1. 1 Agenda for 17th Class Admin –Name plates –Handouts Slides Polinsky –Office hours this week Thursday 12-1PM Not Thursday 2-3PM –Thanks for electing me PILF bake sale judge –Exam: Fri 12/11 9-11AM (in class / multiple choice) 1-9PM (take home / essay) –Change in writing assignment grading -- More 3s Diversity Jurisdiction Supplemental Jurisdiction Introduction to settlement and ADR

2. 2 Assignment for Next Class Blackboard Questions on Subject Matter Jurisdiction –I suggest you do at least first 7 Settlement and ADR –Yeazell pp. 523-24,531-44, 548-50, 555-58 You do not need to read these materials carefully –Handout (Polinsky) If you are not quantitatively inclined, you will need to read this carefully. Polinsky is extremely clear, but it will take time. –Questions on last page of Polinsky handout This is writing assignment for Writing Group 4

3. 3 Review of Subject Matter Jurisdiction Constitution, Article III, Section 2 –Federal courts may have jurisdiction over Cases that raise a federal question Cases between “citizens of different [U.S.] states” –even if not based on federal law Cases between U.S. citizen and foreigner –even if not based on federal law –Article III. “The Judicial Power shall extent to … Controversies between a State or a Citizen thereof, and foreign … Citizens or Subjects.” –Does not mention, and therefore no jurisdiction over Cases between two foreigners, if not based on federal law Unconstitutional for statute to give federal courts jurisdiction over cases not mentioned in Article III –The federal courts shall have jurisdiction over all torts suits –The federal courts shall have jurisdiction over all cases arising under federal law, and all tort cases shall be deemed to arise under federal law.

4. 4 Review of Subject Matter Jurisdiction Statute can and usually is narrower than constitution –1332. Amount in controversy requirement –1332. No jurisdiction in suit between US citizen and foreigner, if foreigner is permanent resident domiciled in same US state as US citizen Judicial interpretation often is narrower than text of statute –Fed Q J. -- well pleaded complaint rule –Diversity J. -- complete diversity rule

5. 5 Review of Federal Question Jurisdiction “Well pleaded complaint rule” –Does cause of action arise under federal statute or US constitution? –Would minimally adequate complaint invoke federal law E.g. plead facts that would satisfy elements required by federal law –Not sufficient that federal issue in answer or reply –Cannot get around rule by pleading more than necessary Federal statute or constitutional provision does not need to be mentioned in “short and plain statement of claim” FRCP 8(a)(2) Federal statute or constitutional provision does need to be in jurisdictional statement. FRCP 8(a)(1)

6. 6 Diversity Jurisdiction I Federal subject matter jurisdiction if –Citizen of State A sues citizen of state B –AND “amount in controversy exceeds … $75,000” Rationale –Concern about state court bias against non-citizens –Concern about anti-corporate bias of state courts –Federal forum for disputes with inter-state/national implications US citizen is citizen of US state in which “domiciled” –Domicile = residence with intent to remain indefinitely “indefinitely” means no plans to leave, even if don’t plan to stay permanently –Individuals do not lose domicile in one state until establish domicile somewhere else –Student who grew up in MA and went to school in IL and CA may still be citizen of MA, even if hasn’t lived there for 10 years, as long as never intended to remain indefinitely in IL or CA Corporations are citizens of two places –State of incorporation –State of principal place of business (PPB) PPB = “nerve center” or headquarters. Hertz (2010) –Means LESS likely to get diversity jurisdiction If individual citizen of CA sues corporation incorporated in Delaware with PPB in CA, then no diversity jurisdiction Similarly, if individual citizen of Delaware sues….

7. 7 Diversity Jurisdiction II Removal allowed if case could have been brought initially in federal court AND defendant is NOT from forum state –CA sues MA in MA court for $80,000, MA defendant cannot remove to federal court, even though CA plaintiff could have brought case in federal court Complete diversity rule –No plaintiff can be a citizen of the same state as any defendant MA v CA & MA, no diversity jurisdiction MA & CA v MA, no diversity jurisdiction MA & CA v NV, diversity jurisdiction AL & AK & CA & DE v AL & FL & KS & MO & NH & NM & OH –NO diversity jurisdiction –Rationale In-state party protects out-of-state party –Doesn’t make sense, because co-defendants may have divergent interests Reduce federal caseload –Not constitutionally required Congress could change by statute Similar to status of well-pleaded complaint rule

8. 8 Diversity Jurisdiction III Also diversity jurisdiction if –Suit between citizen of US and foreigner (citizen or subject of foreign state). 28 USC 1332(2) CA v. France; MA v Germany, etc. Called “alienage jurisdiction” –Alien admitted to US for permanent residence treated like citizen of the state in which domiciled CA v French permanent resident domiciled in MA. Diversity CA v French permanent resident domiciled in CA. No diversity If no diversity, can, of course, still get federal jurisdiction through federal question Even if diversity of citizenship, must still show personal jurisdiction & venue

9. Diversity J Questions Summarize Redner Yeazell Pp. 209 Q1, 3b, 4, Suppose P is a citizen of Turkey, and D is a citizen of Egypt admitted to permanent residence in the US and domiciled in MA. P sues D in federal district court to collect a $100,000 debt. Is there federal jurisdiction? –First consider this question under the current of 28 USC 1332(a) (the version in your Rules Pamphlet –Now consider this question under 28 USC 1332(a) as it existed before 2011 (See next slide) Does the older statute give you a different answer? If so, is that answer constitutional under US Constitution, Article III, Section 2? Would a purposivist interpretation of the text give you a different answer than a textualist interpretation? Can you see why 28 USC 1332(a) was amended in 2011? 9

10. 28 USC 1332(a) before 2011 Amendment The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between-- –(1) citizens of different States; –(2) citizens of a State and citizens or subjects of a foreign state; –(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and –(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States. For the purposes of this section, section 1335, and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled. 10

11. 11 Supplemental Jurisdiction Exception to general rule that need to show independent ground for subject matter jurisdiction over each claim and each plaintiff-defendant pair. Need to serve process on each defendant separately following FRCP 4 Each defendant must serve an answer See problems on handout

12. Intro to Settlement I Most cases settle –Roughly 2/3rds of filed cases settle Some cases settle even before complaint filed –Roughly 5% go to trial –Roughly 20% dismissed (Rule 12) or terminated by summary judgment –Roughly 10% other – default judgment, plaintiff failed to prosecute, referred to arbitration, etc. Settlement is contract by which plaintiff dismisses case in return for something valuable from the defendant –Usually money –Can be almost anything – job, house, letter of recommendation, apology –Often non-monetary terms -- Confidentiality/secrecy, return of discovery documents, payment of costs Economic analysis of settlement –Settlement is attractive to parties because it enables them to save on the cost of litigation –Settlements is sometimes not possible, because parties are sometimes too optimistic about trial outcomes –Settlement is sometimes not reached, if the parties are too stubborn (strategic) in their negotiations 12

13. Intro to Settlement II Economic analysis of settlement –Settlement attractive to parties because saves on litigation costs Total litigation costs often equal net amount plaintiff recovers Suppose plaintiff wins $90,000 –Usually pays one third to lawyer. »So plaintiff’s lawyer gets $30,000 »So plaintiff nets $60,0000 = $90,000 - $30,000 –Defendant usually pays lawyers roughly same amount: $30,000 –So lawyers get $60,000 ($30,000 + $30,000) and plaintiff gets $60,0000 –Defendant pays $120,000 = $90,000 + $30,000 If settle early, parties can both be better off –E.g. Defendant settles with plaintiff for $80,000 –Of course, depends in part on how much parties have already invested in litigation 13

14. Intro to Settlement III Economic analysis of settlement (cont.) –Settlement possible if it makes both sides better off than trial –Need to calculate outcome if case did not settle Easy if trial outcome known with certainty Plaintiff. Judgment minus lawyers fees. 90K -30K=60K Defendant. Judgment plus lawyer’s fees. 90K+30K=120K So any settlement amount between 60K and 120K would make both parties better off Of course, may fail to settle because of hard bargaining –If trial outcome uncertain, need to calculate expected value Expected value = probability that plaintiff will prevail x judgment amount if plaintiff prevails Suppose 50% probability that plaintiff will get 100K Plaintiff better off with settlement greater than: –(50% x 100K) – 30K = 50K – 30K = 20K Defendant better off with settlement less than: –(50% x 100K) + 30K = 50K + 30K = 80K So any settlement between 20K and 80K would make both parties better off –Of course, lots of simplifying assumptions…. 14

15. Intro ADR ADR = Alternative Disputes Resolution –Mediation. Settlement negotiations with assistance from neutral person Mediator does not have power to imposed settlement Used with increasing frequency –Arbitration. Adjudication by private judge –Settlement is sometimes classified as ADR 15