wanton injury” (not mere negligence)
– Rejects Swift v Tyson. Federal courts apply common law as interpreted
by state courts
• Usually that means as interpreted by state court in state in which
federal court is located, but see next class on choice of law.
– Swift gives out-of-state citizens unfair advantage, because they can
choose either state law (by suing in state court) or federal law (by suing
in federal court)
– Congress does not have the power to make commercial law. Nor do the
federal courts. (probably wrong now)
– Swift makes jurisprudential mistake of assuming that there is a
“transcendental body of law outside of any particular State”
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• Influence of legal realism
Erie Doctrine II
• Guaranty Trust v. York (1945)(Frankfurter) (not assigned)
– Federal court must apply state statute of limitations, which
was shorter, because statutes of limitations are “outcome
determinative”
– Law is not “brooding omnipresence of Reason”
– Don’t draw (formalistic) line between substance and
procedure
– Instead, ensure that “outcome of litigation in the federal
court [is] substantially the same, so far as legal rules
determine the outcome of a litigation, as it would be if tried in
State court.”
– State statutes should be disregarded only if they concern
“merely the manner and means by which a right to recover
is … enforced.”
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Erie Doctrine III
• Hanna v. Plumer (1965)
– FRCP 4 applies in federal court rather than narrower state statute
– FRCP are authorized by federal statute, Rules Enabling Act, and apply in
federal court, regardless of contrary state court rule,
• as long as rule is constitutional and governs the “practice and
procedure of the district courts,” and is thus authorized by the statute
– Every rule or practice is potentially “outcome determinative”
– For federal practices
• Consider policies behind Erie
– Discourage forum shopping
– Avoid “inequitable administration of justice”
• What is “federal practice”?
– Procedure not in FRCP or federal statutes
– Example: standards of review
• Modern trend. Apply federal rules and practices in federal court
7
Erie Questions
•
•
Suppose West Dakota has a summary judgment practice different from the that
which has governed in the federal courts since Celotex. In West Dakota, a
defendant may not prevail by pointing out that plaintiff lacks evidence on an issue,
but rather the defendant can only prevail on summary judgment by presenting
undisputed evidence on every issue. If a diversity case is filed in federal district court
in West Dakota, what standard should apply if the defendant files a motion for
summary judgment?
Federal courts have a policy of encouraging mediation. One aspect of that policy is
that neither the parties nor the mediator can be compelled to reveal what was said in
mediation. In addition, a mediator’s proposal is immune from disclosure. That is, if, at
the end of the mediation, the mediator suggests what she thinks is a fair settlement,
those settlement terms are confidential and cannot be revealed to a judge or jury.
The federal policy is not embodied in the Federal Rules of Civil Procedure or Federal
Rules of Evidence, but is part of case law at the appellate level in most circuits,
including the Fourteenth Circuit, which includes East Dakota. East Dakota state
courts have no such policy. Judges are free to ask questions of lawyers about
mediation. Some find it useful to ask, “what was the mediator’s proposal?” Judges
use that information in a variety of ways. Some use it as the starting point for their
own settlement conferences; they encourage the parties to agree to the mediator’s
proposal or something similar. Some take a more aggressive approach and implicitly
threaten lawyers, “if you don’t accept the mediator’s proposal, I’ll make sure
evidentiary and other rulings go against you.” Judge Fred, a federal district court
judge in East Dakota, thinks that the East Dakota state court’s approach is the
correct one, because mediation is so useful that no one in her right mind would
refuse mediation because she feared disclosure of the mediator’s proposal. Patty
sued David for breach of contract in federal court in East Dakota. The parties went
through an unsuccessful mediation. May Judge Fred compel Patty and David to
reveal the mediator’s proposal? (from 2011 exam)
8
Choice of Law Questions II
• 4) Driver and Passenger both reside in West Dakota. Driver
drives passenger to East Dakota. While in East Dakota, Driver
talks on his cell phone and causes an accident in which
Passenger is injured. Passenger sues Driver in West Dakota
state court for negligence. According to East Dakota law,
passengers have no right to sue drivers for injuries caused by
negligence. According to West Dakota law, passengers can
sue drivers for negligence. Which state’s law applies to this
dispute? Is your answer different under the traditional lex loci
commissi rule than under the Restatement Second? If your
answer is different, which rule makes more sense?
• 5) Same as (4), except Passenger sues in West Dakota federal
court.
• 6) Same as (4) except Passenger sues in East Dakota state
court.
9
Choice of Law Questions III
• 7) Spend, a Nevada domiciliary, is completely irresponsible with money.
Fortunately, he recognizes this fact and has set up a spendthrift trust. Under
the terms of the trust, Spend cannot borrow money without the consent of
Trustee, a friend he trusts. Spend goes to California and borrows money
there from Sharkey to be repaid in one year at Sharkey’s place of business
in California. When Spend doesn’t repay the loan, Sharkey sues Spend in
Nevada. Under Nevada law, loans to someone who has set up a spendthrift
trust are void. California law does not allow people to set up spendthrift
trusts, so under California law, such loans are enforceable. The traditional
rule for contracts was the law of the place the contract was formed governs
disputes about contract validity. Under the traditional rule, what state’s law
would apply? Under the Restatement Second, which state’s law should
apply to the dispute? If the traditional rule and Restatement Second suggest
different answers, which makes more sense?
• 8) Same as (7), except Sharkey sues in California state court.
• 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the
money there, with repayment to be made to Sharkey when he returns to
Nevada a year later.
10
Choice of Law Questions IV
• 10) Same as (7), except the loan contract includes the following clause:
“This contract shall be governed by California law.” The traditional rule was
not to enforce choice of law clauses. See also Restatement (Second) below
• § 187. Law Of The State Chosen By The Parties
• (1) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied if the particular issue is one which the
parties could have resolved by an explicit provision in their agreement
directed to that issue.
• (2) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied, even if the particular issue is one which the
parties could not have resolved by an explicit provision in their agreement
directed to that issue, unless either
– (a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties' choice,
or
– (b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
the chosen state in the determination of the particular issue and which,
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under the rule of § 188, would be the state of the applicable law in the
absence of an effective choice of law by the parties.
Introduction to Personal Jurisdiction
• Personal jurisdiction is about which court can hear a case
– If case is in state court, personal jurisdiction answers question “which
state court?”
• California state court? Massachusetts state court?
– If case is in federal court, personal jurisdiction answer question “federal
court in which state?”
• Federal court in California? Federal court in Massachusetts?
– Contrasts
• Subject matter jurisdiction. Federal or state court?
• Venue. Which court within a state
– Los Angeles superior court or San Francisco superior court
– C.D. of California (federal court in LA) or N.D. California (federal
court in San Francisco)
• Choice of Law
– Which (substantive) law applies
12
Personal Jurisdiction (History)
• Pennoyer v Neff (1877)
– 3 bases for personal jurisdiction
• In personam. If defendant is citizen or resident of state, or present in
state, or consented to jurisdiction
– For individuals, extreme case was service of process in airplane
over Arkansas. Grace v. MacArthur (1959)
– Corporations are citizens in state where incorporated (e.g.
Delaware)
– Difficult to determine where corporation is “present”
» Where headquartered. Clearly yes
» Where has plant or office and lots of employees. Clearly yes
» What if only has a few employees? Not clear
» Where does business? Unclear what means to “do business”
• In rem. In dispute about property, personal jurisdiction is proper
where property is located
• Quasi in rem. If suit is NOT about property, but defendant has
property in state, plaintiff can sue in that state for whatever cause of
action, but recovery is limited to value of property in state
• International Shoe (1945) – “minimum contacts”
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• Hanson v Denckla – contacts count if “purposeful availment”