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Understanding Standard of Proof & Diversity in Federal Courts: Sanctions, Jurisdiction & D, Study notes of Civil procedure

Dhirubhai Ambani Institute of Information and Communication TechnologyCivil procedure

Various aspects of federal jurisdiction and diversity, including the standard of proof for r11 sanctions, federal subject matter jurisdiction for diversity and alienage, and attempts to manipulate diversity through assignment and joinder of parties. The document also discusses relevant cases such as kramer v. Caribbean mills and rose v. Giamatti.

Typology: Study notes

2012/2013

Uploaded on 01/27/2013

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1) Standard of proof for R11 sanctions
a. Previous cases support both clear and convincing AND preponderance of
evidence, although there is little out there on the matter at all
b. Issue is unsettled
c. Prof. Green thinks the reason may be that it is odd speaking of a standard of
evidentiary proof for R 11(b)(3) (the most commonly violated section of R 11)
which itself speaks of evidentiary support. What does it mean to have a
preponderance of evidence (or clear and convincing evidence) that there is no
evidentiary support for a factual allegation?
2) Federal subject matter jurisdiction – diversity and alienage
a. Last time: citizenship for individuals (domicile) and citizenship for corporations
(in 28 U.S.C. §1332(c))
i. For corporations, by statute, corp is deemed to have citizenships of all
states (or nations) it is incorporated in + 1 principal state or (nation) of
business
ii. Look to nerve center to determine PPB
1. Difficult to justify from purposive standpoint of diversity
2. Easier to determine administratively than using “muscle test”
3) Problem of constitutionality of 1332(e) “The word ‘States’, as used in this section,
includes the Territories, the District of Columbia, and the Commonwealth of Puerto
Rico”
a. DCer slips in New York and sues NYer under New York law for $100k
i. Diversity under 1332? Yes, because of 1332(e).
ii. but why is this constitutional? how does Congress have the power to send
such a case to federal court?
iii. If this came up on exam, Green would not expect you know answer, but
should be able to articulate problem:
1. Has to satisfy constitution, look to article III
2. Maybe it’s about citizens between dif “States” in Art III
a. Does DC count as a state? Unlikely in framers’ minds
b. Sounds like congress is sending this to the fed courts
unconstitutionally
c. Maybe we could do it through arising under in Art III?
d. It’s a domiciliary of dc that we’re talking about, so maybe
it’s brings up a federal issue
e. BUT plaintiff is suing under New York law, not under
federal law – Mottley rule not satisfied
f. However, satisfying Mottley rule is required only for
arising under jurisdiction in 1331, not required for arising
under in Art III
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  1. Standard of proof for R11 sanctions a. Previous cases support both clear and convincing AND preponderance of evidence, although there is little out there on the matter at all b. Issue is unsettled c. Prof. Green thinks the reason may be that it is odd speaking of a standard of evidentiary proof for R 11(b)(3) (the most commonly violated section of R 11) which itself speaks of evidentiary support. What does it mean to have a preponderance of evidence (or clear and convincing evidence) that there is no evidentiary support for a factual allegation?
  2. Federal subject matter jurisdiction – diversity and alienage a. Last time: citizenship for individuals (domicile) and citizenship for corporations (in 28 U.S.C. §1332(c)) i. For corporations, by statute, corp is deemed to have citizenships of all states (or nations) it is incorporated in + 1 principal state or (nation) of business ii. Look to nerve center to determine PPB
  1. Difficult to justify from purposive standpoint of diversity
  2. Easier to determine administratively than using “muscle test”
  1. Problem of constitutionality of 1332(e) “The word ‘States’, as used in this section, includes the Territories, the District of Columbia, and the Commonwealth of Puerto Rico” a. DCer slips in New York and sues NYer under New York law for $100k i. Diversity under 1332? Yes, because of 1332(e). ii. but why is this constitutional? how does Congress have the power to send such a case to federal court? iii. If this came up on exam, Green would not expect you know answer, but should be able to articulate problem:
  1. Has to satisfy constitution, look to article III
  2. Maybe it’s about citizens between dif “States” in Art III a. Does DC count as a state? Unlikely in framers’ minds b. Sounds like congress is sending this to the fed courts unconstitutionally c. Maybe we could do it through arising under in Art III? d. It’s a domiciliary of dc that we’re talking about, so maybe it’s brings up a federal issue e. BUT plaintiff is suing under New York law, not under federal law – Mottley rule not satisfied f. However, satisfying Mottley rule is required only for arising under jurisdiction in 1331, not required for arising under in Art III

i. what’s required in Art III is a federal issue ii. But then has a federal issue come up? It could… iii. is the fact that it could enough? g. Have to learn how to frame the question

  1. Attempts to use assignment and other tricks to manipulate diversity
  2. Kramer v. Caribbean Mills a. Originally would not be a diversity case, AND not an alienage case i. a Panamanian corp. suing a Haitian corp.
  1. Note: in class Green suggested that Kelly, who was also a party to the contract between Panama and Caribbean Mills, was a defendant. That isn’t so. Only Caribbean Mills was sued. b. So, Panama assigned interest to Kramer, a Texas citizen, for $1, but if Kramer recovered, Panama gets 95% of the winnings i. Basically a contingency fee c. Caribbean made a motion to dismiss for lack of diversity i. Trial court refused to dismiss action – the case proceeded to trial, and there was a judgment in favor of Kramer. ii. case was appealed and the Ct App reversed the trial court’s decision not to dismiss. The SCt affirmed the Ct App’s decision. iii. Green: such a waste. A whole trial that is now worthless because it turns out there was no jurisdiction. The problem is the final judgment rule.
  2. Interlocutory appeal would allow us to save all the effort and resources on trial – it would allow Caribbean Mills to appeal the district court’s decision not to dismiss immediately, rather than after trial (as required by Final Judgment rule) d. Assignment to create jurisdiction i. In this case, U.S.C. § 1359.was violated:
  3. "A district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court."
  4. If Panama had not retained an interest in the suit, this would be OK. However, as it stands, Panama was the real stakeholder in the lawsuit.
  5. Most lawsuits can’t be sold a. You can assign your interest in a contract, but you can’t assign your interest in a tort
  6. Should you be able to sell lawsuits?

ii. Situation where Rose has decent argument that he states a claim (cause of action) against Reds and against MLB – it goes down to state court, and state court dismisses for failure to state claim iii. For fraudulent joinder, it’s not just that you don’t state a claim, but you have to REALLY fail to state a claim against that ∆.

  1. so it is possible to defeat removal by joining a ∆ who destroys diversity, against whom in the end you fail to state a claim a. note: it may be possible to remove after the state court has dismissed the diversity destroying defendant because the action against him fails to state a claim iv. other grounds for fraudulent joinder
  2. fraud concerning jurisdictional facts (e.g. lying and saying that Giamatti is a Ohioan)
  3. the relief requested cannot be provided by the diversity destroying party a. This was main reason in Rose case. Court decides that other defendants are fraudulently joined because they are unable to provide relief. They can’t stop Giamatti from doing the hearing. g. What Rose SHOULD HAVE done is to ask for monetary relief for breach of contract – that is relief that can be provided by the Ohioans h. Hypo i. Π NJ wishes to sue ∆ corp for fraud ii. ∆ corp is incorporated in NY with PPB in NY iii. Π does not want the action removed by ∆ corp to fed court iv. So π joins x NJ, an accountant who was in part responsible for the ∆ corps misrepresentations as a defendant v. This would work vi. You don’t have to look at motivations ALONE, but whether there is a legitimate cause of action against the joined defendants. Maybe the only reason you join them at all as a ∆ is to defeat diversity, but if you actually have a decent claim, this is still ok.
  1. Removal a. Generally a case is removable if there is original jurisdiction, that is, if plaintiffs could have brought action in federal court b. Hypo (removable) i. A (CA) sues B (CA) under 42 USC § 1983 for illegal search and seizure ii. Suit is brought in CA state court in San Fran iii. May B successfully remove to N.D. Cal.?
  1. Yes

c. Hypo 2 (removable) i. A CA sues B CA in CA state court in San Fran in connection with an arrest ii. A has two causes of action against B violation of fed civ rights and state law battery iii. Removable?

  1. Yes – state law action has supplemental jurisdiction (will discuss later) d. Hypo 3 (not removable) i. A CA sues B NY and C CA for battery in state court in NV ii. Can B and C remove?
  2. No – lack of complete diversity iii. Can only B remove?
  3. No because π is master of claim; as long as it doesn’t fall under fraudulent joinder, π is within rights to join whenever
  4. The ENTIRE case has to be removable for ∆ to remove e. Hypo 4 i. A CA sues B NY and C NJ for battery ii. A suing B for more than 75k but C for only 20k iii. May the case be successfully removed by B and C? (C is not above jurisdictional minimum)
  5. No, both parties have to be above jurisdictional minimum a. This makes it so easy to keep actions from being removable. Just join someone below jurisdictional minimum
  6. Note: the defendants might be able to remove, however, by showing the true amount in controversy against C is really more than 75K for some reason – will discuss later f. Hypo 5 i. A NV sues B CA and C OR in CA state court for battery ii. A asks for 80k each from B and C iii. May B and C remove?
  7. NO
  8. see 1441(b)(2): (2) A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.
  9. Instaters have no reason to worry about prejudice so should not be able to request federal court