1
CIVIL PROCEDURE
CASES, MATERIALS, AND QUESTIONS
FIFTH EDITION
2011 Letter Update
RICHARD D. FREER
Robert Howell Hall Professor of Law
Emory University School of Law
Atlanta, Georgia
WENDY COLLINS PERDUE
Dean and Professor of Law
University of Richmond School of Law
Richmond, Virginia
LEXISNEXIS
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2011 Update Memorandum
This memorandum has been prepared by Richard Freer and Wendy Perdue for the
benefit of students and faculty. The closing date for materials was June 30, 2011.
Permission is granted to distribute copies free of charge to students in classes using the
casebook.
The Sixth Edition of this Casebook will be published in early Spring 2012, in time
for review and adoption for courses starting in the Fall Semester 2012.
TABLE OF CONTENTS
Note on Changes to Computation of Time .....................................................................4
CHAPTER 2: PERSONAL JURISDICTION
PART B. CONSTITUTIONAL LIMITS ON PERSONAL JURISDICITON
SECTION 3. THE MODERN ERA .......................................................6
J. McIntyre Machinery, Ltd. v. Nicastro .................................................6
Questions..................................................................................................22
SECTION 4: GENERAL JURISDICTION23
Goodyear Dunlop Tires Operations, S.A. v. Brown ...............................23
Questions .................................................................................................29
CHAPTER 3: NOTICE AND OPPORTUNITY TO BE HEARD ...........................30
PART B: NOTICE .............................................................................................30
PART C: OPPORTUNITY TO BE HEARD .....................................................30
CHAPTER 4: SUBJECT MATTER JURISDICTION ............................................31
PART C: DETERMINING CITIZENSHIP OF ENTITIES ..............................31
i. CORPORATIONS ................................................................................31
The Hertz Corporation v. Friend ...........................................................31
Notes and Questions ...............................................................................39
ii. NON-INCORPORATED BUSINESSES ...........................................40
Note on Non-Incorporated Businesses ....................................................40
SECTION 6: REMOVAL JURISDICTION ..........................................40
Note ......................................................................................................40
CHAPTER 7: PLEADINGS ........................................................................................42
PART C: THE COMPLAINT
SECTION 1 REQUIREMENTS .............................................................42
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Note on Iqbal ..........................................................................................42
Questions .................................................................................................46
PART D: DEFENDANT‘S OPTIONS IN RESPONSE ....................................47
SECTION 4: DEFAULT AND DEFAULT JUDGMENT .................... 47
PART E: AMENDED PLEADINGS
SECTION 1: BASIC PRINCIPLES UNDER RULE 15(a) ...................48
SECTION 3: AMENDMENT AND STATUTE OF LIMITATIONS ..48
CHAPTER 9: ADJUDICATION ................................................................................49
PART A: THE RIGHT TO A JURY .................................................................49
PART C: SUMMARY JUDGMENT ................................................................49
PART D: CONTROLLING AND SECOND-GUESSING JURIES .................49
CHAPTER 10: WHAT LAW APPLIES IN FEDERAL COURT ...........................50
PART B: DETERMINING WHAT LAW APPLIES ........................................50
3. THE FEDERAL RULES OF CIVIL PROCEDURE ..........................50
a. WHAT HAPPENS WHEN THERE IS A FEDERAL RULE OF
CIVIL PROCEDURE ON POINT ...............................................50
ii. DETERMINING WHETHER A FEDERAL DIRECTIVE IS
VALID .........................................................................................50
CHAPTER 11: THE PRECLUSION DOCTRINES ................................................52
PART C: ISSUE PRECLUSION
SECTION 6. AGAINST WHOM CAN ISSUE PRECLUSION BE
ASSERTED? .......................................................................................52
CHAPTER 12: SCOPE OF LITIGATION ...............................................................57
PART F: OVERRIDING PLAINTIFF‘S PARTY STRUCTURE
SECTION 2. NECESSARY AND INDISPENSABLE PARTIES ........57
CHAPTER 13: SPECIAL MULTI-PARTY LITIGATION: INTERPLEADER
AND THE CLASS ACTION .......................................................................................58
PART C: THE CLASS ACTION
SECTION 4:
PRACTICE UNDER RULE 23 ..............................................................58
CHAPTER 14: APPEALS ..........................................................................................61
PART C: APPELLATE JURISDICTION IN THE FEDERAL COURTS
SECTION 2: COLLATERAL ORDER DOCTRINE .............................61
SECTION 5: Rule 54(b) ........................................................................61
SECTION 7: APPEALABILITY OF DISCOVERY ORDERS ............62
PART E: REVIEW OF JUDGMENTS OUTSIDE THE APPEALS
PROCESS ...............................................................................................62
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NOTE ON CHANGES TO COMPUTATION OF TIME
Effective December 1, 2009, the Federal Rules changed the method for
computing time and various time limits. The changes affected these Rules:
• Civil Rules 6, 12, 14, 15, 23, 27, 32, 38, 50, 52, 53, 54, 55, 56, 59, 62, 65, 68,
71.1, 72, 81; Supplemental Rules B, C, and G; and Illustrative Civil Forms 3, 4,
and 60; and
• Appellate Rules 4, 5, 6, 10, 12, 15, 19, 25, 26, 27, 28.1, 30, 31, 39, and 41;
• Bankruptcy Rules 1007, 1011, 1019, 1020, 2002, 2003, 2006, 2007, 2007.2, 2008,
2015, 2015.1, 2015.2, 2015.3, 2016, 3001, 3015, 3017, 3019, 3020, 4001, 4002,
4004, 6003, 6004, 6006, 6007, 7004, 7012, 8001, 8002, 8003, 8006, 8009, 8015,
8017, 9006, 9027, and 9033;
• Criminal Rules 5.1, 7, 12.1, 12.3, 29, 33, 34, 35, 41, 45, 47, 58, 59, and Rules 8 of
the Rules Governing §§ 2254 and 2255 Cases.
The Rules Advisory Committee explained the reasons for the changes in the
Committee Note to the proposed amendments to Fed. R. Civ. P. 6:
Subdivision (a)(1). . . .
Under former Rule 6(a), a period of 11 days or more was
computed differently than a period of less than 11 days. Intermediate
Saturdays, Sundays, and legal holidays were included in computing the
longer periods, but excluded in computing the shorter periods. Former
Rule 6(a) thus made computing deadlines unnecessarily complicated and
led to counterintuitive results. For example, a 10-day period and a 14-day
period that started on the same day usually ended on the same day — and
the 10-day period not infrequently ended later than the 14-day period. . . .
Under new subdivision (a)(1), all deadlines stated in days (no
matter the length) are computed in the same way. The day of the event
that triggers the deadline is not counted. All other days — including
intermediate Saturdays, Sundays, and legal holidays — are counted, with
only one exception: If the period ends on a Saturday, Sunday, or legal
holiday, then the deadline falls on the next day that is not a Saturday,
Sunday, or legal holiday. An illustration is provided below in the
discussion of subdivision (a)(5). Subdivision (a)(3) addresses filing
deadlines that expire on a day when the clerk‘s office is inaccessible.
. . . .
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Periods previously expressed as less than 11 days will be shortened
as a practical matter by the decision to count intermediate Saturdays,
Sundays, and legal holidays in computing all periods. Many of those
periods have been lengthened to compensate for the change. See, e.g.,
Rule 14(a)(1).
Most of the 10-day periods were adjusted to meet the change in
computation method by setting 14 days as the new period. A 14-day
period corresponds to the most frequent result of a 10-day period under the
former computation method — two Saturdays and two Sundays were
excluded, giving 14 days in all. A 14-day period has an additional
advantage. The final day falls on the same day of the week as the event
that triggered the period — the 14th day after a Monday, for example, is a
Monday. This advantage of using week-long periods led to adopting 7-
day periods to replace some of the periods set at less than 10 days, and 21-
day periods to replace 20-day periods. Thirty-day and longer periods,
however, were generally retained without change.
Changes Made after Publication and Comment
. . . .
(2) Civil Rules Time Provisions
Many Civil Rules containing specific time periods shorter than 11
days were published for comment on amendments extending the time
periods to account for the impact of changing to a computation method
that includes every day, abandoning the former practice of excluding
intermediate Saturdays, Sundays, and legal holidays. As set out below, it
is recommended that all of the proposals be adopted as published except
for Rules 50, 52, and 59. The proposals to extend the time for motions
under Rules 50, 52, and 59 from 10 days to 30 days have been scaled back
to a 28-day period. The 28-day period was chosen in coordination with
the Appellate Rules Committee to recognize the inconveniences that
would arise from adopting the same 30-day period as the deadline for
filing notices of appeal in most civil actions.
. . . .
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CHAPTER 2: PERSONAL JURISDICTION
B. CONSTITUTIONAL LIMITS ON PERSONAL JURISDICITON
3. THE MODERN ERA
At page 83, add
J. MCINTYRE MACHINERY, LTD., v. NICASTRO
Supreme Court of the United States
2011 U.S. LEXIS 4800 (June 27, 2011)
JUSTICE KENNEDY announced the judgment of the Court and delivered an
opinion, in which THE CHIEF JUSTICE, JUSTICE SCALIA, and JUSTICE THOMAS
join.
Whether a person or entity is subject to the jurisdiction of a state court despite not
having been present in the State either at the time of suit or at the time of the alleged
injury, and despite not having consented to the exercise of jurisdiction, is a question that
arises with great frequency in the routine course of litigation. The rules and standards for
determining when a State does or does not have jurisdiction over an absent party have
been unclear because of decades-old questions left open in Asahi Metal Industry Co. v.
Superior Court of Cal., Solano Cty., 480 U.S. 102 (1987).
Here, the Supreme Court of New Jersey, relying in part on Asahi, held that New
Jersey's courts can exercise jurisdiction over a foreign manufacturer of a product so long
as the manufacturer "knows or reasonably should know that its products are distributed
through a nationwide distribution system that might lead to those products being sold in
any of the fifty states." Nicastro v. McIntyre Machinery America, Ltd., 201 N. J. 48, 76,
77 (2010). Applying that test, the court concluded that a British manufacturer of scrap
metal machines was subject to jurisdiction in New Jersey, even though at no time had it
advertised in, sent goods to, or in any relevant sense targeted the State.
That decision cannot be sustained. Although the New Jersey Supreme Court issued an
extensive opinion with careful attention to this Court's cases and to its own pre-cedent,
the "stream of commerce" metaphor carried the decision far afield. Due process protects
the defendant's right not to be coerced except by lawful judicial power. As a general rule,
the exercise of judicial power is not lawful unless the defendant "purposefully avails
itself of the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958).
There may be exceptions, say, for instance, in cases involving an intentional tort. But the
general rule is applicable in this products-liability case, and the so-called "stream-of-
commerce" doctrine cannot displace it.
I
This case arises from a products-liability suit filed in New Jersey state court. Robert
Nicastro seriously injured his hand while using a metal-shearing machine manufactured
by J. McIntyre Machinery, Ltd. (J. McIntyre). The accident occurred in New Jersey, but
the machine was manufactured in England, where J. McIntyre is incorporated and
operates. The question here is whether the New Jersey courts have jurisdiction over J.
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McIntyre, notwithstanding the fact that the company at no time either marketed goods in
the State or shipped them there. Nicastro was a plaintiff in the New Jersey trial court and
is the respondent here; J. McIntyre was a defendant and is now the petitioner.
At oral argument in this Court, Nicastro's counsel stressed three primary facts in
defense of New Jersey's assertion of jurisdiction over J. McIntyre.
First, an independent company agreed to sell J. McIntyre's machines in the United
States. J. McIntyre itself did not sell its machines to buyers in this country beyond the
U.S. distributor, and there is no allegation that the distributor was under J. McIntyre's
control.
Second, J. McIntyre officials attended annual conventions for the scrap recycling
industry to advertise J. Mc-Intyre's machines alongside the distributor. The conventions
took place in various States, but never in New Jersey.
Third, no more than four machines (the record suggests only one), including the
machine that caused the injuries that are the basis for this suit, ended up in New Jersey.
In addition to these facts emphasized by petitioner, the New Jersey Supreme Court
noted that J. McIntyre held both United States and European patents on its recycling
technology. 201 N. J., at 55. It also noted that the U.S. distributor "structured [its] adver-
tising and sales efforts in accordance with" J. McIntyre's "direction and guidance
whenever possible," and that "at least some of the machines were sold on consignment
to" the distributor. Id., at 55, 56 (internal quotation marks omitted).
In light of these facts, the New Jersey Supreme Court concluded that New Jersey
courts could exercise jurisdiction over petitioner without contravention of the Due
Process Clause. Jurisdiction was proper, in that court's view, because the injury occurred
in New Jersey; because petitioner knew or reasonably should have known "that its
products are distributed through a nationwide distribution system that might lead to those
products being sold in any of the fifty states"; and because petitioner failed to "take some
reasonable step to prevent the distribution of its prod-ucts in this State." Id., at 77.
Both the New Jersey Supreme Court's holding and its account of what it called "[t]he
stream-of-commerce doctrine of jurisdiction," id., at 80, were incorrect, however. This
Court's Asahi decision may be responsible in part for that court's error regarding the
stream of commerce, and this case presents an opportunity to provide greater clarity.
II
The Due Process Clause protects an individual's right to be deprived of life, liberty, or
property only by the exercise of lawful power. This is no less true with respect to the
power of a sovereign to resolve disputes through judicial process than with respect to the
power of a sovereign to prescribe rules of conduct for those within its sphere. As a
general rule, neither statute nor judicial decree may bind strangers to the State. Cf.
Burnham v. Superior Court of Cal., County of Marin, 495 U.S. 604, 608-609 (1990)
(opinion of SCALIA, J.) (invoking "the phrase coram non judice, 'before a person not a
judge' — meaning, in effect, that the proceeding in question was not a judicial
proceeding because lawful judicial authority was not present, and could therefore not
yield a judgment")
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A court may subject a defendant to judgment only when the defendant has sufficient
contacts with the sovereign "such that the maintenance of the suit does not offend
'traditional notions of fair play and substantial justice.'" International Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940)). Freeform notions of fundamental fairness divorced from traditional practice
cannot transform a judgment rendered in the absence of authority into law. As a general
rule, the sovereign's exercise of power requires some act by which the defendant
"purposefully avails itself of the privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws," Hanson, 357 U.S., at 253, though
in some cases, as with an intentional tort, the defendant might well fall within the State's
authority by reason of his attempt to obstruct its laws. In products-liability cases like this
one, it is the defendant's purposeful availment that makes jurisdiction consistent with
"traditional notions of fair play and substantial justice."
A person may submit to a State's authority in a number of ways. There is, of course,
explicit consent. E.g., Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 703 (1982). Presence within a State at the time suit commences through
service of process is another example. See Burnham, supra. Citizenship or domicile —
or, by analogy, incorporation or principal place of business for corporations — also
indicates general submission to a State's powers. Each of these examples reveals
circumstances, or a course of conduct, from which it is proper to infer an intention to
benefit from and thus an intention to submit to the laws of the forum State. Cf. Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985). These examples support exercise of
the general jurisdiction of the State's courts and allow the State to resolve both matters
that originate within the State and those based on activities and events elsewhere. By
contrast, those who live or operate primarily outside a State have a due process right not
to be subjected to judgment in its courts as a general matter.
There is also a more limited form of submission to a State's authority for disputes that
"arise out of or are connected with the activities within the state." International Shoe Co.,
supra, at 319. Where a defendant "purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and protections of its laws,"
Hanson, supra, at 253, it submits to the judicial power of an otherwise foreign sovereign
to the extent that power is exercised in connection with the defendant's activities touching
on the State. In other words, submission through contact with and activity directed at a
sovereign may justify specific jurisdiction "in a suit arising out of or related to the
defendant's contacts with the forum." Helicopteros, supra, at 414, n. 8.
The imprecision arising from Asahi, for the most part, results from its statement of the
relation between jurisdiction and the "stream of commerce." The stream of commerce,
like other metaphors, has its deficiencies as well as its utility. It refers to the movement of
goods from manufacturers through distributors to consumers, yet beyond that descriptive
purpose its meaning is far from exact. This Court has stated that a defendant's placing
goods into the stream of commerce "with the expectation that they will be purchased by
consumers within the forum State" may indicate purposeful availment. World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980) (finding that expectation
lacking). But that statement does not amend the general rule of personal jurisdiction. It
merely observes that a defendant may in an appropriate case be subject to jurisdiction
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without entering the forum — itself an unexceptional proposition — as where
manufacturers or distributors "seek to serve" a given State's market. Id., at 295. The
principal inquiry in cases of this sort is whether the defendant's activities manifest an
intention to submit to the power of a sovereign. In other words, the defendant must
"purposefully avai[l] it-self of the privilege of conducting activities within the forum
State, thus invoking the benefits and protections of its laws." Hanson, supra, at 253;
Insurance Corp., supra, at 704-705 ("[A]ctions of the defendant may amount to a legal
submission to the jurisdiction of the court"). Sometimes a defendant does so by sending
its goods rather than its agents. The defendant's transmission of goods permits the
exercise of jurisdiction only where the defendant can be said to have targeted the forum;
as a general rule, it is not enough that the defendant might have predicted that its goods
will reach the forum State.
In Asahi, an opinion by Justice Brennan for four Justices outlined a different
approach. It discarded the central concept of sovereign authority in favor of
considerations of fairness and foreseeability. As that concurrence contended, "jurisdiction
premised on the placement of a product into the stream of commerce [without more] is
consistent with the Due Process Clause," for "[a]s long as a participant in this process is
aware that the final product is being marketed in the forum State, the possibility of a
lawsuit there cannot come as a surprise." 480 U.S., at 117 (opinion concurring in part and
concurring in judgment). It was the premise of the concurring opinion that the defendant's
ability to anticipate suit renders the assertion of jurisdiction fair. In this way, the opinion
made foreseeability the touchstone of jurisdiction.
The standard set forth in Justice Brennan's concurrence was rejected in an opinion
written by Justice O'Connor; but the relevant part of that opinion, too, commanded the
assent of only four Justices, not a majority of the Court. That opinion stated: "The
'substantial connection' between the defendant and the forum State necessary for a
finding of minimum contacts must come about by an action of the defendant purposefully
directed toward the forum State. The placement of a product into the stream of
commerce, without more, is not an act of the defendant purposefully directed toward the
forum State." Id., at 112 (emphasis deleted; citations omitted).
Since Asahi was decided, the courts have sought to reconcile the competing opinions.
But Justice Brennan's concurrence, advocating a rule based on general notions of fairness
and foreseeability, is inconsistent with the premises of lawful judicial power. This Court's
precedents make clear that it is the defendant's actions, not his expectations, that
empower a State's courts to subject him to judgment.
The conclusion that jurisdiction is in the first instance a question of authority rather
than fairness explains, for example, why the principal opinion in Burnham "conducted no
independent inquiry into the desirability or fairness" of the rule that service of process
within a State suffices to establish jurisdiction over an otherwise foreign defendant. 495
U.S., at 621. As that opinion explained, "[t]he view developed early that each State had
the power to hale before its courts any individual who could be found within its borders."
Id., at 610. Furthermore, were general fairness considerations the touchstone of
jurisdiction, a lack of purposeful availment might be excused where carefully crafted
judicial procedures could otherwise protect the defendant's interests, or where the
plaintiff would suffer substantial hardship if forced to litigate in a foreign forum. That
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such considerations have not been deemed controlling is instructive. See, e.g., World-
Wide Volkswagen, supra, at 294.
Two principles are implicit in the foregoing. First, personal jurisdiction requires a
forum-by-forum, or sovereign-by-sovereign, analysis. The question is whether a
defendant has followed a course of conduct directed at the society or economy existing
within the jurisdiction of a given sovereign, so that the sovereign has the power to subject
the defendant to judgment concerning that conduct. Personal jurisdiction, of course,
restricts "judicial power not as a matter of sovereignty, but as a matter of individual
liberty," for due process protects the individual's right to be subject only to lawful power.
Insurance Corp., 456 U.S., at 702. But whether a judicial judgment is lawful depends on
whether the sovereign has authority to render it.
The second principle is a corollary of the first. Because the United States is a distinct
sovereign, a defendant may in principle be subject to the jurisdiction of the courts of the
United States but not of any particular State. This is consistent with the premises and
unique genius of our Constitution. Ours is "a legal system unprecedented in form and
design, establishing two orders of government, each with its own direct relationship, its
own privity, its own set of mutual rights and obligations to the people who sustain it and
are governed by it." U.S. Term Limits, Inc. v. Thornton, 514 U.S. 779, 838 (1995)
(KENNEDY, J., concurring). For jurisdiction, a litigant may have the requisite
relationship with the United States Government but not with the government of any
individual State. That would be an exceptional case, however. If the defendant is a
domestic domiciliary, the courts of its home State are available and can exercise general
jurisdiction. And if another State were to assert jurisdiction in an inappropriate case, it
would upset the federal balance, which posits that each State has a sovereignty that is not
subject to unlawful intrusion by other States. Furthermore, foreign corporations will often
target or concentrate on particular States, subjecting them to specific jurisdiction in those
forums.
It must be remembered, however, that although this case and Asahi both involve
foreign manufacturers, the undesirable consequences of Justice Brennan's approach are
no less significant for domestic producers. The owner of a small Florida farm might sell
crops to a large nearby distributor, for example, who might then distribute them to
grocers across the country. If foreseeability were the controlling criterion, the farmer
could be sued in Alaska or any number of other States' courts without ever leaving town.
And the issue of foreseeability may itself be contested so that significant expenses are
incurred just on the preliminary issue of jurisdiction. Jurisdictional rules should avoid
these costs whenever possible.
The conclusion that the authority to subject a defendant to judgment depends on
purposeful availment, consistent with Justice O'Connor's opinion in Asahi, does not by
itself resolve many difficult questions of jurisdiction that will arise in particular cases.
The defendant's conduct and the economic realities of the market the defendant seeks to
serve will differ across cases, and judicial exposition will, in common-law fashion,
clarify the contours of that principle.
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III
In this case, petitioner directed marketing and sales efforts at the United States. It may
be that, assuming it were otherwise empowered to legislate on the subject, the Congress
could authorize the exercise of jurisdiction in appropriate courts. That circumstance is not
presented in this case, however, and it is neither necessary nor appropriate to address here
any constitutional concerns that might be attendant to that exercise of power. See Asahi,
480 U.S., at 113. Nor is it necessary to determine what substantive law might apply
were Congress to authorize jurisdiction in a federal court in New Jersey. A sovereign's
legislative authority to regulate conduct may present considerations different from those
presented by its authority to subject a defendant to judgment in its courts. Here the
question concerns the authority of a New Jersey state court to exercise jurisdiction, so it
is petitioner's purposeful contacts with New Jersey, not with the United States, that alone
are relevant.
Respondent has not established that J. McIntyre engaged in conduct purposefully
directed at New Jersey. Recall that respondent's claim of jurisdiction centers on three
facts: The distributor agreed to sell J. McIntyre's machines in the United States; J.
McIntyre officials attended trade shows in several States but not in New Jersey; and up to
four machines ended up in New Jersey. The British manufacturer had no office in New
Jersey; it neither paid taxes nor owned property there; and it neither advertised in, nor
sent any employees to, the State. Indeed, after discovery the trial court found that the
"defendant does not have a single contact with New Jersey short of the machine in
question ending up in this state." App. to Pet. for Cert. 130a. These facts may reveal an
intent to serve the U.S. market, but they do not show that J. McIntyre purposefully
availed itself of the New Jersey market.
It is notable that the New Jersey Supreme Court appears to agree, for it could "not
find that J. McIntyre had a presence or minimum contacts in this State — in any
jurisprudential sense — that would justify a New Jersey court to exercise jurisdiction in
this case." 201 N. J., at 61. The court nonetheless held that petitioner could be sued in
New Jersey based on a "stream-of-commerce theory of jurisdiction." Ibid. As discussed,
however, the stream-of-commerce metaphor cannot supersede either the mandate of the
Due Process Clause or the limits on judicial authority that Clause ensures. The New
Jersey Supreme Court also cited "significant policy reasons" to justify its holding,
including the State's "strong interest in protecting its citizens from defective products."
Id., at 75. That interest is doubtless strong, but the Constitution commands restraint
before discarding liberty in the name of expediency.
* * *
Due process protects petitioner's right to be subject only to lawful authority. At no
time did petitioner engage in any activities in New Jersey that reveal an intent to invoke
or benefit from the protection of its laws. New Jersey is without power to adjudge the
rights and liabilities of J. McIntyre, and its exercise of jurisdiction would violate due
process. The contrary judgment of the New Jersey Supreme Court is
Reversed.
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JUSTICE BREYER, with whom JUSTICE ALITO joins, concurring in the judgment.
* * *
In my view, the outcome of this case is determined by our precedents. Based on the
facts found by the New Jersey courts, respondent Robert Nicastro failed to meet his
burden to demonstrate that it was constitutionally proper to exercise jurisdiction over
petitioner J. McIntyre Machinery, Ltd. (British Manufacturer), a British firm that
manufactures scrap-metal machines in Great Britain and sells them through an
independent distributor in the United States (American Distributor). On that basis, I agree
with the plurality that the contrary judgment of the Supreme Court of New Jersey should
be reversed.
I
In asserting jurisdiction over the British Manufacturer, the Supreme Court of New
Jersey relied most heavily on three primary facts as providing constitutionally sufficient
"contacts" with New Jersey, thereby making it fundamentally fair to hale the British
Manufacturer before its courts: (1) The American Distributor on one occasion sold and
shipped one machine to a New Jersey customer, namely, Mr. Nicastro's employer, Mr.
Curcio; (2) the British Manufacturer permitted, indeed wanted, its independent American
Distributor to sell its machines to anyone in America willing to buy them; and (3)
representatives of the British Manufacturer attended trade shows in "such cities as
Chicago, Las Vegas, New Orleans, Orlando, San Diego, and San Francisco." Id., at 54-
55. In my view, these facts do not provide contacts between the British firm and the State
of New Jersey constitutionally sufficient to support New Jersey's assertion of jurisdiction
in this case.
None of our precedents finds that a single isolated sale, even if accompanied by the
kind of sales effort indicated here, is sufficient. Rather, this Court's previous holdings
suggest the contrary. The Court has held that a single sale to a customer who takes an
accident-causing product to a different State (where the accident takes place) is not a
sufficient basis for asserting jurisdiction. See World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286 (1980). And the Court, in separate opinions, has strongly suggested that a
single sale of a product in a State does not constitute an adequate basis for asserting
jurisdiction over an out-of-state defendant, even if that defendant places his goods in the
stream of commerce, fully aware (and hoping) that such a sale will take place. See Asahi
Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102, 111, 112 (1987)
(opinion of O'Connor, J.) (requiring "something more" than simply placing "a product
into the stream of commerce," even if defendant is "awar[e]" that the stream "may or will
sweep the product into the forum State"); id., at 117 (Brennan, J., concurring in part and
concurring in judgment) (jurisdiction should lie where a sale in a State is part of "the
regular and anticipated flow" of commerce into the State, but not where that sale is only
an "edd[y]," i.e., an isolated occurrence); id., at 122 (Stevens, J., concurring in part and
concurring in judgment) (indicating that "the volume, the value, and the hazardous
character" of a good may affect the jurisdictional inquiry and emphasizing Asahi's
"regular course of dealing").
Here, the relevant facts found by the New Jersey Supreme Court show no "regular . . .
flow" or "regular course" of sales in New Jersey; and there is no "something more," such
13
as special state-related design, advertising, advice, marketing, or anything else. Mr.
Nicastro, who here bears the burden of proving jurisdiction, has shown no specific effort
by the British Manufacturer to sell in New Jersey. He has introduced no list of potential
New Jersey customers who might, for example, have regularly attended trade shows. And
he has not otherwise shown that the British Manufacturer "purposefully avail[ed] itself of
the privilege of conducting activities" within New Jersey, or that it de-livered its goods in
the stream of commerce "with the expectation that they will be purchased" by New Jersey
users. World-Wide Volkswagen, supra, at 297-298 (internal quotation marks omitted).
There may well have been other facts that Mr. Nicastro could have demonstrated in
support of jurisdiction. And the dissent considers some of those facts. But the plaintiff
bears the burden of establishing jurisdiction, and here I would take the facts precisely as
the New Jersey Supreme Court stated them. Insurance Corp. of Ireland v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 709 (1982); Blakey v. Continental Airlines, Inc., 164
N. J. 38, 71 (2000); see 201 N. J., at 54-56; App. to Pet. for Cert. 128a-137a (trial court's
"reasoning and finding(s)").
Accordingly, on the record present here, resolving this case requires no more than
adhering to our precedents.
II
I would not go further. Because the incident at issue in this case does not implicate
modern concerns, and because the factual record leaves many open questions, this is an
unsuitable vehicle for making broad pronouncements that refashion basic jurisdictional
rules.
A
The plurality seems to state strict rules that limit jurisdiction where a defendant does
not "inten[d] to submit to the power of a sovereign" and cannot "be said to have targeted
the forum." But what do those standards mean when a company targets the world by
selling products from its Web site? And does it matter if, instead of shipping the products
directly, a company consigns the products through an intermediary (say, Amazon.com)
who then receives and fulfills the orders? And what if the company markets its products
through popup advertisements that it knows will be viewed in a forum? Those issues have
serious commercial consequences but are totally absent in this case.
B
But though I do not agree with the plurality's seemingly strict no-jurisdiction rule, I
am not persuaded by the absolute approach adopted by the New Jersey Supreme Court
and urged by respondent and his amici. Under that view, a producer is subject to
jurisdiction for a products-liability action so long as it "knows or reasonably should know
that its products are distributed through a nationwide distribution system that might lead
to those products being sold in any of the fifty states." 201 N. J., at 76-77 (emphasis
added). In the context of this case, I cannot agree.
For one thing, to adopt this view would abandon the heretofore accepted inquiry of
whether, focusing upon the relationship between "the defendant, the forum, and the
litigation," it is fair, in light of the defendant's contacts with that forum, to subject the
defendant to suit there. Shaffer v. Heitner, 433 U.S. 186, 204 (1977) (emphasis added). It
14
would ordinarily rest jurisdiction instead upon no more than the occurrence of a product-
based accident in the forum State. But this Court has rejected the notion that a defendant's
amenability to suit "travel[s] with the chattel." World-Wide Volkswagen, 444 U.S., at 296.
For another, I cannot reconcile so automatic a rule with the constitutional demand for
"minimum contacts" and "purposefu[l] avail[ment]," each of which rest upon a particular
notion of defendant-focused fairness. Id., at 291, 297 (internal quotation marks omitted).
A rule like the New Jersey Supreme Court's would permit every State to assert
jurisdiction in a products-liability suit against any domestic manufacturer who sells its
products (made anywhere in the United States) to a national distributor, no matter how
large or small the manufacturer, no matter how distant the forum, and no matter how few
the number of items that end up in the particular forum at issue. What might appear fair
in the case of a large manufacturer which specifically seeks, or expects, an equal-sized
distributor to sell its product in a distant State might seem unfair in the case of a small
manufacturer (say, an Appalachian potter) who sells his product (cups and saucers)
exclusively to a large distributor, who resells a single item (a coffee mug) to a buyer from
a distant State (Hawaii). I know too little about the range of these or in-between
possibilities to abandon in favor of the more absolute rule what has previously been this
Court's less absolute approach.
Further, the fact that the defendant is a foreign, rather than a domestic, manufacturer
makes the basic fairness of an absolute rule yet more uncertain. I am again less certain
than is the New Jersey Supreme Court that the nature of international commerce has
changed so significantly as to require a new approach to personal jurisdiction.
It may be that a larger firm can readily "alleviate the risk of burdensome litigation by
procuring insurance, passing the expected costs on to customers, or, if the risks are too
great, severing its connection with the State." World-Wide Volkswagen, supra, at 297.
But manufacturers come in many shapes and sizes. It may be fundamentally unfair to
require a small Egyptian shirt maker, a Brazilian manufacturing cooperative, or a Kenyan
coffee farmer, selling its products through international distributors, to respond to
products-liability tort suits in virtually every State in the United States, even those in
respect to which the foreign firm has no connection at all but the sale of a single
(allegedly defective) good. And a rule like the New Jersey Supreme Court suggests
would require every product manufacturer, large or small, selling to American
distributors to understand not only the tort law of every State, but also the wide variance
in the way courts within different States apply that law. See, e.g., Dept. of Justice, Bureau
of Justice Statistics Bulletin, Tort Trials and Verdicts in Large Counties, 2001, p. 11
(reporting percentage of plaintiff winners in tort trials among 46 populous counties,
ranging from 17.9% (Worcester, Mass.) to 69.1% (Milwaukee, Wis.)).
C
At a minimum, I would not work such a change to the law in the way either the
plurality or the New Jersey Supreme Court suggests without a better understanding of the
relevant contemporary commercial circumstances. Insofar as such considerations are
relevant to any change in present law, they might be presented in a case (unlike the
present one) in which the Solicitor General participates.
15
This case presents no such occasion, and so I again reiterate that I would adhere
strictly to our precedents and the limited facts found by the New Jersey Supreme Court.
And on those grounds, I do not think we can find jurisdiction in this case. Accordingly,
though I agree with the plurality as to the outcome of this case, I concur only in the
judgment of that opinion and not its reasoning.
JUSTICE GINSBURG, with whom JUSTICE SOTOMAYOR and JUSTICE
KAGAN join, dissenting.
A foreign industrialist seeks to develop a market in the United States for machines it
manufactures. It hopes to derive substantial revenue from sales it makes to United States
purchasers. Where in the United States buyers reside does not matter to this
manufacturer. Its goal is simply to sell as much as it can, wherever it can. It excludes no
region or State from the market it wishes to reach. But, all things considered, it prefers to
avoid products liability litigation in the United States. To that end, it engages a U.S.
distributor to ship its machines stateside. Has it succeeded in escaping personal
jurisdiction in a State where one of its products is sold and causes injury or even death to
a local user?
Under this Court's pathmarking precedent in International Shoe Co. v. Washington,
326 U.S. 310 (1945), and subsequent decisions, one would expect the answer to be
unequivocally, "No." But instead, six Justices of this Court, in divergent opinions, tell us
that the manufacturer has avoided the jurisdiction of our state courts, except perhaps in
States where its products are sold in sizeable quantities. Inconceivable as it may have
seemed yesterday, the splintered majority today "turn[s] the clock back to the days before
modern long-arm statutes when a manufacturer, to avoid being haled into court where a
user is injured, need only Pilate-like wash its hands of a product by having independent
distributors market it." Weintraub, A Map Out of the Personal Jurisdiction Labyrinth, 28
U. C. Davis L. Rev. 531, 555 (1995).
I
* * *
From at least 1995 until 2001, McIntyre UK retained an Ohio-based company,
McIntyre Machinery America, Ltd. (McIntyre America), "as its exclusive distributor for
the en-tire United States." Nicastro v. McIntyre Machinery America, Ltd., 399 N. J.
Super. 539, 558 (App. 2008). 2 Though similarly named, the two companies were separate
and independent entities with "no commonality of ownership or management." In
invoices and other written communications, McIntyre America described itself as
McIntyre UK's national distributor, "America's Link" to "Quality Metal Processing
Equipment" from England..
In a November 23, 1999 letter to McIntyre America, McIntyre UK's president spoke
plainly about the manufacturer's objective in authorizing the exclusive distributorship:
"All we wish to do is sell our products in the [United] States — and get paid!" Notably,
McIntyre America was concerned about U.S. litigation involving McIntyre UK products,
in which the distributor had been named as a defendant. McIntyre UK counseled
16
McIntyre America to respond personally to the litigation, but reassured its distributor that
"the product was built and designed by McIntyre Machinery in the UK and the buck stops
here — if there's something wrong with the machine." Answering jurisdictional
interrogatories, McIntyre UK stated that it had been named as a defendant in lawsuits in
Illinois, Kentucky, Massachusetts, and West Virginia. And in correspondence with
McIntyre America, McIntyre UK noted that the manufacturer had products liability
insurance coverage. Id., at 129a.
Over the years, McIntyre America distributed several McIntyre UK products to U.S.
customers, including, in addition to the 640 Shear, McIntyre UK's "Niagara" and "Tardis"
systems, wire strippers, and can machines. In promoting McIntyre UK's products at
conventions and demonstration sites and in trade journal advertisements, McIntyre
America looked to McIntyre UK for direction and guidance. To achieve McIntyre UK's
objective, i.e., "to sell [its] machines to customers throughout the United States," 399 N.
J. Super., at 548, "the two companies [were acting] closely in concert with each other,"
McIntyre UK never instructed its distributor to avoid certain States or regions of the
country; rather, as just noted, the manufacturer engaged McIntyre America to attract
customers "from anywhere in the United States."
In sum, McIntyre UK's regular attendance and exhibitions at ISRI conventions was
surely a purposeful step to reach customers for its products "anywhere in the United
States." At least as purposeful was McIntyre UK's engagement of McIntyre America as
the conduit for sales of McIntyre UK's machines to buyers "throughout the United
States." Given McIntyre UK's endeavors to reach and profit from the United States
market as a whole, Nicastro's suit, I would hold, has been brought in a forum entirely
appropriate for the adjudication of his claim. He alleges that McIntyre UK's shear
machine was defectively designed or manufactured and, as a result, caused injury to him
at his workplace. The machine arrived in Nicastro's New Jersey workplace not randomly
or fortuitously, but as a result of the U.S. connections and distribution system that
McIntyre UK deliberately arranged. 3On what sensible view of the allocation of
adjudicatory authority could the place of Nicastro's injury within the United States be
deemed off limits for his products liability claim against a foreign manufacturer who
targeted the United States (including all the States that constitute the Nation) as the
territory it sought to develop?
II
A few points on which there should be no genuine debate bear statement at the outset.
First, all agree, Mc-Intyre UK surely is not subject to general (all-purpose) jurisdiction in
New Jersey courts, for that foreign-country corporation is hardly "at home" in New
Jersey. See Goodyear Dunlop Tires Operations, S.A. v. Brown. The question, rather, is
one of specific jurisdiction, which turns on an "affiliatio[n] between the forum and the
underlying controversy." Goodyear Dunlop, post, at 2 (quoting von Mehren & Trautman,
Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1136 (1966)
(hereinafter von Mehren & Trautman); internal quotation marks omitted); see also
Goodyear Dunlop.
17
Second, no issue of the fair and reasonable allocation of adjudicatory authority among
States of the United States is present in this case. New Jersey's exercise of personal
jurisdiction over a foreign manufacturer whose dangerous product caused a workplace
injury in New Jersey does not tread on the domain, or diminish the sovereignty, of any
sister State. Indeed, among States of the United States, the State in which the injury
occurred would seem most suitable for litigation of a products liability tort claim. See
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (if a manufacturer
or distributor endeavors to develop a market for a product in several States, it is
reasonable "to subject it to suit in one of those States if its allegedly defective [product]
has there been the source of injury"); 28 U.S.C. § 1391(a)-(b) (in federal-court suits,
whether resting on diversity or federal-question jurisdiction, venue is proper in the
judicial district "in which a substantial part of the events or omissions giving rise to the
claim occurred").
Third, the constitutional limits on a state court's adjudicatory authority derive from
considerations of due process, not state sovereignty. As the Court clarified in Insurance
Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 69 (1982):
"The restriction on state sovereign power described in World-Wide
Volkswagen Corp. . . . must be seen as ultimately a function of the individual
liberty interest preserved by the Due Process Clause. That Clause is the only
source of the personal jurisdiction requirement and the Clause itself makes
no mention of federalism concerns. Furthermore, if the federalism concept
operated as an independent restriction on the sovereign power of the court, it
would not be possible to waive the personal jurisdiction requirement:
Individual actions cannot change the powers of sovereignty, although the
individual can subject himself to powers from which he may otherwise be
protected." Id., at 703, n. 10.
See also Shaffer v. Heitner, 433 U.S. 186, 204 (1977) (recognizing that "the mutually
exclusive sovereignty of the States [is not] the central concern of the inquiry into personal
jurisdiction"). But see ante, at 7 (plurality opinion) (asserting that "sovereign authority,"
not "fairness," is the "central concept" in determining personal jurisdiction).
Finally, in International Shoe itself, and decisions thereafter, the Court has made
plain that legal fictions, notably "presence" and "implied consent," should be discarded,
for they conceal the actual bases on which jurisdiction rests. See 326 U.S., at 316, 318;
Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141 (CA2 1930) (L. Hand, J.) ("nothing is
gained by [resort to words that] concea[l] what we do"). "[T]he relationship among the
defendant, the forum, and the litigation" determines whether due process permits the
exercise of personal jurisdiction over a defendant, Shaffer, 433 U.S., at 204, and "fictions
of implied consent" or "corporate presence" do not advance the proper inquiry, id., at
202. See also Burnham v. Superior Court of Cal., County of Marin, 495 U.S. 604, 618
(1990) (plurality opinion) (International Shoe "cast . . . aside" fictions of "consent" and
"presence").
18
Whatever the state of academic debate over the role of consent in modern
jurisdictional doctrines,4 the plurality's notion that consent is the animating concept draws
no support from controlling decisions of this Court. Quite the contrary, the Court has
explained, a forum can exercise jurisdiction when its contacts with the controversy are
sufficient; invocation of a fictitious consent, the Court has repeatedly said, is unnecessary
and unhelpful. See, e.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (Due
Process Clause permits "forum . . . to assert specific jurisdiction over an out-of-state
defendant who has not consented to suit there"); McGee v. International Life Ins.Co., 355
U.S. 220, 222 (1957) ("[T]his Court [has] abandoned 'consent,' 'doing business,' and
'presence' as the standard for measuring the extent of state judicial power over [out-of-
state] corporations.").
III
This case is illustrative of marketing arrangements for sales in the United States
common in today's commercial world. 6 A foreign-country manufacturer engages a U.S.
company to promote and distribute the manufacturer's products, not in any particular
State, but anywhere and everywhere in the United States the distributor can attract
purchasers. The product proves defective and injures a user in the State where the user
lives or works. Often, as here, the manufacturer will have liability insurance covering
personal injuries caused by its products.
When industrial accidents happen, a long-arm statute in the State where the injury
occurs generally permits assertion of jurisdiction, upon giving proper notice, over the
foreign manufacturer. For example, the State's statute might provide, as does New York's
long-arm statute, for the "exercise [of] personal jurisdiction over any non-domiciliary . . .
who . . .
commits a tortious act without the state causing injury to person or property
within the state, . . . if he . . . expects or should reasonably expect the act to
have consequences in the state and derives substantial revenue from
interstate or international commerce." N. Y. Civ. Prac. Law Ann. §
302(a)(3)(ii) (2008).
* * *
The modern approach to jurisdiction over corporations and other legal entities,
ushered in by International Shoe, gave prime place to reason and fairness. Is it not fair
4 Compare Brilmayer, Rights, Fairness, and Choice of Law, 98 Yale L. J. 1277, 1304-1306 (1989) (hereinafter Brilmayer) (criticizing as circular jurisdictional theories founded on "consent" or "[s]ubmission to state authority"), Perdue, Personal Jurisdiction and the Beetle in the Box, 32 Boston College L. Rev. 529, 536-544 (1991) (same), with Trangsrud, The Federal Common Law of Personal Jurisdiction, 57 Geo. Wash. L. Rev. 849, 884-885 (1989) (endorsing a consent-based doctrine of personal jurisdiction), Epstein, Consent, Not Power, as the Basis of Jurisdiction, 2001 U. Chi. Legal Forum 1, 2, 30-32 (urging that "the consent principle neatly explains the dynamics of many of our jurisdictional doctrines," but recognizing that in tort cases, the victim ordinarily should be able to sue in the place where the harm occurred).
19
and reasonable, given the mode of trading of which this case is an example, to require the
international seller to defend at the place its products cause injury? Do not litigational
convenience and choice-of-law considerations point in that direction? On what measure
of reason and fairness can it be considered undue to require McIntyre UK to defend in
New Jersey as an incident of its efforts to develop a market for its industrial machines
anywhere and everywhere in the United States?12
Is not the burden on McIntyre UK to
defend in New Jersey fair, i.e., a reasonable cost of transacting business internationally,
in comparison to the burden on Nicastro to go to Nottingham, England to gain
recompense for an injury he sustained using McIntyre's product at his workplace in
Saddle Brook, New Jersey?
McIntyre UK dealt with the United States as a single market. Like most foreign
manufacturers, it was concerned not with the prospect of suit in State X as opposed to
State Y, but rather with its subjection to suit anywhere in the United States. As a
McIntyre UK officer wrote in an e-mail to McIntyre America: "American law — who
needs it?!" (e-mail dated April 26, 1999 from Sally Johnson to Mary Gaither). If
McIntyre UK is answerable in the United States at all, is it not "perfectly appropriate to
permit the exercise of that jurisdiction . . . at the place of injury"?
In sum, McIntyre UK, by engaging McIntyre America to promote and sell its
machines in the United States, "purposefully availed itself " of the United States market
nationwide, not a market in a single State or a discrete collection of States. McIntyre UK
thereby availed itself of the market of all States in which its products were sold by its
exclusive distributor. "Th[e] 'purposeful availment' requirement," this Court has
explained, simply "ensures that a defendant will not be haled into a jurisdiction solely as
a result of 'random,' 'fortuitous,' or 'attenuated' contacts." Burger King, 471 U.S., at 475.
Adjudicatory authority is appropriately exercised where "actions by the defendant
himself" give rise to the affiliation with the forum. How could McIntyre UK not have
intended, by its actions targeting a national market, to sell products in the fourth largest
destination for imports among all States of the United States and the largest scrap metal
market? But see plurality opinion (manufacturer's purposeful efforts to sell its products
nationwide are "not . . . relevant" to the personal jurisdiction inquiry).
Courts, both state and federal, confronting facts similar to those here, have rightly
rejected the conclusion that a manufacturer selling its products across the USA may
evade jurisdiction in any and all States, including the State where its defective product is
distributed and causes injury. They have held, instead, that it would undermine principles
of fundamental fairness to insulate the foreign manufacturer from accountability in court
at the place within the United States where the manufacturer's products caused injury.
12
The plurality suggests that the Due Process Clause might permit a federal district court in New Jersey,
sitting in diversity and applying New Jersey law, to adjudicate McIntyre UK's liability to Nicastro. In other
words, McIntyre UK might be compelled to bear the burden of traveling to New Jersey and defending itself
there under New Jersey's products liability law, but would be entitled to federal adjudication of Nicastro's
state-law claim. I see no basis in the Due Process Clause for such a curious limitation.
20
IV
A
While this Court has not considered in any prior case the now-prevalent pattern
presented here — a foreign-country manufacturer enlisting a U.S. distributor to develop a
market in the United States for the manufacturer's products — none of the Court's
decisions tug against the judgment made by the New Jersey Supreme Court. McIntyre
contends otherwise, citing World-Wide Volkswagen, and Asahi Metal Industry Co. v.
Superior Court of Cal., Solano Cty., 480 U.S. 102 (1987).
World-Wide Volkswagen concerned a New York car dealership that sold solely in the
New York market, and a New York distributor who supplied retailers in three States
only: New York, Connecticut, and New Jersey. 444 U.S., at 289. New York residents had
purchased an Audi from the New York dealer and were driving the new vehicle through
Oklahoma en route to Arizona. On the road in Oklahoma, another car struck the Audi in
the rear, causing a fire which severely burned the Audi's occupants. Id., at 288. Rejecting
the Oklahoma courts' assertion of jurisdiction over the New York dealer and distributor,
this Court observed that the defendants had done nothing to serve the market for cars in
Oklahoma. Id., at 295-298. Jurisdiction, the Court held, could not be based on the
customer's unilateral act of driving the vehicle to Oklahoma. Id., at 298; see Asahi, 480
U.S., at 109 (opinion of O'Connor, J.) (World-Wide Volkswagen "rejected the assertion
that a consumer's unilateral act of bringing the defendant's product into the forum State
was a sufficient constitutional basis for personal jurisdiction over the defendant").
Notably, the foreign manufacturer of the Audi in World-Wide Volkswagen did not
object to the jurisdiction of the Oklahoma courts and the U.S. importer abandoned its
initially stated objection. 444 U.S., at 288, and n. 3. And most relevant here, the Court's
opinion indicates that an objection to jurisdiction by the manufacturer or national
distributor would have been unavailing. To reiterate, the Court said in World-Wide
Volkswagen that, when a manufacturer or distributor aims to sell its product to customers
in several States, it is reasonable "to subject it to suit in [any] one of those States if its
allegedly defective [product] has there been the source of injury." Id., at 297.
Asahi arose out of a motorcycle accident in California. Plaintiff, a California resident
injured in the accident, sued the Taiwanese manufacturer of the motorcycle's tire tubes,
claiming that defects in its product caused the accident. The tube manufacturer cross-
claimed against Asahi, the Japanese maker of the valve assembly, and Asahi contested
the California courts' jurisdiction. By the time the case reached this Court, the injured
plaintiff had settled his case and only the indemnity claim by the Taiwanese company
against the Japanese valve-assembly manufacturer remained.
The decision was not a close call. The Court had before it a foreign plaintiff, the
Taiwanese manufacturer, and a foreign defendant, the Japanese valve-assembly maker,
and the indemnification dispute concerned a transaction between those parties that
occurred abroad. All agreed on the bottom line: The Japanese valve-assembly
manufacturer was not reasonably brought into the California courts to litigate a dispute
with another foreign party over a transaction that took place outside the United States.
21
* * * In any event, Asahi, unlike McIntyre UK, did not itself seek out customers in
the United States, it engaged no distributor to promote its wares here, it appeared at no
tradeshows in the United States, and, of course, it had no Web site advertising its
products to the world. Moreover, Asahi was a component-part manufacturer with "little
control over the final destination of its products once they were delivered into the stream
of commerce." A. Uberti, 181 Ariz., at 572. It was important to the Court in Asahi that
"those who use Asahi components in their final products, and sell those products in
California, [would be] subject to the application of California tort law." 480 U.S., at 115
(majority opinion). To hold that Asahi controls this case would, to put it bluntly, be dead
wrong.15
B
The Court's judgment also puts United States plaintiffs at a disadvantage in
comparison to similarly situated complainants elsewhere in the world. Of particular note,
within the European Union, in which the United Kingdom is a participant, the jurisdiction
New Jersey would have exercised is not at all exceptional. The European Regulation on
Jurisdiction and the Recognition and Enforcement of Judgments provides for the exercise
of specific jurisdiction "in matters relating to tort . . . in the courts for the place where the
harmful event occurred." Council Reg. 44/2001, Art. 5, 2001 O. J. (L. 12) 4. The
European Court of Justice has interpreted this prescription to authorize jurisdiction either
where the harmful act occurred or at the place of injury.
V
The commentators who gave names to what we now call "general jurisdiction" and
"specific jurisdiction" anticipated that when the latter achieves its full growth,
considerations of litigational convenience and the respective situations of the parties
would determine when it is appropriate to subject a defendant to trial in the plaintiff's
community. See von Mehren & Trautman 1166-1179. Litigational considerations include
"the convenience of witnesses and the ease of ascertaining the governing law." Id., at
1168-1169. As to the parties, courts would differently appraise two situations: (1) cases
involving a substantially local plaintiff, like Nicastro, injured by the activity of a
defendant engaged in interstate or international trade; and (2) cases in which the
defendant is a natural or legal person whose economic activities and legal involvements
are largely home-based, i.e., entities without designs to gain substantial revenue from
sales in distant markets. See id., at 1167-1169. * * * [C]ourts presented with von Mehren
and Trautman's first scenario — a local plaintiff injured by the activity of a manufacturer
seeking to exploit a multistate or global market — have repeatedly confirmed that
15 The plurality notes the low volume of sales in New Jersey. A $ 24,900 shearing machine, however, is unlikely to sell in bulk worldwide, much less in any given State. By dollar value, the price of a single machine represents a significant sale. Had a manufacturer sold in New Jersey $ 24,900 worth of flannel shirts, see Nelson v. Park Industries, Inc., 717 F.2d 1120 (CA7 1983), cigarette lighters, see Oswalt v. Scripto, Inc., 616 F.2d 191 (CA5 1980), or wire-rope splices, see Hedrick v. Daiko Shoji Co., 715 F.2d 1355 (CA9 1983), the Court would presumably find the defendant amenable to suit in that State.
22
jurisdiction is appropriately exercised by courts of the place where the product was sold
and caused injury.
* * *
For the reasons stated, I would hold McIntyre UK answerable in New Jersey for the
harm Nicastro suffered at his workplace in that State using McIntyre UK's shearing
machine. While I dissent from the Court's judgment, I take heart that the plurality opinion
does not speak for the Court, for that opinion would take a giant step away from the
"notions of fair play and substantial justice" underlying International Shoe. 326 U.S., at
316 (internal quotation marks omitted).
NOTES AND QUESTIONS
1. Justice Kennedy differentiates between ―targeting‖ a State and ―predicting‖
that goods will reach the state. He also observes that ―foreign corporations will often
target or concentrate on particular States, subjecting them to specific jurisdiction.‖ For a
manufacturer selling its product through a multi-state distributor what would the indicia
be of ―targeting‖ or ―concentrating‖ on a particular state? Won‘t manufacturers mostly
be concerned with the volume of sales (and getting paid), rather than the location of the
states?
2. Both the Kennedy and Breyer opinions express concern that very small
defendant whose products caused injury in far-away places might be forced to travel
great distances to defend against litigation. But couldn‘t such cases be handled through a
reasonableness inquiry? After all, in Asahi itself, although the Court fragmented on the
question of whether there were sufficient purposeful contacts, the majority of the Court
agreed that jurisdiction was unreasonable in the facts of that case.
3. Justices Breyer‘s opinion asserts that ―none of our precedents finds that a
single isolated sale . . . is sufficient [for jurisdiction].‖ On the other hand, International
Shoe, citing Hess v. Pawloski, indicated that a single act can be sufficient for jurisdiction
based on a claim arising out of that act. If J. McIntrye had sold this machine directly to
the user in New Jersey and had shipped the machine there, would that be sufficient for a
tort claim arising from the use of the machine? What about a breach of contract claim?
4. Asahi and Nicastro were twenty four years apart. Yet despite the passage of
time and an almost total change in Court personnel (only Justice Scalia was on the Court
for both cases), the Court was still unable to generate a majority opinion. Why do you
think personal jurisdiction has proved to be such a divisive area for the Court?
23
4. GENERAL JURISDICTION
At page 85, replace Helicopteros and the first three notes following that case
with:
GOODYEAR DUNLOP TIRES OPERATIONS, S. A. v.
BROWN
Supreme Court of the United States
2011 U.S. LEXIS 4801 (June 27, 2011)
GINSBURG, J., delivered the opinion for a unanimous Court.
This case concerns the jurisdiction of state courts over corporations organized and
operating abroad. We address, in particular, this question: Are foreign subsidiaries of a
United States parent corporation amenable to suit in state court on claims unrelated to any
activity of the subsidiaries in the forum State?
A bus accident outside Paris that took the lives of two 13-year-old boys from North
Carolina gave rise to the litigation we here consider. Attributing the accident to a
defective tire manufactured in Turkey at the plant of a foreign subsidiary of The
Goodyear Tire and Rubber Company (Goodyear USA), the boys' parents commenced an
action for damages in a North Carolina state court; they named as defendants Goodyear
USA, an Ohio corporation, and three of its subsidiaries, organized and operating,
respectively, in Turkey, France, and Luxembourg. Goodyear USA, which had plants in
North Carolina and regularly engaged in commercial activity there, did not contest the
North Carolina court's jurisdiction over it; Goodyear USA's foreign subsidiaries,
however, maintained that North Carolina lacked adjudicatory authority over them.
A state court's assertion of jurisdiction exposes defendants to the State's coercive
power, and is therefore subject to review for compatibility with the Fourteenth
Amendment's Due Process Clause. International Shoe Co. v. Washington, 326 U.S. 310,
316 (1945) (assertion of jurisdiction over out-of-state corporation must comply with
"'traditional notions of fair play and substantial justice'" (quoting Milliken v. Meyer, 311
U.S. 457, 463 (1940))). Opinions in the wake of the pathmarking International Shoe
decision have differentiated between general or all-purpose jurisdiction, and specific or
case-linked jurisdiction. Helicopteros Nacionales de Colombia, S. A. v. Hall, 466 U.S.
408, 414, nn. 8, 9 (1984).
A court may assert general jurisdiction over foreign (sister-state or foreign-country)
corporations to hear any and all claims against them when their affiliations with the State
are so "continuous and systematic" as to render them essentially at home in the forum
State. See International Shoe, 326 U.S., at 317. Specific jurisdiction, on the other hand,
depends on an "affiliatio[n] between the forum and the underlying controversy,"
principally, activity or an occurrence that takes place in the forum State and is therefore
subject to the State's regulation. von Mehren & Trautman, Jurisdiction to Adjudicate: A
Suggested Analysis, 79 Harv. L. Rev. 1121, 1136 (1966) (hereinafter von Mehren &
24
Trautman); see Brilmayer et al., A General Look at General Jurisdiction, 66 Texas L.
Rev. 721, 782 (1988) (hereinafter Brilmayer). In contrast to general, all-purpose
jurisdiction, specific jurisdiction is confined to adjudication of "issues deriving from, or
connected with, the very controversy that establishes jurisdiction." von Mehren &
Trautman 1136.
Because the episode-in-suit, the bus accident, occurred in France, and the tire alleged
to have caused the accident was manufactured and sold abroad, North Carolina courts
lacked specific jurisdiction to adjudicate the controversy. The North Carolina Court of
Appeals so acknowledged. Brown v. Meter, 57-58, 681 S. E. 2d 382, 388 (2009). Were
the foreign subsidiaries nonetheless amenable to general jurisdiction in North Carolina
courts? Confusing or blending general and specific jurisdictional inquiries, the North
Carolina courts answered yes. Some of the tires made abroad by Goodyear's foreign
subsidiaries, the North Carolina Court of Appeals stressed, had reached North Carolina
through "the stream of commerce"; that connection, the Court of Appeals believed, gave
North Carolina courts the handle needed for the exercise of general jurisdiction over the
foreign corporations. Id., at 67-68.
A connection so limited between the forum and the foreign corporation, we hold, is
an inadequate basis for the exercise of general jurisdiction. Such a connection does not
establish the "continuous and systematic" affiliation necessary to empower North
Carolina courts to entertain claims unrelated to the foreign corporation's contacts with the
State.
I
* * *
Goodyear Luxembourg Tires, SA (Goodyear Luxembourg), Goodyear Lastikleri T.
A. S. (Goodyear Turkey), and Goodyear Dunlop Tires France, SA (Goodyear France),
petitioners here, were named as defendants. Incorporated in Luxembourg, Turkey, and
France, respectively, petitioners are indirect subsidiaries of Goodyear USA, an Ohio
corporation also named as a defendant in the suit. Petitioners manufacture tires primarily
for sale in European and Asian markets. Their tires differ in size and construction from
tires ordinarily sold in the United States. They are designed to carry significantly heavier
loads, and to serve under road conditions and speed limits in the manufacturers' primary
markets.
In contrast to the parent company, Goodyear USA, which does not contest the North
Carolina courts' personal jurisdiction over it, petitioners are not registered to do business
in North Carolina. They have no place of business, employees, or bank accounts in North
Carolina. They do not design, manufacture, or advertise their products in North Carolina.
And they do not solicit business in North Carolina or themselves sell or ship tires to
North Carolina customers. Even so, a small percentage of petitioners' tires (tens of
thousands out of tens of millions manufactured between 2004 and 2007) were distributed
within North Carolina by other Goodyear USA affiliates. These tires were typically
custom ordered to equip specialized vehicles such as cement mixers, waste haulers, and
boat and horse trailers. Petitioners state, and respondents do not here deny, that the type
of tire involved in the accident, a Goodyear Regional RHS tire manufactured by
Goodyear Turkey, was never distributed in North Carolina.
25
Petitioners moved to dismiss the claims against them for want of personal
jurisdiction. The trial court denied the motion, and the North Carolina Court of Appeals
affirmed. Acknowledging that the claims neither "related to, nor . . . ar[o]se from,
[petitioners'] contacts with North Carolina," the Court of Appeals confined its analysis to
"general rather than specific jurisdiction," which the court recognized required a "higher
threshold" showing: A defendant must have "continuous and systematic contacts" with
the forum. Id., at 58 (internal quotation marks omitted). That threshold was crossed, the
court determined, when petitioners placed their tires "in the stream of interstate
commerce without any limitation on the extent to which those tires could be sold in North
Carolina." Id., at 67.
Nothing in the record, the court observed, indicated that petitioners "took any
affirmative action to cause tires which they had manufactured to be shipped into North
Carolina." Id., at 64. The court found, however, that tires made by petitioners reached
North Carolina as a consequence of a "highly-organized distribution process" involving
other Goodyear USA subsidiaries. Id., at 67. Petitioners, the court noted, made "no
attempt to keep these tires from reaching the North Carolina market." Id., at 66. Indeed,
the very tire involved in the accident, the court observed, conformed to tire standards
established by the U.S. Department of Transportation and bore markings required for sale
in the United States. Ibid.2 As further support, the court invoked North Carolina's
"interest in providing a forum in which its citizens are able to seek redress for [their]
injuries," and noted the hardship North Carolina plaintiffs would experience "[were they]
required to litigate their claims in France," a country to which they have no ties. Id., at
68. The North Carolina Supreme Court denied discretionary review. Brown v. Meter, 364
N. C. 128 (2010).
We granted certiorari to decide whether the general jurisdiction the North Carolina
courts asserted over petitioners is consistent with the Due Process Clause of the
Fourteenth Amendment.
II
A
The Due Process Clause of the Fourteenth Amendment sets the outer boundaries of a
state tribunal's authority to proceed against a defendant. Shaffer v. Heitner, 433 U.S. 186,
207 (1977). The canonical opinion in this area remains International Shoe, 326 U.S. 310,
in which we held that a State may authorize its courts to exercise personal jurisdiction
over an out-of-state defendant if the defendant has "certain minimum contacts with [the
State] such that the maintenance of the suit does not offend 'traditional notions of fair
play and substantial justice.'" Id., at 316 (quoting Meyer, 311 U.S., at 463).
Endeavoring to give specific content to the "fair play and substantial justice" concept,
the Court in International Shoe classified cases involving out-of-state corporate
defendants. First, as in International Shoe itself, jurisdiction unquestionably could be
asserted where the corporation's in-state activity is "continuous and systematic" and that
2 Such markings do not necessarily show that any of the tires were destined for sale in the United States. To
facilitate trade, the Solicitor General explained, the United States encourages other countries to "treat
compliance with [Department of Transportation] standards, including through use of DOT markings, as
evidence that the products are safely manufactured." Brief for United States as Amicus Curiae 32.
26
activity gave rise to the episode-in-suit. 326 U.S., at 317. Further, the Court observed, the
commission of certain "single or occasional acts" in a State may be sufficient to render a
corporation answerable in that State with respect to those acts, though not with respect to
matters unrelated to the forum connections. Id., at 318. The heading courts today use to
encompass these two International Shoe categories is "specific jurisdiction." See von
Mehren & Trautman 1144-1163. Adjudicatory authority is "specific" when the suit
"aris[es] out of or relate[s] to the defendant's contacts with the forum." Helicopteros, 466
U.S., at 414, n. 8.
International Shoe distinguished from cases that fit within the "specific jurisdiction"
categories, "instances in which the continuous corporate operations within a state [are] so
substantial and of such a nature as to justify suit against it on causes of action arising
from dealings entirely distinct from those activities." 326 U.S., at 318. Adjudicatory
authority so grounded is today called "general jurisdiction." Helicopteros, 466 U.S., at
414, n. 9. For an individual, the paradigm forum for the exercise of general jurisdiction is
the individual's domicile; for a corporation, it is an equivalent place, one in which the
corporation is fairly regarded as at home.
Since International Shoe, this Court's decisions have elaborated primarily on
circumstances that warrant the exercise of specific jurisdiction, particularly in cases
involving "single or occasional acts" occurring or having their impact within the forum
State. As a rule in these cases, this Court has inquired whether there was "some act by
which the defendant purposefully avail[ed] itself of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws." Hanson v.
Denckla, 357 U.S. 235, 253 (1958). See, e.g., World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 287, 297 (1980) (Oklahoma court may not exercise personal
jurisdiction "over a nonresident automobile retailer and its wholesale distributor in a
products-liability action, when the defendants' only connection with Oklahoma is the fact
that an automobile sold in New York to New York residents became involved in an
accident in Oklahoma"); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-475 (1985)
(franchisor headquartered in Florida may maintain breach-of-contract action in Florida
against Michigan franchisees, where agreement contemplated on-going interactions
between franchisees and franchisor's headquarters); Asahi Metal Industry Co. v. Superior
Court of Cal., Solano Cty., 480 U.S. 102, 105 (1987) (Taiwanese tire manufacturer
settled product liability action brought in California and sought indemnification there
from Japanese valve assembly manufacturer; Japanese company's "mere awareness . . .
that the components it manufactured, sold, and delivered outside the United States would
reach the forum State in the stream of commerce" held insufficient to permit California
court's adjudication of Taiwanese company's cross-complaint); id., at 109 (opinion of
O'Connor, J.); id., at 116-117 (Brennan, J., concurring in part and concurring in
judgment).
In only two decisions postdating International Shoe * * * has this Court considered
whether an out-of-state corporate defendant's in-state contacts were sufficiently
"continuous and systematic" to justify the exercise of general jurisdiction over claims
unrelated to those contacts: Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952)
(general jurisdiction appropriately exercised over Philippine corporation sued in Ohio,
where the company's affairs were overseen during World War II); and Helicopteros, 466
27
U.S. 408 (helicopter owned by Colombian corporation crashed in Peru; survivors of U.S.
citizens who died in the crash, the Court held, could not maintain wrongful-death actions
against the Colombian corporation in Texas, for the corporation's helicopter purchases
and purchase-linked activity in Texas were insufficient to subject it to Texas court's
general jurisdiction).
B
To justify the exercise of general jurisdiction over petitioners, the North Carolina
courts relied on the petitioners' placement of their tires in the "stream of commerce." The
stream-of-commerce metaphor has been invoked frequently in lower court decisions
permitting "jurisdiction in products liability cases in which the product has traveled
through an extensive chain of distribution before reaching the ultimate consumer." 18 W.
Fletcher, Cyclopedia of the Law of Corporations § 8640.40, p. 133 (rev. ed. 2007).
Typically, in such cases, a nonresident defendant, acting outside the forum, places in the
stream of commerce a product that ultimately causes harm inside the forum.
Many States have enacted long-arm statutes authorizing courts to exercise specific
jurisdiction over manufacturers when the events in suit, or some of them, occurred within
the forum state. For example, the "Local Injury; Foreign Act" subsection of North
Carolina's long-arm statute authorizes North Carolina courts to exercise personal
jurisdiction in "any action claiming injury to person or property within this State arising
out of [the defendant's] act or omission outside this State," if, "in addition[,] at or about
the time of the injury," "[p]roducts . . . manufactured by the defendant were used or
consumed, within this State in the ordinary course of trade." N. C. Gen. Stat. Ann. § 1-
75.4(4)(b) (Lexis 2009). As the North Carolina Court of Appeals recognized, this
provision of the State's long-arm statute "does not apply to this case," for both the act
alleged to have caused injury (the fabrication of the allegedly defective tire) and its
impact (the accident) occurred outside the forum. See 199 N. C. App., at 61, n. 6.
The North Carolina court's stream-of-commerce analysis elided the essential
difference between case-specific and all-purpose (general) jurisdiction. Flow of a
manufacturer's products into the forum, we have explained, may bolster an affiliation
germane to specific jurisdiction. See, e.g., World-Wide Volkswagen, 444 U.S., at 297
(where "the sale of a product . . . is not simply an isolated occurrence, but arises from the
efforts of the manufacturer or distributor to serve . . . the market for its product in
[several] States, it is not unreasonable to subject it to suit in one of those States if its
allegedly defective merchandise has there been the source of injury to its owner or to
others" (emphasis added)). But ties serving to bolster the exercise of specific jurisdiction
do not warrant a determination that, based on those ties, the forum has general
jurisdiction over a defendant. See, e.g., Stabilisierungsfonds Fur Wein v. Kaiser Stuhl
Wine Distributors Pty. Ltd., 647 F.2d 200, 203, n. 5 (CADC 1981) (defendants'
marketing arrangements, although "adequate to permit litigation of claims relating to
[their] introduction of . . . wine into the United States stream of commerce, . . . would not
be adequate to support general, 'all purpose' adjudicatory authority").
A corporation's "continuous activity of some sorts within a state," International Shoe
instructed, "is not enough to support the demand that the corporation be amenable to suits
unrelated to that activity." 326 U.S., at 318. Our 1952 decision in Perkins v. Benguet
28
Consol. Mining Co. remains "[t]he textbook case of general jurisdiction appropriately
exercised over a foreign corporation that has not consented to suit in the forum."
Donahue v. Far Eastern Air Transport Corp., 652 F.2d 1032, 1037 (CADC 1981).
Sued in Ohio, the defendant in Perkins was a Philippine mining corporation that had
ceased activities in the Philippines during World War II. To the extent that the company
was conducting any business during and immediately after the Japanese occupation of the
Philippines, it was doing so in Ohio: the corporation's president maintained his office
there, kept the company files in that office, and supervised from the Ohio office "the
necessarily limited wartime activities of the company." Perkins, 342 U.S., at 447-448.
Although the claim-in-suit did not arise in Ohio, this Court ruled that it would not violate
due process for Ohio to adjudicate the controversy. Ibid.; see Keeton v. Hustler
Magazine, Inc., 465 U.S. 770, 779-780, n. 11 (1984) (Ohio's exercise of general
jurisdiction was permissible in Perkins because "Ohio was the corporation's principal, if
temporary, place of business").
We next addressed the exercise of general jurisdiction over an out-of-state
corporation over three decades later, in Helicopteros. In that case, survivors of United
States citizens who died in a helicopter crash in Peru instituted wrongful-death actions in
a Texas state court against the owner and operator of the helicopter, a Colombian
corporation. The Colombian corporation had no place of business in Texas and was not
licensed to do business there. "Basically, [the company's] contacts with Texas consisted
of sending its chief executive officer to Houston for a contract-negotiation session;
accepting into its New York bank account checks drawn on a Houston bank; purchasing
helicopters, equipment, and training services from [a Texas enterprise] for substantial
sums; and sending personnel to [Texas] for training." 466 U.S., at 416. These links to
Texas, we determined, did not "constitute the kind of continuous and systematic general
business contacts . . . found to exist in Perkins," and were insufficient to support the
exercise of jurisdiction over a claim that neither "ar[o]se out of . . . no[r] related to" the
defendant's activities in Texas. Id., at 415-416 (internal quotation marks omitted).
Helicopteros concluded that "mere purchases [made in the forum State], even if
occurring at regular intervals, are not enough to warrant a State's assertion of [general]
jurisdiction over a nonresident corporation in a cause of action not related to those
purchase transactions." Id., at 418. We see no reason to differentiate from the ties to
Texas held insufficient in Helicopteros, the sales of petitioners' tires sporadically made in
North Carolina through intermediaries. Under the sprawling view of general jurisdiction
urged by respondents and embraced by the North Carolina Court of Appeals, any
substantial manufacturer or seller of goods would be amenable to suit, on any claim for
relief, wherever its products are distributed. But cf. World-Wide Volkswagen, 444 U.S., at
296 (every seller of chattels does not, by virtue of the sale, "appoint the chattel his agent
for service of process").
Measured against Helicopteros and Perkins, North Carolina is not a forum in which it
would be permissible to subject petitioners to general jurisdiction. Unlike the defendant
in Perkins, whose sole wartime business activity was conducted in Ohio, petitioners are
in no sense at home in North Carolina. Their attenuated connections to the State, fall far
short of the "the continuous and systematic general business contacts" necessary to
29
empower North Carolina to entertain suit against them on claims unrelated to anything
that connects them to the State. Helicopteros, 466 U.S., at 416.5
* * *
For the reasons stated, the judgment of the North Carolina Court of Appeals is
Reversed.
NOTES AND QUESTIONS
1. Helicopteros held that regular purchases are not enough for general
jurisdiction and Goodyear held that regular sales are also not enough. Are other, more
extensive and ongoing business activities ever sufficient for general jurisdiction? Justice
Ginsburg noted that ―petitioners are in no sense at home in North Caroline.‖ Should
general jurisdiction available only at the defendant‘s ―home‖?
5 As earlier noted, the North Carolina Court of Appeals invoked the State's "well-recognized interest in
providing a forum in which its citizens are able to seek redress for injuries that they have sustained." 199 N.
C. App., at 68. But "[g]eneral jurisdiction to adjudicate has in [United States] practice never been based on
the plaintiff's relationship to the forum. There is nothing in [our] law comparable to . . . article 14 of the
Civil Code of France (1804) under which the French nationality of the plaintiff is a sufficient ground for
jurisdiction." von Mehren & Trautman 1137; see Clermont & Palmer, Exorbitant Jurisdiction, 58 Me. L.
Rev. 474, 492-495 (2006) (French law permitting plaintiff-based jurisdiction is rarely invoked in the
absence of other supporting factors). When a defendant's act outside the forum causes injury in the forum,
by contrast, a plaintiff's residence in the forum may strengthen the case for the exercise of specific
jurisdiction. See Calder v. Jones, 465 U.S. 783, 788 (1984); von Mehren & Trautman 1167-1173.
30
CHAPTER 3: NOTICE AND OPPORTUNITY TO BE HEARD
B. NOTICE
1. THE CONSTITUTIONAL REQUIREMENT
At page 150, add to the end of n.5:
You should note that while actual receipt of notice is not always constitutionally
necessary, it is constitutionally sufficient. See United Student Aid Funds Inc. v.
Espinosa, 130 S.Ct. 1367, 1378 (2010). However, as you will see in the next section,
there may be statutory requirements concerning the manner and form of notice that go
beyond the constitutional minimum.
C. OPPORTUNITY TO BE HEARD
At page 176, add to the end of note 10:
In Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008), the
Supreme Court held that ―[a] plaintiff seeking a preliminary injunction must establish that
he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the
absence of preliminary relief, that the balance of equities tips in his favor, and that an
injunction is in the public interest.‖ The Court stressed that the ―possibility‖ of harm is
not sufficient but that the plaintiff must demonstrate a ―strong likelihood‖ of irreparable
harm. In that case, the district court had granted a preliminary injunction imposing
restrictions on the Navy‘s use of sonar training because of concern that it would cause
irreparable harm to certain marine mammals. The Supreme Court reversed, finding that
the injunction was outweighed by the public interest and the Navy‘s interest in effective,
realistic training.
31
CHAPTER 4: SUBJECT MATTER JURISDICTION
PART C: DETERMINING CITIZENSHIP OF ENTITIES
i. CORPORATIONS
At pages 194-199, replace J.A. Olson Co. v. City of Winona and Notes and
Questions with:
Congress passed § 1332(c)(1) in 1958. Before that, federal courts treated
corporations as citizens of the state(s) in which they were incorporated. But corporations
are often incorporated in states in which they do essentially no business. Indeed, most of
the Fortune 500 companies are incorporated in Delaware (to take advantage of what
historically has been thought pro-management business law). Their primary activity,
however, is not in that state. Because diversity of citizenship jurisdiction is apparently
aimed at allowing access to federal court to avoid fear of local bias, the state-of-
incorporation definition of citizenship is under-inclusive. For example, a Delaware
corporation that only does business in California, in theory, need not fear local bias of
California state courts. It should be deemed a citizen of California.
Section 1332(c)(1) reflected that concern. It deems a corporation to be a citizen
of ―any‖ state where incorporated. It is possible for a corporation to incorporate in more
than one state. Because of the word ―any‖ in § 1332(c)(1), such a business would be a
citizen of each state in which it did so. This is mostly a theoretical issue, though, because
today there are only a handful of companies that actually incorporate in more than one
state.
Section 1332(c)(1) provides that a corporation is also a citizen of ―the‖ state in
which it has its principal place of business. The word ―the‖ implies that there can only be
one principal place of business. No corporation can have more than one principal place
of business. The problem is that the statute gives no clue what that place is. Lower
federal courts wrestled with the issue for decades. Some emphasized the place where
business decisions are made – the ―nerve‖ center. Some emphasized the place where the
company engaged in more activity than anywhere else – the ―muscle‖ center. Most used
a combination of the two under the ―total activities‖ test. After 52 years of uncertainty,
the Supreme Court finally defined the statutory term in the following case.
THE HERTZ CORPORATION v. FRIEND
Supreme Court of the United States
130 S. Ct. 1181 (2010)
JUSTICE BREYER delivered the opinion of the Court.
The federal diversity jurisdiction statute provides that "a corporation shall be
deemed to be a citizen of any State by which it has been incorporated and of the State
where it has its principal place of business." 28 U.S.C. § 1332(c)(1) (emphasis added).
We seek here to resolve different interpretations that the Circuits have given this phrase.
32
In doing so, we place primary weight upon the need for judicial administration of a
jurisdictional statute to remain as simple as possible. And we conclude that the phrase
"principal place of business" refers to the place where the corporation's high level officers
direct, control, and coordinate the corporation's activities. Lower federal courts have
often metaphorically called that place the corporation's "nerve center." We believe that
the "nerve center" will typically be found at a corporation's headquarters.
I
[Two employees of the Hertz Corporation – Friend and Nhieu – sued Hertz for
alleged violation of California‘s wage and hour laws. They sought to bring a class action
on behalf of other Californians who had allegedly suffered the same harm. Friend and
Nhieu were citizens of California. The issue is whether Hertz‘s principal place of
business was in California. If it were, there would be no diversity jurisdiction.
It may seem odd, but in this case the plaintiffs are not trying to invoke diversity.
They wanted to sue in state court. Under the doctrine of ―removal jurisdiction‖ – which
we will address in § 6 of this Chapter – a defendant sued in state court may ―remove‖ the
case to federal court. It may do so, though, only if the case invokes federal subject matter
jurisdiction. Hertz did not want to litigate in state court and removed it to federal court.
This procedural posture does not change the diversity-of-citizenship analysis. As you
read the case, however, remember that it is the defendant (not the plaintiff) who is
arguing in favor of diversity. Specifically, Hertz is arguing that its principal place of
business is not in California.]
* * * Hertz claimed that the plaintiffs and the defendant were citizens of different
States. Hence, the federal court possessed diversity-of-citizenship jurisdiction. Friend and
Nhieu, however, claimed that the Hertz Corporation was a California citizen, like
themselves, and that, hence, diversity jurisdiction was lacking.
To support its position, Hertz submitted a declaration by an employee relations
manager that sought to show that Hertz's "principal place of business" was in New Jersey,
not in California. The declaration stated, among other things, that Hertz operated
facilities in 44 States; and that California — which had about 12% of the Nation's
population — accounted for 273 of Hertz's 1,606 car rental locations; about 2,300 of its
11,230 full-time employees; about $811 million of its $4.371 billion in annual revenue;
and about 3.8 million of its approximately 21 million annual transactions, i.e., rentals.
The declaration also stated that the "leadership of Hertz and its domestic subsidiaries" is
located at Hertz's "corporate headquarters" in Park Ridge, New Jersey; that its "core
executive and administrative functions . . . are carried out" there and "to a lesser extent"
in Oklahoma City, Oklahoma; and that its "major administrative operations . . . are
found" at those two locations.
The District Court of the Northern District of California accepted Hertz's
statement of the facts as undisputed. But it concluded that, given those facts, Hertz was a
citizen of California. In reaching this conclusion, the court applied Ninth Circuit
precedent, which instructs courts to identify a corporation's "principal place of business"
by first determining the amount of a corporation's business activity State by State. If the
amount of activity is "significantly larger" or "substantially predominates" in one State,
then that State is the corporation's "principal place of business." If there is no such State,
33
then the "principal place of business" is the corporation's "'nerve center,'" i.e., the place
where "'the majority of its executive and administrative functions are performed.'"
Applying this test, the District Court found that the "plurality of each of the
relevant business activities" was in California, and that "the differential between the
amount of those activities" in California and the amount in "the next closest state" was
"significant." Hence, Hertz's "principal place of business" was California, and diversity
jurisdiction was thus lacking. * * *
* * * The Ninth Circuit affirmed in a brief memorandum opinion. Hertz filed a
petition for certiorari. And, in light of differences among the Circuits in the application of
the test for corporate citizenship, we granted the writ. Compare Tosco Corp., supra, at
500-502, and Capitol Indemnity Corp. v. Russellville Steel Co., 367 F.3d 831, 836 (CA8
2004) (applying "total activity" test and looking at "all corporate activities"), with
Wisconsin Knife Works, supra, at 1282 (applying "nerve center" test).
II
[The Court here concluded that the lower court orders were appealable.]
III
We begin our "principal place of business" discussion with a brief review of
relevant history. The Constitution provides that the "judicial Power shall extend" to
"Controversies . . . between Citizens of different States." Art. III, § 2. This language,
however, does not automatically confer diversity jurisdiction upon the federal courts.
Rather, it authorizes Congress to do so and, in doing so, to determine the scope of the
federal courts' jurisdiction within constitutional limits.
Congress first authorized federal courts to exercise diversity jurisdiction in 1789
when, in the First Judiciary Act, Congress granted federal courts authority to hear suits
"between a citizen of the State where the suit is brought, and a citizen of another State." §
11, 1 Stat. 78. The statute said nothing about corporations. In 1809, Chief Justice
Marshall, writing for a unanimous Court, described a corporation as an "invisible,
intangible, and artificial being" which was "certainly not a citizen." Bank of United States
v. Deveaux, 9 U.S. 61, 5 Cranch 61, 86, 3 L. Ed. 38 (1809). But the Court held that a
corporation could invoke the federal courts' diversity jurisdiction based on a pleading that
the corporation's shareholders were all citizens of a different State from the defendants, as
"the term citizen ought to be understood as it is used in the constitution, and as it is used
in other laws. That is, to describe the real persons who come into court, in this case,
under their corporate name." Id., at 91-92, 5 Cranch 61, 86, 3 L. Ed. 38.
In Louisville, C. & C. R. Co. v. Letson, 43 U.S. 497, 2 How. 497, 11 L. Ed. 353
(1844), the Court modified this initial approach. It held that a corporation was to be
deemed an artificial person of the State by which it had been created, and its citizenship
for jurisdictional purposes determined accordingly. Id., at 558-559, 2 How. 497, 11 L.
Ed. 353. Ten years later, the Court in Marshall v. Baltimore & Ohio R. Co., 57 U.S. 314,
16 How. 314, 14 L. Ed. 953 (1854), held that the reason a corporation was a citizen of its
State of incorporation was that, for the limited purpose of determining corporate
citizenship, courts could conclusively (and artificially) presume that a corporation's
shareholders were citizens of the State of incorporation. Id., at 327-328, 16 How. 314, 14
34
L. Ed. 953. And it reaffirmed Letson. 16 How., at 325-326, 14 L. Ed. 953. Whatever the
rationale, the practical upshot was that, for diversity purposes, the federal courts
considered a corporation to be a citizen of the State of its incorporation.
In 1928 this Court made clear that the "state of incorporation" rule was virtually
absolute. It held that a corporation closely identified with State A could proceed in a
federal court located in that State as long as the corporation had filed its incorporation
papers in State B, perhaps a State where the corporation did no business at all.
Subsequently, many in Congress and those who testified before it pointed out that this
interpretation was at odds with diversity jurisdiction's basic rationale, namely, opening
the federal courts' doors to those who might otherwise suffer from local prejudice against
out-of-state parties. Through its choice of the State of incorporation, a corporation could
manipulate federal-court jurisdiction, for example, opening the federal courts' doors in a
State where it conducted nearly all its business by filing incorporation papers elsewhere.
* * * Although various legislative proposals to curtail the corporate use of diversity
jurisdiction were made, none of these proposals were [sic] enacted into law.
At the same time as federal dockets increased in size, many judges began to
believe those dockets contained too many diversity cases. A committee of the Judicial
Conference of the United States studied the matter. * * *
Among its observations, the committee found a general need "to prevent frauds
and abuses" with respect to jurisdiction. The committee recommended against
eliminating diversity cases altogether. Instead it recommended, along with other
proposals, a statutory amendment that would make a corporation a citizen both of the
State of its incorporation and any State from which it received more than half of its gross
income. If, for example, a citizen of California sued (under state law in state court) a
corporation that received half or more of its gross income from California, that
corporation would not be able to remove the case to federal court, even if Delaware was
its State of incorporation.
During the spring and summer of 1951 committee members circulated their report
and attended circuit conferences at which federal judges discussed the report's
recommendations. Reflecting those criticisms, the committee filed a new report in
September, in which it revised its corporate citizenship recommendation. It now proposed
that "'a corporation shall be deemed a citizen of the state of its original creation . . . [and]
shall also be deemed a citizen of a state where it has its principal place of business.'" * *
* The committee wrote that this new language would provide a "simpler and more
practical formula" than the "gross income" test. It added that the language "ha[d] a
precedent in the jurisdictional provisions of the Bankruptcy Act."
In mid-1957 the committee presented its reports to the House of Representatives
Committee on the Judiciary. [During committee hearings, one witness, Judge Maris,
discussed ―principal place of business‖ as it had been interpreted in bankruptcy cases:]
* * * I think the courts have generally taken the view that where a
corporation's interests are rather widespread, the principal place of business
is an actual rather than a theoretical or legal one. It is the actual place where
its business operations are coordinated, directed, and carried out, which
35
would ordinarily be the place where its officers carry on its day-to-day
business, where its accounts are kept, where its payments are made, and not
necessarily a State in which it may have a plant, if it is a big corporation, or
something of that sort.
"But that has been pretty well worked out in the bankruptcy cases, and
that law would all be available, you see, to be applied here without having to
go over it again from the beginning."
* * * Subsequently, in 1958, Congress both codified the courts' traditional place of
incorporation test and also enacted into law a slightly modified version of the Conference
Committee's proposed "principal place of business" language. A corporation was to "be
deemed a citizen of any State by which it has been incorporated and of the State where it
has its principal place of business."
IV
The phrase "principal place of business" has proved more difficult to apply than
its originators likely expected. Decisions under the Bankruptcy Act did not provide the
firm guidance for which Judge Maris had hoped because courts interpreting bankruptcy
law did not agree about how to determine a corporation's "principal place of business." *
* *
After Congress' amendment, courts were similarly uncertain as to where to look to
determine a corporation's "principal place of business" for diversity purposes. If a
corporation's headquarters and executive offices were in the same State in which it did
most of its business, the test seemed straightforward. The "principal place of business"
was located in that State. See, e.g., Long v. Silver, 248 F.3d 309, 314-315 (CA4 2001);
Pinnacle Consultants, Ltd. v. Leucadia Nat. Corp., 101 F.3d 900, 906-907 (CA2 1996).
But suppose those corporate headquarters, including executive offices, are in one
State, while the corporation's plants or other centers of business activity are located in
other States? In 1959 a distinguished federal district judge, Edward Weinfeld, relied on
the Second Circuit's interpretation of the Bankruptcy Act to answer this question in part:
Where a corporation is engaged in far-flung and varied activities which are
carried on in different states, its principal place of business is the nerve
center from which it radiates out to its constituent parts and from which its
officers direct, control and coordinate all activities without regard to locale,
in the furtherance of the corporate objective. The test applied by our Court of
Appeals, is that place where the corporation has an 'office from which its
business was directed and controlled' — the place where ―all of its business
was under the supreme direction and control of its officers.‖ Scot Typewriter
Co., 170 F. Supp. , at 865.
Numerous Circuits have since followed this rule, applying the "nerve center" test
for corporations with "far-flung" business activities. * * *
Scot's analysis, however, did not go far enough. For it did not answer what courts
should do when the operations of the corporation are not "far-flung" but rather limited to
36
only a few States. When faced with this question, various courts have focused more
heavily on where a corporation's actual business activities are located.
Perhaps because corporations come in many different forms, involve many
different kinds of business activities, and locate offices and plants for different reasons in
different ways in different regions, a general "business activities" approach has proved
unusually difficult to apply. Courts must decide which factors are more important than
others: for example, plant location, sales or servicing centers; transactions, payrolls, or
revenue generation.
The number of factors grew as courts explicitly combined aspects of the "nerve
center" and "business activity" tests to look to a corporation's "total activities," sometimes
to try to determine what treatises have described as the corporation's "center of gravity."
A major treatise confirms this growing complexity, listing Circuit by Circuit, cases that
highlight different factors or emphasize similar factors differently, and reporting that the
"federal courts of appeals have employed various tests" — tests which "tend to overlap"
and which are sometimes described in "language" that "is imprecise." 15 Moore's §
102.54[2], at 102-112. See also id., §§ 102.54[2], [13], at 102-112 to 102-122
(describing, in 14 pages, major tests as looking to the "nerve center," "locus of
operations," or "center of corporate activities"). Not surprisingly, different circuits (and
sometimes different courts within a single circuit) have applied these highly general
multifactor tests in different ways. Id., §§ 102.54[3]-[7], [11]-[13] (noting that the First
Circuit "has never explained a basis for choosing between 'the center of corporate
activity' test and the 'locus of operations' test"; the Second Circuit uses a "two-part test"
similar to that of the Fifth, Ninth, and Eleventh Circuits involving an initial determination
as to whether "a corporation's activities are centralized or decentralized" followed by an
application of either the "place of operations" or "nerve center" test; the Third Circuit
applies the "center of corporate activities" test searching for the "headquarters of a
corporation's day-to-day activity"; the Fourth Circuit has "endorsed neither [the 'nerve
center' or 'place of operations'] test to the exclusion of the other"; the Tenth Circuit
directs consideration of the "total activity of the company considered as a whole"). See
also 13F Wright & Miller § 3625 (describing, in 73 pages, the "nerve center," "corporate
activities," and "total activity" tests as part of an effort to locate the corporation's "center
of gravity," while specifying different ways in which different circuits apply these or
other factors).
This complexity may reflect an unmediated judicial effort to apply the statutory
phrase "principal place of business" in light of the general purpose of diversity
jurisdiction, i.e., an effort to find the State where a corporation is least likely to suffer
out-of-state prejudice when it is sued in a local court, Pease v. Peck, 59 U.S. 595, 18
How. 595, 599, 15 L. Ed. 518 (1856). But, if so, that task seems doomed to failure. After
all, the relevant purposive concern — prejudice against an out-of-state party — will often
depend upon factors that courts cannot easily measure, for example, a corporation's
image, its history, and its advertising, while the factors that courts can more easily
measure, for example, its office or plant location, its sales, its employment, or the nature
of the goods or services it supplies, will sometimes bear no more than a distant relation to
the likelihood of prejudice. At the same time, this approach is at war with administrative
37
simplicity. And it has failed to achieve a nationally uniform interpretation of federal law,
an unfortunate consequence in a federal legal system.
V
A
In an effort to find a single, more uniform interpretation of the statutory phrase,
we have reviewed the Courts of Appeals' divergent and increasingly complex
interpretations. * * * We conclude that "principal place of business" is best read as
referring to the place where a corporation's officers direct, control, and coordinate the
corporation's activities. It is the place that Courts of Appeals have called the corporation's
"nerve center." And in practice it should normally be the place where the corporation
maintains its headquarters — provided that the headquarters is the actual center of
direction, control, and coordination, i.e., the "nerve center," and not simply an office
where the corporation holds its board meetings (for example, attended by directors and
officers who have traveled there for the occasion).
Three sets of considerations, taken together, convince us that this approach, while
imperfect, is superior to other possibilities. First, the statute's language supports the
approach. The statute's text deems a corporation a citizen of the "State where it has its
principal place of business. " 28 U.S.C. § 1332(c)(1). The word "place" is in the singular,
not the plural. The word "principal" requires us to pick out the "main, prominent" or
"leading" place. 12 Oxford English Dictionary 495 (2d ed. 1989) (def. (A)(I)(2)). And the
fact that the word "place" follows the words "State where" means that the "place" is a
place within a State. It is not the State itself.
A corporation's "nerve center," usually its main headquarters, is a single place.
The public often (though not always) considers it the corporation's main place of
business. And it is a place within a State. By contrast, the application of a more general
business activities test has led some courts, as in the present case, to look, not at a
particular place within a State, but incorrectly at the State itself, measuring the total
amount of business activities that the corporation conducts there and determining whether
they are "significantly larger" than in the next-ranking State.
This approach invites greater litigation and can lead to strange results, as the
Ninth Circuit has since recognized. Namely, if a "corporation may be deemed a citizen of
California on th[e] basis" of "activities [that] roughly reflect California's larger
population . . . nearly every national retailer — no matter how far flung its operations —
will be deemed a citizen of California for diversity purposes." Davis v. HSBC Bank Nev.,
N. A., 557 F.3d 1026, 1029-1030 ([9th Cir.] 2009). But why award or decline diversity
jurisdiction on the basis of a State's population, whether measured directly, indirectly
(say proportionately), or with modifications?
Second, administrative simplicity is a major virtue in a jurisdictional statute.
Complex jurisdictional tests complicate a case, eating up time and money as the parties
litigate, not the merits of their claims, but which court is the right court to decide those
claims. Complex tests produce appeals and reversals, encourage gamesmanship, and,
again, diminish the likelihood that results and settlements will reflect a claim's legal and
factual merits. Judicial resources too are at stake. Courts have an independent obligation
38
to determine whether subject-matter jurisdiction exists, even when no party challenges it.
So courts benefit from straightforward rules under which they can readily assure
themselves of their power to hear a case.
Simple jurisdictional rules also promote greater predictability. Predictability is
valuable to corporations making business and investment decisions. Cf. First Nat. City
Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 621, 103 S. Ct. 2591,
77 L. Ed. 2d 46 (1983) (recognizing the "need for certainty and predictability of result
while generally protecting the justified expectations of parties with interests in the
corporation"). Predictability also benefits plaintiffs deciding whether to file suit in a state
or federal court.
A "nerve center" approach, which ordinarily equates that "center" with a
corporation's headquarters, is simple to apply comparatively speaking. The metaphor of a
corporate "brain," while not precise, suggests a single location. By contrast, a
corporation's general business activities more often lack a single principal place where
they take place. That is to say, the corporation may have several plants, many sales
locations, and employees located in many different places. If so, it will not be as easy to
determine which of these different business locales is the "principal" or most important
"place."
Third, the statute's legislative history, for those who accept it, offers a simplicity-
related interpretive benchmark. The Judicial Conference provided an initial version of its
proposal that suggested a numerical test. A corporation would be deemed a citizen of the
State that accounted for more than half of its gross income. The Conference changed its
mind in light of criticism that such a test would prove too complex and impractical to
apply. That history suggests that the words "principal place of business" should be
interpreted to be no more complex than the initial "half of gross income" test. A "nerve
center" test offers such a possibility. A general business activities test does not.
B
We recognize that there may be no perfect test that satisfies all administrative and
purposive criteria. We recognize as well that, under the "nerve center" test we adopt
today, there will be hard cases. For example, in this era of telecommuting, some
corporations may divide their command and coordinating functions among officers who
work at several different locations, perhaps communicating over the Internet. That said,
our test nonetheless points courts in a single direction, towards the center of overall
direction, control, and coordination. Courts do not have to try to weigh corporate
functions, assets, or revenues different in kind, one from the other. Our approach
provides a sensible test that is relatively easier to apply, not a test that will, in all
instances, automatically generate a result.
We also recognize that the use of a "nerve center" test may in some cases produce
results that seem to cut against the basic rationale for 28 U.S.C. § 1332. For example, if
the bulk of a company's business activities visible to the public take place in New Jersey,
while its top officers direct those activities just across the river in New York, the
"principal place of business" is New York. One could argue that members of the public in
New Jersey would be less likely to be prejudiced against the corporation than persons in
New York — yet the corporation will still be entitled to remove a New Jersey state case
39
to federal court. And note too that the same corporation would be unable to remove a
New York state case to federal court, despite the New York public's presumed prejudice
against the corporation.
We understand that such seeming anomalies will arise. However, in view of the
necessity of having a clearer rule, we must accept them. Accepting occasionally
counterintuitive results is the price the legal system must pay to avoid overly complex
jurisdictional administration while producing the benefits that accompany a more uniform
legal system.
The burden of persuasion for establishing diversity jurisdiction, of course,
remains on the party asserting it. When challenged on allegations of jurisdictional facts,
the parties must support their allegations by competent proof. And when faced with such
a challenge, we reject suggestions such as, for example, the one made by petitioner that
the mere filing of a form like the Securities and Exchange Commission's Form 10-K
listing a corporation's "principal executive offices" would, without more, be sufficient
proof to establish a corporation's "nerve center." Such possibilities would readily permit
jurisdictional manipulation, thereby subverting a major reason for the insertion of the
"principal place of business" language in the diversity statute. Indeed, if the record
reveals attempts at manipulation — for example, that the alleged "nerve center" is
nothing more than a mail drop box, a bare office with a computer, or the location of an
annual executive retreat — the courts should instead take as the "nerve center" the place
of actual direction, control, and coordination, in the absence of such manipulation.
VI
Petitioner's unchallenged declaration suggests that Hertz's center of direction,
control, and coordination, its "nerve center," and its corporate headquarters are one and
the same, and they are located in New Jersey, not in California. Because respondents
should have a fair opportunity to litigate their case in light of our holding, however, we
vacate the Ninth Circuit's judgment and remand the case for further proceedings
consistent with this opinion.
It is so ordered.
NOTES AND QUESTIONS
1. Under what circumstances might using the ―nerve center‖ not be consistent
with the underlying theory of diversity of citizenship jurisdiction? Does the Court leave
open the possibility that some other test might be used? Under what circumstances? If
so, does the Court undermine its desire for uniform jurisdictional rules?
2. Although it is Congress‘s job (within Article III) to define the subject matter
jurisdiction of the federal courts, sometimes its efforts create uncertainty. Section
1332(c)(1) is an example. It became obvious soon after its passage in 1958 that
―principal place of business‖ was an imprecise term. Why did Congress not act to fix the
problem? What could it have done? When it passes imprecise jurisdictional statutes and
does not amend them, does Congress essentially delegate to the judiciary the
responsibility of determining the limits of its jurisdiction? Is there a problem with that?
40
ii. NON-INCORPORATED BUSINESSES
At pages 202-203, add to Note 1. All Courts of Appeals to have addressed the
issue agree that the citizenship of an LLC is to be determined by looking to the
citizenship of all its members. V&M Star, LP v. Centimark Corp., 596 F.3d 354, 35F.3d
412, 418 (3d Cir. 2010); Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 418
(3d Cir. 2010); Ferrell v. Express Check Advance of SC, LLC, 591 F.3d 698 (4th Cir.
2010); Rolling Hills MHP, LP v. Comcast SCH Holdings, LLC, 374 F.3d 1020 (11th
Cir.
2004); GMAC Commercial Credit LLC v. Dillard Dept. Stores, Inc., 357 F.3d 827 (8th
Cir. 2004).
g. The Domestic Relations and Probate Exceptions
At page 206, add. Five years later, the Supreme Court held that the Bankruptcy
Court lacked power under Article III to determine Smith‘s claim. Stern v. Marshall, 131
S. Ct. 2594 (U.S. 2011).
6. REMOVAL JURISDICTION
At pages 232-233, at the end of note 2, please insert:
This is no longer true. The majority sentiment has shifted, and rejects the
approach applied in Noble. The issue has proved surprisingly difficult, as courts have
now adopted three approaches.
The traditional approach, adopted in Brown v. Demco, Inc., 792 F.2d 478, 481-
482 (5th
Cir. 1986), and applied in Noble, held that D-1‘s failure to remove the case bars
D-2 from removing. The Fifth Circuit has not rejected the holding, so it is presumably
good law there.
The clear majority rule today – adopted by the Sixth, Eighth, Ninth, and Eleventh
Circuits – is that a later-joined defendant has 30 days from being served with process in
which to get the original defendant to join her notice of removal. Thus, the original
defendant‘s failure to remove within 30 days of service on her does not rule out later
removal. Destfino v. Reiswig, 630 F.3d 952, 956 (9th
Cir. 2011)(―We adopt the later-
served rule as the wiser and more equitable approach‖); Bailey v. Janssen Pharmaceutica,
Inc., 536 F.3d 1202, 1205-1208 (11th Cir. 2008); Marano Enterprises of Kansas v. Z-
Teca Restaurants, LP, 254 F.3d 753, 757 (8th Cir. 2002); Brierly v. Alusuisse Flexible
41
Packaging, Inc. 184 F.3d 527, 533 (6th Cir. 1999). Because Noble was decided by a
district court in the Eleventh Circuit, it would no longer come out the way it did.
The Fourth Circuit takes an ―intermediate approach.‖ It permits the second
defendant to remove the case within 30 days of service of process on her, but only if the
original defendant also removes within 30 days of service on her. Barbour v.
International Union, 640 F.3d 599 (4th
Cir. 2011)(en banc).
To summarize: Plaintiff sues D-1 and D-2 on July 1. Process is served on D-1
the same day. Process is served on D-2 on July 30. Under the tradition approach, the
case will be removed only if D-1 and D-2 remove no later than July 31 (30 days after
service on D-1. The fact that D-2 was served later does not extend the time for removal,
which runs from the date of service on D-1.
Under the majority view, D-2 can remove within 30 days after she was served –
that is, on or before August 29 (30 days after D-2 was served on July 30). She will have
to get D-1 to join her notice of removal, but can remove even if D-1 did not do so on her
own before.
Under the Fourth Circuit approach, D-2 can remove within 30 days of service on
her, but only if D-1 gets around to removing within 30 days of service on her. So if D-1
removes no later than July 31 (30 days after service on D-1), then D-2 can join the
removal anytime through August 29 (30 days after service on D-2).
This all seems more complicated than it should be. Could Congress have
addressed the issue in the removal statutes? How?
42
CHAPTER 7: PLEADINGS
C. THE COMPLAINT
1. Requirements
At page 310, following the Notes and Questions, please insert the following:
Note on Iqbal
The Court revisited Twombly in Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937
(2009). Many observers viewed the Court‘s decision to grant certiorari in Iqbal as an
opportunity to clarify and restrict some of the questionable implications of Twombly.
Instead, in a fractured five-to-four decision, the majority of the Court strongly reaffirmed
and arguably expanded Twombly‘s main themes.
The plaintiff in Iqbal was a Muslim citizen of Pakistan. He alleged that after the
terrorist attacks of September 11, 2001, federal officials arrested and detained him under
restrictive conditions. Two of the defendants were John Ashcroft, the former Attorney
General of the United States, and Robert Mueller, the Director of the FBI. Iqbal
attempted to allege a claim for violation of his constitutional rights under Bivens v. Six
Unknown Federal Narcotics Agents, 403 U.S. 388 (1971). Specifically, Iqbal alleged
that Ashcroft and Mueller violated the First and Fifth Amendments by adopting policies
that led to his designation as a person "of high interest" and subjected him to harsh
conditions of confinement on account of his race, religion, or national origin.
Ashcroft and Mueller moved to dismiss the complaint on the ground that it failed
sufficiently to allege that their conduct violated Iqbal's clearly established constitutional
rights, and they therefore were entitled to immunity from suit. The district court and the
Second Circuit rejected the defendants‘ arguments and upheld the complaint.
The Supreme Court reversed, and held that the complaint failed to state a claim.
Justice Kennedy wrote the majority opinion, in which he was joined by Chief Justice
Roberts and Justices Scalia, Thomas, and Alito. In applying Twombly, the majority
noted, a court must first identify the elements of a viable claim. In actions alleging
unconstitutional discrimination by government officials, those officials may not be held
liable for the unconstitutional conduct of their subordinates under a theory of respondeat
superior. Rather, the plaintiff must allege that each defendant official's own actions have
violated the Constitution:
The factors necessary to establish a Bivens violation will vary with the
constitutional provision at issue. Where the claim is invidious
discrimination in contravention of the First and Fifth Amendments, our
decisions make clear that the plaintiff must plead and prove that the
defendant acted with discriminatory purpose. . . . Under extant precedent
purposeful discrimination requires more than ―intent as volition or intent
43
as awareness of consequences.‖ Personnel Administrator of Mass. v.
Feeney, 442 U. S. 256, 279 (1979). It instead involves a decision maker‘s
undertaking a course of action ―‗because of,‘ not merely ‗in spite of,‘ [the
action‘s] adverse effects upon an identifiable group.‖ Ibid. It follows
that, to state a claim based on a violation of a clearly established right,
respondent must plead sufficient factual matter to show that petitioners
adopted and implemented the detention policies at issue not for a neutral,
investigative reason but for the purpose of discriminating on account of
race, religion, or national origin.
Id. at 1948-1949.
The majority then concluded that Iqbal's allegations against Ashcroft and Mueller
were insufficient under Twombly:
Two working principles underlie our decision in Twombly. First,
the tenet that a court must accept as true all of the allegations contained in
a complaint is inapplicable to legal conclusions. Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements,
do not suffice. . . . Rule 8 marks a notable and generous departure from
the hyper-technical, code-pleading regime of a prior era, but it does not
unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions. Second, only a complaint that states a plausible claim for
relief survives a motion to dismiss. Determining whether a complaint
states a plausible claim for relief will, as the Court of Appeals observed,
be a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense. . . .
. . .
We begin our analysis by identifying the allegations in the
complaint that are not entitled to the assumption of truth. Respondent
pleads that petitioners ―knew of, condoned, and willfully and maliciously
agreed to subject [him]‖ to harsh conditions of confinement ―as a matter of
policy, solely on account of [his] religion, race, and/or national origin and
for no legitimate penological interest.‖ The complaint alleges that
Ashcroft was the ―principal architect‖ of this invidious policy, and that
Mueller was ―instrumental‖ in adopting and executing it. These bare
assertions, much like the pleading of conspiracy in Twombly, amount to
nothing more than a ―formulaic recitation of the elements‖ of a
constitutional discrimination claim, namely, that petitioners adopted a
policy ―‗because of,‘ not merely ‗in spite of,‘ its adverse effects upon an
identifiable group.‖ As such, the allegations are conclusory and not
entitled to be assumed true. To be clear, we do not reject these bald
allegations on the ground that they are unrealistic or nonsensical. . . . It is
the conclusory nature of respondent‘s allegations, rather than their
extravagantly fanciful nature, that disentitles them to the presumption of
44
truth.
We next consider the factual allegations in respondent‘s complaint
to determine if they plausibly suggest an entitlement to relief. The
complaint alleges that ―the [FBI], under the direction of Defendant
Mueller, arrested and detained thousands of Arab Muslim men . . . as part
of its investigation of the events of September 11.‖ It further claims that
―[t]he policy of holding post-September-11th detainees in highly
restrictive conditions of confinement until they were ‗cleared‘ by the FBI
was approved by Defendants Ashcroft and Mueller in discussions in the
weeks after September 11, 2001.‖ Taken as true, these allegations are
consistent with petitioners‘ purposefully designating detainees ―of high
interest‖ because of their race, religion, or national origin. But given more
likely explanations, they do not plausibly establish this purpose.
The September 11 attacks were perpetrated by 19 Arab Muslim
hijackers who counted themselves members in good standing of al Qaeda,
an Islamic fundamentalist group. Al Qaeda was headed by another Arab
Muslim—Osama bin Laden—and composed in large part of his Arab
Muslim disciples. It should come as no surprise that a legitimate policy
directing law enforcement to arrest and detain individuals because of their
suspected link to the attacks would produce a disparate, incidental impact
on Arab Muslims, even though the purpose of the policy was to target
neither Arabs nor Muslims. On the facts respondent alleges the arrests
Mueller oversaw were likely lawful and justified by his nondiscriminatory
intent to detain aliens who were illegally present in the United States and
who had potential connections to those who committed terrorist acts. As
between that ―obvious alternative explanation‖ for the arrests, Twombly,
and the purposeful, invidious discrimination respondent asks us to infer,
discrimination is not a plausible conclusion.
But even if the complaint‘s well-pleaded facts give rise to a
plausible inference that respondent‘s arrest was the result of
unconstitutional discrimination, that inference alone would not entitle
respondent to relief. It is important to recall that respondent‘s complaint
challenges neither the constitutionality of his arrest nor his initial detention
in the [Metropolitan Detention Center in Brooklyn]. Respondent‘s
constitutional claims against petitioners rest solely on their ostensible
―policy of holding post-September-11th detainees‖ in the ADMAX SHU
[Administrative Maximum Special Housing Unit, in which detainees are
in 23-hour-a-day lockdown] once they were categorized as ―of high
interest.‖ To prevail on that theory, the complaint must contain facts
plausibly showing that petitioners purposefully adopted a policy of
classifying post-September-11 detainees as ―of high interest‖ because of
their race, religion, or national origin.
45
This the complaint fails to do. Though respondent alleges that
various other defendants, who are not before us, may have labeled him a
person of ―of high interest‖ for impermissible reasons, his only factual
allegation against petitioners accuses them of adopting a policy approving
―restrictive conditions of confinement‖ for post-September 11 detainees
until they were ―‗cleared‘ by the FBI.‖ Accepting the truth of that
allegation, the complaint does not show, or even intimate, that petitioners
purposefully housed detainees in the ADMAX SHU due to their race,
religion, or national origin. All it plausibly suggests is that the Nation‘s
top law enforcement officers, in the aftermath of a devastating terrorist
attack, sought to keep suspected terrorists in the most secure conditions
available until the suspects could be cleared of terrorist activity.
Respondent does not argue, nor can he, that such a motive would violate
petitioners‘ constitutional obligations. . . .
. . .
Respondent offers three arguments that bear on our disposition of
his case, but none is persuasive.
. . .
Respondent first says that our decision in Twombly should be
limited to pleadings made in the context of an antitrust dispute. This
argument is not supported by Twombly and is incompatible with the
Federal Rules of Civil Procedure. Though Twombly determined the
sufficiency of a complaint sounding in antitrust, the decision was based on
our interpretation and application of Rule 8. That Rule in turn governs the
pleading standard ―in all civil actions and proceedings in the United States
district courts.‖ Fed. Rule Civ. Proc. 1. Our decision in Twombly
expounded the pleading standard for ―all civil actions,‖ and it applies to
antitrust and discrimination suits alike.
. . .
Respondent next implies that our construction of Rule 8 should be
tempered where, as here, the Court of Appeals has ―instructed the district
court to cabin discovery in such a way as to preserve‖ petitioners‘ defense
of qualified immunity ―as much as possible in anticipation of a summary
judgment motion.‖ We have held, however, that the question presented by
a motion to dismiss a complaint for insufficient pleadings does not turn on
the controls placed upon the discovery process. Twombly, supra, at 559
(―It is no answer to say that a claim just shy of a plausible entitlement to
relief can, if groundless, be weeded out early in the discovery process
through careful case management given the common lament that the
success of judicial supervision in checking discovery abuse has been on
46
the modest side.‖).
. . .
We decline respondent‘s invitation to relax the pleading
requirements on the ground that the Court of Appeals promises petitioners
minimally intrusive discovery. That promise provides especially cold
comfort in this pleading context, where we are impelled to give real
content to the concept of qualified immunity for high-level officials who
must be neither deterred nor detracted from the vigorous performance of
their duties. Because respondent‘s complaint is deficient under Rule 8, he
is not entitled to discovery, cabined or otherwise.
. . .
Respondent finally maintains that the Federal Rules expressly allow
him to allege petitioners‘ discriminatory intent ―generally,‖ which he
equates with a conclusory allegation. It follows, respondent says, that his
complaint is sufficiently well pleaded because it claims that petitioners
discriminated against him ―on account of [his] religion, race, and/or
national origin and for no legitimate penological interest.‖ Were we
required to accept this allegation as true, respondent‘s complaint would
survive petitioners‘ motion to dismiss. But the Federal Rules do not
require courts to credit a complaint‘s conclusory statements without
reference to its factual context. It is true that Rule 9(b) requires
particularity when pleading ―fraud or mistake,‖ while allowing ―[m]alice,
intent, knowledge, and other conditions of a person‘s mind [to] be alleged
generally.‖ But ―generally‖ is a relative term. In the context of Rule 9, it is
to be compared to the particularity requirement applicable to fraud or
mistake. Rule 9 merely excuses a party from pleading discriminatory
intent under an elevated pleading standard. It does not give him license to
evade the less rigid—though still operative—strictures of Rule 8. . . .
Justice Souter, who had written the majority opinion in Twombly, dissented,
joined by Justices Stevens, Breyer, and Ginsburg. To them, Twombly was distinguishable
because that case involved allegations of antitrust conspiracy based on parallel conduct,
and such conduct was just as consistent with lawful business behavior as with conspiracy.
Here in contrast, "the allegations of the complaint are neither confined to naked legal
conclusions nor consistent with legal conduct." Id. at 1960.
Questions
1. Is Iqbal consistent with Erickson (discussed in Note 5 above)? After all,
Erickson also engaged deprivation of constitutional rights – but successfully alleged.
Why the different result in Iqbal?
47
2. In his dissent in Twombly, Justice Stevens reviewed the efforts of the drafters
of the Federal Rules to rid federal pleading of the distinction between allegations of
―conclusions‖ and allegations of ―facts.‖ See pages 305-306 of the casebook. Has Iqbal
resurrected that distinction?
3. How does the majority deal with the fact that Rule 9(b) expressly allows
allegations of state of mind to be made generally?
4. Does Iqbal, for all practical purposes, make it impossible to state a claim for
unconstitutionally motivated conduct by government officials? It not, what must a
plaintiff alleging such a complaint include in the complaint that was not included in
Iqbal?
D. DEFENDANT’S OPTIONS IN RESPONSE
At page 325, after the first paragraph, note that the 2009 amendments to Rule 12
change the time in which a defendant must respond to avoid default – from 20 days to 21
days after being served with process.
At page 328, concerning affirmative defenses, note that there is an emerging split
of authority on whether the plausibility standard of Twombly and Iqbal applies to
affirmative defenses. In those cases, the Supreme Court interpreted Rule 8(a), and
affirmative defenses are governed by Rule 8(c), so some courts refuse to apply the
increased detail requirement here. See, e.g., Lane v. Page, 272 F.R.D. 581, 591 (D. N.M.
2011)(providing citations to numerous cases on both sides in footnotes 5 and 6); Shaw v.
Prudential Ins. Co. of Am., 2011 U.S. Dist. LEXIS 29203 at *7 (W.D. Mo. 2011);
Charleswell v. Chase Manhattan Bank, N.A., 2009 U.S. Dist. LEXIS 116358 (D. V.I.
2009); Romantine v. CH2M Hill Eng‘rs, 2009 U.S. Dist. LEXIS 98699 (W.D.Pa. 2009);
First Nat‘l Ins. Co. of America v. Camps Servs, 2009 U.S. Dist. LEXIS 149 (E.D. Mich
2009).
On the other hand, some courts apply the standard to affirmative defenses. See,
e.g., Bradshaw v. Hilco Receivables, LLC, 725 F.Supp.2d 532, 536 (D. Md. 2010);
Hayne v. Green Ford Sales, Inc., 363 F.R.D. 647, 650 (D. Kan. 2009).
SECTION 4: DEFAULT AND DEFAULT JUDGMENT
At page 332, Note 3, change 20 days to 21 days.
48
E. AMENDED PLEADINGS
1. BASIC PRINCIPLES UNDER RULE 15(a)
The 2009 amendments not only changed the time in which defendant must
respond – from 20 to 21 days after being served with process – but also changed the rules
for amendment of right under Rule 15(a). They thus changed the answers to the
hypotheticals on page 334 of the Casebook.
1. (a) Rule 15(a) traditionally allowed the plaintiff to amend of right before the
defendant served her ―responsive pleading.‖ Because a motion is not a responsive
pleading, the plaintiff in this hypothetical would have retained the right to amend. As
amended in 2009, Rule 15(a)(1)(A) now allows a plaintiff to amend of right once within
21 days after the defendant serves her answer or a motion under Rule 12(b), (e), or (f).
Thus, under the old rule, the defendant had the power to cut off the plaintiff‘s right to
amend by serving her answer. Now that is not true. The plaintiff has 21 days after the
defendant responds by serving an answer or motion in which to amend. So in this
hypothetical, assuming Plaintiff amends within 21 days after Defendant‘s service of the
motion, she would have a right to amend.
(b) Again, assuming Plaintiff amended no later than 21 days after Defendant
served her motion, she would have a right to amend.
(c) The 2009 amendments change the timing here from 10 to 14 days after
service of the amended pleading. Rule 15(a)(3).
(d) The 2009 amendments changed the timing during which Defendant has a
right to amend – from 20 days after service of her answer to 21 days. The amendment in
this hypothetical is timely under either version.
(e) This hypothetical is not affected by the 2009 amendments.
3. AMENDMENT AND THE STATUTE OF LIMITITIONS
b. AMENDMENTS CHANGING A PARTY
At page 342, end of the § b., add: In Krupski v. Costa Crociere S. p. A., 130 S.Ct.
2485 (2010), the Court held that relation back depends upon the knowledge of the party
to be joined, and not the plaintiff. Thus, it is the party to be joined that must know,
within the period under Rule 4(m) that it should have been named but for a mistake. The
plaintiff‘s knowledge or lack thereof is not the test.
49
CHAPTER 9: ADJUDICATION WITH AND WITHOUT A TRIAL OR JURY
A. THE RIGHT TO A JURY
At page 435, after the first paragraph concerning Scope of the Constitutional
Right, add:
Professor Madison has detailed the constitutional evolution of the jury, recounting
federalist and anti-federalist writings. He concludes that ―[i]n the Anglo-American
tradition, . . . persons of all political stripes have agreed on one thing: the jury system
serves justice by allowing average citizens to serve as a check within the broader scheme
of governmental checks and balances.‖ Benjamin V. Madison, III, Trial by Jury or by
Military Tribunal for Accused Terrorist Detainees Facing the Death Penalty? An
Examination of the Principles That Transcend the U.S. Constitution, 17 U. Fla. J.L.&
Pub. Pol. 347, 391 (2006).
SECTION C: SUMMARY JUDGMENT – ADJUDICATION WITHOUT TRIAL
OR JURY
At page 496, note 9, add:
In Ortiz v. Jordan, 131 S.Ct. 884 (2011), the Supreme Court answered this
question and held that in federal court a party may not appeal a denial of summary
judgment after a full trial on the merits.
SECTION D: CONTROLLING AND SECOND-GUESSING JURIES
At page 532, end of page, add: To set aside a judgment as ―void‖ under Federal
Rule 60(b)(4), there must be a fundamental flaw; a merely erroneous decision is not
enough (if the decision were merely erroneous, the aggrieved party should have
appealed). A judgment is void if there was not even an ―arguable basis‖ for subject
matter jurisdiction. United Student Aid Funds v. Espinoza, 130 S.Ct. 1367 (2010).
Because the bankruptcy court that entered judgment had jurisdiction, its judgment could
not be set aside as void.
50
CHAPTER 10: WHAT LAW APPLIES IN FEDERAL COURT
B.DETERMINING WHAT LAW APPLIES
3. THE FEDERAL RULES OF CIVIL PROCEDURE
a. WHAT HAPPENS WHEN THERE IS A FEDERAL RULE OF CIVIL
PROCEDURE ON POINT — THE RULES ENABLING ACT PRONG
ii. DETERMINING WHETHER A FEDERAL DIRECTIVE IS VALID
In Shady Grove Orthopedic Assoc. v. Allstate Ins. Co., 130 S.Ct. 1431 (2010), the
Court again considered a conflict between state law and a Federal Rule of Civil
Procedure. Under New York law, insurance companies have 30 days to pay or refuse a
claim and are required to pay a statutorily set interest rate on overdue benefits. The
plaintiff, a medical provider, brought a class action in federal court against Allstate
Insurance, alleging that Allstate routinely refused to pay interest on overdue amounts.
Rule 23 of the Federal Rules of Civil Procedure specifies the criteria for certification of a
class action in federal court. The district court refused to apply Rule 23, however, and
concluded that New York law on class actions governed. That law provides:
Unless a statute creating or imposing a penalty, or a minimum measure of
recovery specifically authorizes the recovery thereof in a class action, an
action to recover a penalty, or minimum measure of recovery created or
imposed by statute may not be maintained as a class action.
N.Y. Civ. Prac. Law Ann § 901 (West 2006). The Second Circuit affirmed. It conceded
that if there were a valid Federal Rule on point that conflicted with state law, the Federal
Rule would control. It concluded, however, that § 901 and Rule 23 did not conflict
because the former addresses eligibility for class certification while the latter addresses
the specific criteria for certification.
A divided the Supreme Court reversed, and held that the issue was governed by
Rule 23 of the Federal Rules of Civil Procedure. Justice Scalia, writing for a five Justice
majority, first rejected the argument that § 901 and Rule 23 do not conflict observing that
―the line between eligibility and certifiability is entirely artificial.‖ 130 S.Ct. at 1438.
Having found a conflict between the two provisions, the majority next considered
whether Rule 23 was valid under the Rules Enabling Act. In making this determination,
Justice Scalia, writing for only four members of the Court, stressed that the focus must be
on the Federal Rule not on the state law: ―[I]t is not the substantive or procedural nature
or purpose of the affected state law that matters, but the substantive or procedural nature
of the Federal Rule. We have held since Sibbach, and reaffirmed repeatedly, that the
validity of a Federal Rule depends entirely upon whether it regulates procedure.‖ 130
S.Ct. at 1444.
51
Justice Stevens, who joined in the first part of Scalia‘s opinion, offered a different
approach to determining the validity of a Federal Rule of Civil Procedure. Justice
Stevens emphasized the provision in the Rules Enabling Act requiring that such rules
―not abridge, enlarge or modify any substantive right.‖ He argued that because of this
language it was necessary to considered the substantive nature of the state law. In the
end he concurred in the holding that Rule 23 controlled because he concluded that the
substantive character of § 901 was not sufficiently clear to invalidate a Federal Rules of
Civil Procedure.
Unlike the majority, the dissent found that Rule 23 can and should be read to
avoid a conflict with state law. After considering the legislative history of § 901, the
dissent concluded that the N.Y. law was intended to have the substantive effect of
limiting damages and therefore should be applied.
52
CHAPTER 11: THE PRECLUSION DOCTRINES
C. ISSUE PRECLUSION
6. AGAINST WHOM CAN ISSUE PRECLUSION BE ASSERTED?
At pages 622-624, in lieu of Notes 3 through 10, please insert:
The Supreme Court sounded the death knell of virtual representation in Taylor v.
Sturgell, 553 U.S. 880 (2008). Although the case involved claim preclusion, its
discussion of against whom a judgment may be enforced is relevant in issue preclusion as
well. In Taylor, Herrick, an antique aviation enthusiast, sought release of technical
documents from the Federal Aviation Administration (FAA). He wanted the documents
to help him restore such a plane to its original condition. After the FAA the request on
the basis that they constituted trade secrets. Herrick then sued the FAA and lost on
summary judgment.
Less than a month later, Taylor, who is a friend of Herrick and also an aircraft
enthusiast, sought the same documents from the FAA. Ultimately, Taylor sued the
agency. The corporation that succeeded to the interests of the airplane‘s manufacturer
intervened and sought to block release of the documents. The lower courts held that
Taylor‘s suit was barred by claim preclusion. Although Taylor was not a party in
Herrick‘s suit, the courts applied virtual representation to hold that Taylor was bound by
the judgment in Herrick‘s case. The district court adopted the Eighth Circuit‘s test from
Tyus, which is discussed in Note 2 at page 622 of the Casebook. On appeal, the District
of Columbia Circuit fashioned its own test for virtual representation.
The Supreme Court reversed. First, it reviewed the lower courts‘ reasoning:
The Eighth Circuit's seven-factor test for virtual representation,
adopted by the District Court in Taylor's case, requires an "identity of
interests" between the person to be bound and a party to the judgment.
Six additional factors counsel in favor of virtual representation under the
Eighth Circuit's test, but are not prerequisites: (1) a "close relationship"
between the present party and a party to the judgment alleged to be
preclusive; (2) "participation in the prior litigation" by the present party;
(3) the present party's "apparent acquiescence" to the preclusive effect of
the judgment; (4) "deliberat[e] maneuver[ing]" to avoid the effect of the
judgment; (5) adequate representation of the present party by a party to the
prior adjudication; and (6) a suit raising a "public law" rather than a
"private law" issue. These factors, the D. C. District Court observed,
"constitute a fluid test with imprecise boundaries" and call for "a broad,
case-by-case inquiry."
The record before the District Court in Taylor's suit revealed the
following facts about the relationship between Taylor and Herrick: Taylor
is the president of the Antique Aircraft Association, an organization to
53
which Herrick belongs; the two men are "close associate[s]"; Herrick
asked Taylor to help restore Herrick's F-45, though they had no contract or
agreement for Taylor's participation in the restoration; Taylor was
represented by the lawyer who represented Herrick in the earlier litigation;
and Herrick apparently gave Taylor documents that Herrick had obtained
from the FAA during discovery in his suit.
Fairchild and the FAA conceded that Taylor had not participated in
Herrick's suit. App. to Pet. for Cert. 32a. The D. C. District Court
determined, however, that Herrick ranked as Taylor's virtual
representative because the facts fit each of the other six indicators on the
Eighth Circuit's list. Accordingly, the District Court held Taylor's suit,
seeking the same documents Herrick had requested, barred by the
judgment against Herrick.
The D.C. Circuit affirmed. It observed, first, that other Circuits
"vary widely" in their approaches to virtual representation. Taylor v.
Blakey, 490 F.3d 965, 971 (2007). In this regard, the D. C. Circuit
contrasted the multifactor balancing test applied by the Eighth Circuit and
the D. C. District Court with the Fourth Circuit's narrower approach,
which "treats a party as a virtual representative only if the party is
'accountable to the nonparties who file a subsequent suit' and has 'the tacit
approval of the court' to act on the nonpart[ies'] behalf." Ibid. (quoting
Klugh v. United States, 818 F.2d 294, 300 (CA4 1987)).
Rejecting both of these approaches, the D.C. Circuit announced its
own five-factor test. The first two factors—"identity of interests" and
"adequate representation"—are necessary but not sufficient for virtual
representation. 490 F.3d at 971-972. In addition, at least one of three
other factors must be established: "a close relationship between the
present party and his putative representative," "substantial participation by
the present party in the first case," or "tactical maneuvering on the part of
the present party to avoid preclusion by the prior judgment."
Applying this test to the record in Taylor's case, the D. C. Circuit
found both of the necessary conditions for virtual representation well met.
As to identity of interests, the court emphasized that Taylor and Herrick
sought the same result—release of the F-45 documents. Moreover, the D.
C. Circuit observed, Herrick owned an F-45 airplane, and therefore had "if
anything, a stronger incentive to litigate" than Taylor, who had only a
"general interest in public disclosure and the preservation of antique
aircraft heritage." Id., at 973.
Turning to adequacy of representation, the D. C. Circuit
acknowledged that some other Circuits regard notice of a prior suit as
essential to a determination that a nonparty was adequately represented in
that suit. See id., at 973-974 (citing Perez v. Volvo Car Corp., 247 F.3d
303, 312 (CA1 2001), and Tice v. American Airlines, Inc., 162 F.3d 966,
973 (CA7 1998)). Disagreeing with these courts, the D. C. Circuit deemed
54
notice an "important" but not an indispensable element in the adequacy
inquiry. The court then concluded that Herrick had adequately
represented Taylor even though Taylor had received no notice of Herrick's
suit. For this conclusion, the appeals court relied on Herrick's "strong
incentive to litigate" and Taylor's later engagement of the same attorney,
which indicated to the court Taylor's satisfaction with that attorney's
performance in Herrick's case. See 490 F.3d at 974-975.
The D.C. Circuit also found its "close relationship" criterion met,
for Herrick had "asked Taylor to assist him in restoring his F-45" and
"provided information to Taylor that Herrick had obtained through
discovery"; furthermore, Taylor "did not oppose Fairchild's
characterization of Herrick as his 'close associate.'" Id., at 975. Because
the three above-described factors sufficed to establish virtual
representation under the D. C. Circuit's five-factor test, the appeals court
left open the question whether Taylor had engaged in "tactical
maneuvering." See id., at 976 (calling the facts bearing on tactical
maneuvering "ambigu[ous]")
We granted certiorari to resolve the disagreement among the
Circuits over the permissibility and scope of preclusion based on "virtual
representation.‖3
553 U.S. at 888-891.
The Court then summarized the circumstances in which a non-party may be
bound by a judgment.
Though hardly in doubt, the rule against nonparty preclusion is
subject to exceptions. For present purposes, the recognized exceptions can
be grouped into six categories.
First, "[a] person who agrees to be bound by the determination of
issues in an action between others is bound in accordance with the terms
of his agreement." 1 Restatement (Second) of Judgments § 40 (1980)
(hereinafter Restatement). For example, "if separate actions involving the
same transaction are brought by different plaintiffs against the same
defendant, all the parties to all the actions may agree that the question of
the defendant's liability will be definitely determined, one way or the
3 The Ninth Circuit applies a five-factor test similar to the D. C. Circuit's. See Kourtis v.
Cameron, 419 F.3d 989, 996 (2005). The Fifth, Sixth, and Eleventh Circuits, like the
Fourth Circuit, have constrained the reach of virtual representation by requiring, inter
alia, the existence of a legal relationship between the nonparty to be bound and the
putative representative. See Pollard v. Cockrell, 578 F.2d 1002, 1008 (CA5 1978);
Becherer v. Merrill Lynch, Pierce, Fenner, & Smith, Inc., 193 F.3d 415, 424 (CA6 1999);
EEOC v. Pemco Aeroplex, Inc., 383 F.3d 1280, 1289 (CA11 2004). The Seventh Circuit,
in contrast, has rejected the doctrine of virtual representation altogether. See Perry v.
Globe Auto Recycling, Inc., 227 F.3d 950, 953 (2000).
55
other, in a 'test case.'" D. Shapiro, Civil Procedure: Preclusion in Civil
Actions 77-78 (2001) (hereinafter Shapiro). See also California v. Texas,
459 U.S. 1096, 1097 (1983) (dismissing certain defendants from a suit
based on a stipulation "that each of said defendants . . . will be bound by a
final judgment of this Court" on a specified issue).
Second, nonparty preclusion may be justified based on a variety of
pre-existing "substantive legal relationship[s]" between the person to be
bound and a party to the judgment. Shapiro 78. See also Richards, 517
U.S., at 798. Qualifying relationships include, but are not limited to,
preceding and succeeding owners of property, bailee and bailor, and
assignee and assignor. See 2 Restatement §§ 43-44, 52, 55. These
exceptions originated "as much from the needs of property law as from the
values of preclusion by judgment." 18A C. Wright, A. Miller, & E.
Cooper, Federal Practice and Procedure § 4448, p 329 (2d ed. 2002).8
Third, we have confirmed that, "in certain limited circumstances,"
a nonparty may be bound by a judgment because she was "adequately
represented by someone with the same interests who [wa]s a party" to the
suit. Richards, 517 U.S., at 798 . Representative suits with preclusive
effect on nonparties include properly conducted class actions, see Martin,
490 U.S., at 762, n. 2 (citing Fed. Rule Civ. Proc. 23), and suits brought by
trustees, guardians, and other fiduciaries, see Sea-Land Services, Inc. v.
Gaudet, 414 U.S. 573, 593.
Fourth, a nonparty is bound by a judgment if she "assume[d]
control" over the litigation in which that judgment was rendered.
Montana, 440 U.S., at 154. Because such a person has had "the
opportunity to present proofs and argument," he has already "had his day
in court" even though he was not a formal party to the litigation.
Fifth, a party bound by a judgment may not avoid its preclusive
force by relitigating through a proxy. Preclusion is thus in order when a
person who did not participate in a litigation later brings suit as the
designated representative of a person who was a party to the prior
adjudication. See Chicago, R. I. & P. R. Co. v. Schendel, 270 U.S. 611,
620, 623. And although our decisions have not addressed the issue
directly, it also seems clear that preclusion is appropriate when a nonparty
later brings suit as an agent for a party who is bound by a judgment.
8 The substantive legal relationships justifying preclusion are sometimes
collectively referred to as "privity." See, e.g., Richards v. Jefferson County, 517
U.S. 793, 798 (1996); 2 Restatement § 62, Comment a. The term "privity,"
however, has also come to be used more broadly, as a way to express the
conclusion that nonparty preclusion is appropriate on any ground. To ward off
confusion, we avoid using the term "privity" in this opinion.
56
Sixth, in certain circumstances a special statutory scheme may
"expressly foreclos[e] successive litigation by nonlitigants . . . if the
scheme is otherwise consistent with due process." Martin, 490 U.S., at
762, n. 2. Examples of such schemes include bankruptcy and probate
proceedings, and quo warranto actions or other suits that, "under [the
governing] law, [may] be brought only on behalf of the public at large,"
Richards, 517 U.S., at 804.
553 U.S. at 893-895.
The Court found that none of these exceptions applied, and thus concluded that
Taylor‘s suit against the FAA could proceed.
57
CHAPTER 12: SCOPE OF LITIGATION –
JOINDER AND SUPPLEMENTAL JURISDICTION
F. OVERRIDING PLAINTIFF’S PARTY STRUCTURE
SECTION 2. NECESSARY AND INDISPENSABLE PARTIES
At page 702, please insert:
7. In Republic of Philippines v. Pimentel, 553 U.S. 851 (2008), the Supreme
Court applied Rule 19(b) to compel dismissal in an interesting context. The case was an
interpleader action. As we will study in Chapter 13, interpleader allows someone in
possession of money or other property to join all potential claimants to the property.
Pimentel involved billions of dollars in assets stolen from various sources by the late
ruler of the Philippines, Ferdinand Marcos. A corporation founded by Marcos held the
assets and instituted interpleader in federal court in California, in an effort to return them
to their rightful owners.
Thousands of claimants were joined. Two claimants – the Republic of the
Philippines and a commission created by it – could not be joined, however, because of
sovereign immunity. The Court concluded that the interpleader proceeding could not
proceed without these two claimants, and that it had to be dismissed under Rule 12(b)(7).
First, the Philippines and its commission were necessary under Rule 19(a)(1)(B)(i). If
they did not participate, the assets to which they were entitled would be distributed to
others. Second, under Rule 19(b), the Court confirmed that judges routinely must
consider the merits of claims and defenses. Rule 19(b), after all, requires a court to
assess whether it is likely that a party or absentee will be harmed by nonjoinder. The
lower courts had done so and had concluded that the claims by the Philippines and its
commission were frivolous. The Court disagreed. In equity and good conscience, the
interpleader case had to be dismissed, at least in part to allow a sovereign nation to
determine in its own courts who owns the assets absconded by its former leader.
58
CHAPTER 13: SPECIAL MULTI-PARTY LITIGATION: INTERPLEADER
AND THE CLASS ACTION
C. CLASS ACTION
4. PRACTICE UNDER RULE 23
c. REQUIREMENTS FOR CERTIFICATION
On June 20, 2011, the Supreme Court issued its decision in In Wal-Mart Stores,
Inc. v. Dukes, 2011 U.S. LEXIS 4567. It reversed the Ninth Circuit, which had upheld a
class of potentially 1.5 million members. The class consisted of women employees of
Wal-Mart, and alleged discrimination on the basis of sex in violation of Title VII. Wal-
Mart permits managers to exercise great discretion in setting pay (within ranges) and
promotion, and sought injunctive and declaratory relief, punitive damages, and back pay.
Plaintiffs assert that the discretion is exercised disproportionately in favor of men, which
causes an unlawful disparate impact on women employees. The majority, led by Justice
Scalia, concluded (1) that the class failed to satisfy Rule 23(a)(2) and (2) that back pay
claims could not be sought under Rule 23(b)(2).
On Rule 23(b)(2), the holding was unanimous, and emphasized two points. First,
the injunctive or declaratory relief sought must be the same for each class member. The
Rule ―does not authorize class certification when each individual class member would be
entitled to a different injunction or declaratory judgment against the defendant.‖ Id. at
*39 (emphasis original). Indeed, the Court noted, because half the class was no longer
employed at Wal-Mart, only the remaining half had any claim for equitable relief. And
their claims were not susceptible to vindication by a single order. Second, Rule 23(b)(2)
does not authorize a class action when ―each class member would be entitled to an
individualized award of monetary damages.‖ Id. This is true even if the award is of back
pay, notwithstanding that back pay may be considered equitable relief. The Rule does
not speak of equitable relief, but of injunctive and declaratory relief.
In this part of the opinion, the Court tipped its hand on two potentially important
points. First, it says that due process (as interpreted in Phillips Petroleum Co. v. Shutts,
472 U.S. 797 (1985)), requires notice and opt-out for any class action ―predominantly for
money damages.‖ Id. at 43. It is not at all clear that Shutts so held. Second, the Court
shreds what it calls ―Trial by Formula,‖ which the Ninth Circuit had pioneered in Hilao v.
Estate of Marcos, 103 F.3d 767, 782-787 (1996), and applied below. In Hilao, the court
dealt with about 10,000 damages claims by selecting 137 at random for reference to a
master for valuation. It then extrapolated the value of the other claims, without further
proceedings. ―We disapprove that novel project,‖ said the majority. Id. at *50.
On the Rule 23(a)(2) holding, the Court split five-to-four. The majority‘s
reasoning is found in Part II of Justice Scalia‘s opinion, from which Justice Ginsburg
leads the dissenters. The holding is critical, because it means that the plaintiffs will not
59
be able to pursue a Rule 23(b)(3) class for their damages claims, because they cannot
meet this prerequisite to certification.
The majority recognized that Rule 23(a)(2) requires only that there be a single
question of law or fact in common to the class, but held that there was none. Saying that
all plaintiffs suffered a violation of Title VII was insufficient, because that provision can
be violated in different ways. Rather, the members must have suffered the same injury,
so ―their claims can productively be litigated at once.‖ Id. at *19. The substantive law
required a showing of a general policy of discrimination. In assessing certification, the
Court recognized the necessity and propriety of a court‘s addressing the merits.
The Court concluded that the plaintiffs had no support for their assertion that
Wal-Mart operated under a general policy of discrimination. Plaintiffs had presented
―social framework‖ analysis of a sociologist, who concluded that Wal-Mart‘s structure
and corporate culture made it ―vulnerable‖ to ―gender bias.‖ The expert conceded,
though, that he could not calculate what percentage of employment decisions might be
affected by ―stereotyped thinking.‖ Accordingly, the Court ―can safely disregard what he
has to say.‖ (Here, by the way, the majority noted that the district court concluded that
Daubert does not apply to expert testimony proffered in motions for certification. ―We
doubt that is so,‖ said the Court, without so holding. Id. at 27-28.)
That left the Wal-Mart policy of allowing local managers to exercise discretion
over pay and promotion. Plaintiffs failed to identify a ―common mode of exercising
discretion that pervades the entire company.‖ Because they could not show an
employment practice that ―ties all their 1.5 million claims together,‖ plaintiffs failed to
demonstrate the existence of a common question under Rule 23(a)(2). Anecdotal
evidence did not suffice; plaintiffs provided only one affidavit for every 12,500 class
members, relating to only 235 of the 3400 Wal-Mart stores. ―[A] few anecdotes selected
from literally millions of employment decisions prove nothing at all.‖ In sum, because
plaintiffs ―provide no convincing proof of a company-wide discriminatory pay and
promotion policy, we have concluded that they have not established the existence of any
common question.‖ Id. at *32.
The dissent criticizes the majority‘s emphasis of dissimilarities among class
members. It would emphasize what the members have in common – whether Wal-Mart‘s
discretionary policies are discriminatory. It characterizes the majority‘s effort as
engrafting the predominance requirement of Rule 23(b)(3) into the analysis of Rule
23(a)(2). Id. at *65.
Both opinions quote from work by the late professor Richard Nagareda, Class
Certification in the Age of Aggregate Proof, 84 N.Y.U. L.Rev. 97, 131-132. For
example:
Any competently crafted class complaint literally raises common
―questions.‖ What matters to class certification, however, is not the raising
of common ―questions‖ – even in droves – but, rather, the capacity of a
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class-wide proceeding to generate common answers apt to drive the
resolution of the litigation. Dissimilarities within the proposed class are
what have the potential to impede the generation of common answers.
According to the dissent, Professor Nagareda was discussing predominance of common
questions in a Rule 23(b)(3) class, which is irrelevant to the application of Rule 23(a)(2).
The majority responded by saying: ―We consider dissimilarities not in order to determine
(as Rule 23(b)(3) requires) whether common questions predominate, but in order to
determine (as Rule 23(a)(2) requires) whether there is ‗[e]ven a single [common]
question. And there is not here.‖ Id. at *36-37.
After Dukes, then, it seems clear that very few Rule 23(b)(2) classes will be -
permitted to seek monetary relief. The Rule 23(b)(2) class must seek a single, class-wide
injunctive or declaratory remedy. It is clear that courts may address the merits as needed
to assess class certification. In addition, all nine justices joined that part of the opinion
rejecting trial by statistics and embracing the notion that due process requires notice and
opt-out for monetary claims.
Several things are unclear after Dukes. Most importantly, it remains to be seen
how lower courts will assess Rule 23(a)(2). Heretofore, it has been the least discussed of
class prerequisites; indeed, many courts seem to assume that it is satisfied from the very
nature of the class action. Will courts see Dukes as applying to all Rule 23(a)(2)
assessments, or only to those in Rule 23(b)(2) cases? How will courts view
dissimilarities in this regard? More broadly, will courts use Dukes to rethink
commonality as required in other Rules, including joinder under Rule 20? Another
looming question is whether Daubert applies at the certification stage. The majority
certainly thought so, but did not make it part of its holding. Moreover, note the
majority‘s requirement of ―convincing proof‖ of a common question. That phrase is not
found in Rule 23.
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CHAPTER 14: APPEALS
C. APPELLATE JURISDICTION IN THE FEDERAL COURTS
2. COLLATERAL ORDER DOCTRINE
At page 778, please insert:
(f) In Mohawk Indus., Inc v. Carpenter, 130 S.Ct. 599 (2009), the Court held that an
order requiring a party to disclose material that it consider protected under the attorney-
client privilege is not immediately appealable under the collateral order doctrine. The
appealing party had argued that disclosure of privileged material is not effectively
reviewable on appeal because the privilege protects against not only the use of privileged
material at trial but the disclosure of material in the first place. The Court rejected this
argument explaining: ―Appellate courts can remedy the improper disclosure of privileged
material in the same way they remedy a host of other erroneous evidentiary rulings: by
vacating an adverse judgment and remanding for a new trial in which the protected
material and its fruits are excluded from evidence.‖ Id. at 606-07. As to concerns that
delayed review might undermine the core purposes of the attorney-client privilege, the
Court noted: ―Mohawk is undoubtedly correct that an order to disclose privileged
information intrudes on the confidentiality of attorney-client communications. But
deferring review until final judgment does not meaningfully reduce the ex ante incentives
for full and frank consultations between clients and counsel.‖ Id. at 607. The Court also
observed that if confronted with a ―particularly injurious or novel privilege ruling‖ a
litigant does have several other options including seeking review under § 1292 or
mandamus (discussed below), or defying the order and appealing the punishment for
criminal contempt of court.
At page 779, please add:
5. The denial of a motion for summary judgment is an interlocutory order and is
immediately appealable only in the relatively rare circumstance that it meets the criteria
of the collateral order doctrine. If the denial of a motion for summary judgment can‘t be
appealed immediately, can it be appealed after a trial on the merits? In Ortiz v. Jordan,
131 S.Ct. 884 (2011), the Court held that an appeal of the summary judgment motion
following trial came too late. The losing party could, of course, appeal the denial of a
motion for judgment as a matter of law, provided that the party made a timely motion
both before and after the verdict.
5. RULE 54(b)
At page 784, please add:
4. Rule 54(b) vests authority in the district to permit the appeal. Suppose the
court dismisses some but not all of the claims, but refuses to authorize the appeal. If the
plaintiff voluntarily dismisses the remaining claims, can the court‘s ruling on the other
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claims be immediately appealed? Courts have split on this issue. Several circuits have
held there is no final judgment when unresolved claims are voluntarily dismissed without
prejudice, see, e.g., Rabbi Jacob Joseph School v. Province of Mendoza, 425 F.3d 207
(2d Cir. 2005); Marshall v. Kansas City Southern Ry. Co., 378 F.3d 495 (5th
Cir. 2004),
while the Federal Circuit has rejected a categorical approached and focused on whether
there is ―evidence of intent to manipulate our appellate jurisdiction.‖ Doe v. United
States, 513 F.3d 1348, 1353 (Fed, Cir. 2008).
7. APPEALABILITY OF DISCOVERY ORDERS
At pages 785-786, please replace the second and third paragraphs of the section
with:
As noted above, in Mohawk Indus., Inc v. Carpenter, 130 S.Ct. 599 (2009), the
Court held that an order denying protection to material allegedly protected under the
attorney-client privilege is not immediately appealable under the collateral order doctrine.
The Court noted that if confronted with a ―particularly injurious or novel privilege
ruling,‖ immediate review might be available under § 1292 or by means of mandamus.
Cf. Agster v. Maricopa County, 422 F.3d 836 (9th
Cir. 2005) (allowing interlocutory
appeal of order to produce document claimed to be privileged). See Cassandra Burke
Robertson, Appellate Review of Discovery Orders in Federal Court: A Suggested
Approach for Handling Privilege Claims, 81 WASH. L. REV. 733 (2006). A further
option is to defy the order and be held in contempt of court. Because the courts treat the
contempt judgment as a separate proceeding, that judgment is immediately appealable.
You will recall that this is the route used in Hickman v. Taylor and Ager, Chapter 8.
There, the lawyers and clients refused to turn over material that they believed was
protected from discovery. They were convicted of contempt and ordered to jail by the
trial judge. Although they were allowed to appeal immediately, this is obviously a risky
mechanism for securing an appeal.
At page 793, please add the following new section:
E. Review of Judgments Outside of the Appeal Process
This chapter focuses on the review of judgments by means of an appeal to a
higher court. Earlier in the book we have seen two other mechanisms be which a
judgment might be reexamined. The first is a collateral attack where a second court
declines to enforce a prior judgment because the second court determines that the first
judgment is void. See Chapter 6 (C).
The second mechanism is to seek to reopen a judgment by means of Rule 60(b).
See Chapter 10 (C). Rue 60(b) (4) allows a party to seek relief from a judgment if it is
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―void,‖ but as the Supreme Court has explained, the fact that a judgment is wrong does
not make it void.. United Student Aid Funds Inc. v. Espinosa, 130 S.Ct. 1367 (2010). The
case involved a bankruptcy judgment that discharged the debtor‘s student loan
obligations. Contrary to the requirements of the bankruptcy code, this discharge occurred
without the court finding ―undue hardship.‖ The creditor received notice of the discharge
but did not object. Later, after the credit sought to collect the discharged and the debtor
filed a motion to enforce the discharge, the creditor sought to reopen the judgment. The
Court held that even though the bankruptcy court‘s failure to find an undue hardship was
―legal error,‖ ―the order remains enforceable and binding on [the creditor] because [it]
had notice of the error and failed to object or timely appeal. Id. at 1380.
―A judgment is not void,‖ for example, ―simply because it is or
may have been erroneous.‘ Similarly, a motion under Rule 60(b)(4) is not
a substitute for a timely appeal.. Instead, Rule 60(b)(4) applies only in the
rare instance where a judgment is premised either on a certain type of
jurisdictional error or on a violation of due process that deprives a party of
notice or the opportunity to be heard. Cf. Chicot County Drainage Dist. v.
Baxter State Bank, 308 U.S. 371, 376 (1940);. The error United alleges
falls in neither category.
* * *
Rule 60(b)(4) strikes a balance between the need for finality of
judgments and the importance of ensuring that litigants have a full and fair
opportunity to litigate a dispute. Where, as here, a party is notified of a
plan‘s contents and fails to object to confirmation of the plan before the
time for appeal expires, that party has been afforded a full and fair
opportunity to litigate, and the party‘s failure to avail itself of that
opportunity will not justify Rule 60(b)(4) relief. We thus agree with the
Court of Appeals that the Bankruptcy Court‘s confirmation order is not
void
Id. at 1377-80.