MGT 301 CH 3 Courts and Alternative Dispute Resolution

Brothers v. Winstead

(Discovery) Phillips Brothers, LP (limited partnership), Harry Simmons, and Ray Winstead were the owners of Kilby Brake Fisher- ies, LLC (limited liability company), a catfish farm in Mississippi. For nearly eight years, Winstead operated a hatchery for the firm. During this time, the hatchery had only two profitable years. Con- sequently, Winstead was fired. He filed a suit in a Mississippi state court against Kilby Brake and its other owners, alleging a "freeze-out." (A freeze- out occurs when a majority of the owners of a firm exclude other owners from certain benefits of par- ticipating in the firm.) The defendants filed a counterclaim of theft. To support this claim, the defendants asked the court to allow them to obtain documents from Winstead regarding his finances, particularly income from his Winstead Cattle Company. The court refused this request. A jury awarded Winstead more than $1.7 million, and the defendants appealed. During discovery, Winstead produced his tax returns from 2006 to 2009, which showed substantial income as coming from the Win- stead Cattle Company. The only other income listed on Winstead's tax returns was from Kilby Brake * * * . Winstead had also produced [other documents showing income] from a fish farmer named Scott Kiker, which did not appear on his tax returns. [The documents supposedly involved income from sales of cattle.] Kilby Brake's theory was the entries for "cattle" represented income from sales of Kilby Brake fish Winstead was brokering and thus, it sought to compel [discovery] of all of the Winstead Cattle Company's financial records. Winstead [tes- tified] in his deposition and again at trial that the Winstead Cattle Company did no actual business, and it was simply his hunting camp. The trial court denied Kilby Brake's motion to compel discovery into Winstead's finances. * * * [Winstead was questioned about the forms he] had produced in discovery showing income from Kiker. Winstead testified that he would often act as a middle man if he knew of a farmer who was in need of fish and another who had fish for sale, taking a commission for brokering the deal. Kiker testified that he had received a load of fish from Kilby Brake [but that] there was no paperwork on the transaction [and] that he sold this load of fish, gave Winstead a commission and did not pay Kilby Brake for the sales. From the evidence noted above, we find the trial court's refusal to allow both discovery into the finances of Winstead and questions con- cerning Winstead Cattle Company on his tax return prevented Kilby Brake and the jury from finding out whether Winstead was selling fish from Kilby Brake and disguising it on his income tax returns * * * . Impor- tantly, the decisions by the trial court denied Kilby Brake the ability to present its case as to what happened to the fish. The record shows there were years in which Winstead received substantial income from brokering fish sales, almost $20,000 in one year. He [testified] that Winstead Cattle Company did no business and was simply his hunting camp, yet it made significant amounts of money. [Emphasis added.] Decision and remedy The Mississippi Supreme Court reversed the lower court's decision to deny discovery of information concerning Winstead's outside finances, especially regarding income from Win- stead Cattle Company. The state supreme court remanded the case for a new trial.

Electronic Discovery (e-discovery)

Any process in which electronic data is sought, located, secured, and searched with the intent of using it as evidence in a civil or criminal legal case. Any relevant material, including information stored electronically, can be the object of a discovery request. The federal rules and most state rules now specifically allow all parties to obtain electronic "data compilations."

reverse

To annul or make void a court ruling on account of some error or irregularity.

Trial Courts

(State) Trial courts are courts in which trials are held and testimony taken. State trial courts have either general or limited jurisdiction. Trial courts that have general jurisdiction as to subject matter may be called county, district, superior, or circuit courts.12 The jurisdiction of these courts is often determined by the size of the county in which the court sits. State trial courts of general jurisdiction have jurisdiction over a wide variety of subjects, including both civil disputes and criminal prosecutions. (In some states, trial courts of general jurisdiction may hear appeals from courts of limited jurisdiction.)

small claims court

(State) A special court in which parties can litigate small claims without an attorney. Small claims courts are inferior trial courts that hear only civil cases involving claims of less than a certain amount, such as $5,000 (the amount varies from state to state). Suits brought in small claims courts are generally conducted informally, and lawyers are not required (in a few states, lawyers are not even allowed). Another example of an inferior trial court is a local municipal court that hears mainly traffic cases. Decisions of small claims courts and municipal courts may some- times be appealed to a state trial court of general jurisdiction.

Jurisdiction over property

A court has jurisdiction over a case if it involves property located in that state A court can also exercise jurisdiction over property that is located within its boundaries. This kind of jurisdiction is known as in rem jurisdiction, or "jurisdiction over the thing."

Subject Matter Jurisdiction can be limited by any of the following:

1. The subject of the lawsuit. 2. The sum in controversy. 3. Whether the case involves a felony (a more serious type of crime) or a misdemeanor (a less serious type of crime). 4. Whether the proceeding is a trial or an appeal.

Diversity of Citizenship

A basis for federal court jurisdiction over a lawsuit between citizens of different states and countries. The most common type of diversity jurisdiction requires both of the following: 5 1. The plaintiff and defendant must be residents of different states. 2. The dollar amount in controversy must exceed $75,000. For purposes of diversity jurisdiction, a corporation is a citizen of both the state in which it is incorporated and the state in which its principal place of business is located. A case involv- ing diversity of citizenship can be filed in the appropriate federal district court. If the case starts in a state court, it can sometimes be transferred, or "removed," to a federal court. A large percentage of the cases filed in federal courts each year are based on diversity of citizenship. As noted, a federal court will apply federal law in cases involving federal questions. In a case based on diversity of citizenship, in contrast, a federal court will apply the relevant state law (which is often the law of the state in which the court sits).

Counterclaim

A claim made by a defendant in a civil lawsuit against the plaintiff. In effect, the defendant is suing the plaintiff. the plaintiff will have to answer it with a pleading, normally called a reply, which has the same characteristics as an answer. Anderson can also admit the truth of Marconi's complaint but raise new facts that may result in dismissal of the action. This is called raising an affirmative defense. For example, Anderson could assert that Marconi was driving negligently at the time of the accident and thus was partially responsible for her own injuries. In some states, a plaintiff's contributory negligence operates as a complete defense, whereas in others it simply reduces the amount of damages that Marconi can recover

Arbitration Clause

A clause in a contract that provides that, in the event of a dispute, the parties will submit the dispute to arbitration rather than litigate the dispute in court.

pretrial conference

A conference, scheduled before the trial begins, between the judge and the attorneys litigating the suit. The parties may settle the dispute, clarify the issues, schedule discovery, and so on during the conference. Either party or the court can request a pretrial conference, or hearing. Usually, the hearing consists of an informal discussion between the judge and the opposing attorneys after discov- ery has taken place. The purpose of the hearing is to explore the possibility of a settlement without trial and, if this is not possible, to identify the matters that are in dispute and to plan the course of the trial.

Justiciable Controversy

A controversy that is not hypothetical or academic but real and substantial; a requirement that must be satisfied before a court will hear a case.

Judges in Federal Courts

are appointed by the president of the United States and con- firmed by the U.S. Senate. Under Article III, federal judges "hold their offices during Good Behavior." In essence, this means that federal judges receive lifetime appointments.

U.S. Court of Appeals

A court within the second tier of the three-tiered federal court system, to which decisions of the district courts and federal agencies may be appealed for review. In the federal court system, there are thirteen U.S. courts of appeals— also referred to as U.S. circuit courts of appeals. The federal courts of appeals for twelve of the circuits, including the U.S. Court of Appeals for the District of Columbia Circuit, hear appeals from the federal district courts located within their respective judicial circuits. The Court of Appeals for the Thirteenth Circuit is called the Federal Circuit. It has national appellate jurisdiction over certain types of cases, such as cases involving patent law and cases in which the U.S. government is a defendant. The decisions of the circuit courts of appeals are final in most cases, but appeal to the United States Supreme Court is possible. Page 68 Exhibit 3-3

Arbitrability

A court's determination on whether an issue must be resolved through arbitration. The terms of an arbitration agreement can limit the types of disputes that the parties agree to arbitrate. Disputes can arise, however, when the parties do not specify limits or when the parties disagree on whether a particular matter is covered by their arbitration agreement. No party, however, will be ordered to submit a particular dispute to arbitration unless the court is convinced that the party has consented to do so. Additionally, the courts will not compel arbitration if it is clear that the arbitration rules and procedures are inherently unfair to one of the parties.

Summons

A document informing a defendant that a legal action has been commenced against him or her and that the defendant must appear in court on a certain date to answer the plaintiff's complaint. The document is delivered by a sheriff or any other person so authorized. The summons notifies Anderson that he must file an answer to the complaint within a specified time period (twenty days in the federal courts) or suffer a default judgment against him. Usually, the server hands the summons and complaint to the defendant personally or leaves it at the defendant's residence or place of business. In some states, process can be served by mail if the defendant consents (accepts service). When the defendant cannot be reached, special rules provide for alternative means of service, such as publishing a notice in the local newspaper or serving process via e-mail.

Bankruptcy Court

A federal court of limited jurisdiction that handles only bankruptcy proceedings, which are governed by federal bankruptcy law.

early neutral case evaluation

A form of alternative dispute resolution in which a neutral third party evaluates the strengths and weakness of the disputing parties' positions; the evaluator's opinion forms the basis for negotiating a settlement.

default judgement

A judgment entered by a court against a defendant who has failed to appear in court to answer or defend against the plaintiff's claim.

Discovery

A method by which the opposing parties obtain information from each other to prepare for trial. Before a trial begins, each party can use a number of procedural devices to obtain information and gather evidence about the case from the other party or from third parties. Generally, discovery is allowed regarding any matter that is not privileged and is relevant to the claim or defense of any party. Discovery rules also attempt to protect witnesses and parties from undue harassment and to safeguard privileged or confidential material from being disclosed. If a discovery request involves privileged or confidential business information, a court can deny the request and can limit the scope of discovery in a number of ways. For instance, a court can require the party to submit the materials to the judge in a sealed envelope so that the judge can decide if they should be disclosed to the opposing party. Discovery prevents surprises at trial by giving parties access to evidence that might oth- erwise be hidden. This allows both parties to learn what to expect during a trial before they reach the courtroom. Discovery also serves to narrow the issues so that trial time is spent on the main questions in the case.

summary jury trial

A method of settling disputes in which a trial is held, but the jury's verdict is not binding. The verdict acts only as a guide to both sides in reaching an agreement during the mandatory negotiations that immediately follow the summary jury trial.

Mediation

A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute. party acts as a mediator and works with both sides in the dis- pute to facilitate a resolution. The mediator talks with the parties separately as well as jointly and emphasizes their points of agreement in an attempt to help them evaluate their options. Although the mediator may propose a solution (called a mediator's proposal), he or she does not make a decision resolving the matter. States that require parties to undergo ADR before trial often offer mediation as one of the ADR options or (as in Florida) the only option. One of the biggest advantages of mediation is that it is not as adversarial as litigation. In a trial, the parties "do battle" with each other in the courtroom, trying to prove each other wrong, while the judge is usually a passive observer. In mediation, the mediator takes an active role and attempts to bring the parties together so that they can come to a mutually satisfactory resolution. The mediation process tends to reduce the hostility between the disputants, allowing them to resume their former relationship without bad feelings. For this reason, mediation is often the preferred form of ADR for disputes involving business partners, employers and employees, or other parties involved in long-term relationships.

motion for a new trial

A motion asserting that the trial was so fundamentally flawed (because of error, newly discovered evidence, prejudice, or another reason) that a new trial is necessary to prevent a miscarriage of justice. The motion will be granted if, after looking at all the evidence, the judge is convinced that the jury was in error but does not feel that it is appropriate to grant judgment for the other side. A judge can also grant a new trial on the basis of newly discovered evidence, misconduct by the participants or the jury during the trial, or error by the judge.

motion for judgment on the pleadings

A motion by either party to a lawsuit at the close of the pleadings requesting the court to decide the issue solely on the pleadings without proceeding to trial. The motion will be granted only if no facts are in dispute.

motion for a directed verdict

A motion for the judge to take the decision out of the hands of the jury and to direct a verdict for the party making the motion on the ground that the other party has not produced sufficient evidence to support her or his claim. At the end of the plaintiff's case, the defendant's attorney has the opportunity to ask the judge to direct a verdict for the defendant on the ground that the plaintiff has presented no evidence that would justify the granting of the plaintiff's remedy. This is called a motion for a directed verdict (known in federal courts as a motion for judgment as a matter of law).

motion for summary judgment

A motion requesting the court to enter a judgment without proceeding to trial. The motion can be based on evidence outside the pleadings and will be granted only if no facts are in dispute. the court may consider evidence outside the pleadings, such as sworn statements (affidavits) by parties or witnesses, or other docu- ments relating to the case. Either party can make a motion for summary judgment. Like the motion for judgment on the pleadings, a motion for summary judgment will be granted only if there are no genuine questions of fact and the sole question is a question of law.

motion for judgment n.o.v.

A motion requesting the court to grant judgment in favor of the party making the motion on the ground that the jury's verdict against him or her was unreasonable and erroneous.

Requests for other information

A party can serve a written request for an admission of the truth with regard to the case Any matter admitted under such a request is conclusively established for the trial. For instance, Marconi can ask Anderson to admit that he was driving at a speed of forty-five miles an hour. A request for admission saves time at trial because the parties will not have to spend time proving facts on which they already agree. A party can also gain access to documents and other items not in her or his possession in order to inspect and examine them. Likewise, a party can gain "entry upon land" to inspect the premises. Anderson's attorney, for instance, normally can gain permission to inspect and photocopy Marconi's car repair bills. When the physical or mental condition of one party is in question, the opposing party can ask the court to order a physical or mental examination, but the court will do so only if the need for the information outweighs the right to privacy of the person to be examined. If the court issues the order, the opposing party can obtain the results of the examination.

motion to dismiss

A pleading in which a defendant admits the facts as alleged by the plaintiff but asserts that the plaintiff's claim to state a cause of action has no basis in law. Grounds for dismissal of a case include improper delivery of the complaint and summons, improper venue, and the plaintiff's failure to state a claim for which a court could grant relief. For instance, suppose that Marconi had suffered no injuries or losses as a result of Anderson's negligence. In that situation, Anderson could move to have the case dismissed because Marconi would not have stated a claim for which relief could be granted. If the judge grants the motion to dismiss, the plaintiff generally is given time to file an amended complaint. If the judge denies the motion, the suit will go forward, and the defen- dant must then file an answer. Note that if Marconi wishes to discontinue the suit because, for example, an out-of-court settlement has been reached, she can likewise move for dismissal. The court can also dismiss the case on its own motion.

negotiation

A process in which parties attempt to settle their dispute informally, with or without attorneys to represent them. The simplest form of ADR Parties may even try to negotiate a settlement during a trial or after the trial but before an appeal. Negotiation tra- ditionally involves just the parties themselves and (typically) their attorneys. The attorneys, though, are advocates—they are obligated to put their clients' interests first.

Federal Question

A question that pertains to the U.S. Constitution, acts of Congress, or treaties. A federal question provides a basis for federal jurisdiction.

Rule of Four

A rule of the United States Supreme Court under which the Court will not issue a writ of certiorari unless at least four justices approve of the decision to issue the writ. Typically, the Court grants petitions when cases raise important constitutional questions or when the lower courts are issuing conflicting decisions on a signif- icant issue. The justices, however, never explain their reasons for hearing certain cases and not others, so it is difficult to predict which type of case the Court might select.

Interragatories

A series of written questions for which written answers are prepared by a party to a lawsuit, usually with the assistance of the party's attorney, and then signed under oath. The main difference between interrogatories and written depositions is that interrogatories are directed to a party to the lawsuit (the plaintiff or the defendant), not to a witness, and the party can prepare answers with the aid of an attorney. In addition, the scope of interrogatories is broader because parties are obligated to answer the questions, even if that means disclosing information from their records and files.

Mandatory Arbitration in the Employment Context

A significant question for businesspersons has concerned mandatory arbitration clauses in employment contracts. Many employees claim they are at a disadvantage when they are forced, as a condition of being hired, to agree to arbitrate all disputes and thus waive their rights under statutes designed to protect employees. The United States Supreme Court, however, has held that mandatory arbitration clauses in employment contracts are generally enforceable.

Probate Court

A state court of limited jurisdiction that conducts proceedings relating to the settlement of a deceased person's estate. Probate courts are state courts that handle only matters relating to the transfer of a person's assets and obliga- tions after that person's death, including matters relating to the custody and guardianship of children.

long arm statute

A state statute that permits a state to exercise jurisdiction over nonresident defendants. Under the authority of a state long arm statute, a court can exercise personal jurisdiction over certain out-of-state defendants based on activities that took place within the state. Before exercising long arm jurisdiction over a nonresident, however, the court must be convinced that the defendant had sufficient contacts, or minimum contacts, with the state to justify the jurisdiction.2 Generally, this means that the defendant must have enough of a connection to the state for the judge to conclude that it is fair for the state to exercise power over the defendant.

State Supreme Court

A state's highest court which typically decides matters of law appealed from lower courts The decisions of each state's highest court are final on all questions of state law. Only when issues of federal law are involved can a decision made by a state's highest court be overruled by the United States Supreme Court.

e-evidence

A type of evidence that consists of computer-generated or electronically recorded information, including e-mail, voice mail, spreadsheets, word-processing documents, and other data. E-evidence can reveal significant facts that are not discoverable by other means. Computers, smartphones, cameras, and other devices automatically record certain information about files—such as who created a file and when, and who accessed, modified, or transmitted it— on their hard drives.

writ of certiorari

A writ from a higher court asking a lower court for the record of a case. Whether the Court will issue a writ of certiorari is entirely within its discretion. The Court is not required to issue one, and most petitions for writs are denied. (Although thousands of cases are filed with the Supreme Court each year, it hears, on average, fewer than one hundred of these cases.) A denial is not a decision on the merits of a case, nor does it indicate agreement with the lower court's opinion. Furthermore, a denial of the writ has no value as a precedent.

Brief

A written summary or statement prepared by one side in a lawsuit to explain its case to the judge. The record includes the pleadings, the trial transcript, the judge's rulings on motions made by the parties, and other trial-related documents. Anderson's attorney will also provide the reviewing court with a condensation of the record, known as an abstract, and a brief. The brief is a formal legal document outlining the facts and issues of the case, the judge's rulings or jury's findings that should be reversed or modified, the applicable law, and arguments

nonbinding

An arbitration in which the arbitration award can be appealed to a court.

closing argument

An argument made after the plaintiff and defendant have rested their cases. Closing arguments are made prior to the jury charges. After the defense concludes its presentation, the attorneys present their closing arguments, each urging a verdict in favor of her or his client.

Voir Dire

An important part of the jury selection process in which the attorneys question prospective jurors about their backgrounds, attitudes, and biases to ascertain whether they can be impartial jurors. During voir dire in most jurisdictions, attorneys for the plaintiff and the defendant ask prospective jurors oral questions to determine whether a potential jury member is biased or has any connection with a party to the action or with a prospective witness. In some jurisdictions, the judge may do all or part of the questioning based on written questions submitted by counsel for the parties. During voir dire, a party may challenge a prospective juror peremptorily—that is, ask that an individual not be sworn in as a juror without providing any reason. Alternatively, a party may challenge a prospective juror for cause—that is, provide a reason why an individual should not be sworn in as a juror. If the judge grants the challenge, the individual is asked to step down. A prospective juror may not be excluded from the jury by the use of discriminatory challenges, however, such as those based on racial criteria or gender.

for cause

Applies when a juror is dismissed because of inability to render an impartial verdict based on prior knowledge of the parties or the facts in the case, bias, or some other disqualifying circumstance.

Appellate Review

As explained earlier, a court of appeals does not hear evidence. Instead, the court reviews the record for errors of law. Its decision concerning a case is based on the record on appeal, the abstracts, and the attorneys' briefs. The attorneys can present oral argu- ments, after which the case is taken under advisement. After reviewing a case, an appellate court has the following options: 1. The court can affirm the trial court's decision. 2. The court can reverse the trial court's judgment if it concludes that the trial court erred or that the jury did not receive proper instructions. 3. The appellate court can remand (send back) the case to the trial court for further proceedings consistent with its opinion on the matter. 4. The court might also affirm or reverse a decision in part. For instance, the court might affirm the jury's finding that Anderson was negligent but remand the case for further proceedings on another issue (such as the extent of Marconi's damages). 5. An appellate court can also modify a lower court's decision. If the appellate court decides that the jury awarded an excessive amount in damages, for instance, the court might reduce the award to a more appropriate, or fairer, amount.

Opening Arguments

At the beginning of the trial, the attorneys present their opening arguments, setting forth the facts that they expect to prove during the trial. Then the plaintiff's case is presented. In our hypothetical case, Marconi's lawyer would introduce evidence (relevant documents, exhibits, and the testimony of witnesses) to support Marconi's position. The defendant has the opportunity to challenge any evidence introduced and to cross-examine any of the plaintiff's witnesses.

Cruise v. Kroger Co.

BackgrounD anD FacTs Stephanie Cruise applied for a job with Kroger Co.'s Compton Cream- ery & Deli Kitchen. The application contained a clause requiring arbitration of "employment- related disputes" and referred to the company's arbitration policy. Cruise was hired. Four years later, she was fired. Cruise filed a suit in a California state court against Kroger, alleging employment dis- crimination. This included retaliation, sexual harassment, sexual and racial discrimination, and failure to investigate and prevent harassment and retaliation—as well as wrongful termination in violation of public pol- icy, intentional infliction of emotional distress, and defamation. Kroger filed a motion to compel arbitration and provided the court with an undated four-page arbitration policy. Because the company could not prove that the policy was in effect when Cruise signed the employment application, the court held that there was no proof of a written agreement to arbitrate and denied the motion. Kroger appealed. Decision and remedy The state intermediate appellate court reversed the lower court's denial of Kroger's motion to compel arbitra- tion with directions to grant the motion. The appellate court concluded that the arbitration clause in the employment application estab- lished that the parties agreed to arbitrate their "employment-related disputes" and that Cruise's claims fell within the meaning of that agreement.

International Jurisdiction Issues

Because the Internet is global in scope, it raises international jurisdictional issues. The world's courts seem to be developing a standard that echoes the minimum-contacts requirement applied by U.S. courts. Most courts are indicating that minimum contacts—doing business within the jurisdiction, for instance—are enough to compel a defendant to appear. The effect of this standard is that a business firm has to comply with the laws in any jurisdiction in which it targets customers for its products. This situation is complicated by the fact that many countries' laws on particular issues—such as free speech—are very different from U.S. laws.

California code of civil procedure

California amended its Code of Civil Procedure to require that all trial courts admonish jurors "that the prohibition on research, dissemination of information, and conversation applies to all forms of electronic and wire- less communication." Any juror may be found guilty of a misdemeanor for "willful disobedience . . . of a court admonishment related to the prohibition on any form of communication or research about the case, including all forms of electronic or wireless communication or research.

Corporate Contacts

Corporations are normally subject to personal jurisdiction in the state in which they are incorporated, have their principal office, and/or are doing business The minimum-contacts requirement is usually met if the corporation advertises or sells its products within the state, or places its goods into the "stream of commerce" with the intent that the goods be sold in the state.

in personam jurisdiction

Court jurisdiction over the "person" involved in a legal action; personal jurisdiction.

Metadata

Data that are automatically recorded by electronic devices and provide information about who created a file and when, and who accessed, modified, or transmitted it on their hard drives. Can be described as data about data.

Marbury v. Madison (1803)

Established judicial review; "midnight judges;" John Marshall; power of the Supreme Court. When Thomas Jefferson defeated the incumbent president, John Adams, in the presidential elections of 1800, Adams feared the Jeffersonians' antip- athy toward business and toward a strong national government. Adams thus rushed to "pack" the judi- ciary with loyal Federalists (those who believed in a strong national government) by appointing what came to be called "midnight judges" just before he left office. But Adams's secretary of state (John Marshall) was able to deliver only forty-two of the fifty-nine judicial appointment letters by the time Jefferson took over as president. Jefferson refused to order his secretary of state, James Madison, to deliver the remaining commissions.

E-Discovery Procedures

FRCP deals specifically with preservation, retrieval, and production of electronic data Advantages and Disadvantages. E-discovery has significant advantages over paper discovery. Back-up copies of documents and e-mail can provide useful—and often quite damaging— information about how a particular matter progressed over several weeks or months. E-discovery can uncover the proverbial smoking gun that will win the lawsuit, but it is also time consuming and expensive, especially when lawsuits involve large firms with multiple offices. Many companies have found it challenging to fulfill their duty to preserve electronic evidence from a vast number of sources. Failure to do so, however, can lead to sanctions and even force companies to agree to settlements that are not in their best interests.

Jurisdiction of Federal Courts

Federal Questions: *Cases involving federal law *Cases involving treaties U.S. has ratified *Cases involving interpretation of the U.S. Constitution Diversity of Citizenship Because the federal government is a government of limited powers, the jurisdiction of the federal courts is limited. Federal courts have subject- matter jurisdiction in two situations.

Jurisdictions over persons

Generally, a court with jurisdiction over a particular geographic area can exercise personal jurisdiction (in personam jurisdiction) over any person or business that resides in that area. A state trial court, for instance, normally has jurisdictional authority over residents (including businesses) in a particular area of the state, such as a county or district. A state's highest court (often called the state supreme court)1 has jurisdiction over all residents of that state.

United States Supreme Court

Highest court in the land that has appellate jurisdiction over state and federal cases and original jurisdiction over cases where the U.S. is a party and those involving ambassadors, consuls, and public ministers. Congress is empowered to create inferior courts as it deems necessary. The inferior courts that Congress has created include the second tier in our model—the U.S. courts of appeals—as well as the district courts and any other courts of limited, or specialized, jurisdiction. The United States Supreme Court consists of nine justices. Although the Supreme Court has original, or trial, jurisdiction in rare instances (set forth in Article III, Section 2), most of its work is as an appeals court. The Supreme Court can review any case decided by any of the federal courts of appeals, and it also has appellate authority over some cases decided in the state courts.

Defendant's Case

If the motion is not granted (it seldom is granted), the defendant's attorney then presents the evidence and witnesses for the defendant's case. At the conclusion of the defendant's case, the defendant's attorney has another opportunity to make a motion for a directed verdict. The plain- tiff's attorney can challenge any evidence introduced and cross-examine the defendant's witnesses.

Appeal to a Higher Appellate Court

If the reviewing court is an intermediate appellate court, the losing party may decide to appeal to the state supreme court (the highest state court). Such a petition corresponds to a petition for a writ of certiorari from the United States Supreme Court. Although the losing party has a right to ask (petition) a higher court to review the case, the party does not have a right to have the case heard by the higher appellate court. Appellate courts normally have discretionary power and can accept or reject an appeal. Like the United States Supreme Court, state supreme courts generally deny most appeals. If the appeal is granted, new briefs must be filed before the state supreme court, and the attorneys may be allowed or requested to present oral arguments.

Gilmer v. Interstate/Johnson Lane Corporation

In a landmark decision, Gilmer v. Interstate/Johnson Lane Corp.,23 the Supreme Court held that a claim brought under a federal statute prohibiting age discrimination could be subject to arbitration. The Court concluded that the employee had waived his right to sue when he agreed, as part of a required registration application to be a securities representative with the New York Stock Exchange, to arbitrate "any dispute, claim, or controversy" relating to his employment. Since the Gilmer decision, some courts have refused to enforce one-sided arbitration clauses. Employment-related agreements often require the parties to split the costs of arbi- tration, but some courts have overturned those provisions when an individual worker lacked the ability to pay.

Question of Law

In a lawsuit, an issue involving the application or interpretation of a law. A question of law concerns the application or interpretation of the law—such as whether flag-burning is a form of speech protected by the First Amendment to the U.S. Constitution. Only a judge, not a jury, can rule on questions of law.

Question of Fact

In a lawsuit, an issue that involves only disputed facts, and not what the law is on a given point. Appellate courts normally defer (yield or give weight) to a trial court's findings on questions of fact, because the trial court judge and jury were in a better position to evaluate testimony. The trial court could directly observe wit- nesses' gestures, demeanor, and nonverbal behavior during the trial. At the appellate level, the judges review the written transcript of the trial, which does not include these nonverbal elements.

mini-trial

In a mini-trial, each party's attorney briefly argues the party's case before the other party and a panel of representatives from each side who have the authority to settle the dispute. Typically, a neutral third party (usually an expert in the area being disputed) acts as an adviser. If the parties fail to reach an agreement, the adviser renders an opinion as to how a court would likely decide the issue.

What requirements must be met before a court can hear a lawsuit?

Jurisdiction Venue Standing to sue

Jurisdiction over subject matter

Jurisdiction over subject matter is a limitation on the types of cases a court can hear. In both the federal and state court systems, there are courts of general (unlimited) jurisdiction and courts of limited jurisdiction. An example of a court of general jurisdiction is a state trial court or a federal district court. Examples include Probate Court Bankruptcy Court A court's jurisdiction over subject matter is usually defined in the statute or constitution creating the court.

exclusive jurisdiction

Jurisdiction that exists when a case can be heard only in a particular court or type of court. Federal courts have exclusive jurisdiction in cases involving federal crimes, bankruptcy, most patent and copyright claims, suits against the United States, and some areas of admiralty law. State courts also have exclusive jurisdiction over certain subject matter—for instance, divorce and adoption.

International Shoe Co. v. State of Washington

Minimum contacts.. due process can be achieved by subjecting the defendant to a judgment in personam if he is not present in the forum he has to have certain minimum contacts and the maintenance of the suit does not affend the "traditional notions of fair play and substantial justice". We look at : 1) minimum contacts 2) look at the quantity and quality of the contacts. 3)make a reasonable and fair determination 4)must consider the inconvenience to the defendant, what they actually did. 5) extensive and continuous and systematic activities that give rise to the cause of action. 6) claim and parties must be related to the forum 7) the court looks at the quality and nature of the activity in relation to the fair and orderly administration of the laws in which due process insures.

Courts Online

Most courts have websites where information, forms, decisions, etc. can be found

Posttrial Motions

Motions asking the trial court to alter or disregard the jury's verdict or to order a new trial

Alternative Dispute Resolution (ADR)

Page 80 The resolution of disputes in ways other than those involved in the traditional judicial process. 1. Negotiation 2. mediation 3. arbitration 4. early neutral case evaluation 5. mini-trial 6. summary jury trials are forms of ADR. The great advantage of ADR is its flexibility. Methods of ADR range from the parties sitting down together and attempting to work out their differences to multinational corporations agreeing to resolve a dispute through a formal hearing before a panel of experts. Normally, the parties themselves can control how they will attempt to settle their dispute, what procedures will be used, whether a neutral third party will be present or make a decision, and whether that decision will be legally binding or nonbinding. Today, more than 90 percent of cases are settled before trial through some form of ADR. Indeed, most states either require or encourage parties to undertake ADR prior to trial.

Defendant's Answer

Procedurally, a defendant's response to the plaintiff's complaint. The defendant's answer either admits the statements or allegations set forth in the complaint or denies them and outlines any defenses that the defendant may have. If Anderson admits to all of Marconi's allegations in his answer, the court will enter a judgment for Marconi. If Anderson denies any of Marconi's allegations, the litigation will go forward.

Reply

Procedurally, a plaintiff's response to a defendant's answer.

Structure of Federal & State Courts

See page 64 Exhibit 3-2

Cyber Courts and Proceedings

Some day, courts may allow for online proceedings. The parties to a case could meet online to make their arguments and present their evidence. Cyber proceedings might use e-mail submissions, video cameras, des- ignated chat rooms, closed sites, or other Internet and social media facilities. The promise of these virtual proceedings is greater efficiency and lower costs. Electronic courtroom projects have already been developed in some federal and state courts. The state of Michigan has cyber courts that hear cases involving technology issues and high-tech businesses.

Pleadings

Statements by the plaintiff and the defendant that detail the facts, charges, and defenses of a case.

Jurisdiction in Cyberspace

The Internet's capacity to bypass political and geographic boundaries undercuts the traditional basis on which courts assert personal jurisdiction. As already discussed, for a court to compel a defendant to come before it, there must be at least minimum contacts—the presence of a salesperson within the state, for example. Today, however, courts frequently have to decide what constitutes sufficient minimum contacts when a defendant's only connection to a jurisdiction is through an ad on a Web site.

Jury Selection

The Seventh Amendment to the U.S. Constitution guarantees the right to a jury trial for cases in federal courts when the amount in controversy exceeds $20, but this guarantee does not apply to state courts. Most states have similar guar- antees in their own constitutions (although the threshold dollar amount is higher than $20). The right to a trial by jury does not have to be exercised, and many cases are tried without a jury. Picking the "right" jury is often an important aspect of litigation strategy, and a number of firms now specialize in jury-selection consulting services.

Is judicial review mentioned in the constitution?

The U.S. Constitution does not mention judicial review (although many constitutional scholars believe that the founders intended the judiciary to have this power).

Jurisdiction

The authority of a court to hear and decide a specific case. Before any court can hear a case, it must have jurisdiction over the person or company against whom the suit is brought (the defendant) or over the property involved in the suit. The court must also have jurisdiction over the subject matter of the dispute.

appellate jurisdiction

The authority of a court to review decisions made by lower courts

in part

The court might also affirm or reverse a decision in part. For instance, the court might affirm the jury's finding that Anderson was negligent but remand the case for further proceedings on another issue (such as the extent of Marconi's damages).

service of process

The delivery of the complaint and summons to a defendant. Before the court can exercise personal jurisdiction over the defendant (Anderson)—in effect, before the lawsuit can begin—the court must have proof that the defendant was notified of the lawsuit. Formally notifying the defendant of a lawsuit is called service of process. The plaintiff must deliver, or serve, a copy of the complaint and a summons (a notice requiring the defendant to appear in court and answer the complaint) to the defendant.

Venue

The geographic district in which a legal action is tried and from which the jury is selected. Venue is concerned with the most appropriate physical location for a trial. Two state courts (or two federal courts) may have the authority to exercise jurisdiction over a case, but it may be more appropriate or convenient to hear the case in one court than in the other. Basically, the concept of venue reflects the policy that a court trying a suit should be in the geographic neighborhood (usually the county) where the incident leading to the lawsuit occurred or where the parties involved in the lawsuit reside. Venue in a civil case typically is where the defendant resides, whereas venue in a criminal case normally is where the crime occurred. Pretrial publicity or other factors, though, may require a change of venue to another community, especially in criminal cases when the defendant's right to a fair and impartial jury has been impaired. Note that venue has lost some significance in today's world because of the Internet and 24/7 news reporting. Courts now rarely grant requests for a change of venue. Because everyone has instant access to the same information about a purported crime, courts reason that no com- munity is more or less informed about the matter or prejudiced for or against the defendant.

charges

The judge instructs the jury in the law that applies to the case (these instructions are often called charges), and the jury retires to the jury room to deliberate a verdict. Typically, jurors are instructed that they must decide the case based only on the information that they learned during the trial. But today, jurors may be tempted to conduct their own investigation of the case using wireless devices—

standing to sue

The legal requirement that an individual must have a sufficient stake in a controversy before he or she can bring a lawsuit. In other words, to have standing, a party must have a legally protected and tangible interest at stake in the litigation. The party bringing the lawsuit must have suffered a harm, or have been threatened by a harm, as a result of the action about which she or he has complained. At times, a person can have stand- ing to sue on behalf of another person, such as a minor (child) or a mentally incompetent person. Standing to sue also requires that the controversy at issue be a justiciable10 controversy—a controversy that is real and substantial, as opposed to hypothetical or academic.

Docket

The list of cases entered on a court's calendar and thus scheduled to be heard by the court.

American Arbitration Association (AAA)

The major organization offering arbitration services in the United States. Cases brought before the AAA are heard by an expert or a panel of experts in the area relating to the dispute and are usually settled quickly. The AAA has a special team devoted to resolving large, complex disputes across a wide range of industries. Hundreds of for-profit firms around the country also provide various dispute-resolution services. Typically, these firms hire retired judges to conduct arbitration hearings or otherwise assist parties in settling their disputes. The judges follow procedures similar to those of the federal courts and use similar rules. Usually, each party to the dispute pays a filing fee and a designated fee for a hearing session or conference.

Award

The monetary compensation given to a party at the end of a trial or other proceeding. the jury will not only decide for the plaintiff or for the defendant but, if it finds for the plaintiff, will also decide on the amount of the award (the compensation to be paid

Complaint

The pleading made by a plaintiff alleging wrongdoing on the part of the defendant; the document that, when filed with a court, initiates a lawsuit. The complaint contains statements alleging: 1. The facts necessary for the court to take jurisdiction. 2. A brief summary of the facts necessary to show that the plaintiff is entitled to relief (a remedy). 3. A statement of the remedy the plaintiff is seeking. Complaints may be lengthy or brief, depending on the complexity of the case and the rules of the jurisdiction.

Judicial Review

The process by which a court decides on the constitutionality of legislative enactments and actions of the executive branch.

Litigation

The process of resolving a dispute through the court system. Usually: Pleadings Complaint Service of Process summons default judgement Defendant's Answer counterclaim reply Pretrial Motions Dismiss Judgment on the Pleading Summary Judgement

Online Dispute Resolution (ODR)

The resolution of disputes with the assistance of organizations that offer dispute-resolution services via the Internet. The disputes have most commonly involved disagreements over the rights to domain names or over the quality of goods sold via the Internet, including goods sold through Internet auction sites. Rules being developed in online forums may ultimately become a code of conduct for everyone who does business in cyberspace. Most online forums do not automatically apply the law of any specific jurisdiction. Instead, results are often based on general, universal legal principles. As with most offline methods of dispute resolution, any party may appeal to a court at any time. ODR may be best suited for resolving small- to medium-sized business liability claims, which may not be worth the expense of litigation or traditional ADR. In addition, some local governments are using ODR to resolve claims. EXAMPLE 3.16 New York City has used Cybersettle.com to resolve auto accident, sidewalk, and other personal-injury claims made against the city. Parties with complaints submit their demands, and the city submits its offers confidentially online. If an offer exceeds a demand, the claimant keeps half the difference as a bonus.

Arbitration

The settling of a dispute by submitting it to a disinterested third party (other than a court), who renders a decision. The decision may or may not be legally binding. In arbitration, a more formal method of ADR, an arbitrator (a neutral third party or a panel of experts) hears a dispute and imposes a resolution on the parties. Arbitration differs from other forms of ADR in that the third party hearing the dispute makes a decision for the parties. Usually, the parties in arbitration agree that the third party's decision will be legally binding, although the parties can also agree to nonbinding arbitration. (Arbitration that is mandated by the courts often is nonbinding.) In nonbinding arbitration, the parties can go forward with a lawsuit if they do not agree with the arbitrator's decision. In some respects, formal arbitration resembles a trial, although usually the procedural rules are much less restrictive than those governing litigation. In the typical arbitration, the parties present opening arguments and ask for specific remedies. Both sides present evidence and may call and examine witnesses. The arbitrator then renders a decision.

Deposition

The testimony of a party to a lawsuit or a witness taken under oath before a trial. A deposition is sworn testimony by a party to the lawsuit or any witness. The person being deposed (the deponent) answers questions asked by the attorneys, and the questions and answers are recorded by an authorized court official and sworn to and signed by the deponent. (Occasionally, written depositions are taken when witnesses are unable to appear in person.) The answers given to depositions will, of course, help the attorneys prepare for the trial.

Appeal

To ask a higher court to review the decision and determine if justice was done A party must have legitimate grounds to file an appeal. In other words, he or she must be able to claim that the lower court committed an error. If Anderson has grounds to appeal the case, a notice of appeal must be filed with the clerk of the trial court within a prescribed time. Anderson now becomes the appellant, or petitioner, and Marconi becomes the appellee, or respondent.

affirm

To declare that a court ruling is valid and must stand.

sliding scale standard

To determine when they can exercise personal jurisdiction over an out-of-state defendant based on the defendant's Web activities. The sliding-scale standard identifies three types of Internet business contacts and outlines the following rules for jurisdiction: 1. When the defendant conducts substantial business over the Internet (such as contracts and sales), jurisdiction is proper. This is true whether the business is conducted with traditional computers, smartphones, or other means of Internet access. 2. When there is some interactivity through a Web site, jurisdiction may be proper, depending on the circumstances. Even a single contact can be sufficient to satisfy the minimum-contacts requirement in certain situations. 3. When a defendant merely engages in passive advertising on the Web, jurisdiction is never proper.

Arbitration Statutes

Uniform Arbitration Act of 1955 Federal Arbitration Act Most states have statutes (often based in part on the Uniform Arbitration Act) under which arbitration clauses will be enforced. Some state statutes compel arbitration of certain types of disputes, such as those involving public employees. At the federal level, the Fed- eral Arbitration Act (FAA) enforces arbitration clauses in contracts involving maritime activity and interstate commerce (though its applicability to employment contracts has been controversial, as discussed later). Because of the breadth of the commerce clause, arbitration agreements involving transactions only slightly connected to the flow of interstate commerce may fall under the FAA.

Gucci America, Inc. v. Wang Huoqing (2011)

Wang Huoqing, a resident of the People's Republic of China, operates numerous Web sites. When Gucci discovered that Huoqing's Web sites were selling counterfeit goods— products that carried Gucci's trademarks but were not genuine Gucci articles—it hired a private investigator in San Jose, California, to buy goods from the Web sites. The investigator purchased a wallet that was labeled Gucci but was counterfeit. Gucci filed a trademark infringement lawsuit against Huoqing in a federal district court in California seeking damages and an injunction to prevent further infringement. Huoqing was notified of the lawsuit via e-mail, but did not appear in court. Gucci asked the court to enter a default judgment—that is, a judgment entered when the defendant fails to appear. The court first had to determine whether it had personal jurisdiction over Huoqing based on the Internet sales.

Exclusive versus Concurrent Jurisdiction

When both federal and state courts have the power to hear a case, as is true in lawsuits involving diversity of citizenship, concurrent jurisdiction exists. When cases can be tried only in federal courts or only in state courts, exclusive jurisdiction exists.

Uniform Arbitration Act

adopted by half the states, promotes the arbitration of disputes at the state level

affirmative defense

a defense whereby the defendant offers new evidence to avoid judgement A response to a plaintiff's claim that does not deny the plaintiff's facts but attacks the plaintiff's legal right to bring an action. An example is the running of the statute of limitations.

Federal Arbitration Act (FAA)

a federal statute that provides for the enforcement of most arbitration agreements

Arbitrator's decision

award It is usually the final word on the matter. Although the parties may appeal an arbitrator's decision, a court's review of the decision will be much more restricted in scope than an appellate court's review of a trial court's decision. The general view is that because the parties were free to frame the issues and set the powers of the arbitrator at the outset, they cannot complain about the results. A court will set aside an award only in the event of one of the following: 1.The arbitrator's conduct or" bad faith" substantially prejudiced the rights of one of the parties. 2. The award violates an established public policy. 3. The arbitrator exceeded her or his powers—that is, arbitrated issues that the parties did not agree to submit to arbitration.

modify

change a lower court's decision

pretrial motions

include the motion to dismiss, the motion for judgment on the pleadings, and the motion for summary judgment Either party may attempt to get the case dismissed before trial through the use of various pre- trial motions. We have already mentioned the motion to dismiss. Two other important pretrial motions are the motion for judgment on the pleadings and the motion for summary judgment.

Enforcing the Judgement

it is up to the plaintiff to collect the debt Even if a plaintiff wins a damages award, there is no guarantee she can collect it from the defendant

What does jurisdiction mean?

juris means law diction means to speak Thus the power to speak the law

concurrent jurisdiction

jurisdiction that exists when two different courts have the power to hear a case When concurrent jurisdiction exists, a party may bring a suit in either a federal court or a state court. A number of factors can affect the decision of whether to litigate in a federal or a state court, such as the availability of different remedies, the distance to the respective court- houses, or the experience or reputation of a particular judge. A resident of a state other than the one with jurisdiction might also choose a federal court over a state court if he or she is concerned that a state court might be biased against an out-of-state plaintiff. In contrast, a plaintiff might choose to litigate in a state court if it has a reputation for awarding substantial amounts of damages or if the judge is perceived as being pro-plaintiff.

in rem jurisdiction

jurisdiction to hear a case because of jurisdiction over the property of the lawsuit A dispute arises over the ownership of a boat in dry dock in Fort Lauderdale, Florida. The boat is owned by an Ohio resident, over whom a Florida court normally cannot exercise personal jurisdiction. The other party to the dispute is a resident of Nebraska. In this situation, a lawsuit concerning the boat could be brought in a Florida state court on the basis of the court's in rem jurisdiction.

peremptorily

leaving no opportunity for denial or refusal

legally binding

legally obligated; can be enforced in a court of law

appellate court

reviews decisions of lower courts to determine if a significant error of law was made during trial Generally, courts of appeals do not conduct new trials, in which evidence is submitted and witnesses are examined. Rather, an appellate court panel of three or more judges reviews the record of the case on appeal, which includes a transcript of the trial proceedings, and determines whether the trial court committed an error. They review / focus on Questions of Law Defer to Trial Court's Finding of Fact

State Court System Structure

state courts may include (1) trial courts of limited jurisdiction, (2) trial courts of general jurisdiction, (3) appellate courts, and (4) the state's highest court (often called the state supreme court).

Electronic filing

the electronic filing of pleadings, briefs, and other documents with the court the federal court system has implemented its electronic filing system, Case Management/Electronic Case Files (CM/ECF), in nearly all federal courts. The system is available in federal district, appellate, and bank- ruptcy courts, as well as the U.S. Court of International Trade and the U.S. Court of Federal Claims. More than 33 million cases are on the CM/ECF system. Access to the electronic doc- uments filed on CM/ECF is available through a system called PACER (Public Access to Court Electronic Records), which is a service of the U.S. courts. A majority of the states have some form of electronic filing, although often it is not yet avail- able in state appellate courts. Some states, including Arizona, California, Colorado, Delaware, Mississippi, New Jersey, New York, and Nevada, offer statewide e-filing systems. Generally, when electronic filing is made available, it is optional. Nonetheless, some state courts have now made e-filing mandatory in certain types of disputes, such as complex civil litigation.

U.S. District Courts

the federal court system's trial courts of general jurisdiction There is at least one federal district court in every state. The number of judicial districts can vary over time, primarily owing to population changes and corresponding caseloads. Today, there are ninety-four federal judicial districts. U.S. district courts have original jurisdiction in federal matters. Federal cases typically originate in district courts.

original jurisdiction

the power of a court to hear a case first, before any other court The distinction between courts of original jurisdiction and courts of appellate jurisdiction normally lies in whether the case is being heard for the first time. Courts having original jurisdiction are courts of the first instance, or trial courts—that is, courts in which lawsuits begin, trials take place, and evidence is presented. In the federal court system, the district courts are trial courts. In the various state court systems, the trial courts are known by various names, as will be discussed shortly.

The Federal Court System is basically a

three-tiered model consisting of (1) U.S. district courts (trial courts of general jurisdiction) and various courts of limited jurisdiction, (2) U.S. courts of appeals (intermediate courts of appeals), and (3) the United States Supreme Court.

remand

to send a case back to a lower court to be tried again