1. 1 Agenda for 28th Class Admin –Name plates –Handouts Slides –No class on Friday Review of Erie Choice of Law Introduction to Personal Jurisdiction

2. Assignment –Personal Jurisdiction: International Shoe & early cases FRCP 4(k), especially 4(k)(1)(A) Yeazell, 79-91 Briefly summarize International Shoe If the Supreme Court had not decided to change the rules in International Shoe, would jurisdiction have been proper under the prior rules? If your answer is “yes,” why do you think the Supreme Court changed the rules? If you answer is “no,” why was the outcome under the new rules better? Yeazell pp. 86ff. Qs 1b, 3 –Optional: Glannon Chapters 1 & 2 2

3. 3 Review of Erie Apply state substantive law in federal court in diversity cases Apply federal procedure in federal court in diversity cases Line between substance and procedure is not clear –Apply FRCP and interpretations of it As long as rule is “arguably procedural” E.g. as long as rule is legitimate, which means always –Apply federal practices when doing so is consistent with purposes of Erie Discourage forum shopping Avoid inequitable administration of law Modern trend is to apply federal practices Federal practice is something procedural (like standards of review) that is not in the FRCP

4. 4 Choice of Law Which state’s law applies? Relevant in state court Relevant in federal court in diversity cases Old rules (1 st Restatement) Torts: Lex loci delictus (law of place of accident) –If Contracts –Place of formation, if issue was whether contract properly entered into –Place of performance, if issue was whether contract breached Choice of law clauses not generally enforced –New Rules (2 nd Restatement) Apply law of state with “most significant contacts” Complex rule for choice of law clauses –Federal courts apply choice of law rules of state where located (Klaxon)

5. 5 Choice of Law Questions I 1) Suppose Wes, a resident of West Dakota, gets into an accident with East, a resident of East Dakota, on a highway in West Dakota. Wes sues East in West Dakota state court alleging per se negligence because East was driving 79 miles per hour. No speed limit was posted. West Dakota law states that, unless otherwise posted, the speed limit on a highway is 70 miles per hour. East Dakota law, however, states that, unless otherwise posted, the speed limit on a highway is 80 miles per hour. Which state’s law applies to this dispute? Is your answer different under the traditional lex loci commissi rule than under the Restatement Second? If your answer is different, which rule makes more sense? 2) Same as (1) except Wes sues in West Dakota federal district court. 3) Same as (1) except Wes sues in East Dakota state court.

6. 6 Choice of Law Questions II 4) Driver and Passenger are both domiciled in West Dakota. Driver drives passenger to East Dakota. While in East Dakota, Driver talks on his cell phone and causes an accident in which Passenger is injured. Passenger sues Driver in West Dakota state court for negligence. According to East Dakota law, passengers have no right to sue drivers for injuries caused by negligence. According to West Dakota law, passengers can sue drivers for negligence. Which state’s law applies to this dispute? Is your answer different under the traditional lex loci commissi rule than under the Restatement Second? If your answer is different, which rule makes more sense? 5) Same as (4), except Passenger sues in West Dakota federal court. 6) Same as (4) except Passenger sues in East Dakota state court.

7. 7 Choice of Law Questions III 7) Spend, a Nevada domiciliary, is completely irresponsible with money. Fortunately, he recognizes this fact and has set up a spendthrift trust. Under the terms of the trust, Spend cannot borrow money without the consent of Trustee, a friend he trusts. Spend goes to California and borrows money there from Sharkey to be repaid in one year at Sharkey’s place of business in California. When Spend doesn’t repay the loan, Sharkey sues Spend in Nevada. Under Nevada law, loans to someone who has set up a spendthrift trust are void. California law does not allow people to set up spendthrift trusts, so under California law, such loans are enforceable. The traditional rule for contracts was the law of the place the contract was formed governs disputes about contract validity. Under the traditional rule, what state’s law would apply? Under the Restatement Second, which state’s law should apply to the dispute? If the traditional rule and Restatement Second suggest different answers, which makes more sense? 8) Same as (7), except Sharkey sues in California state court. 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the money there, with repayment to be made to Sharkey when he returns to Nevada a year later.

8. 8 Choice of Law Questions IV 10) Same as (7), except the loan contract includes the following clause: “This contract shall be governed by California law.” The traditional rule was not to enforce choice of law clauses. See also Restatement (Second) below § 187. Law Of The State Chosen By The Parties (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue. (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either –(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or –(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

9. 9 Choice of Law Questions V Plaintiff in Phillips brought the case in federal district court in Montana. Why is there a decision of the Supreme Court of Montana? In Phillips, the Montana Supreme Court observes that “applying the law of the place of manufacture would be unfair because it would tend to leave victims under compensated as states wishing to attract and hold manufacturing companies would raise the threshold of liability and reduce compensation…. [A state with a high concentration of manufacturing] could enjoy all the benefits associated with liability laws which favored manufacturers in order to attract and retain manufacturing firms and encourage business within its borders while placing the costs of its legislative decision, in the form of less tort compensation, on the shoulders of nonresidents injured by its manufacturers’ products.” (p. 249). –Suppose Montana has a relatively low concentration of manufacturing. Would its citizens benefit by laws which raised the threshold of liability and reduced compensation? Or would its citizens benefit by laws which lowered the threshold of liability and increased compensation? If it lowered the threshold of liability and increased compensation, who would bear the increase in costs? What does this suggest about the fairness of applying Montana law?

10. 10 Choice of Law Questions VI In Phillips, the Montana Supreme Court asserted that “we do not believe that the purpose of any potentially applicable Michigan product liability law would be to regulate the design and manufacture of products within its borders. The purpose of product liability law is to regulate interstate sales or sales to residents and to set the level of compensation when residents are injured. ” (p. 249) –If the plaintiffs in Phillips had filed the case in Michigan state court, do you think Michigan state judges would have agreed that its laws are inapplicable? What purpose might a Michigan judge ascribe to product liability law to show that Michigan law should apply? If you were a judge on the Montana Supreme Court, would you have retained the traditional lex loci commissi rule, or would you have voted (like the actual Montana Supreme Court) to adopt the Restatement (Second) most significant relationship approach? Why?

11. 11 Introduction to Personal Jurisdiction Personal jurisdiction is about which court can hear a case –If case is in state court, personal jurisdiction answers question “which state court?” California state court? Massachusetts state court? –If case is in federal court, personal jurisdiction answer question “federal court in which state?” Federal court in California? Federal court in Massachusetts? –Contrasts Subject matter jurisdiction. Federal or state court? Venue. Which court within a state –Los Angeles superior court or San Francisco superior court –C.D. of California (federal court in LA) or N.D. California (federal court in San Francisco)

12. 12 Long-Arm Statutes Court must have statutory or rule authority AND statute or rule must be constitutional –Structure is similar to Service of Process. Need statutory/rule authority AND statute/rule must be constitutional Subject matter jurisdiction. Need statutory authority AND statute must be constitutional –State statutes are generally called “Long Arm Statutes” Enumerated Act statutes –E.g. statute says, State court has jurisdiction over defendant if it is a citizen of the state, if it committed a tort in the state, if it was a party to a contract to be performed in the state… To the Limit of the Constitution statutes (CA) –Federal rule is FRCP 4(k)(1)(A) Federal courts generally apply state long-arm statute applicable to court of “general jurisdiction –“Court of general jurisdiction” means non-specialized court with power to hear big cases (e.g. superior court), not family court, small claims court or other specialized court –Course will focus on constitutional limitations Due Process clause

13. 13 Rules before International Shoe (1945) Pennoyer v Neff (1877) 3 bases for personal jurisdiction –In personam. If defendant is citizen or resident of state, or present in state, or consented to jurisdiction For individuals, extreme case was service of process in airplane over Arkansas. Grace v. MacArthur (1959) Corporations are citizens in state where incorporated (e.g. Delaware) Difficult to determine where corporation is “present” –Where headquartered. Clearly yes –Where has plant or office and lots of employees. Clearly yes –What if only has a few employees? Not clear –Where does business? Unclear what means to “do business” –In rem. In dispute about property, personal jurisdiction is proper where property is located –Quasi in rem. If suit is NOT about property, but defendant has property in state, plaintiff can sue in that state for whatever cause of action, but recovery is limited to value of property in state

14. 14 2 Ways to Challenge Jurisdiction In court where sued –Make 12(b)(2) motion or state equivalent –“Special appearance” means defendant appears in court solely to challenge jurisdiction Otherwise, appearance in court could be construed as consent to jurisdiction Collateral attack –Only possible where defendant does not have assets in forum So plaintiff would have to enforce judgment in state where defendant has assets Enforcing judgment in another state requires separate suit in that state –But Full Faith & Credit Clause of US Constitution requires state to respect judgment of another state, IF THE STATE WHICH RENDERED THE JUDGMENT HAD JURISDICTION –Defendant does not appear in court where sued –Default judgment is entered against defendant –When plaintiff goes to enforce judgment in state where defendant has assets, defendant raises lack of personal jurisdiction as defense –Very risky, because if enforcing court decides the original court had jurisdiction, defendant cannot then challenge judgment on merits