Rogers' Fed Jur Outline

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    Fed. Jur. Outline

    I. JUDICIAL GATEKEEPINGA. Functions of Art III

    1.Define the scope of federal authority vs. state authority- federal courts are restricted to addressingonly Cases and Controversies under the US Constitution.

    a. Casesmeant federal questionsb. Controverises meant diversity cases

    2.Separation of powers within the federal Govt3.Define the power of the federal courts

    a. Congress has the power to create new federal courtsb. Judges are not controlled by Congress, instead they are appointed by the President.

    4.Division between the SC & the lower federal courtsa. Original jurisdiction cases- there are only 8 options (cases where an actual state is a

    party, cases where a foreign govt is a party, treaties, etc)b. Appellate jurisdiction SCs ability to review decisions of the lower federal courts, but

    Congress can enact exceptions to this jurisdiction.

    B. Background

    a. Marbury v. Madison- this case really gave the SC all of its power. 3 essential rules:1. SC can review the Executive Branch2. Judicial Review exists3. The Supremacy of the SC

    b. Only Cases & Controversy-Art III requires all s to have standing. Standing isgoverned by the SCs prudence rules. What are these rules?

    1. Hayburns case Fed. Court judges refused to comply with federal statutesrequiring them to review Revolutionary War vet benefits. SC said this was moreexecutive in nature & refused to hear the case. RULE: the federal courts can nottake on non-judicial duties, they must remain neutral.

    2. Advisory Opinions President Washington asked the SC for an advisory opinion(US had treaty with France) about taking sides in a war between France &England. SC refused to rule on it. RULE: the SC should not offer advisoryopinions about areas strictly under the cover of the Executive branch (foreign

    policy).

    Policy arguments against offering Advisory Opinions:

    a. Courts should only rule on concrete facts.b. The public would respect to the role of the courts as they became more

    politicalc. Advisory opinions take the courts focus away from their main dutiesd. Over reliance on the courts would cause a shift in our system of checks &

    balances

    it would reduce the power of the Legislative branch.e. Advisory Opinions would make judges more political and less independent.f. Any advisory opinions could be simply disregarded by the legislature or

    executive branches

    3. Adversness & Standing RULE: parties must have a personal stake in casesto sue. Parties must have DIRECT injury for standing. All taxpayer cases fall

    Frothingham v. Mellon taxpayer case. Federal statute grants aid to states forhealth of mothers. claimed the federal statute invaded states rights and causedher specific a injury because it misused her tax dollars. SC held : taxpayer lacked

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    TaxpayerCases

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    standing. The injury was minimal & unmeasurable. SC says test for taxpayerstanding is:

    1) must show how the federal statute in unconstitutional2) must prove a DIRECT INJURY3) there can be not injury common to all other taxpayers.

    Policy argument: if you allowed all taxpayers to bring cases to challenge federal

    expenditures, it would greatly reduce the function of judicial review.

    But in 1968, SC allowed taxpayer challenge to federal aid to church schools (Flastv. Cohen). SC said the taxpayer could prove the statute violated the Constitutionsbar against mixing of church & state, and support direct injury.

    4. Ripeness & Concreteness RULE: No contingency cases. No prematurelitigation. No future harms cases.

    United Public Workers v. Mitchell- fed. employees were banned from makingpolitical contributions under a federal Act. Employees claims injury to theirconstitutional rights of freedom of speech. SC said this was nothing more than

    asking for an advisory opinion. Hypothetical threats are not enough to achievestanding.

    Later the SC says there are exceptions to Ripeness rule: cases where the injury isrecurring & evading review.

    5. Administrative Questions- RULE: SC will not interfere in administrativerulings

    Federal Radio Comm. v. G.E. corporation challenging a federal agencys denialof their renewal of broadcasting licenses. SC says no because this would requirethe federal courts to step into the role of a federal agency. SC adds there is noadversity & thus no standing either.

    6. Political Questions RULE: the SC must leave political questions to theexecutive & Legislative branches.

    Colegrove v. Green- SC refused to step in & decide the constitutionality ofunequal apportionment of congressional seats. SC said that was a political, notjudical question to be decided internally within a state.

    Baker v. Carr SC upheld federal courts authority to determine theconstitutionality of electoral districts for state legislators. Key: SC 1) can answerquestions about federal judicarys relationship to the States. 2) But the federalcourts can not answer political questions about the federal courts relationship to

    other federal branches.

    KEY to political questions: When the States action violate ones 14th Adm. rights& require a definition of those rights, the federal courts have a right to step in,especially if the States offer no other remedy.

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    C. Judicial Review- Marbury v. Madison

    History: Marbury filed a writ of mandamus directly with the Supreme Court to force Madison SOSto honor his judicial appointment by outgoing President Adams. Statute ( 13) Judiciary Act of1789 allowed the SC to issue writs of mandamus. He says the Judiciary act 1789 isunconstitutional- Congress added to the SCs jurisdiction. Yet the Constitution does not allowthat. Therefore, the act is unconstitutional. SC can not simply assume jurisdiction. Article 3.

    Section 2 defines cases that can be heard in the SC. Marbury does not fit.Marshall says (Article 3) gives the SC appellate jurisdiction but not original jurisdiction.

    KEY: Congress can not expand the SCs jurisdiction that is prohibited in the Constitution. IfCongress wants to change the SCs jurisdiction it will need to amend the Constitution.

    Leals 5 principals from Marbury:

    1. Federal courts have judicial review over the executives non-discretionarydecisions. Once the President exercises discretion, his actions are subject toreview.2. Only the people can resolve misconduct of the Executive Branch3. Art III creates SC supremacy, Congress can not increase the jurisdiction of

    the SC4. Give federal judges the power to declare legislation unconstitutional5. SC is the supreme authority on the Constitution

    D. Justiciability & Standing (limits on federal court authority) = GATEKEEPING OF SCPurpose of these limits: to maintain separation of powers

    1. Warth v. Seldin about standing, Does the party have the right to come into federal court?

    The Injury Requirement- must prove INJURY IN FACT

    Leals Requirements for Standing :

    1. must allege injury or future injury2. must allege injury that is traceable back to s

    conduct3. must allege favorable ruling will allow redressability4. can only assert his own rights, not the rights of

    others.5. must raise a claim within a zone defined by Congress

    as having standing

    Warth v. Seldin

    SC will not hear cases unless standing exists as case or controversy under art. III. Standingis not possible without:

    1. There must be direct & immediate injury to the plaintiff for standing.A. The Plaintiff must have a personal stake in the case (Baker v. Carr)B. Example: statute making it a crime to be a member of a group is direct to a member, but

    it is not direct to a non-member. Only the member can have standing.C. Injury does not have to be economic or criminal in nature. Could be aesthetic. (US v.

    SCRAP)2. The plaintiff must show the defendants conduct directly caused the injury:A. The plaintiff must be able to prove the injuries (constitutional violation) is a direct result

    of the defendants actions andB. That a judicial decision will give the plaintiffrelief sought.

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    First 3 from ArtIII & 4/5 fromthe Prudence

    Requirement

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    KEY to Warth v. Seldin: Plaintiffs claiming constitutional violation by zoning statutedesigned to prevent lower to middle income residents in a certain area, must show more thansimple fact that the housing was too expensive for them to purchase to prove direct injuryand direct cause of injury in fact.

    Plaintiff required proving that without the zoning statute in place that he would have been

    able to afford housing in zoned area (this would prove that he would actually benefit by ajudicial decision in his favor. There can be no broad, general guessing about it.

    Rochester residents can not assert the rights of other people not before the court have beenviolated (e.g. people who would have moved to Penfield had exclusionary zoning not beenpracticed.

    Purpose behind Injury in fact requirement: keep 2 types of cases out of the courts:1) Non-individualized harm- Harm is not unique to the individualized person. Person

    must prove they were injured beyond the average person.2) Third Party rights or claims- Harm is to a third party, not even before the court.

    Leals rules from Warth:1. Taxpayer can not sue because harm is not unique to them

    2. Associations can sue if members are injured

    3. Injury must be alleged

    4. Injury must be directly caused by 5. Judicial redress must be possible

    See sister case to Warth: Adolf Lyons v. City of Los Angeles

    2. Abbott Labs v. Gardner- Premature Litigation

    Congress amends FDA to require prescription labeling. Drug companies file sue before Act goes

    into effect. SC says this is premature litigation. There is no standing since there is no direct orimmediate injury. The claims are not ripe. Asking for an injunction would simply be premature.

    Drug companies asked for advisory opinion under the Declared Judgment Act, if they did

    comply so Abbott defines how far away must a harm be to gain standing?

    If your harm is substantial higher likelihood that your case is ripe

    If your harm is more spectative higher likelihood you can gain standing

    3. US Parole Commission v. Geraghty- Mootness s personal stake completely went awaybefore he got to court

    Facts: Federal Parole Comm. enacts new parole guidelines. Geraghty was denied parole. He

    files a class action suit on the behalf of federal prisoners. During his appeal, he is released.Parole Comm. argues that the claim is now, moot! Other prisoners move to have themselvessubstituted in to the case for Geraghty.

    History:Flastdecision says Art III limits fed judicial jurisdiction to cases or controversies.Purpose of this to: 1) preserve the requirement that cases are true adversary between parties 2)prevent judicial intervention into other branches of the govt

    Mootness has 2 requirements: 1) live controversy & 2) Personal stake in cases

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    Standing = who isproper party?

    Ripeness &Mootness = whencan it be brought?

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    Issue: whether or not an appeal of a trial courts denial of class certification does not becomemoot because the named partys case became moot?

    Holding:(An exception to the mootness doctrine)No, standing occurs at thecommencement of the litigation and mootness of the named partys will not end if the

    claim is (RELATION BACK DOCTRINE) Capable of repetition, yet evading review.

    Leals Rules:1) must have a personal stake2) But, class members still have live controversories, the mootness of the named does not

    make the entire class action moot.

    4. Baker v. Carr Political question RULE: No moot or hypothetical injuries. However,

    injury is not hypothetical under asserts injury under 1983 that constitutional rightswere deprived under the color of law.

    Tennessee voters seek a reapportionment of state assembly districts, the districts had notbeen reapportioned since 1901.

    Leals Rules: 1) Claims brought under the Guaranty clause (Art IV 4 providing all

    US citizens a right to a Republican form of govt) are political questions, but claims

    brought under 1983s equal protection clause are justiciable.

    E. Congressional Power to curtail jurisdiction

    1. Sheldon v. Sill- Congress can withhold from any court (that it created) jurisdiction overparticular areas. Courts created by statute can have no jurisdiction except for jurisdiction laid-outin the statute.

    FACTS: Sill (resident of NY) filed suit in Michigan Circuit Court to recover bond & mortgagefrom Sheldon (resident of Michigan) after it had been assigned to him by Hastings (President ofthe Bank of Michigan).

    Sheldon claimed that the federal courts had no jurisdiction over the controversy since the bond &

    mortgage was created between two residents of the same state (leaving no diversity).

    The Circuit Court ruled that it had no jurisdiction.

    HOLDING: The Circuit Court does not have jurisdiction over this case. Because:

    11 of the Judiciary Act requires the federal courts not exercise jurisidiction over promissory

    notes unless there is a foreign bills of exchanges are involved.

    Art. III only creates the SC & leaves it to Congress to form any lower courts while 2 requires

    cases or controversies between citizens of different states.

    Had the Constitution created inferior courts, Congress would not be able to restrict them. But, the

    Constitution did not create inferior courts, only the SC.

    However, Congress can define/restrict jurisdiction of courts it created. Courts created by statute

    have their jurisdiction defined by that statute.ISSUE: Whether or not the federal courts have jurisdiction over all cases before them?RULES:

    1.Art. III creates only the SC, it is up to Congress to create inferior courts & define theirjurisdiction. Congress has not given all Art III powers to fed courts.

    2.Congress can withhold jurisdiction from inferior courts.3.Courts created by statute have no jurisdiction other jurisdiction conferred by the statute.

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    2. Ex Parte McCardle Congress can not destroy jurisdiction of the Supreme Court, butit may limit & regulate it. Congress limited SC jurisdiction over habeas corpus cases inSouth during Reconstruction. CONGRESSIONAL POWER TO CURTAIL JURISIDCTION-CONGRESS CAN CREATE EXCEPTIONS & REGULATIONS TO THE SCS APPELLATEJURISIDCTION

    FACTS: McCardle (Mississippi newspaper editor, who published articles that caused publicresistance & violence to Reconstruction imprisoned for incendiary & libelous articles)appealed a habeas corpus petition to the SC under the 1867 Act, Congress enacted legislationdestroying the Courts appellate jurisdiction in habeas corpus cases.

    ISSUE: Whether or not Congress can repeal the SCs appellate jurisdiction?HOLDING: Yes.While the SC gets its jurisdiction from the Constitution, Congress can makeexceptions & regulations of the SCs jurisdiction. Congress has limited the SCs appellatejurisdiction in habeas corpus cases under the 1867 Act, not other habeas corpus cases. The SCcan not rule on cases where its jurisdiction has been repealed by Congress. The SC does nothave jurisdiction in this case.

    RULES:1. While the SC gets its appellate jurisdiction from the Constitution, Congress may enactregulations and limits to that power. with such exceptions and under such regulations asCongress shall make.2. The SCs appellate jurisdiction has been affirmatively described; any negation of thatjurisdiction is implied.3. While Congress can not limit the SCs jurisdiction granted in the Constitution, Congress isresponsible for granting the SC additional jurisdiction.4. The SC can not question the motivation of Congressional acts.

    WHY THIS CASE IS IMPORTANT: The decision came during post-Civil War

    Reconstruction. The SC had hinted that it might strike down some of the Reconstructionenactments. So, Congress started stripping the Court of some of its powers. President AndrewJohnson vetoed Congress actions, but Congress overrode him. Afterwards, Congressimpeached him. It was Congress attempt to limit the SCs power to rule on verycontroversial issues.

    F. Judicial Power Outside Article III

    1. Northern Pipeline Construction Co. v. Marathon Pipe Line Co.- Art. I judges were given thepowers of Art II judges, but none of the Art III protections

    Class Notes & Preview: Under Art. III 1, two important points: 1) One Supreme Court &2) Congress can set up inferior courts (Sentence #2 lifetime appointment provided goodbehavior and no chance of decreased salary for federal judges. Founding Fathers put this inplace to reduce risks of King George atmosphere. In England, King George would simplyremove any judges who disagreed with him or better yetthe Kings word was the law.

    Congress has created non-Art. III courts: 1) Tax Courts 2) Administrative tribunals agencydriven courts (legislative or Art. I courts)

    NORTHERN PIPELINE CONSTRUCTION CO. v. MARATHON PIPE LINE CO. (1982)

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    FACTS: In 1978, Congress revised the Bankruptcy laws. Prior to the Act, federal districtcourts served as bankruptcy courts and used a Referee system. Decisions were appellableto the district courts. Bankruptcy courts exercised Summary and Plenary jurisdiction.

    Under the Act, the referee system was dissolved and each judicial district created its ownseparate Bankruptcy Court with expanded jurisdiction. Summary & Plenary jurisdictiondistinctions were eliminated and the new courts were given complete jurisdiction under Title

    11 & granting the district courts appellate jurisdiction over the bankruptcy courts.

    Different from the protected salaries & lifetime appointments of federal judges provided inArt. III, the bankruptcy judges were appointed by the President to 14 year terms, subject toremoval by the judicial council of the circuit, and their salaries were set by statute (subject toadjustment).

    In Jan. 1980, Northern Pipeline Construction Co filed a petition for reorganization inMinnesotas Bankruptcy Court. In March 1980, Northern filed suit against Marathon forbreach on contract & warranty, misrepresentation, coercion, & duress. Marathon challengedthe Act on the grounds that it unconstitutionally gave Art. III powers to judges who lackedthe normal Art. III powers (lifetime appointment & protected salaries). The US govt

    intervened in the case to defend the constitutionality of the statute.

    ISSUE: Whether or not the assignment by Congress to bankruptcy judges of the jurisdictiongranted in the Bankruptcy Act of 1978 violates Art. III?

    HOLDING:

    Bankruptcy judges are not Art. III judges. The Constitution gives Congress the powers tocreate courts outside the scope of Art. III. Congress can not give Art. I courts Art III. Powers.To do so, would allow Congress to manipulate the Judiciary. Court looks at the only fourtimes when may Congress may give an Art I court Art. III powers:

    4 situations where Art. I courts are allowed: When Congress can create courts (Art I) with

    Art III powers1) TerritoriesWhen any US preventative (Puerto Rico) is in the transition to statehood.Thus, whatever can be heard in a state court can be heard in an Art. I court.

    2) Military courts Art. II authorities the creation of these courts under the Presidentspowers as Commander and Chief.

    3) Public Rights case by US citizens against the US govt under the Public Rights Doctrinegoes to The Courts of Claims

    4) Adjunct Court US Magistrate Courts, they are designed to deal with specific criminalmatters

    In the case at hand, the Congressional created Bankruptcy Court did not exceed the attributesof Art. III courts. Therefore, judges of bankruptcy courts are vested with all of the powers of

    a court of equity, law, and admiralty, except that they may not enjoin another court or punisha criminal contempt not committed in the presence of the judge of the court. KEY: SC saysCongress has removed the Art. III powers from Bankruptcy Courts, so it is acceptable for theBankruptcy Court to exercise jurisdiction in this case.

    RULES:

    1. When Congress creates a substantive federal right, it possesses substantial discretion toprescribe the manner in which that right may be adjudicated- including the assignment to anadjunct of some functions historically performed by judges. (Congress can create non Art. IIIcourts and give them the same powers as an Art. III court in some limited situations).

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    2. The functions of any congressionally created adjunct courts must be limited so as topreserve the essential attributes of the Art. III courts. (Congress can not give non Art.III courts essentially the same powers as Art. III Courts).

    2. National Mutual Insurance Co. v. Tidewater Transfer Co.-Congress can controlfederal jurisdiction. Statute creating federal diversity for DC is constitutional (well withinCongress Art. I powers)

    FACTS:A D.C. corporation sues a Virginia corporation over an insurance contract in a MarylandDistrict Court, with jurisdiction resting only on diversity of citizenship. No federal issue existed.However, Congress (using its Art. I powers) granted district courts original jurisdiction in civil casesinvolving DC residents and citizens of other states under 28 U.SC.S 4 (1) where the amount incontroversy exceeded $3,000. (The statute created federal diversity for DC citizens). The DistrictCourt dismissed the case by ruling that while diversity was achieved under the statute, that federaldiversity was not met under the Constitution. Therefore, the statute was unconstitutional. TheCircuit Court affirmed the District Court decision. The Supreme Court reversed the decision, rulingthat the statute was constitutional as a permissible exercise of Congressional Art. I powers.

    HOLDING: Congress is empowered to put federally administered justice withinthe reach of the citizens of DC against citizens of another state.

    Chief Justice Marshall once ruled that DC was not a state and could not achievefederal diversity. The SC says DC is still not a state within the meaning of Art IIIand thus, Congress is empowered to give DC statutory diversity because Congressis responsible for DCs welfare.

    RULES: 1) Congress has been exclusive jurisdiction for the welfare of DCincluding the power the create remedies for DC citizens to adjudicate claims against

    citizens of other states.2) DC Courts are Art III courts pursuant to the jurisdiction granted Congress underArt I.3) Congress can open or grant federal diversity to groups or citizens who would bewithout other means of obtaining diversity of citizenship.

    CHAPTER 1 SUMMARY = WAYS TO KEEP CASES OUT OF FEDERAL COURTS

    Purpose for gatekeeping: Respect of the separation of powers

    1. Marbury v. Madison: Supreme Court has judicial review, but it is limited. SupremeCourt only has original jurisdiction in federal question or diversity cases, and in appellatecases from states highest courts or lower federal courts.

    2. Warth v. Seldin: Art III requires cases or controversies: so Standing is a must to get intoa federal court:

    must allege injury or future injury:a. direct & immediate injury

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    must allege injury that is traceable back to s conduct

    must allege favorable ruling will allow redressability

    can only assert his own rights, not the rights of others.

    must raise a claim within a zone defined by Congress as having standing

    3. Supreme Court will not hear cases that are:

    A. Advisory Opinions- must have concrete facts or claims: HayburnsCase

    B. Not Adverse- not concrete facts or claims.1. Personal stake and direct harm. Mellon case.2. No taxpayer cases unless can prove unique injury: Flast case.

    C. Premature or hypothetical litigation : no future harms/no contingencycases: Abbott Laboratories v. Garner

    D. Not Ripe: no claims for harms that have not occurred : United

    Public Workers v. Mitchell

    E. Moot1. must have live controversies2. must have a personal stake3. Exception to Mootness: Cases falling under the Relation Back

    Doctrine: Capable of repetition, yet evading review.: US ParoleComm. v. Geraghty

    F. Administrative Questions leave this to the other branches of govt:Federal Radio Comm. v. General Electric

    G. Political Questions : Baker v. Carr

    4. Congress can curtail federal Jurisdiction

    A. Sheldon v. Sill: The lower federal Courts are all created by Congress. Congresscan withhold from any court (that it created) jurisdiction over particular areas.Courts created by statute can have no jurisdiction except for jurisdiction laid-out inthe statute.

    B. Ex Parte McCardle: Congress can not destroy jurisdiction of the Supreme Court,

    but it may limit & regulate it. Congress can create exceptions &regulations to the SCs Appellate jurisdiction.

    5. Judicial Power Outside of Art III

    A. Northern Pipeline Construction Co. v. Marathon Pipe Line Co.- Congress hasthe power tocreate federal courts outside the authority of Art. III., but those courtswill not have all the same powers as Art III courts. Art. I judges were given thepowers of Art II judges, but none of the Art III protections.

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    4 situations where Congress may create Art. I courts :

    1) TerritoriesWhen any US preventative (Puerto Rico) is in thetransition to statehood. Thus, whatever can be heard in a state court canbe heard in an Art. I court.

    2) Military courts Art. II authorities the creation of these courts underthe Presidents powers as Commander and Chief.

    3) Public Rights case by US citizens against the US govt under thePublic Rights Doctrine goes to The Courts of Claims

    4) Adjunct Court US Magistrate Courts, they are designed to deal withspecific criminal matters

    B. National Mutual Insurance Co. v. Tidewater Transfer Co.: Congress can controlfederal jurisdiction. Statute creating federal diversity for DC is constitutional (wellwithin Congress Art. I powers)

    ___________________________________________________________________________

    II. FEDERAL QUESTION CASES (another way that federal jurisdiction is limited)

    A. Identifying Federal Question Cases

    1. Osborn v. Bank of the US - The Constitution only requires that federal law be aningredientin the cause of action

    Did Congress have the right to create a national bank and give federal judges the power togovern these cases? Must the case rest on a federal law? Holding: NO. SC said the case musthave some federal statute tied to it. Pre-1331, court looks to the fact that federal legislative

    charter created bank and gives it ability to sue or be sued, so the charter is a federalingredient of the banks case

    (a) Note this means that even on a contract suit with the bank, there is potential FQjurisdiction from a constitutional point of view since a law of the US created the bankand gives it the ability to sue, and that law may be an issue in the case (see US v.Planters Bank of Georgia FQ jurisdiction available in suit over a note held by the USbank)

    Cause of Action = Facts + Liability Law + Remedies Law

    The remedies law was usually the federal statute

    2. Louisville & Nashville Railroad Co. v. Mottley The basic rule: in determining FederalQuestion, look only to allegations in a well-pleaded complaint. You cannot create a FederalQuestion by anticipating a defense anticipation of a defense to breach of settlementagreement based on impossibility caused by new federal law does not confer FederalQuestion jurisdiction)

    A simple breach of contract is not a federal question. As part of the well pleaded complaintrule: can not complain an anticipatory position., based on a federal defense. This is not

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    To start any Federal Question Case, a party must have:1) a constitutional provision giving jurisdiction (i.e. Art III)2) a federal statute enacted by Congress giving jurisdiction

    (i.e. 1331)

    This is from the arising under the US Constitution language

    Failure to satisfy both of these requirements results in a

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    well-pleaded. The lower courts (hearing this case) should have picked up on the lack of SMJ.(It is their duty) Because they missed that point, the SC dismisses the case.

    FACTS: Mottley (a husband & wife/citizens of Kentucky) were injured in 1871 by the negligence ofthe Louisville & Nashville Railroad. As a release from future claims, the railroad offered the Mottleysan express contract for life-long free rail passes. The railroad honored this contract up until 1907,when Congress enactment legislation that prohibited free rail passes and transportation.

    Mottley brought suit (for specific performance) against the railroad in the Circuit Court for theWestern District of Kentucky. Mottley argued 1) that the Act did not really prohibit the giving of freepasses. 2) Next, they argued that if the Act was construed to prohibit free rail passes that it violated theFifth Amendment because it deprives them of their property without due process of law. Mottleydemurred the case and the Circuit Court overruled the demurrer. Mottley, then appealed directly to theSupreme Court.

    ISSUE: Whether or not the Supreme Court has jurisdiction when no federal question exists in acase?

    HOLDING:It is improper to plead that a defense under federal law was anticipated, reversedthe judgment and remanded to the circuit court with instructions to dismiss the action for lack offederal question jurisdiction.

    RULES:1) It is the duty of the U.S. Supreme Court to see to it that the jurisdiction of a circuit court,which is defined and limited by statute, is not exceeded.2) A suit arises under the Constitution and laws of the United States only when theplaintiff's statement of his own cause of action shows that it is based upon those laws orthat Constitution. It is not enough that the plaintiff alleges some anticipated defense to hiscause of action and asserts that the defense is invalidated by some provision of theConstitution of the United States

    3. Skelly Oil Co. v. Phillips Petroleum Co. -cant anticipate defenses to get FQ when seekingDeclaratory Judgment (DJ). Again, a case must have, on its face, a well plead complaint.

    (a) Basic point: same rules apply for DJ as for coercive suits if the suit could bebrought as a coercive action, it may be brought as a DJ action; if it couldnt, then itcant

    (b) Thus, the FDJA has not broadened SMJ

    FACTS: Phillips contracted to buy gas from Skelly for resale to Michigan-Wisconsin Pipeline. Each contractgave the seller the right to terminate the contract if Michigan-Wisconsin failed to secure a certificate ofpublic convenience and necessity for construction and operation of its pipe line from the Federal PowerCommission. Notice of termination was to be delivered after Dec 1, 1946, but before the issuance of thecertificate. On Nov. 30, 1946, the Commission ordered the certificate be issued. On Dec 2, Skelly gave noticeof termination. Phillips sued for a declaratory judgment arguing that the contracts were still in effect because

    the certificate was obtained before termination. The District Court and Court of Appeals agreed with Phillips.

    ISSUES: Whether or not the suit arose under the Constitution, laws, or treaties of the USso as to provide declaratory relief under the Federal Declaratory Judgment Act?HOLDING: This is a basic contract dispute; there is no federal question present.Judgment is vacated and cause was remanded for one of the parties. However, thejudgment was reversed and dismissed as to the other parties because the matter did notarise under the federal law. Therefore, the Supreme Court did not have jurisdiction over thematter.

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    Mottley- noFQ when in

    anticipatorydeclarations-not well pleadcomplaint

    Skelly- NoFQ when itsa remedialstatute tocreatejurisdiction

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    RULES:

    1. While Congress can extend remedies offered by the federal courts, it can not extend thejurisdiction of the federal courts.2. A plaintiffs claim must present a federal question unaided by anything alleged inanticipation of avoidance of defenses which it is thought the defendant may interpose.

    (Mottley case)3. A question arising out of the Constitution is required to give the federal courtsjurisdiction over a matter.

    4. Harms v. Eliscu This case satisfied the well plead complaint rule, in that it dealt directlywith a claim under the federal copyright law ( 1338). The problem was that the claim wasnot over infringement, instead it was a suit to set aside a license. This is not a federalQuestion, this belongs in state court. KEY; for there to be a federal Question, the remedyone is seeking must exist under a federal statute. If your remedy exists at a state level, youmust go there first. RULE: One must look at the statute in defining the violation, if there is

    no violation of the federal statute, then there is no federal question involved.

    FACTS: was asking for equitable recovery. Typically, state courts handle equitable remedies. Look at thefederal statute involved (Copyright Act), it does not include remedies for simple breaches of contract.

    OVERVIEW: Plaintiff sued defendants for copyright infringement. Plaintiff alleged its own New Yorkincorporation and did not allege the citizenship of defendants. Defendants moved to dismiss the complaintfor failure to state a claim on which relief could be granted and for lack of federal jurisdiction, which wasgranted. On appeal, the court held that the district court was correct when it treated jurisdictional issue asturning solely on whether the complaint alleged any act or threat of copyright infringement. The plaintiff didnot do so in its complaint and, therefore, plaintiff did not have a proper action. OUTCOME: The courtaffirmed the ruling of the district court, citing the fact that the plaintiff did not allege an act or threat of

    copyright infringement.

    RULES:

    1. Infringement, as used in copyright law, does not include everything that may impair thevalue of the copyright; it is doing one or more of those things which 1 of the Act, 17U.S.C.S. 1, reserves exclusively to the copyright owner.2. The United States Supreme Court has long given a narrower meaning to the "arising

    under" language in statutes defining the jurisdiction of the lower federal courts.3. The Federal courts have exclusive jurisdiction of all cases arising under the patent

    laws, but not of all questions in which a patent may be the subject-matter of thecontroversy. For courts of a state may try questions of title, and may construe and enforcecontracts relating to patents.

    4. Even though a claim is created by state law, a case may "arise under" a law of theUnited States if the complaint discloses a need for determining the meaning or applicationof such a law.5. In the absence of express statute, federal law may govern what might seem an issue of

    local law because the federal interest is dominant.6. An action "arises under" the Copyright Act if and only if the complaint is for a remedyexpressly granted by the Act, e.g., a suit for infringement or for the statutory royalties forrecord reproduction, 17 U.S.C.S. 101, or asserts a claim requiring construction of theAct, or, at the very least and perhaps more doubtfully, presents a case where a distinctive

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    policy of the Act requires that federal principles control the disposition of the claim. Thegeneral interest that copyrights, like all other forms of property, should be enjoyed by theirtrue owner is not enough to meet this last test.

    5. Merrell Dow Pharmaceuticals v. Thompson Bendectin birth defect case. Dow wantedcase removed to federal court. Congress did not create a cause of action in the FFDCA. So,

    the (Dow) could not use the FFDCA as grounds for removal to the federal courts. The Actleft no private actions available, only the FDA commissioner could file suit for a violation ofthe Act. Therefore, Dows claim rested in state court.

    FACTS: Petitioner sought review of judgment of United States Court of Appeals for Sixth Circuit reversingorder denying respondents' motion to remand to state forum their consolidated cases alleging tort claims andviolation of Federal Food, Drug, and Cosmetic Act, 21 U.S.C.S. 301 et seq. (1982 ed. and Supp. III).OVERVIEW: Respondents sued petitioner in state court. Each respondent, alleging that a child sufferedbirth defects due to the mother's ingestion of a drug made by petitioner, requested damages on tort theoriesand for violation of the Federal Food, Drug, and Cosmetic Act (FFDC), 21 U.S.C.S. 301 et seq. (1982 ed.and Supp. III). Petitioner had the cases removed to federal court, the cases were consolidated, andrespondents moved to remand to state court. The district court denied the motion, but the appellate courtreversed. The parties agreed there was no federal cause of action for FFDC violations. On appeal, the Courtheld that federal question jurisdiction was lacking because a complaint using a federal statute as an elementof a state cause of action, when there was no private federal cause of action under the statute, did not state aclaim arising under federal law. The judgment was affirmed.

    OUTCOME: The Court affirmed judgment reversing order denying motion to remand tostate forum where federal question jurisdiction was lacking because complaint usingfederal statute as element of state cause of action, when there was no private federal causeof action under statute, did not state claim arising under federal law.

    RULES:

    1. The question whether a claim "arises under" federal law must be determined byreference to the "well-pleaded complaint." A defense that raises a federal question is

    inadequate to confer federal jurisdiction. Since a defendant may remove a case only if theclaim could have been brought in federal court, 28 U.S.C.S. 1441(b), moreover, thequestion for removal jurisdiction must also be determined by reference to the "well-pleaded complaint."2. The mere presence of a federal issue in a state cause of action does not automaticallyconfer federal-question jurisdiction.3. The congressional determination that there should be no federal remedy for the violationof a federal statute is tantamount to a congressional conclusion that the presence of aclaimed violation of the statute as an element of a state cause of action is insufficiently"substantial" to confer federal-question jurisdiction.4. A complaint alleging a violation of a federal statute as an element of a state cause of

    action, when Congress has determined that there should be no private, federal cause ofaction for the violation, does not state a claim arising under the Constitution, laws, ortreaties of the US. 1331

    B. The Ability to bring tag along state claims into federal court along with your federal

    claim (under Supplemental/Pendent jurisdiction) is limited.

    1. Finley v. US case was eventually overruled by enactment of 1367. Pendent jurisdictionis now called ancillary or supplemental jurisdiction.

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    Facts: Finleys husband & kids were killed when their plane crashed at the San Diegoairport into power lines. She sues power company & city under 1346. Later she finds outthat the FAA was really responsible for the crash. She amends her petition and refiles infederal court. She wanted to include a non federal defendant in the case with the FAAunder pendent jurisdiction.Issue: Can a federal court exert pendant jurisdiction over a non federal defendant?

    Holding: NO. However, this was overruled later by the enactment of 1367(Supplemental jurisdiction). Courts are forced to apply the Gibbs Test. Basic Rule: Courtcan exercise jurisdiction over state law claims where there is a federal law case orcontroversy at issue (e.g., a FQ) (UMW v. Gibbs suit against union for both federal-lawand state law claims; court establishes the Gibbs test for hearing federal law and statelaw claims together)

    The Gibbs Test: A federal court can hear a state claim if:(a) The federal claim is substantial

    (b) The claims are the type that would ordinarily be expected to be heard in one

    action; this means the case involves:

    (i) A common nucleus of operative fact, and

    (ii) Is the type of suit that would be expected to be brought in one action

    RULE: 1367 allows a party to bring a non federal claim into federal court alongwith its federal question provided the claims are derived from a common nucleus of

    operative facts.

    How pendent jurisdiction works?1. files claim in federal court under 1331 (federal question)

    2. If the would like to tag a non federal question claim along with the federal question itmay provided there is a common nucleus of facts.

    2 Examples of Ancillary jurisdiction1. v. (federal question under 1331) OR 2. v. 1 (cross claims arising out of the

    2 set of facts tied to 1331 claim)(contract issue- non federal claim)

    3rd party

    CHAPTER 2 IDENTIFYING FEDERAL QUESTION CASES (another example ofgatekeeping over the federal courts

    1. To bring a cause of actions into federal court, a claim must have:

    A. A Constitutional provision giving the federal court jurisdiction (i.e. Art III)

    B. A federal statute enacted by Congress giving the court jurisdiction (i.e. 1331)

    2. Failure to meet these two requirements violates the Well-Pleaded Complaint Rule.Without satisfaction of the Well-Pleaded Complaint Rule, a federal court can notexercise jurisdiction.

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    3. Osborn v. Bank of the US : the case must have some federal statute tied to it.Federal law must be an ingredient in the cause of action.

    4. Louisville & Nashville Railroad v. Mottley: To decide if a federal question is

    present, the courts can only look at the complaint (& make certain the complaintcomplies with the Well-Pleaded Complaint Rule). No claims based upon a anticaptorydefense.

    5. Skelly Oil v. Phillips Petroleum : A can not ask for declaratory relief under theFederal Declaratory Judgment Act unless there is actually a federal question involved.Contract disputes are not federal questions. Filing a claim under the FDJA that is not afederal question violates the Well-Pleaded Complaint Rule.

    6. Harms v. Eliscu : While there are federal statutes (like the Copyright Act) that areexclusively federal questions, any claims for remedy must fall directly under the federalstatute to comply with the Well-Pleaded Complaint Rule. If the claim is actually a

    contract dispute, and not actually a case of infringement, then there is no federalquestion involved.

    7. Merrell Dow Pharmaceuticals v. Thompson: can not ask for remedy under afederal statute that is restricted to only claims by a federal agency only. If the federalstatute only provides for public actions (claims brought by a federal agency), a cannot bring a private cause of action. Such a claim would violate the Well-PleadedComplaint Rule. Thus, no federal Question is present.

    8. Finley v. US : Tag along non federal claims are acceptable. 1367 overrules thiscase and allows supplemental/ancillary jurisdiction. Non federal question claims can bebrought along with federal question claims in federal court provided the claims arederived from a common nucleus of operative facts.

    __________________________________________________________________________

    III. THE DIVERISTY JURISDICTION & THE APPROPRIATE FEDERAL FORUM

    (another way to keep cases out of the federal courts)

    While Chapters 1 & 2 deal with 1331 (federal question) cases, Chapter 3 is about 1332

    (diversity) cases

    1332 believed to have been designed to protect s against states interests (local prejudice).

    There have been many attempts to abolish 1332:

    Arguments Against Diversity Arguments For Diversity

    a. Costly 1. prejudice would favor in-statersb. it clogs federal courts 2. Outcomes of federal cases willc. would free federal judges become more uniform- bad

    argumentfrom hearing Erie cases because there will only be a shift

    where cases are filed w/o 1332

    Central Rules of diversity:

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    1. Complete diversity of the parties is required : Strawbridge2. Non citizens are ok for diversity purposes: Sadat

    A. The Determination of Citizenship

    1. Sadat v. Mertes- citizenship is determined by where ones domicile is at the time the claimscommences; to be a citizen under 1332, a party must be a citizen of the US & a state, too;foreign nationals are covered under 1332.

    Facts: Sadat was foreign national involved in car accident. He wanted to bring negligenceclaim but he had trouble declaring where his citizen was to bring suit in state court.Therefore, he filed in federal court claiming that under 1332 he should be allowed to suitas a foreign national.

    Issues: Can someone who is not a citizen of one of the United States bring suit under 1332? If not, where do foreign nationals bring suits?Holding: Sadat did not have diversity, but he was allowed to bring suit as a foreign

    national in federal courtLeal Rules:

    1. Citizenship is determined by domicile at the time the suit commences.

    2. State citizenship = domicile

    3. To establish a domicile of choice a person generally must be physically present at

    the location and intend to make that place his home for the time at least.

    4. A domicile once established continues until it is superseded by a new domicile.

    5. State citizenship = citizen of the US & of that state

    6. 1332 covers foreign nationals

    B. Complete Diversity & Ancillary Jurisdiction-Note that Art. III does not require completediversity. It was not until enactment of 1332 that complete diversity became are requirement.

    1. Strawbridge v. Curtiss complete diversity is a must for diversity cases. Federaldiversity can only exist in 2 situations:

    A. a party is an alienB. citizens of different states

    HYPO: (Tx) 1 (FL) = No diveristy2 (Tx)

    2. Treinies v. Sunshine Mining Co. Diversity under the interpleader statute may not becomplete diversity, but they must be statutorily (sufficient) diverse : Diversity ofcitizenship is the basis of jurisdiction under 1335 (the federal interpleader statute). Whencompared with 1332, 1335 does not require complete diversity. RULE: if a case is filedunder federal interpleader, it does not have to comply with 1332s complete diversityrequirement.

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    1332 (Basic diversity statute) vs. 1335 (Federal Interpleader statute)

    complete diversity & $75K not complete diversity & claim over $500

    Interpleader is common in shareholder and estate cases. Interpleader cases are where multiple

    parties state claims to property. The party holder property asks the court to help them resolvedthe dispute and turn-over the property to the right party.

    IMPORTANT: how 1335 interpleader works versus FRCP Rule 22 interpleader:Statutory Interpleader ( 1335) vs. Rule Interpleader (FRCP Rule 22)

    1. Only 1 must be diverse from 1. Must have complete diversity2. $500 amount of controversy 2. Shareholder must be diverse from all

    parties3. $75K =amount in controversy

    Facts: An uncontroversial case of incomplete (but statutorily sufficient) diversity ispresented when the (the interpleading party) is a citizen of state A & the defendants (theinterpleaded parties) are citizens of states A, B, and C. The Court held that under the InterpleaderAct, 28 U.S.C.S. 41(26), only diversity of citizenship between claimants is required.

    3. Owen Equipment & Erection Co. v. Kroger- Impleader (3rd party claim). When an

    impleader action destroys the diversity between the parties, then ancillary jurisdiction is not

    available.

    Facts: Woman, Kroeger, brings a wrongful death action in federal court against a of diversecitizenship and then amended her complaint to include an impleaded third-party , Owens eventhough they were citizens of the same state.Issue: Can a federal court exercise ancillary jurisdiction over a s claim against a third party who is a citizen of the same state in a diversity case?

    Holding: NO. Ancillary jurisdiction is not that broad. 1332 requires complete diversity.Despite an agreement (Impleader) between the parties, SMJ can not be conferred by an

    agreement in District Court.

    4. American Fire & Casualty Co. v. Finn. more Gatekeeping. SC says that 1441s intent was toreduce the number of cases removed to federal courts.

    Under 1441, if any claims could be held as separate and independent and

    removable to a federal court, then otherwise non-removable claims may be removed

    to the federal district courts. However, this only works if the federal district court

    could exercise original jurisdiction other the separate and independent claim to begin

    with.

    However, Finn limits the use of 1441

    1. Originally, 1332 was designed to apply to natural persons only. Eventually, this

    changed and corporations were seen as entities like natural persons. So

    corporations, under 1332(c), are citizens of states where 1) they are incorporated

    and 2) where they maintain a principal place of business.

    2. Suddenly under Finn, corporations could not enjoy the same exception to diversity

    that they had once had.

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    http://www.lexis.com/research/buttonTFLink?_m=ae096f78746751c40f405289bb9bef78&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B308%20U.S.%2066%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=10&_butInline=1&_butinfo=28%20USC%2041&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=e3470a8e8b43268907eb4092216cfee4http://www.lexis.com/research/buttonTFLink?_m=ae096f78746751c40f405289bb9bef78&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B308%20U.S.%2066%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=10&_butInline=1&_butinfo=28%20USC%2041&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=e3470a8e8b43268907eb4092216cfee4
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    Facts: SC denied removal under 1441 in a suit by a Texas citizen agasint two out of stateinsurance companies and their local agent, who was also a citizen of Texas. The complaint hadalleged that the two companies were alternatively liable for fire loss or that the agent was liable forfailing to keep the property insured.

    Holding: The SC held that the claims against the diverse and non diverse parties were not

    separate and independent, because there had only been a single wrong to the a failure to paycompensation for the loss of the property. Under28 U.S.C.S. 1441(c), a separable controversy isno longer an adequate ground for removal unless it also constitutes a separate and independentclaim or cause of action. Removal under 1441(c) is authorized only when there is a separate andindependent claim or cause of action. Where there is a single wrong to plaintiff, for which relief issought, arising from an interlocked series of transactions, there is no separate and independentclaim or cause of action under28 U.S.C.S. 1441(c).

    Impact of Finn: very few case are removable under 1441

    C. Corporations & Associations are not treated the same as corporations or natural persons fordiversity purposes.

    If a corporation is incorporated in all 50 states, chances are they can not file diversity suits,

    forced to file in state courts

    Purpose of 1331 & 1332 was to narrow the ways to get into federal court

    CRITICAL: what are the attritibutes necessary to get an association into federal court?

    Never look at the labels, follow the attritibutes!

    1. Carden v. Arkoma Associates Partnerships citizenship is not based upon the generalpartners citizenship, instead it is based on all partners citizenship. Complete diversity isrequired between the parties to get into federal court. But, associations are treated like

    corporations for diversity purposes.

    FACTS: Arkoma (Plaintiff - was a limited partnership under Arizona law) brought suit for a contract dispute inthe U.S. District Court for the Eastern District of Louisiana, claiming diversity of parties for federal jurisdiction.Carden and Limes (Defendants- were citizens of Louisiana) moved to dismiss the suit because one of Arkomaslimited partners was a citizen of Louisiana. When the ruling was appealed, the 5th Circuit & Court of Appeals

    found complete diversity citing that Arkomas citizenship must be determined based on the citizenship of the

    general partner, not the limited partners. Supreme Court reverses & remands case stating that complete diversitydoes not exist in this case.(rules against Arkoma)

    ISSUE: Whether or not, in a suit brought by a limited partnership, the citizenship of the limitedpartners must be taken into account to determine diversity of citizenship among the parties?HOLDING: YES, each partner of a limited partnership must be diverse from the opposing party tosupport federal diversity in federal court.

    Rules:

    1. While the General rule that corporations are citizens of the state where they areincorporated is firm, that same rule does not necessarily apply to other forms of businessentities (i.e. limited partnerships & associations). The rules for determining citizenship of acorporation are not the same as the rules for determining citizenship of other forms ofbusiness entities in diversity cases.

    2.Citizenship for diversity purposes of associations and limited partnerships is determined bythe citizenship of each member, not the member who exerts the most control.

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    http://www.lexis.com/research/buttonTFLink?_m=953bd7c50d70e8f2c113aeaf020b6e84&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B341%20U.S.%206%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=5&_butInline=1&_butinfo=28%20USC%201441&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=49167852b0368b81c0aac57f2604c0ffhttp://www.lexis.com/research/buttonTFLink?_m=953bd7c50d70e8f2c113aeaf020b6e84&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B341%20U.S.%206%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=7&_butInline=1&_butinfo=28%20USC%201441&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=f0add395c2b23434151b19a2fcca3088http://www.lexis.com/research/buttonTFLink?_m=953bd7c50d70e8f2c113aeaf020b6e84&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B341%20U.S.%206%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=5&_butInline=1&_butinfo=28%20USC%201441&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=49167852b0368b81c0aac57f2604c0ffhttp://www.lexis.com/research/buttonTFLink?_m=953bd7c50d70e8f2c113aeaf020b6e84&_xfercite=%3Ccite%20cc%3D%22USA%22%3E%3C!%5BCDATA%5B341%20U.S.%206%5D%5D%3E%3C%2Fcite%3E&_butType=4&_butStat=0&_butNum=7&_butInline=1&_butinfo=28%20USC%201441&_fmtstr=BRIEF&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAA&_md5=f0add395c2b23434151b19a2fcca3088
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    Other Rules:

    1. Supreme Court has held that local governments are citizens of a particular state under 1332.However, it has held that counties and school districts are not citizens.

    2. 1348 of the Judicial Code says national banks are citizens of the States in which they are

    respectively located. Court held that federally incorporated credit union is citizen of the statein which it is incorporated.

    2. Kelly v. US Steel Corp. The general rule is that corporations citizenship is based on: 1)where the corporation is incorporated & 2) where the corporation has its principal place ofbusiness. However, Kelly suggest that courts should apply a balancing test to decide which ofthese approached to apply.

    FACTS: From a series of cases, brought by citizens of Pennsylvania, from the Western District Court forPennsylvania where judgment was for the defendant (US Steel Corp) because no diversity of citizenshipexisted. Under 1332 (c) & 1441, a corporations citizenship if based on : 1) where the corporation is

    incorporated or 2) where the corporation has its principal place of business. The General Rule for (principalplace of business)PPB is: Corporation gets charter in one state yet does all of its business operations in anotherstate.

    ISSUE: Whether or not the US Steel Corporation has its principal place of business in Pennsylvania?

    HOLDING: YES, US Steels Nerve Center is Pennsylvania, not NYC. The Operation Policy Committee sitsand conducts business in Pennsylvania. The Board of Directors has delegated most tasks to the Committee. TheCommittee appoints most of the officers. 16 of 17 VPs are located in Pennsylvania. 34% of US Steelsemployees are located in Pennsylvania. There are some less important factors that lead to the conclusion thatPennsylvania is the PPB. There are 25 times more employees located in Pennsylvania as are located in NYC.More than 1/3 of corporate property is located in Pennsylvania, as opposed to NYCs less than 1%. KEY:Pennsylvania is where the day-to-day operations are conducted.

    RULES:

    1. The court looks at the factors used to decide where a corporations principal place ofbusiness is? (the PPB test)

    a. Place where shareholders meet is not PPB.b. Place where the Board of Directors meet is insufficient to be the PPB.c. Place where physical activity is carried on is not adequate to meet the PPB test.d. The PPB should be the Nerve Center of a corporation.e. Where a corporation files its tax return is not PPB.

    HYPO: Oil company, based in Houston, purchases a vinery in Napa. Are they citizens ofTX or California? Answer: both, but you must break down the nerve center test

    3. Majewski v. NY Central Railroad Co. overrules the Forum doctrine. Enactment of1958 amendment ( 1332(c)) sets in place the multistate incorporation rule. Multistateincorporation rule provides corporations are deemed to be citizens where they are beingsued. In other words, corporations incorporated in multiple states are citizens if theyincorporated in that state where the suit is filed. Therefore, there can not be diversity inthose cases.

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    ISSUE: Whether or not a court can transfer a federal case when such a transfer would destroy diversitybetween the parties?

    HOLDING: No, the court can not transfer a federal case based on diversity of parties to a forum whichwould destroy the diversity. This case could not be brought in Michigan because there would be no diversityof the parties. NY Central RR was a citizen of Michigan, while Majewski was, too! At the commencement ofthe cause, there was diversity of the parties: Majewski (Michigan) and NY Central RR (Illinois).When NYCentral RR asked for the case to be transferred to Michigan, there was no authority for such a transfer and the

    effect of the transfer would destroy diversity of the parties. The Illinois court may deny NY Central RRsmotion to dismiss and return the case back to the original Illinois court.

    RULES:

    1. A corporation is a citizen of any state in which it is incorporated.2. If a P sues a corporation in his own state who is incorporated in other states, there is no

    diversity.3. Under 1404 (a), for the convenience of parties and witnesses, in the interest of

    justice, a district court may transfer any civil action to any other district or divisionwhere it might have been brought.

    4. Bottom of page 281Multi-state incorporated corporations are deemed to be

    citizens where they are being sued.

    4. Diesing v. Vaughn Wood Products, Inc. - Under 1441, a corporation is a citizen of any Stateby which it has been (BOTH) incorporated and of the State where it has its principal place ofbusiness. When a corporation is only a citizen of another state from the one where it isincorporated, there can not be diversity. Even if a corporation has its principal place of businsslocated in a different state, it is not a a citizen of that state unless it is incorporated there, too!

    FACTS: Diesing, a citizen of Nebraska & president of the Vaughan Wood Products (a corporation charteredunder Nebraska law) won a judgment against the Vaughan for attorney fees ($102K) in Nebraska county court.Vaughns principal and only place of business is in Virginia. Diesing goes to Virginia to levy (collect) onNebraska judgment. Diesing attempted to use the Nebraska ruling (under the Full faith and credit clause of 28

    U.S.C. 1738) to secure another judgment against the Vaughn in Virginia, alleging that Vaughan WoodProducts was a citizen of Virginia under 1332 (c)

    ISSUE: Whether or not diversity of parties can be achieved when a Defendants principal place of businessrests in a different state from the state where the Defendant is incorporated?

    HOLDING: NO, there is no diversity in this case, the Court is without jurisdiction, and the motion to dismissin granted. Diesing and Vaughan Wood Products are citizens of Nebraska. Vaughan is not incorporate in anyother state. Vaughan is not a multi-state incorporated defendant; instead it is a multi-state citizenship defendant.The Court has long held that diversity can exist when dealing with multi-state incorporation defendants. Suchdefendants voluntarily become citizens of states where they incorporate under state law. The purpose of 1332was to restrict federal diversity, not expand it. To allow diversity in these case would allow every Nebraskacitizen and every citizen of any other state to sue Vaughan in Virginia. However, Vaughan may not be

    incorporated in those other states. Such an interpretation of 1332 would be unfair to Vaughan because itwould allow citizens to sue in Virginia (on diversity grounds) despite Vaughan not doing business in theirstates.

    RULES:

    1. Under 1441, a corporation is a citizen of any State by which it has been incorporated andof the State where it has its principal place of business.

    2. Under 1332 (c), the corporation does not by having its principal place of business in astate other than the state of incorporation become a corporate entity of that state; it

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    merely becomes a citizen of that state for the purpose of diversity of citizenship whenjurisdiction in a federal court is invoked.

    5. Smith v. Sperling court attempts to realign the parties. When shareholders suit officersof a corporation for alleged misconduct, the corporation does not become the plaintiff in

    the case. Diversity remains in cases where a shareholder brings suit against managementfor waste.

    Smith (NY) (shareholder) - Sperling (Calif) (director) - Warner Bros. (Delaware Corp) - United States Pictures (Delaware Corp)

    FACTS: Stockholders derivative suit filed in California based on diversity of citizenship alleged fraudulentwaste of assets of Warner Bros. Pictures (WB). Sperling (D) was the son-in-law of a Warner Bros director andpresident of United States Pictures. The suit alleged Uniteds deals with WB were unfair to WB. No demand onthe directors of WB was made since the majority of the Board of Directors approved the contracts between WB &United.

    KEY: It is argued that since the stockholder (Smith) basically is trying to enforce the rights of the corporation

    (WB), then the corporation (WB) becomes the plaintiff in this case because their interests are not antagonistic.If this turned out to be true, then there would be no diversity in this case per Strawbridge. (it would be oneDelaware corporation versus another Delaware corporation).

    If there had been evidence of fraud by the officers of the corporation, instead of simply bad business judgment,then the officers (management) would have been antagonistic to that of the corporation. Since there was noevidence of fraud or misconduct, the corporation become the and no diversity rests in this case. Court appliesErie Doctrine and asserts state law over the case. If there were issues of fraud, then federal law would apply.However, since there are no issues of fraud, state law applies.

    ISSUE: Whether or not diversity is maintained when a stockholder asserts a stockholder derivative suit? Does atarget corporation become the plaintiff in a stockholders derivative suit?

    HOLDING: No, the target company of a derivative suit does not realign to the plaintiff side and therefore, doesnot destroy diversity of the parties.

    Court says the test is antagonism. Look at the pleadings, if there is antagonism, then

    there is diversity. If no antagonism, there no diversity.

    RULES:

    1. In stockholder derivative suits; whenever the management of a company refuses to takeaction to undo a business transaction or whenever it so solidly approves it that any demand torescind would be futile, antagonism is evident. Therefore, it is proper for the target companyto remain as a defendant for purposes of determining diversity of the parties

    2. Absent collusion, there is diversity jurisdiction when the real collision of issues.Diversity jurisdiction exists in derivative suits where the stockholder and companymanagement disagree. Therefore, the target company can not be realigned as a plaintiff.

    6. The Jurisdictional Amount

    a. Synder v. Harris the federal courts can not bend 1332diversity requirement of the amount in controversy for class action suits. There can be no

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    aggregation of claims to achieve diversity. When there are two or more claims, they mustmeet the jurisdictional amount on their own.

    FACTS: 1332 grants federal jurisdiction when suits are between citizens of different states and the amountin controversy exceeds $10,000. (Snyder) brings suit against - BODs of Missouri Fidelity UnionTrust Life Insurance Co. in Eastern District of Missouri alleging that they sold their shares of companystock at amount far in excess of fair market value, in order to obtain complete control of the company and

    under Missouri law, the amount in excess should be distributed to the shareholders. Diversity alleged by despite amount of controversy was only $8740. However, argues that that amount will increase whenother stockholder file based on the class action suit. (Potential amount in controversy would be $1.2 millionthen).Coburn alleges that the D billed and illegally collected a city franchise tax from Coburn & others.Coburn damages were only $7.81. But he alleges more than 18,000 potential s in class action. Amount incontroversy is unknown, but believed to exceed the $10,000 requirement.

    ISSUE: Whether or not separate and distinct claims presented by and for various claimants in a class actionmay be added together to provide the $10,000 jurisdictional amount in controversy?

    HOLDING: No. There can be no aggregation of claims in class action suits to satisfy the jurisdictionalamount required for diversity.

    RULE: When there are two or more s, they must independently satisfy the jurisdictionalamount required for diversity.

    Note: counterclaims can not be included to satisfy the amount in controversy

    7. VENUE PROBLEMS: The Place of Trail & the Supreme Courts Original

    Jurisdiction.

    The 3 threshold requirements for all federal cases:

    1. SMJ2. PJ- M/C required & service is necessary

    3. Venuea. In criminal cases, venue is proper where offense occurredb. Interpleader cases= venue is proper where one or more of the resides

    a. 1391 The federal venue statute :1. Diversity cases:

    a. where any residesb. where a substantial part of the events or omissions giving rise to the

    claim occurred.

    c. Where the is subject to PJ (only a fallback provision)

    2. Federal Question cases:a. the resides orb. where claim arose

    3. Any corporation is deemed to reside in any district where it is subject toPJ at the commencement of the case.

    4. An alien can be sued in any district.

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    b. 1441 actions filed in state courts are removable to federaldistrict courts located within the state where the action was filed.

    c. FNC- 1404(a) By consent or stipulation of the parties, transfer to another

    division is possible at the courts discretion. However, the law of the original

    forum will apply after the transfer.

    CHAPTER III RECAP: WAYS THE FEDERAL COURTS USE DIVERISTY & VENUE TOGATE-KEEP

    1. 1332 (Diversity) intended to reduce the amount of cases filed in federal courts

    2. Sadat v. Mertes: Citizenship is determined by where ones domicile is at the time theclaims commences; to be a citizen under 1332, a party must be a citizen of the US & astate, too; foreign nationals are covered under 1332 .

    3. Strawbridge v. Curtiss: 1332 makes complete diversity a must.

    4. Treinies v. Sunshine Mining Co. Diversity under the interpleader statute may not becomplete diversity, but they must be statutorily (sufficient) diverse :Diversity ofcitizenship is the basis of jurisdiction under 1335 (the federal interpleader statute).When compared with 1332, 1335 does not require complete diversity. RULE: if acase is filed under federal interpleader, it does not have to comply with 1332s completediversity requirement. $500 for 1335 case vs. $75K for 1332 case

    5. Owen Equipment & Erection Co. v. Kroger- Impleader (3rd party claim). When animpleader action destroys the diversity between the parties, then ancillary jurisdiction isnot available.

    6. American Fire & Casuality v. Finn : Under 1441, if any claims could be held asseparate and independent and removable to a federal court, then otherwise non-removable claims may be removed to the federal district courts. However, this only worksif the federal district court could exercise original jurisdiction other the separate andindependent claim to begin with.

    However, Finn limits the use of 14411. Originally, 1332 was designed to apply to natural persons only. Eventually,

    this changed and corporations were seen as entities like natural persons. Socorporations, under 1332(c), are citizens of states where 1) they areincorporated and 2) where they maintain a principal place of business.

    2. Suddenly under Finn, corporations could not enjoy the same exception todiversity that they had once had.

    7. Corporations are treated differently from natural person in terms of diversity: intent is toreduce the amount of cases filed in federal courts.

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    A. Carden v. Arkoma Associates Partnerships citizenship is not based upon thegeneral partners citizenship, instead it is based on all partners citizenship.Complete diversity is required between the parties to get into federal court. But,associations are treated like corporations for diversity purposes.

    1. Supreme Court has held that local governments are citizens of a particular

    state under 1332. However, it has held that counties and school districts arenot citizens.

    2. 1348 of the Judicial Code says national banks are citizens of the States inwhich they are respectively located. Court held that federally incorporatedcredit union is citizen of the state in which it is incorporated.

    B. Kelly v. US Steel Corp. The general rule is that corporations citizenship isbased on: 1) where the corporation is incorporated & 2) where the corporation hasits principal place of business. However, Kelly suggest that courts should apply abalancing test to decide which of these approached to apply. Leal says look at the

    attributes. Always does PPB analysis.

    C. Majewski v. NY Central Railroad Co. overrules the Forum doctrine.Enactment of 1958 amendment ( 1332(c)) sets in place the multistateincorporation rule. Multistate incorporation rule provides corporations aredeemed to be citizens where they are being sued. In other words, corporationsincorporated in multiple states are citizens if they incorporated in that state wherethe suit is filed. Therefore, there can not be diversity in those cases.

    D. Diesing v. Vaughn Wood Products, Inc. - Under 1441, a corporation is a citizenof any State by which it has been (BOTH) incorporated and of the State where ithas its principal place of business. When a corporation is only a citizen of anotherstate from the one where it is incorporated, there can not be diversity. Even if acorporation has its principal place of business located in a different state, it is not acitizen of that state unless it is incorporated there, too!

    E. Smith v. Sperling court attempts to realign the parties. When shareholders suitofficers of a corporation for alleged misconduct, the corporation does not becomethe plaintiff in the case. Diversity remains in cases where a shareholder brings suitagainst management for waste. Court says the test is antagonism. Look at thepleadings, if there is antagonism, then there is diversity. If no antagonism, there nodiversity.

    8. Synder v. Harris the federal courts can not bend 1332 diversity requirement of theamount in controversy for class action suits. There can be no aggregation of claims toachieve diversity. When there are two or more claims, they must meet the jurisdictionalamount on their own.

    9. Venue in federal courts:

    A. 1391 The federal venue statute :1. Diversity cases:

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    a. where any residesb. where a substantial part of the events or omissions giving rise to the

    claim occurred.c. Where the is subject to PJ (only a fallback provision)

    2. Federal Question cases:

    a. the resides orb. where claim arose

    3. Any corporation is deemed to reside in any district where it is subject toPJ at the commencement of the case.

    4. An alien can be sued in any district.

    B. 1441 actions filed in state courts are removable to federal district courtslocated within the state where the action was filed.

    C. FNC- 1404(a) By consent or stipulation of the parties, transfer to another divisionis possible at the courts discretion. However, the law of the original forum willapply after the transfer.

    IV. THE APPLICABLE LAW When there are conflicts of law, which law applies?

    A. The Erie Doctrine

    When exercising diversity jurisdiction ( 1332), the federal judge is to hear state

    law issues

    If federal & state law are the same, application will not matter If there is a conflict, then Erie kicks in: KEY: federal law will only kick in when

    there is a federal statute present.

    Outcome-determinative Test: is there an overriding federal interest. If yes=

    federal law applies. If not = state law applied

    In Swift v. Tyson; federal judges could create federal common law (contrary to

    the Federal Judiciary Act of 1789). Impact: federal CL would create uniformity in

    the law.

    However, Judiciary Act of 1789 34, says federal judges should apply state laws

    unless Congress enacted specific statutes & 1652 says the same thing.

    In diversity suits: if federal judge looks at which law to apply: 1) apply federal law

    Or

    2) apply state law

    If the federal & state law are in

    conflict:

    I) Is there a federal statute on point:

    A. Yes apply it or

    B. No- apply Erie

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    II) Outcome determinative test

    A. YES

    B. NO

    III) Overriding federal interest?

    A. Yes= create or apply federal CLB. NO- Erie Applies

    2. Erie Railroad Co. v. Tompkins

    FACTS: Tompkins ( from Penn.) brought negligence action against The Erie Railroad Company (-NY) in the Southern District Court of NY under diversity jurisdiction after he was injured when aprotruding door from a moving train struck him as he walked near railroad tracks. He was rightfully onthe premises as a licensee because of a beaten path that ran aside the train track.Erie arguedthat it

    only owed Tompkins the same duty of care as if he were a trespasser and application of Penn. statelaw. Under Penn. law, persons walking besides railroad tracks are trespassers and the railroadmaintains no liability.1)Tompkins = trespasser2)Penn law applicable under 34 of the Federal Judiciary Act of 1789 (now 1652) - which states thatunless federal statute or the Constitution provide otherwise, state law is applicable in cases of CL.3)As trespasser under Penn law = no duty to Tompkins4)No liability

    Tompkins arguedthat Penn. courts did not support such a rule and because no Penn. statute

    governed this area that the federal court could decide the duty & liability as a matter of general law.1)No Penn. exists over trespassers2)Case should be decided under federal CL

    Procedural History: Trial judge refused to rule that the applicable law precluded recovery. The

    Circuit Court affirmed that the court did not need to decided whether Penn. state law was as argued bythe parties, instead the case should be decided under federal CL. The Court ruled in favor ofTompkins, placing liability on the Erie Railroad Co.

    ISSUES: 1) Whether or not the Swift v. Tyson decision should be overruled?2) Whether or not the federal court should apply state law in diversity cases or apply federal CL?

    HOLDING: Swift v. Tyson is overturned. There is no longer federal CL. In diversity cases, thefederal court should follow federal civil procedure, but it should apply substantive state law whendeciding the case. Application of 34 offends the US Constitution.RULES:

    1. There is no federal CL.2. The Swift doctrine is overturned.3. When deciding diversity cases, federal courts must apply substantive state law.

    3. Guaranty Trust Co. v. YorkFACTS:- Guaranty Trust(trustee and creditor) moved to enforce the rights of note holders anditself of Van Sweringen Corp. in a plan to purchase outstanding shares of Van Sweringens stock tohelp it meet the corporations obligations. York( who was a donee of a Van Sweringen noteholder/ who had rejected Guarantys offer to buy back Van Sweringens note) filed a suit in equity

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    in New York District Court alleging that Guarantyfailed to protect the interests of fellow noteholders andfailed to disclose Guarantys own self-interests in the purchase.

    Court notes that it has a policy of applying state law in federal diversity jurisdiction cases,

    whether the case is a case at law or a suit in equity. Over the last 100 years, this rule was thought tobe purely declaratory, now it is strictly followed.

    1. Purpose of this rule: to provide uniform equitable relief.2. In the Judiciary Act of 1789, Congress gave the federal courts cognizance of equity suits.3. But Congress never gave and federal courts never seized the power to create substantive rights bydenying state law. (IF a state law existed, federal courts could not override it)

    ISSUES:

    1)Whether or not, when statute of limits barred recovery in State court, could a federal court providean equitable remedy in diversity jurisdiction cases?2)Can federal courts overlook state laws that govern remedies at the state level in equity cases?3)Is state law governing the statute of limitations a Procedural or Substance type issue?

    HOLDING: No. Federal Courts may not offer equitable relief in diversity jurisdiction cases that isnot already offered by state law. It is immaterial whether or not statute of limitations issues are

    either Procedural or Substantive. The Erie doctrine has universal application to diversity cases,whether they are cases at law or cases in equity. Federal diversity cases must follow applicable statelaw. The sole purpose of the diversity jurisdiction is to prevent local bias. To allow out-of-statelitigants another remedy (via federal diversity suits) would swing the scales of justice the oppositeway.

    RULES:

    1)The Erie doctrine applies to all diversity cases in federal courts. The federal court must decidediversity cases based upon applicable sate law.2)In equity cases, state law is applicable as to substantive rights and remedies.3)A plaintiff may not bring equity suit in federal court under diversity, if applicable state lawprevents recovery through a statute of limitations provision.

    4) TEST: outcome determinative test- courts will not stick to labels on

    substantive or procedural law. Procedural laws tell us how to apply the law. Here,NY SOL law is substantive. Thus, under the test, Federal court can not overlook theimpact of the state law.

    4. Hanna v. PlumerFACTS: Ohio resident files suit against the executor of a deceased Massachusetts man for injuriesfrom an auto accident in South Carolina inMassachusetts federal District Courtunder diversityjurisdiction. served under FRCP 4 (d) (1) by serving the summons & complaint on the deceasedmans spouse. However, this service did not comply with Mass. state law requiring service to only beupon the deceased or his executor.Mass. District Court and Court of Appeals ruled that the servicewas invalid under Mass. state law and dismissed the case.

    ISSUES:1)Whether or not service of the parties must comply with Federal Rules of Civil Procedure [4 (d) (1)]in diversity jurisdiction cases?2)Does the Federal Rules of Civil Procedure [4 (d) (1)] governing service exceed congressionalpowers?

    HOLDING: No. Rule 4 (d) (1) defining service under the Federal Rules of Civil Procedure does notexceed congressional powers under the Rules Enabling Act 2072 or constitutional bounds and it isthe standard for service in all diversity cases. State laws governing service of process are notapplicable in federal diversity cases. The test is whether or not a federal court regulates practice or

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    procedure. If the courts do regulate the practice, then federal law applies. If the court does notregulate the practice, then state law applies. The Outcome-determination of Erie was never meant toapply to procedural rules. Erie was designed to prevent forum shopping and inequitable administrationof justice. Erie never dealt with a federal rule; it resolved the dispute of what substantive law appliedto that case.

    RULES:

    1) Under 2072 (The Rules Enabling Act), service of process must comply with theFederal Rule of Civil Procedure - Rule 4 in diversity cases.2) The Erie Doctrine only applies to substantive law, not procedural law, in diversitycases.3) The Erie Rule may not void a federal rule.

    5. Klaxon Co. v. Stentor Electric Mfg. Co.

    FACTS:

    In 1918, respondent (NY) transferred its entire business to petitioner (Delaware). Agreement formed

    whereby petitioner agreed to continue to manufacture and sale the respondents patented devices to

    the best of its efforts. In turn, the respondent would receive a share of the petitioners profits. Agreement was executed in NY and assets transferred to NY. Respondent business was dissolved in

    1919. Respondent filed diversity jurisdiction suit in Delaware District Court for failing to perform itsbest efforts.In 1939, Respondent won recovery for $100K, and then asked for interest on theirrecovery under NY state law ( 480). District court agreed and awarded the interest stating this was acase governed by NY state law. Circuit court affirmed District Court decision.

    ISSUES:

    1)Whether or not in diversity case, the federal courts must follow conflicts of laws prevailing in thestates in which they sit?2)Whether or not 480 of NY Civ Pro Act is applicable to an action in the federal court in Delaware?

    HOLDING: YES. When there are conflicts is substantive state law in diversity

    jurisdiction cases, the federal court should apply the substantive state law fromthe state where the court resides. This is a breach of contract issue which normally is asubstantive state law matter. Outcome of the case should be based on the place of performance.

    Erie extends to conflicts of law. Whenever, there is a conflict of two different states law on asubject in a diversity case, the state law where the federal court is located should be applied to thecase. Otherwise, the equal administration of justice would to be served. Any lack of uniformity createdby this notion is acceptable under the states rights to set their own laws.

    RULES:

    1. Whenever, there is a conflict of two different states law on a subject in adiversity case, the state law where the federal court is located should be applied

    to the case.2. Erie extends to conflicts of law

    B. The Federal Common Law

    1. Clearfield Trust Co. v. US- court goes back and says despiteErie, there is some federal common law. There is federal CL on commercial

    paper.

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    FACTS: In 1936, a check was drawn on the US Treasury through the Federal Reserve Bank ofPhiladelphia to the order of Clair A Barner for $24.20 for services rendered by Barner to the WorksProgress Adm.An unknown party forged Barners name on the check and used it to pay for cash &goods at J.C. Penny.J.C. Penny then endorsed it over to Clearfield Trust Co. who endorsed it over tothe Federal Reserve Bank.Neither Clearfield nor J.C Penny had any knowledge of the forgery. Theforgery only became apparent once Barner reported to WPA tat he did not receive a check and oncethe US Treasury asked Clearfield for reimbursement for the forged check.US govt brought suitagainst Clearfield as a express guaranty of prior endorsements under 24(1) of the Judicial Code (now

    1345)The District Court held the rights of the parties should be decided underPenn. law. & sincethe US govt unreasonably delayed giving notice of the forgery to Clearfield that it was barred fromrecovery. The Circuit court reversed.

    ISSUE: Does the Erie Doctrine apply conflicts of law cases that do not rest on diversity jurisdiction?

    HOLDING: No, federal courts are free to decide non-diversity cases upon federal

    common law. The SC agrees with the Circuit Court that Erie does not apply to this case. The checkissued was done so under federal law and authority, governed by federal commercial paper law, notstate law. Anytime the US govt issues money it does so under its direct Constitutional powers. Statelaw has no application here.

    Since there was no federal law specifically on-point on the subject, it is acceptable for federal courts tocreate their own common law answer for this case. When state law sets in conflict with federalcommercial paper law, the federal courts are free from application of state law. Application of the statelaw would create a lack of uniformity. The court can fashion its answer after Swift v. Tyson

    RULES:

    When a non-diversity case with conflicts of law exists between federal common

    law and state law, the federal common law is applicable.

    2. Bank of America