THE COURT SYSTEMS
Chapter 2
Meiners, Ringleb & Edwards
The Legal Environment of Business, 12th Edition
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
Overview of the American court system

How an injured party can seek relief in the courts

Jurisdiction: Which court has the power and the authority
to decide the case?

Relations between court systems
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ORGANIZATION OF THE COURT SYSTEMS

Both state and federal court systems have


Lower courts: Courts of Original Jurisdiction

Where disputes are initially brought and tried

Generally known as trial courts

Look at issues of fact
Appellate Courts: Courts of Appellate Jurisdiction

Where lower court decisions are reviewed

Look at issues of law
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FEDERAL JUDGES

Federal judges are nominated by the President

Confirmed by a majority vote in US Senate

Lifetime appointment

May be removed from office only if Congress
impeaches them (intricate impeachment process
and rarely happens)

Job security guarantees that judges are
independent and free from political pressure
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STATE JUDGES

Judges chosen by variety of methods

Elected, appointed or mixture of both methods

Unlike federal court, most state judges serve fixed
terms

Evidence indicates that with elected judges the
average in tort cases are larger and out-of-state
companies are treated more poorly than in states with
appointed judges.

See Exhibit 2.1
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JUDICIAL IMMUNITY

o
A judge is absolutely immune from suit for damages for
judicial acts taken within his/her jurisdiction.

Without this, judges may fear being sued by unhappy
party to a lawsuit.

Purpose: Judges are not concerned with the relative
power of parties who appear in court.

Purpose: To protect the system from undue influence
on judicial decision-making
See Davis v. West
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CASE
DAVIS V. WEST
• Houston Reporting Service (HRS) provided court reporting services
for attorney Davis
• HRS billed Davis – was never paid
• Sued for $1083.98 (deposition, attorney’s fees, interest, costs)
• Davis did not defend – judge entered a default judgment
• HRS began collection efforts
• Court appointed Radoff as receiver in the case
• Court order commanded Radoff to take possession of “all . . .
monies in deposit [by Davis] in financial institutions . . . .”
• Radoff sent letter to HRS attorney asking for payment.
• Radoff sent letter to Davis’s bank demanding that the bank turn
over $4,144.91 to Radoff. Bank did.
• Judgment satisfied; HRS was paid; receivership closed.
• Davis sued Radoff for abuse of process.
• Trial court granted summary judgment for Radoff, as he was
entitled to derived judicial immunity. Davis appealed.
(Continued)
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CASE
DAVIS V. WEST
• Held: Affirmed. Radoff is cloaked with derived judicial immunity.
• Derived judicial immunity by a person is the same as absolute
immunity for judges.
• Judicial immunity can attach to certain non-judges when judges
delegate their authority, appointing another to perform services for
the court (as an “officer of the court”).
• Texas uses the “functional approach”– looks “whether the person
seeking immunity is intimately associated with the judicial process.
• Also “that person exercises discretionary judgment comparable to
that of the judge”
• Functional approach focuses on nature of the function performed &
if person’s conduct is like the delegating judge.
• Radoff is “cloaked with derived judicial immunity”.
• Every action “whether good or bad, honest or dishonest, wellintentioned or not” is immune as applied to the function
undertaken.
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THE FEDERAL COURT SYSTEM

Federal District Court

U.S. Court of Appeals

Specialized Federal Courts

U.S. Supreme Court
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FEDERAL DISTRICT COURT

Courts of original jurisdiction

Use juries or judge as “trier of fact”

Trial courts deal in issues of fact

Federal trial courts also use judicial officers called
“magistrates”

94 federal districts in the court system
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U.S. COURT OF APPEALS

12 courts

Usual rule: There is the right to appeal to this court

3 judge panels deal in issues of law and review most
decisions

En banc proceeding means all active judges in a
circuit will a hear a case
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SPECIALIZED FEDERAL COURTS

Limited jurisdiction


Ex: U.S. Bankruptcy Courts
Ex: Court of Appeals for the Federal Circuit takes appeals
from

U.S. District Court in patent, trademark and copyright cases

U.S. Court of Federal Claims

U.S. Court of International Trade

U.S. Tax Court

See Exhibit 2.2

See also Exhibit 2.3
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THE U.S. SUPREME COURT





Highest court in the country
Appellate review court
Cases usually heard by 9 justices
Term begins First Monday in October in Washington, D.C.
Receives thousands of petitions each year



Issues about 70-80 opinions per term
Reviews cases from

U.S. District Courts

U.S. Courts of Appeals

Highest Courts of the States
Review is through Writ of Certiorari

Often deal with Constitutional decisions

If writ not granted, lower court decision is final
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INTERNATIONAL PERSPECTIVE
“THE FRENCH COURT SYSTEM”
• France is a civil law country (typical of Europe)
• Written (code) law used rather than judge-made law
• Court System

Cour de cessation (Supreme Court)

Cour d’appel (Court of Appeals)

Tribunal d’instance (Court of general jurisdiction)
• Appellate process in France is very different from U.S.

Cour de Cessation: no authority to create judgments

Cour de Cessation: rejects an appeal or invalidates the
decision & returns case to Cour d’appel for
reconsideration
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THE TYPICAL STATE COURT SYSTEM



State court of Original Jurisdiction

Where case is first brought; deals in issues of fact

Usually called District Court (But in NY, is called the “Supreme Court”)
State court of Appellate Jurisdiction

Deals with appeals and issues of law

Usually called Court of Appeals

Can have different names (District Court of Appeals in FL; Appellate
Division in NY)
State Supreme Court

Second appellate review dealing w/issues of law

Usually called Supreme Court (but in NY, is called “Court of Appeals”)
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RULES OF CIVIL PROCEDURE
(IN UNITED STATES CODE, TITLE 28)


Federal Rules of Civil Procedure: Govern procedural
aspects of litigation

Pleadings

Discovery

Trial procedures

Relevant motions
States are free to develop their own procedural rules

Most adopt the Federal Rules of Civil Procedure or rules very
similar to them
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
Jurisdiction: Right of a court to hear and decide the case

A number of courts may have jurisdiction over a given
case

Need jurisdiction over the subject matter

Need jurisdiction over either persons or property

If jurisdiction is lacking, judgment is null and void
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
Literal Meaning: “The power to speak of the law”

Plaintiff must select a court that has

Subject-matter jurisdiction

Created by constitution or statute
and

Personal jurisdiction over

The person of the defendant
or

The property of the defendant
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SUBJECT MATTER JURISDICTION:
FEDERAL COURTS

Federal court jurisdiction is derived from the U.S.
Constitution

Federal courts may hear cases involving federal questions

Cases in which the U.S. is a party to the suit

Cases involving citizens of different states

Diversity of citizenship jurisdiction

Amount in Controversy is for more than $75,000

No $ amount needed for cases involving federal law
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SUBJECT MATTER JURISDICTION:
STATE COURTS

A particular court may resolve a particular subject matter, i.e.

Wills & Trusts: Probate Court

Divorces, Child Custody: Domestic/Family Court

Municipal Matters: Municipal Court

Small Claims Court - Limited claims of usually $5000 or less, sometimes up
to $10,000 will be heard

If there is not a particular subject matter, case first goes to general trial court

Courts of original jurisdiction – where case is first brought

Courts of appellate jurisdiction – where lower court decisions are reviewed

If there is no jury, judge decides the facts

General right to appeal to at least one higher court
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INTERNATIONAL PERSPECTIVE
“LONDON’S COMMERCIAL COURT”
• In international contracts, parties can state how future
disputes will be resolved either in the contract or when
disputes arise.
• The Commercial Court in London is a popular forum.
o
Trials handled by one judge
o
No jury
o
Trials usually occur within 1 year of dispute
o
Finished rather quickly
o
Loser pays winner’s attorney’s fees
o
English courts are respected; judgment more likely to be
enforced in other countries
o
Remedies have been innovative & relevant to commercial
matters
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PERSONAL JURISDICTION:
IN PERSONAM JURISDICTION



Over the person, usually through

Summons through service of process or substituted service

Residency

Doing business in the state

Submission to the jurisdiction
Out of state defendants

Jurisdiction is more difficult

Serve them while in the state

May not “trick” them to get into the state for service of process
See Exhibit 2.4
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JURISDICTION OVER OUT-OF-STATE BUSINESS
DEFENDANTS

Long-arm Statutes

Aimed at non-resident businesses

Protects states’ citizens from business defendants who do
business in the state and then leave the state

Jurisdiction over corporations:

Court of the state in which corporation was incorporated

Court is in a state where corporation has headquarters or
main plant

Court is in a state in which corporation is doing business

See Exhibit 2.5 re: Long-Arm Statute

See “The ‘Long Arm’ of the Law”
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CYBERLAW
“THE LONG ARM OF THE INTERNET”
• When does a web site advertiser in nationwide sales become subject
to another state’s jurisdiction?
o
Generally personal jurisdiction occurs when defendant is
engaged in business in a state.
o
i.e. Amazon.com does active business in every state by selling
online, and is subject jurisdiction in those states
• No jurisdiction if contact with a forum is “only informational”, even if
the web site is interactive
• No jurisdiction if web site gives information about sales, allows
customers to download forms and provides e-mail address for
inquiries
• Unclear area: How much sales activity must occur with residents in a
state for the web seller to become subject to jurisdiction in the
buyer’s state?
o
Ex: One low cost item is not “active business”, esp. if buyer
initiates the contact.
o
Ex: One spam e-mail sent out of state – no jurisdiction
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CASE
BLIMKA V. MY WEB WHOLESALER, LLC
• My Web Wholesalers (of Maine) does business on the Internet.
• Blimka (of Idaho) surfed the net, found My Web and called DePalma,
a My Web manager.
• Ordered 26,500 pairs of jeans for $20,935 and wired money
• Shipment of 16,000 jeans arrived. Blimka called My Web to also
complain about quality.
• Blimka sued for fraud against My Web and DePalma in Idaho court.
Process was served on defendants in Maine.
• No response by defendants; court issued a judgment against both
defendants, saying it had jurisdiction. They appealed.
• HELD: Affirmed. Idaho court has jurisdiction.

Defendants’ actions of fraud invoked the use of the Idaho longarm statute.

Defendants’ purposeful false misrepresentation directed into Idaho
created minimum contacts with Idaho that does not offend 14th
Amendment “traditional notions of fair play and substantial
justice”.

Blimka awarded attorney fees and costs.
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ISSUE SPOTTER
“CAN YOUR FIRM BE REACHED?”
• You work for Florida real estate development firm called
Golden Shores.
• Many clients are people coming to Florida from New York to
retire.
• To increase marketing, e-mails are sent to potential clients,
offering 5% discount to buyers who respond by e-mail and
buy property.
• New York requires real estate agents who offer property for
sale to be registered in the state of New York.
• A colleague in the firm says this law doesn’t apply to your
company because Golden Shores is located in Florida – the
only communication with New York is through e-mail
• Colleague says that New York authorities cannot come after
Golden Shores for any violations.
IS THE COLLEAGUE CORRECT???
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JURISDICTION OVER PROPERTY

In rem jurisdiction

In rem (rem means “the thing”)

The dispute between the parties is over property

Where property is located creates jurisdiction

Whether the defendant-property owner is within the jurisdiction
does not matter

Tangible property creates in rem jurisdiction – i.e real estate,
personal property

Intangible property creates in rem – i.e. bank accounts, stocks

If property is removed to another state, no in rem jurisdiction
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EXCLUSIVE JURISDICTION

Federal courts have exclusive
jurisdiction over some matters

State courts have exclusive
jurisdiction over some matters

Examples:

Examples:


Federal crimes

Divorce

Bankruptcy

Adoption

Patents


Copyrights
Matters controlled by state
government

Federal questions
Congress can specify by statute
exclusive jurisdiction in federal
courts

Supremacy of federal law—
state jurisdiction cannot infringe
on federal jurisdiction
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CONCURRENT JURISDICTION

Federal and state courts have exclusive jurisdiction over some
matters; HOWEVER,

Sometimes both state & federal courts have concurrent jurisdiction.

Plaintiff may bring suit in either court system

If plaintiff chooses state court,


Defendant has right to remove to federal court (right of removal in
diversity of citizenship cases).
If plaintiff files suit in defendant’s home state court

Defendant cannot move case to federal court.

Sometimes Congress will explicitly give federal courts exclusive
jurisdiction over an area of law.

See Exhibit 2.6
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APPLYING APPROPRIATE LAW IN FEDERAL
COURT

Issue: When there is diversity of citizenship, which substantive law should
the federal court apply?

Ex: Lil Wayne and Jay-Z are involved in dispute over rights to revenue
from a concert


Lil Wayne sued Jay-Z in California

Both were from California

Case would be decided in California
Ex: Lil Wayne is from California & Jay-Z is from Florida.

If amount in controversy exceeded $75,000, federal court can decide case
based on diversity of citizenship

If case involves statutory law, court will apply law of the statute

What if case involves common-law issues?

Courts will apply law of state “with most significant interest” to the outcome

See Erie v. Tompkins

See Exhibit 2.7
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CASE
ERIE RR CO. V. TOMPKINS
• “A dark night”; protruding object from train owned by Erie RR;
Tompkins injured as he stood next to the tracks in Pennsylvania
• He claimed accident caused by negligent operation of train
• Tompkins: Pennsylvania citizen
• Erie: Incorporated in NY
• Accident: In Pennsylvania
• If federal common law applies: Erie is liable
• If Pennsylvania common law: Tompkins trespassed & Erie is not
liable
• Trial court applied federal common law. Jury awarded $30,000 to
Tompkins. Affirmed by the Court of Appeals. Erie appealed to the
Supreme Court.
• Held: Concept of federal common law in diversity of citizenship
cases is ended. Federal courts will apply relevant state law.
• Pennsylvania law applies. Tompkins is a trespasser. Erie is not
liable.
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APPLYING APPROPRIATE LAW IN STATE COURT

Incidents of the case take place in more than one state

Conflict of laws or choice of law rules apply

Rules vary according to nature of dispute, i.e.

Contract cases: Laws of state in which contract was made will
be applied

Tort cases: Laws of state where tort takes place

States try to look at interests of the parties, government,
policies

General rule: Laws apply for state that has the most
“significant interest”

See Exhibit 2.7
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VENUE





Venue: Appropriate geographical location (proper place) where the
lawsuit is heard
In controversial or well-publicized cases, defendants will ask for
change of venue
Will be in same court system, but likely in a different geographical
location
Doctrine of forum non conveniens – a special venue doctrine: Either
party may request a change of venue to a more convenient court that
could hear the case. Court will consider such issues as
 Where actions of case take place
 Where witnesses are located
 Unfair burdens to parties
See BancorpSouth Bank v. Hazelwood Logistics Center, LLC
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CASE
BANCORPSOUTH BANK V. HAZELWOOD
LOGISTICS CENTER, LLC
• HLC was formed to build commercial real estate development
project in Missouri (Hazelwood Logistics Center)
• HLC – Missouri company – got loan from BancorpSouth Bank (the
Bank) – Mississippi company
• Later 4 Missouri banks (Participating Banks) joined
o
Lent more money for HLC
o
However Bank was the lead lender in the project
• Owners of HLC provided guaranty on loan if problems arose
• Property HLC chose had environmental problems
• Development halted – loan came due
• Bank sued for payment from HLC’s owners in Federal District
Court in Missouri
• Hazelwood moved to dismiss, saying 1) venue was improper & 2)
federal district court lacked subject matter jurisdiction
• Federal District Court held it had jurisdiction and venue was proper
-- HLC appealed
(Continued)
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CASE
BANCORPSOUTH BANK V. HAZELWOOD LOGISTICS CENTER, LLC
• AFFIRMED. Forum selection clauses in documents were upheld
o
The clauses did not prohibit the bank from bringing suit in U.S. District
Court for the Eastern District of Missouri.
• In diversity case, court will apply substantive law that would be applied by
Missouri state court
• Loan agreements and guaranty provided/stated that Missouri law governs
interpretation & application of the contracts.
• This is a “choice of law” provision – binds the parties to Missouri law
• Hazelwood argued #1: Lack of complete “diversity” because at least some of
participating banks are Missouri citizens
o
•
Court disagreed ; Said the participating banks were not demonstrated as
necessary parties to the suit; District court properly exercised jurisdiction
Hazelwood argued #2: Action in federal court violated loan agreements and
guaranty’s choice of venue provisions
o
Court disagreed.
o
Documents did not “limit the right of [the bank] to bring action. . . against
(HLC) in the Court of any other jurisdiction.”
o
Loan agreements provided an action “may be brought in the Courts of St.
Louis County, but do not indicate such actions must be brought there . . . .”
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