San Joaquin College of Law
Civil Procedure--Interim Exam Feb 1996/Cartier
Tenant (a resident of Tennessee who was attending college in California) rented a house in California from Owner (a resident of Ohio). In the winter of 1994, the water heater in the rented house broke. Owner authorized Tenant to purchase and install a new “BH4” hot water heater and to deduct the price from the rent. Tenant went to the local Hardware Depot to get a “BH4” only to find out that this unit, which is manufactured by U.S. Heaters (a Delaware Corporation with its principal place of business in Illinois) is not marketed in California. U.S. Heaters sells its products to various distributors for nation-wide marketing but itself does no business outside of Illinois. A “BH4” was special ordered through the Hardware Depot warehouse in Illinois. Upon delivery in December 1994, Tenant’s boyfriend (a resident of California), an apprentice plumber, installed the “BH4” to the natural gas line at the house. Two days later the unit exploded, Tenant suffered personal injuries along with the loss of personal property maintained in the house. The installation instructions clearly indicated that the “BH4” is intended only for use with propane gas sources and is not to be installed to a natural gas line. Two recent cases against U.S. Heaters litigated in Illinois, however, determined that the “BH4” is “inherently defective.”
In December 1995, Tenant filed a claim in the United States District Court for the Eastern District of California against Hardware Depot (“a California corporation”) seeking $45,000 for personal injuries, including pain and suffering, and $10,000 for destroyed and damaged property. In January, Owner filed a motion to intervene in the suit to seek damages for damage to the real property and loss of profits since the explosion rendered the house uninhabitable. In preparing this motion Owner discovered that Hardware Depot is a wholly-owned subsidiary of Pay-Us (a Delaware corporation with its headquarters in Ohio and with its principal distribution facility in Illinois). Owner seeks also to recover 3 months back rent ($1,800.00) from Tenant for September-November 1994. Tenant now wants to amend her complaint to name Pay-Us as the defendant but the one year statute of limitations for personal injury provided by state law has run. Additionally, Pay-Us asserts that the action must be dismissed for failure to join U.S. Heaters (the manufacturer of the defective product) and Tenant’s boyfriend (the negligent installer of the “BH4”) as necessary and indispensable parties.
1. Should Tenant be permitted to amend her complaint to name Pay-Us as the defendant? DISCUSS.
2. Should Owner be permitted to intervene in this action? DISCUSS.
3. Should Owner be permitted to assert his claim for back rent from Tenant in this action? DISCUSS.
4. Should the action be dismissed for failure to join
A) U.S. Heaters? DISCUSS
B) Tenant’s boyfriend? DISCUSS.
5. What preclusive effect, if any, should be afforded to the prior determinations that the “BH4” is “inherently defective?” DISCUSS.
San Joaquin College of Law
Civil Procedure--Interim Exam Feb 1996--Draft Answer/Cartier
1. AMENDED COMPLAINT. Tenant could have amended her pleading to name Pay-Us before the statute of limitations ran. Under ERIE, the state substantive law (which includes the statute of limitations) applies in the federal court in a diversity action. The facts indicate that the one year S/L for personal injury has run. While tenant might split her claim to seek only property damage from Pay-Us, such action would not satisfy the more that $50,000 amount in controversy requirement even though diversity of citizenship is otherwise satisfied. Tenant is from Tennessee and Pay-Us is a citizen of Delaware AND either Illinois or Ohio, depending on which is its principal place of business. Based on Hannah v.Plummer, a federal court applies its own procedural rules as set forth in the FRCP. FRCP specifically provides that a plaintiff may amend a complaint to correct a misnomer of the defendant (within 120 days of service? or of the end of the limitation period?), provided that the defendant knew that but for the misnomer, it was the intended party and if the defendant will not be prejudiced by the amendment. On the present facts, it appears that Tenant's case is only minimally affected by whether the complaint is amended since Hardware Depot is a wholly owned subsidiary of Pay-Us. I believe the court will deny application of FRCP 15c--which permits relation-back of an amended pleading to circumvent the bar of a statute of limitations--since Tenant's failure to sue Pay-Us in a timely manner stems from mistake or oversight in naming an additional party rather than from misnaming a party.
2. OWNER AS INTERVENOR. Owner is a proper party--as a permissive intervenor-- to seek joinder in this action, since his claim involves a common question of law or fact that is also presented in Tenant's claim--liability for the explosion. An intervenor of right is one whose interests in the subject matter of the suit are not represented by an existing party and whose interest will be adversely impaired as a practical matter. Tenant is seeking recovery for injury to person and personal property; Owner is seeking recovery for damage to real property. As such the interests of the parties are clearly not the same and neither party's interest will be adversely impaired if the actions are not tried together. It appears that Owner, while not qualifying as an intervenor of right, may qualify as a permissive intervenor PROVIDED that he can establish proper subject matter jurisdiction in the federal court--diversity of citizenship + more than $50,000 in controversy. After 12/90 plaintiff intervenors must establish independent subject matter jurisdiction. Owner is from Ohio. Pay-Us is both from Delaware (its state of incorporation) AND either Ohio (its headquarters) or Illinois (it principal distribution center). If the principal place of business for Pay-Us is deemed to be Ohio, diversity jurisdiction would be destroyed. Since this suit involves a product defect rather than corporate office activity, I believe that Illinois should be viewed as Pay-Us' principal place of business--permitting diversity jurisdiction so long as Owner's claim is for more than $50,000. Permissive intervention is discretionary with the court. The court may deny intervention to avoid delay, to prevent confusion, etc.
3. OWNER v TENANT. Owner seeks to recover back rent from Tenant for three months prior to the explosion. If the claim for rent arose from the same transaction or occurrence as Tenant's claim, then supplemental jurisdiction would attach and the rent claim could be asserted as a cross-claim under FRCP 13g. Here the rent appears to be entirely unrelated to injury from an explosion. If so, Owner will be barred from bringing this suit in federal court since the amount in controversy is only $1,800--which is well below the required $50,000. Additionally, since there is no common question of law or fact raised by this proposed claim, it appears that this matter could not in any event be joined to the existing action commenced by Tenant. The argument could be made that since Owner told Tenant to pay for the BH4 with rent money, that the rents would be a proper subject for set-off against any judgment Tenant might recover from Owner. But since Tenant has apparently not filed an action against Owner, this argument should be dismissed.
4. NECESSARY AND INDISPENSABLE PARTY. A necessary party--one whose presence is needed to avoid prejudice or to afford complete relief among those already parties--is a proper party to an action and must be joined if feasible. A necessary party should be joined if subject to the territorial jurisdiction of the court and if the joinder will not destroy diversity. US Heaters and Boyfriend--as potential joint tortfeasors--qualify as necessary parties. Their joinder will help afford complete relief among those who are already parties eliminating the need for later litigation which could produce varied results. Here Owner argues that USH and Boyfriend are not only necessary parties but that they are also indispensable--without whose joinder the action cannot proceed. There is no fact suggesting that the continuance of the lawsuit without USH or Boyfriend cannot provide some measure of relief to the existing parties, therefore neither USH nor Boyfriend is an indispensable party. As a necessary party, however, they must be joined "if feasible."
A. US HEATERS is a citizen of Delaware (its state of incorporation) and Illinois (its principal place of business. Since Tenant is considered a resident of Tennessee, diversity of citizenship required for diversity jurisdiction in the federal court is satisfied. Diversity jurisdiction, however, also requires more than $50,000 in controversy. Tenant's $45,000 personal injury claim when aggregated with her $10,000 property claim satisfy this requirement.
IS US HEATERS SUBJECT TO PERSONAL JURISDICTION IN CALIFORNIA? The courts of California claim territorial jurisdiction to the fullest extent permitted by the U.S. Constitution. The facts state that US Heaters does no business outside of Illinois. US Heaters has no continuous and systematic activities in California. Although its BH4 made its way to California in the stream of commerce, absent some evidence that USH purposefully directed its activity to California or that USH took the benefits and protections of California, knowledge that a product may find its way to a forum is not sufficient to confer jurisdiction. USH is not subject to the jurisdiction of California and therefore cannot be joined in this action against its will. In the absence of this necessary party, the action will be permitted to proceed.
B. BOYFRIEND is a Californian and, as such, is subject to the personal jurisdiction based on domicile. Boyfriend, from California can be joined to this suit without destroying diversity since no other party is from this state.
Pay-Us' assertion that this action should be dismissed because Tenant failed to join USH and Boyfriend will not prevail. Plaintiff is mater of the complaint and is under no obligation to file actions against specific parties that would benefit defendant. While necessary parties should be joined "if feasible," here Pay-Us may implead any party for contribution (as permitted by state law) or indemnity under FRCP 14. Supplemental jurisdiction attaches BUT personal jurisdiction over the implead party is required. Boyfriend may be implead; USH is beyond the jurisdiction of California.
5. PRECLUSION
Res Judicata--Claim preclusion arises when the former litigation involves the same claim and the same parties, is decided on the merits and constitutes a final judgment. Res judicata has no bearing here since the present action does not involve the same parties as the prior Illinois cases.
Collateral Estoppel--Issue preclusion arises when the same issue was actually litigated fully and fairly in the former proceeding. The traditional rule imposed a requirement of mutuality--that the judgment would not be given preclusive effect against one party unless it would also be binding against the other. Modernly the court will permit one who was not a party to the former proceeding to use issue preclusion against one who was a party in the former proceeding--providing there was a full and fair opportunity to litigate the issue in the former proceeding. COLLATERAL ESTOPPEL, HOWEVER, IS NOT AVAILABLE AGAINST ONE WHO WAS NOT A PARTY TO THE FIRST ACTION. If USH was a party to this action, the court might permit the use of offensive nonmutual collateral estoppel on the issue of the product defect. The determining factor is whether USH had the full and fair opportunity to actually litigate the issue. The prior determinations concerning this issue cannot be used against anyone who was not a party to the former actions.