Business Law 5 parts

PagesfromBusinessLaw1of8.pdf

Home >Law homework help >Business Law 5 parts

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 1/439

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 2/439

Business Law for Managers

Gwen Seaquist Business Law for Managers

AVP and Editor-in-Chief: Steve Wainwright

Director of Editorial Technology: Peter Galuardi

Sponsoring Editor: Greer Lleuad

Development Editor: Lisa Smith

Assistant Editor: Jaime Anderson

Editorial Assistant: Teresa Bdzil

Editorial Intern: Colleen Dunn

Production Editor: Lindsay Serra

Cover Design: Anna Magulac

Printing Services: Bordeaux

Composition/Illustration: Lachina Publishing Services

Cover Image: Glowimages/Getty Images

ISBN-10: 1621780368

ISBN-13: 978-1-62178-036-6

GRANT OF PERMISSION TO PRINT: The copyright owner of this material, hereby grants the holder of this publication the right to print these materials for personal use. The holder of this material may print the materials herein for personal use only. Any print, reprint, reproduction or distribution of these materials for commercial use without the express written consent of the copyright owner constitutes a violation of the U.S. Copyright Act, 17 U.S.C. §§ 101- 810, as amended.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 3/439

About the Author Gwen Seaquist was born and raised in the town of Tonawanda, New York, and graduated from Wells College with a B.A. in psychology in 1974, where she was the recipient of the Helen M. Zachos Prize for creative writing. She graduated from the University of Mississippi Law School in 1978, and was admitted to practice and litigated with the law �irm of Boyce Holleman, P.C., in Gulfport, Mississippi. Upon returning to New York, she settled in Ithaca, where she started as legal counsel, af�irmative action of�icer, and assistant to President James J. Whalen of Ithaca College, and then began teaching full-time in the Ithaca College School of Business in 1983. She was admitted to the New York State Bar in 1981 and has continued to work in numerous law �irms in the Ithaca area, as well as to teach, until her retirement from the practice of law in 2012. She has been a visiting professor at Cornell University Law School, Cornell University Hotel School, Suffolk University, Binghamton University, and West Point. She was a visiting researcher at Harvard Law School from 1990–1991 and has written two other textbooks. She is currently a full professor in legal studies and the coordinator of the Legal Studies program at Ithaca College, where she continues to teach both undergraduate and graduate courses in law.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 4/439

Acknowledgments No book, no matter the subject or length, is ever written without the help of many people who make the �inal product possible. This is no exception. I would like to thank the editors at Bridgepoint Education, who steered this project from concept to �inal version: Greer Lleuad, sponsoring editor, and Jaime Anderson, assistant editor, were both an inspiration and signi�icant support system throughout. Thanks also go to those who reviewed this book—Miriam Albert, Hofstra University; Bruce-Alan Barnard, Ashford University; Laura Barnard, Lakeland Community College; George Holbrook, Ashford University; Lisa Johnson, University of Puget Sound; Nancy Kubasek, Bowling Green State University; Barry Morinaka, Ashford University; and to Kathryn Coulter, Mt. Mercy College, who both reviewed the book and wrote Chapter 4, "Business Ethics and Con�lict Management."

Lisa Smith, development editor, added immensely to the accuracy and readability of the text, as she scoured every line, and to her I feel especially grateful for catching errors and making helpful and insightful suggestions that greatly improved the �inal version. Finally, to my family (The Gang at Neimi Road: Laurel, Lilly, Moose, Brenda, Van, and Banjo), who waited patiently for me to complete the task and who put up with my absence, exhaustion, and occasional crankiness, I am especially grateful for your love and support. Without you, this book would have been impossible to complete. And to Webb and Charlie, who slept on my feet throughout the ordeal, thanks for keeping the vigilant stand in the living room with me.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 5/439

Introduction to Textbook Features Business Law for Managers includes a variety of features to help students understand key concepts and examine legal issues from different perspectives:

Cases to Consider boxes provide case excerpts that allow students to see how the law is applied in real-world cases. Follow-up critical thinking questions give students the opportunity for further analysis.

A Closer Look boxes help students to further explore key topics. Links to relevant material from outside sources will aid students in their investigation.

Videos that further illustrate important issues are embedded throughout the e-book.

PowerPoint Presentations embedded throughout the e-book provide quick reviews of the material discussed.

Key Terms list and de�ine key concepts as discussed in each chapter. Click on any term in the e-book Key Terms section to see the de�inition.

Interactive Flashcards included in the e-book allow students to test their knowledge of the key terms discussed in each chapter.

Critical Thinking and Discussion Questions guide students toward critical analysis of topics explored in the chapters.

Timelines of Major 20th Century Legal Developments is a feature that lists legal developments and legislation discussed throughout the text that have affected modern business.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 6/439

Unit I

The Foundation of Law and Ethics

Comstock/Thinkstock

Chapter 1: The Civil Law and Common Law Traditions

In this chapter you will:

Understand the importance of studying law and its relationship to business.

Chapter 2: Beginning a Civil Lawsuit

In this chapter you will:

Be able to distinguish between criminal and civil litigation.

Take a case step-by-step through a civil lawsuit.

Chapter 3: Completing a Civil Lawsuit and Alternative Dispute Resolution

In this chapter you will:

Understand the importance of alternative dispute resolution and its application to business.

Chapter 4: Business Ethics and Con�lict Management

In this chapter you will:

Identify ethical issues one might confront in legal and business matters.

Chapter 5: Administrative Law

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 7/439

In this chapter you will:

Identify the different types of administrative agencies and explain their functions.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 8/439

Law and the Business Person

Chapter 1

The Civil Law and Common Law Traditions Why should a business student study law? After all, you are not going to law school, and if you ever have a legal problem, you can always consult an attorney. Perhaps you have never sued anyone, been sued yourself, been arrested, or written a contract. If all this is true, the law probably seems like some foreign country that you have never been to and have no desire to visit. The truth is, as a businessperson, you can no longer view the law from a distance. Your life and the law, whether you like it or not, will be intertwined, and having a basic understanding of the law’s scope, application, and in�luence will serve you well, both in business and in your personal life.

If you are a manager, business owner, employee, or entrepreneur, the law will impact your daily decision making and have far-reaching consequences in all your business activities. Believe it or not, a law course is an integral part of your education. This will become clearer to you as you read cases and witness for yourself the unfortunate situations that people have gotten themselves into.

Whereas larger companies have in-house legal departments or have access to the expertise of large law �irms, small businesses often operate with little knowledge of the law and minimal access to legal counsel, making a legal background even more valuable in the marketplace. Regardless of size, any business can bene�it greatly from employing people at all levels who have at least a basic understanding of the law and a solid grasp of essential legal principles so that they can recognize potential legal problems and refer them to legal counsel before they become costly matters that threaten the health of a business. This is especially true in the United States, which has no uni�ied legal system but rather an overlay of federal, state, and local laws. Further, the trend toward more global commerce and trade, governed by international treaties such as the North American Free Trade Agreement, has implications for businesses of all sizes and types. Today, many business transactions involve two or more states and may even include parties separated by the full continent, so a much greater amount of business is conducted by various means across state lines.

While no textbook can become a comprehensive hands-on guide to American law (the legal encyclopedias that attempt to do so run tens of thousands of pages and still do not cover all aspects of the law), it is the purpose of this text to provide an accurate, easy-to-understand, useful guide to some areas of the law that have the greatest impact on business. Business law, as well as the legal environment of business and legal studies courses, will provide students with the skills to recognize and apply the proverbial ounce of prevention to their business careers and personal lives. This can prove more useful to employers and to themselves than pounds of competent, costly legal advice obtained too late to remedy a problem that could have been avoided.

Although this course will not "make you a lawyer," it will provide you with a number of advantages. First, you will better be able to recognize legal problems before they happen, a topic often referred to as preventive law. If you can prevent a situation or con�lict from developing into a lawsuit, you may save your business money and the embarrassment of a lawsuit, as well as maintain a lawful and ethical work environment. Second, in the event that you are involved in a controversy, you may be able to resolve the dispute outside of court through "alternative dispute resolution" techniques such as negotiations, mediation, or arbitration. You will learn about each of these and their advantages and disadvantages. If you do have to deal with a lawyer, this course will teach you many legal concepts and the vocabulary to effectively communicate with legal counsel. You will also learn how to hire an attorney, manage legal counsel, and deal with the legal profession.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 9/439

Photodisc/Thinkstock

The United States Capitol in Washington, D.C., is the meeting place of Congress, the nation's federal legislative body.

1.1 Law: Its Scope and Origins No single course or textbook can address all of the complexities of law. If you stop to think about it, law—and legal systems—have been in effect since early civilization began. Thus, there have been many forms of law and legal systems, too many to enumerate. Suf�ice it to say that people need rules to maintain order; otherwise, society would revert to barbarism. Throughout the ages, philosophers, jurists, political scientists, political leaders, and common people from all walks of life have de�ined law in a number of ways. Cicero viewed law as "nothing but a correct principle drawn from the inspiration of the gods, commanding what is honest, and forbidding the contrary." For the eminent British jurist William Blackstone, law could be de�ined as "a rule of civil conduct, prescribed by the supreme power in a state, commanding what is right and prohibiting what is wrong." Saint Thomas Aquinas, on the other hand, de�ined law as "an ordinance of reason for the common good, made by him who has care of the community." Whatever our working de�inition, law is often what Justice Felix Frankfurter described as "all we have standing between us and the tyranny of mere will." We will see that this is true and, even more so, come to appreciate that law also allows us to conduct business, enter into formal relationships, depend on some predictability in our affairs, and create order in our lives.

At its simplest, law comprises rules of behavior that a government imposes on its people for the bene�it of society as a whole. As such, it represents the governing body’s subjective views of what is best for that society, combined with precedent and tradition. And even though most legal systems attempt to protect society and promote the common good, there can be radical differences in the law from one country to another, and even in different regions within countries, the 50 United States being a prime example. Although federal and constitutional law serve to balance and put a check on state and local law, for example, and in turn, the federal government is limited in its powers to legislate and must give states the power to regulate certain matters, there is no "one" law, as in a country whose legal system is based on civil law (codi�ied statutes alone). Unlike the U.S. common law system, a civil law system, such as prevails in Europe and South America, is more ef�icient and stable, leaving little room for judicial interpretation and lawyers. Trial by jury is not an option, so judges apply the law in a highly predictable, relatively swift proceeding, and the law itself is slow to change. In common law jurisdictions like the United Kingdom and the United States, however, there is much more litigation, so you need to be prepared.

One of the reasons that studying law is dif�icult is that the numerous "factions" that constitute our legal system are all operating at the same time. There is state and federal law, statutory law, administrative law, local law, and so on. For example, each of the 50 states has a legislative body that passes state statutes. Each of the states also has a state court system ruling on cases and making state "case or judicial law." Operating at the same time is the federal legislative body—Congress, which makes federal statutes—and the federal courts, which make federal case law. These are just a few of the "places" making law. As you can imagine, there are thousands of volumes and treatises dealing with questions about what is the law and legal history, as well as reporting on all of the new law being made every day. The law is vast and complicated, no doubt, but understanding how it works and how the layers of lawmaking bodies �it together into the larger scheme is an essential part of your education.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 10/439

1.2 Sources of Law Table 1.1 lists the four major sources of law in the United States: judicial, statutory, constitutional, and administrative. Note that each source of law has both a federal and state component.

Table 1.1: The foundations of the American legal system

Judicial Law

Federal case law State case law

Statutory Law

Federal statutes State statutes

Constitutional Law

U.S. Constitution State constitutions

Administrative Law

Federal administrative agencies State administrative agencies

Judicial (Case) Law

The phrase judicial law is used interchangeably with case law. Judicial law is law made in courts, by judges, when they rule on a case and write an opinion; it had its origins in what is called the common law. When the early pilgrims immigrated to America, they brought with them their legal system, along with customs, traditions, and values that helped to shape our legal system. It is in the nature of common law, however, that it adapts to the local customs, traditions, and needs of a people. Thus, despite its English roots, American law has evolved to �it the needs of our federalist system and re�lects regional differences and values. As a result, law in the United States today resembles more the early English common law system, with its regional differences based on local customs and traditions, than it does the relatively uni�ied law of the modern-day United Kingdom.

Before a judge can "make law," there �irst must be a controversy brought to the courtroom for a decision. Such a controversy involves two parties: the plaintiff, or the person bringing the lawsuit, and the defendant, or the person being sued. A civil lawsuit is one in which the plaintiff is seeking money, or restitution. (This should be contrasted with a criminal action, which is being brought to punish and possibly incarcerate the defendant.) As more and more cases are decided, they form a body of law. These cases become precedent for cases that follow, building one upon the other. Judges rely on previous cases to form their opinions and so on down the line.

When a judge decides a case in court, the judge will often write an opinion that is published in case books, or compendiums of court opinions. In that way, others can look up and read the decisions to determine what the law is and how a judge ruled on a speci�ic topic. Figure 1.1 provides an example of a case as it appears in a case book.

Figure 1.1: Example of a case

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,sec… 11/439

Judicial Law

Click here (https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/{pdfs}ch01.pdf)

for a pdf of this slideshow.

Stare Decisis and Precedent

https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/%7Bpdfs%7Dch01.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 12/439

Yet another name for a case or an opinion is precedent. Precedent also means a previous case. If you look at the case in Figure 1.1, you will see in the last paragraph a series of citations that begin like this:

Ciofalo v. Vic Tanney Gyms, supra, 10 N.Y.2d 297, 220 N.Y.S.2d 962, 177 N.E.2d 925;

The judge is using each of these cases to decide in the current case. Each one of these cases is precedent. The actual use of the case to form a decision in the current controversy is called stare decisis, which is Latin for "standing on previous decisions." Stare decisis is a fundamental principle of both English and American legal systems. The stability of common law depends on judges following legal precedent guided by the doctrine of stare decisis. This stability allows legal practitioners to predict how a given case will be decided by examining how similar cases were decided in the past. Judges don’t "invent" or "make up" the law, depending on whim; for the most part, they rely heavily on previous cases to write their opinions. Under the principle of stare decisis, a court should follow established legal precedent unless there is a compelling reason not to do so. This principle is crucial to common law; if judges did not follow established precedent, there would be little predictability to the legal system. Attorneys would have no solid guidelines upon which to base their advice to clients and no stable guideposts on which to base legal arguments and chart legal strategies for arguing cases in court.

Changing Precedent

Sometimes, however, the judge will reject a previous decision and refuse to follow it. Recall, for example, the U.S. Supreme Court decision of Roe v. Wade, which struck down state laws limiting abortion and held that abortion is legal. In doing so, the Court rejected previous cases that stated abortion was illegal. When do courts reject stare decisis? The decisions of a state’s highest court are binding on that state’s lower courts, which must follow it, but are only persuasive precedent on the courts of other states, which are free to follow or ignore such precedent. This means that if a case is being heard in New York and the attorney attempts to use a Pennsylvania case as precedent, the judge can refuse to recognize the Pennsylvania case. Thus, managers should be aware that state law is binding only within that state, and the law varies greatly from one state to another. This is important to you as a business manager because there may be instances in which "law" from another state is brought to your attention but does not apply to you at all. Thus, the doctrine of stare decisis is limited to decisions within the same jurisdiction, state, or region.

Another reason that stare decisis is not always followed is the result of a change in the political climate of the country. Sometimes opinion around an issue changes so much that the courts re�lect a change in attitude and reject well-established doctrine. Consider racial discrimination in the United States, which at one time was legal and upheld as constitutional by the U.S. Supreme Court. Over time, both the law and cases have changed to re�lect a different philosophy. This was true in 1954, when the Supreme Court found racial discrimination illegal in the case of Brown v. Board of Education. Until that time, the doctrine of "separate but equal" accommodations for blacks and whites had been applied by the courts. The Brown decision eradicated the doctrine and replaced it with a new "law." Here was an example of social mores changing to such a degree that the Court refused to follow previous cases.

In summary, case or judicial law is made in courts by judges rendering an opinion. Each state has at least one state court that is hearing controversies and rendering opinions. Thousands of opinions are being written each day from all of these states. All of these state court opinions form a body of law called case or judicial law because they are based on cases, or controversies between people. Thus, when you wonder, "What is the law?" remember that only one aspect of law includes state court opinions.

Statutory Law

Another key site for lawmaking is in both state and federal legislatures, which are governing bodies whose job is to make new laws. Law made by a legislature is called a statute. Legislatures gain consensus from their members to pass the bills making new laws, after which the bills are signed by the governor (for the state) or the president (for Congress). At any time in the United States, there are 50 state legislatures passing state statutes and a federal legislature (Congress) passing federal laws.

Federal

At the federal level, Congress can legislate over a broad range of areas through the exercise of its constitutionally granted powers. These powers are set out in the federal (U.S.) Constitution in Article I, Section 8. Whenever Congress legislates within its area of constitutionally granted power, the resulting legislation has the force of law, although its legality can be challenged in federal court, as will be discussed later on. Federal law is not some remote or arcane academic exercise; it affects each of us on a daily basis. This is especially true for people involved in business. As a manager, you will deal with many important federal laws. For example, the Americans with Disabilities Act of 1990 spells out how employers must accommodate disabled workers. This is a federal law that applies to all businesses, as opposed to a state law that applies only to businesses within that particular state. Other examples of federal statutory law include the Civil Rights Acts of 1964, which prohibits discrimination on the basis of race, and the Age Discrimination in Employment Act of 1967, which describes the rules for hiring and �iring employees above the age of 40. The Senate also plays a role in international agreements, or treaties, as it is empowered to ratify treaties negotiated by the president. These treaties (e.g., the North American Free Trade Agreement, or NAFTA, approved in 1994) impact businesses in all 50 states if they engage in international commerce. See also Timeline of Major Legal Developments That Affect Modern Businesses.

Figure 1.2 provides an example of a federal statute. Notice that a federal statute looks completely different than a case. Federal statutes do not have parties, nor do they involve a controversy between people. Instead, they are a pronouncement of the law and therefore are sometimes much shorter and terse than a case, which involves people, a speci�ic controversy, and an explanation of events. Note the citation for where to �ind the statute in the U.S. Code books.

Figure 1.2: Example of a federal statute

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 13/439

A Closer Look: Finding the Law on the Internet

During the course of your work, you may have occasion to research laws. Since you will most likely be accessing legal materials via the Internet, an excellent site that is free to all users is the Cornell University Law School Legal Information Institute (LII), which can be found at Cornell Law (http://www.law.cornell.edu/) . One advantage of online research is that you do not need an actual citation. For example, if you go to this website and type in "age discrimination law," the appropriate statute will appear. Please note the extensive legal materials that are available online for free.

Many times, �inding federal statutes is not useful because their language is overly complex and dif�icult to understand. In that case, be aware that there are many resources that will explain or interpret what a statute actually means in down-to-earth language along with the underlying reasons for passage of the law. For example, the Congressional Research Service located at Federation of American Scientists (http://www.fas.org/sgp/crs/misc/97-589.pdf) explains many complicated federal statutes.

Suppose, for example, that your supervisor asked you to rewrite part of the employee handbook pertaining to discrimination. Many reliable websites exist that can explain the law, from the more basic aspects to detailed and legally sophisticated information. While these do not take the place of utilizing an attorney, there are many daily tasks that you will perform as a manager for which access to law sites will be informative and helpful to your work.

State

Every state has its own legislature, which is usually patterned after Congress, with two chambers (often, house and senate) comprising elected members from the two main political parties, one of which forms a majority. These legislatures enact state laws in a wide range of areas, including civil and criminal law and procedure, business regulation, and, of course, taxation. The power of state legislatures to regulate both business and private conduct is far greater than that of the federal government, since most states reserve to themselves in their state constitutions broad powers to legislate in all areas touching on the welfare of their citizens. In addition, the Founding Fathers explicitly limited the powers of the federal government to regulate state matters. In general, states have the right to regulate all areas of private or public life as long as they do not infringe on any right protected by the U.S. Constitution (see Table 1.2).

State and local legislation that does not infringe on a constitutionally protected right is valid as long as it can pass a relatively �lexible rational relationship test, which simply means that any state law that is rationally related to the preservation of a valid societal interest is valid. This litmus test of constitutionality is a simple one to pass, since nearly any law can be rationally justi�ied as serving some valid purpose. The test is somewhat more stringent, however, when a vital interest or suspect classi�ication is involved; in such instances, the state must pass a strict scrutiny test of constitutionality, wherein the courts weigh the state’s interest against the infringement of protected rights in determining the validity of a statute. For purposes of the strict scrutiny test, a vital interest can be de�ined as any constitutionally protected right, such as the rights enumerated under the Bill of Rights. A suspect classi�ication would include a law that makes distinctions based on race, sex, color, religion, or national origin.

Figure 1.3 provides an example of what a state statute "looks like." Notice that it begins with a number, in this case 28-1381, which is a typical way to recognize that this is statutory law. Next, note that it has a title, in this case the sentence beginning with "Driving . . ." Notice that there are differences between the format of a case and a statute. Remember that cases begin with the name of the parties and are the result of a controversy between two people, whereas a statute is passed by a legislative body.

Figure 1.3: Example of a state statute

http://www.law.cornell.edu/

http://www.fas.org/sgp/crs/misc/97-589.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 14/439

Local

In addition to state and federal legislatures, "local" legislative bodies (e.g., city councils and various town boards and planning commissions) have the power to legislate in areas allowed them by their local charters. These local ordinances also carry the weight of law and form a part of the state’s statutory law. Often when doing business, these local laws are the �irst place to check when a question about the legality of a certain action arises, such as zoning. Local laws are frequently restrictive and much more narrow in scope and intent than either state or federal laws.

Constitutional Law

In addition to judicial and statutory law, 51 constitutions play a signi�icant role in formulating "the law." There are 51 constitutions because each state has a constitution (50) and there is one federal constitution, the U.S. Constitution. A country or state’s constitution is the most fundamental source of law. It delineates in general terms the sovereign state’s form of government and provides the basic framework for its laws. Article VI, Section 2, of the U.S. Constitution speci�ically sets the U.S. Constitution as the "supreme law of the land" (see Appendix A: The Constitution of the United States of America (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/appa#appA) ). As such, no other law passed by a state or the federal government can con�lict with it; any law that does can be found by the courts to be unconstitutional and void.

Constitutions are necessarily broad documents. In the United States, the job of interpreting the federal constitution and that of every state is left to the courts. Both state and federal courts have the power to interpret the U.S. Constitution, but the �inal word on the analysis of the federal constitution is reserved to the U.S. Supreme Court, whose interpretation of the Constitution is �inal and represents binding precedent on all lower courts, state and federal.

The U.S. Constitution serves as an important source of law in the areas of governmental power. It empowers states and the federal government to pass and enforce laws that regulate people’s interactions with one another and with their government while limiting the government’s ability to legislate in certain areas.

Under our Constitution, the federal government is one of limited powers. Congress has the power to legislate only in areas that it has been speci�ically granted the power to regulate by the U.S. Constitution. The powers of Congress are enumerated in Article I, Section 8 (see Table 1.2).

Table 1.2: Powers of Congress listed in Article I, Section 8, of the U.S. Constitution

Collect taxes and import duties, pay debts, and provide for the common defense and general welfare of the United States

Borrow money

Regulate commerce with foreign nations, among the states, and with the Indian tribes

Establish rules for naturalization and bankruptcy

Coin money, regulate its value, and �ix a standard of weights and measures

Punish counterfeiting

Establish post of�ices and post roads

Issue patents and copyrights

Set up federal courts inferior to the U.S. Supreme Court

https://content.ashford.edu/books/AUBUS670.12.2/sections/appa#appA

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 15/439

De�ine and punish crimes on the high seas and crimes against the United States

Declare war, grant letters of marque and reprisal, and make rules regarding the seizure of property under letters of marque and reprisal

Raise and support armies

Create a navy

Regulate the armed forces

Exercise control over the territory encompassing the seat of government

Under the U.S. Constitution, states are free to create legislation to regulate any area not speci�ically reserved to the federal government. Thus, states can adopt any laws they wish within their borders as long as they do not con�lict with a duly enacted federal law or transgress upon any right guaranteed by the U.S. Constitution, as interpreted in the courts.

While the Constitution gives broad regulatory powers to states and the federal government, it also preserves the rights of the individual in the Bill of Rights. The most signi�icant body of constitutional law concerns itself with the prohibitions on governmental powers enumerated in the Constitution—in particular, the guarantees provided to individuals by the Bill of Rights (the �irst 10 amendments to the U.S. Constitution), the Fourteenth Amendment, and the U.S. Supreme Court’s interpretation of the broad language in which they are framed.

But even the U.S. Constitution is not static. Under Article V of the Constitution, Congress may propose a constitutional amendment by a two-thirds vote by the House of Representatives and the Senate. If a proposed amendment is approved by Congress, it then goes to all the states’ legislatures. If three-quarters of the states’ legislatures approve the amendment, it becomes part of the Constitution and the preeminent law of the land. States may also propose amendments to the Constitution to Congress on their own initiative by votes for such a proposal in two-thirds of the states’ legislatures. If the states make the initiative, Congress must decide whether to allow rati�ication by constitutional conventions in three-quarters of the states; the change is then rati�ied upon its approval by three-quarters of the states’ legislatures, by a constitutional convention in three-quarters of the states, or by a vote for rati�ication by three-quarters of the states’ legislatures.

Other than the right to each state’s equal representation in the Senate, there is no limit to what changes can be written into the Constitution. To date, the Constitution has been amended 27 times. In the case of the Eighteenth Amendment (1919) (better known as Prohibition), which outlawed the manufacturing, sale, or transportation of intoxicating liquors in the United States, Congress changed its mind and repealed Prohibition in the Twenty-First Amendment (1933), leaving it up to the individual states to prohibit the sale of alcoholic beverages as they saw �it.

Administrative Law

One of the least visible entities that "makes law" is the state or federal administrative agency, whose members are appointed by government leaders but who operate quasi-independently, reporting to Congress and the public. When Congress decided to regulate nuclear energy, for example, it created the Nuclear Regulatory Commission and empowered it with the ability to both create and enforce rules for the safe civil use of nuclear energy. Although Congress could have created and enforced these rules itself, individual members of Congress have neither the necessary expertise nor time to engage in such micromanagement of the regulatory environment. The same holds true for other agencies whose primary purpose is the regulation of business and industry, including the Federal Aviation Administration, the Securities and Exchange Commission, the National Labor Relations Board, the Federal Trade Commission, and the Federal Communications Commission, among many others.

At the state level, state legislatures and governors also set up administrative agencies to help them regulate business and carry out other important governmental functions. Taken together, the rules that all federal and state agencies promulgate are quasi-judicial and quasi-legislative. That is, they have the force of law and form the most important component of administrative law. Like statutes, however, most administrative rules and many administrative agency decisions are subject to judicial review, the process whereby statutes, administrative rules, and administrative agency decisions are reviewed by courts when challenged. (See Chapter 5, Administrative Law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/sec5.1#sec5.1) , for a fuller discussion.)

All agencies have this in common: a need to regulate a highly technical industry or business environment in order to ensure safety and fair practices. Administrative agencies are empowered by either the executive or legislative branches of the state or federal government to assist them in carrying out necessary governmental functions that they lack either the time or expertise to carry out themselves.

https://content.ashford.edu/books/AUBUS670.12.2/sections/sec5.1#sec5.1

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 16/439

Wikimedia Commons/Public Domain

John Marshall was the �irst chief justice to enact the power of judicial review.

1.3 The Three Branches of Government and the Balance of Power The U.S. government comprises three branches: judicial, executive, and legislative. These branches were designed to balance each other so that one cannot become too powerful. For example, the courts can review the actions by the legislative and executive branches.

No matter how clear the language of a statute or how plain its import, it is generally impossible in a common law jurisdiction to interpret a statute, or the federal or state constitutions, at face value. Ultimately, the validity of any statute is determined by the courts, as is its meaning. A case in point is the Second Amendment to the U.S. Constitution, which reads: "A well-regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed." Any reasonable interpretation of that amendment that looks at the plain meaning of the language used, particularly when viewed with its revolutionary framers’ inherent distrust of government, leads one to believe that the U.S. Constitution guarantees the right of citizens to own and bear guns. Nevertheless, the amendment has been interpreted to mean only that individual states can raise their own militias (e.g., national guards) if they so choose.

Regardless of the wisdom of such an interpretation, one message is clear: any statute, including the U.S. Constitution, means only what the courts ultimately decide it means. This has been the case ever since Marbury v. Madison (5 U.S. 137 [1803]), when Chief Justice John Marshall �irst announced the power of judicial review (the power of courts to declare the acts of legislative bodies, including the U.S. Congress, void if they violate the courts’ interpretation of the Constitution). In what is arguably the greatest act of judicial activism in the history of U.S. jurisprudence, Chief Justice Marshall argued, "It is a proposition too plain to be contested that the Constitution controls any legislative act repugnant to it, or that the legislature may not alter the Constitution by an ordinary act. . . ." This novel proposition was not challenged. The power of the courts generally, and ultimately of the U.S. Supreme Court, to declare any act of the U.S. Congress or any federal or state law unconstitutional has now been well established by more than 200 years of legal precedent. Nothing in the U.S. Constitution itself explicitly reserves this right to the courts, and British courts did not historically enjoy a similar privilege (only the king, queen, or Parliament itself could invalidate a royal edict or Act of Parliament). Arguably, the chief justice could have been successfully impeached for overstepping his bounds and infringing on congressional legislative privilege. By not challenging the decision, Congress left the courts as the ultimate authority on the Constitution, empowering the judicial branch of government to curb the actions of legislative and executive branches when these, in its view, transgressed the U.S. Constitution.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 17/439

Key Terms

Click on each key term to see the de�inition.

administrative agency (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A governmental entity established to regulate a particularly complex, technical area of business or industry (e.g., nuclear power, communications, securities exchanges) that relies on special expertise.

administrative law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Law made by a state or federal administrative agency.

Bill of Rights (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The �irst 10 amendments to the U.S. Constitution, enumerating the individual rights and powers of citizens.

case law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Law made by a judge (or panel of judges) as the result of a controversy between two parties. Also called judicial law.

citation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The abbreviations following legal sources that tell the reader where to �ind the original text of the law.

common law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The name given to the body of law established by the English and brought to the United States as the �irst law established in the colonies. Can also mean case law or the aggregate body of case law.

Congress (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The federal legislative body that enacts federal statutes.

controversy (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A dispute between two or more parties that may be decided in court.

federal (U.S.) Constitution (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The "supreme law of the land" to whose standards all laws must be submitted.

federal statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by Congress and signed into law by the president.

judicial law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

See case law.

judicial review (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The power of courts to declare the acts of legislative bodies, including the U.S. Congress, void if they violate the courts’ interpretation of the U.S. Constitution.

lawsuit (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 18/439

A controversy brought to court by litigants: the plaintiff and defendant.

litigation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The act of suing someone in court; a plaintiff bringing a lawsuit against a defendant.

precedent (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A previous case or body of cases that holds sway over current legal decisions in a common law system.

quasi-judicial (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

In the context of administrative agencies, describes the process of adjudicating disputes over agency rules or their application in hearings similar to trials, presided over by administrative law judges—that is, when an agency acts "like a court."

quasi-legislative (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Describes the process of creating one’s own rules (such as when an administrative agency exercises a legislative power).

stare decisis (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The use by a judge of previous decisions (precedent) to make a legal decision or ruling.

state constitution (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Each state’s governing document that sets the standard for all laws within its borders. State constitutions are established, written, and amended by the state legislature.

state statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by a state legislature and signed into law by the governor.

statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by either a state or federal legislature.

U.S. Code (U.S.C.) (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The set of books that contains all the federal statutes passed by Congress.

Chapter 1 Flashcards

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 19/439

Critical Thinking and Discussion Questions

1. Why do business managers and others need to understand the foundations, origins, and scope of the law?

2. What is the advantage to the American legal system of using stare decisis?

3. How does the concept of judicial review empower the court system?

4. Locate the website for your state’s legislature. Find a recent law passed by your state legislature and give the citation for the statute as well as a brief summary of the legislation.

5. Locate a case on the Internet. What is the citation for the case? What happened in the case? How did you go about �inding the case? Does the case use stare decisis in its decision, and if so, how?

6. Why were administrative agencies created? Find the website for an administrative agency and explain what types of issues the agency deals with and whether it holds hearings. If the agency does hold hearings, describe the types of opinions it issues.

7. Suppose that Judge Harrison is hearing a case in her court and that the attorneys present her with two disparate cases to use in her decision. Based on the concept of stare decisis, how would the judge go about making her decision? Does Judge Harrison have to use previous cases to make a ruling in the current case?

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 20/439

Chapter 2

Beginning a Civil Lawsuit In the course of your business career, you may be involved in one or more lawsuits. In 2010 alone, �ilings of civil and criminal cases in the U.S. district courts grew 2%, to 361,323. Considering that this is only one of hundreds of courts in the United States, the amount of litigation taking place on a daily basis is astounding. (See the United States Courts website (http://www.uscourts.gov/news/newsview/11-03- 15/Filings_in_the_Federal_Judiciary_Continued_to_Grow_in_Fiscal_Year_2010.aspx) for more details and statistics.)

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

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 21/439

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

Table 2.1: Comparison of civil versus criminal actions

CIVIL CRIMINAL

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

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

Where is the action brought? Civil court Criminal court

Who initiates the action? A private plaintiff, usually through an attorney The state or the U.S. government through the district attorney or the U.S. Attorney

How does the action commence? The defendant is served with papers called the summons and complaint

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

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

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

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

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 22/439

2.2 Steps in a Civil Lawsuit Now that we have distinguished between civil and criminal, the rest of this chapter will deal only with civil litigation (criminal law is discussed in Chapter 6 (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/ch06#ch06) ). The choices discussed below are con�ined to the vocabulary used only for civil cases. Suing a person in court for money is called litigation. Litigation is time consuming and expensive and should be avoided whenever possible. It is a public matter and can be reported in the newspaper, discussed among strangers, and subjected to interpretation by anyone in the community. A business whose name is splashed across the evening news or discussed on the Internet, even if it has done nothing wrong, will look guilty. Customers may avoid doing business with this entity, and potential clients may form a negative opinion of it. Litigants often report that it is the most stressful experience of their lives, and one not to be embarked upon lightly. One way to avoid litigation is to seek a form of alternative dispute resolution, which will be discussed in Chapter 3 (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/sec3.2#sec3.2) . However, should you become involved in litigation, it is important to understand the steps in a civil lawsuit. The �irst three are determining cause of action, determining in personam jurisdiction, and determining subject matter jurisdiction.

Step One: Determining Cause of Action

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

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

Step Two: Determining In Personam Jurisdiction

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

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

2. The defendant must be noti�ied of the lawsuit.

The Civil Lawsuit: In Personam Jurisdiction

Click here (https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/{pdfs}ch02.pdf)

for a pdf of this slideshow.

Minimal Contacts

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

https://content.ashford.edu/books/AUBUS670.12.2/sections/ch06#ch06

https://content.ashford.edu/books/AUBUS670.12.2/sections/sec3.2#sec3.2

https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/%7Bpdfs%7Dch02.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 23/439

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

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

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

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

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

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

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

A Closer Look: In Personam Jurisdiction

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

Click here for the article. (http://articles.latimes.com/2012/may/23/entertainment/la-et-ct-injured-worker-transformers-20120523)

In Personam Jurisdiction: The Long-Arm Statute in Depth

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

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

Cases to Consider: World-Wide Volkswagen v. Woodson

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

Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y., 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 the State of Oklahoma, another car struck their Audi in the rear, causing a �ire which severely burned Kay Robinson and her two children. The Robinsons subsequently brought a products-liability action in . . . , Oklahoma, claiming that their injuries resulted from defective design and placement of the Audi’s gas tank and fuel system.

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

http://articles.latimes.com/2012/may/23/entertainment/la-et-ct-injured-worker-transformers-20120523

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 24/439

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

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

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

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

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

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

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

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

Questions to Consider

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

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

3. What does the Supreme Court say here about the purpose of minimum contacts?

4. What did the court say about whether or not Oklahoma had minimal contacts with World-Wide?

5. Did the court say that the plaintiffs could or could not sue World-Wide in Oklahoma?

6. What was the court’s reasoning?

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

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

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

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 25/439

Excerpts of the opinion are as follows:

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

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

***

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

It had been argued in World-Wide Volkswagen that because an automobile retailer and its wholesale distributor sold a product mobile by design and purpose, they could foresee being haled into court in the distant States into which their customers might drive. The Court rejected this concept of foreseeability as an insuf�icient basis for jurisdiction under the Due Process Clause. The Court disclaimed, however, the idea that "foreseeability is wholly irrelevant" to personal jurisdiction, concluding that "[the] forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumer[s] in the forum State." The Court reasoned: "When a corporation ‘purposefully avails itself of the privilege of conducting activities within the forum State,’ Hanson v. Denckla, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor . . . is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owners or to others."

***

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

. . . We have previously explained that the determination of the reasonableness of the exercise of jurisdiction in each case will depend on an evaluation of several factors. A court must consider the burden on the defendant, the interests of the Forum State, and the plaintiff’s interest in obtaining relief. It must also weigh in its determination "the interstate judicial system’s interest in obtaining the most ef�icient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies."

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 26/439

In the present case, this advice calls for a court to consider the procedural and substantive policies of other nations whose interests are affected by the assertion of jurisdiction by the California court. . . . "Great care and reserve should be exercised when extending our notions of personal jurisdiction into the international �ield."

Because the facts of this case do not establish minimum contacts such that the exercise of personal jurisdiction is consistent with fair play and substantial justice, the judgment of the Supreme Court is reversed.

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

Questions to Consider

1. Did the California Supreme Court agree that California had in personam jurisdiction over Asahi?

2. How did the Supreme Court use the World-Wide opinion in this case?

3. What did the Court say about the use of "foreseeability" as a reason to grant in personam jurisdiction?

4. Is putting a product into the stream of commerce suf�icient cause to grant in personam jurisdiction? Where does the boundary start and stop?

5. What did the U.S. Supreme Court say is the determinative factor for establishing minimum contacts?

6. What is the difference between "purposefully availing oneself of the forum" from "foreseeability"?

7. How would you characterize "traditional notions of fair play"?

8. What was the �inal conclusion by the Court in regard to in personam jurisdiction over Asahi? Why?

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

Service of Process

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

Figure 2.1: Sample complaint

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 27/439

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

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

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

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

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 28/439

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

Step Three: Determining Subject Matter Jurisdiction

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

State Court System

Typically, state courts are divided into the following classi�ications: courts of limited jurisdiction or general jurisdiction, and courts that hear trials or appellate courts. Suppose that a state’s family court is empowered to adjudicate issues relating to domestic relations, such as divorce and child custody disputes. We would say that the subject matter jurisdiction of the family court is divorce and child custody, meaning that when this state’s family court was created, it was given the power to settle controversies over these speci�ic areas. It cannot, however, hear cases relating to traf�ic violations, breach of contract, or negligence because it was not empowered to adjudicate those types of cases. Ultimately, however, the �inal word on the interpretation of all federal law rests with the U.S. Supreme Court, which can hear appeals relating to cases involving federal law or the U.S. Constitution from any lower federal court or from any state’s highest court.

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

Figure 2.2: Sample court system

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 29/439

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

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

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

Table 2.2: A hypothetical state court system

Type of Court Possible Names Jurisdiction of Court Trial or Appeals Location

Appeals Supreme Limited to appeals from the General Trial Court

Appeals State capitol

Trial Circuit Court Claims Court General: It can hear any type of claim and award any amount of money

Trial One in every county

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 30/439

Trial Small Claims Justice of the Peace Court Village Court Town Court Traf�ic Courts

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

Trial In towns, cities

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

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

The Federal Court System

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

Table 2.3: The federal court system

Name of Court Type of Court Limited or General Jurisdiction

Location of Court

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

Limited to appeals Washington, D.C.

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

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

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

At least two in every state

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

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

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

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

Federal Court System

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 31/439

The Supreme Court's Role in Governance

Click here (https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/{pdfs}ch02b.pdf)

for a pdf of this slideshow.

U.S. District Courts

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

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

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

U.S. Courts of Appeal

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

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

Specialized Courts

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

https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/%7Bpdfs%7Dch02b.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 32/439

U.S. Supreme Court

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

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

The Supreme Court's Role in Governance From Title: Judicial Opinions: The Supreme Court Justices (https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=37579)

  0:00 / 2:35 1x

https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=37579

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 33/439

Key Terms

Click on each key term to see the de�inition.

adjudicate (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

appeals court (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A court that reviews litigation after it has gone to trial and determines whether errors were made by the trial court.

beyond a reasonable doubt (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

burden of proof (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The degree to which the plaintiff or the state must convince the jury in order to prevail in the lawsuit or criminal case.

cause of action (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

An underlying legal right that is the basis of a lawsuit and the plaintiff’s grievance.

civil action (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

complaint (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

criminal action (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

defendant (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

delivery upon a family member (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

One of the ways to serve process on a defendant if the defendant cannot be found.

denial of a writ of certiorari (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

When the U.S. Supreme Court will not hear the appeal, ending the case.

district attorney (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

diversity of citizenship (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 34/439

When all the plaintiffs are from different states than all the defendants.

domiciliary (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

An individual living in the state.

due process (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

federal question (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A question or issue "arising under the U.S. Constitution" or having a basis in federal law.

general jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

grant of a writ of certiorari (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

When the U.S. Supreme Court has agreed to hear an appeal.

in personam jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

in rem jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

justiciable cause of action (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

limited jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

litigation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Suing a person in court for monetary damages.

long-arm statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

minimal contacts (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

negligence (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A tort or civil wrong in which the defendant unintentionally causes injury or damages to another.

personal delivery (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 35/439

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

personal jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

petition for a writ of certiorari (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A request to the U.S. Supreme Court asking the Court to review a decision from a lower court.

physical presence (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

plaintiff (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The party bringing a civil lawsuit.

prayer for relief (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

preponderance of the evidence (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The burden of proof in a civil case. In most states, the plaintiff must convince a majority of the jury "more so than not," or by 51% or more, that the defendant did a civil wrong and should be liable.

service of process (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Delivery of the summons and the complaint to the defendant, giving him or her notice of the lawsuit.

small claims courts (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Courts that are usually limited to claims �iled for $5,000 or less.

specialized courts (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

subject matter jurisdiction (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

summons (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

tort (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

trial court (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 36/439

U.S. Attorney (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The federal government employee who prosecutes federal crimes.

U.S. Court of Appeals (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

One of 11 federal courts that hear appeals from the U.S. District Courts.

U.S. District Court (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The trial court of limited jurisdiction in the federal system; limited to trials involving either diversity of citizenship plus $75,000 or more in requested damages, or a federal question.

writ of certiorari (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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

Chapter 2 Flashcards

Critical Thinking and Discussion Questions

1. What are the two elements of in personam jurisdiction?

2. What is the difference between in personam jurisdiction and subject matter jurisdiction?

3. Name the courts of general jurisdiction in the federal system.

4. How are service of process and due process related? Can you think of an example?

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

6. What is the difference between a court of general jurisdiction and a court of limited jurisdiction?

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

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 37/439

Chapter 3

Completing the Civil Lawsuit and Alternative Dispute Resolution

In Chapter 2, we discussed the �irst steps of a civil lawsuit. In this chapter we will discuss the second half of a civil lawsuit as well as some of the options for alternative dispute resolution, mentioned in Chapter 2 as a way to avoid litigation.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 38/439

3.1 Completing the Civil Lawsuit To review, the �irst three steps in a civil lawsuit are:

1. Determining a viable cause of action;

2. Deciding what state to bring the action in (in personam or personal jurisdiction) and how to deliver the summons and the complaint to the defendant; and

3. Finding out what court in that state has the power to hear the case (subject matter jurisdiction).

Now that all these elements are in place, several preparatory steps follow.

Step Four: Preparing an Answer

Recall that the defendant is served with the summons and the complaint to begin the lawsuit. Now the defendant has the opportunity to respond to those papers with a formal document called an Answer. The Answer responds to each of the numbered allegations in the complaint by saying that the defendant admits, denies, or doesn't know. For example, the defendant could say, "With regard to plaintiff's complaint paragraphs 2 through 4, the defendant denies the allegations contained therein." Here is an important fact to remember about the Answer: if the defendant fails to answer any of the paragraphs, even by mistake or omission, then the allegations in that paragraph are admitted as true. Therefore, it is very important to check the Answer to make sure all of the plaintiff's numbered paragraphs are answered.

Sometimes the defendant receives the Answer and does not bother to respond at all. If the defendant does not �ile an Answer, then the plaintiff can continue to court and ask for a default judgment, meaning essentially that the defendant has not shown up for the proceeding and the plaintiff should be declared the winner. Why would a defendant risk a default judgment? One answer is that the defendant has no assets, and so the plaintiff is not going to get anything from the defendant anyway. People often think that you have to show up for a court case, but in a civil proceeding, where the plaintiff is seeking money, this is not true; if there is no money to be had, then the plaintiff is going to end up with nothing, even if the plaintiff "wins" the case.

Summons, complaint, and answer

Click here (https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/{pdfs}ch03.pdf)

for a pdf of this slideshow.

Step Five: Discovery

Unlike in television dramas, where the testimony in court always seems to surprise everyone (including the lawyers), in real life the answers to all of the questions are usually known well ahead of time. This is the result of a proceeding before trial called discovery. Discovery allows any of the parties to gather information before trial in both testimony and documents.

There are two major forms of discovery: one is called interrogatories and the other is called a deposition. Interrogatories are a set of written questions that are sent to a party or witness to answer. Usually that party will sit down with his or her attorney and discuss his or her answers, and the attorney will actually write the response, which is under oath. A question in an interrogatory might look something like this:

45. What type of homeowner's insurance do you have in place?

Please attach a copy of your policy to this interrogatory.

https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/%7Bpdfs%7Dch03.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 39/439

Witnesses and parties must respond to all the questions in the interrogatories. If they refuse, the matter may go to court for a hearing on the issue of not responding. The judge will usually rule that a party must answer and, if the refusal is prolonged, may award the other side attorney's fees. (Attorney's fees are generally paid by the respective parties to their attorneys. However, if one of the parties is especially obstinate and refuses to cooperate, and as a result the litigants have to go to court to force the obstinate party to cooperate, judges have it in their power to make that party pay the other side's attorney fees.)

Another type of discovery is the deposition. Unlike written questions, the deposition documents oral testimony that usually takes place at an attorney's of�ice, where a hired stenographer is present to make a transcript. A typical deposition would have all the attorneys present, as well as the parties to the lawsuit, and then the witnesses one at a time enter the room to "give their deposition." When the deposition is transposed, it looks like this:

Attorney Jenkins: Does your company have in place a nondiscrimination policy?

M. Dutcher: Yes, we do.

Attorney Jenkins: And what does that policy state?

M. Dutcher: That we must follow all of the rules in the company handbook.

These documents are signed at the end under oath so that if the person giving the deposition "changes his mind" in court, the deposition can be shown to the jury to impeach or question the credibility of the witness.

As you can imagine, if one deposes all of the witnesses and parties before getting to trial, then every answer to every question is going to be answered well ahead of time. Some of the advantages of discovery include seeing how people are going to testify (Are they nervous? Believable? Will a jury feel sorry for them?), what they are going to say (Do they change their story? Do they seem dishonest? Credible?), and how prepared the other side is. In short, the attorneys will get a good idea of how strong the other side's case is. If the case looks very strong, and the witnesses and parties seem believable, then it might be time to settle out of court.

The major disadvantage to discovery—and it is a huge obstacle—is the cost. Few litigants can afford extensive discovery. The transcriptionist alone charges for each day and then, when the testimony is converted to a document, the parties must pay by the page. Every hour an attorney sits in a deposition costs $200–$400. All told, this may run into many thousands or even hundreds of thousands of dollars, and that is before reaching the trial phase. For this reason, many litigants completely forgo or greatly limit discovery.

Step Six: Settling Out of Court

At this pretrial phase, the attorneys have a great deal of information. If documents have been acquired in discovery, they know how much insurance coverage a defendant has. Bank account balances have been revealed, as has the temperament of the plaintiff's prime witness. At this point, the costs are mounting, and each party is starting to wonder about cutting losses and settling out of court.

Settling out of court is similar to entering into a contract. It is a legally enforceable agreement that sets out terms for the agreement of the parties. It is typically negotiated between the attorneys for each side and involves the litigants signing a release in which they give up any further legal actions against one another. In fact, one should never settle a lawsuit without acquiring a guarantee that this is indeed the end of the lawsuit, which is the purpose of a release.

Attorneys have a legal and ethical obligation to present their clients with all settlement offers. At the very least, even if an offer is absurd, a client has the right to consider it and then reject it. If an out-of-court settlement is reached, and the parties agree, the attorneys will prepare the appropriate paperwork, and the suit will be formally dismissed by the court "with prejudice," meaning that all rights under the lawsuit have ceased and the lawsuit is over.

Step Seven: Going to Trial

If the parties cannot reach a settlement, then the case will eventually proceed to trial. Many people are not aware that it takes years, sometimes from three to six, for a civil case to actually reach trial. Once scheduled and in the courtroom, the trial will begin with impaneling a jury (unless a jury has been waived). Impaneling (also called voir dire, meaning "to speak the truth") involves selecting jurors that each side feels will be nonbiased in their deliberations. Next, each attorney will make what are called opening statements, in which the attorneys will tell the jurors what they plan to present through the witnesses. Next comes the presentation of evidence through witnesses by way of testimony and, �inally, the closing statements. Note that all testimony is transcribed in court into what is called the Record, which has all the testimony, objections to evidence, and descriptions of the admitted evidence. Only admitted evidence can be considered by the jury when reaching its �inal decision, or verdict. At the end of the trial, the judge will read to the jury a set of instructions, which are a set of parameters for how the jury must reach its decision. The jury will then deliberate and reach its verdict, which in a civil lawsuit may include a dollar amount for the plaintiff, if the plaintiff prevails.

Step Eight: Enforcing Judgments

You may think that now that the plaintiff has suffered through many years and has won the trial, the parties stand up, shake, and hand over to the plaintiff a sizeable check for damages. However, nothing could be further from the truth. The winning plaintiff may be completely without payment until another proceeding to collect the money. Sometimes the plaintiff will have to garnish the wages of the defendant by issuing a court order to have a portion of the

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 40/439

judgment taken directly out of the defendant's paycheck, of which the defendant will receive notice. Another method to obtain relief is to go to court to get an order to sell some of the defendant's assets. That's why it is so important before suing someone to know exactly where his or her assets are and how much they are worth, as the assets are usually what will be converted to cash to pay the �inal judgment.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 41/439

What is Alternative Dispute Resolution (ADR)?

3.2 Alternative Dispute Resolution Alternative dispute resolution (ADR) is the name given to settling a dispute between people (or businesses) without going to court. Perhaps best known as a way to prevent couples from embarking on contested or adversarial divorce proceedings, ADR is also useful in business-related disputes. It can take many forms, but some of the more popular are negotiation, mediation, and arbitration. We will discuss each of these, and their distinct advantages and disadvantages, in the following sections.

Negotiation

Negotiation is generally considered a form of dispute resolution in which the parties try to work out the problem between (or among) themselves. It can take the form of a discussion over a cup of coffee or a formal negotiation session in which both sides are represented by attorneys, such as in a labor dispute. Negotiations are usually less formal than litigation and have the advantage of being quick, private, con�idential, and inexpensive; in fact, since negotiations don't necessitate hiring anyone, this makes them the least expensive form of dispute resolution.

One drawback to a negotiation is that the parties may never reach an agreement. But suppose they do. Another drawback is that even if they reach an agreement, that agreement is a contract. (This is true even if the agreement is oral, as most oral contracts are enforceable.) The problem with a contract is that the only place it can be enforced is in court, which is what the parties were trying to avoid in the �irst place. Here is the reason: No agreements between any parties are enforceable unless the parties can go to court. In court, the "force of the law" means that the loser's assets can be sold and the property converted into money; thus, enforcement means that the winning party gets a monetary award.

Conversely, two parties can agree to anything, but trying to enforce the agreement outside of court is no simple matter! You might try persuasion; if that doesn't work, threats; and if that doesn't work, greater threats, until you run the risk of committing a crime. The bottom line is that if someone chooses to go back on his or her word, court is the only place that can effect a remedy.

Mediation

One drawback to negotiation is that the parties may not be able to arrive at a mutually agreeable solution, and that is where mediation has an advantage. In mediation, a third party enters the scene to help the two parties �igure out a reasonable solution to their dif�iculty. Like negotiation, mediation is fast, inexpensive, private, and con�idential. When a mediator is necessary, there are numerous online sites available, with perhaps the most highly recommended being the American Arbitration Association (www.adr.org (http://www.adr.org/aaa/faces/home;jsessionid=lLnSQvcP2ZFJqTvRCcnJLRphR4T74PJN9rFGTXgml9RrDcLM7g3H!-1303485531?

_afrLoop=493632339552931&_afrWindowMode=0&_afrWindowId=null) ). Note that this site has training for businesspersons who need to learn how to mediate as well as free access to state and federal laws.

Many towns and cities also have mediation centers, often free of charge, that provide mediators. These are available by using the search term "free mediation services." And many courts, especially small claims courts, have mandatory court-ordered mediation in cases such as child custody and divorce, in an effort to cut down on the number of cases they must hear.

Students often �ind the role of a mediator confusing because mediators do not make a decision about who is wrong or right. Instead, they listen to the controversy and make suggestions for different ways to approach resolution. A clever mediator might make suggestions that the parties had not considered or be able to frame them in more palatable ways. The parties are not obligated to accept any of the suggestions. Instead, a persuasive mediator might be able to help the parties see the bene�its to arriving at a satisfactory agreement in mediation as opposed to going to court.

Like negotiation, however, mediation has the same drawback of lack of enforcement. Even when the parties agree to a proposal by the mediator, their agreement is still a contract, and if one of them fails to follow through, then court is the only place to go for enforcement of the agreement.

A Closer Look: Mediation

Mediation is a form of alternative dispute resolution that can help you to save time and money by settling a dispute out of court. View the two video clips showing mediations in progress and then consider the questions that follow.

Questions to Consider

What Is Alternative Dispute Resolution (ADR)? From Title: Alternative Dispute Resolution (https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=40225)

http://www.adr.org/aaa/faces/home;jsessionid=lLnSQvcP2ZFJqTvRCcnJLRphR4T74PJN9rFGTXgml9RrDcLM7g3H!-1303485531?_afrLoop=493632339552931&_afrWindowMode=0&_afrWindowId=null

https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=40225

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 42/439

Click here for video clip one. (http://www.youtube.com/watch?v=heUcre2d9wg&feature=related)

1. What are the four phases of the mediation process that you witnessed in this video?

2. What was the issue between the parties?

3. What steps did the mediator take to resolve this issue?

4. What are your impressions of the process? Do you think it is an effective way to resolve disputes?

Click here for video clip two. (http://www.youtube.com/watch?v=H0_h1BDOhtw)

1. How would you describe the dispute taking place between these parties?

2. What are the biggest obstacles to successful resolution of this dispute?

3. What steps did the mediator take to resolve this dispute?

4. What did you learn from watching this mediator that might help you in resolving problems in the workplace?

Arbitration

Arbitration is the most formal form of dispute resolution. Here a third party is brought in to actually resolve the dispute by pronouncing one person the "winner" and the other the "loser." In short, an arbitrator is akin to a judge and jury who listen to the dispute and then decide the case.

Arbitration is often used because the parties submitted to an arbitration agreement. For example, if you purchase a new car, you probably agreed somewhere in the �ine print that if you had a problem with the car, you waived your right to sue in court and agreed to submit the dispute to arbitration. The arbitration panel, in such a case, is established and chosen by the manufacturer, putting the consumer at a severe disadvantage.

It is true that arbitration is faster than litigation, private, con�idential, and compared with litigation, much cheaper. Arbitrators, however, can be very expensive, depending on their quali�ications and experience. There are numerous disadvantages to arbitration. There is no discovery, so parties enter the fray without any knowledge of the other side's case. If there is an error in the paperwork, there is no one with the power to dismiss the case, as there would be in court. Nor can parties appeal the decision of the arbitrator, even if it is erroneous.

If arbitration is a good �it for a particular dispute, the rules of evidence are not needed, and reliance on an arbitrator won't be a problem, then it might be a viable option. Generally, however, parties are better off taking a chance with a jury.

Civil litigation vs. alternative dispute resolution

Click here (https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/{pdfs}ch03b.pdf)

for a pdf of this slideshow.

Private Judges

Some states allow people to hire a private judge to hear a dispute. Usually the judges are retired from the bench and hire themselves out at a $400 or higher hourly rate. If the disputants can afford the rates, the hearings are private, con�idential, and very fast, but expensive. One huge advantage is that the decision of the judge is appealable and that the rules of evidence apply; thus, for example, there are motions �iled and cases can be dismissed. For an excellent article on hiring a private judge, go to the National Law Journal (http://www.dgslaw.com/images/materials/NLJ-PrivateJudges.pdf) .

http://www.youtube.com/watch?v=heUcre2d9wg&feature=related

http://www.youtube.com/watch?v=H0_h1BDOhtw

https://media.thuze.com/MediaService/MediaService.svc/constellation/book/AUBUS670.12.2/%7Bpdfs%7Dch03b.pdf

http://www.dgslaw.com/images/materials/NLJ-PrivateJudges.pdf

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 43/439

3.3 The Role of the Manager in Hiring an Attorney to Help Resolve Disputes

The day might come when you need to work with an attorney on a problem, or perhaps you might need legal advice for your business. As a manager, it is crucial to know how to �ind the best attorney for your needs and what to expect when working with an attorney.

Hiring an Attorney

When searching for an attorney, your �irst temptation may be to pick up the telephone and call a trusted advisor, like a family member or buddy from college, and ask for the name of his attorney. But is this the best way to choose a lawyer for your business? What is the cost of legal advice? And what kind of work is it realistic to expect from a lawyer?

As you are aware, a law student is a graduate of a four-year college and goes on to an additional three-year graduate program that results in a J.D. (juris doctor) degree. Attorneys who graduate from law school must then pass a bar examination and an ethics test before they can be licensed, a process that usually takes six months after law school graduation.

While there are law schools with specialties, such as international law, many lawyers are generalists who take on a wide variety of cases such as simple traf�ic tickets, wills and estates, real estate closings, and simple contracts. In law, as in medicine, there are general practitioners, or lawyers whose practice covers a wide variety of topics, and there are specialists, some practicing in very narrow areas of expertise. A friend's lawyer who helped him with a speeding ticket is a much different type of attorney from one who sets up businesses or reviews contracts.

There are certain types of law for which it is better to get an expert. These areas include copyright, trademark, trade name, patents, business formation, and discrimination suits that end up going to trial. Most lawyers have no experience with these on a daily basis; thus, it is essential to hire someone with experience.

While it may seem overwhelming to sift through all the information online to locate the right attorney, there are ways to limit your search to make it more accurate and productive. One good beginning point is the bar association in your state, if for no other reason than to check that any attorneys you consider have a valid license and are admitted to practice law in that state. The bar association usually regulates licensing and conduct of attorneys, and many keep websites where you can check to see if they are in good standing or have malpractice actions pending. To �ind the appropriate website, just type into a search engine a phrase like "bar association for the state of Florida" or "attorneys in good standing in Colorado." You should look for the state bar website and then follow the links to the information for admitted, reputable attorneys.

Another way to search for a specialist is to search for attorneys who have won cases on the same topic as the one for which you need a lawyer. For example, if you need representation for a workers' compensation–related eye injury, search for that in the particular state and add phrases like "won largest settlement," "heads the workers' compensation section of the bar," or "nationally known for his work in the �ield of workers' compensation." Search using any phrase that may lead you to reported news clips about attorneys who have "won big" in that particular subject area.

One of the oldest and most reliable sources for attorneys is Martindale Hubbell, located here (http://www.martindale.com/About_Martindale-Hubbell/index.aspx) . This service provides the names of attorneys by specialty and ranks attorneys with an "AV" or "BV" or "CV" rating, with "AV" being the highest. So, for example, you could search for an attorney in a particular state and town who specializes in immigration law. If you look at all the attorneys listed, you can next pick the ones with an AV rating. Ratings are made by judges and fellow attorneys, so they are based on information from competitors and adversaries, and an "AV" rating speaks very highly of one's standing. Note, however, that an attorney has to have been in practice for at least 10 years before receiving an AV rating; thus, there are many excellent younger attorneys who are rated BV. Many other places to locate an attorney can be found on the Web or at your local law library.

Working With an Attorney

How are attorneys paid? The answer is that there are different types of fee arrangements. If you hire an attorney to draft a will, you may be charged a �lat fee that is given to you up front. There are a number of services similar to will drafting for which �lat fees are the norm, including house closings and writing a simple letter. If the matter is more complicated, however, most attorneys charge by the hour. Attorneys so hired keep a form for each client that shows work performed per 15 minutes, or quarter of an hour. If the attorney talks to the client on the phone for 15 minutes and bills at the rate of $200 per hour, then that phone call will be charged $50 toward the client's bill. As you can see, these fees can quickly add up to large sums. Every time you pick up the phone to ask your attorney a question, the attorney is logging the phone call and it is going on your bill.

In personal injury cases, it is typical not to charge clients any money up front but instead to take a percentage of the money won in the lawsuit if it succeeds. The attorney is taking the chance that the jury will award a substantial money verdict to cover his or her time expended in the preparation, discovery, and trial of the case. Attorneys typically receive 33 1/3% at the end of a successful trial and 50% at the end of a successful appeal. For an attorney with a winning record of very large claims, this will add up to a fortune. Most attorneys, however, do not win every case, and very few win cases that entail million-dollar verdicts. As of 2011, the average yearly salary of an attorney was $137,000 according to the Bureau of Labor Statistics (http://www.bls.gov/oes/current/oes231011.htm) .

Bearing in mind that the attorney is paid by the hour, if you work for a company that is being sued, you want to make sure your company structures its time with the attorney so that people are not interrupting each other or engaging in idle chitchat. Management should put one person in charge of

http://www.martindale.com/About_Martindale-Hubbell/index.aspx

http://www.bls.gov/oes/current/oes231011.htm

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 44/439

organizing any meetings with the attorney and �inding out what the attorney needs to know to avoid long and costly and unproductive meetings.

Once you �ind out what the attorney wants, it is essential to organize materials. If the attorney is preparing for litigation, for example, and needs to talk to members of the organization's staff, it is helpful to provide a list of the names of employees to interview, phone numbers, times to call, e-mail addresses, and a paragraph summarizing what each one knows. That way, if what they know is irrelevant, you have saved perhaps an hour of the attorney's time. If the attorney wants documents, make sure they are clearly labeled and organized.

If you are an entrepreneur and need to start a business, it is essential that you hire an attorney with experience in forming a business and experience with tax issues. For a detailed discussion of forms of incorporation, see Unit VII, Business Organizations, Chapters 27–31 (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/unit07#unit07) . You will most likely enter into a fee arrangement. To see a website setting forth different fee arrangement letters, go here (http://www.americanbar.org/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/sampleengageletters.html) .

For an excellent website on hiring an attorney, consult Understanding the Legal Fees Agreement: Consumer Rights (http://practice.�indlaw.com/�inancing-a- law-�irm/understanding-the-legal-fees-agreement-consumer-rights.html) .

https://content.ashford.edu/books/AUBUS670.12.2/sections/unit07#unit07

http://www.americanbar.org/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/sampleengageletters.html

http://practice.findlaw.com/financing-a-law-firm/understanding-the-legal-fees-agreement-consumer-rights.html

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 45/439

Key Terms

Click on each key term to see the de�inition.

admitted as true (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

If the defendant does not answer the allegations in the plaintiff's complaint, then the allegation in the complaint is considered true.

allegations in the complaint (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The individually numbered paragraphs in the plaintiff's complaint.

alternative dispute resolution (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A way to settle a dispute, sometimes using a third party, without going to court.

Answer (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The formal paper �iled by the defendant in response to the plaintiff's complaint.

arbitration (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The process of hiring or employing a designated third party as an arbitrator who renders an opinion that is binding on the parties.

attorney's fees (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The amount paid to an attorney for services rendered, which may include an hourly fee or a percentage of a �inal judgment in a civil case.

default judgment (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A judgment entered by the court when the defendant fails to answer the complaint or show up for the court proceedings.

deposition (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A form of discovery whereby the parties can ask questions about the upcoming lawsuit and the other side has to answer. The deposition testimony can be in the form of a written record, an audiotape or videotape, or both.

discovery (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Prior to a civil trial, a proceeding in which the evidence and testimony are divulged to the other side.

garnishment of wages (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A court proceeding against a defendant who refuses to pay a judgment. In it, money is taken out of the defendant's paycheck and given to the plaintiff.

impaneling a jury (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Choosing the jury; also called voir dire.

impeach (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

To place the integrity and veracity of a witness in doubt by demonstrating before a jury the inaccuracies and contradictions between the witness's testimony and deposition.

interrogatories (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 46/439

A form of discovery whereby the other side is given a set of written questions to answer.

judgment (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The �inal order by a court in which one side is declared the winner and the other the loser; the declaration that the loser has to pay the winner a certain sum of money. A monetary judgment.

mediation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Bringing in a third party to assist with a dispute.

negotiation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Attempting to work out a resolution to a dispute with the other party.

opening statements (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

In a civil trial, the phase in which the lawyers tell the jury what they are going to prove in the trial.

private judge, consultation with (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Another form of alternative dispute resolution in which a former practicing judge is hired by both sides to make a decision.

Record, the (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The bound transcript of the trial, which includes all the testimony, objections, and admitted evidence.

settling out of court (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

When both sides agree to a monetary settlement rather than having the case go to trial.

testimony (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The statements made by witnesses in court that become part of the Record.

verdict (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The �inal decision of a jury about guilt or liability.

Chapter 3 Flashcards

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 47/439

Critical Thinking and Discussion Questions

1. In a civil lawsuit, what is the most important document to acquire from the defendant during discovery, and why?

2. In a civil lawsuit, what are the most important questions to ask the defendant during discovery, and why?

3. Under what circumstances might one consider settling out of court? What are the advantages and disadvantages of doing so?

4. What are the advantages of employing a private judge over a mediator or arbitrator?

5. Why is it important to spend the time to �ind the right attorney for your speci�ic legal situation?

6. You are asked by the attorney for your company to review the responses to a lawsuit. The attorney presents you with the Answer and asks you to look it over. What are you looking for? What should you ask for to properly complete the task?

7. As the manager of 15 employees, you have 2 who cannot get along and have reached an impasse. Describe what forms of alternative dispute resolution you could use and the advantages and disadvantages of each. Do research online to see how much it would cost to bring in a third party to help you resolve the dispute. Report the costs in your town/city and state.

6/30/2019 Print

https://content.ashford.edu/print/AUBUS670.12.2?sections=fm,copyright,author,ack,intro,unit01,ch01,sec1.1,sec1.2,sec1.3,ch01summary,ch02,se… 48/439

Chapter 4

Business Ethics and Con�lict Management Business ethics has become one of the most important and timely topics for business students. Traditionally, business ethics was approached as a discussion of individual ethical philosophies. This is still important and will be part of this chapter. However, since the 1960s, business ethics has become an area of scholarly study within the business academy, a specialty worthy of research into the day-to-day issues faced by companies of all sizes as well as the individuals making crucial decisions that affect our whole economy. Business scandals prompt distrust of our profession, trigger government regulation, and can be so serious that some businesses do not survive them.

As a manager, you set standards for those who work for you, and employees look to you for guidance. As such, having an understanding of the connection between ethics and business law is crucial to your success. In this chapter, we will review the basics of ethical philosophy as it relates to business law, look at some of the important �indings scholars have discovered in the last 50 years of studying business ethics, and provide speci�ic suggestions for how to create an ethical corporate culture and how to make individual ethical decisions.