Agenda for 24th Class

1. Agenda for 24th Class • Name plates out • Subject matter jurisdiction • Federal Question Jurisdiction • Settlement • Next Class -- Settlement • Settlement Handout • Writing Assignment (Group 2) • Suit & Settlement Problems • NOT Fee Shifting Problems • New writing assignment policy • If have written 2 pages, can stop and get full credit • Single-spaced, 12 pt font, reasonable margins

2. Last Class – 1391 Ambiguities I • 1391(b)(1) • Def1 is a corporation which is headquartered in SDNY and incorporated in Delaware • Def2 is individual domiciled in New York City (SDNY) • Is venue proper in Delaware? • Literal reading of statute would say “yes,” but not consistent with purpose • 1391(b)(3) • Def1 resides in SDNY; Def2 resides in ED Cal • All events relevant to suit took place in Canada • Is venue proper in EDNY? Is venue proper in ND Cal? • Literal reading of statute would say “yes,” but not consistent with purpose

3. Last Class – 1391 Ambiguities II • 1391(c) • Def resides in LA on student visa. Def is domiciled in Canada. • Is venue proper in LA under 1391(c)(1) • Literal reading would say, “no,” because not domiciled in LA • Is venue proper anywhere in the in the US under 1391(c)(3) • Literal reading would say, “no,” because that section only applies to a person “not resident in the U.S.” • Perhaps venue is proper anywhere in the US, because under 139a(c)(1), D is “deemed to reside” in Canada (because domiciled there), so really D is “not resident in the U.S.”

4. Federal Question Jurisdiction • US Constitution, Article II, section 2. “The Judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties….” • 28 USC 1331 “The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States.” • Same words “arising under … Constitution, laws….” interpreted differently • In interpreting 28 USC 1331, the words mean federal law is part of a “well pleaded complaint” (e.g. it’s part of the plaintiff’s cause of action) • As a matter of constitutional interpretation, those words mean any case in which federal law affects the outcome (even if federal law is defense) • That’s how the US Supreme Court can hear appeals from state supreme courts when federal issue was a defense • It’s how Mottley eventually got to the Supreme Court • It’s how most First Amendment cases get to the US Supreme Court. • Public official sues reporter for defamation in state court. Reporter claims protection of 1st Amendment. Case goes to state supreme court and then US Supreme Court

5. Federal Q J Qs • Summarize Louisville. • Your summary should include the answer to Yeazell. P. 199 Q1 • Under the FRCP as it exists today • If plaintiff had drafted a “well pleaded complaint,” what would have been the key allegations of that complaint? • If plaintiff had drafted a well-pleaded complaint, what paper would defendant have filed in response? What would have been the key elements of that paper? • How would plaintiff have raised the unconstitutionality the Act of Congress which the defendant alleges prohibited giving the passes that the railroad gave the Mottleys? • If defendant’s answer had admitted that it had given passes to the Mottleys, but argued that they were invalid, what motion would the plaintiff have had to make in order to get the Court to grant the Mottleys the relief they requested without discovery or trial? • Yeazell pp. 199ff Qs 2, 3, 4b, • Under 28 USC 1441(a) & (b), if plaintiff had brought the two cases at issue in Yeazell p. 199 Q2 in state court, which of the two cases could defendant remove to federal district court?

6. Settlement I • A settlement is a contract between the plaintiff and the defendant • Usually the defendant promises money or other relief to the plaintiff • The plaintiff promises to drop the case and/or not to bring related cases • Usually involves compromise • Extremely common • Roughly 2/3rds of cases settle • A quarter are resolved by motions to dismiss and summary judgment • Only about 5% go to trial • Usually negotiated by lawyers • Sometimes assisted by judge --- Settlement conference • Sometimes assisted by mediator • Mediation is sometimes required by courts • Mediation is sometimes completely voluntary • Settlement can occur at any time • Before filing of suit; before, during, or after discovery; during trial; while case is on appeal… • Often settlement happens after discovery is complete and after summary judgment

7. Settlement II • Advantages • Saves litigation costs for parties and courts • Reduces uncertainty • Can provide relief that courts cannot or would not order • Apology, continuing business relationship, etc. • Can preserve secrecy/confidentiality • If part of settlement agreement • Disadvantages • No precedent • Usually provides less than full relief • Secrecy means public may never learn about wrongdoing • Judicial policy is to encourage settlement • Buffalo Creek, Part III provides good description of settlement negotiation • Harr, A Civil Action, provides even better description

8. Economic Model of Settlement I • Economic models are simplifications of reality • But can provide insight into real world • There are many more complicated models of settlement that take into account informational asymmetries, the multi-stage nature of litigation, multiple parties, and other complications not included in the model you read • Plaintiff determines minimum settlement amount it will accept = expected recovery if goes to trial = (Estimated probability of prevailing x damages if prevails) – litigation costs • Litigation costs here are additional costs incurred if case does not settle • Cost already incurred are sunk costs, which should not effect negotiations • Irrational to settle for less than expected value of going to trial • at least if plaintiff is risk neutral

9. Economic Model of Settlement II • Defendant determines maximum settlement amount it will accept = expected liability if goes to trial = (Estimated probability of plaintiff prevailing x damages if prevails) + litigation costs • irrational to settle for more than expected liability if goes to trial • at least if defendant is risk neutral • Litigation costs, as above, are additional costs incurred if case does not settle • Note that litigation costs are ADDED to expected liability for defendant, but SUBTRACTED from expected recovery of plaintiff

10. Economic Model of Settlement III • Plaintiff’s estimate of its probability of prevailing may differ from defendant’s estimate of plaintiff’s probability of prevailing • If plaintiff’s estimate is higher, then parties are optimistic relative to each other • e.g. plaintiff thinks it has a 70% of prevailing, but defendant thinks plaintiff has a 40% chance of prevailing • Or plaintiff thinks it has a 30% chance of prevailing, but defendant thinks plaintiff has a 20% chance of prevailing • If plaintiff’s estimate is lower, then parties are pessimistic relative to each other • If plaintiff’s minimum acceptable offer is higher than defendant’s maximum offer, then settlement is impossible • If plaintiff’s minimum acceptable offer is lower than defendant’s maximum offer, then settlement is possible • But still might not happen, if parties engage in strategic behavior and fail to reach agreement an exact settlement amount

11. Economic Model of Settlement IV • Factors encouraging settlement • Mutual pessimism • High litigation costs • Risk aversion • All lower plaintiff’s minimum acceptable offer and increases defendants maximum offer • Factor discouraging settlement • Mutual optimism