Essay 59 Flashcards
Essay 59
Paul and Tom, both State X residents, were involved in an auto accident in State X. At the time of the accident, Tom, who was working as a delivery truck driver for Danco, was driving through State X to make a delivery to a customer located in State Y. Danco is incorporated in State Y and has its principal place of business in State Z. State Z is located adjacent to State X. Danco does no business in State X.
Paul filed a complaint against Danco in federal district court in State X on the basis of diversity jurisdiction, alleging $70,000 in property and personal injury damages. Danco was properly served with the complaint at its principal place of business.
Appearing specially in the State X federal district court, Danco filed a motion to dismiss the complaint on the grounds that the district court lacked both subject matter and personal jurisdiction and that Paul’s action could not proceed without joining Tom. The district court denied Danco’s motion.
Danco then filed a counterclaim against Paul to recover $20,000 in property damage to the truck Tom was driving at the time of the accident. Paul moved to dismiss Danco’s counterclaim on the ground that the district court lacked supplemental jurisdiction to hear the counterclaim. The district court granted Paul’s motion.
State X law provides that its courts may exercise jurisdiction over nonresidents “on any basis not inconsistent with the Constitution of the United States.”
- Did the district court rule correctly on Danco’s motion to dismiss Paul’s complaint? Discuss.
- Did the district court rule correctly on Paul’s motion to dismiss Danco’s counterclaim? Discuss.
ISSUES CHECKLIST
I. D’s MOTION TO DISMISS
A. Subject Matter Jurisdiction
Diversity Jurisdiction
Complete Diversity
Citizenship of Parties
Amount in Controversy
B. Personal Jurisdiction
In Personam Jurisdiction
Voluntary Presence
Domicile
Consent
Long-Arm Statute
Due Process Requirements
*Minimum Contacts
Purposeful Availment
Specific and General Jurisdiction
*Fair Play and Substantial Justice
Forum State Interest Burden on Defendant Interest of Judicial System Shared Interests of States C. Compulsory Joinder
II. P’S MOTION TO DISMISS
Compulsory Counterclaim
Essay 59
Paul and Tom, both State X residents, were involved in an auto accident in State X. At the time of the accident, Tom, who was working as a delivery truck driver for Danco, was driving through State X to make a delivery to a customer located in State Y. Danco is incorporated in State Y and has its principal place of business in State Z. State Z is located adjacent to State X. Danco does no business in State X.
Paul filed a complaint against Danco in federal district court in State X on the basis of diversity jurisdiction, alleging $70,000 in property and personal injury damages. Danco was properly served with the complaint at its principal place of business.
Appearing specially in the State X federal district court, Danco filed a motion to dismiss the complaint on the grounds that the district court lacked both subject matter and personal jurisdiction and that Paul’s action could not proceed without joining Tom. The district court denied Danco’s motion.
Danco then filed a counterclaim against Paul to recover $20,000 in property damage to the truck Tom was driving at the time of the accident. Paul moved to dismiss Danco’s counterclaim on the ground that the district court lacked supplemental jurisdiction to hear the counterclaim. The district court granted Paul’s motion.
State X law provides that its courts may exercise jurisdiction over nonresidents “on any basis not inconsistent with the Constitution of the United States.”
- Did the district court rule correctly on Danco’s motion to dismiss Paul’s complaint? Discuss.
- Did the district court rule correctly on Paul’s motion to dismiss Danco’s counterclaim? Discuss.
SAMPLE ANSWER
I. DANCO’S (D) MOTION TO DISMISS PAUL’S (P) COMPLAINT
A. SUBJECT MATTER JURISDICTION
The term “subject matter jurisdiction” refers to a court’s competence to hear and determine cases of the general class and subject to which the proceedings in question belong. The most common congressional grants of subject matter jurisdiction are federal question jurisdiction and diversity jurisdiction.
Diversity Jurisdiction
The U.S. district courts have jurisdiction over actions when: (i) the parties to an action are citizens of different states or citizens of a state and citizens or subjects of a foreign state and (ii) the amount in controversy in the action exceeds $75,000. In general, when these requirements are met, a federal court may exercise jurisdiction over the action, regardless of the legal subject of the controversy. This is known as diversity-of-citizenship jurisdiction or, more commonly, diversity jurisdiction.
P filed a complaint against D in federal district court in State X on the basis of diversity jurisdiction, so we must analyze whether these requirements are met
Complete Diversity
Diversity jurisdiction requires complete diversity between opposing parties in a case. There is no diversity of citizenship if any plaintiff in the case is a citizen of the same state as any defendant in the case or if any plaintiff and any defendant are aliens. Two plaintiffs in a case may be from the same state without destroying diversity, as long as no plaintiff is from the same state as any defendant in the case. When the action is commenced, there must be complete diversity between opposing parties. The citizenship of each party must be determined to ensure complete diversity.
Citizenship of Parties
In general, a person is a domiciliary of the state in which he or she is present and intends to reside for an indefinite period. A person can only have one domicile at a time.
P
P is a State X resident and there are no facts to suggest that Paul intends to permanently move out of the state. Thus, P is a citizen of State X.
Corporations
A corporation may be a party to a diversity action. For diversity jurisdiction, “a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.” Thus, corporations, unlike individuals, may be citizens of more than one state for diversity purposes, and diversity jurisdiction will be destroyed if any opposing party is a citizen of any of the states in which the corporation has citizenship.
Here, D’s principal place of business is in State Z and its place of incorporation is State Y. As such, D is a citizen of both State Z and State Y.
Being a State X citizen, P is diverse from D, a State Z and State Y citizen, which means there is complete diversity.
Amount in Controversy
The amount in controversy must exceed the sum or value of $75,000, exclusive of interest, costs, and collateral effects of a judgment. The amount in controversy is determined at the time the action is commenced in federal court, or, if the action has been removed to federal court, at the time of the removal. The party seeking to invoke federal court jurisdiction must allege that the action satisfies the amount-in-controversy requirement. In general, a plaintiff’s good-faith assertion in the complaint that the action satisfies the amount-in-controversy requirement is sufficient.
In this case, P alleged $70,000 in property and personal injury damages. This amount does not exceed $75,000 so this element is not met.
Since the amount in controversy element is not satisfied, there is not proper subject matter jurisdiction. Therefore, the court erred in denying D’s motion to dismiss for lack of subject matter jurisdiction.
B. PERSONAL JURISDICTION
Personal jurisdiction refers to the judicial power over the persons or property involved in the cases or controversies before it. There are three general types of personal jurisdiction: (i) in personam jurisdiction; (ii) in rem jurisdiction; and (iii) quasi-in-rem jurisdiction.
In this case, D filed a motion to dismiss the complaint on the grounds that the district court lacked personal jurisdiction. It must be determined whether the federal district court had in personam jurisdiction over Corporation.
In Personam Jurisdiction
In personam jurisdiction is the power that a court has over an individual party. There are four bases for in personam jurisdiction: (i) voluntary presence; (ii) domicile; (iii) consent; and (iv) long-arm statutes.
Voluntary Presence
If a defendant is voluntarily present in the forum state and is served with process while there, then the court will have personal jurisdiction over the defendant.
Here, D was properly served with the complaint at its principal place of business in State Z. D specially appeared in the forum state, State X, to contest personal jurisdiction. D was not served in State X nor was it voluntarily present there.
Domicile
If authorized by statute, a state can have jurisdiction over a person who is domiciled within the state in which the court is located, even if the person is temporarily absent from the state.
As discussed above, D is a citizen of both State Y and State Z, but not State X. As such, even if there was a statute authorizing domicile as a basis for in personam jurisdiction in this case, D is not subject to personal jurisdiction in State X on the ground of domicile.
Consent
Personal jurisdiction can be established by a party’s consent. Defendants can impliedly or expressly consent. A defendant can impliedly consent through its conduct, such as filing a counterclaim or driving a vehicle within a state. Voluntary appearance of the defendant in court automatically subjects the defendant to personal jurisdiction, unless he is present to object to personal jurisdiction.
Here, D appeared specially in State X to contest personal jurisdiction, so it would appear that there is no consent due to a voluntary appearance. However, D had Tom (T) driving through State X to make a customer delivery in State Y at the time of the accident. D also filed a counterclaim in State X against P to recover $20,000 in property damage to the truck T was driving at the time of the accident. The driving of the vehicle in State X and the counterclaim demonstrate implied consent on the part of D. Therefore, in personam jurisdiction is established by D’s consent.
Long-Arm Statute
Most states have enacted statutes that authorize personal jurisdiction over nonresidents who engage in some activity in the state. In many states, the long-arm statute authorizes jurisdiction to the extent permissible under the Due Process Clause.
Here, State X law provides that its courts may exercise jurisdiction over nonresidents “on any basis not inconsistent with the Constitution of the United States.” State X’s long-arm statute authorizes jurisdiction to the extent permissible under the Due Process Clause, which will be evaluated below.
Due Process Requirements
Due process requirements are satisfied if the nonresident defendant has certain minimum contacts with the forum state such that the maintenance of the action does not offend traditional notions of fair play and substantial justice.
Minimum Contacts
Presently, any attempt to gain in personam jurisdiction, under whatever basis, is subject to the International Shoe requirement of minimum contacts.
Purposeful Availment
A defendant’s contacts with the forum state must be purposeful and substantial, such that the defendant should reasonably anticipate being taken to court there. Foreseeability depends on whether a defendant recognizes or anticipates that by running his business, he runs the risk of being party to a suit in a particular state.
At time of the accident, T was working as a delivery truck driver for D and was driving through State X to make a delivery to a customer located in State Y. Although D does no business in State X, it uses State X for customer deliveries to support its business. Therefore, D purposefully availed itself of the benefits of State X.
Specific and General Jurisdiction
The scope of the contacts necessary for the assertion of personal jurisdiction depends on the relationship that the cause of action has with the forum state. When a cause of action does not arise out of or relate to the defendant’s contacts with the forum, the court must resort to general jurisdiction. To determine whether a foreign corporation is subject to a state’s general jurisdiction, the proper inquiry is whether a corporation’s affiliations with the forum state are so “continuous and systematic” as to render the corporation essentially “at home” in the forum state. A corporate defendant is always “at home” in the state of the corporation’s place of incorporation and, if different, the state of its principal place of business. In exceptional cases, a corporate defendant’s operations in another forum may be so substantial and of such a nature as to render the corporation “at home” in that state even if the state is not the corporation’s place of incorporation or principle place of business, but such cases are rare. However, even when general jurisdiction is unavailable, the court will have specific jurisdiction over a defendant when the cause of action arises out of or closely relates to a defendant’s contact with the forum state.
Here, D’s principal place of business is in State Z and its place of incorporation is State Y. Additionally, D lacks the level of “continuous and systematic” contacts with State X that could render it essentially “at home” in State X. Therefore, State X would lack general jurisdiction over D. However, the accident between P and T occurred in State X while T was driving through the state to make a customer delivery on behalf of D in the neighboring state. Therefore, because the cause of action arose out of State X, there is specific jurisdiction, and the court need not resort to general jurisdiction.
In sum, minimum contacts between D and State X have been established.
Fair Play and Substantial Justice
A court must determine if maintenance of the action would “offend traditional notions of fair play and substantial justice.” Courts consider various factors, including: (i) the interest of the forum state in adjudicating the matter; (ii) the burden on the defendant of appearing in the case; (iii) the interest of the judicial system in the efficient resolution of controversies; and (iv) the shared interests of the states in promoting common social policies.
Forum State Interest
In this case, State X, the forum state, has a high interest in adjudicating personal injury and property damages for its own resident, P. State X also has an interest in hearing causes of action that arise within its borders. Thus, the forum state’s interest is high.
Burden on Defendant
D crosses state lines to make customer deliveries and its principal place of business is located adjacent to the forum state. D would not have a difficult time traveling to State X to defend itself. Although D does not do business in State X, its drivers regularly drive through State X. Therefore, the burden on D is minimal.
Interest of Judicial System
D, a business with delivery trucks, can travel easily to State X to defend itself. State X has a high interest in adjudicating cases that arose within its borders.
Shared Interests of States
The plaintiff, truck driver, witnesses, and evidence are all located in State X. D uses State X for its delivery route for its customers in State Y. This all makes State X a more suitable forum when compared to State Y or State Z.
Considering the above factors, it is likely that a court would not find the action to “offend traditional notions of fair play and substantial justice.” Therefore, Due Process was not violated due to the lack of minimum contacts between D and State X, and there is no violation of the traditional notions of fair play and substantial justice.
In sum, the district court did correctly deny D’s motion to dismiss the complaint for lack of personal jurisdiction.
C. COMPULSORY JOINDER
A person who is subject to service of process and whose joinder will not deprive the court of subject matter jurisdiction or destroy venue must be joined as a party if: (i) complete relief cannot be provided to existing parties in the absence of that person; or (ii) disposition in the absence of that person may impair the person’s ability to protect his interest; or (iii) the absence of that person would leave existing parties subject to a substantial risk of multiple or inconsistent obligations. A necessary party is therefore a person whose participation in the lawsuit is necessary for a just adjudication.
Here, D has asserted that the case cannot proceed without joining T, who was the driver of the truck involved in the accident with P. D may be liable for T’s actions under the theory of respondeat superior. Regardless if T is joined in the action, P can recover from D and complete relief can be granted to P without T’s presence. The facts do not indicate that T will not be able to protect his own interests if he is not joined. Additionally, there is nothing in the facts to suggest D would be subject to a risk of multiple or inconsistent obligations if T were joined.
Therefore, T is not a necessary party and the court correctly denied D’s motion to dismiss on this ground.
II. P’S MOTION TO DISMISS D’S COUNTERCLAIM
Compulsory Counterclaim
A counterclaim is a claim for relief made against an opposing party after an original claim has been made. A pleading is required to state as a counterclaim any claim that, at the time of service, the pleader has against an opposing party if the claim arises out of the same transaction or occurrence that is the subject matter of the opposing party’s claim and does not require adding another party over whom the court cannot acquire jurisdiction.
A federal court must have subject matter jurisdiction over the counterclaim. By definition, though, a compulsory counterclaim arises out of the same transaction or occurrence as does the original claim before the court. Thus, a compulsory counterclaim will likely fall under the supplemental jurisdiction of the federal court and not need independent subject matter jurisdiction from the original claim. A compulsory counterclaim does not have to meet the statutory jurisdictional amount requirement to be considered by the court. A district court with jurisdiction may exercise “supplemental jurisdiction” over additional claims over which the court would not independently have subject-matter jurisdiction but that arise out of a “common nucleus of operative fact” such that all claims should be tried together in a single judicial proceeding.
In this case, D had to assert its counterclaim arising from the accident with P and T because the facts and witnesses are identical to the suit between P and D. If D did not assert its counterclaim, then the counterclaim would be waived. This counterclaim arises from the same operative facts as P’s suit. Therefore, the district court would have supplemental jurisdiction over D’s counterclaim against P to recover $20,000 in property damages, assuming the court had subject matter jurisdiction over P’s initial claim.
If the district court had subject matter jurisdiction over P’s initial claim, the district court would have erred in granting P’s motion to dismiss D’s counterclaim on the ground that the district court lacked supplemental jurisdiction. However, because the district court did not have subject matter jurisdiction over P’s claim upon which supplemental jurisdiction over D’s counterclaim would be based, the district court did not err and both claims must be dismissed as the district court does not otherwise have independent subject matter jurisdiction over D’s counterclaim.
Personal Jurisdiction – Traditional bases.
- In personam personal jurisdiction is the court’s ability to exercise power over a particular defendant.
- The traditional bases for personal jurisdiction are domicile, presence in the state when served, and consent.
General Jurisdiction
General Jurisdiction.
- For general jurisdiction, the court will look to see if the defendant is “at home” in the forum state (i.e, domiciled in, principal place of business in, or incorporated in)
Long Arm Statute and Limitations.
Long Arm Statute and Limitations.
- If no traditional bases exists, the plaintiff must look to see if the state has a long arm statute that would allow personal jurisdiction over an out-of-state defendant.
Minimum Contacts
- Minimum contacts requires a showing of purposeful availment and foreseeability.
- -The court must find that D purposefully availed itself of the privilege of conducting activities in the forum state, thus invoking the benefits and protections of the laws
- -The defendant must also know or reasonably anticipate that its activities in the forum state render it foreseeable that it may be hauled into court there.
Specific Jurisdiction
Specific Jurisdiction
- For specific jurisdiction the claim must be related to the defendant’s contacts with the forum state.
Subject Matter Jurisdiction
Subject Matter Jurisdiction
- [i] Subject matter jurisdiction refers to the court’s ability to hear a type of case.
- [ii] The lack of subject matter jurisdiction is not waived by failing to raise it at trial; [iii] it may also be raise at the first time on appeal.
- [iv]There are two main bases for original federal subject matter jurisdiction: federal question jurisdiction and diversity jurisdiction.
- [v]Each claim asserted in federal court must have an independent basis for federal subject matter jurisdiction, [vi] but note that, if a claim does not have such a basis, the court may be able to exercise supplemental jurisdiction.
Federal Question Jurisdiction
Federal Question
Federal question jurisdiction requires that the plaintiff’s well pleaded complaint sets forth a cause of action that arises under federal law.
Diversity Jurisdiction
Diversity Jurisdiction
- [i] Diversity jurisdiction requires that the plaintiff’s well-pleaded complaint sets forth a cause of action that exceeds $75,000, excluding the interest that is not part of the controversy and costs.
- [ii] The rule of complete diversity requires that each plaintiff be of diverse state citizenship from every defendant.
- (i)individual; (ii) corporation
Compulsory Joinder
Compulsory Joinder
- Compulsory joinder looks to see if the absentee should be and can be joined; if the absentee cannot be joined, the next step is to determine whether the action should proceed without the absentee.
- Absentee (A) should be joined when (1) a complete relief cannot be accorded among the other parties to the lawsuit without the absentee’s presence; or (2) the absentee has such an interest in the subject matter of the lawsuit that A’s absence will, as a practical matter, impact or impede A’s ability to protect that interest or leave the other parties at substantial risk of incurring multiple or inconsistent obligations.
Supplemental jurisdiction over D’s counterclaim against P
- For the federal court to invoke supplemental jurisdiction over a claim, there must be one claim in a federal court that properly invokes either diversity jurisdiction, or a permissive counterclaim, which generally must have an independent basis for federal subject matter jurisdiction.
- —A pleading is required to state as a counterclaim any claim that, at the time of service, the pleader has against an opposing party if the claim arises out of the same transaction or occurrence that is the subject matter of the opposing party’s claim and does not require adding another party over whom the court cannot acquire jurisdiction.
