I was very happy with this exam. I think that it was a fair test of what I taught you during the semester.
Clearly, it was a four hour exam. I did not see it as an unfair four hour exam, but it took four hours to finish comfortably. (This is why I personally proctor my exams, I want to see what you make of the exam.)
The multiple choice were intended to test a variety of concepts from the Federal Rules of Civil of Procedure, and I am pleased that this is precisely what it accomplished.
The short-answer exercises were a real success. I enjoyed seeing the answers. Perhaps it was a bit long, however.
The essay was tough, and I graded it demandingly. I was looking for more than technical ability. Here I was looking for a command of the major concepts and their expert deployment. Although there were a few outstanding answers, they were not many. It was perhaps due to the length of the examination.
Select the best answer to the question presented. In
this section, Do not look for "perfect" answers, just
the most correct one among those alternatives available to you,
in light of the question presented. No explanations are required
or allowed. Your answer will either be correct or incorrect, there
will be no partial credit for incorrect answers. Circle the letter
of your response.
Do not assume any facts not given to you. While you are expected to draw reasonable conclusions based on the facts given, you should not assume facts. In this section of the exam, "missing facts" suggest three possibilities: (1) you need to read the question again, i.e., "it's in there somewhere," (2) the fact is not necessary to the resolution of the question, or (3) I made a mistake and you may need to alert me to it (if you are convinced that this is what is going on, do not be afraid to ask the question).
Do not look for issues that are not relevant to answering the question. The question asked determines the issues raised, read it carefully and answer the question I asked, with the best possible response among the alternatives given.
Applicable Rules. Assume that the applicable rules of procedure are the Federal Rules of Civil Procedure.
Long-arm statutes. In answering these questions, you should assume that the applicable long-arm statutes have extended personal jurisdiction to the maximum extent allowed by the Due Process Clause of the Fourteenth Amendment.
Residence. Unless otherwise indicated, assume that residence and citizenship are treated equally.
1. Jeffrey Jones has sued Robert Smith in the U.S. District Court for the Northern District of Florida. The complaint was filed on March 22, 2000, and Mr. Smith was served on March 23, 2000. On April 3, 2000, defendant Smith appeared in the case for the first time by filing his Answer to the complaint. He did not raise any Rule 12(b) defenses in the answer. On April 11, 2000, without seeking permission from the court or the consent of Mr. Jones, Mr. Smith filed an Amended Answer, raising, for the first time, the defense of lack of personal jurisdiction; this defense was available when the answer was filed. The matter has not been placed on the trial calendar. Should the Court consider the personal jurisdiction defense?
a. No, because the amendment was untimely.
b. Yes, because the amendment was timely and the defense has not been waived.
c. Yes, and the court should dismiss because the defendant lacks minimum contacts with the forum state.
d. No, because that defense has been waived.
ANSWER: B I was bit surprised to see that this question was the most difficult in the bunch. I suppose that people took to heart the warning that an amended complaint cannot raise defenses that cannot be raised in the answer, but you forgot that if the party does not file a Rule 12 motion, then the answer may be amended as a matter of course. Lack of Personal Jurisdiction is a least favored defense under 12(h)(1) which must be included in the defendant's first responsive pleading, which, under Rule 12(b), can be either a Motion to Dismiss or the answer to the complaint. However, since the defendant chose to file his answer first, rule 12(h)(1)(B) applies to prevent the waiver of the defense, if it is included in an Amended Answer, provided that the amendment is made as a matter of course, as contemplated by Rule 15(a). The language about not seeking permission to file and not asking for the opponent's consent, was intended to emphasize that this was an amendment as of right, rather than any of the other two methods of amendment contemplated by Rule 15(a). A is incorrect because the Amendment is timely, since the matter has not been placed in the trial calendar, you have 20 days for the amendment as of right. C is incorrect, because it is not as precise an answer as "B," while the defense has not been waived, all that you are asked is if the court should entertain the defense, not how it should rule on it. Moreover, you are not given any information to actually decide the merits of the defense. "D" is incorrect because, as explained above, the defense has not been waived.
2. Ms. Buffy Summers has filed a federal suit against Mr. Angel Angelus in the United States District Court for the Central District of California, Western Division. The basis of subject-matter jurisdiction is diversity. The complaint includes the following allegations: (1) That Mr. Angelus has wrongly kept a "friendship ring" worth $125,000.00 that rightly belongs to Ms. Summers; she gave him the ring for safekeeping on November 1, 1998; (2) that Mr. Angelus has failed to repay a $250,000.00 loan made to him by Ms. Summers on April 14, 1999; (3) that Mr. Angelus, negligently destroyed her home, valued at $195,000.00 on August 6, 1999. Mr. Angelus moves to dismiss the suit, alleging only that the three claims are improperly joined under the Federal Rules of Civil Procedure. How should the court rule?
a. The court should grant a severance.
b. The court dismiss the case.
c. The court should deny the motion.
d. The court should grant a severance and then order a joinder.
ANSWER: C This one was my gift to you. Obviously, Rule 18(a) allows the joinder of these separate claims by the same plaintiff against the same defendant, therefore, the court should deny the motion, which only seeks dismissal for improper joinder of claims. A is incorrect because that is not the motion before the court, and severance is not dismissal. B is incorrect because C is correct. D is incorrect because C is correct.
3. A tornado destroyed the mobile home owned by George Martinez, a resident of Cedar Key, Florida. Lloyds of Cleveland Insurance Company provides Martinez's mobile home-owner's policy. Because of the tornado, the mobile home landed on top of the house owned by one G.W. Bush, causing property damage in excess of $150.000.00. The day after the tornado, as everyone was assessing the damages, Harry Smith, an agent for Lloyds took a statement from Mr. Bush, who said he was going to sue Mr. Martinez to recover his damages. Mr. Smith wrote down what Mr. Bush said and Mr. Bush, after reading it, signed the document. After that, Mr. Smith, in reasonable anticipation of Mr. Bush's suit, also took similar statements from two neighbors, Albert Martin, and June Jones. Both Mr. Martin and Ms. Jones signed Mr. Smith's transcription of what they said. Mr. Bush files a suit in Federal Court against Mr. Martínez and Lloyd's of Cleveland. During discovery, Ms. Jones sends a letter to counsel for the insurance company asking for a copy of the statement that she signed for Mr. Smith. Should the insurance company refuse to give her a copy of the statement?
a. No, because it is part of it's "work-product."
b. Yes, because Ms. Jones is not a party.
c. No, because Ms. Jones is entitled to a copy of her statement upon request.
d. Yes, because she has not filed a request for production of documents.
ANSWER: C Even though this is fairly clearly covered by the work-product doctrine, as reflected in Rule 26(b)(3), the second paragraph of that sub-section of the rule clearly indicates that any witness is entitled to a copy of their statement upon request. "A" is incorrect because work-product probably applies, and because the answer as crafted is non-sensical, if work-product applies, then, in the absence of an exception, the party would be entitled to refuse the production. "B" is incorrect because of the express language of the second paragraph of 26(b)(3), which clearly allows non-party witnesses the right to examine their own statements. "D" is incorrect because the rule simply says "upon request" and Ms. Jones is not a party, thus, requests for production of documents are not available to her.
4. Ally McBeal, a citizen of Massachusetts, kicks Oren Koolie, a citizen of New York, when he is visiting her law office in Boston. She mistook him for "Mr. Huggy," an imaginary dancing baby. Unfortunately, Mr. Koolie is a very real small person, who happens to be a lawyer. Naturally, Mr. Koolie sues Ms. McBeal in the U.S. District Court for the District of Massachusetts. Mr. Koolie also makes claims against two bystanders, John Cage, a partner in the law offices he was visiting, and Elaine Vassal, a secretary at that same firm, alleging that they had a duty to come to his defense when he was being attacked, pursuant to the Massachusetts "Assistance to Tort Victims Act." He alleges that these two people were "standing nearby" during the assault, and failed to render assistance. Both Mr. Cage and Ms. Vassal are citizens of Massachusetts. On February 2, 1998, Ms. Elaine Vassall serves Mr. Koolie with a Motion for Sanctions, arguing that Mr. Koolie's claim against her is legally groundless and that he violated his duty to conduct a reasonable investigation prior to filing imposed by Rule 11. On February 17, 1998, Mr. Koolie files a stipulation of voluntary dismissal of his claim against Ms. Vassall, subscribed by him and by Ms. Vassall. (Assume that this is a proper voluntary dismissal.) The court issued an order to show cause why sanctions should not be imposed on Mr. Koolie because of this claim, on March 10, 1998. Could the judge order Mr. Koolie to pay a penalty into court as a Rule 11 sanction?
a. No, sanctions would have to be imposed on his counsel.
b. Yes, if Ms. Vassall files her motion before March 10, 1998.
c. Yes, based upon the order to show cause of March 10, 1998.
ANSWER: D The court cannot impose monetary Rule 11 sanctions under the facts given. "A penalty into court," is a form of sanction specifically allowed by Rule 11(c)(2). However, it would be a "monetary" sanction. It could be imposed as a sanction upon motion, as allowed by Rule 11(c)(1)(A), however, the voluntary dismissal occurs within the safe-harbor period, and thus Ms. Vassall's Rule 11 motion is preempted by the safe-harbor provision of Rule 11(c)(1)(A). The court could impose certain Rule 11 sanctions on its own motion, pursuant to Rule 11(c)(1)(B), but her discretion is limited by Rule 11(c)(2)(B). As such, The court can only impose non-monetary Rule 11 sanctions based on its show cause order issued after the voluntary dismissal. While money is not the only sanction that a party can suffer --the court can do all kinds of nasty things to parties and their counsel without directly taking their money-but the question was specific about the type of Rule 11 sanction, thus taking the other possibilities out of play. "A" is incorrect because rule 11(c)(2)(B) expressly allows the court to impose sanctions on counsel, law firms or parties. "B" is incorrect because of the safe harbor provision; note that the 21 days are from the service of the motion, not after the date of the voluntary dismissal. "C" is incorrect because of the limitations on the court's authority that I have already discussed. Red Herrings: alternatives to Rule 11 sanctions, such as Rule 37 or section 1927 or the court's inherent authority, were precluded by the specificity of the question "Can the Court Impose Rule 11 sanctions?"
5. Jerry Seinfeld has sued Cosmo Cramer for the tort of assault and battery with weird hair. He claims over $75,000.00 in damages exclusive of costs and interest. He has filed the action in the US District Court for the Southern District of New York, where all the relevant acts occurred. He claims diversity of citizenship because he is a citizen of New York, and Cosmo Cramer, for tax purposes, has chosen to retain his citizenship in Florida, where he lived before moving to New York, and where he still owns a home. Mr. Cramer has conceded that he is a citizen of Florida, therefore, he has sworn affidavits for use in this case, indicating that he is in New York only temporarily and lacks an intention to stay there. However, he has moved the court, pursuant to Rule 19, to compel the joinder of his hair dresser, one George "Scissors" Costanza, a citizen of New York. The court has ruled that Mr. Costanza is not a "necessary" party as defined in Rule 19(a), therefore, the court should:
a. Refuse to order the joinder of Mr. Costanza, and proceed with the case as filed.
b. Order the dismissal of the case pursuant to Rule 19(b), because the joinder is not feasible.
c. Allow Mr. Cramer to sue Mr. Costanza under Rule 14(a), for contribution only.
d. Allow Mr. Cramer to sue Mr. Costanza under Rule 14(a), but prevent Mr. Seinfeld from making any claims against Mr. Costanza, because, though allowed by Rule 14(a), to the extent that they arise out of the same transaction or occurrence, they are precluded by 28 USC § 1367(b).
ANSWER: A Once the court has ruled that the party is NOT necessary, as it has here, i.e., the court has ruled that the party is not the type of party defined by Rule 19(a)(1) or (2). Joinder is not possible here, because that would destroy diversity given both Mr. Seinfeld and Mr. Costanza are citizens of New York. No supplemental jurisdiction would be available as to plaintiff's claim. Thus, if the joinder were required, the case would have to be dismissed, thus, B appears tempting, but Rule 14(b) does not come into play at all, because the party was not deemed to be "necessary." This is especially true, if we consider that the preference is to use discretion to avoid dismissal, as noted in Provident Tradesmen and note 9 at page 242.
C and D are incorrect because Mr. Cramer is moving for compulsory joinder under Rule 19 and not for impleader under Rule 14. Mr. Cramer must move for impleader by filing a Third Party Complaint, which, under the facts of the question, he has not done. Cramer is trying to get Jerry's case dismissed for failure to join a non-diverse party. Mr. Cramer may choose to file a Rule 19 motion first, even if impleader were possible (see, Janney v. Sheppard at page 228 of the casebook). Moreover, you do not know from the facts what the law of New York is regarding contribution, so you cannot establish if Rule 14 impleader is available to Mr. Cramer. Therefore, the only clear choice available to the court, under the facts given to you, is A, to deny the Rule 19 motion.
An anonymous note was taped to my office door soon after the exam which stated, essentially, that I should not count question no. 5 because "obviously, both 'A' and 'C' were correct answers." (Emphasis added, note on file with Prof. Malavet). I was already a bit concerned about this question, because of the typographical errors, but, we caught them in time, thankfully, and the responses convince me that this question was not problematic. Of 99 answers, 83 selected "A", which is the correct answer. One person selected B. Three persons selected C, and 11 picked D. The standard deviation on this question was hardly disturbing. Moreover, anyone who paid any attention to my coverage of Rule 19 and to the handouts related thereto, and to past exam questions, knew that this was a rule 19 question. Therefore, it counts.
6. John Smith, the owner of the Baseball Fantasy Bar and Grill on Peachtree Street in Atlanta, files a diversity suit in the U.S. District Court for the Northern District of Georgia, against Robert Joseph Jones. Mr. Smith is a citizen of Georgia, and Mr. Jones a citizen of Alabama. Mr. Smith alleges that while visiting the Baseball Fantasy Bar and Grill, Mr. Jones intentionally destroyed four team uniforms that had been autographed respectively by José Cruz, Juan Cepeda, Roberto Clemente and Iván Rodríguez. Mr. Jones visited the Bar and Grill on four different occasions, and surveillance video showed that he destroyed one uniform per visit. The complaint claims damages from Mr. Jones, exclusive of costs and interest, as follows: the uniform autographed by Mr. Cruz was worth $50,000.00, the one autographed by Mr. Cepeda, $37,500.00, the one autographed by Mr. Clemente $65,000.00 and the one autographed by Mr. Rodríguez $42,500.00. Mr. Jones files a motion to dismiss the complaint for lack of subject-matter jurisdiction. What should the court do?
a. The court should grant the dismissal of the complaint for improper joinder of claims.
b. The court should grant the motion to dismiss because it lacks venue.
c. The court should deny the dismissal of the complaint, because the claims add up to more than $75,000.00 and involve the same plaintiff and defendant.
d. The court should grant the dismissal of the complaint because of failure to meet the jurisdictional amount.
ANSWER: C The claims by the single plaintiff against the single defendant add up to more than $75,000.00, exclusive of costs and interest. They can be properly aggregated. "A" is incorrect because these claims can be joined in a single complaint pursuant to Rule 18(a), and aggregated, regardless of factual relatedness other than the same plaintiff against the same defendant. Therefore, the different possible occurrences were a red herring that was intended to suggest the INAPPLICABLE standard of Rule 20(a). "B" is wrong because there is venue based on the occurrence of the incidents in the Northern District of Georgia, which includes Atlanta, and, more fundamentally, because that was not the motion that the court was considering (remember, venue is an affirmative defense that is waived if not raised early in the process (Rule 12(b), 12(g), 12(h)(1)). "D" is incorrect because a single Plaintiff can aggregate all claims against the same party under Rule 18(a) and for purposes of meeting the jurisdictional amount.
Do not assume any facts not given to you. While you are expected to draw reasonable conclusions from the facts given, you should not assume facts. In this section of the exam, "missing facts" suggest three possibilities: (1) you need to read the question again, i.e., "it's in there somewhere," (2) I made a mistake and you may need to alert me to it (if you are convinced that this is what is going on, do not be afraid to ask the question), or (3) you need to indicate that you need to establish certain facts in order to provide a complete opinion. In this section of the exam, identifying missing facts that are necessary to a complete resolution of the issue may be precisely what you need to do in order to provide a proper response.
Do not look for issues that are not relevant to answering the question. The question asked determines the issues raised, read it carefully and answer the question I asked. Civil procedure is a broad and complex course, I have crafted the questions narrowly, do not waste your time covering issues that the question does not require you to resolve. No credit will be awarded for discussion of matters not relevant to the resolution of the question.
Citations. Since this is an open-rule exam, citation should be made to the appropriate rule, especially the Federal Rules of Civil Procedure, section of title 28, Constitutional Provision, etc. Case citations will be judged on a "close-enough" basis.
Charles Boyer is a citizen of France, and James Hernández, a citizen of New York. Mr. Boyer lives in New York city, N.Y., on a Special Work Visa, thus, he is not a permanent resident alien. He directs the New York office of Agence France Presse. Mr. Hernández is an attorney who resides in New York City. Mr. Boyer is covered for liability arising from automobile accidents by the Aetna Insurance Company, a Delaware Corporation, with its principal place of business in Connecticut. Mr. Hernández is covered for liability arising from automobile accidents by the Prudential Insurance Company, a Delaware Corporation with its Principal Place of Business in New York City, New York. Mr. Hernández is the father of Mary Hernández, a minor child, who is a citizen of Connecticut, where she lives with her mother (the parents are divorced and have joint custody over the child, but she resides with her mother).
On April 19, 2000, Mr. Boyer and Mr. Hernández are involved in an automobile accident that results in serious bodily injury to both Mr. Boyer and Mr. Hernández. Mary Hernández was in the car with Mr. Hernández at the time of the accident. She also suffered serious injuries. The accident occurred in Newark, New Jersey.
You may assume that the corporations would be subject to personal jurisdiction in their state of incorporation and at their principal place of business.
Based on the facts described above, and taking into account any modifications made by the question, answer the following questions by writing your answer in the space provided. In references to statutory provisions, you must identify the specific sub-section that applies. Since the only citations that are appropriate are to sections of Title 28, you do not need to write "28 USC," you can simply write, for example, "section 1332" or "§ 1332."
Questions one (1) to six (6), will each account for 3% of the exam grade. Questions seven (7) to nine (9) will each account for 6% of the exam grade.
(The words within parentheses are explanations that did not need to be included in the answer. However, abbreviations within parentheses are shorthand for part of the answer. The use of the abbreviation in the answer was appropriate).
1. Mr. Boyer, as the sole plaintiff, files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. He names Mr. Hernández as the sole defendant. In which district(s) would venue be appropriate? Identify the district(s) and the pertinent section(s) of Title 28.
ANSWER: Southern District of NY, 1391(a)(1) & 112(b). (The only defendant resides in this district. )
District of New Jersey, 1391(a)(2) & 110. (Based on the occurrence of the accident.)
2. Mr. Hernández, as the sole plaintiff, files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. He names Mr. Boyer as the sole defendant. In which district(s) would venue be appropriate? Identify the District(s) and the pertinent section(s) of Title 28. Explain your answer.
ANSWER: Any district of the US Courts. 1391(d) & §§ 81-131. Because Mr. Boyer is a citizen of France, and thus an alien, an alien may be sued in any district.
NOTE: 1391(a) is available supplementarily, but it was not needed, given that all districts are available. This was a venue question, however, clearly, Personal Jurisdiction would protect Mr. Boyer from an arbitrary choice of forum by the Plaintiff.
3. Mr. Boyer, as the sole plaintiff, files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. He names Mr. Hernández and Prudential Insurance as defendants. In which district(s) would venue be appropriate? Identify the District(s) and the pertinent section(s) of Title 28. Explain your answer.
ANSWER: Southern District of New York, 1391(a)(1), 1391(c) & 112(b). Because both defendants reside in the same district within the State of New York. (Hernandez resides there, because you are told that, Prudential resides there because 1391(c) states that a corporation resides in a district in which it is subject to personal jurisdiction, which was a given fact.)
District of New Jersey, 1391(a)(2) & 110. Because the accident occurred in New Jersey.
NOTE: 1391(c) is a definition of residence for corporate defendants, not a provision creating venue. You must then go to the venue provisions to establish residence-based venue.
CUTE, BUT NO. What About the District of Delaware? Interesting, but no. NO. "Plaintiffs aver a novel argument in support of the applicability of 28 U.S.C. § 1391(a)(1) to the present case. Plaintiffs claim that an investigation has revealed that defendant Sunrise is also a resident of South Carolina. See 28 U.S.C. § 1391(c). Assuming this is true, plaintiffs argue that because Sunrise and Timms both "reside in the same State [i.e. South Carolina]," the Southern District of New York, "a judicial district where [at least one] defendant resides," constitutes a proper venue . Plaintiffs' reading is an interesting argument, but an unfair one. 28 U.S.C. § 1392(a) clarifies any ambiguity. It provides that "any civil action, not of a local nature, against defendants residing in different districts in the same State, may be brought in any of such districts." Id. (emphasis added); 15 Charles A. Wright et al., Federal Practice and Procedure § 3807 (Supp. 1995) (explaining that section 1392(a) became superfluous upon the enactment of section 1391(a)(1) ). Accordingly, section 1391(a)(1) applies only when the multiple defendants are residents of the same multi-district state and suit is brought in a judicial district of that common State. Gerety, et al., v. Sunrise Express, Inc., 1996 U.S. Dist. LEXIS 378 (Southern District of New York).
4. Mr. Hernández files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. He names Aetna Insurance Company as the only defendant. In which district(s) would venue be appropriate? Identify the District(s) and the pertinent section(s) of Title 28.
ANSWER: District of Delaware, 1391(a)(1), 1391(c) & 87.
District of Connecticut, 1391(a)(1), 1391(c) & 86.
District of New Jersey, 1391(a)(2) & 110.
RED HERRING: the residence of the non-party insured is irrelevant for venue purposes, the direct action matter affects only subject-matter jurisdiction. 1332(c) expressly indicates that its provisions are applicable only for purposes of applying sections 1332 and 1441.
5. Mr. Hernández files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. Mr. Hernández is the only plaintiff, and Aetna Insurance Company is the sole defendant. Can there be subject-matter jurisdiction over the claim(s) in this situation? Of which state(s) are the parties considered citizens? As to each party, identify the state(s) and the pertinent section(s) of Title 28.
ANSWER: Yes. Mr. Hernández is a citizen of New York, Aetna is a citizen of Connecticut, PPB, and Delaware (Inc.), pursuant to 1332(c)(1), therefore, there is diversity pursuant to 1332(a)(1). The jurisdictional amount of $75,000 would have to be pleaded, but that is not hard, given the serious damages. (This part was simple, and well worth your time. However, in the next section you had to use your judgment to deal with it quickly and then move on. Nevertheless, since I am sure that you all want to know, here is the long explanation.)
DIRECT ACTION. Initially, you had to acknowledge the fact that this was direct action. However, I gave full credit on the direct action issue for two different resolutions. (a) That Aetna was a citizen of France, and thus an alien for 1332(a)(2) purposes, but that this did not deprive the court of jurisdiction. (b) Alternatively, you could argue that the direct action provision only applies to U.S. citizens domiciled in one of the several states as that is defined in 1332(d).
Clearly, this is a direct action, but since Mr. Boyer is not a citizen of New York, it would not destroy diversity to apply his citizenship to Aetna. So the answer is still that there is 1332(a) jurisdiction, although it would now be 1332(a)(2) jurisdiction, given the foreign citizenship. This result would change if Boyer were a Permanent Resident Alien, in which case you probably should apply his New York citizenship to Aetna, consistent with the policy reasons underlying 1332(c)(1)'s direct action provisions, thus destroying 1332(a)(1) diversity. Even if Mr. Boyer is still considered a citizen of France, the application of the direct action provision would also create a problem if there was a alien as plaintiff.
However, there is an interesting question about whether we need to apply the direct action provisions to foreign insured persons at all, and whether this might produce substantially different results under different circumstances. We start with the "State" vs. "state" debate. Note that the capitalization of the word varies in different parts of section 1332. As is suggested by the capitalization in 1332(a)(1), "State" means one of the several U.S. States, and the non-capitalized use in 1332(a)(2) indicates that "state" includes "foreign state". Therefore, you were asked from what state, i.e., from what U.S. state OR foreign state the party was considered a citizen in the questions bellow. However, for a long time, there was debate about the meaning of "State" in section 1332(c)(1). The problem has been mostly resolved as to the generic citizenship of corporations by treating foreign and domestic corporations equally. The French citizenship could create a further problem since it is generally thought that foreign parties, no matter what country they are from, must be on the same side of an alienage case, and must be opposed by at least one U.S. citizen. Still, here, since Mr. Boyer was the only foreign citizen, this did not present a problem, therefore, applying his citizenship to Aetna would not result in dismissal. If Mr. Hernández had been a foreign citizen, there would be a problem if we applied the Boyer's French citizenship to Aetna. There are reported cases in which the citizenship of an American insured is applied to a foreign insurer, to destroy diversity. However, I could find not one case in which the citizenship of a foreign insured is applied to a domestic insurance company. As a practical matter, the only time when this might create problems is if the plaintiff had been a foreign citizen. Under alienage jurisidction all the aliens must be on the same side of the case. Therefore, if Aetna were deemed to be foreign, and the Plaintiff were a non-U.S. citizen as well, there would be a lack of jurisdiction (some argue that this even rises to a constitutional prohibition).
6. Mr. Boyer files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. Mr. Boyer is the only plaintiff and Mr. Hernández is the sole defendant. Can there be subject-matter jurisdiction over the claim(s) in this situation? Of which state(s) are the parties considered citizens? As to each party, identify the state(s) and the pertinent section(s) of Title 28.
ANSWER: Yes. Boyer is a citizen of France, thus an alien, and Hernández an American and a citizen of New York.. There is proper alienage jurisdiction under 1332(a)(2). The jurisdictional amount of $75,000 would have to be pleaded, but that is not hard, given the serious damages.
Note about Alienage: Mr. Boyer is a citizen of France and thus an alien for purposes of section 1332, i.e., a citizen of a foreign state. Furthermore, the last part of section 1332(a) does not deem Mr. Boyer to be a resident of New York, which would destroy both alienage and diversity. It is not correct however, to phrase the answer in terms of "Mr. Boyer is not a citizen of any State" and thus diversity is not destroyed. You must affirmatively establish jurisdiction, which, in this case requires alienage. (You know Hernández is an American because you are told that he is a citizen of New York; in order to qualify for citizenship in a U.S. State, you must be a U.S. citizen who resides in a State with a general intent to remain indefinitely)
Section 1350, contrary to one student's thoughts, does not apply, because the law of New Jersey, as a general rule, does not qualify as "the law of nations or a treaty of the United States." Section 1359 would likewise not apply since that defines foreign institutions.
7. Mr. Hernández files a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. Mr. Hernández appears in his personal capacity and as the representative of his daughter Mary. Mr. Boyer and Aetna Insurance Company are the defendants. Can there be subject-matter jurisdiction over the claim(s) in this situation? Of which state(s) are the parties considered citizens? As to each party, identify the state(s) and the pertinent section(s) of Title 28.
ANSWER: No OR Perhaps, but not as filed. Mr. Hernandez is a citizen of New York in his personal capacity, and a citizen of Connecticut in his representative capacity on behalf of his daughter (1332(c)(2)) (Note that this is as if there were two separate parties acting as plaintiffs). Boyer is a citizen of France and thus an alien, and Aetna is a citizen of Connecticut (PPB) and Delaware (Inc.) under 1332(c)(1). Therefore, there is a lack of Strawbridge v. Curtiss complete diversity because of the Connecticut conflict which deprives the court of SMJ.
Some students made the mistake of trying to sever the claims and claim that the court had jurisdiction over some but not others. Under the complete diversity rule, you would have to dismiss the entire case, unless, the non-diverse parties can be severed, which is possible if they are not indispensable. But how this was phrased was crucial to the correctness of the answer. Either Mary or Aetna, if not considered indispensable, may be dismissed, and the case might move forward with diverse parties. Separate federal suits were also possible here. A third, rather strange tack, was taken by one student who tried to make a 1367 argument, finding that 1367(a) would allow it, but that 1367(b) would preclude it because of the joinder of Boyer and Aetna as Rule 20(a) co-defendants.
EXPLAIN difference between 1331(a)(2) and (a)(3). Mas v. Perry, at page 840, stated that when a U.S. citizen and a foreign citizen sue a U.S. citizen, "two separate legs of diversity jurisdiction" are involved. Therefore, if you discussed both 1332(a)(1) and (2), that would have been acceptable. However, this underscores the complete diversity requirement that is usually applied under 1332(a)(1), but undermines the requirement that there be at least one U.S. citizen involved under 1332(a)(2), which means that you must do both types of analysis carefully. Also, complete diversity is required, whether or not you use 1332(a)(1) or (2) with the additional "one U.S. national" requirement under (2). Then, some courts characterize suits with aliens and U.S. citizens on one side of the case and U.S. citizens on the other as 1332(a)(3) situations. (See, e.g., Karazanos v. Madison Two Assoc., 147 F.3d 624 (7th Cir. 1998).
8. Mr. Hernández and Prudential Insurance Company as plaintiffs file a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. Aetna Insurance Company is the only defendant. Can there be subject-matter jurisdiction over the claim(s) in this situation? Of which state(s) are the parties considered citizens? As to each party, identify the state(s) and the pertinent section(s) of Title 28.
ANSWER: No OR Perhaps, but not as filed. Hernandez is a citizen of New York. (1332(a)(1), Mas v. Perry). Prudential is a citizen of New York (PPB) and Delaware (Inc.) under 1332(c)(1). Aetna is a citizen of Connecticut (PPB) and Delaware (Inc.) 1332(c)(1). There is a conflict between Aetna and Prudential Delaware citizenship which destroys Strawbridge v. Curtiss complete diversity. The direct action issue comes up again, as I described it above.
Again, if one of the non-diverse can be voluntarily dismissed, the remaining parties could proceed. The jurisdictional amount of $75,000 would have to be pleaded, but that is not hard, given the serious damages. Separate federal suits were not a possibility here. Alternately, ONE student made a somewhat coherent argument using section 1367, this time, the claim would not fail because joint plaintiffs under Rule 20 are making claims against the original defendant.
RED HERRING: I was shocked to see answers indicating that Mr. Hernandez and Prudential could not join as co-plaintiffs because they are both from New York.
9. Mr. Boyer, as the sole plaintiff, has filed a federal suit to pursue claims arising out of the accident, using section 1332 as the only basis of subject-matter jurisdiction. Mr. Hernández is the only defendant. Mr. Hernández then impleads Prudential Insurance Company. Can there be subject-matter jurisdiction over the third-party claim(s) in this situation? Of which state(s) are the parties in the third-party complaint considered citizens? Identify the state(s) and the pertinent section(s) of Title 28.
ANSWER: Yes or Perhaps. Mr. Hernandez is a citizen of New York (1332(a)(1)) and Prudential, is a citizen of New York (PPB) and Delaware (Inc.) under 1332(c)(1). Therefore, they are not diverse. However, there would be supplemental jurisdiction over this claim, to the extent that the third-party claim is considered part of the same constitutional case or controversy as the original claim between Boyer, citizen of France ,and Hernandez, citizen of New York, which has 1332(a)(2) jurisdiction (because of alienage, provided that the jurisdictional amount is properly pleaded) and can serve as the anchor claim, thus meeting the requirements of 1367(a). The claim is not precluded by 1367(b). Some students also discussed discretionary declines of jurisdiction pursuant to 1367(c).
There were two or three answers to this question that were really great.
HUH? I saw several references to the Gibbs common nucleus of operative facts test. These were inappropriate. The standard under section 1367(a) is same constitutional case. As I indicated in class, the Palmer court defined this for you.
After law school graduation, you have been hired as a law clerk by the Honorable James H. Hancock, Senior United States District Judge, for the United States District Court in the Northern District of Alabama, Southern Division. The judge has given you the file in the case of Mary Jones v. Beer Across America. After reviewing the file, you determine that the pertinent facts and applicable law are as follows:
On June 8, 1999, plaintiff Mrs. Mary Jones, a resident of Shelby, County, Alabama, initiated the present action by filing a complaint in the United States District Court for the Northern District of Alabama. The complaint asserts a claim under the Civil Damages Act, section 6-5-70 of the Alabama Code, arising from the sale of beer to plaintiff's son, fifteen-year-old Jimmy Jones, by the defendant, via the defendant's internet web site: "www.beeramerica.com." The Civil Damage Act provides for a civil action by the parent or guardian of a minor against anyone who knowingly and illegally sells or furnishes liquor to the minor. See Ala. Code § 6-5-70 (1993). The basis of subject matter jurisdiction for the complaint is diversity of citizenship, given that plaintiff is a citizen of Alabama and that the defendant is an Illinois corporation with its principal place of business in Illinois. The claimed damages exceed $75,000.00, exclusive of costs and interest. The defendant corporation, Beer Across America, Inc., is engaged in the marketing and sale of alcoholic beverages and other, complementary merchandise.
In early April of 1999, plaintiff's minor fifteen-year-old son, Jimmy Jones, apparently was left home unsupervised (but with a credit card issued in his name) while his parents vacationed. Hours after his parents departed, Jimmy registered with defendant through Beer Across America's Internet site on the World Wide Web. Jimmy used his personal computer to log on to his home's internet service provider, America Online, via modem, by dialing a local telephone number. He accessed the www.beeramerica.com website and therein registered as a "member" of their beer club. Membership entitled Jimmy to "two six-packs of microbrewed beer ... delivered fresh, right to the member's door" every month. Each shipment cost $16.95, plus shipping, handling and any applicable taxes. The membership could be cancelled at any time without penalty.
Beer Across America indicated in the web page that it would only ship to the following states: Alabama, Arizona, California, Colorado, Florida, Illinois, Iowa, Indiana, Michigan, New Jersey, New York, North Carolina, Ohio, Virginia, Wisconsin and the District of Columbia. It further indicated that it only sold to persons who were at least 21 years old. However, it conducted no check of the information provided by Jimmy in the on-line registration form, except to confirm authorization of payment on the credit card. Beer Across America did not ask the shipping company to establish the age of the recipient of the beer package.
When plaintiff, Mrs. Mary Jones, returned from her vacation, she found two bottles of beer from the first shipment remaining in the family's refrigerator. She also found ten empty beer bottles in the garbage can. When confronted, Jimmy confessed that he had ordered the beer and that he drank the ten bottles. Mrs. Jones was not amused. She immediately tore up her son's credit card, and called Beer Across America to cancel Jimmy's membership. The company complied immediately.
After the filing of this suit, Beer Across America stopped selling beer to Alabama residents. During the twelve months prior to June of 1999, Beer Across America had sold almost 100,000 memberships to Alabama residents, which accounted for approximately 5.2% of their total sales during that period.
Beer Across America also now requires its shipper to establish, by examining a government-issued picture identification card, the age of all recipients of its beer-of-the-month packages. Unless the person actually accepting the package is a resident of the dwelling, and is over twenty-one years old, the shipper is not allowed to make the delivery, according to its new contract with BAA.
The judge has already determined that Alabama law applies to this case, and he identifies and interprets the pertinent provisions as follows.
The Alabama Civil Damages Act reads as follows:
Either parent of a minor, guardian, or a person standing in loco parentis to the minor having neither father nor mother, shall have a right of action against any person who unlawfully sells or furnishes spiritous liquors to such minor and may recover such damages as the jury may assess, provided the person selling or furnishing liquor to the minor had knowledge or was chargeable with notice or knowledge of such minority. Only one action may be commenced for each offense under this section. (Ala. Code. § 6-5-70 (1993)).
Under the applicable provisions of the U.C.C., the beer sale occurred in Alabama. The membership registration was electronically received in Illinois, where the computer that hosts the www.beeramerica.com web site is located, in Beer Across America's offices. The paperwork for the first beer shipment was then printed and forwarded to the warehouse, which is located on the same premises. The beer was then shipped from Illinois to plaintiff's son in Alabama and delivered to the Jones residence by a carrier chosen by the defendant. The sales invoice and the shipping documents correctly note that ownership of the goods passed to plaintiff's son upon delivery by the carrier, which is consistent with the applicable Alabama version of the U.C.C., providing that title passes at the time and place of delivery, when the contract requires the seller to make delivery at the destination. Under the Alabama U.C.C., "[a] 'sale' consists in the passing of title from the seller to the buyer for a price." Ala. Code § 7-2-106(1) (1997). The Illinois version of the U.C.C. is identical to Alabama's. Clearly, then, the sale was completed in Alabama. Additionally, the invoice included a charge for Alabama's 12% beer tax; Alabama law requires that beer tax be collected only on sales completed within Alabama. Ala. Code §§ 28-3-184(a), -190(a) (1998) (providing for excise taxes on beer sales).
The Alabama long-arm statute provides, in part, as follows:
A person has sufficient contacts with the state when that person ... [has] some minimum contact with this state and, under the circumstances, it is fair and reasonable to require the person to come to this state to defend an action ... so long as the prosecution of the action against a person in this state is not inconsistent with the constitution of this state or the Constitution of the United States.
Ala. R. Civ. P. 4.2(a)(2)(I). Alabama courts interpret this
language to extend the reach of it's long arm jurisdiction to
the full limits of due process.
In preparing the draft of the opinion to deny Beer Across America's Motion to Dismiss for Lack of Personal Jurisdiction, Judge Hancock has instructed you to address the following topics, in the order in which they are listed: (1) Why does the court need to apply the Alabama long-arm statute in this case?; (2) How should the court interpret the Alabama long-arm statute?; (3) What are the limitations on the exercise of personal jurisdiction in cases like this one?; (4) Are there "minimum contacts" in this case?; (5) Is the exercise of Personal Jurisdiction in this case "reasonable"?; (6) Do the facts support the exercise of "general" or "specific" personal jurisdiction?
Well gang, I am glad that some of you thought that I made this all up, but I am just not that original. The essential facts and legal discussion came directly from Judge Hancock's opinion in Butler v. Beer Across America, Inc., 83 F. Supp. 2d 1261; 2000 U.S. Dist. LEXIS 1322 (Hancock, J., North. Dist. of Ala. February 10, 2000). I was doing a Lexis search and this case caption somehow caught my attention.
I changed the facts to justify the exercise of personal jurisdiction, which Judge Hancock had ruled would not have been consistent with Due Process. He had ruled that the sale had occurred in Illinois, I changed that. He had ruled that the website was passive, rather than an active site, I obviously changed that. Very importantly, I also changed the fact that Mrs. Butler had filed her action in the Circuit Court for Shelby County, Alabama, and the defendants removed the case to the U.S. District Court. This makes perfect sense. Mrs. Butler wanted a jury of her county neighbors, Alabama citizens, whom she probably felt would be more sympathetic to her claim. On the other hand, the foreign defendants would definitely want this one in the Federal Court to avoid local bias, especially on the jurisdictional question. Additionally, the Federal Court might be more inclined to consider the effect of the Alabama law on interstate commerce, than a local court.
I found Judge Hancock's opinion granting the defense motion to dismiss for lack of personal jurisdiction to have been well-reasoned and well written. I wanted to change the facts to make the exercise of personal jurisdiction seem appropriate, thus allowing you to make a fairly complete legal and factual analysis of the situation.
I was also mindful of the fact that the State of Alabama has the right to pass legislation that protects minors from alcohol. While I might not make the same choice as the Alabama legislature by creating this private cause of action, it seems to me that this is their prerogative. While free trade and free interstate transportation of goods is an important national prerogative in the United States, there are times when that may conflict with compelling state interests, such as the protection of minors from alcohol. In fact, many states have regulations prohibiting the sale of alcoholic beverages by catalog or via the internet. Florida, for example, is a state to which most on-line vendors will not ship alcoholic beverages.
(1) Why does the court need to apply the Alabama long-arm statute in this case?
I as disappointed by the number of students of thought that questions one and two were some kind of hidden Erie question. That was not the case. If you kept it simple, you did better. Rule 4(k)'s adoption of the forum state long-arm statute applies regardless of the basis of Subject-Matter jurisdiction and or choice of law findings.
I also noted some odd references to Article III, sec. 2, which suggested confusion between Subject Matter Jurisdiction and Personal Jurisdiction. Even more disturbing were references to Article III, sec. 2, cl. 1 that suggested some students thought that this was the source of the Due Process Clause of the 5th and 14th Amendments to the U.S. Constitution!
Initially, BAA has apparently preserved its Personal Jurisdiction defense, by filing a motion that is being substantively considered by the court. Moreover, a special appearance is not required under the Federal Rules (no defenses are waived by being presented with others under Rule 12(b)).
On the substance of the Personal Jurisdiction discussion, first, we have an "absent defendant", i.e., a non-resident foreign corporation. Beer Across America, Inc. is an Illinois corporation, with its Principal Place of Business in Illinois. You have no information that it has registered to do business in Alabama, appointed an agent for service of process within Alabama, or otherwise voluntarily submitted to the jurisdiction of Alabama Courts. In other words, the two basis for the exercise of jurisdiction under the Territoriality Principle --(1) Personal service on the party within the state, and (2) Voluntary appearance by the party-- are not present.
The federal system follows rules similar to those that would apply in the forum state's courts when dealing with absent defendants. As your casebook explains at page 705:
*** Certainly one could reasonably surmise that these federal courts would not be subject to the same personal jurisdiction limitations as the courts of the states in which they sit, particularly since the 14th Amendment, with its due process clause, applies only to the states and not to the federal government (although the 5th Amendment due process clause does apply to the federal government).
But the reality is different, and raises some extremely slippery issues. Rule 4(k)(1)(A) authorizes the finding of personal jurisdiction by a federal court only to the extent a state court of the state in which it sits, under the state's long-arm statute, could exercise jurisdiction. This normally will invoke an International Shoe analysis of minimum contacts with the state even when the plaintiff asserts a federal claim in federal court. Accordingly, with some exceptions noted below, the problems of statutory interpretation and due process are the same whether the case is in federal or state court. ***
Thus, Federal Rule of Civil Procedure 4(k)(1)(A) applies. ("(1) Service of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant (A) who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located"). Note that Rule 4(e) refers to manner of service upon an individual, and Rule 4(h) to manner of service upon a corporation, not to the extent of Personal Jurisdiction over non-resident defendants.
The United States District Court in the Northern District of Alabama, Southern Division, sits in the State of Alabama (28 U.S.C. § 81(a)(3)), therefore, we need to apply the Alabama long arm statute.
(2) How should the court interpret the Alabama long-arm statute?
The Alabama statute must be applied as the courts of Alabama interpret it, because of the express language of Rule 4(k)(1)(A). Therefore, it is extended to the limits of Due Process, as the judge has already ruled.
The Alabama approach is similar to that of the California statute discussed at page 697 of your casebook. In this area, we saw Gray v. American Standard, at page 697. Compare Gray to Feathers v. McLucas, discussed in note 2 at page 701 of the casebook ("the court reached the opposite conclusion [from Gray] interpreting the New York statute, which was modeled on the Illinois statute"). The issue was tangentially addressed in World-Wide Volkswagen, especially the discussion around footnote 7, and the accompanying text at pages 708-709 of your casebook.
Again, this is not an Erie matter, it is rather a question of an express adoption of state law by the Federal Rules. The Federal Court in expressly put in the position to apply the statute as the courts of the forum state apply it. If you wanted to cite Erie for the proposition that state law includes state decisional law, that would have been ok.
On the application, beyond indicating that the statutory analysis is superseded by the constitutional analysis (or perhaps piggybacks on it) or asking if the exercise in this situation would be constitutional, some students correctly argued that you had to determine that the corporation was a "person" for purposes of the statute.
I was surprised to see references to the Civil Damages Act as the Long Arm Statute, since the Alabama Long Arm statute was clearly labeled as such in a different page.
(3) What are the limitations on the exercise of personal jurisdiction in cases like this one?
Thus you now have to determine if the exercise of personal jurisdiction in this situation was constitutional. The Due Process clause of the Fourteenth Amendment to the U.S. Constitution imposes limitations on the exercise of personal jurisdiction. Pennoyer v. Neff. After Pennoyer, in order to be consistent with the Due Process clause of the 14th amendment, the exercise of jurisdiction had to be based on physical presence within the state, or on consent, actual or implied, by the defendant. International Shoe v. Washington, extended the old territoriality principle-bases of in personam jurisdiction, to allow exercises of personal jurisdiction upon non-resident defendants. It allows the states to exercise jurisdiction over non-resident defendants provided that they have certain minimum contacts with the forum. The test: (1) Minimum contacts and (2) Traditional Notions of Fair Play and Substantial Justice. (aka, "Reasonableness"). International Shoe put it as follows at page 689 of the casebook:
"*** But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have  certain minimum contacts with it  such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'
Essentially, you had to show that there was "Purposeful Availment" by the defendant of the Alabama Market and that the "Nature and Quality" of the contacts justified the exercise of personal jurisdiction. The discussion in the next two sections earned the bulk of the points for this essay.
This was not an invitation for students to transcribe their entire outlines on Personal Jurisdiction analysis. Rather, it was an invitation to set up the fundamental nature of your analysis: The Due Process Clause of the 14th Amendment imposes limitations on the exercise of Personal Jurisdiction. Pennoyer had applied to allow for the exercise of PJ based on personal service of process or voluntary submission to the jurisdiction the court. International shoe extended PJ to allow exercises over non-resident defendants.
(4) Are there "minimum contacts" in this case?
One particularly good statement of the Minimum Contacts by way of affirmative conduct, i.e., purposeful availment analysis, which I deconstructed for you in class, is found in Burger King, at pages 731-732:
[1, MC] The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful "contacts, ties, or relations." International Shoe Co. v. Washington, .... By [CB-732] [2-A, MC] requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," Shaffer v. Heitner, ... (1977) (Stevens, J., concurring in judgment), [2-b, MC] the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit," World-Wide Volkswagen Corp. v. Woodson, ... (1980).
Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, [2-c, MC] this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., ... (1984), [3-a, Specific Jurisdiction MC] and the litigation results from alleged injuries that "arise out of or relate to" those activities, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, ... (1984). (FN15) [3-b, MC] Thus "[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State" and those products subsequently injure forum consumers. World-Wide Volkswagen Corp. v. Woodson, ***
Could this be classified as a product specially designed for one market? Even if we call it microbrewed beer, I think not. However, this case is not one car making it into the forum state through a unilateral act of the plaintiff (World-Wide), nor is it a stream of commerce situation in which the defendant has no control over if or how the product makes it to Alabama. Rather, it is a situation in which even the most conservative application of the minimum contacts test would pass muster. Compare the language of Asahi at page 746:
[Asahi] has no office, agents, employees, or property in California. It does not advertise or otherwise solicit business in California. It did not create, control, or employ the distribution system that brought its valves to California. Cf. Hicks v. Kawasaki Heavy Industries, 452 F.Supp. 130 (M.D.Pa.1978).
In the case at hand, BAA has a contract for delivery of the goods specifically to only a few states, including Alabama. The sale is not completed until delivery is accomplished and BAA chooses and pays for the delivery.
Additionally, while WWW advertising can reach anybody, BAA chooses to accept and thus to solicit business from only a few, including Alabama. Moreover, its web site is active, i.e., it accepts sales directly. Remember the internet cases that I showed you: Hall v. LaRonde, 66 Cal. Rptr. 399(1997). (New York defendant submitted to California court jurisdiction by creating a continuing relationship to distribute software with a Californian over the internet.) Bensusan Restaurant Group v. King, 126 F3d 25 (2d cir 1997) ("passive" web page cannot subject someone to jurisdiction anywhere it is viewed), but compare Inset Systems, Inc. v. Instruction Set, Inc., 937 F Supp 161 (D.Conn. 1996) (upholding jurisdiction based on creation of a web page "directed ... toward not only the state of Connecticut, but to all states"). Blumenthal v. Drudge, 992 F Supp. 44 (1998) (Matt Drudge subject to jurisdiction in DC because his internet column was especially targeted at Washington DC, and Drudge visited that city for fundraising). In this case, you had a strong argument for "specially targeting" and for the creation of continuing relationships to particular states.
Additionally, I was surprised by many references that 5.2 percent of national sales and 100,000 subscribers was not significant. Again, not one car unilaterally taken there, and not a few valve assemblies of half a million produced, which indirectly make it into the state. We are talking at least about $1.695 Million in yearly sales, and if the numbers are regular, up to $20 million in yearly sales in Alabama alone. (Compare Calder, 12% of national circulation, twice the national average, and Keeton, a tiny part of national distribution which went to New Hampshire was enough).
Certainly, the defendant controls the chain of distribution, under the facts given. (See cases discussed in Asahi at page 746). Could this be classified as a Complex Relationship, a la Burger King? Could it be single incident of a special nature, like an automobile accident?
In the world wide web era, the courts distinguish between "passive" web pages, which give out information, and "active" web pages, that accept sales orders directly from any location. To follow the quote from Burger King, quoting World Wide, BAA certainly solicited Alabama residents, accepted purchases from Alabama residents, and controlled the delivery of its product to ultimate consumers in Alabama. But, is there "injury" to the ultimate consumers? Here, the best tack was to say that any consumption of alcohol by a minor, in violation of law, is an injury. That Alabama law creates a cause of action for it, and that BAA is being held accountable for its acts.
BAA actively seeks to sell its beer of the month memberships across state lines. It is thus benefitting from and actively seeking interstate sales. Its web site is not a passive web site providing mere information to anyone with access to the world wide web. Rather, it is a tool of commerce that specifically targets and accepts orders from only 16 of the fifty states of the union. Moreover, BAA controls the distribution of its product to those states, by controlling the delivery, by completing the sale upon delivery under the UCC, and by collecting applicable state sales taxes on its sales to specific states.
In Alabama, one of the seventeen states targeted by BAA, it sells 5.2% of overall sales, which represents 100,000 contracts for beer of the month, at $16.95 per month. This is a monthly revenue of $1,695,000.00. That translates into over $20 million in annual sales in Alabama. Certainly substantial revenues. (I was surprised not to see a lot use of the numbers, but I suppose that it is too much to expect you to do math in the time-pressure of an exam).
Moreover, BAA establishes with each of the 100,000 Alabama members of its club, a potentially substantial, long-term, contractual relationship that produces regular income at monthly intervals. The relationship requires BAA continuously to ship products to Alabama and to receive payments from there.
Purposeful availment is there.
Benefits of the Alabama market? 20 million a year sounds pretty good. Moreover, they regularly ship their product there on Alabama roads, and store in Alabama locations and sell to many Alabama residents who use state services.
Additionally, BAA's activities had an "impact," Gray, upon the state of Alabama because the sale to a minor, a tortious (under the Civil Damages Act) and probably illegal act was completed there.
Fair warning was shown by the fact BAA collected Alabama taxes. It was aware of its obligation to collect and to pay the Alabama tax, i.e., that it was subject to the laws of a foreign (from its perspective) sovereign. On $20 million in sales, they would collect about $2.4 Million in taxes for Alabama. $200,000.00 per month.
Can they adjust their primary conduct? Sure. They only sold to 15 states and to the District of Columbia, not to the entire world or even to all 50 us states.
That is certainly enough for minimum contacts.
Several students made good use of cases like McGee (receiving regular payments on one contract from state); Burger King (long-term contractual relationship with one state); Calder v. Jones (publication particularly directed at one state); and Keeton v. Hustler (subscriptions in one state, though a small percentage of revenues, substantial contact with the state). You had to illustrate your factual discussion with case illustrations and citations to the rules established in the cases.
I as not friendly to stream of commerce arguments that failed to account for the additional factors of specifically targeting Alabama and control of the distribution chain.
(5) Is the exercise of Personal Jurisdiction in this case "reasonable"?
Furthermore, in Asahi, the court clearly indicated that in addition to the required Minimum Contacts, the exercise of Personal Jurisdiction must be "reasonable." For example, at page 746, the court states:
We have previously explained that the determination of the reasonableness of the exercise of jurisdiction in each case will depend on an evaluation of several factors. A court must consider the burden on the defendant, the interests of the forum state, and the plaintiff's interest in obtaining relief. It must also weigh in its determination "the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies." World-Wide Volkswagen,
The application of the balancing of the different factors, as I listed for you:
- Volume of Contacts
- Systematic and continuos nature of contacts
- Balance of conveniences
- State interest in regulating defendant's conduct
- State interest in opening its courts to its residents
- Location of witnesses or evidence
- Foreseeability of suit in that forum
- Availability of an Alternative forum.
Clearly, there is some overlap between these factors and the minimum contacts analysis, but the important difference is simply that minimum contacts is a threshold finding of constitutional permissibility. In the reasonableness analysis, you now make qualitative balancing of the factors. If you chose to discuss foreseeability, volume and systematic contacts only in Minimum Contacts, that was fine. Although I think that the volume helps your discussion of the balance of conveniences in litigating, since the individual is at a disadvantage, and the volume of sales, and monthly nature of sales, shows a command and control structure easily capable of participating in long-distance litigation.
However, I noticed a great deal of confusion among some students who believed that Purposeful Availment and/or predictability of being amenable to suit in the forum state were ONLY reasonableness factors. Purposeful availment such that the party is on fair notice of being amenable to suit are the new hallmarks of voluntary minimum contacts. For example, clearly, Alabama has a strong interest in regulating alcohol sales, and in protecting minors who reside in the state. Additionally, relative to the big bad corporation, Mrs. Jones is a little person for whom going to Illinois is difficult, if not impossible, and it is obviously not hard for BAA to maintain 100,000 friends in Alabama.
Bootstrapping arguments were, in my view, irrelevant. However, I did note several arguments which got bootstrapping completely backwards. Bootstrapping arguably allows a weak Minimum Contacts situation to become constitutionally permissible for the exercise of Personal Jurisdiction, because of a strong reasonableness balance favoring the plaintiff. However, the opposite is not true. Minimum Contacts are defeated by reasonableness favoring the defendant, as we saw a clear Majority of the court rule in Asahi. Scalia did not reach this because he did not find Minimum contacts, but, if he had, he certainly would then have gone on to reasonableness.
(6) Do the facts support the exercise of "general" or "specific" personal jurisdiction?
Here, I was open to arguments on behalf of either specific or general jurisdiction. While the path of least resistance is specific jurisdiction, and while I think that this is the most appropriate result in this situation, I was willing to accept findings of general jurisdiction, provided that you explained them coherently, using the cases we discussed in class.
International Shoe initially created the categories for relatedness. Helicol expanded on this concept. Are the contacts such as to expose the defendant to any type of suit, or rather only to one related to its activities within the forum state.