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©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Presentation on theme: "©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part."— Presentation transcript:

1 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T HE C OURT S YSTEMS Chapter 2 Meiners, Ringleb & Edwards The Legal Environment of Business, 12 th Edition

2 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Overview of the American court system How an injured party can seek relief in the courts Jurisdiction: Which court has the power and the authority to decide the case? Relations between court systems

3 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. O RGANIZATION OF THE C OURT S YSTEMS O RGANIZATION OF THE C OURT S YSTEMS Both state and federal court systems have Lower courts: Courts of Original Jurisdiction Where disputes are initially brought and tried Generally known as trial courts Look at issues of fact Appellate Courts: Courts of Appellate Jurisdiction Where lower court decisions are reviewed Look at issues of law

4 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. F EDERAL J UDGES F EDERAL J UDGES Federal judges are nominated by the President Confirmed by a majority vote in US Senate Lifetime appointment May be removed from office only if Congress impeaches them (intricate impeachment process and rarely happens) Job security guarantees that judges are independent and free from political pressure

5 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S TATE J UDGES Judges chosen by variety of methods Elected, appointed or mixture of both methods Unlike federal court, most state judges serve fixed terms Evidence indicates that with elected judges the average in tort cases are larger and out-of-state companies are treated more poorly than in states with appointed judges. See Exhibit 2.1

6 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. J UDICIAL I MMUNITY A judge is absolutely immune from suit for damages for judicial acts taken within his/her jurisdiction. Without this, judges may fear being sued by unhappy party to a lawsuit. Purpose: Judges are not concerned with the relative power of parties who appear in court. Purpose: To protect the system from undue influence on judicial decision-making o See Davis v. West

7 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE D AVIS V. W EST Houston Reporting Service (HRS) provided court reporting services for attorney Davis HRS billed Davis – was never paid Sued for $1083.98 (deposition, attorneys fees, interest, costs) Davis did not defend – judge entered a default judgment HRS began collection efforts Court appointed Radoff as receiver in the case Court order commanded Radoff to take possession of all... monies in deposit [by Davis] in financial institutions.... Radoff sent letter to HRS attorney asking for payment. Radoff sent letter to Daviss bank demanding that the bank turn over $4,144.91 to Radoff. Bank did. Judgment satisfied; HRS was paid; receivership closed. Davis sued Radoff for abuse of process. Trial court granted summary judgment for Radoff, as he was entitled to derived judicial immunity. Davis appealed. (Continued)

8 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE D AVIS V. W EST Held: Affirmed. Radoff is cloaked with derived judicial immunity. Derived judicial immunity by a person is the same as absolute immunity for judges. Judicial immunity can attach to certain non-judges when judges delegate their authority, appointing another to perform services for the court (as an officer of the court). Texas uses the functional approach– looks whether the person seeking immunity is intimately associated with the judicial process. Also that person exercises discretionary judgment comparable to that of the judge Functional approach focuses on nature of the function performed & if persons conduct is like the delegating judge. Radoff is cloaked with derived judicial immunity. Every action whether good or bad, honest or dishonest, well- intentioned or not is immune as applied to the function undertaken.

9 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T HE F EDERAL C OURT S YSTEM Federal District Court U.S. Court of Appeals Specialized Federal Courts U.S. Supreme Court

10 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. F EDERAL D ISTRICT C OURT Courts of original jurisdiction Use juries or judge as trier of fact Trial courts deal in issues of fact Federal trial courts also use judicial officers called magistrates 94 federal districts in the court system

11 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. U.S. C OURT OF A PPEALS 12 courts Usual rule: There is the right to appeal to this court 3 judge panels deal in issues of law and review most decisions En banc proceeding means all active judges in a circuit will a hear a case

12 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S PECIALIZED F EDERAL C OURTS Limited jurisdiction Ex: U.S. Bankruptcy Courts Ex: Court of Appeals for the Federal Circuit takes appeals from U.S. District Court in patent, trademark and copyright cases U.S. Court of Federal Claims U.S. Court of International Trade U.S. Tax Court See Exhibit 2.2 See also Exhibit 2.3

13 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T HE U.S. S UPREME C OURT Highest court in the country Appellate review court Cases usually heard by 9 justices Term begins First Monday in October in Washington, D.C. Receives thousands of petitions each year Issues about 70-80 opinions per term Reviews cases from U.S. District Courts U.S. Courts of Appeals Highest Courts of the States Review is through Writ of Certiorari Often deal with Constitutional decisions If writ not granted, lower court decision is final

14 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTERNATIONAL P ERSPECTIVE I NTERNATIONAL P ERSPECTIVE THE FRENCH COURT SYSTEM France is a civil law country (typical of Europe) Written (code) law used rather than judge-made law Court System Cour de cessation (Supreme Court) Cour dappel (Court of Appeals) Tribunal dinstance (Court of general jurisdiction) Appellate process in France is very different from U.S. Cour de Cessation: no authority to create judgments Cour de Cessation: rejects an appeal or invalidates the decision & returns case to Cour dappel for reconsideration

15 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T HE T YPICAL S TATE C OURT S YSTEM State court of Original Jurisdiction Where case is first brought; deals in issues of fact Usually called District Court (But in NY, is called the Supreme Court) State court of Appellate Jurisdiction Deals with appeals and issues of law Usually called Court of Appeals Can have different names (District Court of Appeals in FL; Appellate Division in NY) State Supreme Court Second appellate review dealing w/issues of law Usually called Supreme Court (but in NY, is called Court of Appeals)

16 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. R ULES OF C IVIL P ROCEDURE R ULES OF C IVIL P ROCEDURE (I N U NITED S TATES C ODE, T ITLE 28) Federal Rules of Civil Procedure: Govern procedural aspects of litigation Pleadings Discovery Trial procedures Relevant motions States are free to develop their own procedural rules Most adopt the Federal Rules of Civil Procedure or rules very similar to them

17 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Jurisdiction: Right of a court to hear and decide the case A number of courts may have jurisdiction over a given case Need jurisdiction over the subject matter Need jurisdiction over either persons or property If jurisdiction is lacking, judgment is null and void

18 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Literal Meaning: The power to speak of the law Plaintiff must select a court that has Subject-matter jurisdiction Created by constitution or statute and Personal jurisdiction over The person of the defendant or The property of the defendant

19 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S UBJECT M ATTER J URISDICTION : F EDERAL C OURTS Federal court jurisdiction is derived from the U.S. Constitution Federal courts may hear cases involving federal questions Cases in which the U.S. is a party to the suit Cases involving citizens of different states Diversity of citizenship jurisdiction Amount in Controversy is for more than $75,000 No $ amount needed for cases involving federal law

20 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S UBJECT M ATTER J URISDICTION : S TATE C OURTS A particular court may resolve a particular subject matter, i.e. Wills & Trusts: Probate Court Divorces, Child Custody: Domestic/Family Court Municipal Matters: Municipal Court Small Claims Court - Limited claims of usually $5000 or less, sometimes up to $10,000 will be heard If there is not a particular subject matter, case first goes to general trial court Courts of original jurisdiction – where case is first brought Courts of appellate jurisdiction – where lower court decisions are reviewed If there is no jury, judge decides the facts General right to appeal to at least one higher court

21 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTERNATIONAL P ERSPECTIVE LONDONS COMMERCIAL COURT In international contracts, parties can state how future disputes will be resolved either in the contract or when disputes arise. The Commercial Court in London is a popular forum. o Trials handled by one judge o No jury o Trials usually occur within 1 year of dispute o Finished rather quickly o Loser pays winners attorneys fees o English courts are respected; judgment more likely to be enforced in other countries o Remedies have been innovative & relevant to commercial matters

22 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. P ERSONAL J URISDICTION : I N P ERSONAM J URISDICTION Over the person, usually through Summons through service of process or substituted service Residency Doing business in the state Submission to the jurisdiction Out of state defendants Jurisdiction is more difficult Serve them while in the state May not trick them to get into the state for service of process See Exhibit 2.4

23 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. J URISDICTION O VER O UT - OF -S TATE B USINESS D EFENDANTS Long-arm Statutes Aimed at non-resident businesses Protects states citizens from business defendants who do business in the state and then leave the state Jurisdiction over corporations: Court of the state in which corporation was incorporated Court is in a state where corporation has headquarters or main plant Court is in a state in which corporation is doing business See Exhibit 2.5 re: Long-Arm Statute See The Long Arm of the Law

24 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C YBERLAW THE LONG ARM OF THE INTERNET When does a web site advertiser in nationwide sales become subject to another states jurisdiction? o Generally personal jurisdiction occurs when defendant is engaged in business in a state. o i.e. Amazon.com does active business in every state by selling online, and is subject jurisdiction in those states No jurisdiction if contact with a forum is only informational, even if the web site is interactive No jurisdiction if web site gives information about sales, allows customers to download forms and provides e-mail address for inquiries Unclear area: How much sales activity must occur with residents in a state for the web seller to become subject to jurisdiction in the buyers state? o Ex: One low cost item is not active business, esp. if buyer initiates the contact. o Ex: One spam e-mail sent out of state – no jurisdiction

25 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE B LIMKA V. M Y W EB W HOLESALER, LLC My Web Wholesalers (of Maine) does business on the Internet. Blimka (of Idaho) surfed the net, found My Web and called DePalma, a My Web manager. Ordered 26,500 pairs of jeans for $20,935 and wired money Shipment of 16,000 jeans arrived. Blimka called My Web to also complain about quality. Blimka sued for fraud against My Web and DePalma in Idaho court. Process was served on defendants in Maine. No response by defendants; court issued a judgment against both defendants, saying it had jurisdiction. They appealed. HELD: Affirmed. Idaho court has jurisdiction. Defendants actions of fraud invoked the use of the Idaho long- arm statute. Defendants purposeful false misrepresentation directed into Idaho created minimum contacts with Idaho that does not offend 14 th Amendment traditional notions of fair play and substantial justice. Blimka awarded attorney fees and costs.

26 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I SSUE S POTTER CAN YOUR FIRM BE REACHED? You work for Florida real estate development firm called Golden Shores. Many clients are people coming to Florida from New York to retire. To increase marketing, e-mails are sent to potential clients, offering 5% discount to buyers who respond by e-mail and buy property. New York requires real estate agents who offer property for sale to be registered in the state of New York. A colleague in the firm says this law doesnt apply to your company because Golden Shores is located in Florida – the only communication with New York is through e-mail Colleague says that New York authorities cannot come after Golden Shores for any violations. IS THE COLLEAGUE CORRECT???

27 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. J URISDICTION OVER P ROPERTY In rem jurisdiction In rem (rem means the thing) The dispute between the parties is over property Where property is located creates jurisdiction Whether the defendant-property owner is within the jurisdiction does not matter Tangible property creates in rem jurisdiction – i.e real estate, personal property Intangible property creates in rem – i.e. bank accounts, stocks If property is removed to another state, no in rem jurisdiction

28 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E XCLUSIVE J URISDICTION Federal courts have exclusive jurisdiction over some matters Examples: Federal crimes Bankruptcy Patents Copyrights Federal questions Congress can specify by statute exclusive jurisdiction in federal courts State courts have exclusive jurisdiction over some matters Examples: Divorce Adoption Matters controlled by state government Supremacy of federal law state jurisdiction cannot infringe on federal jurisdiction

29 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ONCURRENT J URISDICTION Federal and state courts have exclusive jurisdiction over some matters; HOWEVER, Sometimes both state & federal courts have concurrent jurisdiction. Plaintiff may bring suit in either court system If plaintiff chooses state court, Defendant has right to remove to federal court (right of removal in diversity of citizenship cases). If plaintiff files suit in defendants home state court Defendant cannot move case to federal court. Sometimes Congress will explicitly give federal courts exclusive jurisdiction over an area of law. See Exhibit 2.6

30 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A PPLYING A PPROPRIATE L AW IN F EDERAL C OURT Issue: When there is diversity of citizenship, which substantive law should the federal court apply? Ex: Lil Wayne and Jay-Z are involved in dispute over rights to revenue from a concert Lil Wayne sued Jay-Z in California Both were from California Case would be decided in California Ex: Lil Wayne is from California & Jay-Z is from Florida. If amount in controversy exceeded $75,000, federal court can decide case based on diversity of citizenship If case involves statutory law, court will apply law of the statute What if case involves common-law issues? Courts will apply law of state with most significant interest to the outcome See Erie v. Tompkins See Exhibit 2.7

31 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE E RIE RR C O. V. T OMPKINS A dark night; protruding object from train owned by Erie RR; Tompkins injured as he stood next to the tracks in Pennsylvania He claimed accident caused by negligent operation of train Tompkins: Pennsylvania citizen Erie: Incorporated in NY Accident: In Pennsylvania If federal common law applies: Erie is liable If Pennsylvania common law: Tompkins trespassed & Erie is not liable Trial court applied federal common law. Jury awarded $30,000 to Tompkins. Affirmed by the Court of Appeals. Erie appealed to the Supreme Court. Held: Concept of federal common law in diversity of citizenship cases is ended. Federal courts will apply relevant state law. Pennsylvania law applies. Tompkins is a trespasser. Erie is not liable.

32 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A PPLYING A PPROPRIATE L AW IN S TATE C OURT Incidents of the case take place in more than one state Conflict of laws or choice of law rules apply Rules vary according to nature of dispute, i.e. Contract cases: Laws of state in which contract was made will be applied Tort cases: Laws of state where tort takes place States try to look at interests of the parties, government, policies General rule: Laws apply for state that has the most significant interest See Exhibit 2.7

33 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. V ENUE Venue: Appropriate geographical location (proper place) where the lawsuit is heard In controversial or well-publicized cases, defendants will ask for change of venue Will be in same court system, but likely in a different geographical location Doctrine of forum non conveniens – a special venue doctrine: Either party may request a change of venue to a more convenient court that could hear the case. Court will consider such issues as Where actions of case take place Where witnesses are located Unfair burdens to parties See BancorpSouth Bank v. Hazelwood Logistics Center, LLC

34 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE B ANCORP S OUTH B ANK V. H AZELWOOD L OGISTICS C ENTER, LLC HLC was formed to build commercial real estate development project in Missouri (Hazelwood Logistics Center) HLC – Missouri company – got loan from BancorpSouth Bank (the Bank) – Mississippi company Later 4 Missouri banks (Participating Banks) joined o Lent more money for HLC o However Bank was the lead lender in the project Owners of HLC provided guaranty on loan if problems arose Property HLC chose had environmental problems Development halted – loan came due Bank sued for payment from HLCs owners in Federal District Court in Missouri Hazelwood moved to dismiss, saying 1) venue was improper & 2) federal district court lacked subject matter jurisdiction Federal District Court held it had jurisdiction and venue was proper -- HLC appealed (Continued)

35 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE B ANCORP S OUTH B ANK V. H AZELWOOD L OGISTICS C ENTER, LLC AFFIRMED. Forum selection clauses in documents were upheld o The clauses did not prohibit the bank from bringing suit in U.S. District Court for the Eastern District of Missouri. In diversity case, court will apply substantive law that would be applied by Missouri state court Loan agreements and guaranty provided/stated that Missouri law governs interpretation & application of the contracts. This is a choice of law provision – binds the parties to Missouri law Hazelwood argued #1: Lack of complete diversity because at least some of participating banks are Missouri citizens o Court disagreed ; Said the participating banks were not demonstrated as necessary parties to the suit; District court properly exercised jurisdiction Hazelwood argued #2: Action in federal court violated loan agreements and guarantys choice of venue provisions o Court disagreed. o Documents did not limit the right of [the bank] to bring action... against (HLC) in the Court of any other jurisdiction. o Loan agreements provided an action may be brought in the Courts of St. Louis County, but do not indicate such actions must be brought there....


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