MAS v. PERRY United States Court of Appeals, Fifth Circuit 489 F.2d 1396 (1974) (rehearing and cert. denied)

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1 MAS v. PERRY United States Court of Appeals, Fifth Circuit 489 F.2d 1396 (1974) (rehearing and cert. denied) Ainsworth, Circuit Judge [unanimous]. This case presents questions pertaining to federal diversity jurisdiction under 28 U.S.C. 1332, which... provides for original jurisdiction in federal district courts of all civil actions that are between citizens of different States or citizens of a State and citizens of foreign states and in which the amount in controversy is more than $10,000 [the minimum amount then required]. Appellees [i.e., prevailed in trial court] Jean Paul Mas, a citizen of France, and Judy Mas were married at her home in Jackson, Mississippi. Prior to their marriage, Mr. and Mrs. Mas were graduate assistants, pursuing coursework as well as performing teaching duties, for approximately nine months and one year, respectively, at Louisiana State University in Baton Rouge, Louisiana. Shortly after their marriage, they returned to Baton Rouge to resume their duties as graduate assistants at LSU. They remained in Baton Rouge for approximately two more years, after which they moved to Park Ridge, Illinois. At the time of the trial in this case, it was their intention to return to Baton Rouge while Mr. Mas finished his studies for the degree of Doctor of Philosophy. Mr. and Mrs. Mas were undecided as to where they would reside after that. Upon their return to Baton Rouge after their marriage, appellees rented an apartment from appellant Oliver H. Perry, a citizen of Louisiana. This appeal arises from a final judgment entered on a jury verdict awarding $5,000 to Mr. Mas and $15,000 to Mrs. Mas for damages incurred by them as a result of the discovery that their bedroom and bathroom contained twoway mirrors and that they had been watched through them by the appellant during three of the first four months of their marriage. At the close of the appellees case at trial, appellant [lost in trial court] made an oral motion to dismiss for lack of jurisdiction. The motion was denied by the district court [i.e., trial judge]. Before this [appellate] Court, appellant challenges the final judgment below solely on jurisdictional grounds, contending that appellees failed to prove diversity of citizenship among the parties and that the requisite jurisdictional amount is lacking with respect to Mr. Mas. It has long been the general rule that complete diversity of parties is required in order that diversity jurisdiction obtain; that is, no party on one side may be a citizen of the same State as any party on the other side. This determination of one s State Citizenship for diversity purposes is controlled by federal law, not by the law of any State. As is the case in other areas of federal jurisdiction, the diverse citizenship among adverse parties must be present at the time the complaint is filed. Jurisdiction is unaffected by subsequent changes in the citizenship of the parties. The burden of pleading the diverse citizenship is upon the party invoking federal jurisdiction. To be a citizen of a State within the meaning of section 1332, a natural person must be both a citizen of the United States, and a domiciliary of that State. For diversity purposes, citizenship means domicile; mere residence in the State is not sufficient. A person s domicile is the place of [1] his true, fixed, and permanent home and principal establishment, and [2] to which he has the intention of returning whenever he is absent therefrom... A change of domicile may be effected only by a combination of two elements: (a) taking up residence in a different domicile with (b) the intention to remain there.

2 It is clear that at the time of her marriage, Mrs. Mas was a domiciliary of the State of Mississippi. On the other hand, if Mrs. Mas s domicile were Louisiana, she would become a Louisiana citizen for diversity purposes and could not bring suit against appellant, also a Louisiana citizen, on the basis of diversity jurisdiction. An American woman is not deemed to have lost her United States citizenship solely by reason of her marriage to an alien. Similarly, we conclude that for diversity purposes a woman does not have her domicile or State Citizenship [state domicile] changed solely by reason of her marriage to an alien. [Italics added to this ]. Mrs. Mas s Mississippi domicile was disturbed neither by her year in Louisiana prior to her marriage nor as a result of the time she and her husband spent at LSU after their marriage, since for both periods she was a graduate assistant at LSU. Though she testified that after her marriage she had no intention of returning to her parents home in Mississippi, Mrs. Mas did not effect a change of domicile since she and Mr. Mas were in Louisiana only as students and lacked the requisite intention to remain there. Until she acquires a new domicile, she remains a domiciliary, and thus a citizen, of Mississippi. 1 Appellant also contends that Mr. Mas s claim should have been dismissed for failure to establish the requisite jurisdictional amount for diversity cases of more than $10,000. In their complaint Mr. and Mrs. Mas alleged that they had each been damaged in the amount of $100,000. As we have noted, Mr. Mas ultimately recovered [only] $5,000. It is well settled that the amount in controversy is determined by the amount claimed by the plaintiff in good faith. Federal jurisdiction is not lost because a judgment of less than the jurisdictional amount is awarded. That Mr. Mas recovered only $5,000 is, therefore, not compelling. As the [US] Supreme Court stated: The sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of the plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. His good faith in choosing the federal forum is open to challenge not only by resort to the face of his complaint, but by the facts disclosed at trial, and if from either source it is clear that his claim never could have amounted to the sum necessary to give jurisdiction there is no injustice in dismissing the suit. Having heard the evidence presented at the trial, the district court concluded that the appellees properly met the requirements of section 1332 with respect to jurisdictional amount. Upon examination of the record in this case, we are also satisfied that the requisite amount was in controversy. 1 The original complaint in this case was filed within several days of Mr. and Mrs. Mas s realization that they had been watched through the mirrors [in Louisiana], quite some time before they moved to Park Ridge, Illinois. Because the district court s jurisdiction is not affected by actions of the parties subsequent to the commencement of the suit, the testimony concerning Mr. and Mrs. Mas s moves after that time is not determinative of the issue of diverse citizenship...

3 Thus the power of the federal district court to entertain the claims of appellees in this case stands on two separate legs [alternatives] of diversity jurisdiction: a claim by an alien against a State citizen; and an action between citizens of different States. Thus, since the district court had jurisdiction of Mr. Mas s action, sound judicial administration militates strongly in favor of federal jurisdiction of Mrs. Mas s claim. Affirmed. Notes and Questions: 1. Throughout this e-book, most citations to authority have been omitted. Bracketed material, page numbers, and lettered footnotes have been inserted by the prof. Hyperlinks to materials, e.g., Day Two Gunn s 1338a patent statute, are provided; however, you need not read them if the case text otherwise makes sense. Be cautious, however, to read the hyperlinks to and assigned codes/rules listed in each day s Reading assignment (which will not necessarily be linked in the related case). 2. Day 1 read Mas for the in-class How to Prepare for Civ Pro class session. That will yield a sense of why the case and companion Reading rules are assigned. Be sure to also read the related Judicial Code sections. There is no video assigned for Day 1. But the Day 2 video will be discussed, so that you ll understand why you need to watch it before your Day 2 class. The first day s objective is to focus on how to assemble the pieces needed for each day s Civ Pro assignment. 3. Day 2 read Mas, with a view toward learning the two elements of Diversity Jurisdiction. What are they? How do they apply? 4. Mas deals with an individual s domicile. What about corporate entities? See hyperlinked 28 USC 1332(c)(1) (not subparts) on the e-book s Rules webpage. How principal place of business is defined by the Supreme Court will be addressed in Video 1. Other associations? One looks to every member of an unincorporated association, to ensure that none is domiciled in the same state as an adverse party. For example: a limited partnership association although possessing some of the characteristics of a corporation and deemed a citizen by the law creating it may not be deemed a citizen under the jurisdictional rule established for corporations. Carden v. Arkoma Associates, 494 U.S. 185, 189 (1990). 5. Aggregation: Individual claims normally cannot be aggregated. For example, a defendant hits a car with a driver and passenger. The driver is not hurt, but her $40,000 car is totaled. The passenger has $40,000 in claimed personal injury damages. They are free to join together as plaintiffs in a single lawsuit in state court. But they cannot aggregate their respective claims, so as to achieve the $75,000 minimum amount in controversy for federal diversity purposes. (Same result if one P sues two Ds whose cars hit her.) Compare the Class Action Fairness Act, 28 USC 1332(d)(6), which requires aggregation. What about united claims? As succinctly articulated in Urbino v. Orkin Services of California, Inc., 726 F.3d 1118, 1122 (9th Cir. 2013):... The... claims of class members can be aggregated to meet the jurisdictional amount requirement only when they unite to enforce a single title or right in which they have a common and undivided interest. To determine the character of that interest, courts look to the source of plaintiffs claims. If the claims are derived from rights that they hold in group status, then the claims are common and undivided. If not, the claims are separate and distinct. But simply because claims may have questions of fact and law common to the group does not mean they have a common and undivided interest. Only where the claims can strictly be asserted by pluralistic entities as such, or, stated differently, the defendant owes an obligation to the group of plaintiffs as a group and not to the individuals severally, will a common and undivided interest exist.

4 GUNN v. MINTON United States Supreme Court 133 S.Ct (2013) Roberts, Chief Justice [unanimous]. Federal courts have exclusive jurisdiction over cases arising under any Act of Congress relating to patents. 28 U.S.C. 1338(a). The question presented is whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court. I In the early 1990s, respondent Vernon Minton developed a computer program and telecommunications network designed to facilitate securities trading. In March 1995, he leased the system known as the Texas Computer Exchange Network, or TEXCEN to R.M. Stark & Co., a securities brokerage. A little over a year later, he applied for a patent for an interactive securities trading system that was based substantially on TEXCEN. The U.S. Patent and Trademark Office issued the patent in January Patent in hand, Minton filed a patent infringement suit in Federal District Court against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc. He was represented by Jerry Gunn and the other petitioners. NASD and NASDAQ moved for summary judgment on the ground that Minton s patent was invalid under the on sale bar. That [Patent Code] provision specifies that an inventor is not entitled to a patent if the invention was... on sale in [the United States], more than one year prior to the date of the application, and Minton had leased TEXCEN to Stark more than one year prior to filing his patent application. [T]he District Court granted the summary judgment motion and declared Minton s patent invalid. Minton appealed to the U.S. Court of Appeals for the Federal [one of a dozen] Circuit[s]. That court affirmed. Minton, convinced that his attorneys failure to raise the experimental-use argument [exception to the on sale bar] had cost him the lawsuit and led to invalidation of his patent, brought this malpractice action in Texas state court. His former lawyers defended on the ground that the lease to Stark was not, in fact, for an experimental use, and that therefore Minton s patent infringement claims would have failed even if the experimental-use argument had been timely raised. The trial court agreed, holding that Minton had put forward less than a scintilla of proof that the lease had been for an experimental purpose. It [Texas state court] accordingly granted summary judgment to Gunn and the other lawyer [malpractice] defendants. On appeal [from the Texas court defense judgment], Minton raised a new argument: Because his legal malpractice claim was based on an alleged error in a patent case, it aris[es] under federal patent law for purposes of 28 U.S.C. 1338(a). And because, under 1338(a), [n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, the Texas court where Minton had originally brought his malpractice claim lacked subject matter jurisdiction to decide the case. Accordingly, Minton argued, the trial court s order should be vacated and the case dismissed, leaving Minton free to start over in the Federal District Court. A divided panel of the Court of Appeals of Texas rejected Minton s argument. [I]t held that the federal interests implicated by Minton s state law claim were not sufficiently substantial to trigger 1338 arising under jurisdiction. It also held that finding exclusive

5 federal jurisdiction over state legal malpractice actions would disturb the balance of federal and state judicial responsibilities. The Supreme Court of Texas reversed, relying heavily on a pair of cases from the U.S. Court of Appeals for the Federal Circuit. The [Texas Supreme] Court concluded that Minton s claim involved a substantial federal issue because the success of Minton s malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar. Adjudication of Minton s claim in federal court was consistent with the appropriate balance between federal and state judicial responsibilities, it held, because the federal government and patent litigants have an interest in the uniform application of patent law by courts well-versed in that subject matter. The dissenting justices would have held that the federal issue was neither substantial nor disputed, and that maintaining the proper balance of responsibility between state and federal courts precluded relegating state legal malpractice claims to federal court. 2 We granted certiorari. II There is no dispute that the Constitution permits Congress to extend federal court jurisdiction to a case such as this one; the question is whether Congress has done so. Congress has authorized the federal district courts to exercise original jurisdiction in all civil actions arising under the Constitution, laws, or treaties of the United States, 28 U.S.C. 1331, b and, more particularly, over any civil action arising under any Act of Congress relating to patents, 1338(a).... For cases falling within the patent-specific arising under jurisdiction of 1338(a), however, Congress has not only provided for federal jurisdiction but also eliminated state jurisdiction, decreeing that [n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents. 1338(a). To determine whether jurisdiction was proper in the Texas courts, therefore, we must determine whether it would have been proper in a federal district court whether, that is, the case aris [es] under any Act of Congress relating to patents. For statutory purposes, a case can aris[e] under federal law in two ways. Most directly, a case arises under federal law when federal law creates the cause of action asserted. Minton s original patent infringement suit against NASD and NASDAQ, for example, arose under federal law in this manner because it was authorized by 35 U.S.C. 271, 281 [governing patents]. But even where a claim finds its origins in state rather than federal law as Minton s legal malpractice claim indisputably does we have identified a special and small category of cases in which arising under jurisdiction still lies. In outlining the contours of this slim category, we do not paint on a blank canvas. Unfortunately, the canvas looks like one that Jackson Pollock got to first. c In an effort to bring some order to this unruly doctrine several Terms ago, we condensed our prior cases into the following inquiry: Does the state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities? 2 If the various judges were so divided, one should not be surprised that a 1L who is not yet comfortable with ambiguity might feel hopelessly confused, because s/he is still focused on articulating the right answer, as opposed to the far more important matter: how the ultimate answer was derived. b Expressing the general availability of federal question jurisdiction, as of the 1875 statute enabling the federal courts to exercise the Constitution s judicial power over cases arising under federal law. c An influential American painter and major figure in the abstract expressionist movement well known for his unique style of drip painting. See pictures on Wikipedia.

6 That is, federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirements are met, we held, jurisdiction is proper because there is a serious federal interest in claiming the advantages thought to be inherent in a federal forum, which can be vindicated without disrupting Congress s intended division of labor between state and federal courts. d III [I]t is clear that Minton s legal malpractice claim does not arise under federal patent law. e Indeed, for the reasons we discuss, we are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of 1338(a). Although such cases may necessarily raise disputed questions of patent law, those cases are by their nature unlikely to have the sort of significance for the federal system necessary to establish [federal question] jurisdiction. A To begin, we acknowledge that resolution of a federal patent question is necessary to Minton s case. To prevail on his legal malpractice claim, Minton must show that he would have prevailed in his [suit one] federal patent infringement case if only petitioners had timely made an experimental-use argument on his behalf. That will necessarily require application of patent law to the facts of Minton s case. f B The federal [patent validity] issue is also actually disputed here indeed, on the merits, it is the central point of dispute. Minton argues that the experimental-use exception properly applied to his lease to Stark, saving his patent from the on-sale bar; [although] petitioners argue that it did not. This is just the sort of dispute... respecting the... effect of [federal] law that Grable envisioned. C Minton s argument founders on Grable s next requirement, however, for the federal issue in this case is not substantial in the relevant sense. In reaching the opposite conclusion, the Supreme Court of Texas focused on the importance of the issue to the plaintiff's case and to the parties before it ( because the success of Minton s malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar, we hold that it is a substantial federal issue ). As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim necessarily raise[s] a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole. Here, the federal issue carries no such significance. Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton s lawyers had raised a timely experimental-use argument, would the result in the patent d Referring to the four requirements (A through D below) collected in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308 (2005). e The claimed clarity is masked by the facts that: (1) the lower courts, in the Gunn s prior state and federal decisions, were divided; and (2) that this case was not resolved until decided by the U.S. Supreme Court. f Although not dispositive of whether his subsequent malpractice suit arises under federal patent law.

7 infringement proceeding have been different? No matter how the state courts resolve that hypothetical [patent] case within a [malpractice] case, it will not change the real-world result of the prior federal patent litigation. Minton s patent will remain invalid. Nor will allowing state courts to resolve these [patent malpractice] cases undermine the development of a uniform body of [patent] law. Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit. In resolving the nonhypothetical patent questions those cases present, the federal courts are of course not bound by state court case within a case patent rulings. In any event, the state court case-within-a-case inquiry asks what would have happened in the prior federal proceeding if a particular argument had been made. In answering that question, state courts can be expected to hew closely to the pertinent federal precedents. It is those precedents, after all, that would have applied had the argument been made. ( State courts adjudicating civil RICO claims will... be guided by federal court interpretations of the relevant federal criminal statutes, just as federal courts sitting in diversity are guided by state court interpretations of state law ). Nor can we accept the suggestion that the federal courts greater familiarity with patent law means that legal malpractice cases like this one belong in federal court. But the possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law. There is no doubt that resolution of a patent issue in the context of a state legal malpractice action can be vitally important to the particular parties in that case. But something more, demonstrating that the question is significant to the federal system as a whole, is needed. That is missing here. D It follows from the foregoing that Grable s fourth requirement is also not met. That requirement is concerned with the appropriate balance of federal and state judicial responsibilities. We have already explained the absence of a substantial federal issue within the meaning of Grable. The States, on the other hand, have a special responsibility for maintaining standards among members of the licensed professions. Their interest... in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts. We have no reason to suppose that Congress in establishing exclusive federal jurisdiction over patent cases meant to bar from state courts [the ability to adjudicate] state legal malpractice claims simply because they require resolution of a hypothetical patent issue. As we recognized a century ago, [t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subjectmatter of the controversy. In this case, although the state courts must answer a question of patent law to resolve Minton s legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton s patent. Accordingly, there is no serious federal interest in claiming the advantages thought to be inherent in a federal forum. Section 1338(a) does not deprive the state courts of subject matter jurisdiction. The judgment of the Supreme Court of Texas is reversed.

8 It is so ordered. Notes and Questions: 1. T. B. Harms Co. v. Eliscu, 339 F.2d 823 (2d. Cir. 1964) is an often-cited federal question appellate decision. The author began his analysis in a case permeated with patent issues as follows: A layman would doubtless be surprised to learn that an action wherein the purported sole owner of a copyright alleged that persons claiming partial ownership had recorded their claim in the Copyright Office and had warned his licensees against disregarding their interests was not one arising under any Act of Congress relating to copyrights over which 28 U.S.C gives the federal courts exclusive jurisdiction. Yet precedents going back for more than a century teach that lesson and lead us to affirm dismissal of the complaint. Judge Friendly concluded his analysis with the following summation: Mindful of the hazards of formulation in this treacherous area, we think that an action arises under the Copyright Act if and only if the complaint is for [1] a remedy expressly granted by the Act, e.g., a suit for infringement or for the statutory royalties for record reproduction, 17 U.S.C. 101, [2] or asserts a claim requiring construction of the Act, or, [3] at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim. The general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this last test. [1] and [2] are comparatively straightforward applications of Federal Question (FQ) jurisdiction. [3] is ever-murky. You are not expected to remember the Grable factors presented in Gunn. But they do provide insight into the problem courts face when assessing whether FQ jurisdiction exists in this third context. One must sometimes resort to the federal courts of appeal to glean a useful rubric for assessing whether a scenario like Gunn s malpractice can be shoehorned into this third option. The Eleventh Circuit s 2013 MDS v. RAD Source Technologies opinion, for example, conveniently collates the related analyses of three US Supreme Court decisions: the Supreme Court has identified three factors to assist in this inquiry. First, a pure question of law is more likely to be a substantial federal question. Second, a question that will control many other cases is more likely to be a substantial federal question. Third, a question that the government has a strong interest in litigating in a federal forum is more likely to be a substantial federal question. Third, a question that the government has a strong interest in litigating in a federal forum is more likely to be a substantial federal question. 720 F.3d 833, at 842 [authorities omitted]. 2. State and federal courts typically have concurrent subject matter jurisdiction (SMJ) to hear the same claim. In the Diversity Jurisdiction context, Mas will demonstrate that suits seeking more than $75,000 between diverse parties fall within the concurrent SMJ of both

9 judicial systems. A Diversity-based federal suit is, after all, one that arises under state (not federal) law. A Federal Question-based suit is grounded on federal law the vast majority of such cases being triggered by P s claim that D violated a federal statute. In most cases, federal statutes create an actionable claim, with no expressed limitation on where the case may be filed. When the enabling statute is silent on this point, the presumption of concurrent state and federal SMJ authorizes the resolution of a federal claim in state court. Exclusive SMJ is the exception. To promote uniformity of decision, Congress has decided to limit the resolution of certain cases to federal courts only. Examples include bankruptcy, federal antitrust, copyright, patent, and trademark claims. See, e.g., Judicial Code section 1338(a). State courts do not have the power to hear such claims.

10 LOUISVILLE & NASHVILLE RAILROAD COMPANY v. MOTTLEY United States Supreme Court 211 U.S. 149 (1908) Statement by Mr. Justice Moody: The appellees (husband and wife), being residents and citizens of Kentucky, brought this suit against the appellant, a railroad company and a citizen of the same state to compel the specific performance of the following contract: Louisville, Ky., Oct. 2d, E. L. Mottley and wife, Annie E. Mottley, have this day released company from all damages or claims for damages for injuries received by them in consequence of a collision of trains on the railroad of said company, [which] hereby agrees to issue free passes on said railroad to said E. L. & Annie E. Mottley for the remainder of the lives of said Mottley and wife. Source: Association of American Law Schools Civil Procedure webpage; reprinted with permission of Professors Aaron Caplan and Tyler Ochoa. The bill alleged that in September, 1871, plaintiffs, while passengers upon the defendant railroad, were injured by the defendant s negligence, and released their respective claims for damages in consideration of the agreement for transportation during their lives, expressed in the contract. It is alleged that the contract was performed by the defendant up to January 1, 1907, when the defendant [unexpectedly] declined to renew the [annual] passes. The bill then alleges that the refusal to comply with the contract was based solely upon the act of Congress of June 29, 1906, which forbids the giving of free passes or free transportation. The bill further alleges: First, that the act of Congress referred to does not prohibit the giving of passes under the circumstances of this case; and, second, that, if the law is to be construed as prohibiting such passes, it is in conflict with the 5th Amendment of the Constitution, because it deprives the plaintiffs of their property without due process of law. The defendant demurred [objected] to the bill [complaint]. The judge of the circuit court overruled the demurrer, entered a decree for the [plaintiffs ] relief prayed for, and the defendant appealed directly to this court. Mr. Justice Moody, after making the foregoing statement, delivered the [unanimous] opinion of the court: Two questions of law were brought here by appeal. They are, first, whether that part of the act of Congress of June 29, 1906, which forbids the giving of free passes [which thus]

11 makes it unlawful to perform a contract for transportation of persons who before the passage of the act, had accepted such contract in satisfaction of a valid cause of action against the railroad; and, second, whether the statute is in violation of the 5th Amendment of the Constitution of the United States. We do not deem it necessary, however, to consider either of these questions, because, in our opinion, the court below was without jurisdiction of the cause. Neither party has questioned that jurisdiction, but it is the duty of this court to see to it that the jurisdiction of the [trial] court, which is defined and limited by statute, is not exceeded. This duty we have frequently performed of our own motion [i.e., when the defendant has not objected to the trial court s jurisdiction]. There was no diversity of citizenship, and it is not and cannot be suggested that there was any ground of jurisdiction, except that the case was a suit... arising under the Constitution or laws [a statute] of the United States. [A] suit arises under the Constitution and laws of the United States only when the plaintiff s statement of his own cause of action shows that it is based upon those laws or that Constitution. It is not enough that the plaintiff alleges some anticipated defense to his cause of action, and asserts that the defense is invalidated by some provision of the Constitution of the United States. Although such allegations show that very likely, in the course of the litigation, a question under the Constitution would arise, they do not show that the suit, that is, the plaintiff s original cause of action, arises under the Constitution [italics added]. In [another case,] [t]he plaintiff then alleged, for the purpose of showing jurisdiction, that the defendant would set up in defense certain laws of the United States. The cause was held to be beyond the jurisdiction of the [trial] court, the court saying : It would be wholly unnecessary and improper, in order to prove complainant s cause of action, to go into any matters of defense which the defendants might possibly set up, and then attempt to reply to such defense, and thus, if possible, to show that a Federal question might or probably would arise in the course of the trial of the case. To allege such defense and then make an answer to it before the defendant has the opportunity to itself plead or prove its own defense is inconsistent with any known rule of pleading, so far as we are aware, and is improper. The rule is that the complainant shall be confined to a statement of its cause of action, leaving to the defendant to set up in his answer what his defense is, and... imposing upon the defendant the burden of proving such [federal] defense. Conforming itself to that rule, the complainant would not, in the assertion or proof of its cause of action, bring up a single Federal question. The presentation of its cause of action would not show that it was one arising under the Constitution or laws of the United States. The application of this rule to the case at bar is decisive against the jurisdiction of the [trial] court. It is ordered that the judgment be reversed and the case remitted with instructions to dismiss the suit for want of jurisdiction.

12 Notes & Questions: Prior to this case being dismissed, did the defendant object to the trial court s jurisdiction? If no, who did, and why? 2. The husband and wife s complaint alleged a breach of contract, a federal statute, and a constitutional violation. Why would their complaint not be a case arising under federal law? 3. The 10th Amendment limits federal court subject matter jurisdiction (SMJ). It provides that the powers not delegated to the United States [e.g., its federal courts] by the Constitution... are reserved to the states... States thus have the general power to hear and resolve all claims. Thus, P normally does not have to plead SMJ in her state-court complaint. Federal courts possess limited SMJ, largely attributable to the above constitutional limit, whereby the federal government can (at least theoretically) act only pursuant to express constitutional provisions. 4. Judicial Code 1331 also authorizes jurisdiction over cases arising under the U.S. Constitution. The Mottleys were unsuccessful in doing so. So how does one allege such a case? This question was not authoritatively resolved until the Supreme Court s decision in Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971). There was then no federal statute available to the P whose apartment and person were offensively ransacked. P thus sued for damages, directly under the Fourth Amendment, therein alleging an unreasonable search and seizure. This decision occurred almost full century after Congress passed the 1875 statute granting general federal question jurisdiction to the federal courts. Until then, the vast majority of federal cases were Diversity-based cases like the one which follows (Mas). This inadvertently promoted forum shopping between state and federal courts (the theme of our Day 9 Governing Law class).

13 MAS v. PERRY United States Court of Appeals, Fifth Circuit 489 F.2d 1396 (1974) (rehearing and cert. denied) Ainsworth, Circuit Judge [unanimous]. This case presents questions pertaining to federal diversity jurisdiction under 28 U.S.C. 1332, which... provides for original jurisdiction in federal district courts of all civil actions that are between citizens of different States or citizens of a State and citizens of foreign states and in which the amount in controversy is more than $10,000 [the minimum amount then required]. Appellees [i.e., prevailed in trial court] Jean Paul Mas, a citizen of France, and Judy Mas were married at her home in Jackson, Mississippi. Prior to their marriage, Mr. and Mrs. Mas were graduate assistants, pursuing coursework as well as performing teaching duties, for approximately nine months and one year, respectively, at Louisiana State University in Baton Rouge, Louisiana. Shortly after their marriage, they returned to Baton Rouge to resume their duties as graduate assistants at LSU. They remained in Baton Rouge for approximately two more years, after which they moved to Park Ridge, Illinois. At the time of the trial in this case, it was their intention to return to Baton Rouge while Mr. Mas finished his studies for the degree of Doctor of Philosophy. Mr. and Mrs. Mas were undecided as to where they would reside after that. Upon their return to Baton Rouge after their marriage, appellees rented an apartment from appellant Oliver H. Perry, a citizen of Louisiana. This appeal arises from a final judgment entered on a jury verdict awarding $5,000 to Mr. Mas and $15,000 to Mrs. Mas for damages incurred by them as a result of the discovery that their bedroom and bathroom contained twoway mirrors and that they had been watched through them by the appellant during three of the first four months of their marriage. At the close of the appellees case at trial, appellant [lost in trial court] made an oral motion to dismiss for lack of jurisdiction. The motion was denied by the district court [i.e., trial judge]. Before this [appellate] Court, appellant challenges the final judgment below solely on jurisdictional grounds, contending that appellees failed to prove diversity of citizenship among the parties and that the requisite jurisdictional amount is lacking with respect to Mr. Mas. It has long been the general rule that complete diversity of parties is required in order that diversity jurisdiction obtain; that is, no party on one side may be a citizen of the same State as any party on the other side. This determination of one s State Citizenship for diversity purposes is controlled by federal law, not by the law of any State. As is the case in other areas of federal jurisdiction, the diverse citizenship among adverse parties must be present at the time the complaint is filed. Jurisdiction is unaffected by subsequent changes in the citizenship of the parties. The burden of pleading the diverse citizenship is upon the party invoking federal jurisdiction. To be a citizen of a State within the meaning of section 1332, a natural person must be both a citizen of the United States, and a domiciliary of that State. For diversity purposes, citizenship means domicile; mere residence in the State is not sufficient. A person s domicile is the place of [1] his true, fixed, and permanent home and principal establishment, and [2] to which he has the intention of returning whenever he is absent therefrom... A change of domicile may be effected only by a combination of two elements: (a) taking up residence in a different domicile with (b) the intention to remain there.

14 It is clear that at the time of her marriage, Mrs. Mas was a domiciliary of the State of Mississippi. On the other hand, if Mrs. Mas s domicile were Louisiana, she would become a Louisiana citizen for diversity purposes and could not bring suit against appellant, also a Louisiana citizen, on the basis of diversity jurisdiction. An American woman is not deemed to have lost her United States citizenship solely by reason of her marriage to an alien. Similarly, we conclude that for diversity purposes a woman does not have her domicile or State Citizenship [state domicile] changed solely by reason of her marriage to an alien. [Italics added to this ]. Mrs. Mas s Mississippi domicile was disturbed neither by her year in Louisiana prior to her marriage nor as a result of the time she and her husband spent at LSU after their marriage, since for both periods she was a graduate assistant at LSU. Though she testified that after her marriage she had no intention of returning to her parents home in Mississippi, Mrs. Mas did not effect a change of domicile since she and Mr. Mas were in Louisiana only as students and lacked the requisite intention to remain there. Until she acquires a new domicile, she remains a domiciliary, and thus a citizen, of Mississippi. 3 Appellant also contends that Mr. Mas s claim should have been dismissed for failure to establish the requisite jurisdictional amount for diversity cases of more than $10,000. In their complaint Mr. and Mrs. Mas alleged that they had each been damaged in the amount of $100,000. As we have noted, Mr. Mas ultimately recovered [only] $5,000. It is well settled that the amount in controversy is determined by the amount claimed by the plaintiff in good faith. Federal jurisdiction is not lost because a judgment of less than the jurisdictional amount is awarded. That Mr. Mas recovered only $5,000 is, therefore, not compelling. As the [US] Supreme Court stated: The sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of the plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. His good faith in choosing the federal forum is open to challenge not only by resort to the face of his complaint, but by the facts disclosed at trial, and if from either source it is clear that his claim never could have amounted to the sum necessary to give jurisdiction there is no injustice in dismissing the suit. Having heard the evidence presented at the trial, the district court concluded that the appellees properly met the requirements of section 1332 with respect to jurisdictional amount. Upon examination of the record in this case, we are also satisfied that the requisite amount was in controversy. 3 The original complaint in this case was filed within several days of Mr. and Mrs. Mas s realization that they had been watched through the mirrors [in Louisiana], quite some time before they moved to Park Ridge, Illinois. Because the district court s jurisdiction is not affected by actions of the parties subsequent to the commencement of the suit, the testimony concerning Mr. and Mrs. Mas s moves after that time is not determinative of the issue of diverse citizenship...

15 Thus the power of the federal district court to entertain the claims of appellees in this case stands on two separate legs [alternatives] of diversity jurisdiction: a claim by an alien against a State citizen; and an action between citizens of different States. Thus, since the district court had jurisdiction of Mr. Mas s action, sound judicial administration militates strongly in favor of federal jurisdiction of Mrs. Mas s claim. Affirmed. Notes and Questions: 1. Throughout this e-book, most citations to authority have been omitted. Bracketed material, page numbers, and lettered footnotes have been inserted by the prof. Hyperlinks to materials, e.g., Day Two Gunn s 1338a patent statute, are provided; however, you need not read them if the case text otherwise makes sense. Be cautious, however, to read the hyperlinks to and assigned codes/rules listed in each day s Reading assignment (which will not necessarily be linked in the related case). 2. Day 1 read Mas for the in-class How to Prepare for Civ Pro class session. That will yield a sense of why the case and companion Reading rules are assigned. Be sure to also read the related Judicial Code sections. There is no video assigned for Day 1. But the Day 2 video will be discussed, so that you ll understand why you need to watch it before your Day 2 class. The first day s objective is to focus on how to assemble the pieces needed for each day s Civ Pro assignment. 3. Day 2 read Mas, with a view toward learning the two elements of Diversity Jurisdiction. What are they? How do they apply? 4. Mas deals with an individual s domicile. What about corporate entities? See hyperlinked 28 USC 1332(c)(1) (not subparts) on the e-book s Rules webpage. How principal place of business is defined by the Supreme Court will be addressed in Video 1. Other associations? One looks to every member of an unincorporated association, to ensure that none is domiciled in the same state as an adverse party. For example: a limited partnership association although possessing some of the characteristics of a corporation and deemed a citizen by the law creating it may not be deemed a citizen under the jurisdictional rule established for corporations. Carden v. Arkoma Associates, 494 U.S. 185, 189 (1990). 5. Aggregation: Individual claims normally cannot be aggregated. For example, a defendant hits a car with a driver and passenger. The driver is not hurt, but her $40,000 car is totaled. The passenger has $40,000 in claimed personal injury damages. They are free to join together as plaintiffs in a single lawsuit in state court. But they cannot aggregate their respective claims, so as to achieve the $75,000 minimum amount in controversy for federal diversity purposes. (Same result if one P sues two Ds whose cars hit her.) Compare the Class Action Fairness Act, 28 USC 1332(d)(6), which requires aggregation. What about united claims? As succinctly articulated in Urbino v. Orkin Services of California, Inc., 726 F.3d 1118, 1122 (9th Cir. 2013):... The... claims of class members can be aggregated to meet the jurisdictional amount requirement only when they unite to enforce a single title or right in which they have a common and undivided interest. To determine the character of that interest, courts look to the source of plaintiffs claims. If the claims are derived from rights that they hold in group status, then the claims are common and undivided. If not, the claims are separate and distinct. But simply because claims may have questions of fact and law common to the group does not mean they have a common and undivided interest. Only where the claims can strictly be asserted by pluralistic entities as such, or, stated differently, the defendant owes an obligation to the group of plaintiffs as a group and not to the individuals severally, will a common and undivided interest exist.

16 UNITED MINE WORKERS OF AMERICA v. GIBBS United States Supreme Court 383 U.S. 715 (1966) (superseded by statute) Mr. Justice Brennan delivered the opinion of the Court [concurring opinion omitted]. Respondent Paul Gibbs was awarded damages in this action against petitioner United Mine Workers of America (UMW) for alleged violations of s[ection] 303 of the Labor Management Relations Act, 4 and of the [state] common law of Tennessee. The case grew out of the rivalry between the United Mine Workers and [another] Union over representation of workers in the southern Appalachian coal fields. Tennessee Consolidated Coal Company laid off 100 miners of the UMW s Local 5881 when it closed one of its mines in southern Tennessee during the spring of Late that summer, Grundy Company, a wholly owned subsidiary of Consolidated, hired respondent [Gibbs] as mine superintendent to attempt to open a new mine on Consolidated s property. [A]rmed members of Local 5881 forcibly prevented the opening of the mine, threatening respondent and beating an organizer for the rival union. The members of the local [union] believed Consolidated had promised them the jobs at the new mine; they insisted that if anyone would do the work, they would. [T]he members of the local discovered Grundy s plan. There was a limited picket line, to prevent any further violence, and to see to it that the strike did not spread to neighboring mines and no further attempts were made to open the mine during that period. UMW workers coal mine Reprint courtesy of the Tennessee State Library and Archives Union Logo Official Twitter page United Mine Workers of America United Mine 4 Section 303 [et al.] provides: (a) It shall be unlawful for any labor organization to engage in any activity or conduct defined as an unfair labor practice. It shall be an unfair labor practice for a labor organization or its agents to induce or encourage any individual to cease doing business with any other person.

17 Respondent lost his job as superintendent, and never entered into performance of his haulage contract. He testified that he soon began to lose other trucking contracts and mine leases he held in nearby areas. Claiming these effects to be the result of a concerted union plan against him, he sought recovery not against Local 5881 or its members, but only against petitioner, the international union. [J]urisdiction was premised on allegations of secondary boycotts under s[ection] 303. The state law claim, for which jurisdiction was based upon the doctrine of pendent jurisdiction, asserted an unlawful conspiracy and an unlawful boycott aimed at him and (Grundy) to maliciously, wantonly and willfully interfere with his contract of employment and with his contract of haulage. The jury s verdict was that the UMW had violated both s[ection] 303 and state law. Gibbs was awarded damages. On motion, the trial court set aside the award of damages with respect to the haulage contract on the ground that damage was unproved. It also held that union pressure on Grundy to discharge respondent as supervisor would constitute only a primary dispute with Grundy, as respondent s employer, and hence was not cognizable as a [union boycott] claim under s[ection] 303. Interference with the employment relationship was cognizable as a state claim, however, and a remitted award was sustained on the state law claim. A threshold question is whether the District Court properly entertained jurisdiction of the claim [that was] based on Tennessee law.... The question [is] whether the state claim was properly adjudicated in the District Court absent diversity jurisdiction. The [Supreme] Court held in Hurn v. Oursler that state law claims are appropriate for federal court determination if they form a separate but parallel ground for relief also sought in a substantial claim based on federal law. [W]here the federal question averred is not plainly wanting in substance, the federal court, even though the federal ground be not established [by proof at trial], may nevertheless retain and dispose of the case upon the nonfederal ground. [T]he Court found that the weighty policies of judicial economy and fairness to parties were in themselves strong counsel for the adoption of a rule which would permit federal courts to dispose of the state as well as the federal claims.. Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim arising under (the) Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional case. The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff s claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole. 13 That power need not be exercised in every case in which it is found to exist. It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff s 13 While it is commonplace that the Federal Rules of Civil Procedure do not expand the jurisdiction of federal courts, they do embody the whole tendency of our decisions to require a plaintiff to try his whole case at one time, and to that extent emphasize the basis of pendent jurisdiction.

18 right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims. Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well [italics added]. Similarly, if it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals. There may, on the other hand, be situations in which the state claim is so closely tied to questions of federal policy that the argument for exercise of pendent jurisdiction is particularly strong.... Finally, there may be reasons independent of jurisdictional considerations, such as the likelihood of jury confusion in treating divergent legal theories of relief, that would justify separating state and federal claims for trial. If so, jurisdiction should ordinarily be refused. The question of power will ordinarily be resolved on the pleadings. But the issue whether pendent jurisdiction has been properly assumed is one which remains open throughout the litigation. Pretrial procedures or even the trial itself may reveal a substantial hegemony of state law claims, or likelihood of jury confusion, which could not have been anticipated at the pleading stage. Although it will of course be appropriate to take account in this circumstance of the already completed course of the litigation, dismissal of the state claim might even then be merited. For example, it may appear that the plaintiff was well aware of the nature of his proofs and the relative importance of his claims; recognition of a federal court's wide latitude to decide ancillary questions of state law does not imply that it must tolerate a litigant's effort to impose upon it what is in effect only a state law case. Once it appears that a state claim constitutes the real body of a case, to which the federal claim is only an appendage, the state claim may fairly be dismissed. We are not prepared to say that in the present case the District Court exceeded its discretion in proceeding to judgment on the state claim. [T]he state and federal claims arose from the same nucleus of operative fact and reflected alternative remedies. Indeed, the verdict sheet sent in to the jury authorized only one award of damages, so that recovery could not be given separately on the federal and state claims. It is true that the s[ection] 303 claims ultimately failed and that the only recovery allowed respondent was on the state claim. Although the District Court dismissed as unproved the s[ection] 303 claims that petitioner s secondary [boycott] activities included attempts to induce coal operators to cease doing business with respondent, the court submitted the s[ection] 303 claims to the jury. The jury returned verdicts against petitioner on those s[ection] 303 claims, and it was only on petitioner s [post-verdict] motion that the verdicts on those claims were set aside. We thus conclude that although it may be that the District Court might, in its sound discretion, have dismissed the state claim, the circumstances show no error in refusing to do so. Notes and Questions:.. 1. The court begins its jurisdictional analysis with reference to an underlying assumption that the relief [is] also sought in a substantial claim based on federal law. Why substantial? 2. What are the Gibbs elements for assessing whether a federal court can hear a state law claim (absent diversity jurisdiction)?

19 ALDINGER v. HOWARD United States Supreme Court 427 U.S. 1 (1976) (superseded by statute) Mr. Justice Rehnquist delivered the opinion of the Court [3 justices dissented]. This case presents the [question] whether the doctrine of pendent jurisdiction extends to confer jurisdiction over a party as to whom no independent basis of federal jurisdiction exists. In this action, the Court of Appeals for the Ninth Circuit held that pendent jurisdiction was not available to adjudicate petitioner s state-law claims against Spokane County, over which party federal jurisdiction was otherwise nonexistent. We granted certiorari to resolve the conflict on this important question. We affirm. I This case arises at the pleading stage, and the allegations in petitioner s complaint are straightforward. Petitioner was hired in 1971 by respondent Howard, the Spokane County treasurer, for clerical work in that office. Two months later Howard informed petitioner by letter that although her job performance was excellent, she would be dismissed, effective two weeks hence, because she was allegedly living with (her) boy friend. Petitioner s action claimed principally under the Civil Rights Act of 1871, 42 U.S.C. s[ection] 1983, 2 that the discharge violated her substantive constitutional rights. An injunction restraining the dismissal and damages for salary loss were sought against Howard, his wife [essentially Ds 1-2], the named county commissioners [D3], and the county [D4]. Jurisdiction over the federal claim was asserted under 28 U.S.C. s 1343(3), 3 and pendent jurisdiction was alleged to lie over the state law claims against the parties. As to the county, the state-law claim was said to rest on vicarious liability arising out of tortious conduct of its officials. The District Court dismissed the action as to the county on the ground that since it was not suable as a person under s[ection] 1983, there was no independent basis of jurisdiction over the county, and thus this court (has no) power to exercise pendent jurisdiction over the claims against Spokane County. [As the] Court of Appeals reasoned, [Ms. Aldinger] presented the weakest rationale for extension of Gibbs to pendent parties [italics added]: (1) The state claims are pressed against 4 a [every] party who would otherwise not be in federal court; (2) diversity cases generally present more attractive opportunities for exercise of pendent-party jurisdiction, since all claims therein by definition arise from state law; (3) federal courts should be wary of extending courtcreated doctrines of jurisdiction to reach parties who are expressly excluded by Congress from liability, and hence federal jurisdiction, in the federal statute sought to be applied to the defendant in the main claim; (4) pendent state-law claims arising in a civil rights context will 2 Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. 3 The district courts shall have original jurisdiction of any civil action authorized by law to be commenced by any person: (3) To redress the deprivation, under color of any State law, statute, ordinance, regulation, custom or usage, of any right, privilege or immunity secured by the Constitution of the United States or by any Act of Congress providing for equal rights of citizens or of all persons within the jurisdiction of the United States 4 There is no diversity of citizenship under 28 U.S.C. s[ection] 1332 among the parties here, since all are citizens of the State of Washington.

20 almost inevitably involve the federal court in difficult and unsettled questions of state law, with the accompanying potential for jury confusion. II The question whether pendent federal jurisdiction encompasses not merely the litigation of additional claims between parties with respect to whom there is federal jurisdiction, but also the joining of additional parties with respect to whom there is no independent basis of federal jurisdiction, has been much litigated in other federal courts and much discussed by commentators since this Court s decision in Gibbs. Gibbs, in turn, is the most recent in a long line of our cases dealing with the relationship between the judicial power of the United States and the actual contours of the cases and controversies to which that power is extended by Art. III. In Gibbs, a federal-question case, where the federal claim is of sufficient substance, and the factual relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional case, pendent jurisdiction extends to the state claim. The Court, in the second aspect of the Gibbs formulation, went on to enumerate the various factors bearing on a district court s discretionary decision whether the power should be exercised in a given parallel-claims case, emphasizing that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. These cases show that in treating litigation where nonfederal questions or claims were bound up with the federal claim upon which the parties were already in federal court, this Court has found nothing in Art. III s grant of judicial power which prevented adjudication of the nonfederal portions of the parties dispute. None of them, however, adverted to the separate question, involved in the instant case, of whether a nonfederal claim could in turn be the basis for joining a party over whom no independent federal jurisdiction exists, simply because that claim could be derived from the common nucleus of operative fact giving rise to the dispute between the parties to the federal claim. For purposes of addressing the jurisdictional question in this case, however, we think it quite unnecessary to formulate any general, all-encompassing jurisdictional rule. Congress had said nothing about the scope of the word Cases in Art. III [ 2] which would offer guidance on the kind of elusive question whether and to what extent jurisdiction extended to a parallel state claim against the existing federal defendant [italics added]. The situation with respect to the joining of a new party, however, strikes us as being both factually and legally different from the situation facing the Court in Gibbs and its predecessors. From a purely factual point of view, it is one thing to authorize two parties, already present in federal court by virtue of a case over which the court has jurisdiction, to litigate in addition to their federal claim a state-law claim over which there is no independent basis of federal jurisdiction. But it is quite another thing to permit a plaintiff, who has asserted a claim against one defendant with respect to which there is federal jurisdiction, to join an entirely different defendant on the basis of a state-law claim over which there is no independent basis of federal jurisdiction, simply because his claim against the first defendant and his claim against the second defendant derive from a common nucleus of operative fact. True, the same considerations of judicial economy would be served insofar as plaintiff s claims are such that he would ordinarily be expected to try them all in one judicial proceeding... But the addition of a completely new

21 party would run counter to the well-established principle that federal courts, as opposed to state trial courts of general jurisdiction, are courts of limited jurisdiction marked out by Congress. There is also a significant legal difference. In Gibbs Congress was silent on the extent to which the defendant, already properly in federal court under a statute, might be called upon to answer nonfederal questions or claims; the way was thus left open for the Court to fashion its own rules under the general language of Art. III. But the extension of Gibbs to this kind of pendent party jurisdiction bringing in an additional defendant at the behest of the plaintiff presents rather different statutory jurisdictional considerations. Petitioner s contention that she should be entitled to sue Spokane County as a new party, and then to try a wholly state-law claim against the county, all of which would be pendent to her federal claim against respondent county treasurer, must be decided, not in the context of congressional silence or tacit encouragement, but in quite the opposite context. The question here, which it was not necessary to address in Gibbs, is whether by virtue of the statutory grant of subject-matter jurisdiction, upon which petitioner s principal claim against the treasurer rests, Congress has addressed itself to the party as to whom jurisdiction pendent to the principal claim is sought. And it undoubtedly has done so. III [P]etitioner does not, and indeed could not, contest the fact that as to s[ection] 1983, counties are excluded from the person(s) answerable to the plaintiff in an action at law (or) suit in equity to redress the enumerated deprivations. Petitioner must necessarily argue that in spite of the language emphasized above Congress left it open for the federal courts to fashion a jurisdictional doctrine under the general language of Art. III enabling them to circumvent this exclusion, as long as the civil rights action and the state-law claim arise from a common nucleus of operative fact. Parties such as counties, whom Congress excluded from liability in s[ection] 1983, and therefore by reference in the grant of jurisdiction under s[ection] 1343(3), can argue with a great deal of force that the scope of that civil action over which the district courts have been given statutory jurisdiction should not be broadly read as to bring them back within that power merely because the facts also give rise to an ordinary civil action against them under state law. Resolution of a claim of pendent-party jurisdiction, therefore, calls for careful attention to the relevant statutory language. As we have indicated, we think a fair reading of the language used in s[ection] 1343, together with the scope of s[ection] 1983, requires a holding that the joinder of a municipal corporation, like the county here, for purposes of asserting a state-law claim not within federal diversity jurisdiction, is without the statutory jurisdiction of the district court. 12 [W]e believe that it would be as unwise as it would be unnecessary to lay down any sweeping pronouncement upon the existence or exercise of such jurisdiction. Two observations suffice for the disposition of the type of case before us. If the new party sought to be joined is not otherwise subject to federal jurisdiction, there is a more serious obstacle to the exercise of pendent jurisdiction that if parties already before the court are required to litigate a state-law claim. Before it can be concluded that such jurisdiction exists, a federal court must satisfy itself 12 All that we hold is that where the asserted basis of federal jurisdiction over a municipal corporation is not diversity of citizenship, but is a claim of jurisdiction pendent to a suit brought against a municipal officer within s[ection] 1343, the refusal of Congress to authorize suits against municipal corporations under the cognate provisions of s 1983 is sufficient to defeat the asserted claim of pendent-party jurisdiction...

22 not only that Art. III permits it, but that Congress in the statutes conferring jurisdiction has not expressly or by implication negated its existence. We conclude that in this case Congress has by implication declined to extend federal jurisdiction over a party such as Spokane County. The judgment of the Court of Appeals for the Ninth Circuit is therefore Affirmed. Notes and Questions: 1. Both Gibbs and Aldinger address pendent subject matter jurisdiction. Why? 2. Both Gibbs and Aldinger satisfy the common nucleus of operative fact element of pendent jurisdiction. So why did the Supreme Court reject pendent jurisdiction in the latter case? 3. In Con Law, you ll learn that counties have since been deemed persons, within the meaning of federal civil rights law (i.e., they lost their former sovereign immunity in such cases). Aldinger is still an excellent case, however, to illustrate a P s attempt to piggyback a non-federal party, via pendent party jurisdiction, to a viable case against other parties who are proper federal parties under an applicable federal statute. On a related note, states enjoy sovereign immunity from suit in federal court. See the U.S. Constitution s Eleventh Amendment. But a P may avoid that prohibition by suing state officials, rather than the state for which they work. See Ex Parte Young, 209 U.S. 123 (1908).

23 OWEN EQUIPMENT & ERECTION CO. V. KROGER United States Supreme Court 437 U.S. 365 (1978) Mr. Justice Stewart delivered the opinion of the Court [two justices dissented]. In an action in which federal jurisdiction is based on diversity of citizenship, may the plaintiff assert a claim against a third-party defendant when there is no independent basis for federal jurisdiction over that claim? The Court of Appeals for the Eighth Circuit held in this case that such a claim is within the ancillary jurisdiction of the federal courts. We granted certiorari, because this decision conflicts with several recent decisions of other Courts of Appeals. I On January 18, 1972, James Kroger was electrocuted when the boom of a steel crane next to which he was walking came too close to a high-tension electric power line. The respondent (his widow, who is the administratrix of his estate) filed a wrongful-death action in the United States District Court for the District of Nebraska against the Omaha Public Power District (OPPD). Her complaint alleged that OPPD s negligent construction, maintenance, and operation of the power line had caused Kroger s death. Federal jurisdiction was based on diversity of citizenship, since the respondent was a citizen of Iowa and OPPD was a Nebraska corporation. OPPD then filed a third-party complaint pursuant to Fed.Rule Civ.Proc. 14(a) 2 against the petitioner, Owen Equipment and Erection Co. (Owen), alleging that the crane was owned and operated by Owen, and that Owen s negligence had been the proximate cause of Kroger s death. OPPD later moved for summary judgment on the respondent s complaint against it. While this motion was pending, the respondent was granted leave to file an amended complaint naming Owen as an additional defendant [in plaintiff s action]. Thereafter, the District Court granted [the original D] OPPD s motion for summary judgment in an unreported opinion. The case thus went to trial between the respondent [Kroger] and the petitioner [Owen] alone. The respondent s amended complaint alleged that Owen was a Nebraska corporation with its principal place of business in Nebraska. Owen s answer admitted that it was a corporation organized and existing under the laws of the State of Nebraska, and denied every other allegation of the complaint. On the third day of trial, however, it was disclosed that the petitioner s principal place of business was in Iowa, not Nebraska, and that the petitioner and the respondent were thus both citizens of Iowa. The petitioner then moved to dismiss the complaint for lack of jurisdiction. The District Court reserved decision on the motion, and the jury thereafter returned a verdict in favor of the respondent. In an unreported opinion issued after the trial, the District Court denied the petitioner s motion to dismiss the complaint. The judgment was affirmed on appeal. The Court of Appeals held that under this Court s decision in Mine Workers v. Gibbs, the District Court had jurisdictional power, in its discretion, to adjudicate the respondent s claim against the petitioner because that claim arose from the core of operative facts' giving rise to both [respondent's] claim against OPPD and OPPD's claim against Owen. It further held that the District Court had properly exercised its discretion in proceeding to decide the case even after summary judgment had been granted to OPPD, because the petitioner had concealed its Iowa citizenship from the respondent. 2 Rule 14(a) provides in relevant part: At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff s claim against him. [The original D sues the new D, hoping to shift all or part of the blame to the new D should the P prevail against the original D in the trial s initial phase.]

24 It is undisputed that there was no independent basis of federal jurisdiction over the respondent s state-law tort action against the petitioner, since both are citizens of Iowa. And although Fed.Rule Civ.Proc. 14(a) permits a plaintiff to assert a claim against a third-party defendant, it does not purport to say whether or not such a claim requires an independent basis of federal jurisdiction. Indeed, it could not determine that question, since it is axiomatic that the Federal Rules of Civil Procedure do not create or withdraw federal jurisdiction. In affirming the District Court s judgment, the Court of Appeals relied upon the doctrine of ancillary jurisdiction, whose contours it believed were defined by this Court s holding in Mine Workers v. Gibbs. The Gibbs case differed from this one in that it involved pendent jurisdiction, which concerns the resolution of a plaintiff s federal- and state-law claims against a single defendant in one action. By contrast, in this case there was no claim based upon substantive federal law, but rather [only] state-law tort claims against two different defendants. Nonetheless, the Court of Appeals was correct in perceiving that Gibbs and this case are two species of the same generic problem: Under what circumstances may a federal court hear and decide a statelaw claim arising between citizens of the same State? But we believe that the Court of Appeals failed to understand the scope of the doctrine of the Gibbs case. But even if it be assumed that the District Court in the present case had constitutional power to decide the respondent s lawsuit against the petitioner, it does not follow that the decision of the Court of Appeals was correct. Constitutional power is merely the first hurdle that must be overcome in determining that a federal court has jurisdiction over a particular controversy. For the jurisdiction of the federal courts is limited not only by the provisions of Art. III of the Constitution, but also by Acts of Congress. [ 11 ] [ ] The cases thus make clear that a finding that federal and nonfederal claims arise from a common nucleus of operative fact, the test of Gibbs, does not end the inquiry into whether a federal court has power to hear the nonfederal claims along with the federal ones. Beyond this constitutional minimum, there must be an examination of the posture in which the nonfederal claim is asserted and of the specific statute that confers jurisdiction over the federal claim, in order to determine whether Congress in [that statute] has... expressly or by implication negated the exercise of jurisdiction over the particular nonfederal claim. Aldinger. III The relevant statute in this case, 28 U.S.C. 1332(a)(1), confers upon federal courts jurisdiction over civil actions where the matter in controversy... is between... citizens of different States. This statute and its predecessors have consistently been held to require complete diversity of citizenship. That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff. Over the years Congress has repeatedly re-enacted or amended the statute conferring diversity jurisdiction, leaving intact this rule of complete diversity. Whatever may have been the original purposes of diversity-ofcitizenship jurisdiction, this subsequent history clearly demonstrates a congressional mandate that diversity jurisdiction is not to be available when any plaintiff is a citizen of the same State as any defendant. 11 As used in this opinion, the term nonfederal claim means one as to which there is no independent basis for federal jurisdiction. Conversely, a federal claim means one as to which an independent basis for federal jurisdiction exists..

25 ] [ ] Thus it is clear that the respondent could not originally have brought suit in federal court naming Owen and OPPD as codefendants, since citizens of Iowa would have been on both sides of the litigation. Yet the identical lawsuit resulted when she amended her complaint. Complete diversity was destroyed just as surely as if she had sued Owen initially. In either situation, in the plain language of the statute, the matter in controversy could not be between... citizens of different States.. It is not unreasonable to assume that, in generally requiring complete diversity, Congress did not intend to confine the jurisdiction of federal courts so inflexibly that they are unable to protect legal rights or effectively to resolve an entire, logically entwined lawsuit. Those practical needs are the basis of the doctrine of ancillary jurisdiction. But neither the convenience of litigants nor considerations of judicial economy can suffice to justify extension of the doctrine of ancillary jurisdiction to a plaintiff s cause of action against a citizen of the same State in a diversity case. Congress has established the basic rule that diversity jurisdiction exists under 28 U.S.C only when there is complete diversity of citizenship. The policy of the statute calls for its strict construction. To allow the requirement of complete diversity to be circumvented as it was in this case would simply flout the congressional command. 21 Accordingly, the judgment of the Court of Appeals is reversed. It is so ordered. [ Notably, Congress enacted 1332 as part of the Judicial Code of 1948, shortly after Rule 14 was amended in When the Rule was amended, the Advisory Committee noted that in any case where the plaintiff could not have joined the third party originally because of jurisdictional limitations such as lack of diversity of citizenship, the majority view is that any attempt by the plaintiff to amend his complaint and assert a claim against the impleaded third party would be unavailing. The subsequent re-enactment without relevant change of the diversity statute may thus be seen as evidence of congressional approval of that majority view. 21 Our holding is that the District Court lacked power to entertain the respondent s lawsuit against the petitioner. Thus, the asserted inequity in the respondent s alleged concealment of its citizenship is irrelevant. Federal judicial power does not depend upon prior action or consent of the parties.

26 EXXON MOBIL CORPORATION v. ALLAPATTAH SERVICES United States Supreme Court 545 U.S. 546 (2005) Prof s Note: This case finally answered a question that has long-divided lower federal courts not to mention the Supreme Court, in this 5-4, three-opinion case. Gibbs, Aldinger, and Owen are the initial cases assigned for Supplemental Jurisdiction Day (Class 3). Allapattah reviews the key cases, reviews basic diversity jurisdiction principles, and addresses amount-in-controversy aggregation. I have added [ ], and italics at certain points (without so indicating). The unbridled discretion federal judges exercised since Gibbs to dismiss elated state law claims was greatly limited by the 1990 codification of supplemental jurisdiction ( 1367a). Allapattah construes 1367 as a whole, while integrating some important joinder principles we will address focus later in the course. Majority Opinion: Justice Kennedy delivered the opinion of the Court. These consolidated cases present the question whether a federal court in a diversity action may exercise supplemental jurisdiction over additional plaintiffs whose claims do not satisfy the minimum amount-in-controversy requirement, provided the claims are part of the same case or controversy as the claims of plaintiffs who do allege a sufficient amount in controversy. Our decision turns on the correct interpretation of 28 U.S.C The question has divided the Courts of Appeals, and we granted certiorari to resolve the conflict. I In 1991, about 10,000 Exxon dealers filed a class-action suit against the Exxon Corporation in the United States District Court for the Northern District of Florida. The dealers alleged an intentional and systematic scheme by Exxon under which they were overcharged for fuel purchased from Exxon. The plaintiffs invoked the District Court s 1332(a) diversity jurisdiction. After a unanimous jury verdict in favor of the plaintiffs, the District Court certified the case for interlocutory [appellate] review, asking whether it had properly exercised 1367 supplemental jurisdiction over the claims of class members who did not meet the jurisdictional minimum amount in controversy [in excess of $75,000]. Source: < Permission: Reprinted with Permission of EveryMerchant

27 The Court of Appeals for the Eleventh Circuit upheld the District Court s extension of supplemental jurisdiction to these class members. In the other [consolidated for appeal] case now before us a 9-year-old girl sued Star- Kist in a diversity action seeking damages for unusually severe injuries she received when she sliced her finger on a tuna can. Her family joined in the suit, seeking damages for emotional distress and certain medical expenses [totaling <75k]. The Court of Appeals for the First Circuit ruled that the injured girl, but not her family members, had made [justiciable] allegations of damages in the requisite amount. The Court of Appeals then addressed whether, in light of the fact that one plaintiff met the requirements for original jurisdiction, supplemental jurisdiction over the remaining plaintiffs claims was proper under II A The district courts of the United States... are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute. Although the district courts may not exercise jurisdiction absent a statutory basis, it is well established in certain classes of cases that, once a court has original jurisdiction over some claims in the action, it may exercise supplemental jurisdiction over additional claims that are part of the same case or controversy. The leading modern case for this principle is Mine Workers v. Gibbs. In Gibbs, the plaintiff alleged the defendant s conduct violated both federal and state law. The District Court, Gibbs held, had original jurisdiction over the action based on the federal claims. Gibbs confirmed that the District Court had the additional power (though not the obligation) to exercise supplemental jurisdiction over related state claims that arose from the same Article III case or controversy. We have not, however, applied Gibbs expansive interpretive approach to other aspects of the jurisdictional statutes. For instance, we have consistently interpreted 1332 as requiring complete diversity: In a case with multiple plaintiffs and multiple defendants, the presence in the action of a single plaintiff from the same State as a single defendant deprives the district court of original diversity jurisdiction over the entire action [citing Owen Equipment v. Kroeger]. Before the [1990] enactment of 1367, the Court declined in contexts other than the pendent claim instance to follow Gibbs expansive approach to interpretation of the jurisdictional statutes. The Court took a more restrictive view of the proper interpretation of these statutes in so-called pendent-party cases involving supplemental jurisdiction over claims involving additional parties plaintiffs or defendants where the district courts would lack original jurisdiction over claims by each of the parties standing alone. Thus, with respect to plaintiffspecific jurisdictional requirements, the Court held in Clark v. Paul Gray, Inc., (1939), that every plaintiff must separately satisfy the amount-in-controversy requirement. Though Clark was a federal-question case, at that time federal-question jurisdiction had an amount-in-controversy requirement analogous to the amount-in-controversy requirement for diversity cases. Proper practice, Clark held, requires that where each of several plaintiffs is bound to establish the jurisdictional amount with respect to his own claim, the suit should be dismissed as to those who fail to show that the requisite amount is involved. The Court reaffirmed this rule, in the context of a class action brought invoking 1332(a) diversity jurisdiction, in Zahn v. International Paper Co. (1973). It follows inescapably from Clark, the Court held in Zahn, that any plaintiff

28 without the jurisdictional amount must be dismissed from the case, even though others allege jurisdictionally sufficient claims. The Court took a similar [restrictive] approach with respect to supplemental jurisdiction over claims against additional defendants that fall outside the district courts original jurisdiction. In Aldinger v. Howard, the plaintiff brought a 42 U.S.C action against county officials in district court pursuant to the statutory grant of jurisdiction in 28 U.S.C. 1343(3). The plaintiff further alleged the court had supplemental jurisdiction over her related state-law claims against the county, even though the county was not suable [at that time] under 1983 and so was not subject to 1343(3) s original jurisdiction. The Court held that supplemental jurisdiction could not be exercised because Congress, in enacting 1343(3), had declined (albeit implicitly) to extend federal jurisdiction over any party who could not be sued under the federal civil rights statutes. Before it can be concluded that [supplemental] jurisdiction [over additional parties] exists, Aldinger held, a federal court must satisfy itself not only that Art[icle] III permits it, but that Congress in the statutes conferring jurisdiction has not expressly or by implication negated its existence. In Finley v. United States, we confronted a similar issue in a different statutory context. The plaintiff in Finley brought a Federal Tort Claims Act negligence suit against the Federal Aviation Administration in District Court, which had original jurisdiction under 1346(b)[1]. The plaintiff tried to add related claims against other defendants, invoking the District Court s supplemental jurisdiction over so-called pendent parties. We held that the District Court lacked a sufficient statutory basis for exercising supplemental jurisdiction over these claims. Relying primarily on Zahn, Aldinger, and Kroger, we held in Finley that a grant of jurisdiction over claims involving particular parties does not itself confer jurisdiction over additional claims by or against different parties....finley held that in the context of parties, in contrast to claims, we will not assume that the full constitutional power has been congressionally authorized, and will not read jurisdictional statutes broadly. As the jurisdictional statutes existed in , here is how matters stood: First, the diversity requirement in 1332(a) required complete diversity; absent complete diversity, the district court lacked original jurisdiction over all of the claims in the action [citing Owen]. Second, if the district court had original jurisdiction over at least one claim, the jurisdictional statutes implicitly authorized supplemental jurisdiction over all other claims between the same parties arising out of the same Article III case or controversy. Gibbs. Third, even when the district court had original jurisdiction over one or more claims between particular parties, the jurisdictional statutes did not authorize supplemental jurisdiction over additional claims involving other parties. Clark; Zahn, Finley. B In Finley [1989] we emphasized that [w]hatever we say regarding the scope of jurisdiction conferred by a particular statute can of course be changed by Congress. In 1990, Congress accepted the invitation. It passed the Judicial Improvements Act, which enacted 1367, the provision which controls these [consolidated class action and non-class action] cases. All parties to this litigation and all courts to consider the question agree that 1367 overturned the result in Finley....In order to determine the scope of supplemental jurisdiction authorized by 1367, then, we must examine the statute s text in light of context, structure, and related statutory provisions. Section 1367(a) is a broad grant of supplemental jurisdiction over other claims within the

29 same case or controversy, as long as the action is one in which the district courts would have original jurisdiction. The last sentence of 1367(a) makes it clear that the grant of supplemental jurisdiction extends to claims involving joinder or intervention of additional parties. The single question before us, therefore, is whether a diversity case in which the claims of some plaintiffs satisfy the amount-in-controversy requirement, but the claims of others plaintiffs do not, presents a civil action of which the district courts have original jurisdiction. If the answer is yes, 1367(a) confers supplemental jurisdiction over all claims, including those that do not independently satisfy the amount-in-controversy requirement, if the claims are part of the same Article III case or controversy. If the answer is no, 1367(a) is inapplicable and, in light of our holdings in Clark and Zahn, the district court has no statutory basis for exercising supplemental jurisdiction over the additional claims. We now conclude the answer must be yes. When the... complaint contains at least one claim that satisfies the amount-in-controversy requirement, and there are no other relevant jurisdictional defects, the district court, beyond all question, has original jurisdiction over that claim. The presence of other claims in the complaint, over which the district court may lack original jurisdiction, is of no moment. If the court has original jurisdiction over a single claim in the complaint, it has original jurisdiction over a civil action within the meaning of 1367(a), even if the civil action over which it has jurisdiction comprises fewer claims than were included in the complaint. Once the court determines it has original jurisdiction over the civil action, it can turn to the question whether it has a constitutional and statutory basis for exercising supplemental jurisdiction over the other claims in the action. Section 1367(a) commences with the direction that 1367(b) and (c), or other relevant statutes, may provide specific exceptions, but otherwise 1367(a) is a broad jurisdictional grant,with no distinction drawn between pendent-claim and pendent-party cases. In fact, the last sentence of 1367(a) makes clear that the provision grants supplemental jurisdiction over claims involving joinder or intervention of additional parties. The terms of 1367 do not acknowledge any distinction between pendent jurisdiction [Gibbs] and the doctrine of so-called ancillary jurisdiction [Owen]. The specific exceptions to 1367(a) contained in 1367(b), moreover, provide additional support for our conclusion that 1367(a) confers supplemental jurisdiction over these claims. Section 1367(b), which applies only to diversity cases, withholds supplemental jurisdiction over the claims of plaintiffs proposed to be joined as indispensable parties under Federal Rule of Civil Procedure 19, or who seek to intervene pursuant to Rule 24. Nothing in the text of 1367(b), however, withholds supplemental jurisdiction over the claims of plaintiffs permissively joined under Rule 20 (like the additional plaintiffs in [Starkist]) or certified as class-action members pursuant to Rule 23 (like the additional plaintiffs in [Allapattah]). The natural, indeed the necessary, inference is that 1367 confers supplemental jurisdiction over claims by Rule 20 [permissive joinder] and Rule 23 [c;ass action] plaintiffs. This inference, at least with respect to Rule 20 plaintiffs [who join together in a single action], is strengthened by the fact that 1367(b) explicitly excludes supplemental jurisdiction over claims against defendants joined under Rule 20. We cannot accept the view, urged by some of the parties, commentators, and Courts of Appeals, that a district court lacks original jurisdiction over a civil action unless the court has original jurisdiction over every claim in the complaint.

30 We also reject the argument... that while the presence of additional claims over which the district court lacks jurisdiction does not mean the civil action is outside the purview of 1367(a), the presence of additional parties does. The basis for this distinction is not altogether clear... Section 1367(a) applies by its terms to any civil action of which the district courts have original jurisdiction, and the last sentence of 1367(a) expressly contemplates that the court may have supplemental jurisdiction over additional parties. So it cannot be the case that the presence of those parties destroys the court s original jurisdiction, within the meaning of 367(a), over a civil action otherwise properly before it. Also, 1367(b) expressly withholds supplemental jurisdiction in diversity cases over claims by plaintiffs joined as indispensable parties under Rule 19[(a)(1)]. And so we circle back to the original question. When the well-pleaded complaint in district court includes multiple claims, all part of the same case or controversy, and some, but not all, of the claims are within the court s original jurisdiction, does the court have before it any civil action of which the district courts have original jurisdiction? It does. Under 1367, the court has original jurisdiction over the civil action comprising the claims for which there is no jurisdictional defect. No other reading of 1367 is plausible in light of the text and structure of the jurisdictional statute. Though the special nature and purpose of the diversity requirement mean that a single nondiverse party can contaminate every other claim in the lawsuit, the contamination does not occur with respect to jurisdictional defects that go only to the substantive importance of individual claims. It follows from this conclusion that the threshold requirement of 1367(a) is satisfied in cases, like those now before us, where some, but not all, of the plaintiffs in a diversity action allege a sufficient amount in controversy. We hold that 1367 by its plain text overruled Clark and Zahn and authorized supplemental jurisdiction over all claims by diverse parties arising out of the same Article III case or controversy, subject only to enumerated exceptions not applicable in the cases now before us. Justice Stevens, with whom Justice Breyer joins, dissenting [first of two dissents, totaling four justices]. [Arguing, essentially: In diversity cases, the district courts may exercise supplemental jurisdiction, except when doing so would be inconsistent with the jurisdictional requirements of the diversity statute. As Stevens concludes: Given Justice Ginsburg s persuasive account of the statutory text and its jurisprudential backdrop, and given the uncommonly clear legislative history, I am confident that the majority s interpretation of 1367 is mistaken. I respectfully dissent. ] Justice Ginsburg, with whom Justice Stevens, Justice O Connor, and Justice Breyer join, dissenting. These cases present the question whether Congress, by enacting 28 U.S.C. 1367, overruled this Court s decisions in Clark and Zahn. Clark held that, when federal-court jurisdiction is predicated on a specified amount in controversy, each plaintiff joined in the litigation must independently meet the jurisdictional amount requirement. Zahn confirmed that in class actions governed by Federal Rule of Civil Procedure 23(b)(3), [e]ach [class member] must satisfy the jurisdictional amount, and any [class member] who does not must be dismissed from the case.

31 I A In sum, in federal-question cases before 1367 s enactment, the Court recognized pendent-claim jurisdiction, Gibbs, but not pendent-party jurisdiction, Finley. As to ancillary jurisdiction, the Court adhered to the limitation that in diversity cases, throughout the litigation, all plaintiffs must remain diverse from all defendants. See Kroger. II A But from the start, Congress, as its measures have been construed by this Court, has limited federal court exercise of diversity jurisdiction in two principal ways. First, unless Congress specifies otherwise, diversity must be complete, i.e., all parties on plaintiffs side must be diverse from all parties on defendants side. Second, each plaintiff s stake must independently meet the amount-in-controversy specification: When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount.... But in multiparty cases, including class actions, we have unyieldingly adhered to the non-aggregation rule... See Clark (reaffirming the familiar rule that when several plaintiffs assert separate and distinct demands in a single suit, the amount involved in each separate controversy must be of the requisite amount to be within the jurisdiction of the district court, and that those amounts cannot be added together to satisfy jurisdictional requirements ); [and] Snyder v. Harris, 394 U.S. 332 (1969) (abandonment of the non-aggregation rule in class actions would undercut the congressional purpose...to check, to some degree, the rising caseload of the federal courts ). B While 1367 s enigmatic text defies flawless interpretation, the precedent-preservative reading, I am persuaded, better accords with the historical and legal context of Congress enactment of the supplemental jurisdiction statute, and the [previously] established limits on pendent and ancillary jurisdiction. It [precedent-preservative reading] does not attribute to Congress a jurisdictional enlargement broader than the one to which the legislators [expressly] adverted, cf. Finley, and it follows the sound counsel that close questions of [statutory] construction should be resolved in favor of continuity and against change. For the reasons stated, I would hold that 1367 does not overrule Clark and Zahn... Notes & Questions: 1. In what specific way was Gibbs an expansion of federal SMJ? 2. Congress enacted the supplemental jurisdictional statute for the express purpose of overruling Finley. What changed? For Finley Diagram, go to Prob_Hypo_Chart webpage, Day What was the narrow issue to be decided by the Allapatta court? 4. Can a plaintiff aggregate unrelated claims to satisfy the minimum amount-incontroversy requirement?

32 5. What were the related holdings in Clark & Zahn? Did Congress expressly overrule them when enacting the supplemental jurisdiction statute? 6. How did the majority and the dissenters divide regarding the supplemental jurisdiction statute s impact on Clark & Zahn? 7. What happens when a potential non-diverse D surfaces in a federal diversity case? E- mail exchange between ProSlo & 2006 graduate David Perlata (Aug. 12, 2013): Graduate: Facts: Plaintiff has a cause of action against D-1, a diverse defendant. Knowing that D-1 will remove a state court case to federal court, Plaintiff chooses to forgo state court and files directly in federal court on the basis of diversity jurisdiction. As the case progresses, a new defendant, D-2, is discovered who is a non-diverse party. Plaintiff needs this defendant in order to completely adjudicate his claim, as D-1 and D-2 each bear some fault, and a jury would likely apportion liability and damages between them. Problem: A motion to amend the complaint to add D-2 means that diversity is destroyed and the Court loses subject matter jurisdiction. 28 U.S.C. 1447(e) gives a District Court broad discretion to permit this joinder of a non-diverse defendant and remand the case to state court. However, in the present situation, a state court claim was never filed, so it would appear there is nothing to remand the case to and the statute of limitations has already run. Question: Is Plaintiff out of luck? Is Plaintiff forced to continue litigating in federal court against just D-1? Does Plaintiff have an argument that the statute of limitations was satisfied for California state court because he timely filed his action (albeit in federal court)? Hope: It would be great if we could litigate the case in state court against both D-1 and D-2; that a complaint could be filed in state court and the statute of limitations would be considered satisfied because the same action arising out of the same facts was timely filed in federal court. Fear: However, from what I can see, because there was never a state court case to begin with, there is no place for the federal case to be remanded, and I m not sure I see a reason for California state court to consider the statute of limitations satisfied just because the case was timely filed in federal court. Professor: I suspect that 1447e might not bar joinder in your situation. See the last sentence of 1367(a) re supplemental juris over additional parties. The US SCt decision in Allapattah, 545 U.S. 546 (2005) [or for my edited version < click Cases, then scroll to Allapattah] dealt directly with supp 1367 jurisd being extended to allow parties with <75k claims in both the class action and individual contexts to piggy back onto claims where at least one P s claim satisfied the amount in contro requirement was intended to augment fed SMJ, and also overrule a prior US SCt case that had barred the joinder of non-federal parties in the fed question context. While there has not been a US SCt case that has directly answered your question subsequent discovery revealing a substantial non-diverse D there may be 9th (or other) Circuit authority for a trial judge being able to hold on to this type of case, where P wants to remain in fed ct. Research Allapattah & Finley (the above overruled fed quest case), first in the 9th Cir.

33 The counter-argument arises from the (pre-1367 codification of supp juris) relevant US SCt case, Owen Equipment v. Kroger, 437 U.S. 365 (1978). There, the SCt said that a P could not amend her complaint, to sue a non-diverse D, after the diverse D exited via summary jmt. Another detail: Consider the timing factor, associated with the delay of not now dismissing in fed & maybe having to ultimately start over in state ct. One safety net might be CA s potential equitable tolling of the SOL, assuming you first (timely) filed in fed ct. I'm reasonably certain that CA permits equitable tolling of the state SOL in this scenario. STANDARD FIRE INSURANCE COMPANY v. KNOWLES United States Supreme Court 133 S.Ct (2013)

34 Breyer, Associate Justice, delivered the opinion of the Court [unanimous]. The Class Action Fairness Act of 2005 (CAFA) provides that the federal district courts shall have original jurisdiction over a civil class action if, among other things, the matter in controversy exceeds the sum or value of $5,000, U.S.C. 1332(d)(2). The statute adds that to determine whether the matter in controversy exceeds the sum or value of $5,000,000, the claims of the individual class members shall be aggregated. 1332(d)(6). The question presented concerns a class-action plaintiff who stipulates, prior to certification [judicial approval] of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA s scope? In our view, it does not. I In April 2011 respondent, Greg Knowles, filed this proposed class action in an Arkansas state court against petitioner, the Standard Fire Insurance Company. Knowles claimed that, when the company had made certain homeowner s insurance loss payments, it had unlawfully failed to include a general contractor fee. And Knowles sought to certify a class of hundreds, and possibly thousands of similarly harmed Arkansas policyholders. In describing the relief sought, the complaint says that the Plaintiff and Class stipulate they will seek to recover total aggregate damages of less than five million dollars. An attached affidavit stipulates that Knowles will not at any time during this case... seek damages for the class... in excess of $5,000,000 in the aggregate. [T]he company, pointing to CAFA s jurisdictional provision, removed the case to Federal District Court. See 1453 [removal of class actions]. Knowles argued for remand [back to the state court] on the ground that the [federal] District Court lacked jurisdiction. He claimed that the sum or value of the amount in controversy fell beneath the $5 million threshold. On the basis of evidence presented by the company, the District Court found that that the sum or value of the amount in controversy would, in the absence of the stipulation, have [been] above the $5 million [CAFA] threshold. Nonetheless, in light of Knowles stipulation, the court concluded that the amount fell beneath the threshold. The court consequently ordered the case remanded to the state court.. II CAFA [also] provides those class members include persons (named or unnamed) who fall within the definition of the proposed or certified class. As applied here, the District Court found that resulting sum would have exceeded $5 million but for the stipulation. And we must decide whether the stipulation makes a critical difference. Because his precertification stipulation does not bind anyone but himself, Knowles has not reduced the value of the putative class members claims. For jurisdictional purposes, our inquiry is limited to examining the case as of the time it was filed in state court. At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members. The Federal District Court, therefore, wrongly concluded that Knowles precertification stipulation could overcome its finding that the CAFA jurisdictional threshold had been met....

35 We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome [would] run directly counter to CAFA s primary objective: ensuring Federal court consideration of interstate cases of national importance. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute s objective. Knowles also points out that federal courts permit individual plaintiffs, who are the masters of their complaints, to avoid removal to federal court, and to obtain a remand to state court, by stipulating to amounts at issue that fall below the federal jurisdictional requirement [italics added]. That is so. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 294, 58 S.Ct. 586, 82 L.Ed. 845 (1938) ( If [a plaintiff] does not desire to try his case in the federal court he may resort to the expedient of suing for less than the jurisdictional amount, and though he would be justly entitled to more, the defendant cannot remove ). But the key characteristic about those stipulations is that they are legally binding on all plaintiffs [because a] (federal court, as condition for remand, can insist on a binding affidavit or stipulation that the plaintiff will [when back in state court] continue to claim less than the jurisdictional amount (emphasis added)). That essential feature is missing here, as Knowles cannot yet bind the absent class. In sum, the stipulation at issue here can tie Knowles hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class. For this reason, we believe the District Court, when following the statute [requiring him] to aggregate the proposed class members claims, should have ignored that stipulation. [W]e vacate the judgment below and remand the case for further [federal, not state] proceedings consistent with this opinion. It is so ordered. Notes and Questions: 1. The plaintiffs attorney stipulated that the class did not meet the $5,000,000 jurisdictional minimum for this federal question case. Note the difference from the general rules that: (a) there is no minimum amount for federal question cases; (b) plaintiffs may not aggregate their individual claims in diversity cases; and (c) non-cafa removal requires the consent of all [when multiple] defendants. (a) What jurisdictional result did the plaintiffs attorney hope to avoid? (b) What might be some potential reasons (not addressed in the opinion) he may have harbored, notwithstanding his filing a case seeking relief for hundreds, and possibly thousands of similarly harmed Arkansas policyholders? 2. This CAFA case arises under the federal statute designed to facilitate the removal of qualified class actions from state to federal court. It ignored the stipulation to damages being less than the jurisdictional amount (which bound the individual class representative, but not the class members). (a) Would this approach apply to cases where an individual, or group, stipulates to damages being less than $75,000 for each plaintiff?. (b) Have you previously encountered a scenario whereby some class action (or non-class

36 action) plaintiffs, but not all, could remain in the case notwithstanding the general rule that each claim must be in excess of the diversity statute s $75,000 jurisdictional minimum? 3. Fraudulent removal blocking: Knowles addresses manipulation of the amount in controversy element of federal diversity subject matter jurisdiction (and application of a federal statute the Class Action Fairness Act), undertaken with a view toward defeating removability to federal court. P can also seek to defeat removal, before or after filing her complaint, by choosing whom to sue. She might hope to take advantage of the federal approach, which construes the removal statutes restrictively, so as to limit removal jurisdiction. Some circuits apply a strong presumption against removability, whereby doubts as to removability are resolved in favor of remanding the case to state court. Nevertheless, a non-diverse party can be disregarded for purposes of determining whether original diversity jurisdiction exists. For example, P might include a patently non-provable (sham) claim against a non-diverse D in the original complaint, or just after the D files his removal petition. Then, the federal district judge may determine that the P s inclusion of a non-diverse party is a sham or is fraudulent. The case would thus remain removable/not subject to remand to state court. The authorities for this proposition are conveniently collated in Rader v. Sun Life Assurance Co., F.Supp.2d 2013 WL (N.D. Cal.). 4. Gaming the system removal: The courts disagree about the following scenario, whereby defendants may remove within the letter of the statute, but arguably not within its spirit. As the federal removal statute provides: A civil action otherwise removable solely on the basis of... section 1332(a)... 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 [italics added]. 28 USC 1441(b)(2). Assume that P has named and served the non-resident D, but not the named resident co-d. Assuming there is evidence that the P is diligently trying to serve the resident D (i.e., not a fraudulent joinder to defeat removal), some courts allow removal, per the plain meaning of the statute s and served language. At the time of service, no there is no served resident D. Other courts, given the policy behind the removal statute, do not permit this premature removal. Sophisticated Ds game the system by electronically monitoring state court dockets so that as soon as a case is filed, they can remove to federal court, because no resident D has yet been served. 5. Unlike federal court, most states authorize a P to also name fictitious Doe defendants. When a case is removed from those states to federal court, the (state) pleading thus includes potential Ds who are domiciled in the same state as P. Federal judges might thus consider remanding such cases back to state court, for a lack of diversity jurisdiction. Does any statute assigned for your next class address how a federal judge should proceed in this circumstance? 6. Can a plaintiff remove a case to federal court? In Benitez v. Williams, Cal.Rptr.3d (Aug. 30, 2013), P sued D under federal copyright law and related state law claims. The California state court judge given the exclusive federal SMJ over copyright claims ordered the P to remove the case to federal court. P did not do so. The judge thus dismissed the entire case. The California Court of Appeal reversed. Its reasoning was rooted in: two erroneous assumptions. The first was that [plaintiff] Benitez could remove the case to federal court.... [ And as t]he court [wrongly] concluded, plaintiff was required to litigate his entire lawsuit, including his state law claims, in federal court. This was error. The state court judge was apparently unaware of the US Supreme Court s 1941 decision in Shamrock v. Sheets, tracing Congress s historical limitations on removal and its specific omission from the earlier

37 [removal] act of the phrase either party, and the substitution for it of the phrase authorizing removal by the defendant or defendants [only]. PENNOYER v. NEFF United States Supreme Court 95 U.S. 714 (1877)

38 Prof s note: While no easy read, this case is an essential predicate for understanding the nature of personal jurisdiction, and how it evolved through the remaining cases in today s assignment. As with many cases, you have to work backwards, from the Supreme Court s take through the trial and/or intermediate appellate court decisions. Your case diagrams should also include any earlier cases (e.g., as in Pennoyer), to unravel the path the case took through the various state and federal courts through which it travelled, while en route to the U.S. Supreme Court. Finally, never assume who is plaintiff or defendant, based on which side of the v. you find the parties not that a named defendant did something wrong (e.g., Mr. Pennoyer). Mr. Justice Field delivered the [8-1] opinion of the court. This is an action to recover the possession of a tract of land, of the alleged value of $15,000, situated in the State of Oregon. The plaintiff [Neff] asserts title to the premises by a patent of the United States issued to him in 1866, under the act of Congress of Sept. 27, 1850, usually known as the Donation Law of Oregon. The defendant [Pennoyer] claims to have acquired the premises under a sheriff s deed, made upon a sale of the property on execution issued upon a judgment recovered against the plaintiff in one of the [Oregon] courts. The case turns upon the validity of this [prior] judgment. It appears from the record that the judgment was rendered in February, 1866, in favor of [Neff s former attorney] J. H. Mitchell, for less than $300, including costs, in an action brought by him upon a demand for services as an attorney; that, at the time the [prior] action was commenced and the judgment rendered, the defendant therein, the plaintiff here, was a nonresident of the State[,] that he was not personally served with process, and did not appear therein; and that the judgment was entered upon his default in not answering the [Mitchell] complaint, upon a constructive service of summons by publication. John Mitchell (S 1 plaintiff) and Sylvester Pennoyer (purchased Neff s property)... Source: Association of American Law Schools webpage; first photograph reprinted with permission of Professor Aaron H. Caplan;.second photograph reprinted with permission of Professor Ira S. Nathenson.... The Code of Oregon provides for such service when an action is brought against a nonresident and absent defendant, who has property within the State. It also provides, where the action is for the recovery of money damages, for the attachment of the property of the nonresident. And it also declares that no natural person is subject to the jurisdiction of a court of the

39 State, unless he appear in the court, or be found within the State, or be a resident thereof, or have property therein; and, in the last case, only to the extent of such property at the time the jurisdiction attached. Construing this latter provision to mean, that, in an action for money damages where a defendant does not appear in the court, and is not found within the State, and is not a resident thereof, but has property therein, the jurisdiction of the court extends only over such property, the [statutory] declaration expresses a principle of general, if not universal, law. The authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established. Any attempt to exercise authority beyond those limits would be deemed in every other forum an illegitimate assumption of power, and be resisted as mere abuse. In the [prior] case against the plaintiff, the property here in controversy sold under the judgment rendered [which] was not [previously] attached, nor in any way brought under the jurisdiction of the court. Its first connection with the case was caused by a [post-judgment] levy of the execution. It was not, therefore, disposed of pursuant to any adjudication, but only in enforcement of a personal judgment, having no relation to the property, rendered against a nonresident without service of process upon him in the action, or his appearance therein. The court below did not consider that an attachment of the property was essential to its jurisdiction or to the validity of the sale.... But it was also contended in that court, and is insisted upon here, that the judgment in the State court against the plaintiff was void for want of personal service of process on him, or of his appearance in the action in which it was rendered and that the premises in controversy could not be subjected to the payment of the demand of a resident creditor except by a proceeding in rem; that is, by a direct proceeding against the [defendant s] property [as if it were the defendant] for that purpose. If these positions are sound, [it] would seem to follow from two wellestablished principles of public law respecting the jurisdiction of an independent State over persons and property. The several States of the Union possess and exercise the authority of independent States, and the principles of public law to which we have referred are applicable to them. One of these principles is, that every State possesses exclusive jurisdiction and sovereignty over persons and property within its territory. As a consequence, every State has the power to determine for itself regulate the manner and conditions upon which property situated within such territory, both personal and real, may be acquired, enjoyed, and transferred. The other principle of public law referred to follows from the one mentioned; that is, that no State can exercise direct jurisdiction and authority over persons or property without its territory. The several States are of equal dignity and authority, and the independence of one implies the exclusion of power from all others. And so it is laid down by jurists, as an elementary principle, that the laws of one State have no operation outside of its territory, except so far as is allowed by comity; and that no tribunal established by it can extend its process beyond that territory so as to subject either persons or property to its decisions. Any exertion of authority of this sort beyond this limit is a mere nullity, and incapable of binding such persons or property in any other tribunals. But an attempt to give ex-territorial operation to its laws, or to enforce an ex-territorial jurisdiction by its tribunals, would be deemed an encroachment upon the independence of the State in which the [non-resident] persons are domiciled or the property is situated. So the State, through its tribunals, may subject property situated within its limits owned by non-residents to the payment of the demand of its own citizens against them; and the exercise

40 of this jurisdiction in no respect infringes upon the sovereignty of the State where the [nonresident] owners are domiciled. Every State owes protection to its own citizens; and, when nonresidents deal with them, it is a legitimate and just exercise of authority to hold and appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State s jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire into that non-resident s obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control the disposition of the property. If the nonresident have no property in the State, there is nothing upon which the tribunals can adjudicate. If, without personal service, judgments in personam, obtained ex parte against non-residents and absent parties, upon mere publication of process, which, in the great majority of cases[ ] would never be seen by the parties interested, could be upheld and enforced, they would be the constant instruments of fraud and oppression. Judgments for all sorts of claims upon contracts and for torts, real or pretended, would be thus obtained, under which property would be seized, when the evidence of the transactions upon which they were founded, if they ever had any existence, had perished. [Prof s note: The initial portion of this next paragraph is not critical to an understanding in personam jurisdiction. But it does lay the foundation for the other type of territorial jurisdiction you will soon study jurisdiction over defendant s property, aka in rem jurisdiction. That category of jurisdiction is often invoked when plaintiff cannot find and serve the defendant with the summons and complaint (Day 7 materials).] Substituted service by publication [in a local newspaper where the property is located] may be sufficient to inform parties of the object of proceedings taken where property is once brought under the control of the court by [pre-judgment] seizure or some equivalent act. The law assumes that property is always in the possession of its owner, in person or by agent; and it proceeds upon the theory that its seizure will inform him, not only that it is taken into the custody of the court. But where the entire object of the action is to determine the personal rights and obligations of the defendants, that is, where the suit is merely in personam, constructive service in this form upon a non-resident is ineffectual for any purpose. Process from the tribunals of one State cannot run into another State, and summon parties there domiciled to leave its territory and respond to proceedings against them. Publication of process or notice within the State where the tribunal sits cannot create any greater obligation upon the non-resident to appear. Process sent to him out of the State, and process published within it, are equally unavailing in proceedings to establish his personal liability. The [state] court [in a comparable Iowa case] said: These suits were not a proceeding in rem against the land, but were in personam against the owners of it. No person is required to answer in a suit on whom process has not been served, or whose property has not been attached [prior to judgment]. In this case, there was no personal notice, nor an attachment or other proceeding against the land, until after the judgments [italics added]. The judgments, therefore, are nullities, and did not authorize the executions on which the land was sold [to Pennoyer]. Since the adoption of the Fourteenth Amendment [Due Process] to the Federal Constitution, the validity of such judgments may be directly questioned, and their enforcement in the State resisted, on the ground that proceedings in a court of justice to deter mine the personal

41 rights and obligations of parties over whom that court has no jurisdiction do not constitute due process of law. To give such proceedings any validity, and if that involves merely a determination of the personal liability of the defendant, he must be brought within its jurisdiction by service of process within the State, or his voluntary appearance. It follows from the views expressed that the [so-called] personal judgment recovered in the State court of Oregon against the plaintiff herein, then a non-resident of the State, was without any validity, and did not authorize a sale of the property in controversy. Mr. Justice Hunt dissenting. The precise case is this: A statute of Oregon authorizes suits to be commenced by the service of a summons. In the case of a non-resident of the State, it authorizes the service of the summons to be made by publication for not less than six weeks, in a newspaper published in the county where the action is commenced. A copy of the summons must also be sent by mail, directed to the defendant at his place of residence, unless it be shown that the residence is not known and cannot be ascertained. It authorizes a judgment and execution to be obtained in such proceeding. Judgment in a suit commenced by one Mitchell, where the summons was thus served, was obtained against Neff, the present plaintiff; and the land in question was bought by the defendant Pennoyer, at a sale upon the judgment in such suit. This court now holds, that, by reason of the absence of a personal service of the summons on the defendant, the Circuit Court of Oregon had no jurisdiction, its judgment could not authorize the sale of land in said county, and, as a necessary result, a purchaser of land under it obtained no title; that, as to the former owner, it is a case of depriving a person of his property without due process of law. In my opinion, this decision is at variance with the long-established practice under the statutes of the States of this Union, is unsound in principle, and, I fear, may be disastrous in its effects. It tends to produce confusion in titles which have been obtained under similar statutes in existence for nearly a century; it invites litigation and strife, and over throws a well-settled rule of property. To say that a sovereign State has the power to ordain that the property of non-residents within its territory may be subjected to the payment of debts due to its citizens, if the property is levied upon at the commencement of a suit, but that it has not such power if the property is levied upon at the end of the suit, is a refinement and a depreciation of a great general principle that, in my judgment, cannot be sustained [italics added]. Without going into a wearisome detail of the statutes of the various States, it is safe to say that nearly every State in the Union provides a process by which the lands and other property of a non-resident debtor may be subjected to the payment of his debts, through a judgment or decree against the owner, obtained upon a substituted service of the summons or writ commencing the action. All these statutes are now adjudged to be unconstitutional and void. The titles obtained under them are not of the value of the paper on which they are recorded, except where a preliminary [pre-judgment] attachment was issued.

42 The objection now made, that suits commenced by substituted service, as by publication, and judgments obtained without actual notice to the debtor, are in violation of that constitutional provision that no man shall be deprived of his property without due process of law, has often been presented. [But t]hat a State can subject land within its limits belonging to non-resident owners to debts due to its own citizens as it can legislate upon all other local matters; that it can prescribe the mode and process by which it is to be reached, seems to me very plain. I am not willing to declare that a sovereign State cannot subject the land within its limits to the payment of debts due to its citizens, or that the power to do so depends upon the fact whether its statute shall authorize the property to be levied upon at the commencement of the suit or at its termination. This is a matter of detail, and I am of opinion, that if reasonable notice be given, with an opportunity to defend when appearance is made, the question of power will be fully satisfied. Notes and Questions:.. 1. Neff acquired valid title to the property in Mitchell s judgment against, and sale of, Neff s land occurred in The 14th Amendment became effective in The Supreme Court s 1877 judgment effectively decided that the pre-14th Amendment sale then permissible under state law violated a constitutional amendment that was adopted almost a decade later than the sale! 2. In any event, as the Supreme Court was applying the federal constitution to a judicial proceeding, its decision thus bound all state and federal courts throughout the country. Just what did the Court require in 1877 for valid in personam jurisdiction in future cases? 3. Per Justice Hunt s dissent, the rule announced by the majority: is at variance with the long-established practice [which he] fear[s], may be disastrous in its effects. Is this a sound rationale for retaining the long established practice, rather than adopting the majority s new rule? Consider his related concern: all the state statutes are now adjudged to be unconstitutional and void. The titles obtained under them are not of the value of the paper on which they are recorded. While many statutes upon which prior in personam judgments were based are now unconstitutional why would prior final judgments no longer be final? (You will/did presumably study this stare decisis concept in your Legal Writing course.) HESS v. PAWLOSKI United States Supreme Court 274 U.S. 352 (1927) Mr. Justice Butler delivered the [unanimous] opinion of the Court. This action was brought by defendant in error [plaintiff below] to recover damages for personal injuries. The declaration alleged that plaintiff in error [defendant below] negligently and wantonly drove a motor vehicle on a public highway in Massachusetts, and that by reason

43 thereof the vehicle struck and injured defendant in error. Plaintiff in error is a resident of Pennsylvania. No personal service was made on him, and no property belonging to him was attached. The service of process was made in compliance with [the] Laws of Massachusetts, the material parts of which follow: The acceptance by a nonresident of the rights and privileges conferred by the operation by a nonresident of a motor vehicle on a public way in the commonwealth shall be deemed equivalent to an appointment by such nonresident of the [Massachusetts] registrar to be his true and lawful attorney upon whom may be served all lawful processes in any action or proceeding against him, growing out of any accident or collision in which said nonresident may be involved while operating a motor vehicle, and said operation shall be a signification of his agreement that any such process against him which is so served shall be of the same legal force and validity as if served on him personally. Service of such process shall be made by leaving a copy of the process in the hands of the registrar, or in his office, and such service shall be sufficient service upon the said nonresident: Provided, that notice [be] forthwith sent by registered mail by the plaintiff to the defendant, and the defendant s return receipt and the plaintiff s affidavit of compliance herewith are appended to the writ. Cal. Vehicle Code Service of process [current note the similarity of today s California version to the 1920s Massachusetts version]:... Service of process shall be made by leaving one copy of the summons and complaint in the hands of the director or in his office at Sacramento or by mailing either by certified or registered mail, addressee only, return receipt requested, the Plaintiff in error [original defendant] appeared specially for the purpose of contesting jurisdiction. The question is whether the Massachusetts enactment contravenes the due process clause of the Fourteenth Amendment. The process of a court of one state cannot run into another and summon a party there domiciled to respond to proceedings against him. Notice sent outside the state to a nonresident is unavailing to give jurisdiction in an action against him personally for money recovery. Pennoyer v. Neff. There must be actual service within the state of notice upon him or upon some one authorized to accept service for him. A personal judgment rendered against a nonresident, who has neither been served with process nor appeared in the suit, is without validity. The mere transaction of business in a state by nonresident natural persons does not imply consent to be bound by the process of its courts. The power of a state to exclude foreign corporations, although not absolute, but qualified, is the ground on which such an implication is supported as to them.... Motor vehicles are dangerous machines, and, even when skillfully and carefully operated, their use is attended by serious dangers to persons and property. In the public interest the state may make and enforce regulations reasonable calculated to promote care on the part of all, residents and nonresidents alike, who use its highways. The measure in question operates to

44 require a nonresident to answer for his conduct in the state where arise causes of action alleged against him, as well as to provide for a claimant a convenient method by which he may sue to enforce his rights. Under the statute the implied consent is limited to proceedings growing out of accidents or collisions on a highway in which the nonresident may be involved. It is [further] required that he shall actually receive and receipt for notice of the service and a copy of the process. And it contemplates such continuances as may be found necessary to give reasonable time and opportunity for defense. It makes no hostile discrimination against nonresidents, but tends to put them on the same footing as residents. The state s power to regulate the use of its highways extends to their use by nonresidents as well as by residents. And, in advance of the operation of a motor vehicle on its highway by a nonresident, the state may require him to appoint one of its officials as his agent on whom process may be served in proceedings growing out of such use. That case [citation omitted] recognized power of the state to exclude a nonresident until the formal appointment is made. And, having the power so to exclude, the state may declare that the use of the highway by the nonresident is the equivalent of the appointment of the registrar as agent on whom process may be served. The difference between the formal and implied appointment is not substantial, so far as concerns the application of the due process clause of the Fourteenth Amendment. Judgment affirmed. Notes and Questions: The Court says: The mere transaction of business in a state by nonresident natural persons does not imply consent to be bound by the process of its courts. Is the mere driving of a car any different for the same purpose of assessing personal jurisdiction? 2. When you drive across a state line if you know it is it fair that you have thus consented to appointment of that state s designated officer to be your agent for service of process? 3. Pennoyer required service on the defendant in the forum to establish in personam jurisdiction. Does Hess overrule Pennoyer? INTERNATIONAL SHOE CO. v. STATE OF WASHINGTON United States Supreme Court 326 U.S. 310 (1945) Mr. Chief Justice Stone delivered the opinion of the Court [8-0, which includes a concurring opinion]. The questions for decision are (1) whether, within the limitations of the due process clause of the Fourteenth Amendment, appellant, a Delaware corporation, has by its activities in the State of Washington rendered itself amenable to proceedings in the courts of that state to recover unpaid contributions to the state unemployment compensation fund exacted by state

45 statutes and (2) whether the state can exact those contributions consistently with the due process clause of the Fourteenth Amendment. The statutes in question set up a comprehensive scheme of unemployment compensation, the costs of which are defrayed by contributions required to be made by employers to a state unemployment compensation fund. The contributions are a specified percentage of the wages payable annually by each employer for his employees services in the state. In this case notice of assessment for the years in question was personally served upon a [local] sales solicitor employed by appellant in the State of Washington, and a copy of the notice was mailed by registered mail to appellant at its address in St. Louis, Missouri. Appellant appeared specially before the office of unemployment and moved to set aside the order and notice of assessment on the ground that the service upon appellant s salesman was not proper service upon appellant; that appellant was not a corporation of the State of Washington and was not doing business within the state; that it had no agent within the state upon whom service could be made; and that appellant is not an employer and does not furnish employment within the meaning of the [unemployment compensation] statute. International Shoe Company s St. Louis, Missouri plant, circa 1950 < GGwsOTpXJLFOBFGg8lKLw9QsxCZVFAW> Reprinted with permission of TenFooters Blog, Japan Appellant in each of these [Washington] courts assailed the statute as applied, as a violation of the due process clause of the Fourteenth Amendment. The facts as found by the appeal tribunal and accepted by the state Superior Court and Supreme Court, are not in dispute. Appellant is a Delaware corporation, having its principal place of business in St. Louis, Missouri, and is engaged in the manufacture and sale of shoes and other footwear. It maintains places of business in several states, other than Washington, at which its manufacturing is carried on and from which its merchandise is distributed interstate through several sales units or branches located outside the State of Washington. Appellant has no office in Washington and makes no contracts either for sale or purchase of merchandise there. It maintains no stock of merchandise in that state. During the years from 1937 to 1940, now in question, appellant employed eleven to thirteen salesmen under direct supervision and control of sales managers located in St. Louis. These salesmen resided in Washington; their principal activities were confined to that state; and they were compensated by commissions based upon the amount of their sales. The commissions for each year totaled more than $31,000. Appellant supplies its salesmen with a line of samples, each consisting of one shoe of a pair, which they display to prospective purchasers. On occasion they [salesmen] rent permanent sample rooms, for exhibiting samples, in business buildings, or rent rooms in hotels

46 or business buildings temporarily for that purpose. The cost of such rentals is reimbursed by appellant. The authority of the salesmen is limited to exhibiting their samples and soliciting orders from prospective buyers, at prices and on terms fixed by appellant. The salesmen transmit the orders to appellant s office in St. Louis for acceptance or rejection, and when accepted the merchandise for filling the orders is shipped f.o.b. from points outside Washington to the purchasers within the state. All the merchandise shipped into Washington is invoiced at the place of shipment from which collections are made. No salesman has authority to enter into contracts or to make collections. The Supreme Court of Washington was of opinion that the regular and systematic solicitation of orders in the state by appellant s salesmen, resulting in a continuous flow of appellant s product into the state, was sufficient to constitute doing business in the state so as to make appellant amenable to suit in its courts. But it was also of opinion that there were sufficient additional activities shown to bring the case within the rule frequently stated, that solicitation within a state by the agents of a foreign corporation plus some additional activities there are sufficient to render the corporation amenable to suit brought in the courts of the state to enforce an obligation arising out of its activities there. The court found such additional activities in the salesmen s display of samples sometimes in permanent display rooms, and the salesmen s residence within the state, continued over a period of years, all resulting in a substantial volume of merchandise regularly shipped by appellant to purchasers within the state.. Appellant also insists that its activities within the state were not sufficient to manifest its presence there and that in its absence the state courts were without jurisdiction, that consequently it was a denial of due process for the state to subject appellant to suit. It refers to those cases in which it was said that the mere solicitation of orders for the purchase of goods within a state, to be accepted without the state and filled by shipment of the purchased goods interstate, does not render the corporation seller amenable to suit within the state. And appellant further argues that since it was not present within the state, it is a denial of due process to subject it to taxation or other money exaction. It thus denies the power of the state to lay the tax or to subject appellant to a suit for its collection. Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant s person. Hence his presence within the territorial jurisdiction of court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff. But due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. To say that the corporation is so far present there as to satisfy due process requirements, for purposes of taxation or the maintenance of suits against it in the courts of the state, is to beg the question to be decided. For the terms present or presence are used merely to symbolize those activities of the corporation s agent within the state which courts will deem to be sufficient to satisfy the demands of due process. Those demands may be met by such contacts of the corporation with the state of the forum as make it reasonable to require the corporation to defend the particular suit which is brought there. An estimate of the inconveniences which would result to the corporation from a trial away from its home or principal place of business is relevant in this connection.

47 Presence in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept service of process has been given. Conversely it has been generally recognized that the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation s behalf are not enough to subject it to suit on causes of action unconnected with the activities there. To require the corporation in such circumstances to defend the suit away from its home or other jurisdiction where it carries on more substantial activities has been thought to lay too great and unreasonable a burden on the corporation to comport with due process. Finally, although the commission of some single or occasional acts of the corporate agent in a state sufficient to impose an obligation or liability on the corporation has not been thought to confer upon the state authority to enforce it, other such acts, because of their nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit. Cf. [citations omitted and] Hess v. Pawloski, supra. True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized agents. But more realistically it may be said that those authorized acts were of such a nature as to justify the fiction. It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation to suit, and those which do not, cannot be simply mechanical or quantitative. Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Cf. Pennoyer v. Neff, supra; [citation omitted]. But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue. Applying these standards, the activities carried on in behalf of appellant in the State of Washington were neither irregular nor casual. They were systematic and continuous throughout the years in question. They resulted in a large volume of interstate business, in the course of which appellant received the benefits and protection of the laws of the state, including the right to resort to the courts for the enforcement of its rights. The obligation which is here sued upon arose out of those very activities. It is evident that these operations establish sufficient contacts or ties with the state of the forum to make it reasonable and just according to our traditional conception of fair play and substantial justice to permit the state to enforce the obligations which appellant has incurred there. Hence we cannot say that the maintenance of the present suit in the State of Washington involves an unreasonable or undue procedure. Appellant having rendered itself amenable to suit upon obligations arising out of the activities of its salesmen in Washington, the state may maintain the present suit in personam to

48 collect the tax laid upon the exercise of the privilege of employing appellant s salesmen within the state. Affirmed. Mr. Justice Black delivered the following [concurring] opinion. Certainly the due process clause is not brought in issue any more by appellant s further conceptualistic contention that Washington could not levy a tax or bring suit against the corporation because it did not honor that State with its mystical presence. For it is unthinkable that the vague due process clause was ever intended to prohibit a State from regulating or taxing a business carried on within its boundaries simply because this is done by agents of a corporation organized and having its headquarters elsewhere. The Court has engaged in an unnecessary discussion in the course of which it has announced vague Constitutional criteria applied for the first time to the issue before us. It has thus introduced uncertain elements confusing the simple pattern and tending to curtail the exercise of State powers to an extent not justified by the Constitution. The criteria adopted insofar as they can be identified read as follows: Due process does permit State courts to enforce the obligations which appellant has incurred if it be found reasonable and just according to our traditional conception of fair play and substantial justice. And this in turn means that we will permit the State to act if upon an estimate of the inconveniences which would result to the corporation from a trial away from its home or principal place of business, we conclude that it is reasonable to subject it to suit in a State where it is doing business. It is true that this Court [in] previous cases had indicated that the ancient rule against judgments without notice had stemmed from natural justice concepts. These cases, while giving additional reasons why notice under particular circumstances is inadequate, did not mean thereby that all legislative enactments which this Court might deem to be contrary to natural justice ought to be held invalid under the due process clause [italics added]. None of the cases purport to support or could support a holding that a State can tax and sue corporations only if its action comports with this Court s notions of natural justice. I should have thought the Tenth Amendment settled that. I believe that the Federal Constitution leaves to each State, without any ifs' or buts, a power to tax and to open the doors of its courts for its citizens to sue corporations whose agents do business in those States. Believing that the Constitution gave the States that power, I think it a judicial deprivation to condition its exercise upon this Court s notion of fairplay, however appealing that term may be. Nor can I stretch the meaning of due process so far as to authorize this Court to deprive a State of the right to afford judicial protection to its citizens on the ground that it would be more convenient for the corporation to be sued somewhere else. There is a strong emotional appeal in the words fair play, justice, and reasonableness. But they were not chosen by those who wrote the original Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in invalidating State or Federal laws passed by elected legislative representatives. No one, not even those who most feared a democratic government, ever formally proposed that courts should be given power to invalidate legislation under any such elastic standards.

49 True, the State s power is here upheld. But the rule announced means that tomorrow s judgment may strike down a State or Federal enactment on the ground that it does not conform to this Court's idea of natural justice. Notes and Questions: 1. There are several situations whereby an entity or individual is unquestionably subject to in personam jurisdiction (IPJ) in the forum selected by the plaintiff. These include being domiciled in the forum and filing a general appearance (answer). In the interim period between Pennoyer and Shoe, the state and federal judiciary adopted a number of yardsticks for measuring personal jurisdiction in the many other situations where the defendant s ties to the forum are not as robust. The most prominent were doing business, presence, and consent. What are the arguments, for and against, each of these bases for IPJ existing over International Shoe Company in the State of Washington? 2. While the above approaches are still articulated in the IPJ cases, the over-arching analysis must now be undertaken within the unifying framework articulated by the U.S. Supreme Court in Shoe. What was it? 3. Is Shoe a case arising under federal law or a diversity subject matter jurisdiction (SMJ) case? What role, if any, does the answer to the SMJ question play in assessing IPJ? 4. Justice Black s concurring opinion warns against the majority s use of the Fourteenth Amendment as a measuring rod for this Court to use in invalidating State or Federal laws passed by elected legislative representatives. Would a different finding that there was no IPJ necessarily invalidate Washington s unemployment compensation laws? 5. Black would likely be incensed by today s Internet cases employing Shoe s elastic minimum contacts yardstick. There, the general rule is that the more involvement an out-ofstate provider has with the forum, the more likely a finding of IPJ. This approach has given rise to an active-passive distinction. For example, assume P goes to the provider s webpage. Its servers are usually outside the forum. D directs no communications into P s chosen forum, which is not required for P to complete her purchase of D s offending product. No IPJ. WORLD-WIDE VOLKSWAGEN CORPORATION v. WOODSON United States Supreme Court 444 U.S. 286 (1980) Mr. Justice White delivered the [5-4] opinion of the Court [three separate opinions]. The issue before us is whether, consistently with the Due Process Clause of the Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over a nonresident automobile retailer and its wholesale distributor in a products-liability action, when the defendants only connection with Oklahoma is the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma. I

50 Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N. Y., in The following year the Robinson family, who resided in New York, left that State for a new home in Arizona. As they passed through the State of Oklahoma, another car struck their Audi in the rear, causing a fire which severely burned Kay Robinson and her two children. The Robinsons subsequently brought a products-liability action in the District Court for Creek County, Okla., claiming that their injuries resulted from defective design and placement of the Audi s gas tank and fuel system. They joined as defendants the automobile s manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway. Seaway and World-Wide entered special appearances, 3 claiming that Oklahoma s exercise of jurisdiction over them would offend the limitations on the State s jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment. New York Seaway Office Reprinted with permission of Everett Barnes Volkswagen Group of America Logo < frontend/resources/img/layout/logo_new.jpg> The facts presented to the District Court showed that World-Wide is incorporated and has its business office in New York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has its place of business in New York. Insofar as the record reveals, Seaway and World-Wide are fully independent corporations whose relations with each other and with Volkswagen and Audi are contractual only. Respondents adduced no evidence that either World-Wide or Seaway does any business in Oklahoma, ships or sells any products to or in that State, has an agent to receive process there, or purchases advertisements in any media calculated to reach Oklahoma. In fact, as respondents counsel conceded at oral argument, there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma with the single exception of the vehicle involved in the present case. 3 Volkswagen also entered a special appearance in the District Court, but unlike World-Wide and Seaway did not seek review in the Supreme Court of Oklahoma and is not a petitioner here. Both Volkswagen and Audi remain as defendants in the litigation pending before the District Court in Oklahoma.

51 Despite the apparent paucity of contacts between petitioners and Oklahoma, the [Oklahoma] District Court rejected their constitutional claim. Petitioners then sought a writ of prohibition in the Supreme Court of Oklahoma to restrain the District Judge, respondent Charles S. Woodson, from exercising in personam jurisdiction over them. They renewed their contention that, because they had no minimal contacts with the State of Oklahoma, the actions of the District Judge were in violation of their rights under the Due Process Clause. The Supreme Court of Oklahoma denied the writ, holding that personal jurisdiction over petitioners was authorized. [It stated that] In the case before us, the product being sold and distributed by the petitioners is by its very design and purpose so mobile that petitioners can foresee its possible use in Oklahoma. This is especially true of the distributor, who has the exclusive right to distribute such automobile in New York, New Jersey and Connecticut. The evidence presented below demonstrated that goods sold and distributed by the petitioners were used in the State of Oklahoma, and under the facts we believe it reasonable to infer, given the retail value of the automobile, that the petitioners derive substantial income from automobiles which from time to time are used in the State of Oklahoma. This being the case, we hold that under the facts presented, the trial court was justified in concluding that the petitioners derive substantial revenue from goods used or consumed in this State. [Compare the above concession by plaintiff s counsel, during the US Supreme Court hearing, that there was no showing that any automobile sold by World-Wide or Seaway has ever entered Oklahoma with the single exception of the vehicle involved in the present case.] We granted certiorari, to consider an important constitutional question with respect to state-court jurisdiction and to resolve a conflict between the Supreme Court of Oklahoma and the highest courts of at least four other States. II The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. In the present case, it is not contended that notice was inadequate; the only question is whether these particular petitioners were subject to the jurisdiction of the Oklahoma courts. As has long been settled, and as we reaffirm today, a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist minimum contacts between the defendant and the forum State. International Shoe. The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system. The protection against inconvenient litigation is typically described in terms of reasonableness or fairness. We have said that the defendant s contacts with the forum State must be such that maintenance of the suit does not offend traditional notions of fair play and substantial justice. The relationship between the defendant and the forum must be such that it is reasonable... to require the corporation to defend the particular suit which is brought there. Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State s interest in adjudicating the dispute; the plaintiff s interest in obtaining convenient and effective relief ; the interstate judicial system s

52 interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies. The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor against inconvenient litigation, have been substantially relaxed over the years. As we noted [citation omitted] this trend is largely attributable to a fundamental transformation in the American economy: Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.. Nevertheless, we have never accepted the proposition that state lines are irrelevant for jurisdictional purposes, nor could we, and remain faithful to the principles of interstate federalism embodied in the Constitution. [T]he States retain many essential attributes of sovereignty, including, in particular, the sovereign power to try causes in their courts. The sovereignty of each State, in turn, implied a limitation on the sovereignty of all of its sister States a limitation express or implicit in both the original scheme of the Constitution and the Fourteenth Amendment... Hence, even while abandoning the shibboleth that [t]he authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established, Pennoyer v. Neff, we emphasized that the reasonableness of asserting jurisdiction over the defendant must be assessed in the context of our federal system of government, International Shoe Co. v. Washington, and stressed that the Due Process Clause ensures not only fairness, but also the orderly administration of the laws. As we noted in [citation omitted]: As technological progress has increased the flow of commerce between the States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to these changes, the requirements for personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v. Neff, to the flexible standard of International Shoe. But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. Thus, the Due Process Clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment. III

53 Applying these principles to the case at hand, we find in the record before us a total absence of those affiliating circumstances that are a necessary predicate to any exercise of statecourt jurisdiction. Petitioners carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the State. Nor does the record show that they regularly sell cars at wholesale or retail to Oklahoma customers or residents or that they indirectly, through others, serve or seek to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma [while en route to Arizona]. It is argued, however, that because an automobile is mobile by its very design and purpose it was foreseeable that the Robinsons Audi would cause injury in Oklahoma. Yet foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause. 11 This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. The Due Process Clause, by ensuring the orderly administration of the laws, gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit. When a corporation purposefully avails itself of the privilege of conducting activities within the forum State, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve directly 11 Respondents counsel, at oral argument, sought to limit the reach of the foreseeability standard by suggesting that there is something unique about automobiles. It is true that automobiles are uniquely mobile, that they did play a crucial role in the expansion of personal jurisdiction through the fiction of implied consent, e. g., Hess v. Pawloski, and that some of the cases have treated the automobile as a dangerous instrumentality. But today, under the regime of International Shoe, we see no difference for jurisdictional purposes between an automobile and any other chattel. The dangerous instrumentality concept apparently was never used to support personal jurisdiction; and to the extent it has relevance today it bears not on jurisdiction but on the possible desirability of imposing substantive principles of tort law such as strict liability..

54 or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State. But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or Seaway in this case. Seaway s sales are made in Massena, N. Y. World-Wide s market, although substantially larger, is limited to dealers in New York, New Jersey, and Connecticut. There is no evidence of record that any automobiles distributed by World-Wide are sold to retail customers outside this tristate area. It is foreseeable that the purchasers of automobiles sold by World-Wide and Seaway may take them to Oklahoma. But the mere unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. This argument seems to make the point that the purchase of automobiles in New York, from which the petitioners earn substantial revenue, would not occur but for the fact that the automobiles are capable of use in distant States like Oklahoma. Respondents observe that the very purpose of an automobile is to travel, and that travel of automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen service centers throughout the country, including some in Oklahoma. 12 However, financial benefits accruing to the defendant from a collateral relation to the forum State will not support jurisdiction if they do not stem from a constitutionally cognizable contact with that State. In our view, whatever marginal revenues petitioners may receive by virtue of the fact that their products are capable of use in Oklahoma is far too attenuated a contact to justify that State s exercise of in personam jurisdiction over them. Because we find that petitioners have no contacts, ties, or relations with the State of Oklahoma, the judgment of the Supreme Court of Oklahoma is... Reversed. Mr. Justice Marshall, with whom Mr. Justice Blackmun joins, dissenting. For over 30 years the standard by which to measure the constitutionally permissible reach of state-court jurisdiction has been well established: [D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe. The corollary, that the Due Process Clause forbids the assertion of jurisdiction over a defendant with which the state has no contacts, ties, or relations, is equally clear. The concepts of fairness and substantial justice as applied to an evaluation of the quality and nature of the [defendant s] activity, are not readily susceptible of further definition, however, and it is not surprising that the constitutional standard is easier to state than to apply As we have noted, petitioners earn no direct revenues from these service centers.

55 This is a difficult case, and reasonable minds may differ as to whether respondents have alleged a sufficient relationship among the defendant[s], the forum, and the litigation, to satisfy the requirements of International Shoe. I am concerned, however, that the majority has reached its result by taking an unnecessarily narrow view of petitioners forum-related conduct. The majority asserts that respondents seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma. If that were the case, I would readily agree that the minimum contacts necessary to sustain jurisdiction are not present. But the basis for the assertion of jurisdiction is not the happenstance that an individual over whom petitioner had no control made a unilateral decision to take a chattel with him to a distant State. Rather, jurisdiction is premised on the deliberate and purposeful actions of the defendants themselves in choosing to become part of a nationwide, indeed a global, network for marketing and servicing automobiles. Petitioners are sellers of a product whose utility derives from its mobility. The unique importance of the automobile in today s society needs no further elaboration. Petitioners know that their customers buy cars not only to make short trips, but also to travel long distances. In fact, the nationwide service network with which they are affiliated was designed to facilitate and encourage such travel. Seaway would be unlikely to sell many cars if authorized service were available only in Massena, N. Y. Moreover, local dealers normally derive a substantial portion of their revenues from their service operations and thereby obtain a further economic benefit from the opportunity to service cars which were sold in other States. It is apparent that petitioners have not attempted to minimize the chance that their activities will have effects in other States; on the contrary, they have chosen to do business in a way that increases that chance, because it is to their economic advantage to do so.... To be sure, petitioners could not know in advance that this particular automobile would be driven to Oklahoma. They must have anticipated, however, that a substantial portion of the cars they sold would travel out of New York. Seaway, a local dealer in the second most populous State, and World-Wide, one of only seven regional Audi distributors in the entire country, would scarcely have been surprised to learn that a car sold by them had been driven in Oklahoma on Interstate 44, a heavily traveled transcontinental highway. In the case of the distributor, in particular, the probability that some of the cars it sells will be driven in every one of the contiguous States must amount to a virtual certainty. This knowledge should alert a reasonable businessman to the likelihood that a defect in the product might manifest itself in the forum State not because of some unpredictable, aberrant, unilateral action by a single buyer, but in the normal course of the operation of the vehicles for their intended purpose.... It is misleading for the majority to characterize the argument in favor of jurisdiction as one of foreseeability alone. As economic entities petitioners reach out from New York, knowingly causing effects in other States and receiving economic advantage both from the ability to cause such effects themselves and from the activities of dealers and distributors in other States. While they did not receive revenue from making direct sales in Oklahoma, they intentionally became part of an interstate economic network, which included dealerships in Oklahoma, for pecuniary gain. In light of this purposeful conduct I do not believe it can be said that petitioners had no reason to expect to be haled before a[n Oklahoma] court. The majority apparently acknowledges that if a product is purchased in the forum State by a consumer, that State may assert jurisdiction over everyone in the chain of distribution. With this I agree. But I cannot agree that jurisdiction is necessarily lacking if the product enters the

56 State not through the channels of distribution but in the course of its intended use by the consumer. We have recognized the role played by the automobile in the expansion of our notions of personal jurisdiction. Unlike most other chattels, which may find their way into States far from where they were purchased because their owner takes them there, the intended use of the automobile is precisely as a means of traveling from one place to another Of course, the Constitution forbids the exercise of jurisdiction if the defendant had no judicially cognizable contacts with the forum. But as the majority acknowledges, if such contacts are present the jurisdictional inquiry requires a balancing of various interests and policies. I believe such contacts are to be found here and that, considering all of the interests and policies at stake, requiring petitioners to defend this action in Oklahoma is not beyond the bounds of the Constitution. Accordingly, I dissent. Mr. Justice Blackmun, dissenting. For me, a critical factor in the disposition of the litigation is the nature of the instrumentality under consideration. It has been said that we are a nation on wheels. What we are concerned with here is the automobile and its peripatetic character. One need only examine our national network of interstate highways, or make an appearance on one of them, or observe the variety of license plates present not only on those highways but in any metropolitan area, to realize that any automobile is likely to wander far from its place of licensure or from its place of distribution and retail sale. Miles per gallon on the highway (as well as in the city) and mileage per tankful are familiar allegations in manufacturers advertisements today. To expect that any new automobile will remain in the vicinity of its retail sale like the 1914 electric driven car by the proverbial little old lady is to blink at reality. The automobile is intended for distance as well as for transportation within a limited area. It therefore seems to me not unreasonable-and certainly not unconstitutional and beyond the reach of the principles laid down in International Shoe, and its progeny to uphold Oklahoma jurisdiction over this New York distributor and this New York dealer when the accident happened in Oklahoma. I see nothing more unfair for them than for the manufacturer and the importer. All are in the business of providing vehicles that spread out over the highways of our several States. It is not too much to anticipate at the time of distribution and at the time of retail sale that this Audi would be in Oklahoma. Notes and Questions: 1. General IPJ may exist when a defendant s contacts with the forum are so extensive, that a court could generally require her to litigate there, for any cause of action regardless of where it occurred. General jurisdiction examples include a suit against a forum resident, or against a corporation where it is incorporated or has its principal place of business. That would not be the case, given the facts of Pennoyer, or Hess, or Shoe. In the latter cases, the court considered what is often referred to as specific IPJ. Lacking the systematic contacts that would trigger general IPJ, P had to assert that there is specific personal jurisdiction. That would be jurisdiction which flows from a dispute arising within the forum state necessitating a minimum contacts analysis of the D s (comparatively remote) ties to the forum. WWVW s footnote 3 cryptically alludes to this distinction, and suggests why Audi and Volkswagen not join in the

57 other defendants IPJ motion. General v. specific IPJ is not essential to articulating an in personam jurisdiction analysis. But understanding their respective applications should help unravel the mysteries of IPJ s constitutional Due Process cases. 2. WWVW restates the various interests, other than inconvenience to the defendant, which bear upon the reasonableness of exercising IPJ. What are they? How did they influence the result in WWVW? 3. Having now studied several IPJ cases, would you be willing to embrace the dissenting justices view that there should have been IPJ over the tri-state distributor and the New York retailer both of whom are in the chain of distribution of new Audis? Put another way: assume you are in the showroom where the Audi was being sold. Would the retailer be likely to say: This is a great car, but not for driving outside of New York (or New England). Would he be more likely to say: Not only will you have a great car, but it can be serviced by any VW dealer in the country and there are a thousand of them. 4. Page 4 contains the phrase: When a corporation purposefully avails itself of the privilege of conducting activities within the forum State, it has clear notice that it is subject to suit there... That theme is drawn from the Court s earlier decision in Hanson v. Denkla, 357 U.S. 235 (1958). That seminal decision introduced the purposeful availment factor into personal jurisdiction analysis. The essential tenet is that a D s activities, which demonstrates her purposely dealing with the forum (or its residents), subjects her to IPJ in that forum. On the other hand, merely placing a product into the stream of commerce is not enough to establish such purposeful availment. Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987). LONGINES-WITTNAUER WATCH CO. V BARNES & REINECKE New York Court of Appeals 15 N.Y.2d 443 (1965) Fuld, Justice [with two concurring opinions] In the three cases under review one sounding in contract and two in tort we are called upon to decide whether the courts of this State acquired personal jurisdiction, under our long arm statute (CPLR 302), over foreign corporations not doing business here in the traditional sense. Since there are several questions of law common to all three cases, we discuss such questions

58 generally, at the outset, before undertaking a more particularized consideration of the cases themselves. Taking advantage of the [US] Supreme Court s broadening of the bases for the exercise of personal jurisdiction over nondomiciliaries, the Legislature of this State, in 1962, enacted CPLR 302. Modeled upon a provision of the Illinois Civil Practice Act, section 302 discarded the concept of doing business as the exclusive test of jurisdiction and provided, instead, insofar as here pertinent, that personal jurisdiction may be asserted over any nondomiciliary if, in person or through an agent, he transacts any business within the state or commits a tortious act within the state, as long as the particular cause of action asserted is one arising from any of such acts. 3 One of the cases, Longines-Wittnauer Watch Co. v. Barnes & Reinecke, is a suit for breach of contract and turns on paragraph 1 of subdivision (a) of section 302 relating to a defendant s transact[ion of] any business within the state. The other two Feathers v. McLucas and Singer v. Walker are founded on claims of negligence, as well as of breach of warranty, and were decided below on the basis of paragraph 2 of subdivision (a) of section 302 involving a defendant s commission of a tortious act within the state. Longines-Wittnauer v. Barnes & Reinecke The plaintiff Longines-Wittnauer, a New York corporation, seeks damages for breach of warranty in the manufacture and sale of machines specially designed for it by the appellant Barnes & Reinecke, a Delaware corporation having its place of business in Chicago, Illinois. The parties had carried on negotiations in 1962, the appellant mailing its contract proposals for the machines to the plaintiff in New York and shortly thereafter sending key officers to this State to discuss the terms of the agreement. After further meetings in Chicago, a written contract in the form of a printed purchase order was executed in June 1962 by the appellant in Chicago, the purchase order itself reciting, however, that it was a contract made in the State of New York and governed by the laws thereof. Thereafter, officers and employees of the appellant, including its president, treasurer and engineers, twice came to the plaintiff s plant in Lynbrook on Long Island to discuss certain problems in connection with the performance of the contract. There were meetings in Chicago as well, and in March 1963 a supplemental agreement was executed by the plaintiff in New York after it had been signed by the appellant in Chicago. This agreement increased the price of the machines and provided, among other things, that their delivery did not constitute acceptance, it being specified that such acceptance would occur only after the machines had met certain tests following installation in New York. In April 1963, a month after the supplemental agreement was executed, the appellant shipped the machines, f.o.b. Chicago, directed to the plaintiff s plant in Lynbrook and thereafter participated in the installation and testing of the machines; in fact, two of its engineers spent substantially all of their working days 3 The entire text of subdivision (a), the portion of the statute with which we are concerned, reads as follows: (a) Acts which are the basis of jurisdiction. A court may exercise personal jurisdiction over any nondomiciliary, or his executor or administrator, as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he: 1. transacts any business within the state; or 2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or 3. owns, uses or possesses any real property situated within the state.

59 at the plaintiff s plant from April through June 1963 getting the machines ready for acceptance testing. Source: < MINT-US-Air-Force-Longines-Wittnauer-Watch-Co-Pocket.j> Reprinted with Permission of Yabe Edmund The plaintiff, following its acceptance of the machines, discovered certain alleged defects, on the strength of which this action was commenced in October by service of the summons and complaint on the appellant in Illinois. The latter challenged the court s jurisdiction over its person by a motion to dismiss the complaint. The court denied the motion, the Appellate Division unanimously affirmed the resulting order and the appeal is before us by leave of the Appellate Division. The appellant does not dispute that a single transaction in New York, out of which the cause of action has arisen, may satisfy the requirement of the transaction of business provision (CPLR 302, subd. [a], par. 1). The nub of its argument seems to be that, if the contract was not actually made in New York, its activities in this State preliminary and subsequent to the execution of the contract cannot be regarded as amounting to the transaction of business under the statute. We find no merit in this contention. In enacting section 302, the Legislature chose not to fix precise guidelines, as other states have done, so as to draw within the jurisdictional reach of the New York courts only contracts made within this State (Md.) or contracts made in this State or to be performed in this State (N. C.) or contracts to be performed in whole or in part by either party in [this State] (Minn.); Tex.) (Vt.). The Advisory Committee decided, instead, to follow the broad, inclusive language of the Illinois provision, adopting as the criterion the transact[ion of] any business within the state. The design of the legislation, as expressed by the committee, was to take advantage of the new [jurisdictional] enclave opened up by International Shoe where the nonresident defendant has engaged in some purposeful activity in this State in connection with the matter in suit. Therefore, even though the last act marking the formal execution of the

60 contract may not have occurred within New York, the statutory test may be satisfied by a showing of other purposeful acts performed by the appellant in this State in relation to the contract, albeit preliminary or subsequent to its execution. 5 The activities in which the appellant engaged in this State were assuredly adequate to meet the liberal statutory criterion. They comprised substantial preliminary negotiations through high-level personnel during a period of some two months; the actual execution of a supplementary contract; the shipment for use here, subject to acceptance following delivery, of two specially designed machines, priced at the not inconsiderable sum of $118,000; and the rendition of services over a period of some three months by two of the appellant s top engineers in supervising the installation and testing of the complex machines. 6 It follows that the courts below were fully justified in sustaining jurisdiction over the appellant Barnes & Reinecke. Feathers v. McLucas Mr. and Mrs. Feathers, the plaintiffs in this case, brought suit to recover for serious personal injuries and property damage sustained in July 1962 as a result of an explosion on a public highway near their home in Berlin, New York, of a tractor-drawn steel tank, en route from Pennsylvania to Vermont, which contained highly flammable liquefied propane gas. The tank had been manufactured in Kansas in 1957 by the appellant, The Darby Products of Steel Plate Corporation (sued as The Darby Corporation), a Kansas company, under a contract with the Butler Manufacturing Co., a Missouri corporation, presumably with knowledge that the latter would mount the tank on a wheelbase and then sell it to E. Brooke Matlack, a Pennsylvania corporation, which operated as a licensed interstate carrier in Pennsylvania and several other states, including New York. All three companies were named among the defendants sued, the complaint charging Darby with negligence and breach of warranty in the manufacture of the tank. Served with a summons and complaint in Kansas, pursuant to CPLR 302, the appellant moved to dismiss the complaint on the ground that the court lacked jurisdiction of its person, pointing out that all its business was carried on from its plant and offices in Kansas City, Kansas, and that it never had any agents, representatives, offices or other facilities in this State 5 While by no means controlling, it is worthy of some note that the decisions interpreting the Illinois statute on which, as we have noted, section 302 is modeled have held that the place of contracting is not the exclusive criterion, and that the requisite transaction of business by the nonresident defendant within the forum may consist of such activity on his part as engaging in preliminary negotiations for the contract or in subsequent acts in furtherance thereof, the issue turning, in essence, on the totality of the defendant s activities within the forum. 6 We do no more than note the added fact that the contract itself expressed the agreement of the parties that it was to be regarded as having been made in New York and as governed by New York law.

61 and never transacted or solicited any business here. The motion was granted but its order was reversed by the Appellate Division, which granted leave to appeal to this court. There being no showing indeed, not even a claim that the appellant transacted any business in this State, within the purview of paragraph 1 of subdivision (a) of CPLR 302, the case necessarily turns on the construction to be accorded paragraph 2. More particularly, we must ascertain whether the facts of the case satisfy the standard of paragraph 2 that the defendant be shown to have commit[ted] a tortious act within the state. The tortious act charged against the appellant that it improperly designed and assembled the tank indisputably occurred in the out-of- state manufacturing process in Kansas. Nevertheless, the Appellate Division sustained jurisdiction on the strength of the resulting injury in this State, theorizing that the Legislature did not intend to separate foreign wrongful acts from resulting forum consequences, and it went on to say directing its attention to the requirements of Federal due process that section 302 merely codified the minimum contacts test laid down by the Supreme Court decisions. 7 However, the question presented is not as the Appellate Division intimated it was by its reference to minimum contacts whether the Legislature could constitutionally have enacted legislation expanding the jurisdiction of our courts to the extent determined by the Appellate Division but whether the Legislature did, in fact, do so. In short, in both this case and Singer v. Walker [below], our task is simply to determine the import and scope of the jurisdictional provision which the Legislature actually enacted. As bearing on this, it cannot be made too clear that we are concerned solely with the problem of the court s jurisdiction over the person of a non-resident defendant and not with the question of his ultimate liability to a particular plaintiff; that issue is to be considered only after it is decided, on the basis of section 302, that the defendant is subject to the in personam jurisdiction of our courts. The language of paragraph 2 conferring personal jurisdiction over a nondomiciliary if, in person or through an agent, he... commits a tortious act within the state is too plain and precise to permit it to be read, as has the Appellate Division, as if it were synonymous with commits a tortious act without the state which causes injury within the state. The mere occurrence of the injury in this State certainly cannot serve to transmute an out-of-state tortious act into one committed here within the sense of the statutory wording. Any possible doubt on this score is dispelled by the fact that the draftsmen of section 302 pointedly announced that their purpose was to confer on the court personal jurisdiction over a non-domiciliary whose act in the state gives rise to a cause of action or, stated somewhat differently, to subject non-residents to personal jurisdiction when they commit acts within the state (emphasis supplied.) Having in 7 It was the Appellate Division s conclusion that the minimum contacts test was satisfied by the showing that the tank, with its load of flammable liquid, was an instrumentality dangerous to life and property, if defectively constructed, and that the appellant had knowledge that the tank was designed for ultimate use by a Pennsylvania carrier in interstate commerce and could be expected reasonably to foresee that its acts, if wrongful, might well have potential consequences in adjoining New York.

62 mind the plain language of the statute and the expressed design of those who drafted it, we deem unreasonable the interpretation urged upon us by the plaintiffs. If, in fact, the Legislature of this State had intended to confer jurisdiction on the strength of injurious forum consequences alone, without regard to the locus of the commission of the tortious act itself, it would presumably have used language appropriate to reflect such a design. In sharp contrast [to long-arm statutes in other states], the Legislature chose to adopt language which, in so many words, demands that the tortious act be one committed by the defendant, in person or through an agent, within this State. Our attention is directed to the broad interpretation accorded in Gray v. American Radiator & Sanitary Corp. to the similarly worded provision of the Illinois statute relating to the commission of a tortious act within the state on which paragraph 2 of subdivision (a) of section 302 was modeled. In Gray, an Illinois resident, injured in that state as a result of an explosion of a water heater which had, in the court s words, found its way into Illinois in the course of commerce, brought suit against an Ohio corporation which had (it was alleged) negligently manufactured in Ohio a safety valve later incorporated into the heater. The heater itself had been assembled in Pennsylvania by a Pennsylvania corporation which had purchased the valve from the Ohio manufacturer. In rejecting the defendant s contention that it had not committed a tortious act in Illinois [bolding added], the court invoked the traditional rule that the place of a wrong is where the last event takes place which is necessary to render the actor liable and concluded that, since the last event, that is, the injury, had occurred in Illinois, the tort was committed in Illinois for purposes of the jurisdictional statute. We find this argument unconvincing. It certainly does not follow that, if the place of wrong is a particular state, the place of the commission of a tortious act is also that same state for purposes of interpreting a statute conferring jurisdiction over nonresidents. Moreover, the place of the tort is not necessarily the same as the place of the defendant s commission of the tortious act. In our view, then, the interpretation accorded the statute by the Illinois court disregards its plain language and exceeds the bounds of sound statutory construction. Reading the New York statute, as we do, to require a showing that the nondomiciliary committed a tortious act in this State, we need not pass upon the constitutional question raised by the appellant or consider whether the due process requirement of minimum contacts with the forum state would be satisfied by evidence that the injury occurred here and that the appellant presumably knew that its product (the tank) might ultimately reach New York in the course of its use by an interstate carrier or trucker [italics added]. In sum, then, it is our conclusion, based not only on the plain language of the statute but on its legislative history, that paragraph 2 of subdivision (a) of section 302 covers only a tortious act committed (by a nondomiciliary) in this State [as opposed to the effects thereof occurring g in this state]. Any plea for further expansion of its scope, however desirable such expansion may seem, is a matter for the Legislature rather than the courts. It follows, therefore, that, since the tortious act charged against the appellant Darby was committed, if at all, in Kansas and that company transacted no business whatsoever in New York, no basis exists in the present case for subjecting it to the jurisdiction of the courts of this State. Singer v. Walker The complaint alleges that in April of 1960 Michael Singer, then 10 years old and a resident of this State, was seriously injured when a geologist s hammer which he was using in

63 Connecticut broke and a chip penetrated his right eye. The hammer, it is further recited, was manufactured by the appellant Estwing Manufacturing Co., an Illinois corporation not doing business in this State. Bearing a label, Unbreakable Tools Estwing Mfg. Co., the hammer was shipped by the appellant, f. o. b. Illinois, to the defendant Walker, a dealer in geological supplies in New York City. Michael s aunt purchased the hammer from Walker and gave it to the child a month or two before the accident which, as stated, occurred in Connecticut when the hammer fragmented while the youngster, on a field trip with his father, was using it to break and split rock. Service of process on the appellant in an action brought in this State was set aside on the ground that it was not doing business in New York. The present action was brought by service of the summons and complaint on Estwing in Illinois. Its motion to dismiss the complaint on the ground that the court had not acquired personal jurisdiction was granted [s]ince the tortious act complained of did not take place in this state or arise... [from] any transaction of business by defendant in this state. The Appellate Division taking a different view, reversed on the law and denied the motion, holding that the cause of action was one arising from the commission of a tortious act in the State under paragraph 2 of subdivision (a) of section 302. And we note again that we deal with the case in the light of the statutory provision as it actually reads and not as it could, perhaps, have been written. Manifestly, the tortious acts attributed to the appellant in the manufacture and labeling of the hammer occurred at the place of manufacture in Illinois and, as in Feathers, are wholly insufficient to satisfy the requirement of paragraph 2 that the tortious act be one committed within this State. The Appellate Division, nevertheless, sustained jurisdiction on the theory that Estwing s circulation in New York of a hammer mislabeled as unbreakable thereby creating, as that court put it, a continuing condition of hazard wherever the article was sold itself constituted the commission of a tortious act here. We cannot accept this reasoning. The mere fact that a product defectively manufactured and misleadingly labeled in one state is marketed and sold in another cannot serve to change the place where the original tortious acts were committed or to create a new tortious act. The tortious conduct charged to the appellant consists solely of its acts in manufacturing an assertedly defective hammer and in attaching to it a false label, both of which unquestionably took place in Illinois. Accordingly, as the trial judge correctly concluded, jurisdiction cannot be sustained under paragraph 2. However, the question remains whether jurisdiction may be upheld under paragraph 1 on the ground that the appellant transact[ed]... business within the state and that the pleaded cause of action is one arising therefrom. It is clear that paragraph 1 is not limited to actions in contract; it applies as well to actions in tort when supported by a sufficient showing of facts. We hold [Longine v. Barnes] that the appellant s activities in this State are sufficient to satisfy the statutory criterion of transaction of business.... [W]e do not deem it determinative, as urged by the appellant, that the formal execution of its sales contracts may have occurred in Illinois rather than New York.... [T]he cause of action asserted is clearly one arising from the purposeful activities engaged in by the appellant in this State in connection with the sale of its products in the New York market. In sum, then, the Appellate Division was in error in holding paragraph 2 applicable; nevertheless, on the strength of paragraph 1, we affirm its order sustaining jurisdiction over the

64 appellant Notes and Questions: 1. See footnote 6. Is the court saying that the contractual provision regarding New York law governing this contract resolves the issue of statutory applicability? Would that clause more likely address any issue about constitutional minimum contacts? 2. See footnote 7. The Appellate Division (A.D.) answered the 302 question via the minimum contacts test. The high court corrects the A.D. s inappropriate merger. The primary legal source applied by all state and federal courts to assess minimum contacts is the Supreme Court case law interpretations of the federal Due Process clause. The other legal source, for assessing the particular state s ability to require a non-resident defendant to therein litigate, is the forum state s long-arm statute. As noted in Troma Entertainment, Inc. v. Centennial Pictures Inc., 729 F.3d 215, 218 (2d Cir., 2013): See 302(a)(3)(ii). That provision confers personal jurisdiction over an individual who commits a tortious act without the state causing injury to person or property within the state... [ ]It is well-settled that residence or domicile of the injured party within [New York] is not a sufficient predicate for jurisdiction under section 302(a)(3) [which would suffice under federal due process analysis]. 3. What long-arm statute does a federal judge use? See FRCP 4(k)(1)(A). The exception to this general rule is found in 4(k)(2)(a). When would the exception apply? The leading case is Omni Captital Int l v. Rudolf Wolff & Co., 484 U.S. 97 (1987). 4. As of 1970, the California Legislature led the way for those states opting to jettison the IPJ Step 1 long-arm statute process. To avoid satellite litigation regarding the state statutory construction step, California enacted Code of Civil Procedure As it provides: A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States. California courts may thus proceed directly to what is, for other states, Step 2 whether the defendant has minimum contacts with California. The state still has some code-specific long-arm statutes. It s Motor Vehicle Code, for example, reads almost identically with the relevant Massachusetts 1920s Motor Vehicle Code provision in Hess v. Palowski. 5. As Video 4 points out, there are two types of long-arm statute: (1) the traditional category, usually containing multiple factual scenarios whereby the D s conduct must fit one or more of them; and (2) the modern category, which extends a state s personal jurisdiction to the outer limits of federal Due Process, as defined by US Supreme Court case law. As succinctly stated in Companion Property and Casualty Insurance Co. v. Palermo, 723 F.3d 557, at 559 (5th Cir. 2013): the exercise of personal jurisdiction over a non-resident defendant must comport with both federal constitutional due process requirements and the long-arm statute of the state in which the district court is located. Because Texas s [category 2] long-arm statute extends to the limits of federal constitutional due process, only one inquiry is required.

65 MULLANE v. CENTRAL HANOVER BANK & TRUST CO. United States Supreme Court 339 U.S. 306 (1950) Mr. Justice Jackson delivered the [7-1] opinion of the Court. This controversy questions the constitutional sufficiency of notice to beneficiaries on judicial settlement of accounts by the trustee of a common trust fund. The New York Court of Appeals considered and overruled objections that the statutory [method of] notice contravenes requirements of the Fourteenth Amendment and that beneficiaries were [thus] deprived of property without due process of law. Common trust fund legislation is addressed to a problem appropriate for state action. Mounting overheads have made administration of small trusts undesirable to corporate trustees. In order that donors and testators of moderately sized trusts may not be denied the service of

66 corporate fiduciaries, some thirty states other than New York have permitted pooling small trust estates into one fund for investment administration. By this plan, diversification of risk and economy of management can be extended to those whose capital standing alone would not obtain such advantage. Statutory authorization for the establishment of such common trust funds is provided in the New York Banking Law. Under this Act a trust company may establish a common fund and, within prescribed limits, invest therein the assets of an unlimited number of estates, trusts or other funds of which it is trustee. [E]xclusive management and control is in the [local New York] trust company as trustee, and neither a fiduciary nor any beneficiary of a participating trust is deemed to have ownership in any particular asset or investment of this common fund. Provisions are made for accountings twelve to fifteen months after the establishment of a fund and triennially thereafter. The decree in each such judicial settlement of accounts is made binding and conclusive as to any matter set forth in the account upon everyone having any interest in the common fund or in any participating estate, trust or fund. Central Hanover Bank and Trust Company, 35 East 72nd Street, NYC, circa 1932 Source: < Reprinted with permission of Wurts Bros. and the Collection of the Museum of the City of New York In January, 1946, Central Hanover Bank and Trust Company established a common trust fund in accordance with these provisions, and in March, 1947, it petitioned for settlement of its first account as common trustee. During the accounting period a total of 113 trusts participated in the common trust fund, the gross capital of which was nearly three million dollars. The record does not show the number or residence of the beneficiaries, but they were many and it is clear that some of them were not residents of the State of New York. The only notice given beneficiaries of this specific application was by publication in a local newspaper in strict compliance with the minimum requirements of [the] N.Y. Banking Law: After filing such petition (for judicial settlement of its account) the petitioner shall cause to be issued by the court in which the petition is filed and shall publish not less than once in each week for four successive weeks in a newspaper to be designated by the court a notice or citation addressed generally without naming them to all parties interested in such common trust fund and in such estates, trusts or funds mentioned in the petition, all of which may be described in the

67 notice or citation only in the manner set forth in said petition and without setting forth the residence of any such decedent or donor of any such estate, trust or fund. Thus the only notice required, and the only one given, was by [a local] newspaper publication setting forth merely the name and address of the trust company, the name and the date of establishment of the common trust fund, and a list of all participating estates, trusts or funds. At the time the first investment in the common fund was made on behalf of each participating estate, however, the trust company had notified by mail each person whose name and address was then known to it and who was entitled to share in the income therefrom (or) who would be entitled to share in the principal if the event upon which such estate, trust or fund will become distributable should have occurred at the time of sending such notice. Included in the notice was a copy of those provisions of the Act relating to the sending of the notice itself and to the judicial settlement of common trust fund accounts. Upon the filing of the petition for the settlement of accounts, appellant [Mullane] was, by order of the court appointed special guardian and attorney for all persons known or unknown not otherwise appearing who had or might thereafter have any interest in the income of the common trust fund; and appellee Vaughan was appointed to represent those similarly interested in the principal. There were no other appearances on behalf of any one interested in either interest or principal. Appellant appeared specially, objecting that notice and the statutory provisions for notice to beneficiaries were inadequate to afford due process under the Fourteenth Amendment, and therefore that the court was without jurisdiction to render a final and binding decree. Appellant s objections were entertained and overruled, the Surrogate [trail court] holding that the notice required and given was sufficient. A final decree accepting the accounts has been entered, affirmed by the Appellate Division of the Supreme Court, and by the Court of Appeals of the State of New York. The effect of this decree, as held below, is to settle all questions respecting the management of the common fund. We understand that every right which beneficiaries would otherwise have against the trust company, either as trustee of the common fund or as trustee of any individual trust, for improper management of the common trust fund during the period covered by the accounting is sealed and wholly terminated by the decree. We are met at the outset with a challenge to the power of the State the right of its courts to adjudicate at all as against those beneficiaries who reside without the State of New York. It is contended that the proceeding is one in personam in that the decree affects neither title to nor possession of any res [thing], but adjudges only personal rights of the beneficiaries to surcharge their trustee for negligenc or breach of trust. Accordingly, it is said, under the strict doctrine of Pennoyer v. Neff, the Surrogate is without jurisdiction as to nonresidents upon whom personal service of process was not made. Distinctions between actions in rem [against D s property] and those in personam are ancient and originally expressed in procedural terms. American courts have sometimes classed certain actions as in rem because personal service of process was not required, and at other times have held personal service of process not required because the action was in rem. Judicial proceedings to settle fiduciary accounts have been sometimes termed in rem, or vaguely in the nature of a proceeding in rem. It is not readily apparent how the courts of New York did or would classify the present proceeding, which has some characteristics and is wanting in some features of proceedings both in rem and in personam. But in any event we think that the requirements of the Fourteenth Amendment to the Federal Constitution do not depend

68 upon a classification for which the standards are so elusive and confused generally and which, being primarily for state courts to define, may and do vary from state to state. Without disparaging the usefulness of distinctions between actions in rem and those in personam in many branches of law, or on other issues, or the reasoning which underlies them, we do not rest the power of the State to resort to constructive service in this proceeding upon how its courts or this Court may regard this historic antithesis. It is sufficient to observe that, whatever the technical definition of its chosen procedure, the interest of each state in providing means to close trusts that exist by the grace of its laws and are administered under the supervision of its courts is so insistent and rooted in custom as to establish beyond doubt the right of its [state] courts to determine the interests of all claimants, resident or nonresident, provided its procedure accords full opportunity to appear and be heard. Quite different from the question of a state s power to discharge trustees [via account settlement actions such as this one] is that of the opportunity it must give beneficiaries to contest. Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case. In two ways this proceeding does or may deprive beneficiaries of property. It may cut off their rights to have the trustee answer for negligent or illegal impairments of their interests. Also, their interests are presumably subject to diminution in the proceeding by allowance of fees and expenses to one who, in their names but without their knowledge, may conduct a fruitless or uncompensatory contest. Certainly the proceeding is one in which they may be deprived of property rights and hence notice and hearing must measure up to the standards of due process. Personal service of written notice within the jurisdiction is the classic form of notice always adequate in any type of proceeding. But the vital interest of the State in bringing any issues as to its fiduciaries to a final settlement can be served only if interests or claims of individuals who are outside of the State can somehow be determined. A construction of the Due Process Clause which would place impossible or impractical obstacles in the way could not be justified. Against this interest of the State we must balance the individual interest sought to be protected by the Fourteenth Amendment. This is defined by our holding that The fundamental requisite of due process of law is the opportunity to be heard. This right to be heard has little reality or worth unless one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest. The Court has not committed itself to any formula achieving a balance between these interests in a particular proceeding or determining when constructive notice may be utilized or what test it must meet. Personal service has not in all circumstances been regarded as indispensable to the process due to residents, and it has more often been held unnecessary as to nonresidents. We disturb none of the established rules on these subjects. No decision constitutes a controlling or even a very illuminating precedent for the case before us. But a few general principles stand out in the books. An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. The notice must be of such nature as reasonably to convey the required information, and it must afford a reasonable time for those interested to make their appearance. But if with

69 due regard for the practicalities and peculiarities of the case these conditions are reasonably met the constitutional requirements are satisfied. The criterion is not the possibility of conceivable injury, but the just and reasonable character of the requirements, having reference to the subject with which the statute deals. But when notice is a person s due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it. The reasonableness and hence the constitutional validity of any chosen method may be defended on the ground that it is in itself reasonably certain to inform those affected, or, where conditions do not reasonably permit such notice, that the form chosen is not substantially less likely to bring home notice than other of the feasible and customary substitutes. It would be idle to pretend that publication alone as prescribed here, is a reliable means of acquainting interested parties of the fact that their rights are before the courts. It is not an accident that the greater number of cases reaching this Court on the question of adequacy of notice have been concerned with actions founded on process constructively served through local newspapers. Chance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper, and if he makes his home outside the area of the newspaper s normal circulation the odds that the information will never reach him are large indeed. The chance of actual notice is further reduced when as here the notice required does not even name those whose attention it is supposed to attract, and does not inform acquaintances who might call it to attention. In weighing its sufficiency on the basis of equivalence with actual notice we are unable to regard this as more than a feint. In the case before us these beneficiaries do have a resident fiduciary as caretaker of their interest in this property. But it is their caretaker [C.H.T.] who in the accounting becomes their adversary. Their trustee is released from giving notice of jeopardy, and no one else is expected to do so. This Court has not hesitated to approve of resort to publication as a customary substitute in another class of cases where it is not reasonably possible or practicable to give more adequate warning. Thus it has been recognized that, in the case of persons missing or unknown, employment of an indirect and even a probably futile means of notification is all that the situation permits and creates no constitutional bar to a final decree foreclosing their rights. Those beneficiaries represented by appellant whose interests or whereabouts could not with due diligence be ascertained come clearly within this category. As to them the statutory notice is sufficient. However great the odds that publication will never reach the eyes of such unknown parties, it is not in the typical case much more likely to fail than any of the choices open to legislators endeavoring to prescribe the best notice practicable. Nor do we consider it unreasonable for the State to dispense with more certain notice to those beneficiaries whose interests are either conjectural or future or, although they could be discovered upon investigation, do not in due course of business come to knowledge of the common trustee. Whatever searches might be required in another situation under ordinary standards of diligence, in view of the character of the proceedings and the nature of the interests here involved we think them unnecessary. We recognize the practical difficulties and costs that would be attendant on frequent investigations into the status of great numbers of beneficiaries, many of whose interests in the common fund are so remote as to be ephemeral; and we have no doubt that such impracticable and extended searches are not required in the name of due process.

70 The expense of keeping informed from day to day of substitutions among even current income beneficiaries and presumptive remaindermen, to say nothing of the far greater number of contingent beneficiaries, would impose a severe burden on the plan, and would likely dissipate its advantages. These are practical matters in which we should be reluctant to disturb the judgment of the state authorities. Accordingly we overrule appellant s constitutional objections to published notice insofar as they are urged on behalf of any beneficiaries whose interests or addresses are unknown to the trustee. As to known present beneficiaries of known place of residence, however, notice by publication stands on a different footing. Exceptions in the name of necessity do not sweep away the rule that within the limits of practicability notice must be such as is reasonably calculated to reach interested parties. Where the names and post office addresses of those affected by a proceeding are at hand, the reasons disappear for resort to means less likely than the mails to apprise them of its pendency. This type of trust presupposes a large number of small interests. The individual interest does not stand alone but is identical with that of a class. The rights of each in the integrity of the fund and the fidelity of the trustee are shared by many other beneficiaries. Therefore notice reasonably certain to reach most of those interested in objecting is likely to safeguard the interests of all, since any objections sustained would inure to the benefit of all. We think that under such circumstances reasonable risks that notice might not actually reach every beneficiary are justifiable. Now and then an extraordinary case may turn up, but constitutional law, like other mortal contrivances, has to take some chances, and in the great majority of instances, no doubt, justice will be done. The statutory [constructive] notice to known beneficiaries is inadequate, not because in fact it fails to reach everyone, but because under the circumstances it is not reasonably calculated to reach those who could easily be informed by other means at hand. However it may have been in former times, the mails today are recognized as an efficient and inexpensive means of communication. Moreover, the fact that the trust company has been able to give mailed notice to known beneficiaries at the time the common trust fund was established is persuasive that postal notification at the time of accounting would not seriously burden the plan. We hold the notice of judicial settlement of accounts required by the New York Banking Law [notice by publication as to all beneficiaries] is incompatible with the requirements of the Fourteenth Amendment as a basis for adjudication depriving known persons whose whereabouts are also known of substantial property rights. Accordingly the judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion. Reversed. Mr. Justice Burton, dissenting. Whether or not further notice to beneficiaries should supplement the notice and representation here provided is properly within the discretion of the State. The Federal Constitution[ s Due Process Clause] does not require it here.

71 Notes and Questions:. 1. Mullane and Vaughn represented the various trust beneficiaries. They were all named as defendants in this case. Did they allegedly do anything wrong? Alternatively, did they have to be aligned that way by the plaintiff trust company, when seeking its accounting decree? As suggested in Video #1, do not assume who is P or D by the name of the case. Further, do not assume that a named D is always a wrongdoer. 2. The Court s reference to in rem jurisdiction was first addressed ever so briefly in Pennoyer. We will focus on this territorial jurisdiction category in our next class. For now, the essential point is that when a case can be characterized as in rem, as opposed to in personam, notice by publication is often (but not always) characterized as constitutionally sufficient. What would this difference mean, in terms of cost of notice? 3. What are the best and worst forms of notice (of the three described in Video #4)? One of those methods is substituted service. Under FRCP 4(e)(2)(B), service may be accomplished by 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... This might be characterized as spouse in the house service. The target defendant wife is not home; but the process server hands the summons and complaint for her to her husband who is home (and mails a copy of the process to that address). There are other valid methods of service. They include: mailed service whereby U.S. Post Office delivery personnel can effectively be process servers, and D responds by acknowledging service (or otherwise pays the cost of P s process server laying in wait at D s home or workplace) per FRCP 4(e)(2); service on an agent per FRCP 4(h), and the following Day 6 National Equipment case; or service under state law where the federal court is located or where service is made (in the U.S.), per FRCP 4(e)(1). 4. The Court notes that beneficiaries represented by appellant whose interests or whereabouts could not with due diligence be ascertained. What does this phrase mean? Given this dilemma, the Court could have characterized the case as to require personal notice; e.g., a mailed letter to all beneficiaries, which would resemble personal notice. What impact would that have on the trust investment system? One of the adversaries claims this case is exclusively in personam in nature. The other claims its nature is entirely in rem. How does the US Supreme Court majority rule on this distinction?

72 FUENTES V. SHEVIN United States Supreme Court 407 U.S. 67 (1972) Mr. Justice Stewart delivered the [4-3] opinion of the Court. We here review the decisions that upheld the constitutionality of Florida and Pennsylvania laws authorizing the summary seizure of goods or chattels in a person s possession under a writ of replevin. Both statutes provide for the issuance of writs ordering state agents to seize a person s possessions, simply upon the ex parte application of any other person who claims a right to them and posts a security bond. Neither statute provides for notice to be given to the possessor of the property [of the pre-seizure determination], and neither statute gives the possessor an opportunity to challenge the seizure at any kind of prior hearing. The question is whether these statutory procedures violate the Fourteenth Amendment s guarantee that no State shall deprive any person of property without due process of law. I

73 The appellant Margarita Fuentes, is a resident of Florida. She purchased a gas stove and service policy from the Firestone Tire and Rubber Co. (Firestone) under a conditional sales contract calling for monthly payments over a period of time. A few months later, she purchased a stereophonic phonograph from the same company under the same sort of contract. The total cost of the stove and stereo was about $500, plus an additional financing charge of over $100. Under the contracts, Firestone retained title to the merchandise, but Mrs. Fuentes was entitled to possession unless and until she should default on her installment payments. For more than a year, Mrs. Fuentes made her installment payments. But then, with only about $200 remaining to be paid, a dispute developed between her and Firestone over the servicing of the stove. Firestone instituted an action in a small-claims court for repossession of both the stove and the stero, claiming that Mrs. Fuentes had refused to make her remaining payments. Simultaneously with the filing of that action and before Mrs. Fuentes had even received a summons to answer its complaint, Firestone obtained a writ of replevin ordering a sheriff to seize the disputed goods at once. In conformance with Florida procedure, Firestone had only to fill in the blanks on the appropriate form documents and submit them to the clerk of the small-claims court. The clerk signed and stamped the documents and issued a writ of replevin. Later the same day, a local deputy sheriff and an agent of Firestone went to Mrs. Fuentes home and seized the stove and stereo. Shortly thereafter, Mrs. Fuentes instituted the present action in a federal district court, challenging the constitutionality of the Florida prejudgment replevin procedures under the Due Process Clause of the Fourteenth Amendment. She sought declaratory and injunctive relief against continued enforcement of the procedural provisions of the state statutes that authorize prejudgment replevin. The appellants in a very similar action in a federal district court in Pennsylvania, challenging the constitutionality of that State s prejudgment replevin process. The courts in both cases upheld the constitutionality of the statutes. II Thus, at the same moment that the defendant receives the complaint seeking repossession of property through court action, the property is seized from him. He is provided no prior notice and allowed no opportunity whatever to challenge the issuance of the writ. After the property has been seized, he will eventually have an opportunity for a hearing, as the defendant in the trial of the court action for repossession, which the plaintiff is required to pursue. The Pennsylvania law differs, though not in its essential nature, from that of Florida. Unlike the Florida statute, however, the Pennsylvania law does not require that there ever be opportunity for a hearing on the merits of the conflicting claims to possession of the replevied property. The party seeking the writ is not obliged to initiate a court action for repossession. Indeed, he need not even formally allege that he is lawfully entitled to the property. The most that is required is that he file an affidavit of the value of the property to be replevied. If the party who loses property through replevin seizure is to get even a post-seizure hearing, he must initiate a lawsuit himself. He may also, as under Florida law, post his own counterbond within three days after the seizure to regain possession. IV

74 For more than a century the central meaning of procedural due process has been clear: Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified. It is equally fundamental that the right to notice and an opportunity to be heard must be granted at a meaningful time and in a meaningful manner. The primary question in the present cases is whether these state statutes are constitutionally defective in failing to provide for hearings at a meaningful time. [N]either the Florida nor the Pennsylvania statute provides for notice or an opportunity to be heard before the seizure. The issue is whether procedural due process in the context of these cases requires an opportunity for a hearing before the State authorizes its agents to seize property in the possession of a person upon the application of another. The constitutional right to be heard is a basic aspect of the duty of government to follow a fair process of decisionmaking when it acts to deprive a person of his possessions. The purpose of this requirement is not only to ensure abstract fair play to the individual. Its purpose, more particularly, is to protect his use and possession of property from arbitrary encroachment to minimize substantively unfair or mistaken deprivations of property, a danger that is especially great when the State seizes goods simply upon the application of and for the benefit of a private party. So viewed, the prohibition against the deprivation of property without due process of law reflects the high value, embedded in our constitutional and political history, that we place on a person s right to enjoy what is his, free of governmental interference. The requirement of notice and an opportunity to be heard raises no impenetrable barrier to the taking of a person s possessions. But the fair process of decision making that it guarantees works, by itself, to protect against arbitrary deprivation of property. For when a person has an opportunity to speak up in his own defense, and when the State must listen to what he has to say, substantively unfair and simply mistaken deprivations of property interests can be prevented. It has long been recognized that fairness can rarely be obtained by secret, one-sided determination of facts decisive of rights.... (And n)o better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it. If the right to notice and a hearing is to serve its full purpose, then, it is clear that it must be granted at a time when the deprivation can still be prevented. At a later hearing, an individual's possessions can be returned to him if they were unfairly or mistakenly taken in the first place. Damages may even be awarded to him for the wrongful deprivation. But no later hearing and no damage award can undo the fact that the arbitrary taking that was subject to the right of procedural due process has already occurred. This Court has not... embraced the general proposition that a wrong may be done if it can be undone. That the hearing required by due process is subject to waiver, and is not fixed in form does not affect its root requirement that an individual be given an opportunity for a hearing before he is deprived of any significant property interest, except for extraordinary situations where some valid governmental interest is at stake that justifies postponing the hearing until after the event. The Florida and Pennsylvania prejudgment replevin statutes fly in the face of this principle. To be sure, the requirements that a party seeking a writ must first post a bond, allege conclusorily that he is entitled to specific goods, and open himself to possible liability in damages if he is wrong, serve to deter wholly unfounded applications for a writ. But those requirements are hardly a substitute for a prior hearing, for they test no more than the strength of

75 the applicant's own belief in his rights. 13 Since his private gain is at stake, the danger is all too great that his confidence in his cause will be misplaced. Lawyers and judges are familiar with the phenomenon of a party mistakenly but firmly convinced that his view of the facts and law will prevail, and therefore quite willing to risk the costs of litigation. Because of the understandable, self-interested fallibility of litigants, a court does not decide a dispute until it has had an opportunity to hear both sides-and does not generally take even tentative action until it has itself examined the support for the plaintiff's position. The Florida and Pennsylvania statutes do not even require the official issuing a writ of replevin to do that much. The minimal deterrent effect of a bond requirement is, in a practical sense, no substitute for an informed evaluation by a neutral official. More specifically, as a matter of constitutional principle, it is no replacement for the right to a prior hearing that is the only truly effective safeguard against arbitrary deprivation of property. While the existence of these other, less effective, safeguards may be among the considerations that affect the form of hearing demanded by due process, they are far from enough by themselves to obviate the right to a prior hearing of some kind. V The right to a prior hearing, of course, attaches only to the deprivation of an interest encompassed within the Fourteenth Amendment s protection. A A deprivation of a person s possessions under a prejudgment writ of replevin, at least in theory, may be only temporary... When officials of Florida or Pennsylvania seize one piece of property from a person s possession and then agree to return it if he surrenders another, they deprive him of property whether or not he has the funds, the knowledge, and the time needed to take advantage of the recovery provision. The Fourteenth Amendment draws no bright lines around three-day, 10-day or 50-day deprivations of property. Any significant taking of property by the State is within the purview of the Due Process Clause. While the length and consequent severity of a deprivation may be another factor to weigh in determining the appropriate form of hearing, it is not decisive of the basic right to a prior hearing of some kind. B The appellants who signed conditional sales contracts lacked full legal title to the replevied goods. The Fourteenth Amendment s protection of property, however, has never been interpreted to safeguard only the rights of undisputed ownership. Rather, it has been read broadly to extend protection to any significant property interest. The appellants were deprived of such an interest in the replevied goods the interest in continued possession and use of the goods. They had acquired this interest under the conditional sales contracts that entitled them to possession and use of the chattels before transfer of title. In exchange for immediate possession, the appellants had agreed to pay a major financing charge beyond the basic price of the merchandise. Moreover, by the time the goods were summarily repossessed, they had made substantial installment payments. Clearly, their possessory interest in 13 They may not even test that much. For if an applicant for the writ knows that he is dealing with an uneducated, uniformed consumer with little access to legal help and little familiarity with legal procedures, there may be a substantial possibility that a summary seizure of property however unwarranted may go unchallenged, and the applicant may feel that he can act with impunity..

76 the goods, dearly bought and protected by contract, was sufficient to invoke the protection of the Due Process Clause. But even assuming that the appellants had fallen behind in their installment payments, and that they had no other valid defenses, that is immaterial here. The right to be heard does not depend upon an advance showing that one will surely prevail at the hearing. It is enough to invoke the procedural safeguards of the Fourteenth Amendment that a significant property interest is at stake, whatever the ultimate outcome of a hearing on the contractual right to continued possession and use of the goods. C Nevertheless, the District Courts rejected the appellants constitutional claim on the ground that the goods seized from them a stove, a stereo, a table, a bed, and so forth were not deserving of due process protection, since they were not absolute necessities of life. The courts based this holding on a very narrow reading of Sniadach v. Family Finance Corp., and Goldberg v. Kelly, in which this Court held that the Constitution requires a hearing before prejudgment wage garnishment and before the termination of certain welfare benefits [italics added]. They reasoned that Sniadach and Goldberg, as a matter of constitutional principle, established no more than that a prior hearing is required with respect to the deprivation of such basically necessary items as wages and welfare benefits. This reading of Sniadach and Goldberg reflects the premise that those cases marked a radical departure from established principles of procedural due process. They did not. Both decisions were in the mainstream of past cases, having little or nothing to do with the absolute necessities of life but establishing that due process requires an opportunity for a hearing before a deprivation of property takes effect. In none of those cases did the court hold that this most basic due process requirement is limited to the protection of only a few types of property interests. While Sniadach and Goldberg emphasized the special importance of wages and welfare benefits, they did not convert that emphasis into a new and more limited constitutional doctrine. Nor did they carve out a rule of necessity for the sort of nonfinal deprivations of property that they involved. The household goods, for which the appellants contracted and paid substantial sums, are deserving of similar protection. VI There are extraordinary situations that justify postponing notice and opportunity for a hearing. These situations, however, must be truly unusual. Only in a few limited situations has this Court allowed outright seizure without opportunity for a prior hearing. First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force; the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance. Thus, the Court has allowed summary seizure of property to collect the internal revenue of the United States, to meet the needs of a national war effort, to protect against the economic disaster of a bank failure, and to protect the public from misbranded drugs and contaminated food.

77 Nor do the broadly drawn Florida and Pennsylvania statutes limit the summary seizure of goods to special situations demanding prompt action. There may be cases in which a creditor could make a showing of immediate danger that a debtor will destroy or conceal disputed goods. But the statutes before us are not narrowly drawn to meet any such unusual condition. And no such unusual situation is presented by the facts of these cases. VII Finally, we must consider the contention that the appellants who signed conditional sales contracts thereby waived their basic procedural due process rights. The contract signed by Mrs. Fuentes provided that in the event of default of any payment or payments, Seller at its option may take back the merchandise... The contracts signed by the Pennsylvania appellants similarly provided that the seller may retake or repossess the merchandise in the event of a default in any payment. These terms were parts of printed form contracts, appearing in relatively small type and unaccompanied by any explanations clarifying their meaning. There was no bargaining over contractual terms between the parties who, in any event, were far from equal in bargaining power. The purported waiver provision was a printed part of a form sales contract and a necessary condition of the sale. The appellees made no showing whatever that the appellants were actually aware or made aware of the significance of the fine print now relied upon as a waiver of constitutional rights. The conditional sales contracts here did not indicate how or through what process a final judgment, self-help, prejudgment replevin with a prior hearing, or prejudgment replevin without a prior hearing the seller could take back the goods. Rather, the purported waiver provisions here are no more than a statement of the seller s right to repossession upon occurrence of certain events. [T]he language of the purported waiver provisions did not waive the appellants constitutional right to a preseizure hearing of some kind. VIII We hold that the Florida and Pennsylvania prejudgment replevin provisions work a deprivation of property without due process of law insofar as they deny the right to a prior opportunity to be heard before chattels are taken from their possessor. Our holding, however, is a narrow one. We do not question the power of a State to seize goods before a final judgment in order to protect the security interests of creditors so long as those creditors have tested their claim to the goods through the process of a fair prior hearing. The nature and form of such prior hearings, moreover, are legitimately open to many potential variations and are a subject, at this point, for legislation not adjudication. 33 Since the essential reason for the requirement of a prior hearing is to prevent unfair and mistaken deprivations of property, however, it is axiomatic that the hearing must provide a real test. (D)ue process is afforded only by the kinds of notice and hearing that are aimed at establishing the validity, or at least the probable validity, of the underlying claim against the alleged debtor before he can be deprived of his property... For the foregoing reasons, the judgments [below] are vacated and these cases are remanded for further proceedings consistent with this opinion. 33 Leeway remains to develop a form of hearing that will minimize unnecessary cost and delay while preserving the fairness and effectiveness of the hearing in preventing seizures of goods where the party seeking the writ has little probability of succeeding on the merits of the dispute..

78 It is so ordered. Vacated and remanded. Mr. Justice White, with whom The Chief Justice and Mr. Justice Blackmun join, dissenting. In considering whether this resolution of conflicting interests is unconstitutional, much depends on one s perceptions of the practical considerations involved. The Court holds it constitutionally essential to afford opportunity for a probable-cause hearing prior to repossession. Its stated purpose is to prevent unfair and mistaken deprivations of property. But in these typical situations, the buyer-debtor has either defaulted or he has not. If there is a default, it would seem not only fair, but essential, that the creditor be allowed to repossess; and I cannot say that the likelihood of a mistaken claim of default is sufficiently real or recurring to justify a broad constitutional requirement that a creditor do more than the typical state law requires and permits him to do. Sellers are normally in the business of selling and collecting the price for their merchandise. I could be quite wrong, but it would not seem in the creditor s interest for a default occasioning repossession to occur; as a practical matter it would much better serve his interests if the transaction goes forward and is completed as planned. Dollar-and-cents considerations weigh heavily against false claims of default as well as against precipitate action that would allow no opportunity for mistakes to surface and be corrected. Nor does it seem to me that creditors would lightly undertake the expense of instituting replevin actions and putting up bonds. I would not construe the Due Process Clause to require the creditors to do more than they have done in these cases to secure possession pending final hearing. Certainly, I would not ignore, as the Court does, the creditor s interest in preventing further use and deterioration of the property in which he has substantial interest. Surely under the Court s own definition, the creditor has a property interest as deserving of protection as that of the debtor. At least the debtor, who is very likely uninterested in a speedy resolution that could terminate his use of the property, should be required to make those payments, into court or otherwise, upon which his right to possession is conditioned. I am content to rest on the judgment of those who have wrestled with these problems so long and often and upon the judgment of the legislatures that have considered and so recently adopted provisions that contemplate precisely what has happened in these cases... Notes and Questions: 1. Per the Court s first paragraph: The question is whether these statutory procedures violate the Fourteenth Amendment s guarantee that no State shall deprive any person of property without due process of law. Mullane dealt with the same general issue. Mullane and Fuentes deal with different subsets of the above-quoted constitutional protection (neither of which is mentioned in the Fourteenth Amendment). What related but discrete issues do these two cases address? 2. Prior cases you have studied also dealt with federal constitutional Due Process (e.g., Shoe). How does the issue presented in this unit (Mullane and Fuentes) differ? 3. In perhaps most cases, the installment sale property s possessor has no defense (other than poverty). What purpose is served by requiring the seller to provide pre-seizure notice of an intended seizure hearing?

79 4. The Court s precedents (Sniadach and Goldberg) held that the Constitution requires a hearing before prejudgment wage garnishment or before termination of welfare benefits. Should Ms. Fuentes household goods be entitled to the same protection as these two necessities of life? NATIONAL EQUIPMENT RENTAL V. SZUKHENT United States Supreme Court 375 U.S. 311 (1964) Mr. Justice Stewart delivered the [5-4] opinion of the Court. The Federal Rules of Civil Procedure provide that service of process upon an individual may be made by delivering a copy of the summons and of the complaint to an agent authorized by appointment... to receive service of process. The petitioner is a corporation with its principal place of business in New York. It sued the respondents, residents of Michigan, in a New York federal court, claiming that the respondents had defaulted under a farm equipment lease. The only question now before us is whether the person upon whom the summons and complaint were served was an agent authorized by appointment to receive the same, so as to subject the respondents to the jurisdiction of the federal court in New York.

80 The respondents obtained certain farm equipment from the petitioner under a lease executed in The lease provided that the Lessee hereby designates Florence Weinberg, Forty-first Street, Long Island City, N.Y., as agent for the purpose of accepting service of any process within the State of New York. The respondents were not acquainted with Florence Weinberg. In 1962 the petitioner commenced the present action by filing in the federal court in New York a complaint which alleged that the respondents had failed to make any of the periodic payments specified by the lease. The Marshal delivered two copies of the summons and complaint to Florence Weinberg. That same day she mailed the summons and complaint to the respondents, together with a letter stating that the documents had been served upon her as the respondents agent for the purpose of accepting service of process in New York, in accordance with the agreement contained in the lease. 4 The petitioner itself also notified the respondents by certified mail of the service of process upon Florence Weinberg. Upon motion of the respondents, the District Court quashed service of the summons and complaint, holding that, although Florence Weinberg had promptly notified the respondents of the service of process and mailed copies of the summons and complaint to them, the lease agreement itself had not explicitly required her to do so, and there was therefore a failure of the agency arrangement to achieve intrinsic and continuing reality. The Court of Appeals affirmed, and we granted certiorari. For the reasons stated in this opinion, we have concluded that Florence Weinberg was an agent authorized by appointment... to receive service of process, and accordingly we reverse the judgment before us. We need not and do not in this case reach the situation where no personal notice has been given to the defendant. Since the respondents did in fact receive complete and timely notice of the lawsuit pending against them, no due process claim has been made. The case before us is therefore quite different from cases where there was no actual notice. The question presented here is whether a party to a private contract may appoint an agent to receive service of process within the meaning of Federal Rule of Civil Procedure 4(d)(1), where the agent is not personally known to the party, and where the agent has not expressly undertaken to transmit notice to the party. The purpose underlying the contractual provision here at issue seems clear. The clause was inserted by the petitioner and agreed to by the respondents in order to assure that any litigation under the lease should be conducted in the State of New York. The contract specifically provided that This agreement shall be deemed to have been made in Nassau County, New York, regardless of the order in which the signatures of the parties shall be affixed hereto, and shall be interpreted, and the rights and liabilities of the parties here determined, in accordance with the laws of the State of New York. Under well-settled general principles of the law of agency Florence Weinberg s prompt acceptance and transmittal to the respondents of the summons and complaint pursuant to the authorization was itself sufficient to validate the agency, even though there was no explicit previous promise on her part to do so. 4 The complaint, summons, and covering letter were sent by certified mail, and the letter read as follows: Gentlemen: Please take notice that the enclosed Summons and Complaint was duly served upon me this day by the United States Marshal, as your agent for the purpose of accepting service of process within the State of New York, in accordance with your contract with National Equipment Rental, Ltd. Very truly yours, Florence Weinberg

81 We deal here with a Federal Rule, applicable to federal courts in all 50 States. But even if we were to assume that this uniform federal standard should give way to contrary local policies, there is no relevant concept of state law which would invalidate the agency here at issue. In Michigan, where the respondents reside, the statute which validates service of process under the circumstances present in this case contains no provision requiring that the appointed agent expressly undertake to notify the principal of the service of process. Similarly, New York law, which it was agreed should be applicable to the lease provisions, does not require any such express promise by the agent in order to create a valid agency for receipt of process. The New York statutory short form of general power of attorney, which specifically includes the power to accept service of process, is entirely silent as to any such requirement. Indeed, the identical contractual provision at issue here has been held by a New York court to create a valid agency for service of process under the law of that State. It is argued, finally, that the agency sought to be created in this case was invalid because Florence Weinberg may have had a conflict of interest. This argument is based upon the fact that she was not personally known to the respondents at the time of her appointment and upon a suggestion in the record that she may be related to an officer of the petitioner corporation. But such a contention ignores the narrowly limited nature of the agency here involved. Florence Weinberg was appointed the respondents agent for the single purpose of receiving service of process. An agent with authority so limited can in no meaningful sense be deemed to have had an interest antagonistic to the respondents, since both the petitioner and the respondents had an equal interest in assuring that, in the event of litigation, the latter be given that adequate and timely notice which is a prerequisite to a valid judgment. 9 A different case would be presented if Florence Weinberg had not given prompt notice to the respondents, for then the claim might well be made that her failure to do so had operated to invalidate the agency. We hold only that, prompt notice to the respondents having been given, Florence Weinberg was their agent authorized by appointment to receive process within the meaning of Federal Rule of Civil Procedure 4(d)(1). The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion. It is so ordered. Judgment of Court of Appeals reversed and case remanded. Mr. Justice Black, dissenting. The petitioner, National Equipment Rental does a nationwide equipment rental business. The respondents, Steve and Robert Szukhent, father and son farming in Michigan, leased from National two incubators for their farm, signing in Michigan a lease contract which was a standard printed form obviously prepared by the New York company s lawyers. Included in the 18 paragraphs of fine print was the following provision: the Lessee hereby designates Florence Weinberg, Forty-first Street, Long Island City, N.Y., as agent for the purpose of accepting service of any process within the State of New York. 9 There is no allegation that Weinberg had any pecuniary interest in the subject matter of the litigation. Nor is the issue here the applicability of a statute which permits service on a foreign corporation by service on persons who are generally authorized to act as agents of the corporation, when the agent upon whom service is made has a personal interest in suppressing notice of service.

82 Process was served on Mrs. Weinberg as agent of the Michigan farmers. She mailed notice of this service to the Szukhents. A New York lawyer appeared especially for them and moved to quash the service on the ground that Mrs. Weinberg was not their agent but was in reality the agent of the New York company. The record on the motion to quash shows that the Szukhents had never had any dealings with Mrs. Weinberg, their supposed agent. They had never met, seen, or heard of her. She did not sign the lease, was not a party to it, received no compensation from the Szukhents, and undertook no obligation to them. In fact, she was handpicked by the New York company to accept service of process in any suits that might thereafter be filed by the company. Only after this suit was brought was it reluctantly revealed that Mrs. Weinberg was in truth the wife of one of the company s officers. The district judge, applying New York law to these facts, held that there had been no effective appointment of Mrs. Weinberg as agent of the Szukhents, that the service on her as their agent was therefore invalid, and that the service should be quashed. The Court of Appeals, one judge dissenting, affirmed, agreeing that no valid agency had been created. 1 This Court now reverses both courts below and holds that the contractual provision purporting to appoint Mrs. Weinberg as agent is valid and that service of process on her as agent was therefore valid and effective under Rule 4(d)(1) as on an agent authorized by appointment... to receive service of process. I disagree with that holding, believing that (1) whether Mrs. Weinberg was a valid agent upon whom service could validly be effected under Rule 4(d)(1) should be determined under New York law and that we should accept the holdings of the federal district judge and the Court of Appeals sitting in New York that under that State s law the purported appointment of Mrs. Weinberg was invalid and ineffective; (2) if however, Rule 4(d)(1) is to be read as calling upon us to formulate a new federal definition of agency for purposes of service of process, I think our formulation should exclude Mrs. Weinberg from the category of an agent authorized by appointment to receive service of process; and (3) upholding service of process in this case raises serious questions as to whether these Michigan farmers have been denied due process of law in violation of the Fifth and Fourteenth Amendments. I. No federal statute has undertaken to regulate the sort of agency transaction here involved. There is only Rule 4(d)(1), which says nothing more than that in federal courts personal jurisdiction may be obtained by service on an agent. The Rule does not attempt to define who is an agent. To me it is evident that the draftsmen of the Rules did not, by using the word agent, show any intention of throwing out the traditional body of state law and creating a new and different federal doctrine in this branch of the law of agency. Therefore, it is to the law of New York-the State where this action was brought in federal court, the place where the contract was deemed by the parties to have been made, and the State the law of which was specified as determining rights and liabilities under the contract that we should turn to test the validity of the appointment. I agree with the district judge that this agency is invalid under the laws of New York. The highest state court that has passed on the question has held that, because of New York statutes, the designation by a nonresident of New York of an agent to receive service of process is ineffective... Also, we should accept the view of the question taken by the federal courts sitting 1 Both the District Court and the Court of Appeals also rested their decisions on the contract's lack of provision for notice of the service of process.

83 in the State whose law is being applied unless we are shown clearly and convincingly that these courts erred. Here there is no showing that the Court of Appeals where neither the majority nor the dissenter disputed the District Court's view of New York law has erred. 7 II. A. In the first place, we should interpret the federal rule as contemplating a genuine agent, not a sham. Here the agent, Mrs. Weinberg, was unknown to respondents. She was chosen by the New York company, was under its supervision, and, indeed, was the wife of one of its officers facts no one ever told these farmers. 9 State courts in general quite properly refuse to uphold service of process on an agent who, though otherwise competent, has interests antagonistic to those of the person he is meant to represent. I cannot believe that Rule 4(d)(1), which may under some circumstances be used to subject people to jurisdiction thousands of miles from home, was ever meant to bring a defendant into court by allowing service on an agent whose true loyalty is not to the person being sued but to the one bringing suit. The Canons of Ethics forbid a lawyer to serve conflicting parties, at least without express consent given after full disclosure. If we are to create a federal standard, I would hold a 4(d) (1) agent to a like duty. It is true that actual notice was given. But there is a prophylactic value, especially where contracts of this kind can in future cases be used to impose on a nonresident defendant, in requiring that the contract provide for notice in the first place. B.... The right to have a case tried locally and be spared the likely injustice of having to litigate in a distant or burdensome forum is as ancient as the Magna Charta.... C. It is hardly likely that these Michigan farmers, hiring farm equipment, were in any position to dicker over what terms went into the contract they signed. Yet holding this service effective inevitably will mean that the Szukhents must go nearly a thousand miles to a strange city, hire New York counsel, pay witnesses to travel there, pay their own and their witnesses hotel bills, try to explain a dispute over a farm equipment lease to a New York judge or jury, and in other ways bear the burdens of litigation in a distant, and likely a strange, city. The company, of course, must have had this in mind when it put the clause in the contract. It doubtless hoped, by easing into its contract this innocent looking provision for service of process in New York, to succeed in making it as burdensome, disadvantageous, and expensive as possible for lessees to contest actions brought against them. 7 Since New York would not hold Mrs. Weinberg a valid agent to receive service of process, service cannot be upheld as authorized by that part of Rule 4(d)(7) which validates service in the manner prescribed by the law of the state. 9 Apparently the district judge asked the company to supply particulars of Mrs. Weinberg's relationship to the company, but this information was never furnished. For all that appears, she may be a stockholder or director of the company.

84 The end result of today s holding is not difficult to foresee. Clauses like the one used against the Szukhents clauses which companies have not inserted, I suspect, because they never dreamed a court would uphold them will soon find their way into the boilerplate of everything from an equipment lease to a conditional sales contract. Today s holding gives a green light to every large company in this country to contrive contracts which declare with force of law that when such a company wants to sue someone with whom it does business, that individual must go and try to defend himself in some place, no matter how distant, where big business enterprises are concentrated or else suffer a default judgment. I simply cannot believe that Congress, when by its silence it let Rule 4(d)(1) go into effect, meant for that rule to be used as a means to achieve such a far-reaching, burdensome, and unjust result. The very threat of such a suit can be used to force payment of alleged claims, even though they be wholly without merit. This fact will not be news to companies exerting their economic power to wangle such contracts. Mr. Justice Brennan, with whom The Chief Justice and Mr. Justice Goldberg join, dissenting. In my view, federal standards and not state law must define who is an agent authorized by appointment within the meaning of Rule 4(d) (1). In formulating these standards I would, first, construe Rule 4(d)(1) to deny validity to the appointment of a purported agent whose interests conflict with those of his supposed principal. Second, I would require that the appointment include an explicit condition that the agent after service transmit the process forthwith to the principal. Before I would find that an individual purchaser has knowingly and intelligently consented to be sued in another State, I would require more proof of that fact than is provided by his mere signature on the form. Since these standards were not satisfied in this case, the service of the summons and complaint was properly quashed. Notes and Questions:.. 1. This case deals with service on an agent. One may also serve process (summons and complaint) on a business entity s titled officers or designated agent for service of process. FRCP 4(h)(1)(B) and for an individual, at her dwelling or usual place of abode, with someone of suitable age and discretion who resides there. FRCP 4(e)(2)(B). 2. This was a 5-4 split decision. If you were on the court, with whom would you side? Is the majority lending its hand to a shady practice which could led to abuse? On the other hand, is the issue given that the agent did timely provide notice be relegated to the category of form over substance?. 3. The dissent refers to The right to have a case tried locally. Would this right not also apply to defendants, who may have little contact with the lessee s state? Would the level of such contacts matter?

85 HARRIS v. BALK United States Supreme Court 198 U.S. 215 (1905) Statement by Mr. Justice Peckham: The facts are as follows: The plaintiff in error, Harris, was a resident of North Carolina at the time of the commencement of this action, in 1896, and prior to that time was indebted to the defendant in error, Balk, also a resident of North Carolina, in the sum of $180, for money borrowed from Balk by Harris during the year 1896, which Harris verbally promised to repay, but there was no written evidence of the obligation. During the year above mentioned one Jacob Epstein, a resident of Baltimore, in the state of Maryland, asserted that Balk was indebted to him in the sum of over $300. In August, 1896, Harris visited Baltimore for the purpose of purchasing merchandise, and while he was in that city temporarily on August 6, 1896, Epstein caused to be issued out of a proper court in Baltimore a foreign or nonresident writ of attachment against

86 Balk, attaching the debt due Balk from Harris, which writ the sheriff at Baltimore laid in the hands of Harris, with a summons to appear in the court at a day named. With that attachment, a writ of summons and a short declaration against Balk were also delivered to the sheriff, and by him set up at the courthouse door, as required by the law of Maryland [italics added]. Before the return day of the attachment writ Harris left Baltimore, and returned to his home in North Carolina. He did not contest the garnishee process, which was issued to garnish the debt which Harris owed Balk. After his return Harris made an affidavit that he owed Balk $180, and stated that the amount had been attached by Epstein, of Baltimore, and Harris consented therein to an order of condemnation against him as such garnishee for $180, the amount of his debt to Balk. Judgment was thereafter entered in favor of the plaintiff, Epstein, for $180. After the entry of the judgment, condemning the $180 in the hands of the garnishee [Harris], Harris paid the amount of the judgment. Balk [subsequently] commenced an action against Harris before a justice of the peace in North Carolina, to recover the $180 which he averred Harris owed him. The plaintiff in error [Harris], by way of answer to the suit, pleaded in bar the recovery of the Maryland judgment and his payment thereof, and contended that it was conclusive against the defendant in error [Balk] in this [subsequent] action, because that judgment was a valid judgment in Maryland, and was therefore entitled to full faith and credit in the courts of North Carolina. This contention was not allowed by the trial court, and judgment was accordingly entered against Harris for the amount of his indebtedness to Balk, and that judgment was affirmed by the supreme court of North Carolina. The ground of such judgment was that the Maryland court obtained no jurisdiction to attach or garnish the debt due from Harris to Balk, because Harris was but temporarily in the state, and the situs of the debt was in North Carolina. Mr. Justice Peckham, after making the foregoing statement, delivered the [7-2] opinion of the court: The state court of North Carolina has refused to give any effect in this action to the Maryland judgment; and the Federal question is whether it did not thereby refuse the full faith and credit to such judgment which is required by the Federal Constitution. If the Maryland court had jurisdiction to award it, the judgment is valid and entitled to the same full faith and credit in North Carolina that it has in Maryland as a valid domestic judgment. The cases holding that the state court obtains no jurisdiction over the garnishee if he be but temporarily within the state proceed upon the theory that the situs of the debt is at the domicil[e] either of the creditor [Balk, NC] or of the debtor [Harris, NC], and that it does not follow the debtor in his casual or temporary journey into another state, and the garnishee [Harris] has no possession of any property or credit of the principal debtor in the foreign state. Attachment is the creature of the local law; that is, unless there is a law of the state providing for and permitting the attachment, it cannot be levied there. If there be a law of the state providing for the attachment of the debt, then, if the garnishee be found in that state, and process be personally served upon him therein, we think the court thereby acquires jurisdiction over him, and can garnish the debt due from him to the debtor of the plaintiff, and condemn it, provided the garnishee could himself be sued by his creditor in that state [MD]. We do not see how the question of jurisdiction vel non can properly be made to depend upon the so-called original situs of the debt, or upon the character of the stay of the garnishee, whether temporary or

87 permanent, in the state where the attachment is issued. Power over the person of the garnishee confers jurisdiction on the courts of the state where the writ issues. If, while temporarily there, his creditor might sue him there and recover the debt, then he is liable to process of garnishment, no matter where the situs of the debt was originally. We do not see the materiality of the expression situs of the debt, when used in connection with attachment proceedings. If by situs is meant the place of the creation of the debt, that fact is immaterial. If it be meant that the obligation to pay the debt can only be enforced at the situs thus fixed, we think it plainly untrue. The obligation of the debtor to pay his debt clings to and accompanies him wherever he goes [italics added]. He is as much bound to pay his debt in a foreign state when therein sued upon his obligation by his creditor, as he was in the state where the debt was contracted. We speak of ordinary debts, such as the one in this case. It would be no defense to such suit for the debtor to plead that he was only in the foreign state casually or temporarily. His obligation to pay would be the same whether he was there in that way or with an intention to remain. It is nothing but the obligation to pay which is garnished or attached. This obligation can be enforced by the courts of the foreign state after personal service of process therein, just as well as by the courts of the domicil[e] of the debtor. His obligation to pay to his creditor is thereby arrested, and a lien created upon the debt itself. We can see no reason why the attachment could not be thus laid, provided the creditor of the garnishee could himself sue in that state, and its laws permitted the attachment. The importance of the fact of the right of the original creditor to sue his debtor in the foreign state, as affecting the right of the creditor of that creditor to sue the debtor or garnishee, lies in the nature of the attachment proceeding. The plaintiff in such proceeding in the foreign state is able to sue out the attachment and attach the debt due from the garnishee to his (the garnishee s) creditor, because of the fact that the plaintiff [Epstein] is really, in such proceeding, a representative of the creditor [Balk] of the garnishee [Harris], and therefore if such creditor himself had the right to commence suit to recover the debt in the foreign state, his representative has the same right, as representing him, and may garnish or attach the debt, provided the municipal law of the state where the attachment was sued out permits it.. It seems to us, therefore, that the judgment against Harris in Maryland, condemning the $180 which he owed to Balk, was a valid judgment, because the court had jurisdiction over the garnishee by personal service of process within the state of Maryland. It ought to be and it is the object of courts to prevent the payment of any debt twice over. Thus, if Harris, owing a debt to Balk, paid it under a valid judgment against him, to Epstein, he certainly ought not to be compelled to pay it a second time, but should have the right to plead his payment under the Maryland judgment... The defendant in error, Balk, had notice of this attachment because he sued the plaintiff in error to recover his debt within a few days after his (Harris ) return to North Carolina, in which suit the judgment in Maryland was set up by Harris as a plea in bar to Balk s claim. Balk, therefore, had an opportunity to litigate the question of his liability in the Maryland court, and to show that he did not owe the debt, or some part of it, as was claimed by Epstein. He, however, took no proceedings to that end, so far as the record shows, and the reason may be supposed to be that he could not successfully defend the claim, because he admitted in this case that he did, at the time of the attachment proceeding, owe Epstein some $344.

88 The judgment of the Supreme Court of North Carolina must be reversed, and the cause remanded for further proceedings not inconsistent with the opinion of this court. Reversed. Mr. Justice Harlan and Mr. Justice Day dissented.[without opinion]. Notes and Questions: 1. Per Video #5, what three kinds of property may be attached? When does such property have to be attached, to initiate a suit against the D s property? Why would a P choose to attach D s property, as opposed to proceeding directly in personam against the D? 2. What, where, and whose, property was successfully attached in Harris? 3. When Harris was initially served with process in Maryland, had he done anything to wrong to Epstein? As the majority opinion states: the municipal law of Maryland permits the debtor of the principal debtor to be garnished. What does this mean, in terms of jurisdiction to attach a defendant s property? SHAFFER v. HEITNER United States Supreme Court 433 U.S. 186 (1977) Mr. Justice Marshall delivered the [7-1, with two separate concurring] opinion[s] of the Court. The controversy in this case concerns the constitutionality of a Delaware statute that allows a court of that State to take jurisdiction of a lawsuit by sequestering any property of the defendant that happens to be located in Delaware. Appellants contend that the sequestration statute as applied in this case violates the Due Process Clause of the Fourteenth Amendment [ 1] both because it permits the state courts to exercise jurisdiction despite the absence of sufficient contacts among the defendants, the litigation, and the State of Delaware. I Appellee Heitner, a nonresident of Delaware, is the owner of one share of stock in the Greyhound Corp., a business incorporated under the laws of Delaware with its principal place of business in Phoenix, Ariz. [H]e filed a shareholder s derivative suit in... Del., in which he named as defendants Greyhound and 28 present or former officers or directors of one or both of the [Greyhound] corporations. In essence, Heitner alleged that the individual defendants had

89 violated their duties to Greyhound by causing it and its subsidiary to engage in actions that resulted in the corporations being held liable for substantial damages in a private antitrust suit 2 and a large fine in a criminal contempt action. 3 The activities which led to these penalties took place in Oregon. Simultaneously with his complaint, Heitner filed a motion for an order of sequestration of the Delaware property of the individual defendants pursuant to Del. [Corporations] Code s[ection] This motion was accompanied by a supporting affidavit of counsel which stated that the individual defendants were nonresidents of Delaware. The affidavit identified the property to be sequestered as common stock [issued by] the Defendant Greyhound Corporation, a Delaware corporation, as well as all options and all warrants to purchase said stock issued to said individual Defendants and [italics added]. The requested sequestration order was signed the day the motion was filed. Pursuant to that order, the sequestrator seized approximately 82,000 shares of Greyhound common stock belonging to 19 of the defendants, 7 and options belonging to another 2 defendants. 8 These seizures were accomplished by placing stop transfer orders or their equivalents on the books of the Greyhound Corp. So far as the record shows, none of the certificates representing the seized property was physically present in Delaware. The stock was considered to be in Delaware, and so subject to seizure, by virtue of [the] Del. Code, which makes Delaware the situs of ownership of all stock in Delaware corporations. 9 All 28 defendants were notified of the initiation of the suit by certified mail directed to their last known addresses and by publication in a New Castle County newspaper. The 21 defendants whose property was seized (hereafter referred to as appellants) responded by entering a special appearance for the purpose of moving to quash service of process and to vacate the sequestration order. They contended that the ex parte sequestration procedure did not accord them due process of law and that the property seized was not capable of attachment in Delaware. In addition, appellants asserted that under the rule of International Shoe Co. v. Washington, they did not have sufficient contacts with Delaware to sustain the jurisdiction of that State s courts. The Court rejected these arguments in a letter opinion which emphasized the purpose of the Delaware sequestration procedure: 2 A judgment of $13,146,090 plus attorneys fees was entered against Greyhound in [that prior case]. 3 [In other cases] Greyhound was fined $100,000 and Greyhound Lines $500, Section 366 provides: (a) If it appears in any complaint that the defendant or any one or more of the defendants is a nonresident of the State, the Court may make an order directing such nonresident defendant or defendants to appear by a day certain to be designated. Such order shall be served on such nonresident defendant or defendants by mail or otherwise, if practicable, and shall be published in such manner as the Court directs. The Court may compel the appearance of the defendant by the seizure of all or any part of his property, which property may be sold under the order of the Court to pay the demand of the plaintiff, if the defendant does not appear, or otherwise defaults. Any defendant whose property shall have been so seized and who shall have entered a general appearance in the cause may, upon notice to the plaintiff, petition the Court for an order releasing such property or any part thereof from the seizure. (c) Any [purported] transfer or assignment of the property so seized after the seizure thereof shall be void... 7 The value of the sequestered stock was approximately.$1.2 million. 8 Debentures, warrants, and stock unit credits belonging to some of the defendants who owned either stock or options were also sequestered. 9 Section 169 provides: For all purposes of title, action, attachment, garnishment and jurisdiction of all courts held in this State, but not for the purpose of taxation, the situs of the ownership of the capital stock of all corporations existing under the laws of this State, whether organized under this chapter or otherwise, shall be regarded as in this State.

90 The primary purpose of sequestration is not to secure possession of property pending a trial on the issue of who has the right to retain it. On the contrary, sequestration is a process used to compel the personal appearance of a nonresident defendant to answer and defend a suit brought against him. It is accomplished by the appointment of a sequestrator by this Court to seize and hold property of the nonresident located in this State subject to further Court order. If the defendant enters a general appearance, the sequestered property is routinely released, unless the plaintiff makes special application to continue its seizure, in which event the plaintiff has the burden of proof and persuasion [italics added]. This limitation on the purpose and length of time for which sequestered property is held, the court concluded, rendered inapplicable the due process requirements enunciated in Sniadach v. Family Finance Corp.; Fuentes v. Shevin; and [other cases]. Finally, the court held that the statutory Delaware situs of the stock provided a sufficient basis for the exercise of quasi in rem jurisdiction by a Delaware court. On appeal, the Delaware Supreme Court affirmed. Most of the [Delaware] Supreme Court s opinion was devoted to rejecting appellants contention that the sequestration procedure is inconsistent with the due process analysis developed in the Sniadach [and Fuentes] line of cases. We 12 reverse. II The Delaware courts rejected appellants jurisdictional challenge by noting that this suit was brought as a quasi in rem proceeding. Since quasi in rem jurisdiction is traditionally based on attachment or seizure of property present in the jurisdiction, not on contacts between the defendant and the State [as with IPJ], the courts considered appellants claimed lack of contacts with Delaware to be unimportant. This categorical analysis assumes the continued soundness of the conceptual structure founded on the century-old case of Pennoyer v. Neff. [In] Pennoyer the Court focused on the territorial limits of the States judicial powers. Mr. Justice Field found that their jurisdiction was defined by the principles of public law that [similarly] regulate the relationships among independent nations. The first of those principles was that every State possesses exclusive jurisdiction and sovereignty over persons [IPJ] and property [in rem jurisdiction] within its territory. The second was that no State can exercise direct jurisdiction and authority over persons or property without its territory. [A]ny attempt directly to assert extraterritorial jurisdiction over persons or property would offend sister States and exceed the inherent limits of the State s power. A judgment resulting from such an attempt was not only unenforceable in other States, but was also void in the rendering State because it had been obtained in violation of the Due Process Clause of the Fourteenth Amendment. [U]nder Pennoyer state authority to adjudicate was based on the jurisdiction s power over either persons or property. If a court s jurisdiction is based on its authority over the defendants person, the action and judgment are denominated in personam and can impose a personal 12 Under Delaware law, defendants whose property has been sequestered must enter a general appearance, thus subjecting themselves to in personam liability, before they can defend on the merits.

91 obligation on the defendant in favor of the plaintiff. If jurisdiction is based on the court s power over property within its territory, the action is called in rem or quasi in rem. The effect of a judgment in such a case is limited to the property that supports jurisdiction and does not impose a personal liability on the property owner, since he is not before the court. 17 In Pennoyer s terms, the owner is affected only indirectly by an in rem judgment adverse to his interest in the property subject to the court s disposition. By concluding that (t)he authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established, Pennoyer sharply limited the availability of in personam jurisdiction over defendants not resident in the forum State. On the other hand, since the State in which property was located was considered to have exclusive sovereignty over that property, in rem actions could proceed regardless of the owner s location. The Pennoyer rules generally favored nonresident defendants by making them harder to sue. This advantage was reduced, however, by the ability of a resident plaintiff to satisfy a claim against a nonresident defendant by bringing into court any property of the defendant located in the plaintiff s State. For example, in the well-known case of Harris v. Balk, [t]his Court reasoned that the debt Harris owed Balk was an intangible form of property belonging to Balk, and that the location of that property traveled with the debtor. By obtaining personal jurisdiction over Harris, Epstein had arrested his [Harris s] debt to Balk, and brought it into the Maryland court. No equally dramatic change [referring to Shoe s substitution of fairness for presence as the yardstick for measuring Due Process] has occurred in the law governing jurisdiction in rem. Well-reasoned lower court opinions have questioned the proposition that the presence of property in a State gives that State jurisdiction to adjudicate rights to the property regardless of the relationship of the underlying dispute and the property owner to the forum. The overwhelming majority of commentators urge that the [Shoe] traditional notions of fair play and substantial justice that govern a State s power to adjudicate in personam should also govern its power to adjudicate personal rights to property located in the State. Although this Court has not addressed this argument directly, we have held that property cannot be subjected to a court's judgment unless reasonable and appropriate efforts have been made to give the property owners actual notice of the action. Mullane v. Central Hanover Bank & Trust Co. This conclusion recognizes, contrary to Pennoyer, that an adverse judgment in rem directly affects the property owner by divesting him of his rights in the property before the court. Moreover, in Mullane we hold that Fourteenth Amendment rights cannot depend [merely] on the classification of an action as in rem or in personam, since that is a classification for which the standards are so elusive and confused generally and which, being primarily for state courts to define, may and do vary from state to state. It is clear, therefore, that the law of state-court jurisdiction no longer stands securely on the foundation established in Pennoyer. We think that the time is ripe to consider whether the 17 A judgment in rem affects the interests of all persons in designated property. A judgment quasi in rem affects the interests of particular persons in designated property. The latter is of two types. In one the plaintiff is seeking to secure a pre-existing claim in the subject property and to extinguish or establish the nonexistence of similar interests of particular persons. In the other the plaintiff seeks to apply what he concedes to be the property of the defendant to the satisfaction of a claim against him. [W]e will for convenience generally use the term in rem in place of in rem and quasi in rem.

92 standard of fairness and substantial justice set forth in International Shoe should be held to govern actions in rem as well as in personam. III The case for applying to jurisdiction in rem the same test of fair play and substantial justice as governs assertions of jurisdiction in personam is simple and straightforward. It is premised on recognition that (t)he phrase, judicial jurisdiction over a thing, is a customary elliptical way of referring to jurisdiction over the interests of persons in a thing. 22 This recognition leads to the conclusion that in order to justify an exercise of jurisdiction in rem, the basis for jurisdiction must be sufficient to justify exercising jurisdiction over the interests of persons in a thing. The standard for determining whether an exercise of jurisdiction over the interests of persons is consistent with the Due Process Clause is the minimum-contacts standard elucidated in International Shoe. This argument, of course, does not ignore the fact that the presence of property in a State may bear on the existence of jurisdiction by providing contacts among the forum State, the defendant, and the litigation. For example, when claims to the property itself are the source of the underlying controversy between the plaintiff and the defendant, it would be unusual for the State where the property is located not to have jurisdiction. It appears, therefore, that jurisdiction over many types of actions which now are or might be brought in rem would not be affected by a holding that any assertion of state-court jurisdiction must satisfy the International Shoe standard. For the type of quasi in rem action typified by Harris v. Balk and the present case, however, accepting the proposed analysis would result in significant change. These are cases where the property which now serves as the basis for statecourt jurisdiction is completely unrelated to the plaintiff s cause of action. Thus, although the presence of the defendant s property in a State might suggest the existence of other ties among the defendant, the State, and the litigation, the presence of the property alone would not support the State s jurisdiction. If those other ties did not exist, cases over which the State is now thought to have jurisdiction could not be brought in that forum. [W]e note that this type of case also presents the clearest illustration of the argument in favor of assessing assertions of jurisdiction by a single standard. For in cases such as Harris and this one, the only role played by the property is to provide the basis for bringing the defendant into court. Indeed, the express purpose of the Delaware sequestration procedure is to compel the defendant to enter a personal appearance. 33 In such cases, if a direct assertion of personal jurisdiction over the defendant would violate the Constitution, it would seem that an indirect assertion of that jurisdiction should be equally impermissible. 37 The fiction that an assertion of jurisdiction over property is anything but an assertion of jurisdiction over the owner of the property supports an ancient form without substantial modern justification. Its continued acceptance [as permitted under cases like Harris] would serve only to allow state-court jurisdiction that is fundamentally unfair to the defendant. 22 All proceedings, like all rights, are really against persons. Whether they are proceedings or rights in rem depends on the number of persons affected. 33 This purpose is emphasized by Delaware s refusal to allow any defense on the merits unless the defendant enters a general appearance, thus submitting to full in personam liability This case does not raise, and we therefore do not consider, the question whether the presence of a defendant's property in a State is a sufficient basis for jurisdiction when no other forum is available to the plaintiff.

93 We therefore conclude that all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny. 39 IV The Delaware courts based their assertion of jurisdiction in this case solely on the statutory presence of appellants property in Delaware [italics added]. Yet that property is not the subject matter of this litigation, nor is the underlying cause of action related to the property. But as Heitner s failure to secure jurisdiction over seven of the defendants named in his complaint demonstrates, there is no necessary relationship between holding a position as a corporate fiduciary and owning stock or other interests in the corporation. Moreover, Heitner s argument fails to demonstrate that Delaware is a fair forum for this litigation. The interest appellee has identified may support the application of Delaware law to resolve any controversy over appellants actions in their capacities as officers and directors. 44 But we have rejected the argument that if a State s law can properly be applied to a dispute, its courts necessarily have jurisdiction over the parties to that dispute. Delaware s assertion of jurisdiction over appellants in this case is inconsistent with that constitutional limitation on state power. The judgment of the Delaware Supreme Court must, therefore, be reversed. It is so ordered. Mr. Justice Powell, concurring. I would explicitly reserve judgment, however, on whether the ownership of some forms of property whose situs is indisputably and permanently located within a State may, without more, provide the contacts necessary to subject a defendant to jurisdiction within the State to the extent of the value of the property. In the case of real property, [it would] arguably would avoid the uncertainty of the general International Shoe standard without significant cost to traditional notions of fair play and substantial justice. Mr. Justice Stevens, concurring in the judgment. If I visit another State, or acquire real estate or open a bank account in it, I knowingly assume some risk that the State will exercise its power over my property or my person while there. My contact with the State, though minimal, gives rise to predictable risks. One who purchases shares of stock on the open market can hardly be expected to know that he has thereby become subject to suit in a forum remote from his residence and unrelated to the transaction. As a practical matter, the Delaware sequestration statute creates an unacceptable risk of judgment without notice. Unlike the 49 other States, Delaware treats the place of incorporation as the situs of the stock, even though both the owner and the custodian of the 39 It would not be fruitful for us to re-examine the facts of cases decided on the rationales of Pennoyer and Harris to determine whether jurisdiction might have been sustained under the standard we adopt today. To the extent that prior decisions are inconsistent with this standard, they are overruled. 44 In general, the law of the State of incorporation is held to govern the liabilities of officers or directors to the corporation and its stockholders. The rationale for the general rule appears to be based more on the need for a uniform and certain standard to govern the internal affairs of a corporation than on the perceived interest of the State of incorporation.

94 shares are elsewhere. Moreover, Delaware denies the defendant the opportunity to defend the merits of the suit unless he subjects himself to the unlimited jurisdiction of the court. How the Court s opinion may be applied in other contexts is not entirely clear to me. I agree with Mr. Justice Powell that it should not be read to invalidate quasi in rem jurisdiction where real estate is involved. Mr. Justice Brennan, concurring in part and dissenting in part. I join Parts I-III of the Court s opinion. I fully agree that the minimum-contacts analysis developed in International Shoe Co. v. Washington, represents a far more sensible construct for the exercise of state-court jurisdiction than the patchwork of legal and factual fictions that has been generated from the decision in Pennoyer v. Neff. It is precisely because the inquiry into minimum contacts is now of such overriding importance, however, that I must respectfully dissent from Part IV of the Court s opinion. II I am convinced that as a general rule a state forum has jurisdiction to adjudicate a shareholder derivative action centering on the conduct and policies of the directors and officers of a corporation chartered by that State. Unlike the Court, I therefore would not foreclose Delaware from asserting [personal] jurisdiction over appellants were it persuaded to do so on the basis of minimum contacts [thus obviating the need to reach the question of in rem jurisdiction, in a way that will conceivably impact the laws of all 50 states]. Notes and Questions: 1. The property seized in Harris was not the actual $ in Harris s pocket. It was, instead, the intangible obligation to repay it to Balk. What property of the defendants was seized in Shaffer? Where was that property deemed to be located under the Delaware statute (which was amended ten days after Shaffer was decided)?. 2. Pennoyer established the two types of territorial jurisdiction that exist today: in personam and in rem. The in personam wing of Pennoyer was overruled in Shoe, which abandoned the required presence of the person for service in the forum (to establish IPJ). What did Shaffer do to the in rem wing of Pennoyer? What rule might one articulate as the result in Shaffer? 3. Does Shaffer impact cases where the property is the subject of the litigation? Or is Shaffer s impact most felt in cases where the property to be seized prior to judgment, because Shaffer has no cogizable impact on post-judgment enforcement remedies has little if anything to do with the underlying in case? What exceptions does: (a) footnote 37 suggest?; and (b) the concurring opinions?

95 BATES v. C & S ADJUSTERS, INC. United States Court of Appeals, Second Circuit 980 F.2d 865 (1992) Jon O. Newman, Circuit Judge: This appeal concerns venue in an action brought under the Fair Debt Collection Practices Act. Specifically, the issue is whether venue exists in a district in which the debtor resides and to which a bill collector s demand for payment was forwarded. The issue arises on an appeal by Phillip E. Bates from the judgment, dismissing his complaint because of improper venue. We conclude that venue was proper under 28 U.S.C.A. 1391(b)(2) and therefore reverse and remand. Background Bates commenced this action in the Western District of New York upon receipt of a collection notice from C & S Adjusters, Inc. ( C & S ). Bates alleged violations of the Fair Debt Collection Practices Act. The facts relevant to venue are not in dispute. Bates incurred the debt in question while he was a resident of the Western District of Pennsylvania. The creditor, a corporation with its principal place of business in that District, referred the account to C & S, a local [Pennsylvania] collection agency which transacts no regular business in New York. Bates had meanwhile moved to the Western District of New York. When C & S mailed a collection

96 notice to Bates at his Pennsylvania address, the Postal Service forwarded the notice to Bates new address in New York. In its answer, C & S asserted two affirmative defenses and also counterclaimed for costs, alleging that the action was instituted in bad faith and for purposes of harassment. C & S subsequently filed a motion to dismiss for improper venue, which the District Court granted. Discussion 1. Venue and the 1990 amendments to 28 U.S.C. 1391(b) Bates concedes that the only plausible venue provision for this action is 28 U.S.C.A. 1391(b)(2), which allows an action to be brought in a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred. Prior to 1990, section 1391 allowed for venue in the judicial district... in which the claim arose. This case represents our first opportunity to consider the significance of the 1990 amendments. Prior to 1966, venue was proper in federal question cases, absent a special venue statute, only in the defendant s state of citizenship [or plaintiff s, in a diversity case]. If a plaintiff sought to sue multiple defendants who were citizens of different states, there might be no district where the entire action could be brought. Congress closed this venue gap by adding a provision allowing suit in the district in which the claim arose. This phrase gave rise to a variety of conflicting interpretations. Some courts thought it meant that there could be only one such district; others believed there could be several. Different tests developed, with courts looking for substantial contacts, the weight of contacts, the place of injury or performance, or even to the boundaries of personal jurisdiction under state law. The Supreme Court [in its 1979 Leroy case] made several observations: (1) the purpose of the [earlier] 1966 statute was to close venue gaps and should not be read more broadly than necessary to close those gaps ; (2) the general purpose of the venue statute was to protect defendants against an unfair or inconvenient trial location; (3) location of evidence and witnesses was a relevant factor; (4) familiarity of the Idaho federal judges with the Idaho antitakeover statute was a relevant factor; (5) plaintiff s convenience was not a relevant factor; and (6) in only rare cases should there be more than one district in which a claim can be said to arise. Subsequent to Leroy and prior to the 1990 amendment to section 1391(b), [c]ourts continued to have difficulty in determining whether more than one district could be proper. Against this background, we understand Congress 1990 amendment to be at most a marginal expansion of the venue provision. The House Report indicates that the new language was first proposed by the American Law Institute in a 1969 Study, and observes: The great advantage of referring to the place where things happened... is that it avoids the litigation breeding phrase in which the claim arose. It also avoids the problem created by the frequent cases in which substantial parts of the underlying events have occurred in several districts. Thus it seems clear that Leroy s strong admonition against recognizing multiple venues has been disapproved. Many of the factors in Leroy for instance, the convenience of defendants and the location of evidence and witnesses are most useful in distinguishing between two or more plausible venues. Since the new [1990] statute does not, as a general matter, require the District Court to determine the best venue, these factors will be of less significance. Apart from this point, however, Leroy and other precedents remain important sources of guidance. 2. Fair Debt Collection Practices Act

97 Under the version of the venue statute in force from 1966 to 1990, at least three District Courts held that venue was proper under the Fair Debt Collection Practices Act in the plaintiff s home district if a collection agency had mailed a collection notice to an address in that district or placed a phone call to a number in that district. None of these cases involved the unusual fact, present in this case, that the defendant did not deliberately direct a communication to the plaintiff s district. We conclude, however, that this difference is inconsequential, at least under the current venue statute. The statutory standard for venue focuses not on whether a defendant has made a deliberate contact a factor relevant in the analysis of personal jurisdiction 1 but on the location where events occurred. Under the new version of section 1391(b)(2), we must determine only whether a substantial part of the events... giving rise to the claim occurred in the Western District of New York. In adopting this statute, Congress was concerned about the harmful effect of abusive debt practices on consumers. ( Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. ) This harm does not occur until receipt of the collection notice. Indeed, if the notice were lost in the mail, it is unlikely that a violation of the Act would have occurred. Moreover, a debt collection agency sends its dunning letters so that they will be received. Forwarding such letters to the district to which a debtor has moved is an important step in the collection process. If the bill collector prefers not to be challenged for its collection practices outside the district of a debtor s original residence, the envelope can be marked do not forward. We conclude that receipt of a collection notice is a substantial part of the events giving rise to a claim under the Fair Debt Collection Practices Act. The relevant factors identified in Leroy add support to our conclusion. Although bona fide error can be a defense to liability under the Act, the alleged violations of the Act turn largely not on the collection agency s intent, but on the content of the collection notice. The most relevant evidence the collection notice is located in the Western District of New York. Because the collection agency appears not to have marked the notice with instructions not to forward, and has not objected to the assertion of personal jurisdiction, trial in the Western District of New York would not be unfair. CONCLUSION The judgment of the District Court is reversed, and the matter is remanded for further proceedings consistent with this decision. Notes and Questions: 1. As Bates notes, the general purpose of the venue statute was to protect defendants against an unfair or inconvenient trial location. That is similar to the purpose of constitutional Due Process cases you studied earlier. What, then, is the essential difference between IPJ and venue? Go to the Course Web Page, the click the California Federal judicial district map, which may assist with assessing IPJ versus venue. As noted in KM Enterprises, Inc. v. Global Traffic Technologies, Inc., 725 F.3d 718, (7th Cir., 2013): 1 C & S has waived whatever claim it might have had that the District Court lacked personal jurisdiction over it. Waiver resulted from C & S's failure to allege lack of personal jurisdiction in its answer or motion to dismiss.

98 While personal jurisdiction governs a court s power over a defendant, federal venue rules determine in which judicial district... a suit should be heard. Unlike personal jurisdiction, which has a constitutional dimension, civil venue is a creature of statute, intended to limit the potential districts where one may be called upon to defend oneself in any given matter to those that are fair and reasonably convenient. [... For example, a] corporate defendant is deemed to reside in any judicial district in which such defendant is subject to the court s personal jurisdiction with respect to the civil action in question. 1391(c)(2). In states with multiple judicial districts, subsection (d) limits the residency of a corporation to any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district... in the district within which it has the most significant contacts. 2. How does the 1990 statute differ from the earlier 1966 general federal venue statute? What impact did the 1990 change have in Bates? 3. What was the proper venue for the Bates suit? Was there only one? If the collection agency had challenged personal jurisdiction, would it have been more successful than in challenging only venue? 4. Did the court have to determine the best venue? Or only a proper venue(s)? Did it have to determine where the most substantial part of claim occurred? Or only whether a substantial part occurred in the forum chosen by the plaintiff? 4. What does the last phrase of the Conclusion mean? PIPER AIRCRAFT CO. v. REYNO United States Supreme Court 454 U.S. 235 (1981) Justice Marshall delivered the [4-3] opinion of the Court. These cases arise out of an air crash that took place in Scotland. Respondent, acting as representative of the estates of several Scottish citizens killed in the accident, brought wrongfuldeath actions against petitioners [in California] that were ultimately transferred to the United States District Court for the Middle District of Pennsylvania. Petitioners [then] moved to dismiss on the ground of forum non conveniens. After noting that an alternative forum existed in Scotland, the District Court granted their motions. The United States Court of Appeals for the Third Circuit reversed. The Court of Appeals based its decision, at least in part, on the ground that dismissal is automatically barred where the law of the alternative forum is less favorable to the plaintiff than the law of the forum chosen by the plaintiff. Because we conclude that the possibility of an unfavorable change in law should not, by itself, bar dismissal, and because we conclude that the District Court did not otherwise abuse its discretion, we reverse. I

99 (Type of Cessna involved in Piper aircrash. Reprinted with permission of < A In July 1976, a small commercial aircraft crashed in the Scottish highlands during the course of a charter flight from Blackpool to Perth. The pilot and five passengers were killed instantly. The decedents were all Scottish subjects and residents, as are their heirs and next of kin. There were no eyewitnesses to the accident. At the time of the crash the plane was subject to Scottish air traffic control. The aircraft, a twin-engine Piper Aztec, was manufactured in Pennsylvania by petitioner Piper Aircraft Co. (Piper). The propellers were manufactured in Ohio by petitioner Hartzell Propeller, Inc. (Hartzell). At the time of the crash the aircraft was registered in Great Britain and was owned and maintained by Air Navigation and Trading Co., Ltd. (Air Navigation). It was operated by McDonald Aviation, Ltd. (McDonald), a Scottish air taxi service. Both Air Navigation and McDonald were organized in the United Kingdom. The wreckage of the plane is now in a hangar in Farnsborough, England. The British Department of Trade investigated the accident shortly after it occurred. A preliminary report found that the plane crashed after developing a spin, and suggested that mechanical failure in the plane or the propeller was responsible. At Hartzell s request, this report was reviewed by a three-member Review Board, which held a 9-day adversary hearing attended by all interested parties. The Review Board found no evidence of defective equipment and indicated that pilot error may have contributed to the accident. The pilot, who had obtained his commercial pilot s license only three months earlier, was flying over high ground at an altitude considerably lower than the minimum height required by his company s operations manual.

100 In July 1977, a California probate court appointed respondent Gaynell Reyno administratrix of the estates of the five passengers. Reyno is not related to and does not know any of the decedents or their survivors; she was a legal secretary to the attorney who filed this lawsuit. Several days after her appointment, Reyno commenced separate wrongful-death actions against Piper and Hartzell in the Superior Court of California, claiming negligence and strict liability. Air Navigation, McDonald, and the estate of the pilot are not parties to this litigation. The survivors of the five passengers whose estates are represented by Reyno filed a separate action in the United Kingdom against Air Navigation, McDonald, and the pilot s estate. Reyno candidly admits that the action against Piper and Hartzell was filed in the United States because its laws regarding liability, capacity to sue, and damages are more favorable to her position than are those of Scotland. Scottish law does not recognize strict liability in tort. Moreover, it permits wrongful-death actions only when brought by a decedent s relatives. The relatives may sue only for loss of support and society. On [defendant] petitioners motion, the suit was removed to the United States District Court for the Central District of California. Piper then moved for transfer to the United States District Court for the Middle District of Pennsylvania, pursuant to 28 U.S.C. 1404(a). 4 Hartzell moved to dismiss for lack of personal jurisdiction, or in the alternative, to transfer. 5 In December 1977, the District Court quashed service on Hartzell and transferred the case to the Middle District of Pennsylvania. Respondent then properly served process on Hartzell. B In May 1978, after the suit had been transferred, both Hartzell and Piper moved to dismiss the action on the ground of forum non conveniens. The [Pennsylvania] District Court granted these motions in October It relied on the balancing test set forth by this Court in Gulf Oil Corp. v. Gilbert, and its companion case. In those decisions, the Court stated that a plaintiff s choice of forum should rarely be disturbed. However, when an alternative forum has jurisdiction to hear the case, and when trial in the chosen forum would establish... oppressiveness and vexation to a defendant... out of all proportion to plaintiff s convenience, or when the chosen forum [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. To guide trial court discretion, the Court provided a list of private interest factors affecting the convenience of the litigants, and a list of public interest factors affecting the convenience of the forum. 6 [T]he District Court began by observing that an alternative forum existed in Scotland; Piper and Hartzell had agreed to submit to the jurisdiction of the Scottish courts and to 4 Section 1404(a) provides: For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. [See Notes and Questions below for revised version.].. 5 The District Court concluded that it could not assert personal jurisdiction over Hartzell consistent with due process. However, it decided not to dismiss Hartzell because the corporation would be amenable to process in Pennsylvania [ where it might have been brought ]. 6 The factors pertaining to the private interests of the litigants included the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive. The public factors bearing on the question included the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.

101 waive any statute of limitations defense that might be available. It then stated that plaintiff's choice of forum was entitled to little weight. The court recognized that a plaintiff s choice ordinarily deserves substantial deference. It noted, however, that Reyno is a representative of foreign citizens and residents seeking a forum in the United States because of the more liberal rules concerning products liability law, and that the courts have been less solicitous when the plaintiff is not an American citizen or resident, and particularly when the foreign citizens seek to benefit from the more liberal tort rules provided for the protection of citizens and residents of the United States. The District Court next examined several factors relating to the private interests of the litigants, and determined that these factors strongly pointed towards Scotland as the appropriate forum. Although evidence concerning the design, manufacture, and testing of the plane and propeller is located in the United States, the connections with Scotland are otherwise overwhelming. The real parties in interest are citizens of Scotland, as were all the decedents. Witnesses who could testify regarding the maintenance of the aircraft, the training of the pilot, and the investigation of the accident all essential to the defense are in Great Britain. Moreover, all witnesses to damages are located in Scotland. Trial would be aided by familiarity with Scottish topography, and by easy access to the wreckage. The District Court reasoned that because crucial witnesses and evidence were beyond the reach of compulsory process, and because the defendants would not be able to implead potential Scottish third-party defendants, it would be unfair to make Piper and Hartzell proceed to trial in this forum. The survivors had brought separate actions in Scotland against the pilot, McDonald, and Air Navigation. [I]t would be fairer to all parties and less costly if the entire case was presented to one jury with available testimony from all relevant witnesses. [T]he court recognized that if trial were held in the United States, there was a significant risk of inconsistent verdicts. The District Court concluded that the relevant public interests also pointed strongly towards dismissal. The court determined that Pennsylvania law would apply to Piper and Scottish law to Hartzell if the case were tried in the Middle District of Pennsylvania. As a result, trial in this forum would be hopelessly complex and confusing for a jury. In addition, the court noted that it was unfamiliar with Scottish law and thus would have to rely upon experts from that country. The court also found that the trial would be enormously costly and time-consuming; that it would be unfair to burden citizens with jury duty when the Middle District of Pennsylvania has little connection with the controversy; and that Scotland has a substantial interest in the outcome of the litigation. In opposing the motions to dismiss, respondent contended that dismissal would be unfair because Scottish law was less favorable. The District Court explicitly rejected this claim. It reasoned that the possibility that dismissal might lead to an unfavorable change in the law did not deserve significant weight; any deficiency in the foreign law was a matter to be dealt with in the foreign forum. C On appeal, the United States Court of Appeals for the Third Circuit reversed and remanded for trial. The Court held that dismissal is never appropriate where the law of the alternative forum is less favorable to the plaintiff. [T]he Court of Appeals stated:

102 [I]t is apparent that the dismissal would work a change in the applicable law so that the plaintiff s strict liability claim would be eliminated from the case. But... a dismissal for forum non conveniens, like a statutory transfer, should not, despite its convenience, result in a change in the applicable law. Only when American law is not applicable, or when the foreign jurisdiction would, as a matter of its own choice of law, give the plaintiff the benefit of the claim to which she is entitled here, would dismissal be justified. In other words, the court decided that dismissal is automatically barred if it would lead to a change in the applicable law unfavorable to the plaintiff. We granted certiorari in these cases to consider the questions they raise concerning the proper application of the doctrine of forum non conveniens. In this opinion, we begin by considering whether the Court of Appeals properly held that the possibility of an unfavorable change in law automatically bars dismissal. Part II, infra. Since we conclude that the Court of Appeals erred, we then consider its review of the District Court s Gilbert analysis to determine whether dismissal was otherwise appropriate. Part III, infra. We believe that it is necessary to discuss the Gilbert analysis in order to properly dispose of the cases. II 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. The possibility of a change in substantive law should ordinarily not be given conclusive or even substantial weight in the forum non conveniens inquiry. 13 Under Gilbert, dismissal will ordinarily be appropriate where trial in the plaintiff s chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice. If substantial weight were given to the possibility of an unfavorable change in law, however, dismissal might be barred even where trial in the chosen forum was plainly inconvenient. The decisions have repeatedly emphasized the need to retain flexibility. In Gilbert, the Court refused to identify specific circumstances which will justify or require either grant or denial of remedy. And we stated that we would not lay down a rigid rule to govern discretion, and that [e]ach case turns on its facts. If central emphasis were placed on any one factor, the forum non conveniens doctrine would lose much of the very flexibility that makes it so valuable. Upholding the decision of the Court of Appeals would result in other practical problems. At least where the foreign plaintiff named an American manufacturer as defendant, a court could 13 The doctrine of forum non conveniens has a long history. It originated in Scotland, and became part of the common law of many States. The doctrine was also frequently applied in federal admiralty actions. In (1946), the Court first indicated that motions to dismiss on grounds of forum non conveniens could be made in federal diversity actions.

103 not dismiss the case on grounds of forum non conveniens where dismissal might lead to an unfavorable change in law. The American courts, which are already extremely attractive to foreign plaintiffs, 18 would become even more attractive. The flow of litigation into the United States would increase and further congest already crowded courts. 19 We do not hold that the possibility of an unfavorable change in law should never be a relevant consideration in a forum non conveniens inquiry. Of course, if the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, the unfavorable change in law may be given substantial weight; the district court may conclude that dismissal would not be in the interests of justice. In these cases, however, the remedies that would be provided by the Scottish courts do not fall within this category. Although the relatives of the decedents may not be able to rely on a strict liability theory, and although their potential damages award may be smaller, there is no danger that they will be deprived of any remedy or treated unfairly. III The Court of Appeals also erred in rejecting the District Court s Gilbert analysis. A The District Court acknowledged that there is ordinarily a strong presumption in favor of the plaintiff s choice of forum, which may be overcome only when the private and public interest factors clearly point towards trial in the alternative forum. It held, however, that the presumption applies with less force when the plaintiff or real parties in interest are foreign. The District Court s distinction between resident or citizen plaintiffs and foreign plaintiffs is fully justified. When the [plaintiff s] home forum has been chosen, it is reasonable to assume that this choice is convenient. When the plaintiff is foreign, however, this assumption is much less reasonable. 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. B The forum non conveniens determination is committed to the sound discretion of the trial court. It may be reversed only when there has been a clear abuse of discretion; where the court has considered all relevant public and private interest factors, and where its balancing of these factors is reasonable, its decision deserves substantial deference. Here, the Court of Appeals seems to have lost sight of this rule, and substituted its own judgment for that of the District Court. (1) In analyzing the private interest factors, the District Court stated that the connections with Scotland are overwhelming [italics added]. This characterization may be somewhat 18 First, all but 6 of the 50 American States offer strict liability [which] remains primarily an American innovation. Second, the tort plaintiff may choose, at least potentially, from among 50 jurisdictions if he decides to file suit in the United States. Each of these jurisdictions applies its own set of malleable choice-of-law rules. Third, jury trials are almost always available in the United States, while they are never provided in civil law jurisdictions. Fourth, unlike most foreign jurisdictions, American courts allow contingent attorney s fees, and do not tax losing parties with their opponents attorney s fees. Fifth, discovery is more extensive in American than in foreign courts. 19 In holding that the possibility of a change in law unfavorable to the plaintiff should not be given substantial weight, we also necessarily hold that the possibility of a change in law favorable to defendant should not be considered.

104 exaggerated. Particularly with respect to the question of relative ease of access to sources of proof, the private interests point in both directions. As respondent emphasizes, records concerning the design, manufacture, and testing of the propeller and plane are located in the United States. She would have greater access to sources of proof relevant to her strict liability and negligence theories if trial were held here. However, the District Court did not act unreasonably in concluding that fewer evidentiary problems would be posed if the trial were held in Scotland. A large proportion of the relevant evidence is located in Great Britain. (2) The District Court s review of the factors relating to the public interest was also reasonable [italics added]. On the basis of its choice-of-law analysis, it concluded that if the case were tried in the Middle District of Pennsylvania, Pennsylvania law would apply to Piper and Scottish law to Hartzell. It stated that a trial involving two sets of laws would be confusing to the jury. It also noted its own lack of familiarity with Scottish law. Scotland has a very strong interest in this litigation. The accident occurred in its airspace. All of the decedents were Scottish. Apart from Piper and Hartzell, all potential plaintiffs and defendants are either Scottish or English. As we stated in Gilbert, there is a local interest in having localized controversies decided at home. The American interest in this accident is simply not sufficient to justify the enormous commitment of judicial time and resources that would inevitably be required if the case were to be tried here. IV The Court of Appeals erred in holding that the possibility of an unfavorable change in law bars dismissal on the ground of forum non conveniens. It also erred in rejecting the District Court's Gilbert analysis. The District Court properly decided that the presumption in favor of the respondent s forum choice applied with less than maximum force because the real parties in interest are foreign. It did not act unreasonably in deciding that the private interests pointed towards trial in Scotland. Nor did it act unreasonably in deciding that the public interests favored trial in Scotland. Thus, the judgment of the Court of Appeals is Reversed. Notes and Questions: 1. Mini-course review: How did this case get from a California state court to a Pennsylvania federal court? What related procedural issues likely arose during its cross-country journey? What concessions must the D make, as a requirement for obtaining relief? 2. What does the term forum non conveniens (FNC) mean? What factors sway a court s FNC decision? 3. What two alternative remedies are available to a party seeking FNC relief? 4. The transfer statute was amended in A new phrase added at the end of subsection (a) now provides: or to any district or division to which all parties have consented. What difference, if any, would this addition have made in Piper? 5. Some circuits include factors or limitations not stated in either the US Code or Supreme Court case law. The Fifth Circuit, for example, employs a 100-mile rule. As stated in In re Maqdmax, Ltd, 720 Fed.Rptr.3d 285, at (5th Cir. 2013): [t]he Fifth Circuit has established a threshold of 100 miles when giving substantial weight to [the cost of attendance for witnesses], and the court reasoned that because

105 [the] Tyler [division] is well less than 100 miles from Marshall... this factor is neutral. Previously, we explained that [w]hen the distance between an existing venue for trial of a matter and a proposed venue under 1404(a) is more than 100 miles, the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled. Indeed, the en banc court reiterated that guidance and characterized it as a 100 mile threshold or rule. We did not imply, however, that a transfer within 100 miles does not impose costs on witnesses or that such costs should not be factored into the venue-transfer analysis, but only that this factor has greater significance when the distance is greater than 100 miles. ERIE R. CO. v. TOMPKINS United States Supreme Court 304 U.S. 64 (1938) Mr. Justice Brandeis delivered the [6-2, including two concurring] opinion[s] of the Court. The question for decision is whether the oft-challenged doctrine of Swift v. Tyson 1 shall now be disapproved. Tompkins, a citizen of Pennsylvania, was injured on a dark night by a passing freight train of the Erie Railroad Company while walking along its right of way at Hughestown in that state. He claimed that the accident occurred through negligence in the operation, or maintenance, of the train; that he was rightfully on the premises as licensee because on a commonly used beaten footpath which ran for a short distance alongside the tracks [italics added]; and that he was struck by something which looked like a door projecting from one of the moving cars. To enforce that claim he brought an action in the federal court for Southern New York, which had jurisdiction because the company is a corporation of that state. It denied liability; and the case was tried by a jury , 16 Pet. 1.

106 Erie Railroad locomotive Sources: < %20photos/ralston ERIE.jpg> Reprinted with permission of Alex Campbell and Columbus Railroads Erie open shipping car < ancestry.com/~sponholz/erie499.jpg> Reprinted with Permission of James Sponholz The Erie insisted that its duty to Tompkins was no greater than that owed to a trespasser. It contended, among other things, that its duty to Tompkins, and hence its liability, should be determined in accordance with the Pennsylvania law; that under the law of Pennsylvania, as declared by its highest court, persons who use pathways along the railroad right of way-that is, a longitudinal pathway as distinguished from a crossing-are to be deemed trespassers [italics added] and that the railroad is not liable for injuries to undiscovered trespassers resulting from its negligence, unless it be wanton or willful. Tompkins denied that any such rule had been established by the decisions of the Pennsylvania courts; and contended that, since there was no statute of the state on the subject, the railroad s duty and liability is to be determined in federal courts as a matter of general [common] law. The trial judge refused to rule that the applicable [governing] law precluded recovery. The jury brought in a verdict of $30,000; and the judgment entered thereon was affirmed by the Circuit Court of Appeals, which held, that it was unnecessary to consider whether the law of Pennsylvania was as contended, because the question was one not of local, but of general, law, and that upon questions of general law the federal courts are free, in absence of a local statute, to exercise their independent judgment as to what the law is[italics added]; and it is well settled that the question of the responsibility of a railroad for injuries caused by its servants is one of general law. Where the public has made open and notorious use of a railroad right of way for a long period of time and without objection, the company owes to persons on such permissive pathway a duty of care in the operation of its trains. It is likewise generally recognized law that a jury may find that negligence exists toward a pedestrian using a permissive path on the railroad right of way if he is hit by some object projecting from the side of the train. The Erie had contended that application of the Pennsylvania rule was required, among other things, by section 34 of the Federal Judiciary Act of September 24, 1789, which provides: The laws of the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply. Because of the importance of the question whether the federal court was free to disregard the alleged rule of the Pennsylvania common law, we granted certiorari. First. Swift v. Tyson, held that federal courts exercising jurisdiction on the ground of diversity of citizenship need not apply the unwritten law of the state as declared by its court[s]; that they are free to exercise an independent judgment as to what the common law of the state is or should be; and that

107 the true interpretation of the 34th section limited its application to the positive statutes of the state. It never has been supposed by us, that the section did apply, or was designed to apply, to questions of a more general nature as, for example, to the construction of ordinary contracts or other written instruments, and especially to questions of general commercial law, where the state tribunals are called upon to perform the like functions as ourselves, that is, to ascertain, upon general reasoning and legal analogies, what is the true exposition of the contract or instrument, or what is the just rule furnished by the principles of commercial law to govern the case. Doubt was repeatedly expressed as to the correctness of the construction given section 34, and as to the soundness of the rule which it introduced. But it was the more recent research of a competent scholar, who examined the original document, which established that the construction given to it by the Court was erroneous; and that the purpose of the section was merely to make certain that, in all matters except those in which some federal law is controlling, the federal courts exercising jurisdiction in diversity of citizenship cases would apply as their rules of decision the law of the state, unwritten as well as written. Second. Experience in applying the doctrine of Swift v. Tyson, had revealed its defects, political and social; and the benefits expected to flow from the rule did not accrue. Persistence of state courts in their own opinions on questions of common law prevented uniformity. The discrimination resulting became in practice far-reaching. This resulted in part from the broad province accorded to the so-called general law as to which federal courts exercised an independent judgment. Furthermore, state decisions construing local deeds, mineral conveyances, and even devises of real estate, were disregarded.. In part the discrimination resulted from the wide range of persons held entitled to avail themselves of the federal rule by resort to the diversity of citizenship jurisdiction. Through this jurisdiction individual citizens willing to remove from their own state and become citizens of another might avail themselves of the federal rule. And, without even change of residence, a corporate citizen of the state could avail itself of the federal rule by reincorporating under the laws of another state. The injustice and confusion incident to the doctrine of Swift v. Tyson have been repeatedly urged as reasons for abolishing or limiting diversity of citizenship jurisdiction. Other legislative relief has been proposed. If only a question of statutory construction were involved, we should not be prepared to abandon a doctrine so widely applied throughout nearly a century. But the unconstitutionality of the course pursued has now been made clear, and compels us to do so. Third. Except in matters governed by the Federal Constitution or by acts of Congress, the [substantive] law to be applied in any case is the law of the state. And whether the law of the state shall be declared by its Legislature in a statute or by its highest court in a decision is not a matter of federal concern. There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a state whether they be local in their nature or general, be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts. But, notwithstanding the great names which may be cited in favor of the doctrine, and notwithstanding the frequency

108 with which the doctrine has been reiterated, there stands, as a perpetual protest against its repetition, the constitution of the United States, which recognizes and preserves the autonomy and independence of the states, independence in their legislative and independence in their judicial departments. Supervision over either the legislative or the judicial action of the states is in no case permissible except as to matters by the constitution specifically authorized or delegated to the United States. Any interference with either, except as thus permitted, is an invasion of the authority of the state, and, to that extent, a denial of its independence.' The fallacy underlying the rule declared in Swift v. Tyson is made clear by Mr. Justice Holmes. The doctrine rests upon the assumption that there is a transcendental body of law outside of any particular State but obligatory within it unless and until changed by statute, that federal courts have the power to use their judgment as to what the rules of common law are; and that in the federal courts the parties are entitled to an independent judgment on matters of general law. Thus the doctrine of Swift v. Tyson is, as Mr. Justice Holmes said, an unconstitutional assumption of powers by the Courts of the United States which no lapse of time or respectable array of opinion should make us hesitate to correct. In disapproving that doctrine we do not hold unconstitutional section 34 of the Federal Judiciary Act of 1789 or any other act of Congress. We merely declare that in applying the doctrine this Court and the lower courts have invaded rights which in our opinion are reserved by the Constitution to the several states. Reversed. Mr. Justice Butler (dissenting). The laws of a state are more usually understood to mean the rules and enactments promulgated by the legislative authority thereof, or long-established local customs having the force of laws. Undoubtedly, the decisions of the local tribunals upon such subjects are entitled to, and will receive, the most deliberate attention and respect of this court; but they cannot furnish positive rules or conclusive authority, by which our own [federal] judgments are to be bound up and governed. This means that, so far as concerns the rule of decision now condemned, the Judiciary Act of 1789, passed to establish judicial courts to exert the judicial power of the United States, and especially section 34 of that act as construed, is unconstitutional; that federal courts are now bound to follow decisions of the courts of the state in which the controversies arise; and that Congress is powerless otherwise to ordain. It is hard to foresee the consequences of the radical change so made. The Court s opinion strikes down as unconstitutional section 34 as construed by our decisions; it divests the Congress of power to prescribe rules to be followed by federal courts when deciding questions of general law. In that broad field it compels this and the lower federal courts to follow decisions of the courts of a particular state. Notes and Questions:

109 1. What governing law distinction did Swift v. Tyson adopt? Erie overruled that distinction. How so? 2. The Erie majority says: There is no federal general common law. Is that statement overly broad?. 3. One reason for Swift may be that for the first hundred years of the new Republic, the federal courts exercised primarily diversity jurisdiction to ensure that the state courts were true to the ideals of the 1789 Judiciary Act. Congress did not enact general federal question jurisdiction until Today, this latter federal power constitutes about seventy percent of the federal caseload. 4. What rule did Erie adopt? (a) Erie did not resolve whether the federal court in New York would have to apply New York or Pennsylvania law. It did not address whether local state substantive law or its body of conflict of law rules would be applied to cases touching and concerning two or more states. This could lead to mischief, if a federal judge did not like the local substantive law result, and could end-run it by applying a state s conflict of laws rules that might apply the substantive law of another state. (b) Three years later, the Supreme Court closed this substantive law gap. In Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941), the Court determined that federal trial judges are not free to determine substantive law issues, in accordance with their own (Swift-like) conception of the better view of the law. In the federal diversity choice of law context where the case facts touch and concern two or more states they must, instead, apply the conflict of laws rule of the state in which they sit. 5. Does Erie purport to address procedural differences? If not, then the Court would have much work ahead of it, notwithstanding the seeming rule that federal courts have to apply [all] state law in diversity cases. That would include the application of a state s procedural laws, when they could impact the outcome of the case. GUARANTY TRUST CO. OF N.Y. v. YORK United States Supreme Court 326 U.S. 99 (1945) Mr. Justice Frankfurter delivered the [5-2] opinion of the Court. [York and others sued Guarantee Trust (petitioner) in] a class action brought in a federal court solely because of diversity of citizenship, based on an alleged breach of trust by Guaranty in that it failed to protect the interests of the noteholders [including York] and [that it] failed to disclose its self-interest [in a related transaction]. Petitioner moved for summary judgment, which was granted. On appeal, the Circuit Court of Appeals held that in a suit brought on the equity side of a federal district court that [trial] court is not required to apply the State statute of limitations that would govern like suits in the courts of a State where the federal court is sitting even though the exclusive basis of federal jurisdiction is diversity of citizenship. In view of the basis of the decision below, it is not for us to consider whether the New York statute would actually bar this suit were it brought in a State court. Our only concern is with the holding that the federal courts in a suit like this are not bound by local [procedural] law. We [are not addressing] considerations relevant in disposing of questions that arise when a federal court is adjudicating a claim based on a federal law. Our problem only touches

110 transactions for which rights and obligations are created by one of the States, and for the assertion of which, in case of diversity of the citizenship of the parties, Congress has made a federal court another available forum. From the beginning there has been a good deal of talk in the cases that federal equity is a separate legal system. And so it is, properly understood. The suits in equity of which the federal courts have had cognizance ever since 1789 constituted the body of law which had been transplanted to this country from the English Court of Chancery. But this system of equity derived its doctrines, as well as its powers, from its mode of giving relief. In giving federal courts cognizance of equity suits in cases of diversity jurisdiction, Congress never gave, nor did the federal courts ever claim, the power to deny substantive rights created by State law or to create substantive rights denied by State law. And so this case reduces itself to the narrow question whether, when no recovery could be had in a State court because the action is barred by the [state] statute of limitations, a federal court in equity can take cognizance of the suit because there is diversity of citizenship between the parties. Is the outlawry, according to State law, of a claim created by the States a matter of substantive rights [thus triggering Erie] to be respected by a federal court of equity when that court s jurisdiction is dependent on the fact that there is a State-created right, or is such statute of a mere remedial character, which a federal court may disregard [and thus proceed to hear the case, barred by the state statute of limitations, under the federal courts equity powers]. Here we are dealing with a right to recover derived not from the United States but from one of the States. When, because the plaintiff happens to be a nonresident, such a right is enforceable in a federal as well as in a State court, the forms and mode of enforcing the right may at times, naturally enough, vary because the two judicial systems are not identic[al]. But since a federal court adjudicating a state-created right solely because of the diversity of citizenship of the parties is for that purpose, in effect, only another court of the State, it cannot afford recovery if the right to recover is made unavailable by the State nor can it substantially affect the enforcement of the right as given by the State. And so the question is does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court? It is therefore immaterial whether statutes of limitation are characterized either as substantive or procedural in State court opinions. In essence, the intent of that decision [Erie] was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court. The nub of the policy is that for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away, should not lead to a substantially different result. And so, we have held that in diversity cases the federal courts must follow the law of the State as to burden of proof, as to conflict of laws, Klaxon Co. v. Stentor Co., 313 U.S. 487, [and] as to contributory negligence. Erie R. Co. v. Tompkins has been applied with an eye alert to avoiding disregard of State law in diversity cases in the federal courts. A policy so important to our federalism must be kept free from entanglements with analytical or terminological niceties.

111 Plainly enough, a statute that would completely bar recovery in a suit if brought in a State court bears on a [vital] State-created right. As to consequences that so intimately affect recovery or non-recovery a federal court in a diversity case should follow State law [and] the crucial consideration that if a plea of the statute of limitations would bar recovery in a State court, a federal court ought not to afford recovery. To make an exception to Erie R. Co. v. Tompkins on the equity side of a federal court [where federal judges would otherwise have the power to excuse delays in filing, based on the equities of the particular case] is to reject the considerations of policy which led to that decision. Judge Augustus N. Hand thus summarized below the fatal objection to such inroad upon Erie R. Co. v. Tompkins: In my opinion it would be a mischievous practice to disregard state statutes of limitation whenever federal courts think that the result of adopting them may be inequitable. Such procedure would promote the choice of United States rather than of state courts in order to gain the advantage of different laws. The main foundation for the criticism of Swift v. Tyson was that a litigant in cases where federal jurisdiction is based only on diverse citizenship may obtain a more favorable decision by suing in the United States courts. [citation omitted]. Diversity jurisdiction is founded on assurance to non-resident litigants of courts free from susceptibility to potential local bias. And so Congress afforded out-of-state litigants another tribunal, not another body of law. The operation of a double system of conflicting laws in the same State is plainly hostile to the reign of law. Certainly, the fortuitous circumstance of residence out of a State of one of the parties to a litigation ought not to give rise to a discrimination against others equally concerned but locally resident. The source of substantive rights enforced by a federal court under diversity jurisdiction, it cannot be said too often, is the law of the States. Whenever that law is authoritatively declared by a State, whether its voice be the legislature or its highest court, such law ought to govern in litigation founded on that law, whether the forum of application is a State or a federal court and whether the remedies be sought at law or may be had in equity. Dicta may be cited characterizing equity as an independent body of law. But [such] notions have been replaced by a sharper analysis of what federal courts do when they enforce rights that have no federal origin. The judgment is reversed and the case is remanded for proceedings not inconsistent with this opinion. So ordered. Reversed. Mr. Justice Rutledge. I dissent. [There is a] divide between the substantive law and the procedural or remedial law to be applied by the federal courts in diversity cases, a division sharpened but not wiped out by Erie R. Co. v. Tompkins. The large division between adjective law and substantive law still remains, to divide the power of Congress from that of the states and consequently to determine the power of the federal courts to apply federal law or state law in diversity matters.

112 A long tradition, in the states and here, as well as in the common law which antedated both state and federal law, has emphasized the remedial character of statutes of limitations, more especially in application to equity causes. The state of the forum is free to apply its own period of limitations, regardless of whether the state originating the right has barred suit upon it. Whether or not the action will be held to be barred depends therefore not upon the law of the state which creates the substantive right, but upon the law of the state where suit may be brought. This in turn will depend upon where it may be possible to secure service of process, and thus jurisdiction of the person of the defendant. It may be therefore that because of the plaintiff s inability to find the defendant in the jurisdiction which creates his substantive right, he will be foreclosed of remedy by the sheer necessity of going to the haven of refuge within which the defendant confines its presence for jurisdictional purposes. The law of the latter may bar the suit even though suit still would be allowed under the law of the state creating the substantive right. In my judgment this furnishes added reason for leaving any change [which would limit federal equity power], if one is to be made, to the judgment of Congress. The next step may well be to say that in applying the doctrine of laches a federal court must surrender its own judgment and attempt to find out what a state court sitting a block away would do with that notoriously amorphous doctrine. Notes and Questions: 1. What was the issue in York? Justice Rutledge s dissent refers to laches. What is that, and why is it important? 2. As York states, such law ought to govern in litigation founded on that law, whether the forum of application is a State or a federal court. That effectively means that state procedure would govern in addition to state substantive law per Erie in future diversity cases, so as to discourage any state-federal differences in diversity cases. 3. Erie did not decide which state s law should apply in an interstate context nor, whether a federal judge was free to choose between a state s internal substantive law, or its choice of law principles. That choice, if left open to a federal judge, could facilitate her arriving at a different decision than a state court judge. York refers (above) to Klaxton. Three years after Erie, Klaxton decided that a federal judge must apply the substantive law of the state in which s/he sits including the forum s choice of law rules, so as to promote uniformity of decision in state and federal diversity cases. Klaxton did not, however, address the issues raised in York.

113 BYRD V. BLUE RIDGE RURAL ELEC. CO-OP., INC. United States Supreme Court 356 U.S. 525 (1958) Mr. Justice Brennan delivered the [5-4] opinion of the Court. This case was brought in the District Court for the Western District of South Carolina. Jurisdiction was based on diversity of citizenship. The petitioner, a resident of North Carolina, sued respondent, a South Carolina corporation, for damages for injuries allegedly caused by the respondent s negligence. The respondent is in the business of selling electric power to subscribers in rural sections of South Carolina. The petitioner was employed as a lineman in the construction crew of a construction contractor. The contractor held a [sub]contract with the respondent. The petitioner was injured while connecting power lines to one of the new substations. One of respondent s [substantive] affirmative defenses was that under the South Carolina Workmen s Compensation Act, the petitioner because the work contracted to be done by his employer was work of the kind also done by the respondent s own construction and maintenance crews had the status of a statutory employee of the respondent and was therefore barred from

114 suing the respondent at law because obliged to accept statutory compensation benefits as the exclusive remedy for his injuries [italics added]. I. The Supreme Court of South Carolina has held that there is no particular formula by which to determine whether an owner is a statutory employer under s[ection] II. A question is also presented as to whether on remand [to the trial court] the factual issue is to be decided by the judge or by the jury. The respondent argues on the basis of the decision of the Supreme Court of South Carolina in Adams v. Davison-Paxon Co., that the issue of immunity should be decided by the judge and not by the jury. The South Carolina Supreme Court reversed, holding that it was for the judge and not the jury to decide on the evidence whether the owner was a statutory employer. The respondent argues that this state-court decision governs the present diversity case and divests the jury of its normal function to decide the disputed fact question of the respondent s immunity under s[ection] This is to contend that the federal court is bound to follow the state court s holding to secure uniform enforcement of the immunity created by the State. First. It was decided in Erie R. Co. v. Tompkins that the federal courts in diversity cases must respect the definition of state-created rights and obligations by the state courts.. Second. But cases following Erie have evinced a broader policy to the effect that the federal courts should conform as near as may be in the absence of other considerations to state rules even of form and mode where the state rules may bear substantially on the question whether the litigation would come out one way in the federal court and another way in the state court if the federal court failed to apply a particular local rule. E.g., Guaranty Trust Co. of New York v. York. Concededly the nature of the tribunal which tries issues may be important in the enforcement of the parcel of rights making up a cause of action or defense, and bear significantly upon achievement of uniform enforcement of the right. It may well be that in the instant personal-injury case the outcome would be substantially affected by whether the issue of immunity is decided by a judge or a jury. Therefore, were outcome the only consideration, a strong case might appear for saying that the federal court should follow the state practice. But there are affirmative countervailing considerations at work here. The federal system is an independent system for administering justice to litigants who properly invoke its jurisdiction. An essential characteristic of that system is the manner in which, in civil commonlaw actions, it distributes trial functions between judge and jury and, under the influence if not the command 10 of the Seventh Amendment, assigns the decisions of disputed questions of fact to the jury. The policy of uniform enforcement of state-created rights and obligations, see, e.g., Guaranty Trust Co. of New York v. York, cannot in every case exact compliance with a state rule not bound up with [substantive] rights and obligations which disrupts the federal system of allocating functions between judge and jury. Thus the inquiry here is whether the federal policy favoring jury decisions of disputed fact questions should yield to the state rule in the 10 Our conclusion makes unnecessary the consideration of and we intimate no view upon the constitutional question whether the right of jury trial protected in federal courts by the Seventh Amendment embraces the factual issue of statutory immunity when asserted, as here, as an affirmative defense in a common-law negligence action...

115 interest of furthering the objective that the litigation should not come out one way in the federal court and another way in the state court. We think that in the circumstances of this case the federal court should not follow the state rule. It cannot be gainsaid that there is a strong federal policy against allowing state rules to disrupt the judge-jury relationship in the federal courts. Third. We have discussed the problem upon the assumption that the outcome of the litigation may be substantially affected by whether the issue of immunity is decided by a judge or a jury. But clearly there is not present here the certainty that a different result would follow, or even the strong possibility that this would be the case. We do not think the likelihood of a different result is so strong as to require the federal practice of jury determination of disputed factual issues to yield to the state rule in the interest of uniformity of outcome. Reversed and remanded. Mr. Justice Whittaker concurring in part and dissenting in part. The Court, although premising its conclusion upon the assumption that the outcome of the litigation may be substantially affected by whether the issue of immunity is decided by a judge or a jury, holds that the issue is to be determined by a jury not by the judge. I cannot agree to this conclusion for the following reasons. It thus seems to be settled under the South Carolina Workmen s Compensation Law, and the decisions of the highest court of that State construing it, that the question whether exclusive jurisdiction, in cases like this, is vested in its Industrial Commission or in its courts of general jurisdiction is one for decision by the court, not by a jury. A Federal District Court sitting in South Carolina may not legally reach a substantially different result than would have been reached upon a trial of the same case in a State court a block away. Guaranty Trust Co. of New York v. York. It may well be that in the instant personal-injury case the outcome would be substantially affected by whether the issue of immunity is decided by a judge or a jury. And the Court premises its conclusion upon the assumption that the outcome of the litigation may be substantially affected by whether the issue of immunity is decided by a judge or a jury. The words substantive and procedural are mere conceptual labels and in no sense talismanic. To call a legal question by one or the other of those terms does not resolve the question otherwise than as a purely authoritarian performance. When a question though denominated procedural is nevertheless so substantive as materially to affect the result of a trial, federal courts, in enforcing state-created rights, are not free to disregard it, on the ground that it is procedural, for such would be to allow, upon mere nomenclature, a different result in a state court from that allowable in a federal court though both are, in effect, courts of the State and sitting side by side. Inasmuch as the law of South Carolina, as construed by its highest court, requires its courts not juries to determine whether jurisdiction over the subject matter of cases like this is vested in its Industrial Commission, and inasmuch as the Court s opinion concedes that in the instant personal-injury case the outcome would be substantially affected by whether the issue of immunity is decided by a judge or a jury, it follows that in this diversity case the jurisdictional issue must be determined by the judge not by the jury. Insofar as the Court holds that the question of jurisdiction should be determined by the jury, I think the Court

116 departs from its past decisions. I therefore respectfully dissent from part II of the opinion of the Court. Notes and Questions: 1. Practice pointer: Workers compensation (W.C.) is often the only remedy for an injured worker. When the local state W.C. law applies, it is a defense to attempted litigation in a judicial setting. As a practical matter, you should always consider whether a potential client was hurt while on the job. Another litigation defense is an arbitration clause, which can have a significant impact in a host of settings, including employment disputes, and suits against an increasing number of industry defendants. These are the kinds of matters that influence whether a lawyer will take a particular case, and whether non-judicial remedies must be pursued. The substantive issue in Byrd was whether the injured plaintiff who was not the defendant s fulltime employee was nevertheless an employee within the meaning of the South Carolina W.C. statute. This issue is reminiscent of whether International Shoe Company was an employer, within the meaning of Washington state s unemployment compensation laws. 2. What was the conflict in Byrd? The majority and dissent are split on whether it would substantially affect the outcome. One could argue, academically, whether the procedural statefederal difference is significant. The practical reality is that many practitioners believe this difference is huge. The majority nevertheless assumes the difference is not outcomedeterminative. If not, one might wonder why the case went all the way to the U.S. Supreme Court on this issue. 3. Did Byrd overrule York? Did the Court introduce a bright line rule, or a guideline, for future cases? See generally: [T]he right to a jury trial in the federal courts is to be determined as a matter of federal law in diversity as well as other actions. Although the substantive dimension of the claim asserted finds its source in state law in diversity cases, the characterization of that state-created claim as legal or equitable for purposes of whether a right to jury trial is indicated must be made by recourse to federal law. Elm Ridge Exploration Co., LLC v. Engle, 721 F.3d 1199, (10th Cir., 2013). HANNA v. PLUMER United States Supreme Court 380 U.S. 460 (1965) Mr. Chief Justice Warren delivered the opinion of the Court. The question to be decided is whether, in a civil action where the jurisdiction of the United States district court is based upon diversity of citizenship between the parties, service of process shall be made in the manner prescribed by state law or that set forth in Rule 4(d)(1) of the Federal Rules of Civil Procedure. On February 6, 1963, petitioner, a citizen of Ohio, filed her complaint in the District Court for the District of Massachusetts, claiming damages for personal injuries resulting from an automobile accident in South Carolina, allegedly caused by the negligence of one Louise Plumer Osgood, a Massachusetts citizen deceased at the time of the filing of the complaint. Respondent, Mrs. Osgood s executor and also a Massachusetts citizen, was named as defendant. On February 8 [just beyond one year from the accident], service was made by leaving copies of the summons and the complaint with respondent s wife at his residence, concededly in compliance with Rule 4(d)(1) [now 4(e)(2)(B)], which provides: Service shall be made as follows:

117 (1) Upon an individual other than an infant or an incompetent person, by delivering a copy of the summons and of the complaint to him personally or by leaving copies thereof at his dwelling house or usual place of abode with some person of suitable age and discretion then residing therein. Respondent filed his answer alleging, inter alia, that the action could not be maintained because it had been brought contrary to and in violation of the provisions of Massachusetts General Laws Section 9. That section provides: [A]n executor or administrator shall not be held to answer to an action by a creditor of the deceased which is not commenced within one year served by delivery in hand upon such executor or administrator or service thereof accepted by him or a notice stating the name of the estate, the name and address of the creditor, the amount of the claim and the court in which the action has been brought has been filed in the proper registry of probate. [T]he District Court granted respondent s motion for summary judgment [concluding] that the adequacy of the service was to be measured by s[ection] 9, with which, the court held, petitioner had not complied. On appeal, petitioner admitted noncompliance with s[ection] 9, but argued that Rule 4(d)(1) defines the method by which service of process is to be effected in [federal] diversity actions. The Court of Appeals 1 concluded that the conflict of state and federal rules was over a substantive rather than a procedural matter, and unanimously affirmed. Because of the threat to the goal of uniformity of federal procedure posed by the decision below, we granted certiorari. We conclude that the adoption of Rule 4(d)(1), designed to control service of process in 3 diversity actions, neither exceeded the congressional mandate embodied in the Rules Enabling Act nor transgressed constitutional bounds, and that the Rule is therefore the standard against which the District Court should have measured the adequacy of the service. Accordingly, we reverse the decision of the Court of Appeals. The Rules Enabling Act, 28 U.S.C. s[ection] 2072, provides, in pertinent part: The Supreme Court shall have the power to prescribe, by general rules, the forms of process, writs, pleadings, and motions, and the practice and procedure of the district courts of the United States in civil actions. Such rules shall not abridge, enlarge or modify any substantive right and shall preserve the right of trial by jury. 1 The purpose of this part of the [MA] statute is to insure that executors will receive actual notice of claims. Actual notice is of course also the goal of Rule 4(d)(1); however, the Federal Rule reflects a determination that this goal can be achieved by a method less cumbersome than that prescribed in s[ection] 9. In this case the goal seems to have been achieved; although the affidavit filed by respondent in the District Court asserts that he had not been served in hand nor had he accepted service, it does not allege lack of actual notice.. 3 These rules govern the procedure in the United States district courts in all suits of a civil nature whether cognizable as cases at law or in equity. Fed.Rules Civ.Proc. 1.

118 Under the cases construing the scope of the Enabling Act, Rule 4(d)(1) clearly passes muster. Prescribing the manner in which a defendant is to be notified that a suit has been instituted against him, it relates to the practice and procedure of the district courts. The test must be whether a rule really regulates procedure,-the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them... Thus were there no conflicting state procedure, Rule 4(d)(1) would clearly control. National Equipment Rental, Limited v. Szukhent. Respondent, by placing primary reliance on York, suggests that the Erie doctrine acts as a check on the Federal Rules of Civil Procedure, that despite the clear command of Rule 4(d)(1), Erie and its progeny demand the application of the Massachusetts rule. Reduced to essentials, the argument is: (1) Erie, as refined in York, demands that federal courts apply state law whenever application of federal law in its stead will alter the outcome of the case. (2) In this case, a determination that the Massachusetts service requirements obtain will result in immediate victory for respondent. If, on the other hand, it should be held that Rule 4(d)(1) is applicable, the litigation will continue, with possible victory for petitioner. (3) Therefore, Erie demands application of the Massachusetts rule. The syllogism possesses an appealing simplicity, but is for several reasons invalid. In the first place, it is doubtful that, even if there were no Federal Rule making it clear that in-hand service is not required in diversity actions, the Erie rule would have obligated the District Court to follow the Massachusetts procedure. Outcome-determination analysis was never intended to serve as a talisman. Byrd v. Blue Ridge Rural Elec. Cooperative. Indeed, the message of York itself is that choices between state and federal law are to be made not by application of any automatic, litmus paper criterion, but rather by reference to the policies underlying the Erie rule. The Erie rule is rooted in part in a realization that it would be unfair for the character of result of a litigation materially to differ because the suit had been brought in a federal court. The decision was also in part a reaction to the practice of forum-shopping which had grown up in response to the rule of Swift v. Tyson. That the York test was an attempt to effectuate these policies is demonstrated by the fact that the opinion framed the inquiry in terms of substantial variations between state and federal litigation. The outcome-determination test therefore cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws. The difference between the conclusion that the Massachusetts rule is applicable, and the conclusion that it is not, is of course at this point outcome-determinative in the sense that if we hold the state rule to apply, respondent prevails, whereas if we hold that Rule 4(d)(1) governs, the litigation will continue. But in this sense every procedural variation is outcomedeterminative. For example, having brought suit in a federal court, a plaintiff cannot then insist on the right to file subsequent pleadings in accord with the time limits applicable in state courts, even though enforcement of the federal timetable will, if he continues to insist that he must meet only the state time limit, result in determination of the controversy against him. So it is here.

119 There is, however, a more fundamental flaw in respondent s syllogism: the incorrect assumption that the rule of Erie R. Co. v. Tompkins constitutes the appropriate test of the validity and therefore the applicability of a Federal Rule of Civil Procedure. The Erie rule has never been invoked to void a Federal Rule. It is true that there have been cases where this Court has held applicable a state rule in the face of an argument that the situation was governed by one of the Federal Rules. But the holding of each such case was not that Erie commanded displacement of a Federal Rule by an inconsistent state rule, but rather that the scope of the Federal Rule was not as broad as the losing party urged, and therefore, there being no Federal Rule which covered the point in dispute, Erie commanded the enforcement of state law. (Here, of course, the clash is unavoidable; Rule 4(d)(1) says implicitly, but with unmistakable clarity that in-hand service is not required in federal courts.). When a situation is covered by one of the Federal Rules, the question facing the court is a far cry from the typical, relatively unguided Erie Choice: the court has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions. One of the shaping purposes of the Federal Rules is to bring about uniformity in the federal courts by getting away from local rules. This is especially true of matters which relate to the administration of legal proceedings, an area in which federal courts have traditionally exerted strong inherent power, completely aside from the powers Congress expressly conferred in the Rules. The purpose of the Erie doctrine was never to bottle up federal courts with [the terms] outcome-determinative and integral relations stoppers when there are affirmative countervailing (federal) considerations and when there is a Congressional mandate (the Rules) supported by constitutional authority. Erie and its offspring cast no doubt on the long-recognized power of Congress to prescribe housekeeping rules for federal courts even though some of those rules will inevitably differ from comparable state rules. Thus, though a court, in measuring a Federal Rule against the standards contained in the Enabling Act and the Constitution, need not wholly blind itself to the degree to which the Rule makes the character and result of the federal litigation stray from the course it would follow in state courts, it cannot be forgotten that the Erie rule, and the guidelines suggested in York, were created to serve another purpose altogether. To hold that a Federal Rule of Civil Procedure must cease to function whenever it alters the mode of enforcing state-created rights would be to disembowel either the Constitution s grant of power over federal procedure or Congress attempt to exercise that power in the Enabling Act. Rule 4(d)(1) is valid and controls the instant case. Reversed. Mr. Justice Harlan, concurring. It is unquestionably true that up to now Erie and the cases following it have not succeeded in articulating a workable doctrine governing choice of law in diversity actions. Erie was one of the modern cornerstones of our federalism, expressing policies that profoundly touch the allocation of judicial power between the state and federal systems. Erie recognized that there should not be two conflicting systems of law controlling the primary activity of citizens, for such alternative governing authority must necessarily give rise to a

120 debilitating uncertainty in the planning of everyday affairs. And it recognized that the scheme of our Constitution envisions an allocation of law-making functions between state and federal legislative processes which is undercut if the federal judiciary can make substantive law affecting state affairs beyond the bounds of congressional legislative powers in this regard. Thus, in diversity cases Erie commands that it be the state law governing primary private activity which prevails. The Court is quite right in stating that the outcome-determinative test of Guaranty Trust Co. of New York v. York, if taken literally, proves too much, for any rule, no matter how clearly procedural, can affect the outcome of litigation if it is not obeyed. In turning from the outcome test of York back to the unadorned forum-shopping rationale of Erie, however, the Court falls prey to like oversimplification, for a simple forum-shopping rule also proves too much; litigants often choose a federal forum merely to obtain what they consider the advantages of the Federal Rules of Civil Procedure or to try their cases before a supposedly more favorable judge. To my mind the proper line of approach in determining whether to apply a state or a federal rule, whether substantive or procedural, is to stay close to basic principles by inquiring if the choice of rule would substantially affect those primary decisions respecting human conduct which our constitutional system leaves to state regulation. If so, Erie and the Constitution require that the state rule prevail, even in the face of a conflicting federal rule. The Court weakens, if indeed it does not submerge, this basic principle by finding, in effect, a grant of substantive legislative power in the constitutional provision for a federal court system and through it, setting up the Federal Rules as a body of law inviolate. So long as a reasonable man could characterize any duly adopted federal rule as procedural, the Court, unless I misapprehend what is said, would have it apply no matter how seriously it frustrated a State s substantive regulation of the primary conduct and affairs of its citizens. Since the members of the Advisory Committee, the Judicial Conference, and this Court who formulated the Federal Rules are presumably reasonable men, it follows that the integrity of the Federal Rules is absolute. Whereas the unadulterated outcome and forum-shopping tests may err too far toward honoring state rules, I submit that the Court s arguably procedural, ergo constitutional test moves too fast and far in the other direction. Notes and Questions: 1. Per the majority: The outcome-determination test therefore cannot be read without reference to discouragement of forum-shopping and avoidance of inequitable administration of the laws. Given the result, that Rule 4 governs in all cases to which it clearly applies, does that not promote forum shopping? 2. Per Justice Harlan s concurring opinion: It is unquestionably true that up to now Erie and the cases following it have not succeeded in articulating a workable doctrine governing choice of law in diversity actions. Did Hanna succeed, where all the others failed?

121 ASHCROFT v. IQBAL United States Supreme Court 556 U.S. 662 (2009) Professor s Note: The following excerpt (used with permission) regarding Iqbal precedent appears in Levine, Slomanson and Shapell, Cases and Materials on California Civil Procedure, 4th edition (Thomson-West, 2011), p Iqbal starts on p. 3 below: (b) Notice Versus Fact Pleading Introduction. In your federal procedure course, you used the term claim to refer to the plaintiff s charging allegations against the defendant. The deceptively simple federal rules formula provides that a claim for relief must contain * * * a short and plain statement of the claim showing that the pleader is entitled to relief. FRCP 8(a)(2). The California counterpart to claim is cause of action. A pleading in state court must contain * * * [a] statement of the facts constituting the cause of action, in ordinary and concise language. CCP (a)(1). One may explore the technical distinctions between these two terms in the comprehensive hornbooks. See, e.g., Jack H. Friedenthal, Mary Kay Kane & Arthur R. Miller, Civil Procedure (4th ed.2005). The following materials provide the essentials:

122 Pleading in Federal Court. For nearly 50 years, the Supreme Court of the United States consistently characterized the federal pleading standard as follows: [A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 46 47, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). For example, a 2002 unanimous decision reminded the lower federal courts that imposing heightened pleading requirements: conflicts with Federal Rule of Civil Procedure 8(a)(2) * * *. Such a statement must simply give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests. This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 998, 152 L.Ed.2d 1 (2002). The 50 year reign of this generous federal approach to pleading appears to have ended. Justice Souter s majority opinion in a 2007 civil antitrust conspiracy case proclaimed the retirement of part of Conley s articulation of the federal pleading standard. The Court announced that Conley s no set of facts language was best forgotten as an incomplete, negative gloss on an accepted pleading standard. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 562, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007). The Court s alternative articulation was that: [w]hile a complaint * * * does not need detailed factual allegations, a plaintiff s obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do * * *. Factual allegations must be enough to raise a right to relief above the speculative level * * * [and] the pleading must contain something more... than... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action. * * * While, for most types of cases, the Federal Rules eliminated the cumbersome requirement that a claimant set out in detail the facts upon which he bases his claim, Rule 8(a)(2) still requires a showing, rather than a blanket assertion, of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only fair notice of the nature of the claim, but also grounds on which the claim rests. Rule 8(a) contemplate[s] the statement of circumstances, occurrences, and events in support of the claim presented and does not authorize a pleader's bare averment that he wants relief and is entitled to it. Id. at & n.3. In sum, the Court demanded that plaintiffs use nonconclusory allegations in their complaints while crossing the line between possibility and plausibility of entitle[ment] to relief. 550 U.S. at 557. In May 2009, the U.S. Supreme Court confirmed that Bell Atlantic applies to all federal cases governed by FRCP 8(a)(2). [O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Ashcroft v. Iqbal, 556 U.S.,, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). It is unclear to what degree Bell Atlantic and Iqbal will actually transform

123 federal pleading. Cases and scholars still refer to the notice pleading standard, albeit with the recognition that courts now must implement the new plausibility component. Although notice pleading was always more a term of art than a precise description of actual practice in federal court, no term such as plausibility pleading has supplanted it. See Adam Steinman, The Pleading Problem, 62 Stan.L.Rev. 1293, 1328 (2010) (contending the new term should be plain pleading ). Bills proposed in Congress would overrule Iqbal s seemingly stringent pleading standard by returning to the more liberal Conley interpretation, but no bill has become law to date. Lower courts may try to limit the reach of the new standard in certain circumstances. See, e.g., Hebbe v. Pliler, 611 F.3d 1202 (9th Cir.2010) (Iqbal does not apply to pro se complaints). The ultimate impact of Bell Atlantic and Iqbal will not be known for some time. Metropolitan Detention Center, Brooklyn New York, where Javad Iqbal was placed in pretrial detention. Source: < Reprinted with permission of The Federal Bureau of Prisons Justice Kennedy delivered the [5-4] opinion of the Court. Respondent Javaid Iqbal is a citizen of Pakistan and a Muslim. In the wake of the September 11, 2001, terrorist attacks he was arrested in the United States on criminal charges and detained by federal officials. Respondent claims he was deprived of various constitutional protections while in federal custody. To redress the alleged deprivations, respondent filed a complaint against numerous federal officials, including John Ashcroft, the former Attorney General of the United States, and Robert Mueller, the Director of the Federal Bureau of Investigation (FBI). Ashcroft and Mueller are the [only] petitioners in the case now before us. As to these two petitioners, the complaint alleges that they adopted an unconstitutional policy that subjected respondent to harsh conditions of confinement on account of his race, religion, or national origin. In the District Court petitioners raised the defense of qualified immunity and moved to dismiss the suit, contending the complaint was not sufficient to state a claim against them. The District Court denied the motion to dismiss, concluding the complaint was sufficient to state a claim despite petitioners official status at the times in question. Petitioners brought an interlocutory appeal in the Court of Appeals for the Second Circuit. The court * * * affirmed the District Court s decision. Respondent s account of his prison ordeal could, if proved, demonstrate unconstitutional misconduct by some governmental actors. But the allegations and pleadings with respect to these actors are not before us here. This case instead turns on a narrower

124 question: Did respondent, as the plaintiff in the District Court, plead factual matter that, if taken as true, states a claim that petitioners [Ashcroft and Mueller personally] deprived him of his clearly established constitutional rights. We hold respondent s pleadings are insufficient. I Following the 2001 attacks, the FBI and other entities within the Department of Justice * * * [ ] questioned more than 1,000 people with suspected links to the attacks in particular or to terrorism in general. Of those individuals * * * a 184-member subset of that group was deemed to be of high interest to the investigation. The high-interest detainees were held under restrictive conditions designed to prevent them from communicating with the general prison population or the outside world. Respondent was one of the[se] detainees. According to his complaint, in November 2001 agents of the FBI and Immigration and Naturalization Service arrested him on charges of fraud in relation to identification documents and conspiracy to defraud the United States. Pending trial for those crimes, respondent was housed at the Metropolitan Detention Center (MDC) in Brooklyn, New York. * * * [He] was placed in a section of the MDC known as the Administrative Maximum Special Housing Unit (ADMAX SHU). As the facility s name indicates, the ADMAX SHU incorporates the maximum security conditions allowable under Federal Bureau of Prison regulations. ADMAX SHU detainees were kept in lockdown 23 hours a day, spending the remaining hour outside their cells in handcuffs and leg irons accompanied by a four-officer escort. Respondent pleaded guilty to the criminal charges, served a term of imprisonment, and was removed to his native Pakistan. He then filed a Bivens action in the United States District Court for the Eastern District of New York against 34 current and former federal officials and 19 John Doe federal corrections officers. See Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971). The defendants range from the correctional officers who had day-to-day contact with respondent during the term of his confinement, to the wardens of the MDC facility, all the way to petitioners officials who were at the highest level of the federal law enforcement hierarchy. The 21-cause-of-action complaint does not challenge respondent s arrest or his confinement in the MDC s general prison population. Rather, it concentrates on his treatment while confined to the ADMAX SHU. The complaint sets forth various claims against defendants who are not before us [italics added]. For instance, the complaint alleges that respondent s jailors kicked him in the stomach, punched him in the face, and dragged him across his cell without justification; subjected him to serial strip and bodycavity searches when he posed no safety risk to himself or others; and refused to let him and other Muslims pray because there would be [n]o prayers for terrorists. The allegations against petitioners [Ashcraft and Mueller] are the only ones relevant here. The complaint contends that petitioners designated respondent a person of high interest on account of his race, religion, or national origin, in contravention of the First and Fifth Amendments to the Constitution. The complaint alleges that the [FBI], under the direction of Defendant MUELLER, arrested and detained thousands of Arab Muslim men... as part of its investigation of the events of September 11. It further alleges that [t]he policy of holding post-september-11th detainees in highly restrictive conditions of confinement until they were cleared by the FBI was approved by Defendants ASHCROFT and MUELLER in discussions in the weeks after September 11, Lastly, the complaint posits that petitioners each knew of, condoned, and willfully and maliciously agreed to subject respondent to harsh conditions of confinement as a matter of policy, solely on account of [his] religion, race, and/or national origin and for no legitimate penological interest. The pleading names Ashcroft as the

125 principal architect of the policy, and identifies Mueller as instrumental in [its] adoption, promulgation, and implementation. * * *.... III * * * [W]e begin by taking note of the elements a plaintiff must plead to state a claim of unconstitutional discrimination against officials entitled to assert the defense of qualified immunity. * * * Based on the rules our precedents establish, respondent correctly concedes that Government officials may not be held liable for the unconstitutional conduct of their subordinates under a theory of respondeat superior. ( [I]t is undisputed that supervisory Bivens liability cannot be established solely on a theory of respondeat superior. ) * * * Because vicarious liability is inapplicable to Bivens and 1983 [civil rights] suits, a plaintiff must plead that each Government-official defendant, through the official s own individual actions, has violated the Constitution. * * * Where the claim is invidious discrimination in contravention of the First and Fifth Amendments, our decisions make clear that the plaintiff must plead and prove that the defendant acted with discriminatory purpose. *** It follows that, to state a claim based on a violation of a clearly established right, respondent must plead sufficient factual matter to show that petitioners adopted and implemented the detention policies at issue not for a neutral, investigative reason but for the purpose of discriminating on account of race, religion, or national origin. * * * Absent [unchangeable] vicarious liability, each Government official, his or her title notwithstanding, is only liable for his or her own misconduct. * * * IV A We turn to respondent s complaint. Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief. As the Court held in Twombly, the pleading standard Rule 8 announces does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertion[s] devoid of further factual enhancement. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief. Two working principles underlie our [prior] decision[s] * * *. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. * * * Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will,

126 as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not show[n] that the pleader is entitled to relief. In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. * * * B * * * [W]e conclude that respondent s complaint has not nudged [his] claims of invidious discrimination across the line from conceivable to plausible. We begin our analysis by identifying the allegations in the complaint that are not entitled to the assumption of truth. Respondent pleads that petitioners knew of, condoned, and willfully and maliciously agreed to subject [him] to harsh conditions of confinement as a matter of policy, solely on account of [his] religion, race, and/or national origin and for no legitimate penological interest. The complaint alleges that Ashcroft was the principal architect of this invidious policy, and that Mueller was instrumental in adopting and executing it. These bare assertions * * * amount to nothing more than a formulaic recitation of the elements of a constitutional discrimination claim, namely, that petitioners adopted a policy [intentionally] because of, not merely in spite of, its adverse effects upon an identifiable group. As such, the allegations are conclusory and not entitled to be assumed true. To be clear, we do not reject these bald allegations on the ground that they are unrealistic or nonsensical. * * * It is the conclusory nature of respondent s allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth. We next consider the factual allegations in respondent s complaint to determine if they plausibly suggest an entitlement to relief. The complaint alleges that the [FBI], under the direction of Defendant MUELLER, arrested and detained thousands of Arab Muslim men... as part of its investigation of the events of September 11. It further claims that [t]he policy of holding post-september-11th detainees in highly restrictive conditions of confinement until they were cleared by the FBI was approved by Defendants ASHCROFT and MUELLER in discussions in the weeks after September 11, Taken as true, these allegations are consistent with petitioners purposefully designating detainees of high interest because of their race, religion, or national origin. But given more likely explanations, they do not plausibly establish this purpose. The September 11 attacks were perpetrated by 19 Arab Muslim hijackers who counted themselves members in good standing of al Qaeda, an Islamic fundamentalist group. Al Qaeda was headed by another Arab Muslim Osama bin Laden and composed in large part of his Arab Muslim disciples. It should come as no surprise that a legitimate policy directing law enforcement to arrest and detain individuals because of their suspected link to the attacks would produce a disparate, incidental impact on Arab Muslims, even though the purpose of the policy was to target neither Arabs nor Muslims. On the facts respondent alleges the arrests Mueller oversaw were likely lawful and justified by his nondiscriminatory intent to detain aliens who were illegally present in

127 the United States and who had potential connections to those who committed terrorist acts. As between that obvious alternative explanation for the arrests, and the purposeful, invidious discrimination respondent asks us to infer, discrimination is not a plausible conclusion. But even if the complaint s well-pleaded facts give rise to a plausible inference that respondent s arrest was the result of unconstitutional discrimination, that inference alone would not entitle respondent to relief. It is important to recall that respondent s complaint challenges neither the constitutionality of his arrest nor his initial detention in the MDC. Respondent s constitutional claims against petitioners [Ashcroft and Mueller] rest solely on their ostensible policy of holding post-september-11th detainees in the ADMAX SHU once they were categorized as of high interest. To prevail on that theory, the complaint must contain facts plausibly showing that petitioners purposefully adopted a policy of classifying post-september-11 detainees as of high interest because of their race, religion, or national origin. This the complaint fails to do. Though respondent alleges that various other defendants, who are not before us, may have labeled him a person of of high interest for impermissible reasons, his only factual allegation against petitioners accuses them of adopting a policy approving restrictive conditions of confinement for post- September-11 detainees until they were cleared by the FBI. Accepting the truth of that allegation, the complaint does not show, or even intimate, that petitioners purposefully housed detainees in the ADMAX SHU due to their race, religion, or national origin [italics added]. All it plausibly suggests is that the Nation s top law enforcement officers, in the aftermath of a devastating terrorist attack, sought to keep suspected terrorists in the most secure conditions available until the suspects could be cleared of terrorist activity. Respondent does not argue, nor can he, that such a motive would violate petitioners constitutional obligations. He would need to allege more by way of factual content to nudg[e] his claim of purposeful discrimination across the line from conceivable to plausible. * * * [R]espondent s complaint does not contain any factual allegation sufficient to plausibly suggest petitioners discriminatory state of mind. His pleadings thus do not meet the standard necessary to comply with Rule 8. It is important to note, however, that we express no opinion concerning the sufficiency of respondent s complaint against the defendants who are not before us. Respondent s account of his prison ordeal alleges serious official misconduct that we need not address here. Our decision is limited to the determination that respondent s complaint does not entitle him to relief from petitioners [Ashcroft and Mueller]. Respondent offers three arguments that bear on our disposition of his case, but none is persuasive. * * * 3 Respondent finally maintains that the Federal Rules expressly allow him to allege petitioners discriminatory intent generally, which he equates with a conclusory allegation (citing Fed. Rule Civ. Proc. 9[ s inapplicable heightened pleading requirement]). It follows, respondent says, that his complaint is sufficiently well pleaded because it claims that petitioners discriminated against him on account of [his] religion, race, and/or national origin and for no legitimate penological interest. Were we required to accept this allegation as true, respondent s complaint would survive petitioners' motion to dismiss. But the Federal Rules do not require courts to credit a complaint s conclusory statements without reference to its factual context. * * * V

128 We hold that respondent s complaint fails to plead sufficient facts to state a claim for purposeful and unlawful discrimination against petitioners. The Court of Appeals should decide in the first instance whether to remand to the District Court so that respondent can seek leave to amend his deficient complaint. * * *.. Justice Souter, w ith whom Justice Stevens, Justice Ginsburg, and Justice Breyer join, dissenting.... * * * I A * * * The District Court denied Ashcroft and Mueller s motion to dismiss Iqbal s discrimination claim, and the Court of Appeals affirmed. Ashcroft and Mueller then asked this Court to grant certiorari on two questions: 1. Whether a conclusory allegation that a cabinet-level officer or other high-ranking official knew of, condoned, or agreed to subject a plaintiff to allegedly unconstitutional acts purportedly committed by subordinate officials is sufficient to state individual-capacity claims against those officials under Bivens. * * * In the first question, Ashcroft and Mueller did not ask whether a cabinet-level officer or other high-ranking official who knew of, condoned, or agreed to subject a plaintiff to allegedly unconstitutional acts committed by subordinate officials was subject to liability under Bivens. In fact, they conceded in their petition for certiorari that they would be liable if they had actual knowledge of discrimination by their subordinates and exhibited deliberate indifference to that discrimination. Instead, they asked the Court to address whether Iqbal s allegations against them (which they call conclusory) were sufficient to satisfy Rule 8(a)(2) * * *. * * * First, Ashcroft and Mueller have, as noted, made the critical concession that a supervisor s knowledge of a subordinate s unconstitutional conduct and deliberate indifference to that conduct are grounds for Bivens liability. Iqbal seeks to recover on a theory that Ashcroft and Mueller at least knowingly acquiesced (and maybe more than acquiesced) in the discriminatory acts of their subordinates; if he can show this, he will satisfy Ashcroft and Mueller s own test for supervisory liability. We do not normally override a party s concession, [because our precedent establishes that] ( [i]t would be inappropriate for us to [e]xamine in this case, without the benefit of the parties briefing, an issue the Government had conceded), and doing so is especially inappropriate when, as here, the issue is unnecessary to decide the case. I would therefore accept Ashcroft and Mueller s concession for purposes of this case and proceed to consider whether the complaint alleges at least knowledge and deliberate indifference. * * * II Given petitioners concession, the complaint satisfies Rule 8(a)(2). Ashcroft and Mueller admit they are liable for their subordinates conduct if they had actual knowledge of the assertedly discriminatory nature of the classification of suspects as being of high interest and they were deliberately indifferent to that discrimination. *** The complaint thus alleges, at a bare minimum, that Ashcroft and Mueller knew of and condoned the discriminatory policy their subordinates carried out. Actually, the complaint

129 goes further in alleging that Ashcroft and Muller affirmatively acted to create the discriminatory detention policy. If these factual allegations are true, Ashcroft and Mueller were, at the very least, aware of the discriminatory policy being implemented and deliberately indifferent to it. Ashcroft and Mueller argue that these allegations fail to satisfy the plausibility standard * * *. They contend that Iqbal s claims are implausible because such high-ranking officials tend not to be personally involved in the specific actions of lower-level officers down the bureaucratic chain of command. * * * We made it clear, on the contrary, that a court must take the allegations as true, no matter how skeptical the court may be. The sole exception to this rule lies with allegations that are sufficiently fantastic to defy reality as we know it: claims about little green men, or the plaintiff s recent trip to Pluto, or experiences in time travel. That is not what we have here. * * * The complaint alleges that FBI officials discriminated against Iqbal solely on account of his race, religion, and national origin, and it alleges the knowledge and deliberate indifference that, by Ashcroft and Mueller s own admission, are sufficient to make them liable for the illegal action. Iqbal s complaint therefore contains enough facts to state a claim to relief that is plausible on its face. * * * But these allegations do not stand alone as the only significant, nonconclusory statements in the complaint, for the complaint contains many allegations linking Ashcroft and Mueller to the discriminatory practices of their subordinates. * * * The * * * fallacy of the majority s position, however, lies in looking at the relevant assertions in isolation. The complaint contains specific allegations that, in the aftermath of the September 11 attacks, the Chief of the FBI s International Terrorism Operations Section and the Assistant Special Agent in Charge for the FBI s New York Field Office implemented a policy that discriminated against Arab Muslim men, including Iqbal, solely on account of their race, religion, or national origin. Viewed in light of these subsidiary allegations, the allegations singled out by the majority as conclusory are no such thing. Iqbal s claim is not that Ashcroft and Mueller knew of, condoned, and willfully and maliciously agreed to subject him to a discriminatory practice that is left undefined; his allegation is that they knew of, condoned, and willfully and maliciously agreed to subject him to a particular, discrete, discriminatory policy detailed in the complaint. Iqbal does not say merely that Ashcroft was the architect of some amorphous discrimination, or that Mueller was instrumental in an ill-defined constitutional violation; he alleges that they helped to create the discriminatory policy he has described. Taking the complaint as a whole, it gives Ashcroft and Mueller fair notice of what the... claim is and the grounds upon which it rests. * * * Notes and Questions: 1. What is the federal pleading standard under the FRCP, as interpreted by the U.S. Supreme Court in Iqbal? 2. What is the federal pleading relevance of plausibility, probability, and possibility? As stated in a 2013 federal opinion, citing a leading law review analysis: The [Supreme] Court s criticism of Conley has caused a great deal of confusion... [in] determining exactly how the plausibility standard changes previous Rule 8(a)(2) pleading law... Plausible corresponds to a probability greater than possible. Exactly how much greater is

130 uncertain. Evergreen Partnering Group, Inc. v. Pactiv Corp., 720 F.3d 33 (1st Cir. 2013). 3. The majority opinion describes Iqbal s complaint as extravagantly fanciful. Do you agree? As perhaps clarified in Southfield Ltd. Partnership v. Flagstar Bank, F.S., 727 F.3d 502, 504 (6th Cir., 2013): Javaid Iqbal... claimed that... federal officials instituted a [post-9 11] policy of detaining Arab Muslim men on account of their religion, race and national origin.... Iqbal could not proceed to discovery simply by making bare allegations that the defendants violated the law.... [H]e had to identify facts that plausibly supported his legal conclusion. He tried to discharge this burden by pointing to the number of Arab Muslim men thousands confined after September 11. But... the Court in Iqbal perceived an obvious alternative explanation for the pattern: The September 11 attacks were perpetrated by 19 Arab Muslim hijackers... [so it] should come as no surprise that a legitimate policy directing law enforcement to arrest and detain individuals because of their suspected link to the attacks would produce a disparate, incidental impact on Arab Muslims.... [ ] [A] plaintiff cannot overcome a Rule 12(b)(6) motion to dismiss simply by referring to conclusory allegations in the complaint that the defendant violated the law. Instead, the sufficiency of a complaint turns on its factual content, requiring the plaintiff to plead enough factual matter to raise a plausible inference of wrongdoing. The plausibility of an inference depends on a host of considerations, including common sense and the strength of competing explanations for the defendant's conduct [italics added]. 4. Should FRCP 8 be revised in the aftermath of Iqbal? If so, how should FRCP 8(a)(2) be reworded? Some details regarding the pending Notice Pleading Restoration Act of 2009 legislation by some congressional leaders hoping to overrule Iqbal (and restore Conley) is accessible by clicking here. 5. An April 2009 analysis by the American College of Trial Lawyers and Institute for the Advancement of the American Legal System urges the rule makers to adopt state fact pleading (and very limited discovery in both federal and state courts). Its Principle 2 provides that: Notice pleading should be replaced by fact-based pleading. Pleadings should set forth with particularity all of the material facts that are known to the pleading party to establish the pleading party s claims or affirmative defenses. Notice pleading should be replaced by fact-based pleading. Pleadings should set forth with particularity all of the material facts that are known to the pleading party to establish the pleading party s claims or affirmative defenses. For the complete report, click here.

131 GARCIA v. HILTON HOTELS INTERNATIONAL United States District Court, Puerto Rico 97 F.Supp. 5 (1951) Roberts, District Judge. The action here is for damages for defamation brought by plaintiff, a citizen and resident of Puerto Rico, against defendant, a Delaware corporation, in the District Court of Puerto Rico and removed to this Court by defendant corporation. The complaint sets forth two causes of action and the paragraphs considered herein are identical in each cause. Defendant has moved to dismiss the complaint for failure to state a claim upon which relief can be granted and, in the alternative, to strike Paragraphs 5, 6, 7 and 8 and for a more definite statement.

132 The San Juan Caribe Hilton (where Armando Garcia was employed) Source: < Reprinted with Permission of Coleccion Pin In support of its motion to dismiss, defendant contends that no publication of the alleged slanderous statement is alleged and that the complaint, therefore, fails to state a cause of action. This contention will be considered first with respect to Paragraph 4 of the complaint, which reads as follows: [T]he plaintiff was violently discharged by the defendant, being falsely and slanderously accused of being engaged in bringing women from outside the Hotel and introducing them into the rooms thereof for the purpose of developing prostitution in the Hotel and that such women brought by him from outside the Hotel and introduced therein carried on acts of prostitution in said Hotel. The motion to dismiss contemplated in Fed. Rules Civ. Proc. rule 12(b)(6), is not concerned with failure of the pleader to state a cause of action, but only with failure to state a claim upon which relief can be granted. There is an obvious distinction between stating a cause of action and stating a claim upon which relief can be granted. It is clear from the terms of rule 8(a) that a pleader is required to set forth only a short plain statement of the claim showing that the pleader is entitled to relief, and there is no pleading requirement that the pleader state a cause of action upon peril of having his complaint dismissed.... The controlling question here, with respect to the motion to dismiss, is whether the allegations of Paragraph 4 of the complaint, state a claim upon which relief can be granted. An examination of the authorities is persuasive that it does. It is settled, with respect to motions to dismiss for insufficiency of statement, that the complaint is to be construed in the light most favorable to the plaintiff with all doubts resolved in his favor and the allegations accepted as

133 true. If, when a complaint is so considered, it reasonably may be anticipated that plaintiff, on the basis of what has been alleged, could make out a case at trial entitling him to some relief, the complaint should not be dismissed.... [T]he courts have ruled time and again that a motion to dismiss for failure to state a claim should not be granted unless it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of his claim. If, within the framework of the complaint, evidence may be introduced which will sustain a grant of relief to the plaintiff, the complaint is sufficient. Further, it has been a long recognized and generally accepted policy of the courts to look with disfavor upon the practice of terminating litigation, believed to be without merit, by dismissing the complaint for insufficiency of statement.... To warrant such dismissal, it should appear from the allegations that a cause of action does not exist, rather than that a cause of action has been defectively stated.... That rule of procedure should be followed which will be most likely to result in justice between the parties, and, generally speaking, that result is more likely to be attained by leaving the merits of the cause to be disposed of after answer and the submission of proof, than by attempting to deal with the merits on motion to dismiss the bill. In the instant case, it is true that Paragraph 4, of the complaint, fails to state, in so many words, that there was a publication of the alleged slanderous utterance and, to that extent, the cause of action is defectively stated. However, it does not follow that the allegations do not state a claim upon which relief can be granted. It is alleged that plaintiff was violently discharged and was falsely and slanderously accused of procuring for prostitution. While in a technical sense, this language states a conclusion, it is clear that plaintiff used it intending to charge publication of the slanderous utterance and it would be unrealistic for defendant to claim that it does not so understand the allegations. Clearly, under such allegations it reasonably may be conceived that plaintiff, upon trial, could adduce evidence tending to prove a publication. If the provisions of rule 8(a) are not to be negatived by recourse to rule 12(b), the statement in Paragraph 4 of the complaint must be deemed sufficient. In further support of its motion to dismiss, defendant contends that the alleged slanderous utterance was conditionally privileged.... As has been noted, on motion to dismiss for failure to state a claim, complaint must be construed in the light most favorable to plaintiff with all doubts resolved in his favor and the allegation taken as true.... The conclusion to deny defendant s motion to dismiss requires that consideration be given its alternative motion to strike Paragraphs 5, 6, 7 and 8 of the complaint. It is alleged in these paragraphs, in substance, that upon being discharged, plaintiff made claim with the Labor Department of Puerto Rico for severance pay and overtime as is provided for by law; that during a hearing on such claim held by the Labor Department, defendant, falsely and slanderously, repeated its charge that plaintiff had been engaged in procuring for prostitution; and, that, after said hearing defendant had compromised plaintiff s claim for severance pay and overtime. As respects defendant s motion to strike, the controlling allegations are contained in Paragraph 7 of this complaint. Section 4 of An Act Authorizing Civil Actions to recover Damages for Libel and Slander... provides in part as follows: Section 4. A publication or communication shall not be held or deemed malicious when made in any legislative or judicial proceeding or in any other proceeding authorized by law...

134 The effect of the above quoted portions of the statute is to confer absolute privilege upon any communication made in any of the proceedings contemplated therein. If the hearing held by the Labor Department on plaintiff s claim for severance pay and overtime, referred to in Paragraph 7 of the complaint, is a proceeding within the meaning of the phrase or any other proceeding authorized by law as used in said Section 4 of the Act of February 19, 1902, the utterance was absolutely privileged and such privilege constitutes a conclusive defense in an action based on that utterance. It appears... that when hearings are held pursuant to its terms it is necessary, if those purposes are to be effectuated, that those called upon to give evidence therein must be protected against liability, civil or criminal, for communications given in evidence at such hearings. And this without regard for the motives of the witness or the truth or falsity of his statements. For otherwise, the giving of full, free and honest testimony, essential to the enforcement of such laws, will be discouraged. Therefore, communications made by witnesses in the course of such hearings, should be absolutely privileged in the same manner and to like extent as those made in the course of a judicial proceeding. Clearly, then, the utterance of the defendant made during the Labor Department hearing referred to in Paragraph 7 of the complaint was absolutely privileged and that Paragraph 7 is, therefore, redundant in that it fails to state a claim upon which relief can be granted. It appears then, that defendant s motion to strike Paragraphs 5, 6, 7 and 8 should be granted.... [D]efendant s motion for a more definite statement need be considered only with respect to the allegations of Paragraph 4 of the complaint.... But when, in an action for slander, the complaint fails to set out substantially the utterance alleged to have been slanderously made or the facts relied upon to establish a publication of such utterance, such omission constitutes vagueness such as is a ground for granting a motion for more definite statement within the contemplation of rule 12(e). Obviously, when such material allegations are insufficient, it would be unreasonable to require the defendant to prepare a responsive pleading without a more definite statement of the pertinent facts. Considering the allegations of Paragraph 4 of the complaint,... the allegations suffer from vagueness with respect to the utterance alleged to have been slanderously made and the facts relied upon to establish a publication of the utterance. It is concluded that the defendant here is entitled to a more definite statement setting forth substantially the words alleged to have been slanderously uttered and the facts relied upon to establish a publication thereof. Defendant s motion to dismiss the complaint for failure to state a claim upon which relief can be granted is denied. Defendant's motion to strike Paragraphs 5, 6, 7 and 8 of the complaint is granted. Defendant's motion for a more definite statement with respect to the matters prescribed in this opinion, is granted.... Notes and Questions: 1. Go to the course webpage. Click Problems_Hypos_Charts webpage. Then click Garcia Motions. 2. How does the Motion for a More Definite Statement differ from the Motion to Dismiss for Failure to State a Claim? How does the Motion to Strike differ from the Motion to Dismiss for Failure to State a Claim?

135 3. The plaintiff was able to state his claim for defamation at the hotel, and avoid a dismissal. When the same type of claim was restated, regarding the Labor Department hearings, the claim was stricken. What explains the difference? ROSS v. A. H. ROBINS CO., INC. United States Court of Appeals, Second Circuit 607 F.2d 545 (1979) Mishler, District Judge: This is an appeal from an order dismissing plaintiffs proposed class action. Plaintiffs, Kalman and Anita Ross, allege that on July 23, 1973 they purchased 100 shares of common stock of the defendant company, A. H. Robins Company, Inc., ( Robins ), a manufacturer and distributor of pharmaceutical products. They instituted this action pursuant to s[ection] 10(b) of the Securities Exchange Act of 1934, [and] Rule 10b-5, promulgated thereunder, and common law principles, on behalf of all persons who purchased such stock from April 1972 through in or about July, and who still owned shares of Robins at the end of said period and who have suffered damages as a result thereof. In addition to Robins, also named as defendants are seven

136 individuals who are identified as directors and/or officers of Robins. The gravamen of the complaint is that the defendants manipulated and artificially inflated the market price of Robins' common stock by disseminating false and misleading information about the effectiveness and safety of the Dalkon Shield, an interuterine birth control device which it manufactured, and by failing to reveal information which indicated that the shield was less effective and more dangerous than the company s earlier public statements had indicated. The district court determined that: (1) the plaintiffs [ ] exclusive remedy was under the Exchange Act; and (2) the plaintiffs had failed to plead with the degree of specificity required in fraud actions by Rule 9(b) Fed.R.Civ.P. Therefore, the court dismissed the action with prejudice. We hold that the district court erred in concluding that the action could not be maintained under s[ection] 10(b) of the Exchange Act and Rule 10b-5. On the question of the pleadings, we agree with the determination made below that the complaint fails to meet the requirements of Rule 9(b). However, because we are hesitant to preclude the prosecution of a possibly meritorious claim because of defects in the pleadings, we believe that the plaintiffs should be afforded an additional, albeit final opportunity to conform the pleadings to Rule 9(b). The Complaint The complaint which is the subject of this appeal was filed in the district court on June 1, It contains the following pertinent allegations: Robins is primarily engaged in the development, manufacture and distribution of ethical pharmaceutical products and brand name consumer products. The individual defendants were at all times material hereto directors of the defendant corporation. Some of the defendants were also officers of Robins. At all relevant times, the Board of Directors of Robins had the responsibility for the dissemination of information to the public, including the statements alleged in the reports referred to in the complaint as well as the information not disclosed to the public as further alleged in the complaint. The gist of plaintiffs claim is contained in paragraph 13: Robins and the individual defendants herein have engaged in a scheme and plan and continuous course of conduct to deceive the investing public, including plaintiffs, as to the true financial condition and prospects of Robins, particularly with respect to matters concerning the Dalkon Shield, and to conceal from the investing public, including plaintiffs, facts, among other things, concerning the safety and efficiency of the Dalkon Shield and the effect of such upon Robins operating and financial condition. According to paragraph 14: Prior to the commencement of the class period, Robins with approval of its Board of Directors, prepared, issued and disseminated statements to the investing public [which] stressed the safety, reliability and efficiency of the Dalkon Shield, particularly with regard to Robins testing procedures and practices. 1 The original complaint in this action was filed on March 23, In an opinion and order dated April 6, 1978, Judge Pierce dismissed the complaint for failure to meet the pleading requirements of Rule 9(b) Fed.R.Civ.P. Leave to replead was granted. Thereafter, on May 19, 1978, an amended complaint was filed. A corrected amended complaint was filed June 1, 1978 [italics added].

137 These statements are quoted at length and identified as appearing in Robins 1970 Annual Report, 1971 Annual Report and a prospectus issued in or about March Paragraph 18 is of crucial importance. It charges that (d)uring the class period, Robins and the individual defendants knew or recklessly disregarded the fact that there were serious questions as to the safety and efficiency of the Dalkon Shield.... Specifically, it alleges that among other things the defendants knew or recklessly disregarded, inter alia, the facts that the pregnancy rate from use of the shield was significantly higher than the low pregnancy rate Robins had indicated in (its) 1970 Annual Report..., and that, the rate of medical removals of the shield required by manifestations of pain, bleeding and infection was significantly higher than... indicated in the 1970 Annual Report... These facts were evidenced by data found in an updated April 1972 unpublished study on the Shield by Mary Gabrielson... Paragraph 18 further states the defendants knew or recklessly disregarded the fact that: their conclusions about the shield s safety and effectiveness were based on insufficient data; that in 1972 and 1973 there was an alarming increase in the rate of septic abortions and deaths resulting from the shield; and that other significant health hazards existed. Paragraph 20 states that the defendants failed to make proper and timely disclosure of these facts and the fact that Robins was incurring substantial risks to its reputation... and substantial risks of substantial liability for injuries from use of the Dalkon Shield. The named plaintiffs and members of the putative class allegedly made their purchases of Robins common stock at prices that were inflated by (these) misleading public reports and press releases and the representations contained therein and by defendants failure to disclose... adverse matter... Sometime beginning in or about the middle of May 1974, information about the serious medical problems which were resulting from use of the Dalkon Shield began to be disclosed to the public. 6 As a consequence of this, of resulting investigations by the Food and Drug Administration, and the Department of Health, Education and Welfare, and the institution of over 500 product liability suits, Robins reputation and position in its industry have been jeopardized 4 For example, paragraph 15 indicates that Robins 1970 Annual Report stated, in part, that: Clinical tests indicate that the Dalkon Shield offers a low (sic) incidence of spontaneous expulsion, cramping and bleeding than other IUD s, as well as greater protection against pregnancy. We feel it has great promise, in the international as well as the domestic market, and have set up a special staff to introduce it widely in a number of areas overseas. 6 It is alleged that during the middle of May, Robins sent a letter to approximately 120,000 physicians nationwide warning that severe complications, including death, had resulted from use of the Shield.

138 and its business prospects adversely affected. The value of its common stock dropped from approximately $19 to $13 per share on the New York Stock Exchange. The defendants conduct is alleged to have violated s[ection] 10(b) and Rule 10b-5. 7 Specifically, it is stated that the defendants had a duty to disclose (adverse) information (about the Dalkon Shield) in order to correct the false and misleading impression created by (their earlier) statements... These statements had indicated that the shield was safe and reliable and would continue to contribute to Robins sales and earnings. The District Court Opinion The defendants moved the district court for an order dismissing the complaint on the grounds that: (2) the action could not be maintained because s[ection] 18 of the Exchange Act was the exclusive remedy for the acts complained of; and (3) it failed to comply with the pleading requirements of Rule 9(b) Fed.R.Civ.P. Judge Pierce rejected the defendants contention that the complaint essentially stated claims for corporate mismanagement and was therefore not properly brought under the federal securities laws. The district court also determined that the complaint did not meet the pleading requirement of Rule 9(b) in that it failed to aver the alleged fraud with particularity. Two primary shortcomings in the complaint were noted. First, the complaint failed to particularize the time when the defendants allegedly knew or recklessly disregarded the undisclosed information. This failing was found to be particularly crucial because the defendants purported duty to disclose adverse information concerning the shield might have arisen during the class period but after the named plaintiffs purchase. In that case, they would not be proper class representatives. Secondly, the complaint was held defective because it did not set forth the circumstances which lead (plaintiffs) to believe that defendants knew or recklessly disregarded the information contained in the 1972 study prior to their own purchase of Robins common stock. Because the plaintiffs had already been given the opportunity to cure defects in the complaint by repleading, the complaint was dismissed without leave to [yet again] replead. A timely appeal was taken to this court. I. [substantive background] The Securities Act of 1933, and the 1934 Act constitute interrelated components of the federal regulatory scheme governing transactions in securities. We do not believe, however, that by permitting the plaintiffs to proceed under s 10(b) in the instant case, we would be nullifying the terms of the remedy which Congress designed in s[ection] Plaintiffs charge, in language almost identical to that of Rule 10b-5 [italics added], that the defendants: (a) employed devices, schemes and artifices to defraud, (b) made untrue statements of material facts or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading, or (c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiffs and others similarly situated in connection with their purchases of Robins stock.

139 We conclude that even as to those documents filed with the S.E.C., plaintiffs may seek to prosecute their claim under s 10(b) and Rule 10b-5. II. [procedural gist] Rule 9(b) Fed.R.Civ.P. provides: Fraud, Mistake, Condition of Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally. This rule, which is a special pleading requirement and contrary to the general approach of simplified pleading adopted by the federal rules, generally serves two important purposes. First, it assures the defendant of fair notice of what the plaintiff s claim is and the grounds upon which it rests. It is the pleading of these matters with precision that serves the rule s purpose by apprising the defendant of the claim against him and of the acts relied upon as constituting the fraud charged. Secondly, the specificity requirement grows out of the desire to protect defendants from the harm that comes to their reputations or to their goodwill when they are charged with serious wrongdoing... In the context of securities litigation Rule 9(b) serves an additional important purpose. It operates to diminish the possibility that a plaintiff with a largely groundless claim (will be able) to simply take up the time of a number of other people (by extensive discovery), rather than a reasonably founded hope that the process will reveal relevant evidence The plaintiff alleging fraud in connection with a securities transaction must specifically allege the acts or omissions upon which his claim rests. It will not do merely to track the language of Rule 10b-5 and rely on such meaningless phrases as scheme and conspiracy or plan and scheme and course of conduct to deceive. A defendant is entitled to a reasonable opportunity to answer the complaint and must be given adequate information to frame a response. There is no question that the plaintiffs in this instance adequately identified the alleged misrepresentations [italics added].they point to the following specific documents: 1970 Annual Report; 1971 Annual Report; prospectus issued in or about March 1972; 1972 form 10- K; 1973 form 10-K; press release issued on or about April 19, 1973; press release issued July 18, 20 Of course, Rule 9(b) cannot be viewed in vacuo. The requirement of particularity does not abrogate Rule 8, and it should be harmonized with the general directives... of Rule 8 that the pleadings should contain a short and plain statement of the claim or defense and with each averment should be simple, concise and direct. Rule 9(b) does not require nor make legitimate the pleading of detailed evidentiary matter. (Rule 9(b) does not render general principles of Rule 8 inapplicable to pleadings alleging fraud). F.R.Civ.P. 9(b) must be reconciled with F.R.Civ.P. 8(a)(2)...

140 1973; press release dated January 31, 1974; 1973 Annual Report; and finally a press release dated April 18, However, we believe that the pleading is deficient in other important respects. The complaint alleges only in a most sketchy fashion circumstances which would give rise to an inference of fraud. The complaint sets forth numerous facts which, it is alleged, indicate that there were serious questions as to the safety and efficiency of the Dalkon Shield... Some, but not all, of these facts are alleged to have been contained in a 1972 unpublished report on the Dalkon Shield prepared by a Mary Gabrielson. It is not indicated what relationship, if any, exists between Mary Gabrielson and Robins, or whether plaintiffs have any reason to believe that the defendants were even aware of the report s existence. Plaintiffs also indicate that the defendants knowledge of the facts contained in paragraph 18 is evidenced by among other things the 1972 unpublished report. Plaintiffs should indicate whether they are relying solely on the study or have other reasons to believe that the defendants had knowledge of facts raising serious questions about the efficiency of the Dalkon Shield. Additionally, knowledge of many of the facts alleged in paragraph 18, e.g., the number of deaths, septic abortions and other complications resulting from the Dalkon Shield in , is in no way attributed to the defendants. Plaintiffs have also failed to indicate when the defendants allegedly came into possession of this crucial information. No one disputes that the defendants eventually became aware of major safety problems involving their product. The facts alleged in paragraph 34 that by letter dated May 8, 1974 Robins informed approximately 120,000 physicians nationwide that severe complications including death had resulted in instances where the Dalkon Shield remained in place during pregnancy do give rise to the inference that by 1974 officials at Robins were aware that major medical problems existed. However, it is only if the defendants knowledge of various problems with the Dalkon Shield coalesced into a duty to disclose prior to July 1973 (the time when the named plaintiffs bought stock in Robins [italics added]) that the action can be prosecuted as a class action by these named plaintiffs. We believe that it is proper to require the plaintiffs, even at the pleading stage, to fix more definitively the time at which these crucial events in the complaint occurred. [A]t this stage of the litigation, we cannot realistically expect plaintiffs to be able to plead defendants actual knowledge. On the other hand, plaintiffs can be required to supply a factual basis for their conclusory allegations regarding that knowledge. It is reasonable to require that the plaintiffs specifically plead those events which they assert give rise to a strong inference that the defendants had knowledge of the facts contained in paragraph 18 of the complaint or recklessly disregarded their existence. And, of course, plaintiffs must fix the time when these particular events occurred [in order to properly represent the alleged class]. Finally, the complaint is deficient in that it fails to specify the time period during which Robins stock allegedly fell from $19 a share to $13 a share. Absent such a statement, including a claim that the stock has not, since it was acquired, risen above $19 a share, it is impossible to determine whether the named plaintiffs or any members of the proposed class have any viable claim that they sustained a loss due to defendants' alleged misconduct. However, notwithstanding the deficiencies which exist in the pleading, we believe, as we indicated at the outset, that plaintiffs should be given a final chance to replead. CONCLUSION

141 For the reasons set forth above, the decision of the district court is reversed. The cause is remanded. 21 Notes and Questions:. 1. Per 1 of this opinion, the trial judge dismissed the action with prejudice. What does that term mean? 2. How does FRCP 9(b) differ from FRCP 8(b)? 3. Does Rule 9(b) impose a draconian pleading requirement on plaintiffs, who are normally in an inferior position vis-a-vis the corporate officer defendants to know the facts regarding what those defendants knew and when? Did the appellate court appropriately remand this case back to the trial court, to allow the plaintiffs to plead their case for (effectively) the fourth time? 4. To properly plead a securities fraud case, [p]laintiffs needed to plead the identity of the person who made the misrepresentation, the time, place[,] and content of the misrepresentation, and the method by which the misrepresentation was communicated to the [Plaintiffs]. The degree of particularity required will necessarily vary depending on the circumstances under which the plaintiff filed its complaint. Gandhi v. Sitara Capital Management, LLC, 721 F.3d 865, 870 (7th Cir. 2013). 5. More generally, courts have read Rule 9(b) to require describing the who, what, when, where, and how of the fraud. We have noted that the purpose of this particularity requirement is to discourage a sue first, ask questions later philosophy. Heightened pleading in the fraud context is required in part because of the potential stigmatic injury that comes with alleging fraud and the concomitant desire to ensure that such fraught allegations are not lightly leveled. We have also cautioned, however, that the exact level of particularity that is required will necessarily differ based on the facts of the case. Cincinnati Life Ins. Co. v. Beyrer 722 F.3d 939, 948 (7th Cir., 2013). WHITE v. SMITH United States District Court, Western District New York 91 F.R.D. 607 (1981) MEMORANDUM AND ORDER Elfvin, District Judge. Plaintiff in this pro se civil rights action was granted permission to proceed in forma pauperis. In my [earlier] Memorandum and Order I outlined plaintiff s allegations and cited legal authority to the effect that, as presented, plaintiff s contentions pose tenable constitutional claims. 21 We do not reach the question whether the defendants' alleged failure to update and correct prior statements which were accurate when made constitutes conduct actionable under s 10(b) and Rule 10b-5. In view of the fact that we are sustaining the determination of the district court that the complaint is deficient because it fails to particularize allegations of fraud, we believe it would be premature for us to address this issue at the present time.

142 The Complaint was served on defendants. By their attorney, New York State Assistant Attorney General Douglas S. Cream, defendants moved for additional time to answer in order to obtain information concerning a purportedly related action filed by plaintiff in the United States District Court for the Northern District of New York [italics added]. At oral argument, I granted defendants request over plaintiff s written objections. [T]wo months after they were served, all four defendants jointly filed their Answer, recounted in full below. 1 As a general rule, federal court pleadings need not be extensive or detailed. On the contrary, Fed.R.Civ.P. rule 8(b) requires only that defenses shall be stated in short and plain terms. For the most part, denials are to be specific denials of designated averments or paragraphs. However, general denials which controvert all of a complaint s averments are acceptable under the rule if they are made in good faith. These few basic requirements are exceedingly simple to meet. The federal rule does not contemplate an elaborate reply to every allegation of a complaint. It does not bind a defendant to his, her, or its responses for all time. It does not even condemn averments of insufficient information or knowledge upon which to form a belief as to the truth of the complainant s allegations. The rules governing responsive pleadings require merely that an answer be sufficiently particular to inform the plaintiff what defenses he, she, or it will be called upon to meet. Nonetheless, the form answer submitted by defendants in this action does not come close to complying with the Federal Rules of Civil Procedure, not to mention basic notions of due process, adequate notice and fair play. Although plaintiff is proceeding pro se, his claims are plainly and cogently presented. Admittedly, there is no numbering or other denomination of his separate allegations; but, essentially, he alleges that, despite the pendency of a [New York] state habeas corpus challenge to his extradition to North Carolina, defendants delivered him to the North Carolina authorities before the hearing. Unlike many other pro se complaints filed in this court, this Complaint raises allegations which do not hinge solely on plaintiff s word against the defendants words. Such a situation 1 The body of defendants Answer is as follows: Defendants, HAROLD SMITH, DORIS BEITZ, CHARLES SCULLY, EDITH ALMETER, as and for their answer to the complaint, by their attorney, Robert Abrams, Attorney General of the State of New York, Douglas S. Cream, Assistant Attorney General, of counsel, set forth as follows: 1. DENY each and every allegation of the complaint which allege (sic) or tends to allege that they violated any of plaintiff s constitutionally protected rights. [They then pled various boilerplate defenses, none of which directly responded to plaintiff s allegations.]

143 arises, for instance, where a prisoner alleges that a certain correctional officer physically assaulted him or denied him adequate medical care. In those types of cases, the use of a general denial, while not necessarily condonable, is more understandable due to the obvious difficulty of discussing an incident which defendants deny having occurred at all. On the contrary, plaintiff s description of the events surrounding his extradition are meticulously detailed and quite specific. He includes all critical names and dates. Finally, attached to the Complaint are various documents pertaining to his detainer, state habeas corpus petition, and subsequent extradition which, in the court s view, tend to support his claim. Surely it would not have been an onerous burden for defendants attorney to compare plaintiff s averments and attached documents to defendants own records to enable him to frame meaningful and responsible answers to plaintiff s charges. Was or was not plaintiff under detainer [in New York]? Did he or did he not challenge his detainer with a state habeas corpus petition? Did a state judge actually set a hearing date? Was plaintiff permitted to attend the hearing, or did defendants execute his extradition before the hearing was held? I see no reason why defendants attorney would have found it difficult to [more completely] respond to these and other claims raised by plaintiff. The absurdity of defendants general denial appears all the more flagrant when the answer is compared to plaintiff s claims. Three examples will suffice, though many more are obvious. If defendants general denial [of all of plaintiff s allegations] is to be believed, then notwithstanding the Complaint and its Exhibit B, the District Attorney of North Carolina did not [even] request a detainer against plaintiff; notwithstanding the Complaint and its Exhibit F, Acting Superintendent Scully did not sign and send an Offer to Deliver Temporary Custody of plaintiff July 13, 1978; and notwithstanding the Complaint and its Exhibit I, Doris Beitz neither was informed that plaintiff s petition for habeas corpus was made returnable before the Honorable John S. Conable August 23, 1978 nor informed plaintiff of the hearing date in an inter-office communication dated August 7, On the basis of defendants wholly inadequate response to plaintiff s clearly framed allegations, I can only conclude that defendants general denial is [not] offered in good faith, Fed.R.Civ.P. rule 8(b). For all the reasons discussed above, I would be stretching attorney Cream s credibility far beyond the realm of rationality were I to find that to the best of his knowledge, information, and belief there is good ground to support (his general denial). Furthermore, the steps taken by defendants counsel before submitting the answer strongly suggest that the answer was interposed for delay. My Memorandum and Order of January 27, 1981, footnote 1, expressly discussed plaintiff s complaint in the United States District Court for the Eastern District of North Carolina and found the corresponding claim to be against a North Carolina police officer. Even so, defendants felt compelled to move for a twomonth extension of time to answer in order to obtain records relating to a similar complaint brought by plaintiff in the United States District Court for the Northern District of New York, which, according to defendants attorney, plaintiff referred to in his Complaint in this action. A review of the Complaint, my Order of January 27th and plaintiff s Motion in Opposition to defendants Motion for an extension of time would have revealed to defendants attorney that plaintiff s other federal action was before the United States District Court for the Eastern District of North Carolina, rather than the Northern District of New York. Nevertheless, I granted defendants motion for the purpose requested. Under these circumstances, it is particularly significant that defendants unresponsive answer fails to make even the briefest mention of either the existence or non-existence of the court records for which he purportedly was searching.

144 The overwhelming weight of logic demands the conclusion that delay, not the judicial resolution of this lawsuit, was first and foremost on defense counsel s mind when he signed and submitted defendants responsive pleading. In what might easily have been a relatively simple case, defense counsel apparently prefers to impose rather than eradicate obstacles to an expeditious resolution of this action. Under the circumstances of this case, appropriate sanctions are more than justified. [A] pleading may be stricken as sham and false and the action may proceed as though the pleading had not been served. I am satisfied that such a penalty is fully warranted in this matter. Nevertheless, because counsel for defendants has been permitted in the past to use this same type of unresponsive answer and because he and his office should have some advance warning prior to the imposition of the ultimate sanction of entry of a default and the proving up of a default judgment and this Memorandum and Order is such a warning that such will occur in future similar situations it is hereby ORDERED that the defendants Answer is stricken; and it is further hereby ORDERED that defendants shall file an answer or answers to the Complaint not later than twenty (20) days after the entry of this Order. Notes and Questions: 1. What is a defendant s basic obligation under FRCP 8(b)? 2. In this particular instance, why were the defendants unable to employ a general denial in good faith? 3. Was the judge in this case being overly technical, given that plaintiff had already been extradited to North Carolina? What was the New York federal judge s essential purpose for issuing this Memorandum opinion? INGRAHAM v. U.S. United States Court of Appeals, Fifth Circuit 808 F.2d 1075 (1987) Politz, Circuit Judge: The appellees in these consolidated cases sued the United States, under the Federal Tort Claims Act [FTCA], for severe injuries caused by the negligence of government physicians. In each case, after entry of adverse judgment the government moved for relief from the judgment to the extent that the damages exceeded the limit imposed on medical malpractice awards by the

145 Medical Liability and Insurance Improvement Act of Texas. a The respective district courts denied these post-trial motions. Concluding that the government did not raise the issue timely before the trial courts, that the issues were not preserved for appeal, and, in the [consolidated] Bonds case, that the challenged awards were not otherwise excessive, we affirm both judgments. Background Of particular significance to these appeals is the $500,000 cap placed on the ex delicto recovery. 1 not applicable to past and future medical expenses. Dwight L. Ingraham was operated on by an Air Force surgeon. During the back surgery a drill was negligently used and Ingraham s spinal cord was damaged, causing severe and permanent injuries. The court awarded Ingraham judgment for $1,264,000. This total included $364,000 for lost wages and $900,000 for pain, suffering, and disability. There is no reference to the Medical Liability and Insurance Improvement Act of Texas in the pleadings, nor was any reference made to the Act during the trial. After entry of judgment the United States filed a notice of appeal. Thereafter, urging the Act's limitations, the government sought relief from judgment. The district court denied that motion. Similarly, Jocelyn and David Bonds, and their infant daughter Stephanie, were victims of the negligent performance by an Air Force physician. Because of the mismanagement of the 43rd week of Jocelyn Bonds s first pregnancy, and the negligent failure to perform timely a caesarian section delivery, Stephanie suffered asphyxiation in utero. The loss of oxygen caused extensive brain damage, resulting in spastic quadriparesis, cortical blindness, seizures, and mental retardation. In their FTCA action the court awarded Stephanie $1,814, for medical expenses and $1,675, for the other losses. Jocelyn Bonds was awarded $750,000 for her losses, including loss of the society of her daughter. As in the Ingraham case, the government did not invoke the Texas malpractice limitation in pleading or at trial. Postjudgment the government filed a motion to amend the judgment, but, again, there was no mention of the limitations Act. Subsequently, three months after entry of the judgment, the government filed a pleading entitled Motion for Reconsideration, in which it advanced the malpractice Act. That motion was denied. The government appealed. These appeals do not challenge the courts findings of liability, but object only to contending that damages are limited by the Medical Liability and Insurance Improvement Act. Analysis Appellees maintain that we should not consider the statutory limitation of liability invoked on appeal because it is an affirmative defense under Rule 8(c) of the Federal Rules of a Subsection (b)(1) of the FTCA provides for liability to be determined in accordance with the law of the place where the act or omission occurred. Texas law thus provides the rule of decision in this case. If an individual is named, the Complaint is normally amended to substitute the federal government as the defendant. 1 In an action on a health care liability claim where final judgment is rendered against a physician or health care provider, the limit of civil liability for damages of the physician or health care provider shall be limited to an amount not to exceed $500,000.

146 Civil Procedure, 3 and the failure to raise it timely constitutes a waiver. We find this argument persuasive. Rule 8(c) first lists 19 specific affirmative defenses, and concludes with the residuary clause any other matter constituting an avoidance or affirmative defense. In the years since adoption of the rule, the residuary clause has provided the authority for a substantial number of additional defenses which must be timely and affirmatively pleaded. These include: exclusions from a policy of liability insurance; breach of warranty; concealment of an alleged prior undissolved marriage; voidable preference in bankruptcy; noncooperation of an insured; statutory limitation on liability; the claim that a written contract was incomplete; judgment against a defendant's joint tortfeasor; circuity of action; discharge of a contract obligation through novation or extension; recission or mutual abandonment of a contract; failure to mitigate damages; adhesion contract; statutory exemption; failure to exhaust state remedies; immunity from suit; good faith belief in lawfulness of action; the claim that a lender's sale of collateral was not commercially reasonable; a settlement agreement or release barring an action; and custom of trade or business. Determining whether a given defense is affirmative within the ambit of Rule 8(c) is not without some difficulty. We find the salient comments of the principal author of the Federal Rules, to be instructive: [J]ust as certain disfavored allegations made by the plaintiff... must be set forth with the greatest particularity, so like disfavored defenses must be particularly alleged by the defendant. These may include such matters as fraud, statute of frauds..., statute of limitations, truth in slander and libel... and so on. Again it may be an issue which may be generally used for dilatory tactics, such as the question of the plaintiff s right to sue... one usually raised by the defendant on technical grounds. These have been thought of as issues likely to take the opposite party by surprise, which perhaps conveys the general idea of fairness or the lack thereof, though there is little real surprise where the case is well prepared in advance. Also pertinent to the analysis is the logical relationship between the defense and the cause of action asserted by the plaintiff. This inquiry requires a determination (1) whether the matter at issue fairly may be said to constitute a necessary or extrinsic element in the plaintiff s cause of action; (2) which party, if either, has better access to relevant evidence; and (3) policy considerations: should the matter be indulged or disfavored? Central to requiring the pleading of affirmative defenses is the prevention of unfair surprise. A defendant should not be permitted to lie behind a log and ambush a plaintiff with an unexpected defense. The instant cases illustrate this consideration. Plaintiffs submit that, had they known the statute would be applied, they would have made greater efforts to prove medical damages which were not subject to the statutory limit. In addition, plaintiffs maintain that they would have had an opportunity and the incentive to introduce evidence to support their constitutional attacks on the statute. 3 Rule 8(c) requires that... a party shall set forth affirmatively accord and satisfaction, arbitration and award, assumption of risk, contributory negligence, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense [italics added].

147 We view the limitation on damages as an avoidance within the intendment of the residuary clause of 8(c). Black s Law Dictionary, 5th ed. 1979, defines an avoidance in pleadings as the allegation or statement of new matter, in opposition to a former pleading, which, admitting the facts alleged in such former pleading, shows cause why they should not have their ordinary legal effect [italics added]. Considering these factors, we conclude that the Texas statutory limit on medical malpractice damages is an affirmative defense which must be pleaded timely and that in the cases at bar the defense has been waived. The judgments in each of the consolidated cases is AFFIRMED. Notes and Questions: 1. See footnote 3. A subsequent Rules change deleted the italicized phrase. As a damage cap is a partial affirmative defense, was it wise of the rules-makers to delete Rule 8(c) s closing phrase? 2. See the above second page Rules-maker s quote, specifically: disfavored allegations made by the plaintiff... must be set forth with the greatest particularity. What is an example of this phenomenon (which we studied earlier in the pleadings portion of this course)? 3. Both affirmative defenses and denials normally appear in the Answer. How do they differ? 4. At the bottom of the second page above, the court mentions that had the plaintiffs known the statute would be applied, they would have made greater efforts [to juggle the respective types of damage they sought]. But was the major procedural blunder not attributable to the defendant in these cases? GREAT LAKES RUBBER CORPORATION v. HERBERT COOPER CO. United States Court of Appeals Third Circuit 286 F.2d 631 (1961) Prof s Note: Failure to plead a compulsory counterclaim can be a career-ending mistake. I have thus edited and assigned this case, so that you can better appreciate the importance of the compulsory counterclaim in the FRCP 13(a) versus 13(b) sense. You will thus be equipped to scrutinize this type of claim in the supplemental jurisdiction

148 context of 28 U.S.C Italics have been added to the court s opinion, without so indicating. Court s Opinion: Biggs, Chief Judge. This is an appeal from an order of the court below dismissing a counterclaim of Great Lakes Rubber Corporation (Great Lakes), made against Herbert Cooper Co., Inc. (Cooper), on the ground that the court lacked jurisdiction of the subject matter of the counterclaim. Because the question presented on appeal is whether Great Lakes counterclaim arises out of the transaction or occurrence that is the subject matter of a claim asserted by Cooper a detailed analysis of the pleadings is necessary. Great Lakes filed an amended complaint naming Cooper as defendant. Jurisdiction was allegedly based on diversity. The allegations fall roughly into three groups. First, it was alleged that Howard Cooper... had been employed by Great Lakes... and that [he] left Great Lakes employ taking... certain information relating to the flexible rubber tubing manufactured by Great Lakes, and lists disclosing Great Lakes' customers; that shortly thereafter... with others, founded Cooper [Company]; that Cooper competed for and obtained customers that were, until then, customers of Great Lakes; and, that Cooper s offering to sell, and manufacturing and selling flexible tubing made and offered for sale with utilization of knowledge and information acquired (by Howard Cooper and Joseph Herbert) while these men were in a fiduciary relationship with plaintiff constituted acts of unfair competition and unfair business practices. Second, it was alleged that... by reason of Cooper s operation as an unlicensed infringer it is and has been in an unfair competitive position relative to Great Lakes.... Cooper filed an answer to the amended complaint and a counterclaim which asserted that Great Lakes... and various unnamed companies and individuals have been and still are... conspiring together and attempting both individually and in concert to restrain and monopolize interstate commerce in violation of Sections 1 and 2 of the Sherman [federal antitrust] Act. The conspiracy [claimed by Cooper] was alleged to include, without limitation, the making of false representations to certain of Cooper's material suppliers that they were guilty of contributory infringement when the conspirators knew that the supplied items... could not be the basis of such liability. 1

149 The counterclaim also alleged, and this is of prime importance in the instant case, the bringing of a series of unjustified lawsuits by [Great Lakes and] the [other] conspirators in bad faith and without color of right with the sole object of harassing and preventing defendant (Cooper) from competing in the manufacture and sale of flexible hose and thus eliminating defendant as a competitor, including this action... to prevent defendant from seeking the patronage of its principal customer, the United States... and a [separate] patent infringement suit brought against defendant in... to prevent defendant from manufacturing flexible hose... being in violation of 28 U.S.C.A which forbids infringement actions and injunctive restraints against government contractors.... Cooper moved to dismiss Great Lakes amended complaint on the ground that there was no diversity of citizenship between the parties.... [T]he court granted Cooper s motion to dismiss. Jurisdiction of Cooper s counterclaim was retained on the ground that it had an independent basis of jurisdiction in that it asserted a claim arising under the laws of the United States. No appeal was taken from that order and no question regarding it has been raised on this appeal.... Great Lakes filed an answer and a counterclaim to Cooper s counterclaim [effectively, now the complaint ]. Great Lakes counterclaim repeated in substance the allegations of its amended [but previously dismissed] complaint. The counterclaim is distinguishable from the [now defunct] amended complaint only in that it is more specific and in that it alleges further that Cooper... had induced key employees of Great Lakes to leave it and to become employed by Cooper; and that Cooper s charges in the court below were baseless and untrue and have resulted in damaging Great Lakes unfairly.... Cooper moved to dismiss the Great Lakes counterclaim on the ground that the court below lacked jurisdiction of the subject matter. In opposition to this motion Great Lakes contended that the court had ancillary jurisdiction of its counterclaim as a compulsory counterclaim arising out of the same transaction and occurrences that were the subject matter of Cooper's claim arising under the Federal antitrust laws.... [T]he court granted Cooper s motion to dismiss on the ground that Great Lakes counterclaim was not a compulsory counterclaim. This appeal followed. A federal court has ancillary jurisdiction of the subject matter of a counterclaim if it arises out of the transaction or occurrence that is the subject matter of an opposing party s claim of which the court has jurisdiction. Similarly, a counterclaim that arises out of the transaction or occurrence that is the subject matter of an opposing party s claim is a compulsory counterclaim within the meaning of Rule 13(a) of the Federal Rules of Civil Procedure. It is stated frequently that the determination of ancillary jurisdiction of a counterclaim in a federal court must turn on whether the counterclaim is compulsory within the meaning of Rule 13(a). Such a statement of the law relating to ancillary jurisdiction of counterclaims is not intended to suggest that Rule 13(a) extends the jurisdiction of the federal courts to entertain counterclaims for the Federal Rules of Civil Procedure cannot expand the jurisdiction of the United States courts. What is meant is that the issue of the existence of ancillary jurisdiction and the issue as to whether a counterclaim is compulsory are to be answered by the same test. It is not a coincidence that the same considerations that determine whether a counterclaim is compulsory decide also whether the court has ancillary Page 149 of 358

150 jurisdiction to adjudicate it. The tests are the same because Rule 13(a) and the doctrine of ancillary jurisdiction are designed to abolish the same evil, viz., piecemeal litigation in the federal courts. We have indicated that a counterclaim is compulsory if it bears a logical relationship to an opposing party's claim. The phrase logical relationship is given meaning by the purpose of the rule which it was designed to implement. Thus, a counterclaim is logically related to the opposing party's claim where separate trials on each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or the same factual and legal issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action.... Cooper alleges that the claims originally asserted in Great Lakes amended complaint, reiterated in substance in its counterclaim, are unjustified and were brought in bad faith and without color of right with the sole object of harassing and preventing defendant (Cooper) from competing in the manufacture and sale of flexible hose. These are the only allegations set out by Cooper s counterclaim which demonstrate a relationship within the purview of Rule 13(a) to Great Lakes amended complaint or counterclaim. But that they do demonstrate a relationship is unquestionable. It is clear that a determination that Cooper s claims that the claims asserted in Great Lakes amended complaint and reiterated in substance in its counterclaim are harassing and entail an extensive airing of the facts and the law relating to Great Lakes counterclaim. It follows that the court below was in error in dismissing Great Lakes counterclaim on the ground that it was permissive. We hold that Great Lakes counterclaim was a compulsory one within the meaning of Rule 13(a). The judgment will be reversed and the cause will be remanded with the direction to proceed in accordance with this opinion. Notes & Questions: 1. What is the test for determining whether a counterclaim is permissive or compulsory? 2. Are the terms compulsory counterclaim and ancillary jurisdiction synonymous? 3. Can a defendant who fails to plead a S 1 compulsory counterclaim be a S 2 plaintiff on that claim? 4. Did Great Lakes counterclaim differ from the diversity jurisdiction portion of its original complaint? If so, how? If not, how could Great Lakes be allowed to reassert the same claim? Would that not be authorizing it to assert a diversity claim against a non-diverse party? 5. Should Great Lakes be sanctioned? Alternatively, was it required to bring the same claim twice in this lawsuit? Page 150 of 358

151 BEECK v. AQUASLIDE N DIVE CORP. United States Court of Appeals, Eighth Circuit 562 F.2d 537 (1977) Benson, District Judge... Jerry A. Beeck was severely injured, while using a water slide. He and his wife, Judy A. Beeck, sued Aquaslide N Dive Corporation (Aquaslide), a Texas corporation, alleging it manufactured the slide involved in the accident, and sought to recover substantial damages on theories of negligence, strict liability and breach of implied warranty. Aquaslide initially admitted manufacture of the slide, but later moved to amend its answer to deny manufacture; the motion was resisted. The district court granted leave to amend. On motion of the defendant, a separate trial was held on the issue of whether the defendant designed, manufactured or sold the slide in question. This motion was also resisted by the plaintiffs. The issue was tried to a jury, which returned a verdict for the defendant... Plaintiffs took this appeal, and stated the issues presented for review to be: 1. Where the manufacturer of the product, a water slide, admitted in its Answer and later in its Answer to Interrogatories both filed prior to the running of the statute of limitations that it designed, manufactured and sold the water slide in question, was it an abuse of the trial court s discretion to grant leave to amend to the manufacturer in order to deny these admissions after the running of the statute of limitations? Sources: < and < Reprinted with permission of trade.mar.cx I. Facts. In 1971 Kimberly Village Home Association [in] Iowa, ordered an Aquaslide product from one George Boldt, who was a local distributor handling defendant s products. The order was forwarded by Boldt to Sentry Pool and Chemical Supply Co. in Illinois, and Sentry forwarded the order to Purity Swimming Pool Supply in Indiana. A slide was delivered from a Purity warehouse to Kimberly Village, and was installed by Kimberly employees. Jerry A. Beeck was injured while using the slide at a social gathering sponsored at Kimberly Village by his employer, Harker Wholesale Meats, Inc. Soon after the accident investigations were undertaken by representatives of the separate insurers of Harker and Kimberly Village. Aquaslide first learned of the accident through a letter sent by a representative of Kimberly s Page 151 of 358

152 insurer to Aquaslide, advising that one of your Queen Model # Q-3D slides was involved in the accident. Aquaslide forwarded this notification to its insurer. Aquaslide s insurance adjuster made an on-site investigation of the slide, and also interviewed persons connected with the ordering and assembly of the slide. An inter-office letter, indicates that Aquaslide s insurer was of the opinion the Aquaslide in question was definitely manufactured by our insured. The complaint was filed. 3 Investigators for three different insurance companies, representing Harker, Kimberly and the defendant, had concluded that the slide had been manufactured by Aquaslide, and the defendant, with no information to the contrary, answered the complaint, and admitted that it designed, manufactured, assembled and sold the slide in question. 4 The statute of limitations on plaintiff s personal injury claim expired. About six and one-half months later Carl Meyer, president and owner of Aquaslide, visited the site of the accident prior to the taking of his deposition by the plaintiff. 5 From his on-site inspection of the slide, he determined it was not a product of the defendant. Thereafter, Aquaslide moved the court for leave to amend its answer to deny manufacture of the slide.. II. Leave to Amend. Amendment of pleadings in civil actions is governed by Rule 15(a), F.R.Civ.P., which provides in part that once issue is joined in a lawsuit, a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.. In Foman v. Davis, the Supreme Court had occasion to construe that portion of Rule 15(a) set out above: Rule 15(a) declares that leave to amend shall be freely given when justice so requires, this mandate is to be heeded.... If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. the leave sought should, as the rules require, be freely given. Of course, the grant or denial of an opportunity to amend is within the discretion of the District Court... This Court in [cition omitted], held that (p)rejudice must be shown. The burden is on the party opposing the amendment to show such prejudice. In ruling on a motion for leave to amend, the trial court must inquire into the issue of prejudice to the opposing party, in light of the particular facts of the case. Certain principles apply to appellate review of a trial court's grant or denial of a motion to amend pleadings. First, as noted in Foman v. Davis, allowance or denial of leave to amend lies within the sound discretion of the trial court, and is reviewable only for an abuse of discretion. The appellate court must view the case in the posture in which the trial court acted in ruling on 3 Aquaslide N Dive Corporation was the sole defendant named in the complaint. 4 In answers to interrogatories filed on June 3, 1974, Aquaslide again admitted manufacture of the slide in question. 5 Plaintiffs apparently requested Meyer to inspect the slide prior to the taking of his deposition to determine whether it was defectively installed or assembled... Page 152 of 358

153 the motion to amend.. It is evident from the order of the district court that in the exercise of its discretion in ruling on defendant s motion for leave to amend, it searched the record for evidence of bad faith, prejudice and undue delay which might be sufficient to overbalance the mandate of Rule 15(a), and Foman v. Davis, that leave to amend should be freely given. Plaintiffs had not at any time conceded that the slide in question had not been manufactured by the defendant, and at the time the motion for leave to amend was at issue, the court had to decide whether the defendant should be permitted to litigate a material factual issue on its merits. In inquiring into the issue of bad faith, the court noted the fact that the defendant, in initially concluding that it had manufactured the slide, relied upon the conclusions of three different insurance companies, 6 each of which had conducted an investigation into the circumstances surrounding the accident. This reliance upon investigations of three insurance companies, and the fact that no contention has been made by anyone that the defendant influenced this possibly erroneous conclusion, persuaded the court that defendant has not acted in such bad faith as to be precluded from contesting the issue of manufacture at trial. The court further found (t)o the extent that blame is to be spread regarding the original identification, the record indicates that it should be shared equally. In considering the issue of prejudice that might result to the plaintiffs from the granting of the motion for leave to amend, the trial court held that the facts presented to it did not support plaintiffs assertion that, because of the running of the two year Iowa statute of limitations on personal injury claims, the allowance of the amendment would sound the death knell of the litigation. In order to accept plaintiffs argument, the court would have had to assume that the defendant would prevail at trial on the factual issue of manufacture of the slide. On the state of the record before it, the trial court was unwilling to make such assumptions, and concluded (u)nder these circumstances, the Court deems that the possible prejudice to the plaintiffs is an insufficient basis on which to deny the proposed amendment. The court reasoned that the amendment would merely allow the defendant to contest a disputed factual issue at trial, and further that it would be prejudicial to the defendant to deny the amendment. The court also held that defendant and its insurance carrier, in investigating the circumstances surrounding the accident, had not been so lacking in diligence as to dictate a denial of the right to litigate the factual issue of manufacture of the slide. On this record we hold that the trial court did not abuse its discretion in allowing the defendant to amend its answer. The record indicates that Carl Meyer, president and owner of Aquaslide, designs the slides sold by Aquaslide. The slide which plaintiff Jerry A. Beeck was using at the time of his accident was very similar in appearance to an Aquaslide product, and was without identifying marks. Kimberly Village had in fact ordered an Aquaslide for its swimming pool, and thought it had received one. After Meyer s inspection and Aquaslide s subsequent assertion that it was not an Aquaslide product, plaintiffs elected to stand on their contention that it was in fact an Aquaslide. This raised a substantial issue of material fact which, if resolved in defendant s favor, would exonerate defendant from liability. 6 The insurer of Beeck s employer, the insurer of Kimberly Village, as well as the defendant's insurer had each concluded the slide in question was an Aquaslide. Page 153 of 358

154 The jury, by special interrogatory, found that the slide had not been manufactured by Aquaslide. That finding has not been questioned on appeal. The judgment of the district court is affirmed. Notes and Questions: 1. As the trial court comments: (t)o the extent that blame is to be spread regarding the original identification, the record indicates that it should be shared equally. Would you fault the plaintiff? Why? 2. The trial court determined that the facts presented to it did not support plaintiffs assertion that, because of the running of the statute of limitations, the allowance of the amendment would sound the death knell of the litigation [italics added]. Why not? 3. The appellate court agreed with the trial court that the answer could be amended. Was this a fair result? Page 154 of 358

155 WANDA KRUPSKI v. COSTA CROCIERE Supreme Court of the United States 130 S.Ct (2010) Sotomayor, Associate Justice [bracketed insertions and italics added by professor; most internal rule and case references deleted]. Rule 15(c) of the Federal Rules of Civil Procedure governs when an amended pleading relates back to the date of a timely filed original pleading [as if it were the original pleading] and is thus itself timely even though it was filed outside an applicable statute of limitations [assuming the original pleading was timely filed]. Where an amended pleading changes a party or a party s name, the Rule requires, among other things, that the party to be brought in by amendment... knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party s identity. Rule 15(c)(1)(C). In this case, the Court of Appeals held that Rule 15(c) was not satisfied because the plaintiff knew or should have known of the proper defendant before filing her original complaint. The court also held that relation back was not appropriate because the plaintiff had unduly delayed in seeking to amend. We hold that relation back under Rule 15(c)(1)(C) depends on what the party to be added knew or should have known, not on the amending party s knowledge or its timeliness in seeking to amend the pleading. Accordingly, we reverse the judgment of the Court of Appeals. I On February 21, 2007, petitioner, Wanda Krupski, tripped over a cable and fractured her femur while she was on board the cruise ship Costa Magica. Upon her return home, she acquired counsel and began the process of seeking compensation for her injuries. Krupski s passenger ticket which explained that it was the sole contract between each passenger and the carrier included a variety of requirements for obtaining damages for an injury suffered on board one of the carrier s ships. The ticket identified the carrier as Costa Crociere S. p. A., an Italian corporation, and all Vessels and other ships owned, chartered, operated, marketed or provided by Costa Crociere, S. p. A., and all officers, staff members, crew members, independent contractors, medical providers, concessionaires, pilots, suppliers, agents and assigns onboard said Vessels, and the manufacturers of said Vessels and all their component parts. The ticket required an injured party to submit written notice of the claim with full particulars... to the carrier or its duly authorized agent within 185 days after the date of injury. The ticket further required any lawsuit to be filed within one year after the date of injury and to be served upon the carrier within 120 days after filing. *** The ticket extended the defenses, limitations and exceptions... that may be invoked by the CARRIER to all persons who may act on behalf of the CARRIER or on whose behalf the CARRIER may act, including the CARRIER s parents, subsidiaries, affiliates, successors, assigns, representatives, agents, employees, servants, Page 155 of 358

156 concessionaires and contractors as well as Costa Cruise Lines N. V., [which was therein] identified as the sales and marketing agent for the CARRIER and the issuer of this Passage Ticket Contract. The front of the ticket listed Costa Cruise Lines address in Florida and stated that an entity called Costa Cruises was the first cruise company in the world to obtain a certain certification of quality. On July 2, 2007, Krupski s counsel notified Costa Cruise Lines of Krupski's claims. On July 9, 2007, the claims administrator for Costa Cruise requested additional information from Krupski [i]n order to facilitate our future attempts to achieve a prelitigation settlement. The parties were unable to reach a settlement, however ***. The complaint alleged that Costa Cruise owned, operated, managed, supervised and controlled the ship on which Krupski had injured herself ***. The complaint *** averred that, by the July 2007 notice of her claims, Krupski had complied with the ticket s presuit requirements. Krupski served Costa Cruise on February 4, Over the next several months after the limitations period had expired Costa Cruise brought Costa Crociere s existence to Krupski s attention three times. First, on February 25, 2008, Costa Cruise filed its answer, asserting that it was not the proper defendant, as it was merely the North American sales and marketing agent for Costa Crociere, which was the actual carrier and vessel operator. Second, on March 20, 2008, Costa Cruise listed Costa Crociere as an interested party in its corporate disclosure statement [per FRCP 7.1(a)(1), designed to identify related corporate entities]. Finally, on May 6, 2008, Costa Cruise moved for summary judgment, again stating that Costa Crociere was [instead] the proper defendant. On June 13, 2008, Krupski responded to Costa Cruise s motion ***, arguing for limited discovery to determine whether Costa Cruise should be dismissed. According to Krupski, the following sources of information led her to believe Costa Cruise was the responsible party: The travel documents prominently identified Costa Cruise and gave its Florida address; Costa Cruise s Web site listed Costa Cruise in Florida as the United States office for the Italian company Costa Crociere; and the Web site of the Florida Department of State listed Costa Cruise as the only Costa company registered to do business in that State. Krupski also observed that Costa Cruise s claims administrator had responded to her claims notification without indicating that Costa Cruise was not a responsible party. With her response, Krupski simultaneously moved to amend her complaint to add Costa Crociere as a defendant. *** [T]he District Court denied Costa Cruise s motion *** without prejudice [thus granting leave to refile the motion, after some discovery could be undertaken] and granted Krupski leave to amend, ordering that Krupski effect proper service on Costa Crociere ***. [T]he District Court [also] issued an order dismissing Costa Cruise from the case pursuant to the parties joint stipulation *** that Costa Cruise was correct that it bore no responsibility for her injuries. Shortly thereafter, Costa Crociere represented by the same counsel who had represented Costa Cruise moved to dismiss, contending that the amended complaint did not relate back under Rule 15(c) and was therefore untimely. The District Court agreed. Rule 15(c), the court explained, imposes three requirements before an amended complaint against a newly named defendant can relate back to the original complaint. First, the claim against the newly named defendant must have arisen out of the Page 156 of 358

157 conduct, transaction, or occurrence set out-or attempted to be set out-in the original pleading. Second, within the period provided by Rule 4(m) for serving the summons and complaint (which is ordinarily 120 days from when the complaint is filed, see Rule 4(m)), the newly named defendant must have received such notice of the action that it will not be prejudiced in defending on the merits. Finally, the plaintiff must show that, within the Rule 4(m) period, the newly named defendant knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity. The first two conditions posed no problem, the court explained: The claim against Costa Crociere clearly involved the same occurrence as the original claim against Costa Cruise, and Costa Crociere had constructive notice of the action and had not shown that any unfair prejudice would result from relation back. But the court found the third condition fatal to Krupski s attempt to [have the amended complaint naming the new party] relate back, concluding that Krupski had not made a mistake concerning the identity of the proper party. *** [T]he court explained that the word mistake should not be construed to encompass a deliberate decision not to sue a party whose identity the plaintiff knew before the statute of limitations had run. Because Costa Cruise informed Krupski that Costa Crociere was the proper defendant in its answer, corporate disclosure statement, and motion for summary judgment, and yet Krupski delayed for months in moving to amend and then [more so] in filing an amended complaint, the court concluded that Krupski knew of the proper defendant and made no [applicable] mistake [within the meaning of FRCP 15]. The Eleventh Circuit affirmed *** [and] noted that the relevant information was located within Krupski s passenger ticket, which she had furnished to her counsel well before the end of the limitations period. Because the ticket clearly identified Costa Crociere as the carrier, the court stated, Krupski either knew or should have known of Costa Crociere s identity as a potential party. It was therefore appropriate to treat Krupski as having chosen to sue one potential party over another. Alternatively, even assuming that she first learned of Costa Crociere s identity as the correct party from Costa Cruise's answer, the Court of Appeals observed that Krupski waited 133 days from the time she filed her original complaint to seek leave to amend and did not file an amended complaint for another month after that. In light of this delay, the Court of Appeals concluded that the District Court did not abuse its discretion in denying relation back [to the amended complaint naming Costa Crociere]. We now reverse. II Under the Federal Rules of Civil Procedure [15(c)(1)], an amendment to a pleading relates back to the date of the original pleading when: (A) the law that provides the applicable statute of limitations allows relation back; (B) the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out or attempted to be set out in the original pleading; or (C) the amendment changes the party or the naming of the party against whom a Page 157 of 358

158 claim is asserted, if Rule 15(c)(1)(B) is satisfied and if, within the period provided by Rule 4(m) for serving the summons and complaint, the party to be brought in by amendment: (i) received such notice of the action that it will not be prejudiced in defending on the merits; and (ii) knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity. * * * A *** By focusing on Krupski s knowledge, the Court of Appeals chose the wrong starting point. The question *** is not whether Krupski knew or should have known the identity of Costa Crociere as the proper defendant, but whether Costa Crociere knew or should have known that it would have been named as a defendant but for an error. Rule 15(c)(1)(C)(ii) asks what the prospective defendant knew or should have known during the Rule 4(m) period, not what the plaintiff knew or should have known at the time of filing her original complaint. *** A mistake is [a]n error, misconception, or misunderstanding; an erroneous belief. *** That a plaintiff knows of a party s [mere] existence does not preclude her from making a mistake with respect to that party s identity [for purposes of the instant lawsuit]. A plaintiff may know that a prospective defendant call him *** A exists, while erroneously believing him to have the status of party B. Similarly, a plaintiff may know generally what *** A does while misunderstanding the roles that ***A and party B played in the conduct, transaction, or occurrence giving rise to her claim. If the plaintiff sues party B instead of *** A under these circumstances, she has made a mistake concerning the proper party s identity notwithstanding her knowledge of the existence of both parties. The only question *** is whether *** A knew or should have known that, absent some mistake, the action would have been brought against him. Respondent [defendant] urges that the key issue ***is whether the plaintiff made a deliberate choice to sue one party over another. We agree that making a deliberate choice to sue one party instead of another while fully understanding the factual and legal differences between the two parties is the antithesis of making a mistake concerning the proper party s identity. We disagree, however, with respondent s position that any time a plaintiff is aware of the existence of two parties and chooses to sue the wrong one, the proper defendant could reasonably believe that the plaintiff made no mistake. The reasonableness of the mistake is not itself at issue. As noted, a plaintiff might know that the prospective defendant exists but nonetheless harbor[s] a misunderstanding about his status or role in the events giving rise to the claim at issue, and she may mistakenly choose to sue a different defendant based on that misimpression. That kind of deliberate but mistaken choice does not foreclose a finding that Rule 15(c)(1)(C)(ii) has been satisfied. This reading is consistent with the purpose of relation back: to balance the interests of the defendant protected by the statute of limitations with the preference *** for resolving disputes on their merits. A prospective defendant who legitimately believed that the limitations period had passed without any attempt to sue him has a strong interest in repose. But repose would be a windfall for a prospective defendant who understood, Page 158 of 358

159 or who should have understood, that he escaped suit during the limitations period only because the plaintiff misunderstood a crucial fact about his identity. Because a plaintiff s knowledge of the existence of a party does not foreclose the possibility that she has made a mistake of identity about which that party should have been aware, such knowledge does not support that party s interest in repose. * * * B The Court of Appeals offered a second reason why Krupski s amended complaint did not relate back: Krupski had unduly delayed in seeking to file, and in eventually filing, an amended complaint. The Court of Appeals offered no support for its view that a plaintiff s dilatory conduct can justify the denial of relation back under Rule 15(c)(1)(C), and we find none. The Rule plainly sets forth an exclusive list of requirements for relation back, and the amending party s diligence is not among them. Moreover, the Rule mandates relation back once the Rule s requirements are satisfied; it does not leave the decision whether to grant relation back to the district court s equitable discretion. * * * Rule 15(c)(1)(C) does permit a court to examine a plaintiff s conduct during the Rule 4(m) period [120 days to serve all defendants], but not in the way or for the purpose respondent or the Court of Appeals suggests. As we have explained, the question *** is what the prospective defendant reasonably should have understood about the plaintiff s intent in filing the original complaint against the first [but improper] defendant. *** 5 C Applying these principles to the facts of this case, we think it clear that the courts below erred in denying relation back ***. The District Court held that Costa Crociere had constructive notice of Krupski s complaint within the Rule 4(m) period. Costa Crociere has not challenged this finding. Because the complaint made clear that Krupski meant to sue the company that owned, operated, managed, supervised and controlled the ship on which she was injured, and also indicated (mistakenly) that Costa Cruise performed those roles, Costa Crociere should have known, within the Rule 4(m) period, that it was not named as a defendant in that complaint only because of Krupski s misunderstanding about which Costa entity was in charge of the shipclearly a mistake concerning the proper party s identity. Respondent contends that because the original complaint referred to the ticket s forum requirement and presuit claims notification procedure, Krupski was clearly aware of the contents of the ticket, and because the ticket identified Costa Crociere as the carrier and proper party for a lawsuit, respondent was entitled to think that she made a deliberate choice to sue Costa Cruise instead of Costa Crociere. As we have explained, however, that Krupski may have known the contents of the ticket does not foreclose the possibility that she nonetheless misunderstood crucial facts regarding the two companies identities. Especially because the face of the complaint plainly indicated such a misunderstanding, respondent s contention is not persuasive. Moreover, respondent has articulated no strategy that it could reasonably have thought Krupski was pursuing in suing a defendant that was legally unable to provide relief. Page 159 of 358

160 Respondent also argues that Krupski s failure to move to amend her complaint during the Rule 4(m) period shows that she made no mistake in that period. *** Krupski s failure to add Costa Crociere during the Rule 4(m) period is not sufficient to make reasonable any belief that she had made a deliberate and informed decision not to sue Costa Crociere in the first instance. Nothing in Krupski s conduct during the Rule 4(m) period suggests that she failed to name Costa Crociere because of anything other than a mistake. It is also worth noting that Costa Cruise and Costa Crociere are related corporate entities with very similar names; crociera even means cruise in Italian. This interrelationship and [linguistic] similarity heighten the expectation that Costa Crociere should suspect a mistake has been made when Costa Cruise is named in a complaint that actually describes Costa Crociere s activities. *** In addition, Costa Crociere s own actions contributed to passenger confusion over the proper party for a lawsuit. The front of the ticket advertises that Costa Cruises has achieved a certification of quality, without clarifying whether Costa Cruises is Costa Cruise Lines, Costa Crociere, or some other related Costa company. Indeed, Costa Crociere is evidently aware that the difference between Costa Cruise and Costa Crociere can be confusing for cruise ship passengers. *** In light of these facts, Costa Crociere should have known that Krupski s failure to name it as a defendant in her original complaint [timely filed prior to the running of the SOL] was due to a mistake concerning the proper party s identity. We therefore reverse the judgment of the Court of Appeals for the Eleventh Circuit and remand the case [to the trial court] for further proceedings consistent with this opinion. It is so ordered. 5 Similarly, we reject respondent s suggestion that Rule 15(c) requires a plaintiff to move to amend her complaint or to file and serve an amended complaint within the Rule 4(m) period. Rule 15(c)(1)(C)(i) simply requires that the prospective defendant has received sufficient notice of the action within the Rule 4(m) period that he will not be prejudiced in defending the case on the merits. Notes and Questions: 1. Beeck allowed a defendant to amend its answer, to add a new defense (nonmanufacture of the product), after the running of the statute of limitations (SOL). Krupski allowed a plaintiff to add a new defendant after the expiration of the SOL and after the related period within which all defendants must normally be served. Do these cases reasonably apply Rule 15? How did the Krupski court justify its decision? 2. What key question was shifted, from the plaintiff to the defendant, as a result of Krupski? Page 160 of 358

161 NUWESRA v. MERRILL LYNCH, FENNER & SMITH, INC. United States Court of Appeals, Second Circuit 174 F.3d 87 (1999) Prof s Note: Many states have expressly federalized their versions of FRCP 11 which first appeared in the FRCP in Read Rule 11 closely especially as you work your way through the following case. This is an important area of civil procedure, in addition to the likelihood of its appearing on the bar and later touching upon every pleading you file as a plaintiffs or defendants attorney. Merrill is also a good trial practice case, as it implicates the availability of attorneys fees to finance litigation. Minor editorial enhancements have been added to the text, without so indicating. Court s Opinion: PER CURIAM Attorney Lee Nuwesra ( appellant ) appeals from an order of the United States District Court for the Southern District of New York sanctioning him under Fed.R.Civ.P. 11(c)(1)(B). Appellant represented plaintiff Ernesto Forbes in his unsuccessful lawsuit * * *. Following a bench trial, the district court dismissed all of plaintiff's claims and ordered appellant to pay attorneys fees of $25,000 to defendants pursuant to Fed.R.Civ.P. 11(c)(1)(B). We hold that the district court improperly imposed sanctions * * *. We therefore vacate the district court s sanctions order and remand for further proceedings. BACKGROUND A. Plaintiff's Termination Plaintiff alleged that in late summer or early fall of 1992, while he was working as a processing clerk in Merrill Lynch s messenger service center, he learned through an anonymous test that he was infected with the Human Immunodeficiency Virus ( HIV ). Plaintiff claimed that in October 1992, he informed his immediate supervisor, D Apuzzo, of his medical condition, and as a result, her attitude toward [him] soured and [his] work environment gradually became intolerable. * * * In particular, D Apuzzo allegedly reassigned many of plaintiff s duties to other employees, excluded plaintiff from meetings in or entry to her office, sprayed disinfectant in her office and on telephones used by plaintiff, asked the cleaning staff to use disinfectant when cleaning plaintiff s work area, made derogatory statements about gay people and people with AIDS in plaintiff s presence, commented to plaintiff that he looked thin, repeatedly screamed at [plaintiff] in front of vendors and other employees and instigated fights and arguments, falsely accused plaintiff of improperly borrowing money from a vendor, and asked plaintiff s co-workers whether plaintiff was gay and whether he had made sexual advances toward them. In January 1993, plaintiff claimed he informed D Apuzzo s supervisor, DiBiase, that he was having difficulty working with D Apuzzo. DiBiase allegedly acknowledged that he was aware of plaintiff s medical status and promised to intervene, but never did. On April 20, 1993, D Apuzzo issued a ninety-day probation notice indicating that plaintiff was unable or unwilling to work with her. Plaintiff maintained that he later spoke to Merrill Lynch s Director of Human Resources, Nick DiGirolamo, about the intolerable conditions he was enduring at his job and requested a transfer to another department. On September 13, 1993, DiBiase instead called plaintiff into his office and told him he was fired for insubordination. B. Administrative Proceedings Page 161 of 358

162 In February 1994, plaintiff filed dual complaints with the New York City Commission on Human Rights ( NYCCHR ) and the Equal Employment Opportunity Commission ( EEOC ) * * *. In July 1994, plaintiff approached the Gay Men s Health Crisis ( GMHC ) seeking legal representation. The GMHC was of the view that plaintiff presented a credible claim of HIV discrimination and agreed to represent him in the administrative proceedings. On February 23, 1995, the NYCCHR * * * found that [t]he investigation did not support complainant's allegations. The investigation revealed that complainant committed several acts of misconduct and performed his job responsibilities poorly. It was because of his performance problems that complainant was disciplined and eventually terminated * * *. Plaintiff timely sought review of this determination, and * * * the NYCCHR reaffirmed its original decision dismissing plaintiff s complaint. C. District Court Proceedings In July 1995, the GMHC * * * referred plaintiff's case to appellant, who agreed to represent plaintiff on a contingency fee basis. Appellant subsequently filed a complaint on plaintiff's behalf in federal district court alleging that defendants had violated the ADA [American s with Disabilities Act] and state law by terminating plaintiff s employment on the basis of his disability. After the parties conducted discovery, the district court held a three-day bench trial in October At the close of plaintiff s evidence, which included his own testimony, the court found that leaving aside completely the issue of credibility, plaintiff had established a prima facie case of discrimination. Defendants then attempted to establish a legitimate nondiscriminatory reason for firing plaintiff by presenting witnesses * * * who testified that plaintiff was fired for insubordination. These witnesses also testified that they were not aware of plaintiff s medical condition until after he filed his [post-termination] administrative complaints. In his summation, defense counsel argued that the first record of plaintiff s medical condition was an HIV test conducted in June 1993, two months after plaintiff had been placed on probation. At the close of the bench trial, the court dismissed plaintiff s remaining claims, finding that [t]here ha[d] been a total failure of proof on the part of plaintiff as to his claimed disability or claimed perceived disability and defendants knowledge of same. The court further stated: If there is going to be a claim for counsel fees by the prevailing party, the defendants, they must submit [it] in the next thirty days * * *. I think that counsel fees should be awarded in this case because it is the [c]ourt s view that there was no substance to this case to begin with, and the statute allows for the recovery of counsel fees. We also have in this court a rule prohibiting the filing of a complaint where there is no real basis for the complaint. That appears to have been the case here. There has been no [defendants ] application for a Rule 11 sanction, but I think that the awarding of counsel fees can serve as a deter[r]ent to bringing this kind of claim, that is, a claim for which there is no real proof, and no investigation apparently made of the facts prior to filing this complaint. Merrill Lynch subsequently submitted an affidavit of services detailing its legal fees and expenses incurred in connection with the lawsuit, which totaled $234, No motion or Page 162 of 358

163 memorandum of law accompanied the affidavit. One week later, the court issued an order scheduling a hearing on the award of attorney s fees and inviting appellant to respond to Merrill Lynch s affidavit. The order further stated that [t]he court will be awarding attorney s fees based on one or more of the following provisions: * * * Rule 11(c)(1)(B) F.R.C.P.; and the inherent power of the district court to award attorney s fees. Appellant filed responsive papers, and Merrill Lynch filed a reply. The court held a sanctions hearing * * *. [T]he district court issued an order sanctioning appellant under Rule 11(c)(1)(B) and ordering him to pay attorneys fees of $25,000 to defendants. The order stated that appellant is not being sanctioned merely or even primarily for the complaint he filed but rather for taking the case all the way to trial; he is being sanctioned for his ongoing failure to make reasonable inquiries in the papers he filed before the court, from the complaint onward. His pre-trial memorandum, submitted after the close of discovery, reiterated many of the problematic assertions in the case and contained some important omissions. The district court cited four specific grounds for its sanctions award. First, the court faulted appellant for failing to ascertain the exact nature of his client s disability. The court noted that plaintiff had asserted in the complaint and pretrial order that he was HIV-positive, but had testified at trial that he had AIDS. The court was also troubled that appellant had suggested at trial that HIV and AIDS were equivalent. Although the court observed that there is some inconsistent parlance in how AIDS is defined, and that the medical community and society at large did not immediately delineate HIV and AIDS, the court concluded that it is clearly problematic for a lawyer bringing ADA cases to stand in a courtroom in 1997 and suggest that HIV and AIDS are in fact the same thing. Second, the district court sanctioned appellant for failing to investigate precisely when plaintiff learned of his medical condition. In particular, the court noted the absence of any documentary [trial] evidence supporting plaintiff s allegation that he tested positive for HIV either in August 1992, as the complaint alleged, or in October 1992, as plaintiff testified at trial. At the sanctions hearing, appellant had asserted that no documentary evidence of this test existed because plaintiff had been tested anonymously, could not recall the name or location of the testing service, and had received his test results by telephone. * * *. Third, the district court determined that appellant did not reasonably investigate whether, when and under what circumstances plaintiff informed his supervisors about his HIV or AIDS status, which the court characterized as a crucial omission given that the employer s notice was the crux of the case. The court was particularly troubled by certain inconsistencies in plaintiff s complaint, deposition testimony, pretrial submissions and trial testimony concerning when and to whom * * * plaintiff revealed his medical condition. Finally, the district court concluded that the NYCCHR s [administrative] no probable cause determination was an extremely relevant circumstance, which, together with plaintiff s inability to produce evidence to support key aspects of his claim, should have caused [appellant] to proceed with extra caution, or, better yet, not to proceed at all. This appeal followed. DISCUSSION * * * Appellant contends that the district court abused its discretion by, among other things, failing to give him adequate notice and a reasonable opportunity to respond before imposing sanctions, and awarding attorneys fees to defendants sua sponte under Rule Page 163 of 358

164 11(c)(1)(B). We address these contentions in turn. A. Notice and Opportunity to Be Heard [D]ue process requires that courts provide notice and an opportunity to be heard before imposing any kind of sanctions. Rule 11 itself requires that sanctions be imposed only after notice and a reasonable opportunity to respond. Fed.R.Civ.P. 11(c); see also advisory committee's note to 1993 amendments ( Explicit provision is made for litigants to be provided notice of the alleged violation and an opportunity to respond before sanctions are imposed. ). In particular, a sanctioned attorney must receive specific notice of the conduct alleged to be sanctionable and the standard by which that conduct will be assessed, and an opportunity to be heard on that matter. The purpose of particularized notice is to put counsel on notice as to the particular factors that he must address if he is to avoid sanctions. Accordingly, Rule 11 requires that the court, before imposing sanctions sua sponte, enter an order describing the specific conduct that appears to violate [the rule] and directing [the] attorney * * * to show cause why it has not violated [the rule] with respect thereto. Fed.R.Civ.P. 11(c)(1)(B). The district court's orders in this case failed to apprise appellant of the specific conduct alleged to be sanctionable. The court's written order stated only that [t]he court will be awarding attorney's fees based on one or more of the following provisions: 42 U.S.C ; 28 U.S.C. 1927; Rule 11(c)(1)(B) F.R.C.P.; and the inherent power of the district court to award attorney s fees. Although this order notified appellant of the possible legal bases for a fee award, it failed to apprise him of the particular conduct for which the court was considering imposing sanctions. The district judge s statements from the bench at the end of the trial were similarly deficient. 2 Those statements referred only to conduct leading up to and including the filing of the complaint: [see p.3 (above) trial court quotes] * * *. The judge s statements at the end of the trial therefore failed to identify the specific conduct for which appellant was ultimately sanctioned, and thus failed to put [appellant] on notice as to the particular factors that he [needed to] address * * * to avoid sanctions. The district court also failed to give appellant a reasonable opportunity to respond before imposing sanctions. See Fed.R.Civ.P. 11(c). During the sanctions hearing, the court questioned appellant concerning the nature and extent of his pre-filing investigation 3 and his knowledge of the NYCCHR s no probable cause determination. 4 The court did not, however, address other specific instances of conduct for which it later sanctioned appellant. For example, the court did not address appellant s putative failure to ascertain whether plaintiff had HIV or AIDS 5 or his failure to investigate defendants knowledge of plaintiff s disability. 6 Because these alleged failures w[ere] not explicitly raised during the hearing, appellant was not sufficiently put on notice that this was his opportunity to defend himself against th[ese] charge [s]. In our view, appellant was thus entitled to a more focused hearing before sanctions were imposed. B. Attorneys Fees under Rule 11 Under Rule 11(c), a court may impose sanctions either by [a party s] motion, see Rule 11(c)(1)(A), or on its own initiative, see Rule 11(c)(1)(B). Rule 11(c), however, also limits the types of sanctions that may be imposed for violation of the rule as follows: A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated * * *. [T]he sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys' fees Page 164 of 358

165 and other expenses incurred as a direct result of the violation. Fed.R.Civ.P. 11(c)(2) (emphasis added). As the italicized language indicates, a court may award attorneys fees under Rule 11 only if imposed on motion under Rule 11(c)(1)(A). By its terms, the rule thus precludes a court from awarding attorneys fees on its own initiative. See Fed.R.Civ.P. 11 advisory committee s note to 1993 amendments ( The revision [to subsection (c) ] provides that a monetary sanction imposed after a court-initiated show cause order be limited to a penalty payable to the court. ); [case citation omitted 6] ( [W]here sanctions are imposed under Rule 11(c)(1)(B) by a district court on its own initiative, * * * the award of attorney s fees * * * [does not] constitute a valid sanction. ). Defendants did not move for sanctions in this case. The court, not defendants, raised the issue of sanctions at the end of the trial and later issued a written order setting forth the grounds it was considering for the imposition of sanctions. Defendants ask this Court to treat Merrill Lynch s affidavit of services and reply affidavit as a motion for sanctions under Rule 11(c)(1)(A). A motion for sanctions, however, must be made separately from other motions or requests and must describe the specific conduct alleged to violate [the rule]. Fed.R.Civ.P. 11(c)(1)(A). * * * We conclude that the district court sanctioned appellant on its own initiative rather than by motion. Because Rule 11(c)(2) permits a court to award attorneys' fees only by motion, the district court had no authority to do so sua sponte. We also have concerns about the evidentiary basis for the court's sanctions order based on the fuller record that appellant has developed on appeal. See footnotes 3-6, supra. We trust, however, that the experienced [damning with feigned praise?] district court judge will, on remand, consider this fuller record in deciding whether to reinitiate sanctions proceedings under Rule 11(c)(1)(B). CONCLUSION We hold that the district court improperly sanctioned appellant without giving him adequate notice and a reasonable opportunity to respond, and had no authority under Rule 11(c)(1)(B) to award attorneys fees to defendants sua sponte. For the reasons discussed, we vacate the district court s sanctions order and remand for further proceedings in the district court s discretion... Notes and Questions:. 1. What is Rule 11 s most essential requirement? 2. How was that requirement breached in Merrill? 3. In what way did the trial judge breach Rule 11? 2. We assume, without deciding, that a judge s statements on the record could satisfy the requirements of Fed.R.Civ.P. 11(c)(1)(B) in the absence of a written order to show cause. But cf. Fed.R.Civ.P. 11(c)(1)(B) ( On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision (b) and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b) with respect thereto. ) 3. Appellant informed the court that before filing the complaint, he met with plaintiff on at least three occasions, reviewed plaintiff s extensive file, consulted plaintiff's former attorney at the GMHC (who had investigated plaintiff's claims and found them to be credible), and interviewed at least thee non-party witnesses (including two ministers) to whom plaintiff had revealed his HIV status as of late We have noted that employment-agency determinations are not homogeneous products; they vary greatly in quality and factual detail. * * * We have seen many employment discrimination cases in which plaintiffs established liability at trial after an agency finding of no probable cause. Page 165 of 358

166 5. The record reveals that appellant proffered expert medical testimony at trial to explain the relationship between HIV and AIDS. According to appellant's proffer, this testimony would have demonstrated that plaintiff qualified as having AIDS based on his June 1993 HIV test. Appellant argued to the district court, moreover, that proof of actual disability was not required in a case alleging discrimination based on a perceived disability. 6. The record reveals that from the complaint onward, plaintiff consistently averred that he told D Apuzzo, his immediate supervisor, about his HIV/AIDS status before the allegedly discriminatory treatment began. In addition, the pretrial order and pretrial memorandum both asserted that DiBiase, the supervisor who ultimately fired plaintiff, acknowledged that he was aware of plaintiff's medical status prior to his discharge. Page 166 of 358

167 RYDER v. JEFFERSON HOTEL CO. Supreme Court of South Carolina 113 S.E. 474 (1922) Marion, J. [delivered the opinion of a divided court:] The complaint alleges that the plaintiff Charles A. Ryder and the plaintiff Edith C. Ryder are husband and wife; that the plaintiff[s] became guests of the defendant Jefferson Hotel Company, and entered into a contract with said Jefferson Hotel Company for accommodations usually incident to the relationship between innkeeper and guest; that thereafter, during the night of October 4th, the defendant S. J. Bickley, acting as the servant and agent of the defendant Jefferson Hotel Company, roused the plaintiffs by rapping upon their room door, and in a rude and angry manner insulted the plaintiff Edith C. Ryder; that as a result of the insults, imputations, and charges, which are fully set out in the complaint, and of the flagrant breach of the contractual obligations and resultant duties which the defendants owed the plaintiffs as public guests for hire, the plaintiffs were compelled to give up the accommodations due them and leave the said hotel, and were forced at midnight and at great inconvenience and uncertainty to seek another lodging place; that by reason of such high-handed, malicious, and willful conduct, on the part of the said hotel and its servant and agent, the plaintiffs were greatly injured in their reputations, credit, and business, and that the plaintiff Charles A. Ryder has been deprived of great gains and profits which he would have made; and that by reason of the careless, negligent, willful, and wanton breach of said contract and high-handed acts and insults the plaintiffs have been damaged in the sum of $10,000. Source: < Reprinted with Permission of Security Federal Savings and Loan Association (Columbia, S.C.) and Ron Chapiesky Studio Defendants separately demurred to the complaint upon the ground that it appeared upon the face thereof that several causes of action had been improperly united therein, for the reason that the several causes of action united do not affect all the parties to the action. From an order overruling the demurrer, defendants appeal. The sole question for determination is: Does the complaint contain two causes of action which may be joined in the same complaint? It is apparent, as appellants suggest, that the complaint alleges a cause of action by Charles A. Ryder against the defendants for a personal 167

168 tort that is, for a breach of duty growing out of the relationship existing between the parties, to wit, innkeeper and guest and also a cause of action by Edith C. Ryder against the defendants for a tortious breach of duty growing out of the same relationship. It is also apparent that both of these alleged causes of action arose out of the same transaction, in the sense that the injury to each of the plaintiffs was caused by the same delict. But appellants contend that it is equally apparent from the allegations of the complaint that the rights invaded and the injuries sustained are necessarily several, and that plaintiffs cannot maintain a joint action and recover joint damages therefor. We think that contention must be sustained. Section 218 of the Code of Procedure (1912), classifying the various causes of action which may be united in the same complaint, contains this proviso: But the causes of action, so united, must all belong to one of these classes, and, except in actions for the foreclosure of mortgages, must affect all the parties to the action, and not require different places of trial, and must be separately stated. The rule applicable is : When a tort of a personal nature, as assault and battery, a false imprisonment, a libel, a slander, a malicious prosecution, or the like, is committed upon two or more, the right of action must, except in a very few special cases, be several. In order that a joint[ly filed] action may be possible, there must be some prior bond of legal union between the persons injured such as partnership relation of such a nature that the tort interferes with it, and by virtue of that very interference produces a wrong and consequent damage common to all. It is not every prior existing legal relation between the parties that will impress a joint character upon the injury and damage. Thus, if a husband and wife be libeled, or slandered, or beaten, although there is a close legal relation between the parties, it is not one which can be affected by such a wrong, and no joint cause of action will arise. That the rights infringed and the injuries suffered by the two plaintiffs in the case at bar are several, and not joint, would not seem open to question. To illustrate: If the two plaintiffs, husband and wife, occupying the same berth in a sleeping car, had both been physically injured in a wreck of the train, it would scarcely be contended that they could properly bring a joint action for the damages sustained by each on account of the carrier s delict. The complaint here does not state a cause of action for injuries to the wife alone, and join the husband as a formal party. Neither is the husband s alleged cause of action based upon loss of consortium and expenses incurred on behalf of the wife. The wife s cause of action as alleged does not affect the husband, and the husband s cause of action does not affect the wife, in the sense that the Code of Procedure requires that the causes of action joined in the same complaint must affect all parties to the action. Neither has a legal interest in the pecuniary recovery of the other, and in contemplation of law there can be no joint and common damage to both resulting from a wrong which gives rise to separate and distinct rights personal to each. At common law it seems that even the husband s cause of action for the loss of the wife s services and companionship and expenses incurred by him on account of injury to the wife could not be joined with the cause of action for injuries personal to the wife. In the case at bar not only are the parties plaintiff different, and the potential elements of damage recoverable by the parties different, but neither party has the right to sue for the benefit of the other. We are 168

169 therefore clearly of the opinion that there is no such joint right to enforce a common recovery as entitles the plaintiffs in the case at bar to join their several causes of action in the same complaint. The order of the circuit [trial] court is reversed. Fraser, J. (dissenting). I cannot concur in the opinion of Mr. Justice Marion. The plaintiffs were occupying a room at the hotel, claiming that they were husband and wife. They were expelled from the hotel, under the allegation that they were not husband and wife. It was a denial of the joint relationship that caused the trouble. [T]he illustrations used [above] are not appropriate to the case. When a husband and wife are injured in one railroad accident, the injuries are [admittedly] individual, and not joint. [But i]t seems to me that the case is somewhat like an injury to a copartnership. I do not think that it will be doubted that the copartnership can bring an action for injury to the copartnership, although the injury to the two copartners may not be the same. One of the copartners may have no other business that could be affected. The other may have other business, and all business in which the other copartner is engaged may be affected. In the joint action the other copartner may not be able to recover for the injury peculiar to himself; but the injury to the copartnership is a joint injury, and for this injury it may recover. Here the offense was against the husband and wife and affected their relation as husband and wife. This is manifestly a joint injury. If the defendant had moved to strike out those allegations of damage that were peculiar to the husband, a different question would have been presented; but to my mind there certainly was a joint injury, for which a joint action can be maintained, and it was not error [for the trial judge] to overrule the demurrer. For these reasons I dissent. Notes and Questions: 1. The common law penchant for limited joinder had its origins in English practice before the printing press, when the pleadings were oral. As a result, the early American code practice greatly limited joinder of claims and parties. 2. See FRCP 20(a), part of the federal approach to such matters, when promulgated in Would the federal result be the same as in Ryder? 169

170 TANBRO FABRICS CORP. v. BEAUNIT MILLS New York Supreme [trial] Court, Appellate Division 167 N.Y.S.2d 387 (1957) OPINION OF THE COURT Breitel, J. [delivered the unanimous opinion of the court:] [T]he question here is whether a buyer of textile goods may obtain a single trial against the seller and the processor of the goods, either by joinder in a single action, or by consolidation of actions, to determine whether the goods are defective, and if so, whether the defect is the consequence of breach by the seller, or the processor, or both of them. Special Term held that such joinder or consolidation is not available. A contrary view is reached here. It is held that the buyer is entitled to have such a common trial, either by joinder in a single action or by a consolidation of actions. The underlying business dispute spawned three lawsuits. In the first action, the seller, Beaunit, sought to recover the purchase price of goods sold and delivered to Tanbro. The buyer, Tanbro, counterclaimed for breach of warranty for improper manufacture, as a result of which the goods were subject to yarn slippage. The seller replied to the counterclaim by denying that the slippage was due to improper manufacture. A portion of the goods still being in the hands of the processor, Tanbro initiated another action, to recover these goods. The processor, Amity, counterclaimed for its charges and asserted its claim to the goods under an artisan s lien. In the exchanges that preceded and attended the bringing of these lawsuits, the buyer Tanbro received Beaunit s assertion that the yarn slippage was caused by the processor s improper handling, while with equal force the processor charged the same defect to Beaunit as a consequence of its improper manufacture. At this juncture, Tanbro, the buyer, brought the third lawsuit against Beaunit and Amity, charging the goods were defective because of yarn slippage and that such slippage was caused by either the seller, Beaunit, or alternatively the processor, Amity, or both. This is the main action before the court. [T]he buyer Tanbro moved to consolidate the three actions. Beaunit and Amity separately cross-moved to dismiss the complaint in the buyer s main action on the ground that there were prior actions pending between the parties with respect to the same cause of action. The motion to consolidate was denied and Beaunit s cross motion to dismiss the complaint as against it was granted. The order should be modified by granting the consolidation, denying the cross motion of the seller Beaunit to dismiss the complaint as to it in the buyer s main action and otherwise affirming the order. Both the seller and the processor resist consolidation. They do so on the ground that each had a separate and different relationship to the buyer, and that each was involved in a separate and independent contract. Therefore, they say, there is not involved the same transaction or occurrence, nor any common question of law or fact to sustain either a joinder of parties or a consolidation of the actions. They stress that the buyer Tanbro wishes to pit against each other the seller and the processor on the issue of responsibility for the alleged defect, while the buyer sits back free from the obligation to prove a full case, as it would otherwise have to do in separate actions against the seller and the processor. The buyer, on the other hand, argues that what is identical to the cases are the goods and the defect, with the common question of who is responsible for the defect. The buyer concedes that it would have to prove the defect, and also prove that the defect must have been caused by either the seller or the processor or both of them; 170

171 that, therefore, this involves a single transaction or occurrence and involves a common question of fact. The controlling statute is section 212 of the Civil Practice Act. The portion pertinent to the joinder of defendants reads as follows: 2. All persons may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all of them would arise in the action [italics added]. Judgment may be given according to their respective liabilities, against one or more defendants as may be found to be liable upon all of the evidence, without regard to the party by whom it has been introduced. A reading of the section by itself would suggest little or no difficulty in permitting a joinder of parties in the buyer s main action or a consolidation of the three actions. However, the section has a history, which has created some confusion as to the meaning and application of the section. The seller and the processor rely heavily on... [a] case [which] arose under the predecessor statute permitting joinder. In that case the plaintiff sought to join in one death action the person charged with having caused the accident resulting in the injuries ending in death and a treating physician who, it was charged, by his incompetence, was the cause of the decedent s death. The Court of Appeals expressed doubt whether the joinder statute contemplated joinder in such a case, even if the section were given a liberal interpretation. It went on, however, to hold that section 258 of the Civil Practice Act a restriction on joinder of causes of action in pleading, was a limiting factor in permitting joinder of parties. Applying the statute, it held the joinder impermissible. In reaction to this decision, and on the recommendation of the Judicial Council, section 258 was repealed in favor of a broad pleading section. In making the recommendation, the Judicial Council added, Complete freedom should be allowed in the joinder of causes of action as in the joinder of parties, and it is submitted that the correct approach to the joinder both of parties and of causes of action is the English one: May the matters conveniently be tried together? The problem is to combine as many matters as possible to avoid multiplicity and at the same time not unduly complicate the litigation for the jury. Notably, in the English cases relied upon therein, there were joined, as defendants, parties that owed to plaintiff obligations under independent and separate contracts and in independent and separate relationships. In none of the cases was the same transaction or occurrence construed to require an identity of duty and relationship. In the instant case the common questions are: Were the goods defective, and if so, by whom was the defect caused? The emphasis in the legislative and decisional history is that the joinder statute is to be accorded broad liberality and interpretation in order to avoid multiplicity of suits and inconsistencies in determination. Moreover, the philosophy of broad joinder of parties has been followed in many jurisdictions. This then is the background for the present section 212 of the Civil Practice Act. It should be beyond argument, by now, that it is no longer a bar to joinder, and to consolidation, that there is not an identity of duty or contract upon which to assert alternative liability. It is still necessary, of course, that there be a finding that the alternative liability arises out of a common transaction or occurrence involving common questions of fact and law. But this is not a rigid test. It is to be applied with judgment and discretion, in the balancing of convenience and justice 171

172 between the parties involved. Indeed, the buyer s situation prompted Special Term [the judge] to comment that the buyer, Tanbro, is in the unenviable position of not knowing possibly which of its contracting parties is responsible and in separate actions may find itself confronted with defeat in each event though the product as finally delivered may be defective. [A]s the Judicial Council foresaw in its Fifteenth Annual Report: Similarly, when a party is in doubt as to the person from whom he is entitled to relief, the pleading of necessity will assert a right in the alternative; for only by asserting facts which in the alternative fasten liability either upon one or the other defendant can the plaintiff make out a cause of action and, by proving such facts, establish a prima facie case. In the light of this reasoning, the cross motion dismissing the complaint in the buyer s main action against the seller, Beaunit, on the ground of prior action pending, should have been determined otherwise. It is in that action and under that complaint that both defendants are charged with alternative liability. While consolidation would bring all of the parties and their respective claims and cross claims together, there would actually be no [need for a] pleading which asserts alternative liability under section 212. The right of joinder and the privilege to obtain consolidation is always counterbalanced, of course, by the power of the court to grant a severance, or to deny a consolidation, if prejudice or injustice appear. In this case, the danger of separate trials, leading, perhaps, to an unjust and illogical result, is a possibility well worth avoiding. The buyer is entitled to a less hazardous adjudication of his dispute, so long as he is able to make out a prima facie case of alternative liability. Accordingly, the order of Special Term insofar as it granted the cross motion to dismiss the complaint in the first-described action as against the defendant Beaunit and denied the buyer Tanbro s motion to consolidate the three actions should be modified to deny the cross motion and to grant the motion to consolidate, on the law and in the exercise of discretion of the court. Notes and Questions:. 1. The above term jointly, severally, or in the alternative is mentioned in the FRCP. What does it mean? The referenced relaxation of joinder, to which Tanbro alludes, facilitated the consolidation of its several actions into one case. What are the merits of the modern approach? What are the demerits? When the relaxed approach to joinder results in practical problems, they can be alleviated by the alternative remedies provided in FRCP

173 BANK OF CALIFORNIA NATIONAL ASS N v. SUPERIOR COURT California Supreme Court 16 Cal.2d 516 (1940) (superseded by statute) Gibson, Chief Justice [delivered the opinion for a unanimous court:] This is a petition for a writ to restrain the respondent superior court from proceeding with the trial of an action without bringing in certain parties alleged to be necessary and indispensable. Sara M. Boyd, the widow of Colin M. Boyd, died, leaving an estate valued at about $225,000. [I]n the superior court in San Francisco, her will was admitted to probate, and petitioner, Bank of California, was appointed executor. The will left individual legacies and bequests amounting to $60,000 to a large number of legatees, including charitable institutions and individuals, some residing in other states and in foreign countries. Petitioner, St. Luke s Hospital, was named residuary legatee and devisee, and thereby received the bulk of the estate. St. Luke s Hospital (circa 1920) Source: < Reprinted with Permission of California Pacific Medical Center On October 14, 1937, Bertha M. Smedley, a niece and legatee, brought an action to enforce the provisions of an alleged contract by which decedent agreed to leave her entire estate to the plaintiff. The complaint named as parties defendant the executor and all of the beneficiaries under the will, and prayed for a decree adjudging that plaintiff is, by virtue of the agreement, the owner of the entire estate of the decedent after payment of debts and expenses. It was further prayed that plaintiff s title to the property be quieted; that defendants be ordered to execute deeds to her, and that upon the failure of any defendant to do so the clerk should execute such an instrument. Summons was served only upon petitioners, the executor and the residuary legatee. No other defendants were served, and none appeared. Petitioners filed separate answers. The action came to trial on November 15, Immediately upon its opening, petitioners made a motion for an order to bring in the other defendants, and to have summons issued and served upon them. The motion was made on the ground that all the other defendants were necessary and 173

174 indispensable parties to the action, and that the court could not proceed without them. The motion was denied by respondent court. Petitioners then applied for a writ to restrain the trial until these other parties should be brought in. In support of their application, petitioners point out that the complaint challenges the right of every legatee and devisee to share in the estate, and prays for an award of the entire property to plaintiff. It is contended that a trial and judgment without the absent defendants would adversely affect the rights of such parties, would result in a multiplicity of suits, and would subject the petitioning executor to inconvenience, expense and the burden of future litigation. To test the theory of petitioners, it will be necessary to examine briefly the origin and nature of the rules on required or compulsory joinder of parties. We may eliminate, at the outset, the field of permissive joinder of proper parties, for there is no doubt that the absent defendants are interested in the issues and subject of the action, and could properly be joined. For the same reason, these legatees, if they had not been named as defendants, could no doubt have intervened in the action. These propositions are conceded by all parties, and the precise issue is thus made clear, whether the absent defendants are not only proper parties but indispensable parties in the sense that service upon them or their appearance is essential to the jurisdiction of the court to proceed in the action. Equity courts developed another theory of compulsory joinder, to carry out the policy of avoiding piecemeal litigation and multiplicity of suits. Those persons necessary to a complete settlement of the controversy were usually required to be joined, in order that the entire matter might be concluded by a single suit. Generally speaking, the modern rule under the codes carries out the established equity doctrine. Thus, section 389 of the Code of Civil Procedure states: The court may determine any controversy between parties before it, when it can be done without prejudice to the rights of others, or by saving their rights; but when a complete determination of the controversy cannot be had without the presence of other parties, the court must then order them to be brought in. But the equity doctrine as developed by the courts is loose and ambiguous in its expression and uncertain in its application. Sometimes it is stated as a mandatory rule, and at other times as a matter of discretion, designed to reach an equitable result if it is practicable to do so. And despite various attempts at reconciliation of conflicting expressions, a great deal of confusion still remains in the cases. Bearing in mind the fundamental purpose of the doctrine, we should, in dealing with necessary and indispensable parties, be careful to avoid converting a discretionary power or a rule of fairness in procedure into an arbitrary and burdensome requirement which may thwart rather than accomplish justice. These two terms have frequently been coupled together as if they have the same meaning; but there appears to be a sound distinction, both in theory and practice, between parties deemed indispensable and those considered merely necessary [italics added]. It has been objected that the terms necessary and indispensable convey the same idea... But a distinction has been drawn. While necessary parties are so interested in the controversy that they should normally be made parties in order to enable the court to do complete justice, yet if their interests are separable from the rest and particularly where their presence in the suit cannot be obtained, they are not indispensable parties. The latter are those without whom the court cannot proceed. First, then, what parties are indispensable? There may be some persons whose interests, rights, or duties will inevitably be affected by any decree which can be rendered in the action. 174

175 Typical are the situations where a number of persons have undetermined interests in the same property, or in a particular trust fund, and one of them seeks, in an action, to recover the whole, to fix his share, or to recover a portion claimed by him. The other persons with similar interests are indispensable parties. The reason is that a judgment in favor of one claimant for part of the property or fund would necessarily determine the amount or extent which remains available to the others. Hence, any judgment in the action would inevitably affect their rights. Thus, in an action by one creditor against assignees for the benefit of creditors, seeking an accounting and payment of his share of the assets, the other creditors were held indispensable; and in an action by plaintiff to enforce a trust, where he claimed the property in his own right, to the exclusion of another actual beneficiary, failure to join the latter was held fatal to the judgment. Where, also, the plaintiff seeks some other type of affirmative relief which, if granted, would injure or affect the interests of a third person not joined, that third person is an indispensable party. Thus, in an action by a lessor against a sublessee to forfeit a parent lease because of acts of the sublessee, the sublessors (original lessees) were indispensable parties, since a decree of forfeiture would deprive them of their lease. And in a suit to cancel illegal registration of voters, all voters whose registration was challenged were indispensable parties. All of these persons are, of course, necessary parties, but the decisions show that they come within a special classification of necessary parties, to which the term indispensable seems appropriate. An attempt to adjudicate their rights without joinder is futile. Many cases go so far as to say that the court would have no jurisdiction to proceed without them, and that its purported judgment would be void and subject to collateral attack. The objection being so fundamental, it need not be raised by the parties themselves; the court may, of its own motion, dismiss the proceedings, or refuse to proceed, until these indispensable parties are brought in. It follows that if the court does attempt to proceed, it is acting beyond its jurisdiction and may be restrained by [an appellate court s writ of] prohibition. The other classification includes persons who are interested in the sense that they might possibly be affected by the decision, or whose interests in the subject matter or transaction are such that it cannot be finally and completely settled without them; but nevertheless their interests are so separable that a decree may be rendered between the parties before the court without affecting those others. These latter may perhaps be necessary parties to a complete settlement of the entire controversy or transaction, but are not indispensable to any valid judgment in the particular case. They should normally be joined, and the court will usually require them to be joined, in order to carry out the policy of complete determination and avoidance of multiplicity of suits. But, since the rule itself is one of equity, it is limited and qualified by considerations of fairness, convenience, and practicability. Where, for example, it is impossible to find these other persons or impracticable to bring them in, the action may proceed as to those parties who are present. With the foregoing distinctions in mind, the present action may be examined to determine whether the absent defendants are indispensable or only necessary parties. The action in these cases [e.g., by Smedley] is against the distributee personally [in personam], and not against the estate; and it is independent of the will and the probate proceeding [in rem]. Where there are a number of legatees and devisees, they would all appear to be necessary parties in the sense that the main issue, the validity of the testamentary disposition of the property of decedent, affects their property interests, and the entire matter, the disposition of all of the decedent s property, cannot be finally settled without a binding 175

176 adjudication for or against every legatee or devisee. Hence, the court will usually order them served and brought in unless there is some good reason for not doing so. But the absent defendants in such a case are not indispensable parties. Unlike the situations discussed above, in which any judgment would necessarily affect the rights of the absent persons, the case here is one where plaintiff may litigate her claim against the appearing defendants alone and obtain a decree which binds them alone. The absent defendants, not being before the court, will not be bound by the judgment, whether favorable or unfavorable, and their property interests will not be affected. If, in this kind of action, the court has jurisdiction to try the case, and may render a valid judgment where the plaintiff sues or maintains [and thus, directly prosecutes] the suit against less than all of the distributees, it must be clear that they [absentees] are not indispensable parties. So, in the present case, the absent defendants are not indispensable parties, and the court has jurisdiction to proceed without them, to determine the rights of the parties actually before it. Only brief mention need be made of the contention that the prosecution of the action against less than all of the distributees will cause inconvenience and multiplicity of suits to the injury of the [main probate action] executor. These are all matters within the discretion of the court to consider in connection with its policy to settle the entire controversy in one proceeding, if possible. But the contention, as we have seen, does not go to the jurisdiction of the court [to proceed with both actions]. We have refrained from discussing the question whether the lower court's denial of the motion to bring in the absent defendants was, under the circumstances, an abuse of discretion. If they were readily available and could have been brought in without serious difficulty, it may well be that the motion should have been granted. On the other hand, if, as is asserted by respondents, many reside outside the state or the country, great difficulty might be encountered in any attempt to bring them in, and the trial might be indefinitely delayed, to the detriment of the present parties. The fact that the interests of the absent defendants are trivial as compared with that of the residuary legatee, which received over seventy-five percent of the estate, is perhaps some indication of the reason why plaintiff chose to go to trial against the latter alone. All these considerations, however, were for the trial court in the first instance, and its determination, though reviewable in the proper manner, cannot be attacked on an application for writ of prohibition. The alternative writ, heretofore issued is discharged, and the peremptory writ is denied. Notes and Questions: 1. The executor s suit was an in rem proceeding, designed to effectively bring all the estate property before the probate court, so as to disseminate its content to the will s intended beneficiaries. Most of the absentee defendants (in name only) were not served, and few appeared. As you should recall, this would not be a problem, as to the in rem probate action. Beneficiary Smedley s related suit, on the other hand, was an in personam action. Its objective was to deprive the other beneficiaries of the property due them under the will. Recall that in the decade prior to International Shoe, jurisdiction over the absentees could be asserted only if they were served with notice of suit in the forum state. Even if there had been an applicable long-arm 176

177 statute, the foreign location of many defendants precluded Smedley from providing them with notice of her action. 2. How does one distinguish between necessary and indispensible parties? Were both types of defendants present in this case? 3. Assuming Bertha Smedley won her case, what did she get? Would it be all of the estate, as she claimed? If not, what next? 177

178 PROVIDENT TRADESMENS BANK & TRUST CO. v. PATTERSON United States Supreme Court 390 U.S. 102 (1968) Mr. Justice Harlan delivered the [unanimous] opinion of the Court. This controversy, involving in its present posture the dismissal of a[n] action for nonjoinder of an indispensable party, began nearly 10 years ago with a traffic accident. An automobile owned by Edward Dutcher, who was not present when the accident occurred, was being driven by Donald Cionci, to whom Dutcher had given the keys. John Lynch and John Harris were passengers. The automobile crossed the median strip of the highway and collided with a truck being driven by Thomas Smith. Cionci, Lynch, and Smith were killed and Harris was severely injured. Three tort actions were brought. Provident Tradesmens Bank, the administrator of the estate of passenger Lynch and petitioner here, sued the estate of the driver, Cionci, in a diversity action. Smith s administratrix, and Harris in person, each brought a state-court action against the estate of Cionci, Dutcher, the owner, and the estate of Lynch. These Smith and Harris actions, for unknown reasons, have never gone to trial and are still pending. The Lynch action against Cionci s estate was settled for $50,000, which the estate of Cionci, being penniless, has never paid. Dutcher, the owner of the automobile and a defendant in the as yet untried tort actions, had an automobile liability insurance policy with Lumbermens Mutual Casualty Company, a respondent here. That policy had an upper limit of $100,000 for all claims arising out of a single accident. This fund was potentially subject to two different sorts of claims by the tort plaintiffs. First, Dutcher himself might be held vicariously liable as Cionci s principal; the likelihood of such a judgment against Dutcher is a matter of considerable doubt and dispute. Second, the policy by its terms covered the direct liability of any person driving Dutcher s car with Dutcher s permission. The insurance company had declined, after notice, to defend in the tort action brought by Lynch s estate against the estate of Cionci, believing that Cionci had not had permission and hence was not covered by the policy. The facts allegedly were that Dutcher had entrusted his car to Cionci, but that Cionci had made a detour from the errand for which Dutcher allowed his car to be taken. The estate of Lynch, armed with its $50,000 liquidated claim against the estate of Cionci, brought the present diversity action for a declaration that Cionci s use of the car had been with permission of Dutcher. The only named defendants were the company and the estate of Cionci. The other two tort plaintiffs were joined as plaintiffs. Dutcher, a resident of the State of Pennsylvania as were all the plaintiffs, was not joined either as plaintiff or defendant. The failure to join him was not adverted to at the trial level. The major question of law contested at trial was a state-law question. The District Court had ruled that, as a matter of the applicable (Pennsylvania) law, the driver of an automobile is presumed to have the permission of the owner. Hence, unless contrary evidence could be introduced, the tort plaintiffs, now declaratory judgment plaintiffs [in this fourth action], would be entitled to a directed verdict against the insurance company. The only possible contrary evidence was testimony by Dutcher as to restrictions he had imposed on Cionci s use of the automobile. The two estate plaintiffs claimed, however, that under the Pennsylvania Dead Man Rule Dutcher was incompetent to testify on this matter as against them. The District Court 178

179 upheld this claim. The jury found that Cionci had had permission, and hence awarded a verdict to Harris also. Lumbermens appealed the judgment to the Court of Appeals for the Third Circuit, raising various state-law questions. The Court of Appeals, did not reach any of these issues. Instead, after reargument en banc, it decided, 5-2, to reverse on grounds [not] raised in the District Court. The first of these grounds was that Dutcher was an indispensable party. The court held that the adverse interests required him to be made a party. The court did not consider whether the fact that a verdict had already been rendered, without objection to the nonjoinder of Dutcher, affected the matter. Nor did it follow the provision of Rule 19 of the Federal Rules of Civil Procedure that findings of indispensability must be based on stated pragmatic considerations. It held, to the contrary, that the right of a person who may be affected by the judgment to be joined is a substantive right, unaffected by the federal rules; that a trial court may not proceed in the absence of such a person; and that since Dutcher could not be joined as a defendant without destroying diversity jurisdiction the action had to be dismissed. Since this ruling presented a serious challenge to the scope of the newly amended Rule 19, we granted certiorari. Concluding that the inflexible approach adopted by the Court of Appeals in this case exemplifies the kind of reasoning that the Rule was designed to avoid, we reverse. I. We may assume, at the outset, that Dutcher falls within the category of persons who, under s[ection] (a), should be joined if feasible. The action was for an adjudication of the validity of certain claims against a fund. Dutcher, faced with the possibility of judgments against him, had an interest in having the fund preserved to cover that potential liability. Hence there existed, when this case went to trial, at least the possibility that a judgment might impede Dutcher s ability to protect his interest, or lead to later relitigation by him. The optimum solution, an adjudication of the permission question that would be binding on all interested persons, was not feasible, however, for Dutcher could not be made a defendant without destroying diversity. Hence the problem was the one to which Rule 19(b) appears to address itself: in the absence of a person who should be joined if feasible, should the court dismiss the action or proceed without him? Since this problem emerged for the first time in the Court of Appeals, there were also two subsidiary questions. First, what was the effect, if any, of the failure of the defendants to raise the matter in the District Court? Second, what was the importance, if any, of the fact that a judgment, binding on the parties although not binding on Dutcher, had already been reached after extensive litigation? The three questions prove, on examination, to be interwoven. We conclude, upon consideration of the record and applying the equity and good conscience test of Rule 19(b), that the Court of Appeals erred in not allowing the judgment to stand. Rule 19(b) suggests four interests [factors] that must be examined in each case to determine whether, in equity and good conscience, the court should proceed without a party whose absence from the litigation is compelled. 2 Each of these interests must, in this case, be viewed entirely from an appellate perspective since the matter of joinder was not considered in the trial court. First, the plaintiff has an interest in having a forum. Before the trial, the strength 2 For convenience, we treat these interests in a different order from that appearing in Rule 19(b). 179

180 of this interest obviously depends upon whether a satisfactory alternative forum exists. On appeal, if the plaintiff has won, he has a strong additional interest in preserving his judgment. Second, the defendant may properly wish to avoid multiple litigation, or inconsistent relief, or sole responsibility for a liability he shares with another. After trial, however, if the defendant has failed to assert this interest, it is quite proper to consider it foreclosed. Third, there is the interest of the outsider whom it would have been desirable to join. Of course, since the outsider is not before the court, he cannot be bound by the judgment rendered. This means, however, only that a judgment is not res judicata as to, or legally enforceable against, a nonparty. Instead, as Rule 19(a) expresses it, the court must consider the extent to which the judgment may as a practical matter impair or impede his ability to protect his interest in the subject matter. When a case has reached the appeal stage the matter is more complex. The judgment appealed from may not in fact affect the interest of any outsider even though there existed, before trial, a possibility that a judgment affecting his interest would be rendered. When necessary, however, a court of appeals should, on its own initiative, take steps to protect the absent party, who of course had no opportunity to plead and prove his interest below. Fourth, there remains the interest of the courts and the public in complete, consistent, and efficient settlement of controversies. We read the Rule s third criterion, whether the judgment issued in the absence of the nonjoined person will be adequate, to refer to this public stake in settling disputes by wholes, whenever possible, for clearly the plaintiff, who himself chose both the forum and the parties defendant, will not be heard to complain about the sufficiency of the relief obtainable against them. After trial, considerations of efficiency of course include the fact that the time and expense of a trial have already been spent. Rule 19(b) also directs a district court to consider the possibility of shaping relief to accommodate these four interests. Commentators had argued that greater attention should be paid to this potential solution to a joinder stymie, and the Rule now makes it explicit that a court should consider modification of a judgment as an alternative to dismissal. 10 Needless to say, a court of appeals may also properly require suitable modification as a condition of affirmance. Had the Court of Appeals applied Rule 19 s criteria to the facts of the present case, it could hardly have reached the conclusion it did. We begin with the plaintiff s viewpoint. It is difficult to decide at this stage whether they would have had an adequate remedy had the action been dismissed before trial for nonjoinder: we cannot here determine whether the plaintiffs could have brought the same action, against the same parties plus Dutcher, in a state court. Opposing considerations in this case are hard to find. The defendants had no stake, either asserted or real, in the joinder of Dutcher. They showed no interest in joinder until the Court of Appeals took the matter into its own hands. This properly forecloses any interest of theirs, but for purposes of clarity we note that the insurance company, whose liability was limited to $100,000, had or will have full opportunity to litigate each claim on that fund against the claimant involved. The interest of the outsider, Dutcher, is more difficult to reckon. The Court of Appeals, concluding that it should not follow Rule 19 s command to determine whether, as a practical matter, the judgment impaired the nonparty s ability to protect his rights, simply quoted the District Court s reasoning that Dutcher had a right to be joined: 10 An appropriate statement of the question might be Can the decree be written so as to protect the legitimate interests of outsiders and, if so, would such a decree be adequate to the plaintiff s needs and an efficient use of judicial machinery? 180

181 The subject matter of this suit is the coverage of Lumbermens policy issued to Dutcher. Depending upon the outcome of this trial, Dutcher may have the policy all to himself or he may have to share its coverage with the Cionci Estate, thereby extending the availability of the proceeds of the policy to satisfy verdicts and judgments in favor of the two Estate plaintiffs. Sharing the coverage of a policy of insurance with finite limits with another, and thereby making that policy available to claimants against that other person is immediately worth less than having the coverage of such policy available to Dutcher alone. By the outcome in the instant case, to the extent that the two Estate plaintiffs will have the proceeds of the policy available to them in their claims against Cionci s estate, Dutcher will lose a measure of protection. Conversely, to the extent that the proceeds of this policy are not available to the two Estate plaintiffs Dutcher will gain. There is a logical error in the Court of Appeals appropriation of this reasoning for its own quite different purposes: Dutcher had an adverse interest because he would have been benefited by a ruling in favor of the insurance company; [but] the question before the Court of Appeals, however, was whether Dutcher was harmed by the judgment against the insurance company. The two questions are not the same. If the three plaintiffs had lost to the insurance company on the permission issue, that loss would have ended the matter favorably to Dutcher. If, as has happened, the three plaintiffs obtain a judgment against the insurance company on the permission issue, Dutcher may still claim that as a nonparty he is not estopped by that judgment from relitigating the issue. If Dutcher is not bound by the judgment in favor of the insurance company, in theory, he has not been harmed. There remains, however, the practical question whether Dutcher is likely to have any need to relitigate. The only possible threat to him is that if the fund is used to pay judgments against Cionci the money may in fact have disappeared before Dutcher has an opportunity to assert his interest. Upon examination, we find this supposed threat neither large nor unavoidable. In this [appeals] Court, counsel for petitioners represented orally that they, the tort plaintiffs, would accept a limitation of all claims to the amount of the insurance policy [italics added]. Obviously such a compromise could have been reached below had the Court of Appeals been willing to abandon its rigid approach and seek ways to preserve what was, as to the parties, subject to the appellants other contentions, a perfectly valid judgment. II. Whether a person is indispensable, that is, whether a particular lawsuit must be dismissed in the absence of that person, can only be determined in the context of particular litigation. 14 There is a large category, whose limits are not presently in question, of persons who, in the Rule s terminology, should be joined if feasible, and who, in the older [superseded Rule 19] terminology, were called either necessary or indispensable parties. Assuming the existence of a person who should be joined if feasible, the only further question arises when joinder is not 14 As the Court has before remarked, (t)here is no prescribed formula for determining in every case whether a person is an indispensable party. 181

182 possible and the court must decide whether to dismiss or to proceed without him. To use the familiar but confusing terminology, the decision to proceed is a decision that the absent person is merely necessary while the decision to dismiss is a decision that he is indispensable. The decision whether to dismiss (i.e., the decision whether the person missing is indispensable ) must be based on factors varying with the different cases Rule 19 commands the courts to examine each controversy to make certain that the interests really exist. To say that a court must dismiss in the absence of an indispensable party and that it cannot proceed without him puts the matter the wrong way around: a court does not know whether a particular person is indispensable until it had examined the situation to determine whether it can proceed without him. The earliest case giving rise to extended discussion the problem was the relatively simple one of the inefficiency of litigation involving only some of the interested persons. Chief Justice Marshall replied: In the exercise of its discretion, the Court will require the plaintiff to do all in his power to bring every person concerned in interest before the Court. But, if the case may be completely decided as between the litigant parties, the circumstance that an interest exists in some other person, whom the process of the Court cannot reach ought not to prevent a decree upon its merits. [I]f the decree can be so written that it protects the interests of the absent persons, but as so written it leaves the controversy so situated that the outcome may be inconsistent with equity and good conscience, the suit should be dismissed. III. We think it clear that the judgment below cannot stand. The judgment is vacated and the case is remanded to the Court of Appeals for consideration of those issues raised on appeal that have not been considered, and, should the Court of Appeals affirm the District Court as to those issues, for appropriate disposition preserving the judgment of the District Court and protecting the interests of nonjoined persons. It is so ordered. Judgment vacated and case remanded to Court of Appeals. Notes and Questions: 1. Who first raised the issue of whether Dutcher was an indispensible party? If not raised prior to judgment, that would mean that this basis for attacking a judgment is not waivable? If not, would that implicate constitutional Due Process in a fresh (post-pennoyer) joinder context? 2. A judgment in this case would effectively deprive Dutcher of the insurance proceeds he would have, to cover judgments in the other cases pending against him. The intermediate Court of Appeals thus held that he was an indispensible party to this litigation. That reversed the trial court proceedings, and would require a new trial. The Supreme Court faulted the Court of 182

183 Appeals for ignoring an important concession by the plaintiffs. The High Court thus held that the Court of Appeal was being too technical in its approach to Rule 19(b). Why so? 3. As the Supreme Court instructs: the Rule s terminology, should be joined if feasible, [applies to those] who, in the older terminology, were called either necessary or indispensable parties. What does the Court mean by this key phrase? 4. There was a jurisdictional impediment in Bank of California. What was it? There was a jurisdictional impediment in Provident Tradesman as well. Was it the same type of jurisdictional problem? 5. In both cases, the respective Supreme Courts ruled that the case could proceed, without the absentee. Did they thus push the limits of Due Process or, were these practical solutions to a recurring problem? 6. Given Provident s rugged terrain, one might peruse the following fact chart: Cast of Characters: Status: Dutcher car owner (not named party in S4) Cionci driver of Dutcher s car Lynch C s passenger & S4 co-plainitff Harris C s passenger & S4 co-plainitff Smith truck driver other vehicle & S4 co-p Suits 1 & 2 = untried state cases, where Dutcher = defendant Suit 3 = settled case Suit 4 = current case 183

184 COALITION OF ARIZONA/NEW MEXICO COUNTIES FOR STABLE ECONOMIC GROWTH v. DEPARTMENT OF THE INTERIOR United States Court of Appeals, Tenth Circuit 100 F.3d 837 (1996) Henry, Circuit Judge [delivered the unanimous opinion of the court]. Dr. Robin Silver appeals from the order of the United States District Court for the District of New Mexico denying his application to intervene in Coalition of Arizona/New Mexico Counties for Stable Economic Growth s ( Coalition ) suit against the Department of the Interior ( DOI ), the United States Fish and Wildlife Service ( FWS ) and various government officials. The Coalition challenges FWS s decision to protect the Mexican Spotted Owl ( the Owl ) under the Endangered Species Act ( the Act ), alleging that FWS failed to follow proper procedures and lacked data sufficient to list the Owl as threatened. Dr. Silver sought to intervene pursuant to the Rule 24 of the Federal Rule of Civil Procedure. Dr. Silver grounded his application upon two facts: (1) he had photographed and studied the Owl in the wild; and (2) he was instrumental in FWS s initial decision to protect the Owl under the Act, see, e.g., 58 Fed. Reg. 14,248, 14,252 (1993) (citing Dr. Silver s petition as instigating FWS s decision to list the Owl as an endangered species). Source: < Reprinted with permission of OwlPages and Toira Blank An order denying intervention is final and subject to immediate review if it prevents the applicant from becoming a party to an action. Accordingly, we accept jurisdiction and reverse the decision of the district court and remand the case for further proceedings. I. BACKGROUND 184

185 Dr. Silver is a commercial wildlife photographer, an amateur biologist, and a naturalist, specializing in photographing creatures in the American Southwest. Dr. Silver has sought out and photographed the Owl in its natural habitat-old-growth forests in the Southwest. For the past five years, he has been active in the effort to protect the Owl and its habitat [italics added]. In December 1989, Dr. Silver petitioned FWS to list the Owl as a threatened or endangered species. See 16 U.S.C. 1533(b)(3)(A) (an interested person may petition FWS to add a species to the threatened and endangered species list). When FWS failed to act on his petition within the statutory time limit, see 16 U.S.C. 1533(b)(3)(B), Dr. Silver wrote a letter dated November 9, 1992, to the Secretary of the Interior threatening suit under the Act s citizen lawsuit provision [authorizing a private lawsuit under the Act]. In April 1993, FWS listed the Owl as a threatened species. However, FWS failed to designate critical habitat for the Owl, stating that [d]esignation of critical habitat is prudent, but is not determinable at this time. Dr. Silver and other environmentalists filed suit in the United States District Court for the District of Arizona to force the designation of critical habitat for the Owl. [T]he court ordered FWS to designate critical habitat for the Owl, but FWS continued to delay. Dr. Silver moved to have FWS held in contempt of court, and the court ordered FWS to submit daily progress reports to Dr. Silver to insure that FWS would comply with the court s order. FWS designated critical habitat for the Owl on May 30, In September 1994, the Coalition filed the present lawsuit in the United States District Court for the District of New Mexico challenging the listing of the Owl as an endangered and threatened species under the Act [italics added]. The Coalition alleges that FWS failed to follow proper procedures and lacked data sufficient to list the Owl as threatened. In May 1995, Dr. Silver filed an application to intervene as of right, or in the alternative, permissively, pursuant to Fed.R.Civ.P. 24. Both the Coalition and the DOI opposed his application, and in July 1995 the district court denied it. The district court did, however, permit Dr. Silver to submit a brief as amicus curiae. On appeal, Dr. Silver argues that it was error for the court to deny his petition to intervene as of right for the following reasons: he filed his petition in a timely fashion; he has a direct, substantial and legally protectable interest in the subject matter of the action; his interest might be impaired absent his intervention; and the DOI will not adequately represent his interest. Alternatively, Dr. Silver contends that the district court erred by not allowing him to intervene permissively. The Coalition argues that the district court s denial of Dr. Silver s application to intervene was proper because: his interest in the subject matter of the action is not direct, substantial and legally enforceable; his interest is not impaired; and the DOI will adequately represent his interest. II. DISCUSSION A[n] applicant may intervene as of right if: (1) the application is timely; (2) the applicant claims an interest relating to the property or transaction which is the subject of the action; (3) the applicant s interest may as a practical matter be impair [ed] or impede[d]; and (4) the applicant s interest is [not] adequately represented by existing parties. a The parties agree that Dr. Silver s application was timely. We now address de novo whether Dr. Silver s application met the remaining three requirements. A. Dr. Silver has a direct, substantial and legally protectable interest in the listing of the Owl. a The current version of Rule 24 is substantially the same. 185

186 Dr. Silver must first show that he has an interest relating to the property or transaction which is the subject of the action. The contours of the interest requirement have not been clearly defined. Dr. Silver [claims] that he is entitled as a matter of right to intervene in an action challenging the legality of a measure [he] has supported. Our circuit and the Fifth Circuit require that [the] interest in the proceedings be direct, substantial, and legally protectable. Whether an applicant has an interest sufficient to warrant intervention as a matter of right is a highly fact-specific determination, and the interest test is primarily a practical guide to disposing of lawsuits by involving as many apparently concerned persons as is compatible with efficiency and due process. We now address the question of whether Dr. Silver s interest in the Owl, as a photographer, an amateur biologist, and a naturalist who has been at the forefront of efforts to protect the Owl under the Act, is direct, substantial, and legally protectable for the purposes of intervention under Rule 24(a)(2). Dr. Silver initiated the process to protect the Owl by submitting a petition for its protection. He pressed DOI and FWS in two letters to take action on his petition, and sued FWS when it failed to designate critical habitat for the Owl. When FWS failed to comply with the court order to designate a critical habitat for the Owl, Dr. Silver twice moved for an order of contempt, resulting in a court order that FWS maintain a daily diary and inform Dr. Silver of its progress toward the designation of critical habitat. We are not faced, as the Coalition suggests, with an applicant who has no interest in the present litigation other than prior [Arizona] litigation involving the same subject matter. Instead, Dr. Silver has been directly involved with the Owl as a wildlife photographer, an amateur biologist, and a naturalist who has photographed and studied the Owl in its natural environment. Dr. Silver s counsel admitted at oral argument that Dr. Silver had little economic interest in the Owl; however, economic interest is not the sine qua non of the interest analysis for intervention as of right. To limit intervention to situations where the applicant can show an economic interest would impermissibly narrow the broad right of intervention enacted by Congress and recognized by the courts. In sum, we hold that Dr. Silver s involvement with the Owl in the wild and his persistent record of advocacy for its protection amounts to a direct and substantial interest in the listing of the Owl for the purpose of intervention as of right, even though Dr. Silver has little economic interest in the Owl itself. Additionally, Dr. Silver s interest in the Owl is legally protectable as evidenced by his successful effort to have the Owl protected as an endangered species under the Act. Thus, the Act provided Dr. Silver with the legal right to protect his interest in the Owl. Additionally, the Act gives a private citizen the right to commence a civil suit on his own behalf... to enjoin any person, including the United States and any other governmental instrumentality or agency..., who is alleged to be in violation of [the Act]. [T]he desire to use or observe an animal species, even for purely esthetic purposes, is undeniably a cognizable interest for purpose of standing. Because Dr. Silver s interest in the litigation between the Coalition and the DOI is direct, substantial, and legally protectable, it sufficiently relates to the property or transaction which is the subject of the action and thereby satisfies the first element under Rule 24(a)(2). 4 4 We note that a motion to intervene in the litigation between Dr. Silver and FWS taking place in Arizona was filed by the State of Arizona, Apache County, and White Sands Forest Products, Inc. and was denied. Although the memorandum opinion does not supply us with all the relevant facts and the information is not in the record now before us, the memorandum opinion makes it clear that the only threat to the intervenors interest in that litigation was Dr. Silver s request for a ninety day injunction [italics added]. The Ninth Circuit noted that the applicant 186

187 The decision in Ozarks [citation omitted] echoes that of an earlier Tenth Circuit case [citation omitted]. In Allard, we held that two public interest groups had an insufficient interest to intervene in a case in which several owners of native American artifacts made of eagle feathers challenged the Migratory Bird Conservation Act and the Bald Eagle Protection Act. The subject of the suit was whether these federal laws infringed upon the plaintiffs rights to the feathered artifacts. The public interest groups sought to intervene to protect living birds and the environment. We held that the public interest groups were not entitled to intervene as of right because their interest in living birds and the environment was not sufficiently related to the plaintiffs right to the already existing artifacts [italics added]. The nature of the litigation between the Coalition and the DOI is different Both of those [above] cases involved what has been called traditional intervention. [R]ule [24(a)(2) ] was designed with... traditional private action[s] in mind, and its adaptation to other contexts requires a flexible reading of its provisions. Ozarks involved a condemnation dispute, and Allard involved private property interests in native American artifacts. The present litigation involves a challenge to FWS s decision to list the Owl, an administrative action not analogous to the litigation in Ozarks and Allard. Thus, the analysis of the interest requirement here is not analogous to the analyses of the interest requirements in those cases. The Coalition argues that the only interest Dr. Silver has in the litigation is his desire to transfer jurisdiction to the United States District Court for the District of Arizona [from the federal court in New Mexico, under the federal transfer statute], which has handled the litigation surrounding Dr. Silver s petition to have the Owl protected under the Act. This argument is without merit. If a party has the right to intervene under Rule 24(a)(2), the intervenor becomes no less a party than others and has the right to file legitimate motions, including venue motions. It then becomes the charge of the district court to sort through the motions including, in this case, a possible motion to transfer. Further, the right to file a brief as amicus curiae is no substitute for the right to intervene as a party in the action under Rule 24(a)(2). The Coalition s contention that Dr. Silver is forum shopping and that we should not allow him to succeed in this most disfavored practice also rings hollow. If anyone has forum shopped in this action it would appear to be the Coalition. Instead of bringing the present action in New Mexico, the Coalition could have applied to intervene in the action already pending in Arizona. The purpose of Rule 24(a), the prevention of a multiplicity of suits where common questions of law or fact are involved, suggests that all sides of the Owl litigation should be in one action, whether it be in New Mexico or Arizona. Otherwise, an endless string of litigation in two courts may ensue, with each court effectively reviewing the other s decision to list or delist the Owl, and neither court s rulings having preclusive effect on the absent party. B. Dr. Silver s Interest May Be Impaired To satisfy the second element under Rule 24(a)(2), Dr. Silver must show that the disposition of the Coalition s suit against the DOI may as a practical matter impair or impede his ability to protect [his] interest. Such impairment or impediment need not be of a strictly intervenor s legal rights may be adequately protected in a future lawsuit to compensate for damages sustained as a result of [the] court s injunction. Although we make no substantive comment on this holding, it is clear that Dr. Silver s legal rights are in greater jeopardy here where the Coalition seeks a permanent injunction against FWS prohibiting any future action in favor of the Owl [italics added].. 187

188 legal nature. [We] may consider any significant legal effect in the applicant s interest and [we are] not restricted to a rigid res judicata test [whereby intervention could be denied, on the ground that Dr. Silver (not a formal party) would not be bound by the judgment]. Thus, the stare decisis effect of the district court s judgment is sufficient impairment for intervention under Rule 24(a)(2). In its complaint against the DOI, the Coalition contends that the DOI failed to use the best available data, misapplied the data, used unfounded assumptions and jeopardized the Southwestern forest ecosystem. As part of its remedy, the Coalition seeks [a] permanent injunction enjoining [the DOI] from taking any actions pursuant to the listing of the [Owl]. If the district court were to rule in favor of these contentions and to mandate that the DOI delist the Owl, Dr. Silver s interest in the protection of the Owl would be impaired. Dr. Silver could submit a new petition to FWS to protect the Owl; however, he would, as a practical matter, be impaired by the stare decisis effect of the district court s decision, not to mention the direct effect of a possible permanent injunction. Furthermore, the Owl and its habitat would not be protected under the Act while Dr. Silver tried to lift such a permanent injunction and FWS considered Dr. Silver s new petition. C. The Existing Parties Do Not Adequately Represent Dr. Silver s Interest The burden is on the applicant in intervention to show that the representation by the existing parties may be inadequate, but this burden is minimal. An applicant may fulfill this burden by showing collusion between the representative and an opposing party, that the representative has an interest adverse to the applicant, or that the representative failed in fulfilling his duty to represent the applicant s interest. [T]he possibility of divergence of interest need not be great in order to satisfy the burden of the applicants... However, representation is adequate when the objective of the applicant for intervention is identical to that of one of the parties. Dr. Silver argues that his interest and that of DOI are divergent and that DOI s failure to move to transfer venue to the district court in Arizona, where litigation over the protection of the Owl under the Act is pending, evidences DOI s failure to protect his interest. Our decision in [citation omitted] is on point.... We reversed the lower court s denial of the applicants motion to intervene as of right, reasoning as follows: We have here... the familiar situation in which the governmental agency is seeking to protect not only the interest of the public but also the private interest of the petitioners in intervention, a task which is on its face impossible. The cases correctly hold that this kind of a conflict satisfies the minimal burden of showing inadequacy of representation. DOI must represent the public interest, which may differ from Dr. Silver s particular interest in the protection of the Owl in the habitat where he has photographed and studied the Owl. DOI s ability to adequately represent Dr. Silver despite its obligation to represent the public interest is made all the more suspect by its reluctance in protecting the Owl, doing so only after Dr. Silver threatened, and eventually brought, a law suit to force compliance with the Act. Under these circumstances, we conclude that Dr. Silver has made the minimal showing necessary to suggest that the government s representation may be inadequate. 188

189 III. CONCLUSION We hold that Dr. Silver has a right to intervene in the action pursuant to Fed.R.Civ.P. 24(a)(2) because: Dr. Silver has a direct, substantial and legally protectable interest in the subject of the action between the Coalition and DOI; this interest may be impaired by the determination of the action; and neither DOI nor the Coalition will adequately represent Dr. Silver s interest. Because Dr. Silver may intervene as of right under Rule 24(a)(2), it is unnecessary to consider the question of intervention as a matter of discretion under Rule 24(b)(2). We therefore reverse the order denying Dr. Silver s motion to intervene under Rule 24(a)(2) and remand the case to the District Court for the District of New Mexico with the direction that Dr. Silver s application to intervene be granted. Notes and Questions: 1. Note the traditional olive branch the trial court offered when it denied Dr. Silver s petition to intervene in the New Mexico federal suit. It authorized him to file an amicus curiae brief. If you were in his shoes, why would you not accept it? As stated by the Supreme Court: Where he presents no new questions, a third party can contribute usually most effectively and always most expeditiously by a brief amicus curiae and not by intervention. South Carolina v. North Carolina [2010]. 2. The court comments that: economic interest is not the sine qua non of the interest analysis for intervention as of right. Should it be (or some equally tangible interest)? 3. Coalition accused Dr. Silver of forum shopping? The Tenth Circuit court in New Mexico did not embrace that argument. Did the court fairly disregard Coalition s argument? 4. The court notes that Dr. Silver would not be bound by a judgment, if he were denied intervention because he would not then be a party [ res judicata point]. Yet the court employs the stare decisis basis for allowing him to intervene. Why is that a relevant interest, which operated in his favor? 5. If you were writing this opinion, would you have granted Dr. Silver intervention as of right? If so, would you have denied permissive intervention? 189

190 WAL-MART STORES, INC. v. DUKES United States Supreme Court 131 S.Ct (2011) Prof s Note: First, read FRCP 23(a)(1)-(4) on the Rules webpage. Subsection (a) is critically important. Subsection (b) while an important feature of Walmart is less so. Peruse the remainder of the rule, then go to the Problems-Hypos-Charts web page Class Action Chart... Numerous citations to authority have also been omitted, without so indicating. Certain of the Court s editorial enhancements have been deleted, without so indicating. Court s Opinion: Justice Scalia delivered the opinion of the Court. We are presented with one of the most expansive class actions ever. The District Court and the Court of Appeals approved the certification of a class comprising about one and a half million plaintiffs, current and former female employees of petitioner Wal Mart who allege that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII [of the Civil Rights Act of 1964] by discriminating against women. In addition to injunctive and declaratory relief, the plaintiffs seek an award of backpay. We consider whether the certification of the plaintiff class was consistent with Federal Rules of Civil Procedure 23(a) a and (b)(2). b I A Petitioner Wal Mart is the Nation s largest private employer. It operates four types of retail stores throughout the country: Discount Stores, Supercenters, Neighborhood Markets, and Sam s Clubs. Those stores are divided into seven nationwide divisions, which in turn comprise 41 regions of 80 to 85 stores apiece. Each store has between 40 and 53 separate departments and 80 to 500 staff positions. In all, Wal Mart operates approximately 3,400 stores and employs more than one million people. Pay and promotion decisions at Wal Mart are generally committed to local managers broad discretion, which is exercised in a largely subjective manner. Local store managers may increase the wages of hourly employees (within limits) with only limited corporate oversight. As for salaried employees, such as store managers and their deputies, higher corporate authorities have discretion to set their pay within pre[-]established ranges. Promotions work in a similar fashion. Wal Mart permits store managers to apply their own subjective criteria when selecting candidates as support managers, which is the first step on the path to management. [R]egional and district managers have discretion to use their own judgment when selecting candidates for management training. Promotion to higher office e.g., assistant manager, co-manager, or store manager is similarly at the discretion of the employee s superiors after prescribed objective factors are satisfied. B The named plaintiffs in this lawsuit, representing the 1.5 million members of the certified class, are three current or former Wal Mart employees who allege that the company discriminated against them on the basis of their sex [gender] by denying them equal pay or promotions. a See p. 2 text, subsection C below. b See p. 2 last, text accompanying n.2 below (note quotes b(1) & b(3)). 190

191 These plaintiffs, respondents here, do not allege that Wal Mart has any express corporate policy against the advancement of women. Rather, they claim that their local managers discretion over pay and promotions is exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees. And, respondents say, because Wal Mart is aware of this effect, its refusal to cabin its managers authority amounts to disparate treatment. Their complaint seeks injunctive and declaratory relief, punitive damages, and backpay. It does not ask for compensatory damages [other than backpay]. Importantly for our purposes, respondents claim that the discrimination to which they have been subjected is common to all Wal Mart s female employees. The basic theory of their case is that a strong and uniform corporate culture permits bias against women to infect, perhaps subconsciously, the discretionary decision[-]making of each one of Wal Mart s thousands of managers thereby making every woman at the company the victim of one common discriminatory practice. Respondents therefore wish to litigate the Title VII claims of all female employees at Wal Mart s stores in a nationwide class action. C Class certification is governed by Federal Rule of Civil Procedure 23. Under Rule 23(a), the party seeking certification must demonstrate, first, that:. (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. Second, the proposed class must satisfy at least one of the three requirements listed in Rule 23(b). Respondents rely on Rule 23(b)(2), which applies when the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. 2 Invoking these provisions, respondents moved the District Court to certify a plaintiff class consisting of [a]ll women employed at any Wal Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal Mart s challenged pay and management track promotions policies and practices. As evidence that there were indeed questions of law or fact common to all the women of Wal Mart, as Rule 23(a)(2) requires, respondents relied chiefly on three forms of proof: statistical evidence, anecdotal reports, and the testimony of a sociologist, Dr. William Bielby, who conducted a social framework analysis of Wal Mart s culture and personnel practices, and concluded that the company was vulnerable to gender discrimination. 2 Rule 23(b)(1) allows a class to be maintained where prosecuting separate actions by or against individual class members would create a risk of either (A) inconsistent or varying adjudications, or (B) adjudications... that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impeded their ability to protect their interests. Rule 23(b)(3) states that a [damages] class [action] may be maintained where questions of law or fact common to class members predominate over any questions affecting only individual members, and a class action would be superior to other available methods for fairly and efficiently adjudicating the controversy. The applicability of these provisions to the plaintiff class is not before us [although Ps sought certification under b(3), if b(2) were deemed inapplicable]. 191

192 Wal Mart unsuccessfully moved to strike much of this evidence. It also offered its own countervailing statistical and other proof in an effort to defeat Rule 23(a) s requirements of commonality, typicality, and adequate representation. With one limitation not relevant here, the District Court granted respondents motion and certified their proposed class. 3 D A divided en banc [eleven, rather than the routine three-member] Court of Appeals substantially affirmed the District Court s certification order. Finally, the Court of Appeals determined that the action could be manageably tried as a class action because the District Court could adopt the approach the Ninth Circuit approved in Hilao v. Estate of Marcos. There compensatory damages for some 9,541 class members were calculated by selecting 137 claims at random, and then extrapolating the validity and value of the untested claims from the sample set. The Court of Appeals s[aw] no reason why a similar procedure to that used in Hilao could not be employed in this case. It would allow Wal Mart to present individual defenses in the randomly selected sample cases, thus revealing the approximate percentage of class members whose unequal pay or non[-]promotion was due to something other than gender discrimination. We granted certiorari. II The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. In order to justify a departure from that rule, a class representative must be part of the class and possess the same interest and suffer the same injury as the class members. Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate. The Rule s four requirements numerosity, commonality, typicality, and adequate representation effectively limit the class claims to those fairly encompassed by the named plaintiff s claims. A The crux of this case is commonality the rule requiring a plaintiff to show that there are questions of law or fact common to the class. Rule 23(a)(2). That language is easy to misread, since [a]ny competently crafted class complaint literally raises common questions. For example: Do all of us plaintiffs indeed work for Wal Mart? Do our managers have discretion over pay? Is that an unlawful employment practice? What remedies should we get? Reciting these questions is not sufficient to obtain class certification. Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a 3 The District Court excluded backpay claims. [In its discretion,] [i]t also decided to afford class members notice of the action and the right to opt-out of the class with respect to respondents punitive-damages claim. 192

193 nature that it is capable of classwide resolution which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. What matters to class certification... is not the raising of common questions' even in droves but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers. Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc. In this case, proof of commonality necessarily overlaps with respondents merits contention that Wal Mart engages in a pattern or practice of discrimination. That is so because, in resolving an individual s Title VII claim, the crux of the inquiry is the reason for a particular employment decision, Here respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members claims for relief will produce a common answer to the crucial question why was I disfavored. B Conceptually, there is a wide gap between (a) an individual s claim that he has been denied a promotion [or higher pay] on discriminatory grounds, and his otherwise unsupported allegation that the company has a policy of discrimination, and (b) the existence of a class of persons who have suffered the same injury as that individual, such that the individual s claim and the class claim will share common questions of law or fact and that the individual s claim will be typical of the class claims. Wal Mart has no testing procedure or other companywide evaluation method that can be charged with bias. The whole point of permitting discretionary decision[-]making is to avoid evaluating employees under a common standard. [B]ridging the gap requires significant proof that Wal Mart operated under a general policy of discrimination. That is entirely absent here. Wal Mart s announced policy forbids sex discrimination, and as the District Court recognized the company imposes penalties for denials of equal employment opportunity. The only evidence of a general policy of discrimination respondents produced was the testimony of Dr. William Bielby, their sociological expert. Relying on social framework analysis, Bielby testified that Wal Mart has a strong corporate culture, that makes it vulnerable to gender bias. He could not, however, determine with any specificity how regularly stereotypes play a meaningful role in employment decisions at Wal Mart. At his deposition... Dr. Bielby conceded that he could not calculate whether 0.5 percent or 95 percent of the employment decisions at Wal Mart might be determined by stereotyped thinking. The parties dispute whether Bielby s testimony even met the standards for the admission of expert testimony. The District Court concluded that [the Federal Rules of Evidence and our case law] did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so, but even if properly considered, Bielby s testimony does nothing to advance respondents case. [W]hether 0.5 percent or 95 percent of the employment decisions at Wal Mart might be determined by stereotyped thinking is the essential question on which respondents theory of commonality 193

194 depends. If Bielby admittedly has no answer to that question, we can safely disregard what he has to say. It [his testimony] is worlds away from significant proof that Wal Mart operated under a general policy of discrimination. C The only corporate policy that the plaintiffs evidence convincingly establishes is Wal Mart s policy of allowing discretion by local supervisors over employment matters. On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices. It is also a very common and presumptively reasonable way of doing business one that we have said should itself raise no inference of discriminatory conduct. To the contrary, left to their own devices most managers in any corporation and surely most managers in a corporation that forbids sex discrimination would select sex-neutral, performance-based criteria for hiring and promotion that produce no actionable disparity at all. And still other managers may be guilty of intentional discrimination that produces a sex-based disparity. In such a company, demonstrating the invalidity of one manager s use of discretion will do nothing to demonstrate the invalidity of another s. A party seeking to certify a nationwide class will be unable to show that all the employees Title VII claims will in fact depend on the answers to common questions. Respondents have not identified a common mode of exercising discretion that pervades the entire company aside from their reliance on Dr. Bielby s social frameworks analysis that we have rejected. In a company of Wal Mart s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction. Respondents attempt to make that showing by means of statistical and anecdotal evidence, but their evidence falls well short. Even if they are taken at face value, these studies are insufficient to establish that respondents theory can be proved on a classwide basis. [We have] held that one named plaintiff s experience of discrimination was insufficient to infer that discriminatory treatment is typical of [the employer s employment] practices. [I]nformation about disparities at the regional and national level does not establish the existence of disparities at individual stores, let alone raise the inference that a company-wide policy of discrimination is implemented by discretionary decisions at the store and district level. A regional pay disparity, for example, may be attributable to only a small set of Wal Mart stores, and cannot by itself establish the uniform, store-by-store disparity upon which the plaintiffs theory of commonality depends. Other than the bare existence of delegated discretion, respondents have identified no specific employment practice much less one that ties all their 1.5 million claims together. Merely showing that Wal Mart s policy of discretion has produced an overall sex-based disparity does not suffice. Respondents anecdotal evidence suffers from the same defects, and in addition is too weak to raise any inference that all the individual, discretionary personnel decisions are discriminatory. Here, respondents filed some 120 affidavits reporting experiences of discrimination about 1 for every 12,500 class members relating to only some 235 out of Wal Mart's 3,400 stores. More than half of these reports are concentrated in only six States (Alabama, California, Florida, Missouri, Texas, and Wisconsin); half of all States have only one or two anecdotes; and 14 States have no anecdotes about Wal Mart s operations at all. Even if every single one of these accounts is true, that would not demonstrate that the entire company operate 194

195 [s] under a general policy of discrimination, which is what respondents must show to certify a companywide class. 9 The dissent criticizes our focus on the dissimilarities between the putative class members on the ground that we have blend[ed] Rule 23(a)(2) s commonality requirement with Rule 23(b)(3) s inquiry into whether common questions predominate over individual ones. That is not so. We quite agree that for purposes of Rule 23(a)(2) [e]ven a single [common] question will do. We consider dissimilarities not in order to determine (as Rule 23(b)(3) requires) whether common questions predominate, but in order to determine (as Rule 23(a)(2) requires) whether there is [e]ven a single [common] question. And there is not [one] here. Because respondents provide no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question. 10 In sum, we agree with [the Ninth Circuit] Chief Judge Kozinski [dissent] that the members of the class: held a multitude of different jobs, at different levels of Wal Mart's hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed... Some thrived while others did poorly. They have little in common but their sex and this lawsuit. III We also conclude that respondents claims for backpay were improperly certified under Federal Rule of Civil Procedure 23(b)(2). We now hold that they may not, at least where (as here) the monetary relief is not incidental to the injunctive or declaratory relief. The judgment of the Court of Appeals is Reversed. Justice Ginsburg, with whom Justice Breyer, Justice Sotomayor, and Justice Kagan join, concurring in part and dissenting in part. The class in this case, [and] I agree with the Court, should not have been certified under Federal Rule of Civil Procedure 23(b)(2) [ injunctive class action]. The plaintiffs, alleging discrimination in violation of Title VII, seek monetary relief that is not merely incidental to any injunctive or declaratory relief that might be available. A putative class of this type may be certifiable under Rule 23(b)(3) [ damages action, however], if the plaintiffs show that common class questions predominate over issues affecting individuals e.g., qualification for, and the amount of, backpay or compensatory damages and that a class action is superior to other modes of adjudication. 9 The dissent says that we have adopted a rule that a discrimination claim, if accompanied by anecdotes, must supply them in numbers proportionate to the size of the class. That is not quite accurate. A discrimination claimant is free to supply as few anecdotes as he wishes. But when the claim is that a company operates under a general policy of discrimination, a few anecdotes selected from literally millions of employment decisions prove nothing at all. 10 Here also there is nothing to unite all of the plaintiffs claims, since contrary to the dissent s contention, the same employment practices do not touch and concern all members of the class. 195

196 Whether the class the plaintiffs describe meets the specific requirements of Rule 23(b)(3) is not before the Court, and I would reserve that matter for consideration and decision on remand. 1 The Court, however, disqualifies the class at the starting gate, holding that the plaintiffs cannot cross the commonality line set by Rule 23(a)(2). In so ruling, the Court imports into the Rule 23(a) determination concerns properly addressed in a Rule 23(b)(3) assessment. Notes and Questions: 1. Wal-Mart concededly did not have an express policy of gender discrimination. What then was the P s theory of relief? 2. Class actions are designed to accommodate a huge number of Ps. The Dukes class would have included 1,500,000 current and former female workers. D was not attacking P s claim for failure to state a claim. So why did the court not certify Wal-Mart as a class action? 3. In another blow to the Wal-Mart former employees, a more limited number of Ps lost their bid to certify a statewide class action in California. As stated by the federal district judge in his Conclusion: Plaintiffs proposed class suffers from the same problems identified by the [U.S.] Supreme Court, but on a somewhat smaller scale.... Rather than identify an employment practice and define a class around it, Plaintiffs continue to challenge the discretionary decisions of hundreds of decision makers, while arbitrarily confining their proposed class to corporate regions that include stores in California, among other states. Dukes v. Wal-Mart, 2013 WL (N.D. Cal., 2013). 4. Certification turns on whether the issues in a class action would predominate over individual issues. For example, the relief sought by the class members does not have to be identical. As aptly summarized in Butler v. Sears, Roebuck and Co., 727 F.3d 796, 801 (7th Cir.,2013): It would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages. If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification. Otherwise defendants would be able to escape liability for tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits.... The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30 (emphasis in original). The present case is less extreme: tens of thousands of class members, each seeking damages of a few hundred dollars. But few members of such a class, considering the costs and distraction of litigation, would think so meager a prospect made suing worthwhile. [ ]There is a single, central, common issue of liability: whether the Sears washing machine was defective. 1 The plaintiffs requested Rule 23(b)(3) certification as an alternative, should their request for (b)(2) certification fail. 196

197 HARRIMAN v. HANCOCK COUNTY United States Court of Appeals, First Circuit 627 F.3d 22 (2010) Howard, Circuit Judge [delivered the unanimous opinion of the court]. This civil rights action involves competing accounts of an arrestee s weekend stay in Maine s Hancock County Jail. Plaintiff David Harriman, although he remembers virtually nothing that occurred over the entire weekend, contends that one or more correctional officers beat him until he sustained a lasting brain injury. Defendants Hancock County, its sheriff and several correctional officers assert that Harriman fell on his head. Harriman appeals the district court s preclusion of two affidavits and entry of summary judgment in defendants favor. After careful review, we affirm. I. BACKGROUND A. The Weekend Maine State Trooper Gregory Mitchell responded to a disturbance at the Blue Hill Hospital involving a disorderly emergency room patient later identified as Harriman. Mitchell found Harriman in the emergency room. Harriman appeared to be drunk. Because Harriman was prohibited from consuming alcohol in connection with a previous infraction, Mitchell arrested him. Mitchell escorted Harriman outside to the police cruiser and searched him. Harriman launched a stream of epithets against Mitchell, including threats to Mitchell and his children. As Mitchell guided Harriman into the cruiser, Harriman resisted and fell to the ground, pulling Mitchell down with him. Mitchell got back on his feet and hoisted Harriman up and into the cruiser. Once in the cruiser, Harriman spit at Mitchell and then fell asleep. At about 8 p.m., the pair arrived at the jail. Harriman leveled several new expletives against Mitchell, and struggled against Mitchell s hold until correctional officers Ryan Haines and Michael Pileski arrived to take custody. Mitchell then went to the adjacent booking room to complete the necessary paperwork regarding the evening s events. With some assistance from Haines, Harriman changed into an anti-suicide smock. A little after 10 p.m., Sergeant Heather Sullivan, from her position in or around the control room, heard Harriman yelling and hollering in his cell. When Sullivan looked over, she saw Harriman banging around his cell naked; she also noticed blood on the bridge of his nose. Sullivan radioed Haines and instructed him to investigate. Harriman greeted Haines with shouted expletives and, from behind the glass partition, drew his fist back as though he would punch Haines. Sullivan soon arrived outside Harriman s cell. While she and Haines were deciding on a course of action, they both heard a loud thump or thud from inside Harriman s cell. Although neither Sullivan nor Haines saw what happened in Harriman s cell, Pileski and another correctional officer, Crystal Hobbs, from their vantage point in the control room, saw Harriman fall to the floor in a leftward motion. Pileski further saw Harriman strike his head as he fell against the lefthand concrete wall of his cell. Haines entered the cell and saw Harriman lying on the floor in his own urine, apparently unconscious. Harriman then had what appeared to be two seizures, each lasting a matter of seconds. At Sullivan s request, Hobbs called an ambulance from the control room at about 10:20 p.m. The ambulance arrived within several minutes and took Harriman to the hospital. Haines 197

198 accompanied Harriman in the ambulance and stayed with him at the hospital until relieved by another correctional officer later that evening. Harriman remembers next to nothing about his jail stay. From his arrest on Friday until he woke up at home on Monday or Tuesday night, Harriman remembers only the following: a lot of hollering; echoes from hollering; flashes of light; somebody saying he s had enough or I think that s enough or maybe even that s enough; seeing my wife s cousin [Foster Kane, another jail detainee] but just barely; and the smell... [of] urine mixed with cleaning fluid. Given his anamnestic difficulties, Harriman relies on [arresting officer] Mitchell s deposition testimony and affidavits from two other witnesses to contradict the defendants version of events. Mitchell testified at deposition that he spent roughly an hour in the booking room finishing up paperwork after transferring custody of Harriman to Haines and Pileski. When Mitchell exited the booking room at about 9 p.m., he noticed Harriman through a glass partition in a room known as secure holding, not in HD-1, which was further inside the jail. According to Mitchell, Harriman appeared to be unaccompanied and was wearing civilian clothes. Foster Kane, the detainee who Harriman vaguely remembers seeing, stated in an affidavit that, from his cell near the booking room, he heard yelling and screaming and loud thuds of someone hitting a wall. He further stated that the commotion went on for approximately 45 minutes before I saw the correctional officers dragging David Harriman into my cell block. And, David had two black eyes, a cut on his nose, and a cut on his forehead over his right eye. Jenny Sheriff, the emergency medical technician who responded to the jail s call for an ambulance, stated in an affidavit that she picked Mr. Harriman up in [secure holding]. Sheriff noticed dried blood on Harriman s nose, and was certain that I did not receive the call to respond to the Jail immediately after the injuries occurred. She also stated that Harriman was naked and that there was no robe or suicide smock in his cell. The next thing Harriman remembers is waking up at home on Monday or Tuesday night [after the prior Friday s events]. B. The Lawsuit Harriman brought a civil rights action against the defendants in federal district court in Maine. He asserted five claims premised on constitutional violations (excessive force, false arrest, conspiracy under both 1983 and 1985, and deprivation of due process) and three claims premised on state tort law (negligence, intentional infliction of emotional distress, and punitive damages). In due course, the magistrate judge assigned to the case entered a scheduling order setting dates for, among other things, initial disclosures (July 30, 2008) and close of discovery (December 3, 2008). An amended scheduling order required dispositive motions by January 15, Trial, if necessary, was anticipated for April Harriman s initial disclosure identified fourteen individuals likely to have discoverable information; critically, however, it did not identify either Kane [a detainee witness] or Sheriff [medical technician responding to jail ambulance request]. See Fed.R.Civ.P. 26(a)(1)(A)(i) (requiring identification of individuals likely to have discoverable information ). Discovery proceeded over the next several months, during which the parties exchanged written discovery and deposed almost all individuals that Harriman had identified in his initial disclosure. On January 15, 2009, the defendants moved for summary judgment. On February 17, 2009, two days before Harriman s response to the defendants motion was due and more than two months after discovery had closed, Harriman s attorney sent the defendants a supplemental initial disclosure that identified Kane and Sheriff as two additional individuals 198

199 likely to have discoverable information. In a cover letter to the amended disclosure, Harriman s attorney explained that he had retained a private investigator, that the investigator had located Kane and Sheriff, and that Harriman intended to submit affidavits from Kane and Sheriff in opposition to summary judgment. On February 19, 2009, Harriman filed his opposition papers, which drew heavily from the Kane and Sheriff affidavits in contesting the defendants motion. In their reply, the defendants requested that the magistrate judge strike these affidavits as a sanction pursuant to Fed.R.Civ.P. 37(c)(1). The magistrate judge held a telephone conference with counsel to discuss this request. Following the conference, which was not transcribed, Harriman submitted a memorandum and supporting affidavits addressing the failure to identify Kane and Sheriff earlier. Those affidavits revealed that Harriman s attorney had not retained the investigator until January 5, 2009, ten days before the defendants summary judgment motion was due and more than a month after the close of discovery. The magistrate judge issued an order that precluded the Kane and Sheriff affidavits as a sanction, and recommended summary judgment in favor of the defendants on all remaining claims. The magistrate judge reasoned that Harriman offered precious little justification or explanation for his own failure to properly prepare his case and complete discovery in a timely fashion, and that preclusion was necessary if the court s scheduling orders are to maintain any credibility at all. [T]he magistrate judge stated that summary judgment was [also] appropriate even if one considered the Kane and Sheriff affidavits, and so purported to analyze Harriman s claims under the full record. When the magistrate judge analyzed Harriman s excessive force claim, however, she disregarded the Kane affidavit on the basis of her earlier decision precluding that affidavit: Clearly if Harriman has met his burden on his theory that he was deliberately beaten by the guards by providing competent evidence of his theory, a trial would be necessary on this count. However, I have determined that the Kane Affidavit must be stricken because Harriman has in no way demonstrated a justification for his late disclosure (and tardy efforts to investigate). The Sheriff Affidavit also is stricken, but even if it were not, this evidence would not be sufficient to carry Harriman s burden of providing a dispute of fact that justifies sending this count to trial. (Emphasis in original.) The district court adopted in full the magistrate judge s report and recommendation and entered judgment. II. DISCUSSION We address two threshold issues before reaching the propriety of summary judgment. B. Preclusion of the Kane and Sheriff Affidavits Harriman argues, essentially, that precluding the affidavits was wrong because they were important to his case. The defendants counter that preclusion was a proportional response to Harriman s failure to identify Kane and Sheriff earlier. Each individual, the defendants contend, could have been identified in the exercise of reasonable diligence during discovery, and Harriman's failure to do so prejudiced the defendants because they sought discovery and moved for summary judgment without knowing about two prospective witnesses on whom Harriman later relied. 199

200 We begin our inquiry with the Federal Rules of Civil Procedure, which provide the basic framework. Rule 26 requires a party, without awaiting a discovery request, to provide to the other parties... the name... of each individual likely to have discoverable information along with the subjects of that information that the disclosing party may use to support its claims or defenses. Fed.R.Civ.P. 26(a)(1)(A)(i). That obligation is a continuing one. See Fed.R.Civ.P. 26(e)(1)(A) (requiring a party to supplement its disclosure promptly if the party learns that in some material respect the disclosure or response is incomplete or incorrect ). Failure to comply with disclosure obligations can have severe consequences. Rule 37 authorizes district courts to sanction noncomplying parties; although sanctions can vary depending on the circumstances, [t]he baseline rule is that the required sanction in the ordinary case is mandatory preclusion. [S]ee Fed.R.Civ.P. 37(c)(1) (providing that if a party fails to disclose under Rule 26, that party is not allowed to use that information or witness to supply evidence on a motion ). We consult an array of factors when reviewing preclusion decisions. They include the sanctioned party s justification for the late disclosure; the opponent-party s ability to overcome its adverse effects (i.e., harmlessness); the history of the litigation; the late disclosure s impact on the district court s docket; and the sanctioned party s need for the precluded evidence. Harriman s justification for the late disclosure is nonexistent. He do[es] not explain, let alone justify, Harriman s late disclosure or his decision to begin looking for Kane and Sheriff in earnest only after discovery closed. The record shows beyond hope of contradiction that Harriman knew very early on that Kane and Sheriff could help his case. As early as 2006, Harriman knew that Kane was in jail with him over the weekend. It is one of the few fragments of information that Harriman remembered, and Kane s name appeared on an inmate list that the defendants produced during discovery. Harriman also knew, as early as 2007, that Kane had information that supported his claims. Coincidentally, Kane is the first cousin of Harriman s spouse. Kane wrote a letter to Harriman s spouse in April 2007 before this case even commenced stating that he believed David [Harriman] had been beaten by corrections officers at the Hancock County Jail on October 20, Despite knowing Kane s importance to his case, Harriman made no meaningful attempt to find him until after discovery closed. So, too, with Sheriff. Harriman may not have remembered Sheriff, but multiple witnesses testified at their depositions that an EMT responded to the jail and brought Harriman to the hospital in an ambulance. The defendants also produced the ambulance s so-called run report. Among other things, the run report described the circumstances surrounding the call and Harriman s condition when Sheriff arrived. True, the run report did not reveal Sheriff s identity: in what appears to be a [convenient?] photocopying error, the bottom of the page cuts off after asking for the SIGNATURE OF CREW MEMBER IN CHARGE ( i.e., Sheriff). But the salient point is that Harriman knew during discovery that an EMT existed who had information that could support his claims, and yet he did nothing whatsoever to find that individual until after discovery closed. As for the next factor, Harriman s late disclosure was not a harmless inconvenience. The defendants prepared and filed a summary judgment motion premised on evidence submitted before the discovery deadline. Harriman opposed the motion with affidavits obtained after that deadline, from witnesses whom he had not provided the defendants an opportunity to depose. While perhaps not as palpable as if trial were looming, the prejudice to defendants was real. 200

201 Furthermore, Harriman took no steps to minimize the harm caused by the late disclosure. Harriman s attorney retained an investigator ten days before the defendants' summary judgment motion was due, but did not put the defendants or the court on notice that he was attempting to locate Kane and Sheriff. And while Harriman s attorney was actively looking for them, he sought and received an extension to file an opposition to summary judgment not in order to find additional witnesses but on the ground that he was busy with other cases and had been sick. In this light, Harriman s late disclosure begins to look less like an oversight and more like a tactic. Harriman also failed timely to respond to the defendants request to strike the Kane and Sheriff affidavits. Here again the magistrate judge gave Harriman one last extension. Although these infractions may not rise to the level of dereliction displayed in other cases, they do place the court's preclusion decision in context. The late disclosure s impact on the court s docket is apparent. Harriman disclosed Kane and Sheriff more than seven months after the deadline for initial disclosures, more than two months after the discovery deadline, and about a month after the defendants had moved for summary judgment. District courts have an interest in managing their dockets without such disruptions. ( Whenever a party, without good cause, neglects to comply with reasonable deadlines, the court s ability to manage its docket is compromised. ) The only factor that favors Harriman is his need for the affidavits. Reversals based on a sanctioned party s need for precluded evidence are rare, and seldom based on that factor alone. In sum, given the above, we cannot fault the district court for precluding the affidavits. Another judge faced with the same facts might have selected a lesser sanction. But preclusion was not so wide of the mark as to constitute an abuse of discretion... III. CONCLUSION For these reasons, the judgment of the district court is affirmed. Notes and Questions: 1. The plaintiff attorney s investigator found Kane and Sheriff. The plaintiff s attorney then speedily submitted their affidavits, in opposition to the defendants summary judgment motion. Why did the courts preclude those affidavits from consideration? Do you agree with the court, when it says: the prejudice to defendants was real? 2. Harriman further refers to FRCP 26(e)[(1)(A)]. What does that rule require, and why was it breached in this case? 3. There is a veritable arsenal of power that FRCP 37 authorizes, when a judge is considering appropriate sanctions. Harriman dealt with a preclusion order. The flip side of such an order is an establishment order. The court may establish certain contested facts, as a sanction, when a recalcitrant party is not playing by the Rules. What other important sanctions are available to a federal judge under Rule 37? 4. FRCP 1 provides that the Rules should be construed and administered to secure the just, speedy, and inexpensive determination of every action. Was that Rule followed in this instance? Were these courts being too technical? Were the sins of the lawyer improperly attributed to the plaintiff? Could the court have issued a more appropriate Rule 37(b)(2)(A) sanction? 201

202 BLACK HORSE LANE ASSOC., L.P. v. DOW CHEMICAL CORP. United States Court of Appeals, Third Circuit 228 F.3d 275 (2000) Professor s Note: The purchaser of environmentally distressed property sued the seller for breach of contract, breach of implied covenant of good faith and fair dealing. It sought monetary and injunctive relief under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and New Jersey Spill Compensation and Control Act. Mr. Berger was the president of an entity plaintiff, and the deponent who appeared on its behalf. This case opinion will provide useful insight into deposition practice. Several editorial enhancements have been made in this edited version of the case, without indicating the deviance from the original text. Court s Opinion: Greenberg, Circuit Judge [delivered the unanimous opinion of the court]. II. FACTS AND PROCEEDINGS Appellants [plaintiffs] designated Berger as their Fed.R.Civ.P. 30(b)(6) witness to testify on behalf of USLR, USRR and Black Horse. On October 2, 1998, appellees counsel began to depose Berger, but counsel was not able to obtain a date to reconvene the deposition. As a result of counsels inability to agree on the date that Berger s deposition should resume, appellees counsel sought an order from the magistrate judge overseeing discovery to set the date for the resumption of the deposition. After a teleconference with the parties, the magistrate judge signed an order, which provided the following: IT IS on this 9th day of October, 1998, ORDERED, as follows: Lawrence S. Berger, as Plaintiffs Fed.R.Civ.P. 30(b)(6) designated witness and fact witness, shall appear for oral deposition commencing on Tuesday, October 13, 1998, at 10:00 a.m. and continuing from day to day thereafter until completed. Notwithstanding the court s directive, when appellees counsel appeared at Berger s law office to continue his deposition on October 13, 1998, Berger failed to appear and his counsel, Paul Schafhauser, was in trial and not in the office. At that point, appellees counsel again sought the court s intervention. [T]he magistrate judge signed and entered an order which directed that Berger s deposition recommence on Monday, October 19, 1998, at 10:00 a.m. The order also provided that [a]s a sanction for failure by Lawrence Berger to appear for depositions on Tuesday, October 13, Plaintiffs shall promptly pay the fees and costs of counsel fees for defendants (a) for appearing at Mr. Berger s non-deposition on October 13, and (b) for bringing this application and appearance today. While Berger [finally] appeared for his deposition at the designated date and time, appellees claim that he provided evasive and non-responsive answers to many of counsel s questions relating to the negotiation and execution of the Agreement, and appellants damages allegations. 202

203 III. DISCUSSION Moreover, it is relevant to our analysis that Berger s deposition testimony, as appellants designated Rule 30(b)(6) witness, is far from illuminating on the necessary costs of response issue. Contrary to the spirit of Rule 30(b)(6), Berger s evasive answers provide us with little assistance... We only need cite the following colloquy between Essex s counsel and Berger, which occurred at his deposition, to illustrate our point: Q:... Mr. Berger, have you ever seen those bills before? A. I have no idea. Q. Well, then look through them. A. I could look through them for the next five hours and I would have no idea. We ve 90 properties. I get bills from people. There are bills going into 1997 and before. I have no idea whether I have ever seen these bills or any other bills you might put in front of me today. Q. Mr. Berger, other than the charges represented in those bills, are there any other costs that have been expended by any plaintiff for any environmental consulting or removal or remediation with respect to the Black Horse Lane property? A. I have no idea. Q. Do you know a man named Mr. Irving Cohen? A. Yes. Q. How long have you known him? A. I would say about ten years. Q. And in what capacity do you know him? A. Mr. Cohen was the president of Enviro Sciences. It s an environmental consulting firm. Q. Has that firm ever been used by [appellant] Black Horse Lane Associates? A. I have no idea. Q. Looking through the exhibits, if you could, could you tell me whether those bills appear to indicate that such was the case? A. I can t tell you anything about these bills. All I m doing is reading from the bills for you. Q. Turn to the bills that talk about Black Horse Lane, Phase One, I believe. A. There s a bill dated that says Phase One, Black Horse Lane. Q. Q. All right. To what does that bill refer? A. I don t understand the question. Q. What does Phase One, Black Horse Lane refer to? A. I have no idea. Q. Did you ever order a Phase One on Black Horse Lane? A. I have no idea. Q. Do you have an understanding what the phrase Phase One means? A. Yes, I 203

204 do. Q. What is that? A. It s a preliminary environmental report which basically points out areas of potential environmental concern. Q. Do you have any idea why Black Horse Lane would have ordered a Phase One at or about the time period for which the bill is indicated? A. Sitting here today, I have no idea why we did or didn t. I suspect if we did, in fact, order one a year ago, at that point I had a reason for it, but I don t know what that reason would be sitting here today. If, in fact, we did order a Phase One. I don t recall that either. Our review of the remainder of Berger s deposition testimony regarding the nature of ESI s consulting work for appellants confirms that he failed to offer any useful information concerning the factual basis for appellants CERCLA response cost claim relating to the fees paid for ESI s services. B. District Court s Final Order of December 16, 1999 Appellants next contend that the district court erred in affirming the magistrate judge s letter opinion and order entered June 30, 1999, which granted appellees motion for discovery sanctions against appellants pursuant to Rule 37(b) and (d). As we previously mentioned, the magistrate judge agreed with appellees argument that Berger s conduct warranted a sanction in the form of precluding appellants from asserting a position and introducing evidence contrary to the position Berger asserted during his deposition. In addition, the magistrate judge concluded that Berger s lack of preparedness at his deposition justified the imposition of monetary sanctions pursuant to Rule 37(d) in the form of costs and attorney s fees associated with taking the deposition and bringing the sanctions motion before the court. Here, Berger was not completely prepared on any occasion for which he sat for a deposition. Further, his lack of preparation cannot be a mere oversight but is, instead, a clear demonstration of bad faith. This is obvious from Berger s repeated denial of any knowledge of his status as a 30(b)(6) witness despite being present at the deposition and being asked each and every time he appeared if he had knowledge of his status. Further, Berger even denied knowledge of documents which he himself had signed, claiming that he had no recollection of such documents despite acknowledging that he normally did not sign anything that he did not read first. These infractions would not be so detrimental if Berger were no so consistent with his apparent incompetence and lack of cooperation. Had he taken the time to prepare in the slightest as Rule 30(b)(6) requires, he might have been fully prepared for at least one deposition. Additionally, Berger s actions are magnified by his status as a member of the Bar. In affirming the magistrate judge s order, the district court provided its reasons on the record: 204

205 I read the record. It is appalling. It is appalling. [Berger] did nothing except show his face only under the threat of court orders. When he showed up, he knew he was a 30(b)(6) witness and, notwithstanding the fact that he knew he was a 30(b)(6) witness, he refused to answer questions in an intelligent way. He refused to prepare, as you are required to prepare under 30(b)(6), to intelligently answer questions and just literally thumbed his nose at the defendants and, frankly, at the Court. I m satisfied, based upon my review of the record-and I defy anyone to look at the record here which was created by Mr. Berger that the actions taken by [the magistrate judge] were well within his discretion and do not constitute either an abuse of discretion or are they contrary to law or shocking to the conscience of the Court. One, in order to come to that conclusion, one must live in the shoes of [the magistrate judge] in trying to conduct orderly discovery in this matter. One must review meticulously the record of noncompliance by Mr. Berger in this matter. [The magistrate judge] did not issue this opinion lightly. [The magistrate judge] was fully cognizant of the totality of the facts surrounding this matter, which border upon almost conscious disregard of the Court and the court rules. Appellants make two arguments in support of their request to vacate the monetary sanctions order. They claim that pursuant to Rule 37(d), a party making a motion based upon an alleged violation of Rule 37(d) must certify that the movant has in good faith conferred or attempted to confer with the party failing to answer or respond in an effort to obtain such answer or response without court action, but that there was no such good faith effort by appellees to resolve the dispute without court action. Finally, they rely on the fact that Rule 37(d) states that sanctions may be imposed when a party, inter alia, fails to appear before the officer who is to take the deposition, after being served with a proper notice. Here, they argue that we should apply the fails to appear language literally, and that sanctions were inappropriate in this case because Berger appeared for his deposition after the magistrate judge s October 15, 1998 order and testified under oath for more than seventeen hours. Their second argument is based on their interpretation of Berger s behavior during his deposition. They claim that even if we agree with the magistrate judge s finding that Rule 37(d) could support the imposition of sanctions when a Rule 30(b)(6) witness provides inadequate and evasive answers, the record demonstrates that Berger s deposition did not present a situation warranting sanctions. They claim that [a] fair examination of the transcript of Mr. Berger s 570-page deposition confirms that Mr. Berger testified fully and in good faith in response to Defendants questioning. In any event, they maintain that any violation of Rule 30(b)(6) which might be said to have existed was minimal, and indeed, paled in comparison with the extraordinarily broad discovery obtained by Defendants in this matter. We are not persuaded by either contention. The deposition of a corporation, however, poses a different problem, as reflected 205

206 by Rule 30(b)(6). Rule 30(b)(6) streamlines the discovery process. It places the burden of identifying responsive witnesses for a corporation on the corporation. Obviously, this presents a potential for abuse which is not extant where the party noticing the deposition specifies the deponent [by the individual s name]. When a corporation or association designates a person to testify on its behalf, the corporation appears vicariously through that agent. If that agent is not knowledgeable about relevant facts, and the principal has failed to designate an available, knowledgeable, and readily identifiable witness, then the appearance is, for all practical purposes, no appearance at all. The district court did not abuse its discretion in awarding fees and costs under Rule 37(d). We reject appellants final contention that Berger s responses during his deposition did not support the district court s finding that he failed to cooperate with appellees attorneys, and that his conduct was tantamount to a failure to appear that warranted sanctions under Rule 37(d). To the contrary, our review of Berger s deposition testimony in its entirety confirms the observations of both the magistrate judge and the district court on this point. Indeed, throughout his lengthy deposition, Berger failed to offer meaningful testimony about most, if not all, of the items specified in the notice of deposition. While we need not recite every instance in which Berger s testimony was incomplete and unhelpful on the specified topics, we believe that two examples of his uncooperative attitude and his flagrant disregard for his obligation as a Rule 30(b)(6) witness amply illustrate our point Obviously, as appellants Rule 30(b)(6) witness, Berger should have been prepared to discuss these and other topics designated in the notice of deposition. Instead, he divulged as little information as possible in every area that appellees identified. Moreover, Berger s uncooperative attitude is demonstrated further by statements in which he claimed that he was unaware that he was appellants' designated Rule 30(b)(6) representative, did not know what the phrase Rule 30(b)(6) representative meant, and was not familiar with Rule 30(b)(6) or what it required him to do. He also admitted at one point that he did not recall whether he reviewed the notice of deposition prior to the date of the deposition, and later stated clearly that he had not bothered to read it at all. Simply put, we find his professed ignorance on these points particularly unconvincing given that he obtained undergraduate and law degrees from prestigious universities and has been licensed to practice law since either [19]65 or [19]66. In any event, we believe that the magistrate judge s finding that Berger engaged in discovery abuses plainly is justified on this record. The magistrate judge had ample evidence of Berger s failure to cooperate, which in turn rendered his deposition a virtual non-event. Accordingly, we will affirm the monetary sanctions ordered pursuant to Rule 37(d)... IV. CONCLUSION For the foregoing reasons, the district court s orders will be affirmed. Notes and Questions: 1. The facts include that Mr. Berger testified under oath for more than seventeen hours resulting in a 570-page deposition transcript. A subsequent Rules amendment provides for a 206

207 presumptive limit of a one day deposition, listing no more than seven hours. Berger would no doubt not deserve the benefit of that amended Rule default limitation.. 2. When an adversary schedules the deposition of an entity, who normally decides what person within the entity will appear the lawyer scheduling the deposition, or the entity? See FRCP 30(b)(6). Does that default presumption make sense? At the close of such a deposition, what question might you ask the entity s representative? 207

208 O CONNOR v. BOEING NORTH AMERICAN, INC. United States District Court, Central District California 185 F.R.D. 272 (1999) Chapman, United States Magistrate Judge. [P]laintiffs filed a notice of motion and motion to compel further responses to interrogatories regarding the manner of production of documents. The defendants filed [a] declaration in opposition to plaintiffs motion to compel. [D]efendants filed a notice of motion and motion to compel answers to interrogatories and production of documents by plaintiffs in support of defendants motion. The plaintiffs filed the declarations in support of plaintiffs opposition to defendants motion to compel BACKGROUND District Judge Audrey B. Collins certified this action as a class action. Additionally, this action includes personal injury and wrongful death claims brought by 71 plaintiffs. In the Fourth Amended Complaint ( FAC ), plaintiffs allege that, beginning in approximately 1946, the defendants researched, developed, manufactured and tested various missile and rocket engines, as well as propellants, lasers and nuclear reactors at four facilities located in the greater Simi Valley and San Fernando Valley. Those four facilities, referred to as the Rocketdyne Facilities, were located at the following sites: The Santa Susana Field Laboratory ( SSFL ) in Ventura County, the Canoga Facility at 6633 Canoga Avenue, the DeSoto Facility at 8900 DeSoto Avenue, and the Hughes Facility at 8433 Fallbrook Avenue. The plaintiffs allege that the activities of the defendants at the Rocketdyne Facilities involved the use and release of certain chemicals, including, among others, trichloroethene (TCE) and hexavalent chromium, as well as the use, storage, generation and disposal of certain radioactive materials. The plaintiffs allege that they were personally exposed to and/or that their properties were contaminated by certain radioactive and/or chemical substances which were released from one or more of the Rocketdyne Facilities and which were dispersed through the contamination area by means of air currents, surface water runoff and/or subsurface ground water. The plaintiffs further allege that their exposure to these substances has placed them at an increased risk of developing cancer or some other serious illness or disease. As a result, plaintiffs seek the implementation of a court-supervised program of medical monitoring designed to detect early signs of such illness or disease. The plaintiffs also allege that the defendants release of these substances has resulted in the contamination of their properties and has diminished the value of their properties, and they have incurred certain necessary expenses in response to the contamination of their properties for which they seek reimbursement under federal law. The defendants maintain that plaintiffs have not been exposed to any substances released from the Rocketdyne Facilities that place them at an increased risk of illness or disease. The defendants also maintain that plaintiffs properties are not contaminated by any releases from the Rocketdyne Facilities and that, consequently, plaintiffs are not entitled to recover damages for any harm caused to their properties. DISCUSSION Plaintiffs Motion to Compel I 208

209 The plaintiffs served interrogatory nos. 1 through 20 on defendants. 3 The defendants filed multiple objections, including relevancy and definitional objections to the interrogatories; however, without waiving their objections, defendants generally responded to the interrogatories under Rule 33(d), stating that the answers to these interrogatories may be derived or ascertained from defendants business records previously produced to plaintiffs. 4 The plaintiffs argue that defendants responses are improper in that defendants have not complied with Rule 33(d), and, when answering narratively, have not completely and responsively answered The nature of the inquiries made by plaintiffs in their interrogatories was sufficiently broad for defendants to answer under Rule 33(d). 6 See [citation omitted] (One prerequisite for invoking the Rule 33[(d)] option is that there be a burden on the interrogated party if it were required to answer the interrogatories in the traditional manner ). However, Rule 33(d) is not satisfied by the wholesale dumping of documents. Rather, under Rule 33(d), the responding party chooses to produce business records in answer to the interrogatories not to avoid answering them. To answer an interrogatory [in this manner], a responding party has the duty to specify, 3 These interrogatories generally seek information regarding the identities, quantities, and time periods of hazardous substances used and released at each of defendants' facilities, as well as the locations, dates and results of offsite testing of hazardous substances. Additionally, plaintiffs seek information identifying the locations, nature of, and results from tests on substances in the surrounding area, groundwater, surface water, air, and soil. 4 The defendants have filed three sets of responses to plaintiffs, interrogatories: their original responses served on February 5, 1998; Further Responses served on June 1, 1998; and Supplemental Further Responses served on December 22, The plaintiffs have characterized the instant dispute as raising five issues: (1) May defendants respond to interrogatories by referring to a few selected documents produced by them; (2) may defendants refuse to indicate where in the documents produced answers to the interrogatories may be found or must they provide substantive answers to the interrogatories; (3) must defendants provide plaintiffs with a locator and descriptive information to identify documents responsive to specific inquiries; (4) must defendants produce documents in any particular order when producing large volumes of documents; and (5) must a privilege log contain a description of withheld documents (including attachments), as well as the job titles of all authors and recipients sufficient to allow plaintiffs to contest claimed privileges. The Court, however, does not understand issue no. 4 or to what order the plaintiffs are alluding.. 6 Federal Rule of Civil Procedure 33(d) provides [comparably worded in a subsequent amendment]: Where the answer to an interrogatory may be derived or ascertained from the business records of the party upon whom the interrogatory has been served..., and the burden of deriving or ascertaining the answer is substantially the same for the party serving the interrogatory as for the party served, it is a sufficient answer to such interrogatory to specify the records from which the answer may be derived or ascertained and to afford to the party serving the interrogatory reasonable opportunity to examine, audit or inspect such records and to make copies, compilations, abstracts, or summaries. A specification shall be in sufficient detail to permit the interrogating party to locate and to identify, as readily as can the party served, the records from which the answer may be ascertained. 209

210 by category and location, the records from which answers to interrogatories can be derived. 7 Thus, when voluminous documents are produced under Rule 33(d), they must be accompanied by indices designed to guide the searcher to the documents responsive to the interrogatories. See [citation omitted] ( The appropriate answer when documents are to be used [under Rule 33(d) ] is to list the specific document provided the other party and indicat[e] the page or paragraphs that are responsive to the interrogatory ). Without detailed specification by category and location of responsive documents, the burden of deriving the answers to the interrogatories is not the same for the parties; rather, it would be easier for persons employed by the defendants to locate responsive documents. See Advisory Committee s Note to Fed.R.Civ.P ( A respondent may not impose on an interrogating party a mass of records as to which research is feasible only for one familiar with the records. ). Thus, defendants responses to interrogatory nos. 1 through 17 and 19 do not comply with Rule 33(d) and [fail to] adequately specify by category and location the business records containing the answers to the interrogatories, and plaintiffs motion should be GRANTED as to these interrogatories. Interrogatory no. 18 asks defendants to: IDENTIFY the date and location of your first discovery of CONTAMINATION in the SURROUNDING AREA. The defendants, in their Supplemental Further Responses to interrogatory no. 18, state that: BNA first became aware that releases from its SSFL operations in concentrations above normal background had migrated offsite in August or September Water from a monitoring well approximately one hundred feet north of SSFL on property then owned by the Brandeis Bardin Institute measured above background for tritium, but below the drinking water standard. The plaintiffs object that this response is inadequate under Rule 33(d) and that defendants have provided no information with regard to the [other three] Hughes, Canoga or DeSoto facilities [italics added]. However, defendants have narratively answered the interrogatory, rather than rely on Rule 33(d). Additionally, interrogatory no. 18 only requests information regarding defendants first discovery of contamination, not the first discovery of contamination in the surrounding areas of each of the Rocketdyne Facilities; thus, defendants answered the interrogatory. Interrogatory no. 20 asks defendants to: IDENTIFY all allegations, reports, or claims of OFFSITE CONTAMINATION YOU have received. In their Supplemental Further Responses to interrogatory no. 20, defendants list sixteen lawsuits, including the instant action, and further responded that they are not aware of specific complaints of contamination of offsite property other than these lawsuits. 7 The defendants, in response to interrogatory nos. 1 through 5, responded that, because the volume of responsive documents is huge, and listing all the responsive documents would be an overly burdensome endeavor, defendants have identified only a representative sampling of some of the documents containing responsive information. Such a response clearly shows lack of compliance with Rule 33(d).. 210

211 The plaintiffs object that this response is inadequate under Rule 33(d), that defendants have provided no information regarding the Hughes, Canoga or DeSoto facilities, and that the response should also list informal complaints. Here again, defendants have narratively answered the interrogatory, rather than rely on Rule 33(d), and defendants have answered the interrogatory, albeit not to plaintiffs satisfaction. For the foregoing reasons, the Court finds that defendants have not complied with Rule 33(d) in responding to interrogatory nos. 1 through 17 and 19, and plaintiffs motion to compel further responses to those interrogatories is GRANTED. The Court also finds that defendants responses to interrogatory nos. 1 through 17 and 19 were not substantially justified. Since the Court has found that, in light of the nature of the interrogatories, defendants could have chosen to respond under Rule 33(d), the defendants, at their option, will be afforded one last opportunity to respond under Rule 33(d), provided they comply with all of the Court s requirements and limitations set forth herein and in Parts II and V [of this opinion]. The plaintiffs motion to compel further answers to interrogatory nos. 18 and 20 is DENIED. II The Court would like to take this opportunity to provide guidance to the parties regarding the use of Rule 33(d), so that, when properly used, both sides will be able to easily find for trial the documents produced during discovery. For trial purposes, it is best to have all documents placed on CD ROM, which affords a method by which the storage of voluminous documents is less burdensome to the parties. This is not possible, however, without two things: One, a general index describing by topic and subtopic the information in the documents and, two, a locator index identifying the location of each document on CD ROM. Since the Fourth Amended Complaint spans five decades, the descriptive index should also provide the decade (date) in which the document was created. Because both the descriptive and locator indices must meet the needs of both sides, the Court believes the parties should jointly create these indices. Thus, the parties must meet and confer regarding the indices, and such meeting or meetings shall take place no later than fourteen (14) days from the date of this Order. V To prevent the waste of the Court s time in the future, the Court intends to impose certain conditions on the parties. First, each side shall, within the next fourteen (14) days, identify to the Court one attorney who will be primarily responsible for discovery, and that attorney must make himself or herself available at all times to review discovery decisions by the other attorneys and to personally meet and confer with the opposing discovery attorney to resolve any discovery dispute, within 72 hours of a dispute arising. Second, each side shall, within the next fourteen (14) days, submit to the Court for its consideration and adoption a discovery plan containing suggestions about ways in which the discovery process may proceed more smoothly, efficiently and economically. Third, commencing May 3, 1999, and continuing on the first Monday of each month thereafter, until discovery is completed, the sides shall submit to the Court a joint status report specifying the discovery conducted, including the making of supplemental answers and document productions, during the past thirty (30) days, or a declaration signed by both discovery attorneys that there is nothing to report. The Court would like to take this opportunity to address the parties and their counsel, to stress that [t]he discovery system depends absolutely on good faith and common sense from counsel. The courts, sorely pressed by demands to try cases promptly and to rule thoughtfully on 211

212 potentially case dispositive motions, simply do not have the resources to police closely the operation of the discovery process. The whole system of [c]ivil adjudication would be ground to a virtual halt if the courts were forced to intervene in even a modest percentage of discovery transactions. That fact should impose on counsel an acute sense of responsibility about how they handle discovery matters. They should strive to be cooperative, practical and sensible, and should turn to the courts (or take positions that force others to turn to the courts) only in extraordinary situations that implicate truly significant interests. ORDER 1. The plaintiffs motion to compel further responses to interrogatory nos. 1 through 17 and 19 is GRANTED, and defendants shall file supplemental answers to those interrogatories within forty-five (45) days of the date of this Order, or alternatively, defendants may elect to answer the interrogatories under Rule 33(d), provided defendants comply with all of the requirements set forth in Parts I, II and V; however, plaintiffs motion to compel further responses to interrogatory nos. 18 and 20 is DENIED. 2. The plaintiffs motion for attorney's fees is DENIED WITHOUT PREJUDICE. The defendants request for attorney s fees is DENIED. 4. Within fourteen (14) days of the date of this Order, each side shall select its discovery attorney and shall submit a discovery plan to Judge Chapman, as discussed in Part V. The discovery attorneys shall, starting May 3, 1999, submit joint month status reports to Judge Chapman advising of all discovery, including the making of supplemental responses and productions, occurring during the previous thirty (30) days, as set forth in Part V. 5. The Clerk of Court shall serve this Order on the parties. Notes and Questions: 1. O Connor introduces you to the intricacies of modern discovery practice; e.g., the court s early suggestion that Rule 30(b)(6) depositions would likely be the more appropriate device for seeking such complex information. Note the breadth of discretion the court may exercise, when resolving discovery matters especially at the beginning of Part V. 2. As long as what is being asked for lies within the scope of discoverable information, the response does not have to be in lockstep with the method employed to seek it. Thus, the FRCP 33 interrogatory rule authorizes a response via production of/providing access to documents which will answer the interrogatory. 3. The court directed the parties to meet and confer regarding preparation of the indices. Parties also have a responsibility to meet and confer, each time one of them makes a motion to the court. FRCP 37(a)(1). A host of factors influence the method by which moving parties must meet this obligation. They do not have to actually meet. Another factor is that the more complex the case, the more robust the court s expectation regarding the confer portion of this requirement. 4. The court will grant attorney s fees, depending on its view of the genuineness of the dispute. 212

213 ZUBULAKE v. UBS WARBURG LLC United States District Court, Southern District New York 217 F.R.D. 309 (2003) OPINION AND ORDER Scheindlin, District Judge. The world was a far different place in 1849, when Henry David Thoreau opined (in an admittedly broader context) that [t]he process of discovery is very simple. That hopeful maxim has given way to rapid technological advances, requiring new solutions to old problems. The issue presented here is one such problem, recast in light of current technology: To what extent is inaccessible electronic data discoverable, and who should pay for its production? I. INTRODUCTION The Supreme Court recently reiterated that our simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims. Thus, it is now beyond dispute that [b]road discovery is a cornerstone of the litigation process contemplated by the Federal Rules of Civil Procedure. The Rules contemplate a minimal burden to bringing a claim; that claim is then fleshed out through vigorous and expansive discovery. In one context, however, the reliance on broad discovery has hit a roadblock. As individuals and corporations increasingly do business electronically 5 using computers to create and store documents, make deals, and exchange s the universe of discoverable material has expanded exponentially. The more information there is to discover, the more expensive it is to discover all the relevant information until, in the end, discovery is not just about uncovering the truth, but also about how much of the truth the parties can afford to disinter. This case provides a textbook example of the difficulty of balancing the competing needs of broad discovery and manageable costs. Laura Zubulake is suing UBS Warburg LLC, UBS Warburg, and UBS AG (collectively, UBS or the Firm ) under Federal, State and City law for gender discrimination and illegal retaliation. Zubulake s case is certainly not frivolous 8 and if she prevails, her damages may be substantial. 9 She contends that key evidence is located in various s exchanged among UBS employees that now exist only on backup tapes and perhaps other archived media. According to UBS, restoring those s would cost approximately $175,000.00, exclusive of attorney time in reviewing the s. Zubulake now moves for an order compelling UBS to produce those s at its expense. II. BACKGROUND A. Zubulake s Lawsuit UBS hired Zubulake on August 23, 1999, as a director and senior salesperson on its U.S. Asian Equities Sales Desk (the Desk ), where she reported to Dominic Vail, the Desk s 5 See Wendy R. Liebowitz, Digital Discovery Starts to Work, Nat'l L.J., Nov. 4, 2002, at 4 (reporting that in 1999, ninety-three percent of all information generated was in digital form). 8 Indeed, Zubulake has already produced a sort of smoking gun: an suggesting that she be fired ASAP after her EEOC charge was filed, in part so that she would not be eligible for year-end bonuses. See 8/21/01 from Mike Davies to Rose Tong ( 8/21/01 ), Ex. G to the 3/17/03 Affirmation of James A. Batson, counsel for Zubulake ( Batson Aff. ). 9 At the time she was terminated, Zubulake s annual salary was approximately $500,000. Were she to receive full back pay and front pay, Zubulake estimates that she may be entitled to as much as $13,000,000 in damages, not including any punitive damages or attorney s fees. 213

214 manager. At the time she was hired, Zubulake was told that she would be considered for Vail's position if and when it became vacant. In December 2000, Vail indeed left his position to move to the Firm s London office. But Zubulake was not considered for his position, and the Firm instead hired Matthew Chapin as director of the Desk. Zubulake alleges that from the outset Chapin treated her differently than the other members of the Desk, all of whom were male. In particular, Chapin undermined Ms. Zubulake s ability to perform her job by, inter alia: (a) ridiculing and belittling her in front of coworkers; (b) excluding her from work-related outings with male co-workers and clients; (c) making sexist remarks in her presence; and (d) isolating her from the other senior salespersons on the Desk by seating her apart from them. No such actions were taken against any of Zubulake s male co-workers. Zubulake ultimately responded by filing a Charge of (gender) Discrimination with the EEOC on August 16, On October 9, 2001, Zubulake was fired with two weeks notice. On February 15, 2002, Zubulake filed the instant action, suing for sex discrimination and retaliation under Title VII, the New York State Human Rights Law, and the Administrative Code of the City of New York. UBS timely answered on March 12, 2002, denying the allegations. UBS s argument is, in essence, that Chapin s conduct was not unlawfully discriminatory because he treated everyone equally badly. On the one hand, UBS points to evidence that Chapin s antisocial behavior was not limited to women: a former employee made allegations of national origin discrimination against Chapin, and a number of male employees on the Desk also complained about him. On the other hand, Chapin was responsible for hiring three new females employees to the Desk. B. The Discovery Dispute Discovery in this action commenced on or about June 3, 2002, when Zubulake served UBS with her first document request. At issue here is request number twenty-eight, for [a]ll documents concerning any communication by or between UBS employees concerning Plaintiff. The term document in Zubulake s request includ[es], without limitation, electronic or computerized data compilations. On July 8, 2002, UBS responded by producing approximately 350 pages of documents, including approximately 100 pages of s. UBS also objected to a substantial portion of Zubulake s requests. On September 12, 2002 after an exchange of angry letters and a conference before United States Magistrate Judge Gabriel W. Gorenstein the parties reached an agreement (the 9/12/02 Agreement ). With respect to document request twenty-eight, the parties reached the following agreement, in relevant part: Defendants will [ ] ask UBS about how to retrieve s that are saved in the firm s computer system and will produce responsive s if retrieval is possible and Plaintiff names a few individuals. Pursuant to the 9/12/02 Agreement, UBS agreed unconditionally to produce responsive e- mails from the accounts of five individuals named by Zubulake: Matthew Chapin, Rose Tong (a human relations representation who was assigned to handle issues concerning Zubulake), Vinay Datta (a co-worker on the Desk), Andrew Clarke (another co-worker on the Desk), and Jeremy Hardisty (Chapin s supervisor and the individual to whom Zubulake originally complained about Chapin). UBS was to produce such s sent between August 1999 (when Zubulake was hired) and December 2001 (one month after her termination), to the extent possible. 214

215 UBS, however, produced no additional s and insisted that its initial production (the 100 pages of s) was complete. As UBS s opposition to the instant motion makes clear although it remains unsaid UBS never searched for responsive s on any of its backup tapes. To the contrary, UBS informed Zubulake that the cost of producing s on backup tapes would be prohibitive (estimated at the time at approximately $300,000.00). Zubulake, believing that the 9/12/02 Agreement included production of s from backup tapes, objected to UBS s nonproduction. In fact, Zubulake knew that there were additional responsive s that UBS had failed to produce because she herself had produced approximately 450 pages of correspondence. Clearly, numerous responsive s had been created and deleted 19 at UBS, and Zubulake wanted them. On December 2, 2002, the parties again appeared before Judge Gorenstein, who ordered UBS to produce for deposition a person with knowledge of UBS s retention policies in an effort to determine whether the backup tapes contained the deleted s and the burden of producing them. In response, UBS produced Christopher Behny, Manager of Global Messaging, who was deposed on January 14, Mr. Behny testified to UBS s backup protocol, and also to the cost of restoring the relevant data. C. UBS s E Mail Backup System In the first instance, the parties agree that was an important means of communication at UBS during the relevant time period. Each salesperson, including the salespeople on the Desk, received approximately 200 s each day. Given this volume, and because Securities and Exchange Commission regulations require it, 21 UBS implemented extensive backup and preservation protocols. In particular, s were backed up in two distinct ways: on backup tapes and on optical disks. 1. Backup Tape Storage UBS employees used a program called HP OpenMail, manufactured by Hewlett Packard, for all work-related communications. With limited exceptions, all s sent or received by any UBS employee are stored onto backup tapes. To do so, UBS employs a program called Veritas NetBackup, which creates a snapshot of all s that exist on a given server at the 19 The term deleted is sticky in the context of electronic data. Deleting a file does not actually erase that data from the computer s storage devices. Rather, it simply finds the data s entry in the disk directory and changes it to a not used status thus permitting the computer to write over the deleted data. Until the computer writes over the deleted data, however, it may be recovered by searching the disk itself rather than the disk s directory. Accordingly, many files are recoverable long after they have been deleted even if neither the computer user nor the computer itself is aware of their existence. Such data is referred to as residual data. Deleted data may also exist because it was backed up before it was deleted. Thus, it may reside on backup tapes or similar media. Unless otherwise noted, I will use the term deleted data to mean residual data, and will refer to backed-up data as backup tapes. 21 SEC Rule 17a 4, promulgated pursuant to Section 17(a) of the Securities Exchange Act of 1934, provides in pertinent part: Every [ ] broker and dealer shall preserve for a period of not less than 3 years, the first two years in an accessible place... [o]riginals of all communications received and copies of all communications sent by such member, broker or dealer (including inter-office memoranda and communications) relating to his business as such. 215

216 time the backup is taken. Except for scheduling the backups and physically inserting the tapes into the machines, the backup process is entirely automated. UBS used the same backup protocol during the entire relevant time period, from 1999 through Using NetBackup, UBS backed up its s at three intervals: (1) daily, at the end of each day, (2) weekly, on Friday nights, and (3) monthly, on the last business day of the month. Nightly backup tapes were kept for twenty working days, weekly tapes for one year, and monthly tapes for three years. After the relevant time period elapsed, the tapes were recycled. 25 Once s have been stored onto backup tapes, the restoration process is lengthy. Each backup tape routinely takes approximately five days to restore, although resort to an outside vendor would speed up the process (at greatly enhanced costs, of course). Because each tape represents a snapshot of one server s hard drive in a given month, each server/month must be restored separately onto a hard drive. Then, a program called Double Mail is used to extract a particular individual s file. That mail file is then exported into a Microsoft Outlook data file, which in turn can be opened in Microsoft Outlook, a common application. A user could then browse through the mail file and sort the mail by recipient, date or subject, or search for key words in the body of the . Fortunately, NetBackup also created indexes of each backup tape. Thus, Behny was able to search through the tapes from the relevant time period and determine that the files responsive to Zubulake s requests are contained on a total of ninety-four backup tapes. 2. Optical Disk Storage In addition to the backup tapes, UBS also stored certain s on optical disks. For certain registered traders, probably including the members of the Desk, a copy of all e- mails sent to or received from outside sources ( i.e., s from a registered trader at UBS to someone at another entity, or vice versa) was simultaneously written onto a series of optical disks. Internal s, however, were not stored on this system. UBS has retained each optical disk used since the system was put into place in mid Moreover, the optical disks are neither erasable nor rewritable. Thus, UBS has every sent or received by registered traders (except internal s) during the period of Zubulake s employment, even if the was deleted instantaneously on that trader s system. The optical disks are easily searchable using a program called Tumbleweed. Using Tumbleweed, a user can simply log into the system with the proper credentials and create a plain language search. Search criteria can include not just header information, such as the date or the name of the sender or recipient, but can also include terms within the text of the itself. For example, UBS personnel could easily run a search for s containing the words Laura or Zubulake that were sent or received by Chapin, Datta, Clarke, or Hardisty. III. LEGAL STANDARD Rule 26(b)(2) imposes general limitations on the scope of discovery in the form of a proportionality test: 25 Of course, periodic backups such as UBS s necessarily entails the loss of certain s. Because backups were conducted only intermittently, some s that were deleted from the server were never backed up. For example, if a user both received and deleted an on the same day, it would not reside on any backup tape. Similarly, an received and deleted within the span of one month would not exist on the monthly backup, although it might exist on a weekly or daily backup, if those tapes still exist. As explained below, if an was to or from a registered trader, however, it may have been stored on UBS s optical storage devices.. 216

217 The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Finally, [u]nder [the discovery] rules, the presumption is that the responding party must bear the expense of complying with discovery requests, but [it] may invoke the district court s discretion under Rule 26(c) to grant orders protecting [it] from undue burden or expense in doing so, including orders conditioning discovery on the requesting party's payment of the costs of discovery. The application of these various discovery rules is particularly complicated where electronic data is sought because otherwise discoverable evidence is often only available from expensive-to-restore backup media. That being so, courts have devised creative solutions for balancing the broad scope of discovery prescribed in Rule 26(b)(1) with the cost-consciousness of Rule 26(b)(2). By and large, the solution has been to consider cost-shifting: forcing the requesting party [in appropriate cases], rather than the answering party, to bear the cost of discovery. By far, the most influential response to the problem of cost-shifting relating to the discovery of electronic data was an eight-factor test to determine whether discovery costs should be shifted. Those eight factors are: (1) the specificity of the discovery requests; (2) the likelihood of discovering critical information; (3) the availability of such information from other sources; (4) the purposes for which the responding party maintains the requested data; (5) the relative benefits to the parties of obtaining the information; (6) the total cost associated with production; (7) the relative ability of each party to control costs and its incentive to do so; and (8) the resources available to each party [citation omitted]. Both Zubulake and UBS agree that the eight-factor Rowe test should be used to determine whether cost-shifting is appropriate. IV. DISCUSSION A. Should Discovery of UBS s Electronic Data Be Permitted? Under Rule 34, a party may request discovery of any document, including writings, drawings, graphs, charts, photographs, phonorecords, and other data compilations... The inclusive description of the term document accord[s] with changing technology. It makes clear that Rule 34 applies to electronics [sic] data compilations. Thus, [e]lectronic documents are no less subject to disclosure than paper records. This is true not only of electronic documents that are currently in use, but also of documents that may have been deleted and now reside only on backup disks. That being so, Zubulake is entitled to discovery of the requested s so long as they are relevant to her claims, which they clearly are. As noted, constituted a substantial 217

218 means of communication among UBS employees. To that end, UBS has already produced approximately 100 pages of s, the contents of which are unquestionably relevant. Nonetheless, UBS argues that Zubulake is not entitled to any further discovery because it already produced all responsive documents, to wit, the 100 pages of s. This argument is unpersuasive for two reasons. First, because of the way that UBS backs up its files, it clearly could not have searched all of its s without restoring the ninety-four backup tapes (which UBS admits that it has not done). UBS therefore cannot represent that it has produced all responsive s. Second, Zubulake herself has produced over 450 pages of relevant s, including s that would have been responsive to her discovery requests but were never produced by UBS. These two facts strongly suggest that there are s that Zubulake has not received that reside on UBS s backup media. 41 B. Should Cost Shifting Be Considered? Because it apparently recognizes that Zubulake is entitled to the requested discovery, UBS expends most of its efforts urging the court to shift the cost of production to protect [it]... from undue burden or expense. Faced with similar applications, courts generally engage in some sort of cost-shifting analysis, whether the [above-]refined eight-factor test or a cruder application of Rule 34 s proportionality test, or something in between. The first question, however, is whether cost-shifting must be considered in every case involving the discovery of electronic data, which in today s world includes virtually all cases. In light of the accepted principle, stated above, that electronic evidence is no less discoverable than paper evidence, the answer is, No. The Supreme Court has instructed that the presumption is that the responding party must bear the expense of complying with discovery requests... Any principled approach to electronic evidence must respect this presumption. Courts must remember that cost-shifting may effectively end discovery, especially when private parties are engaged in litigation with large corporations. As large companies increasingly move to entirely paper-free environments, the frequent use of cost-shifting will have the effect of crippling discovery in discrimination and retaliation cases. This will both undermine the strong public policy favor[ing] resolving disputes on their merits, and may ultimately deter the filing of potentially meritorious claims. Thus, cost-shifting should be considered only when electronic discovery imposes an undue burden or expense on the responding party. The burden or expense of discovery is, in turn, undue when it outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Many courts have automatically assumed that an undue burden or expense may arise simply because electronic evidence is involved. This makes no sense. Electronic evidence is frequently cheaper and easier to produce than paper evidence because it can be searched automatically, key words can be run for privilege checks, and the production can be made in electronic form obviating the need for mass photocopying. In fact, whether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format (a distinction that 41 UBS insists that [f]rom the time Plaintiff commenced her EEOC action in August UBS collected and produced all existing responsive s sent or received between 1999 and 2001 from these and other employees' computers. Even if this statement is completely accurate, a simple search of employees computer files would not have turned up s deleted prior to August Such deleted documents exist only on the backup tapes and optical disks, and their absence is precisely why UBS's production is not complete. 218

219 corresponds closely to the expense of production). In the world of paper documents, for example, a document is accessible if it is readily available in a usable format and reasonably indexed. Examples of inaccessible paper documents could include (a) documents in storage in a difficult to reach place; (b) documents converted to microfiche and not easily readable; or (c) documents kept haphazardly, with no indexing system, in quantities that make page-by-page searches impracticable. But in the world of electronic data, thanks to search engines, any data that is retained in a machine readable format is typically accessible. 50 C. What Is the Proper Cost Shifting Analysis? [The above] eight factor test has unquestionably become the gold standard for courts resolving electronic discovery disputes. But [ ] In order to maintain the presumption that the responding party pays, the cost-shifting analysis must be neutral; close calls should be resolved in favor of the presumption. The factors, as applied, undercut that presumption for three reasons. First, the [eight-factor] test is incomplete. Second, courts have given equal weight to all of the factors, when certain factors should predominate. Third, courts applying the test have not always developed a full factual record. c. A New Seven Factor Test Set forth below is a new seven-factor test. 1. The extent to which the request is specifically tailored to discover relevant information; 2. The availability of such information from other sources; 3. The total cost of production, compared to the amount in controversy; 4. The total cost of production, compared to the resources available to each party; 5. The relative ability of each party to control costs and its incentive to do so; 6. The importance of the issues at stake in the litigation; and 7. The relative benefits to the parties of obtaining the information. D. A Factual Basis Is Required to Support the Analysis Courts have uniformly favored cost-shifting largely because of assumptions made concerning the likelihood that relevant information will be found. But such proof will rarely exist in advance of obtaining the requested discovery. The suggestion that a plaintiff must not only demonstrate that probative evidence exists, but also prove that electronic discovery will yield a gold mine, is contrary to the plain language of Rule 26(b)(1), which permits discovery of any matter that is relevant to [a] claim or defense. Requiring the responding party to restore and produce responsive documents from a small sample of backup tapes will inform the cost-shifting analysis laid out above. When based on an actual sample there will be tangible evidence of what the backup tapes may have to offer. There will also be tangible evidence of the time and cost required to restore the backup 50 See Scheindlin & Rabkin, Electronic Discovery, 41 B.C. L.Rev. at 364 ( By comparison [to the time it would take to search through 100,000 pages of paper], the average office computer could search all of the documents for specific words or combination[s] of words in [a] minute, perhaps less. ); see also Public Citizen v. Carlin, 184 F.3d 900, (D.C.Cir.1999). 219

220 tapes, which in turn will inform the second group of cost-shifting factors. Thus, by requiring a sample restoration of backup tapes, the entire cost-shifting analysis can be grounded in fact rather than guesswork. IV. CONCLUSION AND ORDER In summary, deciding disputes regarding the scope and cost of discovery of electronic data requires a three-step analysis: First, it is necessary to thoroughly understand the responding party s computer system, both with respect to active and stored data. For data that is kept in an accessible format, the usual rules of discovery apply: the responding party should pay the costs of producing responsive data. A court should consider cost-shifting only when electronic data is relatively inaccessible, such as in backup tapes. Second, because the cost-shifting analysis is so fact-intensive, it is necessary to determine what data may be found on the inaccessible media. Requiring the responding party to restore and produce responsive documents from a small sample of the requested backup tapes is a sensible approach in most cases. Accordingly, UBS is ordered to produce all responsive s that exist on its optical disks or on its active servers at its own expense. UBS is also ordered to produce, at its expense, responsive s from any five backups tapes selected by Zubulake. UBS should then prepare an affidavit detailing the results of its search, as well as the time and money spent. After reviewing the contents of the backup tapes and UBS s certification, the Court will conduct the appropriate cost-shifting analysis. A conference is scheduled in Courtroom 12C at 4:30 p.m. on June 17, Notes and Questions: 1. Which party normally bears the cost burden associated with responding to documentary discovery request? How can that burden shift? 2. Assume a judge believes there are good arguments on both sides of the who pays issue. What would be her default ruling? 3. What is Judge Scheindlin s cost-conscious approach in this case? 4. This is one of the longer cases assigned in this course. Given the practical importance of electronic discovery, one hopes that the editor did not cut too much. What about your ethical obligations regarding electronically stored information. Consider the following, quoted from Qualcomm Inc. v. Broadcom Corp., 2008 WL (S.D. Cal., 2008, not reported in Fed. Supp. 2d): Qualcomm had searched the archives of twenty-one employees and located more than forty-six thousand documents (totaling more than three hundred thousand pages), which had been requested but not produced in discovery. Qualcomm withheld tens of thousands of s and then utilized Broadcom s lack of access to the suppressed evidence to repeatedly and falsely aver that there was no evidence Qualcomm s misconduct in hiding the s and electronic documents 220

221 prevented Broadcom from correcting the false statements and countering the misleading arguments. Qualcomm did not produce over 46,000 responsive documents, many of which directly contradict the argument that Qualcomm repeatedly made to the court and jury. Attorneys must take responsibility for ensuring that their clients conduct a comprehensive and appropriate document search. Producing 1.2 million pages of marginally relevant documents while hiding 46,000 critically important ones does not constitute good faith and does not satisfy either the client's or attorney's discovery obligations. Similarly, agreeing to produce certain categories of documents and then not producing all of the documents that fit within such a category is unacceptable. 5. Optional reading: Students taking an advanced ESI or e-discovery course should consider Judge Scheindlin s (comparatively lengthy/decade later) 2012 ESI spoliation case, opting for adverse inference instructions rather than other sanctions. Sekisui America Corporation v. Hart (S.D.NY 2012). 221

222 SCHLAGENHAUF v. HOLDER United States Supreme Court 379 U.S. 104 (1964) Mr. Justice Goldberg, delivered the [5-4, with 4 discrete] opinion[s] of the Court. This case involves the validity and construction of Rule 35(a) of the Federal Rules of Civil Procedure as applied to the examination of a defendant in a negligence action. I. An action was brought seeking damages arising from personal injuries suffered by passengers of a bus which collided with the rear of a tractor-trailer. The named defendants were The Greyhound Corporation, owner of the bus; petitioner, Robert L. Schlagenhauf, the bus driver; Contract Carriers, Inc., owner of the tractor; Joseph L. McCorkhill, driver of the tractor; 1 and National Lead Company, owner of the trailer. Answers were filed by each of the defendants denying negligence. Greyhound then cross-claimed against Contract Carriers and National Lead for damage to Greyhound s bus, alleging that the collision was due solely to their negligence in that the tractortrailer was driven at an unreasonably low speed, had not remained in its lane, and was not equipped with proper rear lights. Contract Carriers filed an answer to this cross-claim denying its negligence and asserting (t)hat the negligence of the driver of the bus (petitioner Schlagenhauf) proximately caused and contributed to Greyhound s damages. Pursuant to a pretrial order, Contract Carriers filed a letter-which the trial court treated as, and we consider to be, part of the answer alleging that Schlagenhauf was not mentally or physically capable of driving a bus at the time of the accident. Contract Carriers and National Lead then petitioned the District Court for an order directing petitioner Schlagenhauf to submit to both mental and physical examinations by one specialist in each of the following fields: (1) Internal medicine; (2) Ophthalmology; (3) Neurology; and (4) Psychiatry. For the purpose of offering a choice to the District Court of one specialist in each field, the petition recommended two specialists in internal medicine, ophthalmology, and psychiatry, respectively, and three specialists in neurology a total of nine physicians. The petition alleged that the mental and physical condition of Schlagenhauf was in controversy as it had been raised by Contract Carriers answer to Greyhound s cross-claim. This was supported by a brief of legal authorities and an affidavit of Contract Carriers attorney stating that Schlagenhauf had seen red lights 10 to 15 seconds before the accident, that another witness had seen the rear lights of the trailer from a distance of three-quarters to one-half mile, and that Schlagenhauf had been involved in a prior accident. The certified record indicates that petitioner s attorneys filed in the District Court a brief in opposition to this petition asserting, among other things, that the physical and mental condition of the defendant Robert L. Schlagenhauf is not in controversy herein in the sense that 1 In all the pleadings McCorkhill was joined with Contract Carriers. For simplicity, both will be referred to as Contract Carriers. 222

223 these words are used in Rule 35 of the Federal Rules of Civil Procedure; (and) that good cause has not been shown for the multiple examinations prayed for by the cross-defendant. While disposition of this petition was pending, National Lead filed its answer to Greyhound s cross-claim and itself cross-claimed against Greyhound and Schlagenhauf for damage to its trailer. The answer asserted generally that Schlagenhauf s negligence proximately caused the accident. The cross-claim additionally alleged that Greyhound and Schlagenhauf were negligent (b)y permitting said bus to be operated over and upon said public highway by the said defendant, Robert L. Schlagenhauf, when both the said Greyhound Corporation and said Robert L. Schlagenhauf knew that the eyes and vision of the said Robert L. Schlagenhauf was (sic) impaired and deficient. The District Court, on the basis of the petition filed by Contract Carriers, and without any hearing, ordered Schlagenhauf to submit to nine examinations one by each of the recommended specialists despite the fact that the petition clearly requested a total of only four examinations. 3 The Court of Appeals denied mandamus. We granted certiorari to review undecided questions concerning the validity and construction of Rule 35. II. Here petitioner s basic allegation was lack of power in a district court to order a mental and physical examination of a defendant. That this issue was substantial is underscored by the fact that the challenged order requiring examination of a defendant appears to be the first of its kind in any reported decision in the federal courts under Rule 35, and we have found only one such modern case in the state courts. The petitioner, however, also alleged that, even if Rule 35 gives a district court power to order mental and physical examinations of a defendant in an appropriate case, the District Court here exceeded that power in ordering examinations when petitioner s mental and physical condition was not in controversy and no good cause was shown, both as expressly required by Rule 35. We recognize [t]he meaning of Rule 35 s requirements of in controversy and good cause also raised issues of first impression. III. Rule 35 on its face applies to all parties, which under any normal reading would include a defendant. Petitioner contends, however, that the application of the Rule to a defendant would be an unconstitutional invasion of his privacy. 3 After the Court of Appeals denied mandamus, the order was corrected by the District Court to reduce the number of examinations to the four requested. We agree with respondent that the issue of that error has become moot. However, the fact that the District Court ordered nine examinations is not irrelevant, together with all the other circumstances, in the consideration of whether the District Court gave to the petition for mental and physical examinations that discriminating application, which Rule 35 requires. 223

224 We recognize that, insofar as reported cases show, this type of discovery in federal courts has been applied solely to plaintiffs, and that some early state cases seem to have proceeded on a theory that a plaintiff who seeks redress for injuries in a court of law thereby waives' his right to claim the inviolability of his person. We hold that Rule 35, as applied to either plaintiffs or defendants to an action, is free of constitutional difficulty and is within the scope of the Enabling Act. IV. There remains the issue of the construction of Rule 35. We enter upon determination of this construction with the basic premise that the deposition-discovery rules are to be accorded a broad and liberal treatment, to effectuate their purpose that civil trials in the federal courts no longer need be carried on in the dark. Petitioner contends that even if Rule 35 is to be applied to defendants, which we have determined it must, nevertheless it should not be applied to him as he was not a party in relation to Contract Carriers and National Lead the movants for the mental and physical examinations at the time the examinations were sought. 11 The Court of Appeals agreed with petitioner s general legal proposition, holding that the person sought to be examined must be an opposing party vis-a-vis the movant (or at least one of them). While it is clear that the person to be examined must be a party to the case, we are of the view that the Court of Appeals gave an unduly restrictive interpretation to that term. Rule 35 only requires that the person to be examined be a party to the action, not that he be an opposing party vis-a -vis the movant. The [prima facie] basis for the examinations [is the] allegation that petitioner s mental and physical condition had been put in controversy by the National Lead answer and cross-claim. Petitioner next contends that his mental or physical condition was not in controversy and good cause was not shown for the examinations, both as required by the express terms of Rule 35. It is notable that in none of the other discovery provisions is there a restriction that the matter be in controversy. This additional requirement of good cause was reviewed [citation omitted] in the following words: [A] party may take depositions and serve interrogatories without prior sanction of the court or even its knowledge of what the party is doing. Only if a deponent refuses to answer in the belief that the question is irrelevant, can the moving party request under Rule 37 a court order requiring an answer. Significantly, this freedom of action, afforded a party who resorts to depositions and interrogatories, is not granted to one proceeding under Rule 35. Instead, the court must decide as an initial matter, and in every case, whether the motion requesting the making of a physical or mental examination adequately demonstrates good cause. The specific requirement of good cause would be meaningless if good cause could be sufficiently established by merely showing that the desired materials are relevant, for the 11 We have already pointed out,... that at the time of the first petition, Schlagenhauf was a named defendant in the original complaint but was not a named cross-defendant in any pleadings filed by Contract Carriers or National Lead. 224

225 relevancy standard has already been imposed by Rule 26(b). Thus, by adding the words good cause, the Rules indicate that there must be greater showing of need under Rule 35 than under the other discovery rules. The courts of appeals in other cases have also recognized that [the] good-cause requirement is not a mere formality, but is a plainly expressed limitation on the use of that Rule. Th[e] in controversy and good cause requirements of Rule are not met by mere conclusory allegations of the pleadings nor by mere relevance to the case but require an affirmative showing by the movant that each condition is really and genuinely in controversy and that good cause exists for ordering each particular examination. Obviously, what may be good cause for one type of examination may not be so for another. The ability of the movant to obtain the desired information by other means is also relevant. Rule 35, therefore, requires discriminating application by the trial judge, who must decide, as an initial matter in every case, whether the party requesting a mental or physical examination or examinations has adequately demonstrated the existence of the Rule s requirements of in controversy and good cause, which requirements are necessarily related. This does not, of course, mean that the movant must prove his case on the merits in order to meet the requirements for a mental or physical examination. Nor does it mean that an evidentiary hearing is required in all cases. This may be necessary in some cases, but in other cases the showing could be made by affidavits or other usual methods short of a hearing. It does mean, though, that the movant must produce sufficient information, by whatever means, so that the district judge can fulfill his function mandated by the Rule. Of course, there are situations where the pleadings alone are sufficient to meet these requirements. A plaintiff in a negligence action who asserts mental or physical injury places that mental or physical injury clearly in controversy and provides the defendant with good cause for an examination to determine the existence and extent of such asserted injury. This is not only true as to a plaintiff, but applies equally to a defendant who asserts his mental or physical condition as a defense to a claim, such as, for example, where insanity is asserted as a defense to a divorce action [or the original defendant files a counterclaim raising such issues vis-avis the original plaintiff]. Here, however, Schlagenhauf did not assert his mental or physical condition either in support of or in defense of a claim. His condition was sought to be placed in issue by other parties. Thus, under the principles discussed above, Rule 35 required that these parties make an affirmative showing that petitioner s mental or physical condition was in controversy and that there was good cause for the [nine] examinations requested [and granted by the trial court]. This, the record plainly shows, they failed to do. The only allegations in the pleadings relating to this subject were the general conclusory statement in Contract Carriers answer to the cross-claim that Schlagenhauf was not mentally or physically capable of operating the bus at the time of the accident and the limited allegation in National Lead s cross-claim that, at the time of the accident, the eyes and vision of... Schlagenhauf was (sic) impaired and deficient. The attorney s affidavit attached to the petition for the examinations provided: 225

226 That Schlagenhauf, in his deposition admitted that he saw red lights for 10 to 15 seconds prior to a collision with a semi-tractor trailer unit and yet drove his vehicle on without reducing speed and without altering the course thereof. The only eye-witness to this accident known to this affiant testified that immediately prior to the impact between the bus and truck that he had also been approaching the truck from the rear and that he had clearly seen the lights of the truck for a distance of three-quarters to one-half mile to the rear thereof. Schlagenhauf has admitted in his deposition that he was involved in a (prior) similar type rear end collision. This record cannot support even the corrected order which required one examination in each of the four specialties of internal medicine, ophthalmology, neurology, and psychiatry. 15 Nothing in the pleadings or affidavit would afford a basis for a belief that Schlagenhauf was suffering from a mental or neurological illness warranting wide-ranging psychiatric or neurological examinations.nor is there anything stated justifying the broad internal medicine examination. 16 The only specific allegation made in support of the four examinations ordered was that the eyes and vision of Schlagenhauf were impaired. Considering this in conjunction with the affidavit, we would be hesitant to set aside a visual examination if it had been the only one ordered. However, as the case must be remanded to the District Court because of the other examinations ordered, it would be appropriate for the District Judge to reconsider also this order in light of the guidelines set forth in this opinion. The Federal Rules of Civil Procedure should be liberally construed, but they should not be expanded by disregarding plainly expressed limitations. The good cause and in controversy requirements of Rule 35 make it very apparent that sweeping examinations of a party who has not affirmatively put into issue his own mental or physical condition are not to be automatically ordered merely because the person has been involved in an accident or, as in this case, two accidents and a general charge of negligence is lodged. Mental and physical examinations are only to be ordered upon a discriminating application by the district judge of the limitations prescribed by the Rule. To hold otherwise would mean that such examinations could be ordered routinely in automobile accident cases. The plain language of Rule 35 precludes such an untoward result. Accordingly, the judgment of the Court of Appeals is vacated and the case remanded to the District Court to reconsider the examination order in light of the guidelines herein formulated and for further proceedings in conformity with this opinion. Vacated and remanded. [The remaining opinions were omitted]. Notes and Questions: 15 See note 3, supra. 16 Moreover, it seems clear that there was no compliance with Rule 35 s requirement that the trial judge delineate the conditions, and scope of the examinations. Here the examinations were ordered in very broad, general areas. The internal medicine examination might for example, at the instance of the movant or its recommended physician extend to such things as blood tests, electrocardiograms, gastro-intestinal and other X-ray examinations. It is hard to conceive how some of these could be relevant under any possible theory of the case.. 226

227 1. The Supreme Court is in charge of the annual rules-making process, resulting in recommendations to Congress. From time to time, it nevertheless grants (as done in this case) certiorari to review undecided questions concerning the validity and construction of various FRCPs it has previously approved. 2. What document arguably triggered the in controversy element and why? 3. In what kind of case would this requirement be clearly met whereby no hearing would be required, and there would likely be no objection for: (a) a physical examination, and (b) a mental examination? 4. If you were the Schlagenhauf judge, with which examination request would you have the: (a) most, and (b) least trouble deciding? 5. How does the Court define good cause? 6. Note the additional FRCP 35(a)(2)(B) requirement regarding the details which must be specified by the party seeking the examination. Which of the two basic Rule 35 requirements would that information tend to support? 227

228 HICKMAN v. TAYLOR United States Supreme Court 329 U.S. 495 (1947) Mr. Justice Murphy delivered the [unanimous, with one concurring] opinion of the Court. This case presents an important problem under the Federal Rules of Civil Procedure, as to the extent to which a party may inquire into oral and written statements of witnesses, or other information, secured by an adverse party s counsel in the course of preparation for possible litigation after a claim has arisen. Examination into a person s files and records, including those resulting from the professional activities of an attorney, must be judged with care. It is not without reason that various safeguards have been established to preclude unwarranted excursions into the privacy of a man s work. At the same time, public policy supports reasonable and necessary inquiries. Properly to balance these competing interests is a delicate and difficult task. [T]he tug J. M. Taylor sank while engaged in helping to tow a car float of the Baltimore & Ohio Railroad across the Delaware River at Philadelphia. The accident was apparently unusual in nature, the cause of it still being unknown. Five of the nine crew members were drowned. Three days later the tug owners and the underwriters employed a law firm, of which respondent Fortenbaugh is a member, to defend them against potential suits by representatives of the deceased crew members and to sue the railroad for damages to the tug. Railroad car float resembling the one towed by the J.M. Taylor Source: barge < Reprinted with permission of the United States Navy A public hearing was held before the United States Steamboat Inspectors, at which the four survivors were examined. This testimony was recorded and made available to all interested parties. Shortly thereafter, Fortenbaugh privately interviewed the survivors and took statements from them with an eye toward the anticipated litigation; the survivors signed these statements. Fortenbaugh also interviewed other persons believed to have some information relating to the accident and in some cases he made memoranda of what they told him. At the time when Fortenbaugh secured the statements of the survivors, representatives of two of the deceased crew members had been in communication with him. Ultimately claims were presented by representatives of all five of the deceased; four of the claims, however, were settled without litigation. The fifth claimant, petitioner herein, brought suit in a federal court under the Jones Act, naming as defendants the two tug owners, individually and as partners, and the railroad. One year later, petitioner [plaintiff] filed 39 interrogatories directed to the tug owners. The 38th interrogatory read: 228

229 State whether any statements of the members of the crews of the Tugs J. M. Taylor and Philadelphia or of any other vessel were taken in connection with the towing of the car float and the sinking of the Tug John M. Taylor. Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports. The tug owners, through Fortenbaugh, answered all of the interrogatories except No. 38. While admitting that statements of the survivors had been taken, they declined to summarize or set forth the contents. They did so on the ground that such requests called for privileged matter obtained in preparation for litigation and constituted an attempt to obtain indirectly counsel s private files. It was claimed that answering these requests would involve practically turning over not only the complete files, but also the telephone records and, almost, the thoughts of counsel. In connection with the hearing on these objections, Fortenbaugh made a written statement and gave an informal oral deposition explaining the circumstances under which he had taken the statements. The District Court held that the requested matters were not privileged. The court then decreed that the tug owners and Fortenbaugh, as counsel and agent for the tug owners forthwith Answer Plaintiff s 38th interrogatory ; produce all written statements of witnesses obtained by Mr. Fortenbaugh, as counsel and agent for Defendants; state in substance any fact concerning this case which Defendants learned through oral statements made by witnesses to Mr. Fortenbaugh whether or not included in his private memoranda and produce Mr. Fortenbaugh s memoranda containing statements of fact by witnesses or to submit these memoranda to the Court for determination of those portions which should be revealed to Plaintiff. Upon their refusal, the court adjudged them in contempt and ordered them imprisoned until they complied. The Third Circuit Court of Appeals, also sitting en banc, reversed the judgment of the District Court. It held that the information here sought was part of the work product of the lawyer and hence privileged from discovery under the Federal Rules of Civil Procedure. The importance of the problem, which has engendered a great divergence of views among district courts, led us to grant certiorari. The pre-trial deposition-discovery mechanism established by Rules 26 to 37 is one of the most significant innovations of the Federal Rules of Civil Procedure. Under the prior federal practice, the pre-trial functions of notice-giving issue-formulation and fact-revelation were performed primarily and inadequately by the pleadings. Inquiry into the issues and the facts before trial was narrowly confined and was often cumbersome in method. The new rules, however, restrict the pleadings to the task of general notice-giving and invest the depositiondiscovery process with a vital role in the preparation for trial. The various instruments of discovery now serve (1) as a device, along with the pre-trial hearing under Rule 16, to narrow and clarify the basic issues between the parties, and (2) as a device for ascertaining the facts, or information as to the existence or whereabouts of facts, relative to those issues. Thus civil trials in the federal courts no longer need be carried on in the dark. The way is now clear, consistent with recognized privileges, for the parties to obtain the fullest possible knowledge of the issues and facts before trial. In urging that he has a right to inquire into the materials secured and prepared by Fortenbaugh, petitioner emphasizes that the deposition-discovery portions of the Federal Rules 229

230 of Civil Procedure are designed to enable the parties to discover the true facts and to compel their disclosure wherever they may be found. It is said that inquiry may be made under these rules, epitomized by Rule 26, as to any relevant matter which is not privileged; and since the discovery provisions are to be applied as broadly and liberally as possible, the privilege limitation must be restricted to its narrowest bounds. On the premise that the attorney-client privilege is the one involved in this case, petitioner argues that it must be strictly confined to confidential communications made by a client to his attorney. And since the materials here in issue were secured by Fortenbaugh from third persons rather than from his clients, the tug owners, the [petitioner s] conclusion is reached that these materials are proper subjects for discovery under Rule 26. As additional support for this result, petitioner claims that to prohibit discovery under these circumstances would give a corporate defendant a tremendous advantage in a suit by an individual plaintiff. Thus in a suit by an injured employee against a railroad or in a suit by an insured person against an insurance company the corporate defendant could pull a dark veil of secrecy over all the petinent facts it can collect after the claim arises merely on the assertion that such facts were gathered by its large staff of attorneys and claim agents. At the same time, the individual plaintiff, who often has direct knowledge of the matter in issue and has no counsel until some time after his claim arises could be compelled to disclose all the intimate details of his case. By endowing with immunity from disclosure all that a lawyer discovers in the course of his duties, it is said, the rights of individual litigants in such cases are drained of vitality and the lawsuit becomes more of a battle of deception than a search for truth. But framing the problem in terms of assisting individual plaintiffs in their suits against corporate defendants is unsatisfactory. Discovery concededly may work to the disadvantage as well as to the advantage of individual plaintiffs. Discovery, in other words, is not a one-way proposition. It is available in all types of cases at the behest of any party, individual or corporate, plaintiff or defendant. The problem thus far transcends the situation confronting this petitioner. And we must view that problem in light of the limitless situations where the particular kind of discovery sought by petitioner might be used. Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may [generally] compel the other to disgorge whatever facts he has in his possession. The deposition-discovery procedure simply advances the stage at which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility of surprise. But discovery, like all matters of procedure, has ultimate and necessary boundaries. [L]imitations inevitably arise when it can be shown that the examination is being conducted in bad faith or in such a manner as to annoy, embarrass or oppress the person subject to the inquiry. And as Rule 26(b) provides, further limitations come into existence when the inquiry touches upon the irrelevant or encroaches upon the recognized domains of privilege. We also agree that the memoranda, statements and mental impressions in issue in this case fall outside the scope of the attorney-client privilege and hence are not protected from discovery on that basis. It is unnecessary here to delineate the content and scope of that privilege as recognized in the federal courts. For present purposes, it suffices to note that the protective cloak of this privilege does not extend to information which an attorney secures from a witness while acting for his client in anticipation of litigation. Nor does this privilege concern the memoranda, briefs, communications and other writings prepared by counsel for his own use in 230

231 prosecuting his client's case; and it is equally unrelated to writings which reflect an attorney's mental impressions, conclusions, opinions or legal theories. But the impropriety of invoking that privilege does not provide an answer to the problem before us. Petitioner has made more than an ordinary request for relevant, non-privileged facts in the possession of his adversaries or their counsel. He has sought discovery as of right of oral and written statements of witnesses whose identity is well known and whose availability to petitioner appears unimpaired. He has sought production of these matters after making the most searching inquiries of his opponents as to the circumstances surrounding the fatal accident, which inquiries were sworn to have been answered to the best of their information and belief. Interrogatories were directed toward all the events prior to, during and subsequent to the sinking of the tug. Full and honest answers to such broad inquiries would necessarily have included all pertinent information gleaned by Fortenbaugh through his interviews with the witnesses. Petitioner makes no suggestion, and we cannot assume, that the tug owners or Fortenbaugh were incomplete or dishonest in the framing of their answers. In addition, petitioner was free to examine the public testimony of the witnesses taken before the United States Steamboat Inspectors [and thus not subject to any immunity]. We are thus dealing with an attempt to secure the production of written statements and mental impressions contained in the files and the mind of the attorney Fortenbaugh without any showing of necessity or any indication or claim that denial of such production would unduly prejudice the preparation of petitioner's case or cause him any hardship or injustice. For aught that appears, the essence of what petitioner seeks either has been revealed to him already through the interrogatories or is readily available to him direct from the witnesses for the asking. The District Court commanded Fortenbaugh to produce all written statements of witnesses and to state in substance any facts learned through oral statements of witnesses to him. Fortenbaugh was to submit any memoranda he had made of the oral statements so that the court might determine what portions should be revealed to petitioner. All of this was ordered without any showing by petitioner, or any requirement that he make a proper showing, of the necessity for the production of any of this material or any demonstration that denial of production would cause hardship or injustice. The court simply ordered production on the theory that the facts sought were material and were not privileged as constituting attorney-client communications. In our opinion, neither Rule 26 nor any other rule dealing with discovery contemplates production under such circumstances. That is not because the subject matter is privileged or irrelevant, as those concepts are used in these rules. 9 Here is simply an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party s counsel in the course of his legal duties. As such, it falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defense of legal claims. Not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney. Historically, a lawyer is bound to work for the advancement of justice while faithfully protecting the rightful interests of his clients. In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by 9 Reports by a company s servant, if made in the ordinary course of routine [business], are not privileged, even though it is desirable that the solicitor should have them and they are subsequently sent to him; but if the solicitor has requested that such documents shall always be prepared for his use and this was one of the reasons why they were prepared, they need not by disclosed. 231

232 opposing parties and their counsel. Proper preparation of a client s case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference. That is the historical and the necessary way in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients' interests. This work is reflected, of course, in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways aptly termed as the Work product of the lawyer. Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney s thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served. We do not mean to say that all written materials obtained or prepared by an adversary s counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and non-privileged facts remain hidden in an attorney s file and where production of those facts is essential to the preparation of one s [an opposing lawyer s] case, discovery may properly be had. And production might be justified where the witnesses are no longer available or can be reached only with difficulty. Were production of written statements and documents to be precluded under such circumstances, the liberal ideals of the depositiondiscovery portions of the Federal Rules of Civil Procedure would be stripped of much of their meaning. But the general policy against invading the privacy of an attorney s course of preparation is so well recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a court order. That burden, we believe, is necessarily implicit in the rules as now constituted. No attempt was made [by plaintiff s counsel] to establish any reason why Fortenbaugh should be forced to produce the written statements. There was only a naked, general demand for these materials as of right and a finding by the District Court that no recognizable privilege was involved. That was insufficient to justify discovery under these circumstances and the court should have sustained the refusal of the tug owners and Fortenbaugh to produce. But as to oral statements made by witnesses to Fortenbaugh, whether presently in the form of his mental impressions, we do not believe that any showing of necessity can be made under the circumstances of this case so as to justify production [italics added]. Under ordinary conditions, forcing an attorney to repeat or write out all that witnesses have told him and to deliver the account to his adversary gives rise to grave dangers of inaccuracy and untrustworthiness. No legitimate purpose is served by such production. The practice forces the attorney to testify as to what he remembers or what he saw fit to write down regarding witnesses remarks. Such testimony could not qualify as evidence; and to use it for impeachment or corroborative purposes would make the attorney much less an officer of the court and much more an ordinary witness. The standards of the profession would thereby suffer. Denial of production of this nature does not mean that [h]e [adverse counsel becomes] unduly hindered in the preparation of his case, in the discovery of facts or in his anticipation of his opponents position. Searching interrogatories directed to Fortenbaugh and the tug owners, production of written documents and statements upon a proper showing and direct interviews with the witnesses themselves [and depositions may] all serve to reveal the facts in 232

233 Fortenbaugh s possession to the fullest possible extent consistent with public policy. Petitioner s counsel frankly admits that he wants the oral statements only to help prepare himself to examine witnesses and to make sure that he has overlooked nothing. That is insufficient under the circumstances to permit him an exception to the policy underlying the privacy of Fortenbaugh s professional activities. If there should be a rare situation justifying production of these matters, petitioner s case is not of that type. We therefore affirm the judgment of the Circuit Court of Appeals. Affirmed. Mr. Justice Jackson, concurring. The real purpose and the probable effect of the practice ordered by the district court [file turnover] would be to put trials on a level even lower than a battle of wits. I can conceive of no practice more demoralizing to the Bar than to require a lawyer to write out and deliver to his adversary an account of what witnesses have told him. Even if his recollection were perfect, the statement would be his language permeated with his inferences. Every one who has tried it knows that it is almost impossible so fairly to record the expressions and emphasis of a witness that when he testifies in the environment of the court and under the influence of the leading question there will not be departures in some respects. Whenever the testimony of the witness would differ from the exact statement the lawyer had delivered, the lawyer s statement would be whipped out to impeach the witness. Counsel producing his adversary s inexact statement could lose nothing by saying, Here is a contradiction, gentlemen of the jury. I do not know whether it is my adversary or his witness who is not telling the truth, but one is not. Of course, if this practice were adopted, that scene would be repeated over and over again. The lawyer who delivers such statements often would find himself branded a deceiver afraid to take the stand to support his own version of the witness s conversation with him, or else he will have to go on the stand to defend his own credibility perhaps against that of his chief witness, or possibly even his client. Having been supplied the names of the witnesses, petitioner s lawyer gives no reason why he cannot interview them himself. If an employee-witness refuses to tell his story, he, too, may be examined under the Rules. He may be compelled on discovery as fully as on the trial to disclose his version of the facts. But that is his own disclosure it can be used to impeach him if he contradicts it and such a deposition is not useful to promote an unseemly disagreement between the witness and the counsel in the case. Notes and Questions: 1. Fortenbaugh gave an informal oral deposition explaining the circumstances under which he had taken the [witness] statements. That would not happen today. Attorneys oppose, but do not depose, one another. 2. The statements and mental impressions in issue in this case fall outside the scope of the attorney-client privilege. They were nevertheless deemed to be immune from discovery. Under what theory? Are they always immune? 233

234 3. Do reports made in the ordinary course of business, then obtained by counsel qualify as attorney work product? 4. Does the work product doctrine help or hinder what the court refers to as [m]utual knowledge of all the relevant facts gathered by both parties [that] is essential to proper litigation? 5. Under what circumstances would the surviving tug boat sailors statements be obtainable by adverse counsel? Normally, however, adverse counsel can readily obtain the substantial equivalent. How so? 6. There are two categories of work product. What are they? How do they differ? 234

235 PERRY v. W. S. DARLEY & CO. United States District Court, Eastern District, Wisconsin 54 F. R.D. 278 (1971) Professor s Note: Read this case with a view toward distinguishing the three types of witnesses in civil litigation: (1); percipient (fact) witnesses; (2) expert consultants, who are employed by a party retained to assists the hiring lawyer assess the technical aspects of a case; and (3) experts who have been subsequently designated to testify at trial resulting in the waiver of conditional work product protection. I have inserted ten footnotes which are not a part of the original opinion. If I took the time to do so, you should take the time to digest them before class. Court s Opinion: Myron L. Gordon, District Judge. The plaintiff Robert Perry, a volunteer fireman, seeks damages for injuries allegedly sustained when he was struck by a fire truck as he attempted to activate a pump manufactured and installed on the truck by the defendant. 1 The defendant has moved for an order compelling disclosure of the names of certain experts who examined the truck and pump shortly after the accident; the refusal to disclose the names occurred during the oral deposition of Ward Johnson, an employee of the workmen's compensation carrier for the fire department for which Mr. Perry works. 2 Counsel for the plaintiffs objected to disclosure of the experts names on the basis that such information constitutes both privileged communication and work product. However, the defendant argues in its brief that the experts are potential witnesses who have knowledge or relevant facts and that it is entitled, pursuant to Rule 26(b)(1), to the identity and location of persons having knowledge of any discoverable matter. 3 The plaintiffs state that 1 This was a products liability case against a third party. The plaintiff could pursue only administrative remedies against his employer. 2 The fire company s insurance carrier was thus asserting the interests of the fire company s employee Perry. 3 Note that FRCP 26(b)(1) does not expressly distinguish between lay or expert witnesses who may be persons having [such] knowledge. 235

236 It should be noted that the [defendant s] question did not seek the disclosure of the identity of experts which plaintiffs expect to call as witnesses 4 upon the trial, which disclosure is explicitly required. Federal Rule 26(b)(4)(A). However, significantly, no similar requirement is made for the disclosure of identity of experts not retained or specially employed for purposes of testifying at trial. See Rule 26(b)(4)(B). 5 In addition, the Advisory Committee note to Rule 26(b)(4) states, in part: It should be noted that the subdivision does not address itself to the expert whose information was not acquired in preparation for trial but rather because he was an actor or viewer with respect to transactions or occurrences that are part of the subject matter of the lawsuit. Such an expert should be treated as an ordinary witness. The plaintiffs concede that they have a duty to disclose the identity of any expert whom they expect to call as a witness at the trial. 6 As to experts who have been engaged in anticipation of litigation or preparation for trial, however, the plaintiffs point to the provisions of Rule 26(b)(4)(B) to the effect that, when such experts are not expected to be called as [witnesses] at trial, facts known or opinions held by them are discoverable... only upon a showing of exceptional circumstances under which it is impracticable for the party seeking discovery to obtain facts or opinions on the same subject by other means. 7 Rule 26(b)(4)(B) makes no distinction between the identity of an expert and facts known or opinions held by him, although Apparently one party can find out the names of experts 4 What kind of witness is the court referring to at this point? 5 What kind of expert is the court referring to at this point? 6 The retaining party thus designates that party s consultant as an expert witness, thus waving the former work product protection. Why would the retaining attorney want to do that? 7 What case is this passage referring to? What FRCP effectively codified that case? 236

237 specially retained by another party who are not to be called. 8 However, in an affidavit attached to the defendant's motion, the attorney for the defendant states that, because the experts viewed the fire truck well before the commencement of the present action, this in and of itself is sufficient cause to require the plaintiff to turn over not only the names of the expert or experts but the reports of said expert or experts. 9 In my opinion, no showing of exceptional circumstances has been made by the defendant in the case at bar, nor is there any evidence to indicate that the experts were actors or viewers with respect to [the] transactions or occurrences that are part of the subject matter of the lawsuit. 10 Rule 26(b)(4) imposes a more rigorous standard upon the discovery of facts known and opinions held by an expert than is imposed with regard to other witnesses; I am not persuaded that such standard should be relaxed in the present case with regard to the identity of the experts who viewed the fire truck shortly after the accident. Therefore, it is ordered that the defendant's motion for an order compelling answers to certain questions propounded to Ward Johnson be and hereby is denied. Notes and Questions: 1. FRCP 26 does not clearly distinguish between the two types of expert. What are they? 8 But would that information not infringe upon the retaining party s work product? Should an adversary be permitted to: (a) inquire as to the identity of any consultant that the retaining party decided not to use?; or (b) take the deposition of that unused consultant? Would it matter if the party with the financial resources effectively monopolized the few potential experts in the area, to keep the other party from having access to a local consultant? 9 Of the three possible types of witness, which would they be in this circumstance? Should there be an exception for reports written, or people dispatched to the scene of an accident in the ordinary course of business which could overlap with doing so in anticipation of litigation? 10 Assume that these Johnny-on-the-spot fire department employees, with the relevant expertise are on the scene, and observe whether the allegedly defective pump was working/not working; or that there was a grinding noise coming from that pump; or that they saw smoke coming from that pump. Should the trial judge s ruling be the same? 237

238 2. What pre-trial event triggers a change in status (for the same expert ), from the one type of expert to the other? 3. In an illustrative discussion, of the retained consultant-testifying expert distinction, by the California Court of Appeals, in DeLuca v. State Fish Co., Inc., 217 Cal.App.4th 671, (2013): If the expert is solely retained as a consulting expert, the attorney-client privilege applies to communications made by the client or the attorney to the expert in order for the expert to properly advise counsel. As noted above, the attorney-client privilege applies to communications to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted; this clearly includes communications to a consulting expert. Similarly, a consulting expert s [written] report, prepared at the attorney s request and with the purpose of assisting the attorney in trial preparation, constitutes work product, entitled to conditional protection and barred from discovery in the absence of good cause. The situation is different, however, with a testifying expert. As a general rule, neither the attorney-client privilege nor the work product protection will prevent disclosure of statements to, or reports from, a testifying expert. When a client calls that party s attorney to testify at trial to information the attorney could have only learned through the attorney-client privilege, the privilege is waived. It follows that the same waiver exists when an agent of the attorney is to testify to matters that he could only have learned because of the attorney-client relationship. Once a testifying expert is designated as a [deposition or trial] witness, the attorney-client privilege no longer applies, because the decision to use the expert as a witness manifests the client's consent to disclosure of the information. Similarly, when an expert witness is expected to testify, the expert s report, which was subject to the conditional work product protection, becomes discoverable, as the mere fact that the expert is expected to testify generally establishes good cause for its disclosure. 238

239 COBLE v. CITY OF WHITE HOUSE, TENNESSEE United States Court of Appeals, Sixth Circuit 634 F.3d 865 (2011) Bell, District Judge [delivered the unanimous opinion of the court]. Plaintiff Jerry T. Coble ( Coble ) appeals the district court s entry of summary judgment in favor of Officer Curtis Carney, Jr. on Coble s claim under 42 U.S.C that Officer Carney used excessive force against him during his arrest for drunk driving. The issue on appeal is whether the district court erred in finding that there was no question of fact for trial because Coble s testimony regarding the force used was contradicted by a contemporaneous audio recording. For the reasons that follow, we REVERSE the district court s judgment. I. On April 6, 2007, at approximately 10:40 p.m., Officer Curtis Carney, Jr., was on patrol for the City of White House Police Department, when a truck driven by Coble exited the parking lot of Bob & Rhonda s Sports Grill and pulled onto the highway in front of Officer Carney s patrol car. After seeing the truck cross the fog line three times, Officer Carney activated his incar video camera and flashing lights. Coble did not stop. He continued driving until he turned into the driveway of his home and reached the end of his driveway. Public domain sources: < housetn.com/images/police2743.jp> City of White House, Tennessee jail area and patrol car < YourGovernment/Police%20Patrol%201> Officer Carney pulled up behind him and exited his patrol car. Coble did not obey Officer Carney s preliminary commands or answer his questions. Instead, he argued with Officer Carney, told him to get off his property, and began walking toward his house. When he failed to obey Officer Carney s command to stop, Officer Carney removed his chemical agent from its holster, sprayed Coble, and performed a take-down maneuver, during which Coble sustained an open fracture of his right ankle. After a struggle on the ground, Officer Carney, with the assistance of Officer Scott Bilbrey, who had arrived on the scene, succeeded in bringing Coble s arms behind his back and handcuffing him. Once Coble was handcuffed, he did not offer any further resistance. The dispute that is at the heart of this appeal concerns what happened after Coble was handcuffed. None of these events were captured on videotape because they did not occur in front of the patrol car. However, even after Officer Carney and Coble were out of camera range, sounds transmitted by the microphone worn by Officer Carney continued to be recorded. Coble testified that Officer Carney pulled him up by the handcuffs, and, pushing him from behind, 239

240 walked him 7 or 8 steps on his broken ankle, leaving a 34-foot trail of blood. Coble testified that Officer Carney would have known that his leg was broken because bones were sticking out of Coble s leg, his tennis shoe was laid over sideways, one of his legs was shorter than the other, and he was screaming and calling Officer Carney names. Coble testified that when Officer Carney finally stopped, he let go of the handcuffs and dropped Coble face-first on the concrete. Officer Carney s testimony differs markedly from Coble s testimony. Officer Carney testified that, after handcuffing Coble, he and Officer Bilbrey helped Coble to a standing position and began walking with him toward the patrol car. After three or four steps, Coble said his leg was broken. Officer Carney testified that he looked down, saw that Coble's leg was broken, and immediately sat him down on the driveway. Coble was transported by helicopter to a hospital. A blood sample collected from him at 2:10 a.m. on April 7, 2007, indicated a blood alcohol level of Coble pled guilty to charges of driving under the influence and resisting arrest. Coble filed this action against Officer Carney, Officer Bilbrey, and the City of White House, alleging claims of excessive force, false arrest, and failure to implement appropriate policies under 42 U.S.C. 1983, as well as state law claims of negligence, negligent infliction of emotional distress, negligent training and supervision, reckless infliction of emotional distress, and assault and battery. The claims against Officer Bilbrey were dismissed on stipulation of the parties. Officer Carney and the City of White House filed motions for summary judgment. The district court determined that Coble s 1983 claim for the excessive use of force before he was handcuffed and brought under control was barred [citation omitted and italics added]. With respect to Coble s claim that Officer Carney used excessive force after he was handcuffed by walking him on a broken ankle and dropping him face-first onto the ground [italics added], the district court cited Scott v. Harris, 550 U.S. 372 (2007), in support of its determination that, in light of the audio recording, it was not required to accept Coble s version of the events. Listening to the audiotape, no reasonable jury could find by a preponderance of the evidence that Coble screamed during the first few steps while he was being escorted, that he called Officer Carney names to get him to stop walking, or that Coble splattered on the pavement [face down]. To the contrary, the audiotape reveals only the sound of shuffling bodies as if the three men were walking, and Coble was silent. After a few moments, Coble cried out that his leg was broken, and the shuffling stopped. An officer said, Sit down! There is no audible noise that once could associate with a body dropping or splattering to the pavement.... The testimony of Officers Carney and Bilbrey square with the audiotape, while Coble s testimony does not. Therefore, under Scott, the Court need not adopt Coble s version in ruling on the motions for summary judgment. The district court concluded that because Coble failed to generate a genuine issue of material fact for trial on his constitutional claim, Officer Carney was entitled to summary judgment. The district court also concluded that Officer Carney was entitled to qualified immunity, and that there was no evidence to support Coble s claims against the City of White House for failure to train or supervise. The district court accordingly granted the defendants motions for summary judgment on Coble s 1983 claims, and declined to exercise supplemental jurisdiction over Coble s state-law claims. Coble appealed. \ \ 240

241 II. Coble s sole challenge on appeal is to the district court s determination that Officer Carney did not use excessive force after Coble was restrained in handcuffs. 2 We review a district court order granting summary judgment de novo. Summary judgment is proper if the evidence, taken in the light most favorable to the nonmoving party, shows that there are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of law. A constitutional excessive force claim is analyzed under an objective-reasonableness standard, which depends on the facts and circumstance of each case viewed from the perspective of a reasonable officer on the scene. The first step in assessing the constitutionality of [an officer s] actions is to determine the relevant facts. Scott. To the extent there is disagreement about the facts, we must review the evidence in the light most favorable to the plaintiff, and draw all inferences in his favor. Construing the facts on summary judgment in the light most favorable to the non-moving party usually means adopting the plaintiff s version of the facts. Scott. However, the Supreme Court clarified in Scott that facts must be viewed in the light most favorable to the non-moving party only if there is a genuine dispute as to those facts (quoting Fed.R.Civ.P. 56(c)). In Scott, the Supreme Court held that a police officer was entitled to summary judgment on a motorist s claim that the officer used excessive force in ramming his car after a high-speed chase, notwithstanding the fact that the motorist and the officer gave conflicting testimony regarding the events in question. In Scott, the conflicting testimony did not create an issue of fact for trial because the record included a videotape capturing the police chase which clearly contradicted the motorist's contention that he was driving carefully. As noted by the Supreme Court: When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment. In the summary judgment context, appeals courts should not accept visible fiction that is so utterly discredited by the record that no reasonable jury could have believed it. Coble contends that Scott and its progeny in the Sixth Circuit have limited Scott to cases where the events were recorded on a videotape, and that it was improper for the district court to extend Scott to a case involving an audio recording.. There is nothing in the Scott analysis that suggests that it should be restricted to cases involving videotapes. The Scott opinion does not focus on the characteristics of a videotape, but on the record. ( When opposing parties tell two different stories, one of which is blatantly contradicted by the record... ; Respondent s version of events is so utterly discredited by the record... ; At the summary judgment stage... once we have determined the relevant set of facts and drawn all inferences in favor of the nonmoving party to the extent supportable by the record... the reasonableness of [the respondent s] actions... is a pure question of law (emphasis added)). Although we have not had occasion to apply the Scott analysis to audio recordings, 2 Coble has conceded that his plea of guilty to resisting arrest barred any claim that Officer Carney used excessive force against him before his arrest. 241

242 courts routinely look to Scott for guidance in determining whether the non-moving party s version of the events is so blatantly contradicted by objective evidence in the record that it fails to create a genuine issue of material fact for trial, even in the absence of a videotape. Accordingly, our decision does not turn on whether it was proper for the district court to consider the audio recording it was but on whether the district court properly found that Coble s testimony was blatantly contradicted by the audio recording in this case. We think not. The district court found that the audio recording blatantly contradicted Coble s deposition testimony that he screamed during the first few steps while he was being escorted, and called Officer Carney names to get him to stop walking. This finding was based upon the lack of any audible screams or name-calling on the recording. The district court also found that no reasonable jury could find that Coble splattered on the pavement because there was no audible noise that once could associate with a body dropping or splattering to the pavement. The lack of sound on an audio recording cannot be reliably used to discount Coble s testimony. Many factors could affect what sounds are recorded, including the volume of the sound, the nature of the activity at issue, the location of the microphone, whether the microphone was on or off, and whether the microphone was covered. This case differs from Scott, where there were no allegations or indications that the recording was doctored or altered in any way, or any contention that what it depicted differed from what actually happened. Here, in contrast to the plaintiff in Scott, Coble does not merely characterize the recording differently. Rather, Coble insists that the facts differed from what was recorded. Coble testified that he screamed, that he called Officer Carney names, that he was forced to walk on his broken ankle, and that he was dropped face-first on the ground. His testimony is not blatantly contradicted by the lack of corroborating sound on the audio recording. A reasonable jury could believe Coble s version of the events. In addition, the recording does not indicate when Officer Carney became aware of Coble s broken ankle, or how far he made Coble walk after he became aware of the injury. Facts that are not blatantly contradicted by the audio recording remain entitled to an interpretation most favorable to the non-moving party. Coble s testimony that Officer Carney would have known that his ankle was broken is not so utterly discredited by the audio recording, and must be construed in the light most favorable to Coble.. Even if part of Coble s testimony is blatantly contradicted by the audio recording, that does not permit the district court to discredit his entire version of the events. We allow cases to proceed to trial even though a party s evidence is inconsistent, because [i]n reviewing a summary judgment motion, [judicial, as opposed to jury] credibility judgments and weighing of the evidence are prohibited... We cannot say that Coble s version of the events was so utterly discredited by the record that no reasonable jury could believe it. Accordingly, there is a genuine question of material fact as to whether Officer Carney used excessive force, and the district court erred by granting summary judgment for Office Carney... IV. CONCLUSION.. Because there is a genuine issue of material fact as to whether Officer Carney used excessive force after Coble was handcuffed, we REVERSE the order of the district court granting summary judgment to Officer Carney and REMAND for further proceedings consistent with this opinion. 242

243 Notes and Questions: 1. What is the moving party s basic argument in all summary judgment motions? See Rule 56(a).. 2. There was an obvious disagreement about the factual circumstances just after the arrest. What approach does a court employ, when considering such summary judgment evidence, given the conflicting inferences one could draw from the factual evidence? When there is a blatant contradiction in the facts adduced for summary judgment motion, does the court necessarily deny summary judgment? 4. How does a summary judgment motion differ from trial? 243

244 ADICKES v. S. H. KRESS & CO. United States Supreme Court 398 U.S. 144 (1970) Mr. Justice Harlan delivered the [6-2, with two concurring] opinion[s] of the Court. Petitioner, Sandra Adickes, a white school teacher from New York, brought this suit in the United States District Court for the Southern District of New York against respondent S. H. Kress & Co. ( Kress ) to recover damages under 42 U.S.C. s[ection] for an alleged violation of her constitutional rights under the Equal Protection Clause of the Fourteenth Amendment [ 1]. The suit arises out of Kress refusal to serve lunch to Miss Adickes at its restaurant facilities in its Hattiesburg, Mississippi, store on August 14, 1964, and Miss Adickes subsequent arrest upon her departure from the store by the Hattiesburg police on a charge of vagrancy. At the time of both the refusal to serve and the arrest, Miss Adickes was with six young people, all Negroes, who were her students in a Mississippi Freedom School where she was teaching that summer. Unlike Miss Adickes, the students were offered service, and were not arrested. Sandra Adickes, former teacher at Hattiesburg, Mississippi Freedom School Source: < Reprinted with permission of the Association of American Law Schools Civil Procedure webpage owner Petitioner s complaint had two counts, each alleging that Kress had deprived her of the right under the Equal Protection Clause of the Fourteenth Amendment not to be discriminated against on the basis of race. The first count charged that Miss Adickes had been refused service by Kress because she was a Caucasian in the company of Negroes. [T]he District [trial] Court directed a verdict in favor of respondent [Kress]. A divided panel of the Court of Appeals affirmed The second count of her complaint, alleging that both the refusal of service and her subsequent arrest were the product of a conspiracy between Kress and the Hattiesburg police, was dismissed before trial on a motion for summary judgment. The District Court ruled that 1 Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State of Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. 244

245 petitioner had failed to allege any facts from which a conspiracy might be inferred [which was] unanimously affirmed by the Court of Appeals. I Briefly stated, the conspiracy count of petitioner s complaint made the following allegations: While serving as a volunteer teacher at a Freedom School for Negro children in Hattiesburg, Mississippi, petitioner went with six of her students to the Hattiesburg Public Library. The librarian refused to allow the Negro students to use the library, and asked them to leave. Because they did not leave, the librarian called the Hattiesburg chief of police who told petitioner and her students that the library was closed, and ordered them to leave. From the library, petitioner and the students proceeded to respondent s store where they wished to eat lunch. According to the complaint, after the group sat down to eat, a policeman came into the store and observed (Miss Adickes) in the company of the Negro students. A waitress then came to the booth where petitioner was sitting, took the orders of the Negro students, but refused to serve petitioner because she was a white person in the company of Negroes. The complaint goes on to allege that after this refusal of service, petitioner and her students left the Kress store. When the group reached the sidewalk outside the store, the Officer of the Law who had previously entered (the) store arrested petitioner on a groundless charge of vagrancy and took her into custody. A. CONSPIRACIES BETWEEN PUBLIC OFFICIALS AND PRIVATE PERSONS GOVERNING PRINCIPLES The terms of s[ection] 1983 make plain two elements that are necessary for recovery. First, the plaintiff must prove that the defendant has deprived him of a right secured by the Constitution and laws of the United States. Second, the plaintiff must show that the defendant deprived him of this constitutional right under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory. This second element requires that the plaintiff show that the defendant acted under color of law. Although this is a lawsuit against a private party, not the State or one of its officials, our cases make clear that petitioner will have made out a violation of her Fourteenth Amendment rights and will be entitled to relief under s[ection] 1983 if she can prove that a Kress employee, in the course of employment, and a Hattiesburg policeman somehow reached an understanding to deny Miss Adickes service in The Kress store, or to cause her subsequent arrest because she was a white person in the company of Negroes. B. SUMMARY JUDGMENT We now proceed to consider whether the District Court erred in granting summary judgment on the conspiracy count. In granting respondent s motion, the District Court simply stated that there was no evidence in the complaint or in the affidavits and other papers from which a reasonably-minded person might draw an inference of conspiracy. Our own scrutiny of the factual allegations of petitioner s complaint, as well as the material found in the affidavits and depositions presented by Kress to the District Court, however, convinces us that summary judgment was improper here, for we think respondent failed to carry its burden of showing the absence of any genuine issue of fact. Before explaining why this is so, it is useful to state the factual arguments, made by the parties concerning summary judgment, and the reasoning of the courts below. 245

246 In moving for summary judgment, Kress argued that uncontested facts established that no conspiracy existed between any Kress employee and the police. To support this assertion, Kress pointed first to the statements in the deposition of the store manager (Mr. Powell) that (a) he had not communicated with the police, and that (b) he had, by a prearranged tacit signal, ordered the food counter supervisor to see that Miss Adickes was refused service only because he was fearful of a riot in the store by customers angered at seeing a mixed group of whites and blacks eating together. Kress also relied on affidavits from the Hattiesburg chief of police, 11 and the two arresting officers, 12 to the effect that store manager Powell had not requested that petitioner be arrested. Finally, Kress pointed to the statements in petitioner s own deposition that she had no knowledge of any communication between any Kress employee and any member of the Hattiesburg police, and was relying on circumstantial evidence to support her contention that there was an arrangement between Kress and the police. Petitioner, in opposing summary judgment, pointed out that respondent had failed in its 13 moving papers to dispute the allegation in petitioner s complaint, a statement at her deposition, and an unsworn statement by a Kress employee, 14 all to the effect that there was a policeman in the store at the time of the refusal to serve her, and that this was the policeman who subsequently arrested her. Petitioner argued that although she had no knowledge of an agreement between Kress and the police, the sequence of events created a substantial enough possibility of a conspiracy to allow her to proceed to trial, especially given the fact that the non-circumstantial evidence of the conspiracy could only come from adverse witnesses. Further, she submitted an affidavit specifically disputing the manager s assertion that the situation in the store at the time 11 The affidavit of the chief of police, who it appears was not present at the arrest, states in relevant part: Mr. Powell had made no request of me to arrest Miss Sandra Adickes or any other person, in fact, I did not know Mr. Powell personally until the day of this statement. Mr. Powell and I had not discussed the arrest of this person until the day of this statement and we had never previously discussed her in any way. 12 The affidavits of Sergeant Boone and Officer Hillman each state, in identical language: I was contacted by owners of S. H. Kress and Company, who requested that I make a statement concerning [an] alleged conspiracy in connection with the aforesaid arrest. This arrest was made on the public streets of Hattiesburg, Mississippi, and was an officers discretion arrest. I had not consulted with Mr. G. T. Powell, Manager of S. H. Kress and Company in Hattiesburg, and did not know his name until this date. No one at the Kress store asked that the arrest be made and I did not consult with anyone prior to the arrest. 13 When asked whether she saw any policeman in the store up to the time of the refusal of service, Miss Adickes answered: My back was to the door, but one of my students saw a policeman come in. She went on to identify the student as Carolyn. At the trial, Carolyn Moncure, one of the students who was with petitioner, testified that about five minutes after the group had sat down and while they were still waiting for service, she saw a policeman come in the store. She stated: (H)e came in the store, my face was facing the front of the store, and he came in the store and he passed, and he stopped right at the end of our booth, and he stood up and he looked around and he smiled, and he went to the back of the store, he came right back and he left out. This testimony was corroborated by that of Dianne Moncure, Carolyn s sister, who was also part of the group. She testified that while the group was waiting for service, a policeman entered the store, stood for awhile looking at the group, and then walked to the back of the store. 14 During discovery, respondent gave to petitioner an unsworn statement by Miss Irene Sullivan, a checkout girl. In this statement Miss Sullivan said that she had seen Patrolman Hillman come into the store (s)hortly after 12:00 noon, while petitioner's group was in the store. She said that he had traded a hello greeting with her, and then walked past her check-out counter toward the back of the store out of (her) line of vision. She went on: A few minutes later Patrolman Hillman left our store by the northerly front door just slightly ahead of a group composed of several Negroes accompanied by a white woman. As Hillman stepped onto the sidewalk outside our store the police car pulled across the street and into an alley that is alongside our store. The police car stopped and Patrolman Hillman escorted the white woman away from the Negroes and into the police car.. 246

247 of the refusal was explosive, thus creating an issue of fact as to what his motives might have been in ordering the refusal of service. We think that on the basis of this record, it was error to grant summary judgment. As the moving party, respondent had the burden of showing the absence of a genuine issue as to any material fact, and for these purposes the material it lodged must be viewed in the light most favorable to the opposing party. Respondent here did not carry its burden because of its failure to foreclose the possibility [i.e., via store employees] that there was a policeman in the Kress store while petitioner was awaiting service, and that this policeman reached an understanding with some Kress employee that petitioner not be served. Given these unexplained gaps in the materials submitted by respondent, we conclude that respondent failed to fulfill its initial burden of demonstrating what is a critical element in this aspect of the case that there was no policeman in the store. If a policeman were present, we think it would be open to a jury, in light of the sequence that followed, to infer from the circumstances that the policeman and a Kress employee had a meeting of the minds' and thus reached an understanding that petitioner should be refused service. Because (o)n summary judgment the inferences to be drawn from the underlying facts contained in (the moving party s) materials must be viewed in the light most favorable to the party opposing the motion, we think respondent s failure to show there was no policeman in the store requires reversal. Pointing to Rule 56(e), 18 respondent argues that it was incumbent on petitioner to come forward with an affidavit properly asserting the presence of the policeman in the store, if she were to rely on that fact to avoid summary judgment. Respondent notes in this regard that none of the materials upon which petitioner relied met the requirements of Rule 56(e). 19 This argument [while true] does not withstand scrutiny, however, for the burden of the moving party under Rule 56(c) [is] to show initially the absence of a genuine issue concerning any material fact. And, in a comment directed specifically to a contention like respondent s, the Committee stated that (w)here the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented [italics added]. Because respondent did not meet its initial burden of establishing the absence of a policeman in the store, petitioner here was not required to come forward with suitable opposing affidavits. If respondent had met its initial burden by, for example, submitting affidavits from the policemen denying their presence in the store at the time in question, Rule 56(e) would then have 18 When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. 19 Petitioner s statement at her deposition, see n. 13, supra, was, of course, hearsay; and the statement of Miss Sullivan, see n. 14, supra, was unsworn. And, the rule specifies that reliance on allegations in the complaint is not sufficient. 247

248 required petitioner to have done more than [effectively to] simply rely on the contrary allegation in her complaint. To have avoided conceding this fact for purposes of summary judgment, petitioner would have had to come forward with either (1) the affidavit of someone who saw the policeman in the store or (2) an affidavit under Rule 56(f) explaining why at that time it was impractical to do so. Even though not essential here to defeat respondent s motion, the submission of such an affidavit would have been the preferable course for petitioner s counsel to have followed. As one commentator has said: It has always been perilous for the opposing party neither to proffer any countering evidentiary materials nor file a 56(f) affidavit. And the peril rightly continues. Yet the party moving for summary judgment [nevertheless] has the burden to show that he is entitled to judgment under established principles; and if he does not discharge that burden then he is not entitled to judgment [because the burden cannot be shifted to the adverse party]. No defense to an insufficient showing is required. The judgment of the Court of Appeals is reversed, and the case is remanded to that court for further proceedings [i.e., trial] consistent with this opinion. It is so ordered. Mr. Justice Black, concurring in the judgment. Summary judgments may be granted only when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue [now dispute ] as to any material fact. Fed.Rule Civ.Proc. 56(c). The existence or nonexistence of a conspiracy is essentially a factual issue that the jury, not the trial judge, should decide. In this case petitioner may have had to prove her case by impeaching the store s witnesses and appealing to the jury to disbelieve all that they said was true in the affidavits. The right to confront, cross-examine and impeach adverse witnesses is one of the most fundamental rights sought to be preserved by the Seventh Amendment provision for jury trials in civil cases. The advantages of trial before a live jury with live witnesses, and all the possibilities of considering the human factors, should not be eliminated by substituting trial by affidavit and the sterile bareness of summary judgment. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised. Trial by affidavit is no substitute for trial by jury which so long has been the hallmark of even handed justice. Mr. Justice Brennan, concurring in part and dissenting in part [provided for historical perspective]. Title 42 U.S.C. s[ection] 1983 derives from s[ection] 1 of the Civil Rights Act of 1871 entitled, An Act to enforce the Provisions of the Fourteenth Amendment to the Constitution of the United States, and for other Purposes. The 1871 Act, popularly known as the Ku Klux Klan Act, was, as its legislative history makes absolutely clear, a response to the outrages committed by the Klan in many parts of the South. 248

249 Stirred to action by the wholesale breakdown of protection of civil rights in the South, Congress carried to completion the creation of a comprehensive scheme of remedies civil, criminal, and military 16 for the protection of constitutional rights from all major interference. The history of this scheme of remedies for the protection of civil rights was, until very recently, one of virtual nullification by this Court. Key provisions were declared unconstitutional or given an unduly narrow construction wholly out of keeping with their purposes. Notes and Questions: 1. On what evidence did the court s analysis focus? Was it the plaintiff s complaint? May the pleadings be considered? If so, what role do they play? 2. Rule 56 envisions the respective parties submitting affidavits for, and in opposition to, summary judgment. Here, Ms. Adikes did not have any (trial rules of evidence) admissible affidavits to submit in opposition to Kress s motion. So why did the Supreme Court reverse the trial court s granting of summary judgment? 3. Justice Black s concurring opinion states: The existence or nonexistence of a conspiracy is essentially a factual issue that the jury, not the trial judge, should decide. Does this mean that conspiracy cases can never be decided via summary judgment? 4. A case may turn upon the motive of the one or more of the parties. Success in such an action would then require proof that the defendant intended to deprive the plaintiff of her civil rights. FRCP 56(c)(4) requires that affidavits be based on personal knowledge. If you were the lawyer for plaintiff Adikes and alleging an intent to deprive your client of her civil rights, i.e., to impede her from freely associating with her students would you have been able to produce an affidavit attesting to the personal knowledge of the Kress manager, or police, as to their motive for the arrest? If you took their depositions, and they said that they did not intend to so deprive Ms Adikes of her rights, would those sworn statements thus entitle the defendant to summary judgment? 16 The military remedy, designed to become available when the other remedies were inadequate, was created by s[ection] 3 of the 1871 Act, now 10 U.S.C. s[ection]

250 CELOTEX CORP. v. CATRETT United States Supreme Court 477 U.S. 317 (1986) Justice Rehnquist delivered the [5-4 majority] opinion of the Court. The United States District Court for the District of Columbia granted the motion of petitioner Celotex Corporation for summary judgment against respondent Catrett because the latter was unable to produce evidence in support of her allegation in her wrongful-death complaint that the decedent had been exposed to petitioner s asbestos products. A divided panel of the Court of Appeals for the District of Columbia Circuit reversed, however, holding that petitioner s failure to support its motion with evidence tending to negate such exposure precluded the entry of summary judgment in its favor [italics added]. We now reverse the decision of the District of Columbia Circuit. Respondent commenced this lawsuit alleging that the death in 1979 of her husband, Louis H. Catrett, resulted from his exposure to products containing asbestos manufactured or distributed by 15 named corporations. Respondent s complaint sounded in negligence, breach of warranty, and strict liability. [T]he remaining 13 [dendants], including petitioner, filed motions for summary judgment. Petitioner s motion argued that summary judgment was proper because respondent had failed to produce evidence that any [Celotex] product... was the proximate cause of the injuries alleged In particular, petitioner noted that respondent had failed to identify, in answering interrogatories specifically requesting such information, any witnesses who could testify about the decedent s exposure to petitioner s asbestos products. In response to petitioner s summary judgment motion, respondent then produced three documents which she claimed demonstrate that there is a genuine material factual dispute as to whether the decedent had ever been exposed to petitioner s asbestos products. The three documents included a transcript of a deposition of the decedent, a letter from an official of one of the decedent s former employers whom petitioner planned to call as a trial witness, and a letter from an insurance company to respondent s attorney, all tending to establish that the decedent had been exposed to petitioner s asbestos products in Chicago during Petitioner, in turn, argued that the three documents were inadmissible hearsay and thus could not be considered in opposition to the summary judgment motion. The [trial] court explained that it was granting petitioner s summary judgment motion because there [was] no showing that the plaintiff was exposed to the defendant Celotex s product in the District of Columbia or elsewhere within the statutory period. The majority of the Court of Appeals held that petitioner s summary judgment motion was rendered fatally defective by the fact that petitioner made no effort to adduce any evidence, in the form of affidavits or otherwise, to support its motion. According to the majority, Rule 56(e) of the Federal Rules of Civil Procedure, and this Court s decision in Adickes v. S.H. Kress & Co., establish that the party opposing the motion for summary judgment bears the burden of responding only after the moving party has met its burden of coming forward with proof of the absence of any genuine issues of material fact.... The dissenting judge argued that [t]he majority errs in supposing that a party seeking summary judgment must always make an affirmative evidentiary showing, even in cases where there is not a triable, factual dispute. According to the dissenting judge, the majority s decision undermines the traditional authority of trial judges to grant summary judgment in meritless cases. We think that the position taken by the majority of the Court of Appeals is inconsistent with the standard for summary judgment set forth in Rule 56(c) of the Federal Rules of Civil 250

251 Procedure. Under Rule 56(c), summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party s case, and on which that party will bear the burden of proof at trial. In such a situation, there can be no genuine issue as to any material fact, since a complete failure of proof concerning an essential element of the nonmoving party s case necessarily renders all other facts immaterial. The moving party is entitled to a judgment as a matter of law because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof... Of course, a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. But unlike the Court of Appeals, we find no express or implied requirement in Rule 56 that the moving party support its motion with affidavits or other similar materials negating the opponent s claim. On the contrary, Rule 56(c), which refers to the affidavits, if any suggests the absence of such a requirement. And if there were any doubt about the meaning of Rule 56(c) in this regard, such doubt is clearly removed by Rules 56(a) and (b), which provide that claimants and defendants, respectively, may move for summary judgment with or without supporting affidavits. The import of these subsections is that, regardless of whether the moving party accompanies its summary judgment motion with affidavits, the motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied. One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose. Respondent argues, however, that Rule 56(e), by its terms, places on the nonmoving party the burden of coming forward with rebuttal affidavits, or other specified kinds of materials, only in response to a motion for summary judgment made and supported as provided in this rule. According to respondent s argument, since petitioner did not support its motion with affidavits, summary judgment was improper in this case. But as we have already explained, a motion for summary judgment may be made pursuant to Rule 56 with or without supporting affidavits. a In cases like the instant one, where the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the pleadings, depositions, answers to interrogatories, and admissions on file. Such a motion, whether or not accompanied by affidavits, will be made and supported as provided in this rule, and Rule 56(e) therefore requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. The Court of Appeals in this case felt itself constrained, however, by language in our decision in Adickes v. S.H. Kress & Co. There we held that summary judgment had been a The current version of Rule 56 does not include this language. 251

252 improperly entered in favor of the defendant restaurant in an action brought under 42 U.S.C In the course of its opinion, the Adickes Court said that both the commentary on and the background of the 1963 amendment conclusively show that it was not intended to modify the burden of the moving party... to show initially the absence of a genuine issue concerning any material fact. We think that this statement is accurate in a literal sense, since we fully agree with the Adickes Court that the 1963 amendment to Rule 56(e) was not designed to modify the burden of making the showing generally required by Rule 56(c). It also appears to us that, on the basis of the showing before the Court in Adickes, the motion for summary judgment in that case should have been denied. But we do not think the Adickes language quoted above should be construed to mean that the burden is on the party moving for summary judgment to produce evidence showing the absence of a genuine issue of material fact, even with respect to an issue on which the nonmoving party bears the burden of proof. Instead, as we have explained, the burden on the moving party may be discharged by showing that is, pointing out to the district court that there is an absence of evidence to support the nonmoving party s case. The last two sentences of Rule 56(e) were added, as this Court indicated in Adickes, to disapprove a line of cases allowing a party opposing summary judgment to resist a properly made motion by reference only to its pleadings. While the Adickes Court was undoubtedly correct in concluding that these two sentences were not intended to reduce the burden of the moving party, it is also obvious that they were not adopted to add to that burden. Yet that is exactly the result which the reasoning of the Court of Appeals would produce; in effect, an amendment to Rule 56(e) designed to facilitate the granting of motions for summary judgment would be interpreted to make it more difficult to grant such motions. Nothing in the two sentences themselves requires this result, for the reasons we have previously indicated, and we now put to rest any inference that they do so. Respondent commenced this action in September 1980, and petitioner s motion was filed in September The parties had conducted discovery, and no serious claim can be made that respondent was in any sense railroaded by a premature motion for summary judgment. Any potential problem with such premature motions can be adequately dealt with under Rule 56(f), which allows a summary judgment motion to be denied, or the hearing on the motion to be continued, if the nonmoving party has not had an opportunity to make full discovery. The Federal Rules of Civil Procedure have for almost 50 years authorized motions for summary judgment upon proper showings of the lack of a genuine, triable issue of material fact. Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action. Before the shift to notice pleading accomplished by the Federal Rules, b motions to dismiss a complaint or to strike a defense were the principal tools by which factually insufficient claims or defenses could be isolated and prevented from going to trial with the attendant unwarranted consumption of public and private resources. But with the advent of notice pleading, the motion to dismiss seldom fulfills this function any more, and its place has been taken by the motion for summary judgment. Rule 56 must be construed with due regard not only for the rights of persons asserting claims and defenses that are adequately based in fact to have those claims and defenses tried to a jury, but b Given the Iqbal pleadings directive (plausible, not just possible claim), the Court has presumably made summary judgment an even more welcomed arrow in the litigation quiver. 252

253 also for the rights of persons opposing such claims and defenses to demonstrate in the manner provided by the Rule, prior to trial, that the claims and defenses have no factual basis. The judgment of the Court of Appeals is accordingly reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. Justice Brennan, with whom The Chief Justice and Justice Blackmun join, dissenting. The Court clearly rejects the ruling of the Court of Appeals that the defendant must provide affirmative evidence disproving the plaintiff s case. Beyond this, however, the Court has not clearly explained what is required of a moving party seeking summary judgment on the ground that the nonmoving party cannot prove its case. This lack of clarity is unfortunate: district courts must routinely decide summary judgment motions, and the Court s opinion will very likely create confusion. For this reason, even if I agreed with the Court s result, I would have written separately to explain more clearly the law in this area. However, because I believe that Celotex did not meet its burden of production under Federal Rule of Civil Procedure 56, I respectfully dissent from the Court s judgment. I Summary judgment is appropriate where the Court is satisfied that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.Rule Civ.Proc. 56(c). c The burden of establishing the nonexistence of a genuine issue is on the party moving for summary judgment. This burden has two distinct components: an initial burden of production [i.e., affidavits, etc.], which shifts to the nonmoving party if satisfied by the moving party; and an ultimate burden of persuasion [i.e., whether there is a genuine dispute], which always remains on the moving party. The court need not decide whether the moving party has satisfied its ultimate burden of persuasion 2 unless and until the Court finds that the moving party has discharged its initial burden of production. Adickes v. S.H. Kress & Co.; 1963 Advisory Committee s Notes on Fed.Rule Civ.Proc. 56(e). The burden of production imposed by Rule 56 requires the moving party to make a prima facie showing that it is entitled to summary judgment. The manner in which this showing can be made depends upon which party will bear the burden of persuasion on the challenged claim at trial. If the moving party [Celotex] will bear the burden of persuasion at trial, that party must support its motion with credible evidence using any of the materials specified in Rule 56(c) that would entitle it to a directed verdict if not controverted at trial. Such an affirmative showing [only then] shifts the burden of production to the party opposing the motion and requires that party either to produce evidentiary materials that demonstrate the existence of a genuine issue for trial or to submit an affidavit requesting additional time for discovery. If the burden of persuasion at trial would be on the non-moving party [Cartett], the party moving for summary judgment may satisfy Rule 56 s burden of production in either of two ways. First, the moving party may submit affirmative evidence that negates an essential element c Rule 56(c) later substituted dispute for issue. This was supposedly a non-substantive editorial change. 2 The burden of persuasion imposed on a moving party by Rule 56 is a stringent one. Summary judgment should not be granted unless it is clear that a trial is unnecessary, and any doubt as to the existence of a genuine issue for trial should be resolved against the moving party, Adickes v. S.H. Kress & Co. In determining whether a moving party has met its burden of persuasion, the court is obliged to take account of the entire setting of the case and must consider all papers of record as well as any materials prepared for the motion. [Thus,] [i]f... there is any evidence in the record from any source from which a reasonable inference in the [nonmoving party s] favor may be drawn, the moving party simply cannot obtain a summary judgment

254 of the nonmoving party s claim [italics added]. Second, the moving party may demonstrate to the Court that the nonmoving party s evidence is insufficient to establish an essential element of the nonmoving party s claim [italics added]. If the nonmoving party cannot muster sufficient evidence to make out its claim, a trial would be useless and the moving party is entitled to summary judgment as a matter of law. Where the moving party adopts this second option and seeks summary judgment on the ground that the nonmoving party who will bear the burden of persuasion at trial has no evidence, the mechanics of discharging Rule 56 s burden of production are somewhat trickier. Plainly, a conclusory assertion that the nonmoving party has no evidence is insufficient. Such a burden of production is no burden at all and would simply permit summary judgment procedure to be converted into a tool for harassment. Rather, as the Court confirms, a party who moves for summary judgment on the ground that the nonmoving party has no evidence must affirmatively show the absence of evidence in the record [italics added]. This may require the moving party to depose the nonmoving party s witnesses or to establish the inadequacy of documentary evidence. If there is literally no evidence in the record, the moving party may demonstrate this by reviewing for the court the admissions, interrogatories, and other exchanges between the parties that are in the record. Either way, however, the moving party must affirmatively demonstrate that there is no evidence in the record to support a judgment for the nonmoving party. II I do not read the Court s opinion to say anything inconsistent with or different than the preceding discussion. My disagreement with the Court concerns the application of these principles to the facts of this case. Defendant Celotex sought summary judgment on the ground that plaintiff had failed to produce any evidence that her decedent had ever been exposed to Celotex asbestos. Celotex supported this motion with a two-page Statement of Material Facts as to Which There is No Genuine Issue and a three-page Memorandum of Points and Authorities which asserted that the plaintiff had failed to identify any evidence in responding to two sets of interrogatories propounded by Celotex and that therefore the record was totally devoid of evidence to support plaintiff's claim. Approximately three months earlier, Celotex had filed an essentially identical motion. Plaintiff responded to this earlier motion by producing three pieces of evidence which she claimed [a]t the very least... demonstrate that there is a genuine factual dispute for trial: (1) a letter from an insurance representative of another defendant describing asbestos products to which plaintiff s decedent had been exposed; (2) a letter from T.R. Hoff, a former supervisor of decedent, describing asbestos products to which decedent had been exposed; and (3) a copy of decedent s deposition from earlier workmen s compensation proceedings. Plaintiff also apparently indicated at that time that she intended to call Mr. Hoff as a witness at trial. Celotex subsequently withdrew its first motion for summary judgment. However, as a result of this motion, when Celotex filed its second summary judgment motion, the [full] record did contain evidence including at least one witness supporting plaintiff s claim. Indeed, counsel for Celotex admitted to this Court at oral argument that Celotex was aware of this evidence and of plaintiff s intention to call Mr. Hoff as a witness at trial when the second summary judgment motion was filed. Moreover, plaintiff s response to [the] Celotex second motion pointed to this evidence noting that it had already been provided to counsel for Celotex 254

255 in connection with the first motion-and argued that Celotex had failed to meet its burden of proving that there is no genuine factual dispute for trial. Notes and Questions: 1. Why did the District of Columbia Circuit [intermediate appellate court] hold that summary judgment against Mrs. Catrett was improper? The Supreme Court s ensuing reversal means that there are now two methods for achieving summary judgment in federal court exemplified by Adikes and Celotex. What are they? 2. Would the result have been the same, if the Celotext motion had been made, say, six to nine months earlier (i.e., several months after plaintiff filed her lawsuit)? As noted in Greater Baltimore Center for Pregnancy Concerns, Inc. v. Mayor and City Council of Baltimore, 721 F.3d 264, 280 (2013): Chief among its errors was the district court's award of summary judgment to the Center without allowing the City any discovery. As a general proposition, summary judgment is appropriate only after adequate time for discovery. Discovery is usually essential in a contested proceeding prior to summary judgment because [a] party asserting that a fact... is genuinely disputed must support the assertion by, inter alia, citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations..., admissions, interrogatory answers, or other materials. Fed.R.Civ.P. 56(c)(1)(A). Obviously, by its very nature, the summary judgment process presupposes the existence of an adequate record. A district court therefore must refuse summary judgment where the nonmoving party has not had the opportunity to discover information that is essential to [its] opposition. 3. As the majority notes, summary judgment is regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole. Compare California case law a less hospitable environment: Because summary judgment is a drastic measure that deprives the losing party of trial on the merits, it may not be invoked unless it is clear from the declarations that there are no triable issues of material fact [italics added]. Any doubts about the propriety of granting a summary judgment motion must be resolved in favor of the party opposing the motion. Courts must abide by the strong public policy favoring disposition on the merits over judicial efficiency. Johnson v. Superior Court, 143 Cal.App.4th 297, 304 (2006). 255

256 MCCANTS V. FORD MOTOR CO., INC. United States Court of Appeals, Eleventh Circuit 781 F.2d 855 (1986) Hill, Circuit Judge [delivered the unanimous opinion of the court]: This case is before the court on defendant-appellant Ford Motor Company s appeal from an order of the district court dismissing plaintiff-appellee Reta McCants suit without prejudice pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure [italics added]. FACTS Appellee Reta McCants, administratrix of the estate of Johnny McCants, deceased, commenced this suit against appellant Ford Motor Company in federal district court in Alabama. The action arose out of an accident in which appellee s decedent, a member of the United States Army Reserve, was killed while riding in a military jeep on a two week active duty training mission. The accident occurred in Mississippi, and the complaint sought damages under Mississippi products liability law. The decedent was killed on July 24, Appellee filed suit against A.M. General, the company she believed had manufactured the military jeep in question, on July 20, Appellee maintains that she subsequently learned through discovery that appellant [Ford] rather than A.M. General manufactured the jeep, and she sought leave to amend her action to substitute appellant as party defendant. Instead of allowing the amendment, the district court denied her motion to amend and dismissed the suit without prejudice. Appellee then filed this [subsequent] action, naming appellant [Ford] as defendant, on November 14, 1983 [more than one year after the accident]. Discovery began in December of 1983 and continued through most of the following year. In January of 1985 the district court issued an order granting plaintiff-appellee s motion that the case be dismissed without prejudice. Although the action had been pending for more than a year, during which time considerable activity had taken place, the district court declined to attach any conditions to its order of dismissal. Appellant argues on this appeal that the dismissal without prejudice and the failure to attach conditions were an abuse of the district court s discretion. DISCUSSION I. The Dismissal Without Prejudice Rule 41(a)(2) allows a plaintiff, with the approval of the court, to dismiss an action voluntarily and without prejudice to future litigation at any time. The rule provides in relevant part as follows: Except as provided in paragraph (1) of this subdivision of this rule [concerning dismissal by stipulation or by plaintiff prior to answer or motion for summary judgment], an action shall not be dismissed at the plaintiff s instance save upon order of the court and upon such terms and conditions as the court deems proper... Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice. The purpose of the rule is primarily to prevent voluntary dismissals which unfairly affect the other side, and to permit the imposition of curative conditions. Thus a district court 256

257 considering a motion for dismissal without prejudice should bear in mind principally the interests of the defendant, for it is the defendant s position that the court should protect. As we have noted previously, however, in most cases a [voluntary] dismissal should be granted unless the defendant will suffer clear legal prejudice, other than the mere prospect of a subsequent lawsuit, as a result. Thus it is no bar to a voluntary dismissal that the plaintiff may obtain some tactical advantage over the defendant in future litigation. Rather, the district court must exercise its broad equitable discretion under Rule 41(a)(2) to weigh the relevant equities and do justice between the parties in each case, imposing such costs and attaching such conditions to the dismissal as are deemed appropriate. Dismissal on motion of the plaintiff pursuant to Rule 41(a)(2) is within the sound discretion of the district court, and its order may be reviewed only for an abuse of discretion. In this case, appellant argues it will suffer plain legal prejudice as a result of the district court s dismissal without prejudice, as it will lose the complete defense it claims it is afforded by the applicable statute of limitations in Alabama. Appellee, as well as the [Alabama federal] district court in which she originally filed, apparently assumed that either the six year statute of limitations applicable to wrongful death actions under Mississippi law or the two year statute applicable to wrongful death actions in Alabama would be used to determine the timeliness of her suit. As the case developed, however, and the parties dedicated further research to the legal issues involved, it became clear that a very strong argument could be made for the application of the general one year statute of limitations applicable to actions not otherwise specifically provided for in other sections of the Alabama code. Appellant did not plead the one year statute of limitations in its original answer to the complaint. The issue first appears in the record in an amended answer filed July 18, 1984, in which it was simply stated that appellee s claims were barred by the applicable statute of limitations. Appellant then filed a motion for summary judgment on the basis of the one year statute on August 24, 1984; the district court denied that motion the day before it granted appellee s motion for dismissal without prejudice. Although no opinion accompanied the district court s denial of the motion for summary judgment, appellant argues that the district court, in its denial of the summary judgment motion, must have erroneously determined the one year statute of limitations to be inapplicable. Appellant thus argues not only that it suffered legal prejudice in that it lost the statute of limitations defense when the case was dismissed without prejudice, but that the district court abused its discretion when it failed even to acknowledge that important fact in its balancing of the equities. The parties have not yet agreed on the statute of limitations applicable to this suit, as brought in Alabama, although appellant argues persuasively that Alabama s one year statute would apply. Appellee essentially argues her case on this appeal on the basis of the assumption that Alabama s one year statute bars the suit as brought in Alabama, and that a similar suit would not be time-barred in Mississippi, where appellee now intends to sue. We, too, will assume without deciding that the one year Alabama statute bars this [second] suit as filed, but that it could be refiled in Mississippi under the statute of limitations applicable there. We thus must determine whether it constitutes an abuse of discretion for a district court to dismiss without prejudice an action that is time-barred as brought, where the purpose or effect of such dismissal is to allow the plaintiff to refile the action in a place or manner in which it is not similarly barred. Only a few reported cases are on point. [Citations omitted] Thus, what little authority that exists on this particular question suggests that the likelihood that a dismissal without 257

258 prejudice will deny the defendant a statute of limitations defense does not constitute plain legal prejudice and hence should not alone preclude such a dismissal. On proper motion, the complaint may be dismissed without prejudice upon such terms and conditions as the court deems proper. In that [omitted] case, as in this one, the plaintiff s untimeliness yielded the defendant a potentially great legal advantage, had the case proceeded to final judgment, that the defendant presumably would not have enjoyed in a subsequent lawsuit on the same facts. [W]e find no evidence in the record to suggest that appellee or her counsel acted in bad faith in filing this action in Alabama or in filing it more than one year after the accident occurred. Under the circumstances, we cannot find appellant to have suffered any plain legal prejudice other than the prospect of a second [or third] lawsuit on the same set of facts. The district court thus did not abuse its discretion in granting the dismissal without prejudice in this case. II. The Refusal to Attach Conditions Appellant argues that if the district court did not abuse its discretion in dismissing the action without prejudice, it should have at least imposed certain costs and attached certain conditions to the dismissal [italics added]. Appellant claims the district court should have conditioned the dismissal on the payment by appellee of full compensation for the considerable time and effort it claims it wasted in defending this action. Further, appellant argues that the district court should have imposed non-monetary conditions that would have the effect of insuring that appellant retains the benefits it claims it is due under the terms of a discovery order with which appellee apparently failed to comply [italics added]. According to appellant, under the clear terms of an order of the district court in this litigation, appellee would not have been able to call any expert witnesses at trial if this case had not been dismissed, because she failed to furnish to appellant certain information the court ordered her to furnish concerning the expert witnesses she intended to call at trial. According to appellant, it should be permitted to retain the benefits of the sanction thereby imposed in any subsequent litigation. A plaintiff ordinarily will not be permitted to dismiss an action without prejudice under Rule 41(a)(2) after the defendant has been put to considerable expense in preparing for trial, except on condition that the plaintiff reimburse the defendant for at least a portion of his expenses of litigation. Costs may include all litigation-related expenses incurred by the defendant, including reasonable attorneys fees. Where a subsequent similar suit between the parties is contemplated, expenses awarded might be limited to those incurred in discovering information and researching and pressing legal arguments that will not be useful in the later suit. We have also noted previously that a dismissal without prejudice pursuant to Rule 41(a)(2) may be conditioned upon the satisfaction of other non-monetary conditions designed to alleviate the prejudice the defendant might otherwise suffer. Appellant assures us, and appellee does not dispute, that appellant opposed the motion for dismissal without prejudice filed by appellee three days before appellant s motion for summary judgment was set to be heard, and that appellant asked that any dismissal of the action without prejudice include the imposition of specified conditions designed to alleviate the prejudice appellant would otherwise suffer. [But ] the district court did not explicitly rule on appellant s request, instead simply denying it by implication by failing to impose or discuss any conditions when the dismissal without prejudice was ordered. 258

259 As a result, the record now before this court is insufficient to allow us to evaluate the district court s exercise of its discretion in [implicitly] rejecting appellant s request for the attachment of conditions to its order dismissing the case. It is clear that discovery had proceeded and that interrogatories had been served, objected to, and answered to some extent. Depositions had been taken. Appellant had obviously incurred considerable litigation expense. Just how much of the work done by appellant in this case was wasted and how much will be useful in further litigation in Mississippi is not clear. While appellee does not concede that her suit in Alabama is barred by the statute of limitations, it is apparent that appellant s position on the statute of limitations motivated the motion for dismissal without prejudice. As the record makes clear, however, the parties were aware of the statute of limitations problem long before appellee filed the motion to dismiss that was granted by the district court. The district court judge is in a far better position than we are to weigh and advise us concerning the equities that militate for and against the imposition of the various conditions appellant claims are due. We simply cannot properly evaluate the district court s exercise of its discretion in this regard without the benefit of some record of the factors it took into consideration in reaching its decision. We thus remand the case, with instructions as indicated below, for further proceedings in the district court. CONCLUSION For the reasons set forth above, we VACATE the district court s order dismissing this case without prejudice and REMAND the case to the district court for further proceedings not inconsistent with this opinion. On remand, the district court is instructed to rule on appellant s request that conditions be attached to any dismissal of this case without prejudice, and to state the findings and conclusions that lead the court to arrive at the decision it reaches in that regard. The district court may hold further hearings to aid it in determining the conditions that may be appropriate if it so desires. The court need not do so, however, if it finds the current record sufficient to allow it to prepare the order it deems appropriate. During the remand, we will retain jurisdiction over this appeal. Notes and Questions: 1. FRCP Rule 41(a)(1) authorizes the plaintiff s voluntary dismissal, without judicial involvement. Under FRCP 41(a)(2), however, a plaintiff s voluntary dismissal is dismissed on terms that the court deems proper. What is the essential difference between subsection (1) and (2)? 2. Did the likelihood of a subsequent lawsuit in Mississippi aka 11th-hour forum shopping bar the plaintiff s voluntary dismissal? Should it have done so? What would be the arguments for and against? 3. What were the two conditions Ford asserted, when arguing that the trial court abused its discretion (by not imposing those conditions when granting plaintiff s voluntary dismissal)? If you were the judge, would you have ruled the same way and, as to both defense requests? 4. How did the appellate court deal with the silent record (on whether the trial court actually took defendant s extensive costs into consideration), when granting the plaintiff s voluntary dismissal motion? 5. For the factors normally considered during discretionary voluntary dismissal motions, see Colon-Cabrera v. Esso Standard Oil Co., Inc., 723 F.3d 82, at 88 (1st Cir., 2013). Voluntary dismissal under Rule 41(a)(2) is conditioned on court permission to protect the nonmovant from unfair treatment. Such unfairness can take numerous forms, 259

260 including the defendant s effort and expense of preparation for trial, excessive delay and lack of diligence on the part of the plaintiff in prosecuting the action, insufficient explanation [of] the need to take a dismissal, and the fact that a [dispositive] motion for summary judgment has been filed by the defendant. For example, it is appropriate to consider whether a party proposes to dismiss the case at a late stage of pretrial proceedings, or seeks to avoid an imminent adverse ruling. A plaintiff should not be permitted to force a defendant to incur substantial costs in litigating an action, and then simply dismiss his own case and compel the defendant to litigate a wholly new proceeding. 260

261 U.S. S.E.C. v. SHEHYN United States District Court, Southern District, New York 2005 WL , not reported in F.R.D./F.Supp. (2005) OPINION & ORDER Mukasey, J. The Securities and Exchange Commission ( SEC ) sues defendant Rodney S. Shehyn ( Shehyn ), along with co-defendants for violations of the Securities Act of 1933 ; the Securities Exchange Act of 1934 ; and Rule 10b-5 thereunder. Shehyn moves to dismiss all of the claims against him for improper service under Fed.R.Civ.P. 4(m). For the reasons set forth below, Shehyn s motion to dismiss is denied and the SEC s time to serve Shehyn is extended nunc pro tunc to July 23, I. On March 15, 2004, the SEC filed a complaint against Shehyn and the other named defendants alleging numerous violations of the federal securities laws. The details of the scheme are not relevant for the purposes of Shehyn s motion; it suffices to say that Shehyn was alleged to have orchestrated fraudulent operations through offices in Spain and California over the course of more than two years. On July 13, 2004 the 120th day after the SEC filed its complaint the SEC moved to extend its time to serve Shehyn to July 23. In its motion, the SEC explained that Shehyn had pleaded guilty in January 2004 to a different scheme and had been incarcerated at a federal detention facility in San Diego. However, when the SEC attempted to serve Shehyn at the San Diego facility at some point before July 13, it was told that he was in transit to a different facility. On June 29, the SEC learned that this new facility was located in Taft, California, and spent several days trying to reach the correct person at the facility with whom to arrange service. That person had been reached by the time of the SEC s July 13 [extension] motion, leading the SEC to conclude that service could be completed that week. Shehyn was successfully served at the Taft facility on July 20, within the ten day period requested by the July 13 motion. The motion itself was never ruled on by this court. On September 8, 2004, Shehyn moved to dismiss the SEC s complaint based on the SEC s failure serve him within 120 days as required by Fed.R.Civ.P. 4(m). II. Fed.R.Civ.P. 4(m) provides that [i]f service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice... However, the rule also provides that the court shall extend the time for service for an appropriate period if the plaintiff can show good cause for the failure to meet the 120-day deadline. (Emphasis added [by court.]) Such an extension may be granted nunc pro tunc and is often coupled with a denial of a defendant s motion to dismiss under [Rule 12]. Although Fed.R.Civ.P. 4(m) does not spell out what constitutes good cause, courts in this district have required a plaintiff to demonstrate that despite diligent attempts, service could not be made due to exceptional circumstances beyond his or her control. An attorney s ignorance of the rules, inadvertence, neglect, or mistake do not constitute good cause. In evaluating good cause, courts examine whether the plaintiff has made reasonable efforts to effect service and whether the defendant has been prejudiced by the delay. In addition 261

262 to these two factors, several courts have considered also whether the plaintiff moved for an extension before the 120-day period elapsed. An examination of all three factors suggests that the SEC has demonstrated good cause for the seven-day delay in serving Shehyn. First, the SEC s efforts to serve Shehyn in a timely manner were reasonable. More than two weeks before the 120-day period elapsed, the SEC attempted to serve Shehyn at the federal detention facility in San Diego. Upon learning that Shehyn was in transit to another facility and confirming that this facility was in Taft, California, the SEC spent several days trying to reach the proper person at Taft with whom to arrange service. When it finally was able to reach this prison official near the end of the 120-day period, it served Shehyn promptly with the summons and complaint. These facts demonstrate diligence and suggest that circumstances largely beyond the SEC s control Shehyn s transfer to another facility, the need to coordinate service with a prison official at the new facility, and the delay of several days in reaching this prison official were responsible for the failure to meet the 120-day deadline. Ultimately, the SEC served Shehyn only a week after the deadline, the sort of brief delay that courts repeatedly have found to be consistent with a good cause finding. Second, Shehyn offers no evidence that he was prejudiced by the one-week delay in receiving the complaint. Instead, he argues only that the court is within its power and authority to grant a dismissal and that he is entitled to [it]. The lack of any allegation of prejudice also militates against granting Shehyn s motion. Third, the SEC sought to extend its time to serve under Fed.R.Civ.P. 4(m) before the 120- day period expired. Specifically, on July 13, 2004, the SEC moved for an additional 10 days to complete the coordination of service with the prison official at the Taft facility. Although the SEC s motion was submitted on the last day of the 120-day period, the court surmises that the SEC likely did not recognize the need for extra time until after it took several days to reach the appropriate prison official at Taft. In any event, the court could find good cause even if the SEC had not moved for the extension in the first place. See, e.g., Geller (noting that it would be prudent for a party to move for an extension prior to the running the of 120 days, but the failure to do so does not mandate dismissal ). This court s conclusion that the SEC has demonstrated good cause is reinforced by numerous cases that have found good cause when the defendant s whereabouts are unknown or otherwise difficult to discern. In Westerfield, for example, the SEC claimed good cause where it served the defendant 18 days late because it was having considerable difficulty locating the defendant and was able to serve him only on back roads on Kentucky Lake after it had received new information about his location WL , at 2. The Court found that the SEC s efforts to locate the defendant were reasonable, extended the 120-day service period by 18 days, and denied the defendant s motion to dismiss for failure to comply with Fed.R.Civ.P. 4(m). Id. at *3. Similarly, the Court in McNeill excused a 31-day delay and rejected a defendant s motion to dismiss where the plaintiff was unable to locate the defendant s agent for process within 120 days because a state website did not designate the correct agent for service. McNeill, 2004 WL , at 1; see also Geller [above] (denying motion to dismiss based on 14-day delay where plaintiff made extensive inquiries before finally locating defendant outside state); Coleman, 202 F.R.D. at (denying motion to dismiss based on three-week delay where defendant was not alleged to have evaded service, but had been unsuccessfully sought at three different Florida addresses). Although none of these cases presents a situation identical to the one here, all point to a finding of good cause where, as here, the plaintiff struggles to locate and serve the defendant due to circumstances largely beyond the plaintiff s control. 262

263 Because the SEC has shown good cause for its delay in serving Shehyn, the court need not consider whether a discretionary extension is appropriate pursuant to its inherent authority under Fed.R.Civ.P. 4(m). See Advisory Committee Notes (1993 Amendments) (stating that Fed.R.Civ.P. 4(m) authorizes the court to relieve a plaintiff of the consequences of an application of [Rule 4(m) ] even if there is no good cause shown ) (emphasis added [by court]); Feingold, 269 F.Supp.2d at 277 (outlining and applying four-factor test to determine whether discretionary extension was appropriate). For the reasons set forth above, Shehyn s motion to dismiss is denied and the SEC s time to serve Shehyn is extended nunc pro tunc to July 23, 2004 [date of service]. SO ORDERED. Notes and Questions: 1. If you were the SEC lawyer, what would you have done differently with a view toward avoiding Shehyn s motion? 2. What factors influence FRCP 4(m) s good cause applications? Does good cause have to be shown to obtain an extension? 3. Was the trial judge too lenient in the good cause exception to the facts of this case? Should a judge always be lenient? What are the arguments you could generally make for and against such leniency? 263

264 AURA LAMP & LIGHTING INC. V. INTERNATIONAL TRADING CORPORATION United States Court of Appeals, Seventh Circuit 325 F.3d 903 (2003) Ilana Diamond Rovner, Circuit Judge [delivered the unanimous opinion of the court]. The district court dismissed this case for want of prosecution and the plaintiff, Aura Lamp & Lighting Inc. ( Aura Lamp ), appeals. I. Because the district court dismissed the case for want of prosecution and for violations of discovery orders, the salient facts are few. Aura Lamp and International Trading Corporation ( ITC ) allegedly entered into a number of contracts relating to lighting products and their components. The details of these agreements are unnecessary to the resolution of this appeal. Aura Lamp filed the complaint on April 6, A few weeks later, the district court ordered Aura Lamp to amend its complaint by May 19, 2000 to cure jurisdictional defects related to certain diversity jurisdiction allegations in the complaint. That date came and went without any amendment to the complaint by Aura Lamp. ITC then moved to dismiss the complaint or in the alternative to transfer the case. The district court set a briefing schedule, ordering Aura Lamp to reply by July 5, Again the date passed without any action by Aura Lamp. ITC complied with the district court s scheduling order by filing its reply brief even though no responsive brief had been filed by Aura Lamp. Aura Lamp then belatedly filed a response brief which the district court accepted over ITC s objection. The district court denied the motion to dismiss, ordered Aura Lamp once again to amend its complaint to cure the jurisdictional defect and threatened dismissal if Aura Lamp continued to ignore the court s orders. Aura Lamp then amended the complaint. On December 21, 2000, the court ordered the close of written discovery by March 21, 2001 and the close of all other discovery by August 1, Approximately one week later [after the discovery order], ITC served interrogatories, document requests and requests for admission on Aura Lamp. Under the Federal Rules of Civil Procedure, Aura Lamp was to respond to this discovery within thirty days. The thirty days passed without a response from Aura Lamp and without any request for an extension of time to respond. Numerous calls and letters from ITC s counsel followed, and Aura Lamp failed to meet two agreed extension dates. ITC then moved to compel discovery, asking that the requests for admission be deemed admitted, and also seeking sanctions. The case was scheduled for a status conference on March 22, 2001, and the court took up the motion to compel at that time. When asked to explain the delays in responding to discovery, Aura Lamp s counsel replied that he was solely responsible for the case, stating, I wish I had somebody else to go through this stuff. He explained that his client was a one-man operation that did not have the resources to sort through the documents requested. Over ITC s objection, the district court elected to grant one final extension to Aura Lamp, allowing counsel for Aura Lamp to pick the date on which all discovery was to be produced. Several times during the status conference, the court threatened dismissal of the case if Aura Lamp failed to meet the deadline. ( I'll set a deadline, if the case [sic] isn t met, the case is going away. ); ( I want to set a date that is going to be real so that if it isn t met, I m going to take severe action in this case. ); ( Due to the amount of time it s taken the plaintiff to respond to these discovery requests, and given the enormous amount of time I m giving you to respond over the objection of the defendants, if there is not good faith compliance by that date, I am going to seriously consider a motion to dismiss for want of prosecution. ). ( I'm going to have to take some severe action. ); 264

265 ( [I]f I set a deadline, given all that's transpired, it s going to have to be it. ); ( I m setting a deadline, and I want it to be a real deadline, and I want there to be consequences if it isn t followed. ). Aura Lamp s counsel asked to set the deadline to the last working day in April, amounting to an additional one and a half month extension. Shortly thereafter, ITC served a second set of document requests on Aura Lamp. On the very last day of April 2001, Aura Lamp served ITC with responses that ITC characterized as incomplete and defective. According to ITC, Aura Lamp failed to produce a single page of documents and filed specious objections to both the document and interrogatory requests. Aura Lamp filed no response to ITC s second request for the production of documents. ITC s counsel again tried to resolve the matter with a letter requesting compliance. When Aura Lamp did not respond, ITC moved to dismiss the case for repeated violations of court orders, failure to comply with discovery, and failure to prosecute. On June 15, 2001, the court held a status hearing on the motion. Counsel for Aura Lamp informed the court he wanted to reply to the motion in writing and that he intended to file two motions of his own. Remarkably (given the tenor of the prior hearing), he intended to move to extend time to propound the plaintiff s discovery requests and also for additional time to respond to ITC s request for the production of documents. After setting out a deadline for Aura Lamp to file these new motions and briefing schedules for all pending motions, the court set a hearing date of July 11, At the July 11 hearing, the court learned that, in addition to missing several other deadlines, Aura Lamp had failed to comply with the briefing schedule set on June 15. Counsel for Aura Lamp explained that the most recent delays were due to secretarial difficulties, computer problems, and scheduling challenges posed by an ongoing trial in chancery court. He insisted that his conduct was not wilful and wanton but rather due to unforeseen circumstances beyond his control. The district court replied, I don t think I have to find wilful and wanton [to impose sanctions]. Ultimately, the court found that Aura Lamp repeatedly missed court-ordered deadlines and failed to prosecute the case. She noted that Aura Lamp had been granted numerous extensions both by the court and by counsel for ITC to no avail. Aura Lamp had also failed to follow basic court procedures by failing to sign many of the documents filed with the court. The court concluded, [Y]ou brought the case, and the plaintiff has to prosecute a case when they bring it, and the plaintiff hasn t. And I think to allow this to go on anymore would just compound all the problems that have occurred by really doing something that s unfair to the defendants. The court then dismissed the case for want of prosecution and denied all other motions as moot. Aura Lamp appeals. II. On appeal, Aura Lamp maintains that the district court erred in dismissing the case under Federal Rule of Civil Procedure 37 because that rule requires a finding of wilful and wanton misconduct, and the court thus applied the wrong standard. Aura Lamp also contends that dismissal under Rule 37 or Rule 41 requires specific warnings prior to dismissal and also requires that the court consider lesser sanctions before dismissing. Aura Lamp argues that the court s warnings were inadequate and that no lesser sanctions were considered before the court dismissed the case. Before we attend to the merits of Aura Lamp s appeal, we must address a question raised by ITC at oral argument. A. Having determined that the [Washington, D.C.] Federal Circuit has [national] jurisdiction over the [patent] appeal [in this case, rather than the otherwise appropriate local appellate court] 265

266 and that we necessarily lack jurisdiction, we are left with a single question. We must decide whether to dismiss the case or, in the interest of justice, transfer it to the Federal Circuit. ITC urges us to dismiss rather than transfer the case. At this stage of the proceedings, we may take a peek at the merits because whether the appeal has any possible merit bears significantly on our decision to transfer or dismiss the appeal. We may do so even though we lack jurisdiction to decide the merits. B. ITC moved to dismiss the complaint with prejudice pursuant to Fed.R.Civ.Proc. 37(d) and/or 41(b). The district judge ultimately dismissed the case for want of prosecution pursuant to Rule 41(b) but she also discussed and may have relied upon Aura Lamp s violations of orders related to discovery. In an abundance of caution we will therefore address Aura Lamp s Rule 37 arguments as well. As we concluded above, we may consider the consequences of transfer before deciding whether to transfer. [T]here is no reason to raise false hopes and waste judicial resources by transferring a case that is clearly doomed[.] Here, because the case was dismissed for want of prosecution and violations of discovery orders, the district court s ruling rests on procedural matters not unique to patent law. The ruling would thus be reviewed under the law of our own circuit. In our Circuit, we review for abuse of discretion the district court s decision to sanction a plaintiff by dismissing a suit. Our review of a dismissal for want of prosecution is highly deferential [to the trial judge s decision]. In order to find an abuse of discretion, the district court s decision must strike us as fundamentally wrong. ([W]e are obligated to affirm the dismissal unless it is clear that no reasonable person could concur in the trial court s assessment). Certain principles guide the district court in determining whether to dismiss a case for want of prosecution pursuant to Rule 41. Ideally, the district court should consider the frequency and magnitude of the plaintiff s failure to comply with deadlines for the prosecution of the suit, the apportionment of responsibility for those failures between the plaintiff and his counsel, the effect of those failures on the judge s calendar and time, the prejudice if any to the defendant caused by the plaintiff s dilatory conduct, the probable merits of the suit, and the consequences of dismissal for the social objectives of the type of litigation that the suit represents. There is no grace period before dismissal for failure to prosecute and no requirement of graduated sanctions, but there must be an explicit warning before the case is dismissed. Aura Lamp asks us to find the district court abused its discretion in dismissing the case because (1) the court did not adequately warn Aura Lamp that the case would be dismissed; (2) the court failed to consider whether lesser sanctions would be effective; (3) Aura Lamp s violations were not of sufficient frequency or magnitude to warrant dismissal; (4) in apportioning the fault between the parties, the district court should have found that ITC s conduct was responsible for more egregious delays than Aura Lamp s; (5) neither the court nor the defendant suffered prejudice due to Aura Lamp; (6) Aura Lamp s claims are meritorious. We begin with the issue of warning. The district judge is not obliged to warn the plaintiff repeatedly nor is the court required to issue a formal rule to show cause before dismissing a case. A judge is not obliged to treat lawyers like children. All that is required is explicit warning. Here, the court repeatedly and expressly warned Aura Lamp that it was contemplating dismissal during the March 22 status conference. ( I'll set a deadline, if the case [sic] isn t met, the case is going away. ); ( I want to set a date that is going to be real so that if it isn t met, I m going to take severe action in this case. ); ( Due to the amount of time it s taken the plaintiff to respond to these discovery requests, and given the enormous amount of time I m giving you to respond over the objection of the defendants, if there is not good faith compliance by that date, I am 266

267 going to seriously consider a motion to dismiss for want of prosecution. ). This is by no means a complete list of the court s warnings but is merely a representative sample. These warnings are more than adequate. Aura Lamp was on notice of the consequences of further failures to respond to the court s orders. Aura Lamp also faults the court for failing to consider the efficacy of lesser sanctions first. Although we recommend that courts consider sanctioning a misbehaving lawyer before the sanction of dismissal is imposed on a possibly faultless plaintiff, we do not require that courts do so. At the July 11 hearing, as the court was ruling on the motion to dismiss, counsel for Aura Lamp asked the court to allow him to resign from the case and find someone else who could handle the case properly. The court replied that it was too late for such a maneuver. The district judge acknowledged that both counsel and his client had difficulties in prosecuting the case but that ultimately the plaintiff was responsible for prosecuting the case and had failed to do so. Clearly the court believed this was the only effective sanction at the time. Especially in light of counsel s earlier admission that his client was a one-man operation without the resources to respond to discovery, it would appear that the court did not abuse its discretion in refusing to impose lesser sanctions. ([Citation omitted: where a pattern of dilatory conduct is clear, dismissal need not be preceded by the imposition of less severe sanctions). Aura Lamp next argues that its violations were not sufficiently egregious and were too infrequent to warrant such a harsh sanction. This claim is easily answered by merely listing the violations. In addition to failing to sign pleadings filed with the court, Aura Lamp repeatedly missed court-imposed deadlines for both discovery and motion practice, ignored agreed extensions, and failed to amend its complaint to cure a jurisdictional defect for several months after the court ordered it do so. Moreover, Aura Lamp asked permission to propound discovery on the defendant after the court-ordered discovery cut-off date, a date that Aura Lamp s counsel had himself selected at the court s invitation. We have upheld dismissals in cases where the violations were comparable to or less severe than they are here, and no court would find an abuse of discretion in these circumstances. Aura Lamp maintains that ITC caused at least some of the delay. But in apportioning the fault between Aura Lamp and ITC, Aura Lamp offers no valid evidence of dilatory conduct by ITC that contributed to any of Aura Lamp s failures. The sum and substance of Aura Lamp s argument on this point is that ITC did not tell Aura Lamp s counsel that his extraordinarily late responses to discovery were evasive and incomplete. Aura Lamp also complains that ITC did not contact its counsel concerning responses to ITC s request for production of documents. Aura Lamp claims it made the documents available for inspection and ITC did not take advantage of the opportunity to review them. However, Aura Lamp fails to mention that ITC specifically requested that Aura Lamp photocopy the documents and forward them to ITC. This argument is frivolous. So too is Aura Lamp s claim that neither the court nor the defendant suffered any prejudice at its hands. The district court specifically listed the motions that ITC was forced to bring to protect its interests in the case, adding needless expense to the case and clogging the court s docket. We conclude that this is not a close question. On the Rule 41 [lack of prosecution] issues, the appeal is doomed and need not be transferred to the Federal Circuit. There is no more [additional] merit to Aura Lamp s Rule 37 argument. The only issue here is whether the court applied the wrong standard when it dismissed the case without expressly finding that Aura Lamp s conduct was wilful and wanton. We [but not the language of Rule 37] have held that when a court enters a default judgment as a discovery sanction, the court must find that the party against whom sanctions are imposed displayed wilfulness, bad faith or 267

268 fault. Although we strongly encourage courts to make this finding explicitly, we may infer it, if necessary, from the sanction order itself. The court here stated that it did not need to find wilful and wanton conduct, and that is correct. Wilful and wanton implies a more culpable level of conduct than wilful. Aura Lamp has cited no case applying Rule 37 (and we could find none) requiring a court to find that a plaintiff has acted in a wilful and wanton fashion before the court may impose the sanction of dismissal. Indeed, some of our cases suggest the court need not find even wilfulness. We will presume for the purposes of this appeal that the court was required to find at least a wilful violation of discovery orders before dismissing a case. Evidence of the court s implicit finding on wilfulness appears in its final remarks before dismissing the case: I don t want to hear any more argument. I can t bend over anymore. I just think that yes, there may have been excuses for what happened in April, but you can t look at excuses for what happened in April when you re trying to find excuses for what happened in January, February and March. And it s just inadequate. I mean, I don t even have to deal with the fact that I m getting all these things from the clerk s office telling me that you re not complying with the basic rules of filing documents, like signing it. I mean, you don t need a word processor to sign a document. The court thus found that Aura Lamp had no adequate excuse for its repeated failures to comply with discovery for a period of at least three months. Indeed, Aura Lamp had failed to propound discovery on the defendant as of July 2001, more than a year after filing the case. This serves as evidence both of failure to prosecute the case and failure to comply with discovery orders. The court s palpable exasperation with the plaintiff is more than sufficient to infer a finding of wilfulness. The court did not abuse its discretion in granting the sanction of dismissal for Aura Lamp s repeated, unexplained failures to comply with discovery orders. III. We conclude that we should dismiss the case rather than transfer it to the Federal Circuit. Under the deferential standards the Federal Circuit would employ to review a dismissal under Rules 37 and 41, Aura Lamp would not prevail. The appeal is clearly doomed and there is no reason to waste judicial resources or the resources of the parties by transferring the case. The appeal is therefore.. DISMISSED. Notes and Questions: 1. Recall the Shehyn (other) involuntary dismissal case. There, the court authorized additional time for the plaintiff to serve an incarcerated defendant, who had been transferred. Here, in Aura, the court was not as lenient ultimately dismissing the case for a lack of prosecution at the discovery stage. Courts are generally less lenient, when exercising their discretion in the latter type of delay in prosecution cases. Does this difference make sense? It actually does, but can you determine the reason for this difference? 2. As the Aura court states: both counsel and his client had difficulties in prosecuting the case but that ultimately the plaintiff was responsible for prosecuting the case and had failed to do so. Is this a case where the sins of the lawyer were unfairly attributed to the client? On the other hand, can a plaintiff dodge the responsibility of diligently prosecuting his case? Would it matter of the plaintiff were in pro per? A sophisticated litigant? 268

269 3. The former requirement that here be an express finding of a willful failure to comply with a court order (for dismissal/answer striking sanctions) was removed from Rule 37 in the 1970 Amendments to the FRCP. 4. The Sixth Circuit raised the point that it did not have jurisdiction over this appeal (Part II.A.). (a) Did it therefore overstep its authority to act, by nevertheless dismissing this case with prejudice which precluded P s refiling? (b) Aura could not refile its case in the trial court. It had to appeal the dismissal. As Rule 41(b) provides: a dismissal under this subdivision (b) and any dismissal not under this rule [e.g., Rule 37] except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19 operates as an adjudication on the merits. The court states that it could have transferred this appeal to the Federal Circuit. The Sixth Circuit chose, instead, to affirm the dismissal. In doing so, the Sixth Circuit reasoned: we may take a peek at the merits because whether the appeal has any possible merit bears significantly on our decision to transfer or dismiss the appeal. We may do so even though we lack jurisdiction to decide the merits. Notwithstanding P s multiple failures to comply with its discovery obligations, was the Sixth Circuit s failure to transfer the appeal to the proper appellate court a violation of the principle that a federal court cannot act without jurisdiction to do so? Is its Part III conclusion that Aura s case is clearly doomed and there is no reason to waste judicial resources or the resources of the parties by transferring the case a satisfactory rationale? 5. Courts generally do not look for ways to dismiss a case, when there has been but one misstep as articulated in the following passage: [A] district court commits a legal error when it dismisses a suit immediately after the first problem, without exploring other options or saying why they would not be fruitful.... [ ] The district court dismissed Sroga s case too abruptly and without consideration of essential factor[s], such as the frequency and egregiousness of the plaintiff s failure to comply with deadlines, the effect of delay on the court s calendar, and the prejudice resulting to the defendants.... [W]e require more than just a standalone warning to ensure that the punishment fit[s] the crime. Generally a single missed deadline or status hearing does not support dismissal for want of prosecution. Sroga v. Huberman, 722 F.3d 980, (2013). There are various factors a court applies when deciding a post-service motion to dismiss for lack of diligent prosecution. For example, in Carpenter v. City of Flint, 723 F.3d 700, at 704 (6th Cir., 2013): Under this court s precedent, we consider four factors when determining whether dismissal for failure to prosecute was within the district court s discretion: (1) whether the party s failure is due to willfulness, bad faith, or fault; (2) whether the adversary was prejudiced by the dismissed party s conduct; (3) whether the dismissed party was warned that failure to cooperate could lead to dismissal; and (4) whether less drastic sanctions were imposed or considered before dismissal of the action. 269

270 GREENUP v. RODMAN Supreme Court of California 42 Cal.3d 822 (1986) Professor s Note: We discussed default judgment earlier, typically referred to as a true default. We now address default judgment again, in its application as a penalty default. The following California Supreme Court opinion presents the later type of default, in a very teachable context which also better prepares you for trial practice. Greenup also yields a good sense of the important distinction between the two types of default judgment, and a federal procedure comparison. California s version of the FRCP 55 default rule is found in CCP 580. The hotly contested issue (on the California Supreme Court) is whether the latter code section governs both types of default. Make this difference the focus of your reading (rather than the state-federal differences mentioned in Greenup). Court s Opinion: Mosk, Associate Justice [delivered the 6-1 opinion of the court]. As a sanction for wilful and deliberate refusal to obey discovery orders, the trial court in this case struck the answer and entered a default judgment in an amount exceeding the prayer of the complaint. We granted review to consider whether a default judgment entered as a discovery sanction is excepted from the general rule that if there be no answer filed, the plaintiff s relief cannot exceed that which he shall have demanded in his complaint... (Code Civ. Proc., 580.) We conclude that in all default judgments the demand sets a ceiling on recovery. Plaintiff filed a complaint in August 1980 against Dale W. Rodman, individually and as majority shareholder of Rodair, Inc. and sole shareholder of Rodman Aviation, Inc., and against Rodman Aviation. She alleged that defendant Rodman had used involuntary dissolution procedures to transfer assets fraudulently from Rodair, Inc., in which she held a 20 percent minority interest, to Rodman Aviation, a corporation solely owned by Rodman. Charging fraud and conspiracy to defraud, concealment of assets, breach of fiduciary duty, conversion, and intentional infliction of emotional distress, plaintiff claimed damages in a sum that exceeds the jurisdictional requirements of this court. In her prayer, however, the only specific sum requested was $100,000 in exemplary and punitive damages: all other damages were to be subject to proof at time of trial or as the court deems just. Following unsuccessful demurrers, defendants answered and plaintiff commenced discovery. Rodman was recalcitrant throughout this process, actively resisting both document production and deposition. After repeated failures to appear and numerous postponements, he appeared at a deposition on February 12, 1981, rescheduled at his request, only to refuse to answer questions because it was Lincoln s Birthday assertedly a legal holiday. At a June 1981 deposition, on a court order to appear with records at the office of plaintiff s counsel, Rodman produced an assortment of papers in a box filled with straw and horse excrement, which he laughingly dumped on the table. After counsel and the court reporter had inspected the documents for an hour, Rodman announced they must 270

271 be sure to wash their hands thoroughly because the straw had been treated with a toxic chemical readily absorbed through the skin. The reporter, five months pregnant, asked to be excused, and the session was terminated by plaintiff s counsel. On November 6, 1981, plaintiff moved to strike the answer and enter a default judgment. The court ordered defendants to pay $1,000 in sanctions (adding $500 to an earlier sanction that Rodman had failed to pay) and to appear at the office of plaintiff s counsel with the requested documents on December 23, When Rodman again refused to comply, plaintiff renewed her motion, demanding that a default be entered. On August 24, 1982, the court granted plaintiff s motion to strike the answer and enter a default. However, it was not until September 24, 1982 i.e., a month after the default had been entered that she filed a request to enter a default judgment (Cal. Rules of Court, rule 982(a)(6)), stating for the first time the amount of damages she claimed. After several continuances at plaintiff s request, an ex parte prove-up hearing was held. Plaintiff put on evidence in support of her claim of damages; defendants were not present either in person or by counsel. The court found defendants liable for $338,000 in compensatory damages and $338,000 in punitive damages, and entered judgment in the amount of $676,000. Defendants appealed, contending inter alia that the court lacked jurisdiction to award damages in an amount exceeding the prayer. Holding this default for discovery violations exempt from the limit on damages in default judgments set by the code, the Court of Appeal affirmed the judgment. I Section 580, and related sections aim to ensure that a defendant who declines to contest an action does not thereby subject himself to open-ended liability. Reasoning that a default judgment that exceeds the demand would effectively deny a fair hearing to the defaulting party, the Courts of Appeal have consistently read the code to mean that a default judgment greater than the amount specifically demanded is void as beyond the court s jurisdiction. We held that the primary purpose of the section is to guarantee defaulting parties adequate notice of the maximum judgment that may be assessed against them. As we observed, The notice requirement of section 580 was designed to insure fundamental fairness. Surely, this would be undermined if the door were opened to speculation, no matter how reasonable it might appear in a particular case, that a prayer for damages according to proof provided adequate notice of a defaulting defendant s potential liability. [T]he Courts of Appeal have insisted that due process requires formal notice of potential liability; actual notice may not substitute for service of an amended complaint. Nevertheless, plaintiff here maintains that the court acted within its jurisdiction in granting her increased award. She first argues that the terms of her complaint amply notified defendants of the extent of damages she would claim. While conceding that she omitted to state an amount of damages in her demand for judgment as section , subdivision (b), requires, she points to the usual inconsequence of such error. It is true that a general demurrer will not lie for a defective prayer alone. And in the ordinary case in which the litigation proceeds 271

272 to trial, such a deficiency would carry no adverse consequences: the plaintiff would be permitted liberal amendment to the prayer to conform to proof. Furthermore, section 580 specifically provides that the court is not bound by the demand of the complaint, but may award any relief consistent with the case made by the plaintiff. It is precisely when there is no trial, however, that formal notice, and therefore the requirement of section , become critical. Notice is at the heart of the provision, as the Legislature underscored by adding section , which provides that in the single instance in which the amount of damages shall not be specified in the complaint an action for personal injury the plaintiff shall give notice to the defendant of the amount of special and general damages sought before obtaining a default judgment. It would undermine this concern for due process to allow the judgment herein to stand despite plaintiff s failure to meet the requirements of sections or Plaintiff s more substantive claim, and the central issue before us, is that the foregoing limits on default judgments do not, either as a matter of statutory language or policy, apply in the present context. She concedes that section 580 governs the judgment even when, pursuant to section 2034 [now CCP 2023], subdivision (b)(2)(c), a court strikes an answer and enters a default judgment for refusal to make discovery. She would construe the language of section 580, however, to permit unlimited damage judgments when an answer is stricken as a discovery sanction. She asserts that the first clause of the section i.e., The relief granted to the plaintiff, if there be no answer, cannot exceed that which he shall have demanded in his complaint applies only to ordinary defaults, presumably defaults at the pleading stage. And she concludes that when, as here, a default is entered after the defendant has filed his answer, the judgment falls within the more liberal rule of the second clause of section 580, i.e., but in any other case, the Court may grant [the plaintiff] any relief consistent with the case made by the complaint and embraced within the issue.. In effect, plaintiff maintains that defendants entered irreversibly into an adversarial contest by filing a sufficient answer; having crossed that threshold, they may no longer claim the protection of section 580. In this way, plaintiff attempts to exclude answers stricken for discovery violations from the long line of precedents viewing a failure to answer as including the case in which an answer is filed but is later stricken by the court. We are unpersuaded. The rationale stated in Brown, i.e., that striking the answer renders it a nullity (see Brown 149 Cal.App.3d 732, 736], applies equally when the answer is stricken pursuant to section [2023]. It is true that sections 586, 585, and 580, which together govern default judgments, do not explicitly list answers stricken pursuant to section [2023] as proceedings in which default judgment is rendered as if the defendant had failed to answer... ( 586.) Yet unless and until the Legislature specifically provides a separate procedure for defaults after discovery sanctions, these sections remain the sole statutory procedures for default judgments. Indeed, in the present case the ex parte prove-up hearing was conducted pursuant to section 585, subdivision (b). We conclude that the damages awarded must be limited by the terms of the same 272

273 section: when an answer is stricken as a sanction for the defendant s obstruction of discovery, it is as if no answer had been filed in the first instance. Arguing that default judgments entered for discovery violations should be held to differ fundamentally from other defaults as a matter of policy, plaintiff cites to the minority of federal cases that have upheld judgments exceeding the demand of the complaint. Plaintiff stresses that these holdings were reached despite statutory language more absolute than section 580: rule 54(c) of the Federal Rules of Civil Procedure requires that A judgment by default shall not... exceed in amount that prayed for in the demand for judgment... Certainly these holdings give bite to discovery sanctions in cases in which the defendant s own actions obstructed the plaintiff from fixing the amount of damages to which he was entitled. But while unlimited discretion to award such default judgments might further the policy behind discovery sanctions, our paramount concern remains due process. Plaintiff overlooks a crucial difference between state and federal procedures in default judgments: federal defendants who default are entitled to a minitrial on the sole issue of damages. Unlike the ex parte hearing provided for by section 585, the hearing in federal court is a fullfledged adversarial contest. 2.. It is here that plaintiff s analogy to federal law and her contention that merely by filing an answer defendants have irreversibly contested this action breaks down: under section 585 there is no contest whatever once a defendant defaults. We conclude that due process requires notice to defendants, whether they default by inaction or by wilful obstruction, of the potential consequences of a refusal to pursue their defense. Such notice enables a defendant to exercise his right to choose at any point before trial, even after discovery has begun between (1) giving up his right to defend in exchange for the certainty that he cannot be held liable for more than a known amount, and (2) exercising his right to defend at the cost of exposing himself to greater liability. To this end, [t]he rules governing default judgment provide the safeguards which ensure that defendant s choice is a fair and informed one. Plaintiff contends that defendants deliberately thwarted her discovery efforts because they believed they owed an actual debt to her in excess of her demand. Yet this is no less true of many defendants who fail to answer in the first instance. As we emphasized in Becker [27 Cal.3d 489], no matter how reasonable an assessment of damages may appear in the specific case, we cannot open the door to speculation on this subject without undermining due process a protection to which every defendant is entitled, even one as obstreperous and as guilty of reprehensible conduct as this defendant.. II 2 We are equally unpersuaded by defendants attempt to use federal majority interpretation of rule 54(c) to support their contention that our discovery statutes must be read as conforming to the federal statutes on which they were modeled. Because the language and procedure of our code differs so markedly from the federal rule, federal case law and policy are at best suggestive on this point. 273

274 Because the default judgment in this case exceeded the ceiling on damages to which plaintiff is subject, we conclude that the award must be amended to conform to the limitations specified in section 580. Defendants argue that because plaintiff stated no amount of damages in her prayer, she is entitled to no compensatory damages whatever. In Becker, however, we specifically held that the allegations of a complaint may cure a defective prayer for damages. Each of plaintiff s causes of action, with the exception of her personal injury claim, concluded with the allegation that she suffered damage in an amount that exceeds the jurisdictional requirements of this court. Plaintiff brought her action in the Los Angeles Superior Court, which is a court of limited jurisdiction subject to the requirement that the amount in controversy exceed $15,000. a By her allegations, plaintiff thus gave sufficient notice to defendants that she claimed at least $15,000 in compensatory damages. While an award in excess of $15,000 would be improper, a judgment in that amount was within the jurisdiction of the court. The compensatory award should therefore be reduced to the extent that it exceeds $15,000. Even as so modified, the judgment will clearly support an award of punitive damages. We need not, therefore, reach defendants contention that an award of punitive damages cannot stand if there is no compensatory damage award. For the reasons given, however, the award of punitive damages must be reduced to the amount of $100,000 pleaded in the complaint.. III We recognize that the damages thus authorized may not fully compensate plaintiff for her loss. Because this case appears to be the first reported decision to hold that a default judgment entered as a discovery sanction is governed by the general rule that such a judgment cannot exceed the relief demanded in the complaint, both plaintiff and the trial court may have been unaware that the deficiency in her prayer could have been corrected in the same way as in cases of default for failure to answer, i.e., by giving plaintiff the option of serving and filing an amended complaint... In the interest of fairness plaintiff should now be given that option. Specifically, she should be allowed to choose to forego the reduced award prescribed herein and instead to file an amended complaint praying for a different amount of damages and/or other appropriate relief. If she so elects, she must serve her amended complaint on defendants, who will be entitled to file a new answer; all issues will then be at large, including liability. Of course, if defendants thereafter continue to disobey discovery orders and incur a second default judgment as a sanction, plaintiff will have the right, at a second ex parte hearing, to prove her actual damages up to the limits of her amended prayer. The judgment of the Court of Appeal is reversed with directions to modify a The referenced amount was the then-current demarcation between California s Superior and Municipal Court jurisdiction. That amount is now $25,

275 the judgment of the trial court in accord with Part II of this opinion and to affirm the judgment as modified, unless within 30 days after issuance of our remittitur plaintiff serves and files in the Court of Appeal a notice electing the option set forth in Part III of this opinion. In that event, the Court of Appeal shall reverse the judgment of the trial court with directions to allow plaintiff to exercise that option. In either event the parties shall bear their own costs on appeal. Bird, Chief Justice, concurring and dissenting. I write separately to express a concern that has been overlooked by the majority. Civil defendants who wish to limit their liability to the minimum amount specifically pleaded can (1) force plaintiffs to undergo the frustration and expense of discovery, and then (2) absent themselves allowing a default to be entered. This is exactly what happened here.. Witkin notes, C.C.P. 580 provides that if the defendant answers the court may grant any relief consistent with the case made by the complaint and embraced within the issue, and the rule is well settled that in a contested case the plaintiff may secure relief different from or greater than that demanded. Although the majority acknowledge the fact that the statutory scheme does not address this situation, they insist that due process requires a strict construction of section However, this interpretation would mandate the application of the damage ceiling to actions in which answers are stricken as a discovery sanction. In so doing, the majority expand the parameters of section 580 by incorporating all cases falling within the ambit of section [2023]. 3 The justification proffered for equating defaults entered at the pleading stage with those resulting from sanctions imposed under section [2023] is the concern that defaulting parties may be denied the formal notice of the maximum amount of potential liability required by due process. The first clause of section 580 was set down by the Legislature to guarantee defendants adequate notice of the maximum judgment that may be assessed against them. However, it is clear that the statutory language contemplates two different situations. The first clause of section 580 addresses the traditional default context where a defendant has failed to answer. In this situation, fundamental fairness requires that the defendant be notified. The second clause of section 580, by contrast, refers to contested cases. Absent the discovery abuses that occurred here, the defendant would have an opportunity to determine and contest the maximum amount of damages pleaded. In contested cases, therefore, any affirmative action taken by a defendant demonstrates that notice has been received. In the present proceeding, defendants not only filed an answer to the complaint, they gave both plaintiff and the court the impression that they would 3 Section [2023(b)] empowers the courts to impose sanctions against litigants who wrongfully fail or refuse to participate in the discovery process. 275

276 participate in the discovery process. For the two-year period between the date plaintiff filed the complaint August of 1980 and the date the court granted plaintiff s motion to strike the answer and enter a default August of 1982 this case was contested. The record demonstrates that during this two-year period defendants had no intention of providing plaintiff with any information through the discovery process. As the majority note, defendant Rodman actively resist[ed] both document production and deposition. He repeatedly failed to appear at scheduled meetings and, during the one deposition he chose to attend, engaged in behavior that can only be described as shocking, inhumane, and inexcusable. In light of these circumstances, I cannot agree with the majority s conclusion that default judgments entered as a sanction for obstruction of discovery must be treated as if no answer had been filed in the first instance. The policy considerations underlying a decision to uphold judgments exceeding the demand where the defendant s affirmative actions invite a default judgment are considerably more compelling than the majority allow. The principal purpose of the ceiling set forth in section 580 is to apprise defendants of their potential liability so that they may evaluate the consequences of exercising their right not to answer. Here, the defendant Rodman has answered and then obstructed the discovery process. In so doing, he prevented the plaintiff from ascertaining the proper amount of damages. If the ceiling on damages is applied to this situation, it would permit the defendants to profit from wrongdoing. Consider the facts of this case. Defendants answered the complaint, thereby indicating their intention to contest plaintiff s allegations. The ensuing evasive maneuvers permitted defendants to gauge plaintiff s case while raising the stakes by forcing her to file expensive and futile discovery motions. When it became clear that plaintiff could not realistically estimate the losses she suffered as a result of the dissolution without defendants cooperation, defendants attempted to limit their liability by suddenly withdrawing from the proceedings.. The majority admit that the rule they delineate will undercut the effectiveness of discovery sanctions in cases where, as here, only the defendants know the dollar value of the losses suffered. Nevertheless, they claim that due process mandates such a result. If their concern is proper notice to defendants, I see no reason why plaintiffs must suffer the frustration and expense of refiling their claims so that obstreperous defendants may choose the optimal point at which to drop out of the litigation. The majority s holding eliminates any remedy for outrageous abuses of the discovery process. To avoid this inequity, I would suggest an alternative procedure. The trial court, at the time it enters the default, would send a notice to the defendant stating that it will consider evidence in support of a claim of damages in an amount exceeding the prayer of the complaint at the scheduled prove-up hearing under section 585. During that proceeding, the defendant would be permitted to present rebuttal evidence. 276

277 This procedure 5 would provide defendants with ample notice of their potential liability and an opportunity to challenge the amount of damages sought. This solution is preferable to that suggested by the majority for it accommodates due process while ensuring the effectiveness of motions to strike answers as sanctions for clear abuses of the discovery process. Notes and Questions: 1. There are two types of default (in both the state and federal courts). What is the general procedural distinction between them? 2. Given the defendant s outrageous conduct, why did the California Supreme Court not let the trial judge s default stand? Should state or federal courts have more power than provided by the legislative branch of government? 3. Greenup provides a rare glimpse into state and federal procedural differences. If your professor were to cover both procedural systems when federal casebooks do not provide the materials (and professors do not have the time) to address the thousands of state-federal differences might you be more confused about what law applies in federal courts? For those of you who will take the California Bar, the upper-division California Civil Procedure course is the place to address such differences in more detail. 4. For the interplay of FRCP 37 (sanctions) and FRCP 55 (default judgments), see Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444, 451 & 454 (2d Cir., 2013): When assessing a district court s exercise of its discretion pursuant to Rule 37, we generally look to (1) the willfulness of the non-compliant party; (2) the efficacy of lesser sanctions; (3) the duration of the noncompliance; and (4) whether the non-compliant party had been warned that noncompliance would be sanctioned. [A] party defaults when he has failed to plead or otherwise defend the case at hand [italics added]. Fed.R.Civ.P. 55(a). We have embraced a broad understanding of the phrase otherwise defend. [D]efendant failed to otherwise defend by failing to appear for a deposition, dismissing counsel, giving vague and unresponsive answers to interrogatories, and failing to appear for trial... 5 This procedure would be analogous to that employed in the federal courts in cases where a plaintiff seeks damages exceeding the demand in the complaint. 277

278 BEACON THEATRES, INC. v. WESTOVER United States Supreme Court 359 U.S. 500 (1959) Mr. Justice Black delivered the [5-3] opinion of the Court. Petitioner, Beacon Theatres, Inc., sought by mandamus to require a district judge in the Southern District of California to vacate certain orders alleged to deprive it of a jury trial of issues arising in a suit brought against it by Fox West Coast Theatres, Inc. The Court of Appeals for the Ninth Circuit refused the writ, holding that the trial judge had acted within his proper discretion in denying petitioner s request for a jury. We granted certiorari, because Maintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care. A former Fox Theater in San Bernardino County, California Source: < Reprinted with permission of San Bernardino Historical & Pioneer Society Fox had asked for declaratory relief against Beacon alleging a controversy arising under the Sherman Antitrust Act, 15 U.S.C. s[ection] 1, 15 U.S.C.A. s[ection] 2, and under the Clayton Act, 15 U.S.C. s[ection] 15, which authorizes suits for treble damages against Sherman Act violators. According to the complaint Fox operates a movie theatre in San Bernardino, California, and has long been exhibiting films under contracts with movie distributors. These contracts grant if the exclusive right to show first run pictures in the San Bernardino competitive area and provide for clearance a period of time during which no other theatre can exhibit the same pictures. After building a drive-in theatre about 11 miles from San Bernardino, Beacon notified Fox that it considered contracts barring simultaneous exhibitions of first-run films in the two theatres to be overt acts in violation of the antitrust laws. Fox s complaint alleged that this notification, together with threats of treble damage suits against Fox and its distributors, gave rise to duress and coercion which deprived Fox of a valuable property right, the right to negotiate for exclusive first-run contracts. Unless Beacon was restrained, the complaint continued, irreparable harm would result. Accordingly, its pleading was styled a 278

279 Complaint for Declaratory Relief, [whereby] Fox prayed both for a declaration that a grant of clearance between the Fox and Beacon theatres is reasonable and not in violation of the antitrust laws, and for an injunction, pending final resolution of the litigation, to prevent Beacon from instituting any action under the antitrust laws against Fox and its distributors arising out of the controversy alleged in the complaint. Beacon filed an answer, [and] a counterclaim against Fox. These denied the threats [claimed by Fox] and asserted that there was no substantial competition between the two theatres, that the clearances granted [by private contract] were therefore unreasonable, and that a conspiracy existed between Fox and its distributors to manipulate contracts and clearances so as to restrain trade and monopolize first-run pictures in violation of the antitrust laws. Treble damages were asked [for in Beacon s counterclaim]. Beacon demanded a jury trial of the factual issues in the case as provided by Federal Rule of Civil Procedure 38(b). The District Court, however, viewed the issues raised by the Complaint for Declaratory Relief, including the question of competition between the two theatres, as essentially equitable. [I]t directed that these issues be tried to the court. A common issue of the Complaint for Declaratory Relief, the counterclaim, and the cross-claim was the reasonableness of the clearances granted to Fox, which depended, in part, on the existence of competition between the two theatres. Thus the effect of the action of the District Court could be, as the Court of Appeals believed, to limit the petitioner s [Beacon s] opportunity fully to try to a jury every issue which has a bearing upon its treble damage suit. The District Court s finding that the Complaint for Declaratory Relief presented basically equitable issues draws no support from the Declaratory Judgment Act, 28 U.S.C. s 2201[a]; Fed.Rules Civ.Proc. 57. That statute, while allowing prospective defendants to sue to establish their nonliability, specifically preserves the right to jury trial for both parties. It follows that if Beacon would have been entitled to a jury trial in a treble damage suit against Fox it cannot be deprived of that right merely because Fox took advantage of the availability of declaratory relief to sue Beacon first. Since the right to trial by jury applies to treble damage suits under the antitrust laws, and is, in fact, an essential part of the congressional plan for making competition rather than monopoly the rule of trade, the Sherman and Clayton Act issues on which Fox sought a declaration were essentially jury questions. Nevertheless the Court of Appeals refused to upset the order of the district judge. It held that the question of whether a right to jury trial existed was to be judged by Fox s complaint read as a whole. In addition to seeking a declaratory judgment, the court said, Fox s complaint can be read as making out a valid plea for injunctive relief, thus stating a claim traditionally cognizable in equity. [I]t invoked the principle that a court sitting in equity could retain jurisdiction even though later a legal remedy became available. In such instances the equity court had discretion to enjoin the later lawsuit in order to allow the whole dispute to be determined in one case in one court [italics added]. [T]he Court of Appeals held it was not an abuse of discretion for the district judge to try the equitable cause first even though this might prevent a full jury trial of the counterclaim which [was] as effectively stopped as by an equity injunction. Viewed in this manner, the use of discretion by the trial court to deprive Beacon of a full jury trial on its counterclaim, as well as on Fox s plea for declaratory relief, cannot be justified. Under the Federal Rules the same court may try both legal and equitable causes in the same action. Fed.Rules Civ.Proc. 2. Thus any defenses, equitable or legal, Fox may have to charges of antitrust violations can be raised either in its suit for declaratory relief or in answer to Beacon s counterclaim. On proper showing, harassment by threats of other suits, or other suits 279

280 actually brought, involving the issues being tried in this case, could be temporarily enjoined pending the outcome of this litigation. Whatever permanent injunctive relief Fox might be entitled to on the basis of the decision in this case could, of course, be given by the court after the jury renders its verdict [italics added]. In this way the issues between these parties could be settled in one suit giving Beacon a full jury trial of every antitrust issue. By contrast, the holding of the court below would compel Beacon to split his antitrust case, trying part to a judge and part to a jury. 10 Such a result, which involves Fox s own legal claim for declaratory relief as well as of the counterclaim which Beacon was compelled by the Federal Rules to bring, 11 is not permissible. Our decision is consistent with the plan of the Federal Rules and the Declaratory Judgment Act to effect substantial procedural reform while retaining a distinction between jury and nonjury issues and leaving substantive rights unchanged. Thus, the justification for equity s deciding legal issues once it obtains jurisdiction, and refusing to dismiss a case, merely because subsequently a legal remedy becomes available, must be re-evaluated in the light of the liberal joinder provisions of the Federal Rules which allow legal and equitable causes to be brought and resolved in one civil action. This is not only in accord with the spirit of the Rules and the Act but is required by the provision in the Rules that (t)he right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United 16 States shall be preserved inviolate. As this Court said [citation omitted]: In the Federal courts this (jury) right cannot be dispensed with, except by the assent of the parties entitled to it; nor can it be impaired by any blending with a claim, properly cognizable at law, of a demand for equitable relief in aid of the legal action, or during its pendency. The judgment of the Court of Appeals is reversed. Mr. Justice Stewart, with whom Mr. Justice Harlan and Mr. Justice Whittaker concur, dissenting. The district judge simply exercised his inherent discretion, now explicitly confirmed by the Federal Rules of Civil Procedure, to schedule the trial of an equitable claim in advance of an action at law. 1 In any event no abuse of discretion is apparent in this case. The Court of Appeals found that the complaint, although inartistically drawn, contained 2, 3 allegations entitling the petitioner to equitable relief. 10 Since the issue of violation of the antitrust laws often turns on the reasonableness of a restraint on trade in the light of all the facts, it is particularly undesirable to have some of the relevant considerations tried by one factfinder and some by another. 11 Fed.Rules Civ.Proc., 13(a). 16 [As you learned in the Choice of Law segment of this course:] In delegating to the Supreme Court responsibility for drawing up rules, Congress declared that: Such rules shall not abridge, enlarge or modify any substantive right and shall preserve the right of trial by jury as at common law and as declared by the Seventh Amendment to the Constitution. 28 U.S.C.A. s[ection] The complaint filed by Fox stated a claim traditionally cognizable in equity. That claim, in brief, was that Beacon had wrongfully interfered with the right of Fox to compete freely with Beacon and other distributors for the licensing of films for first-run exhibition in the San Bernardino area. The complaint alleged that the plaintiff was without an adequate remedy at law and would be irreparably harmed unless the defendant were restrained from continuing to interfere by coercion and threats of litigation with the plaintiff s lawful business relationships. 280

281 That finding is accepted in the prevailing opinion today. If the [Fox equity] complaint had been answered simply by a general denial, therefore, the issues would under traditional principles have been triable as a proceeding in equity. Instead of just putting in issue the allegations of the complaint, however, Beacon filed pleadings which affirmatively alleged the existence of a broad conspiracy among the plaintiff and other theatre owners to monopolize the first-run exhibition of films in the San Bernardino area to refrain from competing among themselves, and to discriminate against Beacon in granting film licenses. Based upon these allegations, Beacon asked damages in the amount of $300,000. Clearly these conspiracy allegations stated a cause of action triable as of right by a jury. What was demanded by Beacon, however, was a jury trial not only of this cause of action, but also of the issues presented by the original complaint. Assuming the existence of a factual issue common both to the plaintiff s original action and the defendant s counterclaim for damages, I cannot agree that the District Court must be compelled to try the counterclaim first. It is, of course, a matter of no great moment in what order the issues between the parties in the present litigation are tried. What is disturbing is the process by which the Court arrives at its decision a process which appears to disregard the historic relationship between equity and law. I. 2 Upon motion of Fox the trial judge ordered the original action for declaratory and equitable relief to be tried separately to the court and in advance of the trial of the defendant s counter-claim. The court s order, which carefully preserved the right to trial by jury upon the conspiracy and damage issues raised by the counterclaim, was in conformity with the specific provisions of the Federal Rules of Civil Procedure. 3 Yet it is decided today that the Court of Appeals must compel the district judge to rescind it. 3 Rule 42(b) provides: (b) Separate Trials. The court in furtherance of convenience or to avoid prejudice may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims, or issues. The Note to Rule 39 of the Advisory Committee on Rules states that, When certain of the issues are to be tried by jury and others by the court, the court may determine the sequence in which such issues shall be tried. This language was at one time contained in a draft of the Rules, but was deleted because the power is adequately given by Rule 42(b). See also Rule 57, which provides, inter alia, that The court may order a speedy hearing of an action for a declaratory judgment and may advance it on the calendar. 281

282 It has been an established rule that equitable jurisdiction existing at the filing of a bill [complaint in equity] is not destroyed because an adequate legal remedy may have become available thereafter. It has also been long settled that the District Court in its discretion may order the trial of a suit in equity in advance of an action at law between the same parties, even if there is a factual issue common to both. 8 III. The Court today sweeps away these basic principles as precedents decided under discarded procedures. It suggests that the Federal Rules of Civil Procedure have somehow worked an expansion of adequate legal remedies so as to oust the District Courts of equitable jurisdiction, as well as to deprive them of their traditional power to control their own dockets. But obviously the Federal Rules could not and did not expand the substantive law one whit. 10 Like the Declaratory Judgment Act, the Federal Rules preserve inviolate the right to trial by jury in actions historically cognizable at common law, as under the Constitution they must. They do not create a right of trial by jury where that right does not exist under the Constitution or statutes of the United States. Since Beacon s counterclaim was compulsory under the Rules, it is apparent that by filing it Beacon could not be held to have waived its jury rights. But neither can the counterclaim be held to have transformed Fox s original complaint into an action at law. The Rules make possible the trial of legal and equitable claims in the same proceeding, but they expressly affirm the power of a trial judge to determine the order in which claims shall be heard.. Certainly the Federal Rules were not intended to undermine the basic structure of equity jurisprudence, developed over the centuries and explicitly recognized in the United States Constitution. Notes and Questions: 1. How does one claim the right to jury trial in a lawsuit? Can the Seventh Amendment right to jury trial be waived? Can the trial judge nevertheless authorize a jury trial? 2. What rule did the Beacon court announce? Did its ruling preclude the trial judge from issuing an injunction in this (or a like) case? So who is the fact-finder[s]?. 3. The dissent accuses the majority of transforming Fox s equity complaint into a legal one. Do you agree? Can it be argued that because juries do not render injunctions that there is still a determination the judge may make, after the jury returns its verdict? 8 A court has control over its own docket. In the exercise of a sound discretion it may hold one lawsuit in abeyance to abide the outcome of another, especially where the parties and the issues are the same [Supreme Court citation omitted]. 10 Congressional authorization of the Rules expressly provided that Said rules shall neither abridge, enlarge, nor modify the substantive rights of any litigant. See 28 U.S.C. s[ection]

283 DAIRY QUEEN, INC. v. WOOD United States Supreme Court 369 U.S. 469 (1962) Mr. Justice Black delivered the [unanimous, with a concurring] opinion of the Court. The United States District Court for the Eastern District of Pennsylvania granted a motion to strike petitioner s demand for a trial by jury in an action now pending before it on the alternative grounds that either the action was purely equitable or, if not purely equitable, whatever legal issues that were raised were incidental to equitable issues, and, in either case, no right to trial by jury existed. The petitioner then sought mandamus in the Court of Appeals for the Third Circuit to compel the district judge to vacate this order. When that court denied this request without opinion, we granted certiorari because the action of the Court of Appeals seemed inconsistent with protections already clearly recognized for the important constitutional right to trial by jury in our previous decisions. At the outset, we may dispose of one of the grounds upon which the trial court acted in striking the demand for trial by jury that based upon the view that the right to trial by jury may be lost as to legal issues where those issues are characterized as incidental to equitable issues for our previous decisions make it plain that no such rule may be applied in the federal courts. A Dairy Queen store in Pennsylvania, circa Source: < Reprinted with Permission of Dairy Queen International The holding in Beacon Theatres was that where both legal and equitable issues are presented in a single case, only under the most imperative circumstances, circumstances which in view of the flexible procedures of the Federal Rules we cannot now anticipate, can the right to a jury trial of legal issues be lost through prior determination of equitable claims. That holding, of course, applies whether the trial judge chooses to characterize the legal issues presented as incidental to equitable issues or not. 8 Consequently, in a case such as this where there cannot even be a 8 It is therefore immaterial that the case at bar contains a stronger basis for equitable relief than was present in Beacon Theatres. It would make no difference if the equitable cause clearly outweighed the legal cause so 283

284 contention of such imperative circumstances, Beacon Theatres requires that any legal issues for which a trial by jury is timely and properly demanded be submitted to a jury. There being no question of the timeliness or correctness of the demand involved here, the sole question which we must decide is whether the action now pending before the District Court contains legal issues. The District Court proceeding arises out of a controversy between petitioner and the respondent owners of the trademark DAIRY QUEEN with regard to a written licensing contract made by them in December 1949, under which petitioner [Wood] agreed to pay some $150,000 for the exclusive right to use that trademark in certain portions of Pennsylvania. The terms of the contract provided for a small initial payment with the remaining payments to be made at the rate of 50% of all amounts received by petitioner on sales and franchises to deal with the trademark and, in order to make certain that the $150,000 payment would be completed within a specified period of time, further provided for minimum annual payments regardless of petitioner s receipts. In August 1960, the respondents wrote petitioner a letter in which they claimed that petitioner had committed a material breach of that contract by defaulting on the contract s payment provisions and notified petitioner of the termination of the contract and the cancellation of petitioner s right to use the trademark unless this claimed default was remedied immediately. When petitioner continued to deal with the trademark despite the notice of termination, the respondents brought an action based upon their view that a material breach of contract had occurred. The complaint filed in the District Court alleged, among other things, that petitioner had ceased paying as required in the contract; that the default under the said contract (was) in excess of $60, ; that this default constituted a material breach of that contract; that petitioner had been notified by letter that its failure to pay as alleged made it guilty of a material breach of contract which if not cured would result in an immediate cancellation of the contract; that the breach had not been cured but that petitioner was contesting the cancellation and continuing to conduct business as an authorized dealer; that to continue such business after the cancellation of the contract constituted an infringement of the respondents trademark; that petitioner s financial condition was unstable; and that because of the foregoing allegations, respondents were threatened with irreparable injury for which they had no adequate remedy at law. The complaint then prayed for both temporary and permanent relief, including: (1) temporary and permanent injunctions to restrain petitioner from any future use of or dealing in the franchise and the trademark; (2) an accounting to determine the exact amount of money owing by petitioner and a judgment for that amount; and (3) an injunction pending accounting to prevent petitioner from collecting any money from Dairy Queen stores in the territory. In its answer to this complaint, petitioner raised a number of defenses, including: (1) a denial that there had been any breach of contract, apparently based chiefly upon its allegation that in January 1955 the parties had entered into an oral agreement modifying the original written contract by removing the provision requiring minimum annual payments regardless of petitioner s receipts thus leaving petitioner s only obligation that of turning over 50% of all its receipts; (2) laches and estoppel arising from respondents failure to assert their claim promptly, thus permitting petitioner to expend large amounts of money in the development of its right to use the trademark; and (3) alleged violations of the antitrust laws by respondents in connection that the basic issue of the case taken as a whole is equitable. As long as any legal cause is involved the jury rights it creates control. This is the teaching of Beacon Theatres, as we construe it. 284

285 with their dealings with the trademark. Petitioner indorsed upon this answer a demand for trial by jury in accordance with Rule 38(b) of the Federal Rules of Civil Procedure. 11 Petitioner s contention is that insofar as the complaint requests a money judgment it presents a claim which is unquestionably legal. The respondents contention that this money claim is purely equitable is based primarily upon the fact that their complaint is cast in terms of an accounting, rather than in terms of an action for debt or damages. But the constitutional right to trial by jury cannot be made to depend upon the choice of words used in the pleadings. The necessary prerequisite to the right to maintain a suit for an equitable accounting, like all other equitable remedies, is, as we pointed out in Beacon Theaters, the absence of an adequate remedy at law. Consequently, in order to maintain such a suit on a cause of action cognizable at law, as this one [in Dairy Queen] is, the plaintiff must be able to show that the accounts between the parties are of such a complicated nature that only a court of equity can satisfactorily unravel them. a In view of the powers given to District Courts by Federal Rule of Civil Procedure 53(b) to appoint masters to assist the jury in those exceptional cases where the legal issues are too complicated for the jury adequately to handle alone, the burden of such a showing is considerably increased and it will indeed be a rare case in which it can be met. But be that as it may, this is certainly not such a case. A jury, under proper instructions from the court, could readily determine the recovery, if any, to be had here, whether the theory finally settled upon is that of breach of contract, that of trademark infringement, or any combination of the two. The legal remedy cannot be characterized as inadequate merely because the measure of damages may necessitate a look into petitioner s business records. Nor is the legal claim here rendered purely equitable by the nature of the defenses interposed by petitioner. Petitioner s primary defense to the charge of breach of contract that is, that the contract was modified by a subsequent oral agreement presents a purely legal question having nothing whatever to do either with novation, as the district judge suggested, or reformation, as suggested by the respondents here. Such a defense goes to the question of just what, under the law, the contract between the respondents and petitioner is and, in an action to collect a debt for breach of a contract between these parties, petitioner has a right to have the jury determine not only whether the contract has been breached and the extent of the damages if any but also just what the contract is. We conclude therefore that the district judge erred in refusing to grant petitioner s demand for a trial by jury on the factual issues related to the question of whether there has been a breach of contract. Since these issues are common with those upon which respondents claim to equitable relief is based, the legal claims involved in the action must be determined prior to any final court determination of respondents equitable claims. 20 The Court of Appeals should have 11 Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other parties a demand therefor in writing at any time after the commencement of the action and not later than 10 days after the service of the last pleading directed to such issue. Such demand may be indorsed upon a pleading of the party. a The Court did not resolve this looming sub-issue on these facts. This is, however, your first notice that there may be a complexity exception to the Seventh Amendment to be addressed in the next assigned case (Japanese Electronics). 20 This does not, of course, interfere with the District Court's power to grant temporary relief pending a final adjudication on the merits. Such temporary relief has already been granted in this case and is no part of the issues before this Court. 285

286 corrected the error of the district judge by granting the petition for mandamus. The judgment is therefore reversed and the cause remanded for further proceedings consistent with this opinion. Reversed and remanded [for jury trial of the at law money damage issues]. Mr. Justice Harlan, whom Mr. Justice Douglas joins, concurring. I am disposed to accept the view, strongly pressed at the bar, that this complaint seeks an accounting for alleged trademark infringement, rather than contract damages. Even though this leaves the complaint as formally asking only for equitable relief, this does not end the inquiry. The fact that an accounting is sought is not of itself dispositive of the jury trial issue. It is manifest from the face of the complaint that the accounting sought in this instance is not of either variety [exclusively patent infringement or contract]. A jury, under proper instructions from the court, could readily calculate the damages flowing from this alleged trademark infringement, just as courts of law often do in copyright and patent cases. Consequently what is involved in this case is nothing more than a joinder in one complaint of prayers for both legal and equitable relief. In such circumstances, the petitioner cannot be deprived of his constitutional right to a jury trial on the legal claim contained in the complaint. On this basis I concur in the judgment of the Court. Notes and Questions: 1. The three basic charging allegations of the DQ complaint seek an accounting from defendant Woods. An accounting action then, and now is an action inequity. Why, then, is there a Seventh Amendment issue? 2. This complaint sought primarily equitable relief: an accounting, which is historically (and today) a claim arising in equity. But legal relief i.e. money damages was also sought. The latter was incidental to the main relief plaintiff Dairy Queen sought. Prior to Dairy Queen, a federal judge could decide the entire case, including such incidental monetary relief. Building upon the Beacon Theaters framework, what rule can you articulate as the essential holding in Dairy Queen? (The latter case thus sealed a form of legal loophole left open by Beacon.) 286

287 IN RE JAPANESE ELECTRONIC PRODUCTS ANTITRUST LITIGATION United States Court of Appeals, Third Circuit 631 F.2d 1069 (1980) Seitz, Chief Judge [delivered the court s 2-1 opinion]. This certified interlocutory appeal from a pretrial order of the district court raises an issue that currently is the subject of much debate: In an action under the antitrust and antidumping laws, do the parties have a right to trial by jury without regard to the practical ability of a jury to decide the case properly? I. This litigation began in the District of New Jersey with the complaint of National Union Electric Corp. (NUE). NUE was a major domestic producer of television receivers until February The following December, it filed the first complaint of this litigation, charging several of its Japanese competitors with violations of the antitrust laws and the laws governing competition [ dumping ] in international trade. The complaint names as defendants the Mitsubishi Corp., which is a Japanese trading company, and seven Japanese television manufacturers: Matsushita Electric Industrial Co., Toshiba Corp., Hitachi, Ltd., Sharp Corp., Mitsubishi Electric Corp., Sanyo Electric Co., and Sony Corp. Nine subsidiaries of these companies also are named as defendants in NUE s action. NUE alleges that the defendants have sought to drive American television producers out of the American market by selling televisions at artificially depressed prices. Charging that defendants have maintained lower prices for televisions sold in the United States than for comparable televisions sold in Japan, NUE asserts violations of the 1916 Antidumping Act. NUE further alleges that these dumping practices are part of a large conspiracy in which defendants have agreed among themselves and have acted in concert with over 90 coconspirators around the world to maintain artificially low prices for Japanese televisions sold in the United States. Zenith Radio Corp., a major domestic producer of consumer electronic products, filed the second complaint of this litigation. A group of the Japanese defendants in the Zenith action filed two counterclaims. The first charges Zenith and its distributors throughout the United States with territorial allocations, horizontal and vertical price-fixing schemes, key dealer preferences, and price discrimination, in violation of the Sherman Act and the Robinson-Patman Act. The second counterclaim charges Zenith and about 30 coconspirators with maintaining a program of sham litigation against Zenith s competitors. Sears filed a separate counterclaim challenging Zenith s advertising claims that Zenith color televisions are manufactured in the United States. Sears claims that the advertisements create an impression that all components of Zenith s color televisions and other consumer electronic products are of American origin, when some components are manufactured abroad. Shortly after the filing of the Zenith action, the two suits were consolidated for pretrial proceedings in the Eastern District of Pennsylvania. Subsequently, the district court, on NUE s motion, consolidated the two suits for trial. Both NUE and Zenith made timely demands for jury trial. Fourteen of the defendants moved to strike the demands, arguing that the case is too large and complex for a jury. The district court denied their motion, concluding that the seventh amendment does not recognize the 287

288 complexity of a lawsuit as a valid reason for denying a jury trial. The court explained its reasoning in a thorough and scholarly opinion, and certified its order for interlocutory appeal. We have permitted the appeal to determine whether the district court s reason for denying appellants motion was correct. II. Appellants argue that the proof of the foregoing claims will be too burdensome and complicated for a jury. They have cited several dimensions of complexity. The district court accepted one of appellants basic contentions: the trial will be protracted. The court predicted that the trial would last a full year. It noted that the parties are nearing the end of discovery, which after nine years has produced millions of documents and over 100,000 pages of depositions. The court did not estimate how much of this evidence will be introduced at trial. The conspiracy charged in this suit is massive. Appellees allege that it has lasted for at least 30 years, involved almost 100 firms around the world, and affected international trade in several consumer electronic products. Appellants argue that litigation of the existence and operation of this conspiracy will produce an enormous amount of evidence for the jury to consider. They see further difficulties in the fact that the alleged conspiracy involved Japanese businessmen and that its operations included restraint of trade in Japanese markets. Appellants fear that a jury might not understand the evidence due to the difficulty of understanding business practices and market conditions in Japan. Appellees respond that proof of the conspiracy and its operations will be simple because the facts are well established in unambiguous documentation. Appellees foresee no difficulties due to allegations involving Japan. They characterize the alleged conspiracy as classic, much like combinations ordinarily revealed in Sherman Act cases. Finally, appellants argue that the complexity of the suit will be compounded by the presence of some issues that conceptually are very difficult. The claims will require proof of predatory intent. [A]ppellees will have to prove relevant product markets, relevant geographic markets, and market shares. Zenith s [counter-claims will raise issues of whether products sold to different customers are of a like grade and quality and whether any price differences are cost justified. The district court [said:] We expect that the actual size of complexity of this litigation falls somewhere in between the two extremes portrayed by the parties. The court added, By any yardstick, this case is at least as large and complex as the others in which jury demands have been struck (on grounds of complexity). It then proceeded to the conclusion that the seventh amendment preserves the right to jury trial in this suit regardless of its complexity [italics added]. That construction of the seventh amendment is the focus of this appeal. III. The Senate s [1890] debate on the earlier Sherman Act provision contains a few passages in which a senator mentions, in the course of discussing some other issue, that juries will hear treble damage actions.... In short, the legislative history indicates nothing more than the expectation of several congressmen that the seventh amendment generally would guarantee a right to jury trial in treble 288

289 damage actions under the antitrust laws. We are unable to translate their expectations of the ordinary application of the seventh amendment into an intention to require jury trial by statute. Appellants offer two grounds for ruling that the seventh amendment does not guarantee a jury trial in this case, one of which does not depend upon characterizing the suit as equitable. That is the argument based on the due process clause. For the sake of clarity, we should state our understanding of complexity in this context. A suit is too complex for a jury when circumstances render the jury unable to decide in a proper manner. The law presumes that a jury will find facts and reach a verdict by rational means. It does not contemplate scientific precision but does contemplate a resolution of each issue on the basis of a fair and reasonable assessment of the evidence and a fair and reasonable application of the relevant legal rules. A suit might be excessively complex as a result of any set of circumstances which singly or in combination render a jury unable to decide in the foregoing rational manner. Examples of such circumstances are an exceptionally long trial period and conceptually difficult factual issues. Some district courts have recognized complexity as a grounds for denying jury trial. On the other hand, the Ninth Circuit recently has held that the seventh amendment applies without regard to a lawsuit s size or complexity. The Supreme Court has supplied direct support for appellants position only in a footnote to its opinion in Ross v. Bernhard : As our cases indicate, the legal nature of an issue is determined by considering, first, the pre-merger custom with reference to such questions; second, the remedy sought; and, third, the practical abilities and limitations of juries [italics added]. The [italicized] third prong of the [Ross] test plainly recognizes the significance, for purposes of the seventh amendment, of the possibility that a suit may be too complex for a jury. Its inclusion in the three prong test strongly suggests that jury trial might not be guaranteed in extraordinarily complex cases. The district court [in this case] made no use of the Ross footnote, finding it too brief to authorize a major departure from the traditional construction of the seventh amendment. We also find it unlikely that the Supreme Court would have announced an important new application of the seventh amendment in so cursory a fashion. Yet, at the very least, the Court has left open the possibility that the practical abilities and limitation of juries may limit the range of suits subject to the seventh amendment and has read its prior seventh amendment decisions as not precluding such a ruling. With this understanding of Ross, we shall consider the merits of appellants arguments for a complexity exception. V. Appellants first argument relies on historical analysis to advance the proposition that the fact of extraordinary complexity renders a suit equitable in nature. Although complexity is not commonly recognized as a defining feature of equity, appellants argue that by the time of the adoption of the seventh amendment the chancellor s jurisdiction had extended to any suit that he found too complex for a jury. They have submitted a large body of historical authorities to support this proposition. The brief of International Business Machines Corporation, amicus 289

290 curiae in this case, provides some additional historical authorities to support several of appellants arguments. A. Most of these authorities are suits seeking relief in the form of an [equitable] accounting between the parties.... Suits under the antitrust and antidumping laws are similar in form to suits for damages in tort. They impose liability for money damages... Hence, the present lawsuit is most similar to actions in which an equitable accounting was unavailable. Appellants analogy, therefore, fails. B. Appellants also cite a variety of cases that do not involve accountings. They claim that in each of these cases the chancellor took [equitable] jurisdiction because extraordinary complexity made the suit too complex for a common-law jury. Whether or not these conclusions [are] correct is a question that may interest historians; we need not decide it here.... With this meager support, we cannot conclude that complexity alone ever was an established basis of equitable jurisdiction. VI. Both appellants and IBM offer a second constitutional argument. They contend that the due process clause of the fifth amendment prohibits trial by jury of a suit that is too complex for a jury. They further contend that this due process limitation prevails over the seventh amendment s preservation of the right to jury trial. Although no specific precedent exists for a finding a due process violation in the trial of any case to a jury, the principles that define the procedural requirements of due process would seem to impose some limitations on the range of cases that may be submitted to a jury. The primary value promoted by due process in fact-finding procedures is to minimize the risk of erroneous decisions. A jury that cannot understand the evidence and the legal rules to be applied provides no reliable safeguard against erroneous decisions. Moreover, in the context of a completely adversary proceeding, like a civil trial, due process requires that the decisionmaker s conclusion... rest solely on the legal rules and evidence adduced at the hearing. Unless the jury can understand the legal rules and evidence, we cannot realistically expect that the jury will rest its decision on them. As we have noted, the law presumes that a jury will decide rationally; it will resolve each disputed issue on the basis of a fair and reasonable assessment of the evidence and a fair and reasonable application of relevant legal rules. We conclude that due process precludes trial by jury when a jury is unable to perform this task with a reasonable understanding of the evidence and the legal rules. If a particular lawsuit is so complex that a jury cannot satisfy this requirement of due process but is nonetheless an action at law, we face a conflict between the requirements of the fifth and seventh amendments. In this situation, we must balance the constitutionally protected interest, as they are implicated in this particular context, and reach the most reasonable accommodation between the two constitutional provisions. The due process objections to jury trial of a complex case implicate values of fundamental importance. If judicial decisions are not based on factual determinations bearing some reliable degree of accuracy, legal remedies will not be applied consistently with the 290

291 purposes of the laws. There is a danger that jury verdicts will be erratic and completely unpredictable, which would be inconsistent with evenhanded justice. Finally, unless the jury can understand the evidence and the legal rules sufficiently to rest its decision on them, the objective of most rules of evidence and procedure in promoting a fair trial will be lost entirely. We believe that when a jury is unable to perform its decision-making task with a reasonable understanding of the evidence and legal rules, it undermines the ability of a district court to render basic justice. The loss of the right to jury trial in a suit found too complex for a jury does not implicate the same fundamental concerns. The absence of a jury trial requirement in equitable and maritime actions indicates that federal courts can provide fair trials and can grant relief in accordance with the principles of basic justice without the aid of a jury. Moreover, the Supreme Court has consistently refused to rule that preservation of civil jury trial is an essential element of ordered liberty required of the states by the due process clause of the fourteenth amendment. The district court asserted that the due process argument fails to account for the special benefits that juries bring to civil litigation. Because the jury is a representative of the community and can call upon the community s wisdom and values, the legal system has relied on it to perform two important functions. The first is black box decision-making. The jury issues a verdict without an opinion to explain or justify its decision. This feature allows juries to perform a type of jury equity, modifying harsh results of law to conform to community values in cases where a judge would have to apply the law rigidly. The second function is to accord a greater measure of legitimacy to decisions that depend upon determinations of degree rather than of absolutes, such as whether particular conduct constitutes negligence. Certain decisions of this line-drawing nature seem less arbitrary when made by a representative body like the jury. In the context of a lawsuit of the complexity that we have posited, however, these features do not produce real benefits of substantial value. The function of jury equity may be legitimate when the jury actually modifies the law to conform to community values. However, when the jury is unable to determine the normal application of the law to the facts of a case and reaches a verdict on the basis of nothing more than its own determination of community wisdom and values, its operation is indistinguishable from arbitrary and unprincipled decision-making. Similarly, the line-drawing function is difficult to justify when the jury cannot understand the evidence or legal rules relevant to the issue of where to draw a line. The district court also noted that preservation of the right to jury trial is important because the jury provides a needed check on judicial power. A jury unable to understand the evidence and legal rules is hardly a reliable and effective check on judicial power. Our liberties are more secure when judicial decision-makers proceed rationally, consistently with the law, and on the basis of evidence produced at trial. If the jury is unable to function in this manner, it has the capacity of becoming itself a tool of arbitrary and erratic judicial power. Therefore, we find the most reasonable accommodation between the requirements of the fifth and seventh amendments to be a denial of jury trial when a jury will not be able to perform its task of rational decision-making with a reasonable understanding of the evidence and the relevant legal standards. In lawsuits of this complexity, the interests protected by this procedural rule of due process carry greater weight than the interests served by the constitutional guarantee of jury trial. Consequently, we shall not read the seventh amendment to guarantee the right to jury trial in these suits. VII. 291

292 The district court devoted most of its discussions of appellants due process argument not to factors relevant to the balancing of interests set out in the foregoing section but to a number of practical objections to the argument [italics added]. We shall consider those objections in this section. First, the district court challenged the premise that a case could exceed a jury s ability to decide rationally and asserted that a jury was at least as able as a judge, the only alternative factfinder, to decide complex cases. The court noted that a jury possesses the wisdom, experience, and common sense of twelve persons. [But a]ny assessment of a jury s ability to decide complex cases should include consideration not only of a jury s particular strengths and the possible enhancement of its capabilities but also of the particular constraints that operate on a jury in complex cases. The long time periods required for most complex cases are especially disabling for a jury. A long trial can interrupt the career and personal life of a jury member and thereby strain his commitment to the jury s task. A long trial would not greatly disrupt the professional and personal life of a judge and should not be significantly disabling. In fact, the judge's greater ability to allocate time to the task of deciding a complex case can be a major advantage in surmounting the difficulties posed by the suit. Although we cannot presume that a judge will be more intelligent than a jury or more familiar with technical subject matters, a judge will almost surely have substantial familiarity with the process of civil litigation, as a result of experience on the bench or in practice. The district court s second objection to appellants due process argument was that the court can prevent an irrational verdict with its power to direct a verdict or to grant judgment n. o. v. [notwithstanding the verdict]. Denial of a jury trial may [instead] be necessary to minimize the risk of erroneous decisions. Given that substantial property rights often are at stake in actions at law, we believe that due process requires a greater measure of reliability in the decision-making process. It requires some fair assurance that the jury s findings of fact and applications of legal rules are reasonably correct. When a jury is unable to understand the evidence and the legal rules, it cannot provide this measure of assurance. Finally, the district court feared that the authority to strike jury trial demands on case-bycase determinations of complexity would lead to the long-run dilution of the right to jury trial. We do not believe that a due process limitation [necessarily] allows the district courts a substantial amount of discretion to deny jury trials. Because preservation of the right to jury trial remains a constitutionally protected interest, denials of jury trial on grounds of complexity should be confined to suits in which due process clearly requires a nonjury trial. We further recognize a relative lack of precision in this standard, but we do not believe that this problem threatens a dilution in the right to jury trial. We believe that district judges will apply the standard with a good faith concern for the general preservation of the right to jury trial. As an added safeguard, we will require that the district court make explicit findings on the 292

293 dimensions of complexity when it denies a jury trial in an action at law on grounds of complexity. In summary, the district court s practical objections to a due process limitation do not compel its rejection. However, the concern for preservation of the right to jury trial should guide its application. In suits at law, a court should deny jury trial on due process grounds only in exceptional cases when the court, after careful inquiry into the factors contributing to complexity, determines that a jury would be unable to understand the case and decide it rationally. Before any such denial, due consideration should be given to the particular strengths of the jury in deciding complex cases, to the possible use of special trial techniques to increase a jury's capabilities, and to methods of reducing the suit's complexity. VIII. We turn to the disposition of this appeal. The district court concluded that the complexity of the case before us is not a constitutionally permissible reason for striking the plaintiffs jury demands. We are constrained to disagree. Thus, the district court has not ruled on whether this particular lawsuit is too complex for a jury to understand and decide rationally. The court relied entirely on its construction of the seventh amendment and the due process clause. We shall vacate the court s order [denying the motion to strike the jury demand] on the basis of our previous discussion and shall leave for consideration on remand the issue of the complexity of this lawsuit. The order of the district court will be vacated and the case remanded for proceedings consistent with this opinion. Gibbons, Circuit Judge, dissenting. I conclude that the majority has substituted for an express guarantee in the Bill of Rights a rule of district court discretion that in practice will be virtually unreviewable, and therefore largely unfettered. Between Judge Becker s opinion in the district court and that of Chief Judge Seitz here, enough has been written that an extended separate statement is hardly appropriate. The court has now authorized pretrial denials of demands for jury trial in suits at common law on due process grounds... in exceptional cases when the court, after careful inquiry into the factors contributing to complexity, determines that a jury would be unable to understand the case and decide it rationally. The majority opinion attempts to objectify the factors that bear upon complexity, but in the end the factors which are identified will permit the exercise of trial court discretion. Trial court discretion, moreover, in any practical sense will be completely unreviewable. Part of my difficulty with the majority s position probably results from a perception of the nature of the judicial process and the role of juries in that process. It is often said that the judicial process involves the search for objective truth. We have no real assurance, however, of objective truth whether the trial is to the court or to a jury. The... seventh amendment is not a useless appendage to the Bill of Rights, but an important resource in maintaining the authority of the rule of law.... The jury is a sort of ad hoc parliament convened from the citizenry at large to lend respectability and authority to the process. Judges are often prone to believe that they, alone, can bear the full weight of this legitimizing function. I doubt that they can. Any erosion of 293

294 citizen participation in the sanctioning system is in the long run likely, in my view, to result in a reduction in the moral authority that supports the process. Notes and Questions: 1. Some of the defendants wanted a jury trial. Others did not. What might be some of the practical arguments for and against trial by jury? 2. As the appellate majority states: Because preservation of the right to jury trial remains a constitutionally protected interest, denials of jury trial on grounds of complexity should be confined to suits in which due process clearly requires a nonjury trial. Did the majority define which suits would qualify? 3. The appellate court stated that the trial court did not actually rule on the applicability of the complexity exception to this case. Did the appellate court do so? 4. The Courts of Appeals are divided on whether Fifth Amendment Due Process trumps the Seventh Amendment right to jury trial. One wonders whether the Supreme Court will ever grant certiorari to resolve the complexity exception s constitutional viability. 5. You are now on the Supreme Court. You ve read (heard) the arguments. How will you vote? 294

295 ATLAS ROOFING COMPANY v. OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION United States Supreme Court 430 U.S. 442 (1977) Mr. Justice White delivered the [unanimous] opinion of the Court. a The issue in these cases is whether, consistent with the Seventh Amendment, Congress may create a new cause of action for civil penalties enforceable in an administrative agency where there is no jury trial. I After extensive investigation, Congress concluded, in 1970, that work-related deaths and injuries had become a drastic national problem. Finding the existing state statutory remedies as well as state common-law actions for negligence and wrongful death to be inadequate to protect the employee population from death and injury due to unsafe working conditions, Congress enacted the Occupational Safety and Health Act of 1970 (OSHA or Act). The Act created a new statutory duty to avoid maintaining unsafe or unhealthy working conditions, and empowers the Secretary of Labor to promulgate health and safety standards. Two new remedies were provided permitting the Federal Government, proceeding before an administrative agency, (1) to obtain abatement orders requiring employers to correct unsafe working conditions and (2) to impose civil penalties on any employer maintaining any unsafe working condition. Each remedy exists whether or not an employee is actually injured or killed as a result of the condition, and existing state statutory and common-law remedies for actual injury and death remain unaffected. Under the Act, inspectors, representing the Secretary of Labor, are authorized to conduct reasonable safety and health inspections. If a violation is discovered, the inspector, on behalf of the Secretary, issues a citation to the employer fixing a reasonable time for its abatement and, in his discretion, proposing a civil penalty. Such proposed penalties may range from nothing for de minimis and non-serious violations, to not more than $1,000 for serious violations, to a maximum of $10,000 for willful or repeated violations. If the employer wishes to contest the penalty or the abatement order, he may do so by notifying the Secretary of Labor within 15 days, in which event the abatement order is automatically stayed. An evidentiary hearing is then held before an administrative law judge b of the Occupational Safety and Health Review Commission. The Commission consists of three members, appointed for six-year terms, each of whom is qualified by reason of training, education or experience to adjudicate contested citations and assess penalties. At this hearing the burden is on the Secretary to establish the elements of the alleged violation and the propriety of his proposed abatement order and proposed penalty; and the judge is empowered to affirm, modify, or vacate any or all of these items, giving due consideration in his penalty assessment to the size of the business of the employer..., the gravity of the violation, the good faith of the employer, and the history of previous violations. The judge s decision becomes the a The term fact-finding was substituted for factfinding throughout this opinion. b Administrative law judge (ALJ) proceedings are generally described at 5 USC 556. Unlike Article III judges who are appointed (for life) by the President, and confirmed by the Senate ALJs serve at the pleasure of the administrative agency that employs them. Each is ostensibly quite familiar with the statutes and regulations of the government agency within which they serve. Article III judges typically do not have this special regulatoryrelated expertise in a regulated field. 295

296 Commission s final and appealable order unless within 30 days a Commissioner directs that it be reviewed by the full Commission. 3 If review is granted, the Commission s subsequent order directing abatement and the payment of any assessed penalty becomes final unless the employer timely petitions for judicial review in the appropriate court of appeals. The Secretary similarly may seek review of Commission orders, but, in either case, (t)he findings of the Commission with respect to questions of fact, if supported by substantial evidence on the record considered as a whole, shall be conclusive. If the employer fails to pay the assessed penalty, the Secretary may commence a collection action in a federal district court in which neither the fact of the violation nor the propriety of the penalty assessed may be retried. Thus, the penalty may be collected without the employer s ever being entitled to a jury determination of the facts constituting the violation. II Petitioners were separately cited by the Secretary and ordered immediately to abate pertinent hazards after inspections of their respective worksites conducted in 1972 revealed conditions that assertedly violated a mandatory occupational safety standard promulgated by the Secretary. In each case an employee s death had resulted. Petitioner Irey was cited for a willful violation of a safety standard requiring the sides of trenches in unstable or soft material to be shored,... sloped, or otherwise supported by means of sufficient strength to protect the employees working within them. The Secretary proposed a penalty of $7,500 for this violation and ordered the hazard abated immediately. Petitioner Atlas was cited for a serious violation which require[s] that roof opening covers be so installed as to prevent accidental displacement. The Secretary proposed a penalty of $600 for this violation and ordered the hazard abated immediately. Petitioners timely contested these citations and were afforded hearings before Administrative Law Judges of the Commission. The judges, and later the Commission, affirmed the findings of violations and accompanying abatement requirements and assessed petitioner Irey a reduced civil penalty of $5,000 and petitioner Atlas the civil penalty of $600 which the Secretary had proposed. Petitioners respectively thereupon sought judicial review in the Courts of Appeals for the Third and Fifth Circuits, challenging both the Commission s factual findings that violations had occurred and the constitutionality of the Act s enforcement procedures. A panel of the Court of Appeals for the Third Circuit affirmed the Commission s orders in the Irey case over petitioner s and a dissenter s contention that the failure to afford the employer a jury trial on the question whether he had violated OSHA was in violation of the Seventh Amendment to the United States Constitution which provides for jury trial in most civil suits at common law. On rehearing en banc, b the Court of Appeals for the Third Circuit, over four dissents, adhered to the original panel s decision. It concluded that this [Supreme] Court s rulings to date leave no doubt that the Seventh Amendment is not applicable, at least in the context of a case such as this one, and that Congress is free to provide an administrative enforcement scheme without the intervention of a jury at any stage. The Court of Appeals for the Fifth Circuit also affirmed the Commission s order in the Atlas case over a similar claim that the enforcement scheme violated the Seventh Amendment. It stated: 3 Petitioners make no challenge to the absence of mandatory review by the Commission of the administrative law judge s findings of fact. b En banc decisions are made by a larger group of justices than the usual three-judge appellate panel. This procedure is reserved for the most critical cases, usually determined on a case-by-case basis by the particular circuit. 296

297 Where adjudicative responsibility rests only in the administering agency, jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with the (agency s) role in the statutory scheme. 4 We granted the petitions for writs of certiorari limited to the important question whether the Seventh Amendment prevents Congress from assigning to an administrative agency, under these circumstances the task of adjudicating violations of OSHA. III The Seventh Amendment provides that (i)n Suits at common law, the right of trial by jury shall be preserved... The phrase Suits at common law has been construed to refer to cases tried prior to the adoption of the Seventh Amendment in courts of law in which jury trial was customary as distinguished from courts of equity or admiralty in which jury trial was not. Petitioners claim that a suit in a federal court by the Government for civil penalties for violation of a statute is a suit for a money judgment which is classically a suit at common law; and that the defendant therefore has a Seventh Amendment right to a jury determination of all issues of fact in such a case. Petitioners then claim that to permit Congress to assign the function of adjudicating the Government s rights to civil penalties for violation of the statute to a different forum an administrative agency in which no jury is available would be to permit Congress to deprive a defendant of his Seventh Amendment jury right. We disagree. Congress has often created new statutory obligations, provided for civil penalties for their violation, and committed exclusively to an administrative agency the function of deciding whether a violation has in fact occurred. These statutory schemes have been sustained by this Court, albeit often without express reference to the Seventh Amendment. Thus taxes may constitutionally be assessed and collected together with penalties, with the relevant facts in some instances being adjudicated only by an administrative agency. Neither of these cases expressly discussed the question whether the taxation scheme violated the Seventh Amendment. Similarly, Congress has entrusted to an administrative agency the task or adjudicating violations of the customs and immigration laws and assessing penalties based thereon. In [citation omitted], the Court stated: (T)he distinction is at once apparent between cases of private right and those which arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.... (T)he Congress, in exercising the powers confided to it may establish legislative courts... to serve as special tribunals to examine and determine various matters, arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it. But the mode of determining matters of this class is completely within congressional control. Congress may reserve to itself the power to decide, may delegate that power to executive officers, or may commit it to judicial tribunals.... Familiar illustrations of administrative of such matters are found in connection with the exercise of the congressional power as to interstate and foreign commerce, taxation, immigration, the public lands, public health, the facilities of the post office, pensions, and payments to veterans. 4 The other Courts of Appeals which have passed on this issue have uniformly (and without a dissent) agreed with these results [citing the 2d, 6th, 8th, and 10th Circuits]. 297

298 In [citation omitted], the Court squarely addressed the Seventh Amendment issue involved when Congress commits the fact-finding function under a new statute to an administrative tribunal. Under the National Labor Relations Act, Congress had committed to the National Labor Relations Board, in a proceeding brought by its litigating arm, the task of deciding whether an unfair labor practice had been committed and of ordering backpay where appropriate. The Court stated: The instant case is not a suit at common law or in the nature of such a suit. The proceeding is one unknown to the common law. It is a statutory proceeding. Reinstatement of the employee and payment for time lost are requirements (administratively) imposed for violation of the statute and are remedies appropriate to its enforcement. The contention under the Seventh Amendment is without merit. This passage has recently been explained in Curtis v. Loether, in which the Court held the Seventh Amendment applicable to private damages suits in federal courts brought under the housing discrimination provisions of the Civil Rights Act of The Court rejected the argument that the Seventh Amendment [is] inapplicable to any action based on a statutorily created right even if the action was brought before a tribunal which customarily utilizes a jury as its fact-finding arm. Instead, we upheld congressional power to entrust enforcement of statutory rights to an administrative process or specialized court of equity 11 free from the strictures of the Seventh Amendment. In sum, the cases discussed above stand clearly for the proposition that when Congress creates new statutory public rights, it may assign their adjudication to an administrative agency with which a jury trial would be incompatible, without violating the Seventh Amendment s injunction that jury trial is to be preserved in suits at common law. Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with special competence in the relevant field. This is the case even if the Seventh Amendment would have required a jury where the adjudication of those rights is assigned instead to a federal court of law instead of an administrative agency. [Next] is the assertion that the right to jury trial was never intended to depend on the identity of the forum to which Congress has chosen to submit a dispute; otherwise, it is said, Congress could utterly destroy the right to a jury trial by always providing for administrative rather than judicial resolution of the vast range of cases that now arise in the courts. The argument is well put, but it overstates the holdings of our prior cases and is in any event unpersuasive. Our prior cases support administrative fact-finding in only those situations 11 [T]his Court sustained the power of a bankruptcy court, exercising summary jurisdiction without a jury, to adjudicate the otherwise legal issues of voidable preferences... on the ground that a bankruptcy court, exercising its summary jurisdiction, was a specialized court of equity and constituted a forum before which a jury would be out of place and would go far to dismantle the statutory scheme. 298

299 involving public rights, e. g., where the Government is involved in its sovereign capacity under an otherwise valid statute creating enforceable public rights. Wholly private tort, contract, and property cases, as well as a vast range of other cases as well are not at all implicated. More to the point, it is apparent from the history of jury trial in civil matters that factfinding, which is the essential function of the jury in civil cases, was never the exclusive province of the jury under either the English or American legal systems at the time of the adoption of the Seventh Amendment; and the question whether a fact would be found by a jury turned to a considerable degree on the nature of the forum in which a litigant found himself. Critical fact-finding was performed without juries in suits in equity, and there were no juries in admiralty; nor were there juries in the military justice system. The jury was the fact-finding mode in most suits in the common-law courts, but it was not exclusively so: Condemnation was a suit at common law but constitutionally could be tried without a jury. (M)any civil as well as criminal proceedings at common law were without a jury. The question whether a particular case was to be tried in a court of equity without a jury or a court of law with a jury did not depend on whether the suit involved fact-finding or on the nature of the facts to be found. Factfinding could be a critical matter either at law or in equity. Rather, as a general rule, the decision turned on whether courts of law supplied a cause of action and an adequate remedy to the litigant. If it did, then the case would be tried in a court of law before a jury. Otherwise the case would be tried to a court of equity sitting without a jury. Thus, suits for damages for breach of contract, for example, were suits at common law with the issues of the making of the contract and its breach to be decided by a jury; but specific performance was a remedy unavailable in a court of law and where such relief was sought the case would be tried in a court of equity with the facts as to making and breach to be ascertained by the court. The Seventh Amendment was declaratory of the existing law, for it required only that jury trial in suits at common law was to be preserved. It thus did not purport to require a jury trial where none was required before. Moreover, it did not seek to change the fact-finding mode in equity or admiralty or to freeze equity jurisdiction as it existed in 1789, preventing it from developing new remedies where those available in courts of law were inadequate. The point is that the Seventh Amendment was never intended to establish the jury as the exclusive mechanism for fact-finding in civil cases. It took the existing legal order as it found it, and there is little or no basis for concluding that the Amendment should now be interpreted to provide an impenetrable barrier to administrative fact-finding under otherwise valid federal regulatory statutes. We cannot conclude that the Amendment rendered Congress powerless when it concluded that remedies available in courts of law were inadequate to cope with a problem within Congress power to regulate to create new public rights and remedies by statute and commit their enforcement, if it chose, to a tribunal other than a court of law such as an administrative agency in which facts are not found by juries. Indeed, as the Oceanic opinion said, the settled judicial construction was to the contrary from the beginning. Thus, history and our cases support the proposition that the right to a jury trial turns not solely on the nature of the issue to be resolved but also on the forum in which it is to be resolved. 16 Congress found the common-law and other existing remedies for work injuries 16 Petitioners claim that permitting Congress to control the jury-right question by picking the forum is to delegate to it, rather than this Court, the final power to decide Seventh Amendment issues. The claim is incorrect. The Seventh Amendment prevents Congress from depriving a litigant of a jury trial in a legal action before a tribunal customarily utilizing a jury as its fact-finding arm, and this Court has the final decision on the question whether a jury is required. 299

300 resulting from unsafe working conditions to be inadequate to protect the Nation s working men and women. It created a new cause of action, and remedies therefor, unknown to the common law, and placed their enforcement in a tribunal supplying speedy and expert resolutions of the issues involved. The Seventh Amendment is no bar to the creation of new rights or to their enforcement outside the regular courts of law. The judgments below are affirmed. It is so ordered. 1. As the Court states: Notes and Questions:.. Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with special competence in the relevant field.. The Seventh Amendment is no bar to the creation of new rights or to their enforcement outside the regular courts of law. Is Congress effectively chipping away at the Seventh Amendment, with each new regulatory regime involving administrative adjudication?.. 2. Did the drafters likely have the public-private rights distinction in mind at the time of the Seventh Amendment s addition to the Constitution? Did the Court invoke the public-private rights distinction to limit mission-creep from cases involving government agency adjudication, into the realm of private lawsuits not involving government agencies? If so, what rule can you articulate from Atlas? 300

301 BATSON v. KENTUCKY United States Supreme Court 476 U.S. 79 (1986) (partially overruled on other grounds) Justice Powell delivered the [7-2, with three concurring] opinion[s] of the Court. This case requires us to reexamine the evidentiary burden placed on a criminal defendant who claims that he has been denied equal protection through the State s use of peremptory challenges to exclude members of his race from the petit jury. I Petitioner, a black man, was indicted in Kentucky on charges of second-degree burglary and receipt of stolen goods. On the first day of trial, the judge conducted voir dire examination of the venire, excused certain jurors for cause, and permitted the parties to exercise peremptory challenges. 6 The prosecutor used his peremptory challenges to strike all four black persons on the venire, and a jury composed only of white persons was selected. Defense counsel moved to discharge the jury before it was sworn on the ground that the prosecutor s removal of the black veniremen violated petitioner s rights under the Sixth and Fourteenth Amendments to a jury drawn from a cross section of the community, and under the Fourteenth Amendment to equal protection of the laws. Without expressly ruling on the request for a hearing, the trial judge observed that the parties were entitled to use their peremptory challenges to strike anybody they want to. The judge then denied petitioner s motion, reasoning that the cross-section requirement applies only to selection of the venire [overall jury pool] and not to selection of the petit jury itself. The jury convicted petitioner on both counts. On appeal to the Supreme Court of Kentucky, petitioner pressed, among other claims, the argument concerning the prosecutor s use of peremptory challenges. The Supreme Court of Kentucky affirmed [i]n a single paragraph. We now reverse. II The basic principles prohibiting exclusion of persons from participation in jury service on account of their race are essentially the same for grand juries and for petit juries. More than a century ago, the [US Supreme] Court laid the foundation for the Court s unceasing efforts to eradicate racial discrimination in the procedures used to select the venire from which individual jurors are drawn. [T]he central concern of the recently ratified Fourteenth Amendment was to put an end to governmental discrimination on account of race... 6 The Kentucky Rules of Criminal Procedure authorize the trial court to permit counsel to conduct voir dire examination or to conduct the examination itself. After jurors have been excused for cause, the parties exercise their peremptory challenges simultaneously by striking names from a list of qualified jurors equal to the number to be seated plus the number of allowable peremptory challenges. Since the offense charged in this case was a felony the prosecutor was entitled to six peremptory challenges, and defense counsel to nine. 301

302 Exclusion of black citizens from service as jurors constitutes a primary example of the evil the Fourteenth Amendment was designed to cure. In holding that racial discrimination in jury selection offends the Equal Protection Clause, the Court recognized, however, that a defendant has no right to a petit [as opposed to grand] jury composed in whole or in part of persons of his own race. The Equal Protection Clause guarantees the defendant that the State will not exclude members of his race from the [larger pool, i.e.,] jury venire on account of race. B In Strauder, the Court [thus] invalidated a state statute that provided that only white men could serve as jurors. While decisions of this Court have been concerned largely with discrimination during selection of the venire, the principles announced there also forbid discrimination on account of race in selection of the petit jury. Accordingly, the component of the jury selection process at issue here, the State s privilege to strike individual jurors through peremptory challenges, is subject to the commands of the Equal Protection Clause. 12 Although a prosecutor ordinarily is entitled to exercise permitted peremptory challenges for any reason at all, as long as that reason is related to his view concerning the outcome of the case to be tried, the Equal Protection Clause forbids the prosecutor to challenge potential jurors solely on account of their race or on the assumption that black jurors as a group will be unable impartially to consider the State's case against a black defendant. III A While the Constitution does not confer a right to peremptory challenges, those challenges traditionally have been viewed as one means of assuring the selection of a qualified and unbiased jury. To preserve the peremptory nature of the prosecutor s challenge, the Court in Swain declined to scrutinize his actions in a particular case[,] by relying on a presumption that he properly exercised the State s challenges. A number of lower courts following the teaching of Swain reasoned that proof of repeated striking of blacks over a number of cases was necessary to establish a violation of the Equal Protection Clause. Since this interpretation of Swain has placed on defendants a crippling burden of proof, prosecutors peremptory challenges are now largely immune from constitutional scrutiny. For reasons that follow, we reject this evidentiary formulation as inconsistent with standards that have been developed since Swain for assessing a prima facie case under the Equal Protection Clause. 12 We express no views on whether the Constitution imposes any limit on the exercise of peremptory challenges by defense counsel. 302

303 C The standards for assessing a prima facie case in the context of discriminatory selection of the venire have been fully articulated since Swain [italics added]. These principles support our conclusion that a defendant may establish a prima facie case of purposeful discrimination in selection of the petit jury solely on evidence concerning the prosecutor s exercise of peremptory challenges at the defendant's trial [italics added]. To establish such a case, the defendant first must show that he is a member of a cognizable racial group. Second, the defendant is entitled to rely on the fact, as to which there can be no dispute, that peremptory challenges constitute a jury selection practice that permits those to discriminate who are of a mind to discriminate. Finally, the defendant must show that these facts and any other relevant circumstances raise an inference that the prosecutor used that practice to exclude the veniremen from the petit jury on account of their race. This combination of factors in the empaneling of the petit jury, as in the selection of the [larger jury pool] venire, raises the necessary inference of purposeful discrimination. In deciding whether the defendant has made the requisite showing, the trial court should consider all relevant circumstances. For example, a pattern of strikes against black jurors included in the particular venire might give rise to an inference of discrimination. Similarly, the prosecutor s questions and statements during voir dire examination and in exercising his challenges may support or refute an inference of discriminatory purpose. These examples are merely illustrative. We have confidence that trial judges, experienced in supervising voir dire, will be able to decide if the circumstances concerning the prosecutor s use of peremptory challenges creates a prima facie case of discrimination against black jurors. Once the defendant makes a prima facie showing, the burden shifts to the State to come forward with a neutral explanation for challenging black jurors. Though this requirement imposes a limitation in some cases on the full peremptory character of the historic challenge, we emphasize that the prosecutor s explanation need not rise to the level justifying exercise of a challenge for cause. But the prosecutor may not rebut the defendant s prima facie case of discrimination by stating merely that he challenged jurors of the defendant s race on the assumption or his intuitive judgment that they would be partial to the defendant because of their shared race. Just as the Equal Protection Clause forbids the States to exclude black persons from the venire on the assumption that blacks as a group are unqualified to serve as jurors, so it forbids the States to strike black veniremen on the assumption that they will be biased in a particular case simply because the defendant is black. The core guarantee of equal protection, ensuring citizens that their State will not discriminate on account of race, would be meaningless were we to approve the exclusion of jurors on the basis of such assumptions, which arise solely from the jurors race. Nor may the prosecutor rebut the defendant s case merely by denying that he had a discriminatory motive or affirm[ing] [his] good faith in making individual selections. If these general assertions were accepted as rebutting a defendant s prima facie case, the Equal Protection Clause would be but a vain and illusory requirement. The prosecutor therefore must 303

304 articulate a neutral explanation related to the particular case to be tried. 20 The trial court then will have the duty to determine if the defendant has established purposeful discrimination. 21 IV While we recognize, of course, that the peremptory challenge occupies an important position in our trial procedures, we do not agree that our decision today will undermine the contribution the challenge generally makes to the administration of justice. The reality of practice, amply reflected in many state- and federal-court opinions, shows that the challenge may be, and unfortunately at times has been, used to discriminate against black jurors. By requiring trial courts to be sensitive to the racially discriminatory use of peremptory challenges, our decision enforces the mandate of equal protection and furthers the ends of justice. 22 In view of the heterogeneous population of our Nation, public respect for our criminal justice system and the rule of law will be strengthened if we ensure that no citizen is disqualified from jury service because of his race. We decline, however, to formulate particular procedures to be followed upon a 24 defendant s timely objection to a prosecutor s challenges. V In this case, petitioner made a timely objection to the prosecutor s removal of all black persons on the venire. Because the trial court flatly rejected the objection without requiring the prosecutor to give an explanation for his action, we remand this case for further proceedings. If the trial court decides that the facts establish, prima facie, purposeful discrimination and the prosecutor does not come forward with a neutral explanation for his action, our precedents require that petitioner s conviction be reversed. It is so ordered. Justice Marshall, concurring. 20 The Court of Appeals for the Second Circuit observed that [t]here are any number of bases on which a prosecutor reasonably may believe that it is desirable to strike a juror who is not excusable for cause. As we explained in another context, however, the prosecutor must give a clear and reasonably specific explanation of his legitimate reasons for exercising the challenges. 21 In a recent Title VII sex discrimination case, we stated that a finding of intentional discrimination is a finding of fact entitled to appropriate deference by a reviewing court. Since the trial judge s findings in the context under consideration here largely will turn on evaluation of credibility, a reviewing court ordinarily should give those findings great deference. 22 While we respect the views expressed in Justice Marshall s concurring opinion concerning prosecutorial and judicial enforcement of our holding today, we do not share them. The standard we adopt under the Federal Constitution is designed to ensure that a State does not use peremptory challenges to strike any black juror because of his race. We have no reason to believe that prosecutors will not fulfill their duty to exercise their challenges only for legitimate purposes. Certainly, this Court may assume that trial judges, in supervising voir dire in light of our decision today, will be alert to identify a prima facie case of purposeful discrimination. Nor do we think that this historic trial practice, which long has served the selection of an impartial jury, should be abolished because of an apprehension that prosecutors and trial judges will not perform conscientiously their respective duties under the Constitution. 24 In light of the variety of jury selection practices followed in our state and federal trial courts, we make no attempt to instruct these courts how best to implement our holding today. For the same reason, we express no view on whether it is more appropriate in a particular case, upon a finding of discrimination against black jurors, for the trial court to discharge the [entire] venire and select a new jury from a panel not previously associated with the case, or to disallow the discriminatory challenges and resume selection with the improperly challenged jurors reinstated on the venire. 304

305 I join Justice Powell s eloquent opinion for the Court, which takes a historic step toward eliminating the shameful practice of racial discrimination in the selection of juries. The Court s opinion cogently explains the pernicious nature of the racially discriminatory use of peremptory challenges, and the repugnancy of such discrimination to the Equal Protection Clause. The Court s opinion also ably demonstrates the inadequacy of any burden of proof for racially discriminatory use of peremptories that requires that justice... sit supinely by and be flouted in case after case before a remedy is available. I nonetheless write separately to express my views. The decision today will not end the racial discrimination that peremptories inject into the juryselection process. That goal can be accomplished only by eliminating peremptory challenges entirely. a Justice Rehnquist, with whom The Chief Justice joins, dissenting. With these considerations in mind, we cannot hold that the striking of Negroes in a particular case is a denial of equal protection of the laws. In the quest for an impartial and qualified jury, Negro and white, Protestant and Catholic, are alike subject to being challenged without cause. To subject the prosecutor s challenge in any particular case to the demands and traditional standards of the Equal Protection Clause would entail a radical change in the nature and operation of the challenge. The challenge, pro tanto, would no longer be peremptory. I cannot subscribe to the Court s unprecedented use of the Equal Protection Clause to restrict the historic scope of the peremptory challenge, which has been described as a necessary part of trial by jury. In my view, there is simply nothing unequal about the State s using its peremptory challenges to strike blacks from the jury in cases involving black defendants, so long as such challenges are also used to exclude whites in cases involving white defendants, Hispanics in cases involving hispanic defendants, Asians in cases involving Asian defendants, and so on. This case-specific use of peremptory challenges by the State does not single out blacks, or members of any other race for that matter, for discriminatory treatment. Such use of peremptories is at best based upon seat-of-the-pants instincts, which are undoubtedly crudely stereotypical and may in many cases be hopelessly mistaken. But as long as they are applied across-the-board to jurors of all races and nationalities, I do not see and the Court most certainly has not explained how their use violates the Equal Protection Clause. Notes and Questions: 1. What general showing must be made to trigger a prima facie Batson violation? The specific steps are conveniently collated in Aleman v. Uribe, 723 F.3d 976, at (9th Cir. 2013) (authorities omitted): A Batson challenge has three steps. At the first step, the defendant must make a prima facie showing that the prosecutor exercised a peremptory challenge based on race. If the court finds that a prima facie case has been made, then step two requires the prosecutor to give a raceneutral reason for exercising the challenge. Under Batson s third step, the trial court must determine whether the defendant has carried his burden to prove that the prosecutor engaged in purposeful discrimination. To make this determination, the trial court must evaluate the a England, from which the United States drew its legal system, abolished peremptory challenges in

306 persuasiveness of the justification. Although the prosecutor's reasons for the strike must relate to the case to be tried, the court need not believe that the stated reason represents a sound strategic judgment to find the prosecutor s rationale persuasive; rather, it need be convinced only that the justification should be believed Does the Rehnquist dissenting opinion suggest that his dissent is racially motivated? Is this the right question to ask, as a practical method for analyzing his dissent? 3. Should the federal courts abolish peremptory challenges, as has England? Would doing so promote forum shopping? 306

307 PEOPLE v. GARCIA California Court of Appeal, Fourth District 77 Cal.App.4th 1269 (2000) Bedsworth, J. [delivered the unanimous opinion of the court]. Cano Garcia was charged with burglary. During his trial, it somehow became known that two members of the jury venire were lesbians. In fact, they both worked for the same gay and lesbian foundation. After the prosecution excused both women, defense counsel made a Wheeler motion. 1 There was a discussion at the bench, and the trial court denied the motion, explaining, Well, I am going to rule that sexual preference is not a cognizable group... I don t think that your sexual preference specifically relates to them sharing a common perspective or common social or psychological outlook on human events. [ ] Lesbians or gay men vary in their social and psychological outlook on human events and I don't think fit into this protection. So I'm going to deny your motion. This is Garcia s sole assignment of error. In 1986, the United States Supreme Court decided Batson v. Kentucky, holding that the equal protection clause of the United States Constitution prohibits jury selection based upon racial stereotyping. Eight years later, it decided J. E. B. v. Alabama, extending the rationale of Batson to gender discrimination. To date, those are the only two classifications the Supreme Court has recognized as prohibited bases for exclusion of jurors under the equal protection clause. It has not yet dealt with an equal protection challenge which did not involve the strict or heightened scrutiny applied to race and gender-based classifications of all sorts, so it has not yet been established whether such scrutiny [sexual orientation] is a sine qua non of Batson error or merely a common characteristic. Other courts have struggled with classifications as diverse as religion, age, socioeconomic status, union membership and obesity with varying degrees of success. But in this case we have reached territory which, 13 years after Batson and more than two decades after its California predecessor (People v. Wheeler), is still terra incognita: sexual orientation. 2 The terrain before us is as stark as a moonscape and without discernible footprints: Our only issue is whether lesbians and presumably gay males constitute a cognizable class whose exclusion resulted in a jury that failed to represent a cross section of the community and thereby violated Garcia s constitutional rights. For reasons we explain here, we are convinced they do. We are convinced they must. But we recognize the fact the court s ruling obviated the prosecution s defense of its peremptories, so we remand the case for a determination by the trial court whether the prosecution s challenges had valid constitutional bases. Federal authority is sparse on this issue. But we find nothing [fully] discussing the issue in all of federal authority. Which is not surprising. This is not an issue which comes up in the course of ordinary or even extraordinary voir dire. Sexual orientation is not something likely to be volunteered, either by heterosexuals or homosexuals, and it is even less likely to be the subject of inquiry by court or 1 People v. Wheeler (1978) 22 Cal.3d. 258 prohibits exclusion of jurors based upon race, ethnicity, gender or similar group bias. 2 Trial courts confronted with the question of whether jurors may be asked their sexual orientations during voir dire have not responded consistently. Moreover, no appellate court has ruled on this question or on the constitutional treatment of challenges for cause or peremptory challenges to exclude prospective jurors based on sexual orientation. These issues remain unresolved at a point when an increasing number of cases involving sexual orientation reach juries, and the number of such cases will continue to grow. 307

308 counsel. We regret that our record in this case does not clearly reveal how it came up here. But it has come up, and it is our obligation to determine its import in this case of first impression. 3 [T]he [California Supreme] court said, We have reviewed this line of United States Supreme Court opinions in some detail because we fully agree with the views there expressed as to the importance of the representative cross-section rule, particularly in protecting the constitutional right to an impartial jury. California courts have since struggled mightily with this constitutional promise, and our Supreme Court has provided sufficient analytical framework to enable us to say with some certainty that exclusion of lesbians and gay men on the basis of group bias violates the California Constitution. The pivot of our analysis is the definition of the term, cognizable group. Two requirements must thus be met in order to qualify an asserted group as cognizable for purposes of the representative cross-section rule. First, its members must share a common perspective arising from their life experience in the group, i.e., a perspective gained precisely because they are members of that group. It is not enough to find a characteristic possessed by some persons in the community but not by others; the characteristic must also impart to its possessors a common social or psychological outlook on human events. Lesbians and gay men qualify under this standard. It cannot seriously be argued in this era of don t ask; don t tell a that homosexuals do not have a common perspective a common social or psychological outlook on human events based upon their membership in that community. They share a history of persecution comparable to that of Blacks and women. While there is room to argue about degree, based upon their number and the relative indiscernibility of their membership in the group, it is just that: an argument about degree. It is a matter of quantity, not quality. This is not to say that all homosexuals see the world alike. The Attorney General here derides the cognizability of this class with the rhetorical question, [W]hat common perspective is, or was, shared by Rep. Jim Kolbe (R-Ariz.), RuPaul, poet William Alexander Percy, Truman Capote, and Ellen DeGeneres? He confuses common perspective with common personality. Granted, the five persons he mentions are people of diverse backgrounds and life experiences. But they certainly share the common perspective of having spent their lives in a sexual minority, either exposed to or fearful of persecution and discrimination. That perspective deserves representation in the jury venire, and people who share that perspective deserve to bear their share of the burdens and benefits of citizenship, including jury service. The Attorney General also insists there is no evidence that gays or lesbians have a common social or psychological outlook on human events. But this misperceives the nature of the term common perspective. Commonality of perspective does not result in identity of opinion. That is the whole reason exclusion based upon group bias is anathema. It stereotypes. It assumes all people with the same life experience will, given a set of facts, reach the same result. A common perspective does no such thing. It affects how life experiences are seen, not how they are evaluated. And inclusion of a cognizable group in the jury venire does not assure 3 In our recent decision in People v. Wheeler we held that in state criminal prosecutions the right to trial by a jury drawn from a representative cross-section of the community is guaranteed equally and independently by the Sixth Amendment to the federal Constitution and by article I, section 16, of the California Constitution, and that such right is violated when a cognizable group within the community is systematically excluded from jury service. a When Garcia was decided (2000), this phrase was generally attributes to this then-existing military policy. 308

309 any particular position; it assures only that the facts will be viewed from a variety of angles. It assures that as many different life views as possible will be represented in the important decisions of the judicial process. Put more elegantly, [T]he goal of the cross-section rule is to enhance the likelihood that the jury will be representative of significant community attitudes, not of groups per se. The Attorney General misapprehends the nature of this critical consideration in arguing that there is no evidence of a gay or lesbian common psychological outlook. The Attorney General contends, however, that [the] group [does not qualify] because it is heterogeneous in all other respects: its membership cuts across racial, religious, sexual, economic, social, and occupational lines. The argument is fallacious, and proves too much: it could equally well be applied to... women [and] blacks and the daily wage earners excluded in Thiel v. Southern Pacific Co. In each case the group was likewise heterogeneous in all respects save one but that one, as here, imparted to its members a shared viewpoint that could not be excluded from the master jury list without impairing its representativeness. Indeed, the Attorney General s contention has already been refuted in Wheeler: in suggesting ways in which a party may prove that prospective jurors are being removed because of their group association, we said it may be shown that such jurors share only this one characteristic their membership in the group and that in all other respects they are as heterogeneous as the community as a whole. The argument failed to convince the Supreme Court 20 years ago [in Wheeler], and it fails to convince us now. There is a second prong to the test for cognizability : The party seeking to prove a violation of the representative cross-section rule must also show that no other members of the community are capable of adequately representing the perspective of the group assertedly excluded. This is so because the goal of the cross-section rule is to enhance the likelihood that the jury will be representative of significant community attitudes, not of groups per se. When a cognizable group is defined too narrowly, it may duplicate another group in the community with a similar experience and viewpoint. The question, then, is whether another group or groups in the community could adequately represent the views of homosexuals. We don t see how. But we cannot think of anyone who shares the perspective of the homosexual community. Outside of racial and religious minorities, we can think of no group which has suffered such pernicious and sustained hostility and such immediate and severe opprobrium as homosexuals. 7 Certainly the Attorney General has suggested no one, and our search of case law and other literature has turned up no intimation of a group with their perspective. Both the defendant and the community are entitled to have that perspective represented in the jury venire. We emphasize the fact that the community has an interest even greater than albeit not as immediate as the defendant s. While injustice to any individual is intolerable under our system of justice, and denial of the rights of a cognizable group is unconstitutional, in the long 7 A November 1998 poll by the National Law Journal found that 17.1 percent of prospective jurors admitted to a bias which would make it impossible for them to be fair and impartial in a case in which one of the parties was homosexual. By comparison, only 4.8 percent did not think they could be fair to African-Americans, and 5 percent did not think they could be fair to women. (Nat. L.J. (Nov. 2, 1998) p. A1.) 309

310 run, the greatest threat of failure to guarantee the right of gays and lesbians to serve on juries is to the commonweal. The diverse and representative character of the jury must be maintained partly as assurance of a diffused impartiality and partly because sharing in the administration of justice is a phase of civic responsibility. If we deny that civic responsibility to any group, if we deny them the privilege of participating equally... in the administration of justice, we [also] deprive them of part of their membership in the community, and while that has an immediate impact on the excluded group, it must inevitably damage the community as well. Jury service is an important educational experience for the citizen. It encourages the development of civic responsibility as well as an interest in, and respect for, the law and its enforcement. It is not just the excluded group, but the entire community that suffers when these values are not fostered. The Attorney General complains that it is impractical to recognize gays and lesbians as a cognizable group. As he points out, sexual orientation is not necessarily patent, nor a public matter a prospective juror should be required to declare. We acknowledge both those facts. But neither affects our decision. Race and ethnicity are not necessarily patent, either. While gross estimations of race can be made on the basis of physical appearances, such judgments are entirely subjective and often erroneous. And ethnicity has become virtually impossible to judge without inquiry. Our jury venires daily include Cubans named O Rourke, Indonesians named Opdyke, and Anglos named Gomes. Every trial judge has encountered red-haired, freckle-faced Cardenases and Hispaniclooking Maguires. The country is a melting pot and proud of it and a large part of the great folly of stereotyping is that nowhere on earth have race and ethnicity become harder to determine than they are here. Yet the propriety of those criteria for cognizable groups is unassailable. Sexual orientation will present no greater difficulty. Nor do we perceive a great problem lurking with regard to inquiring of jurors about their sexual orientation. It simply should not be done. The Attorney General is right in this regard: No one should be outed in order to take part in the civic enterprise which is jury duty. The whole point is that no one can be excluded because of sexual orientation. That being the case, no one should be allowed to inquire about it. If it comes out somehow, as it did here, the parties will doubtless factor it into their jury selection decisions, just as they factor in occupation, education, body language, and whether the juror resembles their stupid Uncle Cletus. But there is no reason to allow inquiry about it. We are also aware of the argument that gays and lesbians may not be a big enough group to be cognizable. Our record does not reflect the size of the homosexual community. 8 It is simply not possible to read that as a requirement of any particular threshold size. [G]ays and lesbians seem to meet the criteria for a cognizable group. 10 We see no reason in the objections raised by the Attorney General not to acknowledge that status, and nothing in law or logic which would enable us to come to a different conclusion. That group cannot be discriminated against in jury selection. For such discrimination would send an intolerable message, one which the United States Supreme Court has eloquently described: The message it sends to all those in the courtroom, and all those who may later learn of the 8 Most reliable estimates seem to arrive at a number between 1-10 percent of the population. (Compare J. of Human Sexuality (Rekers ed. 1996) pp [1-2 percent], Laumann et al., The Social Organization of Sexuality: Sexual Practices in the United States (Univ. Chi. Press 1994) [1.5 percent women; 2.8 percent men], with the dated, but still often quoted Kinsey et al. study (1948) [10 percent].) 10 Certainly they have been found entitled to protection from group bias in other contexts. The decisions hold the Unruh [Civil Rights] Act [(Civ. Code, 51)] forbids discrimination against individuals on the basis of sexual orientation. 310

311 discriminatory act, is that certain individuals, for no reason other than [sexual orientation], are presumed unqualified by state actors to decide important questions upon which reasonable persons could disagree. We will not send that message..... But it is also possible that the issue which arose in voir dire was so unusual that the parties will be able to conduct a hearing in which the court can appraise the reasons offered by the prosecutor for excusing the two jurors and make a decision whether Garcia s constitutional rights were violated, based upon the principles we have discussed above. The matter is therefore remanded to allow the trial court to conduct a hearing to determine the validity of the prosecutor s peremptory challenges to the two prospective jurors. If the trial court determines the prosecutor s reasons for excusing the two jurors were not constitutionally valid, and grants defendant s Wheeler/Batson motion, reversal and retrial is required. If the trial court determines the prosecutor s reasons for excusing the two jurors were constitutionally valid, and denies defendant s Wheeler/Batson motion, defendant s conviction is ordered reinstated. Notes and Questions: 1. As the court notes: The [California] Attorney General here derides the cognizability of this class with the rhetorical question, [W]hat common perspective is, or was, shared [by its members? What is that distinctive perspective? 2. See note 7. Has those numbers likely changed, now that the US Supreme Court has decided the Defense of Marriage Act and Prop. 8 cases? 3. As the court states: No one should be outed in order to take part in the civic enterprise which is jury duty. The whole point is that no one can be excluded because of sexual orientation. You are now conducting voir dire. How do you apply this theme? You obviously cannot ask: Will everyone who s gay please raise your hands? What about a juror questionnaire in relevant cases providing the opportunity for all jurors to privately respond? Would that, as well, violate Garcia? 3. Should the US Supreme Court add sexual orientation to race and gender, so as to subject all three to strict scrutiny for purposes of voir dire? 311

312 GALLOWAY v. U.S. United States Supreme Court 319 U.S. 372 (1943) Mr. Justice Rutledge delivered the [6-3] opinion of the Court. Petitioner seeks benefits for total and permanent disability by reason of insanity he claims existed May 31, On that day his policy of yearly renewable term insurance lapsed for nonpayment of premium. 1 The suit was filed June 15, At the close of all the evidence the District Court granted the Government s motion for a directed verdict. Judgment was entered accordingly. The Circuit Court of Appeals affirmed. Both courts held the evidence legally insufficient to sustain a verdict for petitioner. The constitutional argument, as petitioner has made it, does not challenge generally the power of federal courts to withhold or withdraw from the jury cases in which the claimant puts forward insufficient evidence to support a verdict. The contention is merely that his case as made was substantial, the courts decisions to the contrary were wrong, and therefore their effect has been to deprive him of a jury trial. Upon the record and the issues as the parties have made them, the only question is whether the evidence was sufficient to sustain a verdict for petitioner. On that basis, we think the judgments must be affirmed. I. Certain facts are undisputed. Petitioner [commenced his] enlistment in the Army November 1, He became a cook in a machine gun battalion. His unit arrived in France in April, He served actively until September 24. From then to the following January he was in a hospital with influenza. He then returned to active duty. He came back to the United States, and received honorable discharge April 29, He enlisted in the Navy January 15, 1920, and was discharged for bad conduct in July. The following December he again enlisted in the Army and served until May, 1922, when he deserted. Thereafter he was carried on the Army records as a deserter. In 1930 began a series of medical examinations by Veterans Bureau physicians. On May 19 that year his condition was diagnosed as Moron, low grade; observation, dementia praecox, simple type. In November, 1931, further examination gave the diagnosis, Psychosis with other diseases or conditions (organic disease of the central nervous system-type undetermined). In July, 1934, still another examination was made, with diagnosis: Psychosis manic and depressive insanity incompetent; hypertension, moderate; otitis media, chronic, left; varicose veins left, mild; abscessed teeth roots; myocarditis, mild.. Petitioner s wife, the nominal party in this suit, was appointed guardian of his person and estate in February, Claim for insurance benefits was made in June, 1934, and was finally denied by the Board of Veterans Appeals in January, This suit followed two and a half years later. 1 The contract was issued pursuant to the War Risk Insurance Act and insured against death or total permanent disability. Pursuant to statutory authority, promulgated March 9, 1918, provided: Any impairment of mind or body which renders it impossible for the disabled person to follow continuously any substantially gainful occupation shall be deemed to be total disability. Total disability shall be deemed to be permanent whenever it is founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it. 3 [T]here is no contention petitioner s behavior was abnormal before he arrived in France in April,

313 Petitioner concededly is now totally and permanently disabled by reason of insanity and has been for some time prior to institution of this suit. It is conceded also that he was sound in mind and body until he arrived in France in April, The theory of his case is that the strain of active service abroad brought on an immediate change, which was the beginning of a mental breakdown that has grown worse continuously through all the later years. Essential in this is the view it had become a total and permanent disability not later than May 31, 1919 [the policy lapse date]. The evidence to support this theory falls naturally into three periods, namely, that prior to 1923; the interval from then to 1930; and that following It consists in proof of incidents occurring in France to show the beginnings of change; testimony of changed appearance and behavior in the years immediately following petitioner s return to the United States as compared with those prior to his departure; the medical evidence of insanity accumulated in the years following 1930; and finally the evidence of a physician, given largely as medical opinion, which seeks to tie all the other evidence together as foundation for the conclusion, expressed as of 1941, that petitioner s disability was total and permanent as of a time not later than May of Documentary exhibits included military, naval and Veterans Bureau records. Testimony was given by deposition or at the trial chiefly by five witnesses. One, O Neill, was a fellow worker and friend from boyhood; two, Wells and Tanikawa, served with petitioner overseas; Lt. Col. Albert K. Mathews, who was an Army chaplain, observed him or another person of the same name at an Army hospital in California during early 1920; and Dr. Wilder, a physician, examined him shortly before the trial and supplied the only expert testimony in his behalf. The petitioner also put into evidence the depositions of Commander Platt and Lt. Col. James E. Matthews, his superior officers in the Navy and the Army, respectively, during What happened in France during is shown chiefly by Wells and Tanikawa. Wells testified [p]etitioner s physical appearance was good, he carried on his duties as a cook all right, and the witness did not see him after June 1. Tanikawa, Hawaiian-born citizen, served with petitioner from the latter s enlistment until September, 1918, when Galloway was hospitalized, although the witness thought they had fought together and petitioner was acting queer at the Battle of the Argonne in October. At Camp Greene, North Carolina, petitioner was just a regular soldier, very normal, pretty neat. After reaching France he was getting nervous, kind of irritable, always picking a fight with other soldier[s]. Tanikawa described another incident in June when we were on the Marne, the Germans were on the other side and we were on this side. It was a new front, without trenches. The witness and petitioner were on guard duty with others. Tanikawa understood the Germans were getting ready for a big drive. One night he (petitioner) screamed. He said, The Germans are coming and we all gagged him. There was no shooting, the Germans were not coming, and there was nothing to lead the witness to believe they were. Petitioner was court martialed for the matter, but Tanikawa did not know what they did with him. He did not talk with Galloway that night, because he was out of his mind and appeared insane. Tanikawa did not know when petitioner left the battalion or what happened to him after[wards]. The witness next saw Galloway in 1936, at a disabled veterans post meeting in Sacramento, California. Petitioner then looked to me like he wasn t all there. Insane. About the same as compared to the way he acted in France, particularly when they gagged him. O Neill was born and raised with petitioner, worked with him as a longshoreman, and knew him from when he come out of the army [1919] for seven years, I would say five or six 313

314 years. When petitioner returned [from the Army] in April or May, 1919, he was a wreck compared to what he was when he went away. The fellow s mind was evidently unbalanced. Symptoms specified were withdrawing to himself; crying spells; alternate periods of normal behavior and nonsensical talk; expression of fears that good friends wanted to beat him up ; spitting blood and remarking about it in vulgar terms. Once petitioner said, G-d-it, I must be a Doctor Jekyll and Mr. Hyde. O Neill testified these symptoms and this condition continued practically the same for about five years. In his opinion petitioner was competent at times and others was incompetent. The intervals might be a couple of days, a couple of months. In his normal periods Galloway would be his old self absolutely O.K. O Neill maintained he saw petitioner right on from that (1920) at times. When he was pinned down by cross-examination, the effect of his testimony was that he recalled petitioner clearly in 1919 because there was such a vast contrast in the man, but for later years he could give little or no definite information. The excerpt from the testimony set forth in the margin shows this contrast. O Neill recalled one specific occasion after 1919 when petitioner returned to Philadelphia, around 1920 or 1921, but I couldn't be sure, to testify in a criminal proceeding. He also said, After he was away for five or six years, he came back to Philadelphia, and he was still just evidently all right, and then he would be off. Lt. Col. (Chaplain) Mathews said he observed a Private Joseph Galloway, who was a prisoner for desertion and a patient in the mental ward at Fort MacArthur Station Hospital, California, during a six weeks period early in The chaplain s testimony gives strong evidence the man he observed was insane. However, there is a fatal weakness in this evidence. Subsequently he admitted that he might have been mistaken in believing that the patientprisoner was petitioner. The record is barren of other evidence, whether by the hospital s or the Army s records or otherwise, to show that petitioner was either patient or prisoner at Fort MacArthur in 1920 or at any other time. Lt. Col. James E. Matthews (not the chaplain) was Galloway s commanding officer from early 1921 to the summer of that year, when petitioner was transferred with other soldiers to another unit. At times he was one of the very best soldiers I had, at others undependable. He was physically sound, able to do his work, perform close order drill, etc., very well. He had alternate periods of gaiety and depression, talked incoherently at times, gave the impression he would fight readily, but did not resent orders and seemed to get along well with other soldiers. The officer attributed petitioner s behavior to alcohol and narcotics and it occurred to him at no time to question his sanity. Dr. Wilder was the key witness. He disclaimed specializing in mental disease, but qualified as having given it special attention. He first saw petitioner shortly before the [mid- 1938] trial, examined him several times. He concluded petitioner s ailment is a schizophrenic branch or form of praecox. Dr. Wilder concluded petitioner was born with an inherent instability, though he remained normal until he went to France; began there to be subjected to the strain of military life, then he began to go to pieces. In May, 1919, petitioner was still suffering from the acuteness of the breakdown. He is going down hill still, but the thing began with the breakdown. Petitioner was definitely insane, yes, sir, in 1920 and has been insane at all times, at least since July, 1918, the time of this episode on the Marne. At no time after he went into the war do we find him able to hold any kind of a job. He broke right down. He 314

315 explained petitioner s enlistment in the Navy and later in the Army by saying, It would have been no trick at all for a man who was reasonably conforming to get into the Service. However, the witness knew nothing whatever except his getting married about petitioner s activities between 1925 and Dr. Wilder at first regarded knowledge concerning what petitioner was doing between 1925 and 1930 as not essential. We have a continuing disease, quite obviously beginning during his military service, and quite obviously continuing in Counsel for the government interrupted to inquire, Well, if he was continuously employed for eight hours a day from 1925 to 1930 would that have any bearing? The witness replied, It would have a great deal. Upon further questioning, however, he reverted to his first position, stating it would not be necessary or helpful for him to know what petitioner was doing from 1925 to II. This, we think, is the crux of the case. His burden was to prove total and permanent disability as of a date not later than May 31, He has undertaken to do this by showing incipience of mental disability shortly before that time and its continuance and progression throughout the succeeding years. He has clearly established incidence of total and permanent disability as of some period prior to 1938, when he began this suit. 9 For our purposes this may be taken as medically established by the Veterans Bureau examination and diagnosis of July, But if the record is taken to show that some form of mental disability existed in 1930, which later became total and permanent, petitioner s problem remains to demonstrate by more than speculative inference that this condition itself began on or before May 31, 1919 and continuously existed or progressed through the intervening years to To show origin before the crucial date, he gives evidence of two abnormal incidents occurring while he was in France, one creating the disturbance before he came near the fighting front, the other yelling that the Germans were coming when he was on guard duty at the Marne. There is no other evidence of abnormal behavior during his entire service of more than a year abroad. That he was court martialed for these sporadic acts and bound and gagged for one does not prove he was insane or had then a general breakdown. To these two incidents petitioner adds the testimony of O Neill that he looked and acted like a wreck, compared with his former self, when he returned from France about a month before the crucial date, and O Neill s vague recollections that this condition continued through the next two, three, four or five years. O Neill s testimony does no more than show that petitioner was subject to alternating periods of gaiety and depression for some indefinite period after his return, extending perhaps as late as But because of its vagueness as to time, dates, frequency of opportunity for 9 He has not established a fixed date at which contemporaneous medical examination, both physical and mental, establishes totality and permanence prior to Dr. Wilder s examinations in The previous examinations of 1930 and 1931 without more do not prove existence of total and permanent disability; on the contrary, they go far toward showing it could not be established then medically. The 1930 diagnosis shows only that the examiner regarded petitioner as a moron of low grade, and recommended he be observed for simple dementia praecox. The 1931 examination is even less conclusive in one respect, namely, that psychosis takes the place of moronic status. However, this examination first indicates existence of organic nervous disease. Not until the 1934 diagnosis is there one which might be regarded as showing possible total and permanent disability by medical evidence contemporaneous with the fact italics added]. 315

316 observation, and specific incident, O Neill s testimony concerning the period from 1922 to 1925 is hardly more than speculative. There is also the testimony of Commander Platt and Lt. Col. James E. Matthews as to his service in the Navy and the Army, respectively, during Neither thought petitioner was insane or that his conduct indicated insanity. Then follows a chasm of eight years. The only evidence we have concerning this period is the fact that petitioner married his present guardian at some time within it, an act from which in the legal sense no inference of insanity can be drawn. This period was eight years of continuous insanity, according to the inference petitioner would be [arguably] allowed to have drawn. If so, he should have no need of inference. Insanity so long and continuously sustained does not hide itself from the eyes and ears of witnesses. 13 Inference is capable of bridging many gaps. But not, in these circumstances, one so wide and deep as this. Knowledge of petitioner s activities and behavior from 1922 or 1925 to 1930 was peculiarly within his ken and that of his wife, who has litigated this cause in his and presumably, though indirectly, in her own behalf. His was the burden to show continuous disability. What he did in this time, or did not do, was vital to his case. Apart from the mere fact of his marriage, the record is blank for five years and almost blank for eight. For all that appears, he may have worked full time and continuously for five and perhaps for eight, with only a possible single interruption. No favorable inference can be drawn from the omission. It was not one of oversight or inability to secure proof. That is shown by the thoroughness with which the record was prepared for all other periods, before and after this one, and by the fact petitioner s wife, though she married him during the period and was available, did not testify. The only reasonable conclusion is that petitioner, or those who acted for him, deliberately chose, for reasons no doubt considered sufficient (and which we do not criticize, since such matters including tactical ones, are for the judgment of counsel) to present no evidence or perhaps to withhold evidence readily available concerning this long interval, and to trust to the genius of expert medical inference and judicial laxity to bridge this canyon. No case has been cited and none has been found in which inference, however expert, has been permitted to make so broad a leap and take the place of evidence which, according to all reason, must have been at hand. To allow this would permit the substitution of inference, tenuous at best, not merely for evidence absent because impossible or difficult to secure, but for evidence disclosed to be available and not produced. This would substitute speculation for proof. 13 The only attempt to explain the absence of testimony concerning the period from 1922 to 1930 is made by counsel in the reply brief: The insured, it will be observed, was never apprehended after his desertion from the Army in It is only reasonable that a person with the status of a deserter at large, whose mind was in the condition of that of this insured, would absent himself from those with whom he would usually associate because of fear of apprehension and punishment. The explanation is obviously untenable. It ignores the one fact proved with relation to the period, that petitioner was married during it. His wife was obviously available as a witness. 316

317 Furthermore, the inference would be more plausible perhaps if the evidence of insanity as of May, 1919, were stronger than it is, such for instance as Chaplain Mathews' testimony would have furnished if it could be taken as applying to petitioner. But, on this record, the evidence of insanity as of that time is thin at best, if it can be regarded as at all more than speculative. Beyond this [speculation], there is nothing to show totality or permanence. But eight years are too many to permit it to skip, when the bridgeheads (if the figure may be changed) at each end are no stronger than they are here. Notes and Questions: 1. What did Galloway have to prove, to win his case? (If the case context were a summary judgment hearing, the relevant question would be What is the disputed material fact? ) 2. What role did the various witnesses play in resolving that issue? In a key passage, the Court restates Dr. Wilder s conclusion that Galloway remained normal until he went to France; began there to be subjected to the strain of military life, then he began to go to pieces. In May, 1919, petitioner was still suffering from the acuteness of the breakdown. Petitioner was definitely insane, yes, sir, in 1920 and has been insane at all times, at least since July, 1918, the time of this episode on the Marne. Why did this testimony not resolve the issue? 3. One can rely on facts established at trial to avoid a directed verdict (now a pre-verdict FRCP 50(a) Motion for Judgment in federal court). Other than documents, not at issue in Galloway, one can also rely on a related matter to establish proof of a claim or defense. What was it that plaintiff Galloway wanted to use in support of his position that he could withstand a directed verdict attack on his trial evidence? 4. One potential witness was noticeably absent from the proceedings. Is it possible that gap in Galloway s case played a pivotal role in the decision to grant (and affirm) a directed verdict against Mr. Galloway? 5. The remainder of Galloway addresses plaintiff s argument that the Seventh Amendment right to jury trial prohibits the directed verdict motion (now FRCP 50 Motion for Judgment). The predecessors of today s pre-verdict and post-verdict Motions for Judgment as well as the Motion for New Trial existed at the time of passage of the Seventh Amendment. Note its concluding savings clause. These motions actually exist to aid the right to jury, especially in cases where plaintiffs like Galloway fail to produce enough trial evidence to make the case jury-worthy. 317

318 DENMAN v. SPAIN Supreme Court of Mississippi 135 So.2d 195 (1961) Lee, Presiding Justice. Betty Denman, a minor, by her mother Joyce H. Denman, sued Mrs. Phina Ross Spain, executrix of the estate of Joseph A. Ross, deceased, to recover damages for personal injuries sustained by her, allegedly resulting from the negligence of the decedent in the operation of an automobile. The issue was submitted to a jury on the evidence for the plaintiff no evidence being offered for the defendant and there was a verdict and judgment for the plaintiff in the sum of $5,000. However, on motion of the defendant, a judgment non obstante veredicto, that is, notwithstanding the verdict, was sustained and entered. From that action, the plaintiff has appealed. a The appellant contends that the evidence offered by her, together with the reasonable inferences therefrom, was sufficient to make an issue for the jury as to whether the alleged negligence of the deceased driver, Ross, proximately caused or contributed to the collision and the consequent damage; and that it was error to set aside the verdict of the jury [whereby the court instead] entered the judgment for the defendant, notwithstanding that verdict. Hence, she says that such judgment should be reversed, and that the verdict and judgment of the jury should be reinstated. Sunday, March 23, 1958, was a rainy, foggy day. About six o clock that afternoon, at dusk, Mrs. Eva B. Denman, accompanied by her granddaughter, Betty, the plaintiff, was driving her Ford car southward on U. S. Highway 49E. At that time, Joseph A. Ross was driving his Plymouth car northward on said highway. [T]he cars collided. Mrs. Denman and Ross were killed. Betty, nearly seven years of age at the time, and Mrs. Haining [a Ross passenger] were injured. Neither had any recollection of what had happened at the time of the collision. Betty, lying in water on her back in a ditch on the east side of the road, cried out and was rescued by some unknown person. a Betty filed an earlier suit in Mississippi against Mack Denman, administrator of the estate of Mrs. Eva B. Denman [Betty s grandmother], deceased; but, at the close of Betty s evidence, the court sustained a directed verdict for the defendant. On appeal the judgment was affirmed by this Court on November 6,