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Courts and the Legal Process

Learning Objectives

After reading this document, you should be able to do the following:

1. Describe the two different court systems in the United States, and explain why

some cases can be filed in either court system.

2. Explain the importance of subject matter jurisdiction and personal jurisdiction,

and know the difference between the two.

3. Describe the various stages of a civil action: from pleadings, to discovery, to

trial, and to appeals.

4. Describe two alternatives to litigation: mediation and arbitration.

In the United States, law and government are interdependent. The Constitution

establishes the basic framework of government and imposes certain limitations on the

powers of government. In turn, the various branches of government are intimately

involved in making, enforcing, and interpreting the law. Today, much of the law comes

from Congress and the state legislatures. But it is in the courts that legislation is

interpreted and prior case law is interpreted and applied.

As we go through this document, consider the case of Harry and Kay Robinson. In which

court should the Robinsons file their action? Can the Oklahoma court hear the case and

make a judgment that will be enforceable against all of the defendants? Which law will the

court use to come to a decision? Will it use New York law, Oklahoma law, federal law, or

German law?

Robinson v. Audi

Learning Resource

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Harry and Kay Robinson purchased a new Audi automobile from Seaway Volkswagen, Inc.

(Seaway), in Massena, New York, in 1976. The following year the Robinson family, who

resided in New York, left that state for a new home in Arizona. As they passed through

Oklahoma, another car struck their Audi in the rear, causing a fire that severely burned

Kay Robinson and her two children. Later on, the Robinsons brought a products-liability

action in the District Court for Creek County, Oklahoma, claiming that their injuries

resulted from the defective design and placement of the Audi’s gas tank and fuel system.

They sued numerous defendants, including the automobile’s manufacturer, Audi NSU

Auto Union Aktiengesellschaft (Audi); its importer, Volkswagen of America, Inc.

(Volkswagen); its regional distributor, World-Wide Volkswagen Corp. (World-Wide); and

its retail dealer, Seaway.

Should the Robinsons bring their action in state court or in federal court? Over which of

the defendants will the court have personal jurisdiction?

The Relationship Between State and Federal Court Systems in the

United States

Learning Objectives

1. Understand the different but complementary roles of state and federal court

systems.

2. Explain why it makes sense for some courts to hear and decide only certain

kinds of cases.

3. Describe the difference between a trial court and an appellate court.

Although it is sometimes said that there are two separate court systems, the reality is

more complex. There are, in fact, fifty-two court systems: those of the fifty states, the

local court system in the District of Columbia, and the federal court system. At the same

time, these are not entirely separate; they all have several points of contact.

State and local courts must honor both federal law and the laws of the other states. First,

state courts must honor federal law where state laws are in conflict with federal laws

(under the supremacy clause of the Constitution). Second, claims arising under federal

statutes can often be tried in the state courts, where the Constitution or Congress has not

explicitly required that only federal courts can hear that kind of claim. Third, under the full

faith and credit clause, each state court is obligated to respect the final judgments of

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courts in other states. Thus, a contract dispute resolved by an Arkansas court cannot be

relitigated in North Dakota when the plaintiff wants to collect on the Arkansas judgment

in North Dakota. Fourth, state courts often must consider the laws of other states in

deciding cases involving issues where two states have an interest, such as when drivers

from two different states collide in a third state. Under these circumstances, state judges

will consult their own state’s case decisions involving conflicts of laws and sometimes

decide that they must apply another state’s laws to decide the case.

As state courts are concerned with federal law, so federal courts are often concerned with

state law and with what happens in state courts. Federal courts will consider state-law-

based claims when a case involves claims using both state and federal law. Claims based

on federal laws will permit the federal court to take jurisdiction over the whole case,

including any state issues raised. In those cases, the federal court is said to exercise

“pendent jurisdiction” over the state claims. Also, the Supreme Court will occasionally take

appeals from a state supreme court where state law raises an important issue of federal

law to be decided. For example, a convict on death row may claim that the state’s chosen

method of execution using the injection of drugs is unusually painful and involves “cruel

and unusual punishment,” raising an Eighth Amendment issue.

There is also a broad category of cases heard in federal courts that concern only state

legal issues—namely, cases that arise between citizens of different states. The federal

courts are permitted to hear these cases under their so-called diversity of citizenship

jurisdiction (or diversity jurisdiction). A citizen of New Jersey may sue a citizen of New

York over a contract dispute in federal court, but if both were citizens of New Jersey, the

plaintiff would be limited to the state courts. The Constitution established diversity

jurisdiction because it was feared that local courts would be hostile toward people from

other states and that they would need separate courts. In 2009, nearly a third of all

lawsuits filed in federal court were based on diversity of citizenship. In these cases, the

federal courts were applying state law, rather than taking federal question jurisdiction,

where federal law provided the basis for the lawsuit or where the United States was a

party (as plaintiff or defendant).

Why are there so many diversity cases in federal courts? Defense lawyers believe that

there is sometimes a “home-court advantage” for an in-state plaintiff who brings a lawsuit

against a nonresident in his local state court. The defense attorney is entitled to ask

for removal to a federal court where there is diversity. This fits with the original reason for

diversity jurisdiction in the Constitution—the concern that judges in one state court would

favor the in-state plaintiff rather than a nonresident defendant. Another reason there are

so many diversity cases is that plaintiffs’ attorneys know that removal is common and that

filing in federal court to begin with will move the case along faster. Some plaintiffs’

attorneys also find advantages in pursuing a lawsuit in federal court. Federal court

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procedures are often more efficient than state court procedures, so that federal dockets

are often less crowded. This means a case will get to trial faster, and many lawyers enjoy

the higher status that comes in practicing before the federal bench. In some federal

districts, judgments for plaintiffs may be higher, on average, than in the local state court.

In short, not only law but also legal strategy factors into the popularity of diversity cases

in federal courts.

State Court Systems

The vast majority of civil lawsuits in the United States are filed in state courts. Two

aspects of civil lawsuits are common to all state courts: trials and appeals. A court

exercising a trial function has original jurisdiction—that is, jurisdiction to determine the

facts of the case and apply the law to them. A court that hears appeals from the trial court

is said to have appellate jurisdiction—it must accept the facts as determined by the trial

court and limit its review to the lower court’s theory of the applicable law.

Limited Jurisdiction Courts

In most large urban states and many smaller states, there are four and sometimes five

levels of courts. The lowest level is that of the limited jurisdiction courts. These are

usually county or municipal courts with original jurisdiction to hear minor criminal cases

(petty assaults, traffic offenses, and breach of peace, among others) and civil cases

involving monetary amounts up to a fixed ceiling (no more than $10,000 in most states

and far less in many states). Most disputes that wind up in court are handled in the

18,000-plus limited jurisdiction courts, which are estimated to hear more than 80 percent

of all cases.

One familiar limited jurisdiction court is the small claims court, with jurisdiction to hear

civil cases involving claims for amounts ranging between $1,000 and $5,000 in about half

the states and for considerably less in the other states ($500 to $1,000). The advantage of

the small claims court is that its procedures are informal, it is often located in a

neighborhood outside the business district, it is usually open after business hours, and it is

speedy. Lawyers are not necessary to present the case and in some states are not allowed

to appear in court.

General Jurisdiction Courts

All other civil and criminal cases are heard in the general trial courts, or courts of general

jurisdiction. These go by a variety of names: superior, circuit, district, or common pleas

court (New York calls its general trial court the supreme court). These are the courts in

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which people seek redress for incidents such as automobile accidents and injuries, or

breaches of contract. These state courts also prosecute those accused of murder, rape,

robbery, and other serious crimes. The fact finder in these general jurisdiction courts is

not a judge, as in the lower courts, but a jury of citizens.

Although courts of general jurisdiction can hear all types of cases, in most states more

than half involve family matters (divorce, child custody disputes, and the like). A third were

commercial cases, and slightly over 10 percent were devoted to car accident cases and

other cases.

Most states have specialized courts that hear only a certain type of case, such as landlord-

tenant disputes or probate of wills. Decisions by judges in specialized courts are usually

final, although any party dissatisfied with the outcome may be able to get a new trial in a

court of general jurisdiction. Because there has been one trial already, this is known as a

trial de novo. It is not an appeal, since the case essentially starts over.

Appellate Courts

The losing party in a general jurisdiction court can almost always appeal to either one or

two higher courts. These intermediate appellate courts—usually called courts of appeal—

have been established in forty states. They do not retry the evidence, but rather

determine whether the trial was conducted in a procedurally correct manner and whether

the appropriate law was applied. For example, the appellant (the losing party who appeals)

might complain that the judge wrongly instructed the jury on the meaning of the law, or

improperly allowed testimony of a particular witness, or misconstrued the law in question.

The appellee (who won in the lower court) will ask that the appellant be denied—usually

this means that the appellee wants the lower-court judgment affirmed. The appellate

court has quite a few choices: it can affirm, modify, reverse, or reverse and remand the

lower court decision (return the case to the lower court for retrial).

The last type of appeal within the state courts system is to the highest court, the state

supreme court, which is composed of a single panel of five to nine judges and is usually

located in the state capital. (The intermediate appellate courts are usually composed of

panels of three judges and are situated in various locations around the state.) In a few

states, the highest court goes by a different name: in New York, it is known as the court of

appeals. In certain cases, appellants to the highest court in a state have the right to have

their appeals heard, but more often the supreme court selects the cases it wishes to hear.

For most litigants, the ruling of the state supreme court is final. In a relatively small class

of cases—those in which federal constitutional claims are made—appeal to the US

Supreme Court to issue a writ of certiorari remains a possibility.

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The Federal Court System

District Courts

The federal judicial system is uniform throughout the United States and consists of three

levels. At the first level are the federal district courts, which are the trial courts in the

federal system. Every state has one or more federal districts; the less populous states

have one, and the more populous states (California, Texas, and New York) have four. The

federal court with the heaviest commercial docket is the US District Court for the

Southern District of New York (Manhattan). There are forty-four district judges and fifteen

magistrates in this district. The district judges throughout the United States commonly

preside over all federal trials, both criminal and civil.

Courts of Appeal

Cases from the district courts can then be appealed to the circuit courts of appeal, of

which there are thirteen. Each circuit oversees the work of the district courts in several

states. For example, the US Court of Appeals for the Second Circuit hears appeals from

district courts in New York, Connecticut, and Vermont. The US Court of Appeals for the

Ninth Circuit hears appeals from district courts in California, Oregon, Nevada, Montana,

Washington, Idaho, Arizona, Alaska, Hawaii, and Guam. The US Court of Appeals for the

District of Columbia Circuit hears appeals from the district court in Washington, D.C., as

well as from numerous federal administrative agencies. The US Court of Appeals for the

Federal Circuit, also located in Washington, D.C., hears appeals in patent and customs

cases. Appeals are usually heard by three-judge panels, but sometimes there will be a

rehearing at the court of appeals level, in which case all judges sit to hear the case “en

banc.”

There are also several specialized courts in the federal judicial system. These include the

US Tax Court, the Court of Customs and Patent Appeals, and the Court of Claims.

United States Supreme Court

Overseeing all federal courts is the US Supreme Court, in Washington, D.C. It consists of

nine justices—the chief justice and eight associate justices. (This number is not

constitutionally required; Congress can establish any number. It has been set at nine since

after the Civil War.) The Supreme Court has selective control over most of its docket. By

law, the cases it hears represent only a tiny fraction of the cases that are submitted. In

2008, the Supreme Court had numerous petitions (over 7,000, not including thousands of

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petitions from prisoners) but heard arguments in only 87 cases. The Supreme Court does

not sit in panels. All the justices hear and consider each case together, unless a justice has

a conflict of interest and must withdraw from hearing the case.

Federal judges—including Supreme Court justices—are nominated by the president and

must be confirmed by the Senate. Unlike state judges, who are usually elected and preside

for a fixed term of years, federal judges sit for life unless they voluntarily retire or are

impeached.

Trial courts and appellate courts have different functions. State trial

courts sometimes hear cases with federal law issues, and federal courts

sometimes hear cases with state law issues. Within both state and

federal court systems, it is useful to know the different kinds of courts

and what cases they can decide.

Exercises

1. Why all of this complexity? Why don’t state courts hear only claims based on

state law, and federal courts only federal-law-based claims?

2. Why would a plaintiff in Iowa with a case against a New Jersey defendant

prefer to have the case heard in Iowa?

3. James, a New Jersey resident, is sued by Jonah, an Iowa resident. After a trial

in which James appears and vigorously defends himself, the Iowa state court

awards Jonah $136,750 in damages for his tort claim. In trying to collect from

James in New Jersey, Jonah must have the New Jersey court certify the Iowa

judgment. Why, ordinarily, must the New Jersey court do so?

The Problem of Jurisdiction

Key Points

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Learning Objectives

1. Explain the concept of subject matter jurisdiction and distinguish it from

personal jurisdiction.

2. Understand how and where the US Constitution provides a set of instructions

as to what federal courts are empowered by law to do.

3. Know which kinds of cases must be heard in federal courts only.

4. Explain diversity of citizenship jurisdiction and be able to decide whether a

case is eligible for diversity jurisdiction in the federal courts.

Jurisdiction is an essential concept in understanding courts and the legal system.

Jurisdiction is a combination of two Latin words: juris (law) and diction (to speak). Which

court has the power “to speak the law” is the basic question of jurisdiction.

There are two questions about jurisdiction in each case that must be answered before a

judge will hear a case: the question of subject matter jurisdiction and the question of

personal jurisdiction. We will consider the question of subject matter jurisdiction first,

because judges do; if they determine, on the basis of the initial documents in the case (the

“pleadings”), that they have no power to hear and decide that kind of case, they will

dismiss it.

The Federal-State Balance: Federalism

State courts have their origins in colonial era courts. After the American Revolution, state

courts functioned (with some differences) much as they did in colonial times. The big

difference after 1789 was that state courts coexisted with federal courts. Federalism was

the system devised by the nation’s founders in which power is shared between states and

the federal government. This sharing requires a division of labor between the states and

the federal government. It is Article III of the US Constitution that spells out the

respective spheres of authority (jurisdiction) between state and federal courts.

Take a close look at Article III of the Constitution. (You can find a printable copy of the

Constitution at http://www.findlaw.com.) Article III makes clear that federal courts are

courts of limited power or jurisdiction. Notice that the only kinds of cases federal courts

are authorized to deal with have strong federal connections. For example, federal courts

have jurisdiction when a federal law is being used by the plaintiff or prosecutor (a “federal

question” case) or the case arises “in admiralty” (meaning that the problem arose not on

land but on sea, beyond the territorial jurisdiction of any state, or in navigable waters

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within the United States). Implied in this list is the clear notion that states would continue

to have their own laws, interpreted by their own courts, and that federal courts were

needed only when the issues raised by the parties had a clear federal connection. The

exception to this is diversity jurisdiction, discussed later.

The Constitution was constructed with the idea that state courts would continue to deal

with basic kinds of claims such as tort, contract, or property claims. Since states sanction

marriages and divorce, state courts would deal with “domestic” (family) issues. Since

states deal with birth and death records, it stands to reason that paternity suits, probate

disputes, and the like usually wind up in state courts. You wouldn’t go to the federal

building or courthouse to get a marriage license, ask for a divorce, or probate a will: these

matters have traditionally been dealt with by the states (and the thirteen original colonies

before them). Matters that historically have been raised and settled in state court under

state law include not only domestic and probate matters but also law relating to

corporations, partnerships, agency, contracts, property, torts, and commercial dealings

generally. You cannot get married or divorced in federal court, because federal courts

have no jurisdiction over matters that have been historically (and are still) exclusively

within the domain of state law.

In terms of subject matter jurisdiction, then, state courts will typically deal with the kinds

of disputes just cited. Thus, if you are a Michigan resident and have an auto accident in

Toledo with an Ohio resident, and you each blame each other for the accident, the state

courts ordinarily resolve the matter if the dispute cannot otherwise be settled. Why state

courts? Because when you blame one another and allege that it’s the other person’s fault,

you have the beginnings of a tort case, with negligence as a primary element of the claim,

and state courts have routinely dealt with this kind of claim, from British colonial times

through Independence and to the present. People have had a need to resolve this kind of

dispute long before our federal courts were created, and you can tell from Article III that

the Founders did not specify that tort or negligence claims should be handled by the

federal courts. Again, federal courts are courts of limited jurisdiction, limited to the kinds

of cases specified in Article III. If the case before the federal court does not fall within one

of those categories, the federal court cannot constitutionally hear the case because it

does not have subject matter jurisdiction.

Always remember: a court must have subject matter jurisdiction to hear and decide a

case. Without it, a court cannot address the merits of the controversy or even take the

next jurisdictional step of figuring out which of the defendants can be sued in that court.

The question of which defendants are appropriately before the court is a question

of personal jurisdiction.

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Because there are two court systems, it is important for a plaintiff to file in the right court

to begin with. The right court is the one that has subject matter jurisdiction over the case

—that is, the power to hear and decide the kind of case that is filed. Not only is it a waste

of time to file in the wrong court system and be dismissed, but if the dismissal comes after

the filing period imposed by the applicable statute of limitations, it will be too late to

refile in the correct court system. Such cases will be routinely dismissed, regardless of

how deserving the plaintiff might be in his or her quest for justice. (The plaintiff’s only

remedy at that point would be to sue his or her lawyer for negligence for failing to mind

the clock and get to the right court in time!)

Exclusive Jurisdiction in Federal Courts

With two court systems, a plaintiff (or the plaintiff’s attorney, most likely) must decide

whether to file a case in the state court system or the federal court system. Federal courts

have exclusive jurisdiction over certain kinds of cases. The reason for this comes directly

from the Constitution. Article III of the US Constitution provides the following:

The judicial Power shall extend to all Cases, in Law and Equity, arising under this

Constitution, the Laws of the United States, and Treaties made, or which shall be made,

under their Authority; to all Cases affecting Ambassadors, other public Ministers and

Consuls; to all Cases of admiralty and maritime Jurisdiction; to Controversies to which the

United States shall be a Party; to Controversies between two or more States; between a

State and Citizens of another State; between Citizens of different States; between

Citizens of the same State claiming Lands under Grants of different States, and between a

State, or the Citizens thereof, and foreign States, Citizens or Subjects.

By excluding diversity cases, we can assemble a list of the kinds of cases that can only be

heard in federal courts. The list looks like this:

1. Suits between states. Cases in which two or more states are a party.

2. Cases involving ambassadors and other high-ranking public figures. Cases arising

between foreign ambassadors and other high-ranking public officials.

3. Federal crimes. Crimes defined by or mentioned in the US Constitution or those

defined or punished by federal statute. Such crimes include treason against the United

States, piracy, counterfeiting, crimes against the law of nations, and crimes relating to the

federal government’s authority to regulate interstate commerce. However, most crimes

are state matters.

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4. Bankruptcy. The statutory procedure, usually triggered by insolvency, by which a

person is relieved of most debts and undergoes a judicially supervised reorganization or

liquidation for the benefit of the person’s creditors.

5. Patent, copyright, and trademark cases

Patent. The exclusive right to make, use, or sell an invention for a specified period

(usually seventeen years), granted by the federal government to the inventor if the

device or process is novel, useful, and nonobvious.

Copyright. The body of law relating to a property right in an original work of

authorship (such as a literary, musical, artistic, photographic, or film work) fixed in

any tangible medium of expression, giving the holder the exclusive right to

reproduce, adapt, distribute, perform, and display the work.

Trademark. A word, phrase, logo, or other graphic symbol used by a manufacturer or

seller to distinguish its product or products from those of others.

6. Admiralty. The system of laws that has grown out of the practice of admiralty courts:

courts that exercise jurisdiction over all maritime contracts, torts, injuries, and offenses.

7. Antitrust. Federal laws designed to protect trade and commerce from restraining

monopolies, price fixing, and price discrimination.

8. Securities and banking regulation. The body of law protecting the public by regulating

the registration, offering, and trading of securities and the regulation of banking practices.

9. Other cases specified by federal statute. Any other cases specified by a federal statute

where Congress declares that federal courts will have exclusive jurisdiction.

Concurrent Jurisdiction

When a plaintiff takes a case to state court, it will be because state courts typically hear

that kind of case (i.e., there is subject matter jurisdiction). If the plaintiff’s main cause of

action comes from a certain state’s constitution, statutes, or court decisions, the state

courts have subject matter jurisdiction over the case. If the plaintiff’s main cause of action

is based on federal law (e.g., Title VII of the Civil Rights Act of 1964), the federal courts

have subject matter jurisdiction over the case. But federal courts will also have subject

matter jurisdiction over certain cases that have only a state-based cause of action; those

cases are ones in which the plaintiff(s) and the defendant(s) are from different states and

the amount in controversy is more than $75,000. State courts can have subject matter

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jurisdiction over certain cases that have only a federal-law-based cause of action. The

Supreme Court has now made clear that state courts have concurrent jurisdiction of any

federal cause of action unless Congress has given exclusive jurisdiction to federal courts.

In short, a case with a federal question can be often be heard in either state or federal

court, and a case that has parties with a diversity of citizenship can be heard in state

courts or in federal courts where the tests of complete diversity and amount in

controversy are met. (See below, "Summary of Rules on Subject Matter Jurisdiction.")

Whether a case will be heard in a state court or moved to a federal court will depend on

the parties. If a plaintiff files a case in state trial court where concurrent jurisdiction

applies, a defendant may (or may not) ask that the case be removed to federal district

court.

Summary of Rules on Subject Matter Jurisdiction

A court must always have subject matter jurisdiction, and personal jurisdiction over

at least one defendant, to hear and decide a case.

A state court will have subject matter jurisdiction over any case that is not required

to be brought in a federal court.

Some cases can only be brought in federal court, such as bankruptcy cases, cases

involving federal crimes, patent cases, and Internal Revenue Service tax court claims. The

list of cases for exclusive federal jurisdiction is fairly short. That means that almost any

state court will have subject matter jurisdiction over almost any kind of case. If it’s a case

based on state law, a state court will always have subject matter jurisdiction.

A federal court will have subject matter jurisdiction over any case that is either

based on a federal law (statute, case, or US Constitution)

OR

A federal court will have subject matter jurisdiction over any case based on state law

where (1) the parties are from different states and (2) the amount in controversy is at least

$75,000.

(1) The different-states requirement means that no plaintiff can have permanent residence

in a state where any defendant has permanent residence—there must be complete

diversity of citizenship between all plaintiffs and defendants.

(2) The amount-in-controversy requirement means that a good-faith estimate of the

amount the plaintiff may recover is at least $75,000.

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NOTE: For purposes of permanent residence, a corporation is considered a resident where

it is incorporated AND where it has a principal place of business.

In diversity cases, the following rules apply.

(1) Federal civil procedure rules apply to how the case is conducted before and during trial

and any appeals, but

(2) State law will be used as the basis for a determination of legal rights and

responsibilities.

This “choice of law” process is interesting but complicated. Basically, each state has

its own set of judicial decisions that resolve conflict of laws. For example, just

because A sues B in a Texas court, the Texas court will not necessarily apply Texas

law. Anna and Bobby collide and suffer serious physical injuries while driving their

cars in Roswell, New Mexico. Both live in Austin, and Bobby files a lawsuit in Austin.

The court there could hear it (having subject matter jurisdiction and personal

jurisdiction over Bobby) but would apply New Mexico law, which governs motor

vehicle laws and accidents in New Mexico. Why would the Texas judge do that?

The Texas judge knows that which state’s law is chosen to apply to the case can

make a decisive difference in the case, as different states have different substantive

law standards. For example, in a breach of contract case, one state’s version of the

Uniform Commercial Code may be different from another’s, and which one the court

decides to apply is often exceedingly good for one side and dismal for the other.

In Anna v. Bobby, if Texas has one kind of comparative negligence statute and New

Mexico has a different kind of comparative negligence statute, who wins or loses, or

how much is awarded, could well depend on which law applies. Because both were

under the jurisdiction of New Mexico’s laws at the time, it makes sense to apply

New Mexico law.

(3) Why do some nonresident defendants prefer to be in federal court?

In the state court, the judge is elected, and the jury may be familiar with or

sympathetic to the “local” plaintiff.

The federal court provides a more neutral forum, with an appointed, life-tenured

judge and a wider pool of potential jurors (drawn from a wider geographical area).

(4) If a defendant does not want to be in state court and there is diversity, what is to be

done?

Make a motion for removal to the federal court.

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The federal court will not want to add to its caseload, or docket, but must take the

case unless there is no complete diversity of citizenship or the amount in

controversy is less than $75,000.

To better understand subject matter jurisdiction in action, let’s take an example. Wile E.

Coyote wants a federal judge to hear his products-liability action against Acme, Inc., even

though the action is based on state law. Mr. Coyote’s attorney wants to “make a federal

case” out of it, thinking that the jurors in the federal district court’s jury pool will

understand the case better and be more likely to deliver a “high value” verdict for Mr.

Coyote. Mr. Coyote resides in Arizona, and Acme is incorporated in the state of Delaware

and has its principal place of business in Chicago, Illinois. The federal court in Arizona can

hear and decide Mr. Coyote’s case (i.e., it has subject matter jurisdiction over the case)

because of diversity of citizenship. If Mr. Coyote was injured by one of Acme’s defective

products while chasing a roadrunner in Arizona, the federal district court judge would

hear his action—using federal procedural law—and decide the case based on the

substantive law of Arizona on product liability.

But now change the facts only slightly: Acme is incorporated in Delaware but has its

principal place of business in Phoenix, Arizona. Unless Mr. Coyote has a federal law he is

using as a basis for his claims against Acme, his attempt to get a federal court to hear and

decide the case will fail. It will fail because there is not complete diversity of citizenship

between the plaintiff and the defendant.

Robinson v. Audi

Now consider Mr. and Mrs. Robinson and their products-liability claim against Seaway

Volkswagen and the other three defendants. There is no federal products-liability law that

could be used as a cause of action. They are most likely suing the defendants using

products-liability law based on common-law negligence or common-law strict liability law,

as found in state court cases. They were not yet Arizona residents at the time of the

accident, and their accident does not establish them as Oklahoma residents, either. They

bought the vehicle in New York from a New York–based retailer. None of the other

defendants is from Oklahoma.

They file in an Oklahoma state court, but how will they (their attorney or the court) know

if the state court has subject matter jurisdiction? Unless the case is required to be in a

federal court (i.e., unless the federal courts have exclusive jurisdiction over this kind of

case), any state court system will have subject matter jurisdiction, including Oklahoma’s

state court system. But if their claim is for a significant amount of money, they cannot file

in small claims court, probate court, or any court in Oklahoma that does not have

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statutory jurisdiction over their claim. They will need to file in a court of general

jurisdiction. In short, even when filing in the right court system (state versus federal), the

plaintiff must be careful to find the court that has subject matter jurisdiction.

If they wish to go to federal court, can they? There is no federal question presented here

(the claim is based on state common law), and the United States is not a party, so the only

basis for federal court jurisdiction would be diversity jurisdiction. If enough time has

elapsed since the accident and they have established themselves as Arizona residents,

they could sue in federal court in Oklahoma (or elsewhere), but only if none of the

defendants—the retailer, the regional Volkswagen company, Volkswagen of North

America, or Audi (in Germany)—are incorporated in or have a principal place of business in

Arizona. The federal judge would decide the case using federal civil procedure but would

have to make the appropriate choice of state law. In this case, the choice of conflicting

laws would most likely be Oklahoma, where the accident happened, or New York, where

the defective product was sold.

Legal Procedure, Including Due Process and Personal Jurisdiction

In this section, we consider how lawsuits are begun and how the court knows that it has

both subject matter jurisdiction and personal jurisdiction over at least one of the named

defendants.

The courts are not the only institutions that can resolve disputes. In the section

“Alternative Means of Resolving Disputes," we will discuss other dispute-resolution

forums, such as arbitration and mediation. For now, let us consider how courts make

decisions in civil disputes. Judicial decision making in the context of litigation (civil

lawsuits) is a distinctive form of dispute resolution.

First, to get the attention of a court, the plaintiff must make a claim based on existing

laws. Second, courts do not reach out for cases. Cases are brought to them, usually when

an attorney files a case with the right court in the right way, following the various laws

that govern all civil procedures in a state or in the federal system. (Most US states’

procedural laws are similar to the federal procedural code.)

Once at the court, the case will proceed through various motions (motions to dismiss for

lack of jurisdiction, for example, or insufficient service of process), the proofs (submission

of evidence), and the arguments (debate about the meaning of the evidence and the law)

of contesting parties.

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This is at the heart of the adversary system, in which those who oppose each other may

attack the other’s case through proofs and cross-examination. Every person in the United

States who wishes to take a case to court is entitled to hire a lawyer. The lawyer works for

his or her client, not the court, and serves as an advocate, or supporter. The client’s goal is

to persuade the court of the accuracy and justness of his or her position. The lawyer’s

duty is to shape the evidence and the argument—the line of reasoning about the evidence

—to advance his or her client’s cause and persuade the court of its rightness. The lawyer

for the opposing party will be doing the same thing, of course, for his or her client. The

judge (or, if one is sitting, the jury) must sort out the facts and reach a decision from this

cross-fire of evidence and argument.

The method of adjudication—the act of making an order or judgment—has several

important features. First, it focuses the conflicting issues. Other, secondary concerns are

minimized or excluded altogether. Relevance is a key concept in any trial. The judge is

required to decide the questions presented at the trial, not to talk about related matters.

Second, adjudication requires that the judge’s decision be reasoned, and that is why

judges write opinions explaining their decisions (an opinion may be omitted when the

verdict comes from a jury). Third, the judge’s decision must not only be reasoned but also

be responsive to the case presented: the judge is not free to say that the case is

unimportant and that he or she therefore will ignore it. Unlike other branches of

government that are free to ignore problems pressing upon them, judges must decide

cases. (For example, a legislature need not enact a law, no matter how many people

petition it to do so.) Fourth, the court must respond in a certain way. The judge must pay

attention to the parties’ arguments, and his or her decision must result from their proofs

and arguments. Evidence that is not presented and legal arguments that are not made

cannot be the basis for what the judge decides. Also, judges are bound by standards of

weighing evidence: the burden of proof in a civil case is generally a “preponderance of the

evidence.”

In all cases, the plaintiff—the party making a claim and initiating the lawsuit (in a criminal

case, the plaintiff is the prosecution)—has the burden of proving his or her case. If he or

she fails to prove it, the defendant—the party being sued or prosecuted—will win.

Criminal prosecutions carry the most rigorous burden of proof: the government must

prove its case against the defendant beyond a reasonable doubt. That is, even if it seems

very likely that the defendant committed the crime, as long as there remains some

reasonable doubt—perhaps he or she was not clearly identified as the culprit, or has an

alibi that could be legitimate—the jury must vote to acquit rather than convict.

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By contrast, the burden of proof in ordinary civil cases—those dealing with contracts,

personal injuries, and most of the cases in this document—is a preponderance of the

evidence, which means that the plaintiff’s evidence must outweigh whatever evidence the

defendant can muster that casts doubts on the plaintiff’s claim. This is not merely a matter

of counting the number of witnesses or of the length of time that they talk: the judge in a

trial without a jury (a bench trial), or the jury where one is impaneled, must apply the

preponderance of evidence test by determining which side has the greater weight of

credible, relevant evidence.

Adjudication and the adversary system imply certain other characteristics of courts.

Judges must be impartial; those with a personal interest in a matter must refuse to hear it.

The ruling of a court, after all appeals are exhausted, is final. This principle is known as res

judicata (Latin for “the thing is decided”), and it means that the same parties may not take

up the same dispute in another court at another time. Finally, a court must proceed

according to a public set of formal procedural rules; a judge cannot make up the rules as

he or she goes along. To these rules we now turn.

How a Case Proceeds

Complaint and Summons

Beginning a lawsuit is simple and is spelled out in the rules of procedure by which each

court system operates. In the federal system, the plaintiff begins a lawsuit by filing a

complaint—a document clearly explaining the grounds for suit—with the clerk of the court.

The court’s agent (usually a sheriff, for state trial courts, or a US deputy marshal, in federal

district courts) will then serve the defendant with the complaint and a summons. The

summons is a court document stating the name of the plaintiff and his or her attorney and

directing the defendant to respond to the complaint within a fixed time period.

The timing of the filing can be important. Almost every possible legal complaint is

governed by a federal or state statute of limitations, which requires a lawsuit to be filed

within a certain period of time. For example, in many states a lawsuit for injuries resulting

from an automobile accident must be filed within two years of the accident, or the

plaintiff forfeits his right to proceed. As noted earlier, making a correct initial filing in a

court that has subject matter jurisdiction is critical to avoiding statute of limitations

problems.

Jurisdiction and Venue

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The place of filing is equally important, and there are two issues regarding location. The

first is subject matter jurisdiction, as already noted. A claim for breach of contract, in

which the amount at stake is $1 million, cannot be brought in a local county court with

jurisdiction to hear cases involving sums up to only $1,000. Likewise, a claim for copyright

violation cannot be brought in a state superior court, since federal courts have exclusive

jurisdiction over copyright cases.

The second consideration is venue—the proper geographic location of the court. For

example, every county in a state might have a superior court, but the plaintiff is not free

to pick any county. Again, a statute will spell out to which court the plaintiff must go (e.g.,

the county in which the plaintiff resides or the county in which the defendant resides or

maintains an office).

Service of Process and Personal Jurisdiction

The defendant must be “served”—that is, must receive notice that he has been sued.

Service can be done by physically presenting the defendant with a copy of the summons

and complaint. But sometimes the defendant is difficult to find (or deliberately avoids the

marshal or other process server). The rules spell out a variety of ways by which individuals

and corporations can be served. These include using US Postal Service certified mail or

serving someone already designated to receive service of process. A corporation or

partnership, for example, is often required by state law to designate a “registered agent”

for purposes of getting public notices or receiving a summons and complaint.

One of the most troublesome problems is service on an out-of-state defendant. The

personal jurisdiction of a state court over persons is clear for those defendants found

within the state. If the plaintiff claims that an out-of-state defendant injured him in some

way, must the plaintiff go to the defendant’s home state to serve him? Unless the

defendant had some significant contact with the plaintiff’s state, the plaintiff may indeed

have to. For instance, suppose a traveler from Maine stopped at a roadside diner in

Montana and ordered a slice of homemade pie that was tainted and caused him to be sick.

The traveler may not simply return home and mail the diner a notice that he is suing it in a

Maine court. But if out-of-state defendants have some contact with the plaintiff’s state of

residence, there might be grounds to bring them within the jurisdiction of the plaintiff’s

state courts. In Burger King v. Rudzewicz (see "Cases" below), the federal court in Florida

had to consider whether it was constitutionally permissible to exercise personal

jurisdiction over a Michigan franchisee.

Again, recall that even if a court has subject matter jurisdiction, it must also have personal

jurisdiction over each defendant against whom an enforceable judgment can be made.

Often this is not a problem; you might be suing a person who lives in your state or

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regularly does business in your state. Or a nonresident may answer your complaint

without objecting to the court’s “in personam” (personal) jurisdiction. But many

defendants who do not reside in the state where the lawsuit is filed would rather not be

put to the inconvenience of contesting a lawsuit in a distant forum. Fairness—and the due

process clause of the Fourteenth Amendment—dictates that nonresidents should not be

required to defend lawsuits far from their home base, especially where there is little or no

contact or connection between the nonresident and the state where a lawsuit is brought.

There are two court systems in the United States. It is important to know

which system—the state court system or the federal court system—has

the power to hear and decide a particular case. Once that is established,

the Constitution compels an inquiry to make sure that no court extends

its reach unfairly to out-of-state residents. The question of personal

jurisdiction is a question of fairness and due process to nonresidents.

Key Points

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Exercises

1. The Constitution specifies that federal courts have exclusive jurisdiction over

admiralty claims. Mr. and Mrs. Shute have a claim against Carnival Cruise Line

for the negligence of the cruise line. Mrs. Shute sustained injuries as a result of

the company’s negligence. Mr. and Mrs. Shute live in the state of Washington.

Can they bring their claim in state court? Must they bring their claim in federal

court?

2. Congress passed Title VII of the Civil Rights Act of 1964. In Title VII,

employers are required not to discriminate against employees on the basis of

race, color, sex, religion, or national origin. In passing Title VII, Congress did

not require plaintiffs to file only in federal courts. That is, Congress made no

statement in Title VII that federal courts had “exclusive jurisdiction” over Title

VII claims. Mrs. Harris wishes to sue Forklift Systems, Inc. of Nashville,

Tennessee, for sexual harassment under Title VII. She has gone through the

Equal Employment Opportunity Commission process and has a right-to-sue

letter, which is required before a Title VII action can be brought to court. Can

she file a complaint that will be heard by a state court?

3. Mrs. Harris fails to go to the Equal Employment Opportunity Commission to

get her right-to-sue letter against Forklift Systems, Inc. She therefore does not

have a viable Title VII cause of action against Forklift. She does, however, have

her rights under Tennessee’s equal employment statute and various court

decisions from Tennessee courts regarding sexual harassment. Forklift is

incorporated in Tennessee and has its principal place of business in Nashville.

Mrs. Harris is also a citizen of Tennessee. Explain why, if she brings her

employment discrimination and sexual harassment lawsuit in a federal court,

her lawsuit will be dismissed for lack of subject matter jurisdiction.

4. Suppose Mr. and Mrs. Robinson find in the original paperwork with Seaway

Volkswagen that there is a contractual agreement with a provision that says,

“All disputes arising between buyer and Seaway Volkswagen will be litigated, if

at all, in the county courts of Westchester County, New York.” Will the

Oklahoma court take personal jurisdiction over Seaway Volkswagen, or will it

require the Robinsons to litigate their claim in New York?

Summary of Rules on Personal Jurisdiction

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Learning Objectives

1. Explain how a lawsuit can be dismissed prior to any trial.

2. Understand the basic principles and practices of discovery before a trial.

1. Once a court determines that it has subject matter jurisdiction, it must find at least one

defendant over which it is “fair” (i.e., in accord with due process) to exercise personal

jurisdiction.

2. If a plaintiff sues five defendants and the court has personal jurisdiction over just one,

the case can be heard, but the court cannot make a judgment against the other four.

a. But if the plaintiff loses against defendant 1, he or she can go elsewhere (to

another state or states) and sue defendants 2, 3, 4, or 5.

b. The court’s decision in the first lawsuit (against defendant 1) does not determine

the liability of the nonparticipating defendants.

This involves the principle of res judicata, which means that you can’t bring the same

action against the same person (or entity) twice. It’s like the civil side of double

jeopardy. Res means “thing,” and judicata means “adjudicated.” Thus the “thing” has been

“adjudicated” and should not be judged again. But, as to nonparticipating parties, it is not

over. If you have a different case against the same defendant—one that arises out of a

completely different situation—that case is not barred by res judicata.

3. Service of process is a necessary (but not sufficient) condition for getting personal

jurisdiction over a particular defendant (see rule 4).

a. In order to get a judgment in a civil action, the plaintiff must serve a copy of the

complaint and a summons on the defendant.

b. There are many ways to do this.

i. The process server personally serves a complaint on the defendant.

ii. The process server leaves a copy of the summons and complaint at the

residence of the defendant, in the hands of a competent person.

iii. The process server sends the summons and complaint by certified mail,

return receipt requested.

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iv. The process server, if all other means are not possible, notifies the

defendant by publication in a newspaper having a minimum number of readers

(as may be specified by law).

4. In addition to successfully serving the defendant with process, a plaintiff must convince

the court that exercising personal jurisdiction over the defendant is consistent with due

process and any statutes in that state that prescribe the jurisdictional reach of that state

(the so-called long-arm statutes). The Supreme Court has long recognized various bases

for judging whether such process is fair.

a. Consent. The defendant agrees to the court’s jurisdiction by coming to court,

answering the complaint, and having the matter litigated there.

b. Domicile. The defendant is a permanent resident of that state.

c. Event. The defendant did something in that state, related to the lawsuit, that

makes it fair for the state to say, “Come back and defend!”

d. Service of process within the state will effectively provide personal jurisdiction

over the nonresident.

Again, let’s consider Mrs. Robinson and her children in the Audi accident. She could file a

lawsuit anywhere in the country. She could file a lawsuit in Arizona after she establishes

residency there. But while the Arizona court would have subject matter jurisdiction over

any products-liability claim (or any claim that was not required to be heard in a federal

court), the Arizona court would face an issue of “in personam jurisdiction,” or personal

jurisdiction: under the due process clause of the Fourteenth Amendment, each state must

extend due process to citizens of all of the other states. Because fairness is essential to

due process, the court must consider whether it is fair to require an out-of-state

defendant to appear and defend against a lawsuit that could result in a judgment against

that defendant.

Almost every state in the United States has a statute regarding personal jurisdiction,

instructing judges when it is permissible to assert personal jurisdiction over an out-of-

state resident. These are called long-arm statutes. But no state can reach out beyond the

limits of what is constitutionally permissible under the Fourteenth Amendment, which

binds the states with its proviso to guarantee the due process rights of the citizens of

every state in the union. The “minimum contacts” test in Burger King v. Rudzewicz (see

"Cases" below) tries to make the fairness mandate of the due process clause more

specific. So do other tests articulated in the case (such as “does not offend traditional

notions of fair play and substantial justice”). These tests are posed by the Supreme Court

and heeded by all lower courts in order to honor the provisions of the Fourteenth

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Amendment’s due process guarantees. These tests are in addition to any state long-arm

statute’s instructions to courts regarding the assertion of personal jurisdiction over

nonresidents.

Choice of Law and Choice of Forum Clauses

In a series of cases, the Supreme Court has made clear that it will honor contractual

choices of parties in a lawsuit. Suppose the parties to a contract wind up in court arguing

over the application of the contract’s terms. If the parties are from two different states,

the judge may have difficulty determining which law to apply. But if the contract says that

a particular state’s law will be applied if there is a dispute, then ordinarily the judge will

apply that state’s law as a rule of decision in the case. For example, Kumar Patel (a

Missouri resident) opens a brokerage account with Goldman, Sachs and Co., and the

contractual agreement calls for “any disputes arising under this agreement” to be

determined “according to the laws of the state of New York.” When Kumar claims in a

Missouri court that his broker is “churning” his account, and, on the other hand, Goldman,

Sachs claims that Kumar has failed to meet his margin call and owes $38,568.25 (plus

interest and attorney’s fees), the judge in Missouri will apply New York law based on the

contract between Kumar and Goldman, Sachs.

Ordinarily, a choice-of-law clause will be accompanied by a choice-of-forum clause. In a

choice-of-forum clause, the parties in the contract specify which court they will go to in

the event of a dispute arising under the terms of contract. For example, Harold (a resident

of Virginia) rents a car from Alamo at the Denver International Airport. He does not look

at the fine print on the contract. He also waives all collision and other insurance that

Alamo offers at the time of his rental. While driving back from Telluride Bluegrass Festival,

he has an accident in Idaho Springs, Colorado. His rented Nissan Altima is badly damaged.

On returning to Virginia, he would like to settle up with Alamo, but his insurance company

and Alamo cannot come to terms. He realizes, however, that he has agreed to hear the

dispute with Alamo in a specific court in San Antonio, Texas. In the absence of fraud or

bad faith, any court in the United States is likely to uphold the choice-of-form clause and

require Harold (or his insurance company) to litigate in San Antonio, Texas.

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Many cases never get to trial. They are disposed of by motions to dismiss

or are settled after extensive discovery makes clear to the parties the

strengths and weaknesses of the parties to the dispute.

Exercises

1. Mrs. Robinson (in the Volkswagen Audi case) never establishes residency in

Arizona, returns to New York, and files her case in federal district court in New

York, alleging diversity jurisdiction. Assume that the defendants do not want to

have the case heard in federal court. What motion will they make?

2. Under contributory negligence, the negligence of any plaintiff that causes or

contributes to the injuries a plaintiff complains of will be grounds for dismissal.

Suppose that in discovery, Mr. Ferlito in Ferlito v. Johnson & Johnson (see

"Cases" below) admits that he brought the cigarette lighter dangerously close

to his costume, saying, “Yes, you could definitely say I was being careless; I had

a few drinks under my belt.” Also, Mrs. Ferlito admits that she never reads

product instructions from manufacturers. If the case is brought in a state

where contributory negligence is the law, on what basis can Johnson &

Johnson have the case dismissed before trial?

Motions and Discovery

Learning Objectives

1. Understand how judges can push parties into pretrial settlement.

2. Explain the meaning and use of directed verdicts.

3. Distinguish a directed verdict from a judgment n.o.v. (“notwithstanding the

verdict”).

Key Points

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The early phases of a civil action are characterized by many different kinds of motions and

a complex process of mutual fact-finding between the parties that is known as discovery.

A lawsuit will start with the pleadings (complaint and answer in every case, and in some

cases a counterclaim by the defendant against the plaintiff and the plaintiff’s reply to the

defendant’s counterclaim). After the pleadings, the parties may make various motions,

which are requests to the judge. Motions in the early stages of a lawsuit usually aim to

dismiss the lawsuit, to have it moved to another venue, or to compel the other party to

act in certain ways during the discovery process.

Initial Pleadings and Motions to Dismiss

The first papers filed in a lawsuit are called the pleadings. These include the plaintiff’s

complaint and then (usually after thirty or more days) the answer or response from the

defendant. The answer may be coupled with a counterclaim against the plaintiff. (In effect,

the defendant becomes the plaintiff for the claims he or she has against the original

plaintiff.) The plaintiff may reply to any counterclaim by the defendant.

State and federal rules of civil procedure require that the complaint must state the nature

of the plaintiff’s claim, the jurisdiction of the court, and the nature of the relief that is

being asked for (usually an award of money, but sometimes an injunction, or a declaration

of legal rights). In an answer, the defendant will often deny all the allegations of the

complaint or will admit to certain of its allegations and deny others.

A complaint and subsequent pleadings are usually quite general and give little detail.

Cases can be decided on the pleadings alone in the following situations. (1) If the

defendant fails to answer the complaint, the court can enter a default judgment, awarding

the plaintiff what he or she seeks. (2) The defendant can move to dismiss the complaint

on the grounds that the plaintiff failed to “state a claim on which relief can be granted,” or

that there is no subject matter jurisdiction for the court chosen by the plaintiff, or that

there is no personal jurisdiction over the defendant. The defendant is saying, in effect,

that even if all the plaintiff’s allegations are true, they do not amount to a legal claim that

can be heard by the court. For example, a claim that the defendant induced a woman to

stop dating the plaintiff (a so-called alienation of affections cause of action) is no longer

actionable in US state courts, and any court will dismiss the complaint without any further

proceedings. (This type of dismissal is occasionally still called a demurrer.)

A third kind of dismissal can take place on a motion for summary judgment. If there is no

triable question of fact or law, there is no reason to have a trial. For example, the plaintiff

sues on a promissory note and, at deposition (an oral examination under oath), the

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defendant admits having made no payment on the note and offers no excuse that would

be recognizable as a reason not to pay. There is no reason to have a trial, and the court

should grant summary judgment.

Discovery

If there is a factual dispute, the case will usually involve some degree of discovery, where

each party tries to get as much information out of the other party as the rules allow. Until

the 1940s, when discovery became part of civil procedure rules, a lawsuit was frequently

a game in which each party hid as much information as possible and tried to surprise the

other party in court.

Beginning with a change in the Federal Rules of Civil Procedure adopted by the Supreme

Court in 1938 and subsequently followed by many of the states, the parties are entitled to

learn the facts of the case before trial. The basic idea is to help the parties determine

what the evidence might be, who the potential witnesses are, and what specific issues are

relevant. Discovery can proceed by several methods. A party may serve an interrogatory

on his or her adversary—a written request for answers to specific questions. Or a party

may depose the other party or a witness. A deposition is a live question-and-answer

session at which the witness answers questions put to him by one of the parties’ lawyers.

The answers are recorded verbatim and may be used at trial. Each party is also entitled to

inspect books, documents, records, and other physical items in the possession of the

other. This is a broad right, as it is not limited to just evidence that is admissible at trial.

Discovery of physical evidence means that a plaintiff may inspect a company’s accounts,

customer lists, assets, profit-and-loss statements, balance sheets, engineering and quality-

control reports, sales reports, and virtually any other document.

The lawyers, not the court, run the discovery process. For example, one party simply

makes a written demand, stating the time at which the deposition will take place or the

type of documents it wishes to inspect and make copies of. A party unreasonably resisting

discovery methods (whether depositions, written interrogatories, or requests for

documents) can be challenged, however, and judges are often brought into the process to

push reluctant parties to make a fuller disclosure or to protect a party from irrelevant or

unreasonable discovery requests. For example, the party receiving the discovery request

can apply to the court for a protective order if it can show that the demand is for

privileged material (e.g., a party’s lawyers’ records are not open for inspection) or that the

demand was made to harass the opponent. In complex cases between companies, the

discovery of documents can run into tens of millions of pages and can take years.

Depositions can consume days or even weeks of an executive’s time.

The Pretrial and Trial Phase

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After considerable discovery, one of the parties may believe that there is no triable issue

of law or fact for the court to consider and may file a motion with the court for summary

judgment. Unless it is very clear, the judge will deny a summary judgment motion, because

that ends the case at the trial level; it is a “final order” in the case that tells the plaintiff

“no” and leaves no room to bring another lawsuit against the defendant for that particular

set of facts (res judicata). If the plaintiff successfully appeals a summary judgment motion,

the case will come back to the trial court.

Prior to the trial, the judge may also convene the parties in an effort to investigate the

possibilities of settlement. Usually, the judge will explore the strengths and weaknesses of

each party’s case with the attorneys. The parties may decide that it is more prudent or

efficient to settle than to risk going to trial.

Pretrial Conference

At various times during the discovery process, depending on the nature and complexity of

the case, the court may hold a pretrial conference to clarify the issues and establish a

timetable. The court may also hold a settlement conference to see if the parties can work

out their differences and avoid trial altogether. Once discovery is complete, the case

moves on to trial if it has not been settled. Most cases are settled before this stage;

perhaps 85 percent of all civil cases end before trial, and more than 90 percent of criminal

prosecutions end with a guilty plea.

Trial

At trial, the first order of business is to select a jury. (In a civil case of any consequence,

either party can request one, based on the Sixth Amendment to the US Constitution.) The

judge and sometimes the lawyers are permitted to question the jurors to be sure that they

are unbiased. This questioning is known as the voir dire (pronounced vwahr-DEER). This is

an important process, and a great deal of thought goes into selecting the jury, especially in

high-profile cases. A jury panel can be as few as six persons, or as many as twelve, with

alternates selected and sitting in court in case one of the jurors is unable to continue. In a

long trial, having alternates is essential; even in shorter trials, most courts will have at

least two alternate jurors.

In both criminal and civil trials, each side has opportunities to challenge potential jurors

for cause. For example, in the Robinsons’ case against Audi, the attorneys representing

Audi will want to know if any prospective jurors have ever owned an Audi, what their

experience has been, and if they had a similar problem (or worse) with their Audi that was

not resolved to their satisfaction. If so, the defense attorney could well believe that such a

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juror has a potential for a bias against his or her client. In that case, the defense attorney

could use a challenge for cause, explaining to the judge the basis for the challenge. The

judge, at his or her discretion, could either accept the for-cause reason or reject it.

Even if an attorney cannot articulate a for-cause reason acceptable to the judge, he or she

may use one of several peremptory challenges that most states (and the federal system)

allow. A trial attorney with many years of experience may have a sixth sense about a

potential juror and, in consultation with the client, may decide to use a peremptory

challenge to avoid having that juror on the panel.

After the jury is sworn and seated, the plaintiff’s lawyer makes an opening statement,

laying out the nature of the plaintiff’s claim, the facts of the case as the plaintiff sees

them, and the evidence that the lawyer will present. The defendant’s lawyer may also

make an opening statement or may reserve his or her right to do so at the end of the

plaintiff’s case.

The plaintiff’s lawyer then calls witnesses and presents the physical evidence that is

relevant to his or her proof. The direct testimony at trial is usually far from a smooth

narration. The rules of evidence (which govern the kinds of testimony and documents that

may be introduced at trial) and the question-and-answer format tend to make the

presentation of evidence choppy and difficult to follow.

Anyone who has watched an actual televised trial or a television melodrama featuring a

trial scene will appreciate the nature of the trial itself: witnesses are asked questions

about a number of issues that may or may not be related, the opposing lawyer will

frequently object to the question or the form in which it is asked, and the jury may be

sent from the room while the lawyers argue at the bench before the judge.

After the direct testimony of each witness is over, the opposing lawyer may conduct a

cross-examination. This is a crucial constitutional right; for criminal cases, it is preserved

in the Constitution’s Sixth Amendment (the right to confront one’s accusers in open

court). The formal rules of direct testimony are then relaxed, and the cross-examiner may

probe the witness more informally, asking questions that may not seem immediately

relevant. This is when the opposing attorney may become harsh, casting doubt on a

witness’s credibility, trying to trip the witness up and show that the answers he or she

gave are false or not to be trusted. This use of cross-examination, along with the

requirement that the witness must respond to questions that are at all relevant to the

questions raised by the case, distinguishes common-law courts from those of

authoritarian regimes around the world.

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Following cross-examination, the plaintiff’s lawyer may question the witness again: this is

called redirect examination and is used to demonstrate that the witness’s original answers

were accurate and that any suggestions otherwise, made by the cross-examiner, were

unwarranted. The cross-examiner may then engage the witness in re-cross-examination,

and so on. The process usually stops after cross-examination or redirect examination.

During the trial, the judge’s chief responsibility is to see that the trial is fair to both sides.

One big piece of that responsibility is to rule on the admissibility of evidence. A judge may

rule that a particular question is out of order—that is, not relevant or appropriate—or that

a given document is irrelevant. Where the attorney is convinced that a particular witness,

a particular question, or a particular document (or part thereof) is critical to his or her

case, he or she may preserve an objection to the court’s ruling by saying “exception,” in

which case the court stenographer will note the exception; on appeal, the attorney may

cite any number of exceptions as adding up to the lack of a fair trial for his or her client

and may request a court of appeals to order a retrial.

For the most part, courts of appeal will not reverse and remand for a new trial unless the

trial court judge’s errors are “prejudicial,” or “an abuse of discretion.” In short, neither party

is entitled to a perfect trial, but only to a fair trial, one in which the trial judge has made

only “harmless errors” and not prejudicial ones.

The purpose of a trial judge is to ensure justice to all parties to the

lawsuit. The judge presides, instructs the jury, and may limit who testifies

and what they testify about what. In all of this, the judge will usually

commit some errors; occasionally these will be the kinds of errors that

seriously compromise a fair trial for both parties. Errors that do seriously

compromise a fair trial for both parties are prejudicial, as opposed to

harmless. The appeals court must decide whether any errors of the trial

court judge are prejudicial or not.

If a judge directs a verdict, that ends the case for the party who hasn’t

asked for one; if a judge grants judgment n.o.v., that will take away a jury

verdict that one side has worked very hard to get. Thus, a judge must be

careful not to unduly favor one side or the other, regardless of his or her

sympathies.

Key Points

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Exercises

1. What if there were not a doctrine of res judicata? What would the legal

system be like?

2. Why do you think cross-examination is a “right,” as opposed to a “good thing”?

What kind of judicial system would not allow cross-examination of witnesses

as a matter of right?

At the end of the plaintiff’s case, the defendant presents his or her case, following the

same procedure just outlined. The plaintiff is then entitled to present rebuttal witnesses, if

necessary, to deny or argue with the evidence the defendant has introduced. The

defendant in turn may present “surrebuttal” witnesses.

Learning Objectives

1. Understand the posttrial process—how appellate courts process appeals.

2. Explain how a court’s judgment is translated into relief for the winning party.

When all testimony has been introduced, either party may ask the judge for

a directed verdict—a verdict decided by the judge without advice from the jury. This

motion may be granted if the plaintiff has failed to introduce evidence that is legally

sufficient to meet his or her burden of proof or if the defendant has failed to do the same

on issues on which he or she has the burden of proof. (For example, the plaintiff alleges

that the defendant owes him or her money and introduces a signed promissory note. The

defendant cannot show that the note is invalid. The defendant must lose the case unless

he or she can show that the debt has been paid or otherwise discharged.)

The defendant can move for a directed verdict at the close of the plaintiff’s case, but the

judge will usually wait to hear the entire case before deciding whether to do so. Directed

verdicts are not usually granted, since it is the jury’s job to determine the facts in dispute.

If the judge refuses to grant a directed verdict, each lawyer will then present a closing

argument to the jury (or, if there is no jury, to the judge alone). The closing argument is

used to tie up the loose ends, as the attorney tries to bring together various seemingly

unrelated facts into a story that will make sense to the jury.

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After closing arguments, the judge will instruct the jury. The purpose of jury instruction is

to explain to the jurors the meaning of the law as it relates to the issues they are

considering and to tell the jurors what facts they must determine if they are to give a

verdict for one party or the other. Each lawyer will have prepared a set of written

instructions that she hopes the judge will give to the jury. These will be tailored to

advance his or her client’s case. Many a verdict has been overturned on appeal because a

trial judge has wrongly instructed the jury. The judge will carefully determine which

instructions to give and often will use a set of pattern instructions provided by the state

bar association or the supreme court of the state. These pattern jury instructions are

often safer because they are patterned after language that appellate courts have used

previously, and appellate courts are less likely to find reversible error in the instructions.

After all instructions are given, the jury will retire to a private room and discuss the case

and the answers requested by the judge for as long as it takes to reach a unanimous

verdict. Some minor cases do not require a unanimous verdict. If the jury cannot reach a

decision, this is called a hung jury, and the case will have to be retried. When a jury does

reach a verdict, it delivers it in court with both parties and their lawyers present. The jury

is then discharged, and control over the case returns to the judge. (If there is no jury, the

judge will usually announce in a written opinion his or her findings of fact and how the

law applies to those facts. Juries just announce their verdicts and do not state their

reasons for reaching them.)

Posttrial Motions

The losing party is allowed to ask the judge for a new trial or for a judgment

notwithstanding the verdict (often called a judgment n.o.v., from the Latin non obstante

veredicto). A judge who decides that a directed verdict is appropriate will usually wait to

see what the jury’s verdict is. If it is favorable to the party the judge thinks should win, he

or she can rely on that verdict. If the verdict is for the other party, the judge can grant the

motion for judgment n.o.v. This is a safer way to proceed, because if the judge is reversed

on appeal, a new trial is not necessary. The jury’s verdict always can be restored, whereas

without a jury verdict (as happens when a directed verdict is granted before the case goes

to the jury), the entire case must be presented to a new jury. Ferlito v. Johnson &

Johnson (see "Cases" below) illustrates the judgment n.o.v. process in a case where the

judge allowed the case to go to a jury that was overly sympathetic to the plaintiffs.

Rule 50(b) of the Federal Rules of Civil Procedure provides the authorization for federal

judges making a judgment contrary to the judgment of the jury. Most states have a similar

rule.

Rule 50(b) says,

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Whenever a motion for a directed verdict made at the close of all the evidence is denied

or for any reason is not granted, the court is deemed to have submitted the action to the

jury subject to a later determination of the legal questions raised by the motion. Not later

than 10 days after entry of judgment, a party who has moved for a directed verdict may

move to have the verdict and any judgment entered thereon set aside and to have

judgment entered in accordance with the party’s motion for a directed verdict.… [A] new

trial may be prayed for in the alternative. If a verdict was returned the court may allow the

judgment to stand or may reopen the judgment and either order a new trial or direct the

entry of judgment as if the requested verdict had been directed.

Judgment, Appeal, and Execution

Judgment or Order

The process of conducting a civil trial has many aspects, starting with

pleadings and continuing with motions, discovery, more motions, pretrial

conferences, and finally the trial itself. At all stages, the rules of civil

procedure attempt to give both sides plenty of notice, opportunity to be

heard, discovery of relevant information, cross-examination, and the

preservation of procedural objections for purposes of appeal. All of these

rules and procedures are intended to provide each side with a fair trial.

Key Points

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Exercises

1. Mrs. Robinson has a key witness on auto safety who the judge believes is not

qualified as an expert. The judge examines the witness while the jury is in the

jury room and disqualifies him from testifying. The jury does not get to hear

this witness. Her attorney objects. She loses her case. What argument would

you expect Mrs. Robinson’s attorney to make in an appeal?

2. Why don’t appellate courts need a witness box for witnesses to give testimony

under oath?

3. A trial judge in Nevada is wondering whether to enforce a surrogate

motherhood contract. Penelope Barr, of Reno, Nevada, has contracted with

Reuben and Tina Goldberg to bear the in vitro-fertilized egg of Mrs. Goldberg.

After carrying the child for nine months, Penelope gives birth, but she is

reluctant to give up the child, even though she was paid $20,000 at the start

of the contract and will earn an additional $20,000 on handing over the baby

to the Goldbergs. (Barr was an especially good candidate for surrogate

motherhood: she had borne two perfect children and at age 28 drinks no wine,

does not smoke or use drugs of any kind, practices yoga, and maintains a

largely vegetarian diet with just enough meat to meet the needs of the fetus

within.)

At the end of a trial, the judge will enter an order that makes findings of fact (often with

the help of a jury) and conclusions of law. The judge will also make a judgment as to what

relief or remedy should be given. Often it is an award of money damages to one of the

parties. The losing party may ask for a new trial at this point or within a short period of

time following. Once the trial judge denies any such request, the judgment—in the form of

the court’s order—is final.

Appeal

Learning Objectives

1. Explain the requirements for standing to bring a lawsuit in US courts.

2. Describe the process by which a group or class of plaintiffs can be certified to

file a class action case.

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If the loser’s motion for a new trial or a judgment n.o.v. is denied, the losing party may

appeal but must ordinarily post a bond sufficient to ensure that there are funds to pay the

amount awarded to the winning party. In an appeal, the appellant aims to show that there

was some prejudicial error committed by the trial judge. There will be errors, of course,

but the errors must be significant (i.e., not harmless). The basic idea is for an appellate

court to ensure that a reasonably fair trial was provided to both sides. Enforcement of the

court’s judgment—an award of money, an injunction—is usually stayed (postponed) until

the appellate court has ruled. As noted earlier, the party making the appeal is called the

appellant, and the party defending the judgment is the appellee (or in some courts, the

petitioner and the respondent).

During the trial, the losing party may have objected to certain procedural decisions by the

judge. In compiling a record on appeal, the appellant needs to show the appellate court

some examples of mistakes made by the judge—for example, having erroneously admitted

evidence, having failed to admit proper evidence that should have been admitted, or

having wrongly instructed the jury. The appellate court must determine if those mistakes

were serious enough to amount to prejudicial error.

Appellate and trial procedures are different. The appellate court does not hear witnesses

or accept evidence. It reviews the record of the case—the transcript of the witnesses’

testimony and the documents received into evidence at trial—to try to find a legal error on

a specific request of one or both of the parties. The parties’ lawyers prepare briefs

(written statements containing the facts in the case), the procedural steps taken, and the

argument or discussion of the meaning of the law and how it applies to the facts. After

reading the briefs on appeal, the appellate court may dispose of the appeal without

argument, issuing a written opinion that may be very short or many pages. Often, though,

the appellate court will hear oral argument. (This can be months, or even more than a year

after the briefs are filed.) Each lawyer is given a short period of time, usually no more than

thirty minutes, to present his or her client’s case. The lawyer rarely gets a chance for an

extended statement, because he or she is usually interrupted by questions from the

judges. Through this exchange between judges and lawyers, specific legal positions can be

tested and their limits explored.

Depending on what it decides, the appellate court will affirm the lower court’s

judgment, modify it, reverse it, or remand it to the lower court for retrial or other action

directed by the higher court. The appellate court itself does not take specific action in the

case; it sits only to rule on contested issues of law. The lower court must issue the final

judgment in the case. As we have already seen, there is the possibility of appealing from

an intermediate appellate court to the state supreme court in twenty-nine states and to

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the US Supreme Court from a ruling from a federal circuit court of appeal. In cases raising

constitutional issues, there is also the possibility of appeal to the Supreme Court from the

state courts.

Like trial judges, appellate judges must follow previous decisions, or precedent. But not

every previous case is a precedent for every court. Lower courts must respect appellate

court decisions, and courts in one state are not bound by decisions of courts in other

states. State courts are not bound by decisions of federal courts, except on points of

federal law that come from federal courts within the state or from a federal circuit in

which the state court sits. A state supreme court is not bound by case law in any other

state. But a supreme court in one state with a type of case it has not previously dealt with

may find persuasive reasoning in decisions of other state supreme courts.

Federal district courts are bound by the decisions of the court of appeals in their circuit,

but decisions by one circuit court are not precedents for courts in other circuits. Federal

courts are also bound by decisions of the state supreme courts within their geographic

territory in diversity jurisdiction cases. All courts are bound by decisions of the US

Supreme Court, except the Supreme Court itself, which seldom reverses itself but on

occasion has overturned its own precedents.

Not everything a court says in an opinion is a precedent. Strictly speaking, only the exact

holding is binding on the lower courts. A holding is the theory of the law that applies to

the particular circumstances presented in a case. The courts may sometimes declare what

they believe to be the law with regard to points that are not central to the case being

decided. These declarations are called dicta (in the singular, dictum), and the lower courts

do not have to give them the same weight as holdings.

Judgment and Order

When a party has no more possible appeals, it usually pays up voluntarily. If it does not,

then the losing party’s assets can be seized or its wages or other income garnished to

satisfy the judgment. If the final judgment is an injunction, failure to follow its dictates can

lead to a contempt citation, with a fine or jail time imposed.

The Goldbergs have asked the judge for an order compelling Penelope to give up the

baby, who was five days old when the lawsuit was filed. The baby is now a month old as

the judge looks in vain for guidance from any Nevada statute, any federal statute, or any

prior case in Nevada that addressed the issue of surrogate motherhood. He does find

several well-reasoned cases, one from New Jersey, one from Michigan, and one from

Oregon. Are any of these “precedent” that he must follow? May he adopt the reasoning of

any of these courts, if he should find that reasoning persuasive?

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When Can Someone Bring a Lawsuit?

Anyone can file a lawsuit, with or without the help of an attorney, but

only those lawsuits where a plaintiff has standing will be heard by the

courts. Standing has become a complicated question and is used by the

courts to ensure that civil cases heard are being pursued by those with

tangible and particular injuries. Class actions are a way of aggregating

claims that are substantially similar and arise out of the same facts and

circumstances.

Exercises

Fuchs Funeral Home is carrying the body of Charles Emmenthaler to its resting

place at Forest Lawn Cemetery. Charles’s wife, Chloe, and their two children,

Chucky and Clarice, are following the hearse when the coffin falls on the street and

opens, and the body of Charles Emmenthaler falls out. The wife and children are

shocked and aggrieved and later sue in civil court for damages. Assume that this is a

viable cause of action based on “negligent infliction of emotional distress” in the

state of California and that Charles’s brother, sister-in-law, and multiple cousins also

were in the funeral procession and saw what happened. The brother of Charles,

Kingston Emmenthaler, also sees his brother’s body on the street, but his wife, their

three children, and some of Charles’s other cousins do not.

Charles was actually emotionally closest to Kingston’s oldest son, Nestor, who was

studying abroad at the time of the funeral and could not make it back in time. He is

as emotionally distraught at his uncle’s passing as anyone else in the family and is

especially grieved over the description of the incident and the grainy video shot by

one of the cousins on his cell phone. Who has standing to sue Fuchs Funeral Home,

and who does not?

Almost anyone can bring a lawsuit, assuming they have the filing fee and the help of an

attorney. But the court may not hear it, for a number of reasons. There may be no case or

controversy, there may be no law to support the plaintiff’s claim, it may be in the wrong

Key Points

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court, too much time might have lapsed (a statute of limitations problem), or the plaintiff

may not have standing.

Learning Objectives

1. Understand the various ways that lawyers charge for services.

2. Describe the contingent fee system in the United States.

3. Know the difference between the American rule and the British rule with

regard to who pays attorneys’ fees.

Case or Controversy: Standing to Sue

Article III of the US Constitution provides limits to federal judicial power. For some cases,

the Supreme Court has decided that it has no power to adjudicate because there is no

“case or controversy.” For example, perhaps the case has been settled or the “real parties

in interest” are not before the court. In such a case, a court might dismiss the case on the

grounds that the plaintiff does not have “standing” to sue.

For example, suppose you see a sixteen-wheel moving van drive across your neighbor’s

flower bed, destroying her beloved roses. You have enjoyed seeing her roses every

summer, for years. She is forlorn and tells you that she is not going to raise roses there

anymore. She also tells you that she has decided not to sue, because she has made the

decision never to deal with lawyers if at all possible. Incensed, you decide to sue on her

behalf. But you will not have standing to sue, because your person or property was not

directly injured by the moving van. Standing means that only the person whose interests

are directly affected has the legal right to sue.

The standing doctrine is easy to understand in straightforward cases such as this but is

often a fairly complicated matter. For example, can fifteen or more state attorneys general

bring a lawsuit for a declaratory judgment that the health care legislation passed in 2010

is unconstitutional? What particular injury have they (or the states) suffered? Are they the

best set of plaintiffs to raise this issue? Time—and the Supreme Court—will tell.

Class Actions

Most lawsuits concern a dispute between two people or between a person and a

company or other organization. But it can happen that someone injures more than one

person at the same time. A driver who runs a red light may hit another car carrying one

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person or many people. If several people are injured in the same accident, they each have

the right to sue the driver for the damage that he caused them. Could they sue as a

group? Usually not, because the damages would probably not be the same for each

person, and different facts would have to be proved at the trial. Plus, the driver of the car

that was struck might have been partially to blame, so the defendant’s liability toward him

might be different from his liability toward the passengers.

If, however, the potential plaintiffs were all injured in the same way and their injuries were

identical, a single lawsuit might be a far more efficient way of determining liability and

deciding financial responsibility than many individual lawsuits.

How could such a suit be brought? All the injured parties could hire the same lawyer, and

he or she could present a common case. But with a group numbering more than a handful

of people, it could become overwhelmingly complicated. So how could, say, a million

stockholders who believed they were cheated by a corporation ever get together to sue?

Litigation is expensive. Getting a lawyer can be costly, unless you get a

lawyer on a contingent fee. Not all legal systems allow contingent fees. In

many legal systems, the loser pays attorneys’ fees for both parties.

Key Points

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Exercises

1. Mrs. Robinson’s attorney estimates that they will recover a million dollars from

Volkswagen in the Audi lawsuit. She has Mrs. Robinson sign a contract that

gives her firm one-third of any recovery after the firm’s expenses are

deducted. The judge does in fact award a million dollars, and the defendant

pays. The firm’s expenses are $100,000. How much does Mrs. Robinson get?

2. Harry Potter brings a lawsuit against Draco Malfoy in Chestershire, England,

for slander, a form of defamation. Potter alleges that Malfoy insists on calling

him a mudblood. Ron Weasley testifies, as does Neville Chamberlain. But

Harry loses, because the court has no conception of wizardry and cannot make

sense of the case at all. In dismissing the case, however, who (under English

law) will bear the costs of the attorneys who have brought the case for Potter

and defended the matter for Malfoy?

Because of these types of situations, there is a legal procedure that permits one person or

a small group of people to serve as representatives for all others. This is the class action.

The class action is provided for in the Federal Rules of Civil Procedure (Rule 23) and in the

separate codes of civil procedure in the states. These rules differ among themselves and

are often complex, but in general anyone can file a class action in an appropriate case,

subject to approval of the court. Once the class is “certified,” or judged to be a legally

adequate group with common injuries, the lawyers for the named plaintiffs become, in

effect, lawyers for the entire class.

Learning Objectives

1. Understand how arbitration and mediation are frequently used alternatives to

litigation.

2. Describe the differences between arbitration and mediation.

3. Explain why arbitration is final and binding.

Usually a person who doesn’t want to be in the class can decide to leave. If so, he or she

will not be included in an eventual judgment or settlement. But a potential plaintiff who is

included in the class cannot, if dissatisfied with the outcome, seek to relitigate the issue

after a final judgment is awarded, even though he or she did not participate at all in the

legal proceeding.

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Relations with Lawyers

Legal Fees

Lawyers charge for their services in one of three different ways: flat rate, hourly rate, and

contingent fee. A flat rate is usually used when the work is relatively routine and the

lawyer knows in advance approximately how long it will take her to do the job. Drawing a

will or doing a real estate closing are examples of legal work that is often paid at a flat

rate. The rate itself may be based on a percentage of the worth of the matter—say, 1

percent of a home’s selling price.

Lawyers generally charge by the hour for courtroom time and for ongoing representation

in commercial matters. Virtually every sizable law firm bills its clients by hourly rates,

which in large cities can range from $300 for an associate’s time to $500 or more for a

senior partner’s time.

A contingent fee is one that is paid only if the lawyer wins—that is, it is contingent, or

depends, upon the success of the case. This type of fee arrangement is used most often in

personal injury cases (e.g., automobile accidents, products liability, and professional

malpractice). Although used quite often, the contingent fee is controversial. Trial lawyers

justify it by pointing to the high cost of preparing for such lawsuits. A typical automobile

accident case can cost at least ten thousand dollars to prepare, and a complicated

products-liability case can cost tens of thousands of dollars. Few people have that kind of

money or would be willing to spend it on the chance that they might win a lawsuit.

Corporate and professional defendants complain that the contingent fee gives lawyers a

license to go big game hunting, or to file suits against those with deep pockets in the

hopes of forcing them to settle.

Trial lawyers respond that the contingent fee arrangement forces them to screen cases

and weed out cases that are weak, because it is not worth their time to spend the

hundreds of hours necessary on such cases if their chances of winning are slim or

nonexistent.

Costs

In England and in many other countries, the losing party must pay the legal expenses of

the winning party, including attorneys’ fees. That is not the general rule in this country.

Here, each party must pay most of its own costs, including (and especially) the fees of

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lawyers. (Certain relatively minor costs, such as filing fees for various documents required

in court, are chargeable to the losing side, if the judge decides it.) This type of fee

structure is known as the American rule (in contrast to the British rule).

There are two types of exceptions to the American rule. By statute, Congress and the

state legislatures have provided that the winning party in particular classes of cases may

recover its full legal costs from the loser—for example, the federal antitrust laws so

provide, and so does the federal Equal Access to Justice Act. The other exception applies

to litigants who either initiate lawsuits in bad faith, with no expectation of winning, or

who defend them in bad faith, in order to cause the plaintiff great expense. Under these

circumstances, a court has the discretion to award attorneys’ fees to the winner. But this

rule is not infinitely flexible, and courts do not have complete freedom to award attorneys’

fees in any amount, but only "reasonable" attorney's fees.

Litigation is not the only way to resolve disputes. Informal negotiation

between the disputants usually comes first, but both mediation and

arbitration are available. Arbitration, though, is final and binding. Once

you agree to arbitrate, you will have a final, binding arbitral award that is

enforceable through the courts, and courts will almost never allow you to

litigate after you have agreed to arbitrate.

Key Points

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Exercises

1. When Mrs. Robinson buys her Audi from Seaway, there is a paragraph in the

bill of sale, which both the dealer and Mrs. Robinson sign, that says, “In the

event of any complaint by customer/buyer against Seaway regarding the

vehicle purchased herein, such complaint shall not be litigated, but may only

be arbitrated under the rules of the American Arbitration Association and in

accordance with New York law.” Mrs. Robinson did not see the provision,

doesn’t like it, and wants to bring a lawsuit in Oklahoma against Seaway. What

is the result?

2. Hendrik Koster (Netherlands) contracts with Automark, Inc. (a US company

based in Illinois) to supply Automark with a large quantity of valve cap gauges.

He does, and Automark fails to pay. Koster thinks he is owed $66,000. There is

no agreement to arbitrate or mediate. Can Koster make Automark mediate or

arbitrate?

3. Suppose that there is an agreement between Koster and Automark to

arbitrate. It says, “The parties agree to arbitrate any dispute arising under this

agreement in accordance with the laws of the Netherlands and under the

auspices of the International Chamber of Commerce’s arbitration facility.” The

International Chamber of Commerce has arbitration rules and will appoint an

arbitrator or arbitral panel in the event the parties cannot agree on an

arbitrator. The arbitration takes place in Geneva. Koster gets an arbitral award

for $66,000 plus interest. Automark does not participate in any way. Will a

court in Illinois enforce the arbitral award?

Alternative Means of Resolving Disputes

Disputes do not have to be settled in court. No law requires parties who have a legal

dispute to seek judicial resolution if they can resolve their disagreement privately or

through some other public forum. In fact, the threat of a lawsuit can frequently motivate

parties toward private negotiation. Filing a lawsuit may convince one party that the other

party is serious. Or the parties may decide that they will come to terms privately rather

than wait the three or four years it can frequently take for a case to move up on the court

calendar.

Arbitration

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Beginning around 1980, a movement toward alternative dispute resolution began to gain

force throughout the United States. Bar associations, other private groups, and the courts

themselves wanted to find quicker and cheaper ways for litigants and potential litigants to

settle certain types of quarrels than through the courts. As a result, neighborhood justice

centers or dispute resolution centers have sprung up in communities. People can come to

these centers for help in settling disputes, of either a civil or a criminal nature, that should

not consume the time and money of the parties or courts in lengthy proceedings.

These alternative forums use a variety of methods, including arbitration, mediation, and

conciliation, to bring about agreement or at least closure of the dispute. These methods

are not all alike, and their differences are worth noting.

Arbitration is a type of adjudication. The parties use a private decision maker, the

arbitrator, and the rules of procedure are considerably more relaxed than those that apply

in the courtroom. Arbitrators might be retired judges, lawyers, or anyone with the kind of

specialized knowledge and training that would be useful in making a final, binding decision

on the dispute. In a contractual relationship, the parties can decide even before a dispute

arises to use arbitration when the time comes. Or parties can decide after a dispute arises

to use arbitration instead of litigation. In a predispute arbitration agreement (often part of

a larger contract), the parties can spell out the rules of procedure to be used and the

method for choosing the arbitrator. For example, they may name the specific person or

delegate the responsibility of choosing to some neutral person, or they may each

designate a person and the two designees may jointly pick a third arbitrator.

Many arbitrations take place under the auspices of the American Arbitration Association,

a private organization headquartered in New York, with regional offices in many other

cities. The association uses published sets of rules for various types of arbitration (e.g.,

labor arbitration or commercial arbitration); parties who provide in contracts for

arbitration through the association are agreeing to be bound by the association’s rules.

Similarly, the National Association of Securities Dealers provides arbitration services for

disputes between clients and brokerage firms. International commercial arbitration often

takes place through the auspices of the International Chamber of Commerce. A

multilateral agreement known as the Convention on the Recognition and Enforcement of

Arbitral Awards provides that agreements to arbitrate—and arbitral awards—will be

enforced across national boundaries.

Arbitration has two advantages over litigation. First, it is usually much quicker, because

the arbitrator does not have a backlog of cases and because the procedures are simpler.

Second, in complex cases, the quality of the decision may be higher, because the parties

can select an arbitrator with specialized knowledge.

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Under both federal and state law, arbitration is favored, and a decision rendered by an

arbitrator is binding by law and may be enforced by the courts. The arbitrator’s decision is

final and binding, with very few exceptions (such as fraud or manifest disregard of the law

by the arbitrator or panel of arbitrators). Saying that arbitration is favored means that if

you have agreed to arbitration, you can’t go to court if the other party wants you to

arbitrate. Under the Federal Arbitration Act, the other party can go to court and get a stay

against your litigation and also get an order compelling you to go to arbitration.

Mediation

Unlike adjudication, mediation gives the neutral party no power to impose a decision. The

mediator is a go-between who attempts to help the parties negotiate a solution. The

mediator will communicate the parties’ positions to each other, will facilitate the finding

of common ground, and will suggest outcomes. But the parties have complete control:

they may ignore the recommendations of the mediator entirely, settle in their own way,

find another mediator, agree to binding arbitration, go to court, or forget the whole thing!

Cases

Burger King v. Rudzewicz

Burger King Corp. v. Rudzewicz

471 U.S. 462 (U.S. Supreme Court 1985)

Summary

Burger King Corp. is a Florida corporation with principal offices in Miami. It principally

conducts restaurant business through franchisees. The franchisees are licensed to use

Burger King’s trademarks and service marks in standardized restaurant facilities.

Rudzewicz is a Michigan resident who, with a partner (MacShara), operated a Burger King

franchise in Drayton Plains, Michigan. Negotiations for setting up the franchise occurred

in 1978 largely between Rudzewicz, his partner, and a regional office of Burger King in

Birmingham, Michigan, although some deals and concessions were made by Burger King in

Florida. A preliminary agreement was signed in February of 1979. Rudzewicz and

MacShara assumed operation of an existing facility in Drayton Plains, and MacShara

attended prescribed management courses in Miami during the four months following

February 1979.

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Rudzewicz and MacShara bought $165,000 worth of restaurant equipment from Burger

King’s Davmor Industries division in Miami. But before the final agreements were signed,

the parties began to disagree over site-development fees, building design, computation of

monthly rent, and whether Rudzewicz and MacShara could assign their liabilities to a

corporation they had formed. Negotiations took place between Rudzewicz, MacShara, and

the Birmingham regional office, but Rudzewicz and MacShara learned that the regional

office had limited decision-making power and turned directly to Miami headquarters for

their concerns. The final agreement was signed by June 1979; it provided that the

franchise relationship was governed by Florida law, and called for payment of all required

fees and forwarding of all relevant notices to Miami headquarters.

The Drayton Plains restaurant did fairly well at first, but a recession in late 1979 caused

the franchisees to fall far behind in their monthly payments to Miami. Notice of default

was sent from Miami to Rudzewicz, who nevertheless continued to operate the restaurant

as a Burger King franchise. Burger King sued in federal district court for the southern

district of Florida. Rudzewicz contested the court’s personal jurisdiction over him, since he

had never been to Florida.

The federal court looked to Florida’s long arm statute and held that it did have personal

jurisdiction over the non-resident franchisees. It awarded Burger King a quarter of a

million dollars in contract damages and enjoined the franchisees from further operation of

the Drayton Plains facility. Franchisees appealed to the 11th Circuit Court of Appeals and

won a reversal based on lack of personal jurisdiction. Burger King petitioned the Supreme

Court for a writ of certiorari.

Justice Brennan delivered the opinion of the court.

The Due Process Clause protects an individual’s liberty interest in not being subject to the

binding judgments of a forum with which he has established no meaningful “contacts, ties,

or relations.” International Shoe Co. v. Washington. By requiring that individuals have “fair

warning that a particular activity may subject [them] to the jurisdiction of a foreign

sovereign,” the Due Process Clause “gives a degree of predictability to the legal system

that allows potential defendants to structure their primary conduct with some minimum

assurance as to where that conduct will and will not render them liable to suit.”

Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who

has not consented to suit there, this “fair warning” requirement is satisfied if the

defendant has “purposefully directed” his activities at residents of the forum, and the

litigation results from alleged injuries that “arise out of or relate to” those activities. Thus

“[t]he forum State does not exceed its powers under the Due Process Clause if it asserts

personal jurisdiction over a corporation that delivers its products into the stream of

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commerce with the expectation that they will be purchased by consumers in the forum

State” and those products subsequently injure forum consumers. Similarly, a publisher

who distributes magazines in a distant State may fairly be held accountable in that forum

for damages resulting there from an allegedly defamatory story.…

…[T]he constitutional touchstone remains whether the defendant purposefully established

“minimum contacts” in the forum State.…In defining when it is that a potential defendant

should “reasonably anticipate” out-of-state litigation, the Court frequently has drawn from

the reasoning of Hanson v. Denckla, 357 U.S. 235, 253 (1958):

The unilateral activity of those who claim some relationship with a nonresident defendant

cannot satisfy the requirement of contact with the forum State. The application of that

rule will vary with the quality and nature of the defendant’s activity, but it is essential in

each case that there be 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.

This “purposeful availment” requirement ensures that a defendant will not be haled into a

jurisdiction solely as a result of “random,” “fortuitous,” or “attenuated” contacts, or of the

“unilateral activity of another party or a third person.” [Citations] Jurisdiction is proper,

however, where the contacts proximately result from actions by the defendant himself

that create a “substantial connection” with the forum State. [Citations] Thus where the

defendant “deliberately” has engaged in significant activities within a State, or has created

“continuing obligations” between himself and residents of the forum, he manifestly has

availed himself of the privilege of conducting business there, and because his activities are

shielded by “the benefits and protections” of the forum’s laws it is presumptively not

unreasonable to require him to submit to the burdens of litigation in that forum as well.

Jurisdiction in these circumstances may not be avoided merely because the defendant did

not physically enter the forum State. Although territorial presence frequently will enhance

a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability

of suit there, it is an inescapable fact of modern commercial life that a substantial amount

of business is transacted solely by mail and wire communications across state lines, thus

obviating the need for physical presence within a State in which business is conducted. So

long as a commercial actor’s efforts are “purposefully directed” toward residents of

another State, we have consistently rejected the notion that an absence of physical

contacts can defeat personal jurisdiction there.

Once it has been decided that a defendant purposefully established minimum contacts

within the forum State, these contacts may be considered in light of other factors to

determine whether the assertion of personal jurisdiction would comport with “fair play

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and substantial justice.” International Shoe Co. v. Washington, 326 U.S., at 320. Thus

courts in “appropriate case[s]” may evaluate “the burden on the defendant,” “the forum

State’s interest in adjudicating the dispute,” “the plaintiff’s interest in obtaining convenient

and effective relief,” “the interstate judicial system’s interest in obtaining the most

efficient resolution of controversies,” and the “shared interest of the several States in

furthering fundamental substantive social policies.” These considerations sometimes serve

to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts

than would otherwise be required. [Citations] Applying these principles to the case at

hand, we believe there is substantial record evidence supporting the District Court’s

conclusion that the assertion of personal jurisdiction over Rudzewicz in Florida for the

alleged breach of his franchise agreement did not offend due process.…

In this case, no physical ties to Florida can be attributed to Rudzewicz other than

MacShara’s brief training course in Miami. Rudzewicz did not maintain offices in Florida

and, for all that appears from the record, has never even visited there. Yet this franchise

dispute grew directly out of “a contract which had a substantial connection with that

State.” Eschewing the option of operating an independent local enterprise, Rudzewicz

deliberately “reach[ed] out beyond” Michigan and negotiated with a Florida corporation

for the purchase of a long-term franchise and the manifold benefits that would derive

from affiliation with a nationwide organization. Upon approval, he entered into a carefully

structured 20-year relationship that envisioned continuing and wide-reaching contacts

with Burger King in Florida. In light of Rudzewicz’ voluntary acceptance of the long-term

and exacting regulation of his business from Burger King’s Miami headquarters, the

“quality and nature” of his relationship to the company in Florida can in no sense be

viewed as “random,” “fortuitous,” or “attenuated.” Rudzewicz’ refusal to make the

contractually required payments in Miami, and his continued use of Burger King’s

trademarks and confidential business information after his termination, caused

foreseeable injuries to the corporation in Florida. For these reasons it was, at the very

least, presumptively reasonable for Rudzewicz to be called to account there for such

injuries.

…Because Rudzewicz established a substantial and continuing relationship with Burger

King’s Miami headquarters, received fair notice from the contract documents and the

course of dealing that he might be subject to suit in Florida, and has failed to demonstrate

how jurisdiction in that forum would otherwise be fundamentally unfair, we conclude that

the District Court’s exercise of jurisdiction pursuant to Fla. Stat. 48.193(1)(g) (Supp. 1984)

did not offend due process. The judgment of the Court of Appeals is accordingly reversed,

and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

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Case Questions

1. Why did Burger King sue in Florida rather than in Michigan?

2. If Florida has a long-arm statute that tells Florida courts that it may exercise

personal jurisdiction over someone like Rudzewicz, why is the court talking about

the due process clause?

3. Why is this case in federal court rather than in a Florida state court?

4. If this case had been filed in state court in Florida, would Rudzewicz be required to

come to Florida? Explain.

Ferlito v. Johnson & Johnson

Ferlito v. Johnson & Johnson Products, Inc.

771 F. Supp. 196 (U.S. District Ct., Eastern District of Michigan 1991)

Gadola, J.

Plaintiffs Susan and Frank Ferlito, husband and wife, attended a Halloween party in 1984

dressed as Mary (Mrs. Ferlito) and her little lamb (Mr. Ferlito). Mrs. Ferlito had constructed

a lamb costume for her husband by gluing cotton batting manufactured by defendant

Johnson & Johnson Products (“JJP”) to a suit of long underwear. She had also used

defendant’s product to fashion a headpiece, complete with ears. The costume covered Mr.

Ferlito from his head to his ankles, except for his face and hands, which were blackened

with Halloween paint. At the party Mr. Ferlito attempted to light his cigarette by using a

butane lighter. The flame passed close to his left arm, and the cotton batting on his left

sleeve ignited. Plaintiffs sued defendant for injuries they suffered from burns which

covered approximately one-third of Mr. Ferlito’s body.

Following a jury verdict entered for plaintiffs November 2, 1989, the Honorable Ralph M.

Freeman entered a judgment for plaintiff Frank Ferlito in the amount of $555,000 and for

plaintiff Susan Ferlito in the amount of $70,000. Judgment was entered November 7,

1989. Subsequently, on November 16, 1989, defendant JJP filed a timely motion for

judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b) or, in the alternative,

for new trial. Plaintiffs filed their response to defendant’s motion December 18, 1989; and

defendant filed a reply January 4, 1990. Before reaching a decision on this motion, Judge

Freeman died. The case was reassigned to this court April 12, 1990.

MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT

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Defendant JJP filed two motions for a directed verdict, the first on October 27, 1989, at

the close of plaintiffs’ proofs, and the second on October 30, 1989, at the close of

defendant’s proofs. Judge Freeman denied both motions without prejudice. Judgment for

plaintiffs was entered November 7, 1989; and defendant’s instant motion, filed November

16, 1989, was filed in a timely manner.

The standard for determining whether to grant a j.n.o.v. is identical to the standard for

evaluating a motion for directed verdict:

In determining whether the evidence is sufficient, the trial court may neither weigh the

evidence, pass on the credibility of witnesses nor substitute its judgment for that of the

jury. Rather, the evidence must be viewed in the light most favorable to the party against

whom the motion is made, drawing from that evidence all reasonable inferences in his

favor. If after reviewing the evidence…the trial court is of the opinion that reasonable

minds could not come to the result reached by the jury, then the motion for j.n.o.v. should

be granted.

To recover in a “failure to warn” product liability action, a plaintiff must prove each of the

following four elements of negligence: (1) that the defendant owed a duty to the plaintiff,

(2) that the defendant violated that duty, (3) that the defendant’s breach of that duty was

a proximate cause of the damages suffered by the plaintiff, and (4) that the plaintiff

suffered damages.

To establish a prima facie case that a manufacturer’s breach of its duty to warn was a

proximate cause of an injury sustained, a plaintiff must present evidence that the product

would have been used differently had the proffered warnings been given. By “prima facie

case,” the court means a case in which the plaintiff has presented all the basic elements of

the cause of action alleged in the complaint. If one or more elements of proof are missing,

then the plaintiff has fallen short of establishing a prima facie case, and the case should

be dismissed (usually on the basis of a directed verdict). [Citations omitted] In the absence

of evidence that a warning would have prevented the harm complained of by altering the

plaintiff’s conduct, the failure to warn cannot be deemed a proximate cause of the

plaintiff’s injury as a matter of law. [In accordance with procedure in a diversity of

citizenship case, such as this one, the court cites Michigan case law as the basis for its

legal interpretation.]…

A manufacturer has a duty “to warn the purchasers or users of its product about dangers

associated with intended use.” Conversely, a manufacturer has no duty to warn of a

danger arising from an unforeseeable misuse of its product. [Citation] Thus, whether a

manufacturer has a duty to warn depends on whether the use of the product and the

injury sustained by it are foreseeable. Gootee v. Colt Industries Inc., 712 F.2d 1057, 1065

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(6th Cir. 1983); Owens v. Allis-Chalmers Corp., 414 Mich. 413, 425, 326 N.W.2d 372

(1982). Whether a plaintiff’s use of a product is foreseeable is a legal question to be

resolved by the court. Trotter, supra. Whether the resulting injury is foreseeable is a

question of fact for the jury. Note the division of labor here: questions of law are for the

judge, while questions of “fact” are for the jury. Here, “foreseeability” is a fact question,

while the judge retains authority over questions of law. The division between questions of

fact and questions of law is not an easy one, however. Thomas v. International Harvester

Co., 57 Mich. App. 79, 225 N.W.2d 175 (1974).

In the instant action no reasonable jury could find that JJP’s failure to warn of the

flammability of cotton batting was a proximate cause of plaintiffs’ injuries because

plaintiffs failed to offer any evidence to establish that a flammability warning on JJP’s

cotton batting would have dissuaded them from using the product in the manner that

they did.

Plaintiffs repeatedly stated in their response brief that plaintiff Susan Ferlito testified that

“she would never again use cotton batting to make a costume…However, a review of the

trial transcript reveals that plaintiff Susan Ferlito never testified that she would never

again use cotton batting to make a costume. More importantly, the transcript contains no

statement by plaintiff Susan Ferlito that a flammability warning on defendant JJP’s

product would have dissuaded her from using the cotton batting to construct the costume

in the first place. At oral argument counsel for plaintiffs conceded that there was no

testimony during the trial that either plaintiff Susan Ferlito or her husband, plaintiff Frank

J. Ferlito, would have acted any different if there had been a flammability warning on the

product’s package. The absence of such testimony is fatal to plaintiffs’ case; for without it,

plaintiffs have failed to prove proximate cause, one of the essential elements of their

negligence claim.

In addition, both plaintiffs testified that they knew that cotton batting burns when it is

exposed to flame. Susan Ferlito testified that she knew at the time she purchased the

cotton batting that it would burn if exposed to an open flame. Frank Ferlito testified that

he knew at the time he appeared at the Halloween party that cotton batting would burn if

exposed to an open flame. His additional testimony that he would not have intentionally

put a flame to the cotton batting shows that he recognized the risk of injury of which he

claims JJP should have warned. Because both plaintiffs were already aware of the danger,

a warning by JJP would have been superfluous. Therefore, a reasonable jury could not

have found that JJP’s failure to provide a warning was a proximate cause of plaintiffs’

injuries.

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The evidence in this case clearly demonstrated that neither the use to which plaintiffs put

JJP’s product nor the injuries arising from that use were foreseeable. Susan Ferlito

testified that the idea for the costume was hers alone. As described on the product’s

package, its intended uses are for cleansing, applying medications, and infant care.

Plaintiffs’ showing that the product may be used on occasion in classrooms for decorative

purposes failed to demonstrate the foreseeability of an adult male encapsulating himself

from head to toe in cotton batting and then lighting up a cigarette.

ORDER

NOW, THEREFORE, IT IS HEREBY ORDERED that defendant JJP’s motion for judgment

notwithstanding the verdict is GRANTED.

IT IS FURTHER ORDERED that the judgment entered November 2, 1989, is SET ASIDE.

IT IS FURTHER ORDERED that the clerk will enter a judgment in favor of the defendant

JJP.

Case Questions

1. The opinion focuses on proximate cause. According to tort law, a negligence case

cannot be won unless the plaintiff shows that the defendant has breached a duty

and that the defendant’s breach has actually and proximately caused the damage

complained of. What, exactly, is the alleged breach of duty by the defendant here?

2. Explain why Judge Gadola reasoned that JJP had no duty to warn in this case. After

this case, would they then have a duty to warn, knowing that someone might use

their product in this way?

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