Foundations of American Law

2. 1 Foundations of American Law The Nature of Law The Resolution of Private Disputes Business and The Constitution Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. The Resolution of Private Disputes 2 C H E A P T R “In case of dissension, never dare to judge till you have heard the other side.” Euripides

4. Learning Objectives • State courts and their jurisdiction • Federal courts and their jurisdiction • Civil Procedure • Alternative Dispute Resolution 2 - 4

5. The U.S. Judicial System • The United States has a federal court system and each state has a court system • A Court is established by a government to hear and decide matters before it and redress past or prevent future wrongs • Jurisdiction (the power to hear and speak) may be original (trial) or appellate (reviews trial court) 2 - 5

6. Federal Court Hierarchy • U.S. Supreme Court (appellate jurisdiction; final review and final decision) •  Courts of Appeals (appellate jurisdiction) •  District Courts (trial courts; original jurisdiction)or Statutory Courts (original limited jurisdiction), such as Tax Court, Court of Int’l Trade, Court of Federal Claims, etc. 2 - 6

7. State Court Hierarchy • State Supreme Court (final appellate) •  State Civil Court of Appeals and State Criminal Court of Appeals •  District Courts (trial courts for civil matters over certain $ amount) and Criminal Courts •  County Courts (trial courts for civil matters under certain $ amount) •  Justice of the Peace Courts (small claims and misdemeanor courts) • Limited Jurisdiction Courts (i.e., family, probate, traffic, zoning) 2 - 7

8. General vs. Limited Jurisdiction • General jurisdiction courts (i.e., trial courts) hear most types of cases • Levels generally classified according to dollar amount of damages or location • Examples: county courts, district courts • Limited jurisdiction courts hear specialized types of cases and appeals from these decisions often require a new trial in a court of general jurisdiction • Examples: traffic court, tax court, family court 2 - 8

9. Subject-Matter Jurisdiction • Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute. • Courts of criminal jurisdiction hear trials of crimes and misdemeanors, which are offenses against the public at large • Courts of civil jurisdiction hear and decide issues concerning private rights and duties (e.g., contracts, torts), as well as non-criminal public matters (e.g., zoning, probate) 2 - 9

10. In Personam or In Rem Jurisdiction • In addition to subject-matter jurisdiction, a court must have either in personam or in rem jurisdiction • In personam jurisdiction requires that the defendant be a resident of, located within, or have committed acts within the physical boundaries of the court’s authority 2 - 10

11. In Personam or In Rem Jurisdiction • In rem jurisdiction applies when property that is the subject of the dispute is located within physical boundaries of the court’s authority • Example: a dispute over a house sale 2 - 11

12. Bombliss v. Cornelsen • Facts & Procedural History: • Illinois residents sued Oklahoma residents in Illinois court and the Oklahoma defendants moved to dismiss for lack of in personam jurisdiction • Trial court dismissed complaint and Plaintiffs appealed • Issue: Does the Illinois long-arm statute permit state courts to exercise jurisdiction over Oklahoma defendants? 2 - 12

13. Bombliss v. Cornelsen • Analysis and Application to Facts: • Defendant must purposefully avail himself of the privilege of conducting activities within the state such that he would reasonably anticipate being haled into the state’s court • Where a contract exists, minimum contacts shown by negotiations between parties, the course of dealing between parties, and foreseeable future consequences • Existence of a contract, defendants’ interactive website, and contact with potential customers of plaintiffs equate to minimum contacts • Holding: In personam jurisdiction exists. Trial court decision reversed and case remanded. 2 - 13

14. Federal Court Jurisdiction • Federal courts must have jurisdiction based on diversity or federal question • Diversity jurisdiction exists when the dispute is between citizens of different states and amount in controversy exceeds $75,000 • Federal question jurisdiction exists when the dispute arises under the Constitution, laws, or treaties of the United States 2 - 14

15. Civil Procedure • A set of rules establishing how a lawsuit proceeds from beginning to end • In an adversarial system, the plaintiff bears the burden of proof to prove his/her case by a preponderance of the evidence • Once the plaintiff has made a “prima facie” case (i.e., proved the basic case), the burden of proof may shift to the defendant 2 - 15

16. Civil Pre-Trial Procedure • Action or event occurs allegedly causes harm  • Injured party, known as Plaintiff, files a Petition or Complaint  • Sheriff serves “process” (writ, notice, summons) on Defendant  • Defendant Answers Complaint  • Case proceeds to trial or settlement 2 - 16

17. Civil Pre-Trial Procedure • Plaintiff’s complaint or petition plus the defendant’s answer or response are known as the pleadings • Defendant may enter a counterclaim against the plaintiff or a cross-complaint against a third party • Other parties may enter the case 2 - 17

18. Civil Pre-Trial Procedure • Motion Practice: some motions ask the judge to decide the result before trial • Motion to dismiss (or demurrer) • Motion for judgment on the pleadings • Motion for summary judgment • Motions should NOT be taken lightly! 2 - 18

19. Civil Pre-Trial Procedure • Discovery: Obtaining evidence from the other party through interrogatories, requests for admissions, requests for documents, and depositions • The discovery process can be a battleground • See Allstate Indemnity Co. v. Ruiz • Pretrial Conference: where the judge will hear and rule on many evidentiary issues, discovery disputes, and other concerns 2 - 19

20. Civil Trial Procedure • Jury Selection (Voir Dire) • Opening Statement from each party 2 - 20

21. Civil Trial Procedure • Plaintiff’s case through direct examination of witnesses (defendant performs cross-examination) and defendant’s case through direct examination (and plaintiff’s cross-examination) 2 - 21

22. Civil Trial Procedure • Closing Argument or Summation from each party • Jury verdict 2 - 22

23. Civil Trial Procedure • Trial motions include: motions in limine (motion to limit evidence), voluntary non-suit or dismissal (drop the case), motion for compulsory non-suit or summary judgment • After summation or closing argument, a party may move for a mistrial (overwhelming prejudice or injustice) or directed verdict (weight of evidence leads to only one conclusion) 2 - 23

24. Civil Trial Procedure • Trier of Fact sees material evidence (physical objects, documents), hears testimony of witnesses (who provide factual evidence), and decides outcome of the case based on facts; trier of fact may be judge or jury • Matters of law are issues not of fact, but of law; matters of law decided only by a judge • E.g., whether a statute means X or Y, or one law or another applies to the facts 2 - 24

25. Civil Trial Post-Trial Procedure • After the jury verdict, a party may make a motion for new trial, judgment non obstanto verdicto (notwithstanding the verdict) or J.N.O.V., or remittitur (defendant’s request for the judge to reduce the amount of damages the jury recommended; very common) 2 - 25

26. Civil Trial Post-Trial Procedure • After a judgment has been entered, losing party may appeal decision to a higher court • After a judgment, winning party must have the judgment executed (carried out) to obtain money, property, or action ordered by the court • Bottom line: a judgment is issued and enforcement of the judgment begins 2 - 26

27. Point of Procedure • Not all dispute resolution mechanisms in the legal system are heard by a judge • Disputes with government often resolved by the relevant administrative agency • Administrative agencies generally have a unique dispute resolution process (hearings and appeals) • Also, disputants may choose alternative dispute resolution 2 - 27

28. Alternate Dispute Resolution • Arbitration: dispute settled by one or more arbitrators selected by the parties to a dispute; relatively formal; Uniform or Federal Arbitration acts typically used • Mediation: parties choose neutral party to aid resolution of dispute • Reference to Third Party: dispute resolution by rent-a-judge, minitrial, summary jury trial, or association tribunal 2 - 28

29. Why Choose ADR? • Less costly, in general • May be more appropriate method of resolution for certain types of cases (e.g., family law disputes, real estate disputes between neighbors, high-tech or trade-secret disputes) • May be required by clause in contract 2 - 29

30. Test Your Knowledge • True=A, False = B • A trial court has original jurisdiction and an appellate court has appellate jurisdiction • The difference between general jurisdiction and limited jurisdiction is based on the amount in controversy (the damages amount) • Subject-matter jurisdiction refers to a court’s authority to hear a particular type of dispute 2 - 30

31. Test Your Knowledge • True=A, False = B • In personam jurisdiction refers to the court’s jurisdiction over the defendant, but in rem jurisdiction refers to the court’s jurisdiction over the property in dispute • The burden of proof solely rests on the plaintiff • Matters of law are determined by either the jury or the judge. 2 - 31

32. Test Your Knowledge • Multiple Choice • Diversity jurisdiction refers to: • (a) a jury pool that reflects the ethnic makeup of the city • (b) a citizen’s lawsuit against the government • (c) a lawsuit by a citizen of one state against a citizen of a different state • Methods of alternative dispute resolution include: • (a) Mediation • (b) Arbitration • (c) Summary jury trial • (d) All of the above 2 - 32

33. Test Your Knowledge • Multiple Choice • Discovery refers to: • (a) the discovery that a dispute exists • (b) the pre-trial process involving interrogatories, requests for admissions, and requests for documents • (c) the analysis of fault in a dispute • After the verdict: • (a) Either party may make post-verdict motions • (b) The trial must end • (c) The trial begins 2 - 33

34. Thought Question • If you were served with a lawsuit, what would you do about it? 2 - 34