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Beginning a Civil Lawsuit 2 In the course of your business career, you may be involved in one or more lawsuits. In 2010 alone, filings of civil and criminal cases in the U.S. district courts grew 2%, to 361,323 (United States Courts, 2011). Considering that this is only one of hundreds of courts in the United States, the amount of litigation taking place on a daily basis is astounding. (See the United States Courts website for more details and statistics: http://www.uscourts.gov/news/newsview/11-03-15/Fil ings_in_the_Federal_Judiciary_Continued_to_Grow_in_Fiscal_Year_2010.aspx.)

Understanding what a lawsuit is and how it works, some of the ways to defend against one, and when to seek legal assistance is essential for efficiently running a business. This chapter will begin by discussing the steps involved in a civil lawsuit, paying particular attention to in personam jurisdiction and subject matter jurisdiction. To set the foundation for this discussion, we first clarify a number of important concepts.

2.1 Distinguishing Between Civil and Criminal Actions

It is important to be able to distinguish between civil and criminal matters. A civil lawsuit is one brought by a private plaintiff, whereas a criminal action is brought by the government through the state attorney or district attorney; if a federal matter, it is brought through the U.S. Attorney. A civil action is brought to seek the remedy of money damages (or other remedies such as an injunction), whereas criminal actions seek jail sentences, penalties, and fines. Finally, the bur- den of proof in a civil action is a preponderance of the evidence, whereas for criminal actions, it is evidence that is beyond a reasonable doubt. A preponderance of the evidence is a much lower burden of proof and can mean that a majority of the jurors must be more convinced than not that the defendant is liable. In a criminal action, however, the state (in the person of the prosecutor), for example, must convince every single member of the jury of the defendant’s guilt, leaving only a small amount of doubt, perhaps quantifiable as less than 10%. Table 2.1 provides a comparison of civil and criminal actions.

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http://www.uscourts.gov/news/newsview/11-03-15/Filings_in_the_Federal_Judiciary_Continued_to_Grow_in_Fiscal_Year_2010.aspx

Section 2.1 Distinguishing Between Civil and Criminal Actions CHAPTER 2

Table 2.1: Comparison of civil versus criminal actions

CIVIL CRIMINAL

What type of action? Plaintiff seeks monetary damages for the defendant’s actions

The state or U.S. government seeks to punish the defendant, impose fines, or require restitution

Where is the action brought? Civil court Criminal court

Who initiates the action? A private plaintiff, usually through an attorney

The state or the U.S. government through the district attorney or the U.S. Attorney

How does the action commence?

The defendant is served with papers called the summons and complaint

The defendant is arrested or a grand jury is convened; eventually, the defendant is brought to court for an arraignment, where the charges are read to him or her

What is the burden of proof? Preponderance of the evidence: A majority of the jury (51% or more) must be more convinced than not (51% or more) that the defendant is liable

Beyond a reasonable doubt: All of the jury must be convinced by more than 90% that the defendant is guilty

What is especially confusing to students when studying the difference between civil and criminal actions is that many events are both civil and criminal. For example, suppose a stranger enters your business and makes threatening gestures while yelling, “I am going to kill you!”; he then rushes toward you with a gun in his hand. You are so frightened that you have a heart attack and miss a month of work. You could sue that stranger for the torts (in a civil case) of assault, seeking monetary damages for your injuries and lost wages. This would be a private lawsuit in which you would hire an attorney and sue the defendant in civil court. At the same time, you could press charges against the same defendant and turn the matter over to the police. They would file a report that the district attorney would then consider. If they thought there was enough evidence of a crime, their office could start a prosecution against the defendant for criminal assault.

Criminal defendants have constitutional protections such as the “right to a speedy trial,” and the proceedings will most likely take place in court many years before a civil lawsuit would. Note that in both the civil and criminal actions, the cause of action or incident is assault and battery; but the burdens of proof are different, the trials will take place at differ- ent times, different parties bring the lawsuit, and what makes up the tort and what makes up the crime have different definitions. Think of torts and crimes as parallel highways, each with their own unique landmarks.

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

2.2 Steps in a Civil Lawsuit

Now that we have distinguished between civil and criminal, the rest of this chapter will deal only with civil litigation (criminal law is discussed in Chapter 6). The choices discussed below are confined to the vocabulary used only for civil cases. Suing a person in court for money is called litigation. Litigation is time consuming and expensive and should be avoided whenever possible. It is a public matter and can be reported in the newspaper, discussed among strangers, and subjected to interpretation by anyone in the community. A business whose name is splashed across the evening news or discussed on the Internet, even if it has done nothing wrong, will look guilty. Custom- ers may avoid doing business with this entity, and potential clients may form a negative opinion of it. Litigants often report that it is the most stressful experience of their lives, and one not to be embarked upon lightly. One way to avoid litigation is to seek a form of alternative dispute resolution, which will be discussed in Chapter 3. However, should you become involved in litigation, it is important to understand the steps in a civil lawsuit. The first three are determining cause of action, determining in personam jurisdiction, and determining subject matter jurisdiction.

Step One: Determining Cause of Action

Often, people feel wronged due to incidents that have no basis in law. Hurt feelings, name- calling, and derision are examples. An individual contemplating a lawsuit must first con- sider whether or not there is a justiciable cause of action. A justiciable cause of action is one that involves a protected legal right and is “able to be adjudicated,” as opposed to a nonjusticiable cause of action, which would involve something like hurt feelings or a bruised ego. A cause of action is a wrong defined by law and recognized as a viable legal claim. For example, negligence is a cause of action when someone unintentionally injures another. Suing for an incident that does not have a viable cause of action will result in dis- missal of the lawsuit. Attorneys are trained to recognize causes of action, and one of the most important reasons to consult an attorney is to determine whether one’s grievance is worth addressing in court.

If a cause of action seems viable, the next determination is where to bring the lawsuit. By where, we mean what state. Many students immediately jump to the conclusion that law- suits are brought where the incident occurred. This is more likely true in criminal actions. In civil actions, however, where to sue is a more complex process, dealing with the con- cept of in personam jurisdiction.

Step Two: Determining In Personam Jurisdiction

In personam, or personal, jurisdiction determines the power of a court to decide a case between the specific litigants involved. In order to have in personam jurisdiction over the defendant, at least two requirements must be met:

1. The state where the plaintiff wishes to sue the defendant must have minimal contacts with the defendant.

2. The defendant must be notified of the lawsuit.

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Minimal Contacts The U.S. Constitution guarantees due process of law, or fairness to its citizens. It would not be fair to be sued in a state in which one had never traveled or conducted business. Stated another way, it is fair to sue a defendant if he or she has been in a state and entered into a contract or committed a wrong there.

Generally speaking, state courts’ personal jurisdiction extends only to persons who have substantial contacts with the state. Although state laws vary somewhat as to what consti- tutes a substantial contact with the state, in general, defendants who meet any one of the following criteria are deemed to have sufficient contact with a state to allow its courts to adjudicate matters in which they are a party:

A. PHYSICAL PRESENCE: The defendant is present in the state when he or she is served with notice of the lawsuit; OR

B. DOMICILIARY: The defendant is living in the state; OR

C. THE LONG-ARM STATUTE OR DOING BUSINESS: The defendant is doing business in the state (e.g., working or conducting business in the state on a regular basis); OR

D. THE LONG-ARM STATUTE OR COMMITTING A TORT: The defendant is committing a tort in the state; OR

E. OWNING REAL PROPERTY: The defendant is owning real or personal property in the state, but if property ownership is the only contact with the state, courts in the state may not issue a judgment that extends beyond the value of the prop- erty. When personal jurisdiction is based on property ownership in the state, it is referred to as quasi in rem jurisdiction, and it is the property itself that is sued rather than the person of its owner. If the property owner chooses not to appear in the state to defend himself, a default judgment can be issued and the property seized and sold to satisfy the judgment; OR

F. AGREEING TO IN PERSONAM JURISDICTION: The defendant voluntarily agrees to allow the state to exert personal jurisdiction by personally appearing before the court as a plaintiff (one who institutes a lawsuit) or defendant (one who defends oneself against a lawsuit initiated by another).

A Closer Look: In Personam Jurisdiction

Read the following article and then consider all of the possible states that would have in perso- nam jurisdiction, all of the possible federal courts that would have subject matter jurisdiction, and which state courts by type, not name, would have subject matter jurisdiction. Assume that Gabriela Cedillo was not an employee at the time of the injury. Ask yourself why this would make a difference. Assume that Paramount Pictures is located in California.

http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-injured-worker-transform ers-20120523,0,7893794.

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http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-injured-worker-transformers-20120523,0,7893794

Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

In Personam Jurisdiction: The Long-Arm Statute in Depth States have enacted long-arm statutes that allow them to extend personal jurisdiction to people who do not meet any of the noted jurisdictional criteria. Typically, states’ long-arm statutes allow them to exert personal jurisdiction over anyone who commits a crime or a tort in the state or who enters into a contract that is the subject of the lawsuit in the state. Under a state’s long-arm statute, for example, a person who drives from Rhode Island to Florida can be forced to appear and defend himself in lawsuits brought by citizens of any East Coast state he drove through on the way, for accidents or traffic violations alleged to have been committed by him while driving through those states, even if he has had abso- lutely no other contact with those states. Likewise, a citizen of Nevada who mails a letter bomb to a citizen of California can be sued in California for any civil or criminal damages flowing from that act, even if he has no other contacts with that state.

To gain a better understanding of in personam jurisdiction, read the following case excerpts and respond to the questions at the end of the section. In the first case, the issue before the court is whether (consistently with the Due Process Clause of the Fourteenth Amend- ment) an Oklahoma court may exercise in personam jurisdiction over a nonresident auto- mobile retailer and its wholesale distributor in a products-liability action. In this situation, the defendants’ only connection with Oklahoma was an automobile sold in New York to New York residents, who later became involved in an accident in Oklahoma.

Cases to Consider: World-Wide Volkswagen v. Woodson

World-Wide Volkswagen v. Woodson, 444 U.S. 286 (1980)

Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volk- swagen, Inc. (Seaway), in Massena, N.Y., in 1976. The following year the Robinson fam- ily, who resided in New York, left that State for a new home in Arizona. As they passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire which severely burned Kay Robinson and her two children. The Robinsons subsequently brought a products-liability action in . . . , Oklahoma, claiming that their injuries resulted from defective design and placement of the Audi’s gas tank and fuel system.

World-Wide is incorporated and has its business office in New York. It distributes vehi- cles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. In fact, as respondents’ counsel conceded at oral argument, there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma with the single exception of the vehicle involved in the present case. (continued)

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Cases to Consider: World-Wide Volkswagen v. Woodson (continued)

The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. Due process requires that the defendant be given adequate notice of the suit and be subject to the personal jurisdiction of the court. In the present case, it is not contended that notice was inadequate; the only question is whether these particular petitioners were subject to the jurisdiction of the Oklahoma courts.

As has long been settled, and as we reaffirm today, a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist “minimum contacts” between the defendant and the forum State. The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defen- dant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system. . . .

The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guar- antor against inconvenient litigation, have been substantially relaxed over the years. As we noted in McGee v. International Life Ins. Co., supra, at 222–223, this trend is largely attributable to a fundamental transformation in the American economy:

Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in eco- nomic activity.

Thus, the Due Process Clause “does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.” Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

Applying these principles to the case at hand, we find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of state-court jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privi- leges and benefits of Oklahoma law. They solicit no business there either through sales- persons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma. (continued)

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Cases to Consider: World-Wide Volkswagen v. Woodson (continued)

Respondents observe that the very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen ser- vice centers throughout the country, including some in Oklahoma. However, financial benefits accruing to the defendant from a collateral relation to the Forum State will not support jurisdiction if they do not stem from a constitutionally cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S., at 94–95. In our view, what- ever marginal revenues petitioners may receive by virtue of the fact that their products are capable of use in Oklahoma is far too attenuated a contact to justify that State’s exer- cise of in personam jurisdiction over them.

Read the full text of the case here: http://www.law.cornell.edu/supremecourt/text/444/286.

Questions to Consider

1. Why is taking an automobile purchased in New York State to Oklahoma not sufficient to grant in personam jurisdiction?

2. Why did the Supreme Court of Oklahoma think that it had in personam jurisdiction over World- Wide Volkswagen?

3. What does the Supreme Court say here about the purpose of minimum contacts? 4. What did the court say about whether or not Oklahoma had minimal contacts with World-Wide? 5. Did the court say that the plaintiffs could or could not sue World-Wide in Oklahoma? 6. What was the court’s reasoning?

In the next case we consider whether or not in personam jurisdiction is established because a manufacturer from another country is aware that parts it makes and sells will eventu- ally reach the United States. The manufacturer, Asahi, made the valve stems that go into motorcycle tires. The stems were then shipped to tire manufacturers worldwide, who inserted them into the tires and sold them. One of the tires was on a motorcycle involved in an accident in the State of California.

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http://www.law.cornell.edu/supremecourt/text/444/286

Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Cases to Consider: Asahi Metal Industry v. Superior Court of California

Asahi Metal Industry v. Superior Court of California, 480 U.S. 102 (1987)

Excerpts of the opinion are as follows:

On September 23, 1978, on Interstate Highway 80 in Solano County, California, Gary Zurcher lost control of his Honda motorcycle and collided with a tractor. Zurcher was severely injured, and his passenger and wife, Ruth Ann Moreno, was killed. In September 1979, Zurcher filed a product liability action in the Superior Court of the State of California in and for the County of Solano. Zurcher alleged that the 1978 accident was caused by a sudden loss of air and an explosion in the rear tire of the motorcycle, and alleged that the motorcycle tire, tube, and sealant were defective. (He sued Cheng Shin, the Taiwanese manufacturer of the tube and Cheng Shin then sued Asahi, the manufacturer of the stem inside the tube. Cheng Shin was eventually dropped from the case, leaving the lawsuit against Asahi.)

Sales to Cheng Shin accounted for 1.24 percent of Asahi’s income in 1981 and 0.44 per- cent in 1982. Cheng Shin alleged that approximately 20 percent of its sales in the United States are in California. Cheng Shin purchases valve assemblies from other suppliers as well, and sells finished tubes throughout the world. In 1983 an attorney for Cheng Shin conducted an informal examination of the valve stems of the tire tubes sold in one cycle store in Solano County. The attorney declared that of the approximately 115 tire tubes in the store, 97 were purportedly manufactured in Japan or Taiwan, and of those 97, 21 valve stems were marked with the circled letter “A,” apparently Asahi’s trademark. Of the 21 Asahi valve stems, 12 were incorporated into Cheng Shin tire tubes. The store contained 41 other Cheng Shin tubes that incorporated the valve assemblies of other manufacturers. An affidavit of a manager of Cheng Shin whose duties included the pur- chasing of component parts stated: “‘In discussions with Asahi regarding the purchase of valve stem assemblies the fact that my Company sells tubes throughout the world and specifically the United States has been discussed. I am informed and believe that Asahi was fully aware that valve stem assemblies sold to my Company and to others would end up throughout the United States and in California.’” An affidavit of the president of Asahi, on the other hand, declared that Asahi “‘has never contemplated that its limited sales of tire valves to Cheng Shin in Taiwan would subject it to lawsuits in California.’”

***

The Due Process Clause of the Fourteenth Amendment limits the power of a state court to exert personal jurisdiction over a nonresident defendant. “[The] constitutional touch- stone” of the determination whether an exercise of personal jurisdiction comports with due process “remains whether the defendant purposefully established ‘minimum con- tacts’ in the forum State.” Most recently we have reaffirmed the oft-quoted reasoning of Hanson v. Denckla, 357 U.S. 235, 253 (1958), that minimum contacts must have a basis in “some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” “Jurisdiction is proper . . . where the contacts proximately result from actions by the defendant himself that create a ‘substantial connection’ with the forum State.”

It had been argued in World-Wide Volkswagen that because an automobile retailer and its wholesale distributor sold a product mobile by design and purpose, they could fore- see being haled into court in the distant States into which their customers (continued)

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Cases to Consider: Asahi Metal Industry v. Superior Court of California (continued) might drive. The Court rejected this concept of foreseeability as an insufficient basis for jurisdiction under the Due Process Clause. The Court disclaimed, however, the idea that “foreseeability is wholly irrelevant” to personal jurisdiction, concluding that “[the] forum State does not exceed its powers under the Due Process Clause if it asserts personal juris- diction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumer[s] in the forum State.” The Court reasoned: “When a corporation ‘purposefully avails itself of the privilege of conducting activities within the forum State,’ Hanson v. Denckla, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insur- ance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor . . . is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owners or to others.”

***

The reasoning of the Supreme Court of California in the present case illustrates the for- mer interpretation of World-Wide Volkswagen. The Supreme Court of California held that, because the stream of commerce eventually brought some valves Asahi sold Cheng Shin into California, Asahi’s awareness that its valves would be sold in California was sufficient to permit California to exercise jurisdiction over Asahi consistent with the requirements of the Due Process Clause. The Supreme Court of California’s position was consistent with those courts that have held that mere foreseeability or awareness was a constitutionally sufficient basis for personal jurisdiction if the defendant’s product made its way into the Forum State while still in the stream of commerce. . . .

. . . We have previously explained that the determination of the reasonableness of the exercise of jurisdiction in each case will depend on an evaluation of several factors. A court must consider the burden on the defendant, the interests of the Forum State, and the plaintiff’s interest in obtaining relief. It must also weigh in its determination “the interstate judicial system’s interest in obtaining the most efficient resolution of contro- versies; and the shared interest of the several States in furthering fundamental substan- tive social policies.”

. . . The possibility of being haled into a California court as a result of an accident involv- ing Asahi’s components undoubtedly creates an additional deterrent to the manufac- ture of unsafe components; however, similar pressures will be placed on Asahi by the purchasers of its components as long as those who use Asahi components in their final products, and sell those products in California, are subject to the application of California tort law. . . .

In the present case, this advice calls for a court to consider the procedural and substan- tive policies of other nations whose interests are affected by the assertion of jurisdiction by the California court. . . . “Great care and reserve should be exercised when extending our notions of personal jurisdiction into the international field.” (continued)

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Cases to Consider: Asahi Metal Industry v. Superior Court of California (continued) Because the facts of this case do not establish minimum contacts such that the exercise of personal jurisdiction is consistent with fair play and substantial justice, the judgment of the Supreme Court is reversed.

Read the full text of the case here: http://www.law.cornell.edu/supremecourt/text/480/102.

Questions to Consider

1. Did the California Supreme Court agree that California had in personam jurisdiction over Asahi? 2. How did the Supreme Court use the World-Wide opinion in this case? 3. What did the Court say about the use of “foreseeability” as a reason to grant in personam

jurisdiction? 4. Is putting a product into the stream of commerce sufficient cause to grant in personam juris-

diction? Where does the boundary start and stop? 5. What did the U.S. Supreme Court say is the determinative factor for establishing minimum

contacts? 6. What is the difference between “purposefully availing oneself of the forum” from “foreseeability”? 7. How would you characterize “traditional notions of fair play”? 8. What was the final conclusion by the Court in regard to in personam jurisdiction over Asahi?

Why?

With the advent of the Internet, the law is still evolving with regard to what constitutes a minimum contact. Since the defendant is not physically present in the state, the question becomes whether or not doing business online suffices to grant a minimum contact over a defendant. At present, the law varies widely from state to state. For example, in New York, a website through which Internet users could access a seller’s products was held to be suf- ficient to grant in personam jurisdiction when the total yearly sales surpassed $2,000 (Bliss- world, LLC v. Kovack, N.Y. Sup.Ct., July 9, 2001). In contrast, an Ohio opinion stated that “a passive Internet website that does little more than make information available to those who are interested in it is not grounds for the exercise of personal jurisdiction” (Edwards v. Erdey, 770 N.E.2d. 673 [Ohio Com. Pl. 2001]). To date, it appears that sales of goods may constitute sufficient minimum contacts, but committing a tort via the Internet does not.

Service of Process Now that we have established the first requirement of in personam jurisdiction, minimum contacts, we will next address the second component, service of process. Service of pro- cess simply means that the defendant must be given notice of the lawsuit, which may be done by handing the defendant the papers telling him that he or she is being sued. The papers that are used to initiate a lawsuit are the summons and the complaint. In most states, these two papers are served together. The summons is usually a one-page docu- ment telling the defendant to appear in court, while the complaint is much more detailed and gives the plaintiff’s version of what happened, tells the court the name of the cause of action, sets forth the basis for in personam jurisdiction, and ends with a prayer for relief or request for money. Figure 2.1 provides an example of a complaint.

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http://www.law.cornell.edu/supremecourt/text/480/102

Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Figure 2.1: Sample complaint

Example taken from http://www.nycourts.gov/courts/6jd/forms/SRForms/complaint_examp.pdf

Notice that the complaint is organized in numbered paragraphs and contains distinct parts, including the name of the court at the very top, the litigants, and the description of events, at least from the plaintiff’s point of view. You may be surprised to learn that com- plaints are sometimes hundreds of pages long owing to the number of defendants listed and the range of causes of actions brought.

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF BROOME

-------------------------------------------------------------------------

JOHN JONES,

Plaintiff , Index No. 2012-0130

- against -

COMPLAINT

GEORGE SMITH,

Defendant.

-------------------------------------------------------------------------

TO THE SUPREME COURT OF THE STATE OF NEW YORK

The complaint of the plaintiff, John Jones, respectfully shows and alleges

as follows:

1. The plaintiff herein, John Jones, is a resident of the State of New York.

Mr. Jones resides at 32 Adams Street, Vestal, New York.

2. The defendant herein, George Smith, has a principal place of business

at 125 Main Street, Binghamton, New York. Defendant is engaged in the business

of building submarines.

3. Plaintiff Jones desired to have a small submarine built pursuant to a design

prepared by him. He and defendant discussed his needs and specifications for this

project.

4. On March 1, 2012, plaintiff and defendant entered into a written agreement.

Pursuant thereto, plaintiff agreed to pay the sum of $200,000.00 for the submarine.

Plaintiff was obligated to make a down payment of $100,000.00 on or before April 1,

2012, with the balance to be due upon delivery of the submarine. The defendant

agreed to build the submarine in accordance with plaintiff’s design for the aforesaid

price and to complete the work and deliver the boat to a fixed place on or before

July 15, 2012.

5. On March 8, 2012, plaintiff delivered to defendant a certified check in the sum

of $100,000.00, which defendant cashed.

6. Defendant failed to deliver the submarine on or before July 15, 2012, as

agreed. Plaintiff made numerous phone calls and sent several letters to defendant

about the contract, but received no response.

7. By reason of the facts and circumstances stated above, defendant has

breached the contract.

8. By reason of the facts and circumstances stated above, plaintiff has been

damaged by defendant in the sum of $120,000.00. WHEREFORE, plaintiff

demands judgment against defendant in the sum of $120,000.00, plus interest

from July 15, 2012, costs and disbursements, together with any other relief the

Court finds to be just and proper.

-----------------------

Name of plaintiff

Name of court where filed

Name of defendant

Filing number supplied by the state

Establishes the in personam jurisdiction

States the cause of action

States the damages the plaintiff is asking the court to award

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http://www.nycourts.gov/courts/6jd/forms/SRForms/complaint_examp.pdf

Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

There are a number of different ways to notify the defendant of the lawsuit. First, the defendant may receive notice through personal delivery, which means that the defen- dant is handed the summons and the complaint. In some states this is done by the sheriff, and in others, by a private, paid process server. This is often called actual or personal service of process.

If the process server shows up at the defendant’s home to serve the papers, and the defen- dant is not at home, many states allow the papers to be left with delivery upon a family member so long as he or she is above the age of 16, or similar. This is called substituted service of process. On occasion, the defendant cannot be found, nor is there anyone ever at the home, but the defendant does have a home. In that case, the courts allow the process server to attach the summons and complaint to the defendant’s door and mail a certified copy to the defendant. While this is not an exhaustive list of all the ways to serve process, it does convey some of the more common methods.

If the defendant is a business, such as a corporation, then service of process usually takes place through an agent of the corporation. This agent is listed in corporate papers on file with the state where the corporation was formed and is easily discernible.

Let’s suppose for a moment that the defendant does not own a home and lives by him- self or herself but at an unknown address. In that case, there is no home or apartment, so a summons and complaint cannot be attached; there is no one at home, so there is no substituted service; and the defendant cannot be found, so there is no personal service. If the process server cannot find the defendant, then the bottom line is that the lawsuit cannot proceed. In this way, it is possible for a defendant to avoid ever being sued in a civil lawsuit.

Step Three: Determining Subject Matter Jurisdiction

Subject matter jurisdiction (also referred to as in rem jurisdiction) is the power of a court to adjudicate a certain type of case. Once the plaintiff has decided the in personam juris- diction, or in which state to bring the lawsuit, the next consideration is in which court to try the case. The U.S. legal regime is actually composed of two very distinct court sys- tems. Each of the 50 states has its own court system (so there are 50 different state court regimes), and there is one federal court system located in each of the states.

State Court System Typically, state courts are divided into the following classifications: courts of limited jurisdiction or general jurisdiction, and courts that hear trials or appellate courts. Sup- pose that a state’s family court is empowered to adjudicate issues relating to domestic relations, such as divorce and child custody disputes. We would say that the subject mat- ter jurisdiction of the family court is divorce and child custody, meaning that when this state’s family court was created, it was given the power to settle controversies over these specific areas. It cannot, however, hear cases relating to traffic violations, breach of con- tract, or negligence because it was not empowered to adjudicate those types of cases. Ulti- mately, however, the final word on the interpretation of all federal law rests with the U.S. Supreme Court, which can hear appeals relating to cases involving federal law or the U.S. Constitution from any lower federal court or from any state’s highest court.

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

The jurisdiction of state courts is set by the state constitution or other state statutes creat- ing and governing the court system (see Figure 2.2). Generally speaking, access to the state courts is broader than that of the federal courts. This is because states have the power to adjudicate all cases and controversies arising out of a state’s laws for its citizens (and oth- ers who have sufficient contacts with the state). State courts can also hear issues relating to federal law unless jurisdiction to hear such cases has been limited to the federal courts, as is the case, for example, with claims against the United States, which must be brought in federal court. Most states impose subject matter jurisdiction limits on their court systems for the sake of expediency, setting up specialized courts with limited subject matter juris- diction to handle routine matters (e.g., traffic court, small claims court).

Figure 2.2: Sample court system

The courts on the bottom level represent where plaintiffs typically begin their lawsuit. The higher levels represent the courts to which they can then appeal.

A court of limited jurisdiction is limited either as to the types of controversies (subject matter) it can hear or to the amount of money it can award. Take, for example, a typical small claims court. Usually these courts are limited to claims filed for $5,000 or less. If a plaintiff sued for $5 million in a small claims court and won, the most the judge could award would be $5,000.

Appeals Court

Trial Courts of General Jurisdiction

Criminal Courts

Surrogate’s Courts

Family Courts

Trial Courts of Limited Jurisdiction Small Claims Courts

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

Courts of general jurisdiction, on the other hand, are not limited to any type of claim or controversy; they can hear any type of lawsuit and can award any amount of money.

Every state has a court of limited and a court of general jurisdiction. What is confusing is that the names for these courts differ from state to state. It is important that you not try to identify the type of court by its name. For example, in New York State, the Supreme Court is a trial court of general jurisdiction and would be the appropriate place to have a jury trial, for example, in a breach of contract lawsuit. In Mississippi, by contrast, the Supreme Court is the top appeals court, or the very highest court in the state, and hears matters only after they have gone to trial. So while the names are the same, the types of courts they represent are completely different. There is no way to accurately guess the type of state court merely by looking at its name. Table 2.2 lists examples of naming conventions within state court systems.

Table 2.2: Comparison of state courts

Type of Court Possible Names Jurisdiction of Court

Trial or Appeals Location

Appeals Supreme Limited to appeals from the General Trial Court

Appeals State capitol

Trial Circuit Court Claims Court

General: It can hear any type of claim and award any amount of money

Trial One in every county

Trial Small Claims

Justice of the Peace Court

Village Court

Town Court

Traffic Courts

Limited in the amount of money it can award and the types of claims it can hear

Trial In towns, cities

Another major demarcation for courts is whether they are for trials or appeals. Trial courts hear disputes and may impanel a jury that makes a decision about what happened, based on the facts. They call witnesses who give testimony, have a judge that presides, and fol- low rules of evidence for what testimony is admitted for the jury to hear.

Appeals courts, on the other hand, hear cases after there has been a trial. They do not decide facts; instead, they rule on errors of law that took place in the lower court trial. All appeals courts are courts of limited jurisdiction because they are limited as to the type of controversy: appeals.

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

The Federal Court System The federal court system was created in the U.S. Constitution and consists of three tiers: trial courts, called U.S. District Courts; appeals courts, called U.S. Courts of Appeal; and at the top, the U.S. Supreme Court. Table 2.3 provides a breakdown of the federal court system.

Table 2.3: The federal court system

Name of Court Type of Court Limited or General Jurisdiction

Location of Court

U.S. Supreme Court Hears appeals from the top state courts and the U.S. Courts of Appeal

Limited to appeals Washington, D.C.

U.S. Court of Appeals Hears appeals from the U.S. District Courts

Limited to appeals 13 circuits throughout the United States; see Figure 2.3

U.S. District Court Trial court Limited to diversity* plus $75,000 or a federal question

At least two in every state

*Meaning that all the plaintiffs are from different states than all the defendants.

Table 2.3 clearly shows that the federal courts are all courts of limited jurisdiction, which means that there are no courts of general jurisdiction at this level. To enter the federal court system, there are only two doors: diversity plus $75,000 or a federal question.

“Diversity” refers to the phrase diversity of citizenship, which means that all the plaintiffs are from different states than all the defendants. In its simplest form, this means that if A, a resident of New York, wished to sue B, a resident of California, there would be diversity, as both the plaintiff and the defendant are from different states. (The plaintiff would also have to sue for the sum of $75,000 or more to meet the second part of the requirement.) The issue of diversity becomes much more complicated when there are hundreds of plain- tiffs and defendants. In such a case, multiple plaintiffs could be from the same state, and multiple defendants could be from the same state, but none of the plaintiffs could be from the same state as any of the defendants, or diversity would fail. In such a case, either the whole lawsuit would have to be heard in state court or the parties defeating diversity would have to be dropped so that the others could stay in federal court.

The other way into federal court is through a federal question, such as a federal statute or a question “arising under the U.S. Constitution,” such as one pertaining to the First Amendment. There is no minimum dollar requirement for federal questions.

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

U.S. District Courts There are at least two U.S. District Courts in each state, as shown in Figure 2.3. The State of California, for example, has four bounded districts: Northern, Eastern, Central, and Southern. These represent the locations of the four U.S. District Courts of California; there are four because of the large population of the state. Wisconsin, on the other hand, has only two U.S. District Courts: a Western and an Eastern division.

Figure 2.3: Geographic boundaries of U.S. Courts of Appeals and U.S. District Courts

Federal Bar Association, About U.S. federal courts, http://fedbar.org/Public-Messaging/About-US-Federal-Courts_1.aspx

TX LA

PR VI

ALMS

IL IN

MI NY

VT NH

RI CT

NJ DE MD

FED DC

5 11

2 1

OK Western

Western

Northern

Northern Northern

Northern

Southern

Central

Southern Southern

Southern

Northern

NorthernNorthern Northern

Northern

Southern

Central

Southern

Eastern

Western

Eastern

Eastern Eastern

Eastern

EasternEastern

Eastern

Middle

Middle Middle

Middle

MP GU HI

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Section 2.2 Steps in a Civil Lawsuit CHAPTER 2

U.S. Courts of Appeal If litigants lose their case in the U.S. District Courts, they can take their case to the U.S. Court of Appeals for the circuit in which their district court sits. The map in Figure 2.3 shows some black circles with numbers in them. Each circle corresponds to an area with a specific color. There are 11 numbers, which represent 11 courts of appeal. There are two more courts of appeal that do not appear on the map, the Federal Appeals Court and the Washington, D.C., Appeals Court. For example, the State of Colorado sits in the 10th Cir- cuit. The 10th Circuit Court of Appeals is located in Denver, Colorado. If a civil suit began in the U.S. District Court in New Mexico, Utah, or Wyoming, the losing parties could appeal to the 10th Circuit Court of Appeals.

As is the case for all appeals, these courts are concerned only with issues of law, not of fact. The losing party can appeal to them only if he or she can show that an error was made in the trial court judge’s application of the law.

Specialized Courts A number of federal courts with limited original jurisdiction are not shown on the map. These include the U.S. Tax Court (which hears cases relating to federal income tax law), the U.S. Claims Court (in which lawsuits against the U.S. government must be filed), and the U.S. Court of International Trade (which adjudicates matters relating to foreign com- merce). Appeals from these courts may generally be taken to the U.S. Court of Appeals that has personal jurisdiction over the litigants.

U.S. Supreme Court The U.S. Supreme Court, the nation’s highest, can hear appeals from all U.S. Courts of Appeal as well as from each state’s highest courts, as long as a question of federal law or the U.S. Constitution is involved.

The process to have an appeal heard by the U.S. Supreme Court consists of filing a peti- tion for a writ of certiorari asking the Court to hear the appeal. If the Court agrees to hear the appeal, we say that the Court has granted a writ of certiorari; if not, it is a denial of a writ of certiorari (cert. denied, for short). The highest court typically receives more than 5,000 requests for appeals each year and grants writs of certiorari at its sole discretion. In recent years, the Court has heard oral arguments for fewer than 100 cases each term. If the Court denies cert., then the decision of the lower court stands.

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Key Terms CHAPTER 2

adjudicate To take a matter to court, to litigate, or to sue in a civil action.

appeals court A court that reviews litiga- tion after it has gone to trial and deter- mines whether errors were made by the trial court.

beyond a reasonable doubt The burden of proof in a criminal case, which states that every single member of the jury must be convinced of the defendant’s guilt.

burden of proof The degree to which the plaintiff or the state must convince the jury in order to prevail in the lawsuit or crimi- nal case.

cause of action An underlying legal right that is the basis of a lawsuit and the plain- tiff’s grievance.

civil action A lawsuit based on a civil action and usually requesting monetary damages.

complaint The initial paper served on the defendant in a civil lawsuit that tells the defendant he or she is being sued, the cause of action, and the amount of dam- ages sought.

criminal action A court action brought by the state through the district attorney or the federal government through the U.S. Attorney seeking confinement of the defendant for a wrong.

defendant The person either sued in a civil action or against whom charges are brought in a criminal action.

delivery upon a family member One of the ways to serve process on a defendant if the defendant cannot be found.

denial of a writ of certiorari When the U.S. Supreme Court will not hear the appeal, ending the case.

district attorney A state government employee who prosecutes crimes on behalf of the citizens of the state.

diversity of citizenship When all the plaintiffs are from different states than all the defendants.

domiciliary An individual living in the state.

due process The concept, grounded in the U.S. Constitution, that to ensure “fairness,” all defendants must be given notice of a lawsuit.

federal question A question or issue “aris- ing under the U.S. Constitution” or having a basis in federal law.

general jurisdiction Refers to a court that can hear any type of controversy and award any amount of money.

grant of a writ of certiorari When the U.S. Supreme Court has agreed to hear an appeal.

in personam jurisdiction The power of the state over the defendant’s assets so that if the plaintiff prevails in the lawsuit, the plaintiff can collect money from the defendant.

in rem jurisdiction Jurisdiction of a court over the person’s real or personal property.

justiciable cause of action A cause of action that involves a protected legal right and is “able to be adjudicated,” as opposed to a nonjusticiable cause of action, which involves subjective wrongs, such as hurt feelings or a bruised ego.

Key Terms

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Key Terms CHAPTER 2

limited jurisdiction Refers to a court that cannot hear all types of controversy and is limited as to how much money it can award a party.

long-arm statute A law that allows a state to acquire in personam jurisdiction over a defendant who comes into the state and commits a tort or enters into a contract.

minimal contacts The least contact a defendant must have with a state before the state will have jurisdiction over that defendant and his or her assets.

negligence When a person falls short of a reasonable or statutory standard of care and causes foreseeable injury to others.

personal delivery One way to serve the defendant with notice of the lawsuit; hand- delivering the summons and the complaint to the defendant.

personal jurisdiction Jurisdiction of the court over a person, meaning that all of the person’s assets are subject to a taking and sale by the court.

petition for a writ of certiorari A request to the U.S. Supreme Court asking the Court to review a decision from a lower court.

physical presence When the defendant is in the state where he or she is handed the summons and the complaint, thus giving that state in personam jurisdiction over the defendant and his or her assets.

plaintiff The party bringing a civil lawsuit.

prayer for relief The last paragraph in a complaint in which the plaintiff requests damages in a dollar amount.

preponderance of the evidence The bur- den of proof in a civil case. In most states, the plaintiff must convince a majority of the jury “more so than not,” or by 51% or more, that the defendant did a civil wrong and should be liable.

service of process Delivery of the sum- mons and the complaint to the defendant, giving him or her notice of the lawsuit.

small claims courts Courts that are usu- ally limited to claims filed for $5,000 or less.

specialized courts Courts within the federal system that have been established to hear very narrow types of disputes, e.g., bankruptcy or trademarks.

subject matter jurisdiction Which court can hear the case, based on the legislation establishing what that particular court has power to adjudicate.

summons A paper served on the defen- dant that tells the defendant he or she is being sued, by whom, and how long he or she has to respond, but that offers little other information.

tort A civil wrong, other than breach of contract, for which the court can award money damages.

trial court A court that is empowered to hold trials consisting of taking testimony before a judge or jury, rendering decisions, and awarding damages.

U.S. Attorney The federal government employee who prosecutes federal crimes.

U.S. Court of Appeals One of 11 federal courts that hear appeals from the U.S. Dis- trict Courts.

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Critical Thinking and Discussion Questions

1. What are the two elements of in personam jurisdiction? 2. What is the difference between in personam jurisdiction and subject matter

jurisdiction? 3. Name the courts of general jurisdiction in the federal system. 4. How are service of process and due process related? Can you think of an

example? 5. What is the burden of proof in a criminal trial? What does this mean? What about

in a civil trial? 6. What is the difference between a court of general jurisdiction and a court of lim-

ited jurisdiction? 7. ABC Corporation is domesticated in the State of California and is doing business

throughout the Southwest. ABC manufactures luxury hot tubs that retail in the $25,000 range. It uses salespeople who travel throughout the Southwest to contact potential clients, arrange for sales, and then follow up for any subsequent issues customers may have. On September 9, 2009, salesperson Horatio Hamilton sold a hot tub to the Anderson family in Albuquerque, New Mexico. Following installa- tion, the hot tub shorted out and severely injured one of the Anderson’s children, who suffered burns on his right leg. The Andersons wish to sue ABC in New Mexico for the injuries suffered under a negligence theory. How would the Ander- sons obtain in personam jurisdiction over ABC? What courts would have subject matter jurisdiction and why?

Critical Thinking and Discussion Questions CHAPTER 2

U.S. District Court The trial court of limited jurisdiction in the federal system; limited to trials involving either diver- sity of citizenship plus $75,000 or more in requested damages, or a federal question.

writ of certiorari A request for a review of the record from the trial court.

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