1. 1 Agenda for 16 th /17th Class Admin – Name plates – Handouts Slides Shavell – Section F-J only F 10/24. Class rescheduled 8-9:50 in Rm 103 M 10/27. Class rescheduled to 1:45-3:35 in Rm 7 – Class canceled Friday Nov 7 Rescheduled for Wednesday Nov 5, 6-8PM in Rm 3 – Mock mediation next Friday Will email info Monday afternoon – F-J. working on rescheduling court visit Review of subject matter jurisdiction

2. Assignment – A-E for Monday 10/27; F-J for F 10/24 Shavell handout Questions / Writing Assignment – Problems on last page of Shavell handout – Remember Civil Action Assignment for M 10/27 – A Civil Action, pp. 146 to end – In what ways does A Civil Action confirm the validity of Polinsky’s economic model of settlement? – In what ways does A Civil Action contradict Polinsky’s economic model of settlement or suggest that the real world is more complex than that model? – Given the settlement, how did they calculate how much Schlichtmann and the other lawyers received? 2

3. 3 Review of Subject Matter Jurisdiction For subject matter jurisdiction in federal court to be proper – It must be authorized by U.S. Constitution and federal statute 2 main bases of federal jurisdiction – Federal question Well-pleaded complaint rule – Diversity Complete diversity rule, amount in controversy Complex litigation – Must find subject matter jurisdiction for each claim against each party – Some relaxation in class actions or mass torts 1332(d) and 1369 – Some relaxation when one claim clearly within federal jurisdiction And other claim is part of same “case or controversy” (same transaction or occurrence) Supplemental jurisdiction – Statute designed to preserve complete diversity rule – Poorly drafted » Textualist versus purposivist/intentionalist approaches

4. Settlement – Settlement Problems

5. 5 Arbitration I Adjudication by private judge under rules agreed to by parties Must be agreed to by parties – Pre-dispute. In contract, before dispute arises – After dispute arises Arbitration is legally binding – Party that agreed to arbitration and then changes its mind can be compelled to arbitrate Court will dismiss case Arbitrator can enter equivalent of default judgment – Arbitration awards are enforceable in court – Arbitration awards are not generally appealable Arbitration may be through established organizations (non-profit or for profit) – American Arbitration Association, JAMS – Organizations have panels of arbitrators and set rules

6. 6 Arbitration II Parties to arbitration generally have control over who arbitrators are – Either agree on arbitrators in advance Or agree to procedure for selecting arbitrator – E.g. Start with list and each side strikes those like least, etc. – Procedure may be set out in organization rules (AAA or JAMS) or may be negotiated by parties – Often arbitrators are retired judges, but can be anyone E.g. Writers Guild has writers as arbitrators Parties to arbitration generally have control over procedures – AAA and JAMS have rules that can choose – Or can set out own rules E.g. Writers Guild. Everything in writing, no oral hearing or testimony

7. 7 Arbitration III Arbitration is controversial – Especially in consumer contracts Where business may put arbitration clause in form contract stipulating defendant friendly arbitrators and procedures (e.g. no class actions) Federal law promotes arbitration – Federal American Arbitration Act is interpreted to require states to enforce arbitration agreements, except in rare circumstances Agreement was unconscionable or otherwise defective under ordinary state law contract principles (e.g. fraud, duress), or Procedure violative of due process (e.g. biased judges) – Very hard to prove, even though probably often true, because business generally chooses arbitration procedures, including rules for selection of arbitrators – Businesses are “repeat players” » So arbitration providers have incentive to please business, otherwise business will choose other arbitration provider in future.

8. Next Class – Fees = Compensation to lawyer Generally large. Approximately 1/3 rd of judgment English rule. Loser pays other side’s attorney fees American rule, no reimbursement of other side’s lawyer’s fees » Except when explicitly allowed or mandated by statute – Costs = court fees Generally small. Loser pays, even in U.S. 8