Jurisdiction in Civil Law: Cases on Contracts and Venue, Study notes of Commercial Law

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C. Consent as a Substitute for Power Includes

• Informed Consent
• Unconscious Consent
• Implied Consent
• Contractual Consent Carnival Cruise Lines, Inc. v. Shute (1991) p.
• Facts: o Shutes purchased tickets for 7-day cruise through travel agent in Arlington, WA; got on the ship in LA o Face of Ticket: “Subject to conditions of contract on pages 1-3” § one of the clauses stated that all disputes shall be litigated in the State of FL o Ms. Shute slipped and fell – brought negligence suit in USDC for Western District of Washington § Carnival moved for SJ – claiming that Shutes were required to being suit in FL § DC: refused to enforce the forum-selection clause § Court of Appeals: affirmed § Supreme Court: reversed
• Issue: Should a forum-selection clause contained on cruise tickets be enforced?
• Holding: Yes. o Forum-selection clauses will not be upheld if there is bad-faith motive, accession is obtained by fraud or overreaching, or if there was no notice of the provision.
• Analysis o they argue that even if they had read the contract, there was no room for negotiation as to the clause § therefore, they argue that there was no consent o Carnival: in deciding that they will take this cruise, as opposed to many other available options, they are consenting o Court Looked at: § Carnival had its principal place of business in FL and leaves from FL ports o Had they not met the personal jurisdiction, would there have been jurisdiction in WA? § sliding scale – interactive websites, agents selling in the state § entered into contract in Washington ú arises out because factual causal relation but the claim is not a contractual claim ú there is a little bit of an issue with minimum contacts 02/12/ D. The Constitutional Requirement of Notice

Due Process

• Nexus
• Notice o FL Long Arm Statute – Subsection (c) What is required to give constitutionally sufficient notice? Mullane v. Central Hanover Bank & Trust Co. (1950) p.
• Facts o NY Banking Law §100c provided for accountings of fund to be made 12- 15 months after the establishment of a common trust fund, and then for every three years thereafter § common trust fund: pools small trust estates into one fund for investment administration o Mar 1947, Bank petitioned NY Surrogate's Court for settlement of its first account as common trustee § by this time there were approximately 113 trusts participating in the fund o only notice of the settlement proceedings required by §100c to beneficiaries was by publication despite the fact that many of the beneficiaries lived outside the state of New York. § when the fund had started, however, Bank had sent notice by mail of the future proceedings Mullane was appointed special guardian and attorney for those parties known or unknown who had any interest in the income of the fund, and Vaughan was appointed to represent those parties with interest in the principal. § Mullane appeared specially to object to the statutory provision for notice, claiming that it was inadequate to afford the due process required by the Fourteenth Amendment § TC: overruled objections, overruled by NY SC and NY Ct. of Appeals § US SC: affirmed in part (id/location unknown) and reversed in part (id/location known)
• Issue: Can a state dispense with notice if the whereabouts of the property owner are known?
• Holding: No. o The reasonableness, and hence the constitutional validity, of any chosen methods may be defended on the ground that it is in itself reasonably certain to inform those affected, or, where conditions do not reasonable permit such notice, that the form chosen is not substantially less likely to bring home notice than other of the feasible and customary substitutes. § can be inherently reasonably likely to give notice § if that is not possible, has to be as good as any of the other ways to give notice

• Analysis: o once basis for asserting power: if the trust corpus is located in the state, physical presence of the property will qualify as an in rem action (adjucating the in state property) § after Shaffer, not real in rem, all actions are really in personam – how we categorize irrelevant o Publication: § sufficient for unknown beneficiaries though know probably won’t reach ú sufficient because there is no method that is more likely to give them not ú cts. treat similar to abandoned property, also, if they had required notice be given, you would be unable to have the common trust accounts – wouldn’t be able to do the accountings § for known beneficiaries, this was deemed insufficient ú when the address is known, then more likely to know about through the mail ú Bank had made mailings to the known beneficiaries in the past (income) o Is Ct. saying mail notice is always sufficient as due process? § NO § OK in this case because: ú when 1 on 1 litigation – the expense is not as much of a factor ú the interest of all beneficiaries is the same – enough will get the notice that interest will be protect - when there are a lot of individuals participating, this type of service suffices o Does this overrule Pennoyer v. Neff that allowed publication as notice for all pure in rem actions? § Pennoyer: when the property is attached, provides constructive notice because the assumption is allowed that the person (a) will have someone looking after the property and will know about it or (b) abandoned the property and would not care if it was adjudicated § Mullane: Implies that in the cases where you have the name and address of the claimant, better notice may be given ú this was held to be true in a later case o Sufficient Notice depends upon the defendants, the nature of the litigation, and likelihood of reaching FRCP 4(e) Serving an Individual Within a Judicial District of the United States. (1) following state summons procedures (2) doing any of the following: (A) delivering a copy of the summons and of the complaint to the individual personally;

(B) leaving a copy of each at the individual’s dwelling or usual place of abode with someone of suitable age and discretion who resides there; or (C) delivering a copy of each to an agent authorized by appointment or by law to receive service of process. Due Process

• Nexus o long arm statute o constitutional (minimum contacts/fair play)
• Notice o Rule 4 o constitutional (reasonableness) Rule 4 – note, only covers summonses (a) what the defendant needs to know to properly defend in the case needs to be contained o this is the basis for the defense insufficient service of process (b) plaintiff is required to carry out service of process (within the statutory period) (c) must be made by someone over the age of 18 and must not be a party (d) waiver of service of process o send form by mail requesting defendant to waive service – would include the request for the waiver and the waiver itself in the mail o this eliminates the requirement for making service of process o why would defendant do this? § defendant has the duty to avoid costs in service of process ú if refusing to waive increases costs, plaintiff can recover the costs from defendant § extends time the defendant has to respond from 20 to 60 days (e) if defendant does not waive, or plaintiff does not ask to waive, must use one of these methods (1) following state laws of where service is made or state where trial will be, or federal methods (k)(1)(a) in the usual cases, reach of jurisdiction of federal district courts is determined by state’s long arm statute (k)(1)(b) 100 mile rule – applies only to parties joined as additional parties o allows assertion of personal jurisdiction, regardless of long arm statute, as long as defendant within 100 miles of the court (k)(1)(c) jurisdiction when authorized by federal statute 02/13/ E. Self-Imposed Restrains on Jurisdictional Power: Long Arm Statutes as a Restraint on Jurisdiction 1. Long Arm Statutes as a Restraint on Jurisdiction Gibbons v. Brown (1998) p.160 (see notes 01/30/2008)

2. Venue as a Further Localizing Principle 28 USC §1331 : The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States. - gives jurisdiction to the district courts – all U.S. DC have the power to hear that kind of case (subject matter jurisdiction) 28 USC §1391 : Venue generally (a) A civil action wherein jurisdiction is founded only on diversity may be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. o this clause makes clear that this is purely a fall back provision – otherwise, must use (1) or (2) (b) A civil action wherein jurisdiction is not founded solely on diversity be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought. o instead of using personal jurisdiction, says where that defendant may be found o corporate, some number of sales, individuals personal service or process (c) Corporation is a resident of any state in which it is subject to personal jurisdiction. - residence is one of the variables for determining venue (d) An alien may be sued in any district. - alien cannot bring suit in any jurisdiction – applies to individuals and foreign corporations - must be subject to personal jurisdiction Problems p.

1. diversity, so under 1391(a) – resides in So. District of NY so venue is proper there under (a)(1); under (a)(2) if the goods are nonconforming, may be able to sue in New Mexico – would need to know more about the claim and which parts applied; cannot use 1391(a)(3) because (1) definitely, and (2) may applies – there is another place that we can sue
2. (assuming contract not formed within the US) – contract can only be in fed ct because of diversity so operating under 1391(a)(1); cannot use (a)(1) or (a)(2) so we are under (a)(3) – you can get personal jurisdiction over both in So. Dist. of NY so that would probably be the best place to bring suit

02/14/

Dee-K Enterprises, Inc. v. Heveafil Sdn. Bhd. (1997) p.

• Facts o 2 American purchasers of rubber thread sued various foreign manufactures and distributors alleging international conspiracy to restrain trade and fix prices o defendants filed motion to dismiss: lack of jurisdiction and venue § Court Finds: ú Jurisdiction: long arm statute reached and due process satisfied ú Venue: Πs must establish that venue in the Eastern District of West Virginia is OK, if not, must move case to Western District of Virginia
• Issue: Venue?
• Holding: Requires discovery. o In order to rule on the 12(b) motion, need to conduct limited discovery to decide that particular issue.
• Analysis o anti-trust law has foreign reach so long as it has an effect on American commerce o section 12 of the Clayton Act, if severable from the transaction of business in the area, allows for jurisdiction over anyone, anywhere in the world o 4(k)(2) and section 12: can assert jurisdiction worldwide so long as it does not offend fair play and substantial justice and there is minimum contacts with the country as a whole § inquiry is under the 5 th amendment due process clause § this position never formally adopted by the Supreme Court but almost universally held by the lower federal courts o Venue: foreign defendants can be sued in any district FRCP 4(k)(2)(12)? (1391(d)) § the only issue is the American defendants – had to be joined in the action because of the intricacies of antitrust law o Under 1391(b) – arising out of federal law § can’s use 1 because not all the defendants reside in the same state ú there are some defendants who do not have any contacts with the E. District § issue with (2) substantial portion of the offense occurred outside the E. District, most overseas § because can’t use (1) or (2), we fall under (3) – at least 1 Δ must be found in the District ú is this found by the fact that all of the foreign Δs are subject to adjucation in this district? NO – would essentially remove all venue limitations as to all Am. Δs (basically would make 1391(d) apply to American corporations)

o Corporations can be found where they conduct business – Court finds that there is no evidence in the record that they conduct business in the Eastern District § evidence points to Western District of VA as where business is conducted

3. Declining Jurisdiction: Transfer and Forum Non Conveniens 1404 (a) “where it might have been brought” – where venue would have been proper originally; conditions being interest and convenience - available to all parties 1406: this is what ended up happening in the Dee-K case 1631: allows you to transfer jurisdiction even in the court does not have it a. Forum Non Conveniens Forum Non Conveniens - as opposed to the above transferability regulations, this applies to states as well as federal - only available to defendants (transfer available to both parties) - unlike transferability, requires dismissal – usually comes with condition of requiring defendant to consent to waiving any personal jurisdiction or statute of limits claims - give less discretion to the trial court, more to plaintiff (unless foreign plaintiff) Leading Case: Gilbert - Private Factors: o relative ease of access to sources of proof o availability and costs of obtaining witnesses o possibility of view of premises - Public Factors: o court congestion o local interest in having local trials at home o interest in having diversity case in a forum that is aware of the laws o avoidance of unnecessary problems in conflict of laws or in the application of foreign laws o unfairness of burdening citizens of unrelated forum with jury duty 02/18/ Forum non conveniens: used to go from one court system to another; involves a dismissal and a refilling of the case - Available to state court systems and available to federal courts for international matters

• Are we allowing courts to get rid of cases they don’t want to hear? it is clearly a factor (don’t want foreign plaintiffs using the United States court system when they could do it in their home country) §1404: are we allowing courts to get rid of cases they don’t want to hear? Hopefully it isn’t a factor Piper Aircraft v. Reyno (1981) p.
• Facts o small commercial aircraft crashed in the Scottish highlands § engine made in PA by Piper, propellers in OH by Hartzell, operated by Scottish air taxi service, and owner was organized in UK where the wreckage from the crash is also located o Reyno appointed administratrix of decedent’s estates – began separate wrongful-death actions against Piper and Hartzell in Superiour Court of CA claiming negligence and strict liability § R admits sued in US because more favorable than Scottish law § Δs removed to federal DC in CA § P then sought transfer to Middle Dist. of PA (where business is) on grounds of convenience and H moved to dismiss for want of personal jurisdiction or in alternative to transfer with P ú DC transferred to federal district court in PA § Δs sought to dismiss on grounds of forum non convienens ú DC granted ú 3 rd^ Circuit Court off Appeals Reversed ú Here: Reversed (reaffirmed the dismissal)
• Issue: Proper forum?
• Holding: The Court of Appeals erred in holding that plaintiffs may defeat a motion to dismiss on the ground of forum non conveniens merely by showing that the substantive law that would be applied in the alternative forum is less favorable to the plaintiffs than that of the present forum o Rule: If the alternative forum is so clearly inadequate or unsatisfactory and there is no remedy at all, then it may be given substantial weight in the court’s decision to keep it in the American court system (not the case with Scotland) o Rule: Because the central purpose of any forum non conveniens inquiry is to ensure that the trial is convenient, a foreign plaintiff’s choice deserves less deference o Rule: Differences in procedural systems are not a sufficient reason to bar forum non conveniens dismissals o Rule: The fact that two different types of law would be used in this suit is more favorable toward the case being moved to Scotland for Scottish law to try it
• Analysis

o Piper’s transfer was moved by the court under § o Hartzell not subject to personal jurisdiction in California and was transferred to Pennsylvania under § § Therefore the Pennsylvania court law applies California law to Piper, but the Pennsylvania court can decide to apply whatever law it wants to Hartzell (decided on Scotland) § California court would apply California choice of law rules; California choice of law rules would say that Pennsylvania law applies to Piper; Pennsylvania rules would not go with the Hartzell case; therefore Pennsylvania choice of law rules say that Scottish law applies to Hartzell; now we have two sets of laws that are applicable to two sets of defendants ú Defendants move for forum non convenience because they want the case tried in Scotland o Forum non convenience is not listed under 12(b) so it is not technically waived here if you do not raise the defense in the first motion § Could have moved for forum non convenience dismissal in California, though ú District court in Pennsylvania grants the forum non convenience ú Court of Appeals reverses, saying that it is inappropriate because of considerations affecting the court’s own administrative and legal problems, the court may in the exercise of its sound discretion dismiss the case” § Court says it is inappropriate to consider whether it is going to be an unfavorable change of law from the plaintiffs point of view ú Court wants forum of non convenience to be a powerful doctrine; don’t want to open the floodgates to foreign litigants who want to come to the united states and sue American companies in American courts to get the benefits of American law (the fact that plaintiffs in this case are foreign is a huge strike against them in this case) § Foreign plaintiff is using to get a more favorable law, whereas an American would be using it to get to another state b. Transfer under 28 U.S.C. §§ 1404, 1406, and 1631

CHAPTER 3: SUBJECT MATTER JURISDICTION

A. The Idea and Structure of Subject Matter Jurisdiction If a court doesn’t have it then it renders whatever it does void; Extremely important to have Transcends adversary system; concept of jurisdiction that is so basic that it cannot be waived (structural concept that relates to structural government)

• Federal government a government of limited powers; true to federal courts
• If federal courts rendered judgment where they had no subject matter jurisdiction it would affect the state and the individuals as well; therefore it is guarded closely Two Main Categories
• Federal Question Jurisdiction
• Diversity Jurisdiction B. Federal Question Jurisdiction Federal Question Jurisdiction:
• Arising under federal law; applies to the whole case if it arises under federal law o Implication: Includes any related state law
• Courts have interpreted it broadly as a constitutional matter o Osborn v. United States: all cases of any federal ingredient may be filed in the United States as a federal matter
• Narrower definition for statutory test with respect to original jurisdiction: § o Language has always been interpreted more narrowly than the constitutional standard § for cases filed originally in the trial court, there has to be a stricter test for cases arising under federal law than the constitutional standard o Congress could change this and say with all cases of any federal ingredient may be filed in the United States as a federal matter, but they have not o Dual insulations: political pressure and broad caseload 02/19/ Louisville& Nashville Railroad v. Mottley (1908) p.
• Facts o Mottleys were injured in a railway accident; to settle their claims the railroad in 1871 gave them a lifetime pass good for free transportation on the line o Several decades later, Congress, believing that railroads were using free transportation to bribe public officials, made free passes unlawful § the railroad thereupon refused to honor the Mottleys’ passes, citing the new federal legislation o The Mottleys sued in federal court for specific performance, alleging - Δs concede these are the issues

§ (a) that act of Congress referred to does not prohibit the giving of passes under the circumstances of the case; and (statute does not apply) § (b) that if the law is to be construed as prohibiting, it conflicts with the 5th Amendment because it deprives the plaintiffs of their property without due process of law o Federal Trial Court: granted Motleys the requested relief § Defendants appeal to the Supreme Court § SC did not look at the merits – ordered dismissal by circuit court for lack of jurisdiction

• Issue: Is there a federal question?
• Holding: No. Although allegations show that very likely, in the course of litigation, a question under the Constitution would arise, they do no show that the suit (ie plaintiff’s original cause of action) arises under the Constitution. o Rule: A suggestion of one party that the other will or may set up a claim under the Constitution or laws of the US does not make the a suit one arising under that Constitution or those law – federal question must be implicated in the original complaint.
• Analysis: o Neither party raised the issue of subject matter jurisdiction – yet, the SC raises it on their own motion § Court will always check to see if their really is a basis for claim to be decided § Why is issue not waived when Δ doesn’t object? FRCP 12(h) § What if the SC decided on the merits and then afterwards, party realizes that there is no subject matter jurisdiction? Can they subsequently bring suit in state court? ú No. Implicitly, by rendering a judgment, the SC must have decided that there was subject matter jurisdiction (even though it may not have been briefed/litigated). o Constitutional Test: Is there any federal issue in the case? § If this was applied, the Court would have subject matter jurisdiction – the only issues are the validity of the contract based on federal law and constitutionality o Here: the Court uses “well pleaded complaint rule” and determines no federal question jurisdiction § Πs are suing for breach of contract seeking specific performance – state law creates the cause of action for breach § the federal issue would come into play in the Δs answer (affirmative defense) § Rule: The federal questions must be properly pleaded in the original complaint to be a federal question; anticipating that they will arise in the defense is not sufficient to establish federal question jurisdiction (“arising under...”).

o Removal would not have been an option – requires that it could have been pleaded in federal court and the rule established here says that as pleaded, not suitable for federal court. Holmes: suit arises under the law which creates the cause of action

• many cases can be resolved thinking about this way o Fair Labor Practices – arising under federal law o libel – arises under state law o Mottley (breach) – state law
• Note: not the same as the well pleaded complaint rule o breach of duty to shareholders – while breach is state law, violation of federal law may be what creates the breach and thus could be a case arising under federal law § it is not unheard of to have state law rights of actions incorporate federal issues Chicot County Drainage District v. Baxter State Bank (p.191)
• parties who have appeared but failed to challenge the subject matter jurisdiction of a district court may generally not thereafter attack its judgment in another court, state or federal, for lack of diversity or federal question jurisdiction
• the issue of jurisdiction is subject to res judicata Dismissal
• 2 Options: o 12(b)(1) – there is no jurisdiction because there is no claim arising under federal law o 12(b)(6) – there is no federal claim, therefore no federal jurisdiction
• Court: if there is any arguable basis for a federal claim, the district court should examine the federal question not as a matter of jurisdiction but on a Rule 12(b)(6) motion to dismiss the substantive claim o important because if dismissed under 12(b)(6) then cannot bring that federal claim in state court