San Joaquin College of Law

Civil Procedure Interim Exam 1208 / Cartier


Time: 3 hours.


Question 1 – 1 hr 10 min


Plaintiff Purchaser, a citizen of California who resides in San Francisco, is a car buff. He came across a 1967 Ford Galaxy for sale on the Ebay auto auction site. The seller, Dealer, owns an operates a car dealership in Wisconsin. The Galaxy, which was located in Wisconsin, was listed as “in awesome condition, rust free, nicely rebuilt, and ready to be driven.” Purchaser bid $34,109 for the vehicle on August 8, 2007, and was notified the same day that he was the winning bidder. Purchaser communicated with Dealer via e-mail to arrange for delivery of the vehicle to California. Ultimately Purchaser hired Trident Transport, a Michigan freight hauling service, to deliver the vehicle to California. Upon delivery of the vehicle, Purchaser noted a variety of problems with the vehicle including a motor that would not turn over, rust, and extensive dents on the body. He also noted significant pitting damage to the windows and paint that likely occurred during transport. Purchaser contacted Dealer in an attempt to rescind the sale but these effort s failed. Purchaser filed this diversity action in the United States District Court alleging causes of action for breach of contract and fraud. In lieu of filing an answer, Dealer filed simultaneous motions to dismiss 1) based on Rule 12(b)1 for want of subject matter jurisdiction and 2) based on Rule 12 (b) 2 for want of personal jurisdiction. The court denied each of these motions.

 

1.          Did the court correctly rule on Dealer’s motion to dismiss based on 12(b)1? DISCUSS.

 

2.          Did the court correctly rule on Dealer’s motion to dismiss based on 12(b)2? DISCUSS.

 

2.          If this action continues, should Purchaser be permitted to amend his complaint in this action to assert a claim against Trident Transport for damages to the vehicle sustained during transport? DISCUSS.





















Question 2 – 1 hr 10 min


Premier Pump, Inc., (“Pump”), a Nevada corporation with its principal place of business in Arizona, commenced an action against a local Arizona distributor , (“Distributor”), a Delaware corporation with its principal place of business in Illinois, seeking damages for breach of a contract to sell and deliver three shipments of parts. Distributor was allegedly unable to perform under its contract with Pump because Distributor’s supplier (“Supplier”) failed to deliver parts under a separate contract. The action filed in state court in Arizona alleged that each part shipment would have resulted in a profit of up to $30,000. The complaint seeks damages in excess of $50,000, the jurisdictional floor of the state superior court. After being properly served, Distributor removed the action to the appropriate federal court in Arizona.. Shortly thereafter, but after the state statute of limitations expired, Pump learned that Distributor acted in concert with Supplier to withhold parts from Pump in an attempt to force Pump out of business. Armed with this information, Pump amended its complaint to assert a cause of action against Distributor for intentional interference with a business relationship. Upon being properly served at its headquarters in Illinois, Distributor filed a motion to dismiss the amended complaint for failure to state a claim since the action against it is barred by the state statute of limitation.

 

1.          Was this case properly removed? DISCUSS.

 

2.          How should the court rule on Distributor’s motion to dismiss for want failure to state a claim? DISCUSS.

.

3.         Assuming this action continues and that the statute of limitations is not a bar, should Distributor be permitted to file a third-party claim for indemnity and/or contribution in this action against Supplier (Delaware corporation with its principal place of business in Nevada)? DISCUSS.

    








Question 3: – 40 min


Write the court’s opinion in Stewart v. Stoller, et al. You are given the facts. You are to complete each of the four sections by answering the specific questions set forth. Identify the factual contentions of the parties, recite the applicable law, and the clearly state the reasoning used to reach the appropriate conclusion(s).

 






Question 1:


1. Motion to dismiss based on Rule 12(b)1 – lack of subject matter jurisdiction

             Subject matter jurisdiction is the power of the court to decide a particular type of case. Federal courts are courts of limited jurisdiction. Here Plaintiff filed a diversity action in federal court. For the court to have the power to decide this case, there must be complete diversity of citizenship (no plaintiff comes from the same state as any defendant) and the amount in controversy must exceed $75,000. For individuals, citizenship is based on domicile (where the party maintains a permanent residence). The facts suggest that Plaintiff is a citizen of California and that Dealer is a citizen of Wisconsin. Complete diversity exists. The amount in controversy is a bit more complicated. Plaintiff purchased the vehicle for less than $35,000, far below the $75,000 required for a diversity action. Plaintiff, however, has alleged fraud which would allow a judgment for punitive damages. Unless Dealer can show that it is substantially certain Plaintiff cannot recover at least $75,000, the amount in controversy amount is met. The court correctly refused to dismiss based on a want of subject matter jurisdiction.

2. Motion to dismiss based on Rule 12(b)2 – lack of personal jurisdiction

             Personal jurisdiction is the power to make a binding order over a defendant. Generally, personal jurisdiction is obtained by giving notice within the grasp of the states long-arm statute. Since Dealer appeared in this action it seems that he obtained notice. If any defect in regard to the method or manner and/or content of servcie would be waived if not raised in his pre-answer motion. Notice is not an issue here. Since Dealer is a citizen of Wisconsin, he is viewed as an out-of-state defendant in California. To hold an out-of-state defendant to answer in a forum, he must have been served within the grasp of the state’s long-arm statute. Here, since California’s long-arm statute is coextensive with the United States Constitution, the state may exercise judicial power over him so ong as he has minimum contacts so that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Here Dealer advertised a vehicle located in Wisconsin on Ebay that was ultimately purchased by Plaintiff in California. Nothing in the facts suggest any continuous and systematic activity by Dealer in California. He has no offices or employees in California. The next inquiry looks at whether, he engaged in any specific act that would make it foreseeable that he could be hailed into court in California. Typically, courts look to see if the defendant has purposefully directed his activities to the forum state or otherwise taken the benefits of the forum. The key fact here is that although Dealer advertised the vehicle on Ebay, after Plaintiff won the bid, it was Plaintiff who arranged for the vehicle to be transported to California. Since Dealer did not direct the car to California, it is difficult to establish any purposeful conduct direct toward California. In this case the use of Ebay was like that of a passive website. Dealer lacks minimum contacts with California and the fairness factors do not compel an exercise of jurisdiction on these facts. The court erred in refusing to dismiss based on a want of personal jurisdiction.

3. Plaintiff seeks to join Trident Transport under Rule 20

             Rule 20 permits a plaintiff to join multiple defendants if the claims arise out of the same transaction or occurrence AND involve common questions of law or fact. Since plaintiffs claims against both Dealer and Trident are related to damages to the same vehicle and rasiie the question of which defendant, if either, is liable, both Rule 20 requirements are met. Plaintiff might join Trident if he is subject ot personal jurisdiction. Since Trident contracted to deliver a car to California and did deliver the car to California, there is no doubt that he purposefully directed his activity toward California.. There is nothing unfair about holding him to answer in California. Subject matter jurisdiction poses a problem, however. Although, complete diversity exists since Plaintiff, a citizen of California, is seeking to bring suit against Trident, a Michigan freight hauling service, the amount in controversy requirement is problematic. While Plaintiff might assert damages in excess of $75,000 based on brach of contract and fraud against Dealer, any damage calim against Trident would be limited to be limited to breach of contract and/or negligence. It is virtually certain that pitting damage form transport cannot meet the amount in controversy requirement for a diversity action. Under the doctrine of supplemental jurisdiction, once a federal court has original jurisdiction over a claim, the court may exercise supplemental jurisdiction over all other claims that form part of the same case and controversy. Since plaintiff cannot use supplemental jurisdiction against a party joined under Rule 20, the court lacks subject matter jurisdiction over any claim by Plaintiff against Trident in this action. Plaintiff should not be permitted to join Trident in this acton.


Question 2:.


1. Was this case properly removed?

             An action filed in state court may be removed from state to federal court by the defendant if the case could have been brought in federal court in the first instance. Since federal courts have limited jurisdiction, an action can be removed if the court would have had original jurisdiction to hear the case. Since this matter arises from a breach of contract, the claim does not arise under federal law. The abilty of the court to hear the case depends on whether diversity jurisdiction (complete diversity of citizenship + amount in controversy in excess of $75K) can be established. Here both Pump and Distributor are corporations. Corporations are citizens of both the state of incorporation and of the principle place of business. Here, Pump is a citizen of Nevada and Arizona; Distributor is a citizen of Delaware and Illinois. .Complete diversity exists. Pumps origianl claim in state court seeks damages in excess of $50,000. While this amount is less than the $75,000 required for diversity jurisdiction, it is clear Pump is seeking damages for failure to deliver part on three occasions with each shippment resulting in damages in excess of $30K. It appears to a substantial certainty that plaintiff is seeking more than $75,000 and consequently the amount in controversy requirement is met. This case is properly removed. Note that the rule that says a defendant cannot remove a diversity action if sued in the defendant’s home state does not bar removal here since Distributor is not a citizen of Arizona where this case was originally filed.

2. Motion to dismiss for failure to state a claim

             A motion to dismiss for failure to state a claim is proper when, taking everything in the complaint as true, the complaint fails to assert an actionable claim that would entitle the plaintiff to the relief sought. Here, defendant asserts, that, Pump’s amended complaint, asserting intentional interference with a business relationship, is barred by the statute of limitations (the time period during which an action can be commenced).

             Under the Erie Doctrine, when a state law claim is filed in (or removed to) federal court, the federal court applies state substantive law and federal procedural rules. Here, the amended action would be barred by the state statute of limitations but FRCP 15 permits the amendment of a complaint even after the statute of limitations has run if the amended claim arises out fo the same transaction or occurrence. .Here Pump’s claim for breach of contract and for intentional interference do arise from the same failure to deliver parts. The court should deny Distributor’s motion to dismiss.

3. Should Distributor be permitted to file third-party claim against Supplier?

             Rule 14 permits a defending party to join a non-party for contribution of indemnity to recover any or all of the damages the defending party might be compelled to pay the plaintiff. If defendant can show Supplier might be responsible for all or part of the damages plaintiff might recover, Rule 14 would permit joinder. To hold Supplier to answer in this case, however, would require that it is subject ot personal jurisdiction. Here the facts are sparse, but it would seem that engaging in a tortious act out of the state causing injury in the state would be sufficient to support a finding of jurisdiction. Of course, if Supplier, regularly engages in business activity in Arizona, this to would suggest personal jurisdiction is proper. Subject matter jurisdiction is problematic. Since Supplier is a corporation (incorporated in Delaware with its principal place of business in Nevada) there is no diversity of citizenship even if the amount in controversy (more than $75K) is met. When the federal court has original jurisdiction over a claim, it may exercise supplemental jurisdiction over all other claims that form part of the same constitutional case and controversy. .Although plaintiffs don not get the benefit of supplemental jurisdciton over a party joined under Rule 14, here Supplier is brought into the suit by a defendant and so the court has can exercise supplemental jurisdiction over this third-party claim.






Question 3: Here is the court’s opinion.

   WAS THE INSTANT ACTION TIMELY FILED?

The question of whether the action is time-barred hinges on which state's law applies. If California law applies, the action is time barred, but if Utah law applies, the action was timely filed.

Defendants contend that courts should look to the law where the harm occurred, which, they claim, is in California. They contend that Ms. Stewart filed her lawsuit in California, the attorneys were all admitted (or were granted permission) to practice in the Central District of California, and the "harmful conduct," which they characterize as the dismissal of the action, occurred in California. 2

Ms. Stewart, on the other hand, argues that Utah's four-year statute of limitations applies in this case. She retained Defendants at various times beginning in 2004, and all events relevant to her claims in the Infringement Action occurred between 2004 and 2006. The instant action was filed in August 2007, within the four-year limitations period. Thus, according to Ms. Stewart, Defendants' motions to dismiss pursuant to F.R.C.P. 12(b)(6) must be denied.

HN1 civpro_1208.gif A federal court sitting in a diversity action follows the procedural law of the forum state, regardless of whether the court applies the substantive law of the forum state or another state. Rocky Mountain Helicopters, Inc. v. Bell Helicopter Textron, Inc., 24 F.3d 125, 128 (10th Cir. 1994). HN2 civpro_12081.gif Utah follows the traditional rule that "statutes of limitation are essentially procedural in nature," and that "under a general conflicts of law analysis, the limitations period of the forum applies." Records v. Briggs, 887 P.2d 864, 870 (Utah Ct. App. 1994) (citing Lee v. Gaufin, 867 P.2d 572, 575 (Utah 1993), Jackett v. Los Angeles Dep't of Water & Power, 771 P.2d 1074, 1075-76 (Utah Ct. App. 1989),  [*6] and Pan Energy v. Martin, 813 P.2d 1142, 1145-46 (Utah 1991)); see also Sun Oil Co. v. Wortman, 486 U.S. 717, 108 S. Ct. 2117, 100 L. Ed. 2d 743 (1988) (application of the forum state's statutes of limitation is consistent with the traditional view that such statutes are procedural and is consistent with the Full Faith and Credit Clause of the U.S. Constitution); Fin. Bancorp, Inc. v. Pingree & Dahle, Inc., 880 P.2d 14, 16 (Utah Ct. App. 1993) (Utah follows the majority position that limitation periods are generally procedural in nature, and thus, Utah's statutes of limitation apply to actions brought in Utah.").

Accordingly, in the instant action, this court applies Utah's limitations period for legal malpractice claims. Because Utah law provides a four-year limitations period, Plaintiff's action is not time-barred.

IS VENUE PROPER IN UTAH?

Next, Defendants argue that venue is improper in Utah, and thus the action should be dismissed or transferred. Defendants conclusorily argue that all the substantial events took place in California and that none of the Defendants lives in Utah. In contrast, Ms. Stewart argues that venue is appropriate in Utah because a substantial part of the events and/or omissions giving rise to  [*7] her claim occurred here.

HN3 civpro_12082.gif Under 28 U.S.C. 1391(a)(2), venue in diversity cases is proper in any judicial district where "a substantial part of the events or omissions giving rise to the claim occurred." This language has been interpreted to allow for the fact that a substantial part of the events may have occurred in more than one district and "venue may be proper even if contacts with another district were more substantial." Mohr v. Margolis, Ainswoth & Kinlaw Consulting, Inc., 434 F. Supp. 2d 1051 (D. Kan. 2006).

HN4 civpro_12083.gif Federal district courts have held that the "substantial part" requirement of Section 1391(a)(2) is satisfied where the plaintiff resides in the forum state and the defendants have contacts with plaintiff in the forum state related to the subject of the action. In Furr v. Aguilar, the District Court for the District of Colorado, the court considered a motion to dismiss for improper venue in a case involving claims by a Colorado resident against a California law firm, which had defended the Colorado resident in an action in California state court. Furr, 2005 WL 1801627 (D. Colo. July 28, 2005) (unpublished decision). The court noted that the law firm's normal duties in representing  [*8] the Colorado resident included informing him of the status of the case, any offers to settle and other matters raised in the action. The court also found that such correspondence occurred via telephone from the law firm's offices in California, and that the attorney-client relationship was established with a resident of Colorado. Based on these contacts, which were related to the malpractice claims at issue, the court concluded that the plaintiff had demonstrated that a substantial part of the relevant events had occurred in Colorado, and denied defendants' motion to dismiss.

In Stein v. Stein, the U.S. District Court for the District of Kansas held that plaintiffs, who were residents of Kansas, met their burden of demonstrating proper venue under Section 1391(a)(2). Stein, 184 Fed. Appx. 808, 2006 WL 1892580 (D. Kan. 2006) (unpublished decision). In that case, plaintiffs, who were residents of Kansas, sued Washington residents and a Washington LLC for breach of contract, fraud, unjust enrichment, breach of duty of good faith and fair dealing, and breach of fiduciary duty. The plaintiffs alleged that they had contracted with defendants to make an equity investment in the LLC's  [*9] business enterprise, and based on that alleged contract plaintiffs had obtained a line of credit from a Kansas bank for the benefit of the defendants. The court found that the alleged contract was sent to plaintiffs in Kansas, plaintiffs performed their part of the alleged contract in this state, and any of the alleged fraudulent representations were made via facsimile, e-mail or in person to plaintiffs in Kansas. Thus, Kansas was an appropriate venue under Section 1391(a)(2).

In this case, Plaintiff has set forth sufficient allegations to demonstrate that Utah is a proper venue under Section 1391(a)(2). Plaintiff is a Utah resident. (First Amended Complaint at P 1). She was contacted by each of Defendants at her residence in Utah, and agreed to retain each in Utah. (Aff. of Sophia Stewart at PP 3-6, 9-10). She executed an engagement letter with Messrs. Lubell, Brown, and Webb in Utah. (Id. P 6). She had telephone conversations and corresponded with each of the Defendants from Utah. (Id. P 7, 11, 14, 17). Plaintiff did not attend any hearings in California, based on the advice of one or more of the Defendants. (Id. P 23). Defendants sent her bills for services at her address in Utah.  [*10] (Id. P 22). These contacts were over the course of the Infringement Action, from the spring of 2004 through summer 2006. (Id. P 3-23). Like the plaintiffs in Furr, Plaintiff has brought this action against her former attorneys for malpractice, who purposefully and regularly directed their contacts toward a Utah resident when they were retained and throughout their handling of the Infringement Action. Like the plaintiffs in Stein, Plaintiff contends that she complied with her obligations with respect to the attorney-client relationship and the prosecution of the Infringement Action in Utah. Thus, the court finds that these contacts were sufficient to qualify as a "substantial part" of the actions and omissions giving rise to Plaintiff's claims, and thereby satisfy the requirements for venue in Utah under Section 1391(a)(2).

SHOULD THE CASE BE TRANSFERRED?

Defendants again conclusorily argue that the court should transfer the case to the Central District of California. Plaintiff contends that Defendants have failed to meet their burden of demonstrating that this action should be transferred. HN5 civpro_12084.gif In considering whether to transfer venue, a court considers the following factors: a plaintiff's  [*11] choice of forum; the accessibility of witnesses and other sources of proof, including the availability of compulsory process to insure attendance of witnesses; the cost of making the necessary proof; questions as to the enforceability of a judgment if one is obtained; relative advantages and obstacles to a fair trial; difficulties that may arise from congested dockets; the possibility of the existence of questions arising in the area of conflict of laws; the advantage of having a local court determine questions of local law; and, all other considerations of a practical nature that make a trial easy, expeditious and economical. Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991) (quoting Tex. Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967)). A court must give great weight to plaintiff's choice of forum. Unless the balance strongly favors the movant, plaintiff's forum choice should rarely be disturbed. Scheidt, 956 F.2d at 965. HN6 civpro_12085.gif "Merely shifting the inconvenience from one side to the other . . . is not a permissible justification for a change of venue." Id. at 966.  [*12] In exercising its discretion, "the Court must 'adjudicate motions for transfer according to an 'individualized, case-by-case consideration of convenience and fairness.'" Chrysler, 928 F.2d at 1516 (quoting Stewart Org. v. Ricoh Corp., 487 U.S. 22, 29, 108 S. Ct. 2239, 101 L. Ed. 2d 22 (1988)).

In addition, HN7 civpro_12086.gif the party moving to transfer a case pursuant to 28 U.S.C. § 1404(a) bears the burden of establishing that the existing forum is inconvenient. Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir. 1991). Defendants have failed to carry their burden in this case. Given the weight assigned to Plaintiff's choice of forum, the fact that at least some of the Defendants would have to travel in any event, and the other factors that a court considers, Defendants simply have failed to demonstrated that the action should be transferred to California.

CONCLUSION

Accordingly, for the foregoing reasons, (1) Defendant Gary S. Brown's Motion to Dismiss (docket # 14) is DENIED and his Motion to Change Venue to the Central District of Los Angeles, CA (docket # 15) is DENIED; (2) Defendant Dean Webb's Motion to Dismiss (docket # 18) is DENIED and his Alternative Motion to Change Venue (docket # 26) is DENIED;  [*13] (3) Defendant Michael T. Stoller's Motion to Dismiss (docket # 20) is DENIED and his Motion to Change Venue (by joining in other Defendants' motions) is DENIED; (4) Defendant Jonathon Lubell's Motion to Dismiss (docket # 21) is DENIED, and his Motion to Change Venue (docket # 22) is DENIED. Defendants are directed to file an Answer to the Complaint by no later than September 23, 2008.