2-1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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1• The Nature of Law

• The Resolution of Private Disputes• Business and The Constitution

• Business Ethics, Corporate Social Responsibility, Corporate Governance,

and Critical Thinking

Foundations of American Law

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The Resolution of Private Disputes

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“In case of dissension, never dare to judge till you have heard the other side.”

Euripides

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Learning Objectives

• Differentiate state court and federal court systems

• Explain jurisdiction and differentiate between subject matter and in personam jurisdiction

• Understand civil procedure• Describe alternative dispute

resolution methods

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• The United States has a federal court system, and each state (and District of Columbia) has a court system

• A Court is established by a government to hear and decide matters before it and redress past or prevent future wrongs

• Jurisdiction (the power to hear and speak) may be original (trial) or appellate (reviews trial court)

The US Judicial System

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• General jurisdiction courts (i.e., trial courts) hear most types of cases– Levels generally classified according to dollar

amount of damages or location– Examples: county courts, district courts

• Limited jurisdiction courts hear specialized types of cases; appeals from decisions often require new trial in general jurisdiction court– Examples: traffic court, tax court, family court

General vs. Limited Jurisdiction

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• Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute

• Courts of criminal jurisdiction hear trials of crimes and misdemeanors– Offenses against the public at large

• Courts of civil jurisdiction hear and decide issues concerning private rights and duties (e.g., contracts, torts), and non-criminal public matters (e.g., zoning, probate)

Subject-Matter Jurisdiction

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• In addition to subject-matter jurisdiction, a court must have either in personam or in rem jurisdiction

• In personam jurisdiction requires that the defendant be a resident of, located within, or have committed acts within the physical boundaries of the court’s authority

In Personam or In Rem Jurisdiction

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• In rem jurisdiction applies when property that is the subject of a dispute is located within the physical boundaries of a court’s authority – Example: a dispute over a sale

In Personam or In Rem Jurisdiction

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Bombliss v. Cornelsen

• Facts & Procedural History: – Illinois residents sued Oklahoma residents

in Illinois court and the Oklahoma defendants moved to dismiss for lack of in personam jurisdiction

– Trial court dismissed complaint and Plaintiffs appealed

• Issue: Does the Illinois long-arm statute permit state courts to exercise jurisdiction over Oklahoma defendants?

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Bombliss v. Cornelsen

• Analysis and Application to Facts: – Defendant must purposefully avail self of

privilege of conducting activities within the state so he would reasonably anticipate being haled into state’s court

– Where a contract exists, minimum contacts shown by negotiations between parties, course of dealing between parties, and foreseeable consequences

– Existence of a contract, defendants’ interactive website, and contact with potential customers of plaintiffs equate to minimum contacts

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Bombliss v. Cornelsen

• Holding: – In personam

jurisdiction exists. Trial court decision reversed and case remanded.

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• Federal courts must have jurisdiction based on diversity or federal question

• Diversity jurisdiction exists when the dispute is between citizens of different states and amount in controversy exceeds $75,000

• Federal question jurisdiction exists when the dispute arises under the Constitution, laws, or treaties of the United States

Federal Court Jurisdiction

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Hertz Corp. V. Friend

• Issue: – Whether corporation was a California citizen for

purposes of diversity jurisdiction statute and removal from state to federal court

• Lower Court Decision:– Federal district court applied Ninth Circuit’s test

to determine a corporation’s principal place of business and concluded that Hertz’s activities in California exceeded activities in other states, thus Hertz was California citizen and diversity jurisdiction does not exist; Ninth Circuit affirmed

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• Supreme Court’s Reasoning and Holding:– Lower courts have interpreted principle place

of business differently, but best interpretation is “nerve center” approach, meaning the place where corporation’s officers direct, control, and coordinate the corporation’s activities

– Hertz’s nerve center is in New Jersey, thus diversity exists

Hertz Corp. V. Friend

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Federal Court Hierarchy

• U.S. Supreme Court (appellate jurisdiction; final review and final decision)

Courts of Appeals (appellate jurisdiction)

District Courts (trial courts; original jurisdiction) or Statutory Courts (original limited jurisdiction), such as Tax Court, Court of Int’l Trade, Court of Federal Claims, etc.

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• State Supreme Court (final appellate) State Civil or Criminal Courts of Appeals District Courts (trial courts for civil matters

over certain $ amount) and Criminal Courts County Courts (civil trial courts for matters

under certain $ amount) Justice of the Peace Courts (small claims

and misdemeanor courts)• Limited Jurisdiction Courts (e.g, family, traffic)

State Court Hierarchy

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Civil Procedure

• A set of rules establishing how a lawsuit proceeds from beginning to end

• In an adversarial system, the plaintiff bears the burden of proof to prove his/her case by a preponderance of the evidence

• Once the plaintiff has made a prima facie case (i.e., proved the basic case), the burden of proof may shift to the defendant

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Civil Pre-Trial Procedure

• Action or event occurs allegedly causes harm

• Injured party, known as Plaintiff, files a Petition or Complaint

• Sheriff serves process (writ, notice, summons) on Defendant

• Defendant Answers Complaint • Case proceeds to trial or settlement

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• Plaintiff’s complaint or petition plus the defendant’s answer or response are known as the pleadings

• Defendant may enter a counterclaim against the plaintiff or a cross-complaint against a third party

• Other parties may enter the case

Civil Pre-Trial Procedure

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• Motion Practice: some motions ask the judge to decide the result before trial– Motion to dismiss (or demurrer)– Motion for judgment on the

pleadings– Motion for summary judgment

• Motions should NOT be taken lightly!

Civil Pre-Trial Procedure

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• Discovery: Obtaining evidence from other party through interrogatories, requests for admissions, requests for documents, and depositions– Discovery process can be a battleground– See Allstate Indemnity Co. v. Ruiz

• Pretrial Conference: Where judge will hear and rule on many evidentiary issues, discovery disputes, and other concerns

Civil Pre-Trial Procedure

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• Facts and Ruling of Eighth Circuit:– In dispute about confusingly similar domain

names, court awarded damages to plaintiff WWP. On appeal, WWFS argued that trial court erred in denying motion to compel WWP to produce certain discovery documents and allowing certain expert testimony at trial

– District court had broad discretion to conclude that WWFS’s request for production was overbroad and WWP’s expert testimony was allowable

WWP, Inc. v. Wounded Warriors Family Support, Inc.

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• Jury Selection – Voir Dire or

Jury Questioning

• Opening Statement from each party

Civil Trial Procedure

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• Plaintiff’s case through direct examination of witnesses (defendant performs cross-examination) and defendant’s case through direct examination (and plaintiff’s cross-examination)

Civil Trial Procedure

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• Closing argument or summation from each party

• Jury verdict

Civil Trial Procedure

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• Trial motions include: motions in limine (motion to limit evidence), voluntary non-suit or dismissal (drop the case), motion for compulsory non-suit or summary judgment

• After summation or closing argument, a party may move for a mistrial (injustice or overwhelming prejudice) or directed verdict (weight of evidence leads to only one conclusion)

Civil Trial Procedure

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• Trier of Fact sees material evidence (physical objects, documents), hears testimony of witnesses (who provide factual evidence), and decides outcome of the case based on facts; trier of fact may be judge or jury

• Matters of law are issues not of fact, but of law; matters of law decided by a judge– E.g., whether a statute means X or Y, or one

law or another applies to the facts

Civil Trial Procedure

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• After the jury verdict, a party may make a motion for new trial, judgment non obstanto verdicto (notwithstanding the verdict; JNOV) or remittitur (defendant’s request for the judge to reduce the amount of damages the jury recommended; very common)

Civil Post-Trial Procedure

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• After a judgment has been entered, losing party may appeal decision to a higher court

• After a judgment, winning party must have the judgment executed (carried out) to obtain money, property, or action ordered by the court

• Bottom line: a judgment is issued and enforcement of the judgment begins

Civil Post-Trial Procedure

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Point of Procedure

• Not all dispute resolution mechanisms in the legal system are heard by a judge

• Disputes with government often resolved by the relevant administrative agency– Administrative agencies generally have a

unique dispute resolution process (hearings, appeals)

• Also, disputants may choose alternative dispute resolution

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Alternate Dispute Resolution

• Arbitration: dispute settled by one or more arbitrators selected by the parties to a dispute; relatively formal; Uniform or Federal Arbitration acts typically used

• Mediation: parties choose neutral party to aid resolution of dispute

• Reference to Third Party: dispute resolution by rent-a-judge, minitrial, summary jury trial, or association tribunal

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• Less costly, in general• May be more appropriate method of

resolution for certain types of cases– Example: family law disputes, real

estate disputes between neighbors, high-tech or trade-secret disputes

• May be required by clause in contract– Example: Preston v. Ferrer

Why Choose ADR?

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• Facts and Ruling:– Vincent & Liza Concepcion filed fraud and

false advertising lawsuit based on their AT&T cell phone contract, which had arbitration clause that prohibited class action claims; AT&T filed motion to compel arbitration

– U.S. Supreme Court:• When parties agree to arbitrate disputes, the

FAA controls and dispute must be submitted to arbitration even if the clause prohibits class claims in contravention of state law

AT&T Mobility LLC v. Concepcion

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Test Your Knowledge

• True=A, False = B– A trial court has original jurisdiction and an

appellate court has appellate jurisdiction– The difference between general jurisdiction

and limited jurisdiction is based on the amount in controversy (the damages amount)

– Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute

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Test Your Knowledge

• True=A, False = B– In personam jurisdiction refers to the

court’s jurisdiction over the defendant, but in rem jurisdiction refers to the court’s jurisdiction over the property in dispute

– The burden of proof solely rests on the plaintiff

– Matters of law are determined by either the jury or the judge.

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Test Your Knowledge

• Multiple Choice– Diversity jurisdiction refers to:

a) a jury pool that reflects the ethnic makeup of the city

b) a citizen’s lawsuit against the governmentc) a lawsuit by a citizen of one state against a

citizen of a different state

– Methods of alternative dispute resolution:a) Mediationb) Arbitrationc) Summary jury triald) All of the above

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Test Your Knowledge

• Multiple Choice– Discovery refers to:

a) the discovery that a dispute existsb) the pre-trial process involving

interrogatories, requests for admissions, and requests for documents

c) the analysis of fault in a dispute

– After the verdict:a) Either party may make post-verdict motionsb) The trial must endc) The trial begins

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Thought Question

• If you were served with a lawsuit, what would you do about it?