San Joaquin College of Law
Civil Procedure–Interim Exam Dec 2002 / Cartier
Time: 2 hours 20 minutes
Question 1:
Polly Purchaser (“Polly”), a resident of Pennsylvania, ordered checks from Tri-State Printers, Inc. (“Tri-State”), a Delaware corporation with its principal place of business in Pennsylvania. Tri-State sent Polly checks with the wrong pre-printed account number. Polly used a misprinted check to make a $30.00 purchase at her local Depot Store (“Depot”) and the check bounced. Polly immediately contacted Tri-State. Polly received new checks and a letter from Tri-State explaining the printing error. Polly took the letter to her local Depot store and offered to write a replacement check. Depot refused a replacement check and insisted that Polly pay $30.00, the amount of the bounced check, plus a $20.00 bounced check charge, in cash or by money order. Polly obtained a money order in the appropriate amount and delivered it to Depot. Three months later, Polly received a criminal summons from Depot accusing her of writing a bad check. The criminal hearing was held in January. Polly was acquitted. Polly filed a civil action in Pennsylvania’s Court of Common Pleas alleging a state law claim for malicious prosecution against Depot, a Delaware corporation with its principal place of business in Georgia. Polly claims special damages of approximately $2,000, including the bad check charge, attorneys fees to defend the criminal action, the cost of the bond posted to avoid incarceration, and loss of wages. She also claims damages for harm to reputation, mental anguish, and humiliation, and punitive damages for a total “in excess of $50,000," an amount that satisfies the jurisdictional requirements for the Court of Common Pleas. Pennsylvania does not impose any statutory limit on the amount of punitive damages that may be awarded in appropriate cases. Upon being properly served with a copy of the summons and complaint, Depot removed the action to the United States District Court for the Western District of Pennsylvania. Depot then filed a third-party complaint against Tri-State seeking contribution among joint tortfeasors, as permitted by state law. Polly now wants to amend her complaint to assert claims against Tri-State for negligence and breach of contract.
1. Was this case properly removed? DISCUSS.
2. Assuming the statute of limitations is not a bar, should Polly be permitted to amend her complaint to assert a claim against Tri-State in this action? DISCUSS.
3. If Polly obtains a jury verdict against Depot for $10,000 actual damages and $500,000 punitive damages, how should the court rule on a challenge that the punitive damage award is grossly excessive? DISCUSS.
Question 2:
Stu, a culinary student, was seriously injured in San Diego when his arm was severed above the elbow by a pasta making machine manufactured by Italco, an Italian company, that was imported into the United States by Distribco, a Delaware corporation with its headquarters in Arizona and its only distribution facility in Los Angeles, California. Stu had recently moved from Arizona to California to attend a 1-year culinary school program in San Diego. After his injury, Stu filed this diversity action in the United States District Court for the Southern District of California against Culinary School, a California corporation, and against Distribco. After filing its answer, Distribco filed a third-party complaint against Italco. The facts are not in dispute. Distribco representatives went to Italy and purchased several Italco pasta machines. Italco, with knowledge that the pasta machines were being re-sold to American purchasers, delivered the machines to a shipping facility in Milan where Distribco arranged to have the machines shipped to the United States. The only machine delivered for use in California was the one Distribco sold to Culinary School. Although Italco would provide parts and service information to American purchasers of its equipment upon request, it maintained no offices or employees in the United States and it did not advertise here directly. Distribco, however, frequently used Italco literature when selling Italco products even though there was no contractual relationship between the two companies regarding distribution of Italco products in the United States or elsewhere. Upon being properly served with a copy of the summons and complaint, in lieu of filing an answer, Italco filed an motion to dismiss the action 1) for want of subject matter jurisdiction; 2) for want of personal jurisdiction; and 3) for failure to state a claim upon which relief can be granted since the third-party complaint fails to satisfy California’s code pleading requirements. Stu’s claims against Culinary School and Distribco have been settled. As a result of the settlement, Stu and Culinary School are no longer parties to this litigation. Stu, who was unable to complete the culinary training program, has returned to Arizona.
Considering all relevant information, how should the court rule on the following motions:
1. Italco’s motion to dismiss for want of subject matter jurisdiction? DISCUSS.
2. Italco’s motion to dismiss for want of personal jurisdiction? DISCUSS.
3. Italco’s motion to dismiss for failure to state a claim? DISCUSS.
San Joaquin College of Law
Civil Procedure Interim Exam 1202 -- Q 1 Analysis / Cartier
Polly (PA) filed an action in state court against Depot (DEL; GA) in Pennsylvania for malicious prosecution. Depot removed the action to federal court and filed a third-party complaint against Tri-State (DEL; PA).
1. Was this case properly removed?
A defendant may remove a case if it could have been brought in state court. If the case rests solely in diversity (i.e. there is no federal question), defendant may remove so long as the case was not filed in his home state. For this case to have been brought in federal court, there must be diversity of citizenship AND the amount in controversy must exceed $75,000. Diversity exists since Polly is from PA and Depot is considered a citizen of its state of incorporation (DEL) and of its principal place of business (GEORGIA) .
In her state court action, Polly sought damages “in excess of $50,000.” This amount was used to satisfy the jurisdictional requirements of the state court. If the action was originally filed in federal court, plaintiff would have to plead damages in excess of $75,000. The burden is in the usual case, and here, on defendant to prove plaintiff cannot recover at least $75,000. Since plaintiff alleges an intentional tort and seeks punitive damages, defendant will not prevail if he asserts plaintiff is unable to recover at least $75,000. Therefore, it appears the case was properly removed.
2. Should Polly be permitted to amend her complaint to assert a claim against Tri-State?
Amendments to complaints are permitted in federal court either before an answer is filed or after with leave of court or with permission from opposing parties. Since the statue of limitations has not expired, one would expect that Polly would be given permission to amend so long as 1) Tri-State is subject o personal jurisdiction AND 2) Tri-State’s joinder would not deprive the court of subject matter jurisdiction. Since Tri-State (a DEL corporation) has its principal place of business in PA, it clearly has the requisite contacts with PA for a claim arising from its business activities in that state. THE PROBLEM is the fact that, since Polly and Tri-state are both citizens of Pennsylvania, there is no diversity of citizenship. Because the court had original jurisdiction over Polly’s claim against Depot, the court could hear Depot’s claim against Tri-State under rule 14 using supplemental jurisdiction. Supplemental jurisdiction afford the court the power to decide claims which are related to claims over which it has original jurisdiction. Plaintiffs do not get the benefit of supplemental jurisdiction over parties joined under Rule 14. Therefore, Polly should not be permitted to amend her complaint because the amendment would destroy diversity and would defeat subject matter jurisdiction.
3. How should the court rule on the claim Polly’s punitive damages are grossly excessive?
Punitive damages are intended to punish the wrong-doer, rather than to compensate the victim. Pennsylvania permits punitive damages in this type of case. Under ERIE, a federal court in a diversity case applies state substantive law and federal procedural rules. Although State law does not limit the amount of punitive damages, such an award could be so grossly excessive as to violate the United States Constitution. Even though a state might not limit punitive damages, the supremacy clause would impose a constitutional limit considering the BMW guideposts for excessiveness–wrongfulness of the defendant’s conduct, ratio between actual and punitive damages, and sanctions for comparable misconduct. On the procedural side, federal rules give a federal court the power to set aside an excessive verdict (by granting a new trial or by remittitur, i.e. a conditional grant of a new trial if plaintiff refuses to accept a reduced amount of damages). Of course, the determination that damages are excessive must be measured against state law unless the state law is unconstitutional.
San Joaquin College of Law
Civil Procedure Interim Exam 1202 -- Q 2 Analysis / Cartier
Stu files a diversity action in federal court against Culinary School and against Distribco; Distribco filed a third-party complaint against Italco.
1. Italco moves to dismiss for want of subject matter jurisdiction.
Federal courts have limited jurisdiction. SMJ is test when the case is filed in federal court or when it is removed to federal court. Here, at the time of removal, there must have been diversity of citizenship between Stu and the two defendants AND the claim must meet the jurisdictional requirement (in excess of $75,000). For Stu, citizenship is based on domicile–his permanent residence. If he was originally domiciled in Arizona, that state remains his domicile until he establishes a new one. A mere change of residence will not suffice. It is not clear if he was a citizen of Arizona or of California. Culinary School is a citizen California. Distribco is a corporation with dual citizenship. Distribco is a citizen of its state of incorporation (DEL), and of its principal place of business (which is either Arizona or California). Simply stated, diversity is met if Stu is a citizen of Arizona and Distribco’s principal place of business is in California. If Stu is from Arizona AND if Distribco’s principal place of business is in Arizona, there is no diversity regardless of where Distribco is from. If Stu is from California, there will be no diversity since Culinary School is from that state. Here, the third-party defendant is asserting a lack of subject matter jurisdiction. If the court had original jurisdiction over Stu’s claims, there would be supplemental jurisdiction over Distribco’s related claims against Italco. If there is no original jurisdiction, supplemental jurisdiction will fail. The court might permit Distribco action against Italco to proceed since it has an independent basis for jurisdiction (alienage jurisdiction), since non-diverse parties are no longer parties.
2. Italco moves to dismiss based on a lack of personal jurisdiction.
For an out of state defendant to be subject to personal jurisdiction in California, he must have minimum contact so as not to offend traditional notions of fair play and substantial justice. Italco has not engaged in any continuous and systematic activity in California. Neither has it purposefully directed its activities here. Any argument that Italco is subject to personal jurisdiction would be based on a “stream of commerce” theory that by putting its product into the stream of commerce it can be sued wherever its product does harm. One view is that putting an item in the stream of commerce, even knowing it destination, is not a minimum contact. Another view is that, even if such activity is a minimum contact, it would be unfair to hold a foreign defendant to answer on a contract entered into and performed in a foreign jurisdiction. Under either of theses views, Italco is not subject to personal jurisdiction in California. Although this case is like Asahi, one might distinguish that case since here an American is in the litigation.
3. Italco moves to dismiss for failure to state a claim.
A motion to dismiss for failure to state a claim is proper when, accepting everything in plaintiff’s complaint as true, the complaint fails to state a claim that entitles plaintiff to relief. Here, defendant’s motion is based on the fact plaintiff failed to satisfy California’s code pleading requirement that the complaint set forth specific facts establishing a cause of action. Under federal notice pleading rules, plaintiff must only assert a claim showing he is entitled to relief. Under ERIE, a federal court, though bound by state substantive law, is free to use its own procedural rules. Notice pleading is set forth in FRCP 8 and is a procedural rule. Plaintiff is not required to used notice pleading in federal court. Italco’s motion to dismiss for failure to state a claim should be denied. Even if plaintiff’s complaint failed to satisfy the liberal requirements of Rule 8, plaintiff would be given leave to amend his complaint at least once unless it was apparent that under no circumstances could he set forth a valid claim.