San Joaquin College of Law
Civil Procedure – Interim Exam Dec 2005 / Cartier
TIME: 2 hours 20 minutes
Question 1:
Polly, a citizen of Illinois, purchased a heater for her hot tub from Dynamo Heaters, Inc., (“DH”), a Nevada corporation with its principal place of business in Pennsylvania. Polly purchased the heater by placing her order on DH’s website. DH manufactured the heater in Pennsylvania and shipped it directly to Polly in Illinois. DH has no offices or employees in Illinois. Approximately one year after the purchase, the heater exploded resulting in $30,000 personal injuries and $60,000 in property damage. Within the time permitted by the state statute of limitations, Polly filed suit against DH in Illinois state court. DH promptly removed the action to the federal court for the Southern District of Illinois. DH then filed an answer asserting a lack of personal jurisdiction and stating a third-party complaint against Delta Valve, Inc., (“Delta”), a Delaware corporation with its principal place of business in Ohio. DH seeks indemnity from Delta since the explosion was caused by a defective valve that was a component part of the heater. The valve was manufactured by Delta and was shipped to DH’s production plant in Pennsylvania. Delta was properly served at its headquarters in Ohio, approximately 100 miles from the federal court where this action is filed. Although Delta has never done any business in Illinois, its valves are included in many heater models sold throughout the United States. The state long-arm statute extends jurisdiction to “any person or entity that conducts any activity within or without the state that causes injury in this state.” Both DH and Delta have filed motions to dismiss for want of personal jurisdiction.
Considering all relevant facts:
1. Was this case properly removed? DISCUSS.
2. How should the court rule on DH’s motion to dismiss for want of personal jurisdiction? DISCUSS.
3. How should the court rule on Delta’s motion to dismiss for want of personal jurisdiction? DISCUSS.
Question 2:
Pam was terminated from her job as a customer service representative with D-Mart, Inc. (“D-Mart”), a California corporation that conducts activities only in that state. Pam worked in the San Francisco area (in the Northern District of California). After her termination, Pam moved to Arizona. Thereafter, Pam filed a diversity suit in United States District Court in the Central District of California (in Los Angeles) against D-Mart and against her supervisor, Del Dale (“Del”). The complaint sought damages in the amount of $60,000 and an injunction requiring D-Mart to provide “employment ethics” classes for all of its several hundred employees. D-Mart has outlets in both the Northern and Central Districts of California. Del resides in the Northern District. The complaint alleged violations of state employment discrimination laws. The complaint was filed and properly served on D-Mart and Del. After the statute of limitations ran but before either named defendant filed a responsive pleading, Pam amended her complaint to add a claim against D-Mart for violation of federal employment discrimination laws. The amended complaint was filed and served on D-Mart at its corporate headquarters and on Del by leaving a copy of the summons and complaint with his wife at the home where he resided with his family. Del filed a motion to dismiss 1) for want of subject matter jurisdiction because Pam resided in California when the cause of action arose, 2) because venue is improper in the Central district, and 3) because the amended complaint is barred by the state’s statute of limitations.
Considering all relevant facts, how should the court rule on each of the following:
1. Del’s motion to dismiss for want of subject matter jurisdiction? DISCUSS.
2. Del’s motion to dismiss for improper venue? DISCUSS
3. Del’s motion to dismiss because the action is barred by the statute of limitations? DISCUSS.
San Joaquin College of Law
Civil Procedure – Interim Exam Dec 2005 Sketch Answers / Cartier
QUESTION 1 – Polly filed suit in Illinois state court against DH for personal injuries and property damages sustained when a hot tub heater purchased from DH exploded. DH removed the action and filed a third-party claim against Delta, the manufacturer of a valve that is allegedly responsible for the explosion. DH and Delta each move to dismiss for want of personal jurisdiction.
1.. Was the case properly removed from the state court to the federal court? An action can generally be removed if it could have been brought in federal court. Since federal courts have limited jurisdiction, a case may be based on a federal question (“arising under federal law”) or on diversity (complete diversity of citizenship and an amount in controversy in excess of $75,000). Polly’s claim arises under state law and can only be heard if the requisites of diversity jurisdiction are met. Polly is a citizen of Illinois. DH, a corporation, has dual citizenship in its principal place of business (Pennsylvania) and its state of incorporation (Nevada). Complete diversity exists since the plaintiff and the defendant are not the citizens of the same state. As regards the amount in controversy, Polly claims $30,000 personal injuries and $60,000 property damage. A plaintiff can aggregate damages against a single defendant to meet the amount in controversy. Here, Polly is seeking more than $75,000. Note: a diversity action cannot be removed if the action is filed in the defendant’s home state. Since Illinois is not DH’s home state, this restriction does not apply.
2. How should the court rule on DH’s motion to dismiss for want of personal jurisdiction? Personal jurisdiction is the power to make a binding order against a party and is obtained by giving notice within the grasp of a state’s long-arm statute. Here the facts tell us the state long-arm statute extends jurisdiction to “any person or entity that conducts any activity within or without the state that causes injury in this state.” DH’s activity would be within the statute since it manufactured a heater that caused injury in the state. It seems that DH was properly served since they it did not object to the method and manner of service. A failure to object at the time of challenging personal jurisdiction would waive any notice defect in the federal court. While it appears DH received proper notice within the grasp of the long-arm statute, the Constitution requires that the defendant have minimum contacts with the forum state so the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. The facts are clear that DH has no offices or employees in Illinois which would evidence continuous and systematic activity in the forum. Here Polly placed her order for the heater on DH’s web site and DH sent the heater to her in Illinois. This purposeful conduct on the part of DH is sufficient to hold it to answer in Illinois since DH purposefully directed its product to Illinois. There is nothing unfair about holding DH to account where it shipped a product as part of a commercial transaction that allegedly caused an injury.
3. How should the court rule on Delta’s motion to dismiss for want of personal jurisdiction? The facts say that Delta was properly served. Its activity, like that of DH, would be within the state long-arm statute BUT do minimum contacts exist so that the exercise of jurisdiction would be fair? Here, Delta has done no activity in Illinois. It did not cause the valve to go to Illinois. Ju. O’Connor’s view in Asahi suggested that merely putting a component in the “stream of commerce” is not a minimum contact even if the party has knowledge it will go to a specific state. Under this view, there would be no minimum contact and any attempt to exercise personal jurisdiction would be unconstitutional. In Gray v. American Radiator, an Illinois court upheld jurisdiction over a component part manufacturer on facts similar to the instant case. The rational of Gray, like that of Ju. Brennan in Asahi, is that by providing parts for a product that will be marketed nationally puts the party on notice of the possibility of suit in a forum where an injury might occur. In any event, since Delta was joined under R. 14 for indemnity (since DH claims Delta would be responsible for all or part of any damages DH might be compelled to pay Polly), personal jurisdiction can be based on the ‘bulge rule” that provides for personal jurisdiction over a party joined under R. 14 if served within a federal district within 100 miles of the court where the action is filed. The facts say DH was served approximately 100 miles from the court. If it was less than 100 miles, the bulge rule provides personal jurisdiction. If “approximately” is more than 100 miles, no.
QUESTION 2 – Pam filed a diversity suit in federal court against her former employer and supervisor. Before either defendant appeared, but after the statute of limitations had run, Pam filed and served an amended complaint alleging a violation of federal law against the employer. The supervisor, Del, seeks a dismissal based on 1) want of subject matter jurisdiction, 2) improper venue, and/or 3) the action is barred by the state statute of limitations.
1. Subject Matter Jurisdiction. Pam filed a diversity action naming these two defendant. For the court to exercise subject matter jurisdiction (the power to decide the claim), there must be complete diversity (no plaintiff from the same state as any defendant) AND the amount in controversy, as to each defendant, must exceed $75,000. Del appears ot be a citizen of California. D-Mart, the employer, is a citizen of its state of incorporation and of its principal place of business, both of which are in California. When the cause of action arose, Pam was likely a citizen of California. Shortly after her termination, she moved to Arizona. If she was changing her “permanent residence, or domicile,” she is now a citizen of Arizona. Diversity is only required to exist when the action is filed. The amount in controversy raises an interesting twist. As to the employer, Pam seeks $60,000 and an injunction. An injunction may be valued at the benefit to the plaintiff or the cost to the defendant. If the injunction is valued at more than $15,000, she can aggregate these damages to meet the amount in controversy as to D-Mart. She only seeks $60,000 from Del since the requested injunction is not directed to him. At this point, it appears the court lacks subject matter jurisdiction to decide this diversity case. If Pam successfully amends her complaint to allege a federal question against D-Mart, the court could then exercise supplemental jurisdiction over the pendent state law claims and the pendent party claim against Del. Pam would not be able to exercise supplemental jurisdiction of Del, joined under R. 20, if the action rested solely in diversity.
2. Venue. As the appropriate place for trial, venue is generally good where any defendant resides, if all defendants reside in the same state OR where a substantial events giving rise to the claim occurred. Del resides in the northern district. D-Mart resides in any district where it would be subject to personal jurisdiction, if that district was a state. Clearly D-Mart has continuos and systematic contacts with the northern and central districts where it maintains stores. The cause of action arose in the northern district. Still, since D-Mart “resides” in the central district where Pam filed her claim, the central district is a good venue because both defendants reside in California. Of course the court might transfer this case to the northern district for the convenience of witness or parties or in the interest of justice.
3. Statute of Limitations. When a state law claim is filed in federal court, a possible Erie problem arises. The general rule is that the federal court will apply state substantive law to the state law claims but will apply federal procedural rules. Where there is a federal rule on point, that rule, which is considered procedural, applies. Rule 15 allows a plaintiff to amend a pleading once as a matter of course before the defendant files a responsive pleading. Additionally, a plaintiff can amend a pleading after the statute of limitations has run IF the amended pleading relates to the same transaction or occurrence and IF the claim was set forth or attempted to be set forth in the original pleading. Specifically, R. 15(c) provides that such an amended pleading will relate back in time to the filing date of the original complaint. Here, Pam originally alleged her termination violated her rights under state law. Neither defendant has filed a responsive pleading and the amendment seeks a federal remedy based on the same transaction or occurrence. The amended pleading should be allowed and the defendants given the opportunity to file appropriate responses.