Civil Procedure Flashcards
(12 cards)
Summary
The company was properly served. Federal Rule of Civil Procedure 4(h) provides that service of process may be made on a corporation by delivering a copy of the summons and complaint to a corporate officer or to a general or managing agent. Because the Federal Rules explicitly authorized this manner of service, it does not matter that it did not comply with State A or State B law.
The District Court has diversity jurisdiction over MedForms’s state-law claim against the company. The amount at stake ($500,000) satisfies the amount-in-controversy requirement, and the parties are diverse. MedForms is a citizen of State A, where it is incorporated and has its headquarters. The company is a citizen of State B, where it is incorporated and has its headquarters. The fact that the document processing facilities for both companies are in State A does not prevent them from being diverse.
However, the third-party complaint should be stricken. Federal Rule of Civil Procedure 14(a) authorizes a defendant to bring a complaint against a nonparty (a “third-party complaint”) only in situations in which the original defendant asserts that the third-party defendant is somehow liable for whatever the original defendant might owe the original plaintiff. Here, MedForms is not asserting that the company is liable to MedForms for any damages owed to the woman. Rather, MedForms seeks to obtain relief for separate injuries it suffered as a result of the company’s breach of contract. It cannot bring such a claim as a third-party complaint in this action.
Do the Federal Rules of Civil Procedure permit service of process on a corporation to be made by delivery of the summons and complaint to a chief executive officer of the corporation at corporate headquarters when the relevant state law requires service on the corporation’s secretary?
MedForms’s delivery of the summons and complaint to the company’s CEO satisfies the requirements of Federal Rule of Civil Procedure 4(h) and of the Constitution.
Rule
Under Federal Rule of Civil Procedure 4(h), service upon a corporation may be effected within a United States judicial district by “following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made,” or “by delivering a copy of the summons and of the complaint to an officer, a managing or general agent.” Here, MedForms did not serve the secretary of the company and therefore did not comply with the service laws of either State A, where the District Court sits, or State B, where service was made. However, MedForms nonetheless properly served the company under Rule 4(h) because it delivered a copy of the summons and complaint to the company’s CEO. This service was explicitly authorized by Rule 4(h). Rule 4(h) does not specify which corporate representatives count as “officers” for the purpose of receiving service of process, but a court would almost certainly conclude that service on a CEO satisfies the rule because such an official would be “‘so integrated with the corporation sued as to make it a priori supposable that he will realize his responsibilities and know what he should do with any legal papers served on him.’”
Application
It is irrelevant that the manner of service chosen by MedForms was in violation of state law. Rule 4 of the Federal Rules of Civil Procedure, which governs the service of process, regulates procedural matters and thus is controlling law in federal diversity suits, notwithstanding any conflict with state service law. See Hanna v. Plumer, 380 U.S. 460 (1965). Finally, this method of service (personal delivery of the summons and complaint to the CEO) was reasonably calculated to provide the company with actual notice of the case and therefore satisfies constitutional requirements. See Mullane v. Central Hanover Bank & Trust, 339 U.S. 306, 1950.
Are two corporations diverse for purposes of federal jurisdiction when they are incorporated and headquartered in different states but their main facilities are located in the same state, which is also the state of incorporation of one of the businesses?
The District Court has diversity jurisdiction over MedForms’s breach of contract claim because the amount in controversy exceeds $75,000 and MedForms and the company are citizens of different states.
Rule
MedForms’s breach of contract claim against the company is created by state law and therefore cannot support federal-question jurisdiction. See 28U.S.C. § 1331. Original jurisdiction will exist, if at all, under 28 U.S.C. § 1332 (diversity jurisdiction).
Federal district courts can exercise jurisdiction over claims between citizens of different states where the amount in controversy exceeds $75,000. 28 U.S.C. § 1332
Application
Here, MedForms has claimed damages of $500,000, and the court will accept this as the amount in controversy unless the allegation was made in bad faith or it appears to a legal certainty that the plaintiff cannot recover that amount. There is nothing in the facts of this problem to suggest that MedForms’s claim was made in bad faith or that its damages were less than $75,000 to a legal certainty. Hence, the amount-in-controversy requirement is satisfied.
The question is therefore whether MedForms (the third-party plaintiff) and the company (the third-party defendant) are citizens of different states. For diversity purposes, corporations have dual citizenship. A corporation is a citizen both of the state where it is incorporated and also of the state where it has its principal place of business. A corporation’s principal place of business is the corporation’s “nerve center” (i.e., “the place where a corporation’s officers direct, control, and coordinatethe corporation’s activities”). Hertz Corp. v. Friend, 559 U.S. 77, 92–93 (2010). Ordinarily, this will be “the place where the corporation maintains its headquarters,” unless the facts indicate that the corporation’s designated “headquarters” is not really its “nerve center” but is simply an office for occasional meetings. Id.
In this case, MedForms is incorporated in State A. It also has its principal place of business in State A, as that is where its headquarters is located. There is no evidence that its headquarters is not its nerve center. Therefore, MedForms is a citizen of State A.
More application
On the other hand, the company is incorporated in State B. Its principal place of business is also in State B, as that is where its headquarters is located. There is no evidence that its headquarters is not its nerve center. The fact that the company’s only document processing facility is in State A does not matter. In Hertz Corp., the Supreme Court determined that a corporation’s principal place of business (and citizenship) for diversity purposes would be determined by the location of the corporation’s headquarters or “nerve center,” rather than by the location of its business activities. Thus, the company is a citizen of State B.
Hence, MedForms and the company are citizens of different states and diversity exists.
[NOTE: An examinee who incorrectly concludes that there is no diversity jurisdiction should go on to analyze whether the district court could exercise supplemental jurisdiction over MedForms’s claim. 28 U.S.C. § 1367 would authorize the district court to exercise supplemental jurisdiction overMedForms’s claim against the company if it is part of the same constitutional “case or controversy” as the woman’s discrimination claim against MedForms. In this case, there would be no supplemental jurisdiction because the two claims are not part of the same case or controversy.
Claims form part of the same case or controversy if they arise out of a common nucleus of operative facts. See United Mine Workers of America v. Gibbs, 383 U.S. 715 (1966). Here, the woman’s and MedForms’s claims arise from related facts, but they do not arise from a common nucleus of operative facts. The operative facts underlying the woman’s claim are based on how her MedForms supervisor treated her and his allegedly gender-based firing of her. MedForms’s claim rests on the company’s unsatisfactory performance of its data-entry obligations under the contract. The main operative facts that form the basis of the two claims are completely separate—the supervisor’s alleged harassment and biased action on the one hand, and the company’s alleged inadequate contract performance on the other.
Can a third-party defendant be joined to a case when the claim against that third-party defendant is factually related to the plaintiff’s original cause of action but the claimant does not allege that the third-party defendant is liable to the original plaintiff or responsible for the original plaintiff’s damages?
MedForms’s joinder of the company as a third-party defendant is improper because a third-party defendant may be joined by the original defendant only when the original defendant claims that the third party is liable for all or part of the plaintiff’s original claim.
Rule
Federal Rule of Civil Procedure 14(a) authorizes a defendant to bring a nonparty into an action only in very limited circumstances. If the defendant claims that the nonparty “is or may be liable to [the defendant] for all or part of the claim against it,” then the defendant may bring a third-party complaint against the nonparty and the nonparty may be joined as a third-party defendant.
Application
Here, MedForms has attempted to bring the company into the action by alleging that the company breached its contract with MedForms. MedForms does not claim that the company is or might be liable for any damages that MedForms might be ordered to pay to the woman. Moreover, there are no facts that suggest that the company played any role in, or had any obligation to indemnify MedForms for, the behavior of MedForms’s supervisor that is the basis for the woman’s claim against MedForms. In short, any liability that the company might have to MedForms is entirely independent of any liability MedForms may incur to the woman. Thus, MedForms’s attempt to bring a third-party complaint against the company exceeds the bounds of proper joinder, and MedForms’s complaint should be stricken.
Note
[NOTE: In the facts, the company moves to “dismiss MedForms’s third-party complaint for . . . (c)improper joinder.” Fed. R. Civ. P. 14(a)(4) allows a “motion to strike” a third-party claim for improper impleader, but makes no mention of a motion to dismiss a third-party complaint. Litigants, however, commonly move to dismiss, and courts regularly grant such motions, without regard to terminology. See, e.g., AIG Europe Limited v. General System, Inc., 2013 WL 6654382(D. Md. 2013). Similarly, although Rule 14 does not use the word “joinder,” litigants, courts, and scholars commonly refer to third-party complaints as a form of joinder. See, e.g., FRIEDENTHAL,KANE &MILLER,CIVIL PROCEDURE 83 (4th ed. 2005) (“It is important to distinguish impleader from the other claim-joinder devices that are available.”)
